EXHIBIT 10.32
iv
MANAGEMENT SERVICES AGREEMENT
BETWEEN
Xxxx X. Xxxxxxx, D.M.D., P.C.
(the "New PC")
AND
Omega Orthodontics of Conyers, Inc.
(the "MSO")
AND
Omega Orthodontics, Inc.
("OMEGA")
MANAGEMENT SERVICES AGREEMENT
TABLE OF CONTENTS
ARTICLE 1 TERM 3
ARTICLE 2 DUTIES OF THE MSO 3
2.1 GENERAL 3
2.2 ORTHODONTIC OFFICE SERVICES 3
2.3 ADMINISTRATIVE SERVICES 3
2.4 BUSINESS SYSTEMS, PROCEDURES AND FORMS 4
2.5 PURCHASING, ACCOUNTS PAYABLE, SUPPLIES AND INVENTORY
CONTROL 5
2.6 REGULATORY COMPLIANCE SERVICES 5
2.7 BILLING, COLLECTION 5
2.8 DISBURSEMENT OF FUNDS 6
2.9 MSO EXPENSES 6
2.10 CREDIT REPORT 8
2.11 ACCOUNTING; BOOKKEEPING AND REPORTS 8
2.12 MARKETING 9
2.13 COMPLAINTS 9
2.14 PRACTICE LAWS 9
2.15 MONTHLY MEETINGS 9
2.16 MAINTENANCE AND CLEANING SERVICES 9
2.17 LICENSES AND PERMITS 10
2.18 INSURANCE 10
2.19 PRACTICE TRANSITION AND ASSOCIATE SELECTION 10
ARTICLE 3 DUTIES OF THE NEW PC 10
3.1 GENERAL 10
3.2 EMPLOYMENT OF THE ORTHODONTISTS AND RENDERING OF
PATIENT CARE. 11
3.3 PROFESSIONAL SERVICES 11
3.4 RECORDS 11
3.5 PROFESSIONAL EXPENSES 12
3.6 PROFESSIONAL LIABILITY INSURANCE 12
3.7 EMPLOYMENT AGREEMENT 12
3.8 CONFIDENTIALITY 13
ARTICLE 4 PROFESSIONAL SERVICES, CONTROL OF SOLICITATION,
APPROVAL OF ADVERTISING MATERIAL AND NO RECIPROCATION 13
ARTICLE 5 LEASE OF OFFICE FACILITIES AND EQUIPMENT 14
5.3. NO WARRANTY 16
ARTICLE 6 COMPENSATION 17
ARTICLE 7 SECURITY INTEREST 17
ARTICLE 8 COVENANTS 18
8.1 NEW PC'S COVENANTS 18
8.2 MSO'S COVENANTS 19
ARTICLE 9 INSURANCE AND INDEMNITY 21
9.1 INSURANCE TO BE MAINTAINED BY THE NEW PC 21
9.2 INSURANCE TO BE MAINTAINED BY THE MSO 21
9.3 TAIL INSURANCE COVERAGE 21
9.4 ADDITIONAL INSUREDS 21
9.5 INDEMNIFICATION 21
ARTICLE 10 TERMINATION 22
10.1 TERMINATION BY THE NEW PC 22
10.2 TERMINATION BY MSO 23
ARTICLE 11 AUTHORIZED AGENT AND POWERS OF ATTORNEY 24
ARTICLE 12 INDEPENDENT CONTRACTOR RELATIONSHIP 24
ARTICLE 13 MISCELLANEOUS 25
13.1 ACCESS TO RECORDS 25
13.2 PATIENT RECORDS 25
13.3 THE NEW PC'S CONTROL OVER THE ORTHODONTIC PRACTICE 25
ARTICLE 14 ALTERNATIVE DISPUTE RESOLUTION 25
14.1 ALTERNATIVE DISPUTE RESOLUTION 25
14.2 WAIVER OF JURY 26
ARTICLE 15 GENERAL PROVISIONS 26
15.1 NOTICES 26
15.2 CONFIDENTIALITY 28
15.3 CONTRACT MODIFICATIONS FOR PROSPECTIVE LEGAL EVENTS28
15.4 REMEDIES CUMULATIVE 28
15.5 NO OBLIGATION TO THIRD PARTIES 28
15.6 ENTIRE AGREEMENT 29
15.7 ASSIGNMENT 29
15.8 ATTORNEYS' FEES 29
15.9 GOVERNING LAW 29
15.10 EVENTS EXCUSING PERFORMANCE 29
15.11 COMPLIANCE WITH APPLICABLE LAWS 30
15.12 LANGUAGE CONSTRUCTION 30
15.13 AMENDMENTS 30
15.14 SEVERABILITY 30
15.15 NO WAIVER 30
15.16 CAPTIONS 30
15.17 COUNTERPARTS 30
SCHEDULE 1 THE ORTHODONTISTS
SCHEDULE 2 ORTHODONTIC OFFICES AND SERVICES
SCHEDULE 3 COMPENSATION - MANAGEMENT FEES
EXHIBIT A ORTHODONTIC OFFICES - MASTER LEASE
EXHIBIT B PRACTICE PROVIDERS
EXHIBIT C NEW PC'S AFFIDAVIT
EXHIBIT D SECURITY AGREEMENTS
EXHIBIT E ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT is made effective as of this 1st
day of January, 1998, by and between Xxxx X. Xxxxxxx,
D.M.D., P.C., a professional corporation (the "New PC")
incorporated under the laws of the State of Georgia (the
"State"), and Omega Orthodontics of Conyers, Inc., a
Delaware corporation (the "MSO"), and Omega Orthodontics,
Inc., a Delaware corporation ("OMEGA").
WHEREAS, OMEGA provides professional management
and marketing services to orthodontic practices in the
United States, which services include providing practice
management systems, office space, equipment, furnishings and
active administrative personnel necessary for the operation
of orthodontic practices and are provided directly or
indirectly through management service organizations such as
the MSO;
WHEREAS, OMEGA and Xxxx X. Xxxxxxx, D.D.S. ("Xx.
Xxxxxxx") who is duly licensed to practice orthodontics in
the State have entered into that certain Affiliation
Agreement and Asset Purchase Agreement (the "Affiliation
Agreement") dated as of December 29, 1997, pursuant to which
OMEGA acquired certain assets of Xx. Xxxxxxx;
WHEREAS, the New PC owns and operates an
orthodontic practice with offices located in the facilities
identified in Exhibit A (the "Orthodontic Offices") and
furnishes orthodontic care to the general public through the
services of Xx. Xxxxxxx and any and all other orthodontists
who are or become affiliated with the New PC as of or
following the date hereof and who are or become subsequently
named on Schedule 1 hereto (individually, an "Orthodontist"
and collectively, the "Orthodontists");
WHEREAS, the MSO was formed and acquired to
provide equipment, facilities and personnel to, and to
manage the non-orthodontic business affairs of, the New PC;
WHEREAS, the MSO's services are designed to
improve the efficiency and profitability of the New PC while
enhancing the ability of Xx. Xxxxxxx and the Orthodontists
(if any) to render quality orthodontic care to the patients
of the New PC;
WHEREAS, the New PC wishes to retain the MSO to
perform the functions and to provide the services described
in this Agreement to assist the New PC to achieve the above
goals.
NOW, THEREFORE, IT IS AGREED that the MSO shall
perform managerial and administrative services for the New
PC and provide office space and orthodontic facilities
appropriate for rendering general orthodontic treatment at
the Orthodontic Offices upon the following terms and
conditions:
ARTICLE 1
TERM
1.1 The initial term of this Agreement shall
commence on the date first above written and continue for a
period of twenty (20) years (the "Initial Term"), subject,
however, to earlier termination in accordance with Article
10 hereof. This Agreement shall continue for two separate
and successive ten year periods (each a "Renewal Term" and
collectively with the Initial Term, the "Term") unless the
MSO otherwise elects upon six months written notice to the
New PC prior to expiration of the Initial Term or any then
effective Renewal Term.
ARTICLE 2
DUTIES OF THE MSO
2.1 General. The MSO shall provide the New PC
with comprehensive practice management, financial and
marketing services, and such facilities, equipment, and
support personnel as are reasonably required by the New PC
to operate its orthodontic practice at the Orthodontic
Offices, as determined by the MSO in consultation with the
New PC. The New PC hereby appoints the MSO as the sole and
exclusive business manager of the New PC and agrees that the
MSO shall have all power and authority reasonably necessary
to manage the non-orthodontic business affairs of the New PC
and carry out the MSO's orthodontic duties under this
Agreement, subject to the requirements of the applicable
provisions of State law relating to the practice of
orthodontics. The MSO may perform some or all of its
services at a location other than at the Orthodontic
Offices.
2.2 Orthodontic Office Services. The MSO shall
provide or arrange for the provision of the office space and
related leasehold improvements to constitute the Orthodontic
Offices and related fixtures, furniture, furnishings,
equipment and related services (collectively, the
"Orthodontic Office Services") described in Schedule 2
hereto, as such Schedule may be amended by the New PC and
the MSO from time to time. The MSO shall be responsible for
all repairs, maintenance and replacement of the Orthodontic
Offices including such leasehold improvements, fixtures,
furniture, furnishings and equipment, except for repairs,
maintenance and replacement necessitated by the negligence
of the New PC, its employees and agents (not including the
MSO or its employees or agents). The MSO shall, on an
ongoing basis, evaluate and consult with the New PC on the
equipment needs of and the efficiency and adequacy of the
Orthodontic Offices. The MSO shall provide telephone,
facsimile transmission, printing, duplicating and
transcribing services as needed, as well as all laundry,
linen and uniforms.
2.3 Administrative Services
(a) The MSO shall supply secretarial, reception,
maintenance, front office, skilled assistants and other
personnel, except duly licensed "Practice Providers," during
normal office hours as reasonably requested by the New PC,
to enable the New PC to perform effectively orthodontic and
treatment services. The MSO shall be responsible for staff
scheduling, provided, however, that all Practice Providers
including orthodontic assistants and hygienists shall be
under the direct supervision of the New PC. The New PC
shall have sole authority to employ and terminate the
employment of all Practice Providers. All personnel placed
in the Orthodontic Offices by the MSO shall be subject to
the approval of the New PC, which approval shall not be
unreasonably withheld, and the New PC shall have the
authority to instruct the MSO to terminate the employment of
such personnel for any lawful reason. The MSO shall be
responsible for all personnel wages, withholding, fringe
benefits, bonuses and workers' compensation insurance in
connection with its employees; provided, however, that the
New PC is in full compliance with the compensation
provisions of this Agreement.
(b) "Practice Providers" shall mean the
individuals who are duly licensed to practice dentistry
and/or orthodontics in the State including Xx. Xxxxxxx and
the Orthodontists (if any) and other individuals who are
employees of the New PC or otherwise under contract with the
New PC to provide dental or orthodontic, hygienic or other
assistance or services to patients of the New PC or
otherwise required by applicable "Laws" (as defined in
Section 2.6 below) to be employees of the New PC to provide
services to patients of the Practice. A list of all
Practice Providers and their relationship to the New PC is
set forth as Exhibit B attached hereto and incorporated
herein by reference. Prior to making any changes in the
list of Practice Providers, the New PC shall use its best
efforts to consult with the MSO. The New PC also shall use
its best efforts to consult with the MSO with regard to the
terms of contracts entered into between the New PC and the
Practice Providers and the terms and conditions of their
employment or engagement as independent contractors.
2.4 Business Systems, Procedures and Forms. In
consultation with the New PC, the MSO shall establish
standardized business systems and procedures for the New PC,
including, but not limited to, patient scheduling systems,
treatment records system, financial reporting and process
control systems and patient communication management systems
(the "OMEGA Patient Scheduling System") that are designed to
improve the New PC operating efficiency. The MSO shall
analyze such information on an ongoing basis in order to
advise the New PC on ways of improving operating
efficiencies. The MSO shall provide training to the staff
of the New PC in the implementation and operation of such
standardized business systems and procedures. The MSO shall
additionally provide the New PC with and train the New PC's
staff in the use of standardized clinical forms, including,
without limitation, forms for patient evaluations and
treatment plans. The New PC expressly acknowledges and
agrees that it shall have no property rights in the OMEGA
Patient Scheduling System and the other foregoing systems,
procedures and clinical forms, and further agrees that such
systems, procedures, and forms shall be deemed to constitute
Confidential Information within the meaning of Section 3.8
hereof and be subject to the restrictions on the use,
appropriation, and reproduction of such Confidential
Information provided for in Section 3.8.
2.5 Purchasing, Accounts Payable, Supplies and
Inventory Control. The MSO shall be responsible for and
shall establish and maintain systems for the handling and
processing of all purchasing and payment activities and for
the performance of all payroll and payroll accounting
functions of the New PC. The MSO shall order and purchase
and maintain all inventory and orthodontic supplies as
reasonably required by the New PC to enable the New PC to
render orthodontic care to its patients including, without
limitation, all orthodontic appliances and other supplies,
laboratory supplies and sanitation supplies.
2.6 Regulatory Compliance Services. The MSO
shall arrange for or cause to be rendered to the New PC such
business, legal and regulatory management consultation and
advice as may be reasonably required or requested by the New
PC and directly related to the operations of the New PC or
its compliance with Federal, state or local laws, rules,
regulations or interpretations governing or applicable to
the New PC (collectively, "Laws"); provided, however, that
the MSO shall not be responsible for any services related to
malpractice or other professional service claims or matters
not directly related to the operation of the New PC or its
compliance with Laws, or for any legal or tax advice or
services or personal financial services to Xx. Xxxxxxx and
the Orthodontists (if any) or any employee or agent of the
New PC.
2.7 Billing, Collection. The MSO shall be
responsible for: (i) billing and collecting payments for all
orthodontic and other professional services rendered by the
New PC and the Practice Providers, with all such billing and
collecting to be done in the name of the New PC; (ii)
receiving payments from patients, insurance companies and
all other third party payors; (iii) taking possession of and
endorsing in the name of the New PC any notes, checks, money
orders, insurance payments and other instruments received in
payment for services or of accounts receivable; and (iv)
settling and compromising claims and, where deemed
appropriate by the MSO and consented to (which consent shall
not be unreasonably withheld or delayed) by the Practice
Provider rendering the professional services which resulted
in the applicable accounts receivable, assigning such
accounts receivable to a collection agency or the bringing
of a legal action against a patient or a payor on the New
PC's behalf. In seeking payments on behalf of the New PC
hereunder, the MSO shall act as the New PC's agent in
billing and collecting professional fees, charges and other
accounts owed to the New PC and shall only 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. Xxxxxxx and
the Orthodontists (if any) and the other Practice Providers
of the New PC, and all withholding taxes and assessments
payable to Federal, state and local governments in
connection with the employment of such personnel; and
(2) All compensation payable to the MSO
pursuant to Article 6 hereof.
(c) In the event the funds in the New PC Account
will, at any time be insufficient to cover the current
portion of the foregoing expenses when payable, the MSO may
advance to the New PC the necessary funds to pay the current
portion of such expenses for the benefit of the New PC,
which advances will be deemed to be loans to the New PC to
be repaid without interest from the New PC Account at such
times as there are adequate funds therein or upon such other
terms and at such times as agreed to by the New PC and the
MSO, which indebtedness shall not be deemed an MSO Expense
for purposes of Section 2.9.
2.9 MSO Expenses. The MSO shall be responsible
for the payment of all MSO Expenses, as defined below,
during the term of this Agreement without reimbursement by
the New PC, unless otherwise agreed to by the parties
hereto.
(a) "MSO Expenses" shall mean all operating and
non-operating expenses initiated by, and 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. Xxxxxxx and all the
Orthodontists (if any) and other Practice Providers);
(2) Direct costs of all employees or
consultants of the MSO who provide services at the
Orthodontic Offices or in connection with the New PC
required for improved clinic performance, such as work
management, materials management, purchasing, charge and
coding analysis, and business office consultation;
(3) Direct costs associated with operating
the Orthodontic Offices, including without limitation,
utilities, cleaning and maintenance;
(4) Obligations of the MSO under leases or
subleases entered into in connection with the operation of
the Orthodontic Offices as well as utility expenses relating
to the Orthodontic Offices;
(5) Personal property and intangible taxes
assessed against the MSO's assets used in connection with
the operation of the Orthodontic Offices, commencing on the
date of this Agreement;
(6) In the event an opportunity arises for
additional Orthodontists to become employed by the New PC or
other orthodontic entities to merge with the New PC, actual
out-of-pocket expenses of the MSO personnel working on a
specified employment arrangement or merger, whether or not
such employment arrangement or merger is consummated;
(7) Other expenses incurred by the MSO in
carrying out its obligations under this Agreement, but
excluding any corporate overhead costs of the MSO or any
corporation affiliated with the MSO not specifically listed
above.
"MSO Expenses" shall not include:
(1) Any Federal, state or local income taxes
of the New PC, Xx. Xxxxxxx and the Orthodontists (if any)
and the other Practice Providers, or the costs of preparing
Federal, state or local tax returns thereof;
(2) Salaries, benefits and other direct
costs of employing Xx. Xxxxxxx and the Orthodontists (if
any) and the other Practice Providers;
(3) Physician licensure fees, board
certification fees and costs of membership in professional
associations and societies for Practice Providers;
(4) Professional liability insurance for the
Practice Providers as provided for under Section 3.6 hereof;
(5) Costs of continuing professional
education for Practice Providers, including travel and
related expenses;
(6) Costs associated with legal, accounting
and professional services incurred by or on behalf of the
New PC other than as otherwise expressly provided for in
Section 2.6 hereof;
(7) Liability judgments assessed against the
New PC or the Practice Providers in excess of policy limits
or within the deductible limits of any policy;
(8) Direct personal expenses of the Practice
Providers of a kind which the New PC may have historically
provided or charged to its Practice Providers (including,
but not limited to, car allowances and other expenses which
are personal in nature);
(9) Charitable contributions by the New PC;
(10) Costs of any merger or acquisition or
litigation expenses attributable to the MSO, OMEGA or any
entity that controls, is controlled by or is under common
control with either or both of them and which costs or
expenses do not arise out of or in connection with any
merger or acquisition to which the New PC is a party or any
litigation involving the New PC or its operation; and
(11) Any operating or non-operating expenses
incurred in the operation of the New PC which are not
otherwise initiated or approved by the New PC and other
expenses which are expressly designated herein as expenses
or responsibilities of the New PC.
2.10 Credit Report. When requested by the New PC,
or its authorized representative, the MSO shall obtain on
behalf of the New PC information with regard to the ability
of patients to pay for the services to be rendered by the
New PC. The MSO shall collect all information and
determine, to the best of its ability, whether or not
patients can pay for services rendered by the New PC, either
in cash or by insurance. Such determination shall be
subject to the reasonable approval by the New PC, and as
between the New PC and the MSO, the New PC shall bear the
risk of claims by potential patients who may be denied
credit.
2.11 Accounting; Bookkeeping and Reports. The MSO
shall provide for or arrange for all accounting and
bookkeeping services related to the New PC's operations,
provided that such services are incurred in the ordinary
course of business. In addition, the MSO shall provide the
New PC with an unaudited internal monthly statement within
twenty (20) days after the end of each month and a quarterly
review within thirty (30) days after the end of each
quarter, respectively, of the MSO's internal statements, as
well as the books and records of the New PC, all prepared by
or with the assistance of an accountant chosen by the MSO.
The New PC shall be responsible for preparing and filing its
own Federal, state and local tax returns. At the end of
each fiscal year of the New PC, the MSO shall arrange for a
financial statement with respect to the New PC to be
prepared by the MSO's accountant. At the New PC's request,
the MSO shall prepare reports indicating the gross revenues,
number of patients, type of patients, and the activity and
the productivity of the New PC. The MSO shall assist and
advise the New PC in the financial management of the New PC.
2.12 Marketing. The MSO shall design and execute
a marketing plan to promote the New PC's professional
services. The MSO shall also make available to the New PC
all brochures, contracts, and other materials reasonably
related to the carrying out of the business purposes of the
New PC, including all stationery, printing and postage costs
in connection therewith. In connection with such marketing
plan, the MSO shall advise Xx. Xxxxxxx and the Orthodontists
(if any) on establishing and maintaining a plan for
patients' payments for orthodontic services on an
installment plan basis. All marketing activities hereunder
shall be conducted in compliance with all applicable Laws
governing advertising by the orthodontic profession.
2.13 Complaints. The MSO shall assist the New PC
in handling all complaints, grievances and disputes
involving the New PC and the Practice Providers and any
patients or third parties. However, the MSO shall have no
control over the New PC's patients. All decisions
concerning the New PC's patients shall be made by the New PC
and the Practice Providers.
2.14 Practice Laws. Notwithstanding any provision
in this Agreement, the MSO shall not take any action in
connection with the services to be rendered hereunder that
violates any Law, including, without limitation, the
performance of any task or the taking of any action which
violates the Business and Professions Code of the State as
it relates to professional orthodontic practices.
2.15 Monthly Meetings. The MSO shall initiate
monthly or more frequent meetings with the New PC regarding
the policies and procedures for the operation of the New PC.
2.16 Maintenance and Cleaning Services. The MSO
shall arrange for security, maintenance and cleaning of the
Orthodontic Offices, including the furniture, fixtures and
equipment therein.
2.17 Licenses and Permits. The MSO shall provide
and pay for all business and other licenses and permits as
necessary to operate the New PC except those related to
licensure and certifications of the Practice Providers. The
MSO shall prepare and file all reports, forms and returns
required by Law in connection with workers' compensation,
unemployment insurance, social security and other similar
Laws with respect to the MSO's employees.
2.18 Insurance. The MSO shall provide and pay for
customary office property damage and liability, including
business interruption insurance, not including professional
liability insurance (which shall be and remain the
responsibility of the New PC).
2.19 Practice Transition and Associate Selection.
Xx. Xxxxxxx and the Orthodontists (if any) shall keep the
MSO informed of retirement goals on an ongoing basis. Upon
request of the New PC, the MSO will conduct a search for an
appropriate orthodontist and other professionals
(collectively, "Practice Associates") for the purposes of
accommodating practice growth, reducing doctor work
schedule, or planned retirement. Such search shall include
use by the MSO of a national journal advertising program and
networking in the profession to locate appropriate Practice
Associates. The MSO estimates that it could take
approximately two years for such a search.
The MSO will provide screening of all applicants and will
then present appropriate applicants for final selection by
the New PC. The New PC shall be responsible for
interviewing and selecting each Practice Associate.
After the Practice Associate(s) is (are) selected by the New
PC, the MSO will assist the New PC with a trial plan of
approximately six months for the new Practice Associate(s).
It is understood that at the end of this period either the
New PC or the new Practice Associate may terminate the
relationship. All such Practice Associates recruited by the
MSO as may be accepted by the New PC shall be employees of
the Practice (if so employed) and not of the MSO. The MSO
will confer with the New PC on an appropriate salary/work-in
arrangement for the new Practice Associate and the final
arrangements shall be determined by the New PC.
ARTICLE 3
DUTIES OF THE NEW PC
3.1 General. The New PC shall be responsible for
the management of its practice and the Orthodontic Office,
in accordance with the requirements of the Laws of the
State.
3.2 Employment of the Orthodontists and Rendering
of Patient Care. The New PC shall be responsible for the
employment and professional supervision of Xx. Xxxxxxx and
all Orthodontists and the other Practice Providers and all
orthodontic care rendered to patients shall be rendered by
Xx. Xxxxxxx and such Orthodontists. Additionally, the New
PC shall be responsible for the professional supervision of
all other Practice Providers in their rendering of patient
care.
3.3 Professional Services. The New PC shall use
and occupy the Orthodontic Offices designated on Schedule 2
hereof exclusively for the practice and rendering of
orthodontic services, and shall comply with all applicable
Laws and all standards of orthodontic care. It is expressly
acknowledged by the parties that the orthodontic practice
conducted at the Orthodontic Offices shall be conducted
solely by Xx. Xxxxxxx and the Orthodontists and the other
Practice Providers acting under the supervision and control
of Xx. Xxxxxxx and the Orthodontists (if any), and no other
orthodontist shall be permitted to use or occupy the
Orthodontic Offices. The New PC shall provide professional
services to patients hereunder in compliance at all times
with ethical standards and Laws applying to the orthodontic
profession. The New PC shall ensure that Xx. Xxxxxxx and
each Orthodontist who provides orthodontic services to
patients is licensed by the State. In the event that any
disciplinary, medical malpractice or other actions are
initiated against Xx. Xxxxxxx or any Orthodontist or other
Practice Provider, the New PC shall immediately inform the
MSO of such action and the underlying facts and
circumstances subject to such confidentiality agreement or
arrangements as the New PC and the MSO shall mutually
determine at or prior to the time of such disclosure. The
New PC agrees to cooperate with and participate in quality
assurance/utilization review programs established by the MSO
or mandated by accreditation and licensure standards
applicable to the practice of orthodontics. Deficiencies
discovered in the performance of any personnel or in the
quality of professional services shall be reported
immediately to the MSO, and appropriate steps shall be taken
by the New PC at once to remedy such deficiencies.
3.4 Records. The New PC will keep or cause to be
kept accurate, complete and timely dental and other records
of all patients. The management of all dental and patient
files and records shall comply with all applicable Laws
regarding their confidentiality and retention and all files
and records shall be located so that they are readily
accessible for patient care, consistent with ordinary
records management practices. Such records shall be
sufficient to enable the MSO, on behalf of the New PC, to
obtain payments for services and related charges and to
facilitate the delivery of quality patient care by the New
PC. Notwithstanding the foregoing, patient dental records
shall be and remain the property of the New PC and the
contents thereof shall be solely the responsibility of the
New PC.
3.5 Professional Expenses. The New PC shall be
solely responsible for the cost of professional licensure
fees and board certification fees, membership in
professional associations and continuing professional
education incurred by each Orthodontist and other Practice
Provider employed by the New PC. The New PC shall ensure
that Xx. Xxxxxxx and all the Orthodontists employed by the
New PC participate in such continuing education as is
necessary for Xx. Xxxxxxx and such the Orthodontists to
remain current.
3.6 Professional Liability Insurance. The New PC
shall provide, or arrange for the provision of, and maintain
throughout the Term of this Agreement, professional
liability insurance coverage in accordance with the
provisions of Article 9 hereof. The New PC shall also
cooperate in any programs recommended by the MSO to assure
that each of its Orthodontists is insurable, and that Xx.
Xxxxxxx and each Orthodontist participates in an on-going
risk management program.
3.7 Employment Agreement. The parties recognize
that the services to be provided by the MSO are feasible
only if the New PC operates an active orthodontic practice
to which it, Xx. Xxxxxxx and each Orthodontist associated
with the New PC devote their full time and attention, unless
other specific provisions are made in writing and mutually
agreed upon by the MSO and New PC. The New PC will cause
Xx. Xxxxxxx and each individual Orthodontist who now is or
hereafter becomes affiliated with the New PC to enter into a
written employment agreement (the "Employment Agreement")
satisfactory in form and substance to the MSO, pursuant to
which Xx. Xxxxxxx or the Orthodontist shall agree not to
establish, operate or provide orthodontic or dental
services, without the prior written consent of both the New
PC and the MSO, at any office or facility other than the
Orthodontic Office. In addition, such Employment Agreement
shall provide by its own terms or by a separate agreement
that if Xx. Xxxxxxx'x or such Orthodontist's employment
shall terminate for any reason during the Term of this
Agreement, for a period of 24 months after the termination
of Xx. Xxxxxxx'x or such Orthodontist's Employment Agreement
with the New PC, Xx. Xxxxxxx or such Orthodontist shall
agree not to establish, operate or provide orthodontic or
dental services, without the prior written consent of both
the New PC and the MSO, at any office practice or facility
whatsoever providing services similar to those provided by
the New PC at any orthodontic office within a fifteen (15)
mile radius. Such Employment Agreement (or separate
agreement) shall also provide, among other things, that in
the event of a breach of Xx. Xxxxxxx'x or the Orthodontist's
agreement not to compete with the New PC provided for in
such Employment Agreement (or separate agreement), the MSO
shall be entitled to receive, in addition to other remedies
and not by way of an election of remedies, liquidated
damages equaling the greater of: (a) Xx. Xxxxxxx'x or such
Orthodontist's income, as shown on the W-2 form prepared by
the New PC, for the most recent calendar year; or (b)
$300,000. Such payment shall be made to the MSO by the New
PC immediately following receipt of the payment from Xx.
Xxxxxxx or the breaching Orthodontist by the New PC. Each
of the MSO and OMEGA shall be expressly named as a third-
party beneficiary to such agreements between the New PC and
Xx. Xxxxxxx and each Orthodontist and the rights and
remedies of the MSO and OMEGA thereunder or otherwise in
respect of the restrictive covenants set forth in such
agreements shall survive termination of this Agreement.
3.8 Confidentiality. The New PC agrees and
acknowledges that all forms, manuals, policies and
procedures provided by the MSO to the New PC constitute
"Confidential Information" and are disclosed in confidence
and with the understanding that it constitutes valuable
business information developed by the MSO with the
assistance of OMEGA at great expenditures of time, effort
and money. The New PC further agrees that it shall not,
directly or indirectly, without the express prior written
consent of the MSO, use or disclose such Confidential
Information for any purpose other than in connection with
the services to be rendered hereunder. The New PC further
agrees: (i) to keep strictly confidential and hold in trust
all Confidential Information and not disclose such
Confidential Information to any third party (except Xx.
Xxxxxxx 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. Xxxxxxx and his
partners, 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.
Xxxxxxx 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.
Xxxxxxx 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 orthodontic services
shall be separate and independent from the provision of
administrative, management and support services by the MSO.
Thus, the New PC shall have sole and absolute control of the
delivery of all professional services and treatment rendered
to patients at the Orthodontic Offices.
4.2 No employee or other representative of the
MSO shall be engaged in, or allowed to solicit patients on
behalf of, the New PC, nor shall the MSO have any control
over the New PC's patients.
4.3 No advertising or promotional materials, or
other materials of any nature, including billing and
collection forms, reports, agreements, correspondence, or
similar materials, used in connection with the New PC shall
be used or distributed without having first been approved by
the New PC.
4.4 The parties hereby acknowledge and agree that
the benefits conferred upon each of them hereunder neither
require nor are in any way contingent upon the admission,
recommendation, referral, or any other arrangement for the
provision of any item or service offered by the MSO to any
patients of the New PC or its shareholders, officers,
directors, employees, contractors or agents, nor are such
benefits in any way contingent upon the recommendation,
referral or any other arrangement for the provision of any
item or service offered by the New PC or any of its Practice
Providers, employees, contractors or agents.
ARTICLE 5
LEASE OF OFFICE FACILITIES AND EQUIPMENT
5.1 In consideration of the sums to be paid to
the MSO under the terms of this Agreement, the MSO hereby
leases or sub-leases, as applicable, to the New PC during
the Term of this Agreement the Orthodontic Offices, and the
leasehold improvements and fixtures, furniture and equipment
at the Orthodontic Offices as listed from time to time on
Schedule 2 attached hereto and incorporated herein by this
reference, under the following terms and conditions:
(a) The MSO is the lessee by assignment under
lease for the premises occupied by the New PC (collectively,
the "Master Lease") a copy of which is attached hereto as
Exhibit A and incorporated herein by this reference. The
New PC hereby acknowledges that the premises described under
the Master Lease are suitable for the New PC's orthodontic
practice. Based and contingent upon the New PC's promise to
timely pay all amounts due under this Agreement, the MSO
hereby agrees to sublease the leased premises to the New PC
upon the following terms and conditions:
(i) This sublease between the MSO and the New PC
of the premises shall be subject to all of the terms and
conditions of the Master Lease. In the event of the
termination of the MSO's interest as lessee under the Master
Lease for any reason, then the sublease created hereby shall
simultaneously terminate, unless the New PC assumes the
obligations under the Master Lease in question and the
Lessor consents thereto.
(ii) All of the terms and conditions contained in
the Master Lease are incorporated herein as terms and
conditions of the sublease (with each reference therein to
"Lessor" and "Lessee," to be deemed to refer to the MSO and
the New PC, respectively) and, along with the provisions of
this Section 5.1(b) and Exhibit "A," shall be the complete
terms and conditions of the sublease created hereby.
(iii) Notwithstanding the foregoing, as
between the MSO and the New PC, the MSO shall remain
responsible for meeting the obligations of "Lessee" under
the sections entitled Rent, Additional Rent Adjustment,
Insurance on Fixtures, Liability Insurance, Repairs, and
Taxes of the Master Lease, all of which obligations shall be
considered MSO Expenses hereunder and the New PC shall have
no monetary obligation in that regard. In addition, as
between the MSO and the New PC, the MSO shall retain the
right to exercise any options to purchase the premises, or
other similar rights of ownership or possession, which may
be granted under the Master Lease, and the New PC shall have
no rights in that regard.
(iv) In the event this Agreement is terminated
according to its terms, this sublease shall also terminate
automatically.
(v) If the Master Lease contains an option to
renew the terms thereof, the MSO shall notify the New PC, at
least 30 days prior to the expiration of the time for
exercising such option, of the MSO's intention to renew or
not to renew such term. If the MSO determines not to renew
such term, the MSO shall provide or arrange for the
provision of comparable office space (the "Substitute
Orthodontic Office") within a radius of 15 miles of the
Orthodontic Office, which Substitute Orthodontic Office
shall be subject to the approval of the New PC (which
approval shall not be unreasonably withheld or delayed).
The lease or sublease for such Substitute Orthodontic
Office, as applicable, shall be substituted for the lease
described on Exhibit A hereto and all references to the
"Master Lease" shall thereafter be applicable to the lease
or sublease for the Substitute Orthodontic Office for
purposes of this Agreement, ab initio.
(vi) The Alternative Dispute Resolution provisions
set forth in Article 14 of this Agreement shall not apply to
any issues concerning the Sub-Lease, the New PC's tenancy or
the MSO's rights and remedies as Sub-Lessor.
5.2 The MSO shall provide the New PC at the
Orthodontic Offices such additional leasehold improvements,
fixtures, furniture, furnishings and equipment as may be
mutually agreed to with the New PC and reflected from time
to time on a supplement to Schedule 2 hereto. The use by the
New PC of all leasehold improvements, fixtures, furniture,
furnishings and equipment provided hereunder shall be
subject to the following conditions:
(a) Title to all such leasehold improvements,
fixtures, furnishings, furniture and equipment shall remain
in the MSO and upon termination of this Agreement, the New
PC shall immediately return and surrender all such leasehold
improvements, fixtures, furniture, furnishings and equipment
to the MSO in as good condition as when received, normal
wear and tear excepted.
(b) The MSO shall be fully and entirely
responsible for all repairs and maintenance of all such
leasehold improvements, fixtures, furniture, furnishings and
equipment; provided, however, that the New PC agrees that it
will use its best efforts to prevent damage, excessive wear,
and breakdown of all such leasehold improvements, fixtures,
furniture, furnishings and equipment, and shall advise the
MSO of any and all needed repairs and equipment failures.
(c) The obligation of the MSO to provide the
leasehold improvements, fixtures, furniture, furnishings and
equipment stated herein shall be concurrent and co-extensive
with the Term of this Agreement.
5.3. No Warranty.
(a) THE NEW PC ACKNOWLEDGES THAT THE MSO MAKES
NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO
THE SUITABILITY OR ADEQUACY OF ANY LEASEHOLD IMPROVEMENTS,
FIXTURES, FURNITURE, FURNISHINGS, EQUIPMENT, INVENTORY OR
SUPPLIES PROVIDED OR LEASED OR SUBLEASED PURSUANT TO THIS
AGREEMENT FOR THE CONDUCT OF AN ORTHODONTICS PRACTICE OR FOR
ANY OTHER PARTICULAR PURPOSE.
(b) Nothing in this Agreement shall be construed
to affect or limit in any way the professional discretion of
the Practice Providers to select and use fixtures,
furniture, furnishings and equipment, inventory and supplies
purchased or provided by the MSO in accordance with the
provisions of this Agreement insofar as such selection or
use constitutes or might constitute the practice of
dentistry or orthodontics.
ARTICLE 6
COMPENSATION
As consideration for the performance of all of its
duties and obligations as provided in this Agreement,
including but not limited to, the costs and expenses
associated with furnishing the services, personnel,
facilities, leasehold improvements, fixtures, furniture,
furnishings, equipment, inventories and supplies provided
for herein, the MSO shall receive compensation in the form
of monthly management fees (the "Management Fees") based
upon a predetermined percentage of the "Practice Revenues",
as defined and determined in accordance with the provisions
set forth in Schedule 3 attached hereto and incorporated
herein by this reference, as such Schedule may be amended by
the New PC and the MSO from time to time. It is
acknowledged by and between the parties hereto that the MSO
and/or its affiliates has (have) incurred substantial
expenses and future obligations in acquiring the capital
stock of the MSO, acquiring or otherwise establishing the
Orthodontic Offices, establishing its systems, including
fees for consultants and other professionals, interest
expense, lease obligations, and costs of furnishing or
refurbishing the premises at which the Orthodontic Offices
are located. The MSO has also assumed substantial
obligations associated with the continuing operation of the
Orthodontic Offices, including those of lessee, obligor and
guarantor and obligor on loans to establish and operate the
Orthodontic Offices. The parties, therefore, having
considered various compensation formulae, acknowledge and
agree that in order for the MSO to receive a fair and
reasonable return for its expenses and obligations, and a
fair return for the lease of the premises and equipment and
for providing the services contemplated hereunder, that the
agreed compensation is not excessive. The New PC
acknowledges that the compensation arrangement is reasonable
under the circumstances noted herein and has executed an
Affidavit attesting to this fact which is attached hereto
and incorporated herein as Exhibit C. In consideration of
the foregoing, the parties agree that the monthly Management
Fees payable to the MSO by the New PC for services rendered
pursuant to this Agreement shall be reviewed and subject to
adjustment in accordance with the terms specified in
Schedule 3 attached hereto. 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
7.1 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-1 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.
7.2 As assurance and collateral security for the
payment of the monies owed by OMEGA to Xx. Xxxxxxx as
evidenced by the Purchase Note (as defined in the
Affiliation Agreement), OMEGA hereby pledges, grants,
bargains, assigns and transfers to Xx. Xxxxxxx a security
interest, pursuant to the Uniform Commercial Code of the
State, in and to all leasehold improvements, fixtures,
furnishings, furniture and equipment now or hereafter
located at the Orthodontic Offices (collectively, the
"Office Collateral"), and further agrees not to pledge,
assign, transfer or convey any of the Office Collateral or
any proceeds therefrom, without the prior written consent of
Xx. Xxxxxxx, except to affiliates or subsidiaries of OMEGA.
Concurrent with the execution of this Agreement, OMEGA shall
execute a Security Agreement, similar in form and content as
that attached hereto as Exhibit D-2 and incorporated herein
by this reference in order that Xx. Xxxxxxx may perfect his
interest in the Office Collateral. OMEGA expressly agrees
to execute any appropriate UCC-1 Financing Statement and UCC-
1 Fixture filings, if so requested in writing by Xx.
Xxxxxxx.
ARTICLE 8
COVENANTS
8.1 New PC's Covenants. As further consideration
for the MSO's performance of the terms and conditions of
this Agreement, the New PC covenants, represents and
warrants as follows (which covenants, representations and
warranties shall survive the execution of this Agreement):
(a) The New PC shall comply with all Laws and
ethical and professional standards applicable to the
practice of orthodontics and to cause all of its employees
to do the same.
(b) The New PC shall provide quality services and
shall cause Xx. Xxxxxxx and the Orthodontists (if any) to
serve the orthodontic needs of the patients of the New PC.
The New PC covenants to monitor rigorously utilization and
quality of services provided at the Orthodontic Offices and
shall take all steps necessary to remedy any and all
deficiencies in the efficiency or the quality of orthodontic
care provided.
(c) During the Term of this Agreement, the New PC
shall not, directly or indirectly, own an interest in,
operate, join, control, participate in or be connected in
any manner with any corporation, partnership,
proprietorship, firm, association, person or entity
providing orthodontic care in competition with the practice
at the Orthodontic Offices, or any other orthodontic
practice managed by the MSO, within a radius of 15 miles of
the Orthodontic Office or of such other orthodontic
practice, without the MSO's prior written consent.
(d) The New PC recognizes the proprietary
interest of OMEGA in and to its OMEGA Patient Scheduling
System and the MSO in its systems for managing the delivery
of orthodontic care and all policies, procedures, operating
manuals, forms, contracts and other information
(collectively, the "MSO Information") regarding such system.
The New PC acknowledges and agrees that all information
relating to the OMEGA Patient Scheduling System and the MSO
Information constitutes trade secrets of OMEGA and/or the
MSO. The New PC hereby waives any and all right, title and
interest in and to such trade secrets and agrees to return
all copies of such trade secrets and information relating
thereto, at its expense, upon termination of this Agreement.
(e) The New PC acknowledges and agrees that OMEGA
and the MSO are entitled to prevent their respective
competitors from obtaining and utilizing their respective
trade secrets. The New PC agrees to hold OMEGA'S and the
MSO's trade secrets in strictest confidence and not to
disclose them or allow them to be disclosed directly or
indirectly to any person or entity other than persons who
are engaged by the New PC to perform duties in connection
with the New PC and who have a need to know such trade
secrets in the performance of their duties for the New PC,
without OMEGA's or the MSO's prior written consent, as the
case may be. The New PC acknowledges its fiduciary
obligations to OMEGA and the MSO and the confidentiality of
its relationships with OMEGA and the MSO and of any
information relating to the services and business methods of
OMEGA and the MSO which it may obtain during the term of
this Agreement. The New PC shall not, either during the
term of this Agreement or at any time after the expiration
or sooner termination hereof, disclose to anyone, other than
employees or independent contractors of OMEGA and the MSO
who use OMEGA's and the MSO's system in the course of the
performance of their duties, any confidential or proprietary
information or trade secrets obtained by the New PC. The
New PC also agrees to place any persons to whom said
information is disclosed for the purpose of performance
under legal obligation to treat such information as strictly
confidential.
8.2 MSO's Covenants. As further consideration
for the New PC's performance of the terms and conditions of
this Agreement, the MSO covenants, represents and warrants
(which covenants, representations and warranties shall
survive the execution of this Agreement) that during the
Term of this Agreement, the MSO agrees not to establish,
develop or open any offices in affiliation with an
orthodontist for the provision of orthodontic services
within a 15 mile radius of the Orthodontic Offices, without
the express written consent of the New PC.
ARTICLE 9
INSURANCE AND INDEMNITY
9.1 Insurance to be Maintained by the New PC.
Throughout the Term of this Agreement, the New PC shall
maintain in full force and effect comprehensive professional
liability insurance with limits of not less than $500,000
per occurrence and $1,000,000 annual aggregate per Xx.
Xxxxxxx and each of the Orthodontists providing services for
the New PC and a separate limit for the New PC. The New PC
shall be responsible for all liabilities within deductibles
and for all liabilities in excess of the limits of such
policies. The MSO agrees to negotiate for and cause
premiums to be paid on behalf of the New PC with respect to
such insurance. Premiums and deductibles with respect to
such policies shall not be MSO Expenses. The New PC also
agrees to name the MSO and OMEGA as co-insureds. The New PC
agrees to deliver to the MSO and OMEGA a certificate of
insurance indicating such coverage.
9.2 Insurance to be Maintained by the MSO.
Throughout the Term of this Agreement, the MSO will use
reasonable efforts to provide and maintain, as a MSO
Expense, (a) comprehensive professional liability insurance
for all professional employees of the MSO with limits as
determined reasonable by the MSO; and (b) comprehensive
general liability and property insurance covering the
Orthodontic Office premises and operations.
9.3 Tail Insurance Coverage. The New PC will
cause Xx. Xxxxxxx and each Orthodontist (if any) providing
services to enter into an agreement with the New PC that
upon termination of Xx. Xxxxxxx'x or such Orthodontist's
relationship with the New PC, for any reason, tail insurance
coverage will be purchased by Xx. Xxxxxxx or such
Orthodontist. Such provisions may be contained in an
employment agreement, restrictive covenant agreement or
other agreement entered into by the New PC and Xx. Xxxxxxx
or the Orthodontist, and the New PC hereby covenants with
the MSO to enforce such provisions relating to the tail
insurance coverage or to provide such coverage at the
expense of the New PC or Xx. Xxxxxxx or each such
Orthodontist.
9.4 Additional Insureds. The New PC and the MSO
agree to use their reasonable efforts to have each other
named as an additional insured on the other's respective
liability insurance policies.
9.5 Indemnification. The New PC shall indemnify,
hold harmless and defend the MSO and OMEGA and their
respective officers, directors, shareholders, employees and
representatives, from and against any and all liability,
losses, damages, claims, causes of action, expenses
judgments, settlements, lawsuits and obligations (including
reasonable attorneys' fees) caused or asserted to have been
caused, directly or indirectly, by or as a result of the
performance of orthodontic services or the performance of
any intentional acts, negligent acts or omissions by the New
PC and/or its affiliates, its shareholders, agents, the
Practice Providers, its other employees and/or its
subcontractors (other than the MSO) during the Term hereof;
provided, however, that no indemnification shall be required
hereby to the extent that the New PC's obligation is
satisfied by an insurance payment. 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, (i)
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) or (ii) as a result of any merger or
acquisition involving the MSO, OMEGA or any entity that
controls, is controlled by or is under common control with
either or both of them to which the New PC is not a party or
any litigation not involving the New PC or its operation
during the Term hereof; provided, however, that no
indemnification shall be required hereby to the extent that
the MSO's obligation is satisfied by an insurance payment..
ARTICLE 10
TERMINATION
10.1 Termination by the New PC.
(a) Termination by the New PC. The New PC may
terminate this Agreement as follows:
(1) In the event of the filing of a petition
in voluntary bankruptcy or an assignment for the benefit of
creditors by the MSO, or upon other action taken or
suffered, voluntarily or involuntarily, under any federal or
state law for the benefit of debtors by the MSO, except for
the filing of a petition in involuntary bankruptcy against
the MSO which is dismissed within sixty (60) days
thereafter, the New PC may give written notice of the
immediate termination of this Agreement.
(2) In the event the MSO shall materially
default in the performance of any duty or obligation imposed
upon it by this Agreement and such default shall continue
for a period of sixty (60) days after written notice thereof
has been given to the MSO by the New PC, the New PC may
terminate this Agreement.
Upon termination of this Agreement by the
Orthodontic Practice under this Section 10.1, the New PC
shall be entitled to exercise the "Call Option," as defined
in and on the terms and conditions set forth in Section 3 of
that certain Stock Put/Call Option and Successor Designation
Agreement (the "Stock Put/Call Option and Successor
Designation Agreement") dated as of even date herewith, by
and among the New PC, Xx. Xxxxxxx and the Orthodontists (if
any), OMEGA and the MSO.
10.2 Termination by MSO. MSO may terminate this
Agreement as follows:
(a) In the event of the filing of a petition in
voluntary bankruptcy or an assignment for the benefit of
creditors by the New PC or any shareholders thereof , or
upon other action taken or suffered, voluntarily or
involuntarily, under any federal or state law for the
benefit of debtors by the New PC or any shareholders
thereof, except for the filing of a petition in involuntary
bankruptcy against the New PC or any shareholder thereof
which is dismissed within sixty (60) days thereafter, MSO
may give written notice of the immediate termination of this
Agreement.
(b) In the event the New PC fails to perform
orthodontic services on a full-time basis consistent with
its pattern of practice in the immediately preceding
calendar year and such default shall continue for a period
of ten (10) days after written notice thereof has been given
to the New PC by the MSO, the MSO may terminate this
Agreement.
(c) In the event the New PC shall materially
default in the performance of any other duty or obligation
imposed upon it by this Agreement, and such default shall
continue for a period of sixty (60) days after written
notice thereof has been given to the New PC by the MSO, the
MSO may terminate this Agreement.
(d) In the event Xx. Xxxxxxx or any Orthodontist
breaches or defaults under his or her Employment Agreement
and the New PC does not cause Xx. Xxxxxxx or such
Orthodontist to cure such breach or default within any
applicable grace period therefor, the MSO may give written
notice of the immediate termination of this Agreement.
Upon termination of this Agreement by the MSO
under this Section 10.2 or upon expiration of the Term of
this Agreement, the MSO and OMEGA shall be entitled to
exercise the "Put Option" and/or the "Successor Designation
Option," as defined in and on the terms and subject to the
conditions set forth in Sections 2 and 5, respectively, of
the Stock Put/Call Option and Designation Agreement. In
addition, upon any termination of this Agreement or upon
expiration of the Term of this Agreement, the MSO shall be
entitled to receive the Management Fees collected to the
effective date of such termination or expiration, the
amounts of any loans or advances (including any accrued but
unpaid interest thereon) and all other sums accrued or
related to occurrences arising at or prior to the date of
termination.
ARTICLE 11
AUTHORIZED AGENT AND POWERS OF ATTORNEY
The New PC hereby designates the MSO (and its
designees) its authorized agent and lawful attorney-in-fact
for purposes of depositing payments, paying accounts
payables, signing checks, negotiating and signing contracts
for services or goods, securing loans or incurring
obligations on behalf of the New PC; provided, however, that
all contracts or fees set for services on behalf of the New
PC will be subject to final approval and acceptance by the
New PC. Additionally, the New PC hereby irrevocably
appoints the MSO (and its designees) its authorized agent
and lawful attorney-in-fact to collect all bills and
accounts receivable for professional fees, charges and other
amounts and authorizes the MSO through its designees to take
possession of all checks, money orders and similar
instruments received as payment of receivables to be
deposited into the New PC Account. The New PC hereby
irrevocably appoints the MSO as the New PC's attorney-in-
fact, with full power and authority in the place and stead
of the New PC, in the MSO's discretion, to endorse in the
name of the New PC any checks, payments, notes, insurance
payments and money orders, to withdraw funds for payments of
expenses, including Management Fees and other sums payable
to the MSO, to open and close the New PC Account and other
bank accounts, to take any action and to execute any other
instrument which the MSO may deem necessary or advisable to
accomplish the purposes hereof. The powers of attorney
granted herein are coupled with an interest and are
irrevocable. Third parties and entities and persons not a
party to this Agreement are entitled to rely on the
foregoing attorneys-in-fact and an affidavit of the MSO
attesting thereto. The acceptance of this appointment by
the MSO shall not obligate it to perform any duty or
covenant required to be performed by the New PC under or by
virtue of this Agreement. Notwithstanding the foregoing
powers of attorney, the New PC shall at any time, on the
request of the MSO, sign financing statements, security
agreements or other agreements necessary or advisable to
accomplish the purpose of this Agreement. Upon the New PC's
failure to sign said financing statements, security
agreements or other agreements, the MSO is authorized as the
agent of the New PC to sign any such instruments. The New
PC may review all deposits and expenses upon request.
ARTICLE 12
INDEPENDENT CONTRACTOR RELATIONSHIP
Neither the New PC nor its employees shall have
any claim under this Agreement or otherwise against the MSO
for worker's compensation, unemployment compensation, sick
leave, vacation pay, retirement benefits, Social Security
benefits, or any other employee benefits, all of which shall
be the sole responsibility of the New PC. Since neither the
New PC nor its employees are employees of the MSO, the MSO
shall not withhold on behalf of the New PC unemployment
insurance, Social Security, or otherwise pursuant to any law
or requirement of any governmental agency, and all such
withholding, if any is required, shall be the sole
responsibility of the New PC.
ARTICLE 13
MISCELLANEOUS
13.1 Access to Records. From and after any
termination, each party shall provide the other party with
reasonable access to books and records then owned by it to
permit such requesting party to satisfy reporting and
contractual obligations which may be required of it.
13.2 Patient Records. Upon termination of this
Agreement, the New PC shall retain all patient dental
records maintained by the New PC or the MSO in the name of
the New PC. During the term of this Agreement, and
thereafter, the New PC or its designee shall have reasonable
access during normal business hours to the New PC's and the
MSO's records, including, but not limited to, records of
collections, expenses and disbursements as kept by the MSO
in performing the MSO's obligations under this Agreement,
and the New PC may copy any or all such records.
13.3 The New PC's Control Over the Orthodontic
Practice. Notwithstanding the authority granted to the MSO
herein, the MSO and the New PC agree that the New PC,
personally or through Xx. Xxxxxxx or any of its
Orthodontists (if any) and other Practice Providers, shall
have complete control and supervision over the professional
aspects of the New PC's practice, as well as the provision
of all professional services, including, without limitation,
the selection of a course of treatment for a patient, the
procedures or materials to be used as a part of such course
of treatment, and the manner in which such course of
treatment is carried out by the New PC. The New PC shall
have sole authority to direct the business, professional,
and ethical aspects of the New PC. The MSO shall have no
authority, directly or indirectly, to perform, and shall not
perform, any orthodontic function, or to influence or
otherwise interfere with the exercise of the New PC's
professional judgment. The MSO may, however, advise the New
PC as to the relationship between its performance of
orthodontic functions and the overall administrative and
business functioning of the New PC.
ARTICLE 14
ALTERNATIVE DISPUTE RESOLUTION
14.1 Alternative Dispute Resolution.
(a) If a dispute arises under this Agreement
which cannot be resolved informally by the parties, any
party may invoke the procedures set forth in Exhibit E
hereto and the parties agree to use these procedures, except
paragraph (b) of this Section 14.1, prior to any party
pursuing other available remedies. The parties will meet
and attempt in good faith to resolve any controversy or
claim arising out of or relating to this Agreement.
(b) Notwithstanding anything in this Section 14.1
to the contrary:
(i) Nothing in this Section 14.1 shall preclude any
party from seeking a preliminary injunction or other
provisional relief, either prior to or during the proceeding
provided for in this section, if in its judgment such action
is necessary to avoid irreparable damage or to preserve the
status quo.
(ii) The parties shall accept as correct, final,
binding and conclusive the determination by the outside
accountants then employed by the MSO as to the calculation
of any and all Management Fees owed by the New PC to the MSO
hereunder, and such determination shall not be subject to
the provisions of this Section 14.1. Disputes as to the
proper interpretation of the provisions of this Agreement
which describe how those amounts are to be calculated,
however, shall be subject to the provisions of this Section
14.1.
(iii) Any determination by either party not to renew
this Agreement in accordance with the terms and provisions
of this Agreement shall not be subject to the provisions for
dispute resolution in this Section 14.1.
14.2 Waiver of Jury. With respect to any dispute
arising under or in connection with this Agreement or any
related agreement, as to which legal action nevertheless
occurs, each party hereby irrevocably waives all rights it
may have to demand a jury trial. This waiver is knowingly,
intentionally and voluntarily made by the parties and each
party acknowledges that no person acting on behalf of the
other party has made any representation of fact to induce
this waiver of trial by jury or in any way modified or
nullified its effect. The parties each further acknowledge
that it has been represented (or has had the opportunity to
be represented) in the signing of this Agreement and in the
making of this waiver by independent legal counsel, selected
of its own free will, and that it has had the opportunity to
discuss this waiver with counsel. Each party further
acknowledges that it has read and understands the meaning
and ramifications of this waiver provision.
ARTICLE 15
GENERAL PROVISIONS
15.1 Notices. Any notice to be given pursuant to
this Agreement shall be deemed effective if given
personally, or by telephone, telegram, telecopy, facsimile
or other electronic transmission, or by letter to an officer
or administrator of OMEGA, the MSO or the New PC, as the
case may be. Notice in person, or by telephone, telegram or
electronic transmission shall be deemed effective when
given. Notice by mail shall be deemed effective seventy-two
(72) hours after deposit in the United States mails, and
properly addressed with postage prepaid.
Notices to the New PC shall be given as follows:
0000 Xxx XxXxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, D.D.S.
or such other address as may be furnished by the New PC to
the MSO from time to time in writing.
Notices to OMEGA and/or the MSO shall be given as
follows:
Omega Orthodontics, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
or other such addresses as may be furnished by the MSO to
the New PC from time to time in writing.
15.2 Confidentiality. No party hereto shall
disseminate or release to any third party any information
regarding any provision of this Agreement, or any financial
information regarding the other parties (past, present or
future) that was obtained in the course of the negotiation
of this Agreement or in the course of the performance of
this Agreement, without the other party's or parties' (as
the case may be) written approval; provided, however, the
foregoing shall not apply to information which is required
to be disclosed by Law, including federal or state
securities laws, or pursuant to court order.
15.3 Contract Modifications for Prospective Legal
Events. In the event any state or federal Laws, now
existing or enacted or promulgated after the effective date
of this Agreement, are interpreted by judicial decision, a
regulatory agency or legal counsel for both parties in such
a manner as to indicate that the structure of this Agreement
may be in violation of such Laws, the New PC and the MSO
shall amend this Agreement as necessary. To the maximum
extent possible, any such amendment shall preserve the
underlying economic and financial arrangements between the
New PC and the MSO.
15.4 Remedies Cumulative. No remedy set forth in
this Agreement or otherwise conferred upon or reserved to
any party shall be considered exclusive of any other remedy
available to any party, but the same shall be distinct,
separate and cumulative and may be exercised from time to
time as often as occasion may arise or as may be deemed
expedient.
15.5 No Obligation to Third Parties. None of the
obligations and duties of the MSO or the New PC under this
Agreement shall in any way or in any manner be deemed to
create any obligation of the MSO or of the New PC to, or any
rights in, any person or entity not a party to this
Agreement other than OMEGA which shall be deemed a party for
limited purposes as set forth in this Agreement.
15.6 Entire Agreement. This Agreement including
the Schedules and Exhibits hereto, together with the Stock
Put/Call Option and Successor Designation Agreement of even
date herewith and the Employment Agreement(s) (including the
related non-competition agreements or covenants),
constitutes the entire agreement between the parties
concerning this subject matter, and supersedes all prior and
contemporaneous agreements, representations and
understandings of the parties concerning the contents
hereof. No supplement, modification, or amendment to this
Agreement shall be binding unless executed in writing by all
of the parties hereto, except as otherwise provided herein.
No waiver of any of the provisions of this Agreement shall
be deemed to constitute a waiver of any other provision,
whether similar or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
15.7 Assignment. The rights and the duties of the
parties under this Agreement may not be assigned or
transferred without the prior written consent of the non-
assigning party, which consent shall not be unreasonably
withheld; provided, however, that the MSO shall be permitted
to assign its rights and obligations hereunder without the
consent of the New PC to any person, firm or corporation
controlled by the MSO, controlling the MSO or under common
control with the MSO.
15.8 Attorneys' Fees. If any mediation or
arbitration or other legal action or proceeding is brought
to enforce this Agreement, because of any alleged breach
hereof, or for a declaration of any rights and obligations
hereunder, the prevailing party in such mediation or
arbitration, action or proceeding shall be entitled to
recover its costs incurred therein, including reasonable
attorneys' fees, in addition to any other relief to which it
may be entitled, all as determined and awarded by the
parties in such mediation or by the arbitrator or court as
part of its judgment or decision therein, as the case may
be.
15.9 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State. The parties acknowledge that the MSO is not
authorized or qualified to engage in any activity which may
be construed or deemed to constitute the practice of
dentistry or orthodontics. To the extent any act or service
required of the MSO in this Agreement should be construed or
deemed, by any governmental authority, agency or court to
constitute the practice of dentistry or orthodontics, the
performance of said act or service by the MSO shall be
deemed waived and forever unenforceable and the provisions
of Section 15.14 shall be applicable.
15.10 Events Excusing Performance. Neither
party shall be liable to the other party for failure to
perform any of the services required herein in the event of
strikes, lock-outs, calamities, acts of God, unavailability
of supplies or other events over which that party has no
control for so long as such events continue, and for a
reasonable period of time thereafter.
15.11 Compliance with Applicable Laws. Both
parties shall comply with all applicable Laws and
restrictions imposed thereunder in the conduct of their
obligations under this Agreement.
15.12 Language Construction. The parties
acknowledge that each party and its counsel have reviewed
and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in
the interpretation of this Agreement.
15.13 Amendments. This Agreement may be
amended only by the written consent of both parties.
15.14 Severability. In the event any provision
of this Agreement is held by a court of competent
jurisdiction to be illegal or unenforceable, (i) the parties
shall amend this Agreement in order to carry out the intent
and essential business purposes of this Agreement as closely
possible within the requirements of applicable provisions of
Law as determined by such a court, and (ii) the remaining
provisions of this Agreement shall continue in full force
and effect.
15.15 No Waiver. The waiver by either party to
this Agreement of any one or more defaults, if any, on the
part of the other party, shall not be construed to operate
as a waiver of the other or future defaults under this
Agreement.
15.16 Captions. Captions to paragraphs in this
Agreement are for ease of reference, and shall not be
considered an interpretation of the paragraph.
15.17 Counterparts. This Agreement may be
executed simultaneously in one or more counterparts, each of
which shall be deemed an original.
INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the parties hereto have
executed this agreement as of the day and year first above
written.
NEW PC:
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: President
MSO:
OMEGA ORTHODONTICS OF
CONYERS, 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 ORTHODONTISTS
Name and Address
Xxxx X. Xxxxxxx, D.D.S.
0000 Xxx XxXxxxxxx Xxxx
Xxxxxxx, XX 00000
SCHEDULE 2
ORTHODONTIC OFFICES AND SERVICES
The office space and related leasehold improvements which
the MSO will provide to the New PC pursuant to Section 2.2
of the Management Services Agreement to which this Schedule
2 is attached are located at 0000 Xxx XxXxxxxxx Xxxx,
Xxxxxxx, Xxxxxxx 00000 and 0000 Xxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxx 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 Orthodontic Offices are the repair, maintenance and
replacement of the Orthodontic Offices, including such
leasehold improvements, fixtures, furniture, furnishings and
equipment, except for repairs, maintenance and replacement
necessitated by the negligence of the New PC, its employees
and agents (not including the MSO or its employees or
agents). The MSO shall also provide telephone, facsimile
transmission, printing, duplicating and transcribing
services as needed, as well as all laundry, linen and
uniforms.
SCHEDULE 3
COMPENSATION - MANAGEMENT FEES
The MSO shall receive, as compensation for the
performance of all of its obligations and duties contained
in the Agreement, monthly management fees in an amount equal
to Seventy Percent (70%) of the Practice Revenues, and the
New PC shall be entitled to Thirty Percent (30%) of such
Practice Revenues, except as may otherwise be provided in
this Schedule 3 or as the parties may otherwise agree from
time to time in writing. At the end of each calendar year
during the term of this Agreement, the MSO shall provide the
New PC with an unaudited internal accounting of MSO
Expenses, prepared in accordance with the accrual method of
accounting. If 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 calendar year,
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 calendar year,
fifty (50%) percent of such excess will be charged to the
New PC and recorded as a liability to be set off against
future Rebates; provided, however, that the full amount of
such liability shall be paid to the MSO within 15 days
following the termination of this Agreement and provided
further that the above compensation provisions shall become
null and void and the formula set forth in the following
paragraph shall take effect beginning with the first day of
the calendar year following the calendar year in which MSO
Expenses exceeded fifty (50%) percent of the Practice
Revenues:
The MSO shall receive, as compensation for the performance
of all of its obligations and duties contained in the
Agreement, monthly management fees in an amount equal to
Seventy-Five Percent (75%) of the Practice Revenues, and the
New PC shall be entitled to Twenty-Five Percent (25%) of
such Practice Revenues, except as the parties may otherwise
agree from time to time in writing. At the end of each
calendar year during the term of this Agreement, the MSO
shall provide the New PC with an unaudited internal
accounting of MSO Expenses, prepared in accordance with the
accrual method of accounting. If MSO Expenses as reflected
in such accounting as having been paid by the MSO are less
than sixty (60%) percent of the Practice Revenues for such
calendar year, fifty (50%) percent of such difference shall
be returned by the MSO to the New PC as a profit incentive
rebate (the "Rebate"). If such MSO Expenses are more than
sixty (60%) percent of the Practice Revenues for such
calendar year, fifty (50%) percent of such excess will be
charged to the New PC and recorded as a liability to be set
off against future Rebates; provided, however, that the full
amount of such liability shall be paid to the MSO within 15
days following the termination of this Agreement.
If the Agreement to which this Schedule 3 is attached is
terminated or expires, the foregoing management fees shall
be payable to the MSO based on all Practice Revenue
collected as of the date of termination or expiration.
Payment to the MSO shall be made in monthly
installments based on the Practice Revenues realized by the
MSO for services rendered hereunder. The MSO shall
distribute the proceeds from the New PC Account and allocate
the proceeds between the MSO and the New PC as described
above, on or before the 15th day of the succeeding month.
In the event the 15th day falls on a weekend or holiday,
then said distribution shall be made on the next business
day. The parties hereto may agree to handle such matters in
a different manner.
For purposes of this Agreement, "Practice Revenues"
shall mean gross collections of all revenues generated by or
on behalf of the New PC (whether through subsidiaries or
affiliates), including, but not limited to, all fees and
charges collected as a result of professional orthodontic
services furnished to patients by the New PC and for any
other goods or services sold or provided to such patients.
EXHIBIT A
ORTHODONTIC OFFICES - MASTER LEASES
EXHIBIT B
PRACTICE PROVIDERS
Xx. Xxxx X. Xxxxxxx
0000 Xxx XxXxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
EXHIBIT C
New PC'S AFFIDAVIT
AFFIDAVIT
I, Xxxx X. Xxxxxxx, D.D.S., declare:
I am an orthodontist, duly licensed in the State of
Georgia and I practice through a professional corporation
under the name Xxxx X. Xxxxxxx, D.M.D., P.C. (the "New
PC").
I have had substantial experience in the practice of
orthodontics and in managing and operating an orthodontic
office.
In the course of operating orthodontic offices, I have
acquired significant knowledge as to the overhead costs
incurred and gross receipts generated by similar types of
orthodontic offices. Further, I am fully aware of the non-
orthodontic, operational, accounting, billing, financing,
management and personnel requirements of an orthodontic
office and the cost factors involved in providing such
management, personnel, accounting, billing, financing and
operation.
I have thoroughly reviewed the Management Services
Agreement (the "Agreement"), which is effective as of
January 1, 1998, between the New PC and Omega Orthodontics
of Conyers, Inc. (the "MSO") concerning the duties,
responsibilities and obligations undertaken by the MSO in
managing and operating all non-orthodontic aspects of the
Orthodontic Offices as contemplated by the Agreement.
I have reviewed the prior operating financial
statements of the orthodontic offices located at 0000 Xxx
XxXxxxxxx Xxxx, Xxxxxxx, Xxxxxxx 00000 and 0000 Xxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx 00000 and an operating budget and
estimated income of the Orthodontic Offices, which, in my
opinion, can reasonably be expected from the operation of
said offices.
In my opinion, based upon my experience, a Management
Fees in the range of Seventy Percent (70%) to Seventy-Five
Percent (75%) of "Practice Revenues" to be charged by the
MSO as contemplated by the Agreement, will afford it a
reasonable but not excessive return for its services
rendered and obligations incurred. In addition, the Thirty
Percent (30%) to Twenty-Five Percent (25%) of "Practice
Revenues" retained by the New PC will provide reasonable
earnings for the performance of orthodontic services.
I declare under penalty of perjury that the foregoing
statement is true and correct to the best of my knowledge
and belief.
Executed at _________________ this ____ day of
_____________, 199_.
___________________________
Xxxx X. Xxxxxxx, D.D.S.
STATE OF GEORGIA
___________________, ss
________________, 199_
Then personally appeared the above-named Xxxx X.
Xxxxxxx, D.D.S. and acknowledged the foregoing Affidavit to
be his free act and deed.
[SEAL]
____________________________
Notary Public
My Commission Expires:
EXHIBIT D
SECURITY AGREEMENTS
Exhibit D-1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is effective as of the 1st day
of January 1998, by _____________________, PC, a Georgia
corporation (the "New PC"), and Xxxx X. Xxxxxxx, D.D.S.
("Xx. Xxxxxxx") who is duly licensed to practice
orthodontics in the state of Georgia (the "State") and Omega
Orthodontics of Conyers, 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. Xxxxxxx 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. 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 Conyers, 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 Xxx XxXxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, 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:
OMEGA ORTHODONTICS
OF
CONYERS, INC.
By:____________________________
By:__________________________
Name: Xxxx X. Xxxxxxx Name:
Xxxxxx X. Xxxxxxxx
Title: President Title:
President
XX. XXXXXXX
_______________________________
Xxxx X. Xxxxxxx, D.D.S.
Exhibit D-
2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is effective as of the 1st day
of January 1998, by OMEGA Orthodontics, Inc., a Delaware
corporation ("OMEGA"), and Xxxx X. Xxxxxxx, D.D.S. ("Xx.
Xxxxxxx") who is duly licensed to practice orthodontics in
the state of Georgia (the "State"), with reference to the
following facts:
WHEREAS, pursuant to an Affiliation Agreement and Asset
Purchase Agreement (the "Affiliation Agreement") dated as of
________ __, 199__ by and between Xx. Xxxxxxx and OMEGA and
the Management Services Agreement (the "Agreement"), dated
as of the date hereof, between the New PC and the MSO,
OMEGA, as assurance and collateral security for the payment
of the monies owned to Xx. Xxxxxxx under the Purchase Note
(as defined in the Affiliation Agreement) (the
"Obligations"), OMEGA agreed to pledge, grant, bargain,
assign and transfer to Xx. Xxxxxxx a security interest,
pursuant to the Uniform Commercial Code of the State, in and
to all leasehold improvements, fixtures, furnishings,
furniture and equipment now or hereafter located at the
Orthodontic Offices (collectively, the "Office Collateral");
WHEREAS, OMEGA is obligated as a condition to Xx.
Xxxxxxx'x performance under the Affiliation Agreement and
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 OMEGA of the Obligations and any and
all amounts payable under this Security Agreement
(collectively, the "Secured Obligations"), OMEGA hereby
pledges, grants, bargains, assigns and transfers to Xx.
Xxxxxxx a security interest, pursuant to the Uniform
Commercial Code of the State, in and to all leasehold
improvements, fixtures, furnishings, furniture and equipment
now or hereafter located at the Orthodontic Offices. Xx.
Xxxxxxx may at his option file a financing statement (Form
UCC-1) in order to perfect his security interest hereunder.
2. Representations and Warranties. OMEGA 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, other than right to
transfer the Collateral to the MSO.
3. Release of Security Interest. Upon the
termination of the Agreement and payment in full of the
amounts due under the Purchase Note, Xx. Xxxxxxx shall
release his security interest hereunder, and will deliver to
OMEGA a release.
4. Realization of Collateral. Xx. Xxxxxxx shall
have, with respect to the Collateral, the rights and
obligations of a secured party under the Uniform Commercial
Code as adopted in the State. Such rights shall include,
without limitation, the following:
A. The right, upon default, to have the
Collateral, or any part thereof, transferred to its own name
or to the name of its nominee;
B. The right, upon default, to sell, assign or
deliver as much of the Collateral as is reasonably necessary
to repay the defaulted indebtedness (together with expenses
attendant upon such sale and repayment), at public or
private sale, as Xx. Xxxxxxx 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. OMEGA shall at any time on the request of Xx.
Xxxxxxx, sign Financing Statements, security agreements or
other agreements with respect to any Collateral. Upon
OMEGA's failure to sign said Financing Statements, security
agreements or other agreements, Xx. Xxxxxxx is authorized as
the agent of the OMEGA to sign any such instruments. Upon
the request of Xx. Xxxxxxx, OMEGA agrees to pay all filing
fees and to reimburse Xx. Xxxxxxx 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 Xx.
Xxxxxxx 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 OMEGA.
Xx. Xxxxxxx agrees, however, that the OMEGA 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, Xx.
Xxxxxxx shall apply the proceeds in the order set forth
below in Paragraph 6 hereof. Xx. Xxxxxxx may have resort to
the Collateral or any portion thereof with no requirements
on the part of Xx. Xxxxxxx 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
Xx. Xxxxxxx in the following order:
A. To the payment of the costs and expenses of
collection incurred by Xx. Xxxxxxx, including, without
limitation, attorneys' fees and all other reasonable
expenses, liabilities and costs incurred by the Xx. Xxxxxxx
in connection therewith;
B. To the payment of the whole amount then owing
and unpaid under the Purchase Note;
C. To the payment to OMEGA 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 Xx.
Xxxxxxx 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 OMEGA shall be given at:
c/o Omega Orthodontics, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
or other such addresses as may be delivered by OMEGA to Xx.
Xxxxxxx from time to time in writing.
Notices to Xx. Xxxxxxx shall be given at:
0000 Xxx XxXxxxxxx Xxxx
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx, D.D.S.
or other such addresses as may be delivered by Xx. Xxxxxxx
to OMEGA 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. OMEGA agrees that it will
duly execute and deliver to Xx. Xxxxxxx any additional
documents which may be reasonably necessary to give effect
fully to the security interest granted to Xx. Xxxxxxx
hereunder, including, without limitation, a financing
statement on Form UCC-1.
11. Benefit. This Security Agreement shall inure to
the benefit of and shall be binding upon the respective
heirs, successors and assigns of the parties hereto.
12. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State.
13. Defined Terms. Capitalized terms used in this
Security Agreement which are not defined herein but which
are defined in the Agreement, shall have the respective
meanings ascribed therein.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed, as of the day and year
first hereinabove written.
OMEGA:
OMEGA ORTHODONTICS INC.
By:____________________________
Name:
Title:
XX. XXXXXXX:
_______________________________
Xxxx X. Xxxxxxx, 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.
