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EXHIBIT 10.3
SERVICES AGREEMENT
THIS AGREEMENT made and entered into this _____ day of ________________
by and between Orthodontix Professional, P.A., a ____________________
professional corporation ("Orthodontix Professional") and
_______________________, P.A., a ______________ professional corporation (the
"P.A."). This Agreement shall be effective on the date of the closing of the
transactions (the "Effective Date") contemplated under the Agreement and Plan of
Reorganization of even date herewith by and among Orthodontix, Inc., the
Orthodontist and a professional corporation affiliated with the Orthodontist
(the "Closing").
RECITALS:
A. Orthodontix Professional owns and operates orthodontic practices.
B. _____________________, D.D.S. (the "Orthodontist") is the sole
shareholder, officer and director of the P.A. and is duly licensed by all
appropriate licensing boards within the state of _________________, is a
practicing orthodontist within the state of _________________ and is qualified
to perform such duties as are set forth in this Agreement.
C. Orthodontix Professional desires to engage the P.A. and the P.A.
wishes to become engaged to cause the Orthodontist to provide orthodontic
services at ________________ and at such other locations as Orthodontix
Professional and the P.A. will, from time to time mutually determine
(collectively, the "Location").
D. The parties agree to work in a cooperative manner to bring about a
mutually advantageous and satisfying relationship. Orthodontix Professional
agrees to consult with P.A. and Orthodontist prior to making material changes at
the Location. Orthodontix Professional and P.A. agree that the parties'
relationship will be built upon open discussion and evaluation of issues
affecting the practice, and that Orthodontist shall remain integrally involved
in the daily running of the practice.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, Orthodontix Professional and the P.A. do hereby agree as follows:
1. RECITALS: The above recitals are true and correct and are
incorporated herein by reference.
2. CLINICAL OBLIGATIONS: The P.A. shall cause the Orthodontist to:
(a) COVERAGE: Provide general orthodontic services at the
Location. The Orthodontist shall not be required to perform any duties which
would interfere with or impair the complete exercise of the Orthodontist's
professional judgment. Further, the Orthodontist shall
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perform all orthodontic services in strict accordance with currently acceptable
orthodontic standards and ethics contained in applicable law or ordinance or
established by rules and regulations of a Federal, State or local agency,
department, commission, association, (including, without limitation, the
American Association of Orthodontists) or other pertinent governing or advisory
body having authority to set standards for health care facilities or
practitioners or contained in rules, regulations or procedures and policies
established by the Orthodontist and Orthodontix Professional.
(b) EVALUATION AND TREATMENT: Evaluate each patient presented for
care and/or treatment. The degree of evaluation and treatment rendered to any
patient shall be the responsibility of the Orthodontist, it being acknowledged
that an orthodontist performing orthodontic services must exercise the
orthodontist's own judgment as to the means and methods of treating each
patient. Orthodontix Professional shall use reasonable efforts to accommodate
patient requests to receive care from a particular orthodontist practicing at
the Location subject to the Orthodontist's desired work schedule. New patients
shall be assigned to orthodontists at the Location on a rotational basis.
(c) ORTHODONTIC EMERGENCIES: Attend to all orthodontic emergencies
when at the Location and as necessary for the general welfare of patients.
3. OTHER OBLIGATIONS: In addition to the clinical obligations set forth
in Section 2 above, the P.A. shall and shall cause the Orthodontist to have the
following additional obligations:
(a) FEES: To assist Orthodontix Professional in any way reasonable
and necessary to enable Orthodontix Professional to xxxx and collect the charges
for services rendered by the Orthodontist. Orthodontix Professional shall have
the exclusive right to xxxx and collect (receive payment) for professional
services rendered by the Orthodontist. The P.A. shall and shall cause the
Orthodontist to assign to Orthodontix Professional all rights to fees for
services performed. Accordingly, all payments to be made by third party payors
for services performed by the Orthodontist shall be paid directly to Orthodontix
Professional. If any fees, payments or other things of value charged are
delivered to the Orthodontist, the Orthodontist shall promptly reassign these
items to Orthodontix Professional. This provision shall survive the termination
of this Agreement. The P.A. agrees and shall cause the Orthodontist to agree
that in no event shall the Orthodontist xxxx, charge or collect or seek
compensation of any form from any patients or third party payment source for the
services provided pursuant to this Agreement.
(b) CREDENTIALING DOCUMENTATION: Furnish Orthodontix Professional
annually with all documentation required by Orthodontix Professional for proper
credentialing including, but not limited to, a copy of the Orthodontist's
original license and current renewal thereof, valid for the state in which the
Location is situated and any other documentation required by the state in which
the Location is situated. Payment for services may be delayed until the P.A.
delivers all necessary documentation.
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(c) ORTHODONTIC AND OTHER RECORDS: Promptly prepare and maintain
such orthodontic records incidental to the services performed by the
Orthodontist hereunder in accordance with the standard dental and/or orthodontic
policies as from time to time adjusted. Further, Orthodontist shall accurately
and promptly prepare such other records as may be required by Orthodontix
Professional, including but not limited to, records necessary for proper billing
for services.
(d) CLAIMS REPORTING: Report to Orthodontix Professional any
incident, or potential incident, which Orthodontist believes might form the
basis of a malpractice or other claim immediately upon the occurrence thereof.
Such claims shall be reported on forms provided by Orthodontix Professional for
such purpose, and sent to the attention of Claims Manager. Failure to report any
such incident or potential incident shall be a material breach of this Agreement
and may have the effect of negating insurance coverage thereof.
4. COMPENSATION: Orthodontix Professional shall pay to the P.A., on a
monthly basis, a base amount (the "Base P.A. Compensation") equal to ___ % of
the practice's Accrued Revenue (as defined below), which percentage amount may
be modified on or prior to the Closing based on information provided as a result
of the audit of Orthodontist's practice for the twelve month period ended
December 31, 1996. For purposes of this Agreement, "Accrued Revenue" shall be
defined as follows:
(i) 24% of the Initial Contract Amount; plus
(ii) the Monthly Contract Residual Amount; plus
(iii) Additional Non-Contract Service Charges.
"INITIAL CONTRACT AMOUNT" for a given month shall be defined as the
total value of any contracts to provide orthodontic services between a patient
or third party payor on the one hand and the Orthodontist, Orthodontix
Professional or the P.A. on the other, for the provision of orthodontic services
at a pre-determined fee-for service amount (whether or not payable in cash)
which contract was generated by the Orthodontist after the Effective Date (the
"Contract"), entered into on or prior to the last business day of each month.
"MONTHLY CONTRACT RESIDUAL AMOUNT" shall mean that amount equal to the
amounts remaining to be paid by the patient or third party payor under a
Contract (the "Remaining Amounts Payable") divided by the number of months
remaining in the term of such Contract; provided, however, that the Remaining
Amounts Payable shall not be in excess of 76% (other than for a Contract entered
into prior to the Effective Date) of the total amounts payable by the patient or
third party payor under the Contract.
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"ADDITIONAL NON-CONTRACT SERVICE CHARGES" shall mean that amount
charged for orthodontic services which are not included in a patient contract.
Such orthodontic services shall include, but are not limited to, diagnosis
charges, observation charges, retention charges and office visit charges.
In addition to the Base P.A. Compensation, Orthodontix Professional
shall pay to the P.A. on an annual basis, a service fee (the "Service Fee"),
which shall equal 70% of the "Net Operating Income" generated from the delivery
of orthodontic services by the Orthodontist. For purposes of this Agreement "Net
Operating Income" shall be defined as that amount, if any, equivalent to the
percentage by which Practice Overhead (as defined below) declines as a
percentage of Accrued Revenue annually; multiplied by the annual Accrued
Revenue.
In the event that the Net Operating Income for any year is zero or less
than zero, then no Service Fee shall be paid to the P.A. for that year.
"Practice Overhead" shall be defined as the sum of:
(i) an agreed upon allocable share of salaries, benefits, and
other direct costs of all employees other than licensed
healthcare professional at the Location;
(ii) an agreed upon allocable share of direct costs of all
patient care and office supplies purchased in connection with
the operation of the Location; and
(iii) an agreed upon allocable share of personal property and
real property leasehold obligations entered into in connection
with the performance of orthodontic services at the Location;
(iv) an agreed upon allocable share of personal property and
intangible taxes assessed against the assets used in connection
with the operation of the orthodontic practice at the Location;
(v) an agreed upon allocable share of malpractice insurance
expenses and orthodontist recruitment expenses;
(vi) The annual Base P.A. Compensation; and
(vii) $___________ per year for the one year period commencing
on the Effective Date (the "Management Fee"), and for each year
thereafter, the Management Fee shall automatically increase by
10% annually.
For purposes of this Agreement, the term allocable share shall be
defined as that percentage of Accrued Revenue generated by the Orthodontist
relative to the total Accrued Revenue generated by orthodontists at the
Location.
In the event a patient of the Orthodontist is treated by an
orthodontist other than the Orthodontist, the Base P.A. Compensation payable to
the P.A. shall be reduced by $80.00 per treatment unless the Orthodontist is
able to provide the coverage at no cost.
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(a) PAYMENT OF BASE P.A. COMPENSATION AND SERVICE FEE: The Base
P.A. Compensation shall be payable to the P.A. once monthly no later than the
fifteenth of the month. Payment of the Service Fee shall be payable to the P.A.
once annually no later than March 31. The amounts payable monthly shall be
estimated based upon the previous month's operating results. Adjustments to the
estimated payments shall be made to reconcile actual amounts due hereunder, no
later than the last day of the following month.
(b) AUDIT RIGHTS: No more than once every six months either
party, upon giving notice to the other party hereto, shall have the right to
inspect the records of the orthodontic practice to ascertain and audit Accrued
Revenue, and the Practice Overhead, subject to patient confidentiality laws. If,
upon audit or examination, it is determined that the Base P.A Compensation or
Service Fee was incorrectly computed, the parties shall, within forty-five (45)
days of such determination, reconcile the difference by a cash payment to the
applicable party.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE P.A.: The P.A.
represents, warrants to and covenants with Orthodontix Professional as follows:
(a) LICENSING: The Orthodontist is and shall continue to be for
the duration of this Agreement licensed to practice orthodontics in the locality
and state in which the Location is located.
(b) STANDARD OF SERVICES: The Orthodontist shall perform all
orthodontic services at the Location in strict accordance with currently
approved and accepted methods of practice within the general vicinity and
community of the Location.
(c) COMPLIANCE WITH LAWS: The Orthodontist shall comply with all
federal, state and local laws, rules, ordinances and regulations, including all
state and Drug Enforcement Administration licensing requirements, and shall not
perform clinical duties at the Location unless all such licensing is correct and
in full force and effect.
(d) CORPORATE REPRESENTATION: The P.A. is validly existing and
organized under the laws of the State of _________; it has provided Orthodontix
Professional with a Certificate of Good Standing dated within sixty (60) days of
the effective date of this Agreement, a copy of which is attached as Exhibit
"A"; The Orthodontist is an authorized representative of said P.A. and the P.A.
agrees to notify Orthodontix Professional within thirty (30) days of any change
in its corporate name, designation or status.
(e) NO RESTRICTION: The P.A. represents to Orthodontix
Professional, and acknowledges that Orthodontix Professional is relying on this
representation, that the P.A. and Orthodontist are free to enter into this
Agreement and that neither the P.A. nor the Orthodontist are under any
restrictions from a former employer or business that would preclude the P.A. or
the Orthodontist from entering into this Agreement.
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6. INDEPENDENT CONTRACTOR RELATIONSHIP: It is agreed and understood by
and between the parties hereto that P.A. is retained only for the purpose and to
the extent set forth in this Agreement and, during the period or periods of its
association with Orthodontix Professional and its performance of services
hereunder, its relation to Orthodontix Professional shall be that of an
independent contractor. This Agreement shall not be construed as an agreement of
employment, a partnership, or any other form of business entity. Neither P.A.
nor Orthodontist shall be considered under the provisions of this Agreement, or
otherwise, as having employee status or as being entitled to participate in any
employee insurance or benefit plans, arrangements, distribution, or other
benefits of any nature whatsoever which may be provided by Orthodontix
Professional for its employees. Accordingly, without limiting the generality of
the foregoing, the P.A. and the Orthodontist acknowledge and agree that neither
P.A. nor Orthodontist will be treated as an employee of Orthodontix Professional
with respect to service for purposes of workers compensation benefits, the
Federal Insurance Contributions Act, the Social Security Act, the Federal
Unemployment Tax Act, and Income Tax Withholding and for purposes of the
employee benefit provisions set forth in the Federal Income Tax Code Section 70
(a group term life insurance purchased for employees), Section 101(b) (employees
death benefits), Sections 104, 105, and 106 (accident and health insurance for
accident and health plans), Section 120 (group legal services plan), Section 127
(educational assistance program), and (a) (contributions to stock bonus,
pension, profit sharing, or plans and related trusts). Further, the P.A. and the
Orthodontist understand and accept as its responsibility all obligations to pay
any and all Federal and State Self-Employment, income and other taxes as they
may apply. Should the P.A. fail to pay such taxes, Orthodontix Professional may
deduct any such tax amounts from amounts owed to the P.A.
7. INSURANCE: Orthodontix Professional, at the P.A.'s cost and expense,
shall procure for the Orthodontist a professional liability insurance policy
covering the Orthodontist in an amount not less than the minimum required in the
state in which the Location is located. Such insurance policy will provide for
coverage on a claims-made and unlimited extended reporting basis.
8. TERM AND TERMINATION:
(a) TERM: The term of this Agreement shall be for a period of
five years from the Effective Date and shall automatically extend for an
additional five year period unless the P.A. gives to Orthodontix Professional at
least 180 days prior written notice of its intent not to renew this Agreement.
(b) TERMINATION OF AGREEMENT: This Agreement shall terminate
upon the occurrence of any of the following:
(i) The Orthodontist is convicted of an illegal act or is
engaged in an immoral or unethical practice;
(ii) The Orthodontist refuses or is unable to work the
number of hours sufficient to service the patients at the
Location in a manner consistent with historical practice
other than as a result of the death or total and permanent
disability of the
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Orthodontist as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended;
(iii) Orthodontix Professional reasonably determines that
the P.A. or the Orthodontist is acting in a manner
detrimental to the interests of Orthodontix Professional
and which results in a material adverse effect to
Orthodontix Professional;
(iv) Upon the breach by the P.A. or the Orthodontist of
this Agreement;
(v) Upon the death or total and permanent disability of the
Orthodontist as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended.
(c) In the event of termination by the P.A. as a result of any
of the factors listed above other than Section 8(b)(v), the P.A. and the
Orthodontist shall jointly and severally be obligated to (x) pay to Orthodontix
Professional liquidated damages as per the schedule below: and (y) cause the
Orthodontist to assign all of the outstanding shares of capital stock in the
P.A. to an orthodontist licensed to render orthodontic services in the state of
_____________ as selected by Orthodontix Professional.
YEAR OF TERMINATION LIQUIDATED DAMAGES
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1 The greater of $250,000 or 1.1 times
the amount of all monies received by
or for the benefit of the
Orthodontist from patients or third
party payors as a result of the
Orthodontist providing orthodontic
services for the twelve-month period
ended December 31, 1996 (the "Net
Cash Collection Amount").
2 The greater of $200,000 or 1.0 times
the Net Cash Collection Amount.
3 The greater of $150,000 or .88 times
the Net Cash Collection Amount.
4 The greater of $100,000 or .66 times
the Net Cash Collection Amount.
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5 The greater of $75,000 or .36 times
the Net Cash Collection Amount.
9. PROPRIETARY INFORMATION; NON-INTERFERENCE; NON-COMPETITION:
(a) PROPRIETARY INFORMATION: During the term of this Agreement,
neither the P.A. nor the Orthodontist will directly or indirectly disclose to
any person, entity, firm or any company whatsoever or use for its own benefit or
the benefit of any other person, entity, firm or company, any knowledge,
information, business method, techniques, or data of Orthodontix Professional as
contained in any policy, procedure manuals or written correspondence or
documents provided to Orthodontist or the P.A. The P.A. shall, and shall cause
the Orthodontist to, upon termination of this Agreement, return to Orthodontix
Professional all books, records, notes and all other information, documents or
policies and procedures manuals applicable to Orthodontix Professional and its
accounts in the matter of conducting its business. Orthodontix Professional and
the P.A. agree that Orthodontix Professional will not request or accept, and
neither the P.A. nor the Orthodontist will divulge, any confidential or
proprietary information concerning the operation of orthodontic practices
learned or obtained by the P.A. or the Orthodontist.
(b) NON-INTERFERENCE: During the term of this Agreement and for
a period of two years thereafter, unless otherwise agreed to in writing by
Orthodontix Professional, neither the P.A. nor the Orthodontist will, either for
own account or for any other person, solicit, induce, attempt to induce,
interfere with, or endeavor to cause (i) any current patient, or any employee,
independent contractor or other affiliate of Orthodontix Professional or any
affiliate of Orthodontix Professional to modify, amend, terminate, or otherwise
alter any of its relationships with Orthodontix Professional or Orthodontix
Professional's subsidiaries or affiliates; or (ii) any currently retained
healthcare professional to modify, amend, terminate, or otherwise alter its
relationship, including compensation arrangements with Orthodontix Professional,
Orthodontix Professional's subsidiaries or affiliates. Further, unless otherwise
agreed to in writing by Orthodontix Professional, for a period of two years from
the date hereof, the P.A. and the Orthodontist agree that they shall refrain
from soliciting and shall not, directly or indirectly, as sole proprietor,
independent contractor, employee, consultant, agent, partner, or joint venturer,
or as an officer, director, stockholder, agent or employee of any firm, person,
entity, partnership or corporation, or otherwise solicit the employees of
Orthodontix Professional or any subsidiary of an affiliate of Orthodontix
Professional to leave the service of Orthodontix Professional or a subsidiary or
affiliate of Orthodontix Professional.
(c) NON-COMPETITION: It is the intention of Orthodontix
Professional and the P.A. to restrict the P.A. and the Orthodontist only to the
extent necessary for the protection of legitimate business interests of
Orthodontix
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Professional and legally permissible and it is agreed that nothing herein
prevents the Orthodontist from earning a livelihood. During the term of this
Agreement the P.A. shall cause the Orthodontist to perform orthodontic services
exclusively at the Location. For a period of two years after this Agreement,
except with the prior written consent of Orthodontix Professional, the P.A.
shall not and shall cause Orthodontist not to establish, develop or open any
offices for the provision of orthodontic services within a 10 mile radius of the
Location.
(d) REMEDIES: In the event of an actual or threatened breach by
the P.A. or the Orthodontist of Section 9 paragraphs (a), (b) or (c),
Orthodontix Professional shall be entitled to an injunction restraining either
the P.A. or the Orthodontist, or both, from its prohibited conduct. If the court
should hold that the duration and/or scope (geographic or otherwise) of the
covenant contained herein is unreasonable, then, to the extent permitted by law,
the court may prescribe a duration and/or scope (geographic or otherwise), that
is reasonable and the parties agree to accept such determination, subject to
their rights of appeal. Nothing contained herein shall be construed as
prohibiting Orthodontix Professional or any third party from pursuing any of the
remedies available to it for such breach or threatened breach, including
recovery of damages from the P.A., the Orthodontist or both. In any action or
proceeding to enforce the provisions of this Section 9(d), the prevailing party
shall be reimbursed by the other party for all costs incurred in such action or
proceeding, including, without limitation, all court costs and filing fees and
all attorneys' fees, incurred either at the trial level or at the appellate
level.
10. MISCELLANEOUS:
(a) POLICIES AND PROCEDURES: The P.A. acknowledges the necessity
for Orthodontix Professional to have uniform policies and procedures for its
operations, and the P.A. agrees that the P.A. and Orthodontist will be governed
by Orthodontix Professional's policies and procedures currently in force, and as
amended from time to time.
(b) ASSIGNMENT PROHIBITED: The P.A. agrees that this Agreement
is personal in nature and it may not assign any of the rights, benefits, or
obligations hereunder without first obtaining the written consent of Orthodontix
Professional.
(c) SURVIVAL CLAUSE: The Orthodontist agrees that all
Orthodontist's obligations, covenants, undertakings and representations set
forth in this Agreement shall survive termination or cancellation of this
Agreement, for any reason whatsoever, whether with cause or without cause.
(d) SAVINGS CLAUSE: If any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the validity or enforceability of any other provision hereof.
(e) NOTICES: All notices provided for by this Agreement shall be
made in writing, as follows: (i) either by actual delivery of the notice into
the hands of the parties hereunto entitled; or (ii) by the mailing of the notice
in the United States mail to the last known address of the parties entitled
thereto by certified or registered mail, return receipt requested. The notice
shall be deemed
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to be received on the earlier of the date of its actual receipt by the parties
entitled thereto, or the date of the return receipt.
(f) ENTIRE AGREEMENT: This Agreement sets forth the full and
complete understanding of the Parties and supersedes any prior agreement, oral
or written. No addition or additions to this Agreement shall be binding upon
either party unless in writing and signed by both Parties except as here and
otherwise provided.
(g) SECTION HEADINGS: The headings of the various sections of
this Agreement have been inserted only for the purposes of convenience, and are
not part of this Agreement and shall not be deemed in any manner to modify,
expand or restrict any of the provisions of this Agreement.
(h) GOVERNING LAW: This Agreement shall be construed and
enforced in accordance with the laws of the State of __________ and this
Agreement shall not be construed more strictly against one party than against
the other, merely by virtue of the fact that it may have been prepared by
counsel for one of the Parties, it being recognized that all of the parties have
contributed substantially and materially to the preparation of this Agreement.
(i) NUMBER; GENDER: Where appropriate, the use of the singular
herein shall include and be deemed to be the plural and the use of the plural
herein shall include and be deemed to be the singular, and the use of the
masculine gender shall include the feminine and neutral gender.
(j) COUNTERPARTS: This Agreement may be executed in any number
of counter parts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
(k) FURTHER ASSURANCES: The parties will upon reasonable
request, execute and deliver all such further documents as may be necessary in
order to carry out the purposes and terms of this Agreement.
(l) TAIL INSURANCE COVERAGE. Upon the termination of this
Agreement, the P.A. shall cause the Orthodontist to acquire tail insurance
coverage in scope and amount acceptable to the P.A.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Parties hereto as of the date first above written.
"ORTHODONTIX PROFESSIONAL" "P.A."
Orthodontix Professional, P.A.,
a ______ professional corporation, a ______ professional corporation,
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By:________________________________ By:___________________________
Authorized Representative Authorized Representative
------------------------------
Xxxxxx Xxxxxxx
------------------------------
Xxxx Xxxxx Zip Code
Telephone ( )
--- --------------
EIN:
--------------------------
Agreed and Accepted this day of , 1997
--- ------------------
"ORTHODONTIST"
By:
--------------------------------
, D.D.S.
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SERVICES AGREEMENT
THIS AGREEMENT made and entered into this ____ day of _________________
by and between Orthodontix Professional, P.A., a professional corporation
("Orthodontix Professional") and ________________, P.A., a _________
professional corporation (the "P.A."). This Agreement shall be effective on the
date of the closing of the transactions (the "Effective Date") contemplated
under the Agreement and Plan of Reorganization of even date herewith by and
among Orthodontix, Inc., the Orthodontist and a professional corporation
affiliated with the Orthodontist (the "Closing"). The parties acknowledge that
Orthodontix, Inc. is a third party beneficiary hereof.
RECITALS:
A. Orthodontix Professional owns and operates orthodontic practices.
B. ____________________, D.D.S. (the "Orthodontist") is the sole
shareholder, officer and director of the P.A. and is duly licensed by all
appropriate licensing boards within the state of _____________, is a practicing
orthodontist within the state of _____________ and is qualified to perform such
duties as are set forth in this Agreement.
C. Orthodontix Professional desires to engage the P.A. and the P.A.
wishes to become engaged to cause the Orthodontist to provide orthodontic
services at ______ and at such other locations as Orthodontix Professional and
the P.A. will, from time to time mutually determine (collectively, the
"Location").
D. The parties agree to work in a cooperative manner to bring about a
mutually advantageous and satisfying relationship. Orthodontix Professional
agrees to consult with P.A. and Orthodontist prior to making material changes at
the Location. Orthodontix Professional and P.A. agree that the parties'
relationship will be built upon open discussion and evaluation of issues
affecting the practice, and that Orthodontist shall remain integrally involved
in the daily running of the practice.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, Orthodontix Professional and the P.A. do hereby agree as follows:
1. RECITALS: The above recitals are true and correct and are
incorporated herein by reference.
2. CLINICAL OBLIGATIONS: The P.A. shall cause the Orthodontist to:
(a) COVERAGE: Provide general orthodontic services at the
Location. The Orthodontist shall not be required to perform any duties which
would interfere with or impair the
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complete exercise of the Orthodontist's professional judgment. Further, the
Orthodontist shall perform all orthodontic services in strict accordance with
currently acceptable orthodontic standards and ethics contained in applicable
law or ordinance or established by rules and regulations of a Federal, State or
local agency, department, commission, association, (including, without
limitation, the American Association of Orthodontists) or other pertinent
governing or advisory body having authority to set standards for health care
facilities or practitioners or contained in rules, regulations or procedures and
policies established by the Orthodontist and Orthodontix Professional.
(b) EVALUATION AND TREATMENT: Evaluate each patient presented
for care and/or treatment. The degree of evaluation and treatment rendered to
any patient shall be the responsibility of the Orthodontist, it being
acknowledged that an orthodontist performing orthodontic services must exercise
the orthodontist's own judgment as to the means and methods of treating each
patient. Orthodontix Professional shall use reasonable efforts to accommodate
patient requests to receive care from a particular orthodontist practicing at
the Location subject to the Orthodontist's desired work schedule. New patients
shall be assigned to orthodontists at the Location on a rotational basis.
(c) ORTHODONTIC EMERGENCIES: Attend to all orthodontic
emergencies when at the Location and as necessary for the general welfare of
patients.
3. OTHER OBLIGATIONS: In addition to the clinical obligations set forth
in Section 2 above, the P.A. shall and shall cause the Orthodontist to have the
following additional obligations:
(a) FEES: To assist Orthodontix Professional in any way
reasonable and necessary to enable Orthodontix Professional to xxxx and collect
the charges for services rendered by the Orthodontist. Orthodontix Professional
shall have the exclusive right to xxxx and collect (receive payment) for
professional services rendered by the Orthodontist. The P.A. shall and shall
cause the Orthodontist to assign to Orthodontix Professional all rights to fees
for services performed. Accordingly, all payments to be made by third party
payors for services performed by the Orthodontist shall be paid directly to
Orthodontix Professional. If any fees, payments or other things of value charged
are delivered to the Orthodontist, the Orthodontist shall promptly reassign
these items to Orthodontix Professional. This provision shall survive the
termination of this Agreement. The P.A. agrees and shall cause the Orthodontist
to agree that in no event shall the Orthodontist xxxx, charge or collect or seek
compensation of any form from any patients or third party payment source for the
services provided pursuant to this Agreement.
(b) CREDENTIALING DOCUMENTATION: Furnish Orthodontix
Professional annually with all documentation required by Orthodontix
Professional for proper credentialing including, but not limited to, a copy of
the Orthodontist's original license and current renewal thereof, valid for the
state in which the Location is situated and any other documentation required by
the state in which the Location is situated. Payment for services may be delayed
until the P.A. delivers all necessary documentation.
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(c) ORTHODONTIC AND OTHER RECORDS: Promptly prepare and maintain
such orthodontic records incidental to the services performed by the
Orthodontist hereunder in accordance with the standard dental and/or orthodontic
policies as from time to time adjusted. Further, Orthodontist shall accurately
and promptly prepare such other records as may be required by Orthodontix
Professional, including but not limited to, records necessary for proper billing
for services.
(d) CLAIMS REPORTING: Report to Orthodontix Professional any
incident, or potential incident, which Orthodontist believes might form the
basis of a malpractice or other claim immediately upon the occurrence thereof.
Such claims shall be reported on forms provided by Orthodontix Professional for
such purpose, and sent to the attention of Claims Manager. Failure to report any
such incident or potential incident shall be a material breach of this Agreement
and may have the effect of negating insurance coverage thereof.
4. COMPENSATION: Orthodontix Professional shall pay to the P.A., on a
monthly basis, a base amount (the "Base P.A. Compensation") equal to ____ % of
the practice's Accrued Revenue (as defined below), which percentage amount may
be modified on or prior to the Closing based on information provided as a result
of the audit of Orthodontist's practice for the twelve month period ended
December 31, 1996. For purposes of this Agreement, "Accrued Revenue" shall be
defined as follows:
(i) 24% of the Initial Contract Amount; plus
(ii) the Monthly Contract Residual Amount; plus
(iii) Additional Non-Contract Service Charges.
"INITIAL CONTRACT AMOUNT" for a given month shall be defined as the
total value of any contracts to provide orthodontic services between a patient
or third party payor on the one hand and the Orthodontist, Orthodontix
Professional or the P.A. on the other, for the provision of orthodontic services
at a pre-determined fee-for service amount (whether or not payable in cash)
which contract was generated by the Orthodontist after the Effective Date (the
"Contract"), entered into on or prior to the last business day of each month.
"MONTHLY CONTRACT RESIDUAL AMOUNT" shall mean that amount equal to the
amounts remaining to be paid by the patient or third party payor under a
Contract (the "Remaining Amounts Payable") divided by the number of months
remaining in the term of such Contract; provided, however, that the Remaining
Amounts Payable shall not be in excess of 76% (other than for a Contract entered
into prior to the Effective Date) of the total amounts payable by the patient or
third party payor under the Contract.
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"ADDITIONAL NON-CONTRACT SERVICE CHARGES" shall mean that amount
charged for orthodontic services which are not included in a patient contract.
Such orthodontic services shall include, but are not limited to, diagnosis
charges, observation charges, retention charges and office visit charges.
In addition to the Base P.A. Compensation, Orthodontix Professional
shall pay to the P.A. on an annual basis, a service fee (the "Service Fee"),
which shall equal 70% of the "Net Operating Income" generated from the delivery
of orthodontic services by the Orthodontist. For purposes of this Agreement "Net
Operating Income" shall be defined as that amount, if any, equivalent to the
percentage by which Practice Overhead (as defined below) declines as a
percentage of Accrued Revenue annually; multiplied by the annual Accrued
Revenue.
In the event that the Net Operating Income for any year is zero or less
than zero, then no Service Fee shall be paid to the P.A. for that year.
"Practice Overhead" shall be defined as the sum of:
(i) an agreed upon allocable share of salaries, benefits, and
other direct costs of all employees other than licensed
healthcare professional at the Location;
(ii) an agreed upon allocable share of direct costs of all
patient care and office supplies purchased in connection with
the operation of the Location; and
(iii) an agreed upon allocable share of personal property and
real property leasehold obligations entered into in connection
with the performance of orthodontic services at the Location;
(iv) an agreed upon allocable share of personal property and
intangible taxes assessed against the assets used in connection
with the operation of the orthodontic practice at the Location;
(v) an agreed upon allocable share of malpractice insurance
expenses and orthodontist recruitment expenses;
(vi) The annual Base P.A. Compensation; and
(vii) 15% of the annual Accrued Revenue (the "Management Fee").
For purposes of this Agreement, the term allocable share shall be
defined as that percentage of Accrued Revenue generated by the Orthodontist
relative to the total Accrued Revenue generated by orthodontists at the
Location.
In the event a patient of the Orthodontist is treated by an
orthodontist other than the Orthodontist, the Base P.A. Compensation payable to
the P.A. shall be reduced by $80.00 per treatment unless the Orthodontist is
able to provide the coverage at no cost.
(a) PAYMENT OF BASE P.A. COMPENSATION AND SERVICE FEE: The Base
P.A. Compensation shall be payable to the P.A. once monthly no later than the
fifteenth of the month. Payment of the Service Fee shall be payable to the P.A.
once annually no later than March 31. The amounts payable monthly shall be
estimated based upon the previous month's operating results.
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Adjustments to the estimated payments shall be made to reconcile actual amounts
due hereunder, no later than the last day of the following month.
(b) AUDIT RIGHTS: No more than once every six months either
party, upon giving notice to the other party hereto, shall have the right to
inspect the records of the orthodontic practice to ascertain and audit Accrued
Revenue, and the Practice Overhead, subject to patient confidentiality laws. If,
upon audit or examination, it is determined that the Base P.A Compensation or
Service Fee was incorrectly computed, the parties shall, within forty-five (45)
days of such determination, reconcile the difference by a cash payment to the
applicable party.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE P.A.: The P.A.
represents, warrants to and covenants with Orthodontix Professional as follows:
(a) LICENSING: The Orthodontist is and shall continue to be for
the duration of this Agreement licensed to practice orthodontics in the locality
and state in which the Location is located.
(b) STANDARD OF SERVICES: The Orthodontist shall perform all
orthodontic services at the Location in strict accordance with currently
approved and accepted methods of practice within the general vicinity and
community of the Location.
(c) COMPLIANCE WITH LAWS: The Orthodontist shall comply with all
federal, state and local laws, rules, ordinances and regulations, including all
state and Drug Enforcement Administration licensing requirements, and shall not
perform clinical duties at the Location unless all such licensing is correct and
in full force and effect.
(d) CORPORATE REPRESENTATION: The P.A. is validly existing and
organized under the laws of the State of _________; it has provided Orthodontix
Professional with a Certificate of Good Standing dated within sixty (60) days of
the effective date of this Agreement, a copy of which is attached as Exhibit
"A"; The Orthodontist is an authorized representative of said P.A. and the P.A.
agrees to notify Orthodontix Professional within thirty (30) days of any change
in its corporate name, designation or status.
(e) NO RESTRICTION: The P.A. represents to Orthodontix
Professional, and acknowledges that Orthodontix Professional is relying on this
representation, that the P.A. and Orthodontist are free to enter into this
Agreement and that neither the P.A. nor the Orthodontist are under any
restrictions from a former employer or business that would preclude the P.A. or
the Orthodontist from entering into this Agreement.
6. INDEPENDENT CONTRACTOR RELATIONSHIP: It is agreed and understood by
and between the parties hereto that P.A. is retained only for the purpose and to
the extent set forth in this Agreement and, during the period or periods of its
association with Orthodontix Professional and its performance of services
hereunder, its relation to Orthodontix Professional shall be that of an
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independent contractor. This Agreement shall not be construed as an agreement of
employment, a partnership, or any other form of business entity. Neither P.A.
nor Orthodontist shall be considered under the provisions of this Agreement, or
otherwise, as having employee status or as being entitled to participate in any
employee insurance or benefit plans, arrangements, distribution, or other
benefits of any nature whatsoever which may be provided by Orthodontix
Professional for its employees. Accordingly, without limiting the generality of
the foregoing, the P.A. and the Orthodontist acknowledge and agree that neither
P.A. nor Orthodontist will be treated as an employee of Orthodontix Professional
with respect to service for purposes of workers compensation benefits, the
Federal Insurance Contributions Act, the Social Security Act, the Federal
Unemployment Tax Act, and Income Tax Withholding and for purposes of the
employee benefit provisions set forth in the Federal Income Tax Code Section 70
(a group term life insurance purchased for employees), Section 101(b) (employees
death benefits), Sections 104, 105, and 106 (accident and health insurance for
accident and health plans), Section 120 (group legal services plan), Section 127
(educational assistance program), and (a) (contributions to stock bonus,
pension, profit sharing, or plans and related trusts). Further, the P.A. and the
Orthodontist understand and accept as its responsibility all obligations to pay
any and all Federal and State Self-Employment, income and other taxes as they
may apply. Should the P.A. fail to pay such taxes, Orthodontix Professional may
deduct any such tax amounts from amounts owed to the P.A.
7. INSURANCE: Orthodontix Professional, at the P.A.'s cost and expense,
shall procure for the Orthodontist a professional liability insurance policy
covering the Orthodontist in an amount not less than the minimum required in the
state in which the Location is located. Such insurance policy will provide for
coverage on a claims-made and unlimited extended reporting basis.
8. TERM AND TERMINATION:
(a) TERM: The term of this Agreement shall be for a period of
five years from the Effective Date and shall automatically extend for an
additional five year period unless the P.A. gives to Orthodontix Professional at
least 180 days prior written notice of its intent not to renew this Agreement.
(b) TERMINATION OF AGREEMENT: This Agreement shall terminate
upon the occurrence of any of the following:
(i) The Orthodontist is convicted of an illegal act or is
engaged in an immoral or unethical practice;
(ii) The Orthodontist refuses or is unable to work the
number of hours sufficient to service the patients at the
Location in a manner consistent with historical practice
other than as a result of the death or total and permanent
disability of the Orthodontist as defined in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended;
(iii) Orthodontix Professional reasonably determines that
the P.A. or the Orthodontist is acting in a manner
detrimental to the interests of Orthodontix
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Professional and which results in a material adverse effect
to Orthodontix Professional;
(iv) Upon the breach by the P.A. or the Orthodontist of
this Agreement;
(v) Upon the death or total and permanent disability of the
Orthodontist as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended.
(c) In the event of termination by the P.A. as a result of any
of the factors listed above other than Section 8(b)(v), the P.A. and the
Orthodontist shall jointly and severally be obligated to (x) pay to Orthodontix
Professional liquidated damages as per the schedule below: and (y) cause the
Orthodontist to assign all of the outstanding shares of capital stock in the
P.A. to an orthodontist licensed to render orthodontic services in the state of
_____ as selected by Orthodontix Professional.
YEAR OF TERMINATION LIQUIDATED DAMAGES
------------------- ------------------
1 The greater of $250,000 or 1.1 times
the amount of all monies received by
or for the benefit of the
Orthodontist from patients or third
party payors as a result of the
Orthodontist providing orthodontic
services for the twelve-month period
ended December 31, 1996 (the "Net
Cash Collection Amount").
2 The greater of $200,000 or 1.0 times
the Net Cash Collection Amount.
3 The greater of $150,000 or .88 times
the Net Cash Collection Amount.
4 The greater of $100,000 or .66 times
the Net Cash Collection Amount.
5 The greater of $75,000 or .36 times
the Net Cash Collection Amount.
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9. PROPRIETARY INFORMATION; NON-INTERFERENCE; NON-COMPETITION:
(a) PROPRIETARY INFORMATION: During the term of this Agreement,
neither the P.A. nor the Orthodontist will directly or indirectly disclose to
any person, entity, firm or any company whatsoever or use for its own benefit or
the benefit of any other person, entity, firm or company, any knowledge,
information, business method, techniques, or data of Orthodontix Professional as
contained in any policy, procedure manuals or written correspondence or
documents provided to Orthodontist or the P.A. The P.A. shall, and shall cause
the Orthodontist to, upon termination of this Agreement, return to Orthodontix
Professional all books, records, notes and all other information, documents or
policies and procedures manuals applicable to Orthodontix Professional and its
accounts in the matter of conducting its business. Orthodontix Professional and
the P.A. agree that Orthodontix Professional will not request or accept, and
neither the P.A. nor the Orthodontist will divulge, any confidential or
proprietary information concerning the operation of orthodontic practices
learned or obtained by the P.A. or the Orthodontist.
(b) NON-INTERFERENCE: During the term of this Agreement and for
a period of two years thereafter, unless otherwise agreed to in writing by
Orthodontix Professional, neither the P.A. nor the Orthodontist will, either for
own account or for any other person, solicit, induce, attempt to induce,
interfere with, or endeavor to cause (i) any current patient, or any employee,
independent contractor or other affiliate of Orthodontix Professional or any
affiliate of Orthodontix Professional to modify, amend, terminate, or otherwise
alter any of its relationships with Orthodontix Professional or Orthodontix
Professional's subsidiaries or affiliates; or (ii) any currently retained
healthcare professional to modify, amend, terminate, or otherwise alter its
relationship, including compensation arrangements with Orthodontix Professional,
Orthodontix Professional's subsidiaries or affiliates. Further, unless otherwise
agreed to in writing by Orthodontix Professional, for a period of two years from
the date hereof, the P.A. and the Orthodontist agree that they shall refrain
from soliciting and shall not, directly or indirectly, as sole proprietor,
independent contractor, employee, consultant, agent, partner, or joint venturer,
or as an officer, director, stockholder, agent or employee of any firm, person,
entity, partnership or corporation, or otherwise solicit the employees of
Orthodontix Professional or any subsidiary of an affiliate of Orthodontix
Professional to leave the service of Orthodontix Professional or a subsidiary or
affiliate of Orthodontix Professional.
(c) NON-COMPETITION: It is the intention of Orthodontix
Professional and the P.A. to restrict the P.A. and the Orthodontist only to the
extent necessary for the protection of legitimate business interests of
Orthodontix Professional and legally permissible and it is agreed that nothing
herein prevents the Orthodontist from earning a livelihood. During the term of
this Agreement the P.A. shall cause the Orthodontist to perform orthodontic
services exclusively at the Location. For a period of two years after this
Agreement, except with the prior written consent of Orthodontix Professional,
the P.A. shall not and shall cause Orthodontist not to establish, develop or
open any offices for the provision of orthodontic services within a 10 mile
radius of the Location.
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(d) REMEDIES: In the event of an actual or threatened breach by
the P.A. or the Orthodontist of Section 9 paragraphs (a), (b) or (c),
Orthodontix Professional shall be entitled to an injunction restraining either
the P.A. or the Orthodontist, or both, from its prohibited conduct. If the court
should hold that the duration and/or scope (geographic or otherwise) of the
covenant contained herein is unreasonable, then, to the extent permitted by law,
the court may prescribe a duration and/or scope (geographic or otherwise), that
is reasonable and the parties agree to accept such determination, subject to
their rights of appeal. Nothing contained herein shall be construed as
prohibiting Orthodontix Professional or any third party from pursuing any of the
remedies available to it for such breach or threatened breach, including
recovery of damages from the P.A., the Orthodontist or both. In any action or
proceeding to enforce the provisions of this Section 9(d), the prevailing party
shall be reimbursed by the other party for all costs incurred in such action or
proceeding, including, without limitation, all court costs and filing fees and
all attorneys' fees, incurred either at the trial level or at the appellate
level.
10. MISCELLANEOUS:
(a) POLICIES AND PROCEDURES: The P.A. acknowledges the necessity
for Orthodontix Professional to have uniform policies and procedures for its
operations, and the P.A. agrees that the P.A. and Orthodontist will be governed
by Orthodontix Professional's policies and procedures currently in force, and as
amended from time to time.
(b) ASSIGNMENT PROHIBITED: The P.A. agrees that this Agreement
is personal in nature and it may not assign any of the rights, benefits, or
obligations hereunder without first obtaining the written consent of Orthodontix
Professional.
(c) SURVIVAL CLAUSE: The Orthodontist agrees that all
Orthodontist's obligations, covenants, undertakings and representations set
forth in this Agreement shall survive termination or cancellation of this
Agreement, for any reason whatsoever, whether with cause or without cause.
(d) SAVINGS CLAUSE: If any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the validity or enforceability of any other provision hereof.
(e) NOTICES: All notices provided for by this Agreement shall be
made in writing, as follows: (i) either by actual delivery of the notice into
the hands of the parties hereunto entitled; or (ii) by the mailing of the notice
in the United States mail to the last known address of the parties entitled
thereto by certified or registered mail, return receipt requested. The notice
shall be deemed to be received on the earlier of the date of its actual receipt
by the parties entitled thereto, or the date of the return receipt.
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(f) ENTIRE AGREEMENT: This Agreement sets forth the full and
complete understanding of the Parties and supersedes any prior agreement, oral
or written. No addition or additions to this Agreement shall be binding upon
either party unless in writing and signed by both Parties except as here and
otherwise provided.
(g) SECTION HEADINGS: The headings of the various sections of
this Agreement have been inserted only for the purposes of convenience, and are
not part of this Agreement and shall not be deemed in any manner to modify,
expand or restrict any of the provisions of this Agreement.
(h) GOVERNING LAW: This Agreement shall be construed and
enforced in accordance with the laws of the State of __________ and this
Agreement shall not be construed more strictly against one party than against
the other, merely by virtue of the fact that it may have been prepared by
counsel for one of the Parties, it being recognized that all of the parties have
contributed substantially and materially to the preparation of this Agreement.
(i) NUMBER; GENDER: Where appropriate, the use of the singular
herein shall include and be deemed to be the plural and the use of the plural
herein shall include and be deemed to be the singular, and the use of the
masculine gender shall include the feminine and neutral gender.
(j) COUNTERPARTS: This Agreement may be executed in any number
of counter parts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
(k) FURTHER ASSURANCES: The parties will upon reasonable
request, execute and deliver all such further documents as may be necessary in
order to carry out the purposes and terms of this Agreement.
(l) TAIL INSURANCE COVERAGE. Upon the termination of this
Agreement, the P.A. shall cause the Orthodontist to acquire tail insurance
coverage in scope and amount acceptable to the P.A.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Parties hereto as of the date first above written.
"ORTHODONTIX PROFESSIONAL" "P.A."
Orthodontix Professional, P.A.,
a _______ professional corporation, a _______ professional corporation,
By: By:
-------------------------------- ---------------------------------
Authorized Representative Authorized Representative
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------------------------------
Street Address
------------------------------
City State Zip Code
Telephone ( )
--- --------------
EIN:
--------------------------
Agreed and Accepted this day of , 1998
--- ------------------
"ORTHODONTIST"
By:
--------------------------------
, D.D.S.
11
