EXHIBIT 10.3
AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
AMONG
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S., M.S., INC.
(the "New PC")
AND
OMEGA ORTHODONTICS OF WOODLAND HILLS, INC.
(the "MSO")
AND
OMEGA ORTHODONTICS, INC.
("OMEGA")
AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is made effective
as of this 7th day of January, 1998, by and among ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, D.D.S., M.S., Inc. , a professional corporation (the
"New PC") incorporated under the laws of the State of California
(the "State"), and OMEGA Orthodontics of Woodland Hills, 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, OMEGA and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S. ("▇▇.
▇▇▇▇▇▇▇") who is duly licensed to practice orthodontics in the
State have entered into that certain Affiliation Agreement and
Asset Purchase Agreement (the "Affiliation Agreement") dated as
of March 31, 1997, pursuant to which OMEGA acquired certain
assets of ▇▇. ▇▇▇▇▇▇▇;
WHEREAS, the New PC owns and operates an orthodontic
practice with offices located in the facilities identified in
Exhibit A (the "Orthodontic Offices") and furnishes orthodontic
care to the general public through the services of ▇▇. ▇▇▇▇▇▇▇
and any and all other orthodontists who are or become affiliated
with the New PC as of or following the date and who are or become
subsequently named on Schedule 1 hereto (individually, an
"Orthodontist" and collectively, the "Orthodontists");
WHEREAS, the New PC and the MSO have entered into that
certain Management Services Agreement, dated October 6, 1997 (the
"Original Agreement"), pursuant to which the MSO provides
equipment, facilities and personnel to, and to manage the non-
orthodontic business affairs of, the New PC;
WHEREAS, the New PC intends with the consent of the MSO
to provide certain professional dental services at an orthodontic
office located at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ (the "Reseda Office"), subject to a Management
Services Agreement between the PC and Omega Orthodontics of
Reseda, Inc., a Delaware corporation ("Omega Reseda");
WHEREAS, the parties hereto desire to amend and restate
this Agreement to permit Omega Reseda to act as the manager of
the PC with respect to the Reseda Office only.
NOW, THEREFORE, IT IS AGREED that the MSO shall perform
managerial and administrative services for the New PC and provide
office space and orthodontic facilities appropriate for rendering
general orthodontic treatment at the Orthodontic Offices upon the
following terms and conditions:
ARTICLE 1.
TERM
a. The initial term of this Agreement shall commence
on January 7, 1998 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 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
New PC prior to expiration of the Initial Term or any then
effective Renewal Term.
ARTICLE 2.
DUTIES OF THE MSO
a. General. The MSO shall provide the New PC with
comprehensive practice management, financial and marketing
services, and such facilities, equipment, and support personnel
as are reasonably required by the New PC to operate its
orthodontic practice at the Orthodontic Offices, as determined by
the MSO in consultation with the New PC. The New PC hereby
appoints the MSO as the sole and exclusive business manager of
the New PC other than at the Reseda Office and agrees that the
MSO shall have all power and authority reasonably necessary to
manage the non-orthodontic business affairs of the New PC at the
Orthodontic Offices and carry out the MSO's orthodontic 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 Offices.
b. Orthodontic Office Services. The MSO shall
provide or arrange for the provision of the office space and
related leasehold improvements to constitute the Orthodontic
Offices and related fixtures, furniture, furnishings, equipment
and related services (collectively, the "Orthodontic Office
Services") described in Schedule 2 hereto, as such Schedule may
be amended by the New PC and the MSO from time to time. The MSO
shall be responsible for all repairs, maintenance and replacement
of the Orthodontic Offices including such leasehold improvements,
fixtures, furniture, furnishings and equipment, except for
repairs, maintenance and replacement necessitated by the
negligence of the New 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 New PC on the
equipment needs of and the efficiency and adequacy of the
Orthodontic Offices. The MSO shall provide telephone, facsimile
transmission, printing, duplicating and transcribing services as
needed, as well as all laundry, linen and uniforms.
c. Administrative Services.
i. The MSO shall supply secretarial, reception,
maintenance, front office, skilled assistants and other personnel
at the Orthodontic Offices, except duly licensed "Practice
Providers," during normal office hours as reasonably requested by
the New PC, to enable the New 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 New PC. The New PC shall
have sole authority to employ and terminate the employment of all
Practice Providers. All personnel placed in the Orthodontic
Offices by the MSO shall be subject to the approval of the New
PC, which approval shall not be unreasonably withheld, and the
New 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, withholding,
fringe benefits, bonuses and workers' compensation insurance in
connection with its employees; provided, however, that the New PC
is in full compliance with the compensation provisions of this
Agreement.
ii. "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 New PC or otherwise under contract with the New PC to provide
dental or orthodontic, hygienic or other assistance or services
to patients of the New PC at the Orthodontic Offices or otherwise
required by applicable "Laws" (as defined in Section 2.6 below)
to be employees of the New PC to provide services to patients of
the Practice. A list of all Practice Providers and their
relationship to the New 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 New PC shall use
its best efforts to consult with the MSO. The New PC also shall
use its best efforts to consult with the MSO with regard to the
terms of contracts entered into between the New PC and the
Practice Providers and the terms and conditions of their
employment or engagement as independent contractors.
d. Business Systems, Procedures and Forms. In
consultation with the New PC, the MSO shall establish
standardized business systems and procedures for the New PC's
business and operations at the Orthodontic Offices, including,
but not limited to, patient scheduling systems, treatment records
system, financial reporting and process control systems and
patient communication management systems (the "OMEGA Patient
Scheduling System") that are designed to improve the New PC
operating efficiency. The MSO shall analyze such information on
an ongoing basis in order to advise the New PC on ways of
improving operating efficiencies at the Orthodontic Offices. The
MSO shall provide training to the staff of the New PC in the
implementation and operation of such standardized business
systems and procedures at the Orthodontic Offices. The MSO shall
additionally provide the New PC with and train the New PC's staff
in the use of standardized clinical forms, including, without
limitation, forms for patient evaluations and treatment plans.
The New 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 3.8 hereof and be subject to the restrictions on the
use, appropriation, and reproduction of such Confidential
Information provided for in Section 3.8.
e. 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 New PC at the
Orthodontic Offices. The MSO shall order and purchase and
maintain all inventory and orthodontic supplies as reasonably
required by the New PC to enable the New PC to render orthodontic
care to its patients at the Orthodontic Offices including,
without limitation, all orthodontic appliances and other
supplies, laboratory supplies and sanitation supplies.
f. Regulatory Compliance Services. The MSO shall
arrange for or cause to be rendered to the New PC such business,
legal and regulatory management consultation and advice as may be
reasonably required or requested by the New PC and directly
related to the operations of the New PC at the Orthodontic
Offices or its compliance with Federal, state or local laws,
rules, regulations or interpretations governing or applicable to
the New 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 New 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 New PC.
g. Billing, Collection. The MSO shall be responsible
for: (i) billing and collecting payments for all orthodontic and
other professional services rendered by the New PC and the
Practice Providers at the Orthodontic Offices , with all such
billing and collecting to be done in the name of the New PC; (ii)
receiving payments from patients, insurance companies and all
other third party payors [for services rendered at the
Orthodontic Offices]; (iii) taking possession of and endorsing in
the name of the New PC any notes, checks, money orders, insurance
payments and other instruments received in payment for services
provided at the Orthodontic Offices 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 at the Orthodontic Offices
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 New PC's
behalf. In seeking payments on behalf of the New PC hereunder,
the MSO shall act as the New PC's agent in billing and collecting
professional fees, charges and other accounts owed to the New PC
and shall only ▇▇▇▇ under the New PC's provider number. In this
regard, the New 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 New PC as a result of any inability to collect fees
and charges.
h. Disbursement of Funds.
i. All monies collected for the New PC by the
MSO pursuant to Section 2.7 above shall be deposited into an
account (the "New 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 New PC (the "Bank"). The
New PC Account shall contain the name of the New PC, but the MSO
shall make all disbursements therefrom. The MSO shall account for
all monies so disbursed from the New PC Account.
ii. From the funds collected and deposited by the
MSO in the New PC Account, the MSO shall make for and on behalf
of the New 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
New PC for services rendered at the Orthodontic Offices, 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.
iii. In the event the funds in the New 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
New PC the necessary funds to pay the current portion of such
expenses for the benefit of the New PC, which advances will be
deemed to be loans to the New PC to be repaid without interest
from the New 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 New PC and the MSO, which indebtedness shall not be deemed
an MSO Expense for purposes of Section 2.9.
i. 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 New PC,
unless otherwise agreed to by the parties hereto.
i. "MSO Expenses" shall mean all operating and
non-operating expenses incurred in the operation of the New PC at
the Orthodontic Offices, including, without limitation:
(1) Salaries, benefits and other direct
costs of all employees of the MSO providing services to the New
PC hereunder (but excluding ▇▇. ▇▇▇▇▇▇▇ and all the Orthodontists
(if any) and other Practice Providers);
(2) Direct costs of all employees or
consultants of the MSO who provide services at the Orthodontic
Offices or in connection with the New PC required for improved
clinic performance, such as work management, materials
management, purchasing, charge and coding analysis, and business
office consultation;
(3) Direct costs associated with operating
the Orthodontic Offices, including without limitation, utilities,
cleaning and maintenance;
(4) Obligations of the MSO under leases or
subleases entered into in connection with the operation of the
Orthodontic Offices as well as utility expenses relating to the
Orthodontic Offices;
(5) Personal property and intangible taxes
assessed against the MSO's assets used in connection with the
operation of the Orthodontic Offices, commencing on the date of
this Agreement;
(6) In the event an opportunity arises for
additional Orthodontists to become employed by the New PC or
other orthodontic entities to merge with the New 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;
(7) 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 New 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 New PC
other than as otherwise expressly provided for in Section 2.6
hereof;
(7) Liability judgments assessed against the
New 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 New 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 New 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 New PC.
As used in this Section 2.9, "Approved Budget"
means, for each fiscal year, the aggregate maximum amount that
the MSO will reimburse the New 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
New PC and the MSO agree that the aggregate maximum annual amount
shall be $5,000.
j. Credit Reports. When requested by the New PC, or
its authorized representative, the MSO shall obtain on behalf of
the New PC information with regard to the ability of patients to
pay for the services to be rendered by the New PC at
theOrthodontic Offices . 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 New PC at the
Orthodontic Offices, either in cash or by insurance. Such
determination shall be subject to the reasonable approval by the
New PC, and as between the New PC and the MSO, the New PC shall
bear the risk of claims by potential patients who may be denied
credit.
k. Accounting; Bookkeeping and Reports. The MSO
shall provide for or arrange for all accounting and bookkeeping
services related to the New PC's operations at the Orthodontic
Offices, provided that such services are incurred in the ordinary
course of business. In addition, the MSO shall provide the New
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, as well as the
books and records of the New PC, all prepared by or with the
assistance of an accountant chosen by the MSO. At the end of
each fiscal year of the New PC, the MSO shall arrange for a
financial statement with respect to the New PC to be prepared by
the MSO's accountant. At the New 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 New PC at the Orthodontic Offices. The MSO shall assist
and advise the New PC in the financial management of the New PC.
l. Marketing. The MSO shall design and execute a
marketing plan to promote the New PC's professional services at
the Orthodontic Offices. The MSO shall also make available to
the New PC all brochures, contracts, and other materials
reasonably related to the carrying out of the business purposes
of the New PC at the Orthodontic Offices, 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.
m. Complaints. The MSO shall assist the New PC in
handling all complaints, grievances and disputes involving the
New PC and the Practice Providers and any patients or third
parties. However, the MSO shall have no control over the New
PC's patients. All decisions concerning the New PC's patients
shall be made by the New PC and the Practice Providers.
n. 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 the Business and Professions
Code 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 New PC regarding the policies
and procedures for the operation of the New PC.
o. Maintenance and Cleaning Services. The MSO shall
arrange for security, maintenance and cleaning of the Orthodontic
Offices, including the furniture, fixtures and equipment therein.
p. Licenses and Permits. The MSO shall provide and
pay for all business and other licenses and permits as necessary
to operate the New 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.
q. Insurance. The MSO shall provide and pay for
customary office property damage and liability insurance for the
operations of the Orthodontic Offices, including business
interruption insurance, not including professional liability
insurance (which shall be and remain the responsibility of the
New PC).
r. 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 New 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 New PC. The New PC shall be responsible for interviewing
and selecting each Practice Associate.
After the Practice Associate(s) is (are) selected
by the New PC, the MSO will assist the New 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 New PC
or the new Practice Associate may terminate the relationship. All
such Practice Associates recruited by the MSO as may be accepted
by the New PC shall be employees of the Practice (if so employed)
and not of the MSO. The MSO will confer with the New PC on an
appropriate salary/work-in arrangement for the new Practice
Associate and the final arrangements shall be determined by the
New PC.
ARTICLE 3.
DUTIES OF THE NEW PC
a. General. The New 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.
b. Employment of the Orthodontists and Rendering of
Patient Care. The New 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 New PC shall be responsible for
the professional supervision of all other Practice Providers in
their rendering of patient care.
c. Professional Services. The New PC shall use and
occupy the Orthodontic Offices 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 orthodontic practice conducted at the
Orthodontic Offices 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 Offices. The New PC shall provide
professional services to patients hereunder in compliance at all
times with ethical standards and Laws applying to the orthodontic
profession. The New 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 against ▇▇.
▇▇▇▇▇▇▇ or any Orthodontist or other Practice Provider, the New
PC shall immediately inform the MSO of such action and the
underlying facts and circumstances subject to such
confidentiality agreement or arrangements as the New PC and the
MSO shall mutually determine at or prior to the time of such
disclosure. The New 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 New PC at once
to remedy such deficiencies.
d. Records. The New 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
New PC, to obtain payments for services performed at the
Orthodontic Offices and related charges and to facilitate the
delivery of quality patient care by the New PC at the Orthodontic
Offices. Notwithstanding the foregoing, patient dental records
shall be and remain the property of the New PC and the contents
thereof shall be solely the responsibility of the New PC.
e. Professional Expenses. The New 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 New PC at the
Orthodontic Offices. The MSO shall reimburse the New PC for such
expenses in accordance with the Approved Budget. The New PC
shall ensure that ▇▇. ▇▇▇▇▇▇▇ and all the Orthodontists employed
by the New PC at the Orthodontic Offices participate in such
continuing education as is necessary for ▇▇. ▇▇▇▇▇▇▇ and such the
Orthodontists to remain current.
f. Professional Liability Insurance. The New 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 New 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.
g. Employment Agreement. The parties recognize that
the services to be provided by the MSO are feasible only if the
New PC operates an active orthodontic practice to which it, ▇▇.
▇▇▇▇▇▇▇ and each Orthodontist associated with the New PC devote
their full time and attention, unless other specific provisions
are made in writing and mutually agreed upon by the MSO and New
PC. The New PC will cause ▇▇. ▇▇▇▇▇▇▇ and each individual
Orthodontist who now is or hereafter becomes affiliated with the
New 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 New 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 ▇▇. ▇▇▇▇▇▇▇ or such
Orthodontist will not, directly or indirectly, either for ▇▇.
▇▇▇▇▇▇▇ or such Orthodontist's own benefit or for the benefit of
any other person, firm, company, corporation or other entity,
call on, solicit, divert or take away, or attempt to call on,
solicit, divert or take away, any of the PC's patients, business
or employees, including but not limited to, those to whom ▇▇.
▇▇▇▇▇▇▇ or such Orthodontist catered or provided services or
those with whom ▇▇. ▇▇▇▇▇▇▇ or such Orthodontist became
acquainted while engaged as an employee of the PC. 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
New 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 New PC, for the most recent calendar year; or (b) $300,000.
Such payment shall be made to the MSO by the New PC immediately
following receipt of the payment from ▇▇. ▇▇▇▇▇▇▇ or the
breaching Orthodontist by the New PC. Each of the MSO and OMEGA
shall be expressly named as a third-party beneficiary to such
agreements between the New 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.
h. Confidentiality. The New PC agrees and
acknowledges that all materials provided by the MSO to the New PC
constitute "Confidential Information" and are disclosed in
confidence and with the understanding that it constitutes
valuable business information developed by the MSO with the
assistance of OMEGA at great expenditures of time, effort and
money. The New PC further agrees that it shall not, directly or
indirectly, without the express prior written consent of the MSO,
use or disclose such Confidential Information for any purpose
other than in connection with the services to be rendered
hereunder. The New PC further agrees: (i) to keep strictly
confidential and hold in trust all Confidential Information and
not disclose such Confidential Information to any third party,
including its shareholders, directors, officers, affiliates,
partners, employees and independent contractors without the
express prior written consent of the MSO; and (ii) to impose this
obligation of confidentiality on its shareholders, directors,
officers, affiliates, partners, employees and independent
contractors. The New 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. Upon
expiration or termination of this Agreement by either party for
any reason whatsoever, the New PC shall immediately return and
shall cause its shareholders, directors, officers, affiliates,
partners, shareholders and independent contractors to immediately
return to the MSO all Confidential Information, and the New PC
will not, and will cause its affiliates, partners, employees and
independent contractors not to, thereafter use, appropriate, or
reproduce such Confidential Information. The New PC further
expressly acknowledges and agrees that any such use,
appropriation or reproduction of any such Confidential
Information by any of the foregoing 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, 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 or other equitable relief without the necessity of
proving actual damages 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.
ARTICLE 4.
PROFESSIONAL SERVICES, CONTROL OF SOLICITATION,
APPROVAL OF ADVERTISING MATERIAL AND NO RECIPROCATION
a. Orthodontic Services Separate. A fundamental
understanding between the parties hereto is that the rendering of
orthodontic services shall be separate and independent from the
provision of administrative, management and support services by
the MSO. Thus, the New PC shall have sole and absolute control
of the delivery of all professional services and treatment
rendered to patients at the Orthodontic Offices.
b. No Solicitation. No employee or other
representative of the MSO shall be engaged in, or allowed to
solicit patients on behalf of, the New PC, nor shall the MSO have
any control over the New PC's patients.
c. Advertising. 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 New PC shall be
used or distributed without having first been approved by the New
PC.
d. No Referrals. 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 New 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 New PC or any of its Practice Providers, employees,
contractors or agents.
ARTICLE 5.
LEASE OF OFFICE FACILITIES AND EQUIPMENT
a. Lease. 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 New PC during the Term of
this Agreement the Orthodontic Offices, and the leasehold
improvements and fixtures, furniture and equipment at the
Orthodontic Offices as listed from time to time on Schedule 2
attached hereto and incorporated herein by this reference, under
the following terms and conditions:
i. The MSO is the lessee by assignment under
lease for the premises occupied by the New PC at the Orthodontic
Offices (collectively, the "Master Lease") a copy of which is
attached hereto as Exhibit A and incorporated herein by this
reference. The New PC hereby acknowledges that the premises
described under the Master Lease are suitable for the New PC's
orthodontic practice at the Orthodontic Offices. Based and
contingent upon the New PC's promise to timely pay all amounts
due under this Agreement, the MSO hereby agrees to sublease the
leased premises to the New PC upon the following terms and
conditions:
(1) This sublease between the MSO and the
New 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 New PC assumes the obligations under the
Master Lease in question and the Lessor consents thereto.
(2) 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
New 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.
(3) Notwithstanding the foregoing, as
between the MSO and the New 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, all
of which obligations shall be considered MSO Expenses hereunder
and the New PC shall have no monetary obligation in that regard.
In addition, as between the MSO and the New 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 New PC shall
have no rights in that regard.
(4) In the event this Agreement is
terminated according to its terms, this sublease shall also
terminate automatically.
(5) If the Master Lease contains an option
to renew the terms thereof, the MSO shall notify the New 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 New 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.
(6) The Alternative Dispute Resolution
provisions set forth in Article 14 of this Agreement shall not
apply to any issues concerning the Sub-Lease, the New PC's
tenancy or the MSO's rights and remedies as Sub-Lessor.
b. Leasehold Improvements and Other Tangible Assets.
The MSO shall provide the New PC at the Orthodontic Offices such
additional leasehold improvements, fixtures, furniture,
furnishings and equipment as may be mutually agreed to with the
New PC and reflected from time to time on a supplement to
Schedule 2 hereto. The use by the New PC of all leasehold
improvements, fixtures, furniture, furnishings and equipment
provided hereunder shall be subject to the following conditions:
i. Title to all such leasehold improvements,
fixtures, furnishings, furniture and equipment shall remain in
the MSO and upon termination of this Agreement, the New 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.
ii. The MSO shall be fully and entirely
responsible for all repairs and maintenance of all such leasehold
improvements, fixtures, furniture, furnishings and equipment;
provided, however, that the New 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.
iii. 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.
c. No Warranty.
i. THE NEW 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.
ii. 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 by the New 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
the capital stock of the MSO, acquiring or otherwise establishing
the Orthodontic Offices, 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 Offices are located. The MSO has also
assumed substantial obligations associated with the continuing
operation of the Orthodontic Offices, including those of lessee,
obligor and guarantor and obligor on loans to establish and
operate the Orthodontic Offices. 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 New 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 New 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 New PC specifically agrees that
the MSO may defer actual receipt of its Management Fees and/or
advance monies for purposes of managing the New 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 New PC pursuant to this Agreement and for the faithful and
timely performance of all the covenants and conditions to be
performed by the New PC under this Agreement, the New 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 New PC relating to its business and operations at
the Orthodontic Offices, 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 New 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 New PC expressly
agrees to execute any appropriate UCC-1 Financing Statement and
UCC-1 Fixture filings, if so requested in writing by the MSO.
ARTICLE 8.
COVENANTS
a. New PC's Covenants. As further consideration for
the MSO's performance of the terms and conditions of this
Agreement, the New PC covenants, represents and warrants as
follows (which covenants, representations and warranties shall
survive the execution of this Agreement):
i. The New 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.
ii. The New PC shall provide quality services and
shall cause ▇▇. ▇▇▇▇▇▇▇ and the Orthodontists (if any) to serve
the orthodontic needs of the patients of the New PC at the
Orthodontic Offices. The New PC covenants to monitor rigorously
utilization and quality of services provided at the Orthodontic
Offices and shall take all steps necessary to remedy any and all
deficiencies in the efficiency or the quality of orthodontic care
provided at the Orthodontic Offices.
iii. During the Term of this Agreement, the New 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 Offices, 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, provided however, that during
the term hereof, the New PC also shall be permitted to practice
orthodontics at the office located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
iv. The New 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 and other information (collectively, the "MSO
Information") regarding such system. The New PC acknowledges and
agrees that all information relating to the OMEGA Patient
Scheduling System and the MSO Information constitutes trade
secrets of OMEGA and/or the MSO. The New PC hereby waives any
and all right, title and interest in and to such trade secrets
and agrees to return all copies of such trade secrets and
information relating thereto, at its expense, upon termination of
this Agreement.
v. The New 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
New PC agrees to hold OMEGA'S and the MSO's trade secrets in
strictest confidence and not to disclose them or allow them to be
disclosed directly or indirectly to any person or entity other
than persons who are engaged by the New PC to perform duties in
connection with the New PC and who have a need to know such trade
secrets in the performance of their duties for the New PC,
without OMEGA's or the MSO's prior written consent, as the case
may be. The New 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 New 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 or proprietary
information or trade secrets obtained by the New PC. The New 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.
b. MSO's Covenants. As further consideration for the
New 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
Offices, without the express written consent of the New PC.
ARTICLE 9.
INSURANCE AND INDEMNITY
a. Insurance to be Maintained by the New PC.
Throughout the Term of this Agreement, the New 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 New PC and a separate
limit for the New PC. The New 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 New PC with
respect to such insurance. Deductibles with respect to such
policies shall not be MSO Expenses. The MSO shall reimburse the
New PC for premiums in accordance with the Approved Budget. The
New PC also agrees to name the MSO and OMEGA as co-insureds. The
New PC agrees to deliver to the MSO and OMEGA a certificate of
insurance indicating such coverage.
b. Insurance to be Maintained by the MSO. Throughout
the Term of this Agreement, the MSO will use reasonable efforts
to provide and maintain, as a 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.
c. Tail Insurance Coverage. The New PC will cause
▇▇. ▇▇▇▇▇▇▇ and each Orthodontist (if any) providing services to
enter into an agreement with the New PC that upon termination of
▇▇. ▇▇▇▇▇▇▇'▇ or such Orthodontist's relationship with the New
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 New PC and ▇▇.
▇▇▇▇▇▇▇ or the Orthodontist, and the New 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 New PC
or ▇▇. ▇▇▇▇▇▇▇ or each such Orthodontist.
d. Additional Insureds. The New 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.
e. Indemnification. The New 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 judgments, settlements, lawsuits and
obligations (including reasonable attorneys' fees), whether or
not covered by insurance, caused or asserted to have been caused,
directly or indirectly, by or as a result of the performance of
orthodontic services or the performance of any intentional acts,
negligent acts or omissions by the New 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 New PC, its officers, directors, shareholders and
employees, from and against any and all liability, loss, damage,
claim, causes of action, and expenses (including reasonable
attorneys' fees), caused or asserted to have been caused,
directly or indirectly, by or as a result of the performance of
any intentional acts, negligent acts or omissions by the MSO
and/or its shareholders, agents, employees and/or subcontractors
(other than the New PC) during the Term hereof.
ARTICLE 10.
TERMINATION
a. Termination by the New PC.
i. Termination by the New PC. The New PC may
terminate this Agreement as follows:
(1) 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 New PC may give
written notice of the immediate termination of this Agreement.
(2) 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 New PC, the New PC may terminate this Agreement.
Upon termination of this Agreement by the Orthodontic
Practice under this Section 10.1, the New PC shall be entitled to
exercise the "Call Option," as defined in and on the terms and
conditions set forth in Section 3 of that certain Stock Put/Call
Option and Successor Designation Agreement (the "Stock Put/Call
Option and Successor Designation Agreement") dated as of even
date herewith, by and among the New PC, ▇▇. ▇▇▇▇▇▇▇ and the
Orthodontists (if any), OMEGA and the MSO.
b. Termination by MSO. MSO may terminate this
Agreement as follows:
i. In the event of the filing of a petition in
voluntary bankruptcy or an assignment for the benefit of
creditors by the New 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
New PC or any shareholders thereof, except for the filing of a
petition in involuntary bankruptcy against the New 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.
ii. In the event the New 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 New PC by the
MSO, the MSO may terminate this Agreement.
iii. In the event the New 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 New PC by the MSO, the MSO may
terminate this Agreement.
iv. In the event ▇▇. ▇▇▇▇▇▇▇ or any Orthodontist
breaches or defaults under his or her Employment Agreement and
the New 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 termination of this Agreement by the MSO under
this Section 10.2 or upon expiration of the Term of this
Agreement, the MSO and OMEGA shall be entitled to exercise the
"Put Option" and/or the "Successor Designation Option," as
defined in and on the terms and subject to the conditions set
forth in Sections 2 and 5, respectively, of the Stock Put/Call
Option and Designation Agreement. In addition, 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 New 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
New PC; provided, however, that all contracts or fees set for
services on behalf of the New PC will be subject to final
approval and acceptance by the New PC. Additionally, the New 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 New
PC Account. The New PC hereby irrevocably appoints the MSO as
the New PC's attorney-in-fact, with full power and authority in
the place and stead of the New PC, in the MSO's discretion, to
endorse in the name of the New 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 New 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 New PC under or by
virtue of this Agreement. Notwithstanding the foregoing powers
of attorney, the New 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 New PC's failure to sign said
financing statements, security agreements or other agreements,
the MSO is authorized as the agent of the New PC to sign any such
instruments. The New PC may review all deposits and expenses
upon request.
ARTICLE 12.
INDEPENDENT CONTRACTOR RELATIONSHIP
Neither the New PC nor its employees shall have any
claim under this Agreement or otherwise against the MSO for
worker's 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 New PC. Since neither the New PC nor its
employees are employees of the MSO, the MSO shall not withhold on
behalf of the New PC 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 New PC.
ARTICLE 13.
MISCELLANEOUS
a. 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.
b. Patient Records. Upon termination of this
Agreement, the New PC shall retain all patient dental records
maintained by the New PC or the MSO in the name of the New PC.
During the term of this Agreement, and thereafter, the New PC or
its designee shall have reasonable access during normal business
hours to the New 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 New PC may copy any or all such records.
c. The New PC's Control Over the Orthodontic
Practice. Notwithstanding the authority granted to the MSO
herein, the MSO and the New PC agree that the New 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 New 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 New PC. The New
PC shall have sole authority to direct the business,
professional, and ethical aspects of the New 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 New PC's
professional judgment. The MSO may, however, advise the New PC
as to the relationship between its performance of orthodontic
functions and the overall administrative and business functioning
of the New PC.
ARTICLE 14.
ALTERNATIVE DISPUTE RESOLUTION
a. Alternative Dispute Resolution.
i. 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.
ii. Notwithstanding anything in this Section 14.1
to the contrary:
(1) 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.
(2) 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 New 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.
(3) 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.
b. 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
a. 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 New 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 New PC shall be given as follows:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
or such other address as may be furnished by the New 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 New
PC from time to time in writing.
b. 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.
c. Contract Modifications for Prospective Legal
Events. In the event any state or federal 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 New PC and the MSO shall amend this Agreement
as necessary. To the maximum extent possible, any such amendment
shall preserve the underlying economic and financial arrangements
between the New PC and the MSO.
d. 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.
e. No Obligation to Third Parties. None of the
obligations and duties of the MSO or the New PC under this
Agreement shall in any way or in any manner be deemed to create
any obligation of the MSO or of the New 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.
f. Entire Agreement. This Agreement including the
Schedules and Exhibits hereto, together with the previously
executed Stock Put/Call Option and Successor Designation
Agreement and the Employment Agreement(s) (including the related
non-competition agreements or covenants), constitutes 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. No supplement, modification, or amendment to
this Agreement shall be binding unless executed in writing by all
of the parties hereto, except as otherwise provided herein. No
waiver of any of the provisions of this Agreement shall be deemed
to constitute a waiver of any other provision, whether similar or
not similar, nor shall any waiver constitute a continuing waiver.
No waiver shall be binding unless executed in writing by the
party making the waiver.
g. 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 New PC to any
person, firm or corporation controlled by the MSO, controlling
the MSO or under common control with the MSO.
h. 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.
i. 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.
j. 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.
k. 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.
l. 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.
m. Amendments. This Agreement may be amended only by
the written consent of both parties.
n. 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 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.
o. No Waiver. The waiver by either party to this
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.
p. Captions. Captions to paragraphs in this Agreement
are for ease of reference, and shall not be considered an
interpretation of the paragraph.
q. Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall
be deemed an original.
r. Schedules and Exhibits. To the extent not
otherwise set forth herein or attached hereto, all schedules and
exhibits to the Original Agreement are incorporated herein by
this reference.
IN WITNESS WHEREOF, the parties hereto have executed
this agreement as of the day and year first above written.
NEW PC:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.,
M.S., INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
D.D.S.
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
MSO:
OMEGA ORTHODONTICS OF
WOODLAND HILLS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
OMEGA:
OMEGA ORTHODONTICS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
SCHEDULE 1
THE ORTHODONTISTS
Name and Address
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE 2
ORTHODONTIC OFFICES AND SERVICES
[▇▇. ▇▇▇▇▇▇▇ Attach]
SCHEDULE 3
COMPENSATION - MANAGEMENT FEES
The MSO shall receive, as compensation for the performance of all of its o
bligations and duties contained in the Agreement, monthly
Management Fees in an amount equal to Sixty-Five Percent (65%) of
the Practice Revenues, and the New PC shall be entitled to Thirty-
Five Percent (35%) of such Practice Revenues, except as the
parties may otherwise agree from time to time in writing. At the
end of each twelve (12) month period during the Term the MSO
shall provide the New 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 fifty
(50%) percent of the Practice Revenues for such twelve month
period, fifty (50%) percent of such difference shall be returned
by the MSO to the New 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 Prac
▇▇▇▇ Revenues realized by the MSO for services rendered
hereunder. The MSO shall distribute the proceeds from the New PC
Account and allocate the proceeds between the MSO and the New 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 hereto may agree to handle such matters in a
different manner.
For purposes of this Agreement, "Practice Revenues" shall mean gross colle
ctions of all revenues generated by or on behalf of the New PC at
the Orthodontic Offices (whether through subsidiaries or
affiliates), including, but not limited to, all fees and charges
collected as a result of professional orthodontic services
furnished to patients by the New PC at the Orthodontic Offices
and for any other goods or services sold or provided to such
patients.
EXHIBIT A
ORTHODONTIC OFFICES - MASTER LEASE
[▇▇. ▇▇▇▇▇▇▇ Attach]
EXHIBIT B
PRACTICE PROVIDERS
[▇▇. ▇▇▇▇▇▇▇ Attach]
EXHIBIT C
NEW PC'S AFFIDAVIT
AFFIDAVIT
I, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S., declare:
I am an orthodontist, duly licensed in the State of
California and I practice through a professional corporation
under the name ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S., M.S., Inc., a California
professional corporation (the "New PC").
I have had substantial experience in the practice of the
Orthodontics and in managing and operating an orthodontic office.
In the course of operating orthodontic offices, I have
acquired significant knowledge as to the overhead costs incurred
and gross receipts generated by similar types of orthodontic
offices. 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 operation.
I have thoroughly reviewed the Management Services Agreement
(the "Agreement"), which is effective as of January 7, 1998,
between the New PC and Omega Orthodontics of Woodland Hills, 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 located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇. ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 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 Sixty Five Percent (65%) of "Practice Revenues" 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 New PC Thirty Five
Percent (35%) of "Practice Revenues" retained by the New 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 Los Angeles, California this ___ day of January,
1998.
___________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
STATE OF CALIFORNIA
______________________, ss January ___, 1998
Subscribed and sworn to before me this ___ day of January,
1998.
[SEAL] ____________________________
Notary Public
My Commission Expires:
EXHIBIT D
SECURITY AGREEMENTS
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is effective as of the 7th day of
January, 1998, by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S., M.S., Inc., a
California professional corporation (the "New PC"), and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, D.D.S. ("▇▇. ▇▇▇▇▇▇▇") who is duly licensed to practice
orthodontics in the State and Omega Orthodontics of Woodland
Hills, 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, between the New PC 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 New PC pursuant to the Agreement and for the faithful and
timely performance of all the covenants and conditions to be
performed by the New PC under the Agreement (collectively, the
"Obligations") the New 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 New PC,
together with all proceeds thereof (collectively, the
"Collateral");
WHEREAS, the New 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 by the New PC of the Obligations and any and
all amounts payable under this Security Agreement (collectively,
the "Secured Obligations"), the New PC hereby pledges, grants,
bargains, assigns and transfers to the MSO, and grants to the MSO
a security interest in, the Collateral. ▇▇. ▇▇▇▇▇▇▇ shall cause
the New PC to perform fully and on a timely basis all of the New
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 New PC represents
and warrants all of the accounts receivable constituting a
portion of the Collateral of the New 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 New PC. Further, the New 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 New 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 of California (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 New PC hereby irrevocably authorizes the MSO
to sign and file financing statements naming the New PC as the
debtor and the MSO as the secured party, at any time with respect
to any Collateral, without the signature of the New PC. The New
PC hereby irrevocably appoints the MSO as the New PC's attorney-
in-fact, with full authority in the place and stead of the New PC
and in the name of the New 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 New PC under or by virtue of the Collateral.
Notwithstanding the foregoing power of attorney, the New PC shall
at any time on the request of the MSO, sign Financing Statements,
security agreements or other agreements with respect to any
Collateral. Upon the New PC's failure to sign said Financing
Statements, security agreements or other agreements, the MSO is
authorized as the agent of the New PC to sign any such
instruments. Upon the request of the MSO, the New 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 such 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 New PC. the MSO agrees, however,
that the New 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 New PC under the Agreement; and
D. To the payment to the New 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 Woodland Hills, Inc.
c/o Omega Orthodontics, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or other such addresses as may be delivered by the MSO to the New
PC from time to time in writing.
Notices to the New PC shall be given at:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
or other such addresses as may be delivered by the New 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 New 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.
NEW PC: MSO:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S., M.S., INC. OMEGA
ORTHODONTICS OF
WOODLAND HILLS , INC.
By:____________________________
By:__________________________
Name: Name:
Title: Title:
▇▇. ▇▇▇▇▇▇▇:
_______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
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 Center for Public Resources, New York, New York ("CPR")
Panels of Neutrals or the American Arbitration Association
("AAA"), with the assistance of CPR or AAA, unless the parties
agree otherwise in finding a mutually acceptable mediator.
5. The New PC and the MSO shall each bear 50% of the fees
and costs of the mediator and any fees and costs of CPR or 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 CPR or 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 in Boston, Massachusetts
before a qualified sole arbitrator in accordance with the then
current CPR Rules for Non-Administered Arbitration of Business
Disputes or comparable AAA rules. The arbitration shall be held
in Woodland Hills, 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 CPR or 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.
TABLE OF CONTENTS
ARTICLE 1. 3
ARTICLE 2. 3
a. General 3
b. Orthodontic Office Services 3
c. Administrative Services 4
d. Business Systems, Procedures and Forms 4
e. Purchasing, Accounts Payable, Supplies and Inventory
Control 5
f. Regulatory Compliance Services 5
g. Billing, Collection 5
h. Disbursement of Funds 6
i. MSO Expenses 6
j. Credit Reports 8
k. Accounting; Bookkeeping and Reports 8
l. Marketing 9
m. Complaints 9
n. Practice Laws 9
2.15 Monthly Meetings 9
o. Maintenance and Cleaning Services 9
p. Licenses and Permits 9
q. Insurance 10
r. Practice Transition and Associate Selection 10
ARTICLE 3. 10
a. General 10
b. Employment of the Orthodontists and Rendering of
Patient Care 10
c. Professional Services 10
d. Records 11
e. Professional Expenses 11
f. Professional Liability Insurance 11
g. Employment Agreement 11
h. Confidentiality 12
ARTICLE 4. 13
a. Orthodontic Services Separate 13
b. No Solicitation 13
c. Advertising 13
d. No Referrals 13
ARTICLE 5. 14
a. Lease 14
b. Leasehold Improvements and Other Tangible Assets 15
ARTICLE 6. 16
ARTICLE 7. 17
ARTICLE 8. 17
a. New PC's Covenants 17
b. MSO's Covenants 18
ARTICLE 9. 18
a. Insurance to be Maintained by the New PC 19
b. Insurance to be Maintained by the MSO 19
c. Tail Insurance Coverage 19
d. Additional Insureds 19
e. Indemnification 19
ARTICLE 10. 20
a. Termination by the New PC 20
b. Termination by MSO 20
ARTICLE 11. 21
ARTICLE 12. 22
ARTICLE 13. 22
a. Access to Records 22
b. Patient Records 22
c. The New PC's Control Over the Orthodontic Practice 22
ARTICLE 14. 23
a. Alternative Dispute Resolution 23
b. Waiver of Jury 23
ARTICLE 15. 24
a. Notices 24
b. Confidentiality 24
c. Contract Modifications for Prospective Legal Events 25
d. Remedies Cumulative 25
e. No Obligation to Third Parties 25
f. Entire Agreement 25
g. Assignment 25
h. Attorneys' Fees 25
i. Governing Law 26
j. Events Excusing Performance 26
k. Compliance with Applicable Laws 26
l. Language Construction 26
m. Amendments 26
n. Severability 26
o. No Waiver 26
p. Captions 26
q. Counterparts 27
r. Schedules and Exhibits 27