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EXHIBIT 10.1
PREMIER ORTHODONTIC GROUP, INC.
SERVICE AGREEMENT
THIS SERVICE AGREEMENT (this "Agreement"), dated as of
__________________, 1997, by and between PREMIER ORTHODONTIC GROUP, INC., a
Delaware corporation, and its successors and assigns ("Premier"), and
_______________________________, a Florida __________________________ (the
"Orthodontic Entity").
RECITALS:
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 (the
"Orthodontist(s)"); and
WHEREAS, Premier is a company which has been formed to own the assets
of, provide personnel and practice management to, and manage the business
affairs of orthodontic practices;
WHEREAS, Premier's services are designed to improve the efficiency and
profitability of orthodontic practices while enhancing the ability of the
orthodontists in such practices to render quality orthodontic care to their
patients;
WHEREAS, the Orthodontic Entity and Premier mutually desire to enter
into a business relationship under the terms of this Agreement to help the
Orthodontic Entity achieve the above goals.
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
I. RESPONSIBILITIES AND OBLIGATIONS OF PREMIER
1.1. General. Premier shall provide the Orthodontic Entity with
comprehensive practice management, financial and marketing services, and such
facilities, equipment, and support personnel as reasonably required by the
Orthodontic Entity to operate its practice, as determined by Premier in
consultation with the Orthodontist. The Orthodontic Entity hereby appoints
Premier as the sole and exclusive business manager of the Center and agrees that
Premier shall have all power and authority reasonably necessary to manage the
business affairs of the Center and carry out Premier's duties under this
Agreement, subject to the requirements
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of the applicable provisions of Florida law relating to the practice of
dentistry. Notwithstanding anything contained herein to the contrary, the
Orthodontic Entity (or the Orthodontist as appropriate) shall retain control
over all aspects of and decisions directly affecting the course of treatment of
any patients of the Orthodontic Entity.
1.2. Facilities and Equipment. The parties expressly agree that all
office space and facilities provided by Premier to the Orthodontic Entity
hereunder shall be leased or provided to the Orthodontic Entity by Premier at
the rental amount incurred by Premier under a lease or other agreement or
arrangement under which the Orthodontic Entity shall maintain complete care,
custody, and control of the foregoing. Subject to the foregoing, Premier agrees
to provide or arrange for on behalf of the Orthodontic Entity the offices,
facilities, furnishings, equipment, and related services described in Exhibit
1.2 hereto, as such Exhibit may be amended from time to time, and, on an ongoing
basis, shall provide for the maintenance and upkeep of the foregoing as a Center
Expense (as hereinafter defined); provided, however that the Orthodontic Entity
shall maintain complete control over and shall make all decisions directly
affecting the complete care, custody and control over all dental equipment.
Premier additionally agrees, on an ongoing basis, to evaluate and consult with
the Orthodontic Entity on the equipment needs of and the efficiency and adequacy
of the facilities utilized by the Center. Unless the Orthodontic Entity chooses
to directly purchase furnishings, equipment and related assets in the future,
Premier shall purchase such assets 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") and treat such depreciation as
a Center Expense.
1.3. Personnel and Payroll. Premier shall employ all of the Center's
staff, except the Orthodontists and dental hygienists, as determined by the
Orthodontic Entity in consultation with Premier, to be required for the
operation of the Center. Additionally, Premier shall be responsible for the
performance of all payroll and payroll accounting functions. The Orthodontic
Entity shall be responsible for determining the hours of practice for the
Center.
1.4. Business Systems, Procedures and Forms. In consultation with the
Orthodontic Entity, Premier shall establish business systems and procedures for
the Center developed by Premier that are designed to improve the Center's
operating efficiency. Premier shall provide training to the Center's staff in
the implementation and operation of such business systems and procedures.
Premier shall additionally provide the Orthodontic Entity with and train the
Center's staff in the use of clinical forms, including, without limitation,
forms for patient evaluations and treatment plans. The Orthodontic Entity
expressly acknowledges and agrees that it shall have no property rights in the
foregoing systems, procedures and clinical forms, and further agrees that such
systems, procedures, and forms shall be deemed to constitute Confidential
Information within the meaning of Section 2.7 hereof and subject to the
restrictions on the use, appropriation, and reproduction of such Confidential
Information provided for in Section 2.7.
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1.5. Purchasing, Accounts Payable and Inventory Control. In
consultation with the Orthodontic Entity, Premier shall purchase and maintain as
a Center Expense all inventory and supplies required by the Center. 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.
Premier shall be responsible for and shall establish and maintain systems for
the handling and processing of all purchasing and payment activities and for the
performance of all payroll and payroll accounting functions of the Center.
1.6. Information Systems and Accounting. Premier shall establish,
maintain and train the Center's staff in the use of information systems to
produce financial and operational information concerning the Center's
operations. Premier shall analyze such information on an ongoing basis in order
to advise the Orthodontic Entity on ways of improving operating efficiencies.
Premier shall provide or arrange for all accounting and bookkeeping services
related to the Center's operations, provided that such services are incurred in
the ordinary course of business.
1.7. Legal Compliance and Services. Premier shall be responsible for
ensuring compliance with all rules, regulations and ordinances applicable to the
Center's operations, and shall arrange for all legal services reasonably
required by the Center, but 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. The parties expressly acknowledge and agree that the
Orthodontic Entity shall exercise control over all policies and decisions
relating to pricing, credit, refunds, warranties and advertising. Subject to the
foregoing, Premier shall design and execute a marketing plan to promote the
Orthodontist's professional services. In connection with such marketing plan,
Premier shall advise the affiliated Orthodontist on establishing and maintaining
a plan for patients' payment for orthodontic services on an installment plan
basis. All marketing activities hereunder shall be conducted in compliance with
all applicable laws and regulations governing advertising by the dental
profession.
1.9. Planning. Premier will assess and advise the Orthodontic Entity on
the establishment of orthodontic offices in new locations and, subject to mutual
agreement, will provide assistance to the Orthodontic Entity in the opening of
such new offices, including assistance in the location of such offices and in
the sale of existing practices, as appropriate.
1.10. Financial 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 Service Fee (as hereinafter set forth) and the expenses of
the Orthodontic Entity, including the Center
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Expenses and shall return to the Orthodontic Entity any funds remaining after
payment in full of such items. Premier shall be responsible for (i) billing and
collecting payments for all orthodontic services rendered by the Orthodontist to
his patients and for all other professional and Center services, with all such
billing and collecting to be done in the name of the Orthodontic Entity; (ii)
receiving payments from patients, insurance companies and all other third party
payors; (iii) taking possession of and endorsing in the name of the Orthodontic
Entity any notes, checks, money orders, insurance payments and other instruments
received in payment of accounts receivable; (iv) administering the Orthodontic
Entity's payroll as applicable; (v) preparing and submitting to the Orthodontist
monthly operating data and quarterly financial reports with respect to the
operation of the Center; and (vii) paying all Center Expenses, as set forth in
Section 3. No funds from the Medicare or Medicaid programs shall be billed or
collected by the Orthodontic Entity or by Premier on the Orthodontic Entity's
behalf, provided, however, that all such funds collected shall be immediately
deposited into the Orthodontic Entity Account (as hereinafter defined) upon
receipt thereof. The Orthodontic Entity and the Orthodontist hereby appoint
Premier for the term of this Agreement to be their true and lawful
attorney-in-fact for the purposes set forth above in this Section.
1.11. Disbursement of Funds. (a) All monies collected for the
Orthodontic Entity by Premier 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
(ii) All sums otherwise due and payable by the Orthodontic
Entity as Center Expenses, as defined in Article III hereof, as well as
fees payable to Premier pursuant to Article III hereof.
(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
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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%).
1.12. Records. Premier shall supervise, manage, organize and develop
systems with respect to all files and records relating to the operation of the
Center, including but not limited to accounting, billing, patient records, and
collection records. Patient records shall at all times be and remain the
property 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. Employment of Orthodontists and Rendering of Patient Care. The
Orthodontic Entity shall be responsible for the employment and professional
supervision of all Orthodontist(s) affiliated with the Orthodontic Entity and
all orthodontic care rendered to patients shall be rendered by such
Orthodontist(s). Additionally, the Orthodontist shall be responsible for the
direct professional supervision of all hygienists and technicians in their
rendering of patient care.
2.2. 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 orthodontist shall be
permitted to use or occupy the Center, 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 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
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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.
2.3. 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 provided by the Orthodontist.
2.4. 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 determined
by the auditors for 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
Service Fee (as defined in the Service Agreement); 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.
2.5. 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.
2.6. 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.
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2.7. 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 law, including, in Florida, Fla. Stat. ch.
688.002. 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 directly or indirectly controlling, controlled by, or under
common control with each such practice or the principals thereof.
2.8. Leases. The Orthodontic Entity agrees to sublease from Premier the
Center or Centers leased by Premier at which the Orthodontic Entity is
practicing pursuant to the form of Center Sublease Agreement attached hereto as
Exhibit 2.8. All such Center Sublease Agreements shall include a provision
whereby the parties agree that the Orthodontic Entity maintains complete care,
custody and control over such office space. The lease expenses
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incurred by Orthodontic Entity in connection with the Center Sublease Agreement
will be deemed "Center Expenses" for purposes of Article III of this Agreement.
2.9. Covenant Not to Compete. During the term of this Agreement, the
Orthodontic Entity, and any of its 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 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. Service Fees. Premier shall receive an annual Service Fee, subject
to the provisions of Section 3.3 below, of 13.5% of the Adjusted Gross Revenue
(based on accrual method of accounting). Except as otherwise provided, the
amounts to be paid to Premier under this Section 3.1 shall be payable monthly.
The amounts shall be paid based upon the previous month's operating results of
the Center. Upon preparation of quarterly financial statements, final
adjustments to the Service Fee for the quarter, if any are required, shall be
made and any additional amounts owing to Premier or the Orthodontic Entity shall
then be made. Any audit adjustments shall be reflected in the calculations for
the fourth quarter.
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 following
definitions shall apply and shall comply with generally accepted accounting
principles:
(a) "Adjusted Gross Revenue" shall mean Gross Revenue of the
Center less any Adjustments, based on the accrual method of accounting.
(b) "Adjustments" shall mean any adjustments to Gross Revenue
for uncollectible accounts, professional courtesies and other activities,
contractual allowances and discounts that do not generate a collectible
fee.
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(c) "Center Expenses" shall mean all operating and
non-operating expenses incurred in the operation of the Center,
including, without limitation:
(i) 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;
(ii) 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 management, materials management,
purchasing, charge and coding analysis, and business office
consultation;
(iii) Obligations of Premier under leases or subleases
entered into in connection with the operation of the Center;
(iv) 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;
(v) Malpractice insurance expenses and Orthodontist
recruitment expenses as agreed to by mutual agreement of Premier
and the Orthodontic Entity;
(vi) Property, casualty and liability insurance for the
Center and its operations;
(vii) 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;
(viii) Amortization of intangible asset value as a result
of each such acquisition referred to in subsection (vii) above;
(ix) Depreciation of all assets used by the Orthodontic
Entity in the operation of the Center;
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(x) 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%);
(xi) Advertising and other marketing expenses
attributable to the promotion of the Center and/or its
Orthodontist(s); and
(xii) 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:
(i) Any federal or state income taxes; or
(ii) Any personal expenses of the Orthodontist as
permitted in the first sentence of Section 3(b) of that certain
employment agreement(s), by and between the Orthodontist(s) and
the Orthodontic Entity, in excess of three percent (3%) of the
Orthodontic Entity's Adjusted Gross Revenue.
(d) "Contract" shall mean the agreement entered into by
patients with the Orthodontic Entity for the provision of orthodontic
services at a predetermined fee for an estimated period of treatment.
(e) "Gross Revenue" shall mean all fees and charges recorded or
booked each month by or on behalf of the Orthodontic Entity as a result
of professional orthodontic or other dental services personally furnished
to patients by the Orthodontist and those under the Orthodontist's
supervision and other fees or income generated in their capacity as a
professional prior to any Adjustments.
3.4. Additional Facilities. In the event the parties agree to add an
additional facility in which the Orthodontic Entity will provide services, the
service fees payable to Premier shall be determined by aggregating the results
of the operations of each additional facility with the results of the operations
of the existing Center or Centers and such fees payable to Premier shall be
calculated pursuant to the provisions of Section 3.1. All other provisions of
this Article III shall apply to any additional facilities. 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.
3.5. Reasonable Efforts. Premier shall use reasonable efforts to
perform the services contemplated by this Agreement.
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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 as required by applicable Florida 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 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
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omissions by Premier, a Premier Affiliate and/or their 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 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.
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 a petition in involuntary 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.
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(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.
5.5. Closing of Repurchase by the Orthodontic Entity and Effective Date
of Termination. Unless another form of payment is agreed to by Premier at such
time, the Orthodontic Entity shall pay cash to Premier for the assets
repurchased pursuant to Section 5.4; provided, however, that such cash payments
for such portion of contracts receivable for services determined in accordance
with GAAP to constitute accounts receivable shall be made as such accounts
receivables are actually collected by the Orthodontic Entity; provided, further,
that the Orthodontic Entity shall in any event pay in cash to Premier the amount
of accounts receivable not collected by the Orthodontic Entity within ninety
(90) days of termination that are not deemed uncollectible accounts. 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
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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 Professional Services.
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 control or supervision
over the provision of all professional services, with the sole authority to
direct the professional, and ethical aspects of his orthodontic practice.
Premier will have no authority, directly or indirectly, to perform, and will not
perform, any orthodontic function. Premier may, however, advise the Orthodontic
Entity 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.
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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
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. Xxxxxx, Esquire
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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 Florida. 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. The provisions of this Agreement shall be deemed
severable and if any portion shall be held invalid, illegal or unenforceable for
any reason, the remainder of this Agreement shall be effective and binding upon
the parties.
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
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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 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
ORTHODONTIC ENTITY:
-------------------------------------------------
By:
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Name:
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Title:
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PREMIER:
PREMIER ORTHODONTIC GROUP, INC.
By:
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Name:
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Title:
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