EX-10.27 11 doc10.txt ADMINISTRATIVE SERVICES AGREEMENT THIS ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") by and between SAFEGUARD HEALTH ENTERPRISES, INC., a Delaware corporation, on behalf of its various subsidiaries ("SafeGuard"), and DENTAL SOURCE OF MISSOURI AND KANSAS, INC., a Missouri corporation ("Dental Source"), sets forth the terms pursuant to which SafeGuard and Dental Source agree to the administration of one or more individual and group dental health coverages to be provided to persons eligible for such coverage under dental health benefits programs ("Members") paid for by employers, health and welfare funds, and others ("Group"), and arises out of the following circumstances: RECITALS: A. Dental Source is a Prepaid Dental Plan Organization in the State of Missouri and Kansas that provides or arranges prepaid dental HMO Products for its enrollees in geographically defined service areas ("Service Areas"). B. SafeGuard, through its subsidiaries, is licensed in various states to provide prepaid dental plan benefits to its enrollees. C. SafeGuard desires that Dental Source provide benefits to those SafeGuard Members who reside in Missouri and Kansas based upon SafeGuard contracts that arise outside the State of Missouri and Kansas. D. Dental Source desires to provide prepaid dental plan benefits to SafeGuard Members in accordance with the terms and conditions of this Agreement. In consideration of the mutual promises set forth herein, the parties hereto agree as follows: 1. PRODUCTS TO BE OFFERED. From time to time SafeGuard will enter into ------------------------- a contract with a Group whereby the Group will have employees residing within the State of Missouri and Kansas. Dental Source agrees to provide services to SafeGuard whereby Members will receive prepaid dental plan services from Dental Source through its providers within the State of Missouri and Kansas. The products currently being sold by SafeGuard in Missouri and Kansas are attached to the Stock Purchase Agreement entered into by the parties hereto contemporaneously herewith, at Schedule 5.28 (the "Products"). From time to time, Dental Source may modify, eliminate or add to the Products described in Schedule 5.28 referred to above upon ninety (90) days advance written notice to SafeGuard of such changes, additions or deletions. 2. ADMINISTRATIVE AND OTHER SERVICES. ------------------------------------ 2.1 MARKETING. SafeGuard may in the ordinary course of business --------- market the Products in all states in which its subsidiaries are licensed. From time to time, instances will arise where a Group with whom SafeGuard contracts has Members residing in the State of Missouri and Kansas. 2.2 ENROLLMENT. ---------- 2.2.1 Enrollment. Dental Source will conduct all necessary ---------- enrollment meetings for Members, and will obtain enrollment cards for those persons to be covered by Dental Source through its relationship with SafeGuard. Dental Source shall maintain all enrollment information on its system. 2.2.2 Customer Service. Dental Source shall perform all ----------------- necessary customer service to members enrolled in Dental Source through Groups to support the enrollment functions. 2.2.3 Disclosure Statements. Dental Source shall be ---------------------- responsible for producing and distributing disclosure statements reasonably necessary and/or required by law of the State of Missouri and Kansas to be furnished by it to assure the availability of appropriate information for enrollees regarding the dental health care services to be provided to Members by Dental Source. 2.3 ELIGIBILITY LISTING. SafeGuard shall provide Dental Source -------------------- with a monthly list of Members by the 20th day of the month preceding the month of coverage for each month this Agreement is in effect. 2.4 QUALITY ASSURANCE AND UTILIZATION REVIEW. Dental Source shall -------------------------------------------- have sole responsibility for the resolution of all grievance lodged by Members, all quality assurance, and all utilization review functions as may be required by the State of Missouri and Kansas in connection with Dental Source's license. 2.5 BILLING AND COLLECTION OF PREMIUMS. SafeGuard shall provide -------------------------------------- all necessary services for billing premiums, reconciling accounts, and the collection of premiums from Groups not domiciled in the State of Missouri and Kansas for the Products. 2.6 REPORTING. --------- 2.6.1 Complaints. Any complaints received by one party ---------- regarding the service, coverage or benefits provided by the other party, shall be promptly referred to the appropriate party for resolution. Each party will report to the other the nature and disposition of such customer complaints. 2.6.2 Other Reports. Administrative and other services -------------- provided by one party on behalf of the other shall be monitored by the other through reports and other information exchanged between the parties as agreed upon by the parties from time to time. 2.7 TAXES. Dental Source shall be responsible for reporting and ----- paying all required state premium income and other taxes, assessments and regulatory fees for Members enrolled in Missouri and Kansas. 3. COMPENSATION AND PAYMENT. SafeGuard shall pay Dental Source -------------------------- seventy-five percent (75%) of the premiums that SafeGuard receives from its groups for coverage of Members for the Products sold by SafeGuard and for which Dental Source provides services to SafeGuard Members enrolled in Missouri and Kansas. Such payment shall be due and payable by SafeGuard to Dental Source within ten (10) days after Dental Source submits an invoice to SafeGuard for the services provided herein. Dental Source shall be responsible for paying all of its own administrative expenses in connection with each Member enrolled, but shall not be responsible for any broker commission that may be required to be paid in connection with any contract for a Group through which such Members are enrolled. 4. PROVIDERS. Dental Source agrees to maintain a panel of' --------- participating dental providers consisting of general dentists and specialists ("Providers") that is reasonable adequate to service the need of the Members. Dental Source shall be solely responsible for the payment of all provider compensation of any kind and nature due to Providers as a result of members covered under this agreement. Dental Source shall also be responsible for all Provider credentialing as may be required under applicable state law. A copy of the initial Dental Source Provider list is attached hereto marked Exhibit B. Not less frequently than fifteen (15) days following the end of each calendar quarter, or within fifteen (15) days after request by SafeGuard, Dental Source shall provide to SafeGuard a current list of Providers. 5. TERM AND TERMINATION. This Agreement shall commence on the ---------------------- Effective Date as set forth below, shall remain in effect for a period of three (3) years unless terminated earlier upon: (a) SafeGuard's failure to pay Dental Source, within ten (10) days after written notice from Dental Source, the compensation set forth in Paragraph 3, or (b) a material breach by a party of its obligations hereunder, and such breach is not cured by the party within thirty (30) days after written notice thereof. Termination of this Agreement shall not terminate the rights or liabilities of either party to perform its obligations to the other party or the obligations of Dental Source to Members pursuant to a contract for any Product with a Group, for those obligations arising during the term of this Agreement. 6. ARBITRATION. If any dispute relating to this Agreement or ----------- administration thereof arises which cannot be resolved to the satisfaction or SafeGuard and Dental Source, the Parties shall submit the dispute to binding arbitration. The arbitrators are not bound by any rule of law, except that the arbitration will be conducted under the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitration shall be conducted in Orange County, California. The parties shall share fees and expenses of the arbitrator. The prevailing party in such arbitration shall be entitled to receive as part of the arbitrator's award, attorneys' fees and costs. 7. INSOLVENCY/CESSATION AND OPERATIONS. In addition to the provisions ------------------------------------ of Paragraph 5 above, this Agreement shall terminate immediately if: (a) SafeGuard becomes insolvent or ceases operations; or (b) Dental Source becomes insolvent or ceases operations in Missouri or Kansas. Insolvency or insolvent shall mean a final determination made by either (a) a court of competent jurisdiction that SafeGuard or Dental Source is insolvent; or (b) the insurance authorities of an appropriate jurisdiction declare SafeGuard or Dental Source insolvent. 8. LITERATURE AND PUBLICITY. No party will distribute any literature -------------------------- or other material or release any publicity or information relating to this Agreement without the other party's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. 9. EXCLUSIVE AGREEMENT. For the term of the Agreement, SafeGuard -------------------- agrees to utilize Dental Source exclusively to provide the services described herein to SafeGuard Members in the State of Missouri and Kansas. Dental Source may contract with other health care plans and may provide benefits directly to members in Missouri and Kansas notwithstanding this Agreement. SafeGuard agrees not to offer for sale or sell any prepaid dental plan in the State of Missouri and Kansas for the term of this Agreement. 10. CONFIDENTIALITY. The parties will maintain a free exchange of --------------- information regarding matters relating to this Agreement. Each party will notify the other of any complaints, inquiries, or litigation with respect to matters related to this Agreement and shall cooperate and assist in the defense of such matters. Each party shall allow the other to audit such parties records related to this Agreement. All information provided by one party to the other hereunder shall be treated by the other party, its agents, officers, employees and representatives, in a confidential manner, and in compliance with all applicable state and federal laws. Each party agrees to prevent the unauthorized disclosure of any such information. Each party agrees to keep confidential all non-public information regarding the other party or its activities that it obtains pursuant to this Agreement. Further, each party agrees to maintain the confidentiality of individual medical records and related information as required by each party's established policies and practices or required by law. Each party may, however, disclose otherwise confidential information to any state or federal regulatory agency when required by law. Any breach of the terms of this covenant shall be deemed a material breach of this Agreement. In the event of any such breach, the aggrieved party shall be entitled to seek an injunction restraining the other from disclosing any confidential information, and to pursue any other legal remedies available to such party for any actual or threatened breach. This covenant regarding confidentiality shall survive the termination of this Agreement. 11. INSURANCE. Each party, at its sole expense, shall maintain in full --------- force and effect, insurance to provide at least the following protection: (a) bodily injury and property damage with limits of not less than One Million Dollars ($1,000,000); and (b) errors and omissions liability which Dental Source will use its best efforts to obtain during the term of the Agreement with limits to be determined by mutual agreement by the parties hereto; (c) multi-perils all risk insurance including contents, and valuable papers with limits of not less than One Million Dollars ($1,000,000); workers' compensation and unemployment insurance of types and levels required by applicable laws and regulations. 12. ACCESS TO BOOKS AND RECORDS. Each party shall make available to ------------------------------ the other all of its books and records relating to this Agreement, and to any regulatory agency having jurisdiction over the parties for the purpose of inspection, examining and copying: (a) at all reasonable times, (b) in a form maintained in accord with the general standards applicable to such book or record keeping, and for the duration of this Agreement plus thirty-six (36) months, or, if longer, as required by applicable state law. 13. MISCELLANEOUS PROVISIONS. ------------------------- 13.1 AMENDMENT. This Agreement may be amended only by written --------- agreement signed by both parties hereto. 13.2 AUTHORIZATION OF AGREEMENT. All parties represent and ---------------------------- warrant, each to the other, that the execution and delivery of this Agreement has, if such is required, been duly authorized by all necessary action of their respective shareholders, partners, owners or governing boards, as the case may be. 13.3 COSTS. Except or otherwise provided in this Agreement, each ----- party shall bear the cost of its legal, accounting, consulting and other services necessary to comply with its duties and obligations under this Agreement. 13.4 COUNTERPARTS. This Agreement may be executed simultaneously ------------ in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 13.5 ENTIRE AGREEMENT. This Agreement (together with any exhibits ---------------- attached hereto) constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties, and there are no warranties, representations or other agreements between the parties in connection with the subject matter hereof except as specifically set forth herein. No changes in or additions to this Agreement shall be recognized unless incorporated herein by amendment, as provided herein, such amendment(s) to become effective on the date stipulated in such amendment(s). 13.6 FORCE MAJEURE. Neither party shall be liable or be deemed in ------------- breach of this Agreement for any failure or delay of performance which results, directly or indirectly, from acts of God, civil or military authority, public disturbance, accidents, fires, or any other cause beyond the reasonable control of either party. 13.7 FURTHER ASSURANCES. The parties hereto, at any time and from ------------------ time to time, will execute and deliver such further instruments and take such further action as may reasonably be requested by the other party hereto in order to cure any defects in the execution and delivery of, or to comply with or accomplish, the covenants and agreements contained in this Agreement. 13.8 GOVERNING LAW. The validity, interpretation and performance ------------- of this Agreement shall be governed by and constructed in accordance with the laws of the State of Missouri. 13.9 HEADINGS. The headings of this Agreement are inserted for -------- convenience only and are not to be considered in the interpretation of this Agreement. They shall not in any way limit the scope or modify the substance or context of any sections of this Agreement. 13.10 NO ASSIGNMENTS. This Agreement may not be assigned by --------------- either party without the prior written consent of the other party. 13.11 NOTICES. Notices regarding this Agreement shall be sent ------- certified mail, return receipt requested and shall be addressed as follows: Dental Source: SafeGuard: Dental Source of Missouri and Kansas, Inc. SafeGuard Health Enterprises, Inc. 11777 Katy Freeway, Suite 405 95 Enterprise, Suite 100 Houston, TX 77029 Aliso Viejo, CA 92656-2605 Attention: James A. Taylor, President and Attention: Ronald I. Brendzel, Chief Executive Officer Senior Vice President Fax: (713) 493-6599 and General Counsel Fax: (949) 425-4586 With a copy to (which shall not constitute notice) Gardere Wynne Sewell LLP 1601 Elm Street Dallas, TX 75201-4761 Attn: Roman J. Kupchynsky II Fax: (214) 999-3528 13.12 RELATIONSHIP OF PARTIES. Nothing contained in this ------------------------- Agreement shall constitute or be construed to be or to create a partnership, joint venture or other such relationship between the parties. Neither party to this Agreement shall use the name of the other party to this Agreement in any promotional or advertising material without prior approval of the other party. This Agreement shall not constitute an endorsement by one party of the other party to this Agreement. 13.13 RIGHTS OF THIRD PARTIES. The parties do not intend, and -------------------------- nothing in this Agreement shall be deemed, to give any person other than the parties hereto any right or interest based on this Agreement. The parties reserve the right to amend this Agreement by mutual consent or to terminate it without notice to or consent of any person not a party to this Agreement. 13.14 WAIVER. No delay or omission by either party to this ------ Agreement in the exercise or enforcement of any of its powers or rights hereunder shall constitute a waiver of such power or right. A waiver by either party of any provision of this Agreement must be in writing and signed by such party, and shall not imply subsequent waiver of that or any other provision. IN WITNESS WHEREOF, the Undersigned have caused this Agreement to be executed effective as of November 1, 2001 (the "Effective Date"). DENTAL SOURCE: Dental Source of Missouri and Kansas, Inc., a Missouri corporation By: /s/ James A. Taylor ------------------------------ JAMES A. TAYLOR, President and Chief Executive Officer SAFEGUARD: Safeguard Health Enterprises, Inc., a Delaware corporation By: /s/ John F. Steen -------------------------------- JOHN F. STEEN, Vice President and Chief Development Officer By: /s/ Ronald I. Brendzel --------------------------------- RONALD I. BRENDZEL, Senior Vice President and Secretary