Exhibit 10.5
AMENDED AND RESTATED MANAGEMENT SERVICES
AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT is made and entered
into effective as of January 1, 2000, by and between CASTLE DENTAL CENTERS OF
FLORIDA, INC., a Florida corporation ("Business Manager"), and CASTLE 1ST DENTAL
CARE, P.A., a Florida professional association ("PA").
RECITALS
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This Management Services Agreement is made with reference to the following
facts:
WHEREAS, on May 19, 1996, Business Manager and PA entered into a Management
Services Agreement ("Original Agreement"); and
WHEREAS, Business Manager and PA desire to amend and restate the Original
Agreement (such Original Agreement, as amended hereby, the "Management Services
Agreement");
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions
hereinabove and hereinafter set forth, the parties agree as follows:
ARTICLE I. DEFINITIONS
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For the purposes of this Management Services Agreement, the following terms
shall have the following meanings ascribed thereto, unless otherwise clearly
required by the context in which such term is used.
Section 1.1 Act. The term "Act" shall mean Chapter 466, Florida
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statutes, as amended, and administrative regulations promulgated thereunder.
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Section 1.2 Adjusted Gross Revenue. The term "Adjusted Gross Revenue"
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shall mean the sum of Professional Services Revenue and Ancillary Revenue.
Section 1.3 Adjustments. The term "Adjustments" shall mean any
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adjustments on an accrual basis for uncollectible accounts, third party payor
contractual adjustments, discounts, workers' compensation adjustments,
professional courtesies, and other reductions in collectible revenue that result
from activities that do not result in collectible charges.
Section 1.4 Ancillary Revenue. The term "Ancillary Revenue" shall mean
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all other revenue actually recorded each month (net of Adjustments) that is not
Professional Services Revenues consisting only of prepaid amounts for services
previously billed and collected, and shall include (a) any amounts received by
PA as liquidated damages under Section 4.2 or Section 4.3 of any Dentist's
employment agreement, and (b) the proceeds of key person life and disability
insurance as provided for in Section 4.14 below.
Section 1.5 Base Management Fee. The term "Base Management Fee" shall
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mean the amount set forth in Section 6.1.
Section 1.6 Budget. The term "Budget" shall mean an operating budget
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and capital expenditure budget for each fiscal year as prepared by Business
Manager and adopted by PA.
Section 1.7 Business Manager. The term "Business Manager" shall mean
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Castle Dental Centers of Florida, Inc., a Florida corporation, or any entity
that succeeds to the interests of Castle Dental Centers of Florida, Inc., a
Florida corporation, and to whom the obligations of Business Manager are
assigned and transferred.
Section 1.8 Business Manager Consent. The term "Business Manager
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Consent" shall mean the consent granted by Business Manager's representatives to
the Policy Board created pursuant to Article III herein.
Section 1.9 Business Manager Expense. The term "Business Manager
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Expense" shall mean an expense or cost incurred by the Business Manager and for
which the Business Manager, and not PA, is financially liable other than
expenses incurred by Business Manager that directly benefit PA which may be
allocated to Office Expense consistent with the Budget.
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Section 1.10 Clinical. The term "Clinical" means having a significant
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relationship, whether real or potential, direct or indirect, to the actual
rendering or outcome of dental care, the practice of dentistry or the quality of
dental care being rendered to one or more patients.
Section 1.11 Confidential Information. The term "Confidential
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Information" shall mean any information of Business Manager or PA, as
appropriate (whether written or oral), including all notes, studies, patient
lists, information, forms, business or management methods, marketing data, fee
schedules, or trade secrets of the Business Manager or of PA, as applicable,
whether or not such Confidential Information is disclosed or otherwise made
available to one party by the other party pursuant to this Management Services
Agreement. Confidential Information shall also include the terms and provisions
of this Management Services Agreement and any transaction or document executed
by the parties pursuant to this Management Services Agreement. Confidential
Information does not include any information that (i) is or becomes generally
available to and known by the public (other than as a result of an unpermitted
disclosure directly or indirectly by the receiving party or its affiliates,
advisors, or Representatives); (ii) is or becomes available to the receiving
party on a nonconfidential basis from a source other than the furnishing party
or its affiliates, advisors, or Representatives, provided that such source is
not and was not bound by a confidentiality agreement with or other obligation of
secrecy to the furnishing party of which the receiving party has knowledge at
the time of such disclosure; or (iii) has already been or is hereafter
independently acquired or developed by the receiving party without violating any
confidentiality agreement with or other obligation of secrecy to the furnishing
party.
Section 1.12 Center. The term "Center" (collectively referred to as
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"Centers") shall mean any office space, clinic, facility, including satellite
facilities, that Business Manager shall own or lease or otherwise procure for
the use of PA, as allowed by law, in the provision of Dental Services pursuant
to this Management Services Agreement.
Section 1.13 Dental Services. The term "Dental Services" shall mean
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dental care and services, including but not limited to the practice of general
dentistry, orthodontics and all related dental care services provided by PA
through PA's Dentists and other dental care providers that are retained by or
professionally affiliated with PA.
Section 1.14 Dentist. The term "Dentist" shall mean each individually
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licensed professional who is employed or otherwise retained by or associated
with PA, each of whom shall meet at all times the qualifications described in
Section 5.2 and Section 5.3.
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Section 1.15 GAAP. The term "GAAP" shall mean generally accepted
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accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity or other
practices and procedures as may be approved by a significant segment of the
accounting profession, which are applicable to the circumstances as of the date
of the determination. For purposes of this Management Services Agreement, GAAP
shall be applied on an accrual basis in a manner consistent with the historic
practices of the person to which the term applies.
Section 1.16 Management Fee. The term "Management Fee" shall mean
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Business Manager's compensation established as described in Article VI hereof.
Section 1.17 Management Services. The term "Management Services" shall
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mean the business, administrative, and management services to be provided for
PA, including without limitation the provision of equipment, supplies, support
services, nondental personnel, office space, management, administration,
financial recordkeeping and reporting, and other business office services;
provided, however, that PA shall maintain complete care, custody and control of
the equipment and material.
Section 1.18 Management Services Agreement. The term "Management
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Services Agreement" shall mean this Management Services Agreement by and between
PA and Business Manager and any amendments hereto as may be adopted as provided
in this Management Services Agreement.
Section 1.19 Office Expense. The term "Office Expense" shall mean all
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operating and nonoperating expenses incurred by the Business Manager or PA in
the provision of services to or by PA. Office Expense shall not include any
State or federal income tax, or any other expense that is a PA Expense or a
Business Manager Expense. Without limitation, Office Expense shall include:
(a) the salaries and benefits of all employees of Business Manager at the
Centers and the salaries and benefits of the nondental employees of PA, but not
the salaries, benefits or other direct costs of the Dentists;
(b) the direct cost of any employee or consultant that provides services
at or in connection with the Centers for improved clinic performance, such as
management, billing and collections, business office consultation, accounting
and legal services, but only when such services are consistent with the Budget
or otherwise with the consent of the Policy Board;
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(c) reasonable recruitment costs and out-of-pocket expenses of Business
Manager or PA directly related to the recruitment of additional dental employees
of PA;
(d) professional liability insurance expenses for Dentists and
comprehensive, general liability and workers' compensation insurance covering
the Centers and employees of PA and Business Manager at each Center;
(e) the expense of using, leasing, purchasing or otherwise procuring each
Center and related equipment, including depreciation;
(f) the cost of capital (whether as actual interest on indebtedness
incurred on behalf of PA or as reasonable imputed interest on capital advanced
by Business Manager, which shall be equal to the average cost of borrowing by
Business Manager from its primary commercial lender as reflected on its most
recent published financial statements) to finance or refinance obligations of
PA, purchase dental or nondental equipment, or finance new ventures of PA;
(g) the Base Management Fee;
(h) the reasonable out-of-pocket travel expenses associated with attending
meetings, conferences, or seminars to benefit PA;
(i) the reasonable costs and expenses associated with marketing,
advertising and promotional activities to benefit PA; and
(j) the cost of dental supplies (including but not limited to drugs,
pharmaceuticals, products, substances, items, or dental devices), office
supplies, inventory, and utilities other than those dental supplies or dental
inventory owned by PA on the date of this Management Services Agreement.
Section 1.20 PA. The term "PA" shall mean Castle 1st Dental Care, P.A., a
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Florida professional association.
Section 1.21 PA Account. The term "PA Account" shall mean the bank
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account of PA established as described in Sections 4.8 and 4.9.
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Section 1.22 PA Consent. The term "PA Consent" shall mean the consent
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granted by PA's representative to the Policy Board created pursuant to Article
III herein.
Section 1.23 PA Expense. The term "PA Expense" shall mean an expense
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incurred by the Business Manager or PA that is consistent with the Budget or
otherwise with the consent of the Policy Board and for which PA, and not the
Business Manager, is financially liable. PA Expense shall include such items as
Dentist salaries, benefits, and other direct costs (including professional dues,
subscriptions, continuing dental education expenses, and travel costs for
continuing dental education or other business travel but excluding business
travel requested by Business Manager, which shall be an Office Expense).
Section 1.24 Performance Fee. The term "Performance Fee" shall mean the
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amount payable to the Business Manager, if any, determined under Section 6.2, as
a Management Fee based upon the Business Manager achieving certain pre-
determined performance criteria.
Section 1.25 Policy Board. The term "Policy Board" shall refer to the
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body responsible for developing management and administrative policies for the
overall operation of PA's facilities, excluding any policies or decisions that
relate directly or indirectly to the practice of dentistry; provided, however
that the Policy Board can make recommendations to the PA that relate directly or
indirectly to the practice of dentistry.
Section 1.26 Practice Territory. The term "Practice Territory" shall
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mean the geographic area within a radius of ten (10) miles of any current or
future facility from which PA provides Dental Services in Florida representing
the specific geographic boundaries of the dental practice conducted by PA within
its particular urban metropolitan area.
Section 1.27 Professional Services Revenues. The term "Professional
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Services Revenues" shall mean the sum of all professional fees actually recorded
each month on an accrual basis under GAAP (net of Adjustments) as a result of
Dental Services and related services rendered by the shareholders and dental
employees of PA.
Section 1.28 Representatives. The term "Representatives" shall mean a
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party's officers, directors, employees, or other agents or representatives.
Section 1.29 State. The term "State" shall mean the State of Florida.
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Section 1.30 Term. The term "Term" shall mean the initial and any renewal
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periods of duration of this Management Services Agreement as described in
Section 7.1.
ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
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Section 2.1 Appointment. PA hereby appoints Business Manager as its
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sole and exclusive agent for the management and administration of the business
functions and business affairs of PA, and Business Manager hereby accepts such
appointment, subject at all times to the provisions of this Management Services
Agreement.
Section 2.2 Authority. Consistent with the provisions of this Management
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Services Agreement, Business Manager shall have the responsibility and
commensurate authority to provide Management Services for PA. Subject to the
terms and conditions of this Management Services Agreement, Business Manager is
hereby expressly authorized to provide the Management Services in any reasonable
manner Business Manager deems appropriate to meet the day-to-day requirements of
the business functions of PA. Business Manager is also expressly and exclusively
authorized to negotiate contracts that do not relate to the provision of Dental
Services; provided, however, that Business Manager shall not have authority to
execute any contract pertaining to pricing of dental services, credit, refunds,
warranties, advertising and employees of PA or other personnel of PA providing
services to PA and/or other agreements for the provision of dental services. PA
shall give Business Manager thirty (30) days prior notice of PA's intent to
execute any agreement obligating PA to perform Dental Services or otherwise
creating a binding legal obligation on PA. Unless an expense is expressly
designated as a Business Manager Expense in this Management Services Agreement,
all expenses incurred by Business Manager in providing services hereunder shall
be an Office Expense. The parties acknowledge and agree that PA, through its
Dentists, shall be responsible for and shall have complete authority,
responsibility, supervision, and control over the provision of all Dental
Services and other professional health care services performed for patients, and
that all diagnoses, treatments, procedures, and other professional health care
services shall be provided and performed exclusively by or under the supervision
of Dentists as such Dentists, in their sole discretion, deem appropriate.
Business Manager shall have and exercise absolutely no control or supervision
over the provision of Dental Services.
Section 2.3 Patient Referrals and Payments. Business Manager and PA
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agree that the benefits to PA hereunder do not require, are not payment for, and
are not in any way contingent upon the referral, admission, or any other
arrangement for the provision of any item or service offered by Business Manager
to patients of PA in any facility, laboratory or health care operation
controlled, managed, or operated by
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Business Manager. Further, Business Manager and PA agree that the payment of
monies hereunder in no way represents the division, sharing, splitting or other
allocation of fees for Dental Services between PA and Business Manager.
Section 2.4 Internal Management of PA. Matters involving the internal
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management, control, or finances of PA, including specifically the allocation of
professional income among the shareholders and Dentist employees of PA, tax
planning, office personnel, and investment planning, shall remain the
responsibility of PA and the shareholders of PA.
Section 2.5 Practice of Dentistry. The parties acknowledge that Business
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Manager is not authorized or qualified to engage in any activity that may be
construed or deemed to constitute the practice of dentistry nor shall Business
Manager now or in the future be regarded as practicing dentistry within the
meaning of Florida Statutes (S) 466.003(3). To the extent any act or service
herein required by Business Manager should be construed by a court of competent
jurisdiction or by the State Board of Dental Examiners to constitute the
practice of dentistry, the requirement to perform that act or service by
Business Manager shall be deemed waived and unenforceable and shall not
constitute a breach or default by Business Manager under this Agreement, and the
parties shall take the actions contemplated by Section 7.2(d) hereof.
ARTICLE III. RESPONSIBILITIES OF THE POLICY BOARD
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Section 3.1 Formation and Operation of the Policy Board. The parties
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hereby establish a Policy Board which shall be responsible for developing
management and administrative policies for the overall operation of PA's
facilities within the terms of this Management Services Agreement. The Policy
Board shall consist of four (4) members. Business Manager shall designate, in
its sole discretion, three (3) members of the Policy Board. PA shall designate,
in its sole discretion, one (1) member of the Policy Board. The Policy Board
member selected by PA shall be a Dentist who holds and maintains a valid and
unrestricted license to practice dentistry in the State. A majority of each
party's representative or representatives to the Policy Board shall have the
authority to make decisions within the terms of this Management Services
Agreement on behalf of the respective party. Except as may otherwise be
provided, the act of a majority of the members of the Policy Board shall be the
act of the Policy Board.
Section 3.2 Duties and Responsibilities of the Policy Board. The Policy
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Board shall have the following duties, obligations, and authority:
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(a) Capital Improvements and Expansion. Any renovation and expansion
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plans with respect to PA's facilities shall be reviewed and approved by the
Policy Board and shall be based upon economic feasibility, dentist support,
productivity, technological innovations, competitive alternatives and then
current market conditions. The Policy Board shall make recommendations to PA
regarding capital equipment, but PA shall have final authority concerning
equipment.
(b) Marketing and Advertising. To make recommendations to PA concerning
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all marketing and other advertising of the services performed at PA's
facilities.
(c) Patient Fees; Collection Policies. As a part of the Budget process,
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in consultation with PA and Business Manager, the Policy Board shall be advised
of the fee schedule determined by the PA representative to the Policy Board and
shall review the related collection policies for all Dental Services rendered by
PA. The Policy Board may make recommendations concerning fee schedules and
collection policies.
(d) Provider and Payor Relationships. To make recommendations regarding
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the establishment or maintenance of relationships with institutional health care
providers and third party payors. The Policy Board shall review all proposed
reimbursement arrangements with third party payors. The Policy Board may make
recommendations concerning reimbursement arrangements.
(e) Strategic Planning. The Policy Board shall develop long-term
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strategic planning objectives, including but not limited to the acquisition of
or merger with any other dental practices in the Practice Territory.
(f) Capital Expenditures. The Policy Board shall determine the priority
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of major capital expenditures.
Section 3.3 Dental Treatment Decisions. Despite the above listing of
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activities and areas of interest, all decisions relating directly or indirectly
to the practice of dentistry will be made solely by PA's representatives to the
Policy Board, but Business Manager's representatives to the Policy Board may
participate in the discussion process. Notwithstanding any provision to the
contrary contained elsewhere in this Management Services Agreement, PA's
representative to the Policy Board shall review and shall have exclusive
jurisdiction over the resolution of issues relating to:
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(a) the use of any dental equipment or material while such equipment or
material is being used for the provision of Dental Services, whether those
services are provided by a Dentist, a dental hygienest or a dental assistant;
(b) the clinical sufficiency, suitability, reliability or efficacy of a
particular product, service, process or activity as it relates to the delivery
of Dental Services;
(c) the Dentist of record's ability to exercise independent professional
judgment over all qualitative and quantitative aspects of the delivery of Dental
Services;
(d) the selection, compensation, terms, conditions, obligations or
privileges of employment or retention of Clinical personnel of the PA;
(e) the scope of services offered by the Dentist of record or the PA;
(f) the methods of payment accepted by the Dentist of record or the PA;
(g) the use of patient scheduling systems, marketing plans, promotion or
advertising for the Dentist of record or the PA which, in the judgment of the
PA's representative to the Policy Board will have the effect of discouraging new
patients from coming into the practice or discouraging patients of record from
seeing the Dentist or postponing future appointments or which gives scheduling
preference to one individual, class or group of existing or new patients over
another individual, class or group of existing or new patients;
(h) reporting perceived violations of the Act or the regulations
promulgated pursuant thereunder to, or seeking clarification from, appropriate
state or federal agencies, departments or boards;
(i) compliance with the requirements of the Act with respect to the
keeping of records for all patients; and
(j) Any other function or decision relating to the practice of dentistry,
including but not limited to (i) the selection of a course of treatment for a
patient, the procedures or materials to be used as part of such course of
treatment and the manner in which such course of treatment is carried out; (ii)
the patient records of PA; (iii) policies and decisions relating to pricing,
credit, refunds, warranties and advertising; and (iv) decisions relating to
office personnel and hours of practice.
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The Policy Board meetings shall be held as mutually agreed, but at least
quarterly, in Florida. Meetings shall be open to any shareholder of PA.
ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER
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During the Term, Business Manager shall provide all Management Services as
are necessary and appropriate for the day-to-day administration of the business
aspects of PA's operations, including without limitation those set forth in this
Article IV in accordance with all law, rules, regulations and guidelines
applicable to the provision of Management Services.
Section 4.1 Centers and Equipment.
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(a) Subject to Section 4.1(b), as necessary and appropriate, taking into
consideration the professional concerns of PA, Business Manager shall in its
reasonable discretion lease, acquire or otherwise procure Centers in a location
or locations reasonably acceptable to PA and shall permit PA to use each such
Center pursuant to this Management Services Agreement, by sublease or otherwise
as required by law.
(b) PA shall not enter into any lease or sublease with respect to a Center
without Business Manager's prior consent. In the event PA is the lessee of any
Center under a lease with an unrelated and nonaffiliated lessor, Business
Manager may require PA to assign such lease to Business Manager upon receipt of
consent from the lessor and Business Manager shall permit PA to use such Center
pursuant to this Management Services Agreement, by sublease or otherwise as
required by law. PA shall use its best efforts to assist in obtaining the
lessor's consent to the assignment. Upon request, PA shall execute any
instruments and shall take any acts that Business Manager may deem necessary to
accomplish the assignment of the lease. Any expenses incurred in the assignment
shall be Office Expenses.
(c) Business Manager shall provide all nondental equipment, fixtures,
office supplies, furniture and furnishings deemed reasonably necessary by
Business Manager for the operation of each Center and reasonably necessary for
the provision of Dental Services pursuant to this Management Services Agreement,
by lease, sublease or otherwise as required by law.
(d) Business Manager shall provide, finance, or cause to be provided or
financed dental related equipment as required by PA. PA shall have final
authority in all dental equipment selections, and Business Manager shall have no
authority in regard to dental equipment selection issues. Business Manager may,
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however, advise PA on the relationship between its dental equipment decisions
and the overall administrative and financial operations of the practice. All
dental and nondental equipment acquired for the use of PA shall be owned by
Business Manager; provided, however, that PA shall maintain complete care,
custody and control of all dental equipment.
(e) Business Manager shall be responsible for the repair and maintenance
of each Center, consistent with Business Manager's responsibilities under the
terms of any lease or other use arrangement.
Section 4.2 Dental Supplies. After consultation with PA and with PA's
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approval, Business Manager shall order, procure, purchase and provide on behalf
of and as agent for PA all dental supplies necessary and appropriate for the
practice of PA in the reasonable discretion of PA unless otherwise prohibited by
federal and/or State law. Furthermore, Business Manager shall ensure that each
Center is at all times adequately stocked with the dental supplies that are
necessary and appropriate for the operation of PA and required for the provision
of Dental Services. The ultimate oversight, supervision and ownership for all
dental supplies is and shall remain the sole responsibility of PA. As used in
this provision the term "dental supplies" shall mean all drugs, pharmaceuticals,
products, substances, items or devices whose purchase, possession, maintenance,
administration, prescription or security requires the authorization or order of
a licensed health care provider or requires a permit, registration,
certification or other governmental authorization held by a licensed health care
provider as specified under any federal and/or State law.
Section 4.3 Support Services. Business Manager shall provide or
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arrange for all printing, stationery, forms, postage, duplication or
photocopying services, and other support services as are reasonably necessary
and appropriate for the operation of each Center and the provision of Dental
Services therein.
Section 4.4 Quality Assurance, Risk Management, and Utilization Review.
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Business Manager shall, upon the request of PA, assist PA in PA's establishment
of procedures to ensure the consistency, quality, appropriateness and necessity
of Dental Services provided by PA, and shall provide administrative support for
PA's overall quality assurance, risk management, and utilization review
programs; provided, however, that PA shall have complete authority concerning
the provision of professional or Dental Services. Business Manager shall
perform these tasks in a manner to ensure the confidentiality and
nondiscoverability of these program actions to the fullest extent allowable
under State and federal law.
Section 4.5 Licenses and Permits. Business Manager shall, on behalf of
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and in the name of PA, coordinate all development and planning processes, and
apply for and use reasonable efforts to obtain and
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maintain all federal, State, and local licenses and regulatory permits required
for or in connection with the operation of PA and equipment (existing and
future) located at each Center, other than those relating to the practice of
dentistry or the administration of drugs by Dentists retained by or associated
with PA.
Section 4.6 Personnel. Business Manager shall be entitled to make
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recommendations to PA relating to selecting, hiring, training, supervising, and
terminating, all management, administrative, clerical, secretarial, bookkeeping,
accounting, payroll, billing and collection and other nonprofessional personnel
as Business Manager deems appropriate to enable Business Manager to perform its
duties and obligations under this Management Services Agreement.
Section 4.7 Contract Negotiations. Business Manager shall advise PA with
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respect to and negotiate, either directly or on PA's behalf, as appropriate and
allowed by law, and the Policy Board shall make recommendations regarding
arrangements between PA and third parties as are appropriate for PA's provision
of Dental Services, including, without limitation, negotiated price agreements
with third party payors, alternative delivery systems, or other purchasers of
group health care services; provided, however, that PA shall have sole
responsibility for decisions relating to entering into such arrangements.
Section 4.8 Billing and Collection. On behalf of and for the account of
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PA, Business Manager shall establish and maintain credit and billing and
collection policies and procedures approved by PA, and shall timely xxxx and
collect all professional and other fees for all Dental Services provided by PA,
or Dentists employed or otherwise retained by PA. Business Manager shall advise
and consult with PA regarding the fees for Dental Services provided by PA; it
being understood, however, that PA shall establish the fees to be charged for
Dental Services and that Business Manager shall have no authority whatsoever
with respect to the establishment of such fees. In connection with the billing
and collection services to be provided hereunder, and throughout the Term (and
thereafter as provided in Section 7.3), PA hereby grants to Business Manager a
special power of attorney and appoints Business Manager as PA's exclusive true
and lawful agent and attorney-in-fact, and Business Manager hereby accepts such
special power of attorney and appointment, for the following purposes:
(a) To xxxx PA's patients, in PA's name and on PA's behalf, for all Dental
Services provided by PA to patients.
(b) To xxxx, in PA's name and on PA's behalf, all claims for reimbursement
or indemnification from Blue Shield/Blue Cross, insurance companies and all
other third party payors or fiscal intermediaries for all covered billable
Dental Services provided by PA to patients.
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(c) To collect and receive in Business Manager's name and for Business
Manager's account all accounts receivable of PA purchased by Business Manager,
and to deposit such collections in an account selected by Business Manager and
maintained in Business Manager's name.
(d) To collect and receive, in PA's name and on PA's behalf, all accounts
receivable generated by such xxxxxxxx and claims for reimbursement that have not
been purchased by Business Manager, to administer such accounts including, but
not limited to, (i) extending the time of payment of any such accounts for cash,
credit or otherwise; (ii) discharging or releasing the obligors of any such
accounts; (iii) suing, assigning or selling at a discount such accounts to
collection agencies; or (iv) taking other measures to require the payment of any
such accounts.
(e) To deposit all amounts collected under clause (d) above into PA
Account which shall be and at all times remain in PA's name. PA covenants to
transfer and deliver to Business Manager for deposit into PA Account (or, with
respect to accounts receivable purchased by Business Manager, Business Manager's
account) all funds received by PA from patients or third party payors for Dental
Services. Upon receipt by Business Manager of any funds from patients or third
party payors or from PA pursuant hereto for Dental Services, Business Manager
shall immediately deposit those that relate to accounts receivable covered by
clause (d) above into the PA Account. Business Manager shall disburse such
deposited funds to creditors and other persons on behalf of PA, maintaining
records of such receipt and disbursement of funds in accordance with Section
4.9(b).
(f) To take possession of, endorse in the name of PA, and deposit into the
PA Account any notes, checks, money orders, insurance payments, and any other
instruments received in payment for Dental Services that relate to accounts
receivable covered by clause (d) above.
(g) To sign checks, drafts, bank notes or other instruments on behalf of
PA, and to make withdrawals from the PA Account for payments specified in this
Management Services Agreement.
Upon request of Business Manager, PA shall execute and deliver to the financial
institution wherein the PA Account is maintained, such additional documents or
instruments as may be necessary to evidence or effect the special and limited
power of attorney granted to Business Manager by PA pursuant to this Section 4.8
or pursuant to Section 4.9 of this Management Services Agreement. The special
and limited power of attorney granted herein shall be coupled with an interest
and shall be irrevocable except with Business Manager's written consent. The
irrevocable power of attorney shall expire on the later of when this Management
Services Agreement has been terminated, when all accounts receivable purchased
by
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Business Manager have been collected, or when all Management Fees due to
Business Manager have been paid. If Business Manager assigns this Management
Services Agreement in accordance with its terms, then PA shall execute a power
of attorney in favor of the assignee including substantially the same terms set
forth in this Section 4.8.
Section 4.9 PA Account.
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(a) Access. Business Manager shall have access to the PA Account solely
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for the purposes contemplated hereby. PA shall neither draw checks on the PA
Account nor request Business Manager to do so.
(b) Priority of Payments. Business Manager shall apply on a monthly
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basis, except as otherwise stated hereunder, funds that are in the PA Account in
the following order of priority: (i) PA Expenses; (ii) Office Expenses (other
than the Base Management Fee); (iii) Management Fees (both Base Management Fee
and Performance Fee); and (iv) any other expenditures.
Section 4.10 Fiscal Matters.
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(a) Annual Budget.
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(1) Initial Budget. The initial Budget shall be agreed upon and
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approved in writing by the parties before the execution of this Management
Services Agreement. The initial Budget shall include an exhibit setting
forth the criteria under which Business Manager shall be entitled to
receive the Performance Fee.
(2) Process for Succeeding Budgets. Annually and at least thirty
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(30) days prior to the commencement of each fiscal year of PA, Business
Manager, in consultation with PA's representative to the Policy Board,
shall prepare and deliver to PA for PA's approval a proposed Budget,
setting forth an estimate of PA's revenues and expenses for the upcoming
fiscal year (including, without limitation, the Management Fee and
Performance Fee associated with the services provided by Business Manager
hereunder). PA shall review the proposed Budget and either approve the
proposed Budget or request any changes within fifteen (15) days after
receiving the proposed Budget. The Budget shall be adopted by PA after its
approval thereof and may be revised or modified only in consultation with
the Business Manager.
15
(3) Succeeding Budgets; Special Rates. In each succeeding Budget,
---------------------------------
unless the parties otherwise mutually agree or are otherwise precluded by
law or regulation, the criteria for the Performance Fee and Business
Manager's right to receive the Performance Fee shall be continued on the
same basis.
(4) Deadlock. In the event the parties are unable to agree on a
--------
Budget by the beginning of the fiscal year, until an agreement is reached,
the Budget for the prior year shall be deemed to be adopted as the Budget
for the current year, with each line item in the Budget (with the exception
of the Base Management Fee and any one-time or non-recurring expenses
included in such prior Budget) increased or decreased by (i) the percentage
by which the Adjusted Gross Revenue in the current year has increased or
decreased compared to the corresponding period of the prior year; (ii) the
increase or decrease from the prior year in the Consumer Price Index -
Health/Medical Services, Pinellas, Florida area; and (iii) the
proportionate increase or decrease in mutually agreed upon personnel costs
as measured by the increase or decrease in full-time-equivalent personnel.
(5) Obligation of Business Manager. Business Manager shall use
------------------------------
commercially reasonable efforts to manage and administer the operations of
PA as herein provided so that the actual revenues, costs and expenses of
the operation and maintenance of PA during any applicable period of PA's
fiscal year shall be consistent with the Budget.
(b) Accounting and Financial Records. Business Manager shall establish
--------------------------------
and administer accounting procedures, controls, and systems for the development,
preparation, and safekeeping of administrative or financial records and books of
account relating to the business and financial affairs of PA and the provision
of Dental Services, all of which shall be prepared and maintained in accordance
with GAAP and applicable laws and regulations. Business Manager shall prepare
and deliver to PA, within one hundred twenty (120) days of the end of each
calendar year, a balance sheet and a profit and loss statement reflecting the
financial status of PA in regard to the provision of Dental Services as of the
end of such calendar year, all of which shall be prepared in accordance with
GAAP consistently applied. In addition, Business Manager shall prepare or
assist in the preparation of any other financial statements or records as PA may
reasonably request.
(c) Review of Expenditures. PA's representative to the Policy Board shall
----------------------
review all expenditures related to the operation of PA, but such PA
representative shall not have the power to prohibit
16
or invalidate any expenditure that is consistent with the Budget. Business
Manager shall not have any authority to make any expenditures not consistent
with the Budget without PA Consent.
(d) Tax Matters.
-----------
(1) In General. Business Manager shall prepare or arrange for the
----------
preparation by an accountant approved in advance by PA (which
approval shall not be unreasonably withheld) of all appropriate
tax returns and reports required of PA.
(2) Sales and Use Taxes. Business Manager and PA acknowledge and
-------------------
agree that to the extent that any of the services to be provided
by Business Manager hereunder may be subject to any State sales
and use taxes, Business Manager may have a legal obligation to
collect such taxes from PA and to remit same to the appropriate
tax collection authorities. PA agrees to pay in addition to the
payment of the Management Fee, the applicable State sales and use
taxes in respect of the portion of the Management Fees
attributable to such services.
Section 4.11 Reports and Records. Subject to PA's prior consent, and
-------------------
subject to the confidentiality requirements of Florida law, Business Manager
shall establish, monitor, and maintain procedures and policies for the timely
creation, preparation, filing and retrieval of all dental records generated by
PA in connection with PA's provision of Dental Services; and, subject to
applicable law, shall use its best efforts to ensure that dental records are
promptly available to Dentists and any other appropriate persons. All such
dental records shall be retained and maintained in accordance with all
applicable State and federal laws relating to the confidentiality and retention
thereof. All dental records shall be and remain the property and under the sole
control of PA and shall be located at the applicable Center so that they are
readily available for patient care, and PA shall remain the custodian thereof
and responsible for their maintenance. Business Manager shall use its
reasonable efforts to preserve the confidentiality of dental records and,
subject to the confidentiality requirements of Florida law, use information
contained in such records only for the limited purpose necessary to perform the
services set forth herein; provided, however, in no event shall a breach of said
confidentiality be deemed a default under this Agreement.
Section 4.12 Recruitment of PA Dentists. Upon PA's request, Business
--------------------------
Manager shall perform all administrative services reasonably necessary and
appropriate to recruit potential Dentist personnel to become employees of PA.
Business Manager shall provide PA with model agreements to document PA's
17
employment, retention or other service arrangements with such individuals. It
will be and remain the sole and complete responsibility of PA to interview,
select, contract with, supervise, control and terminate all Dentists performing
Dental Services or other professional services, and Business Manager shall have
no authority whatsoever with respect to such activities.
Section 4.13 Business Manager's Insurance. Throughout the Term,
-----------------------------
Business Manager shall, as an Office Expense, obtain and maintain with
commercial carriers, through self-insurance or some combination thereof,
appropriate worker's compensation coverage for Business Manager's employed
personnel provided pursuant to this Management Services Agreement, and
professional, casualty and comprehensive general liability insurance covering
Business Manager, Business Manager's personnel, and all of Business Manager's
equipment in such amounts, on such basis and upon such terms and conditions as
Business Manager deems appropriate. Upon the request of PA, Business Manager
shall provide PA with a certificate evidencing such insurance coverage.
Business Manager may also carry, as an Office Expense, key person life and
disability insurance on any shareholder or Dentist employee of PA in amounts
determined reasonable and sufficient by Business Manager. Business Manager
shall be the owner and beneficiary of any such insurance.
Section 4.14 No Warranty. PA acknowledges that Business Manager has not
-----------
made and will not make any express or implied warranties or representations that
the services provided by Business Manager will result in any particular amount
or level of dental practice or income to PA.
ARTICLE V. COVENANTS AND RESPONSIBILITIES OF PA
------------------------------------
Section 5.1 Organization and Operation. PA, as a continuing condition
--------------------------
of Business Manager's obligations under this Management Services Agreement,
shall at all times during the Term be and remain legally organized and operated
to provide Dental Services in a manner consistent with all State and federal
laws. PA shall operate and maintain within the Practice Territory a full time
practice of dentistry specializing in the provision of Dental Services.
Section 5.2 PA Personnel and Shareholders.
-----------------------------
(a) Dental Personnel. PA shall retain, as a PA Expense and not as an
----------------
Office Expense, that number of Dentists as are reasonably necessary and
appropriate in the sole discretion of PA for the provision of Dental Services.
Each Dentist retained by PA shall hold and maintain a valid and unrestricted
license to practice dentistry in the State, and shall be competent in the
practice of dentistry, including any
18
subspecialties that the retained Dentist will practice on behalf of PA. PA shall
enter into, maintain and enforce with each such retained Dentist a written
employment agreement in a form reasonably satisfactory to PA and will not commit
and permit to remain outstanding any breach of such employment agreement that
would allow the Dentist to terminate for cause. PA shall be responsible for
paying the compensation and benefits, as applicable, for all Dentists and any
other dental personnel or other contracted or affiliated dentists, and for
withholding, as required by law, any sums for income tax, unemployment
insurance, social security, or any other withholding required by applicable law.
Business Manager may, on behalf of PA, establish and administer the compensation
with respect to such individuals in accordance with the written agreement
between PA and each Dentist. Business Manager shall neither control nor direct
any Dentist in the performance of Dental Services for patients.
(b) Employment of Non-dentist Dental Care Personnel. PA shall employ or
-----------------------------------------------
retain, as an Office Expense, all non-dentist personnel, including non-dental
care personnel and including dental assistants, dental hygienists and dental
technicians, required under the Act or otherwise required by law to work under
the direct supervision of a Dentist. Such non-dentist personnel shall be under
PA's control, supervision and direction in the performance of Dental Services
for patients.
(c) Option Agreement. Each shareholder of PA shall enter into and comply
----------------
with the terms and provisions of an Option Agreement with respect to his or her
ownership interest in PA, in form and substance acceptable to Business Manager.
Section 5.3 Professional Standards. As a continuing condition of
----------------------
Business Manager's obligations hereunder, each Dentist and any other dental
personnel retained by PA to provide Dental Services must (i) comply with, be
controlled and governed by and otherwise provide Dental Services in accordance
with the code of professional conduct and applicable federal, State and
municipal laws, rules, regulations, ordinances and orders, and the ethics and
standard of care of the dental community wherein any Center is located, and (ii)
obtain and retain appropriate dental staff membership with appropriate clinical
privileges at any hospital or health care facility at which Dental Services are
to be provided. Procurement of temporary staff privileges pending the
completion of the dental staff approval process shall satisfy this provision,
provided the Dentist actively pursues full appointment and actually receives
full appointment within a reasonable time.
Section 5.4 Dental Services. PA shall ensure that Dentists and non-
---------------
dentist dental care personnel are available to provide Dental Services to
patients. In the event that Dentists are not available to provide Dental
Services coverage, PA shall engage and retain locum tenens coverage as it deems
----- ------
19
reasonable and appropriate based on patient care requirements. Dentists
retained on a locum tenens basis shall meet all of the requirements of Section
----- ------
5.3, and the cost of providing locum tenens coverage shall be a PA Expense. PA
----- ------
and the Dentists shall be responsible for scheduling Dentist and non-dentist
dental care personnel coverage of all dental procedures. PA shall cause all
Dentists to develop and promote PA.
Section 5.5 Peer Review/Quality Assurance. PA shall adopt a peer
-----------------------------
review/quality assessment program to monitor and evaluate the quality and cost-
effectiveness of Dental Services provided by dental personnel of PA. Upon
request of PA, Business Manager shall provide administrative assistance to PA in
performing its peer review/quality assurance activities, but only if such
assistance can be provided consistent with maintaining the confidentiality and
nondiscoverability of the processes and actions of the Peer Review/Quality
Assurance process of PA and not be regarded as practicing dentistry under the
Act.
Section 5.6 PA's Insurance. PA shall, as an Office Expense, obtain and
--------------
maintain with commercial carriers acceptable to Business Manager appropriate
worker's compensation coverage for PA's employed personnel, if any, and
professional and comprehensive general liability insurance covering PA and each
of the Dentists PA retains or employs to provide Dental Services. The
comprehensive general liability coverage shall be in the minimum amount of One
Million Dollars ($1,000,000) for each occurrence and Three Million Dollars
($3,000,000) annual aggregate; and professional liability coverage shall be in
the minimum amount of One Million Dollars ($1,000,000) for each occurrence and
Three Million Dollars ($3,000,000) annual aggregate. The insurance policy or
policies shall provide for at least thirty (30) days advance written notice to
PA from the insurer as to any alteration of coverage, cancellation, or proposed
cancellation for any cause. PA shall cause to be issued to Business Manager by
such insurer or insurers a certificate reflecting such coverage and shall
provide written notice to Business Manager promptly upon receipt of notice given
to Dentist of the cancellation or proposed cancellation of such insurance for
any cause. Upon the termination of this Management Services Agreement for any
reason, PA shall obtain and maintain as a PA Expense "tail" professional
liability coverage, in the amounts specified in this section for an extended
reporting period of 15 years, and PA shall be responsible for paying all
premiums for "tail" insurance coverage. In no event shall the professional
liability insurance carrier be replaced or changed without PA Consent and
Business Manager Consent. PA and Business Manager agree to use their best
efforts to have each other named as additional insureds on the other's
respective professional liability insurance at Business Manager's expense.
Section 5.7 Confidential and Proprietary Information. PA will not
----------------------------------------
disclose any Confidential Information of Business Manager without Business
Manager's express written authorization, such Confidential Information will not
be used in any way directly or indirectly detrimental to Business Manager,
20
and PA will keep such Confidential Information confidential and will ensure that
its affiliates and advisors who have access to such Confidential Information
comply with these nondisclosure obligations; provided, however, that PA may
disclose Confidential Information to those of its Representatives who need to
know Confidential Information for the purposes of this Management Services
Agreement, it being understood and agreed to by PA that such Representatives
will be informed of the confidential nature of the Confidential Information,
will agree to be bound by this Section, and will be directed by PA not to
disclose to any other person any Confidential Information. PA agrees to be
responsible for any breach of this Section by its Representatives. If PA is
requested or required (by oral questions, interrogatories, requests for
information or documents, subpoenas, civil investigative demands, or similar
processes) to disclose or produce any Confidential Information furnished in the
course of its dealings with Business Manager or its affiliates, advisors, or
Representatives, PA will (i) provide Business Manager with prompt notice thereof
and copies, if possible, and, if not, a description, of the Confidential
Information requested or required to be produced so that Business Manager may
seek an appropriate protective order or waive compliance with the provisions of
this Section and (ii) consult with Business Manager as to the advisability of
Business Manager's taking of legally available steps to resist or narrow such
request. PA further agrees that, if in the absence of a protective order or the
receipt of a waiver hereunder PA is nonetheless, in the written opinion of its
legal counsel, compelled to disclose or produce Confidential Information
concerning Business Manager to any tribunal or to stand liable for contempt or
suffer other censure or penalty, PA may disclose or produce such Confidential
Information to such tribunal legally authorized to request and entitled to
receive such Confidential Information without liability hereunder; provided,
however, that PA shall give Business Manager written notice of the Confidential
Information to be so disclosed or produced as far in advance of its disclosure
or production as is practicable and shall use its best efforts to obtain, to the
greatest extent practicable, an order or other reliable assurance that
confidential treatment will be accorded to such Confidential Information so
required to be disclosed or produced.
Section 5.8 Noncompetition. PA hereby recognizes and acknowledges that
--------------
Business Manager will incur substantial costs in providing the equipment,
support services, personnel, management, administration, and other items and
services that are the subject matter of this Management Services Agreement and
that in the process of providing services under this Management Services
Agreement, PA will be privy to financial and Confidential Information, to which
PA would not otherwise be exposed. The parties also recognize that the services
to be provided by Business Manager will be feasible only if PA operates an
active practice to which the Dentists associated with PA devote their full
professional time and attention. PA agrees and acknowledges that the
noncompetition covenants described hereunder are necessary for the protection of
Business Manager, and that Business Manager would not have entered into this
Management Services Agreement without the following covenants.
21
(a) During the Term of this Management Services Agreement and except for
its obligations pursuant to this Management Services Agreement, PA shall not
establish, operate, or provide Dental Services at a dental office, clinic or
other health care facility anywhere within the Practice Territory.
(b) Except as specifically agreed to by Business Manager in writing, PA
covenants and agrees that during the Term of this Management Services Agreement
and for a period of five (5) years from the date this Management Services
Agreement is terminated, PA shall not directly or indirectly own (excluding
ownership of less than five percent (5%) of the equity of any publicly traded
entity), manage, operate, control, or be otherwise associated with, lend funds
to, lend its name to, or maintain any interest whatsoever in any enterprise (i)
having to do with the provision, distribution, promotion, or advertising of any
type of management or administrative services or products to third parties in
competition with Business Manager, in the Practice Territory; and/or (ii)
offering any type of service(s) or product(s) to third parties substantially
similar to those offered by Business Manager to PA in the Practice Territory.
Notwithstanding the above restriction, nothing herein shall prohibit PA or any
of its shareholders from providing management and administrative services to its
or their own dental practices after the termination of this Management Services
Agreement.
(c) The written employment agreements described in Section 5.2 shall
contain covenants of the shareholder employees pursuant to which the
shareholders agree not to compete with PA within the Practice Territory for one
(1) year after termination of the employment agreement in accordance with the
terms, conditions and limitations contained therein.
(d) PA shall obtain formal written agreements from its dentist employees
in the form of Exhibit 5.2(a), pursuant to which the employees agree not to
compete with PA within the Noncompetition Territory (as defined in such
employment agreements) for one (1) year after termination of the employment
agreement in accordance with the terms, conditions and limitations contained
therein.
(e) PA understands and acknowledges that the foregoing provisions in
Section 5.7 and Section 5.8 are designed to preserve the goodwill of Business
Manager and the goodwill of the individual Dentists of PA. Accordingly, if PA
breaches any obligation of Section 5.7 or Section 5.8, in addition to any other
remedies available under this Management Services Agreement, at law or in
equity, Business Manager shall be entitled to enforce this Management Services
Agreement by injunctive relief and by specific performance of the Management
Services Agreement. Additionally, nothing in this paragraph shall limit
Business Manager's right to recover any other damages to which it is entitled as
result of PA's breach. If any provision of the covenants is held by a court of
competent jurisdiction to be unenforceable due to an
22
excessive time period, geographic area, or restricted activity, the covenant
shall be reformed to comply with such time period, geographic area, or
restricted activity that would be held enforceable.
Section 5.9 Name, Trademark. PA represents and warrants that, as of the
---------------
date hereof, PA conducts its professional practice under the name of, and only
under the name of "Castle 1st Dental Care, P.A." and that such name has been
licensed to PA by Business Manager. PA covenants and promises that, without the
prior written consent of the Business Manager, PA will not:
(a) take any action or omit to take any action that is reasonably likely
to result in the change or loss of the name;
(b) license, sell, give, or otherwise transfer the name or the right to
use the name to any dental practice, dentist, professional corporation, or any
other entity; or
(c) cease conducting the professional practice of PA under the name.
Section 5.10 Peer Review. PA shall designate a committee of Dentists to
-----------
function as a dental peer review committee to review credentials of potential
recruits, perform quality assurance functions, and otherwise resolve dental
competence issues. The dental peer review committee shall function pursuant to
formal written policies and procedures.
Section 5.11 Indemnification. PA shall indemnify, hold harmless and
---------------
defend Business Manager, its officers, directors and employees, from and against
any and all liability, loss, damage, claim, causes of action and expenses
(including reasonable attorneys' fees), whether or not covered by insurance,
caused or asserted to have been caused, directly or indirectly, by or as a
result of the performance of Dental Services or any other acts or omissions by
PA and/or its shareholders, agents, employees and/or subcontractors (other than
Business Manager) during the term hereof. Business Manager shall indemnify,
hold harmless and defend PA, its officers, directors and employees, from and
against any and all liability, loss, damage, claim, causes of action and
expenses (including reasonable attorneys' fees), caused or asserted to have been
caused, directly or indirectly, by or as a result of the performance of any
intentional acts, negligent acts, or omissions by Business Manager and/or its
shareholders, agents, employees and/or subcontractors (other than PA) during the
term of this Agreement.
23
ARTICLE VI. FINANCIAL ARRANGEMENT
---------------------
Section 6.1 Definitions. For purposes of this Article VI, capitalized
------------
terms used herein shall have the meanings ascribed as follows:
(a) Base Management Fee. The Base Management Fee shall be the amount,
-------------------
calculated on a monthly basis, that is equal to twelve and one-half percent
(12.5%) of the Adjusted Gross Revenue attributable to the applicable monthly
period.
(b) Performance Fee. The Performance Fee shall be the amount, calculated
---------------
on a monthly basis, that is calculated in accordance with the Applicable Exhibit
to the Budget.
Section 6.2 Management Fee. PA and Business Manager agree to the
--------------
compensation set forth herein as being paid to Business Manager in consideration
of a substantial commitment made by Business Manager hereunder and that such
fees are fair and reasonable. Each month, in the priority established by
Section 4.9 (b), Business Manager shall be paid the following:
(i) the amount of all Office Expenses (other than the Base
Management Fee) paid by the Business Manager on behalf of PA.
(ii) the Base Management Fee.
(iii) the Performance Fee.
Section 6.3 Adjustments. If there are not sufficient funds to pay
-----------
either or both of the Base Management Fee or the Performance Fee, all unpaid
amounts shall accumulate and carry over from month to month until paid or until
the termination of this Management Services Agreement, in which case such unpaid
amounts shall be immediately due and payable as of the date of termination.
Amounts carried over shall earn interest at the rate of ten percent (10%) per
annum. Furthermore, the amount of the Performance Fee paid will be monitored
and reconciled on an annual basis and any overpayments of the Performance Fee
shall be promptly refunded by the Business Manager.
Section 6.4 Reasonable Value. Payment of the Base Management Fee or
----------------
Performance Fee is not intended to be and shall not be interpreted or applied as
permitting Business Manager to share in PA's fees for Dental Services or any
other services, but is acknowledged as the parties' negotiated
24
agreement as to the reasonable fair market value of the contract analysis and
support, other support services, purchasing, personnel, office space,
management, administration, strategic management and other items and services
furnished by Business Manager pursuant to this Management Services Agreement,
considering the nature and volume of the services required and the risks assumed
by Business Manager.
Section 6.5 Payment of Management Fee. To facilitate the payment of
-------------------------
the Management Fee as provided in Section 6.1 hereof, PA hereby expressly
authorizes Business Manager to make withdrawals of the Management Fee from the
PA Account as such fee becomes due and payable during the Term and thereafter as
provided in Section 7.3.
Section 6.6 Accounts Receivable. To assure that PA receives the entire
-------------------
amount of professional fees for its services and to assist PA in maintaining
reasonable cash flow for the payment of Office Expenses, Business Manager may,
during the Term, purchase, without recourse to PA for the amount of the
purchase, the accounts receivable of PA arising during the previous month by
transferring the amount set forth below into the PA Account. The consideration
for the purchase shall be an amount equal to the Adjusted Gross Revenue recorded
each month (according to GAAP reflecting adjustments related to the bad debt
reserve). Business Manager shall be entitled to offset Office Expenses
reimbursement due to Business Manager under Section 6.2 above against the amount
payable for the accounts receivable. Although it is the intention of the
parties that Business Manager purchase and thereby become the owner of the
accounts receivable of PA, in the event such purchase shall be ineffective for
any reason, PA is concurrently herewith granting to Business Manager a security
interest in the accounts so purchased, and PA shall cooperate with Business
Manager and execute all documents in connection with the pledge of such
purchased accounts receivable to Business Manager. All collections in respect
to such accounts receivable purchased by Business Manager shall be received by
Business Manager as the agent of PA and shall be endorsed to Business Manager
and deposited in a bank account at a bank designated by Business Manager. To
the extent PA comes into possession of any payments in respect of such accounts
receivable, PA shall direct such payments to Business Manager for deposit in
bank accounts designated by Business Manager; provided, however, that nothing
contained herein shall be construed as PA relinquishing control over credit
extended by PA.
25
Section 6.7 Disputes Regarding Fees. PA shall not be entitled to a
-----------------------
set-off or reduction in its Management Fees by reason of its belief that
Business Manager has failed to perform its obligations hereunder or otherwise.
ARTICLE VII. TERM AND TERMINATION
--------------------
Section 7.1 Initial and Renewal Term. The Term of this Management
------------------------
Services Agreement will be for an initial period of twenty-five (25) years after
the effective date, and shall be automatically renewed for successive five (5)
year periods thereafter, provided that neither Business Manager nor PA shall
have given notice of termination of this Management Services Agreement at least
ninety (90) days before the end of the initial term or any renewal term, or
unless otherwise terminated as provided in Section 7.2 of this Management
Services Agreement.
Section 7.2 Termination.
-----------
(a) Termination By Business Manager. Subject to Section 7.2(c), Business
-------------------------------
Manager may only terminate this Management Services Agreement either without
cause upon ninety (90) days' written notice to PA, or upon the occurrence of any
one of the following events which shall be deemed to be "for cause":
(i) The dissolution of PA or the filing of a petition in voluntary
bankruptcy, an assignment for the benefit of creditors, or other
action taken voluntarily or involuntarily under any State or
federal statute for the protection of debtors;
(ii) PA materially defaults in the performance of any of its material
duties or obligations hereunder, and such default continues for
thirty (30) days after PA receives notice of the default.
(b) Termination By PA. Subject to Section 7.2(c) PA may only terminate
-----------------
this Management Services Agreement upon any of the following occurrences which
shall be deemed to be "for cause":
(i) The dissolution of Business Manager or the filing of a petition
in voluntary bankruptcy, an assignment for the benefit of
creditors, or other action taken voluntarily or involuntarily
under any State or federal statute for the protection of debtors;
or
26
(ii) In the event that Business Manager materially defaults in the
performance of any of its material obligations hereunder and such
default continues for sixty (60) days after Business Manager
receives notice of the default.
Termination by PA hereunder shall require the affirmative vote of three-fourths
of the outstanding voting shares of the common shareholders of PA entitled to
vote.
(c) Termination by Agreement. In the event PA and Business Manager shall
------------------------
mutually agree in writing, this Management Services Agreement may be terminated
on the date specified in such written agreement.
(d) Legislative, Regulatory or Administrative Change. In the event there
------------------------------------------------
shall be a change in the Act, any federal or State statutes, case laws,
regulations or general instructions, the interpretation of any of the foregoing,
the adoption of new federal or State legislation, or a change in any third party
reimbursement system, any of which are reasonably likely to adversely affect the
manner in which either party may perform or be compensated for its services
under this Management Services Agreement or which shall make this Management
Services Agreement unlawful, the parties shall immediately enter into good faith
negotiations regarding a new service arrangement or basis for compensation for
the services furnished pursuant to this Management Services Agreement that
complies with the law, regulation, or policy and that approximates as closely as
possible the economic position of the parties prior to the change. If good
faith negotiations cannot resolve the matter, it shall be submitted to
arbitration as referenced in Section 8.6; provided however that in the event
that the Florida Board of Dentistry or other authorized regulatory body issues a
final and non-appealable order revoking the license of any Dentist on the
grounds that PA's entering into and performing its obligations under this
Management Services Agreement is unlawful, PA may terminate this Management
Services Agreement upon thirty (30) days prior written notice.
Section 7.3 Effects of Termination. Upon termination of this
----------------------
Management Services Agreement, as hereinabove provided, neither party shall have
any further obligations hereunder except for (i) obligations accruing prior to
the date of termination, including, without limitation, payment of the
Management Fees and PA Expenses relating to services provided prior to the
termination of this Management Services Agreement, (ii) obligations, promises,
or covenants set forth herein that are expressly made to extend beyond the Term,
including, without limitation, indemnities, which provisions shall survive the
expiration or termination of this Management Services Agreement for any reason,
and noncompetition provisions, which provisions shall survive the expiration or
termination of this Management Services Agreement by Business Manager for cause
or by PA in breach of this Agreement, and (iii) the obligations of PA and
Business
27
Manager described in Section 7.4. In effectuating the provisions of this Section
7.3, PA specifically acknowledges and agrees that Business Manager shall
continue to collect and receive on behalf of PA all cash collections from
accounts receivable in existence at the time this Management Services Agreement
is terminated, it being understood that such cash collections will represent, in
part, compensation to Business Manager for management services already rendered
and compensation on accounts receivable purchased by Business Manager. Upon the
expiration or termination of this Management Services Agreement for any reason
or cause whatsoever, Business Manager shall surrender to PA all books and
records pertaining to PA's dental practice.
ARTICLE VIII. MISCELLANEOUS
-------------
Section 8.1 Administrative Services Only. Nothing in this Management
----------------------------
Services Agreement is intended or shall be construed to allow Business Manager
to exercise control or direction over the manner or method by which PA and its
Dentists perform Dental Services or other professional health care services.
The rendition of all Dental Services, including, but not limited to, the
prescription or administration of drugs shall be the sole responsibility of PA
and its Dentists, and Business Manager shall not interfere in any manner or to
any extent therewith. Nothing contained in this Management Services Agreement
shall be construed to permit Business Manager to engage in the practice of
dentistry, it being the sole intention of the parties hereto that the services
to be rendered to PA by Business Manager are solely for the purpose of providing
nondental management and administrative services to PA so as to enable PA to
devote its full time and energies to the professional conduct of its dental
practice and provision of Dental Services to its patients and not to
administration, or practice management.
Section 8.2 Status of Contractor; Agency. It is expressly acknowledged
----------------------------
that the parties hereto are independent contractors and that this Management
Services Agreement is intended to constitute Business Manager as PA's agent.
Nothing herein shall be construed to create an employer/employee, partnership,
or joint venture relationship, or to allow either to exercise control or
direction over the manner or method by which the other performs the services
that are the subject matter of this Management Services Agreement or to permit
Business Manager to take any action that would constitute the practice of
dentistry; provided always that the services to be provided hereunder shall be
furnished in a manner consistent with the standards governing such services and
the provisions of this Management Services Agreement. Each party understands and
agrees that (i) the other will not be treated as an employee for federal tax
purposes, (ii) neither will withhold on behalf of the other any sums for income
tax, unemployment insurance, social security, or any other withholding pursuant
to any law or requirement of any governmental body or make available any of the
benefits afforded to its employees, (iii) all of such payments, withholdings,
and benefits,
28
if any, are the sole responsibility of the party incurring the liability, and
(iv) each will indemnify and hold the other harmless from any and all loss or
liability arising with respect to such payments, withholdings, and benefits, if
any.
Section 8.3 Notices. Any notice, demand, or communication required,
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permitted, or desired to be given hereunder shall be in writing and shall be
served on the parties at the following respective addresses:
PA: Castle 1st Dental Care, P.A.
00000 X.X. Xxxxxxx 00X., Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Business Manager: CASTLE DENTAL CENTERS OF FLORIDA, INC.
0000 Xxxx Xxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate. Any notice, demand, or
communication required, permitted, or desired to be given hereunder shall be
sent either (a) by hand delivery, in which case notice shall be deemed received
when actually delivered, (b) by prepaid certified or registered mail, return
receipt requested, in which case notice shall be deemed received five calendar
days after deposit, postage prepaid in the United States Mail, or (c) by a
nationally recognized overnight courier, in which case notice shall be deemed
received one business day after deposit with such courier.
Section 8.4 Governing Law. This Management Services Agreement shall
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be governed by the laws of the State of Florida applicable to agreements to be
performed wholly within the State. Florida law was chosen by the parties after
negotiation to govern interpretation of this Management Services Agreement
because Pinellas County, Florida is the seat of management for Business Manager.
The federal and State courts of Pinellas County, Florida shall be the exclusive
venue for any litigation, special proceeding, or other proceeding between the
parties that may arise out of, or be brought in connection with or by reason of,
this Management Services Agreement.
Section 8.5 Assignment. Except as may be herein specifically provided to
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the contrary, this Management Services Agreement shall inure to the benefit of
and be binding upon the parties hereto and
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their respective legal representatives, successors, and assigns; provided,
however, that PA may not assign this Management Services Agreement without the
prior written consent of Business Manager, which consent may be withheld. The
sale, transfer, pledge, or assignment of any of the common shares held by any
shareholder of PA or the issuance by PA of common or other voting shares to any
other person, or any combination of such transactions within a period of one (1)
year, such that the existing shareholder in PA fails to maintain a majority of
the voting interests in PA shall be deemed an attempted assignment by PA, and
shall be null and void unless consented to in writing by Business Manager prior
to any such transfer or issuance. Any breach of this provision, whether or not
void or voidable, shall constitute a material breach of this Management Services
Agreement, and in the event of such breach, Business Manager may terminate this
Management Services Agreement upon twenty-four (24) hours notice to PA.
Section 8.6 Arbitration.
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(a) General. The parties shall use good faith negotiation to resolve any
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controversy, dispute or disagreement arising out of or relating to this
Management Services Agreement or the breach of this Management Services
Agreement. Any matter not resolved by negotiation shall be submitted to binding
arbitration and such arbitration shall be governed by the terms of this Section
8.6.
(b) Scope. Unless otherwise specifically provided herein, the parties
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hereto agree that any claim, controversy, dispute or disagreement between or
among any of the parties hereto arising out of or relating to this Management
Services Agreement (other than claims involving any noncompetition or
confidentiality covenant) shall be governed exclusively by the terms and
provisions of this Section 8.6; provided, however, that the terms and provisions
of this Section 8.6 shall not preclude any party hereto from seeking, or a court
of competent jurisdiction from granting, a temporary restraining order,
temporary injunction or other equitable relief for any breach of (i) any
noncompetition or confidentiality covenant herein or (ii) any duty, obligation,
covenant, representation or warranty, the breach of which may cause irreparable
harm or damage.
(c) Arbitrators. In the event of any claim, controversy, dispute or
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disagreement between the parties hereto arising out of or relating to this
Management Services Agreement, and in the further event the parties are unable
to resolve such claim, controversy, dispute or disagreement within thirty (30)
days after notice is first delivered pursuant to Section 8.3, the parties agree
to select arbitrators to hear and decide all such claims under this Section 8.6.
Each party shall select one arbitrator, The two arbitrators so chosen shall then
select a third arbitrator who is experienced in the matter or action that is
subject to such arbitration. If such matter or action involves health-care
issues, then the third arbitrator shall have such
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qualifications as would satisfy the requirements of the National Health Lawyers
Association Alternative Dispute Resolution Service. Each of the arbitrators
chosen shall be impartial and independent of all parties hereto. If either of
the parties fails to select an arbitrator within twenty days after the end of
such thirty-day period, or if the arbitrators chosen fail to select a third
arbitrator within twenty days, then any party may in writing request the judge
of the United States District Court for the Middle District of Florida, Tampa
Division, senior in term of service to appoint the arbitrator or arbitrators
and, subject to this Section 8.6, such arbitrators shall hear all arbitration
matters arising under this Section 8.6, and, in default of such selection, may
ask the American Arbitration Association.
(d) Applicable Rules.
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(i) Each arbitration hearing shall be held at a place in Clearwater,
Florida acceptable to a majority of the arbitrators. The
arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association to the
extent such rules do not conflict with the terms hereof. The
decision of a majority of the arbitrators shall be reduced to
writing and shall be binding on the parties. Judgment upon the
award(s) rendered by a majority of the arbitrators may be entered
and execution had in any court of competent jurisdiction or
application may be made to such court for a judicial acceptance
of the award and an order of enforcement. The charges and
expenses of the arbitrators shall be shared equally by the
parties to the hearing.
(ii) The arbitration shall commence within thirty (30) days after the
arbitrators are selected in accordance with the provisions of
this Section 8.6. In fulfilling their duties with respect to the
matter in arbitration, the arbitrators may consider such matters
as, in the opinion of the arbitrators, are necessary or helpful
to make a proper valuation. The arbitrators may consult with and
engage disinterested third parties to advise the arbitrators. The
arbitrators shall not add any interest factor reflecting the time
value of money to the amount of any award granted under any
arbitration hereunder and shall not award any punitive damages.
(iii) If any of the arbitrators selected hereunder should die, resign
or be unable to perform his or her duties hereunder, the
remaining arbitrators or such senior judge (or such judge's
successor) shall select a replacement arbitrator. The procedure
set forth in this Section 8.6 for selecting the arbitrators shall
be followed from time to time as necessary.
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(iv) As to the resolution of any claim, controversy, dispute or
disagreement that under the terms hereof is made subject to
arbitration, no lawsuit based on such resolution shall be
instituted by either of the parties hereto, other than to compel
arbitration proceedings or enforce the award of a majority of the
arbitrators.
(v) All privileges under Florida and federal law, including attorney-
client and work-product privileges, shall be preserved and
protected to the same extent that such privileges would be
protected in a federal court proceeding applying Florida law.
Section 8.7 Waiver of Breach. The waiver by either party of a breach
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or violation of any provision of this Management Services Agreement shall not
operate as, or be construed to constitute, a waiver of any subsequent breach of
the same or another provision hereof.
Section 8.8 Enforcement. In the event either party resorts to legal
-----------
action to enforce or interpret any provision of this Management Services
Agreement, the prevailing party shall be entitled to recover the costs and
expenses of such action so incurred, including, without limitation, reasonable
attorneys' fees.
Section 8.9 Gender and Number. Whenever the context of this
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Management Services Agreement requires, the gender of all words herein shall
include the masculine, feminine, and neuter, and the number of all words herein
shall include the singular and plural.
Section 8.10 Additional Assurances. Except as may be herein
---------------------
specifically provided to the contrary, the provisions of this Management
Services Agreement shall be self-operative and shall not require further
agreement by the parties; provided, however, at the request of either party, the
other party shall execute such additional instruments and take such additional
acts as are reasonable and as the requesting party may deem necessary to
effectuate this Management Services Agreement.
Section 8.11 Consents, Approvals, and Exercise of Discretion.
-----------------------------------------------
Whenever this Management Services Agreement requires any consent or approval to
be given by either party, or either party must or may exercise discretion, and
except where specifically set forth to the contrary, the parties agree that such
consent or approval shall not be unreasonably withheld or delayed, and that such
discretion shall be reasonably exercised.
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Section 8.12 Force Majeure. Neither party shall be liable or deemed
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to be in default for any delay or failure in performance under this Management
Services Agreement or other interruption of service deemed to result, directly
or indirectly, from acts of God, civil or military authority, acts of public
enemy, war, accidents, fires, explosions, earthquakes, floods, failure of
transportation, strikes or other work interruptions by either party's employees,
or any other similar cause beyond the reasonable control of either party unless
such delay or failure in performance is expressly addressed elsewhere in this
Management Services Agreement.
Section 8.13 Severability. The parties hereto have negotiated and
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prepared the terms of this Management Services Agreement in good faith with the
intent that each and every one of the terms, covenants and conditions herein be
binding upon and inure to the benefit of the respective parties. Accordingly,
if any one or more of the terms, provisions, promises, covenants or conditions
of this Management Services Agreement or the application thereof to any person
or circumstance shall be adjudged to any extent invalid, unenforceable, void or
voidable for any reason whatsoever by a court of competent jurisdiction or an
arbitration tribunal, such provision shall be as narrowly construed as possible,
and each and all of the remaining terms, provisions, promises, covenants and
conditions of this Management Services Agreement or their application to other
persons or circumstances shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law. To the extent this
Management Services Agreement is in violation of applicable law, then the
parties agree to negotiate in good faith to amend the Management Services
Agreement, to the extent possible consistent with its purposes, to conform to
law.
Section 8.14 Divisions and Headings. The divisions of this
----------------------
Management Services Agreement into articles, sections, and subsections and the
use of captions and headings in connection therewith is solely for convenience
and shall not affect in any way the meaning or interpretation of this Management
Services Agreement.
Section 8.15 Amendments and Management Services Agreement Execution.
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This Management Services Agreement and amendments hereto shall be in writing and
executed in multiple copies on behalf of PA by its President, and on behalf of
Business Manager by any duly authorized officer thereof. Each multiple copy
shall be deemed an original, but all multiple copies together shall constitute
one and the same instrument.
Section 8.16 Entire Management Services Agreement. With respect to the
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subject matter of this Management Services Agreement, this Management Services
Agreement supersedes all previous contracts
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and constitutes the entire agreement between the parties. Neither party shall be
entitled to benefits other than those specified herein. No prior oral statements
or contemporaneous negotiations or understandings, except for the Budget, or
prior written material not specifically incorporated herein shall be of any
force and effect, and no changes in or additions to this Management Services
Agreement shall be recognized unless incorporated herein by amendment as
provided herein, such amendment(s) to become effective on the date stipulated in
such amendment(s). The parties specifically acknowledge that, in entering into
and executing this Management Services Agreement, except for the Budget, the
parties rely solely upon the representations and agreements contained in this
Management Services Agreement and no others.
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IN WITNESS WHEREOF, PA and Business Manager have caused this Management
Services Agreement to be executed by their duly authorized representatives, all
as of the day and year first above written.
PA: Castle 1st Dental Care, P.A.
By:_________________________________
Xxxx X. Xxxxxx, D.D.S., President
BUSINESS MANAGER: CASTLE DENTAL CENTERS OF FLORIDA, INC.
By:_________________________________
Xxxx X. Xxxxx, Vice President and Chief
Financial Officer
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