EXHIBIT 10.35
iv
MANAGEMENT SERVICES AGREEMENT
BETWEEN
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, P.C. (the "New PC")
AND
Omega Orthodontics of Watertown, Inc.
(the "MSO")
AND
Omega Orthodontics, Inc.
("OMEGA")
MANAGEMENT SERVICES AGREEMENT
TABLE OF CONTENTS
ARTICLE 1 TERM 2
ARTICLE 2 DUTIES OF THE MSO 2
2.1 General 2
2.2 Orthodontic Office Services 2
2.3 Administrative Services 2
2.4 Business Systems, Procedures and Forms 3
2.5 Purchasing, Accounts Payable, Supplies and Inventory
Control 3
2.6 Regulatory Compliance Services 3
2.7 Billing, Collection 4
2.8 Disbursement of Funds 4
2.9 MSO Expenses 5
2.10 Credit Reports 6
2.11 Accounting; Bookkeeping and Reports 7
2.12 Marketing 7
2.13 Complaints 7
2.14 Practice Laws 7
2.15 Monthly Meetings 7
2.16 Maintenance and Cleaning Services 7
2.17 Licenses and Permits 7
2.18 Insurance 8
2.19 Practice Transition and Associate Selection 8
ARTICLE 3 DUTIES OF THE NEW PC 8
3.1 General 8
3.2 Employment of the Orthodontists and Rendering of Patient
Care 8
3.3 Professional Services 8
3.4 Records 9
3.5 Professional Expenses 9
3.6 Professional Liability Insurance 9
3.7 Employment Agreement 9
3.8 Confidentiality 10
ARTICLE 4 PROFESSIONAL SERVICES, CONTROL OF SOLICITATION,
APPROVAL OF ADVERTISING MATERIAL AND NO RECIPROCATION 11
ARTICLE 5 LEASE OF OFFICE FACILITIES AND EQUIPMENT 11
5.3. No Warranty. 14
ARTICLE 6 COMPENSATION 14
ARTICLE 7 SECURITY INTEREST 15
ARTICLE 8 COVENANTS 15
8.1 New PC's Covenants 15
8.2 MSO's Covenants 16
ARTICLE 9 INSURANCE AND INDEMNITY 16
9.1 Insurance to be Maintained by the New PC. 16
9.2 Insurance to be Maintained by the MSO 17
9.3 Tail Insurance Coverage 17
9.4 Additional Insureds 17
9.5 Indemnification 17
ARTICLE 10 TERMINATION 17
10.1 Termination by the New PC 17
10.2 Termination by MSO 18
ARTICLE 11 AUTHORIZED AGENT AND POWERS OF ATTORNEY 20
ARTICLE 12 INDEPENDENT CONTRACTOR RELATIONSHIP 20
ARTICLE 13 MISCELLANEOUS 20
13.1 Access to Records 21
13.2 Patient Records. 21
13.3 The New PC's Control Over the Orthodontic Practice 21
ARTICLE 14 ALTERNATIVE DISPUTE RESOLUTION 21
14.1 Alternative Dispute Resolution 21
14.2 Waiver of Jury. 22
ARTICLE 15 GENERAL PROVISIONS 22
15.1 Notices 22
15.2 Confidentiality 23
15.3 Contract Modifications for Prospective Legal Events 23
15.4 Remedies Cumulative 23
15.5 No Obligation to Third Parties 23
15.6 Entire Agreement 23
15.7 Assignment. 24
15.8 Attorneys' Fees 24
15.9 Governing Law 24
15.10 Events Excusing Performance 24
15.11 Compliance with Applicable Laws 24
15.12 Language Construction 24
15.13 Amendments 24
15.14 Severability. 25
15.15 No Waiver 25
15.16 Captions 25
15.17 Counterparts 25
SCHEDULE 1 THE ORTHODONTISTS
SCHEDULE 2 ORTHODONTIC OFFICES AND SERVICES
SCHEDULE 3 COMPENSATION - MANAGEMENT FEES
EXHIBIT A ORTHODONTIC OFFICES - MASTER LEASE
EXHIBIT B PRACTICE PROVIDERS
EXHIBIT C NEW PC'S AFFIDAVIT
EXHIBIT D SECURITY AGREEMENTS
EXHIBIT E ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT is made effective as of this 1st day of January,
1998, by and between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, P.C., a professional
corporation (the "New PC") incorporated under the laws of the
State of South Dakota (the "State"), and Omega Orthodontics of
Watertown, Inc., a Delaware corporation (the "MSO"), and Omega
Orthodontics, Inc., a Delaware corporation ("OMEGA").
WHEREAS, OMEGA provides professional management and marketing
services to orthodontic practices in the United States, which
services include providing practice management systems, office
space, equipment, furnishings and active administrative personnel
necessary for the operation of orthodontic practices and are
provided directly or indirectly through management service
organizations such as the MSO;
WHEREAS, OMEGA and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S. ("▇▇. ▇▇▇▇▇▇▇▇▇") who
is duly licensed to practice orthodontics in the State have
entered into that certain Affiliation Agreement and Asset
Purchase Agreement (the "Affiliation Agreement") dated as of
January 1, 1998, pursuant to which OMEGA acquired certain assets
of ▇▇. ▇▇▇▇▇▇▇▇▇;
WHEREAS, the New PC owns and operates an orthodontic practice
with offices located in the facilities identified in Exhibit A
(the "Orthodontic Offices") and furnishes orthodontic care to the
general public through the services of ▇▇. ▇▇▇▇▇▇▇▇▇ and any and
all other orthodontists who are or become affiliated with the New
PC as of or following the date hereof and who are or become
subsequently named on Schedule 1 hereto (individually, an
"Orthodontist" and collectively, the "Orthodontists");
WHEREAS, the MSO was formed and acquired to provide equipment,
facilities and personnel to, and to manage the non-orthodontic
business affairs of, the New PC;
WHEREAS, the MSO's services are designed to improve the
efficiency and profitability of the New PC while enhancing the
ability of ▇▇. ▇▇▇▇▇▇▇▇▇ and the Orthodontists (if any) to render
quality orthodontic care to the patients of the New PC;
WHEREAS, the New PC wishes to retain the MSO to perform the
functions and to provide the services described in this Agreement
to assist the New PC to achieve the above goals.
NOW, THEREFORE, IT IS AGREED that the MSO shall perform
managerial and administrative services for the New PC and provide
office space and orthodontic facilities appropriate for rendering
general orthodontic treatment at the Orthodontic Offices upon the
following terms and conditions:
ARTICLE 1
TERM
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 New 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 New PC with
comprehensive practice management, financial and marketing
services, and such facilities, equipment, and support personnel
as are reasonably required by the New PC to operate its
orthodontic practice at the Orthodontic Offices, as determined by
the MSO in consultation with the New PC. The New PC hereby
appoints the MSO as the sole and exclusive business manager of
the New PC and agrees that the MSO shall have all power and
authority reasonably necessary to manage the non-orthodontic
business affairs of the New PC 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.
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 New PC and the MSO from time to time. The MSO shall be
responsible for all repairs, maintenance and replacement of the
Orthodontic Offices including such leasehold improvements,
fixtures, furniture, furnishings and equipment, except for
repairs, maintenance and replacement necessitated by the
negligence of the New PC, its employees and agents (not including
the MSO or its employees or agents). The MSO shall, on an
ongoing basis, evaluate and consult with the New PC on the
equipment needs of and the efficiency and adequacy of the
Orthodontic Offices. The MSO shall provide telephone, facsimile
transmission, printing, duplicating and transcribing services as
needed, as well as all laundry, linen and uniforms.
2.3 Administrative Services.
(a) The MSO shall supply secretarial, reception, maintenance,
front office, skilled assistants and other personnel, except duly
licensed "Practice Providers," during normal office hours as
reasonably requested by the New PC, to enable the New PC to
perform effectively orthodontic and treatment services. The MSO
shall be responsible for staff scheduling, provided, however,
that all Practice Providers including orthodontic assistants and
hygienists shall be under the direct supervision of the New PC.
The New PC shall have sole authority to employ and terminate the
employment of all Practice Providers. All personnel placed in
the Orthodontic Offices by the MSO shall be subject to the
approval of the New PC, which approval shall not be unreasonably
withheld, and the New PC shall have the authority to instruct the
MSO to terminate the employment of such personnel for any lawful
reason. The MSO shall be responsible for all personnel wages,
withholding, fringe benefits, bonuses and workers' compensation
insurance in connection with its employees; provided, however,
that the New PC is in full compliance with the compensation
provisions of this Agreement.
(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 New PC or otherwise
under contract with the New PC to provide dental or orthodontic,
hygienic or other assistance or services to patients of the New
PC or otherwise required by applicable "Laws" (as defined in
Section 2.6 below) to be employees of the New PC to provide
services to patients of the Practice. A list of all Practice
Providers and their relationship to the New PC is set forth as
Exhibit B attached hereto and incorporated herein by reference.
Prior to making any changes in the list of Practice Providers,
the New PC shall use its best efforts to consult with the MSO.
The New PC also shall use its best efforts to consult with the
MSO with regard to the terms of contracts entered into between
the New PC and the Practice Providers and the terms and
conditions of their employment or engagement as independent
contractors.
2.4 Business Systems, Procedures and Forms. In consultation
with the New PC, the MSO shall establish standardized business
systems and procedures for the New PC, including, but not limited
to, patient scheduling systems, treatment records system,
financial reporting and process control systems and patient
communication management systems (the "OMEGA Patient Scheduling
System") that are designed to improve the New PC operating
efficiency. The MSO shall analyze such information on an ongoing
basis in order to advise the New PC on ways of improving
operating efficiencies. The MSO shall provide training to the
staff of the New PC in the implementation and operation of such
standardized business systems and procedures. The MSO shall
additionally provide the New PC with and train the New PC's staff
in the use of standardized clinical forms, including, without
limitation, forms for patient evaluations and treatment plans.
The New PC expressly acknowledges and agrees that it shall have
no property rights in the OMEGA Patient Scheduling System and the
other foregoing systems, procedures and clinical forms, and
further agrees that such systems, procedures, and forms shall be
deemed to constitute Confidential Information within the meaning
of Section 3.8 hereof and be subject to the restrictions on the
use, appropriation, and reproduction of such Confidential
Information provided for in Section 3.8.
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 New PC. The MSO
shall order and purchase and maintain all inventory and
orthodontic supplies as reasonably required by the New PC to
enable the New PC to render orthodontic care to its patients
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 New PC such business, legal and
regulatory management consultation and advice as may be
reasonably required or requested by the New PC and directly
related to the operations of the New PC or its compliance with
Federal, state or local laws, rules, regulations or
interpretations governing or applicable to the New PC
(collectively, "Laws"); provided, however, that the MSO shall not
be responsible for any services related to malpractice or other
professional service claims or matters not directly related to
the operation of the New PC or its compliance with Laws, or for
any legal or tax advice or services or personal financial
services to ▇▇. ▇▇▇▇▇▇▇▇▇ and the Orthodontists (if any) or any
employee or agent of the New PC.
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 New PC and the Practice
Providers, with all such billing and collecting to be done in the
name of the New PC; (ii) receiving payments from patients,
insurance companies and all other third party payors; (iii)
taking possession of and endorsing in the name of the New PC any
notes, checks, money orders, insurance payments and other
instruments received in payment for services or of accounts
receivable; and (iv) settling and compromising claims and, where
deemed appropriate by the MSO and consented to (which consent
shall not be unreasonably withheld or delayed) by the Practice
Provider rendering the professional services which resulted in
the applicable accounts receivable, assigning such accounts
receivable to a collection agency or the bringing of a legal
action against a patient or a payor on the New PC's behalf. In
seeking payments on behalf of the New PC hereunder, the MSO shall
act as the New PC's agent in billing and collecting professional
fees, charges and other accounts owed to the New PC and shall
only ▇▇▇▇ under the New PC's provider number. In this regard, the
New PC appoints the MSO for the Term of this Agreement in
accordance with the provisions of Article 11 hereof as its true
and lawful attorney-in-fact for the purposes set forth above in
this Section 2.7 and in Section 2.8 below. The MSO does not
guarantee collection and is not responsible for any loss to the
New PC as a result of any inability to collect fees and charges.
2.8 Disbursement of Funds.
(a) All monies collected for the New PC by the MSO pursuant to
Section 2.7 above shall be deposited into an account (the "the
New PC Account") with a bank whose deposits are insured with the
Federal Deposit Insurance Corporation and which bank is
acceptable to the MSO and the New PC (the "Bank"). The New PC
Account shall contain the name of the New PC, but the MSO shall
make all disbursements therefrom. The MSO shall account for all
monies so disbursed from the New PC Account.
(b) From the funds collected and deposited by the MSO in the New
PC Account, the MSO shall make for and on behalf of the New PC
the following disbursements promptly, when payable:
(1) Compensation, including salaries, benefits and other
direct costs payable to ▇▇. ▇▇▇▇▇▇▇▇▇ and the Orthodontists (if
any) and the other Practice Providers of the New PC, 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 New PC Account will, at any
time be insufficient to cover the current portion of the
foregoing expenses when payable, the MSO may advance to the New
PC the necessary funds to pay the current portion of such
expenses for the benefit of the New PC, which advances will be
deemed to be loans to the New PC to be repaid without interest
from the New PC Account at such times as there are adequate funds
therein or upon such other terms and at such times as agreed to
by the New PC and the MSO, which indebtedness shall not be deemed
an MSO Expense for purposes of Section 2.9.
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 New 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 New PC, including,
without limitation:
(1) Salaries, benefits and other direct costs of all
employees of the MSO providing services to the New PC hereunder
(but excluding ▇▇. ▇▇▇▇▇▇▇▇▇ and all the Orthodontists (if any)
and other Practice Providers);
(2) Direct costs of all employees or consultants of the
MSO who provide services at the Orthodontic Offices or in
connection with the New PC required for improved clinic
performance, such as work management, materials management,
purchasing, charge and coding analysis, and business office
consultation;
(3) Direct costs associated with operating the Orthodontic
Offices, including without limitation, utilities, cleaning and
maintenance;
(4) Obligations of the MSO under leases or subleases
entered into in connection with the operation of the Orthodontic
Offices as well as utility expenses relating to the Orthodontic
Offices;
(5) Personal property and intangible taxes assessed
against the MSO's assets used in connection with the operation of
the Orthodontic Offices, commencing on the date of this
Agreement;
(6) In the event an opportunity arises for additional
Orthodontists to become employed by the New PC or other
orthodontic entities to merge with the New PC, actual out-of-
pocket expenses of the MSO personnel working on a specified
employment arrangement or merger, whether or not such employment
arrangement or merger is consummated;
(7) Other expenses incurred by the MSO in carrying out its
obligations under this Agreement, but excluding any corporate
overhead costs of the MSO or any corporation affiliated with the
MSO not specifically listed above.
"MSO Expenses" shall not include:
(1) Any Federal, state or local income taxes of the New
PC, ▇▇. ▇▇▇▇▇▇▇▇▇ and the Orthodontists (if any) and the other
Practice Providers, or the costs of preparing Federal, state or
local tax returns thereof;
(2) Salaries, benefits and other direct costs of employing
▇▇. ▇▇▇▇▇▇▇▇▇ and the Orthodontists (if any) and the other
Practice Providers;
(3) Physician licensure fees, board certification fees and
costs of membership in professional associations and societies
for Practice Providers;
(4) Professional liability insurance for the Practice
Providers as provided for under Section 3.6 hereof;
(5) Costs of continuing professional education for
Practice Providers, including travel and related expenses;
(6) Costs associated with legal, accounting and
professional services incurred by or on behalf of the New PC
other than as otherwise expressly provided for in Section 2.6
hereof;
(7) Liability judgments assessed against the New PC or the
Practice Providers in excess of policy limits or within the
deductible limits of any policy;
(8) Direct personal expenses of the Practice Providers of
a kind which the New PC may have historically provided or charged
to its Practice Providers (including, but not limited to, car
allowances and other expenses which are personal in nature);
(9) Charitable contributions by the New PC; and
(10) Any other expenses which are expressly designated
herein as expenses or responsibilities of the New PC.
2.10 Credit Reports. When requested by the New PC, or its
authorized representative, the MSO shall obtain on behalf of the
New PC information with regard to the ability of patients to pay
for the services to be rendered by the New PC. The MSO shall
collect all information and determine, to the best of its
ability, whether or not patients can pay for services rendered by
the New PC, either in cash or by insurance. Such determination
shall be subject to the reasonable approval by the New PC, and as
between the New PC and the MSO, the New PC shall bear the risk of
claims by potential patients who may be denied credit.
2.11 Accounting; Bookkeeping and Reports. The MSO shall provide
for or arrange for all accounting and bookkeeping services
related to the New PC's operations, provided that such services
are incurred in the ordinary course of business. In addition,
the MSO shall provide the New PC with an unaudited internal
monthly statement within twenty (20) days after the end of each
month and a quarterly review within thirty (30) days after the
end of each quarter, respectively, of the MSO's internal
statements, as well as the books and records of the New PC, all
prepared by or with the assistance of an accountant chosen by the
MSO. The New PC shall be responsible for preparing and filing
its own Federal, state and local tax returns. At the end of each
fiscal year of the New PC, the MSO shall arrange for a financial
statement with respect to the New PC to be prepared by the MSO's
accountant. At the New PC's request, the MSO shall prepare
reports indicating the gross revenues, number of patients, type
of patients, and the activity and the productivity of the New PC.
The MSO shall assist and advise the New PC in the financial
management of the New PC.
2.12 Marketing. The MSO shall design and execute a marketing
plan to promote the New PC's professional services. The MSO
shall also make available to the New PC all brochures, contracts,
and other materials reasonably related to the carrying out of the
business purposes of the New PC, 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 New PC in handling
all complaints, grievances and disputes involving the New PC and
the Practice Providers and any patients or third parties.
However, the MSO shall have no control over the New PC's
patients. All decisions concerning the New PC's patients shall
be made by the New PC and the Practice Providers.
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 New PC regarding the policies and
procedures for the operation of the New 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 New PC except those related to licensure and
certifications of the Practice Providers. The MSO shall prepare
and file all reports, forms and returns required by Law in
connection with workers' compensation, unemployment insurance,
social security and other similar Laws with respect to the MSO's
employees.
2.18 Insurance. The MSO shall provide and pay for customary
office property damage and liability, including business
interruption insurance, not including professional liability
insurance (which shall be and remain the responsibility of the
New 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 New PC,
the MSO will conduct a search for an appropriate orthodontist and
other professionals (collectively, "Practice Associates") for the
purposes of accommodating practice growth, reducing doctor work
schedule, or planned retirement. Such search shall include use
by the MSO of a national journal advertising program and
networking in the profession to locate appropriate Practice
Associates. The MSO estimates that it could take approximately
two years for such a search.
The MSO will provide screening of all applicants and will then present
appropriate applicants for final selection by the New PC. The
New PC shall be responsible for interviewing and selecting each
Practice Associate.
After the Practice Associate(s) is (are) selected by the New PC, the MSO
will assist the New PC with a trial plan of approximately six
months for the new Practice Associate(s). It is understood that
at the end of this period either the New PC or the new Practice
Associate may terminate the relationship. All such Practice
Associates recruited by the MSO as may be accepted by the New PC
shall be employees of the Practice (if so employed) and not of
the MSO. The MSO will confer with the New PC on an appropriate
salary/work-in arrangement for the new Practice Associate and the
final arrangements shall be determined by the New PC.
ARTICLE 3
DUTIES OF THE NEW PC
3.1 General. The New PC shall be responsible for the
management of its practice and the Orthodontic Office, in
accordance with the requirements of the Laws of the State.
3.2 Employment of the Orthodontists and Rendering of Patient
Care. The New PC shall be responsible for the employment and
professional supervision of ▇▇. ▇▇▇▇▇▇▇▇▇ and all Orthodontists
and the other Practice Providers and all orthodontic care
rendered to patients shall be rendered by ▇▇. ▇▇▇▇▇▇▇▇▇ and such
Orthodontists. Additionally, the New PC shall be responsible for
the professional supervision of all other Practice Providers in
their rendering of patient care.
3.3 Professional Services. The New PC shall use and occupy the
Orthodontic Offices designated on Schedule 2 hereof exclusively
for the practice and rendering of orthodontic services, and shall
comply with all applicable Laws and all standards of orthodontic
care. It is expressly acknowledged by the parties that the
orthodontic practice conducted at the Orthodontic Offices shall
be conducted solely by ▇▇. ▇▇▇▇▇▇▇▇▇ and the Orthodontists and
the other Practice Providers acting under the supervision and
control of ▇▇. ▇▇▇▇▇▇▇▇▇ and the Orthodontists (if any), and no
other orthodontist shall be permitted to use or occupy the
Orthodontic Offices. The New PC shall provide professional
services to patients hereunder in compliance at all times with
ethical standards and Laws applying to the orthodontic
profession. The New PC shall ensure that ▇▇. ▇▇▇▇▇▇▇▇▇ and each
Orthodontist who provides orthodontic services to patients is
licensed by the State. In the event that any disciplinary,
medical malpractice or other actions are initiated against ▇▇.
▇▇▇▇▇▇▇▇▇ or any Orthodontist or other Practice Provider, the New
PC shall immediately inform the MSO of such action and the
underlying facts and circumstances subject to such
confidentiality agreement or arrangements as the New PC and the
MSO shall mutually determine at or prior to the time of such
disclosure. The New PC agrees to cooperate with and participate
in quality assurance/utilization review programs established by
the MSO or mandated by accreditation and licensure standards
applicable to the practice of orthodontics. Deficiencies
discovered in the performance of any personnel or in the quality
of professional services shall be reported immediately to the
MSO, and appropriate steps shall be taken by the New PC at once
to remedy such deficiencies.
3.4 Records. The New PC will keep or cause to be kept
accurate, complete and timely dental and other records of all
patients. The management of all dental and patient files and
records shall comply with all applicable Laws regarding their
confidentiality and retention and all files and records shall be
located so that they are readily accessible for patient care,
consistent with ordinary records management practices. Such
records shall be sufficient to enable the MSO, on behalf of the
New PC, to obtain payments for services and related charges and
to facilitate the delivery of quality patient care by the New PC.
Notwithstanding the foregoing, patient dental records shall be
and remain the property of the New PC and the contents thereof
shall be solely the responsibility of the New PC.
3.5 Professional Expenses. The New PC shall be solely
responsible for the cost of professional licensure fees and board
certification fees, membership in professional associations and
continuing professional education incurred by each Orthodontist
and other Practice Provider employed by the New PC. The New PC
shall ensure that ▇▇. ▇▇▇▇▇▇▇▇▇ and all the Orthodontists
employed by the New PC participate in such continuing education
as is necessary for ▇▇. ▇▇▇▇▇▇▇▇▇ and such the Orthodontists to
remain current.
3.6 Professional Liability Insurance. The New PC shall
provide, or arrange for the provision of, and maintain throughout
the Term of this Agreement, professional liability insurance
coverage in accordance with the provisions of Article 9 hereof.
The New PC shall also cooperate in any programs recommended by
the MSO to assure that each of its Orthodontists is insurable,
and that ▇▇. ▇▇▇▇▇▇▇▇▇ and each Orthodontist participates in an
on-going risk management program.
3.7 Employment Agreement. The parties recognize that the
services to be provided by the MSO are feasible only if the New
PC operates an active orthodontic practice to which it, ▇▇.
▇▇▇▇▇▇▇▇▇ and each Orthodontist associated with the New PC devote
their full time and attention, unless other specific provisions
are made in writing and mutually agreed upon by the MSO and New
PC. The New PC will cause ▇▇. ▇▇▇▇▇▇▇▇▇ and each individual
Orthodontist who now is or hereafter becomes affiliated with the
New PC to enter into a written employment agreement (the
"Employment Agreement") satisfactory in form and substance to the
MSO, pursuant to which ▇▇. ▇▇▇▇▇▇▇▇▇ or the Orthodontist shall
agree not to establish, operate or provide orthodontic or dental
services, without the prior written consent of both the New PC
and the MSO, at any office or facility other than the Orthodontic
Office. In addition, such Employment Agreement shall provide by
its own terms or by a separate agreement that if ▇▇. ▇▇▇▇▇▇▇▇▇'▇
or such Orthodontist's employment shall terminate for any reason
during the Term of this Agreement, for a period of 24 months
after the termination of ▇▇. ▇▇▇▇▇▇▇▇▇'▇ or such Orthodontist's
Employment Agreement with the New PC, ▇▇. ▇▇▇▇▇▇▇▇▇ or such
Orthodontist shall agree not to establish, operate or provide
orthodontic or dental services, without the prior written consent
of both the New PC and the MSO, at any office practice or
facility whatsoever providing services similar to those provided
by the New PC at any orthodontic office within a fifteen (15)
mile radius. Such Employment Agreement (or separate agreement)
shall also provide, among other things, that in the event of a
breach of ▇▇. ▇▇▇▇▇▇▇▇▇'▇ or the Orthodontist's agreement not to
compete with the New PC provided for in such Employment Agreement
(or separate agreement), the MSO shall be entitled to receive, in
addition to other remedies and not by way of an election of
remedies, liquidated damages equaling the greater of: (a) ▇▇.
▇▇▇▇▇▇▇▇▇'▇ or such Orthodontist's income, as shown on the W-2
form prepared by the New PC, for the most recent calendar year;
or (b) $300,000. Such payment shall be made to the MSO by the
New PC immediately following receipt of the payment from ▇▇.
▇▇▇▇▇▇▇▇▇ or the breaching Orthodontist by the New PC. Each of
the MSO and OMEGA shall be expressly named as a third-party
beneficiary to such agreements between the New PC and ▇▇.
▇▇▇▇▇▇▇▇▇ and each Orthodontist and the rights and remedies of
the MSO and OMEGA thereunder or otherwise in respect of the
restrictive covenants set forth in such agreements shall survive
termination of this Agreement.
3.8 Confidentiality. The New PC agrees and acknowledges that
all materials provided by the MSO to the New PC constitute
"Confidential Information" and are disclosed in confidence and
with the understanding that it constitutes valuable business
information developed by the MSO with the assistance of OMEGA at
great expenditures of time, effort and money. The New PC further
agrees that it shall not, directly or indirectly, without the
express prior written consent of the MSO, use or disclose such
Confidential Information for any purpose other than in connection
with the services to be rendered hereunder. The New PC further
agrees: (i) to keep strictly confidential and hold in trust all
Confidential Information and not disclose such Confidential
Information to any third party, including its shareholders,
directors, officers, affiliates, partners, employees and
independent contractors without the express prior written consent
of the MSO; and (ii) to impose this obligation of confidentiality
on its shareholders, directors, officers, affiliates, partners,
employees and independent contractors. The New PC acknowledges
that the disclosure of Confidential Information to it by the MSO
is done in reliance upon its representations and covenants in
this Agreement. Upon expiration or termination of this Agreement
by either party for any reason whatsoever, the New PC shall
immediately return and shall cause its shareholders, directors,
officers, affiliates, partners, shareholders and independent
contractors to immediately return to the MSO all Confidential
Information, and the New PC will not, and will cause its
affiliates, partners, employees and independent contractors not
to, thereafter use, appropriate, or reproduce such Confidential
Information. The New PC further expressly acknowledges and
agrees that any such use, appropriation or reproduction of any
such Confidential Information by any of the foregoing after the
expiration or termination of this Agreement will result in
irreparable injury to the MSO and OMEGA, that the remedy at law
for the foregoing would be inadequate, and that in the event of
any such use, appropriation, or reproduction of any such
Confidential Information after the termination or expiration of
this Agreement, the MSO and OMEGA, in addition to any other
remedies or damages available to either or both of them, shall be
entitled to injunctive or other equitable relief without the
necessity of proving actual damages but such rights to relief
shall not preclude the MSO and OMEGA from other remedies which
may be available to either or both of them hereunder.
ARTICLE 4
PROFESSIONAL SERVICES, CONTROL OF SOLICITATION,
APPROVAL OF ADVERTISING MATERIAL AND NO RECIPROCATION
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 New 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 New
PC, nor shall the MSO have any control over the New 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 New PC shall be used or distributed without
having first been approved by the New 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 New PC or its
shareholders, officers, directors, employees, contractors or
agents, nor are such benefits in any way contingent upon the
recommendation, referral or any other arrangement for the
provision of any item or service offered by the New PC or any of
its Practice Providers, employees, contractors or agents.
ARTICLE 5
LEASE OF OFFICE FACILITIES AND EQUIPMENT
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 New PC during the Term of this Agreement
the Orthodontic Offices, and the leasehold improvements and
fixtures, furniture and equipment at the Orthodontic Offices as
listed from time to time on Schedule 2 attached hereto and
incorporated herein by this reference, under the following terms
and conditions:
(a) The MSO is the lessee by assignment under lease for the
premises occupied by the New PC (collectively, the "Master
Lease") a copy of which is attached hereto as Exhibit A and
incorporated herein by this reference. The New PC hereby
acknowledges that the premises described under the Master Lease
are suitable for the New PC's orthodontic practice. Based and
contingent upon the New PC's promise to timely pay all amounts
due under this Agreement, the MSO hereby agrees to sublease the
leased premises to the New PC upon the following terms and
conditions:
(i) This sublease between the MSO and the New PC of the
premises shall be subject to all of the terms and conditions of
the Master Lease. In the event of the termination of the MSO's
interest as lessee under the Master Lease for any reason, then
the sublease created hereby shall simultaneously terminate,
unless the New PC assumes the obligations under the Master Lease
in question and the Lessor consents thereto.
(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 New PC, respectively)
and, along with the provisions of this Section 5.1(b) 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 New PC, the MSO shall remain responsible for meeting the
obligations of "Lessee" under the sections entitled Rent,
Additional Rent Adjustment, Insurance on Fixtures, Liability
Insurance, Repairs, and Taxes of the Master Lease, all of which
obligations shall be considered MSO Expenses hereunder and the
New PC shall have no monetary obligation in that regard. In
addition, as between the MSO and the New PC, the MSO shall retain
the right to exercise any options to purchase the premises, or
other similar rights of ownership or possession, which may be
granted under the Master Lease, and the New PC shall have no
rights in that regard.
(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 New PC, at least 30 days prior
to the expiration of the time for exercising such option, of the
MSO's intention to renew or not to renew such term. If the MSO
determines not to renew such term, the MSO shall provide or
arrange for the provision of comparable office space (the
"Substitute Orthodontic Office") within a radius of 15 miles of
the Orthodontic Office, which Substitute Orthodontic Office shall
be subject to the approval of the New PC (which approval shall
not be unreasonably withheld or delayed). The lease or sublease
for such Substitute Orthodontic Office, as applicable, shall be
substituted for the lease described on Exhibit A hereto and all
references to the "Master Lease" shall thereafter be applicable
to the lease or sublease for the Substitute Orthodontic Office
for purposes of this Agreement, ab initio.
(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 New PC's tenancy or the MSO's
rights and remedies as Sub-Lessor.
5.2 The MSO shall provide the New PC at the Orthodontic Offices
such additional leasehold improvements, fixtures, furniture,
furnishings and equipment as may be mutually agreed to with the
New PC and reflected from time to time on a supplement to
Schedule 2 hereto. The use by the New PC of all leasehold
improvements, fixtures, furniture, furnishings and equipment
provided hereunder shall be subject to the following conditions:
(a) Title to all such leasehold improvements, fixtures,
furnishings, furniture and equipment shall remain in the MSO and
upon termination of this Agreement, the New PC shall immediately
return and surrender all such leasehold improvements, fixtures,
furniture, furnishings and equipment to the MSO in as good
condition as when received, normal wear and tear excepted.
(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 New PC agrees that it will use its best efforts
to prevent damage, excessive wear, and breakdown of all such
leasehold improvements, fixtures, furniture, furnishings and
equipment, and shall advise the MSO of any and all needed repairs
and equipment failures.
(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 NEW PC ACKNOWLEDGES THAT THE MSO MAKES NO WARRANTIES
OR REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO THE SUITABILITY OR
ADEQUACY OF ANY LEASEHOLD IMPROVEMENTS, FIXTURES, FURNITURE,
FURNISHINGS, EQUIPMENT, INVENTORY OR SUPPLIES PROVIDED OR LEASED
OR SUBLEASED PURSUANT TO THIS AGREEMENT FOR THE CONDUCT OF AN
ORTHODONTICS PRACTICE OR FOR ANY OTHER PARTICULAR PURPOSE.
(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 New PC and
the MSO from time to time. It is acknowledged by and between the
parties hereto that the MSO and/or its affiliates has (have)
incurred substantial expenses and future obligations in acquiring
the capital stock of the MSO, acquiring or otherwise establishing
the Orthodontic Offices, establishing its systems, including fees
for consultants and other professionals, interest expense, lease
obligations, and costs of furnishing or refurbishing the premises
at which the Orthodontic Offices are located. The MSO has also
assumed substantial obligations associated with the continuing
operation of the Orthodontic Offices, including those of lessee,
obligor and guarantor and obligor on loans to establish and
operate the Orthodontic Offices. The parties, therefore, having
considered various compensation formulae, acknowledge and agree
that in order for the MSO to receive a fair and reasonable return
for its expenses and obligations, and a fair return for the lease
of the premises and equipment and for providing the services
contemplated hereunder, that the agreed compensation is not
excessive. The New PC acknowledges that the compensation
arrangement is reasonable under the circumstances noted herein
and has executed an Affidavit attesting to this fact which is
attached hereto and incorporated herein as Exhibit C. In
consideration of the foregoing, the parties agree that the
monthly Management Fees payable to the MSO by the New PC for
services rendered pursuant to this Agreement shall be reviewed
and subject to adjustment at the close of each year of the Term
of this Agreement based upon industry standards of practice and
the MSO's costs in performing the required services. If the
parties cannot agree within thirty (30) days prior to the close
of any such year on the terms of any adjustment to the Management
Fees for the following year, then the then existing Management
Fees shall remain in effect. The New PC specifically agrees that
the MSO may defer actual receipt of its Management Fees and/or
advance monies for purposes of managing the New PC's cash flow,
and the MSO may repay itself such advances or pay said deferred
Management Fees when it deems appropriate.
ARTICLE 7
SECURITY INTEREST
As assurance and collateral security for the payment of the
monthly Management Fees owed to the MSO pursuant to this
Agreement and any funds advanced by the MSO to or on behalf of
the New PC pursuant to this Agreement and for the faithful and
timely performance of all the covenants and conditions to be
performed by the New PC under this Agreement, the New PC hereby
pledges, grants, bargains, assigns and transfers to the MSO a
security interest, pursuant to the Uniform Commercial Code of the
State, in and to all Practice Revenue and accounts receivable of
patients of the New PC, together with all proceeds thereof
(collectively, the "Collateral"), and further agrees not to
pledge, assign, transfer or convey any of the Collateral or any
proceeds therefrom, without the prior written consent of the MSO,
except to affiliates of the MSO. Concurrent with the execution
of this Agreement, the New PC shall execute a Security Agreement,
similar in form and content as that attached hereto as Exhibit D
and incorporated herein by this reference in order that the MSO
may perfect its interest in the Collateral. The New PC expressly
agrees to execute any appropriate UCC-1 Financing Statement and
UCC-1 Fixture filings, if so requested in writing by the MSO.
ARTICLE 8
COVENANTS
8.1 New PC's Covenants. As further consideration for the MSO's
performance of the terms and conditions of this Agreement, the
New PC covenants, represents and warrants as follows (which
covenants, representations and warranties shall survive the
execution of this Agreement):
(a) The New PC shall comply with all Laws and ethical and
professional standards applicable to the practice of orthodontics
and to cause all of its employees to do the same.
(b) The New PC shall provide quality services and shall cause
▇▇. ▇▇▇▇▇▇▇▇▇ and the Orthodontists (if any) to serve the
orthodontic needs of the patients of the New PC. The New PC
covenants to monitor rigorously utilization and quality of
services provided at the Orthodontic Offices and shall take all
steps necessary to remedy any and all deficiencies in the
efficiency or the quality of orthodontic care provided.
(c) During the Term of this Agreement, the New PC shall not,
directly or indirectly, own an interest in, operate, join,
control, participate in or be connected in any manner with any
corporation, partnership, proprietorship, firm, association,
person or entity providing orthodontic care in competition with
the practice at the Orthodontic Offices, or any other orthodontic
practice managed by the MSO, within a radius of 15 miles of the
Orthodontic Office or of such other orthodontic practice, without
the MSO's prior written consent.
(d) The New PC recognizes the proprietary interest of OMEGA in
and to its OMEGA Patient Scheduling System and the MSO in its
systems for managing the delivery of orthodontic care and all
policies, procedures, operating manuals, forms, contracts and
other information (collectively, the "MSO Information") regarding
such system. The New PC acknowledges and agrees that all
information relating to the OMEGA Patient Scheduling System and
the MSO Information constitutes trade secrets of OMEGA and/or the
MSO. The New PC hereby waives any and all right, title and
interest in and to such trade secrets and agrees to return all
copies of such trade secrets and information relating thereto, at
its expense, upon termination of this Agreement.
(e) The New PC acknowledges and agrees that OMEGA and the MSO
are entitled to prevent their respective competitors from
obtaining and utilizing their respective trade secrets. The New
PC agrees to hold OMEGA'S and the MSO's trade secrets in
strictest confidence and not to disclose them or allow them to be
disclosed directly or indirectly to any person or entity other
than persons who are engaged by the New PC to perform duties in
connection with the New PC and who have a need to know such trade
secrets in the performance of their duties for the New PC,
without OMEGA's or the MSO's prior written consent, as the case
may be. The New PC acknowledges its fiduciary obligations to
OMEGA and the MSO and the confidentiality of its relationships
with OMEGA and the MSO and of any information relating to the
services and business methods of OMEGA and the MSO which it may
obtain during the term of this Agreement. The New PC shall not,
either during the term of this Agreement or at any time after the
expiration or sooner termination hereof, disclose to anyone,
other than employees or independent contractors of OMEGA and the
MSO who use OMEGA's and the MSO's system in the course of the
performance of their duties, any confidential or proprietary
information or trade secrets obtained by the New PC. The New PC
also agrees to place any persons to whom said information is
disclosed for the purpose of performance under legal obligation
to treat such information as strictly confidential.
8.2 MSO's Covenants. As further consideration for the New PC's
performance of the terms and conditions of this Agreement, the
MSO covenants, represents and warrants (which covenants,
representations and warranties shall survive the execution of
this Agreement) that during the Term of this Agreement, the MSO
agrees not to establish, develop or open any offices in
affiliation with an orthodontist for the provision of orthodontic
services within a 15 mile radius of the Orthodontic Offices,
without the express written consent of the New PC.
ARTICLE 9
INSURANCE AND INDEMNITY
9.1 Insurance to be Maintained by the New PC. Throughout the
Term of this Agreement, the New PC shall maintain in full force
and effect comprehensive professional liability insurance with
limits of not less than $500,000 per occurrence and $1,000,000
annual aggregate per ▇▇. ▇▇▇▇▇▇▇▇▇ and each of the Orthodontists
providing services for the New PC and a separate limit for the
New PC. The New PC shall be responsible for all liabilities
within deductibles and for all liabilities in excess of the
limits of such policies. The MSO agrees to negotiate for and
cause premiums to be paid on behalf of the New PC with respect to
such insurance. Premiums and deductibles with respect to such
policies shall not be MSO Expenses. The New PC also agrees to
name the MSO and OMEGA as co-insureds. The New PC agrees to
deliver to the MSO and OMEGA a certificate of insurance
indicating such coverage.
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 New PC will cause ▇▇.
▇▇▇▇▇▇▇▇▇ and each Orthodontist (if any) providing services to
enter into an agreement with the New PC that upon termination of
▇▇. ▇▇▇▇▇▇▇▇▇'▇ or such Orthodontist's relationship with the New
PC, for any reason, tail insurance coverage will be purchased by
▇▇. ▇▇▇▇▇▇▇▇▇ or such Orthodontist. Such provisions may be
contained in an employment agreement, restrictive covenant
agreement or other agreement entered into by the New PC and ▇▇.
▇▇▇▇▇▇▇▇▇ or the Orthodontist, and the New PC hereby covenants
with the MSO to enforce such provisions relating to the tail
insurance coverage or to provide such coverage at the expense of
the New PC or ▇▇. ▇▇▇▇▇▇▇▇▇ or each such Orthodontist.
9.4 Additional Insureds. The New PC and the MSO agree to use
their reasonable efforts to have each other named as an
additional insured on the other's respective liability insurance
policies.
9.5 Indemnification. The New PC shall indemnify, hold harmless
and defend the MSO and OMEGA and their respective officers,
directors, shareholders, employees and representatives, from and
against any and all liability, losses, damages, claims, causes of
action, expenses judgments, settlements, lawsuits and obligations
(including reasonable attorneys' fees), whether or not covered by
insurance, caused or asserted to have been caused, directly or
indirectly, by or as a result of the performance of orthodontic
services or the performance of any intentional acts, negligent
acts or omissions by the New PC and/or its affiliates, its
shareholders, agents, the Practice Providers, its other employees
and/or its subcontractors (other than the MSO) during the Term
hereof. The MSO shall indemnify, hold harmless and defend the
New PC, its officers, directors, shareholders and employees, from
and against any and all liability, loss, damage, claim, causes of
action, and expenses (including reasonable attorneys' fees),
caused or asserted to have been caused, directly or indirectly,
by or as a result of the performance of any intentional acts,
negligent acts or omissions by the MSO and/or its shareholders,
agents, employees and/or subcontractors (other than the New PC)
during the Term hereof.
ARTICLE 10
TERMINATION
10.1 Termination by the New PC.
(a) Termination by the New PC. The New PC may terminate this
Agreement as follows:
(1) In the event of the filing of a petition in voluntary
bankruptcy or an assignment for the benefit of creditors by the
MSO, or upon other action taken or suffered, voluntarily or
involuntarily, under any federal or state law for the benefit of
debtors by the MSO, except for the filing of a petition in
involuntary bankruptcy against the MSO which is dismissed within
sixty (60) days thereafter, the New PC may give written notice of
the immediate termination of this Agreement.
(2) In the event the MSO shall materially default in the
performance of any duty or obligation imposed upon it by this
Agreement and such default shall continue for a period of sixty
(60) days after written notice thereof has been given to the MSO
by the New PC, the New PC may terminate this Agreement.
Upon termination of this Agreement by the Orthodontic Practice
under this Section 10.1, the New PC shall be entitled to exercise
the "Call Option," as defined in and on the terms and conditions
set forth in Section 3 of that certain Stock Put/Call Option and
Successor Designation Agreement (the "Stock Put/Call Option and
Successor Designation Agreement") dated as of even date herewith,
by and among the New PC, ▇▇. ▇▇▇▇▇▇▇▇▇ and the Orthodontists (if
any), OMEGA and the MSO.
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
New PC or any shareholders thereof , or upon other action taken
or suffered, voluntarily or involuntarily, under any federal or
state law for the benefit of debtors by the New PC or any
shareholders thereof, except for the filing of a petition in
involuntary bankruptcy against the New PC or any shareholder
thereof which is dismissed within sixty (60) days thereafter, MSO
may give written notice of the immediate termination of this
Agreement.
(b) In the event the New PC fails to perform orthodontic
services on a full-time basis consistent with its pattern of
practice in the immediately preceding calendar year and such
default shall continue for a period of ten (10) days after
written notice thereof has been given to the New PC by the MSO,
the MSO may terminate this Agreement.
(c) In the event the New PC shall materially default in the
performance of any other duty or obligation imposed upon it by
this Agreement, and such default shall continue for a period of
sixty (60) days after written notice thereof has been given to
the New PC by the MSO, the MSO may terminate this Agreement.
(d) In the event ▇▇. ▇▇▇▇▇▇▇▇▇ or any Orthodontist breaches or
defaults under his or her Employment Agreement and the New PC
does not cause ▇▇. ▇▇▇▇▇▇▇▇▇ or such Orthodontist to cure such
breach or default within any applicable grace period therefor,
the MSO may give written notice of the immediate termination of
this Agreement.
Upon termination of this Agreement by the MSO under this Section
10.2 or upon expiration of the Term of this Agreement, the MSO
and OMEGA shall be entitled to exercise the "Put Option" and/or
the "Successor Designation Option," as defined in and on the
terms and subject to the conditions set forth in Sections 2 and
5, respectively, of the Stock Put/Call Option and Designation
Agreement. In addition, upon any termination of this Agreement
or upon expiration of the Term of this Agreement, the MSO shall
be entitled to receive the Management Fees collected to the
effective date of such termination or expiration, the amounts of
any loans or advances (including any accrued but unpaid interest
thereon) and all other sums accrued or related to occurrences
arising at or prior to the date of termination.
ARTICLE 11
AUTHORIZED AGENT AND POWERS OF ATTORNEY
The New PC hereby designates the MSO (and its designees) its
authorized agent and lawful attorney-in-fact for purposes of
depositing payments, paying accounts payables, signing checks,
negotiating and signing contracts for services or goods, securing
loans or incurring obligations on behalf of the New PC; provided,
however, that all contracts or fees set for services on behalf of
the New PC will be subject to final approval and acceptance by
the New PC. Additionally, the New PC hereby irrevocably appoints
the MSO (and its designees) its authorized agent and lawful
attorney-in-fact to collect all bills and accounts receivable for
professional fees, charges and other amounts and authorizes the
MSO through its designees to take possession of all checks, money
orders and similar instruments received as payment of receivables
to be deposited into the New PC Account. The New PC hereby
irrevocably appoints the MSO as the New PC's attorney-in-fact,
with full power and authority in the place and stead of the New
PC, in the MSO's discretion, to endorse in the name of the New PC
any checks, payments, notes, insurance payments and money orders,
to withdraw funds for payments of expenses, including Management
Fees and other sums payable to the MSO, to open and close the New
PC Account and other bank accounts, to take any action and to
execute any other instrument which the MSO may deem necessary or
advisable to accomplish the purposes hereof. The powers of
attorney granted herein are coupled with an interest and are
irrevocable. Third parties and entities and persons not a party
to this Agreement are entitled to rely on the foregoing attorneys-
in-fact and an affidavit of the MSO attesting thereto. The
acceptance of this appointment by the MSO shall not obligate it
to perform any duty or covenant required to be performed by the
New PC under or by virtue of this Agreement. Notwithstanding the
foregoing powers of attorney, the New PC shall at any time, on
the request of the MSO, sign financing statements, security
agreements or other agreements necessary or advisable to
accomplish the purpose of this Agreement. Upon the New PC's
failure to sign said financing statements, security agreements or
other agreements, the MSO is authorized as the agent of the New
PC to sign any such instruments. The New PC may review all
deposits and expenses upon request.
ARTICLE 12
INDEPENDENT CONTRACTOR RELATIONSHIP
Neither the New PC nor its employees shall have any claim under
this Agreement or otherwise against the MSO for worker's
compensation, unemployment compensation, sick leave, vacation
pay, retirement benefits, Social Security benefits, or any other
employee benefits, all of which shall be the sole responsibility
of the New PC. Since neither the New PC nor its employees are
employees of the MSO, the MSO shall not withhold on behalf of the
New PC unemployment insurance, Social Security, or otherwise
pursuant to any law or requirement of any governmental agency,
and all such withholding, if any is required, shall be the sole
responsibility of the New PC.
ARTICLE 13
MISCELLANEOUS
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
New PC shall retain all patient dental records maintained by the
New PC or the MSO in the name of the New PC. During the term of
this Agreement, and thereafter, the New PC or its designee shall
have reasonable access during normal business hours to the New
PC's and the MSO's records, including, but not limited to,
records of collections, expenses and disbursements as kept by the
MSO in performing the MSO's obligations under this Agreement, and
the New PC may copy any or all such records.
13.3 The New PC's Control Over the Orthodontic Practice.
Notwithstanding the authority granted to the MSO herein, the MSO
and the New PC agree that the New PC, personally or through ▇▇.
▇▇▇▇▇▇▇▇▇ or any of its Orthodontists (if any) and other Practice
Providers, shall have complete control and supervision over the
professional aspects of the New PC's practice, as well as the
provision of all professional services, including, without
limitation, the selection of a course of treatment for a patient,
the procedures or materials to be used as a part of such course
of treatment, and the manner in which such course of treatment is
carried out by the New PC. The New PC shall have sole authority
to direct the business, professional, and ethical aspects of the
New PC. The MSO shall have no authority, directly or indirectly,
to perform, and shall not perform, any orthodontic function, or
to influence or otherwise interfere with the exercise of the New
PC's professional judgment. The MSO may, however, advise the New
PC as to the relationship between its performance of orthodontic
functions and the overall administrative and business functioning
of the New PC.
ARTICLE 14
ALTERNATIVE DISPUTE RESOLUTION
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 New PC to the MSO hereunder, and such
determination shall not be subject to the provisions of this
Section 14.1. Disputes as to the proper interpretation of the
provisions of this Agreement which describe how those amounts are
to be calculated, however, shall be subject to the provisions of
this Section 14.1.
(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 New PC, as the case may be. Notice in person, or by
telephone, telegram or electronic transmission shall be deemed
effective when given. Notice by mail shall be deemed effective
seventy-two (72) hours after deposit in the United States mails,
and properly addressed with postage prepaid.
Notices to the New PC shall be given as follows:
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S.
or such other address as may be furnished by the New PC to the MSO from
time to time in writing.
Notices to OMEGA and/or the MSO shall be given as follows:
Omega Orthodontics, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or other such addresses as may be furnished by the MSO to the New PC from
time to time in writing.
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
New PC and the MSO shall amend this Agreement as necessary. To
the maximum extent possible, any such amendment shall preserve
the underlying economic and financial arrangements between the
New PC and the MSO.
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 New PC under this Agreement shall in
any way or in any manner be deemed to create any obligation of
the MSO or of the New PC to, or any rights in, any person or
entity not a party to this Agreement other than OMEGA which shall
be deemed a party for limited purposes as set forth in this
Agreement.
15.6 Entire Agreement. This Agreement including the Schedules
and Exhibits hereto, together with the Stock Put/Call Option and
Successor Designation Agreement of even date herewith 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, including, without limitation, that certain
Interim Management Agreement between OMEGA and ▇▇. ▇▇▇▇▇▇▇▇▇
dated as of November 30, 1997. 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 New PC to any person, firm
or corporation controlled by the MSO, controlling the MSO or
under common control with the MSO.
15.8 Attorneys' Fees. If any mediation or arbitration or other
legal action or proceeding is brought to enforce this Agreement,
because of any alleged breach hereof, or for a declaration of any
rights and obligations hereunder, the prevailing party in such
mediation or arbitration, action or proceeding shall be entitled
to recover its costs incurred therein, including reasonable
attorneys' fees, in addition to any other relief to which it may
be entitled, all as determined and awarded by the parties in such
mediation or by the arbitrator or court as part of its judgment
or decision therein, as the case may be.
15.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State. The parties
acknowledge that the MSO is not authorized or qualified to engage
in any activity which may be construed or deemed to constitute
the practice of dentistry or orthodontics. To the extent any act
or service required of the MSO in this Agreement should be
construed or deemed, by any governmental authority, agency or
court to constitute the practice of dentistry or orthodontics,
the performance of said act or service by the MSO shall be deemed
waived and forever unenforceable and the provisions of Section
15.14 shall be applicable.
15.10 Events Excusing Performance. Neither party shall be
liable to the other party for failure to perform any of the
services required herein in the event of strikes, lock-outs,
calamities, acts of God, unavailability of supplies or other
events over which that party has no control for so long as such
events continue, and for a reasonable period of time thereafter.
15.11 Compliance with Applicable Laws. Both parties shall
comply with all applicable Laws and restrictions imposed
thereunder in the conduct of their obligations under this
Agreement.
15.12 Language Construction. The parties acknowledge that each
party and its counsel have reviewed and revised this Agreement
and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement.
15.13 Amendments. This Agreement may be 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.
NEW PC:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, P.C.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
MSO:
OMEGA ORTHODONTICS OF
WATERTOWN, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
OMEGA:
OMEGA ORTHODONTICS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
SCHEDULE 1
THE ORTHODONTISTS
Name and Address
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S.
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE 2
ORTHODONTIC OFFICES AND SERVICES
The office space and related leasehold improvements which the MSO
will provide to the New PC pursuant to Section 2.2 of the
Management Services Agreement to which this Schedule 2 is
attached is located at ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇. The related fixtures, furniture, furnishings and
equipment are set forth on the attached asset list. The services
to be provided by the MSO to the New PC in relation to the
Orthodontic Offices are the repair, maintenance and replacement
of the Orthodontic Offices, including such leasehold
improvements, fixtures, furniture, furnishings and equipment,
except for repairs, maintenance and replacement necessitated by
the negligence of the New PC, its employees and agents (not
including the MSO or its employees or agents). The MSO shall
also provide telephone, facsimile transmission, printing,
duplicating and transcribing services as needed, as well as all
laundry, linen and uniforms.
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 Seventy-Five Percent (75%)
of the Practice Revenues, and the New PC shall be entitled to
Twenty-Five Percent (25%) of such Practice Revenues, except as
the parties may otherwise agree from time to time in writing. At
the end of each twelve (12) month period during the Term, the MSO
shall provide the New PC with an unaudited internal accounting of
the MSO Expenses, prepared in accordance with the accrual method
of accounting. If the MSO Expenses as reflected in such
accounting as having been paid by the MSO are less than sixty
(60%) percent of the Practice Revenues for such twelve month
period, fifty (50%) percent of such difference shall be returned
by the MSO to the New PC as a profit incentive rebate (the
"Rebate"). If such MSO Expenses are more than sixty (60%)
percent of the Practice Revenues for such twelve month period,
fifty (50%) percent of such excess will be charged to the New PC
and recorded as a liability to be set off against future Rebates.
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 New PC
Account and allocate the proceeds between the MSO and the New PC
as described above, on or before the 15th day of the succeeding
month. In the event the 15th day falls on a weekend or holiday,
then said distribution shall be made on the next business day.
The parties hereto may agree to handle such matters in a
different manner.
For purposes of this Agreement, "Practice Revenues" shall mean
gross collections of all revenues generated by or on behalf of
the New PC (whether through subsidiaries or affiliates),
including, but not limited to, all fees and charges collected as
a result of professional orthodontic services furnished to
patients by the New PC and for any other goods or services sold
or provided to such patients.
EXHIBIT A
ORTHODONTIC OFFICES - MASTER LEASE
[▇▇. ▇▇▇▇▇▇▇▇▇ Attach]
EXHIBIT B
PRACTICE PROVIDERS
[▇▇. ▇▇▇▇▇▇▇▇▇ Attach]
EXHIBIT C
New PC'S AFFIDAVIT
AFFIDAVIT
I, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S., declare:
I am an orthodontist, duly licensed in the State of South Dakota
and I practice through a professional corporation under the name
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, P.C.(the "New 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 1, 1998, between
the New PC and Omega Orthodontics of Watertown, 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
Seventy-Five Percent (75%) of "Practice Revenues" to be charged
by the MSO as contemplated by the Agreement, will afford it a
reasonable but not excessive return for its services rendered and
obligations incurred. In addition, the New PC Twenty-Five
Percent (25%) of "Practice Revenues" retained by the New PC, will
provide reasonable earnings for the performance of orthodontic
services.
I declare under penalty of perjury that the foregoing statement
is true and correct to the best of my knowledge and belief.
Executed at _________________ this _____ day of December, 1997.
___________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S.
STATE OF SOUTH DAKOTA
___________________, ss _______________________, 199_
Then personally appeared the above-named ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S.
and acknowledged the foregoing Affidavit to be his free act and
deed.
[SEAL] ____________________________
Notary Public
My Commission Expires:
EXHIBIT D
SECURITY AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is effective as of the 1st day of January
1998, by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, P.C., a South Dakota corporation
(the "New PC"), and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S. ("▇▇. ▇▇▇▇▇▇▇▇▇") who
is duly licensed to practice orthodontics in the State and Omega
Orthodontics of Watertown, Inc., a Delaware corporation (the
"MSO") with reference to the following facts:
WHEREAS, pursuant to a Management Services Agreement (the
"Agreement"), dated as of the date hereof, between the New PC and
the MSO, as assurance and collateral security for the payment of
the monthly Management Fees owed to the MSO pursuant to the
Agreement and any funds advanced by the MSO to or on behalf of
the New PC pursuant to the Agreement and for the faithful and
timely performance of all the covenants and conditions to be
performed by the New PC under the Agreement (collectively, the
"Obligations") the New PC agreed to pledge, grant, bargain,
assign and transfer to the MSO a security interest, pursuant to
the Uniform Commercial Code of the State, in and to all Practice
Revenue and the accounts receivable of patients of the New PC,
together with all proceeds thereof (collectively, the
"Collateral");
WHEREAS, the New PC is obligated as a condition to the MSO's
performance under the Agreement to execute and deliver this
Security Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the
covenants and agreements hereinafter set forth, the parties
hereto agree as follows:
1. Grant of Security Interest. As and for collateral security
for payment by the New PC of the Obligations and any and all
amounts payable under this Security Agreement (collectively, the
"Secured Obligations"), the New PC hereby pledges, grants,
bargains, assigns and transfers to the MSO, and grants to the MSO
a security interest in, the Collateral. ▇▇. ▇▇▇▇▇▇▇▇▇ shall cause
the New PC to perform fully and on a timely basis all of the New
PC's obligations under this Security Agreement. The MSO may at
its option file a financing statement (Form UCC-1) in order to
perfect its security interest hereunder.
2. Representations and Warranties. The New PC represents and
warrants all of the accounts receivable constituting a portion of
the Collateral of the New PC pledged to the MSO are and will be
validly created obligations of each of the obligors who incurred
same for services actually rendered in the ordinary course of
business of the New PC. Further, the New PC represents and
warrants that the Collateral is not subject to any lien, pledge,
charge, encumbrance or security interest or right or option on
the part of any third person.
3. Release of Security Interest. Upon the termination of the
Agreement and payment in full of the accrued Management Fees
thereunder and any and all other Secured Obligations, the MSO
shall release its security interest hereunder, and will deliver
to the New PC any property forming part of the Collateral
delivered to the MSO and then held by the MSO hereunder.
4. Realization of Collateral. The MSO shall have, with
respect to the Collateral, the rights and obligations of a
secured party under the Uniform Commercial Code as adopted in the
state of South Dakota (the "State"). Such rights shall include,
without limitation, the following:
A. The right, upon default, to have the Collateral, or any
part thereof, transferred to its own name or to the name of its
nominee;
B. The right, upon default, to sell, assign or deliver as much
of the Collateral as is reasonably necessary to repay the
defaulted indebtedness (together with expenses attendant upon
such sale and repayment), at public or private sale, as the MSO
may elect, either for cash or on credit, without assumption of
any credit risk and without demand or advertisement (unless
otherwise required by law).
C. The New PC hereby irrevocably authorizes the MSO to sign
and file financing statements naming the New PC as the debtor and
the MSO as the secured party, at any time with respect to any
Collateral, without the signature of the New PC. The New PC
hereby irrevocably appoints the MSO as the New PC's attorney-in-
fact, with full authority in the place and stead of the New PC
and in the name of the New PC, from time to time in the MSO's
discretion, to take any action and to execute any instrument
which the MSO may deem necessary or advisable to accomplish the
purposes hereof. The attorney-in-fact granted herein is coupled
with an interest and is irrevocable. Third parties and entities
and persons not a party to this Security Agreement are entitled
to rely on this attorney-in-fact and an affidavit of the MSO
attesting thereto. The acceptance of this appointment by the MSO
shall not obligate it to perform any duty or covenant required to
be performed by the New PC under or by virtue of the Collateral.
Notwithstanding the foregoing power of attorney, the New PC shall
at any time on the request of the MSO, sign Financing Statements,
security agreements or other agreements with respect to any
Collateral. Upon the New PC's failure to sign said Financing
Statements, security agreements or other agreements, the MSO is
authorized as the agent of the New PC to sign any such
instruments. Upon the request of the MSO, the New PC agrees to
pay all filing fees and to reimburse the MSO on demand for all
costs and expenses of any kind (including, without limitation,
legal fees) incurred in any way in connection with the
Collateral.
5. Purchase of Collateral. At any such private or public sale
of the Collateral or part thereof, the MSO may purchase and pay
for the same by cancellation of such portion of the Obligations,
equal to the purchase price and free of any right of redemption
on the part of the New PC. The MSO agrees, however, that the New
PC shall have all rights, including rights of notice, provided by
the Uniform Commercial Code as adopted in the State. In any case
where notice is required, five days' notice shall be deemed
reasonable notice. In the event of any sale hereunder, the MSO
shall apply the proceeds in the order set forth below in
Paragraph 6 hereof. The MSO may have resort to the Collateral or
any portion thereof with no requirements on the part of the MSO
to proceed first against any other person or property.
6. Application of Collateral. Proceeds from the sale of the
Collateral or any part thereof shall be applied by the MSO in the
following order:
A. To the payment of the costs and expenses of collection
incurred by the MSO, including, without limitation, attorneys'
fees and all other reasonable expenses, liabilities and costs
incurred by the MSO in connection therewith;
B. To the payment of the whole amount then owing and unpaid
for advances and/or Management Fees;
C. To the payment in full of all other Obligations of the New
PC under the Agreement; and
D. To the payment to the New PC of any surplus then remaining
from such proceeds.
7. Extension of Agreement. No renewal or extension of the
Agreement, no release or surrender of any Collateral given as
security in connection therewith, and no delay in enforcement
thereof or in exercising any right or power with respect thereto
or hereunder shall affect the rights of the MSO with respect to
the Collateral or any part thereof.
8. Notices. Any notice to be given pursuant to this Agreement
shall be deemed effective the same day when such notice is given
personally, or by telegram, or electronic transmission to the
President of the party to whom notice is being given. Notice by
mail shall be deemed effective three days after deposit in the
United States mail, and properly addressed with postage prepaid.
Notices to the MSO shall be given at:
Omega Orthodontics of Watertown, Inc.
c/o Omega Orthodontics, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or other such addresses as may be delivered by the MSO to the New PC from
time to time in writing.
Notices to the New PC shall be given at:
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S.
or other such addresses as may be delivered by the New PC to the MSO from
time to time in writing.
9. Waiver. The waiver by either party to this Security
Agreement of any one or more defaults, if any, on the part of the
other party, shall not be construed to operate as a waiver of the
other or future defaults under this Agreement. This Security
Agreement may be amended or modified only by the written consent
of both parties.
10. Additional Documents. The New PC agrees that it will duly
execute and deliver to the MSO any additional documents which
may be reasonably necessary to give effect fully to the security
interest granted to the MSO hereunder, including, without
limitation, a financing statement on Form UCC-1.
11. Benefit. This Security Agreement shall inure to the
benefit of and shall be binding upon the respective heirs,
successors and assigns of the parties hereto.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State.
13. Defined Terms. Capitalized terms used in this Security
Agreement which are not defined herein but which are defined in
the Agreement, shall have the respective meanings ascribed
therein.
14. Counterparts. This Security 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 caused this
Agreement to be duly executed, as of the day and year first
hereinabove written.
NEW PC: MSO:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, P.C. OMEGA ORTHODONTICS OF
WATERTOWN, INC.
By:____________________________
By:__________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
Title: President Title: 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 Center for Public Resources, New York, New York ("CPR")
Panels of Neutrals or the American Arbitration Association
("AAA"), with the assistance of CPR or AAA, unless the parties
agree otherwise in finding a mutually acceptable mediator.
5. The New PC and the MSO shall each bear 50% of the fees and
costs of the mediator and any fees and costs of CPR or AAA.
6. The parties agree to participate in good faith in the
mediation and negotiations related thereto for a period of thirty
(30) days from appointment of a mediator by any of the parties or
the CPR or AAA.
B. Mediation procedures
1. The mediator shall be neutral and impartial.
2. The mediator shall control the procedural aspects of the
mediation. The parties will cooperate fully with the mediator.
(a) The mediator is free to meet and communicate
separately with each party.
(b) The mediator will decide when to hold joint
meetings with the parties and when to hold separate
meetings. There shall be no stenographic record of any
meeting. Formal rules of evidence will not apply.
(c) The mediator may request that there be no direct
communication between the parties or between their
attorneys without the concurrence of the mediator.
3. Each party may be represented by more than one person,
e.g., one or more of its officers and an attorney. Each party
will have a representative fully authorized to negotiate a
settlement of the dispute present.
4. The process will be conducted expeditiously.
5. The mediator will not transmit information received from
any party to another party or any third person unless authorized
to do so by the party transmitting the information.
6. The entire process is confidential. The parties and the
mediator will not disclose information regarding the process,
including settlement terms, to third persons, unless the parties
otherwise agree. The process shall be treated as a compromise
negotiation for purposes of the Federal Rules of Evidence and
state rules of evidence.
7. The parties will refrain from pursuing administrative
and/or judicial remedies during the mediation process, except as
otherwise expressly provided in the agreement which incorporates
these procedures.
8. Unless all parties and the mediator otherwise agree in
writing,
(a) The mediator will be disqualified as a witness,
consultant or expert in any pending or future
investigation, action or proceeding relating to the subject
matter of the mediation (including any investigation,
action or proceeding which involves persons not party to
this mediation); and
(b) The mediator and any documents and information in
the mediator's possession will not be subpoenaed in any
such investigation, action or proceeding, and all parties
will oppose any effort to have the mediator and documents
subpoenaed.
9. If the dispute goes into arbitration, the mediator shall
not serve as an arbitrator, unless the parties and the mediator
otherwise agree in writing.
10. The mediator, if a lawyer, may freely express views to the
parties on the legal issues of the dispute.
11. The mediator shall not be liable for any act or omission in
connection with the mediation.
12. The mediator may withdraw at any time by written notice to
the parties (i) for overriding personal reasons, (ii) if the
mediator believes that a party is not acting in good faith, or
(iii) if the mediator concludes that further mediation efforts
would not be useful.
C. Binding Arbitration
If the parties do not resolve the dispute through mediation
within the period provided in Part A above, the parties shall
submit the matter to binding arbitration in Boston, Massachusetts
before a qualified sole arbitrator in accordance with the then
current CPR Rules for Non-Administered Arbitration of Business
Disputes or comparable AAA rules. The sole arbitrator shall be
agreed upon by the parties within twenty (20) days after either
party elects to submit any issue to arbitration or, failing that,
shall be selected by CPR or AAA. A qualified arbitrator is one
who is familiar with the principal subject matter of the issues
to be arbitrated such as by way of example, healthcare services
industry matters, management consulting services generally or
business law/corporate matters generally. Judgment upon the award
rendered by the arbitrator may be entered in any court having
jurisdiction. The arbitrator shall not have the authority to
award multiple, punitive or consequential damages under any
circumstances.