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EXHIBIT 10.4
FORM OF
CONSULTING AND BUSINESS SERVICES AGREEMENT
THIS CONSULTING AND BUSINESS SERVICES AGREEMENT (this
"Agreement"), dated as of ________________, ________, by and between PREMIER
ORTHODONTIC GROUP, INC., a Delaware corporation, and its successor or assigns
("Premier") and ___________________, a ________________ (the "Orthodontic
Entity").
WITNESSETH:
WHEREAS, the Orthodontic Entity owns and operates an
orthodontic practice with offices located in the facilities identified in
Exhibit 1.2 (the "Center(s)") and furnishes orthodontic and other dental care to
the general public through the services of the orthodontist(s) and dentist(s)
affiliated with the Orthodontic Entity to provide patient care at the Center(s)
(the "Orthodontist(s)"); and
WHEREAS, Premier is a company which has been formed to provide
business and consulting services to orthodontists; and
WHEREAS, the Orthodontic Entity and Premier mutually desire to
enter into this Consulting and Business Services Agreement.
NOW THEREFORE, in consideration of Ten Dollars ($10.00), the
mutual covenants and agreements herein contained, and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
I. RESPONSIBILITIES OF PREMIER
1.1 General. Premier shall furnish the Orthodontic Entity the
business and consulting services described in this Agreement, subject to the
requirements of the _____________________ Dental Practice Act relating to,
without limitations, the control by dentists over the practice of dentistry.
1.2 Facilities and Equipment. Premier will consult with and
advise the Orthodontic Entity on its equipment and office needs and the
efficient configuration of its office space and will arrange for all equipment
and furnishings determined by the Orthodontic Entity to be necessary for the
operation of the Center, as specified on Exhibit 1.2 (together with any future
asset purchases in accordance herewith, the "Assets"). The Orthodontic Entity
shall have complete custody and control over the Assets provided to the
Orthodontic Entity by Premier, including, without limitation, the right to make
decisions, after consultation with Premier, with respect to the repair,
replacement, modification and upkeep of such Assets. Unless the Orthodontic
Entity chooses to directly purchase furnishings, equipment and related assets in
the future, Premier shall purchase such assets and lease such assets to the
Orthodontic Entity under a capital leasing arrangement with such terms as
mutually agreed to by the Orthodontic Entity and Premier. If the Orthodontic
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Entity chooses to purchase such assets, then it shall depreciate such assets in
accordance with generally accepted accounting principles ("GAAP").
1.3 Personnel and Payroll. Premier will consult with the
Orthodontic Entity on its staffing needs. Premier will employ the staff
determined by the Orthodontic Entity to be necessary for the Center's
operations, as specified on Exhibit 1.3, except for the Orthodontists and
orthodontic and hygienist staff, who will be employed by the Orthodontic Entity.
At the election of the Orthodontic Entity, Premier will additionally assist in
staff scheduling, administer the Center's payroll and provide payroll accounting
services. The parties expressly agree that the Orthodontic Entity will have
discretion and control over all personnel and staffing matters in respect to the
Center's staff.
1.4 Business Systems, Procedures and Forms. Premier will
advise the Orthodontic Entity on and assist in the implementation and operation
of business systems and procedures. Premier will provide training to the
Center's staff in the use of such systems and procedures. Premier will
additionally provide the Orthodontic Entity clinical forms developed in
consultation with the Orthodontic Entity and will provide training to the
Center's staff in the use of such forms. The Orthodontic Entity expressly
acknowledges and agrees that it shall have no property rights in the foregoing
systems, procedures or clinical forms, and further agrees that such systems,
procedures and form shall be deemed to constitute Confidential Information
within the meaning of Section 2.8 hereof and shall be subject to the
restrictions on the use, appropriation and reproduction of such Confidential
Information provided for in Section 2.8. The parties agree that the Orthodontic
Entity's use of any such systems, procedures and forms shall be at the
Orthodontic Entity's sole discretion and, notwithstanding its use of any such
systems, procedures, or forms, the Orthodontic Entity shall retain control over
the management of all aspects of the Center's operations, including, without
limitation, patient scheduling.
1.5 Purchasing and Inventory Control. Premier in consultation
with the Orthodontic Entity, will provide the Orthodontic Entity purchasing
services for inventory and supplies and will be responsible for maintaining the
Center's inventory. The price charged to the Center for such inventory and
supplies shall be the same as the price paid by Premier, including any rebates.
In any event, the Orthodontic Entity has the right to purchase its supplies from
the supplier of its choice.
1.6 Accounting Services and Financial Reporting. Premier will
advise the Orthodontic Entity with respect to and provide or arrange for all
accounting and bookkeeping services reasonably required for the Center's normal
and routine operations. Premier will additionally advise the Orthodontic Entity
on and assist in implementing information systems designed in consultation with
the Orthodontic Entity to generate financial and operational data concerning the
Center. Premier will prepare and submit to the Orthodontic Entity monthly
operating data and quarterly financial reports with respect to the Center's
operations. Premier will analyze such data on an ongoing basis to advise the
Center on improving productivity.
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1.7 Legal Services. Premier shall arrange for all legal
services reasonably required by the Center, excluding the costs of malpractice
litigation which shall be the sole responsibility of the Orthodontist. Premier
shall use reasonable efforts to obtain under its blanket policies for the
Orthodontist as a Center Expense malpractice insurance that meets the coverage
requirements set forth in Section 4.1 hereof.
1.8 Marketing. Premier will advise the Orthodontic Entity in
designing and assist in executing a marketing plan to promote the Center's
professional services. In connection with the development of the marketing plan,
Premier will advise the Orthodontic Entity on establishing an installment plan
for patient payments, and, in the event the Orthodontic Entity elects to offer
such a plan, will assist in implementing and administering the plan. The
Orthodontic Entity shall exercise sole discretion and control over all policies
and decisions relating to marketing, pricing, credits, refunds, warranties and
advertising. All marketing activities hereunder will be conducted in compliance
with applicable laws and regulations of the State of __________________
governing the dental profession.
1.9 Planning. Premier will assess the business potential of
establishing orthodontic offices in new locations, and, in the event the
Orthodontic Entity elects to relocate or open an office in a new location,
subject to mutual agreement, Premier will provide assistance to the Orthodontic
Entity as appropriate.
1.10 Billing and Collections. Premier shall provide billing
and collection services for all professional services rendered at the Center,
all such billing and collections to be done in the name of and subject to the
control of the Orthodontic Entity.
1.11 Payment Services. On a continuous basis, the accounts
receivable of the Orthodontic Entity shall be deposited with Premier for the
Orthodontic Entity's account, and Premier shall use the funds collected from
such accounts receivable to pay the Consulting Fee (as hereinafter defined) and
to pay, on the Orthodontic Entity's behalf as a Center Expense (as hereinafter
defined) and otherwise, all expenses of the Orthodontic Entity duly authorized
for payment by the Orthodontic Entity and shall return to the Orthodontic Entity
any funds remaining after payment in full of such items.
1.12 Disbursement of Funds. (a) All monies collected by
Premier from the Orthodontic Entity's accounts receivable pursuant to Section
1.10 above shall be deposited into an account (the "Orthodontic Entity Account")
with a bank whose deposits are insured with the Federal Deposit Insurance
Corporation. The Orthodontic Entity Account shall contain the name of the
Orthodontic Entity, but Premier shall make all disbursements therefrom. Premier
shall account for all monies so disbursed from the Orthodontic Entity Account.
From the funds collected and deposited each month by Premier in the Orthodontic
Entity Account, Premier shall make the following disbursements, among others,
promptly when payable.
(i) Compensation payable to all employees of the
Orthodontic Entity, and all taxes and assessments payable to
local, state and Federal governments in connection with the
employment of such personnel; and
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(ii) All other sums otherwise due and payable by the
Orthodontic Entity as Center Expenses or otherwise, including,
without limitation, the Consulting Fee.
(b) In the event the funds in the Orthodontic Entity Account
will, at any time, be insufficient to cover current expenses, Premier shall
notify the Orthodontic Entity and Premier shall advance to the Orthodontic
Entity the necessary funds to pay current expenses for the benefit of the
Orthodontic Entity, which advances will be deemed to be loans to the Orthodontic
Entity to be repaid upon such terms as agreed to by the Orthodontic Entity and
Premier, which indebtedness shall be deemed a Center Expense for purposes of
Article III hereof; provided, however, that in any event the outstanding
principal amount of such indebtedness shall bear interest at an annual rate
adjusted on the first calendar day of each month to reflect that certain rate
from time to time published by the Wall Street Journal as the prime rate, as of
the last business day of the immediately preceding month for which such prime
rate was published (the "Prime Rate"), plus one percent (1%).
1.13 Records. Premier shall organize and develop systems in
consultation with the Orthodontic Entity with respect to all files and records
relating to the business operations of the Center, including, but not limited
to, accounting, billing and collection records. The parties expressly
acknowledge and agree that patient records shall at all times be and remain the
property and under the control of the Orthodontist and shall be located at the
Orthodontic Entity's facilities so that they are readily accessible for patient
care. The management of all files and records shall comply with applicable state
and federal statutes. Premier shall use its reasonable efforts to preserve the
confidentiality of patient medical records and use information contained in such
records only for the limited purpose necessary to perform the services set forth
herein; provided, however, in no event shall a breach of said confidentiality be
deemed a default under this Agreement.
II. OBLIGATIONS OF THE ORTHODONTIC ENTITY
2.1 General. The Orthodontic Entity will be responsible for
the management of the Center, in accordance with the requirements of the
_________________ law.
2.2 Employment of Orthodontists and Rendering of Patient
Care. The Orthodontic Entity will be responsible for the employment of all
Orthodontist(s) and hygienists affiliated with the Orthodontic Entity and
supervision of all care and services rendered to patients.
2.3 Professional Services. The Orthodontic Entity shall use
and occupy the offices and facilities designated on Exhibit 1.2 exclusively for
the practice of orthodontic and general dentistry services and shall comply with
all applicable local rules, ordinances and all standards of dental and
orthodontic care. It is expressly acknowledged by the parties that the
orthodontic practice conducted at the Center shall be conducted solely by the
Orthodontists associated with the Orthodontic Entity except those additional
orthodontists employed by the
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general dentists' offices from which the Orthodontic Entity rents only space,
and no other orthodontist shall be permitted to use or occupy the Center or
Centers, except as provided in Exhibit 2.3. The Orthodontic Entity shall provide
professional services to patients hereunder in compliance at all times with
ethical standards and laws and regulations applying to the dental profession.
The Orthodontic Entity shall ensure that each Orthodontist providing orthodontic
or dental services to patients is licensed by the state in which the Center is
located. In the event that any disciplinary, medical malpractice or other
actions are initiated against any such Orthodontist, the Orthodontic Entity
shall immediately inform Premier of such action and the underlying facts and
circumstances. The Orthodontic Entity agrees to cooperate with and participate
in the quality assurance/utilization review programs established by Premier or
mandated by accreditation and/or licensure standards applicable to the practice
of orthodontics and dentistry. Deficiencies discovered in the performance of any
personnel or in the quality of professional services shall be reported
immediately to Premier, and appropriate steps shall be taken by the Orthodontic
Entity at once to remedy such deficiencies. Any termination of an Orthodontist
other than for cause (as such term is defined in the Employment Agreement
between the Orthodontic Entity and the Orthodontist) must be approved by a
majority of the Board of Advisors of Premier.
2.4 Records. The Orthodontic Entity will keep or cause to be
kept accurate, complete and timely medical and other records of all patients.
Such records shall be sufficient to enable Premier, on behalf of the Orthodontic
Entity, to obtain payment for the services and facilities and to facilitate the
delivery of quality patient care by the Orthodontist.
2.5 Professional Expenses. Payments expended each fiscal year
by the Orthodontic Entity on behalf of the Orthodontist and other orthodontists
or dentists delivering patient care at the Center(s) for continuing education,
seminars, professional license fees and dues, professional memberships, expenses
related to a company automobile for the Orthodontist, and all other expenses of
the Orthodontist and other orthodontists and dentists delivering patient care at
the Center(s) that do not directly benefit the Orthodontic Entity (as reasonably
determined by Premier), up to the amount of three percent (3%) of the
Orthodontic Entity's Adjusted Gross Revenue, shall be considered a Center
Expense. To the extent that such expenses exceed three percent (3%) of the
Orthodontic Entity's Adjusted Gross Revenue for such year, the Center Expenses
shall be reduced by such excess amount solely for the purpose of calculating the
Consulting Fee; provided, however, that the Orthodontic Entity shall pay such
excess expenses. Notwithstanding the foregoing, the Orthodontic Entity 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 the Orthodontist. The Orthodontic Entity
shall ensure that the Orthodontist participates in such continuing education as
is necessary for such Orthodontist to remain current.
2.6 Professional Insurance Eligibility. The Orthodontic Entity
shall cooperate in the obtaining and retaining of professional liability
insurance by assuring that each of its Orthodontists is insurable and
participating in an on-going risk management program.
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2.7 Employment Agreement. The parties recognize that the
services to be provided by Premier are feasible only if the Orthodontic Entity
operates an active orthodontic practice to which it and each orthodontist
associated with the Orthodontic Entity devote their full time and attention.
Simultaneously with the execution of this Agreement, each Orthodontist who is or
becomes an equity owner of the Orthodontic Entity or delivers patient care at
the Center(s) on average more than ten (10) days each month, whether on the date
hereof or at any time during the term of this Agreement, shall enter into an
employment agreement with the Orthodontic Entity in substantially the form of
that certain Employment Agreement dated of even date herewith by and between the
Orthodontic Entity and the principal Orthodontist(s) of the Orthodontic Entity.
2.8 Confidentiality. The Orthodontic Entity agrees and
acknowledges that all materials provided by Premier or a Premier Affiliate (as
hereinafter defined) to the Orthodontic Entity, including all trade secrets,
constitute "Confidential Information" and are disclosed in confidence and with
the understanding that it constitutes valuable business information developed by
Premier at great expenditures of time, effort, and money. Trade secrets are
property rights protected by law and, for purposes of this letter, shall have
the meaning provided under applicable state law. The Orthodontic Entity further
agrees that it shall not, directly or indirectly, without the express prior
written consent of Premier, use or disclose such Confidential information for
any purpose other than in connection with the services to be rendered hereunder.
The Orthodontic Entity further agrees: (i) to keep strictly confidential and
hold in trust all Confidential Information and not disclose such Confidential
Information to any third party without the express prior written consent of
Premier; and (ii) to impose this obligation of confidentiality on its
affiliates, co-owners, associates, partners, employees, shareholders, members
and independent contractors. The Orthodontic Entity acknowledges that the
disclosure of Confidential Information to it by Premier 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
Orthodontic Entity shall immediately return and shall cause its affiliates,
co-owners, associates, partners, employees, shareholders, members and
independent contractors to immediately return to Premier all Confidential
Information (only to the extent such Confidential Information does not include
patient information), and the Orthodontic Entity will not, and will cause its
affiliates, co-owners, associates, partners, employees, shareholders, members
and independent contractors not to, thereafter use, appropriate, or reproduce
such Confidential Information. The Orthodontic Entity 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 Premier, 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, Premier, in
addition to any other remedies which may be available to it, shall be entitled
to injunctive or other equitable relief. As used in this Agreement, the term
"Premier Affiliate" shall mean (i) each corporation or other business entity
directly or indirectly controlling, controlled by, or under common control with
Premier and (ii) each orthodontic or dental practice to which Premier provides
management or consulting services, the employees and principals of such
practices, and each corporation or other business entity
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directly or indirectly controlling, controlled by, or under common control with
each such practice or the principals thereof.
2.9 Covenant Not to Compete. During the term of this
Agreement, the Orthodontic Entity, and any of its members or shareholders,
agrees not to establish, develop or open any offices for the provision of
orthodontic services within a ten (10) mile radius of any of the Centers covered
by this Agreement (the "Area of Dominant Influence") without the express written
consent of Premier. For a period of two (2) years following the termination of
this Agreement, the Orthodontic Entity and any of its members or shareholders
shall be prohibited within the Area of Dominant Influence (i) from advertising
in print (except for yellow page advertising and announcements for the opening
of a practice) or electronic media of any kind, (ii) from soliciting in any
manner patients, orthodontists or staff associated with the Centers, and (iii)
from soliciting any referrals from any dentist who referred one or more patients
to the Center within the three (3) years prior to the date of such termination.
In the event the Orthodontic Entity terminates this Agreement pursuant to
Section 5.2(b), then this Section 2.9 shall be void and of no further effect;
provided, however, the remainder of this Agreement shall remain in full force
and effect.
III. FINANCIAL ARRANGEMENTS
3.1 Consulting Fees. Premier shall receive an annual
Consulting Fee, subject to the provisions of Section 3.3 below, of 17% of the
Adjusted Gross Revenue (based on accrual method of accounting). Except as
otherwise provided, the amounts to be paid to Premier under this Section 3.1
shall be payable monthly. The amounts shall be paid based upon the previous
month's operating results of the Center. Upon preparation of quarterly financial
statements, final adjustments to the Consulting Fee for the quarter, if any are
required, shall be made and any additional amounts owing to Premier or the
Orthodontic Entity shall then be made. Any audit adjustments shall be reflected
in the calculations for the fourth quarter. The Orthodontic Entity hereby agrees
that in addition to the Consulting Fee, the Orthodontic Entity shall pay to
Premier 25% of the reduction, if any, of the Center's annual overhead percentage
as compared to the immediately preceding year as reasonably determined by
Premier multiplied by the current year's Adjusted Gross Revenue. Such additional
fee shall be paid as of the end of each fiscal year of the Orthodontic Entity
during the term hereof. See Exhibit 3.1 for an example of the calculation of the
additional fee.
3.2 Center Expenses. Premier shall be responsible for the
payment of all Center Expenses, as defined below, during the term of this
Agreement and the Orthodontic Entity shall immediately reimburse Premier for
such payments from funds held in the Orthodontic Entity Account.
3.3 Definitions. For the purposes of this Agreement, the
following definitions shall apply and shall comply with generally accepted
accounting principles:
(a) "Adjusted Gross Revenue" shall mean Gross Revenue
of the Center less any Adjustments, based on the accrual
method of accounting.
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(b) "Adjustments" shall mean any adjustments to Gross
Revenue for uncollectible accounts, professional courtesies
and other activities, contractual allowances and discounts
that do not generate a collectible fee.
(c) "Center Expenses" shall mean all operating and
non-operating expenses incurred in the operation of the
Center, including, without limitation:
(i) Salaries, benefits, payroll taxes,
workers compensation, health insurance, 401(k) and
other benefit plans, and other direct costs of all
employees of Premier at the Center, including dental
assistants (but excluding all Orthodontists);
provided that only expenses for health insurance,
401(k) and other benefit plans approved by the
Orthodontic Entity shall be included;
(ii) Direct costs of all employees or
consultants of Premier who, upon mutual agreement of
Premier and the Orthodontic Entity, provide services
at or, if consented to by the Orthodontic Entity, in
connection with the Center required for improved
clinic performance, such as work management,
materials management, purchasing, charge and coding
analysis, and business office consultation;
(iii) Obligations of Premier under leases or
subleases entered into in connection with the
operation of the Center;
(iv) Personal property and intangible taxes
assessed against Premier's assets used in connection
with the operation of the Center, commencing on the
date of this Agreement;
(v) Malpractice insurance expenses and
Orthodontist recruitment expenses as agreed to by
Premier and the Orthodontic Entity;
(vi) Property, casualty and liability insurance
for the Center and its operations;
(vii) In the event an opportunity arises for
additional Orthodontists in the Area of Dominant
Influence to become employed by or merge with the
Orthodontic Entity, actual out-of-pocket expenses of
Premier personnel working on a specified merger,
whether or not such merger is completed if such
merger is approved or requested by the Orthodontic
Entity;
(viii) Amortization of intangible asset value as
a result of each such acquisition referred to in
subsection (vii) above;
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(ix) Depreciation of all assets used by the
Orthodontic Entity in the operation of the Center;
(x) Repayment of interest on any funds
loaned to the Orthodontic Entity by Premier in
connection with the operation of the Center, at an
interest rate not in excess of the Prime Rate plus
one percent (1%);
(xi) Advertising and other marketing expenses
attributable to the promotion of the Center and/or
its Orthodontist(s); and
(xii) Other expenses incurred by Premier
with the consent of the Orthodontic Entity in
carrying out its obligations under this Agreement for
the benefit of the Center or the Orthodontic Entity;
provided, however, that such expenses shall not
include Premier's home office overhead expenses.
"Center Expenses" shall not include:
(i) Any federal or state income taxes; or
(ii) Any personal expenses of the
Orthodontist as permitted in the first sentence of
Section 3(b) of that certain employment agreement(s)
by and between the Orthodontist(s) and the
Orthodontic Entity, in excess of three percent (3%)
of the Orthodontic Entity's Adjusted Gross Revenue.
(d) "Contract" shall mean the agreement entered into
by patients with the Orthodontic Entity for the provision of
orthodontic services at a predetermined fee for an estimated
period of treatment.
(e) "Gross Revenue" shall mean all fees and charges
recorded or booked each month by or on behalf of the
Orthodontic Entity as a result of professional orthodontic or
other dental services personally furnished to patients by the
Orthodontist and those under the Orthodontist's supervision
and other fees or income generated in their capacity as a
professional prior to any Adjustments.
3.4 Additional Facilities. In the event the parties
agree to add an additional facility in which the Orthodontic Entity will provide
services, the consulting fees payable to Premier shall be determined by
aggregating the results of the operations of each additional facility with the
results of the operations of the existing Center or Centers and such fees
payable to Premier shall be calculated pursuant to the provisions of Section
3.1. All other provisions of this Article III shall apply to any additional
facilities. As part of its strategic growth strategy, Premier plans to provide
capital support or arrange favorable funding for
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orthodontic practice expansion and development. Any expenditures on practice
growth, acquisition or development shall be subject to approval by Premier's
Board of Directors.
IV. INSURANCE AND INDEMNITY
4.1 Insurance to be Maintained by the Orthodontic Entity.
Throughout the term of this Agreement, the Orthodontic Entity shall maintain
comprehensive professional liability insurance with limits of not less than
$500,000 per claim and with aggregate policy limits of not less than $1,000,000
per Orthodontist providing services at the Center and a separate limit for the
Orthodontic Entity or such other amounts required by the applicable state laws,
regulations, rules or directives. The Orthodontic Entity shall be responsible
for all such liabilities in excess of the limits of such policies. Premier
agrees to negotiate for and cause premiums to be paid with respect to such
insurance. Premiums and deductibles with respect to such policies shall be a
Center Expense.
4.2 Insurance to be Maintained by Premier. Throughout the term
of this Agreement, Premier will use reasonable efforts to provide and maintain,
as a Center Expense, comprehensive general liability and property insurance
covering the Center premises and operations.
4.3 Tail Insurance Coverage. The Orthodontic Entity will cause
each individual Orthodontist providing services at the Center to enter into an
agreement with the Orthodontic Entity that upon termination of such Orthodontic
Entity's relationship with the Orthodontist, for any reason, tail insurance
coverage for a period of three (3) years will be purchased by each Orthodontist.
Such provisions may be contained in employment agreements, restrictive covenant
agreements or other agreements entered into by the Orthodontic Entity and the
individual Orthodontists, and the Orthodontic Entity hereby covenants with
Premier to enforce such provisions relating to the tail insurance coverage or to
provide such coverage at the expense of the Orthodontic Entity.
4.4 Additional Insureds. The Orthodontic Entity shall have
Premier named as an additional insured on the Orthodontic Entity's professional
liability insurance programs.
4.5 Indemnification. The Orthodontic Entity shall indemnify,
hold harmless and defend Premier, its officers, directors, shareholders, members
and employees, from and against any and all liabilities, losses, damages,
claims, causes of action, and expenses (including reasonable attorneys' fees),
whether or not covered by insurance, caused or asserted to have been caused,
directly or indirectly, by or as a result of the performance of medical, dental
or orthodontic services or the performance of any intentional acts, negligent
acts or omissions by the Orthodontic Entity and/or its affiliates, shareholders,
members, agents, employees and/or subcontractors (other than Premier) prior to
and after the date of this Agreement and throughout the term hereof. Premier
shall indemnify, hold harmless and defend the Orthodontic Entity, and its
directors, shareholders, members and employees, from and against any and all
liabilities, losses, damages, claims, causes of action, and expenses (including
reasonable attorneys' fees), caused or asserted to have been caused,
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directly or indirectly, by or as a result of the performance of any intentional
acts, negligent acts or omissions by Premier, a Premier Affiliate and/or their
members, shareholders, agents, employees and/or subcontractors (other than the
Orthodontic Entity) during the term of this Agreement.
V. TERM AND TERMINATION
5.1 Term of Agreement. This Agreement shall commence on the
date the Securities and Exchange Commission declares effective Premier's
registration Statement on Form S-1 for the sale of Premier's common stock or
membership interests in an initial public offering (the "IPO") and shall expire
on the twentieth (20th) anniversary thereof unless earlier terminated pursuant
to the terms hereof. In the event that Premier does not complete the IPO on or
before October 15, 1997, this Agreement shall be null and void and of no further
effect between the parties hereto.
5.2 Termination by the Orthodontic Entity. The Orthodontic
Entity 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 Premier, or upon
other action taken or suffered, voluntarily or involuntarily, under any federal
or state law for the benefit of debtors by Premier, except for the filing of a
petition in involuntary bankruptcy against Premier which is dismissed within
thirty (30) days thereafter, the Orthodontic Entity may give written notice of
the immediate termination of this Agreement.
(b) In the event Premier 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 ninety (90) days after written notice
thereof has been given to Premier by the Orthodontic Entity (which notice shall
contain specific details of the reason for such default), the Orthodontic Entity
may terminate this Agreement; provided, however, if the nature of such default
is such that cure is not capable within said 90-day period, then Premier shall
have such additional time as may be required to effect and complete such cure
provided that Premier shall commence such cure within the aforesaid 90-day
period and shall prosecute such cure to completion with reasonable diligence.
(c) In the event that the IPO has not been completed on or
before October 15, 1997, the Orthodontic Entity may terminate this Agreement.
(d) In the event that a "Change in Control" (as herein
defined) occurs with respect to Premier, the Orthodontic Entity may, within 10
days after the expiration of the Approval Period (as herein defined), terminate
this Agreement by providing five (5) days prior written notice to Premier. For
purposes of this Section, "Change in Control" means an acquisition or
aggregation of any voting securities of Premier by a "person" (as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) immediately
after which such person is or becomes the beneficial owner, directly or
indirectly, of 15% or more of the combined voting power of Premier's then
outstanding voting securities; provided, however,
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that no acquisition or aggregation of Premier's voting securities shall be
deemed a "Change in Control" if such acquisition or aggregation (i) has the
prior approval of Premier's board of directors, or (ii) is approved by Premier's
board of directors within 60 days after Premier receives notice of such
acquisition or aggregation (the "Approval Period").
5.3 Termination by Premier. Premier 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 Orthodontic
Entity, or upon other action taken or suffered, voluntarily or involuntarily,
under any federal or state law for the benefit of debtors by the Orthodontic
Entity, except for the filing of an involuntary petition in bankruptcy against
the Orthodontic Entity which is dismissed within thirty (30) days thereafter,
Premier may give written notice of the immediate termination of this Agreement.
(b) In the event the Orthodontic Entity 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 ninety (90) days
after written notice thereof has been given to the Orthodontic Entity by
Premier, Premier may terminate this Agreement.
(c) In the event that the IPO has not been completed on or
before October 15, 1997, Premier may terminate this Agreement.
5.4 Actions after Termination. Upon termination of this
Agreement by either party for any reason other than a default by the Orthodontic
Entity or upon expiration of this Agreement, the Orthodontic Entity may, and
upon termination of this Agreement by Premier due to the reasons set forth in
Section 5.3(b) hereof, the Orthodontic Entity shall:
(a) Purchase all improvements, additions or leasehold
improvements which have been made by Premier and which relate solely to the
performance of its obligations under this Agreement at adjusted book value;
(b) Assume all debt and all contracts, payables and leases
which are obligations of Premier and which relate solely to the performance of
its obligations under this Agreement or the properties subleased by Premier; and
(c) Purchase from Premier at book value all of the equipment
of the Center, including all replacements and additions thereto made by Premier
pursuant to the performance of its obligations under this Agreement, and all
other assets, including inventory and supplies, tangibles and intangibles
(including but not limited to accounts receivable), set forth on the balance
sheet prepared for the month most recently ended prior to the date of such
termination in accordance with GAAP to reflect operations of the Center,
depreciation, amortization and other adjustments of assets shown on such balance
sheet.
5.5 Closing of Repurchase by the Orthodontic Entity and
Effective Date of Termination. Unless another form of payment is agreed to by
Premier at such time, the
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Orthodontic Entity shall pay cash to Premier for (i) the assets repurchased
pursuant to Section 5.4 and (ii) an amount equal to the Consulting Fee that
would have been payable hereunder for services rendered to patients by the
Orthodontic Entity prior to the termination of this Agreement; provided,
however, that such cash Consulting Fee payment shall only be made as payment for
such services as are actually collected by the Orthodontic Entity. The amount of
the purchase price shall be reduced by the amount of debt and liabilities of
Premier assumed by the Orthodontic Entity and shall also be reduced by any
payment Premier has failed to make under this Agreement. The Orthodontic Entity
and any Orthodontist associated with the Orthodontic Entity shall execute such
documents as may be required to assume the liabilities set forth in Section
5.4(c) and shall use its best efforts to remove Premier from any liability with
respect to such repurchased assets and with respect to any property leased or
subleased by Premier. The closing date for the repurchase shall be determined by
the Orthodontic Entity, but shall in no event occur later than 180 days from the
date of the notice of termination. The termination of this Agreement shall
become effective upon the closing of the sale of the assets and the Orthodontic
Entity and Premier shall be released from the restrictive covenants provided for
in Section 2.9 on the closing date. 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.
5.6 Patient Records. Upon termination of this Agreement, the
Orthodontic Entity shall retain all patient medical records maintained by the
Orthodontic Entity or Premier in the name of the Orthodontic Entity. During the
term of this Agreement, and thereafter, the Orthodontic Entity or its designee
shall have reasonable access during normal business hours to the Orthodontic
Entity's and Premier's records, including, but not limited to, records of
collections, expenses and disbursements as kept by Premier in performing
Premier's obligations under this Agreement, and the Orthodontic Entity may copy
any or all such records.
VI. INDEPENDENT CONTRACTOR
6.1 Orthodontic Entity's Control Over the Orthodontic
Practice. Notwithstanding the authority granted to Premier herein, Premier and
the Orthodontic Entity agree that the affiliated Orthodontist, personally or
through any of his professional employees or agents, shall have complete control
and supervision over the business aspects of the Orthodontic Entity'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 Orthodontist(s). The
Orthodontist(s) shall have sole authority to direct the business, professional,
and ethical aspects of the orthodontic practice. Premier will have no authority,
directly or indirectly, to perform, and will not perform, any orthodontic
function, or to influence or otherwise interfere with the exercise of the
Orthodontist(s) professional judgment. Premier may, however, advise the
Orthodontic Entity as to the relationship between its performance of orthodontic
functions and the overall administrative and business functions of its practice.
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6.2 Independent Relationship. The Orthodontic Entity and
Premier intend to act and perform as independent contractors, and the provisions
hereof are not intended to create any partnership, joint venture, agency or
employment relationship between the parties. The Orthodontic Entity will not
have any claim under this Agreement, or otherwise, against Premier for vacation
pay, sick leave, unemployment insurance, worker's compensation, disability
benefits or employee benefits of any kind.
6.3 Other Professionals. No provision of this Agreement is
intended to limit Premier's right, authority, or ability under applicable law to
contract with other dentists or physicians, or to employ, contract with, or
enter into any partnership or joint venture with any healthcare professional,
provided that the exercise of such right, authority or ability does not
contravene the terms of this Agreement.
6.4 Patient Care. Nothing in this Agreement is intended to
interfere, or shall be construed as interfering, in any way with the
Orthodontist(s)'s ability to independently exercise professional and ethical
judgment in the performance of his patient care responsibilities.
VII. GENERAL PROVISIONS
7.1 Assignment. This Agreement shall be assignable by Premier
to (i) any person, firm or corporation that controls or is under common control
with Premier, (ii) US Orthodontic Care, Inc. ("USOC") or any person, firm or
corporation that controls or is under common control with USOC, or (iii) any
entity that results from a merger or other combination between Premier and USOC
("Newco") and any person, firm or corporation that controls or is under common
control with Newco. Except as set forth above, neither Premier nor the
Orthodontic Entity shall have the right to assign their respective rights and
obligations hereunder without the written consent of the other party, which
consent shall not be unreasonably withheld. Subject to this provision, this
Agreement shall be binding upon the parties hereto, and their successors and
assigns.
7.2 Whole Agreement; Modification. There are no other
agreements or understandings, written or oral, between the parties regarding
this Agreement, the Exhibits and the Schedules, other than as set forth herein.
This Agreement shall not be modified or amended except by a written document
executed by both parties to this Agreement, and such written modification(s)
shall be attached hereto.
7.3 Notices. All notices required or permitted by this
Agreement shall be in writing and shall be addressed as follows:
To Premier: Premier Orthodontic Group, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇ ▇▇▇▇▇▇▇▇, Chief Executive Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Scarborough, L.L.P.
First Union Plaza, Suite 1400
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
To the
------------------------------------------
Orthodontic Entity:
------------------------------------------
Attn:
------------------------------------
or to such other address as either party shall notify the other.
7.4 Waiver of Provisions. Any waiver of any terms and
conditions hereof must be in writing, and signed by the parties hereto. The
waiver of any of the terms and conditions of this Agreement shall not be
construed as a waiver of any other terms and conditions hereof.
7.5 Governing Law. The validity, interpretation and
performance of this Agreement shall be governed by and construed in accordance
with the laws of the State of ________________. The parties acknowledge that
Premier 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 Premier 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 Premier shall be deemed waived and forever unenforceable and
the provision of Section 7.12 shall be applicable.
7.6 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.
7.7 Compliance with Applicable Laws. Both parties shall comply
with all applicable federal, state and local laws, regulations and restrictions
in the conduct of their obligations under this Agreement.
7.8 Severability. In the event that any provision of this
Agreement or the application thereof to any of the parties hereto or any
circumstance in any jurisdiction governing this Agreement shall, to any extent,
be invalid or unenforceable under any applicable statute, regulation or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict herewith and shall be deemed modified to conform to such statute,
regulation or rule of law, and the remainder of this Agreement and the
application of any such invalid or unenforceable provision to parties,
jurisdictions or circumstances other
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than to whom or to which it is held invalid or unenforceable shall not be
affected thereby nor shall the same affect the validity or enforceability of any
other provision of this Agreement.
7.9 Additional Documents. Each of the parties hereto agrees
to execute any document or documents that may be requested from time to time by
the other party to implement or complete such party's obligations pursuant to
this Agreement.
7.10 Attorneys' Fees. If legal action is commenced by either
party to enforce or defend its rights under this Agreement, the prevailing party
in such action shall be entitled to recover its costs and reasonable attorneys'
fees in addition to any other relief granted.
7.11 Confidentiality. Neither 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 (past, present or
future) that was obtained by the other in the course of the negotiation of this
Agreement or in the course of the performance of this Agreement, without the
other party's 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.
7.12 Contract Modifications for Prospective Legal Events. In
the event any state or federal laws or regulations, 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 or regulations, the Orthodontic Entity and Premier shall amend this
Agreement as necessary. To the maximum extent possible, any such amendment shall
preserve the underlying economic and financial arrangements between the
Orthodontic Entity and Premier.
7.13 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.
7.14 Language Construction. The language in all parts of this
Agreement shall be construed, in all cases, according to the parties' intent and
the parties hereto 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.
7.15 No Obligation to Third Parties. None of the obligations
and duties of Premier or the Orthodontic Entity under this Agreement shall in
any way or in any manner be deemed to create any obligation of Premier or of the
Orthodontic Entity to, or any rights in, any person or entity not a party to
this Agreement.
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7.16 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same Agreement.
7.17 Singular and Plural; Gender. Where the context so
requires or permits, the use of the singular form includes the plural, and the
use of the plural form includes the singular, and the use of any gender includes
any and all genders.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
ORTHODONTIC ENTITY:
-------------------------------
By:
Name
Title:
PREMIER:
PREMIER ORTHODONTIC GROUP, INC.
By:
Name:
Title:
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EXHIBIT 10.4
ADDITIONAL FEE CALCULATION
If the Center's Adjusted Gross Revenue for Year 1 is $1,000,000 and the Center's
annual overhead for Year 1 is $500,000 and the Center's Adjusted Gross Revenue
for Year 2 is $1,200,000 and the Center's annual overhead for Year 2 is
$552,000, then the additional fee required by Section 3.1 shall be calculated as
follows:
Year 1 overhead percentage: $500,000/$1,000,000 = 50%
Year 2 overhead percentage: $552,000/$1,200,000 = 46%
Reduction in Center's office overhead percentage: 50% - 46% = 4%
4% * $1,200,000 = $48,000
$48,000 * 25% fee = $12,000 additional fee
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SCHEDULE 10.4
OrthAlliance has succeeded to the rights to agreements identical to
Exhibit 10.4 as follows:
1. Consulting and Business Services Agreement with ▇▇▇▇▇▇ Dental
Corporation.
2. Consulting and Business Services Agreement with ▇▇▇▇ ▇. ▇▇▇▇▇,
D.D.S., Incorporated.
3. Consulting and Business Services Agreement with ▇▇▇▇ Dental
Corporation.
4. Consulting and Business Services Agreement with Halliburton
Orthodontics, P.C.
5. Consulting and Business Services Agreement with ▇▇▇▇▇▇▇▇▇
Dental Corporation.
6. Consulting and Business Services Agreement with ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, D.D.S., A Professional Corp.
7. Consulting and Business Services Agreement with A. ▇▇▇▇
▇▇▇▇▇▇▇, D.D.S., P.C.
8. Consulting and Business Services Agreement with ▇▇▇▇▇▇▇ ▇.
▇▇▇▇, D.D.S., Inc.
9. Consulting and Business Services Agreement with ▇▇▇ ▇. ▇▇▇▇▇▇▇,
D.D.S., M.S., A Professional Corporation.
