EXHIBIT 10.41
BOST1-636502-2
MANAGEMENT SERVICES AGREEMENT
AMONG
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S. M.S, Inc.
(the "PC")
AND
OMEGA ORTHODONTICS OF RESEDA, INC.
(the "MSO")
AND
OMEGA Orthodontics, Inc.
("OMEGA")
TABLE OF CONTENTS
ARTICLE 1 4
ARTICLE 2 5
2.1 General 5
2.2 Orthodontic Office Services 5
2.3 Administrative Services 5
2.4 Business Systems, Procedures and Forms 6
2.5 Purchasing, Accounts Payable, Supplies and
Inventory Control 6
2.6 Regulatory Compliance Services 7
2.7 Billing, Collection 7
2.8 Disbursement of Funds 7
2.9 MSO Expenses 8
2.10 Credit Reports 10
2.11 Accounting; Bookkeeping and Reports 10
2.12 Marketing 10
2.13 Complaints 10
2.14 Practice Laws 11
2.15 Monthly Meetings 11
2.16 Maintenance and Cleaning Services 11
2.17 Licenses and Permits 11
2.18 Insurance 11
2.19 Practice Transition and Associate Selection 11
ARTICLE 3 12
3.1 General 12
3.2 Employment of the Orthodontists and Rendering of
Patient Care 12
3.3 Professional Services 12
3.4 Records 13
3.5 Professional Expenses 13
3.6 Professional Liability Insurance 13
3.7 Employment Agreement 13
3.8 Confidentiality 14
ARTICLE 4 15
ARTICLE 5 15
ARTICLE 6 17
ARTICLE 7 18
ARTICLE 8 19
8.1 PC's Covenants 19
8.2 MSO's Covenants 20
ARTICLE 9 20
9.1 Insurance to be Maintained by the PC 20
9.2 Insurance to be Maintained by the MSO 20
9.3 Tail Insurance Coverage 20
9.4 Additional Insureds 21
9.5 Indemnification 21
ARTICLE 10 21
10.1 Termination by the PC 21
10.2 Termination by MSO 22
ARTICLE 11 22
ARTICLE 12 23
ARTICLE 13 23
13.1 Access to Records 23
13.2 Patient Records 23
13.3 The PC's Control Over the Orthodontic Practice 24
ARTICLE 14 24
14.1 Alternative Dispute Resolution 24
14.2 Waiver of Jury 25
ARTICLE 15 26
15.1 Notices 26
15.2 Confidentiality 26
15.3 Contract Modifications for Prospective Legal
Events 26
15.4 Remedies Cumulative 27
15.5 No Obligation to Third Parties 27
15.6 Entire Agreement 27
15.7 Assignment 27
15.8 Attorneys' Fees 27
15.9 Governing Law 28
15.10 Events Excusing Performance 28
15.11 Compliance with Applicable Laws 28
15.12 Language Construction 28
15.13 Amendments 28
15.14 Severability 28
15.15 No Waiver 28
15.16 Captions 28
15.17 Counterparts 29
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT is made effective as of this 7th day of
January, 1998, by and among ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S. , INC., a
professional corporation (the "PC") incorporated under the laws
of the State of California (the "State"), and OMEGA ORTHODONTICS
OF RESEDA, INC., a Delaware corporation (the "MSO"), and OMEGA
ORTHODONTICS, INC., a Delaware corporation ("OMEGA").
WHEREAS, OMEGA provides professional management and
marketing services to orthodontic practices in the United States,
which services include providing practice management systems,
office space, equipment, furnishings and active administrative
personnel necessary for the operation of orthodontic practices
and are provided directly or indirectly through management
service organizations such as the MSO;
WHEREAS, the PC owns and operates an orthodontic practice
(the "Practice") with offices located in the facilities
identified in Exhibit A (the "Orthodontic Offices") and furnishes
orthodontic care to the general public at the Orthodontic Offices
through the services of ▇▇. ▇▇▇▇▇▇▇ and any and all other
orthodontists who are or become affiliated with the PC as of or
following the date hereof and who are or become subsequently
named on Schedule 1 hereto (individually, an "Orthodontist" and
collectively, the "Orthodontists");
WHEREAS, the MSO was formed to provide equipment, facilities
and personnel to, and to manage the non-orthodontic business
affairs of, the PC at the Orthodontic Offices;
WHEREAS, the MSO's services are designed to improve the
efficiency and profitability of the PC at the Orthodontic Offices
while enhancing the ability of ▇▇. ▇▇▇▇▇▇▇ and the Orthodontists
(if any) to render quality orthodontic care to the patients of
the PC;
WHEREAS, the PC wishes to retain the MSO to perform the
functions and to provide the services described in this Agreement
solely at the Orthodontic Offices and to assist the PC to achieve
the above goals.
NOW, THEREFORE, IT IS AGREED that the MSO shall perform
managerial and administrative services for the PC solely at the
Orthodontic Offices 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
1.1 The initial term of this Agreement shall commence on
the date first above written and continue for a period of twenty
(20) years (the "Initial Term"), subject, however, to earlier
termination in accordance with Article 10 hereof. This Agreement
shall continue for two separate and successive ten year periods
(each a "Renewal Term" and collectively with the Initial Term,
the "Term") unless the MSO otherwise elects upon six months
written notice to the PC prior to expiration of the Initial Term
or any then effective Renewal Term.
ARTICLE 2
DUTIES OF THE MSO
2.1 General. The MSO shall provide the PC with
comprehensive practice management, financial and marketing
services, and such facilities, equipment, and support personnel
as are reasonably required by the PC to operate its Practice at
the Orthodontic Offices, as determined by the MSO in consultation
with the PC. The PC hereby appoints the MSO as the sole and
exclusive business manager of the PC at the Orthodontic Offices
and agrees that the MSO shall have all power and authority
reasonably necessary to manage the non-orthodontic business
affairs of the 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. The PC acknowledges and agrees that the MSO may
subcontract with other persons or entities, including OMEGA and
any entities related to the MSO by ownership or control, to
perform any part or all of the services required of the MSO
hereunder.
2.2 Orthodontic Office Services. The MSO shall provide or
arrange for the provision of the office space and related
leasehold improvements to constitute the Orthodontic 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 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 PC, its employees and agents (not including the
MSO or its employees or agents). The MSO shall, on an ongoing
basis, evaluate and consult with the PC on the equipment needs of
and the efficiency and adequacy of the Orthodontic Offices. The
MSO shall provide telephone, facsimile transmission, printing,
duplicating and transcribing services as needed, as well as all
laundry, linen and uniforms.
2.3 Administrative Services.
(a) The MSO shall supply secretarial, reception,
maintenance, front office, skilled assistants and other personnel
at the Orthodontic Offices, except duly licensed "Practice
Providers," during normal office hours as reasonably requested by
the PC, to enable the PC to perform effectively orthodontic and
treatment services. The MSO shall be responsible for staff
scheduling, provided, however, that all Practice Providers
including orthodontic assistants and hygienists shall be under
the direct supervision of the PC. The PC shall have sole
authority to employ and terminate the employment of all Practice
Providers. All personnel placed in the Orthodontic Offices by
the MSO shall be subject to the approval of the PC, which
approval shall not be unreasonably withheld, and the PC shall
have the authority to instruct the MSO to terminate the
employment of such personnel for any lawful reason. The MSO
shall be responsible for all personnel wages, withholding,
fringe benefits, bonuses and workers' compensation insurance in
connection with its employees; provided, however, that the PC is
in full compliance with the compensation provisions of this
Agreement.
(b) "Practice Providers" shall mean the individuals
who are duly licensed to practice dentistry and/or orthodontics
in the State including ▇▇. ▇▇▇▇▇▇▇ and the Orthodontists (if any)
and other individuals who are employees of the PC or otherwise
under contract with the PC to provide dental or orthodontic,
hygienic or other assistance or services to patients of the PC at
the Orthodontic Offices or otherwise required by applicable
"Laws" (as defined in Section 2.6 below) to be employees of the
PC to provide services to patients of the Practice. A list of
all Practice Providers and their relationship to the PC is set
forth as Exhibit B attached hereto and incorporated herein by
reference. Prior to making any changes in the list of Practice
Providers, the PC shall use its best efforts to consult with the
MSO. The PC also shall use its best efforts to consult with the
MSO with regard to the terms of contracts entered into between
the PC and the Practice Providers and the terms and conditions of
their employment or engagement as independent contractors.
2.4 Business Systems, Procedures and Forms. In
consultation with the PC, the MSO shall establish standardized
business systems and procedures for the PC'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 PC operating
efficiency. The MSO shall analyze such information on an ongoing
basis in order to advise the PC on ways of improving operating
efficiencies at the Orthodontic Offices. The MSO shall provide
training to the staff of the PC in the implementation and
operation of such standardized business systems and procedures at
the Orthodontic Offices. The MSO shall additionally provide the
PC with and train the PC's staff in the use of standardized
clinical forms, including, without limitation, forms for patient
evaluations and treatment plans. The PC expressly acknowledges
and agrees that it shall have no property rights in the OMEGA
Patient Scheduling System and the other foregoing systems,
procedures and clinical forms, and further agrees that such
systems, procedures, and forms shall be deemed to constitute
Confidential Information within the meaning of Section 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.
2.5 Purchasing, Accounts Payable, Supplies and Inventory
Control. The MSO shall be responsible for and shall establish
and maintain systems for the handling and processing of all
purchasing and payment activities and for the performance of all
payroll and payroll accounting functions of the PC at the
Orthodontic Offices. The MSO shall order and purchase and
maintain all inventory and orthodontic supplies as reasonably
required by the PC to enable the PC to render orthodontic care to
its patients at the Orthodontic Offices including, without
limitation, all orthodontic appliances and other supplies,
laboratory supplies and sanitation supplies.
2.6 Regulatory Compliance Services. The MSO shall arrange
for or cause to be rendered to the PC such business, legal and
regulatory management consultation and advice as may be
reasonably required or requested by the PC and directly related
to the operations of the PC at the Orthodontic Offices or its
compliance with Federal, state or local laws, rules, regulations
or interpretations governing or applicable to the PC
(collectively, "Laws"); provided, however, that the MSO shall not
be responsible for any services related to malpractice or other
professional service claims or matters not directly related to
the operation of the PC or its compliance with Laws, or for any
legal or tax advice or services or personal financial services to
▇▇. ▇▇▇▇▇▇▇ and the Orthodontists (if any) or any employee or
agent of the PC.
2.7 Billing, Collection. The MSO shall be responsible for:
(i) billing and collecting payments for all orthodontic and other
professional services rendered by the PC and the Practice
Providers relating to services rendered at the Orthodontic
Offices, with all such billing and collecting to be done in the
name of the PC; (ii) receiving payments from patients, insurance
companies and all other third party payors relating to services
rendered at the Orthodontic Offices; (iii) taking possession of
and endorsing in the name of the PC any notes, checks, money
orders, insurance payments and other instruments received in
payment for services or of accounts receivable in each case
relating to services rendered at the Orthodontic Offices; and
(iv) settling and compromising claims relating to the services
rendered at the Orthodontic Offices and, where deemed appropriate
by the MSO and consented to (which consent shall not be
unreasonably withheld or delayed) by the Practice Provider
rendering the professional services which resulted in the
applicable accounts receivable, assigning such accounts
receivable to a collection agency or the bringing of a legal
action against a patient or a payor on the PC's behalf. In
seeking payments on behalf of the PC hereunder, the MSO shall act
as the PC's agent in billing and collecting professional fees,
charges and other accounts owed to the PC and shall only ▇▇▇▇
under the PC's provider number. In this regard, the PC appoints
the MSO for the Term of this Agreement in accordance with the
provisions of Article 11 hereof as its true and lawful attorney-
in-fact for the purposes set forth above in this Section 2.7 and
in Section 2.8 below. The MSO does not guarantee collection and
is not responsible for any loss to the PC as a result of any
inability to collect fees and charges.
2.8 Disbursement of Funds.
(a) All monies collected for the PC by the MSO
pursuant to Section 2.7 above shall be deposited into an account
(the "PC Account") with a bank whose deposits are insured with
the Federal Deposit Insurance Corporation and which bank is
acceptable to the MSO and the PC (the "Bank"). The PC Account
shall contain the name of the PC, but the MSO shall make all
disbursements therefrom. The MSO shall account for all monies so
disbursed from the PC Account.
(b) From the funds collected and deposited by the MSO
in the PC Account, the MSO shall make for and on behalf of the PC
the following disbursements promptly, when payable:
(1) Compensation, including salaries, benefits
and other direct costs payable to ▇▇. ▇▇▇▇▇▇▇ and the
Orthodontists (if any) and the other Practice Providers of the PC
for the 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.
(c) In the event the funds in the PC Account will, at
any time be insufficient to cover the current portion of the
foregoing expenses when payable, the MSO may advance to the PC
the necessary funds to pay the current portion of such expenses
for the benefit of the PC, which advances will be deemed to be
loans to the PC to be repaid without interest from the PC Account
at such times as there are adequate funds therein or upon such
other terms and at such times as agreed to by the PC and the MSO,
which indebtedness shall not be deemed an MSO Expense for
purposes of Section 2.9.
2.9 MSO Expenses. The MSO shall be responsible for the
payment of all MSO Expenses, as defined below, during the term of
this Agreement without reimbursement by the PC, unless otherwise
agreed to by the parties hereto.
(a) "MSO Expenses" shall mean all operating and non-
operating expenses incurred in the operation of the PC at the
Orthodontic Offices, including, without limitation:
(1) Salaries, benefits and other direct costs of
all employees of the MSO providing services to the PC hereunder
(but excluding ▇▇. ▇▇▇▇▇▇▇ and all the Orthodontists (if any) and
other Practice Providers);
(2) Direct costs of all employees or consultants
of the MSO who provide services at the Orthodontic Offices or in
connection with the PC required for improved clinic performance,
such as work management, materials management, purchasing, charge
and coding analysis, and business office consultation;
(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 PC or other
orthodontic entities to merge with the PC, actual out-of-pocket
expenses of the MSO personnel working on a specified employment
arrangement or merger, whether or not such employment arrangement
or merger is consummated;
(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 PC, ▇▇. ▇▇▇▇▇▇▇ and the Orthodontists (if any) and the other
Practice Providers, or the costs of preparing Federal, state or
local tax returns thereof;
(2) Salaries, benefits and other direct costs of
employing ▇▇. ▇▇▇▇▇▇▇ and the Orthodontists (if any) and the
other Practice Providers;
(3) Physician licensure fees, board certification
fees and costs of membership in professional associations and
societies for Practice Providers beyond any reimbursement made
under the "Approved Budget", as defined below;
(4) Professional liability insurance for the
Practice Providers as provided for under Section 3.6 hereof,
beyond any reimbursement made under the Approved Budget;
(5) Costs of continuing professional education
for Practice Providers, including travel and related expenses,
beyond any reimbursement made under the Approved Budget;
(6) Costs associated with legal, accounting and
professional services incurred by or on behalf of the PC other
than as otherwise expressly provided for in Section 2.6 hereof;
(7) Liability judgments assessed against the PC
or the Practice Providers in excess of policy limits or within
the deductible limits of any policy;
(8) Direct personal expenses of the Practice
Providers of a kind which the PC may have historically provided
or charged to its Practice Providers (including, but not limited
to, car allowances and other expenses which are personal in
nature);
(9) Charitable contributions by the PC beyond any
reimbursements made under the Approved Budget; and
(10) Any other expenses which are expressly
designated herein as expenses or responsibilities of the PC.
As used in this Section 2.9, "Approved Budget" means, for
each fiscal year, the aggregate maximum amount that the MSO will
reimburse the PC for physician licensure fees, board
certification fees, costs of membership in professional
associations and societies for Practice Providers, professional
liability insurance for the Practice Providers, continuing
professional education costs for Practice Providers, including
travel and related expenses, and charitable contributions. The
PC and the MSO agree that the aggregate maximum annual amount
shall be $5,000.
2.10 Credit Reports. When requested by the PC, or its
authorized representative, the MSO shall obtain on behalf of the
PC information with regard to the ability of patients to pay for
the services to be rendered by the PC at the Orthodontic 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 PC at the Orthodontic Offices either in cash or
by insurance. Such determination shall be subject to the
reasonable approval by the PC, and as between the PC and the MSO,
the PC shall bear the risk of claims by potential patients who
may be denied credit.
2.11 Accounting; Bookkeeping and Reports. The MSO shall
provide for or arrange for all accounting and bookkeeping
services related to the PC's operations and business at the
Orthodontic Offices, provided that such services are incurred in
the ordinary course of business. In addition, the MSO shall
provide the PC with an unaudited internal monthly statement
within twenty (20) days after the end of each month and a
quarterly review within thirty (30) days after the end of each
quarter, respectively, of the MSO's internal statements, as well
as the books and records of the PC, all prepared by or with the
assistance of an accountant chosen by the MSO. At the end of
each fiscal year of the PC, the MSO shall arrange for a financial
statement with respect to the PC to be prepared by the MSO's
accountant. At the PC's request, the MSO shall prepare reports
indicating the gross revenues, number of patients, type of
patients, and the activity and the productivity of the PC. The
MSO shall assist and advise the PC in the financial management of
the PC.
2.12 Marketing. The MSO shall design and execute a
marketing plan to promote the PC's professional services at the
Orthodontic Offices. The MSO shall also make available to the PC
all brochures, contracts, and other materials reasonably related
to the carrying out of the business purposes of the PC 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.
2.13 Complaints. The MSO shall assist the PC in handling
all complaints, grievances and disputes involving the PC and the
Practice Providers and any patients or third parties. However,
the MSO shall have no control over the PC's patients. All
decisions concerning the PC's patients shall be made by the PC
and the Practice Providers.
2.14 Practice Laws. Notwithstanding any provision in this
Agreement, the MSO shall not take any action in connection with
the services to be rendered hereunder that violates any Law,
including, without limitation, the performance of any task or the
taking of any action which violates 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 PC regarding the policies and
procedures for the operation of the PC.
2.16 Maintenance and Cleaning Services. The MSO shall
arrange for security, maintenance and cleaning of the Orthodontic
Offices, including the furniture, fixtures and equipment therein.
2.17 Licenses and Permits. The MSO shall provide and pay
for all business and other licenses and permits as necessary to
operate the PC except those related to licensure and
certifications of the Practice Providers. The MSO shall prepare
and file all reports, forms and returns required by Law in
connection with workers' compensation, unemployment insurance,
social security and other similar Laws with respect to the MSO's
employees.
2.18 Insurance. The MSO shall provide and pay for customary
office property damage and liability insurance for the
Orthodontic Offices, including business interruption insurance,
not including professional liability insurance (which shall be
and remain the responsibility of the PC).
2.19 Practice Transition and Associate Selection. ▇▇.
▇▇▇▇▇▇▇ and the Orthodontists (if any) shall keep the MSO
informed of retirement goals on an ongoing basis. Upon request of
the PC, the MSO will conduct a search for an appropriate
orthodontist and other professionals (collectively, "Practice
Associates") for the purposes of accommodating practice growth,
reducing doctor work schedule, or planned retirement. Such
search shall include use by the MSO of a national journal
advertising program and networking in the profession to locate
appropriate Practice Associates. The MSO estimates that it could
take approximately two years for such a search. The MSO will
provide screening of all applicants and will then present
appropriate applicants for final selection by the PC. The PC
shall be responsible for interviewing and selecting each Practice
Associate. After the Practice Associate(s) is (are) selected by
the PC, the MSO will assist the PC with a trial plan of
approximately six months for the new Practice Associate(s). It
is understood that at the end of this period either the PC or the
new Practice Associate may terminate the relationship. All such
Practice Associates recruited by the MSO as may be accepted by
the PC shall be employees of the Practice (if so employed) and
not of the MSO. The MSO will confer with the PC on an
appropriate salary/work-in arrangement for the new Practice
Associate and the final arrangements shall be determined by the
PC.
ARTICLE 3
DUTIES OF THE PC
3.1 General. The PC shall be responsible for the
management of its practice and the Orthodontic Office, in
accordance with the requirements of the Laws of the State.
3.2 Employment of the Orthodontists and Rendering of
Patient Care. The PC shall be responsible for the employment and
professional supervision of ▇▇. ▇▇▇▇▇▇▇ and all Orthodontists and
the other Practice Providers and all orthodontic care rendered to
patients shall be rendered by ▇▇. ▇▇▇▇▇▇▇ and such Orthodontists.
Additionally, the PC shall be responsible for the professional
supervision of all other Practice Providers in their rendering of
patient care.
3.3 Professional Services. The PC shall use and occupy the
Orthodontic 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 PC shall provide professional services to patients
hereunder in compliance at all times with ethical standards and
Laws applying to the orthodontic profession. The PC shall ensure
that ▇▇. ▇▇▇▇▇▇▇ and each Orthodontist who provides orthodontic
services to patients is licensed by the State. In the event that
any disciplinary, medical malpractice or other actions are
initiated against ▇▇. ▇▇▇▇▇▇▇ or any Orthodontist or other
Practice Provider, the PC shall immediately inform the MSO of
such action and the underlying facts and circumstances subject to
such confidentiality agreement or arrangements as the PC and the
MSO shall mutually determine at or prior to the time of such
disclosure. The PC agrees to cooperate with and participate in
quality assurance/utilization review programs established by the
MSO or mandated by accreditation and licensure standards
applicable to the practice of orthodontics. Deficiencies
discovered in the performance of any personnel or in the quality
of professional services shall be reported immediately to the
MSO, and appropriate steps shall be taken by the PC at once to
remedy such deficiencies.
3.4 Records. The PC will keep or cause to be kept
accurate, complete and timely dental and other records of all
patients. The management of all dental and patient files and
records shall comply with all applicable Laws regarding their
confidentiality and retention and all files and records shall be
located so that they are readily accessible for patient care,
consistent with ordinary records management practices. Such
records shall be sufficient to enable the MSO, on behalf of the
PC, to obtain payments for services at the Orthodontic Offices
and related charges and to facilitate the delivery of quality
patient care by the PC at the Orthodontic Offices.
Notwithstanding the foregoing, patient dental records shall be
and remain the property of the PC and the contents thereof shall
be solely the responsibility of the PC.
3.5 Professional Expenses. The PC shall be solely
responsible for the cost of professional licensure fees and board
certification fees, membership in professional associations and
continuing professional education incurred by each Orthodontist
and other Practice Provider employed by the PC. The MSO shall
reimburse the PC for such expenses incurred in connection with
the Orthodontic Offices in accordance with the Approved Budget.
The PC shall ensure that ▇▇. ▇▇▇▇▇▇▇ and all the Orthodontists
employed by the PC participate in such continuing education as is
necessary for ▇▇. ▇▇▇▇▇▇▇ and such other Orthodontists to remain
current.
3.6 Professional Liability Insurance. The PC shall
provide, or arrange for the provision of, and maintain throughout
the Term of this Agreement, professional liability insurance
coverage in accordance with the provisions of Article 9 hereof.
The PC shall also cooperate in any programs recommended by the
MSO to assure that each of its Orthodontists is insurable, and
that ▇▇. ▇▇▇▇▇▇▇ and each Orthodontist participates in an on-
going risk management program.
3.7 Employment Agreement. The parties recognize that the
services to be provided by the MSO are feasible only if the PC
operates an active orthodontic practice to which it, ▇▇. ▇▇▇▇▇▇▇
and each Orthodontist associated with the PC devote their full
time and attention, unless other specific provisions are made in
writing and mutually agreed upon by the MSO and PC. The PC will
cause ▇▇. ▇▇▇▇▇▇▇ and each individual Orthodontist who now is or
hereafter becomes affiliated with the PC to enter into a written
employment agreement (the "Employment Agreement") satisfactory in
form and substance to the MSO, pursuant to which ▇▇. ▇▇▇▇▇▇▇ or
the Orthodontist shall agree not to establish, operate or provide
orthodontic or dental services, without the prior written consent
of both the PC and the MSO, at any office or facility other than
the Orthodontic Offices and the orthodontic office located at
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇. 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
PC provided for in such Employment Agreement (or separate
agreement), the MSO shall be entitled to receive, in addition to
other remedies and not by way of an election of remedies,
liquidated damages equaling the greater of: (a) ▇▇. ▇▇▇▇▇▇▇'▇ or
such Orthodontist's income, as shown on the W-2 form prepared by
the PC, for the most recent calendar year; or (b) $300,000. Such
payment shall be made to the MSO by the PC immediately following
receipt of the payment from ▇▇. ▇▇▇▇▇▇▇ or the breaching
Orthodontist by the PC. Each of the MSO and OMEGA shall be
expressly named as a third-party beneficiary to such agreements
between the PC and ▇▇. ▇▇▇▇▇▇▇ and each Orthodontist and the
rights and remedies of the MSO and OMEGA thereunder or otherwise
in respect of the restrictive covenants set forth in such
agreements shall survive termination of this Agreement.
3.8 Confidentiality. The PC agrees and acknowledges that
all materials provided by the MSO to the 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 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 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 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 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 PC will not, and will cause its affiliates, partners,
employees and independent contractors not to, thereafter use,
appropriate, or reproduce such Confidential Information. The 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
4.1 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 PC shall have sole
and absolute control of the delivery of all professional services
and treatment rendered to patients at the Orthodontic Offices.
4.2 No employee or other representative of the MSO shall be
engaged in, or allowed to solicit patients on behalf of, the PC,
nor shall the MSO have any control over the PC's patients.
4.3 No advertising or promotional materials, or other
materials of any nature, including billing and collection forms,
reports, agreements, correspondence, or similar materials, used
in connection with the PC shall be used or distributed without
having first been approved by the PC.
4.4 The parties hereby acknowledge and agree that the
benefits conferred upon each of them hereunder neither require
nor are in any way contingent upon the admission, recommendation,
referral, or any other arrangement for the provision of any item
or service offered by the MSO to any patients of the PC or its
shareholders, officers, directors, employees, contractors or
agents, nor are such benefits in any way contingent upon the
recommendation, referral or any other arrangement for the
provision of any item or service offered by the PC or any of its
Practice Providers, employees, contractors or agents.
ARTICLE 5
LEASE OF OFFICE FACILITIES AND EQUIPMENT
5.1 In consideration of the sums to be paid to the MSO
under the terms of this Agreement, the MSO hereby leases or sub-
leases, as applicable, to the PC during the Term of this
Agreement the Orthodontic 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:
(a) The MSO is the lessee by assignment under lease
for the premises occupied by the 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 PC hereby acknowledges that the premises described under the
Master Lease are suitable for the PC's orthodontic practice at
the Orthodontic Offices. Based and contingent upon the PC's
promise to timely pay all amounts due under this Agreement, the
MSO hereby agrees to sublease the leased premises to the PC upon
the following terms and conditions:
(i) This sublease between the MSO and the PC of
the premises shall be subject to all of the terms and conditions
of the Master Lease. In the event of the termination of the
MSO's interest as lessee under the Master Lease for any reason,
then the sublease created hereby shall simultaneously terminate,
unless the PC assumes the obligations under the Master Lease in
question and the Lessor consents thereto.
(ii) All of the terms and conditions contained in
the Master Lease are incorporated herein as terms and conditions
of the sublease (with each reference therein to "Lessor" and
"Lessee," to be deemed to refer to the MSO and the PC,
respectively) and, along with the provisions of this Section
5.1(a) and Exhibit "A," shall be the complete terms and
conditions of the sublease created hereby.
(iii) Notwithstanding the foregoing, as
between the MSO and the PC, the MSO shall remain responsible for
meeting the obligations of "Lessee" under the sections entitled
Rent, Additional Rent Adjustment, Insurance on Fixtures,
Liability Insurance, Repairs, and Taxes of the Master Lease, all
of which obligations shall be considered MSO Expenses hereunder
and the PC shall have no monetary obligation in that regard. In
addition, as between the MSO and the PC, the MSO shall retain the
right to exercise any options to purchase the premises, or other
similar rights of ownership or possession, which may be granted
under the Master Lease, and the PC shall have no rights in that
regard.
(iv) In the event this Agreement is terminated
according to its terms, this sublease shall also terminate
automatically.
(v) If the Master Lease contains an option to
renew the terms thereof, the MSO shall notify the PC, at least 30
days prior to the expiration of the time for exercising such
option, of the MSO's intention to renew or not to renew such
term. If the MSO determines not to renew such term, the MSO
shall provide or arrange for the provision of comparable office
space (the "Substitute Orthodontic Office") within a radius of 15
miles of the Orthodontic Offices, which Substitute Orthodontic
Office shall be subject to the approval of the PC (which approval
shall not be unreasonably withheld or delayed). The lease or
sublease for such Substitute Orthodontic Office, as applicable,
shall be substituted for the lease described on Exhibit A hereto
and all references to the "Master Lease" shall thereafter be
applicable to the lease or sublease for the Substitute
Orthodontic Office for purposes of this Agreement, ab initio.
(vi) The Alternative Dispute Resolution provisions
set forth in Article 14 of this Agreement shall not apply to any
issues concerning the Sub-Lease, the PC's tenancy or the MSO's
rights and remedies as Sub-Lessor.
5.2 The MSO shall provide the PC at the Orthodontic Offices
such additional leasehold improvements, fixtures, furniture,
furnishings and equipment as may be mutually agreed to with the
PC and reflected from time to time on a supplement to Schedule 2
hereto. The use by the PC of all leasehold improvements,
fixtures, furniture, furnishings and equipment provided hereunder
shall be subject to the following conditions:
(a) Title to all such leasehold improvements,
fixtures, furnishings, furniture and equipment shall remain in
the MSO and upon termination of this Agreement, the PC shall
immediately return and surrender all such leasehold improvements,
fixtures, furniture, furnishings and equipment to the MSO in as
good condition as when received, normal wear and tear excepted.
(b) The MSO shall be fully and entirely responsible
for all repairs and maintenance of all such leasehold
improvements, fixtures, furniture, furnishings and equipment;
provided, however, that the PC agrees that it will use its best
efforts to prevent damage, excessive wear, and breakdown of all
such leasehold improvements, fixtures, furniture, furnishings and
equipment, and shall advise the MSO of any and all needed repairs
and equipment failures.
(c) The obligation of the MSO to provide the leasehold
improvements, fixtures, furniture, furnishings and equipment
stated herein shall be concurrent and co-extensive with the Term
of this Agreement.
5.3. No Warranty.
(a) THE PC ACKNOWLEDGES THAT THE MSO MAKES NO
WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO THE
SUITABILITY OR ADEQUACY OF ANY LEASEHOLD IMPROVEMENTS, FIXTURES,
FURNITURE, FURNISHINGS, EQUIPMENT, INVENTORY OR SUPPLIES PROVIDED
OR LEASED OR SUBLEASED PURSUANT TO THIS AGREEMENT FOR THE CONDUCT
OF AN ORTHODONTICS PRACTICE OR FOR ANY OTHER PARTICULAR PURPOSE.
(b) Nothing in this Agreement shall be construed to
affect or limit in any way the professional discretion of the
Practice Providers to select and use fixtures, furniture,
furnishings and equipment, inventory and supplies purchased or
provided by the MSO in accordance with the provisions of this
Agreement insofar as such selection or use constitutes or might
constitute the practice of dentistry or orthodontics.
ARTICLE 6
COMPENSATION
As consideration for the performance of all of its duties
and obligations as provided in this Agreement, including but not
limited to, the costs and expenses associated with furnishing the
services, personnel, facilities, leasehold improvements,
fixtures, furniture, furnishings, equipment, inventories and
supplies provided for herein, the MSO shall receive compensation
in the form of monthly management fees (the "Management Fees")
based upon a predetermined percentage of the "Practice Revenues",
as defined and determined in accordance with the provisions set
forth in Schedule 3 attached hereto and incorporated herein by
this reference, as such Schedule may be amended by the PC and the
MSO from time to time. It is acknowledged by and between the
parties hereto that the MSO and/or its affiliates has (have)
incurred substantial expenses and future obligations in acquiring
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 PC acknowledges that the compensation arrangement
is reasonable under the circumstances noted herein and has
executed an Affidavit attesting to this fact which is attached
hereto and incorporated herein as Exhibit C. In consideration of
the foregoing, the parties agree that the monthly Management Fees
payable to the MSO by the PC for services rendered pursuant to
this Agreement shall be reviewed and subject to adjustment at
the close of each year of the Term of this Agreement based upon
industry standards of practice and the MSO's costs in performing
the required services. If the parties cannot agree within thirty
(30) days prior to the close of any such year on the terms of any
adjustment to the Management Fees for the following year, then
the then existing Management Fees shall remain in effect. The PC
specifically agrees that the MSO may defer actual receipt of its
Management Fees and/or advance monies for purposes of managing
the PC's cash flow relating to its business and operations at the
Orthodontic Offices, and the MSO may repay itself such advances
or pay said deferred Management Fees when it deems appropriate.
ARTICLE 7
SECURITY INTEREST
As assurance and collateral security for the payment of the
monthly Management Fees owed to the MSO pursuant to this
Agreement and any funds advanced by the MSO to or on behalf of
the PC pursuant to this Agreement and for the faithful and timely
performance of all the covenants and conditions to be performed
by the PC under this Agreement, the PC hereby pledges, grants,
bargains, assigns and transfers to the MSO a security interest,
pursuant to the Uniform Commercial Code of the State, in and to
all Practice Revenue and accounts receivable of patients of the
PC 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 PC shall execute a Security Agreement, similar in
form and content as that attached hereto as Exhibit D and
incorporated herein by this reference in order that the MSO may
perfect its interest in the Collateral. The PC expressly agrees
to execute any appropriate UCC-1 Financing Statement and UCC-1
Fixture filings, if so requested in writing by the MSO.
ARTICLE 8
COVENANTS
8.1 PC's Covenants. As further consideration for the MSO's
performance of the terms and conditions of this Agreement, the PC
covenants, represents and warrants as follows (which covenants,
representations and warranties shall survive the execution of
this Agreement):
(a) The PC shall comply with all Laws and ethical and
professional standards applicable to the practice of orthodontics
and cause all of its employees to do the same.
(b) The PC shall provide quality services and shall
cause ▇▇. ▇▇▇▇▇▇▇ and the Orthodontists (if any) to serve the
orthodontic needs of the patients of the PC at the Orthodontic
Offices. The 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.
(c) During the Term of this Agreement, the PC shall
not, directly or indirectly, own an interest in, operate, join,
control, participate in or be connected in any manner with any
corporation, partnership, proprietorship, firm, association,
person or entity providing orthodontic care in competition with
the practice at the Orthodontic 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 PC shall be permitted to practice orthodontics at
the offices located at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(d) The PC recognizes the proprietary interest of
OMEGA in and to its OMEGA Patient Scheduling System and the MSO
in its systems for managing the delivery of orthodontic care and
all policies, procedures, operating manuals, forms, contracts and
other information (collectively, the "MSO Information") regarding
such system. The 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 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.
(e) The PC acknowledges and agrees that OMEGA and the
MSO are entitled to prevent their respective competitors from
obtaining and utilizing their respective trade secrets. The PC
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 PC to perform duties in connection with
the PC and who have a need to know such trade secrets in the
performance of their duties for the PC, without OMEGA's or the
MSO's prior written consent, as the case may be. The PC
acknowledges its fiduciary obligations to OMEGA and the MSO and
the confidentiality of its relationships with OMEGA and the MSO
and of any information relating to the services and business
methods of OMEGA and the MSO which it may obtain during the term
of this Agreement. The PC shall not, either during the term of
this Agreement or at any time after the expiration or sooner
termination hereof, disclose to anyone, other than employees or
independent contractors of OMEGA and the MSO who use OMEGA's and
the MSO's system in the course of the performance of their
duties, any confidential or proprietary information or trade
secrets obtained by the PC. The PC also agrees to place any
persons to whom said information is disclosed for the purpose of
performance under legal obligation to treat such information as
strictly confidential.
8.2 MSO's Covenants. As further consideration for the PC's
performance of the terms and conditions of this Agreement, the
MSO covenants, represents and warrants (which covenants,
representations and warranties shall survive the execution of
this Agreement) that during the Term of this Agreement, the MSO
agrees not to establish, develop or open any offices in
affiliation with an orthodontist for the provision of orthodontic
services within a 15 mile radius of the Orthodontic Offices,
without the express written consent of the PC.
ARTICLE 9
INSURANCE AND INDEMNITY
9.1 Insurance to be Maintained by the PC. Throughout the
Term of this Agreement, the PC shall maintain in full force and
effect comprehensive professional liability insurance with limits
of not less than $500,000 per occurrence and $1,000,000 annual
aggregate for ▇▇. ▇▇▇▇▇▇▇ and each of the Orthodontists providing
services for the PC and a separate limit for the PC. The PC
shall be responsible for all liabilities within deductibles and
for all liabilities in excess of the limits of such policies.
The MSO agrees to negotiate for and cause premiums to be paid on
behalf of the PC with respect to such insurance. Deductibles
with respect to such policies shall not be MSO Expenses. The MSO
shall reimburse the PC for premiums in accordance with the
Approved Budget. The PC also agrees to name the MSO and OMEGA
as co-insureds. The PC agrees to deliver to the MSO and OMEGA a
certificate of insurance indicating such coverage.
9.2 Insurance to be Maintained by the MSO. Throughout the
Term of this Agreement, the MSO will use reasonable efforts to
provide and maintain, as 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.
9.3 Tail Insurance Coverage. The PC will cause ▇▇. ▇▇▇▇▇▇▇
and each Orthodontist (if any) providing services to enter into
an agreement with the PC that upon termination of ▇▇. ▇▇▇▇▇▇▇'▇
or such Orthodontist's relationship with the PC, for any reason,
tail insurance coverage will be purchased by ▇▇. ▇▇▇▇▇▇▇ or such
Orthodontist. Such provisions may be contained in an employment
agreement, restrictive covenant agreement or other agreement
entered into by the PC and ▇▇. ▇▇▇▇▇▇▇ or the Orthodontist, and
the PC hereby covenants with the MSO to enforce such provisions
relating to the tail insurance coverage or to provide such
coverage at the expense of the PC or ▇▇. ▇▇▇▇▇▇▇ or each such
Orthodontist.
9.4 Additional Insureds. The PC and the MSO agree to use
their reasonable efforts to have each other named as an
additional insured on the other's respective liability insurance
policies.
9.5 Indemnification. The PC shall indemnify, hold harmless
and defend the MSO and OMEGA and their respective officers,
directors, shareholders, employees and representatives, from and
against any and all liability, losses, damages, claims, causes of
action, expenses 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 PC and/or its affiliates, its
shareholders, agents, the Practice Providers, its other employees
and/or its subcontractors (other than the MSO) during the Term
hereof. The MSO shall indemnify, hold harmless and defend the
PC, its officers, directors, shareholders and employees, from and
against any and all liability, loss, damage, claim, causes of
action, 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 PC)
during the Term hereof.
ARTICLE 10
TERMINATION
10.1 Termination by the PC.
(a) Termination by the PC. The 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 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 PC, the PC may terminate this Agreement.
10.2 Termination by MSO. MSO may terminate this Agreement
as follows:
(a) In the event of the filing of a petition in
voluntary bankruptcy or an assignment for the benefit of
creditors by the PC or any shareholders thereof , or upon other
action taken or suffered, voluntarily or involuntarily, under any
federal or state law for the benefit of debtors by the PC or any
shareholders thereof, except for the filing of a petition in
involuntary bankruptcy against the PC or any shareholder thereof
which is dismissed within sixty (60) days thereafter, MSO may
give written notice of the immediate termination of this
Agreement.
(b) In the event the PC fails to perform orthodontic
services on a full-time basis consistent with its pattern of
practice in the immediately preceding calendar year and such
default shall continue for a period of ten (10) days after
written notice thereof has been given to the PC by the MSO, the
MSO may terminate this Agreement.
(c) In the event the PC shall materially default in
the performance of any other duty or obligation imposed upon it
by this Agreement, and such default shall continue for a period
of sixty (60) days after written notice thereof has been given to
the PC by the MSO, the MSO may terminate this Agreement.
(d) In the event ▇▇. ▇▇▇▇▇▇▇ or any Orthodontist
breaches or defaults under his or her Employment Agreement and
the PC does not cause ▇▇. ▇▇▇▇▇▇▇ or such Orthodontist to cure
such breach or default within any applicable grace period
therefor, the MSO may give written notice of the immediate
termination of this Agreement.
Upon any termination of this Agreement or upon expiration of
the Term of this Agreement, the MSO shall be entitled to receive
the Management Fees collected to the effective date of such
termination or expiration, the amounts of any loans or advances
(including any accrued but unpaid interest thereon) and all other
sums accrued or related to occurrences arising at or prior to the
date of termination.
ARTICLE 11
AUTHORIZED AGENT AND POWERS OF ATTORNEY
The PC hereby designates the MSO (and its designees) its
authorized agent and lawful attorney-in-fact for purposes of
depositing payments, paying accounts payables, signing checks,
negotiating and signing contracts for services or goods, securing
loans or incurring obligations on behalf of the PC; provided,
however, that all contracts or fees set for services on behalf of
the PC will be subject to final approval and acceptance by the
PC. Additionally, the PC hereby irrevocably appoints the MSO
(and its designees) its authorized agent and lawful attorney-in-
fact to collect all bills and accounts receivable for
professional fees, charges and other amounts and authorizes the
MSO through its designees to take possession of all checks, money
orders and similar instruments received as payment of receivables
to be deposited into the PC Account. The PC hereby irrevocably
appoints the MSO as the PC's attorney-in-fact, with full power
and authority in the place and stead of the PC, in the MSO's
discretion, to endorse in the name of the PC any checks,
payments, notes, insurance payments and money orders, to withdraw
funds for payments of expenses, including Management Fees and
other sums payable to the MSO, to open and close the PC Account
and other bank accounts, to take any action and to execute any
other instrument which the MSO may deem necessary or advisable to
accomplish the purposes hereof. The powers of attorney granted
herein are coupled with an interest and are irrevocable. Third
parties and entities and persons not a party to this Agreement
are entitled to rely on the foregoing attorneys-in-fact and an
affidavit of the MSO attesting thereto. The acceptance of this
appointment by the MSO shall not obligate it to perform any duty
or covenant required to be performed by the PC under or by virtue
of this Agreement. Notwithstanding the foregoing powers of
attorney, the PC shall at any time, on the request of the MSO,
sign financing statements, security agreements or other
agreements necessary or advisable to accomplish the purpose of
this Agreement. Upon the PC's failure to sign said financing
statements, security agreements or other agreements, the MSO is
authorized as the agent of the PC to sign any such instruments.
The PC may review all deposits and expenses upon request.
ARTICLE 12
INDEPENDENT CONTRACTOR RELATIONSHIP
Neither the PC nor its employees 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 PC. Since neither the PC nor its employees are employees
of the MSO, the MSO shall not withhold on behalf of the 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 PC.
ARTICLE 13
MISCELLANEOUS
13.1 Access to Records. From and after any termination,
each party shall provide the other party with reasonable access
to books and records then owned by it to permit such requesting
party to satisfy reporting and contractual obligations which may
be required of it.
13.2 Patient Records. Upon termination of this Agreement,
the PC shall retain all patient dental records maintained by the
PC or the MSO in the name of the PC. During the term of this
Agreement, and thereafter, the PC or its designee shall have
reasonable access during normal business hours to the PC's and
the MSO's records, including, but not limited to, records of
collections, expenses and disbursements as kept by the MSO in
performing the MSO's obligations under this Agreement, and the PC
may copy any or all such records.
13.3 The PC's Control Over the Orthodontic Practice.
Notwithstanding the authority granted to the MSO herein, the MSO
and the PC agree that the PC, personally or through ▇▇. ▇▇▇▇▇▇▇
or any of its Orthodontists (if any) and other Practice
Providers, shall have complete control and supervision over the
professional aspects of the PC's practice, as well as the
provision of all professional services, including, without
limitation, the selection of a course of treatment for a patient,
the procedures or materials to be used as a part of such course
of treatment, and the manner in which such course of treatment is
carried out by the PC. The PC shall have sole authority to
direct the business, professional, and ethical aspects of the PC.
The MSO shall have no authority, directly or indirectly, to
perform, and shall not perform, any orthodontic function, or to
influence or otherwise interfere with the exercise of the PC's
professional judgment. The MSO may, however, advise the PC as to
the relationship between its performance of orthodontic functions
and the overall administrative and business functioning of the
PC.
ARTICLE 14
ALTERNATIVE DISPUTE RESOLUTION
14.1 Alternative Dispute Resolution.
(a) If a dispute arises under this Agreement which
cannot be resolved informally by the parties, any party may
invoke the procedures set forth in Exhibit E hereto and the
parties agree to use these procedures, except paragraph (b) of
this Section 14.1, prior to any party pursuing other available
remedies. The parties will meet and attempt in good faith to
resolve any controversy or claim arising out of or relating to
this Agreement.
(b) Notwithstanding anything in this Section 14.1 to
the contrary:
(i) Nothing in this Section 14.1 shall preclude
any party from seeking a preliminary injunction or other
provisional relief, either prior to or during the proceeding
provided for in this section, if in its judgment such action is
necessary to avoid irreparable damage or to preserve the status
quo.
(ii) The parties shall accept as correct, final,
binding and conclusive the determination by the outside
accountants then employed by the MSO as to the calculation of any
and all Management Fees owed by the PC to the MSO hereunder, and
such determination shall not be subject to the provisions of this
Section 14.1. Disputes as to the proper interpretation of the
provisions of this Agreement which describe how those amounts are
to be calculated, however, shall be subject to the provisions of
this Section 14.1.
(iii) Any determination by either party not to
renew this Agreement in accordance with the terms and provisions
of this Agreement shall not be subject to the provisions for
dispute resolution in this Section 14.1.
14.2 Waiver of Jury. With respect to any dispute arising
under or in connection with this Agreement or any related
agreement, as to which legal action nevertheless occurs, each
party hereby irrevocably waives all rights it may have to demand
a jury trial. This waiver is knowingly, intentionally and
voluntarily made by the parties and each party acknowledges that
no person acting on behalf of the other party has made any
representation of fact to induce this waiver of trial by jury or
in any way modified or nullified its effect. The parties each
further acknowledge that it has been represented (or has had the
opportunity to be represented) in the signing of this Agreement
and in the making of this waiver by independent legal counsel,
selected of its own free will, and that it has had the
opportunity to discuss this waiver with counsel. Each party
further acknowledges that it has read and understands the meaning
and ramifications of this waiver provision.
ARTICLE 15
GENERAL PROVISIONS
15.1 Notices. Any notice to be given pursuant to this
Agreement shall be deemed effective if given personally, or by
telephone, telegram, telecopy, facsimile or other electronic
transmission, or by letter to an officer or administrator of
OMEGA, the MSO or the PC, as the case may be. Notice in person,
or by telephone, telegram or electronic transmission shall be
deemed effective when given. Notice by mail shall be deemed
effective seventy-two (72) hours after deposit in the United
States mails, and properly addressed with postage prepaid.
Notices to the PC shall be given as follows:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ,▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
or such other address as may be furnished by the PC to the MSO
from time to time in writing.
Notices to OMEGA and/or the MSO shall be given as
follows:
Omega Orthodontics, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or other such addresses as may be furnished by the MSO to the PC
from time to time in writing.
15.2 Confidentiality. No party hereto shall disseminate or
release to any third party any information regarding any
provision of this Agreement, or any financial information
regarding the other parties (past, present or future) that was
obtained in the course of the negotiation of this Agreement or in
the course of the performance of this Agreement, without the
other party's or parties' (as the case may be) written approval;
provided, however, the foregoing shall not apply to information
which is required to be disclosed by Law, including federal or
state securities laws, or pursuant to court order.
15.3 Contract Modifications for Prospective Legal Events.
In the event any 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
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 PC and
the MSO.
15.4 Remedies Cumulative. No remedy set forth in this
Agreement or otherwise conferred upon or reserved to any party
shall be considered exclusive of any other remedy available to
any party, but the same shall be distinct, separate and
cumulative and may be exercised from time to time as often as
occasion may arise or as may be deemed expedient.
15.5 No Obligation to Third Parties. None of the
obligations and duties of the MSO or the PC under this Agreement
shall in any way or in any manner be deemed to create any
obligation of the MSO or of the PC to, or any rights in, any
person or entity not a party to this Agreement other than OMEGA
which shall be deemed a party for limited purposes as set forth
in this Agreement.
15.6 Entire Agreement. This Agreement including the
Schedules and Exhibits hereto, 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.
15.7 Assignment. The rights and the duties of the parties
under this Agreement may not be assigned or transferred without
the prior written consent of the non-assigning party, which
consent shall not be unreasonably withheld; provided, however,
that the MSO shall be permitted to assign its rights and
obligations hereunder without the consent of the PC to any
person, firm or corporation: (i) controlled by the MSO,
controlling the MSO or under common control with the MSO; or (ii)
with which the MSO has contracted for the sale, assignment or
other disposition, by merger, reorganization or otherwise, of all
or any substantial portion of its assets.
15.8 Attorneys' Fees. If any mediation or arbitration or
other legal action or proceeding is brought to enforce this
Agreement, because of any alleged breach hereof, or for a
declaration of any rights and obligations hereunder, the
prevailing party in such mediation or arbitration, action or
proceeding shall be entitled to recover its costs incurred
therein, including reasonable attorneys' fees, in addition to any
other relief to which it may be entitled, all as determined and
awarded by the parties in such mediation or by the arbitrator or
court as part of its judgment or decision therein, as the case
may be.
15.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State. The
parties acknowledge that the MSO is not authorized or qualified
to engage in any activity which may be construed or deemed to
constitute the practice of dentistry or orthodontics. To the
extent any act or service required of the MSO in this Agreement
should be construed or deemed, by any governmental authority,
agency or court to constitute the practice of dentistry or
orthodontics, the performance of said act or service by the MSO
shall be deemed waived and forever unenforceable and the
provisions of Section 15.14 shall be applicable.
15.10 Events Excusing Performance. Neither party shall
be liable to the other party for failure to perform any of the
services required herein in the event of strikes, lock-outs,
calamities, acts of God, unavailability of supplies or other
events over which that party has no control for so long as such
events continue, and for a reasonable period of time thereafter.
15.11 Compliance with Applicable Laws. Both parties
shall comply with all applicable Laws and restrictions imposed
thereunder in the conduct of their obligations under this
Agreement.
15.12 Language Construction. The parties acknowledge
that each party and its counsel have reviewed and revised this
Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this
Agreement.
15.13 Amendments. This Agreement may be amended only by
the written consent of both parties.
15.14 Severability. In the event any provision of this
Agreement is held by a court of competent jurisdiction to be
illegal or unenforceable, (i) the parties shall amend this
Agreement in order to carry out the intent and essential business
purposes of this Agreement as closely possible within the
requirements of applicable provisions of Law as determined by
such a court, and (ii) the remaining provisions of this Agreement
shall continue in full force and effect.
15.15 No Waiver. The waiver by 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.
15.16 Captions. Captions to paragraphs in this Agreement
are for ease of reference, and shall not be considered an
interpretation of the paragraph.
15.17 Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall
be deemed an original.
IN WITNESS WHEREOF, the parties hereto have executed
this agreement as of the day and year first above written.
PC:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.,
M.S., INC.
By:_______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.,
President
MSO:
OMEGA ORTHODONTICS OF
RESEDA, INC.
By:_______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
President
OMEGA:
OMEGA ORTHODONTICS, INC.
By:_______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
President
SCHEDULE 1
THE ORTHODONTISTS
Name and Address
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE 2
ORTHODONTIC OFFICES AND SERVICES
Those offices located at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SCHEDULE 3
COMPENSATION - MANAGEMENT FEES
The MSO shall receive, as compensation for the
performance of all of its obligations and duties contained in the
Agreement, monthly Management Fees in an amount equal to Sixty-
Five Percent (65%) of the Practice Revenues, and the 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 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 PC as a profit incentive rebate (the
"Rebate"). If the Agreement to which this Schedule 3 is attached
is terminated or expires, the foregoing Management Fees shall be
payable to the MSO based on all Practice Revenue collected as of
the date of termination or expiration.
Payment to the MSO shall be made in monthly installments
based on the Practice Revenues realized by the MSO for services
rendered hereunder. The MSO shall distribute the proceeds from
the PC Account and allocate the proceeds between the MSO and the
PC as described above, on or before the 15th day of the
succeeding month. In the event the 15th day falls on a weekend
or holiday, then said distribution shall be made on the next
business day. The parties hereto may agree to handle such
matters in a different manner.
For purposes of this Agreement, "Practice Revenues" shall
mean gross collections of all revenues generated by or on behalf
of the PC (whether through subsidiaries or affiliates from its
operations and business at the Orthodontic Offices), including,
but not limited to, all fees and charges collected as a result of
professional orthodontic services furnished to patients by the PC
at the Orthodontic Offices and for any other goods or services
sold or provided to such patients.
EXHIBIT A
ORTHODONTIC OFFICES - MASTER LEASE
Not Applicable.
EXHIBIT B
PRACTICE PROVIDERS
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.S., D.D.S.
EXHIBIT C
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., (the "PC").
I have had substantial experience in the practice of
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 PC and Omega Orthodontics of Reseda, 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 PC Thirty
Five Percent (35%) of "Practice Revenues" retained by the PC,
will provide reasonable earnings for the performance of
orthodontic services.
I declare under penalty of perjury that the foregoing
statement is true and correct to the best of my knowledge and
belief.
Executed at 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 AGREEMENT
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 "PC"), and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, D.D.S. ("▇▇. ▇▇▇▇▇▇▇") who is duly licensed to practice
orthodontics in the State and Omega Orthodontics of Reseda, 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 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 PC
pursuant to the Agreement and for the faithful and timely
performance of all the covenants and conditions to be performed
by the PC under the Agreement (collectively, the "Obligations")
the PC agreed to pledge, grant, bargain, assign and transfer to
the MSO a security interest, pursuant to the Uniform Commercial
Code of the State, in and to all Practice Revenue and the
accounts receivable of patients of the PC, together with all
proceeds thereof (collectively, the "Collateral");
WHEREAS, the PC is obligated as a condition to the MSO's
performance under the Agreement to execute and deliver this
Security Agreement;
NOW, THEREFORE, in consideration of the foregoing and of
the covenants and agreements hereinafter set forth, the parties
hereto agree as follows:
1. Grant of Security Interest. As and for collateral
security for payment by the PC of the Obligations and any and all
amounts payable under this Security Agreement (collectively, the
"Secured Obligations"), the PC hereby pledges, grants, bargains,
assigns and transfers to the MSO, and grants to the MSO a
security interest in, the Collateral. ▇▇. ▇▇▇▇▇▇▇ shall cause the
PC to perform fully and on a timely basis all of the PC's
obligations under this Security Agreement. The MSO may at its
option file a financing statement (Form UCC-1) in order to
perfect its security interest hereunder.
2. Representations and Warranties. The PC represents
and warrants all of the accounts receivable constituting a
portion of the Collateral of the PC pledged to the MSO are and
will be validly created obligations of each of the obligors who
incurred same for services actually rendered in the ordinary
course of business of the PC. Further, the PC represents and
warrants that the Collateral is not subject to any lien, pledge,
charge, encumbrance or security interest or right or option on
the part of any third person.
3. Release of Security Interest. Upon the termination
of the Agreement and payment in full of the accrued Management
Fees thereunder and any and all other Secured Obligations, the
MSO shall release its security interest hereunder, and will
deliver to the PC any property forming part of the Collateral
delivered to the MSO and then held by the MSO hereunder.
4. Realization of Collateral. The MSO shall have, with
respect to the Collateral, the rights and obligations of a
secured party under the Uniform Commercial Code as adopted in the
State 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 PC hereby irrevocably authorizes the MSO to
sign and file financing statements naming the PC as the debtor
and the MSO as the secured party, at any time with respect to any
Collateral, without the signature of the PC. The PC hereby
irrevocably appoints the MSO as the PC's attorney-in-fact, with
full authority in the place and stead of the PC and in the name
of the PC, from time to time in the MSO's discretion, to take any
action and to execute any instrument which the MSO may deem
necessary or advisable to accomplish the purposes hereof. The
attorney-in-fact granted herein is coupled with an interest and
is irrevocable. Third parties and entities and persons not a
party to this Security Agreement are entitled to rely on this
attorney-in-fact and an affidavit of the MSO attesting thereto.
The acceptance of this appointment by the MSO shall not obligate
it to perform any duty or covenant required to be performed by
the PC under or by virtue of the Collateral. Notwithstanding the
foregoing power of attorney, the PC shall at any time on the
request of the MSO, sign Financing Statements, security
agreements or other agreements with respect to any Collateral.
Upon the PC's failure to sign said Financing Statements, security
agreements or other agreements, the MSO is authorized as the
agent of the PC to sign any such instruments. Upon the request
of the MSO, the PC agrees to pay all filing fees and to reimburse
the MSO on demand for all costs and expenses of any kind
(including, without limitation, legal fees) incurred in any way
in connection with the Collateral.
5. Purchase of Collateral. At any 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 PC. the MSO agrees,
however, that the PC shall have all rights, including rights of
notice, provided by the Uniform Commercial Code as adopted in the
State. In any case where notice is required, five days' notice
shall be deemed reasonable notice. In the event of any sale
hereunder, the MSO shall apply the proceeds in the order set
forth below in Paragraph 6 hereof. The MSO may have resort to
the Collateral or any portion thereof with no requirements on the
part of the MSO to proceed first against any other person or
property.
6. Application of Collateral. Proceeds from the sale
of the Collateral or any part thereof shall be applied by the MSO
in the following order:
A. To the payment of the costs and expenses of
collection incurred by the MSO, including, without limitation,
attorneys' fees and all other reasonable expenses, liabilities
and costs incurred by the MSO in connection therewith;
B. To the payment of the whole amount then owing
and unpaid for advances and/or Management Fees;
C. To the payment in full of all other Obligations
of the PC under the Agreement; and
D. To the payment to the PC of any surplus then
remaining from such proceeds.
7. Extension of Agreement. No renewal or extension of
the Agreement, no release or surrender of any Collateral given as
security in connection therewith, and no delay in enforcement
thereof or in exercising any right or power with respect thereto
or hereunder shall affect the rights of the MSO with respect to
the Collateral or any part thereof.
8. Notices. Any notice to be given pursuant to this
Agreement shall be deemed effective the same day when such notice
is given personally, or by telegram, or electronic transmission
to the President of the party to whom notice is being given.
Notice by mail shall be deemed effective three days after deposit
in the United States mail, and properly addressed with postage
prepaid.
Notices to the MSO shall be given at:
Omega Orthodontics of Reseda, Inc.
c/o Omega Orthodontics, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or other such addresses as may be delivered by the MSO to the PC
from time to time in writing.
Notices to the PC shall be given at:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
or other such addresses as may be delivered by the PC to the MSO
from time to time in writing.
9. Waiver. The waiver by either party to this Security
Agreement of any one or more defaults, if any, on the part of the
other party, shall not be construed to operate as a waiver of the
other or future defaults under this Agreement. This Security
Agreement may be amended or modified only by the written consent
of both parties.
10. Additional Documents. The PC agrees that it will
duly execute and deliver to the MSO any additional documents
which may be reasonably necessary to give effect fully to the
security interest granted to the MSO hereunder, including,
without limitation, a financing statement on Form UCC-1.
11. Benefit. This Security Agreement shall inure to the
benefit of and shall be binding upon the respective heirs,
successors and assigns of the parties hereto.
12. Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State.
13. Defined Terms. Capitalized terms used in this
Security Agreement which are not defined herein but which are
defined in the Agreement, shall have the respective meanings
ascribed therein.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed, as of the day and year first
hereinabove written.
PC: MSO:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S., M.S., INC. OMEGA ORTHODONTICS
OF RESEDA, INC.
By:____________________________
By:__________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, President
▇▇. ▇▇▇▇▇▇▇:
_______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, 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 American Arbitration Association ("AAA"), with the assistance
of the AAA, unless the parties agree otherwise in finding a
mutually acceptable mediator.
5. The PC and the MSO shall each bear 50% of the fees and
costs of the mediator and any fees and costs of the AAA.
6. The parties agree to participate in good faith in the
mediation and negotiations related thereto for a period of thirty
(30) days from appointment of a mediator by any of the parties or
the AAA.
B. Mediation Procedures
1. The mediator shall be neutral and impartial.
2. The mediator shall control the procedural aspects of the
mediation. The parties will cooperate fully with the mediator.
(a) The mediator is free to meet and communicate
separately with each party.
(b) The mediator will decide when to hold joint meetings
with the parties and when to hold separate meetings. There shall
be no stenographic record of any meeting. Formal rules of
evidence will not apply.
(c) The mediator may request that there be no direct
communication between the parties or between their attorneys
without the concurrence of the mediator.
3. Each party may be represented by more than one person,
e.g., one or more of its officers and an attorney. Each party
will have a representative fully authorized to negotiate a
settlement of the dispute present.
4. The process will be conducted expeditiously.
5. The mediator will not transmit information received from
any party to another party or any third person unless authorized
to do so by the party transmitting the information.
6. The entire process is confidential. The parties and the
mediator will not disclose information regarding the process,
including settlement terms, to third persons, unless the parties
otherwise agree. The process shall be treated as a compromise
negotiation for purposes of the Federal Rules of Evidence and
state rules of evidence.
7. The parties will refrain from pursuing administrative
and/or judicial remedies during the mediation process, except as
otherwise expressly provided in the agreement which incorporates
these procedures.
8. Unless all parties and the mediator otherwise agree in
writing,
(a) The mediator will be disqualified as a witness,
consultant or expert in any pending or future investigation,
action or proceeding relating to the subject matter of the
mediation (including any investigation, action or proceeding
which involves persons not party to this mediation); and
(b) The mediator and any documents and information in
the mediator's possession will not be subpoenaed in any such
investigation, action or proceeding, and all parties will oppose
any effort to have the mediator and documents subpoenaed.
9. If the dispute goes into arbitration, the mediator shall
not serve as an arbitrator, unless the parties and the mediator
otherwise agree in writing.
10. The mediator, if a lawyer, may freely express views
to the parties on the legal issues of the dispute.
11. The mediator shall not be liable for any act or
omission in connection with the mediation.
12. The mediator may withdraw at any time by written
notice to the parties (i) for overriding personal reasons, (ii)
if the mediator believes that a party is not acting in good
faith, or (iii) if the mediator concludes that further mediation
efforts would not be useful.
C. Binding Arbitration
If the parties do not resolve the dispute through mediation
within the period provided in Part A above, the parties shall
submit the matter to binding arbitration before a qualified sole
arbitrator in accordance with the then current Rules of
Commercial Arbitration of the AAA. The arbitration shall be held
in Los Angeles, California. The sole arbitrator shall be
agreed upon by the parties within twenty (20) days after either
party elects to submit any issue to arbitration or, failing that,
shall be selected by the AAA. A qualified arbitrator is one who
is familiar with the principal subject matter of the issues to be
arbitrated such as by way of example, healthcare services
industry matters, management consulting services generally or
business law/corporate matters generally. Judgment upon the award
rendered by the arbitrator may be entered in any court having
jurisdiction. The arbitrator shall not have the authority to
award multiple, punitive or consequential damages under any
circumstances.