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DENTAL GROUP MANAGEMENT AGREEMENT
by and between
Gentle Dental Service Corporation
(a Washington corporation)
and
Affordable Dental Care, P.C.
(an Oregon corporation)
================================================================================
March 1, 1998
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................... 1
ARTICLE II SCOPE OF AGREEMENT............................................ 2
Section 2.1 General Scope of Agreement......................... 2
Section 2.2 Revenues........................................... 2
Section 2.3 Deposit Accounts.................................... 2
ARTICLE III OPERATION OF PRACTICE......................................... 2
Section 3.1 Appointment........................................ 2
Section 3.2 Professional Matters............................... 3
Section 3.3 Relationship of Parties............................ 3
Section 3.4 Authority and Control.............................. 3
Section 3.5 Joint Operations Committee......................... 4
Section 3.6 Budgets............................................ 5
Section 3.7 Budget Process..................................... 6
Section 3.8 Personnel.......................................... 6
ARTICLE IV MANAGEMENT SERVICES........................................... 7
Section 4.1 General Description of Services.................... 7
Section 4.2 Practice Site Facilities........................... 7
Section 4.3 Purchased Items and Services....................... 7
Section 4.4 Manager Personnel.................................. 7
Section 4.5 Day-to-Day Management and Supervision.............. 8
Section 4.6 Billing and Collection Payment of Expenses......... 8
Section 4.7 Bookkeeping and Accounting......................... 8
Section 4.8 Marketing and Public Relations Services............ 9
Section 4.9 Group Agreements................................... 9
Section 4.10 Utilization Review Quality Improvement and
Outcomes Monitoring................................ 9
Section 4.11 Patient Referrals.................................. 9
Section 4.12 Applicable Law..................................... 10
ARTICLE V GROUP RESPONSIBILITIES........................................ 10
Section 5.1 Diagnosis, Treatment Planning, Specific
Patient Education and Consultation................. 10
Section 5.2 Dental Services.................................... 10
Section 5.3 Provision of Dental Services by Group.............. 11
Section 5.4 Providers.......................................... 11
Section 5.5 Peer Review........................................ 11
Section 5.6 Fees, Charges and Payor Agreements................. 11
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Section 5.7 Hours of Clinical Operation........................ 12
Section 5.8 Billing Information and Assignments................ 12
Section 5.9 Third Party Contracts.............................. 12
Section 5.10 Use of Manager's Goods and Services................ 12
Section 5.11 Negative Covenants................................. 12
Section 5.12 Group Maintains Full Professional Authority........ 12
ARTICLE VI TERM.......................................................... 13
Section 6.1 Term............................................... 13
Section 6.2 Termination and Extension.......................... 13
ARTICLE VII FINANCIAL AND SECURITY ARRANGEMENTS........................... 15
Section 7.1 Management Fee..................................... 15
Section 7.2 Payments........................................... 15
Section 7.3 Advances........................................... 15
Section 7.4 Security Agreement................................. 15
Section 7.5 Priority of Payments............................... 15
Section 7.6 Accounts Receivable................................ 16
ARTICLE VIII INDEMNITY AND INSURANCE....................................... 16
Section 8.1 Indemnity.......................................... 16
Section 8.2 Manager's Insurance................................ 17
Section 8.3 Group's Insurance.................................. 17
ARTICLE IX BOOKS AND RECORDS............................................. 17
Section 9.1 Ownership of Records............................... 17
ARTICLE X RESTRICTIVE COVENANTS......................................... 18
Section 10.1 Covenant Regarding Proprietary Information......... 18
Section 10.2 Covenants Not to Compete During the Term........... 18
Section 10.3 Covenant Not to Solicit............................ 19
Section 10.4 Enforcement........................................ 19
ARTICLE XI MISCELLANEOUS PROVISIONS...................................... 19
Section 11.1 Assignment......................................... 19
Section 11.2 Headings........................................... 20
Section 11.3 Waiver............................................. 20
Section 11.4 Notices............................................ 20
Section 11.5 Attorneys' Fees.................................... 20
Section 11.6 Successors......................................... 20
Section 11.7 Entire Agreement................................... 20
Section 11.8 Governing Law...................................... 20
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Section 11.9 Severability, Contract Modifications for
Prospective Legal Events........................... 21
Section 11.10 Time Is of the Essence............................. 21
Section 11.11 Authority.......................................... 21
Section 11.12 Counterparts....................................... 21
EXHIBITS
Exhibit 1 - Definitions
Exhibit 7.1 - Management Fee
Exhibit 7.4 - Security Agreement
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DENTAL GROUP MANAGEMENT AGREEMENT
---------------------------------
This Dental Group Management Agreement (this "Agreement") is dated and
effective as of March 1, 1998 ("Effective Date"), by and between Gentle Dental
Service Corporation, a Washington corporation ("Manager"), and Affordable Dental
Care, P.C., an Oregon corporation ("Group").
RECITALS
--------
A. Group engages in the practice of dentistry by providing dental
services to patients of Group ("Group Patients") and to enrollees
("Beneficiaries") of dental plans ("Plans") under contracts ("Payor Contracts")
between Group and Plans or between Beneficiaries and Plans.
B. Group provides dental services to Beneficiaries and to Group
Patients through arrangements with licensed individuals ("Providers"). Such
arrangements may include agreements ("Employment Agreements") with
professionally licensed employees, including dentists and dental hygienists
(collectively "Employee Providers"), and agreements ("Provider Subcontracts")
with independent contractor dentists and non-dentist providers of various dental
care services (collectively "Subcontract Providers").
C. All activities of Group subject to this Agreement are referenced as
the "Practice." All references to "dental" care and services include general and
specialist dental services. All references to "dentists" include generalists and
specialists.
D. Manager is a dental management company that has been organized to
provide certain support services for the Practice and for other dental groups.
Manager is in the business of providing or arranging for management and
administrative services, facilities, equipment and certain personnel necessary
for the operation of the Practice and other dental groups.
E. Group desires to retain Manager on an independent contractor basis
to provide management and administrative services that are more particularly
described below, and Manager desires to provide such management services under
the terms and conditions set forth in this Agreement.
AGREEMENTS
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Now, Therefore, in consideration of the covenants and conditions
contained herein, Manager and Group agree as follows:
ARTICLE I
DEFINITIONS
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Terms that are capitalized within this Agreement and its exhibits are
defined in Exhibit 1.
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ARTICLE II
SCOPE OF AGREEMENT
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Section 2.1 General Scope of Agreement. This Agreement shall apply to
the Practice being conducted by Group, including, without limitation, all
professional, administrative and technical services, marketing, contracting,
case management, ancillary dental services, outpatient services and dental care
facilities, equipment, supplies and items, except as otherwise specifically
provided in this Agreement. Group's Employment Agreements shall encompass
substantially all such activities of Employee Providers and shall provide that
all revenues derived from such activities (and not excluded below) shall be
included in Revenues as such term is defined in Section 2.2 hereof. Nothing in
this Agreement shall be construed to alter or in any way affect the legal,
ethical and professional relationship between and among Provider and Provider's
patients, nor shall anything contained in this Agreement abrogate any right or
obligation arising out of or applicable to the dentist-patient relationship.
Section 2.2 Revenues. "Revenues" shall mean all of Group's xxxxxxxx
(net of contractual adjustments and bad debt), cash collections and any other
amounts that would be considered revenues of Group under GAAP. Revenues shall
include all funds collected by, or legally due to, Group or any Affiliate of
Group, including, without limitation, the following: (a) all fee-for-service
payments for services to Group Patients or Beneficiaries; (b) all payments
established under Payor Contracts; (c) all coordination of benefits or
deductibles and third-party liability recoveries related to the Group's
services; (d) all payments, dues, fees or other compensation to Group; (e) any
income, profits, dividends, distributions or other payments from Group's
investments; and (f) any interest or other non-operating income of Group.
Section 2.3 Deposit Accounts. All cash received by Group from whatever
source shall be deposited into an account or accounts ("Accounts") in the name
of Group at a banking institution selected by Group and approved by Manager.
Group authorizes Manager to xxxx and collect, in Group's name, all charges and
reimbursements for Group's dental related activities and to deposit such
collections in the Accounts. Group agrees to assist and cooperate with Manager
in the billing and collection process and to immediately deliver to Manager for
deposit any monies Group may receive. Manager shall manage the cash equivalents
of Group and Manager shall be entitled (and is hereby authorized) to transfer
such cash to the account of Manager and to use such cash for purposes as Manager
deems appropriate, subject to and consistent with the terms and provisions of
this Agreement. Nothing in this Section 2.3 shall be construed to limit or
otherwise modify the requirement that Manager disburse funds in fulfillment of
the obligations of the Group and Manager under this Agreement.
ARTICLE III
OPERATION OF PRACTICE
---------------------
Section 3.1 Appointment. Subject to applicable laws and requirements
governing the practice of dentistry, Group hereby appoints Manager as its sole
and exclusive Manager for the operation of the Practice and covenants not to
enter into an agreement with any Person other than Manager to perform or assume
any of Manager's rights, duties or responsibilities as provided herein and
hereby appoints Manager as its true and lawful attorney-in-fact to negotiate and
execute on its behalf all Payor Contracts, Employment Agreements and Provider
Subcontracts. Manager hereby accepts appointment as Group's attorney-in-fact and
accepts full responsibility for management of Group as more fully set forth
herein.
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Section 3.2 Professional Matters. Pursuant to applicable laws and
requirements governing the practice of dentistry, Group shall retain ultimate
responsibility for all activities of Group that are within the scope of a
dentist's licensure and cannot be performed by Manager due to Manager's non-
licensed status.
Section 3.3 Relationship of Parties. In the performance of its duties
and obligations under this Agreement, it is understood and agreed that Manager
shall, at all times, be acting and performing as an independent contractor and
not as an employee of Group. Except as provided in this Agreement or as required
by law, Group shall neither have nor exercise any control or direction over the
methods by which Manager shall perform its obligations hereunder; nor shall
Manager have or exercise any control or direction over the methods by which
Group shall practice dentistry. It is expressly agreed by the parties that no
work, act, commission or omission of Manager pursuant to the terms and
conditions of this Agreement shall be construed to make or render Manager or
Manager's employees or agents, the employees of Group. Manager and Group are not
partners or joint venturers with each other and nothing herein shall be
construed so as to make them partners or joint venturers or impose upon either
of them any liability as partners or joint venturers. Manager's responsibility
is to assure that the services covered by this Agreement shall be performed and
rendered in a competent, efficient and satisfactory manner. Both Manager and
Group will act in good faith in connection with the performance of their
respective obligations under this Agreement.
Section 3.4 Authority and Control. Strategic planning, overall
direction and control of the business and affairs of Group, and authority over
the day-to-day activities of Group shall be accomplished as follows:
a. Group. Notwithstanding anything else to the contrary contained
herein, Group shall have the sole responsibility and authority for all aspects
of the practice of the profession of dentistry and delivery of dental services
to Group Patients and Beneficiaries by Group and its Providers. Providers shall
use and occupy at the practice sites of Group established from time to time
under this Agreement ("Practice Sites") the facilities provided by Manager
hereunder ("Practice Site Facilities") exclusively for the practice of
dentistry. Group and Manager expressly acknowledge that the Practice or
Practices conducted at these Practice Site Facilities shall be conducted solely
by dentists and dental hygienists associated with Group as Employee Providers or
Subcontract Providers. Group shall consult with Manager or the Joint Operations
Committee, to the extent reasonable, on all matters pertaining to or affecting
the Practice and not otherwise inconsistent with the applicable laws governing
the practice of dentistry.
b. Joint Operations Committee Authority. All other
decision-making authority over the business, affairs and operations of Group
shall be vested in a joint operations committee (the "Joint Operations
Committee"). Notwithstanding anything in this Agreement to the contrary, unless
such authority has been otherwise granted or delegated to Manager herein, or is
otherwise prohibited by applicable federal or state law, the Joint Operations
Committee shall have exclusive decision-making authority over all matters
necessary to enable Manager to consolidate Group for accounting purposes
pursuant to Financial Accounting Standards Board ("FASB") Statement No. 94 (or
any successor statement, interpretation or release), as such matters are
described and set forth in the Emerging Issues Task Force ("EITF") Issue No.
97-2 (as may be further interpreted or modified by FASB, the EITF or the
Securities and Exchange Commission) including, without limitation, scope of
services provided, patient acceptance policies and procedures, pricing of
services, negotiation and execution of contracts, establishment and approval of
operating and capital budgets, total Group compensation, establishment and
implementation of guidelines for selection, hiring and termination of dentists
and other dental professionals, and the incurrence or issuance of debt by Group.
Nothing herein shall be construed as preventing the Joint Operations Committee
from appointing representatives and
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delegating authority to such representatives so long as the Joint Operations
Committee may revoke such appointment and delegation at any time and so long as
the Joint Operations Committee retains ultimate responsibility for the decisions
of such representatives.
Section 3.5 Joint Operations Committee. Subject to applicable laws and
requirements governing the practice of dentistry, the Joint Operations Committee
shall have authority and responsibility (in addition to the matters set forth in
Section 3.4b) to provide strategic planning and to manage the business
operations and administrative activities of the Group as follows:
a. Joint Operations Committee Membership. The Joint Operations
Committee shall consist of three (3) individuals (the "Committee Members").
Group shall designate one (1) Committee Member who shall be licensed dentists
(the "Group Members") and the remaining two (2) Committee Members (the "Manager
Members") shall be appointed by Manager. The number of Committee Members may be
increased by mutual agreement of the parties. Each party shall continue to
direct the appointment of the same percentage of Committee Members as described
above. Each Committee Member shall serve at the pleasure of the party
designating such Committee Member and may be replaced, with or without cause, at
any time by such party upon the delivery of written notice thereof to the other
Committee Members. Manager, Group and their respective Committee Members shall
diligently pursue any preliminary activities that are necessary to allow the
Joint Operations Committee to take an action. Where Committee Members are
required to consult with the organization appointing such Committee Members, the
Committee shall establish and agree on a deadline for accomplishing such
consultation.
b. Joint Operations Committee Action.
(1) Joint Action. Except as otherwise expressly set forth
above, the Joint Operations Committee shall take all actions that have been
approved by a majority of the Committee Members and both Group and Manager
hereby agree to be bound by the decisions of the Joint Operations Committee.
(2) Consultation Forum. Consultation between Group and
Manager, if any, shall take place at a meeting of the Joint Operations
Committee, and Group and Manager hereby agree to be bound by the decision of
their Group Members or Manager Members, as the case may be.
c. Joint Operations Committee Meetings. Meetings of the Joint
Operations Committee may be held by telephone or similar communications
equipment so long as all Committee Members participating in a meeting can hear
and speak to each other. The Joint Operations Committee shall prepare and
maintain written minutes of all meetings and shall, upon request, provide a copy
of the minutes to the parties within fifteen (15) business days following each
meeting.
(1) Regular Meetings. The Joint Operations Committee shall
hold not less than four (4) regular meetings each year, at such specific times
and places as the Committee Members may determine.
(2) Special Meetings. A special meeting of the Joint
Operations Committee may be called by a majority of the Committee Members.
(3) Notice Requirement. A Committee Member calling a special
meeting must provide all other Committee Members with three (3) days' advance
written or telephonic notice.
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Notice must be given or sent to the Committee Member's address or telephone
number as shown on the records of the Joint Operations Committee. Notice may be
delivered directly to each Committee Member or to a person at the Committee
Member's principal place of business who reasonably would be expected to
communicate that notice promptly to the Committee Member.
(4) Waiver of Notice Requirement.
(a) Written Waiver, Consent or Approval. Notice of a
special meeting need not be given to any Committee Member who, either before or
after the meeting, signs a waiver of notice or a written consent to the holding
of the special meeting, or an approval of the minutes of the special meeting.
Such waiver, consent or approval need not specify the purpose of the special
meeting. All such waivers, consents and approvals shall be filed with the Joint
Operations Committee records or made a part of the minutes of the special
meetings.
(b) Failure to Object. Notice of a special meeting need
not be given to any Committee Member who attends the special meeting and does
not protest before or at the commencement of the special meeting such lack of
notice.
(5) Quorum. The smallest number of Committee Members that
exceed fifty percent (50%) of all Committee Members shall constitute a quorum of
the Joint Operations Committee, provided, however, that such quorum shall
include at least one Group Member and one Manager Member.
(6) Proxies. The Joint Operations Committee shall provide
for the use of proxies, telephonic conference calls, written consents or other
appropriate methods by which the full participation of the Group Members and
Manager Members can be assured.
d. Limitation of Responsibility. Notwithstanding any other
provisions hereof, Committee Members shall be liable to the parties only for
actions constituting bad faith, gross negligence or breach of an express
provision of this Agreement (so long as such breach remains uncured after ten
(10) days of receiving notice of the nature of such breach). In all other
respects, Committee Members shall not be liable for negligence or mistakes of
judgment.
Section 3.6 Budgets. Each year during the term hereof, the Joint
Operations Committee shall approve and establish an annual capital and operating
budget ("Annual Budget") regarding all financial aspects of the Practice. The
Annual Budget shall include the following elements and other items, as
appropriate:
a. A capital expenditure budget outlining a program of capital
expenditures, if any, that are required for the next succeeding fiscal year;
b. An operating budget setting forth an estimate of revenues and
expenses for the next succeeding fiscal year, together with an explanation of
anticipated changes or modifications, if any, in the Practice's utilization,
rates, charges to patients or third party payors, salaries, costs of Providers,
non- wage cost increases, and all other similar factors expected to differ
significantly from those prevailing during the current fiscal year;
c. Other expenses of operation;
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d. The amount of a reasonable reserve to satisfy possible
shortfalls from operations. The allocation of such reserve shall be made by the
Joint Operations Committee as and when necessary;
e. The total annual amount of Group Expenses for the next
succeeding fiscal year, and
f. The Management Fee, as defined below, for the next succeeding
fiscal year.
Section 3.7 Budget Process.
a. Initial Annual Budget. Not later than 45 days after the
Effective Date, the Joint Operations Committee will have prepared the initial
Annual Budget for the first fiscal year (which shall initially be the calendar
year) during the term of this Agreement. If the Effective Date is other than the
first day of a fiscal year, then such initial Annual Budget shall encompass only
such portion of the then current fiscal year as remains, or, at the option of
the parties, such portion of the then current fiscal year plus the immediately
subsequent fiscal year.
b. Preliminary Budget. Not later than forty-five (45) days prior
to the end of each fiscal year during the term of this Agreement, the Manager
shall prepare and deliver to the Joint Operations Committee a preliminary Annual
Budget for the next succeeding fiscal year ("Preliminary Budget").
c. Joint Operations Committee Approval. The Joint Operations
Committee shall review and suggest modifications to the Preliminary Budget
within ten (10) days of receipt. Manager shall prepare a revised budget based
upon the Joint Operations Committee's recommendations and the Preliminary Budget
as revised shall become the Annual Budget.
d. Adjustments. In the event of a material deviation between
financial forecasts and financial performance during a fiscal year, Manager or
Group may propose adjustments to the Annual Budget which adjustments shall be
approved or disapproved by the Joint Operations Committee pursuant to the
procedures set forth above.
3.8 Personnel.
a. Providers. Except in unusual circumstances approved by the
Joint Operations Committee, and as permitted by law, Manager shall not employ or
contract with any Provider for the provision of dental services. All Providers
who provide dental services to Group Patients or to Beneficiaries shall be
either (1) Employee Providers, (2) Subcontract Providers, or (3) employees of
Subcontract Providers. Subject to guidelines established by the Joint Operations
Committee, Group shall have complete control of and responsibility for the
hiring, engagement, compensation, training, scheduling, supervision, evaluation,
and termination of all Employee Providers and Subcontract Providers, although
Manager shall consult with Group respecting such matters and shall coordinate
the advertising of positions available, interviewing of candidates, and
scheduling of clinical staff meetings and training sessions.
b. Non-Providers. With the exception of employees of Subcontract
Providers, Manager shall employ all non-Provider personnel reasonably necessary
for the operation of the Practice.
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c. Salary and Benefits. Subject to Manager's responsibilities
under Article VII, each party to this Agreement shall remain liable for the
salary and benefits paid to such party's own employees and shall be ultimately
responsible for compliance with state and federal laws pertaining to workers'
compensation, unemployment compensation and other employment-related statutes
pertaining to the party's own employees.
d. Payments to Subcontract Providers. Subject to Manager's
responsibilities under Article VII, Group shall be liable for any payments due
Subcontract Providers under Provider Subcontracts.
ARTICLE IV
MANAGEMENT SERVICES
-------------------
Section 4.1 General Description of Services. Except as prohibited by
law and within the limitations set out elsewhere in this Agreement, Manager
shall provide or arrange for the provision to Group of all management,
administrative and support services reasonably necessary and appropriate for the
efficient operation of the Practice. Such services include all administrative
services necessary to Group's performance of its obligations under Payor
Contracts, contracting, marketing, capital formation and assistance with long
term strategic planning. Manager shall exercise reasonable commercial efforts to
fulfill the administrative functions of a well managed dental group.
Section 4.2 Practice Site Facilities. Manager shall secure and
maintain Practice Site Facilities, including, without limitation, office space,
improvements, furnishings, equipment, supplies, and personal property, of a
nature and in a condition necessary and appropriate for the efficient and
effective operations of the Practice subject to the general approval of the
Joint Operations Committee. Group hereby accepts and approves of the Practice
Site Facilities initially provided by Manager. However, Manager from time to
time shall make such changes to Practice Site Facilities, including but not
limited to dental equipment purchases, as reasonably may be requested by Group
and consistent with the Annual Budget.
Section 4.3 Purchased Items and Services. Manager shall serve as the
purchasing agent for Group and shall arrange for personnel benefits, insurance,
and any other items and services required for the proper operation of the
Practice.
Section 4.4 Manager Personnel.
a. Management Team. Subject to the approval and continuing
supervision of the Joint Operations Committee, Manager may engage or designate
one or more individuals experienced in dental group management and direction,
including, but not limited to, an administrator, who will be responsible for the
overall administration of the Practice including day-to-day operations and
strategic development activities in accordance with this Agreement.
b. Other Manager Personnel. Manager shall select, hire, train,
supervise, monitor and terminate all non-Provider personnel necessary for the
operation and management of the Practice; provided, however, with respect to the
selection, hiring and termination of non-Provider clinical staff, Manager shall
obtain the consent of the Group, which consent will not be unreasonably
withheld.
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Section 4.5 Day-to-Day Management and Supervision. Subject to any
approval or consulting rights of the Joint Operations Committee, Manager shall
provide general management including, but not limited to, day-to-day supervision
of:
a. manager personnel;
b. equipment and supply acquisition;
c. office space and facility maintenance;
d. patient records organization and retention;
e. third party payor contracting;
f. case management;
g. billing, collections and accounting activities as set forth
below;
h. all operating aspects and policies of the Practice including,
but not limited to, hours of operation, work schedules, standard duties and job
descriptions, for all non-Group personnel; and
i. other related and incidental matters.
Section 4.6 Billing and Collection. In addition to the
responsibilities of Manager under Article VII, Manager shall be responsible for
all billing and collection activities required by Group. Manager shall also be
responsible for reviewing and paying accounts payable of Group. Group hereby
appoints the Manager its true and lawful attorney-in-fact to take the following
actions for and on behalf of and in the name of Group:
a. xxxx and collect in Group's name or the name of the individual
practicing dentist, all charges and reimbursements for Group. Group shall give
Manager all necessary access to Patient records to accomplish all billing and
collection. In so doing, Manager will use its best efforts but does not
guarantee any specific level of collections, and Manager will comply with
Group's reasonable and lawful policies regarding courtesy discounts;
b. take possession of and endorse in the name of the Group any
and all instruments received as payment of accounts receivable;
c. deposit all such collections directly into the Accounts and
make withdrawals from such Accounts in accordance with this Agreement; and
d. place accounts for collection, settle and compromise claims,
and institute legal action for the recovery of accounts.
Section 4.7 Bookkeeping and Accounting. Manager shall provide
bookkeeping services, financial reports, and shall implement and manage a
computerized management information system appropriate for the Practice.
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a. Financial Reporting. Manager shall prepare, analyze and
deliver to the Joint Operations Committee financial reports to the extent
necessary or appropriate for the operation of the Practice, including the
following:
(1) financial statements, including balance sheets and
statements of cash flow and income;
(2) accounts payable and accounts receivable analysis;
(3) billing status including any medicaid remittances; and
(4) reconciliation of assets, liabilities and major
expenses.
b. Audits. Group shall have the right to review, inspect and/or
copy and, at its sole cost and expense (which cost and expense shall be an
Excluded Expense), obtain an audit of (separate from any annual audit or review
of Group's financial statements performed at the direction of the Manager)
Group's financial books and records maintained by the Manager. Upon five (5)
days' prior written notice, Manager shall allow Group access during reasonable
business hours to all information and documents reasonably required for such
review, inspection and/or audit. Upon Group's request and at Group's sole cost
and expense (which cost and expense shall be an Excluded Expense), Manager shall
also provide copies of such documents.
Section 4.8 Marketing and Public Relations Services. Subject to any
limitation of law, regulation or ethical standards pertaining to the practice of
dentistry and following consultation with Group, Manager shall provide such
marketing and public relations services as Manager determines reasonably
necessary to promote, market and develop the dental services of Group. Manager
shall provide Group with copies of all marketing materials.
Section 4.9 Group Agreements. On behalf of Group, as its
attorney-in-fact, and subject to applicable state and federal law and the
continuing supervision of the Joint Operations Committee, Manager shall review,
evaluate, negotiate and enter into on Group's behalf, Payor Contracts,
Employment Agreements and Provider Subcontracts and any other contracts or
agreements regarding the provision of dental related items or services by Group
or Providers.
Section 4.10 Utilization Review Quality Improvement and Outcomes
Monitoring. Manager shall be responsible for providing administrative support
for Group's utilization review, quality improvement and outcomes monitoring
activities, including, without limitation, data collection, analysis and
reporting for Group Patients and Beneficiaries. Manager shall also support the
development and implementation of relevant policies, procedures, protocols,
practice guidelines and other interventions based on such activities.
Section 4.11 Patient Referrals. The parties agree that the benefits to
Group hereunder do not require, are not payment for, and are not in any way
contingent upon the admission, referral or any other arrangements for the
provision of any item or service offered by Manager or any affiliate of Manager
to any of Group's Patients in any facility or laboratory controlled, managed or
operated by Manager or any affiliate of Manager.
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Section 4.12 Applicable Law. Manager and Group shall comply with all
applicable federal and state laws, statutes, rules and regulations, including
without limitation, those relating to Medicaid reimbursement and any other
applicable governmental rules or the guidelines governing the standards for
administering a professional dental practice.
ARTICLE V
GROUP RESPONSIBILITIES
----------------------
Section 5.1 Diagnosis, Treatment Planning, Specific Patient Education
and Consultation. Group shall have sole responsibility for all professional
dental services provided to Patients with regard to the diagnosis of the
Patient's condition and the development of treatment plan alternatives,
including, without limitation, the following:
a. Diagnosis. Group shall have sole responsibility for all
medical and dental history evaluation, examination, obtaining clinical records,
and diagnostic procedures appropriate for complete diagnosis.
b. Treatment Planning. Group shall have sole responsibility for
all determination of treatment alternatives that may be professionally
acceptable for the treatment of the Patient's condition.
c. Specific Patient Education. Group shall have sole
responsibility for all discussion, recommendation, demonstration, and other
educational modalities intended to address the Patient's specific condition, as
differentiated from general Patient education intended to address the common
concerns of all Patients presenting with similar conditions.
d. Consultation. Group shall have sole responsibility for all
discussion of clinical advantages, disadvantages, complications, and risks of
each alternative treatment plan, and including the likely results of no
treatment.
e. Manager to Assist with Record Procurement. Notwithstanding the
above, Manager shall be responsible for exercising reasonable efforts to
procure, at its own expense, medical and dental history information, previous
clinical records, and X-ray records prior to presentation of the Patient for
treatment by Group, in accordance with protocols developed by Group in
consultation with Manager.
Section 5.2 Dental Services. Group shall have sole responsibility for
all professional dental services provided to Patients with regard to the
treatment of the Patient's condition, including, without limitation, the
following:
a. Preventive Care. Group shall have sole responsibility for all
preventive care intended to delay, or intercept the development of pathologic
conditions.
b. Therapeutic Care. Group shall have sole responsibility for all
therapeutic care intended to ameliorate, or improve existing pathologic
conditions.
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c. Referral to Specialists. Group shall have sole responsibility
for all referral to appropriate dental specialists and other allied health care
professionals in accordance with professional dental standards of care.
d. Continuing Care. Group shall have sole responsibility for all
development and execution of continuing care protocols intended to maintain the
Patient's condition over the course of time.
e. Manager to Assist with Patient Compliance Tracking.
Notwithstanding the above, Manager shall be responsible for exercising
reasonable efforts to facilitate, coordinate, and document the scheduling,
tracking, and confirmation of Group's recommendations for dental diagnostic and
therapeutic services, treatments, referrals, and continuing care in accordance
with protocols developed by Group in consultation with Manager.
Section 5.3 Provision of Dental Services by Group. Group shall operate
the Practice during the Term as a dental practice in accordance with the terms
of this Agreement and shall use its best efforts to operate and conduct the
Practice in accordance with the Annual Budget. However, nothing in this
Agreement shall be construed to affect or limit in any way the professional
discretion or duty of Group insofar as such constitutes the practice of
dentistry.
Section 5.4 Providers.
a. Professional Dental Services. Subject to guidelines
established by the Joint Operations Committee, Group shall use its best efforts
to employ or contract with the number of Providers necessary for the efficient
and effective operation of the Practice and in accordance with the Annual Budget
and quality assurance, credentialing and utilization management protocols
approved by the Joint Operations Committee. Group shall provide full and prompt
dental coverage for the Practice, including emergency service twenty-four hours
per day, seven days per week, including holidays, according to policies and
schedules approved by the Joint Operations Committee.
b. Provider Subcontracts and Employment Agreements. Group shall
not negotiate or execute any Provider Subcontract, Employment Agreement, or any
amendment thereto, or terminate any Provider Subcontract or Employment Agreement
without the approval of the Joint Operations Committee. Subject to Manager's
responsibilities under Article VII, Group shall be responsible for the payment
of compensation, in accordance with the Annual Budget, of all Employee Providers
and Subcontract Providers.
Section 5.5 Peer Review. Group, after consultation with the Joint
Operations Committee, shall implement, regularly review, modify as necessary or
appropriate and obtain the commitment of Providers to actively participate in
peer review procedures for Providers. Group shall assist Manager in the
production of periodic reports describing the results of such procedures. Group
shall provide Manager with prompt notice of any information that raises a
reasonable risk to the health and safety of Group Patients or Beneficiaries. In
any event, after consultation with the Joint Operations Committee, Group shall
take such action as may be reasonably warranted under the facts and
circumstances.
Section 5.6 Fees, Charges and Payor Agreements. The Joint Operations
Committee shall, after consultation with Group, determine the fees, charges,
premiums, or other amounts due in connection with delivery of dental services to
Patients. Such fees, charges, premiums, or other amounts
11
(regardless of whether determined on a fee-for-service, capitated, prepaid, or
other basis) shall be reasonable and consistent with the fees, charges,
premiums, and other amounts due to dental care providers for similar services
within the community under similar types of reimbursement programs involved if
such programs are currently offered within the community.
Section 5.7 Hours of Clinical Operation. After consultation with
Group, the Joint Operations Committee shall establish hours of operation that
are consistent with good dental practice, and are appropriate to the need to
timely deliver professional dental care services to Group Patients.
Section 5.8 Billing Information and Assignments. Group shall promptly
provide Manager with all billing and Patient encounter information reasonably
requested by Manager for purposes of billing and collecting for Group's
services. Group shall use reasonable efforts to procure consents to assignments
and other approvals and documents necessary to enable Manager to obtain payment
or reimbursement from third party payors and Patients. With the assistance of
Manager, Group shall obtain all provider numbers necessary to obtain payment or
reimbursement for its services.
Section 5.9 Third Party Contracts. Group shall be in compliance with
all contracts, agreements and arrangements, including any contracts that exist
on the Effective Date, between Group and third parties.
Section 5.10 Use of Manager's Goods and Services. Group shall not use
any goods or services provided by Manager pursuant to this Agreement for any
purpose other than the provision of and management of dental services as
contemplated by this Agreement and purposes incidental thereto.
Section 5.11 Negative Covenants. During the Term, Group shall not,
without the prior approval of the Joint Operations Committee, either in a single
or series of related transactions (a) pledge, mortgage or otherwise encumber any
of its property, (b) sell, assign, transfer or convey all or substantially all
of its assets, including its goodwill, (c) merge or consolidate with any other
entity, (d) allow the transfer or issuance of any of its stock (other than in
accordance with the terms and provisions of that certain Shares Acquisition
Agreement dated of even date herewith between Manager and the sole shareholder
of Group), or (e) take or allow any act that would materially impair the ability
of Group to carry on the business of the Practice or to fulfill its obligations
under this Agreement. Notwithstanding the preceding, prior to consummating with
any third party, any transfer, sale, assignment or conveyance or any merger or
consolidation contemplated in subparagraphs (a), (b) or (c) above, Group shall
first offer (the "Offer") to Manager or its designee the right to acquire the
assets of Group or to effect a merger or consolidation with Group upon
substantially the same business and economic terms as proposed to Group by such
third party. Manager or its designee shall have 60 days to elect to accept or
reject such Offer, which election shall be binding on the parties.
Section 5.12 Group Maintains Full Professional Authority.
Notwithstanding Manager's general and specific rights and responsibilities set
forth in this Agreement, Group shall have full authority and control with
respect to all dental, professional and ethical determinations over Group's
Practice to the extent required by federal, state and local laws, rules and
regulation. Manager shall not engage in activities which constitute the practice
of dentistry as prohibited under applicable law. Manager shall neither exercise
control over nor interfere with the dentist-patient relationship, which shall be
maintained strictly between Group's Providers and their Patients.
12
ARTICLE VI
TERM
----
Section 6.1 Term. This Agreement shall be effective the Effective
Date, and shall remain in effect for an initial term of forty (40) years from
the Effective Date, expiring on the fortieth (40th) anniversary of the Effective
Date, unless earlier terminated pursuant to the terms of this Agreement. The
word "Term" shall include such initial term and, where applicable, any extension
of such initial term (whether extended pursuant to Section 6.2a or otherwise),
subject to earlier termination pursuant to the provisions of this Agreement.
Section 6.2 Termination and Extension.
a. Automatic Extension. At the end of the initial term and any
subsequent term, this Agreement shall automatically renew for a five (5) year
term unless one of the parties provides the other party with written notice of
intent not to renew not less than one hundred eighty (180) days prior to the
expiration of the then current term.
b. Early Termination. This Agreement may be terminated according
to the provisions of this Section.
(1) Material Breach. In the event either party materially
breaches this Agreement and such breach is not cured to the reasonable
satisfaction of the non-breaching party within thirty (30) days after the
non-breaching party serves written notice of the default upon the defaulting
party (the "Default Notice"), the Agreement shall automatically terminate at the
election of the non-breaching party upon the giving of a written notice of
termination to the defaulting party not later than fifteen (15) days after
expiration of the 30-day cure period; provided that if such uncured breach is
only capable of being cured within a reasonable period of time in excess of
thirty (30) days, the non-breaching party shall not be entitled to terminate
this Agreement so long as the defaulting party has commenced such cure and
thereafter diligently pursues such cure to completion.
(2) Refusal to Comply. In the event that Group or Manager
refuses or fails to comply with a decision of the Joint Operations Committee,
the aggrieved party shall have the option to require the non-complying party to
participate in good faith mediation under the auspices of the American Mediation
Association, and if such dispute between Group and Manager continues for sixty
(60) days after the date the aggrieved party exercises its option regarding
mediation, the non-complying party shall have thirty (30) days in which to
comply with the decision of the Joint Operations Committee. If the noncomplying
party has not complied by the end of such thirty (30) day period, the aggrieved
party shall have the option to terminate this Agreement upon fifteen (15) days'
prior written notice. During such mediation, Manager and Group shall continue to
operate and manage the practice in good faith.
(3) Bankruptcy. A party may, upon three (3) days' prior
written notice, ---------- terminate this Agreement if the other party:
(a) Applies for or consents to the appointment of a
receiver, trustee or liquidator of all or a substantial part of its assets,
files a voluntary petition in bankruptcy or consents to an involuntary petition,
makes a general assignment for the benefit of its creditors, files a petition or
answer seeking reorganization or arrangement with its creditors, or admits in
writing its inability to pay its debts when due, or
13
(b) Suffers any order, judgment or decree to be entered
by any court of competent jurisdiction, adjudicating such party bankrupt or
approving a petition seeking its reorganization or the appointment of a
receiver, trustee or liquidator of such party or of all or a substantial part of
its assets, and such order, judgment or decree continues unstayed and in effect
for ninety (90) days after its entry.
(4) Nonperformance. Manager may terminate this Agreement in
the event that in any two consecutive fiscal quarters the Manager has not been
paid all of the Reimbursable Expense Portion and at least three-quarters (3/4)
of the Percentage Fee Portion of the Management Fee and, in the sole discretion
of the Manager, it is not reasonably likely that such amounts of the Management
Fee will be paid in the next fiscal quarter. Any such termination shall be
effective as of the last day of such third fiscal quarter provided at least 60
days notice shall have been given; otherwise, such termination shall be
effective on the sixtieth day after notice is given.
(5) Change in Law. In the event of any material change in
federal or state law that has a significant adverse impact on either party
hereto in connection with their performance under this Agreement, or if
performance by a party of any duties under this Agreement be deemed illegal by
any administrative agency or in a formal opinion rendered to Manager by legal
counsel knowledgeable in health law matters retained by the Manager, the
affected party shall have the right to require that the other party renegotiate
the terms of this Agreement. Solely in the event of illegality, if the parties
fail to reach an agreement within thirty (30) days of the request for
renegotiation, either party may (subject to the severability provision of this
Agreement) terminate this Agreement upon thirty (30) days' prior written notice
to the other party.
c. Effect of Termination. Upon termination of this Agreement:
(1) Group shall surrender to Manager all of Manager's
property used primarily in the operation of the Practice in the same condition
as received, reasonable wear and tear excepted.
(2) Manager shall deliver to Group all records related to
the business of and provision of dental care through the Practice including,
without limitation, patient records and any corporate, personnel and financial
records maintained for the Practice and Providers, provided, that except as
limited by law, including, but not limited to laws governing the confidentiality
of patient records, Manager shall have the option to copy (or otherwise
duplicate) at its sole cost and expense such records of Group and to retain and
utilize such records for its own use;
(3) Manager shall deliver to Group any other property of
Group in Manager's possession;
(4) Both parties shall cooperate to ensure the provision of
appropriate dental care to Group Patients and Beneficiaries;
(5) Group shall promptly deliver to Manager any Management
Fees due and payable to Manager (such fees prorated for the month of
termination) and any amounts owed to Manager for advances made pursuant to
Section 7.3; and
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(6) Both parties shall cooperate to ensure the appropriate
billing and collections for dental services rendered by Group prior to the
effective date of termination, and any such cash collected shall be retained by
Group and/or paid to Manager pursuant to Article VII.
ARTICLE VII
FINANCIAL AND SECURITY ARRANGEMENTS
-----------------------------------
Section 7.1 Management Fee. Group and Manager agree that the
compensation set forth in this Article VII is being paid to Manager in
consideration of the services provided and the substantial commitment and effort
made by Manager hereunder and that such fees have been negotiated at arms'
length and are fair, reasonable and consistent with fair market value. Manager
shall be paid the management fee (the "Management Fee") as set forth on Exhibit
7.1 hereto. Payment of the Management Fee is not intended to and shall not be
interpreted or implied as permitting Manager to share in Group's fees for dental
services but is acknowledged as the negotiated fair market value compensation to
Manager considering the scope of services and the business risks assumed by
Manager.
Section 7.2 Payments. Except as otherwise set forth on Exhibit 7.1
hereto, the amounts to be paid to Manager under this Article VII shall be
calculated by Manager on the accrual basis of accounting and shall be payable
monthly. Payments due for any Management Fee shall be made by Group each
calendar month as provided herein and shall be paid on the 15th day following
the end of such month (or the first preceding day that is a business day if the
15th day is not a business day) (a "Payment Date"). Such amounts paid shall be
estimates based upon available information for such month, and adjustments to
the estimated payments shall be made to reconcile final amounts due under
Section 7.1 on the next Payment Date and shall be paid in such priority as set
forth in Section 7.5 hereof.
Section 7.3 Advances. Group shall be entitled to an advance from
Manager of such additional sums, over and above Group's right to the amounts
otherwise set forth in this Article VII, as shall be required by Group to pay
Practice Expenses and Group Expenses consistent with the Annual Budget of the
Practice (prepared as provided in Section 3.6 hereof) and the Management Fee as
provided in Exhibit 7.1 hereto. Additional amounts may be advanced to Group upon
Group's request and at the sole discretion of Manager. Any amounts advanced to
Group pursuant to this Section 7.3 shall be repaid by Group in such priority as
set forth in Section 7.5 below and shall bear interest at a rate equal to one
percent (1%) above the prime rate reported by the Wall Street Journal as
adjusted on a quarterly basis, compounded monthly until all such amounts of
principal and interest are repaid to Manager as provided herein.
Section 7.4 Security Agreement. In order to enforce Manager's rights
granted hereunder and subject to applicable law, Group shall execute a Security
Agreement in substantially the form attached hereto as Exhibit 7.4 (the
"Security Agreement"), which Security Agreement grants a security interest in
all of Group's assets and accounts receivable (as more fully described in the
Security Agreement) to Manager. In addition, Group shall cooperate with Manager
and execute all documents requested by Manager or its lenders to enable Manager
to perfect its security interest provided by the Security Agreement.
Section 7.5 Priority of Payments. Manager shall administer and make
disbursements from amounts deposited into the Accounts or transferred from the
Accounts to pay (including, without limitation the making of advances as
provided in Section 7.3) the Practice Expenses and Group Expenses as the same
become due and payable, and for which Group shall remain responsible. In
performing its obligations pursuant to Article IV, Manager shall apply funds of
Group in the following order of priority:
15
a. payment of all Group Expenses;
b. payment of all Practice Expenses;
c. payment of the Management Fee;
d. repayment of amounts advanced to Group, and applicable
interest thereon (as contemplated in Section 7.3); and
e. payment of Excluded Expenses.
Any amounts which remain following the payment of the expenses and fees set
forth in subparagraphs (a) through (e) above shall be retained in the Accounts
and applied as contemplated in the Annual Budget(s).
Section 7.6 Accounts Receivable. At the option of Manager, on the
first business day of each month, Manager may purchase all or any portion of the
accounts receivable of Group relating to Revenues arising during the previous
month, by payment of cash or other readily available funds into an account for
Group or by offset of amounts owed by Group to Manager. The consideration for
the purchase shall be an amount equal to all fees recorded each month (net of
adjustments for uncollectible accounts, professional courtesies and other such
activities that do not generate a collectible fee) less Management Fees due to
Manager under this Article VII. Manager's purchase shall be effective upon full
payment of the purchase price. In the event that such purchase shall be
ineffective for any reason, Group is concurrently herewith entering into the
Security Agreement to grant a security interest in the accounts receivable to
Manager. In addition, Group shall cooperate with Manager and execute all
necessary documents in connection with the pledge of such accounts receivable to
Manager or at Manager's option, its lenders. All collections in respect of such
accounts receivable shall be deposited in a bank account at a bank selected by
mutual agreement of Group and Manager. To the extent Group comes into possession
of any payments in respect of such accounts receivable, Group shall direct such
payments to Manager for deposit.
ARTICLE VIII
INDEMNITY AND INSURANCE
-----------------------
Section 8.1 Indemnity.
a. Indemnification. Each party shall indemnify, defend and hold
harmless the other party from any and all liability, loss, claim, lawsuit,
injury, cost, damage or expense whatsoever (including reasonable attorneys' fees
and court costs) arising out of, incident to or in any manner occasioned by the
performance or nonperformance of any duty or responsibility under this Agreement
by such indemnifying party, or any of their employees, agents, contractors or
subcontractors; provided, however, that neither party shall be liable to the
other party hereunder for any claim covered by insurance, except to the extent
that the liability of such party exceeds the amount of such insurance coverage.
Specifically, and without limiting the generality of the foregoing, Group agrees
to indemnify, defend and hold harmless Manager for all liability, loss, claim,
lawsuit, injury, cost, damage or expense whatsoever (including reasonably
attorneys' fees and court costs) arising out of the professional negligence of
Group, its employees, agents, contractors or subcontractors, including any
amounts in excess of the professional liability insurance coverage of Group or
its employees, agents, contractors or subcontractors.
16
b. Mutual Indemnity. Each party to this Agreement shall be
indemnified by the other party for any claim under this Agreement or otherwise
against the indemnified party for vacation pay, sick leave, retirement benefits,
Social Security benefits, workers' compensation benefits, disability or
unemployment, insurance benefits, or other employee benefits of any kind accrued
during the term of this Agreement by an employee of the indemnifying party.
Section 8.2 Manager's Insurance. Manager shall, on its own behalf and
at its sole cost and expense, procure and maintain in force during the term of
this Agreement policies in the following categories in the amount indicated:
a. Comprehensive general liability insurance covering the risks
of Manager, in an amount determined by the Joint Operations Committee;
b. Workers' Compensation insurance covering the employees of
Manager, in such amounts as is usual and customary under the circumstances;
c. Property insurance covering the facilities, equipment and
supplies owned or leased by Manager or Group for use in the operation of the
Practice.
Section 8.3 Group's Insurance. Manager shall obtain, and maintain on
behalf of Group in full force and effect during the Term, policies in the
following categories in the amount indicated:
a. Comprehensive professional liability insurance coverage for
Group and Group's Employee Providers in such amounts as are usual and customary
for similar dental practices within the same area and as approved by the Joint
Operations Committee, which approval shall not be unreasonably withheld (the
cost and expense of which shall be a Group Expense);
b. Workers' Compensation insurance covering the employees of
Group, in such amounts as is usual and customary under the circumstances (the
cost and expense of which shall be a Practice Expense); and
c. Comprehensive general liability insurance covering the risks
of Group, in an amount determined by the Joint Operations Committee (the cost
and expense of which shall be a Practice Expense).
ARTICLE IX
BOOKS AND RECORDS
-----------------
Section 9.1 Ownership of Records. All business records and information
relating exclusively to the business and activities of either party shall be the
property of that party, irrespective of identity of the party responsible for
producing or maintaining such records and information. Without limiting the
foregoing, all patient charts and records maintained by Manager relating to the
dental services of Group shall be the property of Group. Group also shall be
entitled to a copy at Group's sole cost of all business records pertaining to
Group. Except as limited by law, including, but not limited to laws governing
the confidentiality of patient records, Manager shall be entitled to a copy at
Manager's sole cost of all records of Group.
17
ARTICLE X
RESTRICTIVE COVENANTS
---------------------
Section 10.1 Covenant Regarding Proprietary Information. In the course
of the relationship created pursuant to this Agreement, Group will have access
to certain methods, trade secrets, processes, ideas, systems, procedures,
inventions, discoveries, concepts, software in various stages of development,
designs, drawings, specifications, models, data, documents, diagrams, flow
charts, research, economic and financial analysis, developments, procedures,
know-how, policy manuals, form contracts, marketing and other techniques, plans,
materials, forms, copyrightable materials and trade information (all of which is
referred to in this Agreement as "Proprietary Information") regarding the
operations of Manager and/or of its Affiliates (collectively, the "Protected
Parties"). Group shall maintain all such Proprietary Information in strict
secrecy and shall neither use for itself or any third parties nor divulge such
information to any third parties, except as may be necessary for the discharge
of their obligations under this Agreement or otherwise consented to in writing
by Manager. Group shall take all necessary and proper precautions against
disclosure of any Proprietary Information to unauthorized persons by any of its
employees or agents. Group and all employees, and agents of Group who will have
access to all or any part of the Proprietary Information may be required to
execute an agreement, at the request of Manager, valid under the law of the
jurisdiction in which such agreement is executed, and in a form acceptable to
Manager and its counsel, committing themselves to maintain the Proprietary
Information in strict confidence and not to disclose it to any unauthorized
person or entity. The Protected Parties not party to this Agreement are hereby
specifically made third party beneficiaries of this Section, with the power to
enforce the provisions hereof. Upon termination of this Agreement for any
reason, Group and each of its Employee Providers and Subcontract Providers shall
cease all use of any of the Proprietary Information and, at the request of
Manager, shall execute such documents as may be necessary to evidence Group's
abandonment of any claim thereto. The parties recognize that a breach of this
Section cannot be adequately compensated in money damages and therefore agree
that injunctive relief shall be available to the Protected Parties as their
respective interests may appear.
The obligations of Group under this Section 10.1 shall not apply to
information: (i) which is a matter of public knowledge on or becomes a matter of
public knowledge after the Effective Date of this Agreement, other than as a
breach of the confidentiality terms of this Agreement or as a breach of the
confidentiality terms of any other agreement between a third party and Group,
Manager and/or its Affiliates; or (ii) which was lawfully obtained by Group on a
nonconfidential basis other than in the course of performance under this
Agreement and from some Person other than Manager or its Affiliates or from some
person other than one employed or engaged by Manager or its Affiliates, which
Person has no obligation of confidentiality to Manager or its Affiliates.
Section 10.2 Covenants Not to Compete During the Term. The parties
recognize that the services to be provided by Manager shall be feasible only if
Group operates an active dental practice to which Group and its Providers devote
their full time and attention. To that end:
a. Restrictive Covenants by Group. During the term of this
Agreement and except as otherwise agreed to in writing by Manager, Group shall
not (i) establish, operate or provide dental care services at any dental office,
clinic or other facility providing services substantially similar to those
provided by Group pursuant to this Agreement anywhere other than at the Practice
Sites or as may be approved in writing by Manager; (ii) enter into any
management or administrative services agreement or other similar arrangement
with any person or entity other than Manager without Manager's prior written
approval and (iii) operate or, directly or indirectly, hold or own any type of
ownership or other form of equity interest
18
in, or serve as a consultant to or otherwise perform services for any person or
entity engaged in the business of providing management and administrative
services to dental practices.
b. Restrictive Covenants by Providers. Group shall use its best
efforts to obtain and enforce formal agreements with its Employee Providers and
Subcontract Providers who are dentists not to establish, operate or provide
dental care services, during the term of this Agreement and for a period of two
(2) years after any termination of employment with Group (except a termination
of such employment (i) based upon a material breach by Manager which shall
remain uncured for a period of sixty (60) days after receipt of notice in
accordance with Section 11.4 hereof, (ii) by reason of nonpayment of a material
amount owed by Manager to or to be paid by Manager on behalf of Group, or (iii)
by Group without cause), at any dental office, clinic or facility located within
30 miles of any Practice Site at which the Employee Provider or Subcontract
Provider has practiced. Any variation of such restrictive covenants shall be
approved in advance in writing by Manager.
Section 10.3 Covenant Not to Solicit. For three (3) years following
the termination of this Agreement, except for a valid termination by Group
pursuant to Section 6.2b, Group shall not:
a. directly or indirectly solicit, recruit or hire, or induce any
party to solicit, recruit or hire any person who is an employee of, or who has
entered into an independent contractor arrangement with, Manager or any
Affiliate of Manager;
b. directly or indirectly, whether for itself or for any other
person or entity, call upon, solicit, divert or take away, or attempt to
solicit, call upon, divert or take away any of Manager's customers, business, or
clients; or
c. directly or indirectly solicit, or induce any party to
solicit, any of Manager's contractors or the contractors of any Affiliate of
Manager, to enter into the same or a similar type of contract with any other
party.
Section 10.4 Enforcement. Manager and Group acknowledge and agree that
since a remedy at law for any breach or attempted breach of the provisions of
this Article X shall be inadequate, either party shall be entitled to specific
performance and injunctive or other equitable relief in case of any such breach
or attempted breach, in addition to whatever other remedies may exist by law.
All parties hereto also waive any requirement for the securing or posting of any
bond in connection with the obtaining of any such injunctive or other equitable
relief.
ARTICLE XI
MISCELLANEOUS PROVISIONS
------------------------
Section 11.1 Assignment. Neither party shall assign this Agreement to
any other party or parties without the prior written consent of the other party,
which consent may be withheld arbitrarily or capriciously, for any reason or for
no reason whatsoever and any attempted assignment in violation of this Agreement
shall be null and void. Notwithstanding the preceding, Manager may assign this
Agreement to any Affiliate of Manager or to a financial institution as
collateral security for the indebtedness of Manager or any of its Affiliates.
Group hereby agrees that (a) upon notice of any default or event of default from
any financial institution (or its agent, as applicable) to which this Agreement
has been assigned as collateral security for such indebtedness, Group will make
all payments required to be made under this Agreement to such financial
institution (or its agent, as applicable) and such financial institution (or its
agent, as applicable)
19
shall be entitled to exercise any and all rights and remedies of Manager under
this Agreement, and (b) Group will not, without the prior written consent of
such financial institution (or its agent, as applicable), terminate (except
pursuant to the terms hereof) or amend or otherwise modify this Agreement.
Section 11.2 Headings. The article and section headings used in this
Agreement are for purposes of convenience only. They shall not be construed to
limit or to extend the meaning of any part of this Agreement.
Section 11.3 Waiver. Waiver by either Group or Manager of any breach
of any provision of this Agreement shall not be deemed to be a waiver of such
provision or of any subsequent breach of the same or of any other provision of
this Agreement.
Section 11.4 Notices. Any notice, demand, approval, consent or other
communication required or desired to be given under this Agreement in writing
shall be personally served or given by overnight express carrier or by mail, and
if mailed, shall be shall be deemed to have been given when five (5) business
days have elapsed from the date of deposit in the United States mails, certified
and postage prepaid, addressed to the party to be served at the following
address or such other address as may be given in writing to the parties:
Group: Affordable Dental Care, P.C.
000 X. Xxxxxx Xx.
Xxxxxxx, XX 00000
Attn: President and Chief Executive Officer
Manager: Gentle Dental Service Corporation
00000 Xxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: President and Chief Executive Officer
Section 11.5 Attorneys' Fees. If any legal action or arbitration or
other proceeding is commenced, whether by Manager or Group concerning this
Agreement, the prevailing party shall recover from the losing party reasonable
attorneys' fees and costs and expenses, including those of appeal and not
limited to taxable costs, incurred by the prevailing party, in addition to all
other remedies to which the prevailing party may be entitled.
Section 11.6 Successors. Without limiting or otherwise affecting any
restrictions on assignments of this Agreement or rights or duties under this
Agreement, this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of Group and Manager.
Section 11.7 Entire Agreement. This Agreement, and that certain Shares
Acquisition Agreement by and among Manager, Group and the sole shareholder of
Group of even date herewith, set forth the entire agreement between Group and
Manager and supersede all prior negotiations and agreements, written or oral,
concerning or relating to the subject matter of this Agreement, and this
Agreement may not be modified except by a writing executed by all parties and
subject to the provisions thereof.
Section 11.8 Governing Law. This Agreement and the rights and
obligations of the parties hereto shall be governed by, and construed according
to, the laws of the State of Oregon.
20
Section 11.9 Severability, Contract Modifications for Prospective
Legal Events. Nothing contained in this Agreement shall be construed to require
the commission of an act contrary to law, and whenever there is any conflict
between any provision of this Agreement and any statute, law, ordinance or
regulation, the latter shall prevail. In such event, and in any case in which
any provision of this Agreement is determined to be in violation of a statute,
law, ordinance or regulation, the affected provision(s) shall be limited only to
the extent necessary to bring it within the requirements of the law and, insofar
as possible under the circumstances, to carry out the purposes of this
Agreement. The other provisions of this Agreement shall remain in full force and
effect, and the invalidity or unenforceability of any provision hereof shall not
affect the validity and enforceability of the other provisions of this
Agreement, nor the availability of all remedies in law or equity to the parties
with respect to such other provisions.
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 of both
parties in such a manner as to indicate that the substantive structure of this
Agreement may be in violation of such laws or regulations, Group and Manager
shall proceed in good faith to amend this Agreement, to the maximum extent
possible, to preserve the underlying economic, financial and composition of
Joint Operations Committee arrangements between Group and Manager. A party to
this Agreement may choose to, but shall not be required to, take any action or
to make any amendment to this Agreement if such action or amendment would put
them in a substantially and materially worse economic or financial position than
that contemplated by the terms of this Agreement. The parties acknowledge that
such amendment may require reorganization of Group or Manager, or both, and may
require either or both parties to obtain appropriate regulatory licenses and
approvals. If an amendment is not possible, either party shall have the right to
terminate this Agreement upon thirty (30) days notice to the other party.
Section 11.10 Time Is of the Essence. Time is of the essence in this
Agreement.
Section 11.11 Authority. Any Person signing this Agreement on behalf
of any entity hereby represents and warrants in his or her individual capacity
that he or she has full authority to do so on behalf of such entity.
Section 11.12 Counterparts. This Agreement may be executed in two (2)
or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Group and Manager have caused their authorized
representatives to execute this Dental Group Management Agreement as of the date
first above written.
AFFORDABLE DENTAL CARE, P.C.
By: X. X. XXX XXXXXX
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Its: Secretary
GENTLE DENTAL SERVICE CORPORATION
By: X. X. XXX XXXXXX
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Its: Executive Vice President
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EXHIBIT 1
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Definitions
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For purposes of this Agreement, the following terms shall have the meaning
indicated below or defined at the indicated section:
(1) Accounts. See Section 2.3.
(2) Affiliate. "Affiliate" shall mean, with respect to any Person, (i) any
individual or entity directly or indirectly owned or controlled by such Person,
(ii) any individual or entity directly or indirectly owning or controlling such
Person or (iii) any individual or entity directly or indirectly owned or
controlled by the same family member, individual or entity as owns or controls
such Person. For purposes of this Agreement, neither Group nor Manager shall be
deemed an Affiliate of the other.
(3) Agreement. "Agreement" means this Dental Group Management Agreement.
(4) Annual Budget. See Section 3.6.
(5) Beneficiaries. See Recital A.
(6) Capital Costs. "Capital Costs" shall mean any and all investments that
are or would be capitalized pursuant to GAAP.
(7) Committee Members. See Section 3.5a.
(8) Default Notice. See Section 6.2b(1).
(9) EITF. See Section 3.4b.
(10) Effective Date. See first paragraph of this Agreement.
(11) Employee Providers. See Recital B.
(12) Employment Agreements. See Recital B.
(13) Excluded Expenses. "Excluded Expenses" shall mean those costs and
expenses incurred by Group which are (i) expressly identified as Excluded
Expenses in this Agreement, and/or (ii) not Practice Expenses or Group Expenses
expressly contemplated by or set forth in the Annual Budget.
(14) FASB. See Section 3.4b.
(15) GAAP. "GAAP" means at any particular time generally accepted
accounting principles as in effect at such time. Any accounting term used in
this Agreement shall have, unless otherwise specifically provided herein, the
meaning customarily given in accordance with GAAP, and all financial
computations hereunder shall be computed unless otherwise specifically provided
herein, in accordance with GAAP as consistently applied and using the same
method of valuation as used in the preparation of Manager's financial statement.
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(16) Group. See first paragraph of this Agreement.
(17) Group Expenses. "Group Expenses" means salaries and wages,
compensation, payroll taxes, and employee benefits of Employee Providers and
Subcontract Providers, and costs of professional liability insurance,
professional dues and license fees, continuing education and similar costs for
Employee Providers, all as set forth in, and subject to and limited by, the
Annual Budget.
(18) Group Members. See Section 3.5a.
(19) Group Patients. See Recital A.
(20) Joint Operations Committee. See Section 3.4b.
(21) Management Fee. See Section 7.1.
(22) Manager. See first paragraph of this Agreement.
(23) Manager Members. See Section 3.5a.
(24) Offer. See Section 5.11.
(25) Patient. "Patient" shall mean and include any Group Patient and/or
Beneficiary.
(26) Payment Date. See Section 7.2.
(27) Percentage Fee Portion. See Exhibit 7.1.
(28) Payor Contracts. See Recital A.
(29) Person. "Person" shall mean any natural person, corporation,
partnership or other business structure recognized as a separate legal entity.
(30) Plans. See Recital A.
(31) Practice. See Recital C.
(32) Practice Expenses. "Practice Expenses" means all costs incurred by
Manager including amortization and/or depreciation associated with assets of
Manager utilized by Group in the conduct of its Practice or covering operations
and Capital Costs, direct labor costs, supplies, direct overhead and indirect
overhead expense attributable to the management and operation of the Practice
and direct and indirect corporate overhead of Manager including all interest
expense and other expenses which are attributable to Manager's business
operations in accordance with Manager's corporate allocation policies, all as
consistent with and/or contemplated in the Annual Budget.
(33) Practice Sites. See Section 3.4a.
(34) Practice Site Facilities. See Section 3.4a.
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(35) Preliminary Budget. See Section 3.7b.
(36) Proprietary Information. See Section 10.1.
(37) Protected Parties. See Section 10.1.
(38) Providers. See Recital B. The term "Providers" shall include
individuals or organizations licensed to practice dentistry (including
specialists) as well as other licensed dental professionals who provide
ancillary reimbursable dental services.
(39) Provider Subcontracts. See Recital B.
(40) Reimbursable Expense Portion. See Exhibit 7.1.
(41) Revenues. See Section 2.2.
(42) Security Agreement. See Section 7.4.
(43) Subcontract Providers. See Recital B.
(44) Term. See Section 6.1.
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