1
EXHIBIT 10(VV)
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT, effective the 10th day of October, 1995, by
and between VFD of Pennsylvania, Inc., a Delaware corporation, successor to MID
ATLANTIC MSO, LLC, a Pennsylvania limited liability company (the "Manager"), and
Xxxxx X. Xxxxxx, D.M.D., P.C., a Maryland professional services corporation (the
"P.C.").
W I T N E S S E T H:
WHEREAS, the P.C. is engaged in the business of providing, among other
things, dental services and related activities in the State of Maryland (the
"Practice");
WHEREAS, the P.C. desires to obtain the benefit of the Manager's
expertise in operating, directing, managing and supervising the non-professional
aspects of the operations of the Practice;
WHEREAS, the P.C. desires to obtain from the Manager, and the Manager
desires to provide to the P.C., certain premises and certain physical assets,
furniture and equipment needed to operate the Practice;
WHEREAS, the Manager and the P.C. are parties to that certain
Management Agreement dated as of October 10, 1995; and
WHEREAS, the Manager and the P.C. wish to amend and restate the
Management Agreement in its entirety on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto, intending to be
legally bound, hereby agree as follows:
ARTICLE 1
RELATIONSHIP OF PARTIES
1.1 Responsibilities of Parties. The parties agree that the P.C. will
provide, and shall be solely responsible for providing, all professional
services for the Practice and the Manager will be responsible only for
administrative services (as further described in this Agreement). Nothing
contained in this Agreement shall be
2
2
construed as permitting or providing for the ownership, establishment, operation
or management by the Manager of the professional services of the Practice, which
services shall at all times be the sole responsibility of the P.C. or permitting
the Manager to exercise control over the Practice in violation of Maryland
Statute 4-101(m), 4-601 or 4-603; provided, however that pursuant to its
engagement hereunder, the Manager shall be the exclusive provider of all
administrative services and control all aspects of the P.C.'s business other
than those aspects which relate directly to the provision of dental services.
Without limiting the generality of the foregoing, the P.C. shall be solely
responsible for all activities described in Section 2.4 of this Agreement.
1.2 Relationship of Parties. The P.C. and the Manager are not joint
venturers, partners, employees or agents of each other and, except as provided
herein, neither party shall have any authority to bind the other.
1.3 Practice. The P.C. agrees to conduct the Practice in compliance
with all applicable laws, rules and ordinances. ARTICLE 2
SERVICES OF THE MANAGER
2.1 Covered Services. The Manager, unless otherwise prohibited by law,
shall control all aspects of, and provide to the P.C. the following services,
premises and assets (such services, premises and assets are hereinafter referred
to collectively as the "Covered Services"):
a. General Administrative Services. Overall day-to-day
supervision, conduct and management of the general administrative services
required in connection with the Practice, including supervision of the
non-professional services and personnel described below.
b. Personnel. Provision of all personnel (other than
licensed or certified professionals, technicians or hygienists, collectively,
the "Professional Personnel") needed to operate and support the Practice, such
as receptionists and secretarial, clerical, purchasing and marketing personnel
(collectively, the "Administrative Personnel"). The Manager shall have the sole
and exclusive responsibility for determining the salaries and fringe benefits of
all Administrative Personnel provided hereunder, and for paying such salaries
and providing such fringe
3
3
benefits. In recognition of the fact that the Manager's personnel provided to
the P.C. under this Agreement may from time to time perform services for others,
this Agreement shall not prevent the Manager from performing such services for
others or restrict the Manager from so using the Administrative Personnel
provided to the P.C. under this Agreement. The Manager will make every effort
consistent with sound business practices to honor the specific requests of the
P.C. with regard to the assignment of its employees to the P.C.; however, the
Manager reserves the sole right to determine the assignment of its employees.
Further, the Manager, in its sole discretion, may require each of its employees
assigned to the P.C. to perform several of the aforedescribed functions and
duties simultaneously.
c. Professional Personnel. Establish guidelines for the
selection, hiring and firing of the Professional Personnel by the P.C. and
recruit and evaluate prospective Professional Personnel; provided, however, that
all of the Professional Personnel shall be employees of, or independent
contractors to, the P.C.
d. Training. Training of all Administrative Personnel
and assistance to the P.C. in arranging for training and continuing education
for Professional Personnel.
e. Administrative and Fiscal Services. Provision of
general administrative, business and fiscal services to the P.C. in connection
with the operation of the Practice, including patient xxxxxxxx, collecting
xxxxxxxx, accounting, auditing (by a certified public accountant selected by the
Manager with the approval of the P.C., which approval shall not be unreasonably
withheld or delayed), bookkeeping, budgeting, record keeping, accounts
receivable and accounts payable processing, electronic data processing and such
other services as the P.C. may from time to time require.
f. Annual Budget. Prepare, in reasonable detail, annual
operating and capital budgets for the P.C. which shall be delivered to the P.C.
within thirty (30) days after the end of each fiscal year, with the Manager
retaining final authority with respect to budget items including, without
limitation, with respect to compensation and payments to the Professional
Personnel and the Administrative Personnel.
g. Patient Records. Maintenance of patient records
(which shall at all times remain the property and under the control of the P.C.)
and provision of record
4
4
retrieval and monitoring services to assist the P.C. in utilization and quality
assurance reviews in accordance with instructions and guidelines issued by the
P.C.
h. Quality Control. Development of appropriate quality
control programs, including development of performance standards, sampling
techniques for case review, and preparation of appropriately documented studies.
i. Marketing, Development and Program Negotiation.
Marketing of the professional services provided by the P.C. to potential
patients, facilities, health maintenance organizations, self-insured employer
health plans and various third-party payors (the "Marketing Services"). The
Marketing Services to be provided by the Manager may include, but are not
necessarily limited to, (i) assistance and support in the preparation of
marketing material and brochures and responses to requests for proposals, (ii)
the placing of advertisements or articles in magazines, newspapers, other
publications and any and all media determined by the Manager to be beneficial to
the P.C., (iii) undertaking telemarketing campaigns and (iv) the holding of
seminars. The Manager shall also assist the P.C. in negotiating and securing
contracts with self-insured employer health plans, third-party payors, health
maintenance organizations, managed care companies and any other institution,
facility or organization that may be in need of services that the P.C. is
qualified to provide.
j. Equipment and Supplies. Provision of all inventory,
equipment, furnishings and supplies reasonably necessary for the efficient
operation of the Practice. Title to such inventory, equipment, furnishings and
supplies shall at all times remain in the Manager. At the end of the term of
this Agreement, the Manager shall retain such inventory, equipment, furnishings
and supplies as shall not have been consumed in the day-to-day operations of the
Practice.
k. Janitorial and Maintenance Service. Arranging for
janitorial, grounds and maintenance and repair services for the P.C. and its
equipment and furnishings.
l. Malpractice Insurance. Assistance to the P.C. in
obtaining malpractice coverage for the P.C., its employees and agents in an
amount not less than One Million Dollars ($1,000,000). The Manager shall also
assist the P.C. in obtaining general liability and property insurance in usual
and customary amounts for the P.C. The Manager shall, on behalf and in the name
of the P.C., pay the premiums for all such insurance and shall provide the P.C.
5
5
with evidence of payment on a periodic basis or as requested.
m. Contracts with Facilities/Programs. Contracts with
facilities and programs serviced by the Practice shall be by and in the name of
the P.C. The Manager shall serve as contracting agent for the P.C. in connection
with such facilities or programs contracts.
n. Protecting Goodwill. Take all necessary steps to
preserve and protect the reputation and goodwill associated with the P.C.,
including assistance in the monitoring of utilization and quality of services
provided by the P.C., and shall assist the P.C. to take all steps necessary to
remedy any and all deficiencies in the efficiency or the quality of the services
provided. This section shall not be construed as permitting the Manager to
influence or control Professional Personnel.
o. Facilities. Facilities occupied by the P.C. for
the Practice shall be made available to the P.C. by the Manager.
p. Operations and Regulatory Reports. Deliver to the
P.C. operations reports containing such information as the P.C. may reasonably
request. The Manager shall prepare all written reports and information that
shall be lawfully required by any government body or agency having jurisdiction
over the P.C. or the Practice. The P.C. shall review and approve all such
required reports and/or information before any dissemination of the same.
q. Processing Disputes. Administer and process all
disputes, grievances and complaints between the P.C. and all third parties,
subject at all times to the review and final approval of the P.C.
r. Government Regulations; Licenses. To the extent
known and material to the operation of the P.C. and the Practice, the Manager
shall promptly notify the P.C. of any changes which may occur in relevant laws
or regulations of any government, governmental body or agency having
jurisdiction over the P.C. or the Practice. The foregoing shall not in any way
limit the P.C.'s continuing professional and legal responsibility to comply
with, and be aware of, all licensing, regulatory, professional or other
requirements applicable to individuals licensed to provide dental services.
s. Advances to the Manager. The Manager shall make
advances to the P.C. as required by Section 5.6.
6
6
Such advances shall bear a reasonable rate of interest, as mutually agreed to by
the Manager and the P.C.
The Covered Services shall include assumption of all
obligations of the P.C. to provide administrative services to professional
personnel who are not employed by the P.C. The Manager may perform the Covered
Services directly or by reimbursing the P.C. for the cost of any Covered
Services. The parties acknowledge and agree that the services to be provided by
the Manager to the P.C. are to be provided on a non-exclusive basis. The Manager
is in the independent business of providing these services to other third
parties.
2.2 Performance of Services. The Manager is hereby expressly
authorized to perform the Covered Services hereunder in whatever reasonable
manner it deems appropriate to meet the day-to-day administrative needs of the
Practice. It is understood and agreed that the Manager will perform some of the
Covered Services for the P.C. at a centralized location.
2.3 Events Excusing Performance. The Manager will not be
liable to the P.C. for failure to perform any of the services required herein in
the event of strikes, lockouts, calamities, acts of God, unavailability of
supplies or other events over which the Manager has no control for so long as
such event continues and for a reasonable period of time thereafter.
2.4 Excluded Services. The parties hereto expressly
acknowledge that the provision of all professional services, including but not
limited to, dental services by the P.C., shall be separate and independent from
the provision of administrative, fiscal and support services by the Manager, and
the P.C. shall be solely and exclusively responsible for all professional dental
services rendered to patients of the Practice. Without limiting the generality
of the foregoing, the parties acknowledge that the P.C. shall be solely
responsible for setting all professional standards of the Practice and shall be
responsible for the employment and discharge of all Professional Personnel.
2.5 Use of Name. The Manager hereby grants to the P.C.
a nontransferable, nonexclusive license to use any proprietary names owned by
the Manager and used by the P.C. in connection with the Practice along with any
and all trademarked symbols for the term of this Agreement (the "License"). All
applicable common law and statutory rights in any proprietary names owned by the
Manager and used by the Practice and their accompanying symbols, including, but
7
7
not limited to, rights relating to trademark, service xxxx, patent and copyright
shall be and remain the sole property of the Manager. The P.C. shall have no
right, title or interest in any such proprietary rights.
ARTICLE 3
PROPRIETARY INTEREST AND RIGHTS OF THE MANAGER
3.1 Competition. During the term of this Agreement,
neither the P.C. nor any shareholder of the P.C. shall, directly or indirectly,
own an interest in, administer, manage, advise, assist, operate, join, control,
participate in, or be connected in any manner with any corporation, partnership,
proprietorship, firm, association, person or entity providing dental services or
administrative services in competition with the P.C. or the Manager.
3.2 Confidentiality. The P.C. acknowledges and agrees
that the Manager is entitled to prevent its competitors from obtaining and
utilizing its trade secrets. The P.C. agrees to hold the Manager's trade secrets
in strictest confidence and not to disclose them or allow them to be disclosed
directly or indirectly to any person or entity other than persons engaged by the
P.C. or the Manager. The P.C. acknowledges its fiduciary obligations to the
Manager and the confidentiality of its relationship with the Manager and of any
information relating to the services and business methods of the Manager which
it may obtain during the term of this Agreement. The P.C. shall not, either
during the term of this Agreement or at any time after the expiration or sooner
termination of this Agreement, disclose to anyone other than employees or
independent contractors of the P.C. or the Manager any confidential or
proprietary information or trade secret obtained by the P.C. from the Manager.
The P.C. also agrees to place any persons to whom said information is disclosed
for the purpose of performance under legal obligation to treat such information
as strictly confidential.
ARTICLE 4
BILLING AGENT AGREEMENT
4.1 Professional and Other Fees. The P.C. shall, in
consultation with the Manager, establish a schedule of fees and charges for the
Practice's professional services or shall comply with the schedule of fees and
charges set forth
8
8
in the health care contracts pursuant to which the P.C. provides services
through its Professional Personnel.
4.2 Xxxxxxxx. Xxxxxxxx of the Practice for all services
rendered by the P.C. shall be by and in the name of the P.C.
4.3 Billing and Collection Agent. The Manager shall serve
as billing and collection agent for the P.C. in connection with the Practice.
The Manager shall establish a depository bank account on behalf of the Practice
and will deposit into such account collected fees generated from the Practice.
As provided for in standing instructions issued by the P.C. to the bank where
such depository account is located, the Manager may withdraw all monies daily
from said bank account for processing at a central location to be used for
payment of the P.C.'s expenses, including the administrative services fee set
forth in Section 5.4 hereof and any amounts advanced to the P.C. pursuant to
Section 5.6 hereof. Said processing will consist of establishing and maintaining
a book account for the P.C. showing all fee collections and expense
disbursements made by the Manager at the P.C.'s request. The Manager will
provide the P.C. with periodic financial statements for the Practice reflecting
such processing.
4.4 Reports. The Manager shall provide the P.C. with
financial statements for the Practice, stating Gross Xxxxxxxx (as hereafter
defined) and the Manager's Administrative Fees (as hereafter defined).
4.5 Security for the Manager's Compensation. To
secure the prompt and orderly payment of any amounts owing by the P.C. to the
Manager pursuant to this Agreement, the P.C. hereby agrees to grant, at the
request of the Manager, a security interest to the Manager or to a third party
designated by the Manager, in all its existing and hereafter created accounts
receivable, all cash or non-cash proceeds therefrom, all insurance policies and
proceeds relating thereto, and all of the P.C.'s rights as an unpaid provider of
services, whether now existing or hereafter created or acquired (collectively,
the "Collateral"). The P.C. agrees to execute any and all documents necessary to
perfect such security interest, including but not limited to, UCC financing
statements.
9
9
ARTICLE 5
COMPENSATION
5.1 Gross Xxxxxxxx. The term "Gross Xxxxxxxx" as used in
this Agreement shall mean all xxxxxxxx by the P.C. in connection with the
Practice for dental services, including any other income or receivables relating
thereto, less contractual allowances, if any, and an allowance for bad debts, to
be determined from time to time by the Manager, in its discretion, based upon
the actual experience of the P.C., plus all other cash payments and
miscellaneous revenues received by the P.C. in connection with the Practice.
5.2 Intention of the Parties. It is the intention of the
parties hereto that from the Gross Xxxxxxxx of the P.C. in connection with the
Practice, the P.C. shall be entitled to fairly and reasonably compensate its
Professional Personnel, and the Manager shall be entitled to receive from the
P.C. fair and reasonable compensation for (i) the provision of the Covered
Services pursuant to this Agreement, (ii) the License provided for in Section
2.5 hereof, and (iii) the expenses, obligations, and risks assumed by the
Manager in connection therewith.
5.3 Fair and Reasonable Compensation of the P.C. for
Services of Professional Personnel. The parties hereto agree that the P.C. shall
have the right to fairly and reasonably compensate its Professional Personnel
for their professional services. Compensation for the Professional Personnel
shall be determined in accordance with employment agreements and other
employment arrangements entered into by the P.C., in consultation with the
Manager, and the Professional Personnel.
5.4 Fair and Reasonable Compensation to the Manager.
a. The Manager's Administrative Fees. The
term "Manager's Administrative Fees" as used in this article shall mean Gross
Xxxxxxxx less compensation payable by the P.C. as set forth in Section 5.3.
b. For Services of the Manager. The parties
hereto agree that the Manager shall be fairly and reasonably compensated for its
administrative services. The Manager's Administrative Fees shall be paid to the
Manager as compensation for (i) the provision of the Covered Services under this
Agreement, (ii) the License and (iii) its expenses, obligations, and risks in
connection
10
10
therewith. The Manager shall pay all expenses of the Practice, except for
compensation to the Professional Personnel, (including interest expenses payable
with respect to any indebtedness of the P.C. to which the Manager shall have
consented in writing) out of the Manager's Administrative Fees or out of funds
advanced to the P.C. by the Manager.
5.5 Periodic Adjustment of Compensation. The parties hereto
recognize that the Practice may change in size and scope over the term of this
Agreement which may necessitate adjusting the fees provided for herein.
Therefore, the parties shall review the compensation to the Manager no less
frequently than annually and more frequently at the request of the Manager or
the P.C., if changes in the business of the P.C. or services by the Manager
warrant such more frequent review, and may agree in writing to modification of
the compensation. Such review shall consider the scope of operations pursuant to
this Agreement at the time of review, the financial success of the Manager and
the P.C. in connection with the Practice, changes in the purchasing power of
money, the size and number of facilities being supplied by the Manager, the
scope of the Marketing Services, the size of the Administrative Personnel
workforce and the expenses and risks to the respective parties of performing
this Agreement.
5.6 Remittances. To the extent the P.C. shall not generate
adequate revenues to meet the P.C.'s ongoing operating expenses, including the
compensation for professional services pursuant to Section 5.3 of this
Agreement, the Manager shall advance to the P.C. or arrange for such amounts as
may be required. To the extent that the Manager advances any funds to the P.C.
pursuant to this Section 5.6, such advances shall be evidenced by
interest-bearing demand note(s) from the P.C. in favor of the Manager and shall
be secured by the Collateral as provided in Section 4.5 hereof.
ARTICLE 6
TERM AND TERMINATION
6.1 Term. The term of this Agreement shall be for a period of
forty (40) years and thereafter this Agreement shall continue indefinitely until
terminated in accordance with Section 6.2 hereof.
11
11
6.2 Termination. Notwithstanding any provision of this
Agreement to the contrary, this Agreement may be terminated as set forth below:
a. In the event of a material breach of this Agreement by
either party as a result of such party's gross negligence or fraud, the other
party may, at any time commencing sixty (60) days after written notice of the
breach has been given to the breaching party, terminate this Agreement by
delivery to the breaching party of a further written notice of termination;
provided, however, that if the breaching party, prior to receiving such notice
of termination, has begun and is diligently continuing good faith efforts to
cure such breach, this Agreement shall remain in full force and effect;
b. If either party is determined by a court,
administrative body or peer review organization having jurisdiction, to have
engaged in conduct that results in material harm to the P.C. and constitutes (i)
a felony or other crime involving moral turpitude, including fraud, theft, or
embezzlement or (ii) a failure to act in an ethical or professional manner, in
keeping with accepted dental care standards, then immediately upon notice by the
other party;
c. If either party has engaged in any practice that
results in material harm to the P.C. and violates any federal, state or local
law or regulation that is aimed at protecting the public from coercion into
treatment and preventing fraud upon or abuse of public funding of health
services, then immediately upon notice by the other party;
d. If either party commences a voluntary case under
bankruptcy, insolvency or similar law, or any involuntary case is commenced
against either party under any bankruptcy, insolvency or similar law and such
involuntary case is not dismissed within thirty (30) days after filing, then
immediately upon notice from the other party; or
e. After the initial forty (40) year term of this
Agreement, either party may also terminate this Agreement, with or without
cause, by giving the other written notice of termination not less than one (1)
year prior to the effective date of termination.
6.3 Rights Upon Termination. The termination of this
Agreement shall not release or discharge either party from any obligation, debt
or liability which shall have
12
12
previously accrued and remain to be performed upon the date of termination.
ARTICLE 7
GENERAL PROVISIONS
7.1 Indemnification. Each party shall indemnify, hold harmless
and defend the other party from and against any liability, loss, claims,
lawsuits, damages, injury, cost, expense or other detriment arising out of or
incident to the performance or nonperformance under this Agreement by such
indemnifying party, its employees, Professional Personnel, and agents,
including, without limitation, all consequential damages and attorneys' fees,
provided, however, neither party shall be liable to the other under this Section
7.1 for any claim covered by insurance, except to the extent liability of the
party exceeds the amount of the coverage.
7.2 Assignment. The rights conferred upon the P.C.
hereunder may not be transferred or assigned without the prior written consent
of the Manager and any assignment in violation of this Section 7.2 shall be
void. This Agreement shall be assignable by the Manager.
7.3 Notices. All notices, requests or instructions hereunder
shall be in writing and delivered personally or sent by registered or certified
mail, postage prepaid, as follows:
(1) If to the P.C.:
000 Xxxxxx Xxxxxxx Xx.
Xxxxx 0
Xxxxxxxxx, XX 00000
(2) If to the Manager:
c/o Valley Forge
Dental Associates, Inc.
0000 Xxxx Xxxxx Xxxxxx
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000
Telephone No: (000) 000-0000
Telecopy No: (000) 000-0000
Either of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given
13
13
in accordance herewith shall be deemed received on the date of delivery, if hand
delivered, and two business days after the date of mailing, if mailed.
7.4 Entire Agreement. This Agreement and the documents
referred to herein contain the entire agreement between the parties hereto with
respect to the transactions contemplated hereby, and no modification hereof
shall be effective unless in writing and signed by the party against which it is
sought to be enforced.
7.5 Further Assurances. Each of the parties hereto shall use
such party's best efforts to take such actions as may be necessary or reasonably
requested by the other party hereto to carry out and consummate the transactions
contemplated by this Agreement.
7.6 Attorneys Fees. Each of the parties hereto shall bear
such party's own expenses in connection with this Agreement and the transactions
contemplated hereby.
7.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland applicable to
agreements made and to be performed entirely within such State.
7.8 Article and Section Headings. The article and section
headings in this Agreement are inserted solely for convenience of reference and
are not a part of and are not intended to govern, limit or aid in the
construction of any term or provision hereof.
7.9 Waiver. The waiver of any covenant, condition or duty
hereunder by either party shall not prevent that party from later insisting upon
full performance of the same.
7.10 Amendment. No amendment in the terms of this Agreement
shall be binding on either party unless in writing and executed by the duly
authorized representatives of each party.
7.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and both of which taken
together shall constitute one and the same instrument.
7.12 Severability. In the event that any provision of
this Agreement shall be held to be void or unenforceable for any reason, the
parties shall negotiate in good faith for a period of up to one hundred eighty
(180)
14
14
days in order to arrive at a mutually acceptable substitute provision.
* * *
15
15
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the date
first above written.
XXXXX X. XXXXXX, D.M.D., P.C.
By: /s/ Xxxxx X. Magove, D.M.D.
------------------------------
Name: Xxxxx X. Magove, D.M.D.
Title: President
VFD OF PENNSYLVANIA, INC.
By: /s/ W. Xxxx Xxxxxxx
------------------------------
Name: W. Xxxx Xxxxxxx
Title: Vice President
