EXHIBIT 10.16
AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT is made and entered
into effective as of May 15, 2002, by and between CASTLE DENTAL CENTERS OF
TEXAS, INC., a Texas corporation ("Business Manager"), and XXXX X. XXXXXX,
D.D.S., P.C., a Texas professional corporation ("PC"), which will change its
name to CASTLE DENTAL ASSOCIATES OF TEXAS, P.C. shortly after the execution of
this agreement.
RECITALS
Whereas, on December 18, 1995, Castle Dental Centers, Inc., a Delaware
corporation ("Castle Dental") and PC entered into a Management Services
Agreement (the "Original Agreement"); and
Whereas, subsequent to that date, Castle Dental assigned all of its rights
to the Original Agreement to Business Manager; and
Whereas, Business Manager and PC desire to amend and restate the Original
Agreement.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinabove and hereinafter set forth, the parties agree as follows:
ARTICLE I DEFINITIONS
For the purposes of this Management Services Agreement, the following terms
shall have the following meanings ascribed thereto, unless otherwise clearly
required by the context in which such term is used.
Section 1.1 Act. The term "Act" shall mean Chapter Nine (Art. 4543-4551)
of the Civil Statutes of the State of Texas, as amended.
Section 1.2 Adjusted Gross Revenue. The term "Adjusted Gross Revenue"
shall mean the sum of Professional Services Revenue and Ancillary Revenue.
Section 1.3 Adjustments. The term "Adjustments" shall mean any
adjustments on an accrual basis for uncollectible accounts, third party payor
contractual adjustments, discounts, workers' compensation adjustments,
professional courtesies, and other reductions in collectible revenue that result
from activities that do not result in collectible charges.
Section 1.4 Ancillary Revenue. The term "Ancillary Revenue" shall
mean all other revenue actually recorded each month (net of Adjustments) that is
not Professional Services Revenues or capitation revenues consisting only of
prepaid amounts for services previously billed and collected, and shall include
the proceeds of key person life and disability insurance as provided for in
Section 3.13 below.
Section 1.5 Base Management Fee. The term "Base Management Fee" shall
mean the amount set forth in Section 5.1.
Section 1.6 Budget. The term "Budget" shall mean an operating budget
and capital expenditure budget for each fiscal year as prepared by Business
Manager and adopted by PC.
Section 1.7 Business Manager. The term "Business Manager" shall mean
Castle Dental Centers of Texas, Inc., a Texas corporation, or any entity that
succeeds to the interests of Castle Dental Centers of Texas, Inc., a Texas
corporation, and to whom the obligations of Business Manager are assigned and
transferred.
Section 1.8 Business Manager Expense. The term "Business Manager
Expense" shall mean an expense or cost incurred by the Business Manager and for
which the Business Manager, and not PC, is financially liable other than
expenses incurred by Business Manager that directly benefit PC which may be
allocated to Office Expense consistent with the Budget.
Section 1.9 Center. The term "Center" (collectively referred to as
"Centers") shall mean any office space, clinic, facility, including satellite
facilities, that Business Manager shall own or lease or otherwise procure for
the use of PC, as allowed by law, in the provision of Dental Services pursuant
to this Management Services Agreement.
Section 1.10 Dental Services. The term "Dental Services" shall mean
dental care and services, including but not limited to the practice of general
dentistry, orthodontics and all related dental care services provided by PC
through PC's Dentists and other dental care providers that are retained by or
professionally affiliated with PC.
Section 1.11 Dentist. The term "Dentist" shall mean each individually
licensed professional who is employed or otherwise retained by or associated
with PC, each of whom shall meet at all times the qualifications described in
Section 4.2 and Section 4.3.
Section 1.12 GAAP. The term "GAAP" shall mean generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity or other
practices and procedures as may be approved by a significant segment of the
accounting profession, which are applicable to the
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circumstances as of the date of the determination. For purposes of this
Management Services Agreement, GAAP shall be applied on an accrual basis in a
manner consistent with the historic practices of the person to which the term
applies.
Section 1.13 Management Fee. The term "Management Fee" shall mean
Business Manager's compensation established as described in Article 5 hereof.
Section 1.14 Management Services. The term "Management Services" shall
mean the business, administrative, and management services to be provided for
PC, including without limitation the provision of equipment, supplies, support
services, nondental personnel, office space, management, administration,
financial recordkeeping and reporting, and other business office services.
Section 1.15 Management Services Agreement. The term "Management
Services Agreement" shall mean this Amended and Restated Management Services
Agreement by and between PC and Business Manager and any amendments hereto as
may be adopted as provided in this Amended and Restated Management Services
Agreement.
Section 1.16 Office Expense. The term "Office Expense" shall mean all
operating and nonoperating expenses incurred by the Business Manager or PC in
the provision of services to or by PC. Office Expense shall not include any
State or federal income tax, or any other expense that is a PC Expense or a
Business Manager Expense. Without limitation, Office Expense shall include:
(a) the salaries and benefits of all employees of Business
Manager at the Centers and the salaries and benefits of the nondental employees
of PC, but not the salaries, benefits, or other direct costs of the Dentists;
(b) the direct cost of any employee or consultant that provides
services at or in connection with the Centers for improved clinic performance,
such as management, billing and collections, business office consultation,
accounting and legal services, but only when such services are consistent with
the Budget;
(c) reasonable recruitment costs and out-of-pocket expenses of Business
Manager or PC directly related to the recruitment of additional dental employees
of PC;
(d) professional liability insurance expenses for Dentists and
comprehensive, general liability and workers' compensation insurance covering
the Centers and employees of PC and Business Manager at each Center;
(e) the expense of using, leasing, purchasing or otherwise procuring
each Center and related equipment, including depreciation;
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(f) the cost of capital (whether as actual interest on indebtedness
incurred on behalf of PC or as reasonable imputed interest on capital advanced
by Business Manager, which shall be equal to the average cost of borrowing by
Business Manager from its primary commercial lender as reflected on its most
recent published financial statements) to finance or refinance obligations of
PC, purchase dental or nondental equipment, or finance new ventures of PC;
(g) the Base Management Fee;
(h) the reasonable out-of-pocket travel expenses associated with
attending meetings, conferences, or seminars to benefit PC;
(i) the reasonable costs and expenses associated with marketing,
advertising and promotional activities to benefit PC; and
(j) the cost of dental supplies (including but not limited to drugs,
pharmaceuticals, products, substances, items, or dental devices), office
supplies, inventory, and utilities other than those dental supplies or dental
inventory owned by PC on the date of this Management Services Agreement.
Section 1.17 PC. The term "PC" shall mean Xxxx X. Xxxxxx, D.D.S., P.C., a
Texas professional corporation.
Section 1.18 PC Account. The term "PC Account" shall mean the bank
account of PC established as described in Sections 3.8 and 3.9.
Section 1.19 PC Expense. The term "PC Expense" shall mean an expense
incurred by the Business Manager or PC that is consistent with the Budget and
for which PC, and not the Business Manager, is financially liable. PC Expense
shall include such items as Dentist salaries, benefits, and other direct costs
(including professional dues, subscriptions, continuing dental education
expenses, and travel costs for continuing dental education or other business
travel but excluding business travel requested by Business Manager, which shall
be an Office Expense).
Section 1.20 Performance Fee. The term "Performance Fee" shall mean the
amount payable to the Business Manager, if any, determined under Section 5.2, as
a Management Fee based upon the Business Manager achieving certain
pre-determined performance criteria.
Section 1.21 Professional Services Revenues. The term "Professional
Services Revenues" shall mean the sum of all professional fees actually recorded
each month on an accrual basis under GAAP (net of Adjustments) as a result of
Dental Services and related services rendered by the shareholders and dental
employees of PC.
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Section 1.22 Representatives. The term "Representatives" shall mean a
party's officers, directors, employees, or other agents or representatives.
Section 1.23 State. The term "State" shall mean the State of Texas.
Section 1.24 Term. The term "Term" shall mean the initial and any renewal
periods of duration of this Management Services Agreement as described in
Section 6.1.
ARTICLE 2. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
Section 2.1 Appointment. PC hereby appoints Business Manager as its
sole and exclusive agent for the management, and administration of the business
functions and business affairs of PC, and Business Manager hereby accepts such
appointment, subject at all times to the provisions of this Management Services
Agreement.
Section 2.2 Authority. Consistent with the provisions of this Management
Services Agreement, Business Manager shall have the responsibility and
commensurate authority to provide Management Services for PC. Subject to the
terms and conditions of this Management Services Agreement, Business Manager is
hereby expressly authorized to provide the Management Services in any reasonable
manner Business Manager deems appropriate to meet the day-to-day requirements of
the business functions of PC. Business Manager is also expressly authorized to
negotiate and execute on behalf of PC contracts that do not relate to the
provision of Dental Services. PC shall give Business Manager thirty (30) days
prior notice of PC's intent to execute any agreement obligating PC to perform
Dental Services or otherwise creating a binding legal obligation on PC. The
parties acknowledge and agree that PC, through its Dentists, shall be
responsible for and shall have complete authority, responsibility, supervision,
and control over the provision of all Dental Services and other professional
health care services performed for patients, and that all diagnoses, treatments,
procedures, and other professional health care services shall be provided and
performed exclusively by or under the supervision of Dentists as such Dentists,
in their sole discretion, deem appropriate. Business Manager shall have and
exercise absolutely no control or supervision over the provision of Dental
Services.
Section 2.3 Patient Referrals and Payments. Business Manager and PC agree
that the benefits to PC hereunder do not require, are not payment for, and are
not in any way contingent upon the referral, admission, or any other arrangement
for the provision of any item or service offered by Business Manager to patients
of PC in any facility, laboratory or health care operation controlled, managed,
or operated by Business Manager. Further, Business Manager and PC agree that the
payment of monies hereunder in no way represents the division, sharing,
splitting or other allocation of fees for Dental Services between PC and
Business Manager.
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Section 2.4 Internal Management of PC. Matters involving the internal
management, control, or finances of PC, including specifically the allocation of
professional income among the shareholders and Dentist employees of PC, tax
planning, and investment planning, shall remain the exclusive responsibility of
PC and the shareholders of PC.
Section 2.5 Practice of Dentistry. The parties acknowledge that Business
Manager is not authorized or qualified to engage in any activity that may be
construed or deemed to constitute the practice of dentistry nor shall Business
Manager now or in the future be regarded as practicing dentistry within the
meaning of Article 4551a of the Act. To the extent any act or service herein
required by Business Manager should be construed by a court of competent
jurisdiction or by the State Board of Dental Examiners to constitute the
practice of dentistry, the requirement to perform that act or service by
Business Manager shall be deemed waived and unenforceable and shall not
constitute a breach or default by Business Manager under this Agreement, and the
parties shall take the actions contemplated by Section 6.2(d) hereof.
ARTICLE 3. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER
During the Term, Business Manager shall provide all Management Services as
are necessary and appropriate for the day-to-day administration of the business
aspects of PC's operations, including without limitation those set forth in this
Article 3 in accordance with all law, rules, regulations and guidelines
applicable to the provision of Management Services.
Section 3.1 Centers and Equipment.
(a) Subject to Section 3.1(b), as necessary and appropriate, taking
into consideration the professional concerns of PC, Business Manager shall in
its reasonable discretion lease, acquire or otherwise procure Centers in a
location or locations reasonably acceptable to PC and shall permit PC to use
each such Center pursuant to this Management Services Agreement, by sublease or
otherwise as required by law.
(b) PC shall not enter into any lease or sublease with respect to a
Center without Business Manager's prior consent. In the event PC is the lessee
of any Center under a lease with an unrelated and nonaffiliated lessor, Business
Manager may require PC to assign such lease to Business Manager upon receipt of
consent from the lessor and Business Manager shall permit PC to use such Center
pursuant to this Management Services Agreement, by sublease or otherwise as
required by law. PC shall use its best efforts to assist in obtaining the
lessor's consent to the assignment. Upon request, PC shall execute any
instruments and shall take any acts that Business Manager may deem necessary to
accomplish the assignment of the lease. Any expenses incurred in the assignment
shall be Office Expenses.
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(c) Business Manager shall provide all nondental equipment, fixtures,
office supplies, furniture and furnishings deemed reasonably necessary by
Business Manager for the operation of each Center and reasonably necessary for
the provision of Dental Services pursuant to this Management Services Agreement,
by lease, sublease or otherwise as required by law.
(d) Business Manager shall provide, finance, or cause to be provided or
financed dental related equipment as required by PC. PC shall have final
authority in all dental equipment selections, and Business Manager shall have no
authority in regard to dental equipment selection issues. Business Manager may,
however, advise PC on the relationship between its dental equipment decisions
and the overall administrative and financial operations of the practice. All
dental and nondental equipment acquired for the use of PC shall be owned by
Business Manager.
(e) Business Manager shall be responsible for the repair and
maintenance of each Center, consistent with Business Manager's responsibilities
under the terms of any lease or other use arrangement, and for the repair,
maintenance, and replacement of all equipment other than such repairs,
maintenance and replacement necessitated by the negligence or willful misconduct
of PC, its Dentists or other personnel employed by PC, the repair or replacement
of which shall be a PC Expense and not an Office Expense.
Section 3.2 Dental Supplies. Business Manager shall order, procure,
purchase and provide on behalf of and as agent for PC all dental supplies
necessary and appropriate for the practice of PC in the reasonable discretion of
PC unless otherwise prohibited by federal and/or State law. Furthermore,
Business Manager shall ensure that each Center is at all times adequately
stocked with the dental supplies that are necessary and appropriate for the
operation of PC and required for the provision of Dental Services. The ultimate
oversight, supervision and ownership for all dental supplies is and shall remain
the sole responsibility of PC. As used in this provision the term "dental
supplies" shall mean all drugs, pharmaceuticals, products, substances, items or
devices whose purchase, possession, maintenance, administration, prescription or
security requires the authorization or order of a licensed health care provider
or requires a permit, registration, certification or other governmental
authorization held by a licensed health care provider as specified under any
federal and/or State law.
Section 3.3 Support Services. Business Manager shall provide or arrange
for all printing, stationery, forms, postage, duplication or photocopying
services, and other support services as are reasonably necessary and appropriate
for the operation of each Center and the provision of Dental Services therein.
Section 3.4 Quality Assurance, Risk Management, and Utilization Review.
Business Manager shall, upon the request of PC, assist PC in PC's establishment
of procedures to ensure the consistency, quality, appropriateness and necessity
of Dental
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Services provided by PC, and shall provide administrative support for PC's
overall quality assurance, risk management, and utilization review programs.
Business Manager shall perform these tasks in a manner to ensure the
confidentiality and nondiscoverability of these program actions to the fullest
extent allowable under State and federal law.
Section 3.5 Licenses and Permits. Business Manager shall, on behalf of
and in the name of PC, coordinate all development and planning processes, and
apply for and use reasonable efforts to obtain and maintain all federal, State,
and local licenses and regulatory permits required for or in connection with the
operation of PC and equipment (existing and future) located at each Center,
other than those relating to the practice of dentistry or the administration of
drugs by Dentists retained by or associated with PC.
Section 3.6 Personnel. Except as specifically provided in Section 4.2(b)
of this Management Services Agreement, Business Manager shall, consistent with
the Budget, employ or otherwise retain and shall be responsible for selecting,
hiring, training, supervising, and terminating, all management, administrative,
clerical, secretarial, bookkeeping, accounting, payroll, billing and collection
and other nonprofessional personnel as Business Manager deems reasonably
necessary and appropriate to enable Business Manager to perform its duties and
obligations under this Management Services Agreement. All such personnel
employed by Business Manager at each Center shall be reasonably acceptable to PC
and the Business Manager shall consult with PC on the individual who is hired as
PC's office manager. Business Manager shall, consistent with the Budget, have
sole responsibility for determining the salaries and providing such fringe
benefits, and for withholding, as required by law, any sums for income tax,
unemployment insurance, social security, or any other withholding required by
applicable law or governmental requirement.
Section 3.7 Contract Negotiations. Business Manager shall advise PC
with respect to and negotiate, either directly or on PC's behalf, as appropriate
and allowed by law all contractual arrangements between PC and third parties as
are reasonably necessary and appropriate for PC's provision of Dental Services,
including, without limitation, negotiated price agreements with third party
payors, alternative delivery systems, or other purchasers of group health care
services.
Section 3.8 Billing and Collection. On behalf of and for the account of
PC, Business Manager shall establish and maintain credit and billing and
collection policies and procedures, and shall timely xxxx and collect all
professional and other fees for all Dental Services provided by PC, or Dentists
employed or otherwise retained by PC. Business Manager shall advise and consult
with PC regarding the fees for Dental Services provided by PC; it being
understood, however, that PC shall establish the fees to be charged for Dental
Services and that Business Manager shall have no authority whatsoever with
respect to the establishment of such fees. In connection with the billing and
collection services to be provided hereunder, and throughout the Term (and
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thereafter as provided in Section 6.3), PC hereby grants to Business Manager a
special power of attorney and appoints Business Manager as PC's exclusive true
and lawful agent and attorney-in-fact, and Business Manager hereby accepts such
special power of attorney and appointment, for the following purposes:
(a) To xxxx PC's patients, in PC's name and on PC's behalf, for all
Dental Services provided by PC to patients.
(b) To xxxx, in PC's name and on PC's behalf, all claims for
reimbursement or indemnification from Blue Shield/Blue Cross, insurance
companies and all other third party payors or fiscal intermediaries for all
covered billable Dental Services provided by PC to patients.
(c) To collect and receive in Business Manager's name and for Business
Manager's account all accounts receivable of PC purchased by Business Manager,
and to deposit such collections in an account selected by Business Manager and
maintained in Business Manager's name.
(d) To collect and receive, in PC's name and on PC's behalf, all
accounts receivable generated by such xxxxxxxx and claims for reimbursement that
have not been purchased by Business Manager, to administer such accounts
including, but not limited to, (i) extending the time of payment of any such
accounts for cash, credit or otherwise; (ii) discharging or releasing the
obligors of any such accounts; (iii) suing, assigning or selling at a discount
such accounts to collection agencies; or (iv) taking other measures to require
the payment of any such accounts.
(e) To deposit all amounts collected under clause (d) above into PC
Account which shall be and at all times remain in PC's name or in the name of
Business Manager. PC covenants to transfer and deliver to Business Manager for
deposit into PC Account (or, with respect to accounts receivable purchased by
Business Manager, Business Manager's account) all funds received by PC from
patients or third party payors for Dental Services. Upon receipt by Business
Manager of any funds from patients or third party payors or from PC pursuant
hereto for Dental Services, Business Manager shall immediately deposit those
that relate to accounts receivable covered by clause (d) above into the PC
Account. Business Manager shall disburse such deposited funds to creditors and
other persons on behalf of PC, maintaining records of such receipt and
disbursement of funds in accordance with Section 3.9(b).
(f) To take possession of, endorse in the name of PC, and deposit into
the PC Account any notes, checks, money orders, insurance payments, and any
other instruments received in payment for Dental Services that relate to
accounts receivable covered by clause (d) above.
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(g) To sign checks, drafts, bank notes or other instruments on behalf
of PC, and to make withdrawals from the PC Account for payments specified in
this Management Services Agreement.
Upon request of Business Manager, PC shall execute and deliver to the financial
institution wherein the PC Account is maintained, such additional documents or
instruments as may be necessary to evidence or effect the special and limited
power of attorney granted to Business Manager by PC pursuant to this Section 3.8
or pursuant to Section 3.9 of this Management Services Agreement. The special
and limited power of attorney granted herein shall be coupled with an interest
and shall be irrevocable except with Business Manager's written consent. The
irrevocable power of attorney shall expire on the later of when this Management
Services Agreement has been terminated, when all accounts receivable purchased
by Business Manager have been collected, or when all Management Fees due to
Business Manager have been paid. If Business Manager assigns this Management
Services Agreement in accordance with its terms, then PC shall execute a power
of attorney in favor of the assignee including substantially the same terms set
forth in this Section 3.8.
Section 3.9 PC Account.
(a) Access. Business Manager shall have access to the PC Account solely
for the purposes contemplated hereby. PC shall neither draw checks on the PC
Account nor request Business Manager to do so.
(b) Priority of Payments. Business Manager shall apply on a monthly
basis, except as otherwise stated hereunder, funds that are in the PC Account in
the following order of priority: (i) PC Expenses; (ii) Office Expenses (other
than the Base Management Fee); (iii) Management Fees (both Base Management Fee
and Performance Fee); and (iv) any other expenditures.
Section 3.10 Fiscal Matters.
(a) Annual Budget.
1. Initial Budget. The initial Budget shall be agreed upon and
approved in writing by the parties before the execution of this Management
Services Agreement.
2. Process for Succeeding Budgets. Annually and at least thirty
(30) days prior to the commencement of each fiscal year of PC, Business
Manager, in consultation with PC, shall prepare and deliver to PC for PC's
approval a proposed Budget, setting forth an estimate of PC's revenues and
expenses for the upcoming fiscal year (including, without limitation, the
Management Fee and Performance Fee associated with the services provided by
Business Manager hereunder). PC shall review the proposed Budget and either
approve
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the proposed Budget or request any changes within fifteen (15) days after
receiving the proposed Budget. The Budget shall be adopted by PC after its
approval thereof and may be revised or modified only in consultation with
the Business Manager.
3. Succeeding Budgets; Special Rates. In each succeeding Budget,
unless the parties otherwise mutually agree or are otherwise precluded by
law or regulation, the criteria for the Performance Fee and Business
Manager's right to receive the Performance Fee shall be continued on the
same basis.
4. Deadlock. In the event the parties are unable to agree on a
Budget by the beginning of the fiscal year, until an agreement is reached,
the Budget for the prior year shall be deemed to be adopted as the Budget
for the current year, with each line item in the Budget (with the exception
of the Base Management Fee and any one-time or non-recurring expenses
included in such prior Budget) increased or decreased by (i) the percentage
by which the Adjusted Gross Revenue in the current year has increased or
decreased compared to the corresponding period of the prior year; (ii) the
increase or decrease from the prior year in the Consumer Price Index -
Health/Medical Services, Houston, Texas area; and (iii) the proportionate
increase or decrease in mutually agreed upon personnel costs as measured by
the increase or decrease in full-time-equivalent personnel.
5. Obligation of Business Manager. Business Manager shall use
commercially reasonable efforts to manage and administer the operations of
PC as herein provided so that the actual revenues, costs and expenses of
the operation and maintenance of PC during any applicable period of PC's
fiscal year shall be consistent with the Budget.
(b) Accounting and Financial Records. Business Manager shall establish
and administer accounting procedures, controls, and systems for the development,
preparation, and safekeeping of administrative or financial records and books of
account relating to the business and financial affairs of PC and the provision
of Dental Services all of which shall be prepared and maintained in accordance
with GAAP and applicable laws and regulations. Business Manager shall prepare
and deliver to PC, within one hundred twenty (120) days of the end of each
calendar year, a balance sheet and a profit and loss statement reflecting the
financial status of PC in regard to the provision of Dental Services as of the
end of such calendar year, all of which shall be prepared in accordance with
GAAP consistently applied. In addition, Business Manager shall prepare or assist
in the preparation of any other financial statements or records as PC may
reasonably request.
(c) Review of Expenditures. PC shall review all expenditures related to
the operation of PC, but PC shall not have the power to prohibit or invalidate
any
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expenditure that is consistent with the Budget. Business Manager shall not
have any authority to make any expenditures not consistent with the Budget.
(d) Tax Matters.
1. In General. Business Manager shall prepare or arrange for the
preparation by an accountant approved in advance by PC (which
approval shall not be unreasonably withheld) of all
appropriate tax returns and reports required of PC.
2. Sales and Use Taxes. Business Manager and PC acknowledge and
agree that to the extent that any of the services to be
provided by Business Manager hereunder may be subject to any
State sales and use taxes, Business Manager may have a legal
obligation to collect such taxes from PC and to remit same to
the appropriate tax collection authorities. PC agrees to pay
in addition to the payment of the Management Fee, the
applicable State sales and use taxes in respect of the
portion of the Management Fees attributable to such services.
Section 3.11 Reports and Records. Business Manager shall establish,
monitor, and maintain procedures and policies for the timely creation,
preparation, filing and retrieval of all dental records generated by PC in
connection with PC's provision of Dental Services; and, subject to applicable
law, shall use its best efforts to ensure that dental records are promptly
available to Dentists and any other appropriate persons. All such dental records
shall be retained and maintained in accordance with all applicable State and
federal laws relating to the confidentiality and retention thereof. All dental
records shall be and remain the property and under the control of PC and shall
be located at the applicable Center so that they are readily available for
patient care, and PC shall remain the custodian thereof and responsible for
their maintenance. Business Manager shall use its reasonable efforts to preserve
the confidentiality of dental records and use information contained in such
records only for the limited purpose necessary to perform the services set forth
herein; provided, however, in no event shall a breach of said confidentiality be
deemed a default under this Agreement.
Section 3.12 Recruitment of PC Dentists. Upon PC's request, Business
Manager shall perform all administrative services reasonably necessary and
appropriate to recruit potential Dentist personnel to become employees of PC.
Business Manager shall provide PC with model agreements to document PC's
employment, retention or other service arrangements with such individuals. It
will be and remain the sole and complete responsibility of PC to interview,
select, contract with, supervise, control and terminate all Dentists performing
Dental Services or other professional services, and Business Manager shall have
no authority whatsoever with respect to such activities.
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Section 3.13 Business Manager's Insurance. Throughout the Term, Business
Manager shall, as an Office Expense, obtain and maintain with commercial
carriers, through self-insurance or some combination thereof, appropriate
worker's compensation coverage for Business Manager's employed personnel
provided pursuant to this Management Services Agreement, and professional,
casualty and comprehensive general liability insurance covering Business
Manager, Business Manager's personnel, and all of Business Manager's equipment
in such amounts, on such basis and upon such terms and conditions as Business
Manager deems appropriate. Upon the request of PC, Business Manager shall
provide PC with a certificate evidencing such insurance coverage. Business
Manager may also carry, as an Office Expense, key person life and disability
insurance on any shareholder or Dentist employee of PC in amounts determined
reasonable and sufficient by Business Manager. Business Manager shall be the
owner and beneficiary of any such insurance.
Section 3.14 No Warranty. PC acknowledges that Business Manager has not
made and will not make any express or implied warranties or representations that
the services provided by Business Manager will result in any particular amount
or level of dental practice or income to PC.
ARTICLE 4. COVENANTS AND RESPONSIBILITIES OF PC
Section 4.1 Organization and Operation. PC, as a continuing condition
of Business Manager's obligations under this Management Services Agreement,
shall at all times during the Term be and remain legally organized and operated
to provide Dental Services in a manner consistent with all State and federal
laws. PC shall operate and maintain within the Practice Territory a full time
practice of dentistry specializing in the provision of Dental Services.
Section 4.2 PC Personnel.
(a) Dental Personnel. PC shall retain, as a PC Expense and not as an
Office Expense, that number of Dentists as are reasonably necessary and
appropriate in the sole discretion of PC for the provision of Dental Services.
Each Dentist retained by PC shall hold and maintain a valid and unrestricted
license to practice dentistry in the State, and shall be competent in the
practice of dentistry, including any subspecialties that the retained Dentist
will practice on behalf of PC. PC shall enter into and maintain with each such
retained Dentist a written employment agreement in a form reasonably
satisfactory to PC and Business Manager and will not commit and permit to remain
outstanding any breach of such employment agreement that would allow the Dentist
to terminate for cause. PC shall be responsible for paying the compensation and
benefits, as applicable, for all Dentists and any other dental personnel or
other contracted or affiliated dentists, and for withholding, as required by
law, any sums for income tax, unemployment insurance, social security, or any
other withholding required by applicable law. Business Manager may, on behalf of
PC, establish and administer the compensation with respect to such individuals
in accordance with the
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written agreement between PC and each Dentist. Business Manager shall neither
control nor direct any Dentist in the performance of Dental Services for
patients.
(b) Employment of Non-dentist Dental Care Personnel. PC shall employ or
retain, as an Office Expense, all non-dentist dental care personnel, such as
dental assistants, dental hygienists and dental technicians, required under the
Act or otherwise required by law to work under the direct supervision of a
Dentist or who Business Manager and PC determine should work under the direct
supervision of a Dentist. Such non-dentist dental care personnel shall be under
PC's control, supervision and direction in the performance of Dental Services
for patients.
Section 4.3 Professional Standards. As a continuing condition of Business
Manager's obligations hereunder, each Dentist and any other dental personnel
retained by PC to provide Dental Services must (i) comply with, be controlled
and governed by and otherwise provide Dental Services in accordance with the
code of professional conduct and applicable federal, State and municipal laws,
rules, regulations, ordinances and orders, and the ethics and standard of care
of the dental community wherein any Center is located and (ii) obtain and retain
appropriate dental staff membership with appropriate clinical privileges at any
hospital or health care facility at which Dental Services are to be provided.
Procurement of temporary staff privileges pending the completion of the dental
staff approval process shall satisfy this provision, provided the Dentist
actively pursues full appointment and actually receives full appointment within
a reasonable time.
Section 4.4 Dental Services. PC shall ensure that Dentists and
non-dentist dental care personnel are available to provide Dental Services to
patients. In the event that Dentists are not available to provide Dental
Services coverage, PC shall engage and retain locum tenens coverage as it deems
reasonable and appropriate based on patient care requirements. Dentists retained
on a locum tenens basis shall meet all of the requirements of Section 4.3, and
the cost of providing locum tenens coverage shall be a PC Expense. With the
assistance of the Business Manager, PC and the Dentists shall be responsible for
scheduling Dentist and non-dentist dental care personnel coverage of all dental
procedures. PC shall cause all Dentists to develop and promote PC.
Section 4.5 Peer Review/Quality Assurance. PC shall adopt a peer
review/quality assessment program to monitor and evaluate the quality and
cost-effectiveness of Dental Services provided by dental personnel of PC. Upon
request of PC, Business Manager shall provide administrative assistance to PC in
performing its peer review/quality assurance activities, but only if such
assistance can be provided consistent with maintaining the confidentiality and
nondiscoverability of the processes and actions of the Peer Review/Quality
Assurance process of PC and not be regarded as practicing dentistry under the
Act.
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Section 4.6 PC's Insurance. PC shall, as an Office Expense, obtain and
maintain with commercial carriers acceptable to Business Manager appropriate
worker's compensation coverage for PC's employed personnel, if any, and
professional and comprehensive general liability insurance covering PC and each
of the Dentists PC retains or employs to provide Dental Services. The
comprehensive general liability coverage shall be in the minimum amount of One
Million Dollars ($1,000,000) for each occurrence and Two Million Dollars
($2,000,000) annual aggregate; and professional liability coverage shall be in
the minimum amount of One Million Dollars ($1,000,000) for each occurrence and
Three Million Dollars ($3,000,000) annual aggregate. The insurance policy or
policies shall provide for at least thirty (30) days advance written notice to
PC from the insurer as to any alteration of coverage, cancellation, or proposed
cancellation for any cause. PC shall cause to be issued to Business Manager by
such insurer or insurers a certificate reflecting such coverage and shall
provide written notice to Business Manager promptly upon receipt of notice given
to Dentist of the cancellation or proposed cancellation of such insurance for
any cause. Upon the termination of this Management Services Agreement for any
reason, PC shall obtain and maintain as a PC Expense "tail" professional
liability coverage, in the amounts specified in this section for an extended
reporting period of 10 years, and PC shall be responsible for paying all
premiums for "tail" insurance coverage. In no event shall the professional
liability insurance carrier be replaced or changed without the consent of PC and
Business Manager. PC and Business Manager agree to use their best efforts to
have each other named as additional insureds on the other's respective
professional liability insurance at Business Manager's expense.
Section 4.7 Name, Trademark. PC represents and warrants that, as of the
date hereof, PC conducts its professional practice under the name of, and only
under the name of "Xxxx X. Xxxxxx, D.D.S., P.C." and that such name is the name
of PC under Texas law, and that to its knowledge PC is the sole and absolute
owner of the name. PC covenants and promises that, except as provided below,
without the prior written consent of the Business Manager, PC will not:
(a) take any action or omit to take any action that is reasonably
likely to result in the change or loss of the name;
(b) license, sell, give, or otherwise transfer the name or the right to
use the name to any dental practice, dentist, professional corporation, or any
other entity; or
(c) cease conducting the professional practice of PC under the name.
Immediately following the signing of this Agreement, the PC shall change its
name to "Castle Dental Associates of Texas, P.C." and all provisions applicable
to the prior name shall thereafter be applicable to this new name.
Section 4.8 Peer Review. PC shall designate a committee of Dentists to
function as a dental peer review committee to review credentials of potential
recruits, perform
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quality assurance functions, and otherwise resolve dental competence issues. The
dental peer review committee shall function pursuant to formal written policies
and procedures.
Section 4.9 Indemnification. PC shall indemnify, hold harmless and defend
Business Manager, its officers, directors and employees, from and against any
and all liability, loss, damage, claim, causes of action and expenses (including
reasonable attorneys' fees), whether or not covered by insurance, caused or
asserted to have been caused, directly or indirectly, by or as a result of the
performance of Dental Services or any other acts or omissions by PC and/or its
shareholders, agents, employees and/or subcontractors (other than Business
Manager) during the term hereof. Business Manager shall indemnify, hold harmless
and defend PC, its officers, directors and employees, from and against any and
all liability, loss, damage, claim, causes of action and expenses (including
reasonable attorneys' fees), caused or asserted to have been caused, directly or
indirectly, by or as a result of the performance of any intentional acts,
negligent acts, or omissions by Business Manager and/or its shareholders,
agents, employees and/or subcontractors (other than PC) during the term of this
Agreement.
ARTICLE 5. FINANCIAL ARRANGEMENT
Section 5.1 Definitions. For purposes of this Article 5, capitalized
terms used herein shall have the meanings ascribed as follows:
(a) Base Management Fee. The Base Management Fee shall be the amount,
calculated on a monthly basis, that is equal to fifteen percent (15%) of the
Adjusted Gross Revenue attributable to the applicable monthly period.
(b) Performance Fee. The Performance Fee shall be the amount,
calculated on a monthly basis, that is calculated in accordance with the
Applicable Exhibit to the Budget.
Section 5.2 Management Fee. PC and Business Manager agree to the
compensation set forth herein as being paid to Business Manager in consideration
of a substantial commitment made by Business Manager hereunder and that such
fees are fair and reasonable. Each month, in the priority established by Section
3.9 (b), Business Manager shall be paid the following:
(i) the amount of all Office Expenses (other than the Base
Management Fee) paid by the Business Manager on behalf of PC.
(ii) the Base Management Fee.
(iii) the Performance Fee.
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Section 5.3 Adjustments. If there are not sufficient funds to pay either
or both of the Base Management Fee or the Performance Fee, all unpaid amounts
shall accumulate and carry over from month to month until paid or until the
termination of this Management Services Agreement, in which case such unpaid
amounts shall be immediately due and payable as of the date of termination.
Amounts carried over shall earn interest at the rate of ten percent (10%) per
annum. Furthermore, the amount of the Performance Fee paid will be monitored and
reconciled on an annual basis and any overpayments of the Performance Fee shall
be promptly refunded by the Business Manager.
Section 5.4 Reasonable Value. Payment of the Base Management Fee or
Performance Fee is not intended to be and shall not be interpreted or applied as
permitting Business Manager to share in PC's fees for Dental Services or any
other services, but is acknowledged as the parties' negotiated agreement as to
the reasonable fair market value of the equipment, contract analysis and
support, other support services, purchasing, personnel, office space,
management, administration, strategic management and other items and services
furnished by Business Manager pursuant to this Management Services Agreement,
considering the nature and volume of the services required and the risks assumed
by Business Manager.
Section 5.5 Payment of Management Fee. To facilitate the payment of the
Management Fee as provided in Section 5.1 hereof, PC hereby expressly authorizes
Business Manager to make withdrawals of the Management Fee from the PC Account
as such fee becomes due and payable during the Term and thereafter as provided
in Section 6.3.
Section 5.6 Accounts Receivable. To assure that PC receives the entire
amount of professional fees for its services and to assist PC in maintaining
reasonable cash flow for the payment of Office Expenses, Business Manager may,
during the Term, purchase, without recourse to PC for the amount of the
purchase, the accounts receivable of PC arising during the previous month by
transferring the amount set forth below into the PC Account. The consideration
for the purchase shall be an amount equal to the Adjusted Gross Revenue recorded
each month (according to GAAP reflecting adjustments related to the bad debt
reserve). Business Manager shall be entitled to offset Office Expenses
reimbursement due to Business Manager under Section 5.2 above against the amount
payable for the accounts receivable. Although it is the intention of the parties
that Business Manager purchase and thereby become the owner of the accounts
receivable of PC, in the event such purchase shall be ineffective for any
reason, PC is concurrently herewith granting to Business Manager a security
interest in the accounts so purchased, and PC shall cooperate with Business
Manager and execute all documents in connection with the pledge of such
purchased accounts receivable to Business Manager. All collections in respect to
such accounts receivable purchased by Business Manager shall be received by
Business Manager as the agent of PC and shall be endorsed to Business Manager
and deposited in a bank account at a bank designated by Business Manager. To the
extent PC comes into possession of any
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payments in respect of such accounts receivable, PC shall direct such payments
to Business Manager for deposit in bank accounts designated by Business Manager.
Section 5.7 Disputes Regarding Fees. PC shall not be entitled to a
set-off or reduction in its Management Fees by reason of its belief that
Business Manager has failed to perform its obligations hereunder or otherwise.
ARTICLE 6. TERM AND TERMINATION
Section 6.1 Initial and Renewal Term. The Term of this Management
Services Agreement will be for an initial period of twenty-five (25) years after
the effective date, and shall be automatically renewed for successive five (5)
year periods thereafter, provided that neither Business Manager nor PC shall
have given notice of termination of this Management Services Agreement at least
ninety (90) days before the end of the initial term or any renewal term, or
unless otherwise terminated as provided in Section 6.2 of this Management
Services Agreement.
Section 6.2 Termination.
(a) Termination By Business Manager. Subject to Section 6.2(c),
Business Manager may only terminate this Management Services Agreement either
without cause upon ninety (90) days' written notice to PC, or upon the
occurrence of any one of the following events which shall be deemed to be "for
cause":
(i) The dissolution of PC or the filing of a petition in
voluntary bankruptcy, an assignment for the benefit of
creditors, or other action taken voluntarily or involuntarily
under any State or federal statute for the protection of
debtors;
(ii) PC materially defaults in the performance of any of its
material duties or obligations hereunder, and such default
continues for thirty (30) days after PC receives notice of
the default.
(b) Termination By PC. Subject to Section 6.2(c) PC may only terminate
this Management Services Agreement upon any of the following occurrences which
shall be deemed to be "for cause":
(i) The dissolution of Business Manager or the filing of a
petition in voluntary bankruptcy, an assignment for the
benefit of creditors, or other action taken voluntarily or
involuntarily under any State or federal statute for the
protection of debtors;
(ii) In the event that Business Manager materially defaults in the
performance of any of its material obligations hereunder and
such
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default continues for sixty (60) days after Business Manager
receives notice of the default.
Termination by PC hereunder shall require the affirmative vote of three-fourths
of the outstanding voting shares of the common shareholders of PC entitled to
vote.
(c) Termination by Agreement. In the event PC and Business Manager
shall mutually agree in writing, this Management Services Agreement may be
terminated on the date specified in such written agreement.
(d) Legislative, Regulatory or Administrative Change. In the event
there shall be a change in the Act, any federal or State statutes, case laws,
regulations or general instructions, the interpretation of any of the foregoing,
the adoption of new federal or State legislation, or a change in any third party
reimbursement system, any of which are reasonably likely to adversely affect the
manner in which either party may perform or be compensated for its services
under this Management Services Agreement or which shall make this Management
Services Agreement unlawful, the parties shall immediately enter into good faith
negotiations regarding a new service arrangement or basis for compensation for
the services furnished pursuant to this Management Services Agreement that
complies with the law, regulation, or policy and that approximates as closely as
possible the economic position of the parties prior to the change. If good faith
negotiations cannot resolve the matter, it shall be submitted to arbitration as
referenced in Section 7.6; provided however that in the event that the State
Board of Dental Examiners issues a final and non-appealable order revoking the
license of any Dentist on the grounds that PC's entering into and performing its
obligations under this Management Services Agreement is unlawful, PC may
terminate this Management Services Agreement upon thirty (30) days prior written
notice.
Section 6.3 Effects of Termination. Upon termination of this Management
Services Agreement, as hereinabove provided, neither party shall have any
further obligations hereunder except for (i) obligations accruing prior to the
date of termination, including, without limitation, payment of the Management
Fees and PC Expenses relating to services provided prior to the termination of
this Management Services Agreement and (ii) obligations, promises, or covenants
set forth herein that are expressly made to extend beyond the Term, including,
without limitation, indemnities, which provisions shall survive the expiration
or termination of this Management Services Agreement for any reason. In
effectuating the provisions of this Section 6.3, PC specifically acknowledges
and agrees that Business Manager shall continue to collect and receive on behalf
of PC all cash collections from accounts receivable in existence at the time
this Management Services Agreement is terminated, it being understood that such
cash collections will represent, in part, compensation to Business Manager for
management services already rendered and compensation on accounts receivable
purchased by Business Manager. Upon the expiration or termination of this
Management Services Agreement for any reason or
19
cause whatsoever, Business Manager shall surrender to PC all books and records
pertaining to PC's dental practice.
ARTICLE 7. MISCELLANEOUS
Section 7.1 Administrative Services Only. Nothing in this Management
Services Agreement is intended or shall be construed to allow Business Manager
to exercise control or direction over the manner or method by which PC and its
Dentists perform Dental Services or other professional health care services. The
rendition of all Dental Services, including, but not limited to, the
prescription or administration of drugs shall be the sole responsibility of PC
and its Dentists, and Business Manager shall not interfere in any manner or to
any extent therewith. Nothing contained in this Management Services Agreement
shall be construed to permit Business Manager to engage in the practice of
dentistry, it being the sole intention of the parties hereto that the services
to be rendered to PC by Business Manager are solely for the purpose of providing
nondental management and administrative services to PC so as to enable PC to
devote its full time and energies to the professional conduct of its dental
practice and provision of Dental Services to its patients and not to
administration, or practice management.
Section 7.2 Status of Contractor; Agency. It is expressly acknowledged
that the parties hereto are independent contractors and that this Management
Services Agreement is intended to constitute Business Manager as PC's agent.
Nothing herein shall be construed to create an employer/employee, partnership,
or joint venture relationship, or to allow either to exercise control or
direction over the manner or method by which the other performs the services
that are the subject matter of this Management Services Agreement or to permit
Business Manager to take any action that would constitute the practice of
dentistry; provided always that the services to be provided hereunder shall be
furnished in a manner consistent with the standards governing such services and
the provisions of this Management Services Agreement. Each party understands and
agrees that (i) the other will not be treated as an employee for federal tax
purposes, (ii) neither will withhold on behalf of the other any sums for income
tax, unemployment insurance, social security, or any other withholding pursuant
to any law or requirement of any governmental body or make available any of the
benefits afforded to its employees, (iii) all of such payments, withholdings,
and benefits, if any, are the sole responsibility of the party incurring the
liability, and (iv) each will indemnify and hold the other harmless from any and
all loss or liability arising with respect to such payments, withholdings, and
benefits, if any.
Section 7.3 Notices. Any notice, demand, or communication required,
permitted, or desired to be given hereunder shall be in writing and shall be
served on the parties at the following respective addresses:
PC: CASTLE DENTAL ASSOCIATES OF TEXAS, P.C.
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0000 Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
ATTN: President
Business Manager: CASTLE DENTAL CENTERS OF TEXAS, INC.
0000 Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
ATTN: President
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate. Any notice, demand, or
communication required, permitted, or desired to be given hereunder shall be
sent either (a) by hand delivery, in which case notice shall be deemed received
when actually delivered, (b) by prepaid certified or registered mail, return
receipt requested, in which case notice shall be deemed received five calendar
days after deposit, postage prepaid in the United States Mail, or (c) by a
nationally recognized overnight courier, in which case notice shall be deemed
received one business day after deposit with such courier.
Section 7.4 Governing Law. This Management Services Agreement shall be
governed by the laws of the State of Texas applicable to agreements to be
performed wholly within the State. Texas law was chosen by the parties after
negotiation to govern interpretation of this Management Services Agreement
because Xxxxxx County, Texas is the seat of management for Business Manager. The
federal and State courts of Xxxxxx County, Texas shall be the exclusive venue
for any litigation, special proceeding, or other proceeding between the parties
that may arise out of, or be brought in connection with or by reason of, this
Management Services Agreement.
Section 7.5 Assignment. Except as may be herein specifically provided
to the contrary, this Management Services Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors, and assigns; provided, however, that PC may not
assign this Management Services Agreement without the prior written consent of
Business Manager, which consent may be withheld. The sale, transfer, pledge, or
assignment of any of the common shares held by any shareholder of PC or the
issuance by PC of common or other voting shares to any other person, or any
combination of such transactions within a period of one (1) year, such that the
existing shareholder in PC fails to maintain a majority of the voting interests
in PC shall be deemed an attempted assignment by PC, and shall be null and void
unless consented to in writing by Business Manager prior to any such transfer or
issuance. Any breach of this provision, whether or not void or voidable, shall
constitute a material breach of this Management Services Agreement, and in the
event of such breach, Business Manager may terminate this Management Services
Agreement upon twenty-four (24) hours notice to PC.
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Section 7.6 Arbitration.
(a) General. The parties shall use good faith negotiation to resolve
any controversy, dispute or disagreement arising out of or relating to this
Management Services Agreement or the breach of this Management Services
Agreement. Any matter not resolved by negotiation shall be submitted to binding
arbitration and such arbitration shall be governed by the terms of this Section
7.6.
(b) Scope. Unless otherwise specifically provided herein, the parties
hereto agree that any claim, controversy, dispute or disagreement between or
among any of the parties hereto arising out of or relating to this Management
Services Agreement shall be governed exclusively by the terms and provisions of
this Section 7.6; provided, however, that the terms and provisions of this
Section 7.6 shall not preclude any party hereto from seeking, or a court of
competent jurisdiction from granting, a temporary restraining order, temporary
injunction or other equitable relief for any breach of any duty, obligation,
covenant, representation or warranty, the breach of which may cause irreparable
harm or damage.
(c) Arbitrators. In the event of any claim, controversy, dispute or
disagreement between the parties hereto arising out of or relating to this
Management Services Agreement, and in the further event the parties are unable
to resolve such claim, controversy, dispute or disagreement within thirty (30)
days after notice is first delivered pursuant to Section 7.3, the parties agree
to select arbitrators to hear and decide all such claims under this Section 7.6.
Each party shall select one arbitrator, The two arbitrators so chosen shall then
select a third arbitrator who is experienced in the matter or action that is
subject to such arbitration. If such matter or action involves health-care
issues, then the third arbitrator shall have such qualifications as would
satisfy the requirements of the National Health Lawyers Association Alternative
Dispute Resolution Service. Each of the arbitrators chosen shall be impartial
and independent of all parties hereto. If either of the parties fails to select
an arbitrator within twenty days after the end of such thirty-day period, or if
the arbitrators chosen fail to select a third arbitrator within twenty days,
then any party may in writing request the judge of the United States District
Court for the Southern District of Texas senior in term of service to appoint
the arbitrator or arbitrators and, subject to this Section 7.6, such arbitrators
shall hear all arbitration matters arising under this Section 7.6, and, in
default of such selection, may ask the American Arbitration Association.
22
(d) Applicable Rules.
(i) Each arbitration hearing shall be held at a place in Houston,
Texas acceptable to a majority of the arbitrators. The
arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association to the
extent such rules do not conflict with the terms hereof. The
decision of a majority of the arbitrators shall be reduced to
writing and shall be binding on the parties. Judgment upon the
award(s) rendered by a majority of the arbitrators may be entered
and execution had in any court of competent jurisdiction or
application may be made to such court for a judicial acceptance
of the award and an order of enforcement. The charges and
expenses of the arbitrators shall be shared equally by the
parties to the hearing.
(ii) The arbitration shall commence within thirty (30) days after the
arbitrators are selected in accordance with the provisions of
this Section 7.6. In fulfilling their duties with respect to the
matter in arbitration, the arbitrators may consider such matters
as, in the opinion of the arbitrators, are necessary or helpful
to make a proper valuation. The arbitrators may consult with and
engage disinterested third parties to advise the arbitrators. The
arbitrators shall not add any interest factor reflecting the time
value of money to the amount of any award granted under any
arbitration hereunder and shall not award any punitive damages.
(iii) If any of the arbitrators selected hereunder should die, resign
or be unable to perform his or her duties hereunder, the
remaining arbitrators or such senior judge (or such judge's
successor) shall select a replacement arbitrator. The procedure
set forth in this Section 7.6 for selecting the arbitrators shall
be followed from time to time as necessary.
(iv) As to the resolution of any claim, controversy, dispute or
disagreement that under the terms hereof is made subject to
arbitration, no lawsuit based on such resolution shall be
instituted by either of the parties hereto, other than to compel
arbitration proceedings or enforce the award of a majority of the
arbitrators.
(v) All privileges under Texas and federal law, including
attorney-client and work-product privileges, shall be preserved
and protected to the same extent that such privileges would be
protected in a federal court proceeding applying Texas law.
Section 7.7 Waiver of Breach. The waiver by either party of a breach or
violation of any provision of this Management Services Agreement shall not
operate as,
23
or be construed to constitute, a waiver of any subsequent breach of the same or
another provision hereof.
Section 7.8 Enforcement. In the event either party resorts to legal
action to enforce or interpret any provision of this Management Services
Agreement, the prevailing party shall be entitled to recover the costs and
expenses of such action so incurred, including, without limitation, reasonable
attorneys' fees.
Section 7.9 Gender and Number. Whenever the context of this Management
Services Agreement requires, the gender of all words herein shall include the
masculine, feminine, and neuter, and the number of all words herein shall
include the singular and plural.
Section 7.10 Additional Assurances. Except as may be herein specifically
provided to the contrary, the provisions of this Management Services Agreement
shall be self-operative and shall not require further agreement by the parties;
provided, however, at the request of either party, the other party shall execute
such additional instruments and take such additional acts as are reasonable and
as the requesting party may deem necessary to effectuate this Management
Services Agreement.
Section 7.11 Consents, Approvals, and Exercise of Discretion. Whenever
this Management Services Agreement requires any consent or approval to be given
by either party, or either party must or may exercise discretion, and except
where specifically set forth to the contrary, the parties agree that such
consent or approval shall not be unreasonably withheld or delayed, and that such
discretion shall be reasonably exercised.
Section 7.12 Force Majeure. Neither party shall be liable or deemed to be
in default for any delay or failure in performance under this Management
Services Agreement or other interruption of service deemed to result, directly
or indirectly, from acts of God, civil or military authority, acts of public
enemy, war, accidents, fires, explosions, earthquakes, floods, failure of
transportation, strikes or other work interruptions by either party's employees,
or any other similar cause beyond the reasonable control of either party unless
such delay or failure in performance is expressly addressed elsewhere in this
Management Services Agreement.
Section 7.13 Severability. The parties hereto have negotiated and
prepared the terms of this Management Services Agreement in good faith with the
intent that each and every one of the terms, covenants and conditions herein be
binding upon and inure to the benefit of the respective parties. Accordingly, if
any one or more of the terms, provisions, promises, covenants or conditions of
this Management Services Agreement or the application thereof to any person or
circumstance shall be adjudged to any extent invalid, unenforceable, void or
voidable for any reason whatsoever by a court of competent jurisdiction or an
arbitration tribunal, such provision shall be as narrowly construed as possible,
and each and all of the remaining terms, provisions, promises,
24
covenants and conditions of this Management Services Agreement or their
application to other persons or circumstances shall not be affected thereby and
shall be valid and enforceable to the fullest extent permitted by law. To the
extent this Management Services Agreement is in violation of applicable law,
then the parties agree to negotiate in good faith to amend the Management
Services Agreement, to the extent possible consistent with its purposes, to
conform to law.
Section 7.14 Divisions and Headings. The divisions of this Management
Services Agreement into articles, sections, and subsections and the use of
captions and headings in connection therewith is solely for convenience and
shall not affect in any way the meaning or interpretation of this Management
Services Agreement.
Section 7.15 Amendments and Management Services Agreement Execution.
This Management Services Agreement and amendments hereto shall be in writing and
executed in multiple copies on behalf of PC by its President, and on behalf of
Business Manager by any duly authorized officer thereof. Each multiple copy
shall be deemed an original, but all multiple copies together shall constitute
one and the same instrument.
Section 7.16 Entire Management Services Agreement. With respect to the
subject matter of this Management Services Agreement, this Management Services
Agreement supersedes all previous contracts and constitutes the entire agreement
between the parties. Neither party shall be entitled to benefits other than
those specified herein. No prior oral statements or contemporaneous negotiations
or understandings, except for the Budget, or prior written material not
specifically incorporated herein shall be of any force and effect, and no
changes in or additions to this Management Services Agreement shall be
recognized unless incorporated herein by amendment as provided herein, such
amendment(s) to become effective on the date stipulated in such amendment(s).
The parties specifically acknowledge that, in entering into and executing this
Management Services Agreement, except for the Budget, the parties rely solely
upon the representations and agreements contained in this Management Services
Agreement and no others.
Signature Pages to Follow
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IN WITNESS WHEREOF, PC and Business Manager have caused this Management
Services Agreement to be executed by their duly authorized representatives, all
as of the day and year first above written.
PC: XXXX X. XXXXXX, D.D.S., P.C.
By:
---------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
BUSINESS MANAGER: CASTLE DENTAL CENTERS OF TEXAS,
INC.
By:
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Name:
-------------------------------------
Title:
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