OMEGA ORTHODONTICS, INC.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
02/28/99
▇▇▇▇ ▇. ▇▇▇▇, D.D.S.
▇▇▇▇ ▇. ▇▇▇▇ D.D.S. Inc.
----- --------------
-------------------
Re: Letter of Intent
Dear ▇▇. ▇▇▇▇:
As we have discussed, Omega Orthodontics, Inc., a Delaware corporation ("OMEGA")
is interested in entering into an arrangement with you under which it would
provide to you management services for your orthodontic practices conducted
currently at __________________________ for a period of two years pursuant to a
Management Services Agreement. At the expiration of the Management Services
Agreement, you will have the option to: (a) sell the non-professional assets of
your practice to Omega as set forth in section 5; or (b) renew the Management
Services Agreement for a period to be mutually agreed.
1. Form of Practice. As you have indicated, you are licensed to practice
dentistry in the State of Texas and are currently doing business through a
___________ professional corporation known as ▇▇▇▇ ▇. ▇▇▇▇ D.D.S., Inc. (the
"PC").
2. Management Services. Upon execution of this letter of intent, The parties
agree that Omega shall provide management services to your PC on the terms and
conditions specified in the Management Agreement attached hereto as Exhibit 1
and as generally set forth below. Management Services shall be provided by Omega
Orthodontics of Austin, Inc. ("MSO"), a wholly owned subsidiary of OMEGA. Under
the terms of the Management Agreement, Omega will pay all operating expenses of
the practice and will be compensated at a rate equal to ___% of the gross
receipts of the practice.
The terms of the management service agreement will include the following
material terms:
A. Final Authority of the Doctor. Although Omega may advise the doctor
on management of the practice the doctor has all final authority over
all decisions on diagnosis, treatment, fees, selection of materials and
appliances.
B. Work Days and Vacations. The doctor has final authority on selection
of days worked and vacations as long as the schedule respects patient
treatment needs and agrees to work an average of ____days per month and
carry patient loads of ____ patients per day if it is necessitated by
patient load.
C. Staff. Omega will provide screening of all new staff and current
non-professional staff must meet ▇▇▇▇▇'s approval. Doctor will have the
final selection of new staff from those approved by ▇▇▇▇▇ and may order
the termination of any staff not meeting his standards of performance.
D. Collection and Accounting. All funds will be collected by ▇▇▇▇▇ and
deposited in a special bank account under the name of the doctor, and
all funds will be distributed by Omega under power of attorney from the
Doctor.
E. Cash vs Accrual Accounting. Because we are governed by SEC
accounting rules, our accounting for profit and loss is based upon the
accrual method of accounting. However, payments under the management
agreement will be made to both parties based upon the cash collected.
F. Compensation to Omega. Omega will receive for its services __% of
the collected gross income, and will be responsible for paying all
practice expenses including staff salaries and benefits, supplies,
facilities, equipment, maintenance, facility Insurance, management and
marketing costs. During the term of the Management Agreement, Omega
will also receive an additional management fee of $____, per month to
provide to offset start-up costs with respect to the practice. In no
case will the net management fee to Omega be less than $___,000 in any
year of the agreement.
G. Personal responsibilities of Doctor. ▇▇▇▇▇ will not pay for Doctor's
liability insurance, professional dues, continuing education expenses,
automobile, or entertainment for the purpose of practice development
not specifically approved.
▇. ▇▇▇▇ Advances by ▇▇▇▇▇. If in any month the actual cash received is
not sufficient to cover current expenses and the Doctor's draw, the MSO
will advance the necessary funds to make such payments at no interest.
I. Profit Sharing. At the end of each fiscal year, expenses and income
will be reviewed. If less than __% of the gross income of the practice
has been spent on expenses of the practice (other than salary for
professionals) the MSO will payout 50% of the savings to Doctor
"Payout". If more than 60% has been spent 65% of the excess will be
charged to a expense account and recorded as a liability against future
Payouts.
▇. ▇▇▇▇ of the agreement. The term of the agreement between the MSO and
PC will be for 2 years, renewable upon the mutual agreement of the
parties.
K. Reasons for termination. Either side may terminate the agreement for
significant non performance of duties by the other party, provided the
other party has been given notice of the non performance and has had
reasonable time to correct the deficiency. This includes non payment of
the note tendered by Omega as a part of the acquisition of the MSO, as
described below in paragraph 7.
L. Insolvency of Omega. In the event that ▇▇▇▇▇ becomes insolvent or
does not pay the practice expenses in a timely manner, the Doctor will
reassume all control over the bank account and may terminate the
management agreement.
M. Non Competition. Both parties will during the term of the management
agreement not work for or establish a competing orthodontic facility
within 15 miles of the existing facility without the prior written
consent of the other party. Doctor agrees to cause all professional
employees, partner or owners of the PC to be covered by similar
agreements.
4. Use of other facilities. It is understood and agreed that in order optimize
your orthodontics practice, you shall agree to perform your practice at such
locations as Omega may reasoanbly require. In the event the foregoing results in
the utilization of another Doctor's facilities, an appropriate, mutually
acceptable arrangement shall be concluded with the goal of fairly allocating
both cost and income.
5. Option to sell Management Elements. At the expiration of the Management
Services Agreement you shall have the option to have Omega purchase the
management elements of your practice for the following price and conditions:
a. The consideration paid to you for the acquisition of the management
elements of your practice would be _____ in cash, _______ in the common
stock of Omega and _____ in promissory note. Shares of stock of Omega
tendered for the acquisition will be the average daily closing sales
price of the stock for the week ending on the Friday preceding the date
such option is officially exercised.
b. The structure of the transaction would be mutually agreed by the
parties so as to minimize any potential tax exposure by the parties. It
is understood that the purchase of the management elements of your
practice will possibly require the formation of new entities,
professional and otherwise, as well as require the completion and
execution of several agreements including but not limited to a revised
Management Services Agreement, OMEGA's Non Competition Agreement,
OMEGA's Stock or Asset Purchase Agreement with reference to the shares
of the Doctor's Professional Corporation, a stock option agreement with
respect to shares of OMEGA, and a Promissory Note.
6. Contingencies. Promptly following execution of this letter of intent, you
will schedule an in-office visit with a representative of Omega to evaluate the
facility and existing systems and to introduce Omega to the staff of your
practice. The monetary portion of your option which you may have to sell the
management elements of you practice pursuant to _____above, will be contingent
upon a financial audit of the practice prior to the completion of the
transaction which confirms the unaudited data provided by you. If the audit
reveals either that the gross or net income is different than the data provided
by you, appropriate adjustments will be made to the purchase price.
The following will be prepared by the your accountant and presented as part of
the prior to exercising your option:
a. Three years federal tax returns
b. Current years financial statements to closing date
c. List of fixed assets
d. Accounts Receivable Summary
e. Liabilities assumed
f. Notes payable, if applicable
g. Capital Purchases schedule
h. Any special considerations
7. Confidentiality.
a. Confidentiality of Practice Information. ▇▇▇▇▇ hereby agrees to hold
any and all financial and operating information regarding your practice
in strictest confidence and will not divulge such information to third
parties without your express consent.
b. Confidentiality of Omega Information. You will be provided detailed
financial, operating and contractual information of Omega in order to
allow you to evaluate the appropriateness of an affiliation with Omega.
You agree to hold such information in the strictest confidence and will
not divulge it to any third parties without the prior express consent
of Omega. You also agree not to utilize materials which are valuable
trade secrets of Omega, including but not limited to, contracts and
methodology in any business endeavor without the written consent of
Omega.
8. Cooperation. The parties hereto will cooperate with each other in every way
in carrying out the transactions contemplated herein, in obtaining any and all
required approvals and authorizations, and in executing and delivering all
documents, instruments or copies thereof deemed necessary or useful by the other
parties.
9. Costs. Each party hereto shall bear and be responsible for its own costs and
expenses, including legal and accounting fees, incurred in connection with the
transactions contemplated hereunder.
10. Specific Performance: the parties agree that irreparable damage would result
in the event that this Agreements not fully performed. Therefore, the rights and
obligations of the parties hereunder shall be enforceable in a court of equity
by a decree of specific performance, and appropriate injunctive relief may be
applied for and granted in connection therewith. Such remedies are not exclusive
and shall be in addition to any other remedies that either party may have under
this agreement or otherwise.
11. Liability. Notwithstanding anything to the contrary in this Agreement, in no
event shall Omega be liable for any form of indirect, special or consequential
damage, whether such damage arises in contract or tort, irrespective of fault,
negligence or strict liability.
12. Completion. The parties hereto agree to complete the transactions described
herein no later than March 31, 1998, unless extended by agreement of the
parties. By executing this letter of intent, the parties agree to negotiate an
agreement in good faith based upon the principles stated herein, but are not
hereby agreeing to the specific terms of this letter and do not agree to be
bound hereby, other than paragraph 9 hereof.
13. Entire Agreement. This Agreement constitutes the entire agreement between
the Members with respect to the subject matter herein, and is subject to no
other oral or written proposals, agreements, or understandings whatsoever, and
can only be supplemented or amended by a written document subscribed by the
Members.
14. Governing Law. This Agreement shall be construed, performed and enforced in
accordance with the laws of the Commonwealth of Massachusetts applicable to
agreement made and to be performed wholly within such jurisdiction. Each of the
parties hereto irrevocably submits to the exclusive jurisdiction of any U.S.
Federal court located in Massachusetts or Massachusetts state court in any
action or proceeding arising out of or relating to this Agreement.
If you agree to the foregoing terms and conditions, please indicate
your acceptance thereof by countersigning the enclosed copy of this letter and
returning it to me in the enclosed envelope. I look forward to hearing from you.
Sincerely yours,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Agreed and Accepted:
By:_______________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, D.D.S.
