MANAGEMENT SERVICES AGREEMENT
BETWEEN
Xxxxxx X. Xxxx, P.C.
(the "New PC")
AND
Omega Orthodontics of Woodland Hills, Inc.
(the "MSO")
AND
Omega Orthodontics, Inc.
("OMEGA")
MANAGEMENT SERVICES AGREEMENT
TABLE OF CONTENTS
ARTICLE 1 TERM................................................................1
ARTICLE 2 DUTIES OF THE MSO...................................................1
2.1 General....................................................................1
2.2 Endodontic Office Services.................................................1
2.3 Administrative Services....................................................1
2.4 Business Systems, Procedures and Forms.....................................1
2.5 Purchasing, Accounts Payable, Supplies and Inventory Control...............1
2.6 Regulatory Compliance Services.............................................1
2.7 Billing, Collection........................................................1
2.8 Disbursement of Funds......................................................1
2.9 MSO Expenses...............................................................1
2.10 INTENTIONALLY BLANK.......................................................7
2.11 Accounting; Bookkeeping and Reports.......................................7
2.12 Marketing.................................................................8
2.13 Complaints................................................................8
2.14 Practice Laws.............................................................8
2.15 Monthly Meetings..........................................................8
2.16 Maintenance and Cleaning Services.........................................8
2.17 Licenses and Permits......................................................8
2.18 Insurance.................................................................8
2.19 Practice Transition and Associate Selection...............................9
ARTICLE 3 DUTIES OF THE NEW PC...............................................10
3.1 General...................................................................10
3.2 Employment of the Endodontists and Rendering of Patient Care..............10
3.3 Professional Services.....................................................10
3.4 Records...................................................................10
3.5 Professional Expenses.....................................................11
3.6 Professional Liability Insurance..........................................11
3.7 Employment Agreement......................................................11
3.8 Confidentiality...........................................................12
ARTICLE 4 PROFESSIONAL SERVICES, CONTROL OF SOLICITATION, APPROVAL OF
ADVERTISING MATERIAL AND NO RECIPROCATION..........................13
4.1 Fundamental Understanding.................................................13
4.2 No Solicitation; Control..................................................13
4.3 No Advertising............................................................13
4.4 No Referrals..............................................................13
ARTICLE 5 LEASE OF OFFICE FACILITIES AND EQUIPMENT...........................14
5.1 Office Lease/Sublease.....................................................14
5.2 Leasehold Improvements, etc...............................................15
0.0.Xx Warranty...............................................................16
ARTICLE 6 COMPENSATION.......................................................16
ARTICLE 7 SECURITY INTEREST..................................................17
ARTICLE 8 COVENANTS..........................................................18
8.1 New PC's Covenants........................................................18
8.2 MSO's Covenants...........................................................19
ARTICLE 9 INSURANCE AND INDEMNITY.............................................19
9.1 Insurance to be Maintained by the New PC..................................19
9.2 Insurance to be Maintained by the MSO.....................................20
9.3 Tail Insurance Coverage...................................................20
9.4 Additional Insureds.......................................................20
9.5 Indemnification...........................................................20
ARTICLE 10 TERMINATION.......................................................21
10.1 Termination by the New PC................................................21
10.2 Termination by MSO.......................................................21
ARTICLE 11 AUTHORIZED AGENT AND POWERS OF ATTORNEY...........................23
ARTICLE 12 INDEPENDENT CONTRACTOR RELATIONSHIP...............................24
ARTICLE 13 MISCELLANEOUS.....................................................24
13.1 Access to Records........................................................24
13.2 Patient Records..........................................................24
13.3 The New PC's Control Over the Endodontic Practice........................24
ARTICLE 14 ALTERNATIVE DISPUTE RESOLUTION.....................................25
14.1 Alternative Dispute Resolution...........................................25
14.2 Waiver of Jury...........................................................26
ARTICLE 15 GENERAL PROVISIONS................................................26
15.2 INTENTIONALLY OMITTED....................................................27
15.3 Contract Modifications for Prospective Legal Events......................27
15.4 Exclusive Remedies.......................................................27
15.5 No Obligation to Third Parties...........................................27
15.6 Entire Agreement.........................................................27
15.7 Assignment...............................................................28
15.8 INTENTIONALLY OMITTED....................................................28
15.9 Governing Law............................................................28
15.10 Events Excusing Performance.............................................28
15.11 Compliance with Applicable Laws.........................................29
15.12 Language Construction...................................................29
15.13 Amendments..............................................................29
15.14 Severability............................................................29
15.15 No Waiver...............................................................29
15.16 Captions................................................................29
15.17 Counterparts............................................................29
SCHEDULE 1 THE ENDODONTISTS
SCHEDULE 2 ENDODONTIC OFFICES AND SERVICES
SCHEDULE 3 COMPENSATION - MANAGEMENT FEES
EXHIBIT A ENDODONTIC OFFICES - MASTER LEASE
EXHIBIT B PRACTICE PROVIDERS
EXHIBIT C NEW PC'S AFFIDAVIT
EXHIBIT D SECURITY AGREEMENT
EXHIBIT E ALTERNATIVE DISPUTE RESOLUTION PROCEDURES
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT is made effective as of this 1st day of August, 1998, by and
between Xxxxxx X. Xxxx, P.C., a professional corporation (the "New PC")
incorporated under the laws of the State of Oregon (the "State"), and Omega
Orthodontics of Woodland Hills, Inc., a Delaware corporation (the "MSO"), and
Omega Orthodontics, Inc., a Delaware corporation ("OMEGA").
WHEREAS, OMEGA provides professional management and marketing services to
endodontic and other dental specialty practices in the United States, which
services include providing practice management systems, office space, equipment,
furnishings and active administrative personnel necessary for the operation of
such practices and are provided directly or indirectly through management
service organizations such as the MSO;
WHEREAS, OMEGA and Xxxxxx X. Xxxx, D.D.S., M.S. ("Xx. Xxxx") who is duly
licensed to practice endodontics in the State have entered into that certain
Affiliation Agreement and Asset Purchase Agreement (the "Affiliation Agreement")
dated as of May 1, 1998, pursuant to which OMEGA acquired certain assets of Xx.
Xxxx;
WHEREAS, the New PC owns and operates an endodontic practice with offices
located in the facilities identified in Exhibit A (the "Endodontic Offices") and
furnishes endodontic care to the general public through the services of Xx. Xxxx
and any and all other Endodontists who are or become affiliated with the New PC
as of or following the date hereof and who are or become subsequently named on
Schedule 1 hereto (individually, an "Endodontist" and collectively, the
"Endodontists");
WHEREAS, the MSO was formed to provide equipment, facilities and personnel to,
and to manage the non-endodontic business affairs of, the New PC;
WHEREAS, the MSO's services are designed to improve the efficiency and
profitability of the New PC while enhancing the ability of Xx. Xxxx and the
Endodontists (if any) to render quality endodontic care to the patients of the
New PC;
WHEREAS, the New PC wishes to retain the MSO to perform the functions and to
provide the services described in this Agreement to assist the New PC to achieve
the above goals.
NOW, THEREFORE, IT IS AGREED that the MSO shall perform managerial and
administrative services for the New PC and provide office space and endodontic
facilities appropriate for rendering general endodontic treatment at the
Endodontic Offices upon the following terms and conditions:
ARTICLE 1
TERM
1.1 The initial term of this Agreement shall commence on the date first above
written and continue for a period of twenty (20) years (the "Initial Term"),
subject, however, to earlier termination in accordance with Article 10 hereof.
This Agreement shall continue for two separate and successive ten year periods
(each a "Renewal Term" and collectively with the Initial Term, the "Term")
unless the MSO otherwise elects upon six months written notice to the New PC
prior to expiration of the Initial Term or any then effective Renewal Term.
ARTICLE 2
DUTIES OF THE MSO
2.1 General. The MSO shall provide the New PC with comprehensive practice
management, financial and marketing services, and such facilities, equipment,
and support personnel as are reasonably required by the New PC to operate its
endodontic practice at the Endodontic Offices, as determined by the MSO in
consultation with the New PC. The New PC hereby appoints the MSO as the sole and
exclusive business manager of the New PC and agrees that the MSO shall have all
power and authority reasonably necessary to manage the non-endodontic business
affairs of the New PC and carry out the MSO's endodontic duties under this
Agreement, subject to the requirements of the applicable provisions of State law
relating to the practice of endodontics and subject to consultation with the New
PC. The MSO may perform some or all of its services at a location other than at
the Endodontic Offices.
2.2 Endodontic Office Services. The MSO shall provide or arrange for the
provision of the office space and related leasehold improvements to constitute
the Endodontic Offices and related fixtures, furniture, furnishings, equipment
and related services (collectively, the "Endodontic Office Services") described
in Schedule 2 hereto, as such Schedule may be amended by the New PC and the MSO
from time to time. The MSO shall be responsible for all repairs, maintenance and
replacement of the Endodontic Offices including such leasehold improvements,
fixtures, furniture, furnishings and equipment, except for repairs, maintenance
and replacement necessitated by the negligence of the New PC, its employees and
agents (not including the MSO or its employees or agents). The MSO shall, on an
ongoing basis, evaluate and consult with the New PC on the equipment needs of
and the efficiency and adequacy of the Endodontic Offices. The MSO shall provide
telephone, facsimile transmission, printing, duplicating and transcribing
services as needed, as well as all laundry, linen and uniforms.
2.3 Administrative Services.
(a) The MSO shall supply secretarial, reception, maintenance, front office,
skilled assistants and other personnel, except duly licensed "Practice
Providers," during normal office hours as reasonably requested by the New PC, to
enable the New PC to perform effectively endodontic and treatment services. The
MSO shall be responsible for staff scheduling, provided, however, that all
Practice Providers including endodontic assistants and hygienists shall at all
times be under the direct supervision of the New PC. The New PC shall have sole
authority to employ and terminate the employment of all Practice Providers. All
personnel placed in the Endodontic Offices by the MSO shall be subject to the
approval of the New PC, which approval shall not be unreasonably withheld, and
the New PC shall have the authority to instruct the MSO to terminate the
employment of such personnel for any lawful reason. The MSO shall be responsible
for all personnel wages, withholding, fringe benefits, bonuses and workers'
compensation insurance in connection with its employees; provided, however, that
the New PC is in full compliance with the compensation provisions of this
Agreement.
(b) "Practice Providers" shall mean the individuals who are duly licensed to
practice dentistry and/or endodontics in the State including Xx. Xxxx and the
Endodontists (if any) and other individuals who are employees of the New PC or
otherwise under contract with the New PC to provide dental or endodontic,
services to patients of the New PC or otherwise required by applicable "Laws"
(as defined in Section 2.6 below) to be employees of the New PC to provide
services to patients of the Practice. A list of all Practice Providers and their
relationship to the New PC is set forth as Exhibit B attached hereto and
incorporated herein by reference. Prior to making any changes in the list of
Practice Providers, the New PC shall use its best efforts to consult with the
MSO. The New PC also shall use its best efforts to consult with the MSO with
regard to the terms of contracts entered into between the New PC and the
Practice Providers and the terms and conditions of their employment or
engagement as independent contractors.
2.4 Business Systems, Procedures and Forms. In consultation with the New PC, the
MSO shall establish standardized business systems and procedures for the New PC,
including, but not limited to, patient scheduling systems, treatment records
system, financial reporting and process control systems and patient
communication management systems (the "OMEGA Patient Scheduling System") that
are designed to improve the New PC operating efficiency. The MSO shall analyze
such information on an ongoing basis in order to advise the New PC on ways of
improving operating efficiencies. The MSO shall provide training to the staff of
the New PC in the implementation and operation of such standardized business
systems and procedures. The MSO shall additionally provide the New PC with and
train the New PC's staff in the use of standardized clinical forms, including,
without limitation, forms for patient evaluations and treatment plans. The New
PC expressly acknowledges and agrees that it shall have no property rights in
the OMEGA Patient Scheduling System and the other foregoing systems, procedures
and clinical forms, and further agrees that such systems, procedures, and forms
shall be deemed to constitute Confidential Information within the meaning of
Section 3.8 hereof and be subject to the restrictions on the use, appropriation,
and reproduction of such Confidential Information provided for in Section 3.8.
2.5 Purchasing, Accounts Payable, Supplies and Inventory Control. The MSO shall
be responsible for and shall establish and maintain systems for the handling and
processing of all purchasing and payment activities and for the performance of
all payroll and payroll accounting functions of the New PC. The MSO shall order
and purchase and maintain all inventory and endodontic supplies as reasonably
required by the New PC to enable the New PC to render endodontic care to its
patients including, all endodontic appliances and other supplies, laboratory
supplies and sanitation supplies.
2.6 Regulatory Compliance Services. The MSO shall arrange for or cause to be
rendered to the New PC such business, legal and regulatory management
consultation and advice as may be reasonably required or requested by the New PC
and directly related to the non-endodontic operations of the New PC or its
compliance with Federal, state or local laws, rules, regulations or
interpretations governing or applicable to the New PC (collectively, "Laws");
provided, however, that the MSO shall not be responsible for any services
related to malpractice or other professional service claims or other matters not
directly related to services provided by the MSO hereunder or its compliance
with Laws, or for any legal or tax advice or services or personal financial
services to Xx. Xxxx and the Endodontists (if any) or any employee or agent of
the New PC.
2.7 Billing, Collection. The MSO shall be responsible for: (i) billing and
collecting payments for all endodontic and other professional services rendered
by the New PC and the Practice Providers, with all such billing and collecting
to be done in the name of the New PC; (ii) receiving payments from patients,
insurance companies and all other third party payors; (iii) taking possession of
and endorsing in the name of the New PC any notes, checks, money orders,
insurance payments and other instruments received in payment for services or of
accounts receivable; and (iv) settling and compromising claims and, where deemed
appropriate by the MSO and consented to (which consent shall not be unreasonably
withheld or delayed) by the Practice Provider rendering the professional
services which resulted in the applicable accounts receivable, assigning such
accounts receivable to a collection agency or the bringing of a legal action
against a patient or a payor on the New PC's behalf. In seeking payments on
behalf of the New PC hereunder, the MSO shall act as the New PC's agent in
billing and collecting professional fees, charges and other accounts owed to the
New PC and shall only xxxx under the New PC's provider number. In this regard,
the New PC appoints the MSO for the Term of this Agreement in accordance with
the provisions of Article 11 hereof as its true and lawful attorney-in-fact for
the purposes set forth above in this Section 2.7 and in Section 2.8 below. The
MSO does not guarantee collection and is not responsible for any loss to the New
PC as a result of any inability to collect fees and charges.
2.8 Disbursement of Funds.
(a) All monies collected for the New PC by the MSO pursuant to Section 2.7 above
shall be deposited into an account (the "the New PC Account") with a bank whose
deposits are insured with the Federal Deposit Insurance Corporation and which
bank is acceptable to the MSO and the New PC (the "Bank"). The New PC Account
shall contain the name of the New PC, however, only the MSO shall be entitled to
make all disbursements therefrom. The MSO shall account for all monies so
disbursed from the New PC Account.
(b) From the funds collected and deposited by the MSO or Xx. Xxxx in the New PC
Account, the MSO shall make for and on behalf of the New PC the following
disbursements promptly, when payable:
(1) Compensation, including salaries, benefits and other direct costs
payable to Xx. Xxxx and the Endodontists (if any) and the other
Practice Providers of the New PC, and all withholding taxes and
assessments payable to Federal, state and local governments in
connection with the employment of such personnel; and
(2) All compensation payable to the MSO pursuant to Article 6 hereof.
(c) In the event the funds in the New PC Account will, at any time be
insufficient to cover the current portion of the foregoing expenses when
payable, the MSO may advance to the New PC the necessary funds to pay the
current portion of such expenses for the benefit of the New PC, which advances
will be deemed to be loans to the New PC to be repaid without interest from the
New PC Account at such times as there are adequate funds therein or upon such
other terms and at such times as agreed to by the New PC and the MSO, which
indebtedness shall not be deemed an MSO Expense for purposes of Section 2.9.
2.9 MSO Expenses. The MSO shall be responsible for the payment (whether received
pursuant to Section 2.8(b)(2) hereof or from other sources unrelated to the New
PC) of all MSO Expenses, as defined below, during the term of this Agreement
without reimbursement by the New PC, unless otherwise agreed to by the parties
hereto.
(a) "MSO Expenses" shall mean such operating and non-operating expenses incurred
by the MSO in performing its services, including, without limitation:
(1) Salaries, benefits and other direct costs of all employees of the
MSO providing services to the New PC hereunder (but excluding Xx. Xxxx
and all the Endodontists (if any) and other Practice Providers);
(2) Direct costs associated with operating the Endodontic Offices,
including without limitation, utilities, cleaning and maintenance,
including maintenance of the interior, exterior and grounds of the
Endodontic offices as provided in the Master Lease;
(3) Obligations of the MSO under leases or subleases entered into in
connection with the operation of the Endodontic Offices as well as
utility expenses relating to the Endodontic Offices;
(4) Personal property and intangible taxes assessed against the MSO's
assets used in connection with the operation of the Endodontic Offices,
commencing on the date of this Agreement;
(5) In the event an opportunity arises for additional Endodontists to
become employed by the New PC or other endodontic entities to merge
with the New PC, actual out-of-pocket expenses of the MSO personnel
working on a specified employment arrangement or merger, whether or not
such employment arrangement or merger is consummated;
(6) Other expenses incurred by the MSO in carrying out its obligations
under this Agreement, but excluding any corporate overhead costs of the
MSO or any corporation affiliated with the MSO not specifically listed
above.
"MSO Expenses" shall not include:
(1) Any Federal, state or local income taxes of the New PC, Xx. Xxxx
and the Endodontists (if any) and the other Practice Providers, or the
costs of preparing Federal, state or local tax returns thereof;
(2) Salaries, benefits and other direct costs of employing Xx. Xxxx and
the Endodontists (if any) and the other Practice Providers;
(3) Physician licensure fees, board certification fees and costs of
membership in professional associations and societies for Practice
Providers;
(4) Professional liability insurance for the Practice Providers as
provided for under Section 3.6 hereof;
(5) Costs of continuing professional education for Practice Providers,
including travel and related expenses;
(6) Costs associated with legal, accounting and professional services
incurred by or on behalf of the New PC;
(7) Liability judgments assessed against the New PC or the Practice
Providers in excess of policy limits or within the deductible limits of
any policy;
(8) Direct personal expenses of the Practice Providers of a kind which
the New PC may have historically provided or charged to its Practice
Providers (including, but not limited to, car allowances and other
expenses which are personal in nature);
(9) Charitable contributions by the New PC; and
(10) Any other expenses which are expressly designated herein as
expenses or responsibilities of the New PC.
2.10 INTENTIONALLY BLANK
2.11 Accounting; Bookkeeping and Reports. The MSO shall provide for or arrange
for all accounting and bookkeeping services related to the New PC's operations,
provided that such services are incurred in the ordinary course of business. In
addition, the MSO shall provide the New PC with an unaudited internal monthly
statement within twenty (20) days after the end of each month and a quarterly
review within thirty (30) days after the end of each quarter, respectively, of
the MSO's internal statements, as well as the books and records of the New PC,
all prepared by or with the assistance of an accountant chosen by the MSO. At
the end of each fiscal year of the New PC, the MSO shall arrange for a financial
statement with respect to the New PC to be prepared by the MSO's accountant. At
the New PC's request, the MSO shall prepare reports indicating the gross
revenues, number of patients, type of patients, and the activity and the
productivity of the New PC. The MSO shall assist and advise the New PC in the
financial management of the New PC.
2.12 Marketing. The MSO shall design and execute a marketing plan to promote the
New PC's professional services. The MSO shall also make available to the New PC
all brochures, contracts, and other materials reasonably related to the carrying
out of the business purposes of the New PC, including all stationery, printing
and postage costs in connection therewith. In connection with such marketing
plan, the MSO shall advise Xx. Xxxx and the Endodontists (if any) on
establishing and maintaining a plan for patients' payments for endodontic
services on an installment plan basis. All marketing activities hereunder shall
be conducted in compliance with all applicable Laws governing advertising by the
endodontic profession.
2.13 Complaints. The MSO shall assist the New PC in handling all complaints,
grievances and disputes involving the New PC and the Practice Providers and any
patients or third parties. However, the MSO shall have no control over the New
PC's patients. All decisions concerning the New PC's patients shall be made by
the New PC and the Practice Providers.
2.14 Practice Laws. Notwithstanding any provision in this Agreement, the MSO
shall not take any action in connection with the services to be rendered
hereunder that violates any Law, including, without limitation, the performance
of any task or the taking of any action which violates the Business and
Professions Code of the State as it relates to professional endodontic
practices.
2.15 Monthly Meetings. The MSO shall initiate monthly or more frequent meetings
with the New PC regarding the policies and procedures for the operation of the
New PC.
2.16 Maintenance and Cleaning Services. The MSO shall arrange for security,
maintenance and cleaning of the Endodontic Offices, including the furniture,
fixtures and equipment therein.
2.17 Licenses and Permits. The MSO shall provide and pay for all business and
other licenses and permits as necessary to operate the New PC except those
related to licensure and certifications of the Practice Providers. The MSO shall
prepare and file all reports, forms and returns required by Law in connection
with workers' compensation, unemployment insurance, social security and other
similar Laws with respect to the MSO's employees.
2.18 Insurance. The MSO shall provide and pay for customary office property
damage and liability, including business interruption insurance, but not
including professional liability insurance (which shall be and remain the
responsibility of the New PC).
2.19 Practice Transition and Associate Selection. Xx. Xxxx and the Endodontists
(if any) shall keep the MSO informed of retirement goals on an ongoing basis;
provided, however, that Xx. Xxxx shall, at a minimum, continue as a full time
employee of the New PC, actively engaged in the practice of endodontics, for a
period of five (5) years following the date of this Agreement. Notwithstanding
the foregoing, Xx. Xxxx may, after a period of four (4) years following the date
of this Agreement, notify the MSO of his intent to retire. Upon receiving such
notice, the MSO shall have a period of two (2) years to conduct a search for an
appropriate endodontist and other professionals (collectively, "Practice
Associates") who will assume the MSO Agreement. Such search shall include use by
the MSO of a national journal advertising program and networking in the
profession to locate appropriate Practice Associates. If at the end of such two
(2) year period the MSO has been unable to find a replacement who will undertake
the practice and the MSO Agreement, then the MSO and Xx. Xxxx shall work
together for a period of one (1) year to find an endodontist who will purchase
the practice valued as if it were a traditional (i.e. not operated with a MSO)
practice holding both the clinical and non-clinical assets. At the end of such
one (1) year period, the MSO shall sell the practice to the highest offer made
by a bona fide purchaser. Upon completion of such transfer of the New PC, Xx.
Xxxx, the MSO and OMEGA shall provide mutual releases of liability in a form
acceptable to all parties.
It is understood and agreed that Xx. Xxxx shall continue to work during the
practice transition period and Xx. Xxxx shall work under the MSO agreement for a
minimum for seven (7) years in total unless a successor is designated pursuant
to this Agreement. However, in no event shall Xx. Xxxx be obligated to work
under the MSO agreement for longer than seven (7) years.
The MSO will provide screening of all applicants and will then present
appropriate applicants for final selection by the New PC. The New PC shall be
responsible for interviewing and selecting each Practice Associate.
After the Practice Associate(s) is (are) selected by the New PC, the MSO will
assist the New PC with a trial plan of approximately six months for the new
Practice Associate(s). It is understood that at the end of this period either
the New PC or the new Practice Associate may terminate the relationship. All
such Practice Associates recruited by the MSO as may be accepted by the New PC
shall be employees of the Practice (if so employed) and not of the MSO. The MSO
will confer with the New PC on an appropriate salary/work-in arrangement for the
new Practice Associate and the final arrangements shall be determined by the New
PC.
ARTICLE 3
DUTIES OF THE NEW PC
3.1 General. The New PC shall be responsible for the operation of its practice
and the Endodontic Office, in accordance with the requirements of the Laws of
the State.
3.2 Employment of the Endodontists and Rendering of Patient Care. The New PC
shall be responsible for the employment and professional supervision of Xx. Xxxx
and all Endodontists and the other Practice Providers and all endodontic care
rendered to patients shall be rendered by Xx. Xxxx and such Endodontists.
Additionally, the New PC shall be solely responsible for the professional
supervision of all other Practice Providers in their rendering of patient care.
3.3 Professional Services. The New PC shall use and occupy the Endodontic
Offices designated on Schedule 2 hereof exclusively for the practice and
rendering of endodontic services, and shall comply with all applicable Laws and
all standards of endodontic care. It is expressly acknowledged by the parties
that the endodontic practice conducted at the Endodontic Offices shall be
conducted solely by Xx. Xxxx and the Endodontists and the other Practice
Providers acting under the supervision and control of Xx. Xxxx and the
Endodontists (if any), and no other endodontist shall be permitted to use or
occupy the Endodontic Offices. The New PC shall provide professional services to
patients hereunder in compliance at all times with ethical standards and Laws
applying to the endodontic profession. The New PC shall ensure that Xx. Xxxx and
each Endodontist who provides endodontic services to patients is licensed by the
State. In the event that any disciplinary, medical malpractice or other actions
are initiated against Xx. Xxxx or any Endodontist or other Practice Provider,
the New PC shall immediately inform the MSO of such action and the underlying
facts and circumstances subject to such confidentiality agreement or
arrangements as the New PC and the MSO shall mutually determine at or prior to
the time of such disclosure. The New PC agrees to cooperate with and participate
in quality assurance/utilization review programs established by the MSO or
mandated by accreditation and licensure standards applicable to the practice of
endodontics. Deficiencies discovered in the performance of any personnel or in
the quality of professional services shall be reported immediately to the MSO,
and appropriate steps shall be taken by the New PC at once to remedy such
deficiencies.
3.4 Records. The New PC will keep or cause to be kept accurate, complete and
timely dental and other records of all patients. The management of all dental
and patient files and records shall comply with all applicable Laws regarding
their confidentiality and retention and all files and records shall be located
so that they are readily accessible for patient care, consistent with ordinary
records management practices. Such records shall be sufficient to enable the
MSO, on behalf of the New PC, to obtain payments for services and related
charges and to facilitate the delivery of quality patient care by the New PC.
Notwithstanding the foregoing, patient dental records shall be and remain the
property of the New PC and the contents thereof shall be solely the
responsibility of the New PC.
3.5 Professional Expenses. The New PC shall be solely responsible for the cost
of professional licensure fees and board certification fees, membership in
professional associations and continuing professional education incurred by each
Endodontist and other Practice Provider employed by the New PC. The New PC shall
ensure that Xx. Xxxx and all the Endodontists employed by the New PC participate
in such continuing education as is necessary for Xx. Xxxx and such the
Endodontist to remain current.
3.6 Professional Liability Insurance. The New PC shall provide, or arrange for
the provision of, and maintain throughout the Term of this Agreement,
professional liability insurance coverage in accordance with the provisions of
Article 9 hereof. The New PC shall also cooperate in any programs recommended by
the MSO to assure that each of its Endodontists is insurable, and that Xx. Xxxx
and each Endodontist participates in an on-going risk management program.
3.7 Employment Agreement. The parties recognize that the services to be provided
by the MSO are feasible only if the New PC operates an active endodontic
practice to which it, Xx. Xxxx and each Endodontist associated with the New PC
devote their full time and attention (which shall mean an average of not less
than fourteen (14) full days per month), unless other specific provisions are
made in writing and mutually agreed upon by the MSO and New PC. The New PC will
cause Xx. Xxxx and each individual Endodontist who now is or hereafter becomes
affiliated with the New PC to enter into a written employment agreement (the
"Employment Agreement") satisfactory in form and substance to the MSO, pursuant
to which Xx. Xxxx or the Endodontist shall agree not to establish, operate or
provide endodontic or dental services, without the prior written consent of both
the New PC and the MSO, at any office or facility other than the Endodontic
Office. In addition, such Employment Agreement shall provide by its own terms or
by a separate agreement that if Xx. Xxxx'x or such Endodontist's employment
shall terminate for any reason (other than a material breach of this Agreement
by the MSO or OMEGA) during the Term of this Agreement, for a period of 24
months after the termination of Xx. Xxxx'x or such Endodontist's Employment
Agreement with the New PC, Xx. Xxxx or such Endodontist shall agree not to
establish, operate or provide endodontic or dental services, without the prior
written consent of both the New PC and the MSO, at any office practice or
facility whatsoever providing services similar to those provided by the New PC
at any endodontic office within a fifteen (15) mile radius. Such Employment
Agreement (or separate agreement) shall also provide, among other things, that
in the event of a breach of Xx. Xxxx'x or the Endodontist's agreement not to
compete with the New PC provided for in such Employment Agreement (or separate
agreement), the MSO shall be entitled to receive, in addition to other remedies
and not by way of an election of remedies, liquidated damages equaling the
greater of: (a) Xx. Xxxx'x or such Endodontist's income, as shown on the W-2
form prepared by the New PC, for the most recent calendar year; or (b) Thirty
five (35%) percent of the preceeding years Gross Practice Revenues. Such payment
shall be made to the MSO by the New PC immediately following receipt of the
payment from Xx. Xxxx or the breaching Endodontist by the New PC. Each of the
MSO and OMEGA shall be expressly named as a third-party beneficiary to such
agreements between the New PC and Xx. Xxxx and each Endodontist and the rights
and remedies of the MSO and OMEGA thereunder or otherwise in respect of the
restrictive covenants set forth in such agreements shall survive termination of
this Agreement.
3.8 Confidentiality. The New PC agrees and acknowledges that all materials
defined as "Confidential Information" in paragraph 10.7 of the Affiliation
Agreement constitute "Confidential Information" and are disclosed in confidence
and with the understanding that it constitutes valuable business information
developed by the MSO with the assistance of OMEGA at great expenditures of time,
effort and money. The New PC further agrees that it shall not, directly or
indirectly, without the express prior written consent of the MSO, use or
disclose such Confidential Information for any purpose other than in connection
with the services to be rendered hereunder. The New PC further agrees (i) to
keep strictly confidential and hold in trust all Confidential Information and
not disclose such Confidential Information to any third party (except Xx. Xxxx
and his partners, employees and professional advisors on a "need to know" basis)
without the express prior written consent of the MSO; and (ii) to impose this
obligation of confidentiality on Xx. Xxxx and his partners, employees and
professional advisors. The New PC acknowledges that the disclosure of
Confidential Information to it by the MSO is done in reliance upon its
representations and covenants in this Agreement. Upon expiration or termination
of this Agreement by either party for any reason whatsoever, the New PC shall
immediately return and shall cause Xx. Xxxx and his partners, employees and
professional advisors to immediately return to the MSO all Confidential
Information, and the New PC will not, and will cause Xx. Xxxx and his partners,
employees and professional advisors not to, thereafter use, appropriate, or
reproduce such Confidential Information. The New PC further expressly
acknowledges and agrees that any such use, appropriation or reproduction of any
such Confidential Information by any of the foregoing after the expiration or
termination of this Agreement will result in irreparable injury to the MSO and
OMEGA, that the remedy at law for the foregoing would be inadequate, and that in
the event of any such use, appropriation, or reproduction of any such
Confidential Information after the termination or expiration of this Agreement,
the MSO and OMEGA, in addition to any other remedies or damages available to
either or both of them, shall be entitled to injunctive or other equitable
relief without the necessity of proving actual damages but such rights to relief
shall not preclude the MSO and OMEGA from other remedies which may be available
to either or both of them hereunder.
ARTICLE 4
PROFESSIONAL SERVICES, CONTROL OF SOLICITATION,
APPROVAL OF ADVERTISING MATERIAL AND NO RECIPROCATION
4.1 Fundamental Understanding. A fundamental understanding between the parties
hereto is that the rendering of endodontic services shall be separate and
independent from the provision of administrative, management and support
services by the MSO. Thus, the New PC shall have sole and absolute control of
the delivery of all professional services and treatment rendered to patients at
the Endodontic Offices.
4.2 No Solicitation; Control. No employee or other representative of the MSO
shall be engaged in, or allowed to solicit patients on behalf of, the New PC,
nor shall the MSO have any control over the New PC's patients.
4.3 No Advertising. No advertising or promotional materials, or other materials
of any nature, including billing and collection forms, reports, agreements,
correspondence, or similar materials, used in connection with the New PC shall
be used or distributed without having first been approved by the New PC.
4.4 No Referrals. The parties hereby acknowledge and agree that the benefits
conferred upon each of them hereunder neither require nor are in any way
contingent upon the admission, recommendation, referral, or any other
arrangement for the provision of any item or service offered by the MSO to any
patients of the New PC or its shareholders, officers, directors, employees,
contractors or agents, nor are such benefits in any way contingent upon the
recommendation, referral or any other arrangement for the provision of any item
or service offered by the New PC or any of its Practice Providers, employees,
contractors or agents.
ARTICLE 5
LEASE OF OFFICE FACILITIES AND EQUIPMENT
5.1 Office Lease/Sublease. In consideration of the sums to be paid to the MSO
under the terms of this Agreement, the MSO hereby leases or sub-leases, as
applicable, to the New PC during the Term of this Agreement the Endodontic
Offices, and the leasehold improvements and fixtures, furniture and equipment at
the Endodontic Offices as listed from time to time on Schedule 2 attached hereto
and incorporated herein by this reference, under the following terms and
conditions:
(a) The MSO hereby agrees to enter into a mutually acceptable lease with the
owner of such property for the premises currently occupied by the New PC
(collectively, the "Master Lease") a copy of which is attached hereto as Exhibit
A and incorporated herein by this reference. The amount of rent to be paid by
the MSO shall not be greater than $1.50 per square foot exclusive of property
taxes, Insurance and maintenance. The New PC hereby acknowledges that the
premises to be leased are suitable for the New PC's endodontic practice. Based
and contingent upon the New PC's promise to timely pay all amounts due under
this Agreement, the MSO hereby agrees to sublease the leased premises to the New
PC upon the following terms and conditions:
(i) This sublease between the MSO and the New PC of the premises shall
be subject to all of the terms and conditions of the Master Lease. In
the event of the termination of the MSO's interest as lessee under the
Master Lease for any reason, then the sublease created hereby shall
simultaneously terminate, unless the New PC assumes the obligations
under the Master Lease in question and the Lessor consents thereto.
(ii) All of the terms and conditions contained in the Master Lease are
incorporated herein as terms and conditions of the sublease (with each
reference therein to "Lessor" and "Lessee," to be deemed to refer to
the MSO and the New PC, respectively) and, along with the provisions of
this Section 5.1(b) and Exhibit "A," shall be the complete terms and
conditions of the sublease created hereby.
(iii) Notwithstanding the foregoing, as between the MSO and the New PC,
the MSO shall remain responsible for meeting the obligations of
"Lessee" under the sections entitled Rent, Additional Rent Adjustment,
Insurance on Fixtures, Liability Insurance, Repairs, and Taxes of the
Master Lease, all of which obligations shall be considered MSO Expenses
hereunder and the New PC shall have no monetary obligation in that
regard. In addition, as between the MSO and the New PC, the MSO shall
retain the right to exercise any options to purchase the premises, or
other similar rights of ownership or possession, which may be granted
under the Master Lease, and the New PC shall have no rights in that
regard.
(iv) In the event this Agreement is terminated according to its terms,
this sublease shall also terminate automatically.
(v) If the Master Lease contains an option to Renew the terms thereof,
the MSO shall notify the New PC, at least 30 days prior to the
expiration of the time for exercising such option, of the MSO's
intention to Renew or not to Renew such term. If the MSO determines not
to Renew such term, the MSO shall provide or arrange for the provision
of comparable office space (the "Substitute Endodontic Office") within
a radius of 15 miles of the Endodontic Office, which Substitute
Endodontic Office shall be subject to the approval of the New PC (which
approval shall not be unreasonably withheld or delayed). The lease or
sublease for such Substitute Endodontic Office, as applicable, shall be
substituted for the lease described on Exhibit A hereto and all
references to the "Master Lease" shall thereafter be applicable to the
lease or sublease for the Substitute Endodontic Office for purposes of
this Agreement, ab initio.
(vi) INTENTIONALLY OMITTED.
5.2 Leasehold Improvements, etc. In accordance with Article 2.2 hereof, the MSO
shall provide the New PC at the Endodontic Offices such additional leasehold
improvements, fixtures, furniture, furnishings and equipment as may be mutually
agreed to with the New PC and reflected from time to time on a supplement to
Schedule 2 hereto. The use by the New PC of all leasehold improvements,
fixtures, furniture, furnishings and equipment provided hereunder shall be
subject to the following conditions:
(a) Subject to the terms of the lease, title to all such leasehold improvements,
fixtures, furnishings, furniture and equipment shall remain in the MSO and upon
termination of this Agreement, the New PC shall immediately return and surrender
all such leasehold improvements, fixtures, furniture, furnishings and equipment
to the MSO in as good condition as when received, normal wear and tear excepted.
(b) Subject to the terms of the lease, the MSO shall be fully and entirely
responsible for all repairs and maintenance of all such leasehold improvements,
fixtures, furniture, furnishings and equipment; provided, however, that the New
PC agrees that it will use its best efforts to prevent damage, excessive wear,
and breakdown of all such leasehold improvements, fixtures, furniture,
furnishings and equipment, and shall advise the MSO of any and all needed
repairs and equipment failures.
(c) The obligation of the MSO to provide the leasehold improvements, fixtures,
furniture, furnishings and equipment stated herein shall be concurrent and
co-extensive with the Term of this Agreement.
5.3. No Warranty.
(a) THE NEW PC ACKNOWLEDGES THAT THE MSO MAKES NO WARRANTIES OR REPRESENTATIONS,
EXPRESS OR IMPLIED, AS TO THE SUITABILITY OR ADEQUACY OF ANY LEASEHOLD
IMPROVEMENTS, FIXTURES, FURNITURE, FURNISHINGS, EQUIPMENT, INVENTORY OR SUPPLIES
PROVIDED OR LEASED OR SUBLEASED PURSUANT TO THIS AGREEMENT FOR THE CONDUCT OF AN
ENDODONTICS PRACTICE OR FOR ANY OTHER PARTICULAR PURPOSE.
(b) Nothing in this Agreement shall be construed to affect or limit in any way
the professional discretion of the Practice Providers to select and use
fixtures, furniture, furnishings and equipment, inventory and supplies purchased
or provided by the MSO in accordance with the provisions of this Agreement
insofar as such selection or use constitutes or might constitute the practice of
dentistry or endodontics.
ARTICLE 6
COMPENSATION
As consideration for the performance of all of its duties and obligations as
provided in this Agreement, including but not limited to, the costs and expenses
associated with furnishing the services, personnel, facilities, leasehold
improvements, fixtures, furniture, furnishings, equipment, inventories and
supplies provided for herein, the MSO shall receive compensation in the form of
monthly management fees (the "Management Fees") based upon a predetermined
percentage of the "Practice Revenues", as defined and determined in accordance
with the provisions set forth in Schedule 3 attached hereto and incorporated
herein by this reference, as such Schedule may be amended by the New PC and the
MSO from time to time. It is acknowledged by and between the parties hereto that
the MSO and/or its affiliates has (have) incurred substantial expenses and
future obligations in acquiring the capital stock of the MSO, acquiring or
otherwise establishing the Endodontic Offices, establishing its systems,
including fees for consultants and other professionals, interest expense, lease
obligations, and costs of furnishing or refurbishing the premises at which the
Endodontic Offices are located. The MSO has also assumed substantial obligations
associated with the continuing operation of the Endodontic Offices, including
those of lessee, obligor and guarantor and obligor on loans to establish and
operate the Endodontic Offices. The parties, therefore, having considered
various compensation formulae, acknowledge and agree that in order for the MSO
to receive a fair and reasonable return for its expenses and obligations, and a
fair return for the lease of the premises and equipment and for providing the
services contemplated hereunder, that the agreed compensation is not excessive.
The New PC acknowledges that the compensation arrangement is reasonable under
the circumstances noted herein and has executed an Affidavit attesting to this
fact which is attached hereto and incorporated herein as Exhibit C. In
consideration of the foregoing, the parties agree that the monthly Management
Fees payable to the MSO by the New PC for services rendered pursuant to this
Agreement shall be reviewed and subject to adjustment at the close of each year
of the Term of this Agreement based upon industry standards of practice and the
MSO's costs in performing the required services. If the parties cannot agree
within thirty (30) days prior to the close of any such year on the terms of any
adjustment to the Management Fees for the following year, then the then existing
Management Fees shall remain in effect. The New PC specifically agrees that the
MSO may defer actual receipt of its Management Fees and/or advance monies for
purposes of managing the New PC's cash flow, and the MSO may repay itself,
without interest, such advances or pay said deferred Management Fees when it
deems appropriate.
ARTICLE 7
SECURITY INTEREST
As assurance and collateral security for the payment of the monthly Management
Fees owed to the MSO pursuant to this Agreement and any funds advanced by the
MSO to or on behalf of the New PC pursuant to this Agreement and for the
faithful and timely performance of all the covenants and conditions to be
performed by the New PC under this Agreement, the New PC hereby pledges, grants,
bargains, assigns and transfers to the MSO a security interest, pursuant to the
Uniform Commercial Code of the State, in and to all Practice Revenue and
accounts receivable of patients of the New PC, together with all proceeds
thereof (collectively, the "Collateral"), and further agrees not to pledge,
assign, transfer or convey any of the Collateral or any proceeds therefrom,
without the prior written consent of the MSO, except to affiliates of the MSO.
Concurrent with the execution of this Agreement, the New PC shall execute a
Security Agreement, similar in form and content as that attached hereto as
Exhibit D and incorporated herein by this reference in order that the MSO may
perfect its interest in the Collateral. The New PC expressly agrees to execute
any appropriate UCC-1 Financing Statement and UCC-1 Fixture filings, if so
requested in writing by the MSO.
ARTICLE 8
COVENANTS
8.1 New PC's Covenants. As further consideration for the MSO's performance of
the terms and conditions of this Agreement, the New PC covenants, represents and
warrants as follows (which covenants, representations and warranties shall
survive the execution of this Agreement):
(a) The New PC shall comply with all Laws and ethical and professional standards
applicable to the practice of endodontics and to cause all of its employees to
do the same.
(b) The New PC shall provide quality services and shall cause Xx. Xxxx and the
Endodontists (if any) to serve the endodontic needs of the patients of the New
PC. The New PC covenants to monitor rigorously utilization and quality of
services provided at the Endodontic Offices and shall take all steps necessary
to remedy any and all deficiencies in the efficiency or the quality of
endodontic care provided.
(c) During the Term of this Agreement, the New PC shall not, directly or
indirectly, own an interest in, operate, join, control, participate in or be
connected in any manner with any corporation, partnership, proprietorship, firm,
association, person or entity providing endodontic care in competition with the
practice at the Endodontic Offices, or any other endodontic practice managed by
the MSO, within a radius of 15 miles of the Endodontic Office or of such other
endodontic practice, without the MSO's prior written consent.
(d) The New PC recognizes the proprietary interest of OMEGA in and to its OMEGA
Patient Scheduling System and the MSO in its systems for managing the delivery
of endodontic care and all policies, procedures, operating manuals, forms,
contracts and other information (collectively, the "MSO Information") regarding
such system. The New PC acknowledges and agrees that all information relating to
the OMEGA Patient Scheduling System and the MSO Information constitutes trade
secrets of OMEGA and/or the MSO. The New PC hereby waives any and all right,
title and interest in and to such trade secrets and agrees to return all copies
of such trade secrets and information relating thereto, at its expense, upon
termination of this Agreement.
(e) The New PC acknowledges and agrees that OMEGA and the MSO are entitled to
prevent their respective competitors from obtaining and utilizing their
respective trade secrets. The New PC agrees to hold OMEGA'S and the MSO's trade
secrets in strictest confidence and not to disclose them or allow them to be
disclosed directly or indirectly to any person or entity other than persons who
are engaged by the New PC to perform duties in connection with the New PC and
who have a need to know such trade secrets in the performance of their duties
for the New PC, without OMEGA's or the MSO's prior written consent, as the case
may be. The New PC acknowledges its fiduciary obligations to OMEGA and the MSO
and the confidentiality of its relationships with OMEGA and the MSO and of any
information relating to the services and business methods of OMEGA and the MSO
which it may obtain during the term of this Agreement. The New PC shall not,
either during the term of this Agreement or at any time after the expiration or
sooner termination hereof, disclose to anyone, other than employees or
independent contractors of OMEGA and the MSO who use OMEGA's and the MSO's
system in the course of the performance of their duties, any confidential or
proprietary information or trade secrets obtained by the New PC. The New PC also
agrees to place any persons to whom said information is disclosed for the
purpose of performance under legal obligation to treat such information as
strictly confidential.
8.2 MSO's Covenants. As further consideration for the New PC's performance of
the terms and conditions of this Agreement, the MSO covenants, represents and
warrants (which covenants, representations and warranties shall survive the
execution of this Agreement) that during the Term of this Agreement, the MSO
agrees not to establish, develop or open any offices in affiliation with an
endodontist for the provision of endodontic services within a 15 mile radius of
the Endodontic Offices, without the express written consent of the New PC.
ARTICLE 9
INSURANCE AND INDEMNITY
9.1 Insurance to be Maintained by the New PC. Throughout the Term of this
Agreement, the New PC shall maintain in full force and effect comprehensive
professional liability insurance with limits of not less than $500,000 per
occurrence and $1,000,000 annual aggregate per Xx. Xxxx and each of the
Endodontists providing services for the New PC and a separate limit for the New
PC. The New PC shall be responsible for all liabilities within deductibles and
for all liabilities in excess of the limits of such policies. The MSO agrees to
negotiate for and cause premiums to be paid on behalf of the New PC with respect
to such insurance. Premiums and deductibles with respect to such policies shall
not be MSO Expenses. The New PC also agrees to name the MSO and OMEGA as
co-insureds and provided for waivers of insurers rights of subrogation in favor
of the MSO and OMEGA. The New PC agrees to deliver to the MSO and OMEGA a
certificate of insurance indicating such coverage. In the event that naming the
MSO as an additional insured results in extra cost to the New PC, then the MSO
shall reimburse the New PC for such cost.
9.2 Insurance to be Maintained by the MSO. Throughout the Term of this
Agreement, the MSO will use reasonable efforts to provide and maintain, as a MSO
Expense, (a) comprehensive professional liability insurance for all professional
employees of the MSO with limits as determined reasonable by the MSO; and the
MSO shall provide (b) comprehensive general liability and property insurance
covering the Endodontic Office premises and operations. Such insurances shall
provide for waivers of insurers rights of subrogation in favor of Xx. Xxxx and
each of the Endodontists providing services for the New PC.
9.3 Tail Insurance Coverage. The New PC will cause Xx. Xxxx and each Endodontist
(if any) providing services to enter into an agreement with the New PC that upon
termination of Xx. Xxxx'x or such Endodontist's relationship with the New PC,
for any reason, tail insurance coverage will be purchased by Xx. Xxxx or such
Endodontist. Such provisions may be contained in an employment agreement,
restrictive covenant agreement or other agreement entered into by the New PC and
Xx. Xxxx or the Endodontist, and the New PC hereby covenants with the MSO to
enforce such provisions relating to the tail insurance coverage or to provide
such coverage at the expense of the New PC or Xx. Xxxx or each such Endodontist.
9.4 Additional Insureds. The New PC and the MSO agree to use their reasonable
efforts to have each other named as an additional insured on the other's
respective liability insurance policies and obtain appropriate waivers of
insurers rights of subrogation. In the event that naming the MSO as an
additional insured results in extra cost to the New PC, then the MSO shall
reimburse the New PC for such cost.
9.5 Indemnification. The New PC shall indemnify, hold harmless and defend the
MSO and OMEGA and their respective officers, directors, shareholders, employees
and representatives, from and against any and all liability, losses, damages,
claims, causes of action, expenses judgments, settlements, lawsuits and
obligations (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 endodontic services or the performance of any
intentional acts, negligent acts or omissions by the New PC and/or its
affiliates, its shareholders, agents, the Practice Providers, its other
employees and/or its subcontractors (other than the MSO) during the Term hereof.
The MSO shall indemnify, hold harmless and defend the New PC, its officers,
directors, shareholders 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 the MSO and/or its shareholders, agents,
employees and/or subcontractors (other than the New PC) during the Term hereof.
9.6 Notwithstanding anything to the contrary contained in this Agreement, or any
Schedule or Exhibit hereto, in no event shall Xx. Xxxx, the New PC, the MSO or
OMEGA or their officers, directors or employees be liable for any form of
indirect, special, incidental or consequential damages, whether such damages
arise in contract or tort, irrespective of fault, negligence or strict
liability.
ARTICLE 10
XXXXXXXXXXX
00.0 Xxxxxxxxxxx xx xxx Xxx XX.
(x) Termination by the New PC. The New PC may terminate this Agreement as
follows:
(1) In the event of the filing of a petition in voluntary bankruptcy or
an assignment for the benefit of creditors by the MSO, or upon other
action taken or suffered, voluntarily or involuntarily, under any
federal or state law for the benefit of debtors by the MSO, except for
the filing of a petition in involuntary bankruptcy against the MSO
which is dismissed within sixty (60) days thereafter, the New PC may
give written notice of the immediate termination of this Agreement.
(2) In the event the MSO shall materially default in the performance of
any duty or obligation imposed upon it by this Agreement and such
default shall continue for a period of sixty (60) days after written
notice thereof has been given to the MSO by the New PC, the New PC may
terminate this Agreement.
Upon termination of this Agreement by the Endodontic Practice under this Section
10.1, the New PC shall be entitled to exercise the "Call Option," as defined in
and on the terms and conditions set forth in Section 3 of the Stock Put/Call
Option and Successor Designation Agreement and recover such direct damages
actually incurred by Xx. Xxxx as a result of such termination.
10.2 Termination by MSO. MSO may terminate this Agreement as follows:
(a) In the event of the filing of a petition in voluntary bankruptcy or an
assignment for the benefit of creditors by the New PC or any shareholders
thereof, or upon other action taken or suffered, voluntarily or involuntarily,
under any federal or state law for the benefit of debtors by the New PC or any
shareholders thereof, except for the filing of a petition in involuntary
bankruptcy against the New PC or any shareholder thereof which is dismissed
within sixty (60) days thereafter, MSO may give written notice of the immediate
termination of this Agreement.
(b) In the event the New PC fails to perform endodontic services on a full-time
basis consistent with its pattern of practice in the immediately preceding
calendar year (other than as a result of the death or disability of Xx. Xxxx)
and such default shall continue for a period of sixty (60) days after written
notice thereof has been given to the New PC by the MSO, the MSO may terminate
this Agreement. Notwithstanding the foregoing, the parties understand and agree
that in no event shall the retirement of Xx. Xxxx following the designation of a
successor endodontist pursuant to the Stock Put/Call Option and Successor
Designation Agreement constitute grounds for termination under this Section
10.2(b).
(c) In the event the New PC shall materially default in the performance of any
other duty or obligation imposed upon it by this Agreement, and such default
shall continue for a period of sixty (60) days after written notice thereof has
been given to the New PC by the MSO, the MSO may terminate this Agreement.
(d) In the event Xx. Xxxx or any Endodontist breaches or defaults under his or
her Employment Agreement and the New PC does not cause Xx. Xxxx or such
Endodontist to cure such breach or default within any applicable grace period
therefor but not less than sixty (60) days, the MSO may give written notice of
the immediate termination of this Agreement.
Upon termination of this Agreement by the MSO under this Section 10.2 or upon
expiration of the Term of this Agreement, the MSO and OMEGA shall have the
option to either (1) exercise the "Put Option" and/or the "Successor Designation
Option," as defined in and on the terms and subject to the conditions set forth
in Sections 2 and 5, respectively, of the Stock Put/Call Option and Designation
Agreement or (2) Omega may terminate this Agreement and bring in a replacement
to take over the practice. If this Agreement is terminated by the MSO or Omega,
Xx. Xxxx shall be bound by the terms of the non-compete agreement attached as
Exhibit C to the Stock Put/Call Agreement. In addition, upon any termination of
this Agreement or upon expiration of the Term of this Agreement, the MSO shall
be entitled to receive the Management Fees collected to the effective date of
such termination or expiration, the amounts of any loans or advances (including
any accrued but unpaid interest thereon) and all other sums accrued or related
to occurrences arising at or prior to the date of termination and recover such
direct damages actually incurred by OMEGA or the MSO as a result of such
termination.
ARTICLE 11
AUTHORIZED AGENT AND POWERS OF ATTORNEY
The New PC hereby designates the MSO (and its designees) its authorized agent
and lawful attorney-in-fact for purposes of depositing payments, paying accounts
payables, signing checks, negotiating and signing contracts for services or
goods, securing loans or incurring obligations on behalf of the New PC;
provided, however, that all contracts or fees set for services on behalf of the
New PC will be subject to final approval and acceptance by the New PC.
Additionally, the New PC hereby irrevocably appoints the MSO (and its designees)
its authorized agent and lawful attorney-in-fact to collect all bills and
accounts receivable for professional fees, charges and other amounts and
authorizes the MSO through its designees to take possession of all checks, money
orders and similar instruments received as payment of receivables to be
deposited into the New PC Account. The New PC hereby irrevocably appoints the
MSO as the New PC's attorney-in-fact, with full power and authority in the place
and stead of the New PC, in the MSO's discretion, to endorse in the name of the
New PC any checks, payments, notes, insurance payments and money orders, to
withdraw funds for payments of expenses, including Management Fees and other
sums payable to the MSO, to open and close the New PC Account and other bank
accounts, to take any action and to execute any other instrument which the MSO
may deem necessary or advisable to accomplish the purposes hereof. The powers of
attorney granted herein are coupled with an interest and are irrevocable. Third
parties and entities and persons not a party to this Agreement are entitled to
rely on the foregoing attorneys-in-fact and an affidavit of the MSO attesting
thereto. The acceptance of this appointment by the MSO shall not obligate it to
perform any duty or covenant required to be performed by the New PC under or by
virtue of this Agreement. Notwithstanding the foregoing powers of attorney, the
New PC shall at any time, on the request of the MSO, sign financing statements,
security agreements or other agreements necessary or advisable to accomplish the
purpose of this Agreement. Upon the New PC's failure to sign said financing
statements, security agreements or other agreements, the MSO is authorized as
the agent of the New PC to sign any such instruments. The New PC may review all
deposits and expenses upon request.
Upon termination of this agreement or upon a breach of this agreement by the MSO
which is not remedied within any applicable cure period, but not less than sixty
(60) days, Xx. Xxxx may, upon notice to the MSO and OMEGA, revoke all powers of
attorney granted to the MSO or OMEGA.
ARTICLE 12
INDEPENDENT CONTRACTOR RELATIONSHIP
Neither the New PC nor its employees shall have any claim under this Agreement
or otherwise against the MSO for worker's compensation, unemployment
compensation, sick leave, vacation pay, retirement benefits, Social Security
benefits, or any other employee benefits, all of which shall be the sole
responsibility of the New PC. Since neither the New PC nor its employees are
employees of the MSO, the MSO shall not withhold on behalf of the New PC
unemployment insurance, Social Security, or otherwise pursuant to any law or
requirement of any governmental agency, and all such withholding, if any is
required, shall be the sole responsibility of the New PC.
ARTICLE 13
MISCELLANEOUS
13.1 Access to Records. From and after any termination, each party shall provide
the other party with reasonable access to books and records then owned by it to
permit such requesting party to satisfy reporting and contractual obligations
which may be required of it.
13.2 Patient Records. Upon termination of this Agreement, the New PC shall
retain all patient dental records maintained by the New PC or the MSO in the
name of the New PC. During the term of this Agreement, and thereafter, the New
PC or its designee shall have reasonable access during normal business hours to
the New PC's and the MSO's records, including, but not limited to, records of
collections, expenses and disbursements as kept by the MSO in performing the
MSO's obligations under this Agreement, and the New PC may copy any or all such
records.
13.3 The New PC's Control Over the Endodontic Practice. Notwithstanding the
authority granted to the MSO herein, the MSO and the New PC agree that the New
PC, personally or through Xx. Xxxx or any of its Endodontists (if any) and other
Practice Providers, shall have complete control and supervision over the
professional aspects of the New PC's practice, as well as the provision of all
professional services, including, without limitation, the selection of a course
of treatment for a patient, the procedures or materials to be used as a part of
such course of treatment, and the manner in which such course of treatment is
carried out by the New PC. The New PC shall have sole authority to direct the
business, professional, and ethical aspects of the New PC. The MSO shall have no
authority, directly or indirectly, to perform, and shall not perform, any
endodontic function, or to influence or otherwise interfere with the exercise of
the New PC's professional judgment. The MSO may, however, advise the New PC as
to the relationship between its performance of endodontic functions and the
overall administrative and business functioning of the New PC.
ARTICLE 14
DISPUTE RESOLUTION
14.1 Alternative Dispute Resolution.
(a) If during the term of this Agreement a dispute arises between the parties,
or one party perceives the other as acting unfairly or unreasonably, or a
question of interpretation arises hereunder, then the parties' shall promptly
confer and exert their best efforts in good faith to reach a reasonable and
equitable resolution of the issue.
If resolution cannot be reached by the parties within thirty (30) days as set
forth above, then any controversy or claim arising out of this Agreement of an
aggregate amount less than $250,000 not resolved pursuant to the above shall be
settled by arbitration under the rules or the American Arbitration Association's
Rules. Judgment upon any award rendered by the arbitrator(s) may be entered in
any court having jurisdiction thereof. Any arbitration decision awarding an
amount less than $250,000 shall be final and binding upon the parties. Amount
awarded in excess of $250,000 shall be appealable to a court in accordance with
Article 15.9 hereof. Any arbitration proceeding shall be filed in the office of
the American Arbitration Association located in Portland, Oregon and conducted
in Bend, Oregon. Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction. The arbitrator, shall be bound by the
terms and conditions of this Agreement and shall not have the authority to award
multiple, punitive or consequential damages under any circumstances.
For claims exceeding $250,000, either Party may, at its option, elect to have
any dispute adjudicated by either arbitration in accordance with Article 15.9
hereof.
(b) In the event of a disagreement concerning the calculation of any fees by
either party, the parties agree to accept as correct, final and binding, the
determination of an independent certified public accountant (CPA) selected by
the mutual agreement of the parties. If the parties cannot agree upon the
selection of a CPA within thirty (30) days after a written request for a CPA's
selection, then the requesting party shall deliver a list of five (5) CPAs ( at
least two of which are a member of the "Big Six" accounting firms). Upon receipt
of such list, the other party shall select one of such five firms as the CPA. If
no selection is made, the requesting party may select one from the list of five
and notify the other party of such choice. The cost of the CPA's review shall be
born by the requesting party unless the CPA determines that the requesting party
was under paid by more than two (2%) percent in which event the parties shall
split such cost. In the event such under payment is greater than ten (10%)
percent, the other party shall pay all CPA costs. Each party agrees to cooperate
fully with the CPA in connection with its review.
14.2 Waiver of Jury. With respect to any dispute arising under or in connection
with this Agreement or any related agreement, as to which legal action
nevertheless occurs, each party hereby irrevocably waives all rights it may have
to demand a jury trial. This waiver is knowingly, intentionally and voluntarily
made by the parties and each party acknowledges that no person acting on behalf
of the other party has made any representation of fact to induce this waiver of
trial by jury or in any way modified or nullified its effect. The parties each
further acknowledge that it has been represented (or has had the opportunity to
be represented) in the signing of this Agreement and in the making of this
waiver by independent legal counsel, selected of its own free will, and that it
has had the opportunity to discuss this waiver with counsel. Each party further
acknowledges that it has read and understands the meaning and ramifications of
this waiver provision.
ARTICLE 15
GENERAL PROVISIONS
15.1 Notices. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram or facsimile transmission) addressed as provided below and if either
(a) actually delivered at said address, or (b) in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mail, postage prepaid and registered or certified, return receipt
requested, or sent by reputable overnight courier:
If to Xx. Xxxx, to:
Xxxxxx X. Xxxx, D.D.S., M.S.
0000 X.X. Xxxxxxxxxx Xxxxxxxxx
Xxxx, Xxxxxx 00000
CC:
Xxxxx X. Xxxxxxx
000 XX Xxxxxxxxxx Xxx
Xxxx, Xxxxxx 00000
If to the OMEGA, to:
Omega Orthodontics, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx
and in any case at such other address as the addressee shall have specified by
written notice. All periods of notice shall be measured from the date of
delivery thereof.
15.2 INTENTIONALLY OMITTED.
15.3 Contract Modifications for Prospective Legal Events. In the event any state
or federal Laws, now existing or enacted or promulgated after the effective date
of this Agreement, are interpreted by judicial decision, a regulatory agency or
legal counsel for both parties in such a manner as to indicate that the
management structure of this Agreement may be in violation of such Laws, the New
PC and the MSO shall amend this Agreement as necessary. To the maximum extent
possible, any such amendment shall preserve the underlying economic and
financial arrangements between the New PC and the MSO. Neither party shall be
deemed to be in breach of this agreement by reason of a violation of such Laws
as described above unless such party had actual knowledge of such violation as
of the effective date of this Agreement.
15.4 Exclusive Remedies. The remedies specified in this Agreement are the
exclusive remedies for liabilities of the parties arising under this Agreement.
The limitations on liability, releases from liability, and waiver and indemnity
provisions expressed in this Agreement shall apply to the full extent permitted
by law, even in the event of a parties' fault, negligence (in whole or in part),
strict liability, or other basis of liability, and whether liability is founded
in contract, tort, or otherwise, and shall extend to the parties and its
affiliated companies and its and their shareholders, directors, officers,
employees, agents, subcontractors, and suppliers.
15.5 No Obligation to Third Parties. None of the obligations and duties of the
MSO or the New PC under this Agreement shall in any way or in any manner be
deemed to create any obligation of the MSO or of the New PC to, or any rights
in, any person or entity not a party to this Agreement other than OMEGA which
shall be deemed a party for limited purposes as set forth in this Agreement.
15.6 Entire Agreement. This Agreement including the Schedules and Exhibits
hereto, together with the Affiliation Agreement of even date herewith, the Stock
Put/Call Option and Successor Designation Agreement of even date herewith and
the Employment Agreement(s) (including the related non-competition agreements or
covenants), constitutes the entire agreement between the parties concerning this
subject matter, and supersedes all prior and contemporaneous agreements,
representations and understandings of the parties concerning the contents
hereof. No supplement, modification, or amendment to this Agreement shall be
binding unless executed in writing by all of the parties hereto, except as
otherwise provided herein. No waiver of any of the provisions of this Agreement
shall be deemed to constitute a waiver of any other provision, whether similar
or not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.
15.7 Assignment. The rights and the duties of the parties under this Agreement
may not be assigned or transferred without the prior written consent of the
non-assigning party, which consent shall not be unreasonably withheld; provided,
however, that the MSO shall be permitted to assign its rights and obligations
hereunder without the consent of the New PC to any person, firm or corporation
controlled by the MSO, controlling the MSO or under common control with the MSO
or to such financing institutions as may be required by the terms of credit
agreements which may be entered into from time to time by Omega for the
obtaining of addition financing for Omega.
15.8 INTENTIONALLY OMITTED.
15.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon, irrespective of its conflict of
laws rules. The parties agree to submit to the jurisdiction of any state or
federal court located in Bend, Oregon. The parties acknowledge that the MSO is
not authorized or qualified to engage in any activity which may be construed or
deemed to constitute the practice of dentistry or endodontics. To the extent any
act or service required of the MSO in this Agreement should be construed or
deemed, by any governmental authority, agency or court to constitute the
practice of dentistry or endodontics, the performance of said act or service by
the MSO shall be deemed waived and forever unenforceable and the provisions of
Section 15.14 shall be applicable.
15.10 Events Excusing Performance. Neither party shall be liable to the other
party for failure to perform any of the services required herein in the event of
strikes, lock-outs, calamities, acts of God, unavailability of supplies or other
events over which that party has no control for so long as such events continue,
and for a reasonable period of time thereafter.
15.11 Compliance with Applicable Laws. Both parties shall comply with all
applicable Laws and restrictions imposed thereunder in the conduct of their
obligations under this Agreement.
15.12 Language Construction. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement.
15.13 Amendments. This Agreement may be amended only by the written consent of
both parties.
15.14 Severability. In the event any provision of this Agreement is held by a
court of competent jurisdiction to be illegal or unenforceable, (i) the parties
shall amend this Agreement in order to carry out the intent and essential
business purposes of this Agreement as closely possible within the requirements
of applicable provisions of Law as determined by such a court, and (ii) the
remaining provisions of this Agreement shall continue in full force and effect
in order to carry out the intent and essential business purposes of this
Agreement as closely possible within the requirements of applicable provisions
of Law as determined by such a court.
15.15 No Waiver. The waiver by either party to this Agreement of any one or more
defaults, if any, on the part of the other party, shall not be construed to
operate as a waiver of the other or future defaults under this Agreement.
15.16 Captions. Captions to paragraphs in this Agreement are for ease of
reference, and shall not be considered an interpretation of the paragraph.
15.17 Counterparts. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the day and year first above written.
NEW PC:
[Insert Name of New PC]
By:_______________________________
Name: Xxxxxx X. Xxxx, D.D.S., M.S.
Title: President
MSO:
OMEGA ORTHODONTICS OF WOODLAND HILLS, INC.
By:_______________________________
Name: Xxxxxx X. Xxxxxxxx
Title: President
OMEGA:
OMEGA ORTHODONTICS, INC.
By:_______________________________
Name: Xxxxxx X. Xxxxxxxx
Title: President
SCHEDULE 1
THE ENDODONTISTS
Name and Address
Xxxxxx X. Xxxx, D.D.S., M.S.
0000 X.X. Xxxxxxxxxx Xxxxxxxxx
Xxxx, Xxxxxx 00000
SCHEDULE 2
ENDODONTIC OFFICES AND SERVICES
The office space and related leasehold improvements which the MSO will provide
to the New PC pursuant to Section 2.2 of the Management Services Agreement to
which this Schedule 2 is attached are located at 0000 X.X. Xxxxxxxxxx Xxxxxxxxx,
Xxxx, Xxxxxx 00000. The related fixtures, furniture, furnishings and equipment
are set forth on the attached asset list. The services to be provided by the MSO
to the New PC in relation to the Endodontic Offices are the repair, maintenance
and replacement of the Endodontic Offices, including such leasehold
improvements, fixtures, furniture, furnishings and equipment, except for
repairs, maintenance and replacement necessitated by the negligence of the New
PC, its employees and agents (not including the MSO or its employees or agents).
The MSO shall also provide telephone, facsimile transmission, printing,
duplicating and transcribing services as needed, as well as all laundry, linen
and uniforms.
SCHEDULE 3
COMPENSATION - MANAGEMENT FEES
The MSO shall receive, as compensation for the performance of all of its
obligations and duties contained in the Agreement, (a) during the Term of this
Agreement, monthly Management Fees in an amount equal to Sixty Five Percent
(65%) of the Practice Revenues, plus (b) during the first thirty six (36) months
of this Agreement only, a monthly start up management fee in an amount equal to
$5,000 commencing on the effective date of this Agreement. The New PC shall be
entitled to Thirty Five Percent (35%) of such monthly Practice Revenues, less
the start up management fee during the first thirty six (36) months of this
Agreement, except as the parties may otherwise agree from time to time in
writing; provided, however, that in no event shall the MSO receive less than
fifteen (15%) percent of the Practice Revenues in Management Fees (not including
the start up management fees during the first thirty six (36) months of this
Agreement) annually. At the end of each financial quarter during the Term, the
MSO shall provide the New PC with an unaudited internal accounting of the MSO
Expenses actually incurred for such quarter, prepared in accordance with the
accrual method of accounting. If the MSO Expenses as reflected in such
accounting as having been paid by the MSO are less than fifty (50%) percent of
the Practice Revenues for such financial quarter, fifty (50%) percent of such
difference shall be returned by the MSO to the New PC as a profit incentive
rebate (the "Rebate"). If such MSO Expenses are more than fifty (50%) percent of
the Practice Revenues for such financial quarter, fifty (50%) percent of such
excess will be charged to the New PC and set off against payments due to the New
PC hereunder. If the Agreement to which this Schedule 3 is attached is
terminated or expires, the foregoing Management Fees (including any start up
management fees) shall be payable to the MSO based on all Practice Revenue
collected as of the date of termination or expiration.
Payment to the MSO shall be made in monthly installments based on the Practice
Revenues realized by the MSO for services rendered hereunder. The MSO shall
distribute the proceeds from the New PC Account and allocate the proceeds
between the MSO and the New PC as described above, on or before the 15th day of
the succeeding month. In the event the 15th day falls on a weekend or holiday,
then said distribution shall be made on the next business day. The parties
hereto may agree to handle such matters in a different manner.
For purposes of this Agreement, "Practice Revenues" shall mean gross collections
of all revenues generated by or on behalf of the New PC (whether through
subsidiaries or affiliates), including, but not limited to, all fees and charges
collected as a result of professional endodontic services furnished to patients
by the New PC and for any other goods or services sold or provided to such
patients.
EXHIBIT A
ENDODONTIC OFFICES - MASTER LEASE
EXHIBIT B
PRACTICE PROVIDERS
Xxxxxx X. Xxxx, D.D.S., M.S.
0000 X.X. Xxxxxxxxxx Xxxxxxxxx
Xxxx, Xxxxxx 00000
EXHIBIT C
New PC'S AFFIDAVIT
AFFIDAVIT
I, Xxxxxx X. Xxxx, D.D.S., M.S., declare:
I am an endodontist, duly licensed in the State of Oregon and I
practice through a professional corporation under the name [Insert Name of New
PC] (the "New PC").
I have had substantial experience in the practice of endodontics and in
managing and operating an endodontic office.
In the course of operating endodontic offices, I have acquired
significant knowledge as to the overhead costs incurred and gross receipts
generated by similar types of endodontic offices. Further, I am fully aware of
the non-endodontic, operational, accounting, billing, financing, management and
personnel requirements of an endodontic office and the cost factors involved in
providing such management, personnel, accounting, billing, financing and
operation.
I have thoroughly reviewed the Management Services Agreement (the
"Agreement"), which is effective as of ________, 1998, between the New PC and
Omega Orthodontics of Woodland Hills, Inc. (the "MSO") concerning the duties,
responsibilities and obligations undertaken by the MSO in managing and operating
all non-endodontic aspects of the Endodontic Office as contemplated by the
Agreement.
I have reviewed the prior operating financial statements of the
endodontic office located at 0000 X.X. Xxxxxxxxxx Xxxxxxxxx, Xxxx, Xxxxxx 00000
and an operating budget and estimated income of the endodontic office, which, in
my opinion, can reasonably be expected from the operation of said office.
In my opinion, based upon my experience, the Management Fees of Sixty
Five Percent (65%) of "Practice Revenues" to be charged by the MSO as
contemplated by the Agreement (plus the monthly start up management fee of
$5,000 payable during each of the first thirty six (36) months of the
Agreement), will afford it a reasonable but not excessive return for its
services rendered and obligations incurred. In addition, the Thirty Five Percent
(35%) of "Practice Revenues" (less the start up management fees due during the
first thirty six (36) months of this Agreement) retained by the New PC will
provide reasonable earnings for the performance of endodontic services.
I declare under penalty of perjury that the foregoing statement is true and
correct to the best of my knowledge and belief.
Executed at Bend, Oregon this ____ day of ________ 1998.
---------------------------
Xxxxxx X. Xxxx, D.D.S., M.S.
STATE OF OREGON
___________________, ss. January ___, 1998
Then personally appeared the above-named Xxxxxx X. Xxxx, D.D.S., M.S. and
acknowledged the foregoing Affidavit to be his free act and deed.
[SEAL] ____________________________
Notary Public
My Commission Expires:
EXHIBIT D
SECURITY AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is effective as of the 1st day of January 1998, by
[Insert Name of New PC]., an Oregon corporation (the "New PC"), and Xxxxxx X.
Xxxx, D.D.S., M.S. ("Xx. Xxxx") who is duly licensed to practice endodontics in
the State and Omega Orthodontics of Woodland Hills, Inc., a Delaware corporation
(the "MSO") with reference to the following facts:
WHEREAS, pursuant to a Management Services Agreement (the "Agreement"), dated as
of the date hereof, between the New PC and the MSO, as assurance and collateral
security for the payment of the monthly Management Fees owed to the MSO pursuant
to the Agreement and any funds advanced by the MSO to or on behalf of the New PC
pursuant to the Agreement and for the faithful and timely performance of all the
covenants and conditions to be performed by the New PC under the Agreement
(collectively, the "Obligations") the New PC agreed to pledge, grant, bargain,
assign and transfer to the MSO a security interest, pursuant to the Uniform
Commercial Code of the State, in and to all Practice Revenue and the accounts
receivable of patients of the New PC, together with all proceeds thereof
(collectively, the "Collateral");
WHEREAS, the New PC is obligated as a condition to the MSO's performance under
the Agreement to execute and deliver this Security Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. Grant of Security Interest. As and for collateral security for payment by the
New PC of the Obligations and any and all amounts payable under this Security
Agreement (collectively, the "Secured Obligations"), the New PC hereby pledges,
grants, bargains, assigns and transfers to the MSO, and grants to the MSO a
security interest in, the Collateral. Xx. Xxxx shall cause the New PC to perform
fully and on a timely basis all of the New PC's obligations under this Security
Agreement. The MSO may at its option file a financing statement (Form UCC-1) in
order to perfect its security interest hereunder.
2. Representations and Warranties. The New PC represents and warrants all of the
accounts receivable constituting a portion of the Collateral of the New PC
pledged to the MSO are and will be validly created obligations of each of the
obligors who incurred same for services actually rendered in the ordinary course
of business of the New PC. Further, the New PC represents and warrants that the
Collateral is not subject to any lien, pledge, charge, encumbrance or security
interest or right or option on the part of any third person.
3. Release of Security Interest. Upon the termination of the Agreement and
payment in full of the accrued Management Fees thereunder and any and all other
Secured Obligations, the MSO shall release its security interest hereunder, and
will deliver to the New PC any property forming part of the Collateral delivered
to the MSO and then held by the MSO hereunder.
4. Realization of Collateral. The MSO shall have, with respect to the
Collateral, the rights and obligations of a secured party under the Uniform
Commercial Code as adopted in the state of Oregon (the "State"). Such rights
shall include, without limitation, the following:
A. The right, upon default, to have the Collateral, or any part
thereof, transferred to its own name or to the name of its nominee;
B. The right, upon default, to sell, assign or deliver as much of the
Collateral as is reasonably necessary to repay the defaulted
indebtedness (together with expenses attendant upon such sale and
repayment), at public or private sale, as the MSO may elect, either
for cash or on credit, without assumption of any credit risk and
without demand or advertisement (unless otherwise required by law).
C. The New PC hereby irrevocably authorizes the MSO to sign and file
financing statements naming the New PC as the debtor and the MSO as
the secured party, at any time with respect to any Collateral, without
the signature of the New PC. The New PC hereby irrevocably appoints
the MSO as the New PC's attorney-in-fact, with full authority in the
place and stead of the New PC and in the name of the New PC, from time
to time in the MSO's discretion, to take any action and to execute any
instrument which the MSO may deem necessary or advisable to accomplish
the purposes hereof. The attorney-in-fact granted herein is coupled
with an interest and is irrevocable. Third parties and entities and
persons not a party to this Security Agreement are entitled to rely on
this attorney-in-fact and an affidavit of the MSO attesting thereto.
The acceptance of this appointment by the MSO shall not obligate it to
perform any duty or covenant required to be performed by the New PC
under or by virtue of the Collateral. Notwithstanding the foregoing
power of attorney, the New PC shall at any time on the request of the
MSO, sign Financing Statements, security agreements or other
agreements with respect to any Collateral. Upon the New PC's failure
to sign said Financing Statements, security agreements or other
agreements, the MSO is authorized as the agent of the New PC to sign
any such instruments. Upon the request of the MSO, the New PC agrees
to pay all filing fees and to reimburse the MSO on demand for all
costs and expenses of any kind (including, without limitation, legal
fees) incurred in any way in connection with the Collateral.
5. Purchase of Collateral. At any such private or public sale of the Collateral
or part thereof, the MSO may purchase and pay for the same by cancellation of
such portion of the Obligations, equal to the purchase price and free of any
right of redemption on the part of the New PC. The MSO agrees, however, that the
New PC shall have all rights, including rights of notice, provided by the
Uniform Commercial Code as adopted in the State. In any case where notice is
required, five days' notice shall be deemed reasonable notice. In the event of
any sale hereunder, the MSO shall apply the proceeds in the order set forth
below in Paragraph 6 hereof. The MSO may have resort to the Collateral or any
portion thereof with no requirements on the part of the MSO to proceed first
against any other person or property.
6. Application of Collateral. Proceeds from the sale of the Collateral or any
part thereof shall be applied by the MSO in the following order:
A. To the payment of the costs and expenses of collection incurred by the
MSO, including, without limitation, attorneys' fees and all other
reasonable expenses, liabilities and costs incurred by the MSO in
connection therewith;
B. To the payment of the whole amount then owing and unpaid for advances
and/or Management Fees;
C. To the payment in full of all other Obligations of the New PC under the
Agreement; and
D. To the payment to the New PC of any surplus then remaining from such
proceeds.
7. Extension of Agreement. No Renewal or extension of the Agreement, no release
or surrender of any Collateral given as security in connection therewith, and no
delay in enforcement thereof or in exercising any right or power with respect
thereto or hereunder shall affect the rights of the MSO with respect to the
Collateral or any part thereof.
8. Notices. Any notice to be given pursuant to this Agreement shall be deemed
effective the same day when such notice is given personally, or by telegram, or
electronic transmission to the President of the party to whom notice is being
given. Notice by mail shall be deemed effective three days after deposit in the
United States mail, and properly addressed with postage prepaid.
Notices to the MSO shall be given at:
Omega Orthodontics of Woodland Hills, Inc.
c/o Omega Orthodontics, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
or other such addresses as may be delivered by the MSO to the New PC from time
to time in writing.
Notices to the New PC shall be given at:
0000 X.X. Xxxxxxxxxx Xxxxxxxxx
Xxxx, Xxxxxx 00000
Attn: Xxxxxx X. Xxxx, D.D.S., M.S.
CC:
Xxxxx X. Xxxxxxx
000 XX Xxxxxxxxxx Xxx
Xxxx, Xxxxxx 00000
or other such addresses as may be delivered by the New PC to the MSO from time
to time in writing.
9. Waiver. The waiver by either party to this Security Agreement of any one or
more defaults, if any, on the part of the other party, shall not be construed to
operate as a waiver of the other or future defaults under this Agreement. This
Security Agreement may be amended or modified only by the written consent of
both parties.
10. Additional Documents. The New PC agrees that it will duly execute and
deliver to the MSO any additional documents which may be reasonably necessary to
give effect fully to the security interest granted to the MSO hereunder,
including, without limitation, a financing statement on Form UCC-1.
11. Benefit. This Security Agreement shall inure to the benefit of and shall be
binding upon the respective heirs, successors and assigns of the parties hereto.
12. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State.
13. Defined Terms. Capitalized terms used in this Security Agreement which are
not defined herein but which are defined in the Agreement, shall have the
respective meanings ascribed therein.
14. Counterparts. This Security Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first hereinabove written.
NEW PC: MSO:
Xxxxxx X. Xxxx, P.C. OMEGA ORTHODONTICS OF
WOODLAND HILLS, INC.
By:____________________________ By:__________________________
Name: Xxxxxx X. Xxxx, D.D.S., M.S. Name: Xxxxxx X. Xxxxxxxx
Title: President Title: President
XX. XXXX
-------------------------------
Xxxxxx X. Xxxx, D.D.S., M.S.
