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EXHIBIT 10.5
PREMIER ORTHODONTIC GROUP, INC.
CONSULTING AND BUSINESS SERVICES AGREEMENT
THIS CONSULTING AND BUSINESS SERVICES AGREEMENT (this
"Agreement"), dated as of ______________, by and between PREMIER ORTHODONTIC
GROUP, INC., a Delaware corporation, and its successor or assigns ("Premier")
and _____________________________, a Utah ________________________ (the
"Orthodontic Entity").
W I T N E S S E T H:
WHEREAS, the Orthodontic Entity owns and operates an
orthodontic practice with offices located in the facilities identified in
Exhibit 1.2 (the "Center(s)") and furnishes orthodontic and other dental care
to the general public through the services of the orthodontist(s) and
dentist(s) affiliated with the Orthodontic Entity to provide patient care at
the Center(s) (the "Orthodontist(s)"); and
WHEREAS, Premier is a company which has been formed to provide
business and consulting services to orthodontists; and
WHEREAS, the Orthodontic Entity and Premier mutually desire to
enter into this Consulting and Business Services Agreement.
NOW THEREFORE, in consideration of Ten Dollars ($10.00), the
mutual covenants and agreements herein contained, and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
I. RESPONSIBILITIES OF PREMIER
1.1 General. Premier shall furnish the Orthodontic
Entity the business and consulting services described in this Agreement,
subject to the requirements of the Utah law relating to, without limitations,
the control by dentists over the practice of dentistry.
1.2 Facilities and Equipment. Premier will consult with
and advise the Orthodontic Entity on its equipment and office needs and the
efficient configuration of its office space and will arrange for all equipment
and furnishings determined by the Orthodontic Entity to be necessary for the
operation of the Center, as specified on Exhibit 1.2 (together with any future
asset purchases in accordance herewith, the "Assets"). The Orthodontic Entity
shall have complete custody and control over the Assets provided to the
Orthodontic Entity by Premier, including, without limitation, the right to make
decisions, after consultation with Premier, with respect to the repair,
replacement, modification and upkeep of such Assets. Unless the Orthodontic
Entity chooses to directly purchase furnishings, equipment and related assets
in the future, Premier shall purchase such assets
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and lease such assets to the Orthodontic Entity under a capital leasing
arrangement with such terms as mutually agreed to by the Orthodontic Entity and
Premier. If the Orthodontic Entity chooses to purchase such assets, then it
shall depreciate such assets in accordance with generally accepted accounting
principles ("GAAP").
1.3 Personnel and Payroll. Premier will consult with the
Orthodontic Entity on its staffing needs. Premier will employ the staff
determined by the Orthodontic Entity to be necessary for the Center's
operations, as specified on Exhibit 1.3, except for the Orthodontists and
orthodontic, hygienist and dental assistant staff, who will be employed by the
Orthodontic Entity. At the election of the Orthodontic Entity, Premier will
additionally assist in staff scheduling, administer the Center's payroll and
provide payroll accounting services. The parties expressly agree that the
Orthodontic Entity will have discretion and control over all personnel and
staffing matters in respect to the Center's staff.
1.4 Business Systems, Procedures and Forms. Premier will
advise the Orthodontic Entity on and assist in the implementation and operation
of business systems and procedures. Premier will provide training to the
Center's staff in the use of such systems and procedures. Premier will
additionally provide the Orthodontic Entity clinical forms developed in
consultation with the Orthodontic Entity and will provide training to the
Center's staff in the use of such forms. The Orthodontic Entity expressly
acknowledges and agrees that it shall have no property rights in the foregoing
systems, procedures or clinical forms, and further agrees that such systems,
procedures and form shall be deemed to constitute Confidential Information
within the meaning of Section 2.8 hereof and shall be subject to the
restrictions on the use, appropriation and reproduction of such Confidential
Information provided for in Section 2.8. The parties agree that the
Orthodontic Entity's use of any such systems, procedures and forms shall be at
the Orthodontic Entity's sole discretion and, notwithstanding its use of any
such systems, procedures, or forms, the Orthodontic Entity shall retain control
over the management of all aspects of the Center's operations, including,
without limitation, patient scheduling.
1.5 Purchasing and Inventory Control. Premier in
consultation with the Orthodontic Entity, will provide the Orthodontic Entity
purchasing services for inventory and supplies and will be responsible for
maintaining the Center's inventory. The price charged to the Center for such
inventory and supplies shall be the same as the price paid by Premier,
including any rebates. In any event, the Orthodontic Entity has the right to
purchase its supplies from the supplier of its choice.
1.6 Accounting Services and Financial Reporting. Premier
will advise the Orthodontic Entity with respect to and provide or arrange for
all accounting and bookkeeping services reasonably required for the Center's
normal and routine operations. Premier will additionally advise the
Orthodontic Entity on and assist in implementing information systems designed
in consultation with the Orthodontic Entity to generate financial and
operational data concerning the Center. Premier will prepare and submit to the
Orthodontic Entity monthly operating data and quarterly financial reports with
respect to the Center's operations. Premier will analyze such data on an
ongoing basis to advise the Center on improving productivity.
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1.7 Legal Services. Premier shall arrange for all legal
services reasonably required by the Center, excluding the costs of malpractice
litigation which shall be the sole responsibility of the Orthodontist. Premier
shall use reasonable efforts to obtain under its blanket policies for the
Orthodontist as a Center Expense malpractice insurance that meets the coverage
requirements set forth in Section 4.1 hereof.
1.8 Marketing. Premier will advise the Orthodontic
Entity in designing and assist in executing a marketing plan to promote the
Center's professional services. In connection with the development of the
marketing plan, Premier will advise the Orthodontic Entity on establishing an
installment plan for patient payments, and, in the event the Orthodontic Entity
elects to offer such a plan, will assist in implementing and administering the
plan. The Orthodontic Entity shall exercise sole discretion and control over
all policies and decisions relating to marketing, pricing, credits, refunds,
warranties and advertising. All marketing activities hereunder will be
conducted in compliance with applicable laws and regulations of the State of
Utah governing the dental profession.
1.9 Planning. Premier will assess the business potential
of establishing orthodontic offices in new locations, and, in the event the
Orthodontic Entity elects to relocate or open an office in a new location,
subject to mutual agreement, Premier will provide assistance to the Orthodontic
Entity as appropriate.
1.10 Billing and Collections. Premier shall provide
billing and collection services for all professional services rendered at the
Center, all such billing and collections to be done in the name of and subject
to the control of the Orthodontic Entity.
1.11 Payment Services. On a continuous basis, the
accounts receivable of the Orthodontic Entity shall be deposited with Premier
for the Orthodontic Entity's account, and Premier shall use the funds collected
from such accounts receivable to pay the Consulting Fee (as hereinafter
defined) and to pay, on the Orthodontic Entity's behalf as a Center Expense (as
hereinafter defined) and otherwise, all expenses of the Orthodontic Entity duly
authorized for payment by the Orthodontic Entity and shall return to the
Orthodontic Entity any funds remaining after payment in full of such items.
1.12 Disbursement of Funds. (a) All monies collected by
Premier from the Orthodontic Entity's accounts receivable pursuant to Section
1.10 above shall be deposited into an account (the "Orthodontic Entity
Account") with a bank whose deposits are insured with the Federal Deposit
Insurance Corporation. The Orthodontic Entity Account shall contain the name
of the Orthodontic Entity, but Premier shall make all disbursements therefrom.
Premier shall account for all monies so disbursed from the Orthodontic Entity
Account. From the funds collected and deposited each month by Premier in the
Orthodontic Entity Account, Premier shall make the following disbursements,
among others, promptly when payable.
(i) Compensation payable to all employees of the
Orthodontic Entity, and all taxes and assessments payable to
local, state and Federal governments in connection with the
employment of such personnel; and
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(ii) All other sums otherwise due and payable by
the Orthodontic Entity as Center Expenses or otherwise,
including, without limitation, the Consulting Fee.
(b) In the event the funds in the Orthodontic Entity
Account will, at any time, be insufficient to cover current expenses, Premier
shall notify the Orthodontic Entity and Premier shall advance to the
Orthodontic Entity the necessary funds to pay current expenses for the benefit
of the Orthodontic Entity, which advances will be deemed to be loans to the
Orthodontic Entity to be repaid upon such terms as agreed to by the Orthodontic
Entity and Premier, which indebtedness shall be deemed a Center Expense for
purposes of Article III hereof; provided, however, that in any event the
outstanding principal amount of such indebtedness shall bear interest at an
annual rate adjusted on the first calendar day of each month to reflect that
certain rate from time to time published by the Wall Street Journal as the
prime rate, as of the last business day of the immediately preceding month for
which such prime rate was published (the "Prime Rate"), plus one percent (1%).
1.13 Records. Premier shall organize and develop systems
in consultation with the Orthodontic Entity with respect to all files and
records relating to the business operations of the Center, including, but not
limited to, accounting, billing and collection records. The parties expressly
acknowledge and agree that patient records shall at all times be and remain the
property and under the control of the Orthodontist and shall be located at the
Orthodontic Entity's facilities so that they are readily accessible for patient
care. The management of all files and records shall comply with applicable
state and federal statutes. Premier shall use its reasonable efforts to
preserve the confidentiality of patient medical 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.
II. OBLIGATIONS OF THE ORTHODONTIC ENTITY
2.1 General. The Orthodontic Entity will be responsible
for the management of the Center, in accordance with the requirements of Utah
law.
2.2 Employment of Orthodontists and Rendering of Patient
Care. The Orthodontic Entity will be responsible for the employment of all
Orthodontist(s), hygienists and dental assistants affiliated with the
Orthodontic Entity and supervision of all care and services rendered to
patients.
2.3 Professional Services. The Orthodontic Entity shall
use and occupy the offices and facilities designated on Exhibit 1.2 exclusively
for the practice of orthodontic and general dentistry services and shall comply
with all applicable local rules, ordinances and all standards of dental and
orthodontic care. It is expressly acknowledged by the parties that the
orthodontic practice conducted at the Center shall be conducted solely by the
Orthodontists associated with the Orthodontic Entity except those additional
orthodontists employed by the general dentists' offices from which the
Orthodontic Entity rents only space, and no other
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orthodontist shall be permitted to use or occupy the Center or Centers, except
as provided in Exhibit 2.3. The Orthodontic Entity shall provide professional
services to patients hereunder in compliance at all times with ethical
standards and laws and regulations applying to the dental profession. The
Orthodontic Entity shall ensure that each Orthodontist providing orthodontic or
dental services to patients is licensed by the state in which the Center is
located. In the event that any disciplinary, medical malpractice or other
actions are initiated against any such Orthodontist, the Orthodontic Entity
shall immediately inform Premier of such action and the underlying facts and
circumstances. The Orthodontic Entity agrees to cooperate with and participate
in the quality assurance/utilization review programs established by Premier or
mandated by accreditation and/or licensure standards applicable to the practice
of orthodontics and dentistry. Deficiencies discovered in the performance of
any personnel or in the quality of professional services shall be reported
immediately to Premier, and appropriate steps shall be taken by the Orthodontic
Entity at once to remedy such deficiencies. Any termination of an Orthodontist
other than for cause (as such term is defined in the Employment Agreement
between the Orthodontic Entity and the Orthodontist) must be approved by a
majority of the Board of Advisors of Premier.
2.4 Records. The Orthodontic Entity will keep or cause
to be kept accurate, complete and timely medical and other records of all
patients. Such records shall be sufficient to enable Premier, on behalf of the
Orthodontic Entity, to obtain payment for the services and facilities and to
facilitate the delivery of quality patient care by the Orthodontist.
2.5 Professional Expenses. Payments expended each fiscal
year by the Orthodontic Entity on behalf of the Orthodontist and other
orthodontists or dentists delivering patient care at the Center(s) for
continuing education, seminars, professional license fees and dues,
professional memberships, expenses related to a company automobile for the
Orthodontist, and all other expenses of the Orthodontist and other
orthodontists and dentists delivering patient care at the Center(s) that do not
directly benefit the Orthodontic Entity (as reasonably determined by Premier),
up to the amount of three percent (3%) of the Orthodontic Entity's Adjusted
Gross Revenue, shall be considered a Center Expense. To the extent that such
expenses exceed three percent (3%) of the Orthodontic Entity's Adjusted Gross
Revenue for such year, the Center Expenses shall be reduced by such excess
amount solely for the purpose of calculating the Consulting Fee; provided,
however, that the Orthodontic Entity shall pay such excess expenses.
Notwithstanding the foregoing, the Orthodontic Entity shall be solely
responsible for the cost of professional licensure fees and board certification
fees, membership in professional associations and continuing professional
education incurred by the Orthodontist. The Orthodontic Entity shall ensure
that the Orthodontist participates in such continuing education as is necessary
for such Orthodontist to remain current.
2.6 Professional Insurance Eligibility. The Orthodontic
Entity shall cooperate in the obtaining and retaining of professional liability
insurance by assuring that each of its Orthodontists is insurable and
participating in an on-going risk management program.
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2.7 Employment Agreement. The parties recognize that the
services to be provided by Premier are feasible only if the Orthodontic Entity
operates an active orthodontic practice to which it and each orthodontist
associated with the Orthodontic Entity devote their full time and attention.
Simultaneously with the execution of this Agreement, each Orthodontist who is
or becomes an equity owner of the Orthodontic Entity or delivers patient care
at the Center(s) on average more than ten (10) days each month, whether on the
date hereof or at any time during the term of this Agreement, shall enter into
an employment agreement with the Orthodontic Entity in substantially the form
of that certain Employment Agreement dated of even date herewith by and between
the Orthodontic Entity and the principal Orthodontist(s) of the Orthodontic
Entity.
2.8 Confidentiality. The Orthodontic Entity agrees and
acknowledges that all materials provided by Premier or a Premier Affiliate (as
hereinafter defined) to the Orthodontic Entity, including all trade secrets,
constitute "Confidential Information" and are disclosed in confidence and with
the understanding that it constitutes valuable business information developed
by Premier at great expenditures of time, effort, and money. Trade secrets are
property rights protected by law and, for purposes of this letter, shall have
the meaning provided under applicable Utah law. The Orthodontic Entity further
agrees that it shall not, directly or indirectly, without the express prior
written consent of Premier, use or disclose such Confidential information for
any purpose other than in connection with the services to be rendered
hereunder. The Orthodontic Entity further agrees: (i) to keep strictly
confidential and hold in trust all Confidential Information and not disclose
such Confidential Information to any third party without the express prior
written consent of Premier; and (ii) to impose this obligation of
confidentiality on its affiliates, co-owners, associates, partners, employees,
shareholders, members and independent contractors. The Orthodontic Entity
acknowledges that the disclosure of Confidential Information to it by Premier
is done in reliance upon its representations and covenants in this Agreement.
Upon expiration or termination of this Agreement by either party for any reason
whatsoever, the Orthodontic Entity shall immediately return and shall cause its
affiliates, co-owners, associates, partners, employees, shareholders, members
and independent contractors to immediately return to Premier all Confidential
Information (only to the extent such Confidential Information does not include
patient information), and the Orthodontic Entity will not, and will cause its
affiliates, co-owners, associates, partners, employees, shareholders, members
and independent contractors not to, thereafter use, appropriate, or reproduce
such Confidential Information. The Orthodontic Entity further expressly
acknowledges and agrees that any such use, appropriation, or reproduction of
any such Confidential Information by any of the foregoing after the expiration
or termination of this Agreement will result in irreparable injury to Premier,
that the remedy at law for the foregoing would be inadequate, and that in the
event of any such use, appropriation, or reproduction of any such Confidential
Information after the termination or expiration of this Agreement, Premier, in
addition to any other remedies which may be available to it, shall be entitled
to injunctive or other equitable relief. As used in this Agreement, the term
"Premier Affiliate" shall mean (i) each corporation or other business entity
directly or indirectly controlling, controlled by, or under common control with
Premier and (ii) each orthodontic or dental practice to which Premier provides
management or consulting services, the employees and principals of such
practices, and each corporation or other business entity
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directly or indirectly controlling, controlled by, or under common control with
each such practice or the principals thereof.
2.9 Covenant Not to Compete. During the term of this
Agreement, the Orthodontic Entity, and any of its members or shareholders,
agrees not to establish, develop or open any offices for the provision of
orthodontic services within a ten (10) mile radius of any of the Centers
covered by this Agreement (the "Area of Dominant Influence") without the
express written consent of Premier. For a period of two (2) years following
the termination of this Agreement, the Orthodontic Entity and any of its
members or shareholders shall be prohibited within the Area of Dominant
Influence (i) from advertising in print (except for yellow page advertising and
announcements for the opening of a practice) or electronic media of any kind,
(ii) from soliciting in any manner patients, orthodontists or staff associated
with the Centers, and (iii) from soliciting any referrals from any dentist who
referred one or more patients to the Center within the three (3) years prior to
the date of such termination. In the event the Orthodontic Entity terminates
this Agreement pursuant to Section 5.2(b), then this Section 2.9 shall be void
and of no further effect; provided, however, the remainder of this Agreement
shall remain in full force and effect.
III. FINANCIAL ARRANGEMENTS
3.1 Consulting Fees. Premier shall receive a Consulting
Fee, subject to the provisions of Section 3.3 below, of __________________
__________________________ dollars ($______________) per year payable monthly.
On the first anniversary of the date hereof and on each anniversary thereafter
during the term hereof, the Consulting Fee shall be increased by three percent
(3%) per year.
3.2 Center Expenses. Premier shall be responsible for
the payment of all Center Expenses, as defined below, during the term of this
Agreement and the Orthodontic Entity shall immediately reimburse Premier for
such payments from funds held in the Orthodontic Entity Account.
3.3 Definitions. For the purposes of this Agreement, the
term "Center Expenses" shall mean all operating and non-operating expenses
incurred in the operation of the Center, including, without limitation:
(a) Salaries, benefits, payroll taxes, workers
compensation, health insurance, 401(k) and other benefit
plans, and other direct costs of all employees of Premier at
the Center, including dental assistants (but excluding all
Orthodontists); provided that only expenses for health
insurance, 401(k) and other benefit plans approved by the
Orthodontic Entity shall be included;
(b) Direct costs of all employees or consultants
of Premier who, upon mutual agreement of Premier and the
Orthodontic Entity, provide services at or, if consented to by
the Orthodontic Entity, in connection with the Center required
for improved clinic performance, such as work
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management, materials management, purchasing, charge and
coding analysis, and business office consultation;
(c) Obligations of Premier under leases or
subleases entered into in connection with the operation of the
Center;
(d) Personal property and intangible taxes
assessed against Premier's assets used in connection with the
operation of the Center, commencing on the date of this
Agreement;
(e) Malpractice insurance expenses and
Orthodontist recruitment expenses as agreed to by Premier and
the Orthodontic Entity;
(f) Property, casualty and liability insurance
for the Center and its operations;
(g) In the event an opportunity arises for
additional Orthodontists in the Area of Dominant Influence to
become employed by or merge with the Orthodontic Entity,
actual out-of-pocket expenses of Premier personnel working on
a specified merger, whether or not such merger is completed if
such merger is approved or requested by the Orthodontic
Entity;
(h) Amortization of intangible asset value as a
result of each such acquisition referred to in subsection (g)
above;
(i) Depreciation of all assets used by the
Orthodontic Entity in the operation of the Center;
(j) Repayment of any interest on funds loaned to
the Orthodontic Entity by Premier in connection with the
operation of the Center, at an interest rate not in excess of
the Prime Rate plus one percent (1%);
(k) Advertising and other marketing expenses
attributable to the promotion of the Center and/or its
Orthodontist(s); and
(l) Other expenses incurred by Premier with the
consent of the Orthodontic Entity in carrying out its
obligations under this Agreement for the benefit of the Center
or the Orthodontic Entity; provided, however, that such
expenses shall not include Premier's home office overhead
expenses.
"Center Expenses" shall not include any federal or state
income taxes.
3.4 Additional Facilities. In the event the parties
agree to add an additional facility in which the Orthodontic Entity will
provide services, the Consulting Fee payable to Premier shall be determined by
dividing the Consulting Fee by the original number of facilities and adding an
amount equal to the pro rata share of such fee for one facility to the
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Consulting Fee each year, which additional amount shall be prorated during the
year the additional facility is opened. As part of its strategic growth
strategy, Premier plans to provide capital support or arrange favorable funding
for orthodontic practice expansion and development. Any expenditures on
practice growth, acquisition or development shall be subject to approval by
Premier's Board of Directors.
IV. INSURANCE AND INDEMNITY
4.1 Insurance to be Maintained by the Orthodontic Entity.
Throughout the term of this Agreement, the Orthodontic Entity shall maintain
comprehensive professional liability insurance with limits of not less than
$500,000 per claim and with aggregate policy limits of not less than $1,000,000
per Orthodontist providing services at the Center and a separate limit for the
Orthodontic Entity or such other amounts required by the applicable state laws,
regulations, rules or directives. The Orthodontic Entity shall be responsible
for all such liabilities in excess of the limits of such policies. Premier
agrees to negotiate for and cause premiums to be paid with respect to such
insurance. Premiums and deductibles with respect to such policies shall be a
Center Expense.
4.2 Insurance to be Maintained by Premier. Throughout
the term of this Agreement, Premier will use reasonable efforts to provide and
maintain, as a Center Expense, comprehensive general liability and property
insurance covering the Center premises and operations.
4.3 Tail Insurance Coverage. The Orthodontic Entity will
cause each individual Orthodontist providing services at the Center to enter
into an agreement with the Orthodontic Entity that upon termination of such
Orthodontic Entity's relationship with the Orthodontist, for any reason, tail
insurance coverage for a period of three (3) years will be purchased by each
Orthodontist. Such provisions may be contained in employment agreements,
restrictive covenant agreements or other agreements entered into by the
Orthodontic Entity and the individual Orthodontists, and the Orthodontic Entity
hereby covenants with Premier to enforce such provisions relating to the tail
insurance coverage or to provide such coverage at the expense of the
Orthodontic Entity.
4.4 Additional Insureds. The Orthodontic Entity shall
have Premier named as an additional insured on the Orthodontic Entity's
professional liability insurance programs.
4.5 Indemnification. The Orthodontic Entity shall
indemnify, hold harmless and defend Premier, its officers, directors,
shareholders, members and employees, from and against any and all liabilities,
losses, damages, claims, 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 medical, dental or orthodontic services or the performance of any
intentional acts, negligent acts or omissions by the Orthodontic Entity and/or
its affiliates, shareholders, members, agents, employees and/or subcontractors
(other than Premier) prior to and after the date of this Agreement and
throughout the term hereof. Premier shall indemnify, hold
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harmless and defend the Orthodontic Entity, and its directors, shareholders,
members and employees, from and against any and all liabilities, losses,
damages, claims, 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 Premier, a Premier Affiliate and/or their
members, shareholders, agents, employees and/or subcontractors (other than the
Orthodontic Entity) during the term of this Agreement.
V. TERM AND TERMINATION
5.1 Term of Agreement. This Agreement shall commence on
the date the Securities and Exchange Commission declares effective Premier's
registration Statement on Form S-1 for the sale of Premier's common stock or
membership interests in an initial public offering (the "IPO") and shall expire
on the twentieth (20th) anniversary thereof unless earlier terminated pursuant
to the terms hereof. In the event that Premier does not complete the IPO on or
before October 15, 1997, this Agreement shall be null and void and of no
further effect between the parties hereto.
5.2 Termination by the Orthodontic Entity. The
Orthodontic Entity may terminate this Agreement as follows:
(a) In the event of the filing of a petition in voluntary
bankruptcy or an assignment for the benefit of creditors by Premier, or upon
other action taken or suffered, voluntarily or involuntarily, under any federal
or state law for the benefit of debtors by Premier, except for the filing of a
petition in involuntary bankruptcy against Premier which is dismissed within
thirty (30) days thereafter, the Orthodontic Entity may give written notice of
the immediate termination of this Agreement.
(b) In the event Premier shall materially default in the
performance of any duty or obligation imposed upon it by this Agreement and
such default shall continue for a period of ninety (90) days after written
notice thereof has been given to Premier by the Orthodontic Entity (which
notice shall contain specific details of the reason for such default), the
Orthodontic Entity may terminate this Agreement; provided, however, if the
nature of such default is such that cure is not capable within said 90-day
period, then Premier shall have such additional time as may be required to
effect and complete such cure provided that Premier shall commence such cure
within the aforesaid 90-day period and shall prosecute such cure to completion
with reasonable diligence.
(c) In the event that the IPO has not been completed on
or before October 15, 1997, the Orthodontic Entity may terminate this
Agreement.
(d) In the event that a "Change in Control" (as herein
defined) occurs with respect to Premier, the Orthodontic Entity may, within 10
days after the expiration of the Approval Period (as herein defined), terminate
this Agreement by providing five (5) days prior written notice to Premier. For
purposes of this Section, "Change in Control" means an acquisition or
aggregation of any voting securities of Premier by a "person" (as defined in
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Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) immediately
after which such person is or becomes the beneficial owner, directly or
indirectly, of 15% or more of the combined voting power of Premier's then
outstanding voting securities; provided, however, that no acquisition or
aggregation of Premier's voting securities shall be deemed a "Change in
Control" if such acquisition or aggregation (i) has the prior approval of
Premier's board of directors, or (ii) is approved by Premier's board of
directors within 60 days after Premier receives notice of such acquisition or
aggregation (the "Approval Period").
5.3 Termination by Premier. Premier may terminate this
Agreement as follows:
(a) In the event of the filing of a petition in voluntary
bankruptcy or an assignment for the benefit of creditors by the Orthodontic
Entity, or upon other action taken or suffered, voluntarily or involuntarily,
under any federal or state law for the benefit of debtors by the Orthodontic
Entity, except for the filing of an involuntary petition in bankruptcy against
the Orthodontic Entity which is dismissed within thirty (30) days thereafter,
Premier may give written notice of the immediate termination of this Agreement.
(b) In the event the Orthodontic Entity shall materially
default in the performance of any duty or obligation imposed upon it by this
Agreement, and such default shall continue for a period of ninety (90) days
after written notice thereof has been given to the Orthodontic Entity by
Premier, Premier may terminate this Agreement.
(c) In the event that the IPO has not been completed on
or before October 15, 1997, Premier may terminate this Agreement.
5.4 Actions after Termination. Upon termination of this
Agreement by either party for any reason other than a default by the
Orthodontic Entity or upon expiration of this Agreement, the Orthodontic Entity
may, and upon termination of this Agreement by Premier due to the reasons set
forth in Section 5.3(b) hereof, the Orthodontic Entity shall:
(a) Purchase all improvements, additions or leasehold
improvements which have been made by Premier and which relate solely to the
performance of its obligations under this Agreement at adjusted book value;
(b) Assume all debt and all contracts, payables and
leases which are obligations of Premier and which relate solely to the
performance of its obligations under this Agreement or the properties subleased
by Premier; and
(c) Purchase from Premier at book value all of the
equipment of the Center, including all replacements and additions thereto made
by Premier pursuant to the performance of its obligations under this Agreement,
and all other assets, including inventory and supplies, tangibles and
intangibles (including but not limited to accounts receivable), set forth on
the balance sheet prepared for the month most recently ended prior to the date
of such termination in accordance with GAAP to reflect operations of the
Center, depreciation, amortization and other adjustments of assets shown on
such balance sheet.
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5.5 Closing of Repurchase by the Orthodontic Entity and
Effective Date of Termination. Unless another form of payment is agreed to by
USOC at such time, the Orthodontic Entity shall pay cash to USOC for (i) the
assets repurchased pursuant to Section 5.4 and (ii) an amount equal to the
Consulting Fee that would have been payable hereunder for services rendered to
patients by the Orthodontic Entity prior to the termination of this Agreement;
provided, however, that such cash Consulting Fee payment shall only be made as
payment for such services as are actually collected by the Orthodontic Entity.
The amount of the purchase price shall be reduced by the amount of debt and
liabilities of Premier assumed by the Orthodontic Entity and shall also be
reduced by any payment Premier has failed to make under this Agreement. The
Orthodontic Entity and any Orthodontist associated with the Orthodontic Entity
shall execute such documents as may be required to assume the liabilities set
forth in Section 5.4(c) and shall use its best efforts to remove Premier from
any liability with respect to such repurchased assets and with respect to any
property leased or subleased by Premier. The closing date for the repurchase
shall be determined by the Orthodontic Entity, but shall in no event occur
later than 180 days from the date of the notice of termination. The
termination of this Agreement shall become effective upon the closing of the
sale of the assets and the Orthodontic Entity and Premier shall be released
from the restrictive covenants provided for in Section 2.9 on the closing date.
From and after any termination, each party shall provide the other party with
reasonable access to books and records then owned by it to permit such
requesting party to satisfy reporting and contractual obligations which may be
required of it.
5.6 Patient Records. Upon termination of this Agreement,
the Orthodontic Entity shall retain all patient medical records maintained by
the Orthodontic Entity or Premier in the name of the Orthodontic Entity.
During the term of this Agreement, and thereafter, the Orthodontic Entity or
its designee shall have reasonable access during normal business hours to the
Orthodontic Entity's and Premier's records, including, but not limited to,
records of collections, expenses and disbursements as kept by Premier in
performing Premier's obligations under this Agreement, and the Orthodontic
Entity may copy any or all such records.
VI. INDEPENDENT CONTRACTOR
6.1 Orthodontic Entity's Control Over the Orthodontic
Practice. Notwithstanding the authority granted to Premier herein, Premier and
the Orthodontic Entity agree that the affiliated Orthodontist, personally or
through any of his professional employees or agents, shall have complete
control and supervision over the business aspects of the Orthodontic Entity's
practice, as well as the provision of all professional services, including,
without limitation, the selection of a course of treatment for a patient, the
procedures or materials to be used as a part of such course of treatment, and
the manner in which such course of treatment is carried out by the
Orthodontist(s). The Orthodontist(s) shall have sole authority to direct the
business, professional, and ethical aspects of the orthodontic practice.
Premier will have no authority, directly or indirectly, to perform, and will
not perform, any orthodontic function, or to influence or otherwise interfere
with the exercise of the Orthodontist(s) professional judgment. Premier may,
however, advise the Orthodontic Entity
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as to the relationship between its performance of orthodontic functions and the
overall administrative and business functions of its practice.
6.2 Independent Relationship. The Orthodontic Entity and
Premier intend to act and perform as independent contractors, and the
provisions hereof are not intended to create any partnership, joint venture,
agency or employment relationship between the parties. The Orthodontic Entity
will not have any claim under this Agreement, or otherwise, against Premier for
vacation pay, sick leave, unemployment insurance, worker's compensation,
disability benefits or employee benefits of any kind.
6.3 Other Professionals. No provision of this Agreement
is intended to limit Premier's right, authority, or ability under applicable
law to contract with other dentists or physicians, or to employ, contract with,
or enter into any partnership or joint venture with any healthcare
professional, provided that the exercise of such right, authority or ability
does not contravene the terms of this Agreement.
6.4 Patient Care. Nothing in this Agreement is intended
to interfere, or shall be construed as interfering, in any way with the
Orthodontist(s)'s ability to independently exercise professional and ethical
judgment in the performance of his patient care responsibilities.
VII. GENERAL PROVISIONS
7.1 Assignment. This Agreement shall be assignable by
Premier to (i) any person, firm or corporation that controls or is under common
control with Premier, (ii) US Orthodontic Care, Inc. ("USOC") or any person,
firm or corporation that controls or is under common control with USOC, or
(iii) any entity that results from a merger or other combination between
Premier and USOC ("Newco") and any person, firm or corporation that controls or
is under common control with Newco. Except as set forth above, neither Premier
nor the Orthodontic Entity shall have the right to assign their respective
rights and obligations hereunder without the written consent of the other
party, which consent shall not be unreasonably withheld. Subject to this
provision, this Agreement shall be binding upon the parties hereto, and their
successors and assigns.
7.2 Whole Agreement; Modification. There are no other
agreements or understandings, written or oral, between the parties regarding
this Agreement, the Exhibits and the Schedules, other than as set forth herein.
This Agreement shall not be modified or amended except by a written document
executed by both parties to this Agreement, and such written modification(s)
shall be attached hereto.
7.3 Notices. All notices required or permitted by this
Agreement shall be in writing and shall be addressed as follows:
To Premier: Premier Orthodontic Group, Inc.
00000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
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Attn: Xx. Xxx Xxxxxxxx, Chief Executive Officer
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
With a copy to: Xxxxxx Xxxxxxx Xxxxx & Scarborough, L.L.P.
First Union Plaza, Suite 1400
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Quir#s, Esquire
To the ____________________________________
Orthodontic Entity:
or to such other address as either party shall notify the other.
7.4 Waiver of Provisions. Any waiver of any terms and
conditions hereof must be in writing, and signed by the parties hereto. The
waiver of any of the terms and conditions of this Agreement shall not be
construed as a waiver of any other terms and conditions hereof.
7.5 Governing Law. The validity, interpretation and
performance of this Agreement shall be governed by and construed in accordance
with the laws of the State of California. The parties acknowledge that Premier
is not authorized or qualified to engage in any activity which may be construed
or deemed to constitute the practice of dentistry or orthodontics. To the
extent any act or service required of Premier in this Agreement should be
construed or deemed, by any governmental authority, agency or court to
constitute the practice of dentistry or orthodontics, the performance of said
act or service by Premier shall be deemed waived and forever unenforceable and
the provision of Section 7.12 shall be applicable.
7.6 Events Excusing Performance. Neither party shall be
liable to the other party for failure to perform any of the services required
herein in the event of strikes, lock-outs, calamities, acts of God,
unavailability of supplies or other events over which that party has no control
for so long as such events continue, and for a reasonable period of time
thereafter.
7.7 Compliance with Applicable Laws. Both parties shall
comply with all applicable federal, state and local laws, regulations and
restrictions in the conduct of their obligations under this Agreement.
7.8 Severability. In the event that any provision of
this Agreement or the application thereof to any of the parties hereto or any
circumstance in any jurisdiction governing this Agreement shall, to any extent,
be invalid or unenforceable under any applicable statute, regulation or rule of
law, then such provision shall be deemed inoperative
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to the extent that it may conflict herewith and shall be deemed modified to
conform to such statute, regulation or rule of law, and the remainder of this
Agreement and the application of any such invalid or unenforceable provision to
parties, jurisdictions or circumstances other than to whom or to which it is
held invalid or unenforceable shall not be affected thereby nor shall the same
affect the validity or enforceability of any other provision of this Agreement.
7.9 Additional Documents. Each of the parties hereto
agrees to execute any document or documents that may be requested from time to
time by the other party to implement or complete such party's obligations
pursuant to this Agreement.
7.10 Attorneys' Fees. If legal action is commenced by
either party to enforce or defend its rights under this Agreement, the
prevailing party in such action shall be entitled to recover its costs and
reasonable attorneys' fees in addition to any other relief granted.
7.11 Confidentiality. Neither party hereto shall
disseminate or release to any third party any information regarding any
provision of this Agreement, or any financial information regarding the other
(past, present or future) that was obtained by the other in the course of the
negotiation of this Agreement or in the course of the performance of this
Agreement, without the other party's written approval; provided, however, the
foregoing shall not apply to information which is required to be disclosed by
law, including federal or state securities laws, or pursuant to court order.
7.12 Contract Modifications for Prospective Legal Events.
In the event any state or federal laws or regulations, now existing or enacted
or promulgated after the effective date of this Agreement, are interpreted by
judicial decision, a regulatory agency or legal counsel for both parties in
such a manner as to indicate that the structure of this Agreement may be in
violation of such laws or regulations, the Orthodontic Entity and Premier shall
amend this Agreement as necessary. To the maximum extent possible, any such
amendment shall preserve the underlying economic and financial arrangements
between the Orthodontic Entity and Premier.
7.13 Remedies Cumulative. No remedy set forth in this
Agreement or otherwise conferred upon or reserved to any party shall be
considered exclusive of any other remedy available to any party, but the same
shall be distinct, separate and cumulative and may be exercised from time to
time as often as occasion may arise or as may be deemed expedient.
7.14 Language Construction. The language in all parts of
this Agreement shall be construed, in all cases, according to the parties'
intent and the parties hereto acknowledge that each party and its counsel have
reviewed and revised this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement.
7.15 No Obligation to Third Parties. None of the
obligations and duties of Premier or the Orthodontic Entity under this
Agreement shall in any way or in any manner
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be deemed to create any obligation of Premier or of the Orthodontic Entity to,
or any rights in, any person or entity not a party to this Agreement.
7.16 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same Agreement.
7.17 Singular and Plural; Gender. Where the context so
requires or permits, the use of the singular form includes the plural, and the
use of the plural form includes the singular, and the use of any gender
includes any and all genders.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
ORTHODONTIC ENTITY:
------------------------------------------
By:
Name
Title:
PREMIER:
PREMIER ORTHODONTIC GROUP, INC.
By:
Name:
Title:
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SCHEDULE 10.5
OrthAlliance has succeeded to the rights to agreements substantially
identical to Exhibit 10.5 as follows:
1. Consulting and Business Services Agreement with Xxxxxxx X. Xxxxxxx, D.D.S.,
M.S., P.C. A material detail in which this agreement differs from Exhibit
10.5 is that the Consulting Fee paid pursuant to Section 3.1 is $340,000.
2. Consulting and Business Services Agreement with Xxxxxxxxx X. Xxxx, D.D.S.,
M.S., P.C. A material detail in which this agreement differs from Exhibit
10.5 is that the Consulting Fee paid pursuant to Section 3.1 is $71,999.
3. Consulting and Business Services Agreement with Xxxxx X. Xxxxxx, D.D.S.,
M.S., Ltd. A material detail in which this agreement differs from Exhibit
10.5 is that the Consulting Fee paid pursuant to Section 3.1 is $268,473.
