EXHIBIT 10.81
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
CASTLE DENTAL CENTERS OF TEXAS, INC.,
A TEXAS CORPORATION
AND
SW DENTAL ASSOCIATES, LC
A TEXAS LIMITED LIABILITY COMPANY
EFFECTIVE JUNE 1, 1997
TABLE OF CONTENTS
Page No.
ARTICLE I. DEFINITIONS................................................... 2
Section 1.1 Act............................................ 2
Section 1.2 Adjusted Gross Revenue......................... 2
Section 1.3 Adjustments.................................... 2
Section 1.4 Ancillary Revenue.............................. 2
Section 1.5 Base Management Fee............................ 2
Section 1.6 Business Manager............................... 2
Section 1.7 Business Manager Expense....................... 2
Section 1.8 Cash Flow...................................... 2
Section 1.9 Confidential Information....................... 3
Section 1.10 Center......................................... 3
Section 1.11 Dental Services................................ 3
Section 1.12 Dentist........................................ 3
Section 1.13 GAAP........................................... 3
Section 1.14 Management Fee................................. 4
Section 1.15 Management Services............................ 4
Section 1.16 Management Services Agreement.................. 4
Section 1.17 Office Expense................................. 4
Section 1.18 Option Agreement............................... 5
Section 1.19 PC............................................. 5
Section 1.20 PC Account..................................... 5
Section 1.21 PC Expense..................................... 5
Section 1.22 Practice Territory............................. 5
Section 1.23 Professional Services Revenues................. 5
Section 1.24 Representatives................................ 5
Section 1.25 State.......................................... 5
Section 1.26 Term........................................... 6
ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER................ 6
Section 2.1 Appointment.................................... 6
Section 2.2 Authority...................................... 6
Section 2.3 Patient Referrals and Payments................. 6
Section 2.4 Internal Management of PC...................... 6
Section 2.5 Practice of Dentistry.......................... 7
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ARTICLE III. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER.......... 7
Section 3.1 Support Services............................... 7
Section 3.2 Quality Assurance, Risk Management, and
Utilization Review.......................... 7
Section 3.3 Licenses and Permits........................... 7
Section 3.4 Personnel...................................... 8
Section 3.5 Contract ...................................... 8
Section 3.6 Billing and Collection......................... 8
Section 3.7 PC Account..................................... 9
Section 3.8 Fiscal Matters................................. 9
Section 3.9 Reports and Records............................ 10
Section 3.10 Recruitment of PC Dentists..................... 11
Section 3.11 Business Manager's Insurance................... 11
Section 3.12 Advertising.................................... 11
Section 3.13 No Warranty.................................... 11
ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF PC......................... 11
Section 4.1 Organization and Operation..................... 11
Section 4.2 PC Personnel and Shareholders.................. 12
Section 4.3 Professional Standards......................... 12
Section 4.4 Dental Services................................ 12
Section 4.5 Peer Review/Quality Assurance.................. 13
Section 4.6 PC's Insurance................................. 13
Section 4.7 Confidential and Proprietary Information....... 13
Section 4.8 Noncompetition................................. 14
Section 4.9 Name, Trademark................................ 16
Section 4.10 Peer Review.................................... 16
Section 4.11 Indemnification................................ 16
ARTICLE V. FINANCIAL ARRANGEMENT......................................... 16
Section 5.1 Base Management Fee............................ 16
Section 5.2 Management Fee................................. 17
Section 5.3 Adjustments.................................... 17
Section 5.4 Reasonable Value............................... 17
Section 5.5 Payment of Management Fee...................... 17
ARTICLE VI. TERM AND TERMINATION......................................... 18
Section 6.1 Initial and Renewal Term....................... 18
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Section 6.2 Termination.................................... 18
Section 6.3 Effects of Termination......................... 19
ARTICLE VII. MISCELLANEOUS............................................... 20
Section 7.1 Administrative Services Only................... 20
Section 7.2 Status of Contractor; Agency................... 20
Section 7.3 Notices........................................ 21
Section 7.4 Governing Law.................................. 21
Section 7.5 Assignment..................................... 22
Section 7.6 Arbitration.................................... 22
Section 7.7 Waiver of Breach............................... 24
Section 7.8 Enforcement.................................... 24
Section 7.9 Gender and Number.............................. 24
Section 7.10 Additional Assurances.......................... 24
Section 7.11 Consents, Approvals, and Exercise of
Discretion.................................. 24
Section 7.12 Force Majeure.................................. 24
Section 7.13 Severability................................... 25
Section 7.14 Divisions and Headings......................... 25
Section 7.15 Amendments and Management Services Agreement
Execution................................... 25
Section 7.16 Entire Management Services Agreement........... 25
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MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT is made and entered into effective
as of June 1, 1997, by and between CASTLE DENTAL CENTERS OF TEXAS, INC., a Texas
corporation ("Business Manager"), and SW DENTAL ASSOCIATES, LC, a Texas limited
liability company ("PC")
RECITALS
This Management Services Agreement is made with reference to the
following facts:
A. PC is a validly existing Texas limited liability company, formed for
and engaged in the practice of dentistry and the provision of dental services to
the general public in the State of Texas through individual dentists who are
licensed to practice dentistry in the State of Texas and who are employed or
otherwise retained by PC.
B. Business Manager is a validly existing Texas corporation, which has
been duly formed to manage the business aspects of the dental practices in the
State of Texas.
C. PC desires to focus its energies, expertise and time on the practice
of dentistry and on the delivery of dental services to patients, and to
accomplish this goal it desires to delegate the increasingly more complex
business functions of its dental practice to persons with business expertise.
D. PC wishes to engage Business Manager to provide certain management,
administrative and business services for the administration of certain nondental
aspects of PC's dental practice in the Practice Territory (as defined below),
and Business Manager desires to provide such services all upon the terms and
conditions hereinafter set forth.
E. PC and Business Manager have determined a fair market value for the
services to be rendered by Business Manager, and based on this fair market
value, have determined a basis for the compensation for Business Manager that
will allow the parties to establish a relationship permitting each party to
devote its skills and expertise to the appropriate responsibilities and
functions.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinabove and hereinafter set forth, the parties agree as follows:
ARTICLE I. DEFINITIONS
For the purposes of this Management Services Agreement, the following
terms shall have the following meanings ascribed thereto, unless otherwise
clearly required by the context in which such term is used.
Section 1.1 ACT. The term "Act" shall mean Title 71, Chapter Nine (Art
4543-4551) of the Civil Statutes of the State of Texas, as amended.
Section 1.2 ADJUSTED GROSS REVENUE. The term "Adjusted Gross Revenue"
shall mean the sum of Professional Services Revenue and Ancillary Revenue.
Section 1.3 ADJUSTMENTS. The term "Adjustments" shall mean any
adjustments on an accrual basis for uncollectible accounts, third party payor
contractual adjustments, discounts, workers' compensation adjustments,
professional courtesies, and other reductions in collectible revenue that result
from activities that do not result in collectible charges.
Section 1.4 ANCILLARY REVENUE. The term "Ancillary Revenue" shall mean
all other revenue actually recorded each month (net of Adjustments) that is not
Professional Services Revenues consisting only of prepaid amounts for services
previously billed and collected.
Section 1.5 BASE MANAGEMENT FEE. The term "Base Management Fee" shall
mean the amount set forth in Section 5.1.
Section 1.6 BUSINESS MANAGER. The term "Business Manager" shall mean
Castle Dental Centers of Texas, Inc., a Texas corporation, or any entity that
succeeds to the interests of Business Manager and to whom the obligations of
Business Manager are assigned and transferred.
Section 1.7 BUSINESS MANAGER EXPENSE. The term "Business Manager
Expense" shall mean an expense or cost incurred by the Business Manager and for
which the Business Manager, and not PC, is financially liable other than
expenses incurred by Business Manager that directly benefit PC which may be
allocated to Office Expense.
Section 1.8 CASH FLOW. The term "Cash Flow" shall mean for any period,
earnings before depreciation and amortization, less capital expenditures, all
computed in accordance with
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GAAP. For the purpose of calculating Cash Flow, one-half of the compensation
paid to ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall be deemed to be an expense of PC.
Section 1.9 CONFIDENTIAL INFORMATION. The term "Confidential
Information" shall mean any information of Business Manager or PC, as
appropriate (whether written or oral), including all notes, studies, patient
lists, information, forms, business or management methods, marketing data, fee
schedules, or trade secrets of the Business Manager or of PC, as applicable,
whether or not such Confidential Information is disclosed or otherwise made
available to one party by the other party pursuant to this Management Services
Agreement. Confidential Information shall also include the terms and provisions
of this Management Services Agreement and any transaction or document executed
by the parties pursuant to this Management Services Agreement. Confidential
Information does not include any information that (i) is or becomes generally
available to and known by the public (other than as a result of an unpermitted
disclosure directly or indirectly by the receiving party or its affiliates,
advisors, or Representatives); (ii) is or becomes available to the receiving
party on a nonconfidential basis from a source other than the furnishing party
or its affiliates, advisors, or Representatives, provided that such source is
not and was not bound by a confidentiality agreement with or other obligation of
secrecy to the furnishing party of which the receiving party has knowledge at
the time of such disclosure; (iii) has already been or is hereafter
independently acquired or developed by the receiving party without violating any
confidentiality agreement with or other obligation of secrecy to the furnishing
party; or (iv) is required to be disclosed by Business Manager in connection
with a financing of its business.
Section 1.10 CENTER. The term "Center" (collectively referred to as
"Centers") shall mean any office space, clinic, facility, including satellite
facilities, owned or leased by PC or which is otherwise used by PC, as allowed
by law, in the provision of Dental Services pursuant to this Management Services
Agreement.
Section 1.11 DENTAL SERVICES. The term "Dental Services" shall mean
dental care and services, including but not limited to the practice of general
dentistry, orthodontics and all related dental care services provided by PC
through PC's Dentists and other dental care providers that are retained by or
professionally affiliated with PC.
Section 1.12 DENTIST. The term "Dentist" shall mean each individually
licensed professional who is employed or otherwise retained by or associated
with PC, each of whom shall meet at all times the qualifications described in
Section 4.2 and Section 4.3.
Section 1.13 GAAP. The term "GAAP" shall mean generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the
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American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity or other practices and procedures as may be
approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of the determination. For
purposes of this Management Services Agreement, GAAP shall be applied on an
accrual basis in a manner consistent with the historic practices of the person
to which the term applies.
Section 1.14 MANAGEMENT FEE. The term "Management Fee" shall mean
Business Manager's compensation established as described in Article V hereof.
Section 1.15 MANAGEMENT SERVICES. The term "Management Services" shall
mean the business, administrative, and management services to be provided for PC
in accordance with Article III hereof.
Section 1.16 MANAGEMENT SERVICES AGREEMENT. The term "Management
Services Agreement" shall mean this Management Services Agreement by and between
PC and Business Manager and any amendments hereto as may be adopted as provided
in this Management Services Agreement.
Section 1.17 OFFICE EXPENSE. The term "Office Expense" shall mean all
operating and nonoperating expenses incurred by the Business Manager in the
provision of services to PC. Office Expense shall not include any State or
federal income tax, or any other expense that is a PC Expense or a Business
Manager Expense. Without limitation, Office Expense shall include:
(a) the salaries and benefits of all employees of Business Manager at
the Centers and the salaries and benefits of the nondental employees of PC, but
not the salaries or benefits of the Dentists;
(b) the direct cost of any employee or consultant that provides
services at or in connection with the Centers for improved clinic performance,
such as management, billing and collections, business office consultation,
accounting and legal services;
(c) the Base Management Fee;
(d) the reasonable out-of-pocket travel expenses associated with
attending meetings, conferences, or seminars to benefit PC; and
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(e) the reasonable costs and expenses associated with marketing,
advertising and promotional activities to benefit PC.
To the extent, if any, that an Office Expense should properly be
allocated in part to PC and in part to other dental practices managed by
Business Manager, the amount allocated to PC shall be in proportion to the ratio
between PC's total Adjusted Gross Revenue to the total Adjusted Gross Revenue of
dental practices managed by Business Manager attributable to operations in the
Practice Territory.
Section 1.18 OPTION AGREEMENT. The term "Option Agreement" shall mean
that certain Option Agreement of even date herewith by and among PC, Business
Manager, ▇▇▇▇ ▇. ▇▇▇▇▇▇ D.D.S., P.C. and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
Section 1.19 PC. The term "PC" shall mean SW Dental Associates, LC, a
Texas limited liability company.
Section 1.20 PC ACCOUNT. The term "PC Account" shall mean the bank
account of PC described in Section 3.6.
Section 1.21 PC EXPENSE. The term "PC Expense" shall mean an expense
incurred by the Business Manager or PC and for which PC, and not the Business
Manager, is financially liable. PC Expense shall include such items as Dentist
salaries, benefits, and other direct costs (including professional dues,
subscriptions, continuing dental education expenses, and travel costs for
continuing dental education or other business travel but excluding business
travel requested by Business Manager, which shall be an Office Expense).
Section 1.22 PRACTICE TERRITORY. The term "Practice Territory" shall
mean ▇▇▇▇▇▇ County, Texas and all counties contiguous thereto.
Section 1.23 PROFESSIONAL SERVICES REVENUES. The term "Professional
Services Revenues" shall mean the sum of all professional fees actually recorded
each month on an accrual basis under GAAP (net of Adjustments) as a result of
Dental Services and related services rendered by the shareholders and dental
employees of PC.
Section 1.24 REPRESENTATIVES. The term "Representatives" shall mean a
party's officers, directors, employees, or other agents or representatives.
Section 1.25 STATE. The term "State" shall mean the State of Texas.
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Section 1.26 TERM. The term "Term" shall mean the duration of this
Management Services Agreement as described in Section 6.1.
ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
Section 2.1 APPOINTMENT. PC hereby appoints Business Manager as its
sole and exclusive agent for the management and administration of the business
functions and business affairs of PC described in Article III hereof, and
Business Manager hereby accepts such appointment, subject at all times to the
provisions of this Management Services Agreement.
Section 2.2 AUTHORITY. Consistent with the provisions of this
Management Services Agreement, Business Manager shall provide to PC the
Management Services set forth in Article III hereof. Subject to the terms and
conditions of this Management Services Agreement, Business Manager is hereby
expressly authorized to provide the Management Services in any reasonable manner
Business Manager deems appropriate. PC shall give Business Manager thirty (30)
days prior notice of PC's intent to execute any agreement obligating PC to
perform Dental Services or otherwise creating a binding legal obligation on PC.
The parties acknowledge and agree that PC, through its Dentists, shall be
responsible for and shall have complete authority, responsibility, supervision,
and control over the provision of all Dental Services and other professional
health care services performed for patients, and that all diagnoses, treatments,
procedures, and other professional health care services shall be provided and
performed exclusively by or under the supervision of Dentists as such Dentists,
in their sole discretion, deem appropriate. Business Manager shall have and
exercise absolutely no control or supervision over the provision of Dental
Services.
Section 2.3 PATIENT REFERRALS AND PAYMENTS. Business Manager and PC
agree that the benefits to PC hereunder do not require, are not payment for, and
are not in any way contingent upon the referral, admission, or any other
arrangement for the provision of any item or service offered by Business Manager
to patients of PC in any facility, laboratory or health care operation
controlled, managed, or operated by Business Manager. Further, Business Manager
and PC agree that the payment of monies hereunder in no way represents the
division, sharing, splitting or other allocation of fees for Dental Services
between PC and Business Manager.
Section 2.4 INTERNAL MANAGEMENT OF PC. Matters involving the internal
management, control, or finances of PC, including specifically the allocation of
professional income among the shareholders and Dentist employees of PC, tax
planning, and investment planning, shall remain the responsibility of PC and the
shareholders of PC.
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Section 2.5 PRACTICE OF DENTISTRY. The parties acknowledge that
Business Manager is not authorized or qualified to engage in any activity that
may be construed or deemed to constitute the practice of dentistry nor shall
Business Manager now or in the future be regarded as practicing dentistry within
the meaning of the Act. To the extent any act or service herein required by
Business Manager should be construed by a court of competent jurisdiction or by
the State Board of Dental Examiners to constitute the practice of dentistry, the
requirement to perform that act or service by Business Manager shall be deemed
waived and unenforceable and shall not constitute a breach or default by
Business Manager under this Agreement.
ARTICLE III. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER
During the Term, Business Manager shall provide the Management Services
set forth in this Article III in accordance with all laws, rules, regulations
and guidelines applicable to the provision of Management Services; provided,
however, that prior to incurring any obligation on behalf of or for the account
of PC that by its terms extends beyond the Term of this Management Services
Agreement, Business Manager shall obtain the consent of PC, which shall not be
unreasonably withheld.
Section 3.1 SUPPORT SERVICES. Business Manager shall provide or arrange
for all printing, stationery, forms, postage, duplication or photocopying
services, and other support services as are reasonably necessary and appropriate
for the operation of each Center and the provision of Dental Services therein.
Section 3.2 QUALITY ASSURANCE, RISK MANAGEMENT, AND UTILIZATION REVIEW.
Business Manager shall, upon the request of PC, assist PC in PC's establishment
of procedures to ensure the consistency, quality, appropriateness and necessity
of Dental Services provided by PC, and shall provide administrative support for
PC's overall quality assurance, risk management, and utilization review
programs. Business Manager shall perform these tasks in a manner to ensure the
confidentiality and nondiscoverability of these program actions to the fullest
extent allowable under State and federal law.
Section 3.3 LICENSES AND PERMITS. Business Manager shall, on behalf of
and in the name of PC, coordinate all development and planning processes, and
apply for and use reasonable efforts to obtain and maintain all federal, State,
and local licenses and regulatory permits required for or in connection with the
operation of PC and equipment (existing and future) located at each Center,
other than those relating to the practice of dentistry or the administration of
drugs by Dentists retained by or associated with PC.
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Section 3.4 PERSONNEL. Except as specifically provided in Section
4.2(b) of this Management Services Agreement, Business Manager shall employ or
otherwise retain and shall be responsible for selecting, hiring, training,
supervising, and terminating, all management, administrative, clerical,
secretarial, bookkeeping, accounting, payroll, billing and collection and other
nonprofessional personnel as Business Manager deems reasonably necessary and
appropriate to enable Business Manager to perform its duties and obligations
under this Management Services Agreement. Business Manager shall have sole
responsibility for determining the salaries and providing such fringe benefits,
and for withholding, as required by law, any sums for income tax, unemployment
insurance, social security, or any other withholding required by applicable law
or governmental requirement. PC shall reimburse Business Manager on a
semi-monthly basis for all payroll costs incurred in connection with such
personnel.
Section 3.5 CONTRACT NEGOTIATIONS. Business Manager shall, upon request
of PC, advise PC with respect to and negotiate, either directly or on PC's
behalf, as appropriate and allowed by law, contractual arrangements between PC
and third parties for PC's provision of Dental Services, including, without
limitation, negotiated price agreements with third party payors, alternative
delivery systems, or other purchasers of group health care services.
Section 3.6 BILLING AND COLLECTION. On behalf of and for the account of
PC, Business Manager shall establish and maintain credit and billing and
collection policies and procedures, and shall timely ▇▇▇▇ and collect all
professional and other fees for all Dental Services provided by PC, or Dentists
employed or otherwise retained by PC. Business Manager shall advise and consult
with PC regarding the fees for Dental Services provided by PC; it being
understood, however, that PC shall establish the fees to be charged for Dental
Services and that Business Manager shall have no authority whatsoever with
respect to the establishment of such fees. In connection with the billing and
collection services to be provided hereunder, and throughout the Term, PC hereby
grants to Business Manager a special power of attorney and appoints Business
Manager as PC's exclusive true and lawful agent and attorney-in-fact, and
Business Manager hereby accepts such special power of attorney and appointment,
for the following purposes:
(a) To ▇▇▇▇ PC's patients, in PC's name and on PC's behalf, for all
Dental Services provided by PC to patients.
(b) To ▇▇▇▇, in PC's name and on PC's behalf, all claims for
reimbursement or indem nification from Blue Shield/Blue Cross, insurance
companies and all other third party payors or fiscal intermediaries for all
covered billable Dental Services provided by PC to patients.
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(c) To administer such accounts including, but not limited to, (i)
extending the time of payment of any such accounts for cash, credit or
otherwise; (ii) discharging or releasing the obligors of any such accounts;
(iii) suing, assigning or selling at a discount such accounts to collection
agencies; or (iv) taking other measures to require the payment of any such
accounts.
(d) To deposit all amounts collected under clause (c) above into PC
Account which shall be and at all times remain in PC's name. PC covenants to
transfer and deliver to Business Manager for deposit into PC Account all funds
received by PC from patients or third party payors for Dental Services. Upon
receipt by Business Manager of any funds from patients or third party payors or
from PC pursuant hereto for Dental Services, Business Manager shall immediately
deposit those that relate to accounts receivable into the PC Account.
(e) To take possession of, endorse in the name of PC, and deposit into
the PC Account any notes, checks, money orders, insurance payments, and any
other instruments received in payment for Dental Services that relate to
accounts receivable.
Upon request of Business Manager, PC shall execute and deliver to the financial
institution wherein the PC Account is maintained, such additional documents or
instruments as may be neces sary to evidence the nature of Business Manager's
relationship with PC as described herein.
Section 3.7 PC ACCOUNT. Business Manager shall have access to the
records regarding the PC Account solely for the purposes contemplated hereby.
Section 3.8 FISCAL MATTERS.
(a) ACCOUNTING AND FINANCIAL RECORDS. Business Manager shall establish
and administer accounting procedures, controls, and systems for the development,
preparation, and safekeeping of administrative or financial records and books of
account relating to the business and financial affairs of PC and the provision
of Dental Services ("PC Records"), all of which shall be prepared and maintained
in accordance with GAAP and applicable laws and regulations. Business Manager
shall prepare and deliver to PC, (i) within 45 days of the end of each month,
and (ii) within one hundred twenty (120) days of the end of each calendar year,
a balance sheet and a profit and loss statement reflecting the financial status
of PC in regard to the provision of Dental Services as of the end of such
period, including a detailed description of disbursements made by Business
Manager on behalf of PC, all of which shall be prepared in accordance with GAAP
consistently applied. In addition, Business Manager shall prepare or assist in
the preparation of any other financial statements or records as PC may
reasonably request. PC and its authorized representatives shall have access,
during normal business hours, to any and all PC
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Records in the possession of Business Manager, and PC shall have the right to
review and copy any such PC Records, including but not limited to the copying of
any PC Records in electronic format.
(b) REVIEW OF EXPENDITURES. Business Manager shall not have any
authority to make any expenditures not consistent with this Management Services
Agreement without PC Consent.
(c) TAX MATTERS.
(1) IN GENERAL. At PC's request, Business Manager shall
prepare or arrange for the preparation by an
accountant approved in advance by PC (which approval
shall not be unreasonably withheld) of all
appropriate tax returns and reports required of PC.
(2) SALES AND USE TAXES. Business Manager and PC
acknowledge and agree that to the extent that any of
the services to be provided by Business Manager
hereunder may be subject to any State sales and use
taxes, Business Manager may have a legal obligation
to collect such taxes from PC and to remit same to
the appropriate tax collection authorities. PC agrees
to pay in addition to the payment of the Management
Fee, the applicable State sales and use taxes in
respect of the portion of the Management Fee
attributable to such services.
Section 3.9 REPORTS AND RECORDS. Business Manager shall establish,
monitor, and maintain procedures and policies for the timely creation,
preparation, filing and retrieval of all dental records generated by PC in
connection with PC's provision of Dental Services; and, subject to applicable
law, shall use its best efforts to ensure that dental records are promptly
available to Dentists and any other appropriate persons. All such dental records
shall be retained and maintained in accordance with all applicable State and
federal laws relating to the confidentiality and retention thereof. All dental
records shall be and remain the property and under the control of PC and shall
be located at the applicable Center so that they are readily available for
patient care, and PC shall remain the custodian thereof and responsible for
their maintenance. Business Manager shall use its reasonable efforts to preserve
the confidentiality of dental records and use information contained in such
records only for the limited purpose necessary to perform the services set forth
herein; provided, however, in no event shall a breach of said confidentiality be
deemed a default under this Agreement.
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Section 3.10 RECRUITMENT OF PC DENTISTS. Upon PC's request, Business
Manager shall perform all administrative services reasonably necessary and
appropriate to recruit potential Dentist personnel to become employees of PC.
Business Manager shall provide PC with model agreements to document PC's
employment, retention or other service arrangements with such indi viduals. It
will be and remain the sole and complete responsibility of PC to interview,
select, contract with, supervise, control and terminate all Dentists performing
Dental Services or other professional services, and Business Manager shall have
no authority whatsoever with respect to such activities.
Section 3.11 BUSINESS MANAGER'S INSURANCE. Throughout the Term,
Business Manager shall obtain and maintain with commercial carriers, through
self-insurance or some combination thereof, appropriate worker's compensation
coverage for Business Manager's employed personnel provided pursuant to this
Management Services Agreement, and professional, casualty and comprehensive
general liability insurance covering Business Manager, Business Manager's
personnel, and all of Business Manager's equipment in such amounts, on such
basis and upon such terms and conditions as Business Manager deems appropriate.
Upon the request of PC, Business Manager shall provide PC with a certificate
evidencing such insurance coverage.
Section 3.12 ADVERTISING. PC shall reimburse Business Manager on a
monthly basis for PC's pro rata share of advertising expenses incurred in the
Territory determined on the ratio of PC's Adjusted Gross Revenue to the total
Adjusted Gross Revenue of dental practices managed by Business Manager
attributable to operations in the Practice Territory.
Section 3.13 NO WARRANTY. PC acknowledges that Business Manager has not
made and will not make any express or implied warranties or representations that
the services provided by Business Manager will result in any particular amount
or level of dental practice or income to PC.
ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF PC
Section 4.1 ORGANIZATION AND OPERATION. PC, as a continuing condition
of Business Manager's obligations under this Management Services Agreement,
shall at all times during the Term be and remain legally organized and operated
to provide Dental Services in a manner consistent with all State and federal
laws. PC shall operate and maintain within the Practice Territory a full time
practice of dentistry specializing in the provision of Dental Services.
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Section 4.2 PC PERSONNEL AND SHAREHOLDERS.
(a) DENTAL PERSONNEL. PC shall retain, as a PC Expense and not as an
Office Expense, that number of Dentists as are reasonably necessary and
appropriate in the sole discretion of PC for the provision of Dental Services.
Each Dentist retained by PC shall hold and maintain a valid license to practice
dentistry in the State, and shall be competent in the practice of dentistry,
including any subspecialties that the retained Dentist will practice on behalf
of PC. PC shall enter into, maintain and enforce with each such retained Dentist
a written employment agreement in a form reasonably satisfactory to PC and
Business Manager. No such employment contract may be amended without the prior
written consent of Business Manager if such amendment is effective beyond the
Term of this Management Services Agreement. PC shall be responsible for paying
the compensation and benefits, as applicable, for all Dentists and any other
dental personnel or other contracted or affiliated dentists, and for
withholding, as required by law, any sums for income tax, unemployment
insurance, social security, or any other withholding required by applicable law.
Business Manager may, on behalf of PC, establish and administer the compensation
with respect to such individuals in accordance with the written agreement
between PC and each Dentist. Business Manager shall neither control nor direct
any Dentist in the performance of Dental Services for patients.
(b) EMPLOYMENT OF NON-DENTIST DENTAL CARE PERSONNEL. PC shall employ or
retain, as an Office Expense, all non-dentist dental care personnel, such as
dental assistants, dental hygienists and dental technicians, required under the
Act or otherwise required by law to work under the direct supervision of a
Dentist or who Business Manager and PC determine should work under the direct
supervision of a Dentist. Such non-dentist dental care personnel shall be under
PC's control, supervision and direction in the performance of Dental Services
for patients.
Section 4.3 PROFESSIONAL STANDARDS. As a continuing condition of
Business Manager's obligations hereunder, each Dentist and any other dental
personnel retained by PC to provide Dental Services must comply with, be
controlled and governed by and otherwise provide Dental Services in accordance
with the code of professional conduct and applicable federal, State and
municipal laws, rules, regulations, ordinances and orders, and the ethics and
standard of care of the dental community wherein any Center is located.
Section 4.4 DENTAL SERVICES. PC shall ensure that Dentists and
non-dentist dental care personnel are available to provide Dental Services to
patients. In the event that Dentists are not available to provide Dental
Services coverage, PC shall engage and retain LOCUM TENENS coverage as it deems
reasonable and appropriate based on patient care requirements. Dentists retained
on a LOCUM TENENS basis shall meet all of the requirements of Section 5.3, and
the cost of providing
-▇▇-
▇▇▇▇▇ ▇▇▇▇▇▇ coverage shall be a PC Expense. With the assistance of the Business
Manager, PC and the Dentists shall be responsible for scheduling Dentist and
non-dentist dental care personnel coverage of all dental procedures.
Section 4.5 PEER REVIEW/QUALITY ASSURANCE. PC shall adopt a peer
review/quality assessment program to monitor and evaluate the quality of Dental
Services provided by dental personnel of PC. Upon request of PC, Business
Manager shall provide advice and administrative assistance to PC in structuring
and performing its peer review/quality assurance activities, but only if such
advice and assistance can be provided consistent with maintaining the
confidentiality and nondiscoverability of the processes and actions of the Peer
Review/Quality Assurance process of PC and not be regarded as practicing
dentistry under the Act. PC shall be under no obligation to act in accordance
with any advice provided to PC by Business Manager pursuant to this Section 4.5.
Section 4.6 PC'S INSURANCE. PC shall obtain and maintain with
commercial carriers appropriate worker's compensation coverage for PC's employed
personnel, if any, and professional and comprehensive general liability
insurance covering PC and each of the Dentists PC retains or employs to provide
Dental Services. The comprehensive general liability coverage shall be in the
minimum amount of One Million Dollars ($1,000,000) for each occurrence and Three
Million Dollars ($3,000,000) annual aggregate; and professional liability
coverage shall be in the minimum amount of Five Hundred Thousand Dollars
($500,000) for each occurrence and One Million Five Hundred Thousand Dollars
($1,500,000) annual aggregate. With respect to any insurance policies to be
renewed or obtained during the Term of this Management Services Agreement, PC
shall use reasonable efforts to obtain a provision in such policies that
provides for at least thirty (30) days advance written notice to PC from the
insurer as to any alteration of coverage, cancellation, or proposed cancellation
for any cause, and provide that a copy of such notice be sent to Business
Manager. PC shall cause to be issued to Business Manager by such insurer or
insurers a certificate reflecting such coverage and shall provide notice to
Business Manager promptly upon receipt of notice given to Dentist of the
cancellation or proposed cancellation of such insurance for any cause. PC and
Business Manager agree to use their best efforts to have each other named as
additional insureds on the other's respective professional liability insurance
at Business Manager's expense.
Section 4.7 CONFIDENTIAL AND PROPRIETARY INFORMATION. PC will not
disclose any Confidential Information of Business Manager without Business
Manager's express written authorization, such Confidential Information will not
be used in any way directly or indirectly detrimental to Business Manager, and
PC will keep such Confidential Information confidential and will take reasonable
steps to ensure that its affiliates and advisors who have access to such
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Confidential Information comply with these nondisclosure obligations; provided,
however, that PC may disclose Confidential Information to those of its
Representatives who need to know Confidential Information for the purposes of
this Management Services Agreement, it being understood and agreed to by PC that
such Representatives will be informed of the confidential nature of the
Confidential Information, will agree to be bound by this Section, and will be
directed by PC not to disclose to any other person any Confidential Information.
If PC is requested or required by a court of competent jurisdiction (by oral
questions, interrogatories, requests for information or documents, subpoenas,
civil investigative demands, or similar processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with Business
Manager or its affiliates, advisors, or Representatives, PC will (i) provide
Business Manager with prompt notice thereof and copies, if possible, and, if
not, a description, of the Confidential Information requested or required to be
produced so that Business Manager may seek an appropriate protective order or
waive compliance with the provisions of this Section and (ii) consult with
Business Manager as to the advisability of Business Manager's taking of legally
available steps to resist or narrow such request. PC further agrees that, if in
the absence of a protective order or the receipt of a waiver hereunder PC is
nonetheless, in the written opinion of its legal counsel, compelled to disclose
or produce Confidential Information concerning Business Manager to any tribunal
or to stand liable for contempt or suffer other censure or penalty, PC may
disclose or produce such Confidential Information to such tribunal legally
authorized to request and entitled to receive such Confidential Information
without liability hereunder; provided, however, that PC shall give Business
Manager written notice of the Confidential Information to be so disclosed or
produced as far in advance of its disclosure or production as is practicable and
shall use its best efforts to obtain, to the greatest extent practicable, an
order or other reliable assurance that confidential treatment will be accorded
to such Confidential Information so required to be disclosed or produced.
Section 4.8 NONCOMPETITION. PC hereby recognizes and acknowledges that
Business Manager will incur substantial costs in providing the support services,
personnel, management, administration, and other items and services that are the
subject matter of this Management Services Agreement and that in the process of
providing services under this Management Services Agreement, PC will be privy to
financial and Confidential Information, to which PC would not otherwise be
exposed. The parties also recognize that the services to be provided by Business
Manager will be feasible only if PC operates an active practice to which the
Dentists associated with PC devote their full professional time and attention.
PC agrees and acknowledges that the noncompetition covenants described hereunder
are necessary for the protection of Business Manager, and that Business Manager
would not have entered into this Management Services Agreement without the
following covenants.
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(a) During the Term of this Management Services Agreement and except
for its obligations pursuant to this Management Services Agreement, PC shall not
establish, operate, or provide Dental Services at a dental office, clinic or
other health care facility anywhere within the Practice Territory.
(b) Except as specifically agreed to by Business Manager in writing, PC
covenants and agrees that during the Term of this Management Services Agreement,
PC shall not directly or indirectly own (excluding passive ownership of less
than five percent (5%) of the equity of any publicly traded entity), manage,
operate, control, or be otherwise associated with, lend funds to, lend its name
to, or maintain any interest whatsoever in any enterprise (i) having to do with
the provision, distribution, promotion, or advertising of any type of management
or administrative services or products to third parties in competition with
Business Manager, in the Practice Territory; and/or (ii) offering any type of
service(s) or product(s) to third parties substantially similar to those offered
by Business Manager to PC in the Practice Territory.
(c) The written employment agreements described in Section 4.2 shall
contain covenants of the shareholder employees pursuant to which the
shareholders agree not to compete with PC within the Practice Territory for the
shorter of (i) the term of the Management Services Agreement or (ii) one (1)
year after termination of the employment agreement in accordance with the terms,
conditions and limitations contained therein.
(d) PC shall obtain formal written agreements from its dentist
employees pursuant to which the employees agree not to compete with PC within
the Practice Territory (as defined in such employment agreements) for the
shorter of (i) the term of the Management Services Agreement or (ii) one (1)
year after termination of the employment agreement in accordance with the terms,
conditions and limitations contained therein.
(e) PC understands and acknowledges that the foregoing provisions in
Section 4.7 and Section 4.8 are designed to preserve the goodwill of Business
Manager and the goodwill of the individual Dentists of PC. Accordingly, if PC
breaches any obligation of Section 4.7 or Section 4.8, in addition to any other
remedies available under this Management Services Agreement, at law or in
equity, Business Manager shall be entitled to enforce this Management Services
Agreement by injunctive relief and by specific performance of the Management
Services Agreement. Additionally, nothing in this paragraph shall limit Business
Manager's right to recover any other damages to which it is entitled as result
of PC's breach. If any provision of the covenants is held by a court of
competent jurisdiction to be unenforceable due to an excessive time period,
geographic area, or restricted activity, the covenant shall be reformed to
comply with such time period, geographic area, or restricted activity that would
be held enforceable.
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Section 4.9 NAME, TRADEMARK. PC represents and warrants that, as of the
date hereof, PC conducts its professional practice under the name of, and only
under the name of "Southwest Dental Associates" and derivatives thereof. PC
covenants and promises that, without the prior written consent of the Business
Manager, PC will not:
(a) take any action or omit to take any action that is reasonably
likely to result in the change or loss of the name;
(b) license, sell, give, or otherwise transfer the name or the right to
use the name to any dental practice, dentist, professional corporation, or any
other entity; or
(c) conduct the professional practice of PC under any name other than
"SW Dental Associates" or "Castle Dental Centers" or respective derivatives
thereof.
Section 4.10 PEER REVIEW. PC shall designate a committee of Dentists to
function as a dental peer review committee to review credentials of potential
recruits, perform quality assurance functions, and otherwise resolve dental
competence issues. The dental peer review committee shall function pursuant to
formal written policies and procedures.
Section 4.11 INDEMNIFICATION. PC shall indemnify, hold harmless and
defend Business Manager, its officers, directors and employees, from and against
any and all liability, loss, damage, claim, causes of action and expenses
(including reasonable attorneys' fees), whether or not covered by insurance,
caused or asserted to have been caused, directly or indirectly, by or as a
result of the performance of Dental Services or any other acts or omissions by
PC and/or its shareholders, agents, employees and/or subcontractors (other than
Business Manager) during the term hereof. Business Manager shall indemnify, hold
harmless and defend PC, its officers, directors and employees, from and against
any and all liability, loss, damage, claim, causes of action and expenses
(including reasonable attorneys' fees), 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 Business Manager and/or its shareholders,
agents, employees and/or subcontractors (other than PC) during the term of this
Agreement.
ARTICLE V. FINANCIAL ARRANGEMENT
Section 5.1 BASE MANAGEMENT FEE. The Base Management Fee shall be the
amount, calculated on a monthly basis, that is equal to fifteen percent (15%) of
the Adjusted Gross Revenue attributable to the applicable monthly period;
provided, however, that in no event shall
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the aggregate Base Management Fee during the Term exceed the aggregate Cash Flow
of PC for the Term.
Section 5.2 MANAGEMENT FEE. PC and Business Manager agree to the
compensation set forth herein as being paid to Business Manager in consideration
of a substantial commitment made by Business Manager hereunder and that such fee
is fair and reasonable. Each month, Business Manager shall be paid the
following:
(i) the amount of all Office Expenses (other than the
Base Management Fee) paid by the Business Manager on
behalf of PC; and
(ii) the Base Management Fee.
Section 5.3 ADJUSTMENTS. If there are not sufficient funds in any
period to pay the Base Management Fee, all unpaid amounts shall accumulate and
carry over from month to month until paid or until the termination of this
Management Services Agreement, in which case such unpaid amounts shall be
immediately due and payable as of the date of termination.
Section 5.4 REASONABLE VALUE. Payment of the Base Management Fee is not
intended to be and shall not be interpreted or applied as permitting Business
Manager to share in PC's fees for Dental Services or any other services, but is
acknowledged as the parties' negotiated agreement as to the reasonable fair
market value of the support services, purchasing, personnel, management,
administration, strategic management and other items and services furnished by
Business Manager pursuant to this Management Services Agreement, considering the
nature and volume of the services required and the risks assumed by Business
Manager.
Section 5.5 PAYMENT OF MANAGEMENT FEE. PC shall pay the Management Fee
with respect to each calendar month by the 15th day of the succeeding calendar
month. If PC fails to pay Business Manager the Management Fee in accordance with
the terms of this Management Services Agreement, and such default continues for
five days after PC receives notice of the default: (i) if Business Manager
elects not to enter into the Member Interests Purchase Agreement referred to in
the Option Agreement, then Business Manager may exercise only such right with
respect to such unpaid Management Fee as Business Manger may have as a creditor
of PC; and (ii) if Business Manager elects to enter into the Member Interests
Purchase Agreement referred to in the Option Agreement, then the purchase price
to be paid in accordance with the terms of the Member Interests Purchase
Agreement shall be reduced by the amount of such unpaid Management Fee.
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ARTICLE VI. TERM AND TERMINATION
Section 6.1 INITIAL AND RENEWAL TERM. The Term of this Management
Services Agreement shall commence effective June 1, 1997 and end on the earlier
of (i) May 31, 1998, and (ii) the closing of the transactions described in the
Member Interests Purchase Agreement referred to in the Option Agreement.
Section 6.2 TERMINATION.
(a) TERMINATION BY BUSINESS MANAGER. Subject to Section 6.2(c),
Business Manager may only terminate this Management Services Agreement either
without cause upon ninety (90) days' written notice to PC, or upon the
occurrence of any one of the following events which shall be deemed to be "for
cause":
(i) The dissolution of PC or the filing of a petition in
voluntary bankruptcy, an assignment for the benefit
of creditors, or other action taken voluntarily or
involuntarily under any State or federal statute for
the protection of debtors;
(ii) PC materially defaults in the performance of any of
its material duties or obligations hereunder, other
than payment to Business Manager of the Management
Fee, and such default continues for thirty (30) days
after PC receives notice of the default; or
(iii) PC fails to pay Business Manager the Management Fee
in accordance with the terms of this Management
Services Agreement, and such default continues for
five (5) days after PC receives notice of the
default.
(b) TERMINATION BY PC. Subject to Section 6.2(c) PC may only terminate
this Management Services Agreement upon any of the following occurrences which
shall be deemed to be "for cause":
(i) The dissolution of Business Manager or the filing of
a petition in voluntary bankruptcy, an assignment for
the benefit of creditors, or other action taken
voluntarily or involuntarily under any State or
federal statute for the protection of debtors;
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(ii) In the event that Business Manager materially
defaults in the performance of any of its material
obligations hereunder and such default continues for
thirty (30) days after Business Manager receives
notice of the default; or
(iii) In the event that a violation of the Act is asserted
by the Texas State Board of Dental Examiners that
could reasonably be expected to result in the
suspension or revocation of, or the imposition of
penalties or disciplinary action on, the dental
license of ▇▇▇▇ ▇▇▇▇▇▇▇ or any Dentists employed by
PC, on the grounds that PC's entering into and
performing its obligations under this Management
Services Agreement is unlawful or as a result of a
violation of the Act by Business Manager.
(c) TERMINATION BY AGREEMENT. In the event PC and Business Manager
shall mutually agree in writing, this Management Services Agreement may be
terminated on the date specified in such written agreement.
(d) LEGISLATIVE, REGULATORY OR ADMINISTRATIVE CHANGE. In the event
there shall be a change in the Act, any federal or State statutes, case laws,
regulations or general instructions, the interpretation of any of the foregoing,
the adoption of new federal or State legislation, or a change in any third party
reimbursement system, any of which are reasonably likely to adversely affect the
manner in which either party may perform or be compensated for its services
under this Management Services Agreement or which shall make this Management
Services Agreement unlawful, the parties shall immediately enter into good faith
negotiations regarding a new service arrangement or basis for compensation for
the services furnished pursuant to this Management Services Agreement that
complies with the law, regulation, or policy and that approximates as closely as
possible the economic position of the parties prior to the change. If good faith
negotiations cannot resolve the matter, it shall be submitted to arbitration as
referenced in Section 7.6; provided however that in the event that a violation
of the Act is asserted by the Texas State Board of Dental Examiners that could
reasonably be expected to result in the suspension or revocation of, or the
imposition of penalties or disciplinary action on, the dental license of ▇▇▇▇
▇▇▇▇▇▇▇ or any Dentists employed by PC on the grounds that PC's entering into
and performing its obligations under this Management Services Agreement is
unlawful, or as a result of a violation of the Act by Business Manager, PC may
immediately terminate this Management Services Agreement upon written notice to
Business Manager pursuant to Section 6.2(b)(iii).
Section 6.3 EFFECTS OF TERMINATION. Upon termination of this Management
Services Agreement neither party shall have any further obligations hereunder
except for (i) obligations accruing prior to the date of termination, including,
without limitation, payment of the Manage ment Fee and PC Expenses relating to
services provided prior to the termination of this Management Services Agreement
and (ii) obligations, promises, or covenants set forth herein that are expressly
made to extend beyond the Term, which provisions shall survive the expiration or
termination of this Management Services Agreement for any reason. Without
limiting the generality of the foregoing, upon termination of this Management
Services Agreement for any reason, neither PC, ▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S. nor ▇▇▇▇▇▇
▇▇▇▇▇▇▇ shall be subject to any employment, noncompetition, confidentiality,
secrecy, hiring limitation or nonsolicitation obligations with respect to
Business Manager or any of its affiliates. Upon the expiration or termination of
this Management Services Agreement for any reason or cause whatsoever, Business
Manager shall surrender to PC all books and records pertaining to PC's dental
practice.
ARTICLE VII. MISCELLANEOUS
Section 7.1 ADMINISTRATIVE SERVICES ONLY. Nothing in this Management
Services Agreement is intended or shall be construed to allow Business Manager
to exercise control or direction over the manner or method by which PC and its
Dentists perform Dental Services or other professional health care services. The
rendition of all Dental Services, including, but not limited to, the
prescription or administration of drugs shall be the sole responsibility of PC
and its Dentists, and Business Manager shall not interfere in any manner or to
any extent therewith. Nothing contained in this Management Services Agreement
shall be construed to permit Business Manager to engage in the practice of
dentistry, it being the sole intention of the parties hereto that the services
to be rendered to PC by Business Manager are solely for the purpose of providing
nondental management and administrative services to PC so as to enable PC to
devote its full time and energies to the professional conduct of its dental
practice and provision of Dental Services to its patients and not to
administration, or practice management.
Section 7.2 STATUS OF CONTRACTOR; AGENCY. It is expressly acknowledged
that the parties hereto are independent contractors and that this Management
Services Agreement is intended to constitute Business Manager as PC's agent,
such agency to be strictly limited to the matters set forth herein. Nothing
herein shall be construed to create an employer/employee, partnership, or joint
venture relationship, or to allow either to exercise control or direction over
the manner or method by which the other performs the services that are the
subject matter of this Management Services Agreement or to permit Business
Manager to take any action that would constitute the practice of dentistry;
provided always that the services to be provided hereunder shall be furnished in
a manner consistent with the standards governing such services and the
provisions of this Management Services Agreement. Each party understands and
agrees that (i) the other will not be treated as an employee for federal tax
purposes, (ii) neither will withhold on behalf of the other any sums for income
tax, unemployment insurance, social security, or any other withholding
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pursuant to any employment related law or requirement of any governmental body
or make available any of the benefits afforded to its employees, (iii) all of
such payments, withholdings, and benefits, if any, are the sole responsibility
of the party incurring the liability, and (iv) each will indemnify and hold the
other harmless from any and all loss or liability arising with respect to such
payments, withholdings, and benefits, if any.
Section 7.3 NOTICES. Any notice, demand, or communication required,
permitted, or desired to be given hereunder shall be in writing and shall be
served on the parties at the following respective addresses:
PC: SW DENTAL ASSOCIATES, LC
--------------------------
--------------------------
--------------------------
Business Manager: CASTLE DENTAL CENTERS OF TEXAS, INC.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate. Any notice, demand, or
communication required, permitted, or desired to be given hereunder shall be
sent either (a) by hand delivery, in which case notice shall be deemed received
when actually delivered, (b) by prepaid certified or registered mail, return
receipt requested, in which case notice shall be deemed received five calendar
days after deposit, postage prepaid in the United States Mail, or (c) by a
nationally recognized overnight courier, in which case notice shall be deemed
received one business day after deposit with such courier.
Section 7.4 GOVERNING LAW. This Management Services Agreement shall be
governed by the laws of the State of Texas applicable to agreements to be
performed wholly within the State. The law of the State was chosen by the
parties after negotiation to govern interpretation of this Management Services
Agreement because ▇▇▇▇▇▇ County, Texas is the seat of management for Business
Manager. The federal and State courts of ▇▇▇▇▇▇ County, Texas shall be the
exclusive venue for any litigation, special proceeding, or other proceeding
between the parties that may arise out of, or be brought in connection with or
by reason of, this Management Services Agreement.
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Section 7.5 ASSIGNMENT. Except as may be herein specifically provided
to the contrary, this Management Services Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors, and assigns; provided, however, that neither party
hereto may assign this Management Services Agreement without the prior written
consent of the other party, which consent may be withheld. The sale, transfer,
pledge, or assignment of any of the common shares held by any shareholder of PC
or the issuance by PC of common or other voting shares to any other person, or
any combination of such transactions shall be deemed an attempted assignment by
PC, and shall be null and void unless consented to in writing by Business
Manager prior to any such transfer or issuance. Any breach of this provision,
whether or not void or voidable, shall constitute a material breach of this
Management Services Agreement, and in the event of such breach, Business Manager
may terminate this Management Services Agreement upon twenty-four (24) hours
notice to PC.
Section 7.6 ARBITRATION.
(a) GENERAL. The parties shall use good faith negotiation to resolve
any controversy, dispute or disagreement arising out of or relating to this
Management Services Agreement or the breach of this Management Services
Agreement. Any matter not resolved by negotiation shall be submitted to binding
arbitration and such arbitration shall be governed by the terms of this Section
7.6.
(b) SCOPE. Unless otherwise specifically provided herein, the parties
hereto agree that any claim, controversy, dispute or disagreement between or
among any of the parties hereto arising out of or relating to this Management
Services Agreement (other than claims involving any noncompetition or
confidentiality covenant) shall be governed exclusively by the terms and
provisions of this Section 7.6; provided, however, that the terms and provisions
of this Section 7.6 shall not preclude any party hereto from seeking, or a court
of competent jurisdiction from granting, a temporary restraining order,
temporary injunction or other equitable relief for any breach of (i) any
noncompetition or confidentiality covenant herein or (ii) any duty, obligation,
covenant, representation or warranty, the breach of which may cause irreparable
harm or damage.
(c) ARBITRATORS. In the event of any claim, controversy, dispute or
disagreement between the parties hereto arising out of or relating to this
Management Services Agreement, and in the further event the parties are unable
to resolve such claim, controversy, dispute or disagreement within thirty (30)
days after notice is first delivered pursuant to Section 7.3, the parties agree
to select arbitrators to hear and decide all such claims under this Section 7.6.
Each party shall select one arbitrator, and the two arbitrators so chosen shall
then select a third arbitrator who is experienced in the matter or action that
is subject to such arbitration. If such matter or action
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involves health-care issues, then the third arbitrator shall have such
qualifications as would satisfy the requirements of the National Health Lawyers
Association Alternative Dispute Resolution Service. Each of the arbitrators
chosen shall be impartial and independent of all parties hereto. If either of
the parties fails to select an arbitrator within twenty days after the end of
such thirty-day period, or if the arbitrators chosen fail to select a third
arbitrator within twenty days, then any party may in writing request the judge
of the United States District Court for the Southern District of Texas senior in
term of service to appoint the arbitrator or arbitrators and, subject to this
Section 7.6, such arbitrators shall hear all arbitration matters arising under
this Section 7.6, and, in default of such selection, may ask the American
Arbitration Association.
(d) APPLICABLE RULES.
(i) Each arbitration hearing shall be held at a place in Houston,
Texas acceptable to a majority of the arbitrators. The
arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association to the extent such rules do not conflict with the
terms hereof. The decision of a majority of the arbitrators
shall be reduced to writing and shall be binding on the
parties. Judgment upon the award(s) rendered by a majority of
the arbitrators may be entered and execution had in any court
of competent jurisdiction or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement. The charges and expenses of the arbitrators shall
be shared equally by the parties to the hearing.
(ii) The arbitration shall commence within thirty (30) days after
the arbitrators are selected in accordance with the provisions
of this Section 7.6. In fulfilling their duties with respect
to the matter in arbitration, the arbitrators may consider
such matters as, in the opinion of the arbitrators, are
necessary or helpful to make a proper valuation. The
arbitrators may consult with and engage disinterested third
parties to advise the arbitrators. The arbitrators shall not
add any interest factor reflecting the time value of money to
the amount of any award granted under any arbitration
hereunder and shall not award any punitive damages.
(iii) If any of the arbitrators selected hereunder should die,
resign or be unable to perform his or her duties hereunder,
the remaining arbitrators or such senior judge (or such
judge's successor) shall select a replacement arbitrator. The
procedure set forth in this Section 7.6 for selecting the
arbitrators shall be followed from time to time as necessary.
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(iv) As to the resolution of any claim, controversy, dispute or
disagreement that under the terms hereof is made subject to
arbitration, no lawsuit based on such resolution shall be
instituted by either of the parties hereto, other than to
compel arbitration proceedings or enforce the award of a
majority of the arbitrators.
(v) All privileges under Texas and federal law, including
attorney-client and work- product privileges, shall be
preserved and protected to the same extent that such
privileges would be protected in a federal court proceeding
applying Texas law.
Section 7.7 WAIVER OF BREACH. The waiver by either party of a breach or
violation of any provision of this Management Services Agreement shall not
operate as, or be construed to constitute, a waiver of any subsequent breach of
the same or another provision hereof.
Section 7.8 ENFORCEMENT. In the event either party resorts to legal
action to enforce or interpret any provision of this Management Services
Agreement, the prevailing party shall be entitled to recover the costs and
expenses of such action so incurred, including, without limitation, reasonable
attorneys' fees.
Section 7.9 GENDER AND NUMBER. Whenever the context of this Management
Services Agreement requires, the gender of all words herein shall include the
masculine, feminine, and neuter, and the number of all words herein shall
include the singular and plural.
Section 7.10 ADDITIONAL ASSURANCES. Except as may be herein
specifically provided to the contrary, the provisions of this Management
Services Agreement shall be self-operative and shall not require further
agreement by the parties; provided, however, at the request of either par ty,
the other party shall execute such additional instruments and take such
additional acts as are reasonable and as the requesting party may deem necessary
to effectuate this Management Services Agreement.
Section 7.11 CONSENTS, APPROVALS, AND EXERCISE OF DISCRETION. Whenever
this Management Services Agreement requires any consent or approval to be given
by either party, or either party must or may exercise discretion, and except
where specifically set forth to the contrary, the parties agree that such
consent or approval shall not be unreasonably withheld or delayed, and that such
discretion shall be reasonably exercised.
Section 7.12 FORCE MAJEURE. Neither party shall be liable or deemed to
be in default for any delay or failure in performance under this Management
Services Agreement or other interruption of service deemed to result, directly
or indirectly, from acts of God, civil or military
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authority, acts of public enemy, war, accidents, fires, explosions, earthquakes,
floods, failure of transportation, strikes or other work interruptions by either
party's employees, or any other sim ilar cause beyond the reasonable control of
either party unless such delay or failure in performance is expressly addressed
elsewhere in this Management Services Agreement.
Section 7.13 SEVERABILITY. The parties hereto have negotiated and
prepared the terms of this Management Services Agreement in good faith with the
intent that each and every one of the terms, covenants and conditions herein be
binding upon and inure to the benefit of the respective parties. Accordingly, if
any one or more of the terms, provisions, promises, covenants or conditions of
this Management Services Agreement or the application thereof to any person or
circumstance shall be adjudged to any extent invalid, unenforceable, void or
voidable for any reason whatsoever by a court of competent jurisdiction or an
arbitration tribunal, such provision shall be as narrowly construed as possible,
and each and all of the remaining terms, provisions, promises, covenants and
conditions of this Management Services Agreement or their application to other
persons or circumstances shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law. To the extent this
Management Services Agreement is in violation of applicable law, then the
parties agree to negotiate in good faith to amend the Management Services
Agreement, to the extent possible consistent with its purposes, to conform to
law.
Section 7.14 DIVISIONS AND HEADINGS. The divisions of this Management
Services Agreement into articles, sections, and subsections and the use of
captions and headings in connection therewith is solely for convenience and
shall not affect in any way the meaning or interpretation of this Management
Services Agreement.
Section 7.15 AMENDMENTS AND MANAGEMENT SERVICES AGREEMENT EXECUTION.
This Management Services Agreement and amendments hereto shall be in writing and
executed in multiple copies on behalf of PC by its President, and on behalf of
Business Manager by any duly authorized officer thereof. Each multiple copy
shall be deemed an original, but all multiple copies together shall constitute
one and the same instrument.
Section 7.16 ENTIRE MANAGEMENT SERVICES AGREEMENT. With respect to the
subject matter of this Management Services Agreement, (i) this Management
Services Agreement, the Option Agreement and the Member Interests Purchase
Agreement referred to in the Option Agreement supersedes all previous contracts
and constitutes the entire agreement between the parties; (ii) neither party
shall be entitled to benefits other than those specified herein; and (iii) no
prior oral statements or contemporaneous negotiations or understandings or prior
written material not specifically incorporated herein shall be of any force and
effect, and no changes in or additions
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to this Management Services 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).
IN WITNESS WHEREOF, PC and Business Manager have caused this Management
Services Agreement to be executed by their duly authorized representatives, all
as of the day and year first above written.
PC: SW DENTAL ASSOCIATES LC
By: _____________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
President
BUSINESS MANAGER: CASTLE DENTAL CENTERS OF TEXAS, INC.
_________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
President
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