EXHIBIT 10.38
iv
MANAGEMENT SERVICES AGREEMENT
BETWEEN
Xxxxxx X. Xxxx, D.D.S., M.S., Ltd.
(the "New PC")
AND
Omega Orthodontics of Reno, 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 Endodontic 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 4
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 9
3.1 General 9
3.2 Employment of the Endodontists and Rendering of Patient
Care 9
3.3 Professional Services 9
3.4 Records 9
3.5 Professional Expenses 10
3.6 Professional Liability Insurance 10
3.7 Employment Agreement 11
3.8 Confidentiality 11
ARTICLE 4 PROFESSIONAL SERVICES, CONTROL OF SOLICITATION,
APPROVAL OF ADVERTISING MATERIAL AND NO RECIPROCATION 12
ARTICLE 5 LEASE OF OFFICE FACILITIES AND EQUIPMENT 12
5.3. No Warranty. 15
ARTICLE 6 COMPENSATION 15
ARTICLE 7 SECURITY INTEREST 16
ARTICLE 8 COVENANTS 17
8.1 New PC's Covenants 17
8.2 MSO's Covenants 18
ARTICLE 9 INSURANCE AND INDEMNITY 18
9.1 Insurance to be Maintained by the New PC. 18
9.2 Insurance to be Maintained by the MSO 18
9.3 Tail Insurance Coverage 18
9.4 Additional Insureds 18
9.5 Indemnification 19
ARTICLE 10 TERMINATION 19
10.1 Termination by the New PC 19
10.2 Termination by MSO 20
ARTICLE 11 AUTHORIZED AGENT AND POWERS OF ATTORNEY 20
ARTICLE 12 INDEPENDENT CONTRACTOR RELATIONSHIP 21
ARTICLE 13 MISCELLANEOUS 21
13.1 Access to Records 21
13.2 Patient Records. 21
13.3 The New PC's Control Over the Endodontic Practice 22
ARTICLE 14 ALTERNATIVE DISPUTE RESOLUTION 22
14.1 Alternative Dispute Resolution 22
14.2 Waiver of Jury. 23
ARTICLE 15 GENERAL PROVISIONS 23
15.1 Notices Error!
15.2 Confidentiality 21
15.3 Contract Modifications for Prospective Legal Events 21
15.4 Remedies Cumulative 21
15.5 No Obligation to Third Parties 21
15.6 Entire Agreement 21
15.7 Assignment. 21
15.8 Attorneys' Fees 22
15.9 Governing Law 22
15.10 Events Excusing Performance 22
15.11 Compliance with Applicable Laws 22
15.12 Language Construction 22
15.13 Amendments 22
15.14 Severability. 22
15.15 No Waiver 22
15.16 Captions 23
15.17 Counterparts 23
SCHEDULE 1 THE ENDODONTISTS
SCHEDULE 2 ENDODONTIC OFFICES AND SERVICES
SCHEDULE 3 COMPENSATION - MANAGEMENT FEES
EXHIBIT A ENDODONTIC 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 Xxxxxx X. Xxxx, D.D.S., M.S., Ltd., a
professional corporation (the "New PC") incorporated under the
laws of the State of Nevada (the "State"), and Omega Orthodontics
of Reno, Inc., a Delaware corporation (the "MSO"), and Omega
Orthodontics, Inc., a Delaware corporation ("OMEGA").
WHEREAS, OMEGA provides professional management and marketing
services to endodontic and other dental specialty 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
such practices and are provided directly or indirectly through
management service organizations such as the MSO;
WHEREAS, OMEGA and Xxxxxx X. Xxxx, D.D.S. ("Xx. Xxxx") who is
duly licensed to practice endodontics 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 Xx.
Xxxx;
WHEREAS, the New PC owns and operates an endodontic practice
with offices located in the facilities identified in Exhibit A
(the "Endodontic Offices") and furnishes endodontic care to the
general public through the services of Xx. Xxxx and any and all
other Endodontists 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
"Endodontist" and collectively, the "Endodontists");
WHEREAS, the MSO was formed and acquired to provide equipment,
facilities and personnel to, and to manage the non-endodontic
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 Xx. Xxxx and the Endodontists (if any) to render
quality endodontic 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 endodontic facilities appropriate for rendering
general endodontic treatment at the Endodontic 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
endodontic practice at the Endodontic 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-endodontic
business affairs of the New PC and carry out the MSO's endodontic
duties under this Agreement, subject to the requirements of the
applicable provisions of State law relating to the practice of
endodontics. The MSO may perform some or all of its services at
a location other than at the Endodontic Offices.
2.2 Endodontic Office Services. The MSO shall provide or
arrange for the provision of the office space and related
leasehold improvements to constitute the Endodontic Offices and
related fixtures, furniture, furnishings, equipment and related
services (collectively, the "Endodontic 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
Endodontic 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
Endodontic 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 endodontic and treatment services. The MSO
shall be responsible for staff scheduling, provided, however,
that all Practice Providers including endodontic 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 Endodontic 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 endodontics in the
State including Xx. Xxxx and the Endodontists (if any) and other
individuals who are employees of the New PC or otherwise under
contract with the New PC to provide dental or endodontic,
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
endodontic supplies as reasonably required by the New PC to
enable the New PC to render endodontic care to its patients
including, without limitation, all endodontic 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 Xx. Xxxx and the Endodontists (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 endodontic 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 xxxx 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 Xx. Xxxx and the Endodontists (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
from its own funds (whether received pursuant to Section
2.8(b)(2) hereof or from other sources unrelated to the New PC)
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 Xx. Xxxx and all the Endodontists (if any) and
other Practice Providers);
(2) Direct costs of all employees or consultants of the
MSO who provide services at the Endodontic 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 Endodontic
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 Endodontic
Offices as well as utility expenses relating to the Endodontic
Offices;
(5) Personal property and intangible taxes assessed
against the MSO's assets used in connection with the operation of
the Endodontic Offices, commencing on the date of this Agreement;
(6) In the event an opportunity arises for additional
Endodontists to become employed by the New PC or other endodontic
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, Xx. Xxxx and the Endodontists (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
Xx. Xxxx and the Endodontists (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. 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 Xx.
Xxxx and the Endodontists (if any) on establishing and
maintaining a plan for patients' payments for endodontic services
on an installment plan basis. All marketing activities hereunder
shall be conducted in compliance with all applicable Laws
governing advertising by the endodontic 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 endodontic
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 Endodontic 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. Xx. Xxxx and
the Endodontists (if any) shall keep the MSO informed of
retirement goals on an ongoing basis; provided, however, that Xx.
Xxxx shall continue as a full time employee of the New PC,
actively engaged in the practice of endodontics, for a period of
five (5) years following the date of this Agreement, after which
time Xx. Xxxx may notify the MSO of his intent to retire. Upon
request of the New PC, the MSO will conduct a search for an
appropriate endodontist 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. In the event
that Xx. Xxxx has notified the MSO of his intent to retire and a
successor endodontist has not been designated by the MSO pursuant
to the Stock Put/Call Option and Successor Designation Agreement
of even date herewith (the "Stock Put/Call Option and Successor
Designation Agreement") by and among the New PC, Xx. Xxxx and the
Endodontists (if any), OMEGA and the MSO within two years of such
notice, thereafter the New PC may terminate this Agreement
pursuant to Section 10.1 hereof and exercise the "Call Option,"
as defined in and on the terms and conditions set forth in
Section 3 of the Stock Put/Call Option and Successor Designation
Agreement; provided, however, that if after such two year period
Xx. Xxxx locates an endodontist who has made a bona fide offer to
purchase the New PC for not less than its fair market value
(valued as if it were a traditional (i.e. not operated with a
MSO) practice holding both the clinical assets then held by the
New PC and the non-clinical assets then held by the MSO and
provided to the New PC) but is unwilling to affiliate with the
MSO and OMEGA by assuming this Agreement, OMEGA will cause the
MSO to sell such non-clinical assets directly to such endodontist
for a price equal to such fair market value of the New PC, such
price to be paid to the MSO and provided further that, if so
requested by Xx. Xxxx, OMEGA will provide reasonable market
financing to permit the New PC to be sold to such endodontist.
In the event that the parties have not located an endodontist to
purchase the New PC either as an OMEGA affiliate or as a
traditional practice (referred to above) within one year
following the expiration of the two year period referred to
above, Xx. Xxxx may repurchase the assets of the MSO identified
in Section 3(a) of the Stock Put/Call and Successor Designation
Agreement for their then book value and the MSO will cancel his
non-competition agreement.
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 Endodontic Office, in
accordance with the requirements of the Laws of the State.
3.2 Employment of the Endodontists and Rendering of Patient
Care. The New PC shall be responsible for the employment and
professional supervision of Xx. Xxxx and all Endodontists and the
other Practice Providers and all endodontic care rendered to
patients shall be rendered by Xx. Xxxx and such Endodontists.
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
Endodontic Offices designated on Schedule 2 hereof exclusively
for the practice and rendering of endodontic services, and shall
comply with all applicable Laws and all standards of endodontic
care. It is expressly acknowledged by the parties that the
endodontic practice conducted at the Endodontic Offices shall be
conducted solely by Xx. Xxxx and the Endodontists and the other
Practice Providers acting under the supervision and control of
Xx. Xxxx and the Endodontists (if any), and no other endodontist
shall be permitted to use or occupy the Endodontic Offices. The
New PC shall provide professional services to patients hereunder
in compliance at all times with ethical standards and Laws
applying to the endodontic profession. The New PC shall ensure
that Xx. Xxxx and each Endodontist who provides endodontic
services to patients is licensed by the State. In the event that
any disciplinary, medical malpractice or other actions are
initiated against Xx. Xxxx or any Endodontist 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 endodontics. 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 Endodontist
and other Practice Provider employed by the New PC. The New PC
shall ensure that Xx. Xxxx and all the Endodontists employed by
the New PC participate in such continuing education as is
necessary for Xx. Xxxx and such the Endodontist 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 Endodontists is insurable, and
that Xx. Xxxx and each Endodontist 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 endodontic practice to which it, Xx. Xxxx
and each Endodontist 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 Xx. Xxxx and each individual Endodontist 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
Xx. Xxxx or the Endodontist shall agree not to establish, operate
or provide endodontic or dental services, without the prior
written consent of both the New PC and the MSO, at any office or
facility other than the Endodontic Office. In addition, such
Employment Agreement shall provide by its own terms or by a
separate agreement that if Xx. Xxxx'x or such Endodontist's
employment shall terminate for any reason (other than a breach of
this Agreement by the MSO or OMEGA) during the Term of this
Agreement, for a period of 24 months after the termination of Xx.
Xxxx'x or such Endodontist's Employment Agreement with the New
PC, Xx. Xxxx or such Endodontist shall agree not to establish,
operate or provide endodontic 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 endodontic 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 Xx. Xxxx'x or the Endodontist'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) Xx. Xxxx'x or such Endodontist'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 Xx. Xxxx
or the breaching Endodontist 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 Xx. Xxxx and each
Endodontist 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 defined as "Confidential Information" in paragraph
10.7 of the Affiliation Agreement 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 (except Xx. Xxxx and his partners,
employees and professional advisors on a "need to know" basis)
without the express prior written consent of the MSO; and (ii) to
impose this obligation of confidentiality on Xx. Xxxx and his
partners, employees and professional advisors. 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 Xx. Xxxx and his
partners, employees and professional advisors to immediately
return to the MSO all Confidential Information, and the New PC
will not, and will cause Xx. Xxxx and his partners, employees and
professional advisors 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 endodontic 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 Endodontic 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 Endodontic Offices, and the leasehold improvements and
fixtures, furniture and equipment at the Endodontic 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 endodontic 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 Endodontic Office") within a radius of 15 miles of
the Endodontic Office, which Substitute Endodontic 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 Endodontic 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 Endodontic Office for
purposes of this Agreement, ab initio.
(vi) INTENTIONALLY OMITTED.
5.2 The MSO shall provide the New PC at the Endodontic 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
ENDODONTICS 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 endodontics.
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 Endodontic 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 Endodontic Offices are located. The MSO has also
assumed substantial obligations associated with the continuing
operation of the Endodontic Offices, including those of lessee,
obligor and guarantor and obligor on loans to establish and
operate the Endodontic 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 endodontics
and to cause all of its employees to do the same.
(b) The New PC shall provide quality services and shall cause
Xx. Xxxx and the Endodontists (if any) to serve the endodontic
needs of the patients of the New PC. The New PC covenants to
monitor rigorously utilization and quality of services provided
at the Endodontic Offices and shall take all steps necessary to
remedy any and all deficiencies in the efficiency or the quality
of endodontic 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 endodontic care in competition with
the practice at the Endodontic Offices, or any other endodontic
practice managed by the MSO, within a radius of 15 miles of the
Endodontic Office or of such other endodontic 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 endodontic 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 endodontist for the provision of endodontic
services within a 15 mile radius of the Endodontic 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 Xx. Xxxx and each of the Endodontists
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 Endodontic Office premises and operations.
9.3 Tail Insurance Coverage. The New PC will cause Xx. Xxxx
and each Endodontist (if any) providing services to enter into an
agreement with the New PC that upon termination of Xx. Xxxx'x or
such Endodontist's relationship with the New PC, for any reason,
tail insurance coverage will be purchased by Xx. Xxxx or such
Endodontist. Such provisions may be contained in an employment
agreement, restrictive covenant agreement or other agreement
entered into by the New PC and Xx. Xxxx or the Endodontist, 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 Xx. Xxxx or each
such Endodontist.
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 endodontic
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.
(3) In the event that, pursuant to Section 2.19 hereof,
Xx. Xxxx has notified the MSO of his intent to retire and a
successor endodontist has not been designated by the MSO pursuant
to the Stock Put/Call Option and Successor Designation Agreement
within two years of such notice.
Upon termination of this Agreement by the Endodontic 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 the Stock Put/Call Option and Successor
Designation Agreement.
10.2 Termination by MSO. MSO may terminate this Agreement as
follows:
(a) In the event of the filing of a petition in voluntary
bankruptcy or an assignment for the benefit of creditors by the
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 endodontic
services on a full-time basis consistent with its pattern of
practice in the immediately preceding calendar year (other than
as a result of the death or disability of Xx. Xxxx, neither of
which shall permit the MSO to terminate this Agreement) 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. Notwithstanding the
foregoing, the parties understand and agree that in no event
shall the retirement of Xx. Xxxx following the designation of a
successor endodontist pursuant to the Stock Put/Call Option and
Successor Designation Agreement constitute grounds for
termination under this Section 10.2(b).
(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 Xx. Xxxx or any Endodontist breaches or
defaults under his or her Employment Agreement and the New PC
does not cause Xx. Xxxx or such Endodontist 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 Endodontic Practice.
Notwithstanding the authority granted to the MSO herein, the MSO
and the New PC agree that the New PC, personally or through Xx.
Xxxx or any of its Endodontists (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 endodontic 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 endodontic
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 independent accountants then
employed by the MSO as to the calculation of any and all fees
owed by any party to another party 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 or other communication in
connection with this Agreement shall be deemed to be
delivered if in writing (or in the form of a telegram or
facsimile transmission) addressed as provided below and if
either (a) actually delivered at said address, or (b) in the
case of a letter, three business days shall have elapsed
after the same shall have been deposited in the United
States mail, postage prepaid and registered or certified,
return receipt requested, or sent by reputable overnight
courier:
If to Xx. Xxxx, to:
Xxxxxx X. Xxxx, D.D.S.
0000 Xxxxxxxx Xxxxxx - Xxxxx 0
Xxxx, Xxxxxx 00000
If to the OMEGA, to:
Omega Orthodontics, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx
and in any case at such other address as the addressee shall have
specified by written notice. All periods of notice shall be
measured from the date of delivery thereof.
15.2 INTENTIONALLY OMITTED.
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 Affiliation Agreement of
even date herewith, 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. 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 INTENTIONALLY OMITTED.
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 endodontics. 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 endodontics, 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.
INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the day and year first above written.
NEW PC:
XXXXXX X. XXXX, D.D.S., M.S., LTD.
By: /s/ Xxxxxx X. Xxxx
Name: Xxxxxx X. Xxxx
Title: President
MSO:
OMEGA ORTHODONTICS OF
RENO, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: President
OMEGA:
OMEGA ORTHODONTICS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: President
SCHEDULE 1
THE ENDODONTISTS
Name and Address
Xxxxxx X. Xxxx, D.D.S.
0000 Xxxxxxxx Xxxxxx - Xxxxx 0
Xxxx, Xxxxxx 00000
SCHEDULE 2
ENDODONTIC 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 are
located at 0000 Xxxxxxxx Xxxxxx, Xxxxx 0, Xxxx, Xxxxxx 00000.
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 Endodontic
Offices are the repair, maintenance and replacement of the
Endodontic 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, (a)
during the Term of this Agreement, monthly Management Fees in an
amount equal to Sixty Five Percent (65%) of the Practice Revenues
plus (b) during the first thirty six (36) months of this
Agreement only, a monthly start up management fee in an amount
equal to $8,333.33, and the New PC shall be entitled to Thirty
Five Percent (35%) of such monthly Practice Revenues, less the
start up management fee during the first thirty six (36) months
of this Agreement, except as the parties may otherwise agree from
time to time in writing; provided, however, that in no event
shall the MSO receive less than $200,000 in Management Fees (not
including the start up management fees during the first thirty
six (36) months of this Agreement) annually. At the end of each
twelve (12) month period during the Term, the MSO shall provide
the New PC with an unaudited internal accounting of the MSO
Expenses, prepared in accordance with the accrual method of
accounting. If the MSO Expenses as reflected in such accounting
as having been paid by the MSO are less than fifty (50%) percent
of the Practice Revenues for such twelve month period, fifty
(50%) percent of such difference shall be returned by the MSO to
the New PC as a profit incentive rebate (the "Rebate"). If such
MSO Expenses are more than fifty (50%) percent of the Practice
Revenues for such twelve month period, fifty (50%) percent of
such excess will be charged to the New PC and set off against
payments due to the New PC hereunder. If the Agreement to which
this Schedule 3 is attached is terminated or expires, the
foregoing Management Fees (including any start up 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 endodontic services furnished to
patients by the New PC and for any other goods or services sold
or provided to such patients.
EXHIBIT A
ENDODONTIC OFFICES - MASTER LEASE
EXHIBIT B
PRACTICE PROVIDERS
Xxxxxx X. Xxxx, D.D.S.
0000 Xxxxxxxx Xxxxxx - Xxxxx 0
Xxxx, Xxxxxx 00000
EXHIBIT C
New PC'S AFFIDAVIT
AFFIDAVIT
I, Xxxxxx X. Xxxx, D.D.S., declare:
I am an endodontist, duly licensed in the State of Nevada and I
practice through a professional corporation under the name Xxxxxx
X. Xxxx, D.D.S., M.S., Ltd. (the "New PC").
I have had substantial experience in the practice of endodontics
and in managing and operating an endodontic office.
In the course of operating endodontic offices, I have acquired
significant knowledge as to the overhead costs incurred and gross
receipts generated by similar types of endodontic offices.
Further, I am fully aware of the non-endodontic, operational,
accounting, billing, financing, management and personnel
requirements of an endodontic 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 Reno, Inc. (the "MSO")
concerning the duties, responsibilities and obligations
undertaken by the MSO in managing and operating all non-
endodontic aspects of the Endodontic Office as contemplated by
the Agreement.
I have reviewed the prior operating financial statements of the
endodontic office located at 0000 Xxxxxxxx Xxxxxx - Xxxxx 0,
Xxxx, Xxxxxx 00000 and an operating budget and estimated income
of the endodontic office, which, in my opinion, can reasonably be
expected from the operation of said office.
In my opinion, based upon my experience, the Management Fees of
Sixty Five Percent (65%) of "Practice Revenues" to be charged by
the MSO as contemplated by the Agreement (plus the monthly start
up management fee of $8,333.33 payable during each of the first
thirty six (36) months of the Agreement), will afford it a
reasonable but not excessive return for its services rendered and
obligations incurred. In addition, the Thirty Five Percent (35%)
of "Practice Revenues" (less the start up management fees due
during the first thirty six (36) months of this Agreement)
retained by the New PC will provide reasonable earnings for the
performance of endodontic 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 Reno, Nevada this ____ day of January 1998..
___________________________
Xxxxxx X. Xxxx, D.D.S.
STATE OF NEVADA
___________________, ss January ___, 1998
Then personally appeared the above-named Xxxxxx X. Xxxx, 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 Xxxxxx X. Xxxx, D.D.S., M.S., Ltd., a Nevada corporation
(the "New PC"), and Xxxxxx X. Xxxx, D.D.S. ("Xx. Xxxx") who is
duly licensed to practice endodontics in the State and Omega
Orthodontics of Reno, 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. Xx. Xxxx 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 Nevada (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 Reno, Inc.
c/o Omega Orthodontics, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
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:
0000 Xxxxxxxx Xxxxxx - Xxxxx 0
Xxxx, Xxxxxx 00000
Attn: Xxxxxx X. Xxxx, 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:
XXXXXX X. XXXX, D.D.S., M.S., LTD. OMEGA ORTHODONTICS OF
RENO, INC.
By:____________________________
By:__________________________
Name: Xxxxxx X. Xxxx Name: Xxxxxx X.
Xxxxxxxx
Title: President Title: President
XX. XXXX
_______________________________
Xxxxxx X. Xxxx, 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.
