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EXHIBIT 10.9
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement") is made by and
between MODERN DENTAL PROFESSIONALS--XXXXXXXXXXXX, P.A., a professional
corporation organized and existing under the laws of the State of Arkansas
("P.A."), and CONVENIENT DENTAL CARE, INC., a corporation organized and
existing under the laws of the State of Arkansas ("Service Company").
RECITALS
A. P.A. is engaged in the practice of dentistry through dentists licensed
by the Arkansas State Board of Dental Examiners and who are employed by P.A. or
who have entered into independent contractor agreements with P.A. to provide
services to patients of P.A. and conducts such practice at dental centers
located in the State of Arkansas (the "Dental Centers").
B. Service Company has been organized for the purpose of providing
comprehensive management and related administrative services to dental
practices and has developed extensive expertise and experience in the
operation, management and marketing of the non-dental aspects of dental centers
of the type operated by P.A.
C. P.A., in order to enable its dental employees and independent
contractors to focus their efforts and time on the practice of dentistry and
the delivery of dental services to the public, has requested, and Service
Company has agreed to provide comprehensive management and related
administrative services.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements set forth herein, the parties agree as follows:
1. Definitions.
(a) "Act" means the Arkansas Dental Practice Act and the Regulations of
the Arkansas State Board of Dental Examiners adopted pursuant thereto.
(b) "Cost of Dental Services" means: the aggregate compensation of
dentists who are employed by or who are independent contractors with P.A. at
the Dental Centers and other personnel who must be employed by the P.A. under
applicable law including dental hygienists ("Support Personnel") together with
the cost of expenses, taxes and benefits of such dentists and Support Personnel
including, but not limited to, vacation pay, sick pay, health care expenses,
professional dues, expense reimbursement, discretionary bonuses or incentive
payments, if any, based on profitability or productivity and other expenses and
payments required to be made to or for the benefit of the dentists or the
Support Personnel pursuant to their employment agreements or independent
contractor agreements or
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otherwise plus P.A.'s portion of all employment and payroll taxes; other
expenses incurred by P.A. in carrying out its obligations under this Agreement;
and the costs of malpractice insurance, in each case on an accrual basis.
(c) "Dental Board" means the Arkansas State Board of Dental Examiners
established under the Act.
(d) "Dental Center" means the facility or facilities operated by P.A.
and at which Dental Services are, or in the future may be, rendered by P.A.
identified on Exhibit A hereto, as amended, supplemented or modified from time
to time.
(e) "Dental Services" means all services rendered by P.A. which
constitute the practice of dentistry as defined by the Act.
(f) "Net Pre-Tax Income" means Net Revenues less the total of Service
Company Costs and the Cost of Dental Services, but without regard for the
provision for income taxes.
(g) "Net Revenues" means all Revenues net of refunds or billing
adjustments.
(h) "Non-Dental Personnel" means all personnel including, but not
limited to, accountants, bookkeepers and receptionists who perform services
which do not constitute the practice of dentistry or who are not required by
applicable law to be employees of P.A.
(i) "Revenues" means all amounts on an accrual basis which P.A. receives
or becomes entitled to receive for any services or sales of products or
otherwise, including, without limitation, for the performance of Dental
Services for its patients by dentists or Support Personnel who are employees or
independent contractors of P.A. or for the sale of products including
pharmaceuticals.
(j) "Service Company Costs" means all costs incurred by Service Company,
including indirect overhead and other expenses attributable to the carrying out
of its obligations under this Agreement, in each case on an accrual basis.
(k) "Support Personnel" shall have the meaning specified in the
definition of Cost of Dental Services.
2. Engagement to Provide Services. During the term of this Agreement and
all renewals and extensions thereof, P.A. engages Service Company to provide
sole and exclusive development, management and administrative services with
respect to all non-dental functions relating to the operation of the Dental
Centers, and Service Company agrees to furnish to P.A. all of the non-dental
development, management and administrative services needed by P.A. in
connection with the operation of the Dental Centers. Pursuant to its
engagement hereunder,
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Service Company shall control all aspects of P.A.'s business other than those
aspects which relate to the provision of dental services, as contemplated by
Section 4.
3. Services. The non-dental development, management and administrative
services to be provided by Service Company shall include the following:
(a) Bookkeeping and Accounts. Service Company shall provide all
bookkeeping and accounting services necessary or appropriate to the functioning
of the Dental Centers including, but not limited to, maintenance, custody and
supervision of all business records, ledgers, journals and reports, and the
preparation, distribution and recordation of all bills and statements for
professional services rendered by P.A. including the billing and completion of
reports and forms required by insurance companies, dental maintenance
organizations, governmental agencies or other third-party payors (collectively,
the "Business Records"); provided, however, that such Business Records shall
not be deemed to include patient records and other records or documents which
relate to patient treatment by dentists.
(b) Billing; Collections. Service Company shall be responsible, for and
on behalf of P.A., as its agent, for billing and collecting the charges made
with respect to all Dental Services provided by P.A. at the Dental Centers.
The extent to which Service Company attempts to collect such charges, the
methods of collection and the amount of settlements with respect to disputed
charges, and the determination of which charges are not collectible, shall be
within the sole discretion of the Service Company; provided that Service
Company will comply with all applicable law, including without limitation, the
Federal Fair Debt Collection Practice Act.
(c) Non-Dental Personnel. Service Company shall, in its sole discretion
but following consultation with P.A., select for employment and terminate the
employment of all Non-Dental Personnel as Service Company shall deem necessary
or advisable, and shall be responsible for the supervision, direction, training
and assigning of duties of all Non-Dental Personnel, with the exception of
activities carried on by Non-Dental Personnel which must be under the direction
or supervision of licensed dentists in accordance with applicable law and
regulations. Unless otherwise specifically agreed in writing, all Non-Dental
Personnel shall be employees or independent contractors employed or engaged by
Service Company, and the selection and terms of employment or engagement,
including the rates of compensation, supervision, direction, training and
assignment of duties of all Non-Dental Personnel shall be determined and
controlled exclusively by Service Company.
(d) Dental Personnel. Service Company shall, in consultation with P.A.,
establish guidelines for the selection, hiring and firing of dentists and
Support Personnel by P.A. and shall recruit and evaluate prospective dentists
and Support Personnel as employees or independent contractors of P.A., provided
that all dentists and Support Personnel shall be employees of or independent
contractors to P.A.
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(e) Marketing and Advertising Programs. Service Company shall: develop
marketing and advertising programs for P.A.; provide advice and assistance to
P.A. on overall marketing programs, and determine and analyze the effect of
such programs; plan, create, write and prepare advertising materials; negotiate
contracts with advertising media for space and time; and obtain services
necessary in connection with the production and presentation of advertisements.
(f) Insurance. Service Company shall, in its sole discretion but
following consultation with P.A., make reasonable efforts to obtain and
maintain in full force and effect during the term of this Agreement, and all
extensions and renewals thereof, public liability and property insurance which
Service Company deems appropriate to protect against loss, claims, and other
risks, or which is necessary to comply with the terms of lease agreements for
the Dental Centers, and Service Company shall assist P.A. and the dentists in
obtaining professional liability insurance.
(g) Supplies. Service Company shall acquire and supply to P.A. all
dental and non-Dental supplies which may be reasonably required in connection
with the operation of the Dental Centers.
(h) Negotiation; Plans. Service Company shall carry on and be
responsible for all negotiations, in consultation with P.A., with managed care
plans, preferred provider plans, insurers and other third party payors relating
to the provision of services by P.A. Service Company shall develop, negotiate,
market and administer prepaid managed and other health plans for the providing
of dental care and shall obtain licensure as a third party administrator, and
any other appropriate licenses, registrations or certificates, if and to the
extent required by applicable law.
(i) Bank Accounts, Cash Management. Service Company is authorized to
establish and maintain for and on behalf of P.A. bank accounts for the
collection and disbursement of P.A.'s funds. Service Company is authorized to
disburse funds from such accounts for the payment of costs incurred by or on
behalf of P.A. in accordance with this Agreement, for Service Company's
compensation, and for all other costs, expenses, and disbursements which are
incurred in connection with this Agreement. Service Company shall manage all
cash and cash equivalents of P.A.
(j) Tax Returns, Reports. Service Company shall be responsible for
preparing and filing all tax returns and reports required or necessary in
connection with the operation of the Dental Centers.
(k) Overall Supervision. Service Company shall provide P.A. with
overall supervision and management, including maintenance and repair, of the
Dental Centers and all furniture, fixtures, furnishings, equipment, and
leasehold improvements located in or used at the Dental Centers.
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(l) Equipment and Furnishings. Service Company shall provide and
maintain, either directly or through appropriate lease agreements, all
necessary equipment and furnishings for the Dental Centers.
(m) New Dental Centers. Service Company shall provide planning and
studies to determine the location of new Dental Centers (including acquired
Dental Centers), provide designs for such new Dental Centers, obtain leases for
the space for Dental Centers, and do all things necessary in connection with
equipping of such new Dental Centers for operation, and shall make such space
available to P.A. Service Company shall amend, modify or supplement Exhibit A
to this Agreement in connection with the establishment of new Dental Centers,
as appropriate.
(n) Financial Statements and Budgets. Service Company shall prepare
monthly and annual financial statements containing a balance sheet and
statement of income for P.A. Annual financial statements shall be delivered to
P.A. within 90 days after the end of each fiscal year and monthly financial
statements shall be delivered to P.A. within 30 days after the end of each
calendar month. Service Company shall prepare, in reasonable detail, an annual
operating and capital budgets for P.A. which shall be delivered to P.A. within
30 days after the end of each fiscal year, with Service Company retaining final
authority with respect to budgeting including without limitation as to
compensation and payments to employees and independent contractors.
(o) Litigation Management. Service Company will (i) manage and direct
the defense of all claims, actions, proceedings, or investigations against P.A.
or any of its officers, directors or employees in their capacity as such, and
(ii) manage and direct the initiation and prosecution of all claims, actions,
proceedings or investigations brought by P.A. against any person other than the
Service Company.
(p) Access. Service Company shall grant access to its facilities to all
employees and independent contractors of P.A. for the purpose of performing
Dental Services in connection with the business of the Dental Centers.
(q) Business Operations. Service Company shall generally control and
manage all aspects of business of the Dental Centers other than those aspects
relating to the provision of Dental Services which under applicable law are
required to be subject to the control of P.A., as contemplated by Section 4.
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4. Conduct of Dental Practice and Other Matters.
(a) Practice of Dentistry. P.A. shall be solely and exclusively in
control of all clinical aspects of the practice of dentistry and the delivery
of Dental Services at the Dental Centers, including the exercise of independent
professional judgment regarding the diagnosis or treatment of any dental
disease, disorder or physical condition (which Service Company shall not
control, attempt to control, influence, attempt to influence or otherwise
interfere with), and P.A. shall be responsible for providing all Dental
Services and for the payment of all Costs of Dental Services. All persons to
whom such Dental Services are provided shall be patients of P.A. and not of
Service Company, and Service Company shall not have or exercise any control or
direction over the manner or methods with which Dental Services and related
duties are performed or interfere in any way with the exercise by the dentists
who are employees or independent contractors of P.A. of their professional
judgment. P.A. shall be solely responsible for assuring that all dentists who
are employed or who are independent contractors of P.A. hold all necessary
licenses from the State of Arkansas and that such licenses are current and in
good standing, and that such professional services are performed in accordance
with the applicable ethical standards, laws and regulations relating to
professional practice in the State of Arkansas. P.A. shall take all actions
necessary to maintain its status as a professional corporation including
provision for succession so that the outstanding shares of P.A. are owned at
all times by a person licensed to practice dentistry in the State of Arkansas.
(b) Patient Referrals. It is not a purpose of this Agreement to
induce or encourage the referral of patients. The parties agree that the
benefits to P.A. and Service Company do not require, are not payment or
inducement for, and are not in any way contingent upon the admission, referral
or any other arrangement for the provisions of any item or service offered by
Service Company to any of P.A.'s patients or for the referral of any patient.
(c) Noncompetition. P.A. hereby irrevocably appoints Service Company as
its agent and attorney in fact during the term of this Agreement with full
power and authority to enforce the terms of any employment or independent
contractor agreements to which it is a party and any noncompetition,
confidentiality and similar covenants or restrictions (collectively,
"Non-competition Agreements") of which it is the beneficiary. During the term
of this Agreement, P.A. shall not establish, operate or provide dental services
at any dental office, clinic or other health care facility providing services
substantially similar to those provided by P.A. pursuant to this Agreement
anywhere within 100 miles of any facility operated by Service Company. The
provisions of this Section 4(c) shall not in any way limit or otherwise affect
the terms and provisions of the Non-Competition Agreement dated as of November
7, 1996 by and among Monarch Dental Corporation, Xxxxxx X. Xxxxxxxxxxxx, D.D.S.
and the other parties identified on the signature pages thereto (the
"Xxxxxxxxxxxx Non-Competition Agreement"). To the extent of any conflict
between the provisions of this Section 4(c) and the provisions of the
Xxxxxxxxxxxx Non-Competition Agreement, the provisions of the Xxxxxxxxxxxx
Non-Competition Agreement shall control.
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(d) Attorney-in-Fact. P.A. hereby appoints Service Company for the term
of this Agreement to be its true and lawful attorney-in-fact for all purposes
relating to or arising in connection with the provisions by Service Company of
the comprehensive management and related administrative services as provided in
this Agreement, including without limitation the provisions of Section 3(b) and
Section 3(i). This power of attorney and the power of attorney granted under
Section 4(c) are coupled with an interest and shall be irrevocable and remain
in effect for the term of this Agreement.
5. Compensation of Service Company.
(a) Assignment to Service Company. P.A. assigns to Service Company all
of P.A.'s right and interests in all Revenues such that all Revenues shall be
paid to and collected by Service Company and all Revenues of P.A. (and all
accounts receivable relating thereto) shall be reported on the income statement
and balance sheet of Service Company during the term of this Agreement;
provided, however, that no assignment shall be made of any such rights or
interests, the assignment of which is prohibited by law (for example, amounts
receivable from Medicare or Medicaid accounts). P.A. hereby issues a standing
instruction, which it shall confirm upon request from time to time, that all
payments due to P.A. shall be remitted directly to Service Company as its agent
and attorney-in-fact hereunder. To the extent that the foregoing assignment of
Revenues shall be ineffective for any reason, P.A. hereby grants a security
interest in all accounts receivable, contract rights, Revenues and general
intangibles of P.A. to Service Company to secure all indebtedness and
obligations of P.A. to Service Company arising under or in connection with this
Agreement. At the request of Service Company, P.A. shall execute all documents
and instruments necessary to evidence and perfect the foregoing security
interest.
(b) Compensation of Service Company. As consideration for the services
provided by Service Company under this Agreement, Service Company shall receive
a service fee (the "Service Fee") in an amount equal to: (i) Service Company
Costs, plus (ii) an amount equal to the lesser of Net Pre-Tax Income or 30% of
Net Revenues.
(c) Application of Net Revenues. Service Company shall apply Net
Revenues as follows:
(i) First, Service Company shall remit to P.A., or cause to
be paid on behalf of P.A., from Net Revenues an amount
equal to the Costs of Dental Services and such other
payments or disbursements as P.A. shall direct Service
Company to make in accordance with this Agreement;
(ii) Second, Service Company shall retain out of Net Revenues
an amount equal to the Service Fee; and
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(iii) Third, Service Company shall remit all remaining Net
Revenues to P.A.
(d) Adjustment. The Service Fee shall be payable monthly in arrears
based upon Service Company Costs and P.A.'s Net Revenues in the prior month.
Adjustments to the estimated payments shall be made to reconcile actual amounts
due under Section 5(b) by the end of the following month. The Service Fee
shall be reviewed annually and at such other times as may be deemed appropriate
and adjusted in such manner as the parties may agree; in the absence of such
agreement, the Service Fee then in effect shall continue in effect.
6. General Obligations of P.A. and Service Company. P.A. and Service
Company each agrees to cooperate fully with the other in connection with the
carrying out of their respective obligations under this Agreement and to employ
their best efforts to resolve any dispute which may arise under or in
connection with the carrying out of this Agreement.
7. Term. The term of this Agreement shall be for a period of 40 years
from November 1, 1996 and, unless either party shall give notice to the
contrary at least 180 days prior to the thirty-first anniversary of this
Agreement or any anniversary thereafter, the term shall be extended for an
additional year on the thirty-first anniversary and on each anniversary
thereafter so that at each anniversary of this Agreement the remaining term
shall be, unless such notice is given, ten (10) years.
8. [Omitted].
9. Termination. This Agreement may be terminated as follows:
(a) By mutual agreement of the parties.
(b) If either party fails to perform any of its obligations under this
Agreement and, after written notice from the other party demanding that such
failure be cured, the party on whom such notice is served shall fail to cure
such breach within 30 days after such notice or, if such breach will reasonably
require more than 30 days to cure, such party is not diligently pursuing
efforts to cure such breach; provided, however, that if the party on whom such
demand is made elects to submit such dispute to arbitration, no action to
terminate this Agreement can be taken until such arbitration has been finally
adjudicated and then only if the party guilty of such failure shall fail to
comply with the arbitration award within 60 days after its issuance.
(c) If any bankruptcy, insolvency or receivership proceedings are
instituted by or against the P.A. and not dismissed within sixty (60) days
after the commencement of such proceedings or if the P.A. party shall
voluntarily dissolve.
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(d) As of any anniversary date of this Agreement, by Service Company
delivering written notice to P.A. of such termination of at least 90 days prior
to such anniversary date.
If this Agreement is terminated for any reason, P.A. shall have the right,
exercisable within sixty days after the date of termination, to purchase
equipment and furnishings provided by Service Company at the Dental Centers for
a purchase price equal to the appraised fair market value thereof.
10. Relationship of Parties. This Agreement is not intended to and shall
not be construed as creating the relationship of employer and employee,
partnership, joint venture or association between Service Company and P.A.
Since the dentists who perform services for the P.A. are not employees or
independent contractors of Service Company, Service Company shall not withhold
on their behalf any amounts for income tax, social security, unemployment
compensation, workers compensation or other similar withholding provisions and
all such withholding shall be the obligation of P.A.
11. Confidential Information. Each of P.A. and Service Company
acknowledges that it will have access to information of proprietary nature
owned by the other including (i) information on the systems, policies and
procedures developed by the Service Company in connection with the providing of
management services for dental centers and dental practices and (ii) patient
information. P.A. acknowledges that the Service Company has a proprietary
interest in such information, that such information constitutes trade secrets
and that P.A. does not, by reason of this Agreement, acquire any continuing
right or interest in such proprietary information or trade secrets. P.A. will
hold such proprietary information and trade secrets in confidence and will not
disclose them, either during the term of this Agreement or thereafter, to any
person or entity other than employees or independent contractors of P.A. or
Service Company without the prior written consent of Service Company or as may
be required by law. Service Company will preserve the confidentiality of all
files and records of P.A. including patient records and comply with all
federal, state and local laws, rules and regulations relating to the
confidentiality of the P.A.'s files and records (including patient records).
Service Company will use the information in such records only for the limited
purposes necessary to perform the services of Service Company set forth herein
(including billing and collections) and shall not use patient names, addresses
or any other patient information for marketing or any other purpose except as
expressly permitted by this Agreement without the prior written consent of P.A.
Each of P.A. and Service Company acknowledges that it does not have an
adequate remedy at law for a breach of this Section 11, will suffer irreparable
harm in the event of such breach and that, therefore, the other party shall be
entitled to injunctive and other equitable relief for the enforcement of this
Section 11. The provisions of this Section 11 shall survive termination of
this Agreement.
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12. Miscellaneous.
(a) Assignment. This Agreement shall not be assignable by either party
hereto without the express prior written consent of the other; provided,
however, that this Agreement shall be assignable by Service Company to any of
its affiliates or successors without the consent of P.A.
(b) Waiver. Waiver of any agreement or obligation set forth in this
Agreement by either party shall not prevent that party from later insisting
upon full performance of such agreement or obligation and no course of dealing,
partial exercise or any delay or failure on the part of any party hereto in
exercising any right, power, privilege, or remedy under this Agreement or any
related agreement or instrument shall impair or restrict any such right, power,
privilege or remedy or be construed as a waiver therefor. No waiver shall be
valid against any party unless made in writing and signed by the party against
whom enforcement of such waiver is sought.
(c) Amendment. No amendment or change in the provisions of this
Agreement shall be effective unless made in writing and signed by and on behalf
of the parties to this Agreement or their successors and assigns.
(d) Entire Agreement. This Agreement constitutes the entire agreement
between the parties in connection with the subject matter of this Agreement and
supersedes all prior agreements entered into before the effective date of this
Agreement, amending and restating in its entirety the Management Services
Agreement dated as of November 7, 1996.
(e) Notices. The mailing addresses of Service Company and P.A. for the
purposes of any notices to be given under this Agreement are as follows:
If to Service Company: Convenient Dental Care, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxx Xxxxx, Xxxxxxxx 00000
Attn: President
With a copy to: Monarch Dental Corporation
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: President
If to P.A.: Modern Dental Professionals--Xxxxxxxxxxxx, P.A.
0000 Xxxxx 00xx Xxxxxx
Xxxx Xxxxx, Xxxxxxxx 00000
Attn: President
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(f) Binding Effect. Subject to the provisions set forth in this
Agreement, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and upon their respective successors and assigns.
(g) Arbitration. Any disputes arising under this Agreement shall be
resolved by arbitration; provided, however, that arbitration shall not apply to
the enforcement of the Service Company's rights under Section 11. Any party
electing to submit an action to arbitration shall give written notice to the
other party of such election. The dispute shall be submitted to arbitration in
accordance with the Rules of the American Arbitration Association. Such
arbitration shall be conducted, unless otherwise agreed by the parties, by a
single arbitrator in Little Rock, Arkansas. The award of the arbitrator can be
confirmed or enforced in any court of competent jurisdiction. The prevailing
party in any arbitration shall be entitled to recover all costs incurred by
such party in connection with such proceedings, including reasonable attorney
fees.
(h) Severability. If any one or more of the provisions of this
Agreement is adjudged to any extent invalid, unenforceable, or contrary to law
by a court of competent jurisdiction, each and all of the remaining provisions
of this Agreement will not be affected thereby and shall be valid and forcible
to the fullest extent permitted by law.
(i) Governing Law. This Agreement shall be governed by and enforced in
accordance with the laws of the State of Arkansas.
(j) Change in Law. If after the effective date of this Agreement, any
new law, rule or regulation becomes effective which renders illegal the
structure of the relationship between P.A. and the Service Company set forth in
this Agreement, or otherwise substantially impairs the economics of the parties
hereunder, this Agreement shall not terminate, but the parties hereto agree to
exclusively negotiate with each other in good faith for a period of six months
following such change of law or circumstance with respect to the subject matter
hereof. To the maximum extent possible, any amendment hereto shall preserve
the underlying economic and financial arrangements between P.A. and the Service
Company.
IN WITNESS WHEREOF, the parties have signed this Agreement and agreed that
it shall be deemed effective as of November 1, 1996.
SERVICE COMPANY: P.A.:
CONVENIENT DENTAL CARE, INC. MODERN DENTAL PROFESSIONALS--
XXXXXXXXXXXX, P.A.
By: /s/ XXXX X. XXXX By: /s/ XXXXXX X. XXXXXXXXXXXX
--------------------------------- -------------------------------
Name: Xxxx X. Xxxx Name: Xxxxxx X. Xxxxxxxxxxxx, D.D.S.
Title: Vice President Title: President
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EXHIBIT A
Locations of Dental Centers
0000 X. Xxxxxxx
Xxxxxx Xxxx, XX
0000 Xxxxxx Xxxx
Xxxxx Xxxxxx Xxxx, XX
0000-X Commercial Drive
North Little Rock, AR
0000-X0 Xxxxxxxxxx Xxxxx
Xxxxx Xxxxxx Xxxx, XX
000 Xxxxxx
Xxxxxx, XX
#00 Xxxxxx Xxxxxxx Xxxxxxxx Xxxxxx
Xxxx Xxxxx, XX
000 Xxxxxxxxxxx, Xxxxx Xxx.
Xxxx Xxxxxxx, XX
0000 Xxxxx Xxxxxxx Xxx.
Xxxxxxxxxxxx, XX
0000 Xxxxxxx Xxx.
Xxx Xxxxxxx, XX
0000 Xxxxxxx Xxx.
Xxx Xxxxxxx, XX
