EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this_____day of
_________, 1996, is entered into by Medical Care Partners, P.C., a Massachusetts
professional corporation (the "Practice"), Physicians Quality Care, Inc, a
Delaware corporation as guarantor ("PQC") and the physician whose name appears
on the signature page hereof (the "Physician Member").
The Practice desires to employ the Physician Member to provide
professional medical services, and the Physician Member desires to be employed
by the Practice. In consideration of the mutual covenants and promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by the parties hereto, the parties agree as
follows:
1. Terms and Conditions. The General Terms and Conditions of Physician
--------------------
Member Employment attached hereto as Annex A, as modified by the addendum
attached hereto as Annex B, (the "Terms and Conditions") are made a part of this
Employment Agreement. All terms used herein and defined in the Terms and
Conditions shall have the meaning assigned thereto. To the extent that the terms
of this Agreement conflict with the Terms and Conditions, the Terms and
Conditions shall control and be binding upon the parties hereto.
2. Term of Employment. The Practice hereby agrees to employ the
------------------
Physician Member, and the Physician Member hereby accepts employment with the
Practice, upon the terms set forth in this Agreement and the Terms and
Conditions, for an initial period commencing on the Effective Date (as defined
in Annex A) and ending on the anniversary of the Effective Date (such period, as
it may be extended, the "Employment Period"), unless terminated in accordance
with the Terms and Conditions. The Employment Period shall automatically extend
as provided in the Terms and Conditions. The Base Compensation Pool Amount for
the Physician Responsibility Center to which the Physician Member is assigned is
set forth on Annex D.
3. Reimbursement of Expenses. The Physician Member shall be entitled
-------------------------
to be reimbursed, subject to such procedures as the Practice shall establish,
for any any travel, entertainment and other
-1-
expenses reflected in the operating budget established with respect to the
Physician Member by the Joint Policy Board.
4. Professional Liability Insurance. During the term of this Agreement,
--------------------------------
the Practice shall provide professional liability insurance covering
professional services provided by the Physician Member to the Practice's
patients in accordance with the Physician Member's duties under this Agreement
with such limits of liability as determined from time to time by the Joint
Policy Board and which initially shall be not less than $1 million per person
and $3 million in the aggregate. The Practice's obligation to provide such
insurance is subject to the Physician Member's compliance with any conditions of
such insurance other than the obligation to pay premiums. Except as otherwise
provided by separate agreement with the Physician Member, such insurance shall
cover only such services as the Physician Member provides in connection with
employment by the Practice. MCP shall consider in good faith, but shall not be
obligated to, include the activities of the Physician Member that are not
performed pursuant to this Agreement in MCP's professional insurance coverage if
such coverage can be efficiently provided through MCP, provided that any such
additional coverage shall be at the expense of the Physician Member.
5. Other Agreements. The Physician Member hereby represents that the
----------------
Physician Member is not bound by the terms of any agreement with any previous
employer or other party to refrain from using or disclosing any trade secret or
confidential or proprietary information in the course of the Physician Member's
employment with the Practice or to refrain from competing, directly or
indirectly, with the business of such previous employer or any other party. The
Physician Member further represents that the Physician Member's performance of
all the terms of this Agreement and as an employee of the Practice does not and
will not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by Physician Member in confidence or in trust prior
to his employment with the Practice.
6. Obligations of PQC PQC hereby agrees to pay promptly to the
------------------
Physician Member any amount due to such Physician Member pursuant to Article VII
of the Terms and Conditions if MCP shall fail to pay such amount to the
Physician Member in a timely manner; provided that PQC shall not have any
liability to the Physician Member and all other Physician Members in excess of
the Compensation Pool.
-2-
7. Survival. Articles VII, VIII and IX and Sections 10.3, 10.4,
--------
10.5, 10.6 and 11.1 of the Terms and Conditions, shall survive termination
of this Agreement for any reason.
8. Notices. All notices required or permitted under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address or addresses as either party shall designate to the other in
accordance with this Section 8
9. Pronouns. Whenever the context may require, any pronouns used in
--------
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns and pronouns shall include the plural,
and vice versa.
10. Entire Agreement. This Agreement, including all Annexes,
----------------
Schedules and Exhibits hereto, constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, whether written
or oral, relating to the subject matter of this Agreement.
11. Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by the MCP, PQC and the Physician Member.
12. Governing Law. This Agreement shall be construed, interpreted
-------------
and enforced in accordance with the laws of the Commonwealth of Massachusetts.
13. Successors and Assigns. Subject to Section 10.2(e) of the Terms and
----------------------
Conditions, this Agreement shall be binding upon and inure to the benefit of
both parties and their respective successors and assigns, including any
corporation with which or into which the Practice may be merged or which may
succeed to its assets or business, provided, however, that the obligations of
the Physician Member are personal and shall not be assigned by Physician Member.
14. Change in Law or Regulation. The Practice and the Physician Member
---------------------------
acknowledge that this Agreement is subject to applicable state, local and
federal laws and regulations. The Practice and the Physician Member further
recognize that this Agreement shall be subject to amendments in such laws and
regulations and to new legislation such as healthcare reform or governmental
health insurance programs. Any provisions of law that invalidate, or are
otherwise inconsistent with the terms of this Agreement or that
-3-
would cause any party to be in violation of law, shall be deemed to have
superseded the terms of this Agreement, provided, however, that the parties
shall exercise their best efforts to accommodate the terms and intent of this
Agreement to the greatest extent possible consistent with requirements of law.
15. Miscellaneous. (a) No delay or omission by the Practice in
-------------
exercising any right under this Agreement shall operate as a waiver of that or
any other right. A waiver or consent given by the Practice on any one occasion
shall be effective only in that instance and shall not be construed as a bar or
waiver of any right on any other occasion.
(b) The captions or the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
(c) In case any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.
-4-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year set forth above.
PHYSICIANS QUALITY CARE, INC
By:
-----------------------------------
--------------------------------------
MEDICAL CARE PARTNERS, PC
By:
-----------------------------------
Physician Member
--------------------------------------
-5-
Annex A to Employment Agreement
-------------------------------
GENERAL TERMS AND CONDITIONS OF PHYSICIAN MEMBER EMPLOYMENT
Article I
Definitions
Section 1.1. Purpose. These General Terms and Conditions of
--------
Physician Member Employment (the "Terms and Conditions") are incorporated in and
made a part of the Employment Agreements between MCP and certain Physicians
Members.
Section 1.2. Physician Responsibility Centers. For purposes of these
---------------------------------
Terms and Conditions, Physician Responsibility Centers shall mean the groups of
Physician Members set forth below and any other group approved by the Joint
Policy Board, as such Physician Responsibility Centers may be increased,
decreased or modified in the future by the admission of new Physician Members,
the resignation or removal of a Physician Member or as otherwise approved by the
Joint Policy Board. Notwithstanding the forgoing, two or more Physician
Responsibility Centers may combine at any time upon the request of the Physician
Members constituting such Physician Responsibility Centers and no Physician
Responsibility Center shall be combined with another Physician Responsibility
Center without the approval of the Physician Members of such Physician
Responsibility Center.
Responsibility Center A: Xxxxx Xxxx, M.D.
Responsibility Center B: Xxxxxxx Xxxxxxxxx, M.D.
Xxxxx Xxxxxx, M.D.
Responsibility Center C: Xxx X. Xxxxxx, D.O.
Xxxxxxxx X. Xxxxxxx, M.D.
Xxxxxxxx X. Xxxx, M.D.
Xxxxxxx X. Xxxxxxx, M.D.
Xxxx X. Xxxxxx, M.D.
Xxxxxx X. Xxxxxxx, M.D.
Xxxxxx X. Xxxxxx, M.D.
Xxxxx X. Meth, M.D.
Xxxxx X. Xxxxxx, M.D.
Xxxxxxx X. Xxxx, M.D.
Xxxxx X. Xxxxxxxxxx, M.D.
Xxxxx X. Xxxxx, M.D.
Xxxxxx X. Race, M.D.
Xxxxxxx X. Xxxxx, M.D.
Xxx Xxxxxxxxxx, M.D.
Xxxx X. Xxxxxxxxx, M.D.
Responsibility Center D: Xxxxxxxx Xxxxxxxxx, M.D.
Responsibility Center E: W. Xxxxxxx Xxxxxxxx, M.D.
Xxxxxx Xxxxxxxx, M.D.
Xxxxxxx Xxxx, M.D.
Xxxxxxx Xxxxx, M.D.
Responsibility Center F: Xxxx X. Xxxxxxx, M.D.
Xxxx X. Xxxxxx, M.D.
Xxxxxxx X. Xxxxxx, M.D.
P.J. Ramaswamy, M.D.
Responsibility Center G: Xxx Xxxxx, M.D.
Responsibility Center H: Laboratory services
Section 1.3. Definitions. For the purposes of these Terms and
-----------
Conditions, the following definitions shall apply:
(a) "Affiliate" with respect to any person shall mean a person
that directly or indirectly through one (1) or more intermediaries controls, or
is controlled by or is under common control with, such person. Neither MCP nor
any Physician Member is deemed to be an Affiliate of the other for purposes of
these Terms and Conditions.
(b) "Affiliations" means any merger, purchase of assets or
other affiliation transactions pursuant to which a Physician Member becomes an
employee of MCP.
(c) "Base Distributions" have the meaning assigned
thereto in Section 7.4.
(d) "Base Compensation Pool Amount", with respect to each
Physician Responsibility Center, shall initially be the amount set forth on an
annex to the Employment Agreement of the Physician Members of the Physician
Responsibility Center and, with respect to the Physician Responsibility Centers
as a group, shall mean $5,977,063. Base Compensation Pool Amount shall be
adjusted as determined by the Joint Policy Board and MCP (i) to reflect the
addition of new Physician Members or the termination or resignation of any
Physician Member or (ii) to reflect such other factors as PQC and the Joint
Policy Board shall mutually agree to be appropriate.
(e) "Book Value" means the value of an asset reflected on a
balance sheet prepared in accordance with generally accepted accounting
principles, which balance sheet shall be audited by a firm of independent public
accountants.
(f) "Capitation Revenues" means all payments from Managed Care
Payors under contracts pursuant to which payments are made periodically on a per
member basis for the partial or total medical care needs of a patient,
including, but not limited to, (i) co-payments, (ii) incentive payments or
bonuses, and (iii) any other compensation under such agreements; provided,
however, that Capitation Revenues shall not include that portion of the revenues
from Managed Care Payors which is paid by MCP or any of its Affiliates to
contracted providers of care, including, but not limited to hospitals,
specialists (who are not Physician Members) and home care providers.
(g) "Compensation Committee" shall mean five (5) Physician
Members elected annually by the Physician Members pursuant to MCP's By-laws, who
shall be responsible for allocating certain distributions from the Compensation
Pool as contemplated by Section 7.4.
(h) "Compensation Pool" shall have the meaning set forth
in Section 7.1.
(i) "Deductible Expenses" with respect to any Fiscal Period
shall mean, when used with respect to any Physician Responsibility Center, an
amount equal to (i) any Tax MCP is required to pay or withhold with respect to
the Physician Members in such Physician Responsibility Center, (ii) the cost of
any pension, health or automobile benefits and any other benefits not included
in Physician Responsibility Center Operating Expenses, in each case that are
provided to such Physician Members and (iii) any Physician Responsibility Center
Discretionary Expenses.
-2-
(j) "Effective Date" means August 1996.
--------
(k) "Employment Agreements" means the employment agreements
between MCP and each Physician Member which agreements are made subject to these
Terms and Conditions.
(l) "Fair Market Value" shall mean, as to any asset, the fair
market value of such asset as agreed upon by MCP and the Physician Members, or
in the event that MCP and the Physician Members cannot agree to such value by
ninety (90) days prior to the Purchase Closing (as defined in Section 10.6), the
fair market value of such asset as determined by an entity (the "Independent
Financial Expert") regularly engaged in the business of evaluating assets of
medical clinics and associated businesses and that is mutually acceptable to MCP
and the Physician Members. The Independent Financial Expert may use any
customary and generally accepted method of determining fair market values, and
shall take into account the effect of any liens, claims or encumbrances (other
than those arising out of Physician Related Liabilities (as defined in Section 1
0.4(a)(ii)) that may reasonably be expected to have an effect on the value of
such assets. The cost of any Independent Financial Expert shall be paid one-half
(1/2) by MCP and one-half (1/2) by the Physician Members.
(m) "Fiscal Period" means the twelve (12) month or shorter
period ending on December 31 of each year.
(n) "IHS Expenses" means, for any period, the direct and
indirect expenses (incurred in accordance with a budget approved by the Joint
Policy Board and MCP) by or on behalf of MCP or any of its Affiliates during
such period in connection with the provision of Integrated Health Services
(including overhead of MCP and PQC incurred in connection with the provision of
Integrated Health Services).
(o) "IHS Profits" means, for any period, the excess of
(a) IHS Revenues over (b) IHS Expenses.
(p) "IHS Revenues" means, for any period, the revenues,
determined in accordance with generally accepted accounting principles, earned
during such period by MCP from the provision of Integrated Health Services.
(q) "Integrated Health Services" shall mean any business that
MCP or PQC establishes, whether directly or through a subsidiary, which (i)
provides medical related services that are not traditionally performed by
physicians or physician practices at medical offices (it being understood that
in-office laboratory and other ancillary services performed by the Physician
Members as of the Effective Date are not Integrated Health Services) and (ii)
are determined to be Integrated Health Services by PQC, MCP and the Joint Policy
Board.
(r) "Intellectual Property" means all (i) patents, patent
applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, re-examination, utility model,
certificate of invention and design patents, registrations and applications for
registrations, (ii) trademarks, service marks, trade dress, logos, trade names
and corporate names and registration and applications for registration thereof,
(iii) copyrights and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data and documentations, (vi) trade secrets and confidential
business information, whether patentable or non-patentable and whether or not
reduced to practice, know-how, clinical product and service processes and
techniques, research and development information, medical protocols,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, (vii) other proprietary rights relating to the foregoing
(including, without limitations, remedies against infringement thereof and
rights of protection of interest therein under the laws of all jurisdictions)
and (viii) copies and tangible embodiments thereof.
-3-
(s) "Joint Policy Board" means the Joint Policy Board
established pursuant to Article IV of these Terms and Conditions and the By-laws
of MCP.
(t) "Laboratory Center" means as of the Effective Date
Physician Responsibility Center H and shall mean in the future any other
Physician Responsibility Center that primarily provides laboratory services.
(u) "Managed Care Contracts" has the meaning assigned
thereto in Section 2.9.
(v) "Managed Care Payors" has the meaning assigned thereto
in Section 2.9.
(w) MCP means Medical Care Partners, P.C., a Massachusetts
professional corporation.
(x) "MCP Allocation Account" shall mean a record keeping entry
on the books of MCP to which Revenues allocated to MCP with respect to any
Fiscal Period are recorded.
(y) "MCP Shareholder" means the one (1) or more physicians who
from time to time are the record holder of all of the issued and outstanding
capital stock of MCP.
(z) "Medical Advisory Board" means the Medical Advisory Board
established pursuant to Article V of these Terms and Conditions and the By-laws
of MCP.
(aa) "Medical Waste" includes, but is not limited to, (i)
pathological waste, (ii) blood, (iii) sharps, (iv) wastes from surgery or
autopsy, (v) dialysis waste, including contaminated disposable equipment and
supplies, (vi) cultures and stocks of infectious agents and associated
biological agents, (vii) contaminated animals, (viii) isolation wastes, (ix)
contaminated equipment, (x) laboratory waste, (xi) any substance, pollutant,
material, or contaminant listed or regulated under any Medical Waste Law, and
(xii) other biological waste and discarded materials contaminated with or
exposed to blood, excretion, or secretions from human beings or animals.
(ab) "Medical Waste Laws" shall mean the following, including
regulations promulgated and orders issued thereunder, all as may be amended from
time to time: (i) the Medical Waste Tracking Act 42 USCA ss.6991 Lt. sea.
("MWTA"), (ii) the U.S. Public Vessel Medical Waste Anti-Dumping Act of 1988, 33
USCA ss.ss.2501 et seq., (iii) the Marine Protection, Research and Sanctuaries
Act of 1972, 33 USCA ss.ss.1401 et seq., (iv) The Occupational Safety and Health
Act, 29 USCA ss.ss.651 et seq., (v) the United States Department of Health and
Human Services, National Institute for Occupational Safety and Health,
Infectious Waste Disposal Guide Publication No. 88-119, and (vi) any other
federal, state, regional, county, municipal, or other local laws, regulations,
and ordinances insofar as they purport to regulate Medical Waste, or impose
requirements relating to Medical Waste.
(ac) "Nonpatient Revenue" means revenue of a Physician Member
attributable to activities other than direct patient care, such as payments for
consulting services outside the scope of direct patient care provided in
connection with the practice, military service, speaking services, legal
consultation (deposition fees), publications, directorships, research and
teaching and, to the extent (i) historically conducted by the Physician Member
and (ii) that such activity does not involve the facilities of MCP,
interpretation of laboratory and diagnostic tests.
(ad) "Operating Manager" has the meaning assigned thereto
in Section 6.3.
(ae) "Operating Revenues" means, for any period, the aggregate
of Physician Responsibility Center Gross Revenues for each Physician
Responsibility Center for such period.
-4-
(af) "Physicians" means Physician Members and Physician
Associates.
(ag) "Physician Associates" means those employees of MCP who
are licensed physicians but are not Physician Members.
(ah) "Physician Extender Employees" shall mean non-Physicians
who provide medical services which may be billed by MCP to third parties either
as incident to the services of a Physician or separately from the Physicians
services.
(ai) "Physician Responsibility Center Discretionary Expenses"
means, during the Fiscal Period ended December 31,1996, any increase in actual
staffing or other expenses, including Physician Responsibility Center Operating
Expenses, above the levels set forth in Exhibit A to these Terms and Conditions,
subject to adjustment as contemplated in Section 7.3. With respect to any Fiscal
Period commencing after December 31,1996, Physician Responsibility Center
Discretionary Expenses means any personnel, operating and other expenses,
including Physician Responsibility Center Operating Expenses, over and above the
standard levels developed by the Joint Policy Board and approved by MCP and
included in a Physician Responsibility Center's annual operating budget, as
adjusted from time to time in accordance with Section 7.3.
(aj) "Physician Responsibility Center Gross Revenues" means,
except with respect to a Laboratory Center, the aggregate revenues determined in
accordance with generally accepted accounting principles for direct and indirect
patient care services performed in an inpatient or outpatient setting by the
Physician Members, Physician Associates or Physician Extender Employees of any
Physician Responsibility Center, including fee for service payments for billed
services, discounted fee for service payments for Managed Care Payors,
Capitation Revenues, and if applicable, any surplus payment received by MCP with
respect to hospital, medical and other risk pools under any Managed Care
Contract, including the Secured Horizons Managed Care Contract, and may include,
as determined by the Joint Policy Board, Nonpatient Revenues for any Physician
Member in such Physician Responsibility Center; provided, however, that for the
Fiscal Period ended December 31,1996, Physician Responsibility Center Gross
Revenues shall not include Nonpatient Revenues. "Physician Responsibility Center
Gross Revenues" with respect to any Laboratory Center means the aggregate
revenues determined in accordance with generally accepted accounting principles
for the provision of laboratory services performed by such Laboratory Center,
including fee for service payments and the portion, if any, of any payment from
a Managed Care Payor allocated to such Laboratory Center pursuant to Section
2.9.
(ak) "Physician Responsibility Center Net Revenues" means,
with respect to any Physician Responsibility Center, Physician Responsibility
Center Gross Revenues minus Physician Responsibility Center Operating Expenses.
(al) "Physician Responsibility Center Operating Expenses",
except with respect to a Laboratory Center, means, for any period, all the
operating expenses incurred by or on behalf of MCP with respect to any Physician
Responsibility Center to the extent approved from time to time by MCP and to the
extent contemplated by Section 4.1, the Joint Policy Board, including: (i) rent,
utilities, maintenance and related cleaning costs and any other Premises and
Personal Property Expenses; (ii) depreciation and amortization of capital
expenditures made for the benefit of a particular medical practice site operated
by MCP at which all or some of the Physician Members in the Physician
Responsibility Center practice; (iii) repairs; (iv) office equipment expenses;
(v) telephone; (vi) compensation, benefits and other direct and indirect costs
of non-physician employees, Physician Extender Employees and Physician
Associates, including federal and state employee taxes, and the benefits for
Physician Members to the extent not treated as a Deductible Expense; (vii)
insurance (including, but not limited to, malpractice, commercial, property and
casualty, and workers' compensation); (viii) office administration expenses;
(ix) billing services; (x) transcription services; (xi) professional services
(including legal and accounting); (xii) drugs
-5-
and medical supplies; (xiii) medical dues and subscriptions; (xiv) approved
continuing medical education expenses; (xv) advertising and public relations
expenses; (xvi) personal property and intangible taxes assessed against assets
used by or in connection with MCP; (xvii) office supplies; (xviii) other
expenses incurred by or on behalf of the Physician Members and agreed to be paid
by MCP; and (xix) losses and other costs attributable to the Physician
Responsibility Center under any Managed Care Contract or otherwise allocated to
the Physician Responsibility Center by the Joint Policy Board, including any
liability with respect to any risk pools under such Managed Care Contract.
"Physician Responsibility Center Operating Expenses with respect to any
Laboratory Center means, for any period, all the operating expenses incurred by
or on behalf of MCP with respect to such Laboratory Center to the extent
approved from time to time by MCP and to the extent contemplated by Section 4.1,
the Joint Policy Board, including: (i) rent, utilities, maintenance and related
cleaning costs and any other Premises and Personal Property Expenses; (ii)
depreciation and amortization of capital expenditures made for the benefit of
such Laboratory Center; (iii) repairs; (iv) office equipment expenses; (v)
telephone; (vi) compensation, benefits and other direct and indirect costs of
Laboratory Center employees, including federal and state employee taxes; (vii)
insurance (including, but not limited to, malpractice, commercial, property and
casualty, and workers' compensation); (viii) office administration expenses;
(ix) billing services; (x) transcription services; (xi) professional services
(including legal and accounting); (xii) laboratory, testing, drugs and medical
supplies; (xiii) medical and laboratory dues and subscriptions; (xiv) approved
continuing education expenses; (xv) advertising and public relations expenses;
(xvi) personal property and intangible taxes assessed against assets used by or
in connection with MCP; (xvii) office supplies; and (xviii) losses and other
costs attributable to the Laboratory Center under any Managed Care Contract or
otherwise allocated to the Laboratory Center by the Joint Policy Board,
including any liability with respect to any risk pools under such Managed Care
Contract.
(am) "Physician Members" shall mean only those physicians who
(i) share in the Revenues of MCP as provided in Article VII, (ii) are employees
of MCP, whose employment agreements with MCP provide that such employment
arrangement is subject to these Terms and Conditions and (iii) are licensed to
provide professional medical services in the Commonwealth of Massachusetts or
the State of Connecticut and in any other credentialling guidelines established
by the Medical Advisory Board and approved by the Joint Policy Board and MCP.
(an) "Physician Payments" means the aggregate consideration
pursuant to affiliation, asset purchase, merger or similar agreements, including
earn-out or similar payments, paid from time to time to a Physician Member for
agreeing to become affiliated with MCP.
(ao) "PQC" means Physicians Quality Care, Inc., a Delaware
corporation.
(ap) "Practice Fund Account" shall mean a record keeping entry
on the books of MCP on which expenses incurred by MCP, PQC or their Affiliates
with respect to Practice Wide Expenses are recorded as negative amounts and
allocations of Stage One Gross Margin pursuant to Section 7.1 are reflected as
positive amounts.
(aq) "Practice Wide Expenses" shall mean capital or operating
expenditures which the Joint Policy Board has designated as Practice Wide
Expense and which relate to services beneficial to more than one Physician
Responsibility Center.
(ar) "Premises" has the meaning assigned thereto in
Section 2.3.
(as) "Premises and Personal Property Expenses" has the meaning
assigned thereto in Section 2.3.
-6-
(at) "Responsibility Center Operating Expenses" means, for any
period, the aggregate of Physician Responsibility Center Operating Expenses for
each Physician Responsibility Center.
(au) "Revenues" means Stage One Gross Margin and IHS Profits.
(av) "Stage One Gross Margin" means, for any period, the
excess of (a) Operating Revenues over (b) Responsibility Center Operating
Expenses.
(aw) "Stage Two Gross Margin" has the meaning set forth in
Section 7.1. [B
(ax) "Stage Three Gross Margin" has the meaning set forth
in Section 7.1.
(ay) "Xxxxx" means 42 U.S.C. (s)1395nn and all rules and
regulations thereunder, and any interpretations thereof issued by any government
authority, as such may be amended or revised from time to time.
(az) "Targeted Physician Responsibility Center Expenses"
means, for any Fiscal Period, the budgeted amount of Physician Responsibility
Center Operating Expenses recommended to be incurred by a Physician
Responsibility Center during such Fiscal Period as determined by the Joint
Policy Board.
(ba) "Targeted Physician Responsibility Center Revenues"
means, for any Fiscal Period, the budgeted amount of Physician Responsibility
Center Gross Revenue recommended to be realized by a Physician Responsibility
Center during such Fiscal Period as determined by the Joint Policy Board.
(bb) "Tax" means all federal, state, local, foreign and other
income, gross receipts, sales, use, ad valorem, transfer, withholding, payroll,
employment, franchise, property and other taxes.
(bc) "Tax Return" means all returns, statements and other
documents in respect of Taxes.
Section 1.4. Initial Partial Year. With respect to the Base
--------------------
Compensation Pool Amount or any other amount expressed as an annual amount or
budget, for the year ended December 31,1996 such amounts shall be adjusted to
reflect the fact that the Effective Date is in the middle of a Fiscal Period,
such adjustment to be accomplished by multiplying such amount or budget by a
fraction the numerator of which is the number of calendar days remaining in the
current calendar year after the Effective Date and the denominator of which is
366.
Article II
Facilities and Support Services to be Provided by MCP
Section 2.1. General Administrative Services.
--------------------------------
(a) MCP shall provide, or arrange for the provision of, all
management and administration services in connection with its day-to-day
business operations and the medical practices of the Physician Members. MCP
shall also provide, or arrange for the provision of, such other non-physician
services relating to its operation contemplated by these Terms and Conditions.
Any reference in these Terms and Conditions to a service being provided or a
person being employed by MCP shall be satisfied if MCP arranges for such service
to be provided or for such person to be employed by a third party, which third
party may, but need not, be an Affiliate of MCP; provided, however, that all
Physician Members shall be employed by MCP. MCP agrees that, to the maximum
extent possible, the intent of MCP is to relieve
-7 -
the Physician Members of the administrative, accounting, purchasing,
non-physician personnel and other business aspects of their practices. MCP's
employees who are not Physicians shall have no authority, directly or
indirectly, to perform, and shall not perform, any medical services required to
be provided by a physician. All clinical support personnel, while performing
patient care services, shall be subject solely to the direction and supervision
of a Physician and, in the performance of such medical services, shall not be
--
subject to any direction or control by MCP's employees who are not Physicians.
(b) MCP shall, in its own name and on behalf of the
Physicians, xxxx patients, insurance companies and other third-party payors and
collect the professional fees for medical services rendered at the Premises and
outside the Premises for hospitalized patients and for all other professional
and medical services and products provided by MCP, the Physicians and the
Physician Extender Employees. To the extent that legal or contractual
obligations require that payment for medical services be paid directly to a
Physician Member, or payment for such services come into a Physician Member's
possession, each Physician Member agrees to promptly endorse and forward any
payment received from patients, insurance companies and other third-party payors
with respect to services rendered by MCP, any Physician Member or Physician
Extender Employee to MCP. Each Physician Member agrees in a timely and accurate
manner to maintain and submit such records, documents and other materials
required for patient billing, reimbursement and requirements of federal and
state statutes, regulations and rules as MCP or PQC shall reasonably determine
to be necessary or desirable. Each Physician Member shall execute a Power of
Attorney in the form and substance reasonably acceptable to MCP in connection
with the rights and powers granted to MCP pursuant to this Section 2.1(b). Each
Physician Member shall cooperate with and, at the request of MCP, shall provide
reasonable assistance to MCP in connection with the functions set forth herein.
In the performance of the services described in this Section 2.1(b), MCP shall
use commercially reasonable efforts to collect such professional fees and shall
comply with all applicable Managed Care Contracts and all applicable laws, rules
and regulations. From time to time, MCP in its discretion, and subject to the
approval of the Joint Policy Board, shall adopt and implement fee schedules for
non-prepaid patients and for all re-xxxxxxxx and recovery items on prepaid
Managed Care Contracts which are authorized and permitted by such contracts.
Notwithstanding any provision of these Terms and Conditions to the contrary,
nothing herein shall be construed as precluding MCP or any of its Affiliates
from entering into agreements with other physicians or entities owned by other
physicians, including use of the trade names and trademarks of MCP or its
Affiliates utilized by MCP.
(c) MCP shall supply to each Physician Member the ordinary,
necessary or appropriate administrative services required for the efficient
operation of the Physician Member's practice, including, without limitation,
necessary clerical, accounting. purchasing, payroll, legal, bookkeeping and
computer services, information management, printing, postage and duplication
services and medical record documentation.
(d) MCP shall prepare unaudited monthly statements of revenues
and expenses with respect to each Physician Responsibility Center, which shall
be delivered to the relevant Physician Responsibility Center as soon as
practicable, but no later than forty-five (45) days, after the end of each
calendar month. All financial statements shall be prepared in accordance with
generally accepted accounting principles applied on a consistent basis. The
Physician Members, at the election of a majority of the Physician Members, shall
have the right, at their own expense, to have the financial statements of MCP
audited by independent accountants selected by such Physician Members with
respect to any Fiscal Period. If such independent accountants present a report
identifying a departure in such financial statements from generally accepted
accounting principles which departure has had a material adverse affect on the
revenues allocated to the Compensation Pool pursuant to Sections 7.1 or 7.2
hereof, MCP shall reimburse the Physician Members for the cost of such audit.
(e) MCP shall maintain all files and records relating to the
operation of the medical practice, including, but not limited to, accounting,
billing, collection and customary financial records and
-8-
patient files. The management of all files and records shall comply with all
applicable federal, state and local statutes and regulations, and all files and
records shall be located so that they are readily accessible for patient care,
consistent with efficient records management practices. The Physician Members
shall supervise the preparation of, and direct the contents of, patient medical
records, all of which shall remain confidential. Although MCP shall own all
medical and patient records, MCP grants each Physician Member the right to use
such information and data in connection with the provision of medical care to
patients. Subject to applicable laws, regulations and any applicable
accreditation policies, each Physician Member shall, if requested by MCP,
provide MCP with true and complete copies of the original patient records that
such Physician Member owns. Each Physician Member and MCP hereby agree to
preserve the confidentiality of such patient medical records.
Section 2.2. Development of MCP's Practice.
------------------------------
(a) MCP may have opportunities to provide new services and
utilize new technologies that will require capital expenditures, and MCP
anticipates that such opportunities may include use of such new and replacement
equipment, including information management systems, as may be economically
justified. Development of new services will depend on, among other factors,
physician composition, physician support and the performance of MCP. Capital
expenditures shall be made at the election of MCP subject to the approval of the
Joint Policy Board as contemplated by Section 4.1. MCP will attempt, but shall
not be obligated to, add new services, which may include, but are not limited
to, contracts, joint ventures, partnerships and other arrangements with
healthcare providers to provide Integrated Health Services.
(b) Any employment of physicians or acquisition of physician
groups or practices by MCP shall be subject to PQC's approval of the business
prudence of the transaction and the availability of capital.
(c) Each Physician Member shall assist in providing or
operating such Integrated Health Services as are approved by the Joint Policy
Board, MCP and PQC provided such assistance does not unduly burden such
Physician Member or interfere with a Physician Member's ability to render
medical care. If PQC or one of its Affiliates proposes to provide any Integrated
Health Service in the geographic area described on Exhibit B (the "MCP Region"),
PQC shall notify MCP and the Joint Policy Board and MCP shall have 30 days
during which to elect to participate in the provision of such Integrated Health
Service in the MCP Region on such terms as are mutually acceptable to MCP and
PQC. MCP shall not agree to participate in any Integrated Health Service unless
the terms of such participation have been approved by the Joint Policy Board. If
MCP does not elect to participate in such Integrated Health Service in the MCP
Region within such 30 day period, PQC may, but shall not be obligated to,
provide such Integrated Health Service directly or through another entity and
MCP shall have no right to participate in the revenues or income from such
Integrated Health Service. MCP shall not have the right to participate in the
provision of any Integrated Health Service outside of the MCP Region. Except as
provided in this Section 2.2(c), PQC and its Affiliates shall be entitled to
provide Integrated Health Services through entities other than MCP. Except as
provided in this Section 2.2(c), nothing in these Terms and Conditions grants
any Physician Member the right to participate in the provision of, or revenues
from, any services which PQC elects to offer through Affiliates other than MCP.
(d) PQC agrees not to affiliate with a professional
corporation other than MCP in the MCP Region that provides substantially the
same medical services as MCP.
Section 2.3. Facilities.
-----------
(a) Premises. MCP shall make available for use in connection
--------
with a Physician Members' practice the premises that are described in Exhibit C
attached hereto or such other real property
-9-
in the Commonwealth of Massachusetts or the State of Connecticut acquired or
leased by MCP (the "Premises"); provided that, in the event that MCP's rights to
use any such Premises terminates or MCP determines that such premises are no
longer appropriate for the efficient operation of MCP's medical practice, MCP
shall use its reasonable efforts to provide other suitable premises to be used
by the Physician Members, the use of which premises shall be subject to the
approval of the Joint Policy Board, such approval not to be unreasonably
withheld. MCP shall not require a Physician Member to practice at any Premise
other than the Premises at which the Physician Member practices on the Effective
Date (or the initial date of employment, if later) without the approval of the
Joint Policy Board. MCP shall arrange for the provision of all utilities
reasonably required in connection with the use of the Premises and shall provide
for the proper cleanliness of the Premises, including normal janitorial services
and refuse and Medical Waste disposal. MCP shall maintain the Premises and make
all necessary repairs thereto as promptly as practicable. MCP shall consult with
the Physician Members regarding the condition, use and needs of such Premises
and any required improvements. MCP shall assure that the Premises satisfy the
standard set forth in Section 2.11.
(b) Personal Property. MCP shall own, lease or otherwise
-----------------
provide the equipment, furniture, fixtures, furnishings and other personal
property acquired in the Affiliations, together with such other equipment,
furniture, fixtures, furnishings and other personal property acquired by MCP or
any Affiliate pursuant to these Terms and Conditions, as shall be necessary or
appropriate for MCP's practice (collectively, the "Personal Property"). MCP
shall maintain the Personal Property and promptly make necessary repairs and
maintenance thereto. MCP shall consult with the Physician Members regarding the
condition, use and needs of such Personal Property. MCP shall assure that all
Personal Property satisfy the standard set forth in Section 2.11.
(c) Expenses. All costs, fees, expenses and other
--------
disbursements and liabilities incurred in connection with the Premises and the
Personal Property, including, without limitation, all costs of repairs,
maintenance and improvements, utility expenses (i.e.,telephone, electric, gas
and water), janitorial services, refuse disposal, Medical Waste disposal, real
or personal property lease payments and expenses, interest, principal and other
debt service or refinancing payment and expenses in connection with the Premises
or Personal Property, depreciation, real estate taxes and casualty, liability
and other insurance (collectively, "Premises and Personal Property Expenses")
shall be included in Responsibility Center Operating Expenses.
(d) Disposition. Nothing herein shall be construed as
-----------
precluding MCP or any of its Affiliates from selling, lending or otherwise
disposing of all or any part of its real property, improvements, Personal
Property, trade names, trademarks and other intangible property; provided that
any such disposition shall not eliminate or diminish MCP's obligations
hereunder.
Section 2.4. Financial Planning and Budgeting. MCP shall prepare
--------------------------------
annual budgets reflecting the anticipated revenues and expenses, sources and
uses of capital in the practice of each Physician Responsibility Center. Such
budgets shall be presented to the Joint Policy Board at least thirty (30) days
prior to the end of each Fiscal Period. All budgets are subject to the approval
of the Joint Policy Board and MCP. Subject to the powers assigned to the Joint
Policy Board pursuant to Article IV, PQC shall determine the amount and form of
capital to be invested annually in the assets to be utilized by MCP. MCP shall
specify the targeted profit margin for MCP, which shall be reflected in the
overall budget.
Section 2.5. Management Information Systems. MCP shall make available
------------------------------
for use in each Physician Member's practice, such state-of-the-art (or such
other standards as are approved by the Joint Policy Board) at the earliest
practicable opportunity consistent with budgets adopted in accordance with
Section 7.3 information and management systems hardware and software as PQC,
with the approval of the Joint Policy Board, shall reasonably determine to be
necessary for MCP's operation and such Physician Member's practice. MCP shall
consult with the Physician Members concerning their need for information
-10-
or management systems hardware and software and make a recommendation to the
Joint Policy Board with respect to the acquisition of such hardware and
software.
Section 2.6. Inventory and Supplies. MCP shall order and purchase
----------------------
inventory, supplies, and such other ordinary, necessary or appropriate materials
which are requested by the Physician Members and which MCP shall reasonably
determine to be necessary in its operation.
Section 2.7. Advertising and Public Relations. MCP shall design and
---------------------------------
implement such local public relations and advertising programs, with appropriate
emphasis on public awareness of the availability of services at MCP, as MCP
determines to be appropriate. Prior to publication or distribution of marketing
or public relations material or information, MCP shall submit such material to
the Joint Policy Board for its review and approval. MCP shall also design and
implement all other non-local public relations or advertising programs (together
with other professional corporations that utilize the services of Affiliates of
PQC). All public relations and advertising programs shall be conducted in
compliance with applicable standards of medical ethics, laws and regulations. In
the event that there is an adverse incident involving MCP or any Physician
Member or patient, any public statement or announcement by or on behalf of
either MCP or any Physician Member shall be approved in advance by MCP.
Section 2.8. Personnel. (a) MCP shall retain such non-physician
----------
professional support, including nursing and other non-physician professional
support, and administrative, clerical, secretarial, bookkeeping and collection
personnel, as is reasonably necessary for the efficient conduct of its
operations. The Joint Policy Board shall determine the salaries and benefits of
any Physician Associate. The salaries and benefits of Physician Extender
Employees shall be determined by MCP after consultation with the Joint Policy
Board and the Physician Responsibility Center utilizing such Physician Extender
Employee. Such personnel shall be under the direction, supervision and control
of MCP, except that those personnel performing patient care services shall be
subject to the professional supervision of the Physicians to whom they are
assigned. If any Physician Member is dissatisfied with the services of any
employee who provides services for such Physician Member at the Premises, MCP,
after consultation with the Joint Policy Board, shall in good faith determine
whether the performance of that employee could be brought to acceptable levels
through counsel and assistance, or whether such employee should be terminated.
If MCP determines to retain such employee and the Physician Member is still
dissatisfied with such employee's services after a two (2) month period, MCP
shall either relocate such employee or otherwise cease to utilize such employee
unless MCP reasonably determines that such termination may expose MCP to
liability.
(b) The staffing of MCP shall be governed by the overriding
principle and goal of providing high-quality medical care. Employee assignments
shall be made to attempt to assure consistent and continued rendering of
high-quality medical and support services and to attempt to assure prompt
availability and accessibility of individual medical and support personnel to
the Physician Members in order to develop constant, familiar and routine working
relationships between individual physicians and individual members of the
medical support personnel. MCP shall maintain established working relationships
between Physician Members, Physician Associates, Physician Extender Employees
and non-physician employees wherever possible and MCP shall make every effort
consistent with sound business practices to honor the specific requests of a
Physician Member with regard to the assignment of MCP's employees. MCP agrees
not to terminate or transfer any employee listed on Exhibit D without the
consent of the Joint Policy Board, which consent shall not be unreasonably
withheld.
(c) MCP and each Physician Member agree not to discriminate
unlawfully against any employee of MCP on the basis of race, religion, age, sex,
sexual orientation, disability or national origin, or any other basis proscribed
by laws.
Section 2.9. Provider and Pavor Relationships. MCP shall negotiate,
--------------------------------
establish, supervise and maintain all contracts and relationships
(collectively, the "Managed Care Contracts") with all managed care
-11-
and institutional healthcare providers and payors, health maintenance
organizations, preferred provider organizations, exclusive provider
organizations, Medicare, Medicaid and other similar entities (collectively,
"Managed Care Payors"). Each Physician Member appoints MCP and PQC as the
Physician Member's exclusive agents for the negotiation and establishment of
Managed Care Contracts and shall not enter into a Managed Care Contract or
assume any liability under a risk pool or similar arrangement without MCP's and
Joint Policy Board's consent. Except as otherwise provided herein, approval,
disapproval, termination or amendment of any contract or relationship of such
Managed Care Payors with MCP shall be the joint responsibility of the Joint
Policy Board and MCP. The allocation of profits and losses with respect to risk
pools under any Managed Care Contract shall be allocated among Physician
Responsibility Centers in a manner mutually acceptable to each Physician
Responsibility Center which is participating in such Managed Care Contract, or,
in the event that such Physician Responsibility Centers can not agree upon such
allocation, as determined in good faith by MCP and approved by the Joint Policy
Board.
Section 2.10. Events Excusing Performance. In the event of strikes,
---------------------------
lock-outs, calamities, acts of God, or other events beyond the reasonable
control of MCP, MCP shall not be liable to any Physician Member for failure to
perform any of the services required hereunder and the Physician Members shall
not have the right, as a result of such events and their consequences, to
terminate their Employment Agreements pursuant to Article X of these Terms and
Conditions, for so long as such events continue and for a reasonable period of
time thereafter; provided that MCP uses its reasonable efforts to cure any
nonperformance capable of being cured as soon as practicable.
Section 2.11. Performance Standard. All services, facilities,
--------------------
furniture, fixtures, and equipment provided by MCP shall be provided in a manner
consistent with community standards for medical practices of similar locality,
size and speciality.
Section 2.12. Provision of Service Through Third Parties. Any services
------------------------------------------
or other obligation required to be provided by MCP pursuant to these terms and
conditions may, at MCP's sole election, be provided through third parties,
including PQC or any of its Affiliates.
Section 2.13. Compliance with Laws. For purposes of this Section 2.13,
---------------------
actions of, or the failure to comply by, a Physician Member or by any person
under a Physician Member's supervision shall not be deem to be an action of, or
failure to comply by, MCP. MCP shall comply, in all material respects with all
applicable federal, state and local laws, rules, regulations and restrictions in
the conduct of MCP's business. Without limiting the generality of the foregoing,
MCP shall comply with all Medical Waste Laws applicable to the operation of MCP
in the generation, transportation, treatment, storage, disposal or other
handling of Medical Waste. MCP agrees not to:
(a) enter into any contract, lease, agreement or arrangement,
including, but not limited to, any joint venture or consulting agreement, to
provide services, lease space, lease equipment or engage in any other venture or
activity with any physician, hospital, pharmacy, home health agency or other
person or entity which is in a position to make or influence referrals to, or
otherwise generate business for, MCP, if such transaction is in violation of any
applicable law, rule or regulation;
(b) knowingly and willfully make or cause to be made a false
statement or representation of a material fact in any application for, or in
determining rights to, any benefit or payment;
(c) fail to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with intent to
fraudulently secure such benefit or payment;
(d) knowingly and willfully pay, solicit or receive any
remuneration (including any kickback, bribe, or rebate), directly or indirectly,
overtly or covertly, in cash or in kind or offer to pay or
-12-
receive such remuneration (i) in return for referring an individual to a person
for the furnishing or arranging for the furnishing of any item or service for
which payment may be made in whole or in part by Medicare or Medicaid, or (ii)
in return for purchasing, leasing, or ordering, or arranging for or recommending
purchasing, leasing, or ordering any good, facility, service, or item for which
payment may be made in whole or in part by Medicare or Medicaid; and
(e) refer a Medicare or Medicaid patient for Designated
Health Services (as defined in Xxxxx) to, or provide Designated Health Services
to, a patient upon a referral from, an entity or person with which MCP has a
financial relationship, other than as permitted by exceptions set forth in
Xxxxx.
Section 2.14. Advance of Initial Working Capital. PQC agrees to advance
to MCP working capital in an amount as shall reasonably be require to fund MCP's
operations for the first 45 days after the Effective Date. Thereafter, PQC may,
if required for the operations of MCP, but shall not be obligated to, provide
MCP with additional working capital financing. Any advance for working capital
shall be in the form of a loan, repayable to PQC upon demand, that shall not
accrue interest until 60 days after the Effective Date. If any amount remains
outstanding thereafter, such working capital loan shall bear interest at such
rate as PQC and the Joint Policy Board shall agree or, in the absence of such
agreement, at a rate 200 basis points above the rate charged for prime
commercial loans by commercial banks in the City of Boston.
Article III
Obligations of Physician Members
Section 3.1. Professional Services. Each Physician Member shall provide
---------------------
professional services to patients in compliance at all times with ethical
standards, laws, rules and regulations applicable to the operations of MCP and
the Physician Members and any standards, guidelines, policies and procedures
established by MCP or the Medical Advisory Board. Each Physician Member
represents to MCP that such Physician Member has and will maintain all required
licenses, credentials, approvals or other certifications to perform his or her
duties and services for MCP. In the event that any disciplinary actions or
medical malpractice actions are initiated against any Physician Member or the
Physician Member becomes aware of the breach of any law, policies, guidelines,
procedures or standards, such Physician Member shall promptly inform the
president of MCP of such action and the underlying facts and circumstances.
Section 3.2. Medical Practice. (a) The primary responsibility of the
----------------
Physician Member shall be to provide medical services to MC P's patients with
scheduled office hours at MCP's medical practice offices or any other site
served by MCP in the Commonwealth of Massachusetts or, if the Physician Member
holds a valid, unencumbered medical license in Connecticut, the State of
Connecticut. The Physician Member shall be available for regularly scheduled
office visits consistent with the schedule generally applicable to Physician
Members and developed by the Medical Director. The Physician Members shall use
and occupy the Premises exclusively for the practice of medicine and for
providing other related services. Unless otherwise approved in writing by MCP,
it is expressly acknowledged by each Physician Member that the medical practice
or practices conducted at MCP shall be conducted solely by physicians associated
with MCP, and no other physician or medical practitioner shall be permitted to
use or occupy the Premises. All medical professional services, including, but
not limited to, diagnosis, treatment, surgery, therapy, the prescription of
medicine and drugs, and the supervision and preparation of medical reports shall
be the responsibility of the Physicians.
(b) A Physician Member shall devote the Physician Member's
full professional time, attention and energy to the Physician Member's medical
practice and other professional duties, except as both MCP and the Joint Policy
Board shall otherwise agree. MCP agrees that it will at no time knowingly
-13-
issue to the Physician Member any direction or impose upon the Physician Member
any requirements the compliance with which would cause the Physician Member to
violate any regulations or mandatory professional standards applicable to the
Physician Member. The Physician Member agrees to provide professional services
to all MCP patients that are customarily performed by physicians including, but
not limited to, examination of patients, performance of diagnostic procedures,
treatment, surgery (if the Physician Member is a surgeon), consultation and
referral, prompt preparation of medical records, charts and reports and
follow-up care. The Physician Member agrees that any medical services rendered
by the Physician Member to MCP's patients who expressly desire to engage the
Physician Member personally shall be rendered by the Physician Member as an
employee of MCP. The Physician Member further agrees to serve on committees and
to perform such other professional duties and responsibilities and comply with
such policies and procedures as may be reasonably designated or adopted from
time to time by MCP and, if required by Section 4.1, the Joint Policy Board.
(c) The Physician Member agrees and understands that, as a
condition of employment, the Physician Member must maintain in good standing an
unrestricted license to practice medicine in the Commonwealth of Massachusetts
or the State of Connecticut. The Physician Employee agrees to participate as a
provider in MCP's local care networks and all other managed care plans and other
third-party payment arrangements approved as to the Physician Member by the
Joint Policy Board.
(d) The Physician Member shall participate in an on-call
rotation to provide twenty-four (24) hour availability and coverage in person or
on an on-call basis for MCP's patients, in each case as determined by the
Medical Director.
(e) The Physician Member shall maintain active privileges as
a member of the active or courtesy staff of any hospital in the Commonwealth of
Massachusetts or the State of Connecticut with MCP's consent or as MCP shall
reasonably require.
Section 3.3. Professional Education. Each Physician Member shall
----------------------
participate in such medical education programs as shall be necessary for such
Physician Member to maintain the Physician Member's licenses and credentials or
as shall otherwise be necessary for the efficient conduct of the Physician
Member's practices.
Section 3.4. Cooperation with Other Employees. Each Physician Member
--------------------------------
agrees not to interfere with, and shall take all steps reasonably necessary for
the other employees of MCP, including the Operating Manager, to perform their
duties.
Section 3.5. Name. Each Physician Member agrees that MCP shall be
----
entitled to use on a royalty free, non-exclusive and non-transferable basis for
the term of the Employment Agreement, solely in connection with advertising for
or informational documents with respect to MCP or PQC, the name of each
Physician Member.
Section 3.6. Compliance with Laws. Each Physician Member shall comply,
--------------------
in all material respects with all applicable federal, state and local laws,
rules, regulations and restrictions in the conduct of MCP's business. Without
limiting the generality of the foregoing, each Physician Member shall comply
with all Medical Waste Laws applicable to the operation of MCP in the
generation, transportation, treatment, storage, disposal or other handling of
Medical Waste (to the extent that the Physician Member or persons under the
Physician Member's supervision engage in such activities). Each Physician Member
agrees not to:
(a) enter into any contract, lease, agreement or arrangement,
including, but not limited to, any joint venture or consulting agreement, to
provide services, lease space, lease equipment or engage in any other venture or
activity with any physician, hospital, pharmacy, home health agency or other
-14-
person or entity which is in a position to make or influence referrals to, or
otherwise generate business for, MCP or any Physician Member, if such
transaction is in violation of any applicable law, rule or regulation;
(b) knowingly and willfully make or cause to be made
a false statement or representation of a material fact in any application
for, or in determining rights to, any benefit or payment;
(c) fail to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on the Physician Member's own behalf or on behalf of another, with
intent to fraudulently secure such benefit or payment;
(d) knowingly and willfully pay, solicit or receive any
remuneration (including any kickback, bribe, or rebate), directly or indirectly,
overtly or covertly, in cash or in kind or offer to pay or receive such
remuneration (i) in return for referring an individual to a person for the
furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part by Medicare or Medicaid, or (ii) in
return for purchasing, leasing, or ordering, or arranging for or recommending
purchasing, leasing, or ordering any good, facility, service, or item for which
payment may be made in whole or in part by Medicare or Medicaid; and
(e) refer a Medicare or Medicaid patient for Designated
Health Services (as defined in Xxxxx) to, or provide Designated Health Services
to, a patient upon a referral from, an entity or person with which the Physician
Member or an immediate family member has a financial relationship (as defined in
Xxxxx), other than as permitted by exceptions set forth in Xxxxx.
Section 3.7. Other Medical Services. During the term of a Physician
----------------------
Member's Employment Agreement and thereafter subject to Section 8.1, a Physician
Member shall not (directly or as an employee, shareholder, partner, consultant
or otherwise) acquire. establish or commence the operation of any medical
office, ambulatory surgery center, Integrated Health Service, optical shop,
health maintenance organization. preferred provider organization, exclusive
provider organization or similar entity or organization without the prior
approval of the Joint Policy Board and PQC.
Section 3.8. Premises and Personal Property. Each Physician Member
------------------------------
shall use his or her best efforts to prevent damage, excessive wear and tear,
and malfunction or other breakdown of the Premises and Personal Property or any
part thereof by the Physician Members. Each Physician Member shall promptly
inform MCP in writing of any and all necessary replacements, repairs or
maintenance to any of the Premises or Personal Property and any failures of
equipment that such Physician Member becomes aware of. Each Physician Member
shall comply in all material respects with all of the covenants and provisions
set forth in any leases or subleases for the Premises entered into or assumed by
MCP.
Section 3.9. Assignment of Intellectual Property. Each Physician
-----------------------------------
Member agrees to assign to PQC any Intellectual Property rights that the
Physician Member acquires during the term of the Employment Agreement; provided,
that the Physician Member shall not be required to assign to PQC Intellectual
Property rights that relate to (i) non-medical studies and inventions, (ii)
royalties from medical devices unless developed as part of the Physician
Member's services to MCP, (iii) publications on clinical aspects of a medical
practice unless developed as a part of the Physician Member's services to MCP
and (iv) medical books and articles designed primarily for purchase by non-
physicians and (v) any Intellectual Property developed by the Physician Member
prior to, or in progress on, the date of the Employment Agreement as disclosed
in writing to MCP on such date. MCP intends to review the feasibility of
commercializing any Intellectual Property assigned to it pursuant to these Terms
and Conditions. If PQC elects to commercialize such Intellectual Property, PQC
and the Physician Member shall enter into an agreement on terms acceptable to
PQC and the Physician Member to share the costs and revenues from such
commercialization with the Physician Member that assigned the Intellectual
Property to PQC. Each Physician Member agrees for the benefit of PQC, to execute
such further instruments or agreements, to
-15-
make such filing or registration and to take such other actions as PQC
determines to be necessary or desirable to give effect to the assignments
contemplated by this Section 3.9 or to protect. establish or record PQC's rights
to such Intellectual Property. Each Physician Member also agrees that PQC, the
Joint Policy Board and the Compensation Committee may consider the time devoted
by the Physician Member to the development or promotion of Intellectual Property
rights that are not assigned to PQC in determining a Physician Member's
operating budget (and the operating budget of the Physician Responsibility
Center of which such Physician Member is a part) and the allocation of the
Compensation Pool among Physician Members and Physician Responsibility Centers.
Article IV
Joint Policy Board
Section 4.1. Formation and Operation of the Joint Policy Board. (a)
-------------------------------------------------
MCP shall establish a Joint Policy Board that is responsible for developing
certain management and administrative polices for the overall business operation
of MCP and facilitating communication and interaction between MCP and the
Physician Members. The Joint Policy Board shall have the following duties and
responsibilities:
(i) Approval of all annual budgets with respect to each Physician
Responsibility Center, including but not limited to, the
salaries and benefits of Physician Associates, Targeted
Physician Responsibility Center Revenues and Targeted
Physician Responsibility Center Expenses with respect to each
Physician Responsibility Center and amounts to be expended
with respect to insurance coverage, acquisition of information
and management systems hardware and software, facilities,
furniture, equipment and fixtures, professional association
memberships, professional education and development of
ancillary services;
(ii) Determination of the policy of MCP with respect to courtesy
discounts, professional discounts, free care and other
matters;
(iii) Approval of the number and type of physicians required for the
efficient operation of MCP;
(iv) Approval of any modification to the definition of all
revenues and expenses under these Terms and Conditions;
(v) Review and approval of all advertising and other marketing
of the services performed at MCP;
(vi) Approval of the scope of Integrated Health Services provided
by MCP as contemplated by Section 2.2(c) and any revenue and
expense allocation with respect to such Integrated Health
Service if different than the allocation provided in Section
7.2;
(vii) Approval of the formation, maintenance and/or termination
of relationships with institutional health care providers and
payors;
(viii) Approval of all contracts material to MCP, including all
amendments to real property leases in effect on the Effective
Date, and all the terms of and amendments to all real property
leases entered into after the date thereof, governing the
space utilized by any Physician Member;
-16-
(ix) Consideration and determination of non-patient care grievances
pertaining to matters raised by MCP or the Physician Members;
(x) Approval of the transfer or termination of any non-physician
employee listed on Exhibit E, as contemplated by Section
2.8(b);
(xi) Approval of any review of the records of MCP as contemplated
by Section 2.1(d);
(xii) Approval of fee schedules;
(xiii) Allocation of profit and losses from risk pools to the extent
contemplated by Section 2.9;
(xiv) Approval of the Operating Manager;
(xv) Approval of any change in the Base Compensation Pool Amount to
reflect the addition or termination of Physician Members or to
reflect other factors it deems appropriate, in each case as
contemplated by Section 1.3(d);
(xvi) Approval of business and strategic plans;
(xvii) Approval of MCP's determination to terminate a Physician
Member upon disability;
(xviii) Approval of the modification or waiver of the restriction
covenants applicable to any Physician Member; and
(xix) Other activities as required by these Terms and Conditions.
The Joint Policy Board may consult with MCP, PQC and any Physician
Member before taking any action specified in this Section 4.1. but, except as
otherwise provided in these Terms and Conditions, neither the recommendations of
MCP, PQC nor any Physician Member shall be binding on the Joint Policy Board.
Any determination of the Joint Policy Board pursuant to (i), (iii), (iv), (vi),
(vii), (viii), (xiv), (xv), (xiv), and (xv) shall not be effective unless
approved by the MCP Shareholder. The President of MCP and a member of the Joint
Policy Board designated by PQC shall act as Co-Chairs of the Joint Policy Board.
Section 4.2. Number, Election and Qualification. The number of
----------------------------------
members which shall constitute the Joint Policy Board shall be nine (9). The
Physician Members, by a majority vote of the Physician Members, shall appoint
four (4) members of the Joint Policy Board; two (2) of whom shall be primary
care physicians and two (2) of whom shall be specialist physicians (the
"Physician Board Members"). PQC shall appoint five (5) members of the Joint
Policy Board, one (1) of whom shall be the President of MCP ("MCP Board
Members").
Section 4.3. Tenure. Each member of the Joint Policy Board shall
------
hold office for any number of terms, each term to be for three (3) years, except
that the initial terms of one-third (1/3) of the initial members shall be for a
term of one (1) year, one-third (1/3) shall have an initial term of two (2)
years and one-third (1/3) shall have an initial term of three (3) years. In the
event that there is a vacancy existing by reason of the death, resignation,
removal or expiration of the term of one (1) or more members of the Joint Policy
Board, such vacancy shall be filled by a person elected by whoever had
previously appointed such member, either Physician Members or PQC, as the case
may be. Each such successor shall hold office for the unexpired term of his or
her predecessor. Any member of the Joint Policy Board may resign by delivering
his or her written resignation to the President of MCP. A Physician Board Member
may be removed and replaced at any time with or without cause upon the
affirmative vote of a majority of the
-17-
Physician Members. A PQC appointed Joint Policy Board Member may be replaced
at any time with or without cause by the PQC.
Section 4.4. Subcommittees of the Joint Policy Board. The Joint
---------------------------------------
Policy Board may, by the vote of a majority of its members, elect such
committees, including an Information Systems Subcommittee, as the members of the
Joint Policy Board shall determine to be appropriate; provided, however, that
the Joint Policy Board shall establish a Dispute Resolution Subcommittee with
the powers and duties specified in Sect Section 4.5 hereof; provided further
that the Joint Policy Board shall not delegate to any other committee the duties
and responsibilities assigned to the Dispute Resolution Subcommittee. The
Dispute Resolution Subcommittee shall be composed of the persons designated in
Section 4.5. Subcommittees may include persons who are not members of the Joint
Policy Board. All subcommittees shall be chaired by a member of the Joint Policy
Board. Each subcommittee shall include, to the extent practicable, members who
are engaged in a primary care practice and physicians engaged in a specialist
practice in a ratio of 3:2.
Section 4.5. Dispute Resolution Subcommittee. The Joint Policy Board
-------------------------------
shall establish a Dispute Resolution Subcommittee. The Subcommittee shall
consist of the following five (5) members: the President of MCP, the Medical
Director of MCP, the Operating Manager and two (2) members (who shall be members
of the Joint Policy Board) appointed by the Physician Members. The President of
MCP shall act as Chair of the Dispute Resolution Subcommittee. The Dispute
Resolution Subcommittee shall have the authority to consider and make a final
determination with respect to (i) any issue within the authority of the Joint
Policy Board that has been presented for consideration by the Joint Policy Board
but with respect to which an equal number of members of the Joint Policy Board
have voted against and in favor, and (ii) any non-patient care grievances that
are referred to the Dispute Resolution Subcommittee by MCP or the Joint Policy
Board.
Article V
Medical Advisory Board
Section 5.1. Medical Advisory Board. A Medical Advisory Board shall
----------------------
be established, which shall be responsible for (i) providing medical advice to
MCP on managed care contracting, (ii) developing and disseminating, subject to
MCP's approval, medical protocols and quality and outcome measures for MCP and
the Physicians, (iii) advising MCP with respect to the number and qualifications
of physicians required for the efficient operation of MCP's practice and (iv)
overseeing the recruitment by MCP and credentialling of new physicians. The
Medical Advisory Board shall consist of seven (7) members. The members of the
Medical Advisory Board shall be the Medical Director of MCP and six (6) other
licensed physicians elected by a majority of the Physician Members, of whom four
(4) shall be primary care physicians and two (2) shall be engaged in a
specialist practice. The Medical Director of MCP shall act as chair of the
Medical Advisory Board. Each member of the Medical Advisory Board shall hold
office for any number of three (3) years terms and until successors are elected.
In the event that there is a vacancy existing by reason of the death,
resignation, removal or expiration of the term of one (1) or more members of the
Medical Advisory Board, such vacancy shall be filled by a physician elected by a
majority of the Physician Members, except that vacancies created by the death,
resignation, removal of the Medical Director shall only be filled by the
successor Medical Director or an interim Medical Director selected by MCP. Each
such successor shall hold office for the unexpired term of his or her
predecessor. Any member of the Medical Advisory Board may resign by delivering
his or her written resignation to the President of MCP. A member of a Medical
Advisory Board may be removed with or without cause by the vote of a majority of
Physician Members, except that the Medical Director may only be removed by
seventy-five percent (75%) of the Physician Members. The Medical Director shall
be responsible for organizing the agenda for each meeting of the Medical
Advisory Board.
-18-
Section 5.2. Subcommittees of the Medical Advisory Board. The
-------------------------------------------
Medical Advisory Board may, by a vote of a majority of its members, elect such
committees, including the Quality Assurance Committee, Utilization Review
Committee and the Committee on Clinical Protocols and Medical Outcome
Management, as the members of the Medical Advisory Board shall determine to be
appropriate. Subcommittees may include physicians who are not members of the
Medical Advisory Board. Each subcommittee shall be chaired by a member of the
Medical Advisory Board and shall include physicians engaged in a primary care
practice and physicians engaged in a specialist practice in a ratio of 3:2.
Article VI
Certain Provisions Regarding the
Governance of MCP
Section 6.1. The President of MCP. (a) MCP shall hire and appoint a
---------------------
physician to act as President of MCP who shall work in conjunction with the
Operating Manager in order to implement the policies established by the Joint
Policy Board. Subject to the direction and supervision of PQC and the Board of
Directors of MCP, the duties of the President shall include, without limitation,
(i) interfacing with representatives from the national corporate offices of PQC;
(ii) in cooperation with the Operating Manager, implementing the business and
strategic plans of MCP and overseeing the business operation of MCP; (iii) in
cooperation with the Operating Manager, negotiating and interfacing with payors
and other regulatory agencies; and (iv) serving as the Co-chair of the Joint
Policy Board and the Chair of the Dispute Resolution Subcommittee. The MCP
Shareholder shall determine the salary and fringe benefits of the President, who
shall also be an employee of MCP or one of its Affiliates.
(b) Subject to the By-Laws of MCP, the Physician Members shall
nominate three (3) candidates, who shall be primary care physicians, for the
position of President and the MCP Shareholder shall select one (1) candidate
from among such nominees to be employed by MCP as President. In the event that
there is a vacancy in the position of President at any time for any reason, the
MCP Shareholder shall have the authority to appoint a person to serve as interim
President until another person is duly appointed in accordance with the above
specified procedures. The President shall serve part-time in this capacity until
such time as his/her responsibilities warrant full-time employment status. The
President shall serve for an initial period of two (2) years, which may be
renewed for a maximum of two (2) additional two (2) year terms, subject to the
control of and review by MCP. MCP shall assist in the development of procedures
for the nomination, appointment and replacement of the President in such a
manner as to ensure a smooth transition period in the medical practice of any
individual who assumes the position of the President.
Section 6.2. The Medical Director of MCP. (a) MCP shall hire and
----------------------------
appoint a physician to act as Medical Director to provide guidance and advice to
MCP on clinical issues. The duties of the Medical Director shall include,
without limitation, (i) interfacing with the National Medical Advisory Board of
PQC and representing MCP on the PQC National Medical Advisory Board; (ii)
chairing the Medical Advisory Board; (iii) providing medical advice on managed
care contracting by MCP; (iv) leading the development and dissemination of
medical protocols, quality and outcome measures; and (v) overseeing the
recruitment and credentialling of new physicians. The MCP Shareholder shall
determine the salary and fringe benefits of the Medical Director, who shall also
be an employee of MCP or one of its Affiliates.
(b) Subject to the By-Laws of MCP, the Physician Members shall
nominate three (3) candidates, who shall. be engaged in a specialist practice,
for the position of Medical Director and MCP shall select one (1) candidate from
among such nominees to be employed by MCP as Medical Director. In the event that
there is a vacancy in the position of Medical Director at any time for any
reason, the MCP Shareholder shall have the authority to appoint a person to
serve as interim Medical Director until another person is
-19-
duly appointed in accordance with the above specified procedures. The Medical
Director shall serve part-time in this capacity until such time as his"'her
responsibilities warrant full-time employment status. The Medical Director shall
serve for an initial period of three (3) years, which may be renewed for a
maximum of two (2) additional three (3) year terms, subject to the control of
and review by MCP and the Physician Members. The Medical Director can be removed
prior to the end of his or her term by the vote of seventy-five percent (75%) of
the Physician Members. MCP shall assist in the development of procedures for the
nomination, appointment and replacement for the Medical Director in such a
manner as to ensure a smooth transition period in the medical practice of any
individual who assumes the position of the Medical Director.
Section 6.3. Operating Manager. Subject to the reasonable approval
-----------------
of the Joint Policy Board, MCP shall retain a non-physician employee to serve as
an Operating Manager (the "Operating Manager"). The Operating Manager shall
manage and administer all of the day-to-day business functions necessary for the
operation of MCP. MCP shall determine the salary and fringe benefits of the
Operating Manager. At the direction, supervision and control of MCP, the
Operating Manager shall implement the policies established by MCP and the Joint
Policy Board and shall generally perform the duties and have the
responsibilities of an administrator.
Article VII
Compensation for Physician Services
Section 7.1. Compensation Pool. As exclusive compensation for the
-----------------
services of the Physician Members under their respective Employment Agreements,
MCP shall establish a compensation pool (the "Compensation Pool") which, on an
annual basis, shall be in an amount determined pursuant to this Section 7.1 and
Section 7.2 and shall be allocated among and distributed to the Physician
Members as provided in Section 7.4. No Physician Member shall be entitled to any
compensation for services under an Employment Agreement or these Terms and
Conditions except as provided in this Article VII. The amount of the
Compensation Pool with respect to each Fiscal Period shall be determined as an
allocation of Stage One Gross Margin between the Compensation Pool and MCP,
which allocation shall be determined as provided below:
(a) First, an amount equal to ninety-five percent (95%) of any
Stage One Gross Margin with respect to any Fiscal Period shall be
allocated to the Compensation Pool until the total allocation to the
Compensation Pool for such Fiscal Period equals the ninety-five percent
(95%) of the Base Compensation Pool Amount (or a proportionally lesser
amount for any Fiscal Period that is less than twelve (12) calendar
months) and five percent (5%) of Stage One Gross Margin shall be
allocated to MCP Allocation Account until the total allocation to the
MCP Allocation Account equals five percent (5%) of the Base
Compensation Pool Amount (or a proportionally lesser amount for any
Fiscal Period that is less than twelve (12) calendar months);
(b) Second, any Stage One Gross Margin with respect to any Fiscal
Period that remain after allocation of the Stage One Gross Margin
pursuant to Clause (a) ("Stage Two Gross Margin"), shall be allocated
to the Practice Fund Account up to an amount sufficient to cause the
balance in such account to be equal to zero;
(c) Third, any Stage Two Gross Margin with respect to any Fiscal
Period that remain after allocation of the amounts pursuant to Clauses
(a) and (b) shall be allocated twenty percent (20%) to the Compensation
Pool and eighty percent (80%) to MCP Allocation Account until the
amount of Stage One or Stage Two Gross Margin allocated to the MCP
Allocation Account pursuant to Clause
-20-
(a) or this Clause (c) equals fifteen percent (15%) of Stage One Gross
Margin with respect to any Fiscal Period; and
(d) Fourth, any Stage Two Gross Margin that remains after
allocation of the amounts pursuant to (a), (b) and (c) ("Stage Three
Gross Margin") shall be allocated fifty percent (50%) to the
Compensation Pool and fifty percent (50%) to the MCP Allocation
Account.
The allocation of Stage One, Stage Two and Stage Three Gross Margins to
the Compensation Pool pursuant to this Section 7.1 shall be calculated
separately for each Fiscal Period. Subject to review by the Joint Policy Board,
MCP shall be responsible for the calculating of the amounts of Stage One, Stage
Two and Stage Three Gross Margins to be allocated to each of MCP and the
Compensation Pool. If the Stage One Gross Margin for any Fiscal Period is
negative, such negative amount shall be an Responsibility Center Operating
Expenses for the next following Fiscal Period.
Section 7.2. Integrated Health Services. As additional compensation
--------------------------
for the services of the Physician Members under the Employment Agreements and
these Terms and Conditions, IHS Profits (whether a profit or loss) shall be
allocated fifty percent (50%) to the Compensation Pool and fifty percent (50%)
to the MCP Allocation Account; provided, however, that with respect to the
provision of individual Integrated Health Services, MCP and the Joint Policy
Board may approve a different allocation of revenues between the Compensation
Pool and the MCP Profit Account. The allocation of IHS Profits shall be
calculated separately for each Fiscal Period pursuant to this Section 7.2.
Section 7.3. Establishment of Budgets for Physician Responsibility
-----------------------------------------------------
Centers. Prior to the end of each Fiscal Period, MCP shall establish a capital
-------
and operating budget for each Physician Responsibility Center. The capital and
operating budgets for each Physician Member Responsibility Center shall
initially be jointly developed by the Operating Manager and a Physician
representative (the "Representative") of the Physician Responsibility Center.
Targeted Responsibility Center Operating Revenues and Targeted Responsibility
Center Operating Expenses shall be established for the next Fiscal Period with
respect to each Physician Responsibility Center. After the capital and operating
budgets have been established by the Operating Manager and the Representative,
the capital and operating budgets, including the Targeted Responsibility Center
Operating Revenues and Targeted Responsibility Center Operating Expenses for
each Physician Responsibility Center shall be submitted to the Joint Policy
Board. If the Operating Manager and the Representative can not agree upon
capital and operating budgets, each of the Operating Manager and the
Representative shall submit a proposed budget to the Joint Policy Board. The
Joint Policy Board shall approve or modify the budgets or the Targeted
Responsibility Center Operating Revenues and Targeted Responsibility Center
Operating Expenses with respect to any Physician Responsibility Center. At any
point during a Fiscal Period, the Joint Policy Board may, and if the actual
Physician Responsibility Center Net Revenues are below the projected Physician
Responsibility Center Net Revenues for such Physician Responsibility Center
shall, review the budgets for such Physician Responsibility Center and make such
changes to such budgets, including the Base Distributions, as the Joint Policy
Board deems to be appropriate. All capital and operating budgets, and changes
thereto, also shall be subject to the approval of PQC.
Section 7.4. Allocation of the Compensation Pool Among Physician
---------------------------------------------------
Members. (a) On a weekly basis, MCP shall distribute to each Physician
-------
Responsibility Center (other than a Laboratory Center the contribution from
which will be allocated pursuant to Section 7.4(b)) from the Compensation Pool
an amount equal to 80% of one-fifty-second of the Base Compensation Pool Amount
allocated to such Physician Responsibility Center pursuant to the operating
budget approved by the Joint Policy Board (the "Base Distribution") less the
Deductible Expenses allocated to such Physician Responsibility Center (which
amount shall be distributed to MCP); provided, however. if at any time during a
Fiscal Period MCP determines that the amount of Revenues allocated to the
Compensation Pool for any Fiscal Period may be less than ninety-five percent
(95%) of the Base Compensation Pool Amount for such Fiscal Period, or if
-21-
MCP or the Joint Policy Board determine the Physician Responsibility Center
Operating Expenses for such Fiscal Period will exceed the Targeted Physician
Responsibility Center Operating Expenses for such Physician Responsibility
Center's or the Physician Responsibility Center's Operating Revenues will be
less than the Physician Responsibility Center's Targeted Responsibility Center
Operating Revenues, MCP may, subject to the approval of the Joint Policy Board,
which approval shall be granted unless the Joint Policy Board determines in good
faith that such shortfall in revenues or increase in operating expense is
primarily attributable to MCP, reduce the Base Distributions as MCP determines
to be appropriate in order that the aggregate Base Distributions to all
Physician Responsibility Centers do not exceed the amount of the Compensation
Pool for such Fiscal Period. MCP may, but shall not be required to, advance
money to the Compensation Pool to fund such Base Distributions. Within 45 days
of the end of each three-month period, the MCP shall advise the Compensation
Committee of the amount (the "Variable Distribution Pool"), if any, of the
Compensation Pool that has not been used, or is not reasonably anticipated by
MCP to be needed to fund, the Base Distributions. The Compensation Committee, by
the approval of a majority of the members of such committee, shall determine how
the Variable Distribution Pool, if any, shall be allocated among the Physician
Responsibility Centers. Distributions of the Base Distribution and, if
applicable, the Variable Distribution Pool to a Physician Responsibility Center
shall be allocated among the Physician Members of such Physician Responsibility
Center as determined by a majority of the Physician Members in such Physician
Responsibility Center.
(b) Within 45 days after the end of each calendar quarter, MCP
shall distribute to the Physician Responsibility Centers (other than a
Laboratory Center) from the Compensation Pool an amount in aggregate equal to
the net amount contributed to the Compensation Pool with respect to any
Laboratory Centers. If a Laboratory Center Physician Responsibility Center
Operating Revenues are less than the Laboratory Center Physician Responsibility
Center Operating Expenses. the amount of such difference shall be deducted from
distributions payable to the Physician Responsibility Centers pursuant to
Section 7.4(a). The Compensation Committee, by the approval of a majority of the
members of such committee, shall determine how the distributions from the
Compensation Pool with respect to Laboratory Centers shall be allocated among
the Physician Responsibility Centers. Distributions from the Compensation Pool
with respect to Laboratory Centers shall be allocated among the Physician
Members of the Physician Responsibility Centers as determined by a majority of
the Physician Members in such Physician Responsibility Center.
(c) The determination of the Compensation Committee and Physician
Responsibility Centers pursuant to this Section 7.4 shall be binding upon MCP
and each Physician Member, and neither PQC nor MCP shall not have any liability
to the Physician Members as a result of any determination of the Compensation
Committee or any Physician Responsibility Center; provided. however, that MCP
shall not be required to make any distribution in accordance with the
determinations of the Compensation Committee or any Physician Responsibility
Center that MCP reasonably believes to conflict with Xxxxx or any other federal
or state statute or regulation. In no event shall any Physician Member be
entitled to any compensation in addition to that determined pursuant to this
Section 7.4 nor shall the aggregate compensation to all Physician Members with
respect to any Fiscal Period exceed the amount of the Compensation Pool for such
Fiscal Period.
Section 7.5. Modification to Sections 7.1 and 7.2. Six months prior
------------------------------------
to the third anniversary of the Effective Date, MCP or a majority of the
Physician Members shall be entitled to require that the provisions of Section
7.1 and Section 7.2 of these Terms and Conditions be amended, effective as of
the third anniversary of the Effective Date (for Fiscal Periods commencing after
such date), so that the economic terms of the Employment Agreements and the
Terms and Conditions, taken as a whole, (and giving effect to any payments or
other compensation received by the Physician Member in connection with their
Affiliation with MCP) are adjusted to reflect the terms being entered into by
independent third parties for similar affiliation and employment relationships
at such time. If MCP and a majority of the Physician Members are not able to
agree upon economic terms that are reflective of then current market practice
for
-22-
similar affiliation and employment relationships, the determination of market
practice shall be submitted to binding arbitration in accordance with Section
11.1.
Article VIII
Restrictive Covenants and Liquidated Damages
Section 8.1. Restrictive Covenants.
---------------------
(a) Noncompetition. During the term of a Physician Member's
--------------
Employment Agreement, a Physician Member shall not, without the prior written
consent of MCP, directly or indirectly (whether as a shareholder, employee,
individual, partner, independent contractor, consultant or otherwise),
establish, operate or provide physician or other medical services at any medical
office, clinic or other healthcare facility providing services similar to those
provided by MCP, PQC or any of their Affiliates in the MCP region. In addition,
for a period of one (1) year after the termination of a Physician Member's
Employment Agreement, such Physician Member shall not establish, operate or
provide physician or other medical services (whether as an employee,
shareholder, partner, independent contractor, manager, consultant or otherwise)
at any medical office, clinic or other healthcare facility providing services
similar to those provided by MCP, PQC or their Affiliates within twenty-five
(25) miles of the Premises at which the Physician Member practiced at the time
of such termination of employment; provided, however, that the Physician Member
shall not be prohibited from practicing medicine in such geographic area either
as a solo practitioner or with one (1) other physician.
(b) Integrated Health Services. During the term of a Physician
--------------------------
Member's Employment Agreement, a Physician Member shall not directly or
indirectly (whether as a shareholder, employee, individual, partner, independent
contractor, consultant or otherwise) establish, operate or provide any
Integrated Health Services or any medical practice management services provided
by MCP, PQC or their Affiliates. For two (2) years after the termination of a
Physician Member's Employment Agreement, a Physician Member shall not directly
or indirectly (whether as a shareholder, employee, individual, partner,
independent contractor, consultant or otherwise) establish, operate or provide
any Integrated Health Services or any other medical practice management services
provided by MCP, PQC or their Affiliates within twenty-five (25) miles of the
Premises at which the Physician Member practiced at the time of such termination
of employment.
(c) Non-Solicitation of Employees and Patients. During the term of
------------------------------------------
a Physician Member's Employment and for a two (2) year period thereafter, a
Physician Member shall not recruit, solicit or induce, or attempt to induce, any
employee or employees of MCP, PQC or any of their Affiliates to terminate their
employment with, or otherwise cease their relationship with MCP, PQC or any of
their Affiliates. During the term of a Physician Member's Employment Agreement
and for a one (1) year period thereafter, a Physician Member shall not solicit.
divert or take away, or attempt to divert or to take away, the business or
patronage of any of the patients, clients, customers or accounts of MCP.
(d) Acknowledgment of Proprietary Interest. Each Physician Member
---------------------------------------
recognizes the proprietary interest of MCP, PQC and their Affiliates in any
Confidential and Proprietary Information (as hereinafter defined) of MCP, PQC
and their Affiliates and agrees that MCP is entitled to prevent the disclosure
of Confidential and Proprietary Information. Each Physician Member acknowledges
and agrees that any and all Confidential and Proprietary Information
communicated to, learned of, developed or otherwise acquired by the Physician
Member during the term of the Physician Member's Employment Agreement shall be
the property of MCP, PQC and their Affiliates. Each Physician Member further
acknowledges and understands that its disclosure of any Confidential and
Proprietary Information of MCP will result in irreparable injury and damage to
MCP, PQC and their Affiliates. Each Physician Member
-23-
agrees at all times during the term of the Physician Member's Employment
Agreement and thereafter to hold such Confidential and Proprietary Information
in strictest confidence and not to disclose, without prior written consent of
MCP, such Confidential and Proprietary Information to any person, firm or
corporation, unless (i) such information becomes known or available to the
public generally through no wrongful act of the Physician Member receiving
Confidential and Proprietary Information, (ii) disclosure is required by law, or
the rule, regulation or order of any governmental authority, provided, that
prior to disclosing any Confidential and Proprietary Information pursuant to
this clause (ii), a Physician Member shall, if possible, give prior written
notice thereof to MCP and provide MCP with the opportunity to contest such
disclosure, (iii) such Confidential and Proprietary Information is known by or
generally available to the healthcare industry without restrictions on use, or
(iv) such Confidential and Proprietary Information was received by the Physician
Member on a non-confidential basis from a third-party lawfully possessing and
lawfully entitled to disclose such information. As used herein, "Confidential
and Proprietary Information" means all trade secrets and other confidential
and/or proprietary information of MCP, PQC and their Affiliates, including
information derived from reports, investigations, research, work in progress,
codes, marketing and sales programs, financial projections, cost summaries,
pricing formulas, contracts analyses, financial information, projections,
patient lists, confidential filings with any state or federal agency, and all
other confidential concepts, methods of doing business, ideas, materials or
information prepared or performed for, by or on behalf of a party by their
employees, officers, directors, agents, representatives, or consultants.
(e) Return of Materials to MCP. In the event of the termination of
--------------------------
a Physician Members Employment Agreement for any reason whatsoever or upon the
request of MCP, a Physician Member in receipt of Confidential and Proprietary
Information will promptly deliver to MCP all files, letters, memoranda, reports,
records, data, program listings or other written, photographic or other tangible
material in the Physician Member's possession that contains any Confidential and
Proprietary Information. The Physician Member shall not take or retain any
documents or other information, or any reproduction or excerpt thereof,
containing any Confidential and Proprietary Information, unless otherwise
authorized in writing by MCP.
Section 8.2. Remedies. Each Physician Member acknowledges and agrees
--------
that a remedy at law for any breach or attempted breach of the provisions of
this Article VIII shall be inadequate, and, therefore, MCP shall be entitled to
specific performance and injunctive or other equitable relief in the event of
any such breach or attempted breach, in addition to any other rights or remedies
available to MCP at law or in equity. Each Physician Member waives any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or other equitable relief. If any provision of
the Restrictive Covenants in this Article VIII relating to the restrictive
period, scope of activity restricted and/or the territory described therein
shall be declared by a court of competent jurisdiction to exceed the maximum
time period, scope of activity restricted or geographical area such court deems
reasonable and enforceable under applicable law, the time period, scope of
activity restricted and/or area of restriction held reasonable and enforceable
by the court shall thereafter be the restrictive period, scope of activity
restricted and/or the territory applicable to such provision of the Restrictive
Covenants in this Article VIII. The invalidity or nonenforceability of any
provision of the Restrictive Covenants in this Article VIII in any respect shall
not affect the validity or enforceability of the remainder of the Restrictive
Covenants or of any other provisions of these Terms and Conditions or the
Physician Member's Employment Agreements. Without limiting any other right that
MCP or PQC may have for violation of any provision of this Article VIII, any
shares of capital stock or options to acquire Capital Stock of PQC (or any
successive entity) (the "Capital Stock") that are beneficially owned by the
Physician Member(s) who violated this Article VIII, which Capital Stock pursuant
to the terms under which such Capital Stock was issued have not yet vested,
shall be immediately forfeited to PQC and any unexercised options to purchase
Capital Stock of PQC shall immediately terminate.
-24-
ARTICLE IX
Insurance and Indemnity
Section 9.1. Insurance to be Maintained by MCP. MCP will use its
---------------------------------
best efforts to obtain from a third party insurer comprehensive professional
liability insurance for each Physician Member in the amounts and subject to such
conditions and deductibles as shall be approved by the Joint Policy Board, and
comprehensive general liability and property insurance covering the Premises and
MCP's operations.
Section 9.2. Indemnification. Each Physician Member, severally and
---------------
not jointly, shall indemnify, defend and hold MCP, PQC and their Affiliates and
their respective officers, directors, shareholders, employees, agents and
consultants harmless, from and against any and all liabilities, losses, damages,
claims, causes of action and expenses (including reasonable attorneys' fees),
not covered by insurance (including self-insured insurance and reserves),
whenever arising or incurred, that are caused or asserted to have been caused,
directly or indirectly, by or as a result of the performance of medical services
by such Physician Member during the term of the Physician Member's Employment
Agreement. MCP shall indemnify, defend and hold each Physician Member harmless
from and against any and all liabilities, losses, damages, claims, causes of
action and expenses (including reasonable attorneys' fees), not covered by
insurance (including self-insured insurance and reserves), whenever arising or
incurred, that are caused or asserted to have been caused, directly or
indirectly, by, or as a result of, the performance of any intentional acts,
negligent acts or omissions by MCP and/or its shareholders, employees,
consultants, agents and/or subcontractors (other than a Physician Member) during
the term of the Physician Member's Employment Agreement.
ARTICLE X
Term and Termination
Section 10.1. Term of Employment. Each Employment Agreement shall
------------------
have the initial term (the "Employment Period") set forth therein. The
Employment Period under each Employment Agreement shall automatically extend for
an additional twelve (12) months at the end of the initial Employment Period and
on each anniversary of the end of the initial Employment Period thereafter
provided that neither the Physician Member nor MCP has provided at least one
hundred and twenty (120) days notice that the Employment Period shall not be
extended. MCP and each Physician Member intend that these Terms and Conditions
(as they may be amended or modified from time to time) shall be applicable to
any employment relationship between MCP and a Physician Member during the period
of thirty (30) years after the Effective Date.
Section 10.2. Termination. An Employment Agreement shall terminate
-----------
or be terminable at the end of the Employment Period, as it may be extended, or
under any of the following circumstances:
(a) Death.
------
In the event of the Physician Member's death, the Employment Agreement
shall immediately and automatically terminate.
(b) Disability.
-----------
MCP, subject to approval by the Joint Policy Board, which approval
shall be granted unless the Joint Policy Board determines in good faith that the
Physician Member is not disabled, may terminate an Employment Agreement, upon
written notice to the Physician Member, in the event that the Physician
-25-
Member becomes disabled during the Employment Period through any illness,
injury, accident or condition of either a physical or psychological nature and,
as a result, is unable to perform substantially all of the Physician Member's
duties and responsibilities hereunder for ninety (90) days during any period of
three hundred sixty-five (365) consecutive calendar days. If any question arises
as to whether during any period the Physician Member is so disabled, the
Physician Member shall, at the request of MCP, submit to a medical examination
by a physician selected by MCP, to whom the Physician Member or the Physician
Member's guardian has no reasonable objection, to determine whether the
Physician Member is so disabled. If the Physician Member (or his or her
guardian) shall disagree with the determination of such physician, the Physician
Member within thirty (30) days following the determination by the physician
selected by MCP may submit to a medical examination by a physician selected by
the Physician Member (or his or her guardian). If the determination of such
second physician differs from that of the first, MCP and the Physician Member
(or his or her guardian) within thirty (30) days following the determination by
such physician shall agree upon a third physician, who shall examine the
Physician Member and whose determination shall be conclusive of the issue. If
the Physician Member does not request a second opinion, the determination of the
first physician shall be conclusive of the issue. If this question arises and
the Physician Member does not submit to medical examination, MCP's determination
of the issue shall be binding on the Physician Member.
(c) Termination by MCP for Cause.
-----------------------------
MCP may terminate a Physician Member's Employment Agreement for cause
at any time upon ninety (90) day's written notice to the Physician Member
setting forth in reasonable detail the nature of such cause. MCP shall provide
the Physician Member with an opportunity to respond to the notice and discuss
with the Medical Director of MCP the issues identified in the notice, and to
cure the basis for the notice; provided, however, that MCP shall not be required
to provide ninety (90) days notice of an opportunity to cure any cause that in
the reasonable judgment of MCP is not capable of being cured. Cause shall be
determined by MCP in its reasonable judgment and shall include, but not be
limited to: (i) the Physician Member's fraud or dishonesty with respect to MCP,
its employees, patients or visitors; (ii) the Physician Member's suspension or
termination from, or failure to participate, if so requested by MCP, as an
eligible provider in, Medicare, Medicaid or any third-party reimbursement
program, for cause other than the fact of the Physician Member's employment by
MCP; (iii) the Physician Member ceases to maintain without the approval of the
Medical Director, the Board Certifications in effect at any time during the
Employment Period; (iv) the Physician Member's material negligence in the
performance of the Physician Member's duties or responsibilities to MCP; (v) the
Physician Member's breach (or the breach by a professional corporation of which
the Physician Member was formerly a shareholder (other than a breach based upon
a misrepresentation regarding the conduct of another Physician Member)) of any
material term of any agreement entered into in connection with such Physician
Member's Affiliation; (vi) the medical staff membership or clinical privileges
of the Physician Member at any hospital in the Commonwealth of Massachusetts,
the State of Connecticut or any other jurisdiction: (I) shall be revoked or
shall terminate or shall not be renewed or, without the approval of the Medical
Director, shall expire; or (11) shall be reduced to a level which, in the sole
judgment of the Medical Director of MCP, would prevent the Physician Member from
rendering the services contemplated by the Employment Agreement and these Terms
and Conditions in any material respect. (MCP may terminate the Employment
Agreement, upon written notice to the Physician Member, if the Physician
Member's medical staff membership or clinical privileges at any hospital in the
Commonwealth of Massachusetts, the State of Connecticut or any other
jurisdiction shall be suspended (other than (i) during a period of summary
suspension pending hearing and appeal, provided such are timely requested by the
Physician Member or (ii) a nonrecurring, temporary suspension arising solely out
of failure to complete medical records. During any period of summary suspension
of the Physician Member's privileges (other than a nonrecurring, temporary
suspension arising solely out of failure to complete medical records), the
Physician Member's employment shall be suspended pending hearing and appeal
timely requested by the Physician Member; compensation and benefits shall be
continued to the extent provided by policies in effect at the time); (vii) the
Physician Member ceases to be
-26-
licensed to practice medicine without restriction under the laws of any state in
which the Physician Member is licensed; (viii) the Physician Member ceases to
maintain a current and valid Federal Drug Enforcement Agency license; (ix) the
Physician Member ceases to be covered by professional liability insurance (other
than as a result of MCP's act or omission in connection with such insurance);
(x) the Physician Member is convicted of a felony or any crime involving moral
turpitude, (xi) the Physician Member is penalized with civil monetary fines or
assessment under any federal or state law involving Medicare, Medicaid or any
third- party reimbursement program (other than as a result of MCP's act or
omission); or (xii) the Physician Member (I) engages in any conduct or is
formally accused of conduct for which the Physician Member's license to practice
medicine reasonably would be expected to be subject to revocation or suspension,
whether or not actually revoked or suspended, or (II) is otherwise disciplined
by any licensing, regulatory or professional entity or institution, the result
of any of which event described in clause (I) or (II) does, or reasonably would
be expected to, materially adversely affect MCP or significantly impair the
ability of MCP to perform medical services in an amount and of a nature
consistent with the medical services performed at the time of such action.
(d) Termination Events Permitting Recovery of Costs.
------------------------------------------------
MCP may terminate an Employment Agreement and require the Physician
Member to comply with Section 10.4 hereof by giving written notice to the
Physician Member and the Joint Policy Board (after the giving of any required
notices and the expiration of any applicable waiting periods set forth below)
upon the occurrence of any of the following events:
(i) The Physician Member shall default in, or shall
continue to fail to comply with, the performance of any material duty
or material obligation imposed upon such Physician Member by these
Terms and Conditions or the related Employment Agreement and such
default or failure to comply shall continue for a period of ninety (90)
days after written notice thereof has been given to the Physician
Member by MCP.
(ii) A law firm with nationally recognized expertise in
healthcare law and acceptable to MCP and the Joint Policy Board renders
an opinion to the Joint Policy Board that (I) a material provision of
these Terms and Conditions is in violation of applicable law or any
court or regulatory agency enters an order finding a material provision
of these Terms and Conditions is in violation of applicable law and
(11) these Terms and Conditions cannot be amended pursuant to Section
11.2 hereof to cure such violation.
(iii) MCP is prevented by the Physician Member or any person
under the Physician Member's direction or control, from entering any
Premises, and such inability to enter such Premises continues for more
than forty-eight (48) hours after notice thereof to the Joint Policy
Board.
(e) Termination by the Physician Member.
-----------------------------------
The Physician Member may terminate such Physician Member's Employment
Agreement (i) upon written notice to MCP of the failure of MCP to make any
payments of the compensation required under the Employment Agreement or these
Terms and Conditions when due and continued failure to pay such compensation
after thirty (30) days notice of such failure to MCP unless the amount of such
payment is being contested in good faith, (ii) upon ninety (90) days written
notice from the Physician Member to MCP of MCP's failure to comply with any
other material obligation of MCP under the Employment Agreement or these Terms
and Conditions, which failure is not cured within such ninety (90) day period,
(iii) the sale of substantially all of the assets of PQC to a third party, or
the issuance (other than in a public or private offering of equity securities of
PQC) of capital stock of PQC to a third party with the result that such third
party obtains a controlling interest in the capital stock of PQC; (iv) a law
firm with a nationally recognized
-27-
expertise in healthcare law and acceptable to MCP and the Joint Policy Board
renders an opinion to the Joint Policy Board that (1) a material provision of
these Terms and Conditions is in violation of applicable law or any court or
regulatory authority entered into an order finding a material provisions of
these Terms and Conditions is in violation of applicable laws and (11) these
Terms and Conditions cannot be amended pursuant to Section 11.2 to cure such
violation; and (v) upon not less than six (6) months written notice to MCP from
the Physician Member.
Section 10.3. Effect of Termination. In the event that a Physician
----------------------
Members Employment Agreement is terminated pursuant to Section 10.2 (a), (b) or
(c), MCP shall pay to the Physician Member the compensation and benefits
otherwise payable to the Physician Member under these Terms and Conditions
through the last day of his or her actual employment by MCP (but the Physician
Member shall not have any right to the portion of the Compensation Pool, if any,
that has not been allocated by the Compensation Committee). In the event that a
Physician Member's Employment Agreement is terminated pursuant to Section 10.2
(d), MCP shall pay to the Physician Member the compensation and benefits
otherwise payable to the Physician Member under these Terms and Conditions
through the last day of his or her actual employment by MCP (but the Physician
Member shall not have any right to the portion of the Compensation Pool, if any,
that has not been allocated by the Compensation Committee) and MCP shall have
the right to require the Physician Member to purchase the assets contemplated by
Section 10.4 on the terms provided in Section 10.4. In the event that a
Physician Member's Employment Agreement is terminated pursuant to Section 10.2
(e), MCP shall pay to the Physician Member the compensation and benefits
otherwise payable to the Physician Member under these Terms and Conditions
through the last day of his or her actual employment by MCP (but the Physician
Member shall not have any right to the portion of the Compensation Pool, if any,
that has not been allocated by the Compensation Committee) and the Physician
Member shall be entitled to purchase the assets contemplated by and on the terms
set forth in Section 10.5; in addition, if the Employment Agreement is
terminated pursuant to Section 10.2(e)(i), (ii) or (iii) the Physician Member
shall be entitled to purchase the assets and restrictive covenants contemplated
by Section 10.4(b).
Section 10.4. Purchase of Assets Upon Certain Events. (a) Within 120
---------------------------------------
days of the termination of an Employment Agreement pursuant to Sections 1
0.2(d)(i) or (iii) by MCP or 10.02(d) (ii) to the extent that the Physician
Member has not exercised its rights pursuant to Section 10.04(b) with respect to
a termination by the Physician Member pursuant to Section 1 0.02(e)(iv) within
60 days of termination of the Physician Member's employment, subject to the
provisions set forth below. MCP shall have the option to require the Physician
Member to:
(i) Purchase from MCP, PQC or their Affiliates at Book
Value (I) all tangible assets of MCP, PQC or their Affiliates that
relate primarily to the Physician Member's practice or that were
acquired, directly or indirectly, from the Physician Member, other than
MCP' s, PQC's or their Affiliates' medical, accounting and financial
records (II) restrictive covenants in Article VIII, and (III), to the
extent not a duplication of (I) or (II), Physician Payments to the
Physician Member as set forth or reflected on the balance sheet of MCP,
PQC or their Affiliates (the assets to be purchased pursuant to I and
II being referred to as the "Purchased Assets"); and
(ii) Assume or pay all of MCP's, PQC's and their Affiliates'
liabilities, debt, payables and other obligations (including lease and
other contractual obligations). or portions thereof, which relate
directly or are directly attributable to the Physician Member or the
Physician Member's medical practice (the "Physician Related
Liabilities").
(b) Upon the termination of an Employment Agreement by a
Physician Member pursuant to Section 10.2(e)(i), (ii). (iii) or (iv) the
Physician Member shall have the option to require MCP to sell all the Purchased
Assets, collectively and not individually. to the Physician Member at the lesser
of (i) Book Value or (ii) Fair Market Value. The restrictive covenants in
Section 8.1 shall terminate in the event that the
-28-
Physician Member terminates the Physician Member's Employment Agreement pursuant
to 10.2(e)(i) or (ii) unless such termination is being contested in good faith
by MCP.
(c) Any election to purchase the Purchased Assets pursuant to this
Section 10.4 shall be upon written notice thereof in the termination notice, if
applicable. on or prior to ninety (90) days before the Termination Date. In
connection with the purchase and sale of the Purchased Assets pursuant to this
Section 10.4, MCP shall use its commercially reasonable efforts to cause the
Purchased Assets to be conveyed free of any lien, claim or encumbrance.
(d) Notwithstanding Section 10.4(a) and (b), the Employment
Agreement shall not constitute an agreement to assign any contract or asset, or
any benefit arising thereunder or resulting therefrom, if any attempted
assignment thereof, without the consent required or necessary for such
assignment, would constitute a breach or violation thereof or in anyway
adversely affect the rights of MCP or the Physician Member thereunder. MCP
agrees to use its reasonable efforts to obtain any consent required for such
assignment.
Section 10.5. Certain Rights Upon Voluntary Termination. In the
-----------------------------------------
event that a Physician Member terminates an Employment Agreement pursuant to
Section 1 0.2(e) (v), the terminating Physician Member shall have the right to
purchase the following assets (the "Section 10.5 Assets"):
(i) All, but not less than all, of the physical assets
purchased by MCP from such Physician Member as part of an Affiliation
provided that MCP, PQC or an Affiliate still owns such physical assets.
MCP and the Physician Member may also agree that the Physician Member
shall purchase other physician assets acquired by MCP, PQC or an
Affiliate after Affiliation; provided that MCP shall not be obligated
to sell any assets acquired after Affiliation. The purchase price of
the physical assets shall be the lesser of the purchase price MCP paid
for such assets at the time of Affiliation or their Fair Market Value
as of the Purchase Closing Date.
(ii) Subject to the consent of the lessor and release by the
lessor of MCP from any obligations under the lease, MCP agrees to use
its best efforts to transfer to the Physician Member the lease relating
to any Premises occupied solely by the Physician Member prior to
Affiliation and that the Physician Member continues to occupy at the
time of termination of the Employment Agreement. In consideration of
such transfer, the Physician Member shall pay MCP an amount equal to
the sum of (A) 115% of the total lease obligations required to be paid
during the remaining term of the lease and (B) to the extent not
covered in (I) above the book value of any leasehold improvements.
(iii) The Physician Member (not withstanding Section 8 of
these Terms and Conditions) shall be entitled for a three month period
commencing upon the delivery of the Physician Member's termination
notice to solicit any employee of MCP directly providing support for
the Physician Member's medical practice to leave such employee's
employment with MCP. Prior to soliciting such employee. the Physician
Member shall notify MCP of the Physician Member's intent to solicit
such employee and pay MCP an amount equal to three months salary and
benefits of any employee so solicited.
(iv) MCP shall not attempt to prevent the Physician Member
from obtaining and using the telephone number that the Physician Member
used prior to Affiliation. MCP shall have no obligation to cause such
telephone number to be assigned to the Physician Member and the
Physician Member shall be responsible for all costs associated with
reestablishing such phone number.
-29-
(v) MCP shall retain custody of patient records. The
Physician Member shall be entitled, at the Physician Member's cost and
with the written approval of the patient, to make copies of the patient
record for any patient to whom the Physician Member provided services.
If requested by a patient, MCP shall transfer each patient's medical
records as directed by the patient.
(vi) MCP agrees that it will not interfere with the
Physician Member's ability to reactivate any provider numbers under any
Managed Care Contract that were assigned to the Physician Member prior
to Affiliation. MCP shall not be obligated to terminate or transfer any
provider number that it possesses and shall not be liable to the
Physician Member if the Physician Member is unable to establish or re-
establish provider status under any Managed Care Contract.
(vii) Except as provided in clause (iii) of this Section
10.5, the Physician Member shall continue to be subject to the
restrictive covenants and agreements in Article VIII of these Terms and
Conditions.
Section 10.6. Terms of Purchase. The closing of the transactions
-----------------
contemplated by Sections 10.4 or 10.5 (the "Purchase Closing") shall occur (a)
on the Termination Date or (b) on a date mutually acceptable to MCP and the
Physician Member that shall be within one hundred and eighty (180) days after
receipt of a termination notice (or such later date as is necessary for MCP to
obtain lessor consents to the assignment to the Physician Member of leases of
real and personal property to be assumed by the Physician Member). Subject to
the conditions set forth below, at the Purchased Closing, MCP, PQC and/or their
Affiliates, as the case may be, shall transfer and assign the Purchase Assets or
the Section 10.5 Assets, as the case may be, to the Physician Member and in
consideration therefor, the Physician Member shall (a) pay to MCP the purchase
price in cash and assume, if applicable, Physician Related Liabilities. Each of
MCP and the Physician Member shall execute such documents or instruments as is
reasonably necessary, in the opinion of MCP, the Physician Member and their
respective counsel, to effect the foregoing transaction.
Section 10.7. Exception to Purchase. Notwithstanding anything
---------------------
contained herein to the contrary, MCP shall not be obligated to sell the assets
to the Physician Member if Physician Member is not able to pay the purchase
price therefor pursuant to the terms set forth above at the Purchase Closing. In
such event, the Physician Member shall surrender the assets in the Physician
Member's possession or control to MCP as of the Purchase Closing. If a Physician
Member fails to so surrender the assets, MCP may, without prejudice to any other
remedy which it may have hereunder or otherwise, enter the Premises and take
possession of the assets and expel or remove the Physician Member and any other
person who may be occupying the Premises or any part thereof, by force if
necessary, without being liable for prosecution or any claim for damages
therefor.
ARTICLE XI
General Provisions
Section 11.1. Arbitration. Any controversy or claim between MCP, PQC
-----------
and any Physician Member arising under or relating to these Terms and Conditions
or any breach thereof (including the question of whether any particular matter
is arbitrable hereunder) shall be settled by arbitration in accordance with the
commercial arbitration rules of the American Arbitration Association then in
effect; provided, however, that no provision of these Terms and Conditions shall
be modified, deleted or added by reason of such arbitration; provided, further,
that no controversy or claim that may be brought before the Dispute Resolution
Subcommittee and no decision of such Subcommittee shall be submitted to
arbitration. MCP and each Physician Member agrees (subject to judicial review)
to abide by all awards rendered in such arbitration proceedings, and all such
awards may be filed by the prevailing party in any federal or state court having
proper jurisdiction, as a basis for judgment in the issuance of execution
-30-
thereon. Such judgment shall not be open for review except to the extent
permitted by the Federal Rules of Civil Procedure and the relevant arbitration
statute. Such arbitration shall be initiated by either MCP or a Physician Member
by serving a written demand on the other party and the Joint Policy Board
stating the substance of the controversy and the contention of the party
requesting arbitration. The American Arbitration Association shall appoint or
provide the procedure for the determination of a single neutral arbitrator who
shall be a fit and impartial person. The fees and costs of the arbitrator and
related expenses of arbitration shall be borne by the nonprevailing party. If
the arbitrator determines that neither party has substantially prevailed, the
parties shall bear equally the fees and costs of the arbitrator and the related
expenses of arbitration.
Section 11.2. Contract Modifications for Prospective Legal Events.
---------------------------------------------------
In the event any state or federal laws or regulations, now existing or enacted
or promulgated after the Effective Date are interpreted by judicial decision, a
regulatory agency or legal counsel in such a manner as to indicate that these
Terms and Conditions or any provision hereof may be in violation of such laws or
regulations, the Joint Policy Board and MCP shall agree upon such amendments to
these Terms and Conditions as necessary to preserve the underlying economic and
financial arrangements between the Physician Members and MCP and without
substantial economic detriment to either MCP or Physician Members. Any such
amendment approved by the Joint Policy Board shall be binding upon each
Physician Member. To the extent any act or service required of MCP should be
construed or deemed, by any governmental authority, agency or court, to
constitute the practice of medicine by PQC, the performance of said act or
service by MCP shall be deemed waived and forever unenforceable and the
provisions of this Section 11.2 shall be applicable. None of MCP nor any
Physician Member shall claim or assert illegality as a defense to the
enforcement of these Terms and Conditions or any provision hereof; instead, any
such purported illegality shall be resolved pursuant to the terms of this
Section 11.2.
Section 11.3. Parties in Interest; No Third-Party Beneficiaries.
-------------------
Except as otherwise provided herein, these Terms and Conditions shall inure to
the benefit of and be binding upon the respective heirs, legal representatives,
successors and permitted assigns of the parties hereto. Neither these Terms and
Conditions nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
Section 11.4. No Waiver; Remedies Cumulative. None of MCP, PQC or
------------------------------
any Physician Member shall by any act, delay, indulgence, omission or otherwise
be deemed to have waived any right or remedy hereunder or to have acquiesced in
any default in or breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of either MCP, PQC or any
Physician Member, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or privilege
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right. power or privilege. No remedy set
forth in this these Terms and Conditions or the Employment Agreements or
otherwise conferred upon or reserved to either MCP or any Physician Member shall
be considered exclusive of any other remedy available to either MCP or any
Physician Member, but the same shall be distinct, separate and cumulative and
may be exercised from time to time as often as occasion may arise or as may be
deemed expedient.
Section 11.5. Availability of Certain Documents. The parties agree,
---------------------------------
to the extent required by law necessary to permit receipt of reimbursement for
services by MCP, to make available to the Secretary of Health and Human
Services, the Comptroller General of the General Accounting Office, or their
authorized representatives, any books, documents and records in their possession
relating to the nature and extent of the costs of services hereunder for a
period of four (4) years after the provision of such services.
Section 11.6. Governing Law. These Terms and Conditions shall be
-------------
governed by and construed in accordance with the laws of the Commonwealth
of Massachusetts.
-31-
ANNEX B
ADDENDUM DATED AS OF DECEMBER 31,1996
TO GENERAL TERMS AND CONDITIONS OF PHYSICIAN EMPLOYMENT
Section 1. The General Terms and Conditions are amended to add an
additional Physician Responsibility Center as follows:
Responsibility Center I: Xxxxxx X. Xxxxxx, M.D.
Xxxx X. Egeihofer, M.D.
Xxxxx X. Xxxxx, M.D.
Xxxxx Xxxxxxx, M.D.
Responsibility Center J: Xxxxx Xxxxxxxxx, M.D.
Section 2. Until August 30, 1999, a separate Compensation Pool
(the "Additional Responsibility Centers Pool,") shall be established with
respect to Responsibility Centers I, J and any other Physician Responsibility
Centers designated by the Joint Policy Board as participating in the Additional
Responsibility Centers Pool (the "Additional Responsibility Centers") and
Section 7.1 of the General Terms and Conditions shall not apply to the
Additional Responsibility Centers. Except with respect to Integrated Health
Services, all Stage One Gross Margin attributable to the Additional
Responsibility Centers Pool and MCP, as provided below and shall constitute the
exclusive compensation for the services of the Physician Member in the
additional Responsibility Centers under their respective Employment Agreements.
The Physician Members in the Additional Responsibility Centers shall not be
entitled to participate in the Compensation Pool prior to August 30, 1999 except
to the extent that the Physician Members in an Additional Responsibility Center
are allocated any portion of the Compensation Pool attributable to a Laboratory
Center pursuant Section 7.4(b) or to Integrated Health Services pursuant to
Section 7.2. No Physician Member in the Additional Responsibility Centers shall
be entitled to any compensation for services under an Employment Agreement or
the Terms and Conditions except as provided in Article VII as modified by this
Addendum. No Physician Member who is not included in an Additional
Responsibility Center shall be entitled to any portion of the Additional
Responsibility Centers Pool or to any Stage One Gross Margin attributable to an
Additional Responsibility Center allocated to the Compensation Pool.
The amount of the Additional Responsibility Centers Pool with respect
to each Fiscal Period shall be determined as an allocation of Stage One Gross
Margin attributable to the Additional Responsibility Centers between the
Additional Responsibility Centers Pool and MCP, which allocation shall be
determined as provided below:
(a) First, an amount equal to eighty percent (80%) of any Stage One
Gross Margin attributable to the Additional Responsibility Centers with
respect to any Fiscal Period shall be allocated to the Additional
Responsibility Centers Pool until the total allocation to the
Additional Responsibility Center Pool for such Fiscal Period equals
eighty percent (80%) of the Base Compensation Pool Amount with respect
to the Additional Responsibility Centers (or a proportionally lesser
amount for any Fiscal Period that is less than twelve (12) calendar
months) and twenty percent (20%) of Stage One Gross Margin attributable
to the Additional Responsibility Centers shall be allocated to MCP
Allocation Account until the total allocation to the MCP Allocation
Account equals twenty percent (20%) of the Base Compensation Pool
Amount with respect to the Additional Responsibility Centers (or a
proportionally lesser amount for any Fiscal Period that is less than
twelve (12) calendar months);
(b) Second, any Stage One Gross Margin attributable to Additional
Responsibility Centers with respect to any Fiscal Period that remain
after allocation of the Stage One Gross Margin pursuant to Clause (a)
("Additional Responsibility Centers Stage Two Gross Margin"), shall be
allocated to the Practice Fund Account proportionately with the
contributions of other Physician Responsible Centers up to an amount
sufficient to cause the balance in such account to be equal to zero;
and
(c) Third, any Additional Responsibility Centers Stage Two Gross
margin that remains after allocation of the amounts pursuant to (a) and
(b) ("the Additional Responsibility Centers Stage Three Gross Margin")
shall be allocated fifty percent (50%) to the Additional Responsibility
Centers Pool and fifty percent (50%) to the MCP Allocation Account.
The allocation of Stage One, Stage Two and Stage Three Gross Margins to
the Additional Responsibility Centers Pool shall be calculated separately for
each Fiscal Period. Subject to review by the Joint Policy Board, MCP shall be
responsible for calculating the amounts of Stage One, Stage Two and Stage Three
Gross Margins to be allocated to each of MCP and the Additional Responsibility
Centers Pool. If the Stage One Gross Margin attributable to the Additional
Responsibility Centers for any Fiscal Period is negative, such negative amount
shall be an Additional Responsibility Centers Operating Expenses for the next
following Fiscal Period.
Section 3. Until August 30, 1999, Section 7.4(a) of the General
Terms and Conditions shall not apply to the Additional Responsibility Centers
and the following provision shall apply in lieu thereof:
Section 7.4. Allocation of the Compensation Pool among Physician Members in each
-------------------------------------------------------------------
Additional Responsibility Center. (a) On a weekly basis, MCP shall distribute to
--------------------------------
each Additional Responsibility Center from the Additional Responsibility Centers
Pool an amount equal to 80% of one-fifty-second of the Base Compensation Pool
Amount for the Additional Responsibility Centers (the "Base Distribution") less
the Deductible Expenses allocated to the Additional Responsibility Centers
(which amount shall be distributed to MCP); provided, however, if at any time
during a Fiscal Period MCP reasonably determines that the amount of Revenues
allocated to the Additional Responsibility Centers Pool for any Fiscal Period
may be less than eighty percent (80%) of the Additional Responsibility Centers'
Base Compensation Pool Amount for such Fiscal Period maybe less than eighty
percent (80%) of the Additional Responsibility Period, or if MCP or the Joint
Policy Board determines an Additional Responsibility Center's Physician
Responsibility Center Operating Expenses for such Fiscal Period will exceed such
Additional Responsibility Center's Targeted Physician Responsibility Center
Operating Expenses or an Additional Responsibility Center's Operating Revenues
will be less than such Responsibility Center's Targeted Responsibility Center
Operating Revenues, MCP may, subject to the approval of the Joint Policy Board,
which approval shall be granted unless the Joint Policy Board determines in good
faith that such shortfall in revenues or increase in operating expense is
primarily attributable to MCP, reduce the Base Distribution of an Additional
Responsibility Center as MCP determines to be appropriate in order that the
aggregate Base Distributions to the Additional Responsibility Centers do not
exceed the amount of the Additional Responsibility Centers Pool for such Fiscal
Period. MCP may, but shall not be required to, advance money to the Additional
Responsibility Centers Pool to fund such Base Distributions. Within 45 days of
the end of each three-month period, MCP shall advise the Compensation Committee
of the amount (the "Additional Variable Distribution Pool"), if any, of the
Additional Responsibility Centers Pool that has not been used, or is not
reasonably anticipated by MCP to be needed to fund, the Base Distributions. The
Compensation Committee, by the approval of a majority of the members of such
committee, shall determine how the Additional Variable Distribution Pool, if
any, shall be allocated among the Additional Responsibility Centers.
Distributions of the Base Distribution and, if applicable, the Additional
Variable Distribution Pool to an Additional Responsibility Center shall be
allocated among the Physician Members of such Additional Responsibility Center
as determined by a majority of the Physician Members in such Additional
Responsibility Center.
Section 4. From and after August 30, 1999, Article VII in its
entirety shall apply to Responsibility Center I and the provisions of Section 2
and 3 of this Addendum shall no longer be of any effect.
ANNEX C
Premises to which Physician Member is to be
assigned:
ANNEX D
Base Compensation Pool Amount for Physicians Responsibility Center
