EXHIBIT 10.42
BOST1-636474-2
MANAGEMENT SERVICES AGREEMENT
AMONG
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D., PC
(the "PC")
AND
Omega Orthodontics of Virginia, Inc.
(the "MSO")
AND
OMEGA Orthodontics, Inc.
("OMEGA")
TABLE OF CONTENTS
ARTICLE 1TERM 2
ARTICLE 2DUTIES OF THE MSO 2
2.1 General 2
2.2 Orthodontic Office Services 2
2.3 Administrative Services 3
2.4 Business Systems, Procedures and Forms 3
2.5 Purchasing, Accounts Payable, Supplies and Inventory
Control 4
2.6 Regulatory Compliance Services 4
2.7 Billing, Collection 4
2.8 Disbursement of Funds 5
2.9 MSO Expenses 5
2.10 Credit Reports 8
2.11 Accounting; Bookkeeping and Reports 8
2.12 Marketing 8
2.13 Complaints 8
2.14 Practice Laws 8
2.15 Monthly Meetings 9
2.16 Maintenance and Cleaning Services 9
2.17 Licenses and Permits 9
2.18 Insurance 9
2.19 Practice Transition and Associate Selection 9
ARTICLE 3 DUTIES OF THE PC 10
3.1 General 10
3.2 Employment of the Orthodontists and Rendering of Patient
Care 10
3.3 Professional Services 10
3.4 Records 10
3.5 Professional Expenses 11
3.6 Professional Liability Insurance 11
3.7 Employment Agreement 11
ARTICLE 4 PROFESSIONAL SERVICES, CONTROL OF SOLICITATION,
APPROVAL OF ADVERTISING MATERIAL AND NO RECIPROCATION 12
ARTICLE 5 LEASE OF OFFICE FACILITIES AND EQUIPMENT 12
ARTICLE 6 COMPENSATION 15
ARTICLE 7 SECURITY INTEREST 15
ARTICLE 8 COVENANTS 16
8.1 PC's Covenants 16
(f) 17
8.2 MSO's Covenants 18
ARTICLE 9 INSURANCE AND INDEMNITY 18
9.1 Insurance to be Maintained by the PC 18
9.2 Insurance to be Maintained by the MSO 18
9.3 Tail Insurance Coverage 18
9.4 Additional Insureds 18
9.5 Indemnification 18
10.1 Termination by the PC 19
ARTICLE 11 AUTHORIZED AGENT AND POWERS OF ATTORNEY 20
ARTICLE 12 INDEPENDENT CONTRACTOR RELATIONSHIP 21
ARTICLE 13 MISCELLANEOUS 21
13.1 Access to Records 21
13.2 Patient Records 21
13.3 The PC's Control Over the Orthodontic Practice 21
ARTICLE 14 ALTERNATIVE DISPUTE RESOLUTION 22
14.1 Alternative Dispute Resolution 22
14.2 Waiver of Jury 22
ARTICLE 15 GENERAL PROVISIONS 23
15.1 Notices 23
15.2 Confidentiality 23
15.3 Contract Modifications for Prospective Legal Events 24
15.4 Remedies Cumulative 24
15.5 No Obligation to Third Parties 24
15.6 Entire Agreement; Termination of Interim Management
Agreement 24
15.7 Assignment 24
15.8 Attorneys' Fees 25
15.9 Governing Law 25
15.10 Events Excusing Performance 25
15.11 Compliance with Applicable Laws 25
15.12 Language Construction 25
15.13 Amendments 25
15.14 Severability 25
15.15 No Waiver 26
15.16 Captions 26
15.17 Counterparts 26
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT is made effective as of this 31 st day of
December, 1997, by and among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D., PC, a
professional corporation (the "PC") incorporated under the laws
of the Commonwealth of Virginia (the "State"), and OMEGA
ORTHODONTICS OF VIRGINIA, INC., a Delaware corporation (the
"MSO"), and OMEGA ORTHODONTICS, INC., a Delaware corporation
("OMEGA").
WHEREAS, OMEGA provides professional management and
marketing services to orthodontic practices in the United States,
which services include providing practice management systems,
office space, equipment, furnishings and active administrative
personnel necessary for the operation of orthodontic practices
and are provided directly or indirectly through management
service organizations such as the MSO;
WHEREAS, the PC owns and operates an orthodontic practice
(the "Practice") with offices located in the facilities
identified in the lease attached hereto as Exhibit A (the
"Orthodontic Office") and furnishes and will furnish orthodontic
care to the general public through the services of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, D.M.D. ("▇▇. ▇▇▇▇▇") who is duly licensed to practice
orthodontics in the State and any and all other orthodontists who
are or become affiliated with the PC as of or following the date
hereof and who are or become subsequently named on Schedule 1
hereto (individually, an "Orthodontist" and collectively, the
"Orthodontists");
WHEREAS, as of December 20, 1997, OMEGA, ▇▇. ▇▇▇▇▇ and the
PC previously entered into that certain Interim Management
Agreement (the "Interim Management Agreement") pursuant to which
OMEGA agreed to provide certain services to the PC;
WHEREAS, the MSO was formed and acquired to provide
equipment, facilities and personnel to, and to manage the non-
orthodontic business affairs of, the PC;
WHEREAS, OMEGA, the PC and ▇▇. ▇▇▇▇▇ have entered into that
certain Affiliation Agreement and Asset Purchase Agreement (the
"Affiliation Agreement") dated as of December 20, 1997, pursuant
to which the MSO will acquire certain assets of the PC;
WHEREAS, the PC and OMEGA desire to terminate the Interim
Management Agreement upon the effective date of the Affiliation
Agreement;
WHEREAS, the MSO's services are designed to improve the
efficiency and profitability of the PC while enhancing the
ability of ▇▇. ▇▇▇▇▇ and the Orthodontists (if any) to render
quality orthodontic care to the patients of the PC;
WHEREAS, the PC wishes to retain the MSO to perform the
functions and to provide the services described in this Agreement
to assist the PC to achieve the above goals.
NOW, THEREFORE, IT IS AGREED that the MSO shall perform
managerial and administrative services for the PC and provide
office space and orthodontic facilities appropriate for rendering
general orthodontic treatment at the Orthodontic Office upon the
following terms and conditions:
ARTICLE 1
TERM
1.1 The initial term of this Agreement shall commence on
the date first above written and continue for a period of twenty
(20) years (the "Initial Term"), subject, however, to earlier
termination in accordance with Article 10 hereof. This Agreement
shall continue for two separate and successive ten (10) year
periods (each a "Renewal Term" and collectively with the Initial
Term, the "Term") unless the MSO otherwise elects upon six months
written notice to the PC prior to expiration of the Initial Term
or any then effective Renewal Term.
ARTICLE 2
DUTIES OF THE MSO
2.1 General. The MSO shall provide the PC with
comprehensive practice management, financial and marketing
services, and such facilities, equipment, and support personnel
as are reasonably required by the PC to operate its Practice at
the Orthodontic Office, as determined by the MSO in consultation
with the PC. The PC hereby appoints the MSO as the sole and
exclusive business manager of the PC and agrees that the MSO
shall have all power and authority reasonably necessary to manage
the non-orthodontic business affairs of the PC and carry out the
MSO's duties under this Agreement, subject to the requirements of
the applicable provisions of State law relating to the practice
of orthodontics. The MSO may perform some or all of its services
at a location other than at the Orthodontic Office. The PC
acknowledges and agrees that the MSO may subcontract with other
persons or entities, including any entities related to the MSO by
ownership or control, to perform any part or all of the services
required of the MSO hereunder.
2.2 Orthodontic Office Services. The MSO shall provide or
arrange for the provision of the office space and related
leasehold improvements to constitute the Orthodontic Office and
related fixtures, furniture, furnishings, equipment and related
services (collectively, the "Orthodontic Office Services")
described in Schedule 2 attached hereto and incorporated by
reference, as such Schedule may be amended by the PC and the MSO
from time to time. The MSO shall be responsible for all repairs,
maintenance and replacement of the Orthodontic Office including
such leasehold improvements, fixtures, furniture, furnishings and
equipment, except for repairs, maintenance and replacement
necessitated by the negligence of the PC, its employees and
agents (not including the MSO or its employees or agents). The
MSO shall, on an ongoing basis, evaluate and consult with the PC
on the equipment needs of and the efficiency and adequacy of the
Orthodontic Office. The MSO shall provide telephone, facsimile
transmission, printing, duplicating and transcribing services as
needed, as well as all laundry, linen and uniforms.
2.3 Administrative Services.
(a) The MSO shall supply secretarial, reception,
maintenance, front office, skilled assistants and other
personnel, except duly licensed "Practice Providers," during
normal office hours as reasonably requested by the PC, to enable
the PC to perform effectively orthodontic and treatment services.
The MSO shall be responsible for staff scheduling, provided,
however, that all Practice Providers including orthodontic
assistants and hygienists shall be under the direct supervision
of the PC. The PC shall have sole authority to employ and
terminate the employment of all Practice Providers. All
personnel placed in the Orthodontic Office by the MSO shall be
subject to the approval of the PC, which approval shall not be
unreasonably withheld, and the PC shall have the authority to
instruct the MSO to terminate the employment of such personnel
for any lawful reason. The MSO shall be responsible for all
personnel wages (excluding wages for Practice Providers and
clinical personnel, such as hygienists and laboratory
personnel), withholding, fringe benefits, bonuses and workers'
compensation insurance in connection with its employees;
provided, however, that the PC is in full compliance with the
compensation provisions of this Agreement.
(b) "Practice Providers" shall mean the individuals
who are duly licensed to practice dentistry and/or orthodontics
in the State including ▇▇. ▇▇▇▇▇ and the Orthodontists (if any)
and other individuals who are employees of the PC or otherwise
under contract with the PC to provide dental or orthodontic,
hygienic or other assistance or services to patients of the PC or
otherwise required by applicable "Laws" (as defined in Section
2.6 below) to be employees of the PC to provide services to
patients of the Practice. A list of all Practice Providers and
their relationship to the PC is set forth as Exhibit B attached
hereto and incorporated herein by reference. Prior to making any
changes in the list of Practice Providers, the PC shall use its
best efforts to consult with the MSO. The PC also shall use its
best efforts to consult with the MSO with regard to the terms of
contracts entered into between the PC and the Practice Providers
and the terms and conditions of their employment or engagement as
independent contractors.
2.4 Business Systems, Procedures and Forms. In
consultation with the PC, the MSO shall establish standardized
business systems and procedures for the PC, including, but not
limited to, patient scheduling systems, treatment records
systems, financial reporting and process control systems and
patient communication management systems including any amendments
from time to time (the "OMEGA Patient Scheduling System"), that
are designed to improve the PC's operating efficiency. The MSO
shall analyze such information on an ongoing basis in order to
advise the PC on ways of improving operating efficiencies. The
MSO shall provide training to the staff of the PC in the
implementation and operation of such standardized business
systems and procedures. The MSO shall additionally provide the
PC with and train the PC's staff in the use of standardized
clinical forms, including, without limitation, forms for patient
evaluations and treatment plans. The PC expressly acknowledges
and agrees that it shall have no property rights in the OMEGA
Patient Scheduling System and the other foregoing systems,
procedures and clinical forms, and further agrees that such
systems, procedures, and forms shall be deemed to constitute
Confidential Information within the meaning of Section 8.1 hereof
and be subject to the restrictions on the use, appropriation, and
reproduction of such Confidential Information provided for in
Section 8.1.
2.5 Purchasing, Accounts Payable, Supplies and Inventory
Control. The MSO shall be responsible for and shall establish
and maintain systems for the handling and processing of all
purchasing and payment activities and for the performance of all
payroll and payroll accounting functions of the PC. The MSO
shall order and purchase and maintain all inventory and
orthodontic supplies as reasonably required by the PC to enable
the PC to render orthodontic care to its patients including,
without limitation, all orthodontic appliances and other
supplies, laboratory supplies and sanitation supplies.
2.6 Regulatory Compliance Services. The MSO shall arrange
for or cause to be rendered to the PC such business, legal and
regulatory management consultation and advice as may be
reasonably required or requested by the PC and directly related
to the operations of the PC or its compliance with Federal, state
or local laws, rules, regulations or interpretations governing or
applicable to the PC (collectively, "Laws"); provided, however,
that the MSO shall not be responsible for any services related to
malpractice or other professional service claims or matters not
directly related to the operation of the PC or its compliance
with Laws, or for any legal or tax advice or services or personal
financial services to ▇▇. ▇▇▇▇▇ and the Orthodontists (if any) or
any employee or agent of the PC.
2.7 Billing, Collection. The MSO shall be responsible for:
(i) billing and collecting payments for all orthodontic and other
professional services rendered by the PC and the Practice
Providers, with all such billing and collecting to be done in the
name of the PC; (ii) receiving payments from patients, insurance
companies and all other third party payors; (iii) taking
possession of and endorsing in the name of the PC any notes,
checks, money orders, insurance payments and other instruments
received in payment for services or of accounts receivable; and
(iv) settling and compromising claims and, where deemed
appropriate by the MSO and consented to (which consent shall not
be unreasonably withheld or delayed) by the Practice Provider
rendering the professional services which resulted in the
applicable accounts receivable, assigning such accounts
receivable to a collection agency or the bringing of a legal
action against a patient or a payor on the PC's behalf. In
seeking payments on behalf of the PC hereunder, the MSO shall act
as the PC's agent in billing and collecting professional fees,
charges and other accounts owed to the PC and shall only ▇▇▇▇
under the PC's provider number. In this regard, the PC appoints
the MSO for the Term of this Agreement in accordance with the
provisions of Article 11 hereof as its true and lawful attorney-
in-fact for the purposes set forth above in this Section 2.7 and
in Section 2.8 below. The MSO does not guarantee collection and
is not responsible for any loss to the PC as a result of any
inability to collect fees and charges.
2.8 Disbursement of Funds.
(a) All monies collected for the PC by the MSO
pursuant to Section 2.7 above shall be deposited into an account
(the "PC Account") with a bank whose deposits are insured with
the Federal Deposit Insurance Corporation and which bank is
acceptable to the MSO and the PC (the "Bank"). The PC Account
shall contain the name of the PC, but the MSO shall make all
disbursements therefrom. The MSO shall account for all monies so
disbursed from the PC Account.
(b) From the funds collected and deposited by the MSO
in the PC Account, the MSO shall make for and on behalf of the PC
the following disbursements promptly, when payable:
(1) Compensation, including salaries, benefits
and other direct costs payable to ▇▇. ▇▇▇▇▇ and the Orthodontists
(if any) and the other Practice Providers of the PC, and all
withholding taxes and assessments payable to Federal, state and
local governments in connection with the employment of such
personnel; and
(2) All compensation payable to the MSO pursuant
to Article 6 hereof.
(c) In the event the funds in the PC Account will, at
any time be insufficient to cover the current portion of the
foregoing expenses when payable, the MSO may advance to the PC
the necessary funds to pay the current portion of such expenses
for the benefit of the PC, which advances will be deemed to be
loans to the PC to be repaid without interest from the PC Account
at such times as there are adequate funds therein or upon such
other terms and at such times as agreed to by the PC and the MSO,
which indebtedness shall not be deemed an MSO Expense for
purposes of Section 2.9.
2.9 MSO Expenses. The MSO shall be responsible for the
payment of all MSO Expenses, as defined below, during the term of
this Agreement without reimbursement by the PC, unless otherwise
agreed to by the parties hereto.
(a) "MSO Expenses" shall mean all operating and non-
operating expenses incurred in the operation of the PC,
including, without limitation:
(1) Salaries, benefits and other direct costs of
all employees of the MSO providing services to the PC hereunder
(but excluding ▇▇. ▇▇▇▇▇ and all the Orthodontists (if any) and
other Practice Providers);
(2) (i) Salaries, benefits and other direct costs
of all employees of the PC (other than ▇▇. ▇▇▇▇▇ and all the
Orthodontists (if any) and other Practice Providers), for
services provided on and after the commencement date of this
Agreement, and (ii) to the extent not paid by OMEGA under the
Interim Management Agreement, all such costs of such employees
for services provided on and after the commencement date of the
Interim Management Agreement and prior to the commencement date
of this Agreement, excluding any and all costs of such employees
of the PC which are compensation for services rendered by such
employees prior to the commencement date of the Interim
Management Agreement. To the extent any such excluded costs are
paid by OMEGA or the MSO, as the case may be, the MSO shall be
entitled to offset such amounts against any amounts to be paid by
the MSO to ▇▇. ▇▇▇▇▇ pursuant to Schedule 3 of this Agreement;
(3) Direct costs of all employees or consultants
of the MSO who provide services at the Orthodontic Office or in
connection with the PC required for improved clinic performance,
such as work management, materials management, purchasing, charge
and coding analysis, and business office consultation;
(4) Accounts payable of the PC (not including
payroll, "Accounts Payable") which have accrued prior to the
commencement date of the Interim Management Agreement and which
remain unpaid as of the commencement date of this Agreement, but
only to the extent that such Accounts Payable do not exceed one-
half (1/2) of one "Average" month of Accounts Payable of the PC
(the term "Average" shall mean an average of the Accounts Payable
of the PC using the last 12 months prior to the end of the month
immediately preceding the commencement date of the Interim
Management Agreement);
(5) Direct costs associated with operating the
Orthodontic Office, including without limitation, utilities,
cleaning and maintenance;
(6) Obligations of the MSO under leases or
subleases entered into in connection with the operation of the
Orthodontic Office as well as utility expenses relating to the
Orthodontic Office;
(7) Personal property and intangible property
taxes assessed against the MSO's assets used in connection with
the operation of the Orthodontic Office, commencing on the date
of this Agreement;
(8) In the event an opportunity arises for
additional Orthodontists to become employed by the PC or other
orthodontic entities to merge with the PC, actual out-of-pocket
expenses of the MSO personnel working on a specified employment
arrangement or merger, whether or not such employment arrangement
or merger is consummated;
(9) Other expenses incurred by the MSO in
carrying out its obligations under this Agreement, but excluding
any corporate overhead costs of the MSO or any corporation
affiliated with the MSO not specifically listed above.
"MSO Expenses" shall not include:
(1) Any Federal, state or local income taxes of
the PC, ▇▇. ▇▇▇▇▇ and the Orthodontists (if any) and the other
Practice Providers, or the costs of preparing Federal, state or
local tax returns thereof;
(2) Salaries, benefits and other direct costs of
employing ▇▇. ▇▇▇▇▇ and the Orthodontists (if any) and the other
Practice Providers;
(3) Physician licensure fees, board certification
fees and costs of membership in professional associations and
societies for Practice Providers beyond any reimbursement made
under the "Approved Budget", as defined below;
(4) Professional liability insurance for the
Practice Providers as provided for under Section 3.6 hereof,
beyond any reimbursement made under the Approved Budget;
(5) Costs of continuing professional education
for Practice Providers, including travel and related expenses,
beyond any reimbursement made under the Approved Budget;
(6) Costs associated with legal, accounting and
professional services incurred by or on behalf of the PC other
than as otherwise expressly provided for in Section 2.6 hereof;
(7) Liability judgments assessed against the PC
or the Practice Providers in excess of policy limits or within
the deductible limits of any policy;
(8) Direct personal expenses of the Practice
Providers of a kind which the PC may have historically provided
or charged to its Practice Providers (including, but not limited
to, car allowances and other expenses which are personal in
nature);
(9) Charitable contributions by the PC beyond any
reimbursements made under the Approved Budget; and
(10) Any other expenses which are expressly
designated herein as expenses or responsibilities of the PC.
Notwithstanding the foregoing, the cost of any "lump sum"
payments, including but not limited to bonuses, accrued but
unpaid sick leave and other similar payments, made to employees
of the PC (other than the individuals who are duly licensed to
practice dentistry and/or orthodontics in the State and other
individuals who are employees of the PC or otherwise under
contract with the PC to provide dental or orthodontic, hygienic
or other assistance or services to patients of the PC or
otherwise required by applicable Laws to be employees of the PC
to provide services to patients of the Practice) and to employees
of the MSO shall be shared equally by the PC and the MSO.
As used in this Section 2.9, "Approved Budget" means, for
each fiscal year, the aggregate maximum amount that the MSO will
reimburse the PC for physician licensure fees, board
certification fees, costs of membership in professional
associations and societies for Practice Providers, professional
liability insurance for the Practice Providers, continuing
professional education costs for Practice Providers, including
travel and related expenses, and charitable contributions. The
PC and the MSO agree that the aggregate maximum annual amount
shall be $5,000.
2.10 Credit Reports. When requested by the PC, or its
authorized representative, the MSO shall obtain on behalf of the
PC information with regard to the ability of patients to pay for
the services to be rendered by the PC. The MSO shall collect all
information and determine, to the best of its ability, whether or
not patients can pay for services rendered by the PC, either in
cash or by insurance. Such determination shall be subject to the
reasonable approval by the PC, and as between the PC and the MSO,
the PC shall bear the risk of claims by potential patients who
may be denied credit.
2.11 Accounting; Bookkeeping and Reports. The MSO shall
provide for or arrange for all accounting and bookkeeping
services related to the PC's operations, provided that such
services are incurred in the ordinary course of business. In
addition, the MSO shall provide the PC with an unaudited internal
monthly statement within twenty (20) days after the end of each
month and a quarterly review within thirty (30) days after the
end of each quarter, respectively, of the MSO's internal
statements related to the PC, as well as the books and records of
the PC, all prepared by or with the assistance of an accountant
chosen by the MSO. At the end of each fiscal year of the PC, the
MSO shall arrange for a financial statement with respect to the
PC to be prepared by the MSO's accountant. At the PC's request,
the MSO shall prepare reports indicating the gross revenues,
number of patients, type of patients, and the activity and the
productivity of the PC. The MSO shall assist and advise the PC in
the financial management of the PC.
2.12 Marketing. The MSO shall design and execute a
marketing plan to promote the PC's professional services. The
MSO shall also make available to the PC all brochures, contracts,
and other materials reasonably related to the carrying out of the
business purposes of the PC, including all stationery, printing
and postage costs in connection therewith. In connection with
such marketing plan, the MSO shall advise ▇▇. ▇▇▇▇▇ and the
Orthodontists (if any) on establishing and maintaining a plan for
patients' payments for orthodontic services on an installment
plan basis. All marketing activities hereunder shall be
conducted in compliance with all applicable Laws governing
advertising by the orthodontic profession.
2.13 Complaints. The MSO shall assist the PC in handling
all complaints, grievances and disputes involving the PC and the
Practice Providers and any patients or third parties. However,
the MSO shall have no control over the PC's patients. All
decisions concerning the PC's patients shall be made by the PC
and the Practice Providers.
2.14 Practice Laws. Notwithstanding any provision in this
Agreement, the MSO shall not take any action in connection with
the services to be rendered hereunder that violates any Law,
including, without limitation, the performance of any task or the
taking of any action which violates any Law of the State as it
relates to professional orthodontic practices.
2.15 Monthly Meetings. The MSO shall initiate monthly or
more frequent meetings with the PC regarding the policies and
procedures for the operation of the PC.
2.16 Maintenance and Cleaning Services. The MSO shall
arrange for security, maintenance and cleaning of the Orthodontic
Office, including the furniture, fixtures and equipment therein.
2.17 Licenses and Permits. The MSO shall provide and pay
for all business and other licenses and permits as necessary to
operate the PC except those related to licensure and
certifications of the Practice Providers. The MSO shall prepare
and file all reports, forms and returns required by Law in
connection with workers' compensation, unemployment insurance,
social security and other similar Laws with respect to the MSO's
employees and with respect to the PC's employees (other than ▇▇.
▇▇▇▇▇ and all the Orthodontists (if any) and other Practice
Providers).
2.18 Insurance. The MSO shall provide and pay for customary
office property damage and liability insurance, including
business interruption insurance, not including professional
liability insurance (which shall be and remain the responsibility
of the PC).
2.19 Practice Transition and Associate Selection. ▇▇. ▇▇▇▇▇
and the Orthodontists (if any) shall keep the MSO informed of
retirement goals on an ongoing basis. Upon request of the PC, the
MSO will conduct a search for an appropriate orthodontist and
other professionals (collectively, "Practice Associates") for the
purposes of accommodating practice growth, reducing doctor work
schedule, or planned retirement. Such search shall include use
by the MSO of a national journal advertising program and
networking in the profession to locate appropriate Practice
Associates. The MSO estimates that it could take approximately
two years for such a search. The MSO will provide screening of
all applicants and will then present appropriate applicants for
final selection by the PC. The PC shall be responsible for
interviewing and selecting each Practice Associate. After the
Practice Associate(s) is (are) selected by the PC, the MSO will
assist the PC with a trial plan of approximately six months for
the new Practice Associate(s). It is understood that at the end
of this period either the PC or the new Practice Associate may
terminate the relationship. All such Practice Associates
recruited by the MSO as may be accepted by the PC shall be
employees of the PC (if so employed) and not of the MSO. The MSO
will confer with the PC on an appropriate salary/work-in
arrangement for a new Practice Associate and the final
arrangements shall be determined by the PC.
ARTICLE 3
DUTIES OF THE PC
3.1 General. The PC shall be responsible for the
management of its practice and the Orthodontic Office, in
accordance with the requirements of the Laws of the State.
3.2 Employment of the Orthodontists and Rendering of
Patient Care. The PC shall be responsible for the employment and
professional supervision of ▇▇. ▇▇▇▇▇ and all Orthodontists and
the other Practice Providers and all orthodontic care rendered to
patients shall be rendered by ▇▇. ▇▇▇▇▇ and such Orthodontists.
Additionally, the PC shall be responsible for the professional
supervision of all other Practice Providers in their rendering of
patient care.
3.3 Professional Services. The PC shall use and occupy the
Orthodontic Office designated on Schedule 2 hereof exclusively
for the practice and rendering of orthodontic services, and shall
comply with all applicable Laws and all standards of orthodontic
care. It is expressly acknowledged by the parties that the
Practice conducted at the Orthodontic Office shall be conducted
solely by ▇▇. ▇▇▇▇▇ and the Orthodontists and the other Practice
Providers acting under the supervision and control of ▇▇. ▇▇▇▇▇
and the Orthodontists (if any), and no other orthodontist shall
be permitted to use or occupy the Orthodontic Office. The PC
shall provide professional services to patients hereunder in
compliance at all times with ethical standards and Laws applying
to the orthodontic profession. The PC shall ensure that ▇▇.
▇▇▇▇▇ and each Orthodontist who provides orthodontic services to
patients is licensed by the State. In the event that any
disciplinary, medical malpractice or other actions are initiated
or threatened against ▇▇. ▇▇▇▇▇ or any Orthodontist or other
Practice Provider, the PC shall immediately inform the MSO of
such action and the underlying facts and circumstances, subject
to such confidentiality agreement or arrangements as the PC and
the MSO shall mutually determine at or prior to the time of such
disclosure. The PC agrees to cooperate with and participate in
quality assurance/utilization review programs established by the
MSO or mandated by accreditation and licensure standards
applicable to the practice of orthodontics. Deficiencies
discovered in the performance of any personnel or in the quality
of professional services shall be reported immediately to the
MSO, and appropriate steps shall be taken by the PC at once to
remedy such deficiencies.
3.4 Records. The PC will keep or cause to be kept
accurate, complete and timely dental and other records of all
patients. The management of all dental and patient files and
records shall comply with all applicable Laws regarding their
confidentiality and retention and all files and records shall be
located so that they are readily accessible for patient care,
consistent with ordinary records management practices. Such
records shall be sufficient to enable the MSO, on behalf of the
PC, to obtain payments for services and related charges and to
facilitate the delivery of quality patient care by the PC.
Notwithstanding the foregoing, patient dental records shall be
and remain the property of the PC and the contents thereof shall
be solely the responsibility of the PC.
3.5 Professional Expenses. The PC shall be solely
responsible for the cost of professional licensure fees and board
certification fees, membership in professional associations and
continuing professional education incurred by each Orthodontist
and other Practice Provider employed by the PC. The MSO shall
reimburse the PC for such expenses in accordance with the
Approved Budget. The PC shall ensure that ▇▇. ▇▇▇▇▇ and all the
Orthodontists employed by the PC participate in such continuing
education as is necessary for ▇▇. ▇▇▇▇▇ and such Orthodontists to
remain current.
3.6 Professional Liability Insurance. The PC shall
provide, or arrange for the provision of, and maintain throughout
the Term of this Agreement, professional liability insurance
coverage in accordance with the provisions of Article 9 hereof.
The PC shall also cooperate in any programs recommended by the
MSO to assure that each of its Orthodontists is insurable, and
that ▇▇. ▇▇▇▇▇ and each Orthodontist participates in an on-going
risk management program.
3.7 Employment Agreement. The parties recognize that the
services to be provided by the MSO are feasible only if the PC
operates an active orthodontic practice to which it, ▇▇. ▇▇▇▇▇
and each Orthodontist associated with the PC devote their full
time and attention, unless other specific provisions are made in
writing and mutually agreed upon by the MSO and PC. The PC will
cause ▇▇. ▇▇▇▇▇ and each individual Orthodontist who now is or
hereafter becomes affiliated with the PC to enter into a written
employment agreement (the "Employment Agreement") satisfactory in
form and substance to the MSO, pursuant to which ▇▇. ▇▇▇▇▇ or the
Orthodontist shall agree not to establish, operate or provide
orthodontic or dental services, without the prior written consent
of both the PC and the MSO, at any office or facility other than
the Orthodontic Office. In addition, such Employment Agreement
shall provide by its own terms or by a separate agreement that if
▇▇. ▇▇▇▇▇'▇ or such Orthodontist's employment shall terminate for
any reason during the Term of this Agreement, for a period of 18
months after the termination of ▇▇. ▇▇▇▇▇'▇ or such
Orthodontist's Employment Agreement with the PC, ▇▇. ▇▇▇▇▇ or
such Orthodontist shall agree not to establish, operate or
provide orthodontic or dental services, without the prior written
consent of both the PC and the MSO, at any office practice or
facility whatsoever providing services similar to those provided
by the PC at any orthodontic office within a fifteen (15) mile
radius. Such Employment Agreement (or separate agreement) shall
also provide, among other things, that in the event of a breach
of ▇▇. ▇▇▇▇▇'▇ or the Orthodontist's agreement not to compete
with the PC provided for in such Employment Agreement (or
separate agreement), the MSO shall be entitled to receive, in
addition to other remedies and not by way of an election of
remedies, liquidated damages equaling the greater of: (a) ▇▇.
▇▇▇▇▇'▇ or such Orthodontist's income, as shown on the W-2 form
prepared by the PC, for the most recent calendar year; or (b)
$300,000. Such payment shall be made to the MSO by the PC
immediately following receipt of the payment from ▇▇. ▇▇▇▇▇ or
the breaching Orthodontist by the PC. Each of the MSO and OMEGA
shall be expressly named as a third-party beneficiary to such
agreements between the PC and ▇▇. ▇▇▇▇▇ and each Orthodontist and
the rights and remedies of the MSO and OMEGA thereunder or
otherwise in respect of the restrictive covenants set forth in
such agreements shall survive termination of this Agreement.
ARTICLE 4
PROFESSIONAL SERVICES, CONTROL OF SOLICITATION,
APPROVAL OF ADVERTISING MATERIAL AND NO RECIPROCATION
4.1 A fundamental understanding between the parties hereto
is that the rendering of orthodontic services by the PC shall be
separate and independent from the provision of administrative,
management and support services by the MSO. Thus, the PC shall
have sole and absolute control of the delivery of all
professional services and treatment rendered to patients at the
Orthodontic Office.
4.2 No employee or other representative of the MSO shall be
engaged in solicitation of, or allowed to solicit, patients on
behalf of the PC, nor shall the MSO have any control over the
PC's patients.
4.3 No advertising or promotional materials, or other
materials of any nature, including billing and collection forms,
reports, agreements, correspondence, or similar materials, used
in connection with the PC shall be used or distributed without
having first been approved by the PC.
4.4 The parties hereby acknowledge and agree that the
benefits conferred upon each of them hereunder neither require
nor are in any way contingent upon the admission, recommendation,
referral, or any other arrangement for the provision of any item
or service offered by the MSO to any patients of the PC or its
shareholders, officers, directors, employees, contractors or
agents, nor are such benefits in any way contingent upon the
recommendation, referral or any other arrangement for the
provision of any item or service offered by the PC or any of its
Practice Providers, employees, contractors or agents.
ARTICLE 5
LEASE OF OFFICE FACILITIES AND EQUIPMENT
5.1 In consideration of the sums to be paid to the MSO
under the terms of this Agreement, the MSO hereby leases or sub-
leases, as applicable, to the PC during the Term of this
Agreement the Orthodontic Office, and the leasehold improvements
and fixtures, furniture and equipment at the Orthodontic Office
as listed from time to time on Schedule 2 attached hereto and
incorporated herein by this reference, under the following terms
and conditions:
(a) The MSO is the lessee by assignment under a lease
for the premises occupied by the PC (collectively, the "Master
Lease") a copy of which is attached hereto as Exhibit A and
incorporated herein by this reference. The PC hereby
acknowledges that the premises described under the Master Lease
are suitable for the PC's orthodontic practice. Based and
contingent upon the PC's promise to timely pay all amounts due
under this Agreement, the MSO hereby agrees to sublease the
leased premises to the PC upon the following terms and
conditions:
(i) This sublease between the MSO and the PC of
the premises shall be subject to all of the terms and conditions
of the Master Lease. In the event of the termination of the
MSO's interest as lessee under the Master Lease for any reason,
then the sublease created hereby shall simultaneously terminate,
unless the PC assumes the obligations under the Master Lease in
question and the Lessor consents thereto.
(ii) All of the terms and conditions contained in
the Master Lease are incorporated herein as terms and conditions
of the sublease (with each reference therein to "Lessor" and
"Lessee," to be deemed to refer to the MSO and the PC,
respectively) and, along with the provisions of this Section
5.1(a) and Exhibit "A," shall be the complete terms and
conditions of the sublease created hereby.
(iii) Notwithstanding the foregoing, as
between the MSO and the PC, the MSO shall remain responsible for
meeting the obligations of "Lessee" under the sections entitled
Rent, Additional Rent Adjustment, Insurance on Fixtures,
Liability Insurance, Repairs, and Taxes of the Master Lease, or
the sections containing provisions relating to the subjects
described in such titles, as the case may be, all of which
obligations shall be considered MSO Expenses hereunder and the PC
shall have no monetary obligation in that regard. In addition,
as between the MSO and the PC, the MSO shall retain the right to
exercise any options to purchase the premises, or other similar
rights of ownership or possession, which may be granted under the
Master Lease, and the PC shall have no rights in that regard.
(iv) In the event this Agreement is terminated
according to its terms, this sublease shall also terminate
automatically.
(v) If the Master Lease contains an option to
renew the terms thereof, the MSO shall notify the PC, at least 30
days prior to the expiration of the time for exercising such
option, of the MSO's intention to renew or not to renew such
term. If the MSO determines not to renew such term, the MSO
shall provide or arrange for the provision of comparable office
space (the "Substitute Orthodontic Office") within a radius of 15
miles of the Orthodontic Office, which Substitute Orthodontic
Office shall be subject to the approval of the PC (which approval
shall not be unreasonably withheld or delayed). The lease or
sublease for such Substitute Orthodontic Office, as applicable,
shall be substituted for the lease described on Exhibit A hereto
and all references to the "Master Lease" shall thereafter be
applicable to the lease or sublease for the Substitute
Orthodontic Office for purposes of this Agreement, ab initio.
(vi) The Alternative Dispute Resolution provisions
set forth in Article 14 of this Agreement shall not apply to any
issues concerning the Sub-Lease, the PC's tenancy or the MSO's
rights and remedies as Sub-Lessor.
5.2 The MSO shall provide the PC at the Orthodontic Office
such additional leasehold improvements, fixtures, furniture,
furnishings and equipment as may be mutually agreed to with the
PC and reflected from time to time on a supplement to Schedule 2
attached hereto and incorporated by reference. The use by the PC
of all leasehold improvements, fixtures, furniture, furnishings
and equipment provided hereunder shall be subject to the
following conditions:
(a) Title to all such leasehold improvements,
fixtures, furnishings, furniture and equipment shall remain in
the MSO and upon termination of this Agreement, the PC shall
immediately return and surrender all such leasehold improvements,
fixtures, furniture, furnishings and equipment to the MSO in as
good condition as when received, normal wear and tear excepted.
(b) The MSO shall be fully and entirely responsible
for all repairs and maintenance of all such leasehold
improvements, fixtures, furniture, furnishings and equipment
(other than repairs and maintenance necessitated by the
negligence of the PC, its employees and agents (not including the
MSO or its employees or agents)); provided, however, that the PC
agrees that it will use its best efforts to prevent damage,
excessive wear, and breakdown of all such leasehold improvements,
fixtures, furniture, furnishings and equipment, and shall advise
the MSO of any and all needed repairs and equipment failures.
(c) The obligation of the MSO to provide the leasehold
improvements, fixtures, furniture, furnishings and equipment
stated herein shall be concurrent and co-extensive with the Term
of this Agreement.
5.3. No Warranty.5.3. No Warranty.
(a) THE PC ACKNOWLEDGES THAT THE MSO MAKES NO
WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO THE
SUITABILITY OR ADEQUACY OF ANY LEASEHOLD IMPROVEMENTS, FIXTURES,
FURNITURE, FURNISHINGS, EQUIPMENT, INVENTORY OR SUPPLIES PROVIDED
OR LEASED OR SUBLEASED PURSUANT TO THIS AGREEMENT FOR THE CONDUCT
OF AN ORTHODONTICS PRACTICE OR FOR ANY OTHER PARTICULAR PURPOSE.
(b) Nothing in this Agreement shall be construed to
affect or limit in any way the professional discretion of the
Practice Providers to select and use fixtures, furniture,
furnishings and equipment, inventory and supplies purchased or
provided by the MSO in accordance with the provisions of this
Agreement insofar as such selection or use constitutes or might
constitute the practice of dentistry or orthodontics.
ARTICLE 6
COMPENSATION
As consideration for the performance of all of its duties
and obligations as provided in this Agreement, including but not
limited to, the costs and expenses associated with furnishing the
services, personnel, facilities, leasehold improvements,
fixtures, furniture, furnishings, equipment, inventories and
supplies provided for herein, the MSO shall receive compensation
in the form of monthly management fees (the "Management Fees")
based upon a predetermined percentage of the "Practice Revenues",
as defined and determined in accordance with the provisions set
forth in Schedule 3 attached hereto and incorporated herein by
this reference, as such Schedule may be amended in writing and
signed by the PC and the MSO from time to time. It is
acknowledged by and between the parties hereto that the MSO
and/or its affiliates has (have) incurred substantial expenses
and future obligations in acquiring certain assets of the PC,
acquiring or otherwise establishing the Orthodontic Office,
establishing its systems, including fees for consultants and
other professionals, interest expense, lease obligations, and
costs of furnishing or refurbishing the premises at which the
Orthodontic Office is located. The MSO has also assumed
substantial obligations associated with the continuing operation
of the Orthodontic Office, including those of lessee, obligor and
guarantor and obligor on loans to establish and operate the
Orthodontic Office. The parties, therefore, having considered
various compensation formulae, acknowledge and agree that in
order for the MSO to receive a fair and reasonable return for its
expenses and obligations, and a fair return for the lease of the
premises and equipment and for providing the services
contemplated hereunder, that the agreed compensation is not
excessive. The PC acknowledges that the compensation arrangement
is reasonable under the circumstances noted herein and ▇▇. ▇▇▇▇▇
has executed an Affidavit attesting to this fact which is
attached hereto and incorporated herein as Exhibit C. In
consideration of the foregoing, the parties agree that the
monthly Management Fees payable to the MSO by the PC for services
rendered pursuant to this Agreement shall be reviewed and
subject to adjustment at the close of each year of the Term of
this Agreement based upon industry standards of practice and the
MSO's costs in performing the required services. If the parties
cannot agree within thirty (30) days prior to the close of any
such year on the terms of any adjustment to the Management Fees
for the following year, then the then existing Management Fees
shall remain in effect. The PC specifically agrees that the MSO
may defer actual receipt of its Management Fees and/or advance
monies for purposes of managing the PC's cash flow, and the MSO
may repay itself such advances or pay said deferred Management
Fees when it deems appropriate.
ARTICLE 7
SECURITY INTEREST
As assurance and collateral security for the payment of the
monthly Management Fees owed to the MSO pursuant to this
Agreement and any funds advanced by the MSO to or on behalf of
the PC pursuant to this Agreement and for the faithful and timely
performance of all the covenants and conditions to be performed
by the PC under this Agreement, the PC hereby pledges, grants,
bargains, assigns and transfers to the MSO a security interest,
pursuant to the Uniform Commercial Code of the State, in and to
all Practice Revenue and accounts receivable of patients of the
PC, together with all proceeds thereof (collectively, the
"Collateral"), and further agrees not to pledge, assign, transfer
or convey any of the Collateral or any proceeds therefrom,
without the prior written consent of the MSO, except to
affiliates of the MSO. Concurrent with the execution of this
Agreement, the PC shall execute a Security Agreement, similar in
form and content as that attached hereto as Exhibit D and
incorporated herein by this reference in order that the MSO may
perfect its interest in the Collateral. The PC expressly agrees
to execute and deliver any appropriate UCC-1 Financing Statement
and UCC-1 Fixture filings, if so requested in writing by the MSO.
ARTICLE 8
COVENANTS
8.1 PC's Covenants. As further consideration for the MSO's
performance of the terms and conditions of this Agreement, the PC
covenants, represents and warrants as follows (which covenants,
representations and warranties shall survive the execution of
this Agreement):
(a) The PC shall comply with all Laws and ethical and
professional standards applicable to the practice of orthodontics
and cause all of its employees to do the same.
(b) The PC shall provide quality services and shall
cause ▇▇. ▇▇▇▇▇ and the Orthodontists (if any) to serve the
orthodontic needs of the patients of the PC. The PC covenants to
monitor rigorously utilization and quality of services provided
at the Orthodontic Office and shall take all steps necessary to
remedy any and all deficiencies in the efficiency or the quality
of orthodontic care provided.
(c) During the Term of this Agreement, the PC shall
not, directly or indirectly, own an interest in, operate, join,
control, participate in or be connected in any manner with any
corporation, partnership, proprietorship, firm, association,
person or entity providing orthodontic care in competition with
the practice at the Orthodontic Office, or any other orthodontic
practice managed by the MSO, within a radius of 15 miles of the
Orthodontic Office or of such other orthodontic practice, without
the MSO's prior written consent.
(d) The PC recognizes the proprietary interest of
OMEGA in and to its OMEGA Patient Scheduling System and the MSO
in its systems for managing the delivery of orthodontic care and
all policies, procedures, operating manuals, forms, contracts,
computer software, related materials and other information, as
amended from time to time (collectively, the "MSO Information"),
regarding such systems. The PC acknowledges and agrees that all
information, whether imparted orally or in writing, relating to
the OMEGA Patient Scheduling System and the MSO Information
(collectively the "Confidential Information") constitutes trade
secrets of OMEGA and/or the MSO. The PC hereby waives any and
all right, title and interest in and to such Confidential
Information. Upon expiration or termination of this Agreement by
either party for any reason whatsoever, the PC, at its expense,
shall immediately return and shall cause its shareholders,
directors, officers, affiliates, partners, employees and
independent contractors to immediately return to OMEGA or the
MSO, as applicable, all Confidential Information, and the PC will
not, and will cause its shareholders, directors, officers,
affiliates, partners, employees and independent contractors not
to, thereafter use, appropriate, disclose, or reproduce such
Confidential Information.
(e) The PC acknowledges and agrees that OMEGA and the
MSO are entitled to prevent their respective competitors from
obtaining and utilizing their respective trade secrets. The PC
further agrees and acknowledges that the Confidential Information
is disclosed in confidence and with the understanding that it
constitutes valuable business information developed by the MSO
with the assistance of OMEGA, or OMEGA, as the case may be, at
great expenditures of time, effort and money. The PC agrees to
hold in trust and keep strictly confidential the Confidential
Information and not to disclose it or allow it to be disclosed
directly or indirectly to any person or entity other than persons
who are engaged by the PC to perform duties in connection with
the PC and who have a need to know such Confidential Information
in the performance of their duties for the PC, without OMEGA's or
the MSO's prior written consent, as the case may be. The PC
acknowledges its fiduciary obligations to OMEGA and the MSO and
the confidentiality of its relationships with OMEGA and the MSO
and of any information relating to the services and business
methods of OMEGA and the MSO which it may obtain during the term
of this Agreement. The PC shall not, either during the term of
this Agreement or at any time after the expiration or sooner
termination hereof, disclose to anyone, other than employees or
independent contractors of OMEGA and the MSO who use OMEGA's and
the MSO's system in the course of the performance of their
duties, any Confidential Information or trade secrets obtained by
the PC. The PC also agrees to place any persons to whom said
information is disclosed for the purpose of performance under
legal obligation to treat such information as strictly
confidential. The PC acknowledges that the disclosure of
Confidential Information to it by the MSO is done in reliance
upon its representations and covenants in this Agreement.
(f) The PC further expressly acknowledges and agrees
that any use, appropriation, disclosure or reproduction of any
Confidential Information in breach or violation of any of the
representations or covenants of this Section 8.1 after the
expiration or termination of this Agreement will result in
irreparable injury to the MSO and OMEGA, that the remedy at law
for the foregoing would be inadequate, and that in the event of
any such use, appropriation, disclosure or reproduction of any
such Confidential Information after the termination or expiration
of this Agreement, the MSO and OMEGA, in addition to any other
remedies or damages available to either or both of them, shall be
entitled to injunctive relief, including specific performance, or
other equitable relief without the necessity of proving actual
damages or posting any bond or other security, but such rights to
relief shall not preclude the MSO and OMEGA from other remedies
which may be available to either or both of them hereunder.
8.2 MSO's Covenants. As further consideration for the PC's
performance of the terms and conditions of this Agreement, the
MSO covenants, represents and warrants (which covenants,
representations and warranties shall survive the execution of
this Agreement) that during the Term of this Agreement, the MSO
agrees not to establish, develop or open any offices in
affiliation with an orthodontist for the provision of orthodontic
services within a 15 mile radius of the Orthodontic Office,
without the express written consent of the PC.
ARTICLE 9
INSURANCE AND INDEMNITY
9.1 Insurance to be Maintained by the PC. Throughout the
Term of this Agreement, the PC shall maintain in full force and
effect comprehensive professional liability insurance with limits
of not less than $500,000 per occurrence and $1,000,000 annual
aggregate for ▇▇. ▇▇▇▇▇ and each of the Orthodontists providing
services for the PC and a separate limit for the PC. The PC
shall be responsible for all liabilities within deductibles and
for all liabilities in excess of the limits of such policies.
The MSO agrees to negotiate for and cause premiums to be paid on
behalf of the PC with respect to such insurance. Deductibles
with respect to such policies shall not be MSO Expenses. The MSO
shall reimburse the PC for premiums in accordance with the
Approved Budget. The PC also agrees to name the MSO and OMEGA
as co-insureds. The PC agrees to deliver to the MSO and OMEGA a
certificate of insurance indicating such coverage.
9.2 Insurance to be Maintained by the MSO. Throughout the
Term of this Agreement, the MSO will use reasonable efforts to
provide and maintain, as an MSO Expense: (a) comprehensive
professional liability insurance for all professional employees
of the MSO with limits as determined reasonable by the MSO; and
(b) comprehensive general liability and property insurance
covering the Orthodontic Office premises and operations.
9.3 Tail Insurance Coverage. The PC will cause ▇▇. ▇▇▇▇▇
and each Orthodontist (if any) providing services to enter into
an agreement with the PC that upon termination of ▇▇. ▇▇▇▇▇'▇ or
such Orthodontist's relationship with the PC, for any reason,
tail insurance coverage will be purchased by ▇▇. ▇▇▇▇▇ or such
Orthodontist. Such provisions may be contained in an employment
agreement, restrictive covenant agreement or other agreement
entered into by the PC and ▇▇. ▇▇▇▇▇ or the Orthodontist, and the
PC hereby covenants with the MSO to enforce such provisions
relating to the tail insurance coverage or to provide such
coverage at the expense of the PC or ▇▇. ▇▇▇▇▇ or each such
Orthodontist.
9.4 Additional Insureds. The PC and the MSO agree to use
their reasonable efforts to have each other named as an
additional insured on the other's respective liability insurance
policies.
9.5 Indemnification. The PC shall indemnify, hold harmless
and defend the MSO and OMEGA and their respective officers,
directors, shareholders, employees and representatives, from and
against any and all liability, losses, damages, claims, causes of
action, expenses (including reasonable attorneys' fees),
judgments, settlements, lawsuits and obligations, 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
orthodontic services or the performance of any intentional acts,
negligent acts or omissions by the PC and/or its affiliates, its
shareholders, agents, the Practice Providers, its other employees
and/or its subcontractors (other than the MSO) during the Term
hereof. The MSO shall indemnify, hold harmless and defend the
PC, its officers, directors, shareholders and employees, from and
against any and all liability, loss, damage, claim, causes of
action, expenses (including reasonable attorneys' fees),
judgments, settlements, lawsuits and obligations, 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
any intentional acts, negligent acts or omissions by the MSO
and/or its shareholders, agents, employees and/or subcontractors
(other than the PC) during the Term hereof.
ARTICLE 10
TERMINATION
10.1 Termination by the PC. The PC may terminate this
Agreement as follows:
(a) In the event of the filing of a petition in
voluntary bankruptcy or an assignment for the benefit of
creditors by the MSO, or upon other action taken or suffered,
voluntarily or involuntarily, under any federal or state law for
the benefit of debtors by the MSO, except for the filing of a
petition in involuntary bankruptcy against the MSO which is
dismissed within sixty (60) days thereafter, the PC may give
written notice of the immediate termination of this Agreement.
(b) In the event the MSO shall materially default in
the performance of any duty or obligation imposed upon it by this
Agreement and such default shall continue for a period of sixty
(60) days after written notice thereof has been given to the MSO
by the PC, the PC may terminate this Agreement.
10.2 Termination by the MSO. The MSO may terminate this
Agreement as follows:
(a) In the event of the filing of a petition in
voluntary bankruptcy or an assignment for the benefit of
creditors by the PC or any shareholders thereof, or upon other
action taken or suffered, voluntarily or involuntarily, under any
federal or state law for the benefit of debtors by the PC or any
shareholders thereof, except for the filing of a petition in
involuntary bankruptcy against the PC or any shareholder thereof
which is dismissed within sixty (60) days thereafter, MSO may
give written notice of the immediate termination of this
Agreement.
(b) In the event the PC fails to perform orthodontic
services on a full-time basis consistent with its pattern of
practice in the immediately preceding calendar year and such
default shall continue for a period of ten (10) days after
written notice thereof has been given to the PC by the MSO, the
MSO may terminate this Agreement.
(c) In the event the PC shall materially default in
the performance of any other duty or obligation imposed upon it
by this Agreement, and such default shall continue for a period
of sixty (60) days after written notice thereof has been given to
the PC by the MSO, the MSO may terminate this Agreement.
(d) In the event ▇▇. ▇▇▇▇▇ or any Orthodontist
breaches or defaults under his or her Employment Agreement and
the PC does not cause ▇▇. ▇▇▇▇▇ or such Orthodontist to cure such
breach or default within any applicable grace period therefor,
the MSO may give written notice of the immediate termination of
this Agreement.
Upon any termination of this Agreement or upon expiration of
the Term of this Agreement, the MSO shall be entitled to receive
the Management Fees collected to the effective date of such
termination or expiration, the amounts of any loans or advances
(including any accrued but unpaid interest thereon) and all other
sums accrued or related to occurrences arising at or prior to the
date of termination.
ARTICLE 11
AUTHORIZED AGENT AND POWERS OF ATTORNEY
The PC hereby designates the MSO (and its designees) its
authorized agent and lawful attorney-in-fact for purposes of
depositing payments, paying accounts payables, signing checks,
negotiating and signing contracts for services or goods, securing
loans or incurring obligations on behalf of the PC; provided,
however, that all contracts or fees set for services on behalf of
the PC will be subject to final approval and acceptance by the
PC. Additionally, the PC hereby irrevocably appoints the MSO
(and its designees) its authorized agent and lawful attorney-in-
fact to collect all bills and accounts receivable for
professional fees, charges and other amounts and authorizes the
MSO through its designees to take possession of all checks, money
orders and similar instruments received as payment of receivables
to be deposited into the PC Account. The PC hereby irrevocably
appoints the MSO (and its designees) as the PC's attorney-in-
fact, with full power and authority in the place and stead of the
PC, in the MSO's discretion, to endorse in the name of the PC any
checks, payments, notes, insurance payments and money orders, to
withdraw funds for payments of expenses, including Management
Fees and other sums payable to the MSO, to open and close the PC
Account and other bank accounts, to take any action and to
execute any other instrument which the MSO may deem necessary or
advisable to accomplish the purposes hereof. The powers of
attorney granted herein are coupled with an interest and are
irrevocable. Third parties and entities and persons not a party
to this Agreement are entitled to rely on the foregoing attorneys-
in-fact and an affidavit of the MSO attesting thereto. The
acceptance of this appointment by the MSO shall not obligate it
to perform any duty or covenant required to be performed by the
PC under or by virtue of this Agreement. Notwithstanding the
foregoing powers of attorney, the PC shall at any time, on the
request of the MSO, sign financing statements, security
agreements or other agreements necessary or advisable to
accomplish the purpose of this Agreement. Upon the PC's failure
to sign and deliver said financing statements, security
agreements or other agreements, the MSO is authorized as the
agent of the PC to sign any such instruments. The PC may review
all deposits and expenses upon request.
ARTICLE 12
INDEPENDENT CONTRACTOR RELATIONSHIP
Neither the PC nor its employees or Practice Providers shall
have any claim under this Agreement or otherwise against the MSO
for workers' compensation, unemployment compensation, sick leave,
vacation pay, retirement benefits, Social Security benefits, or
any other employee benefits, all of which shall be the sole
responsibility of the PC. Since neither the PC nor its employees
are employees of the MSO, the MSO shall not be obligated to make
any withholding tax payments on behalf of the PC for unemployment
insurance, Social Security, or otherwise pursuant to any law or
requirement of any governmental agency, and all such withholding,
if any is required, shall be the sole responsibility of the PC.
ARTICLE 13
MISCELLANEOUS
13.1 Access to Records. From and after any termination,
each party shall provide the other party with reasonable access
to books and records then owned by it to permit such requesting
party to satisfy reporting and contractual obligations which may
be required of it.
13.2 Patient Records. Upon termination of this Agreement,
the PC shall retain all patient dental records maintained by the
PC or the MSO in the name of the PC. During the term of this
Agreement, and thereafter, the PC or its designee shall have
reasonable access during normal business hours to the PC's and
the MSO's records, including, but not limited to, records of
collections, expenses and disbursements as kept by the MSO in
performing the MSO's obligations under this Agreement, and the PC
may copy any or all such records.
13.3 The PC's Control Over the Orthodontic Practice.
Notwithstanding the authority granted to the MSO herein, the MSO
and the PC agree that the PC, personally or through ▇▇. ▇▇▇▇▇ or
any of its Orthodontists (if any) and other Practice Providers,
shall have complete control and supervision over the professional
aspects of the PC's practice, as well as the provision of all
professional services, including, without limitation, the
selection of a course of treatment for a patient, the procedures
or materials to be used as a part of such course of treatment,
and the manner in which such course of treatment is carried out
by the PC. The PC shall have sole authority to direct the
business, professional, and ethical aspects of the PC. The MSO
shall have no authority, directly or indirectly, to perform, and
shall not perform, any orthodontic function, or to influence or
otherwise interfere with the exercise of the PC's professional
judgment. The MSO may, however, advise the PC as to the
relationship between its performance of orthodontic functions and
the overall administrative and business functioning of the PC.
ARTICLE 14
ALTERNATIVE DISPUTE RESOLUTION
14.1 Alternative Dispute Resolution.
(a) If a dispute arises under this Agreement which
cannot be resolved informally by the parties, any party may
invoke the procedures set forth in Exhibit E hereto and the
parties agree to use these procedures, except paragraph (b) of
this Section 14.1, prior to any party pursuing other available
remedies. The parties will meet and attempt in good faith to
resolve any controversy or claim arising out of or relating to
this Agreement.
(b) Notwithstanding anything in this Section 14.1 to
the contrary:
(i) Nothing in this Section 14.1 shall preclude
any party from seeking a preliminary injunction or other
provisional relief, either prior to or during the proceeding
provided for in this section, if in its judgment such action is
necessary to avoid irreparable damage or to preserve the status
quo.
(ii) The parties shall accept as correct, final,
binding and conclusive the determination by the outside
accountants then employed by the MSO as to the calculation of any
and all Management Fees owed by the PC to the MSO hereunder, and
such determination shall not be subject to the provisions of this
Section 14.1. Disputes as to the proper interpretation of the
provisions of this Agreement which describe how those amounts are
to be calculated, however, shall be subject to the provisions of
this Section 14.1.
(iii) Any determination by either party not to
renew this Agreement in accordance with the terms and provisions
of this Agreement shall not be subject to the provisions for
dispute resolution in this Section 14.1.
14.2 Waiver of Jury. With respect to any dispute arising
under or in connection with this Agreement or any related
agreement, as to which legal action nevertheless occurs, each
party hereby irrevocably waives all rights it may have to demand
a jury trial. This waiver is knowingly, intentionally and
voluntarily made by the parties and each party acknowledges that
no person acting on behalf of the other party has made any
representation of fact to induce this waiver of trial by jury or
in any way modified or nullified its effect. The parties each
further acknowledge that it has been represented (or has had the
opportunity to be represented) in the signing of this Agreement
and in the making of this waiver by independent legal counsel,
selected of its own free will, and that it has had the
opportunity to discuss this waiver with counsel. Each party
further acknowledges that it has read and understands the meaning
and ramifications of this waiver provision.
ARTICLE 15
GENERAL PROVISIONS
15.1 Notices. Any notice to be given pursuant to this
Agreement shall be deemed effective if given personally, or by
telephone, telegram, telecopy, facsimile or other electronic
transmission, or by letter to an officer or administrator of
OMEGA, the MSO or the PC, as the case may be. Notice in person,
or by telephone, telegram or electronic transmission shall be
deemed effective when given. Notice by mail shall be deemed
effective seventy-two (72) hours after deposit in the United
States mails, and properly addressed with postage prepaid.
Notices to the PC shall be given as follows:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D., PC
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D.
or such other address as may be furnished by the PC to the MSO
from time to time in writing.
Notices to OMEGA and/or the MSO shall be given as
follows:
Omega Orthodontics, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or other such addresses as may be furnished by the MSO to the PC
from time to time in writing.
15.2 Confidentiality. No party hereto shall disseminate or
release to any third party any information regarding any
provision of this Agreement, or any financial information
regarding the other parties (past, present or future) that was
obtained in the course of the negotiation of this Agreement or in
the course of the performance of this Agreement, without the
other party's or parties' (as the case may be) written approval;
provided, however, the foregoing shall not apply to information
which is required to be disclosed by Law, including federal or
state securities laws, or pursuant to court order.
15.3 Contract Modifications for Prospective Legal Events.
In the event any Laws, now existing or enacted or promulgated
after the effective date of this Agreement, are interpreted by
judicial decision, a regulatory agency or legal counsel for both
parties in such a manner as to indicate that the structure of
this Agreement may be in violation of such Laws, the PC and the
MSO shall amend this Agreement as necessary to comply with such
Laws. To the maximum extent possible, any such amendment shall
preserve the underlying economic and financial arrangements
between the PC and the MSO.
15.4 Remedies Cumulative. No remedy set forth in this
Agreement or otherwise conferred upon or reserved to any party
shall be considered exclusive of any other remedy available to
any party, 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.
15.5 No Obligation to Third Parties. None of the
obligations and duties of the MSO or the PC under this Agreement
shall in any way or in any manner be deemed to create any
obligation of the MSO or of the PC to, or any rights in, any
person or entity not a party to this Agreement other than OMEGA
which shall be deemed a party for limited purposes as set forth
in this Agreement.
15.6 Entire Agreement; Termination of Interim Management
Agreement. This Agreement including the Schedules and Exhibits
hereto, the Affiliation Agreement, including any schedules,
exhibits and related agreements thereto, the Stock Put/Call
Option and Successor Designation Agreement of even date herewith
by and among the PC, ▇▇. ▇▇▇▇▇, OMEGA and the MSO, including any
schedules, exhibits and related agreements thereto, and the
Employment Agreement(s) (including the related non-competition
agreements or covenants), constitute the entire agreement between
the parties concerning this subject matter, and supersedes all
prior and contemporaneous agreements, representations and
understandings of the parties concerning the contents hereof,
including but not limited to the Interim Management Agreement.
Upon execution of this Agreement, the Interim Management
Agreement shall terminate and all provisions and terms thereof
shall become null and void, except as otherwise provided herein.
15.7 Assignment. The rights and the duties of the parties
under this Agreement may not be assigned or transferred without
the prior written consent of the non-assigning party, which
consent shall not be unreasonably withheld; provided, however,
that the MSO shall be permitted to assign its rights and
obligations hereunder without the consent of the PC to any
person, firm or corporation controlled by the MSO, controlling
the MSO or under common control with the MSO.
15.8 Attorneys' Fees. If any mediation or arbitration or
other legal action or proceeding is brought to enforce this
Agreement, because of any alleged breach hereof, or for a
declaration of any rights and obligations hereunder, the
prevailing party in such mediation or arbitration, action or
proceeding shall be entitled to recover its costs incurred
therein, including reasonable attorneys' fees, in addition to any
other relief to which it may be entitled, all as determined and
awarded by the parties in such mediation or by the arbitrator or
court as part of its judgment or decision therein, as the case
may be.
15.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State. The
parties acknowledge that the MSO is not authorized or qualified
to engage in any activity which may be construed or deemed to
constitute the practice of dentistry or orthodontics. To the
extent any act or service required of the MSO in this Agreement
should be construed or deemed, by any governmental authority,
agency or court to constitute the practice of dentistry or
orthodontics, the performance of said act or service by the MSO
shall be deemed waived and forever unenforceable and the
provisions of Section 15.14 shall be applicable.
15.10 Events Excusing Performance. Neither party shall
be liable to the other party for failure to perform any of the
services required herein in the event of strikes, lock-outs,
calamities, acts of God, unavailability of supplies or other
events over which that party has no control for so long as such
events continue, and for a reasonable period of time thereafter.
15.11 Compliance with Applicable Laws. Both parties
shall comply with all applicable Laws and restrictions imposed
thereunder in the conduct of their obligations under this
Agreement.
15.12 Language Construction. The parties acknowledge
that each party and its counsel have reviewed and revised this
Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this
Agreement.
15.13 Amendments. This Agreement may be supplemented,
modified or amended only by the written consent of all parties
hereto, except as otherwise provided herein.
15.14 Severability. In the event any provision of this
Agreement is held by a court of competent jurisdiction to be
illegal or unenforceable, (i) the parties shall amend this
Agreement in order to carry out the intent and essential business
purposes of this Agreement as closely as possible within the
requirements of applicable provisions of Law as determined by
such a court, and (ii) the remaining provisions of this Agreement
shall continue in full force and effect.
15.15 No Waiver. The waiver by any party to this
Agreement of any one or more defaults, if any, on the part of any
other party, shall not be construed to operate as a waiver of any
other or future defaults under this Agreement. No waiver shall
be binding unless executed in writing by the party making the
waiver.
15.16 Captions. Captions to sections in this Agreement
are for ease of reference, and shall not be considered an
interpretation of the section.
15.17 Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall
be deemed an original.
IN WITNESS WHEREOF, the parties hereto have executed
this agreement as of the day and year first above written.
PC:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D., PC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
President
MSO:
OMEGA ORTHODONTICS OF
VIRGINIA, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
President
OMEGA:
OMEGA ORTHODONTICS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
SCHEDULE 1
THE ORTHODONTISTS
Name and Address
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE 2
ORTHODONTIC OFFICE AND
ORTHODONTIC OFFICE SERVICES
[▇▇. ▇▇▇▇▇ Attach]
SCHEDULE 3
COMPENSATION - MANAGEMENT FEES
The MSO and the PC have agreed that upon receipt of the
Practice Revenues each month, the compensation shall be paid to
the MSO and the PC as follows:
1. First, the MSO Expenses shall be paid, until paid in
full.
2. Second, to the extent that there are Practice Revenues
remaining after payment of the MSO Expenses, a monthly management
fee of $2,500 shall be paid to the MSO. Any portion of the
management fee which is not paid shall accrue.
3. The balance, if any, of Practice Revenues received for
the month, remaining after payment of items 1 and 2 shall be
considered profit, and distributed as follows:
(a) First to the PC, up to a monthly maximum of twenty-
five percent (25%) of Practice Revenue collected for such month.
(b) Any balance remaining after the payment of 3(a),
shall be paid to the MSO, up to an monthly maximum amount of the
difference between twenty-five percent (25%) of Practice Revenue
collected for such month less $2,500.
At the end of each quarter during the Term the MSO shall
provide the PC with an unaudited internal accounting of the MSO
Expenses, prepared in accordance with the accrual method of
accounting. If the MSO Expenses as reflected in such accounting
as having been paid by the MSO are less than sixty (60%) percent
of the Practice Revenues for such quarter, fifty (50%) percent of
such difference shall be returned by the MSO to the PC as a
profit incentive rebate (the "Rebate"). If the Agreement to which
this Schedule 3 is attached is terminated or expires, the
foregoing Management Fees shall be payable to the MSO based on
all Practice Revenue collected as of the date of termination or
expiration.
Payment to the MSO shall be made in monthly installments
based on the Practice Revenues realized by the MSO for services
rendered under the Agreement. The MSO shall distribute the
proceeds from the PC Account and allocate the proceeds between
the MSO and the PC as described above, on or before the 15th day
of the succeeding month. In the event the 15th day falls on a
weekend or holiday, then said distribution shall be made on the
next business day. The parties to the Agreement may agree to
handle such matters in a different manner.
For purposes of the Agreement, "Practice Revenues" shall
mean gross collections of all revenues generated by or on behalf
of the PC (whether through subsidiaries or affiliates),
including, but not limited to, all fees and charges collected as
a result of professional dental or orthodontic services furnished
to patients by the PC and for any other goods or services sold or
provided to such patients.
Notwithstanding 3(a) above, each month during the term of
the Agreement, the PC shall be entitled to a draw of the greater
of the amounts payable under 3(a), or $__________. If Practice
Revenues are insufficient to support the draw amount, the
difference shall be paid by the MSO. The draw amount and the
actual compensation due the PC under this Schedule shall be
reconciled at the end of each year.
EXHIBIT A
ORTHODONTIC OFFICE - MASTER LEASE
[▇▇. ▇▇▇▇▇ Attach]
EXHIBIT B
PRACTICE PROVIDERS
[▇▇. ▇▇▇▇▇ Attach]
EXHIBIT C
PC'S AFFIDAVIT
AFFIDAVIT
I, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D., declare:
I am an orthodontist, duly licensed in the Commonwealth of
Virginia and I practice through a professional corporation under
the name ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D., PC (the "PC").
I have had substantial experience in the practice of
orthodontics and in managing and operating an orthodontic office
located at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Orthodontic Office").
In the course of operating the Orthodontic Office, I have
acquired significant knowledge as to the overhead costs incurred
and gross receipts generated by similar types of orthodontic
office. Further, I am fully aware of the non-orthodontic,
operational, accounting, billing, financing, management and
personnel requirements of an orthodontic office and the cost
factors involved in providing such management, personnel,
accounting, billing, financing and operations.
I have thoroughly reviewed the Management Services Agreement
(the "Agreement"), which is effective as of ________________,
1997, among between the PC, Omega Orthodontics, Inc. and Omega
Orthodontics of Virginia, Inc. (the "MSO") concerning the
duties, responsibilities and obligations undertaken by the MSO in
managing and operating all non-orthodontic aspects of the
Orthodontic Office as contemplated by the Agreement.
I have reviewed the prior operating financial statements of
the Orthodontic Office and an operating budget and estimated
income of the Orthodontic Office, which, in my opinion, can
reasonably be expected from the operation of said office.
In my opinion, based upon my experience, the Management Fees
of $2,500 per month plus the excess of Twenty-Five Percent (25%)
of "Practice Revenues" in excess of $2,500 per month to be
charged by the MSO as contemplated by the Agreement, will afford
it a reasonable but not excessive return for its services
rendered and obligations incurred. In addition, the Twenty-Five
Percent (25%) of "Practice Revenues" retained by the PC, will
provide reasonable earnings for the performance of orthodontic
services.
I declare under penalty of perjury that the foregoing
statement is true and correct to the best of my knowledge and
belief.
Executed at ____________ this ___ day of _____________,
1997.
___________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D.
COMMONWEALTH OF VIRGINIA )
) ss
________________________________________ __)
________________________, 1997
Then personally appeared the above-named ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
D.M.D. and acknowledged the foregoing Affidavit to be his free
act and deed.
[SEAL] ____________________________
Notary Public
My Commission Expires:
EXHIBIT D
SECURITY AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is effective as of the 31st day of
December 1997, by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D., PC, a Virginia
professional corporation (the "PC"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D.
("▇▇. ▇▇▇▇▇") who is duly licensed to practice orthodontics in
the Commonwealth of Virginia (the "State") and Omega
Orthodontics of Virginia, Inc., a Delaware corporation (the
"MSO") with reference to the following facts:
WHEREAS, pursuant to a Management Services Agreement (the
"Agreement"), dated as of the date hereof, among the PC, Omega
Orthodontics, Inc., a Delaware corporation and the MSO, as
assurance and collateral security for the payment of the monthly
Management Fees owed to the MSO pursuant to the Agreement and any
funds advanced by the MSO to or on behalf of the PC pursuant to
the Agreement and for the faithful and timely performance of all
the covenants and conditions to be performed by the PC under the
Agreement (collectively, the "Obligations") the PC agreed to
pledge, grant, bargain, assign and transfer to the MSO a security
interest, pursuant to the Uniform Commercial Code of the State,
in and to all Practice Revenue and the accounts receivable of
patients of the PC, together with all proceeds thereof
(collectively, the "Collateral");
WHEREAS, the PC is obligated as a condition to the MSO's
performance under the Agreement to execute and deliver this
Security Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the
covenants and agreements hereinafter set forth, the parties
hereto agree as follows:
1. Grant of Security Interest. As and for collateral
security for payment or performance as the case may be by the PC
of the Obligations and any and all amounts payable under this
Security Agreement (collectively, the "Secured Obligations"), the
PC hereby pledges, grants, bargains, assigns and transfers to the
MSO, a security interest in, the Collateral. ▇▇. ▇▇▇▇▇ shall
cause the PC to perform fully and on a timely basis all of the
PC's obligations under this Security Agreement. The MSO may at
its option file a financing statement (Form UCC-1) in order to
perfect its security interest hereunder.
2. Representations and Warranties. The PC represents and
warrants all of the accounts receivable constituting a portion of
the Collateral of the PC pledged to the MSO are and will be
validly created obligations of each of the obligors who incurred
same for services actually rendered in the ordinary course of
business of the PC. Further, the PC represents and warrants that
the Collateral is not subject to any lien, pledge, charge,
encumbrance or security interest or right or option on the part
of any third person.
3. Release of Security Interest. Upon the termination of
the Agreement and payment in full of the accrued Management Fees
thereunder and any and all other Secured Obligations, the MSO
shall release its security interest hereunder, and will deliver
to the PC any property forming part of the Collateral delivered
to the MSO and then held by the MSO hereunder.
4. Realization of Collateral. The MSO shall have, with
respect to the Collateral, the rights and obligations of a
secured party under the Uniform Commercial Code as adopted in the
State. Such rights shall include, without limitation, the
following:
A. The right, upon default, to have the Collateral,
or any part thereof, transferred to its own name or to the name
of its nominee;
B. The right, upon default, to sell, assign or
deliver as much of the Collateral as is reasonably necessary to
repay the defaulted indebtedness (together with expenses
attendant upon such sale and repayment), at public or private
sale, as the MSO may elect, either for cash or on credit, without
assumption of any credit risk and without demand or advertisement
(unless otherwise required by law).
C. The PC hereby irrevocably authorizes the MSO to
sign and file financing statements naming the PC as the debtor
and the MSO as the secured party, at any time with respect to any
Collateral, without the signature of the PC. The PC hereby
irrevocably appoints the MSO as the PC's authorized agent and
lawful attorney-in-fact, with full authority in the place and
stead of the PC and in the name of the PC, from time to time in
the MSO's discretion, to take any action and to execute any
instrument which the MSO may deem necessary or advisable to
accomplish the purposes hereof. The attorney-in-fact granted
herein is coupled with an interest and is irrevocable. Third
parties and entities and persons not a party to this Security
Agreement are entitled to rely on this attorney-in-fact and an
affidavit of the MSO attesting thereto. The acceptance of this
appointment by the MSO shall not obligate it to perform any duty
or covenant required to be performed by the PC under or by virtue
of the Collateral. Notwithstanding the foregoing power of
attorney, the PC shall at any time upon the request of the MSO,
sign and deliver financing statements, security agreements or
other agreements with respect to any Collateral. Upon the PC's
failure to sign and deliver said financing statements, security
agreements or other agreements, the MSO is authorized as the
agent of the PC to sign any such instruments. Upon the request
of the MSO, the PC agrees to pay all filing fees and to reimburse
the MSO on demand for all costs and expenses of any kind
(including, without limitation, legal fees) incurred in any way
in connection with the Collateral.
5. Purchase of Collateral. At any private or public sale
of the Collateral or part thereof, the MSO may purchase and pay
for the same by cancellation of such portion of the Obligations
equal to the purchase price and free of any right of redemption
on the part of the PC. The MSO agrees, however, that the PC
shall have all rights, including rights of notice, provided by
the Uniform Commercial Code as adopted in the State. In any case
where notice is required, five days' notice shall be deemed
reasonable notice. In the event of any sale hereunder, the MSO
shall apply the proceeds in the order set forth below in
Paragraph 6 hereof. The MSO may have resort to the Collateral or
any portion thereof with no requirements on the part of the MSO
to proceed first against any other person or property.
6. Application of Collateral. Proceeds from the sale of
the Collateral or any part thereof shall be applied by the MSO in
the following order:
A. To the payment of the costs and expenses of
collection incurred by the MSO, including, without limitation,
attorneys' fees and all other reasonable expenses, liabilities
and costs incurred by the MSO in connection therewith;
B. To the payment of the whole amount then owing and
unpaid for advances and/or Management Fees;
C. To the payment in full of all other Obligations of
the PC under the Agreement; and
D. To the payment to the PC of any surplus then
remaining from such proceeds.
7. Extension of Agreement. No renewal or extension of the
Agreement, no release or surrender of any Collateral given as
security in connection therewith, and no delay in enforcement
thereof or in exercising any right or power with respect thereto
or hereunder shall affect the rights of the MSO with respect to
the Collateral or any part thereof.
8. Notices. Any notice to be given pursuant to this
Agreement shall be deemed effective the same day when such notice
is given personally, or by telegram, or electronic transmission
to the President of the party to whom notice is being given.
Notice by mail shall be deemed effective three days after deposit
in the United States mail, and properly addressed with postage
prepaid.
Notices to the MSO shall be given at:
Omega Orthodontics of Virginia, Inc.
c/o Omega Orthodontics, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or other such addresses as may be delivered by the MSO to the PC
from time to time in writing.
Notices to ▇▇. ▇▇▇▇▇ or the PC shall be given at:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D., PC
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D.
or other such addresses as may be delivered by the PC to the MSO
from time to time in writing.
9. Waiver. The waiver by either party to this Security
Agreement of any one or more defaults, if any, on the part of the
other party, shall not be construed to operate as a waiver of the
other or future defaults under this Agreement. This Security
Agreement may be amended or modified only by the written consent
of both parties.
10. Additional Documents. The PC agrees that it will duly
execute and deliver to the MSO any additional documents which
may be reasonably necessary to give effect fully to the security
interest granted to the MSO hereunder, including, without
limitation, a financing statement on Form UCC-1.
11. Benefit. This Security Agreement shall inure to the
benefit of and shall be binding upon the respective heirs,
successors and assigns of the parties hereto.
12. Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State.
13. Defined Terms. Capitalized terms used in this
Security Agreement which are not defined herein but which are
defined in the Agreement shall have the respective meanings
ascribed therein.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first
hereinabove written.
PC: MSO:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D., PC OMEGA ORTHODONTICS
OF
VIRGINIA, INC.
By:____________________________
By:__________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, President
▇▇. ▇▇▇▇▇:
_______________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, D.M.D.
EXHIBIT E
ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
A. Method of Invoking ADR Procedures
1. These procedures may be invoked by any party to an
agreement which incorporates these procedures by giving written
notice to the other of the dispute and designating a person with
decision-making authority (the "representative") to act on behalf
of the disputing party regarding the dispute. The other party
shall be required to respond to the disputing party's notice
within five (5) business days by designating in writing its own
representative. A party may choose more than one person to
represent it. If a party appoints only one representative, one
or more of its officers may nonetheless attend such meetings.
2. The parties, each acting through its representative,
shall meet at a mutually acceptable time and place within five
business days after the non-disputing party designates its
representative to the other. At that meeting, the parties shall
attempt in good faith to negotiate a resolution of the dispute,
or failing that, to agree on a method for resolving the claim or
dispute.
3. If, within ten (10) business days after the first
meeting or within such longer period of time as the parties may
mutually agree, the parties have not succeeded in negotiating a
resolution of the claim or dispute or agreeing on a dispute
resolution mechanism, they shall submit the dispute to mediation
in accordance with the procedures set forth herein.
4. The parties will jointly appoint a mutually acceptable
mediator to mediate the dispute. If the parties are unable to
agree on a mutually acceptable mediator within five (5) days
after the conclusion of the negotiations described in paragraph 3
above, then the parties shall select a neutral third party from
the American Arbitration Association ("AAA"), with the assistance
of AAA, unless the parties agree otherwise in finding a mutually
acceptable mediator.
5. The PC and the MSO shall each bear 50% of the fees and
costs of the mediator and any fees and costs of the AAA.
6. The parties agree to participate in good faith in the
mediation and negotiations related thereto for a period of thirty
(30) days from appointment of a mediator by any of the parties or
the AAA.
B. Mediation procedures
1. The mediator shall be neutral and impartial.
2. The mediator shall control the procedural aspects of
the mediation. The parties will cooperate fully with the
mediator.
(a) The mediator is free to meet and communicate
separately with each party.
(b) The mediator will decide when to hold joint
meetings with the parties and when to hold separate meetings.
There shall be no stenographic record of any meeting. Formal
rules of evidence will not apply.
(c) The mediator may request that there be no direct
communication between the parties or between their attorneys
without the concurrence of the mediator.
3. Each party may be represented by more than one person,
e.g., one or more of its officers and an attorney. Each party
will have a representative fully authorized to negotiate a
settlement of the dispute present.
4. The process will be conducted expeditiously.
5. The mediator will not transmit information received
from any party to another party or any third person unless
authorized to do so by the party transmitting the information.
6. The entire process is confidential. The parties and
the mediator will not disclose information regarding the process,
including settlement terms, to third persons, unless the parties
otherwise agree. The process shall be treated as a compromise
negotiation for purposes of the Federal Rules of Evidence and
state rules of evidence.
7. The parties will refrain from pursuing administrative
and/or judicial remedies during the mediation process, except as
otherwise expressly provided in the agreement which incorporates
these procedures.
8. Unless all parties and the mediator otherwise agree in
writing,
(a) The mediator will be disqualified as a witness,
consultant or expert in any pending or future investigation,
action or proceeding relating to the subject matter of the
mediation (including any investigation, action or proceeding
which involves persons not party to this mediation); and
(b) The mediator and any documents and information in
the mediator's possession will not be subpoenaed in any such
investigation, action or proceeding, and all parties will oppose
any effort to have the mediator and documents subpoenaed.
9. If the dispute goes into arbitration, the mediator
shall not serve as an arbitrator, unless the parties and the
mediator otherwise agree in writing.
10. The mediator, if a lawyer, may freely express views to
the parties on the legal issues of the dispute.
11. The mediator shall not be liable for any act or
omission in connection with the mediation.
12. The mediator may withdraw at any time by written notice
to the parties (i) for overriding personal reasons, (ii) if the
mediator believes that a party is not acting in good faith, or
(iii) if the mediator concludes that further mediation efforts
would not be useful.
C. Binding Arbitration
If the parties do not resolve the dispute through mediation
within the period provided in Part A above, the parties shall
submit the matter to binding arbitration before a qualified sole
arbitrator in accordance with the then current Rules of
Commercial Arbitration the AAA. The arbitration shall be held in
Los Angeles, California. The sole arbitrator shall be agreed
upon by the parties within twenty (20) days after either party
elects to submit any issue to arbitration or, failing that, shall
be selected by the AAA. A qualified arbitrator is one who is
familiar with the principal subject matter of the issues to be
arbitrated such as by way of example, healthcare services
industry matters, management consulting services generally or
business law/corporate matters generally. Judgment upon the award
rendered by the arbitrator may be entered in any court having
jurisdiction. The arbitrator shall not have the authority to
award multiple, punitive or consequential damages under any
circumstances.