Exhibit 10.49

SECOND AMENDED AND RESTATED

SERVICE AGREEMENT

AMONG

NORTHLAND DENTAL PARTNERS, PLLC

FAMILY PERIODONTIC SPECIALISTS, P.L.C.,

FAMILY ORAL SURGERY SPECIALISTS, PLC,

FAMILY ENDODONTIC SPECIALISTS, PLC

and

AMERICAN DENTAL PARTNERS OF MINNESOTA, LLC

Effective Date: January 1, 2010

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TABLE OF CONTENTS

 

         Page

ARTICLE I          DEFINITIONS

   1

ARTICLE II        ENGAGEMENT AND AUTHORITY OF SERVICE COMPANY

   2

2.1

 

Engagement

   2

2.2

 

Limitations On Service Company Authority

   2

2.3

 

Patient Referrals

   2

2.4

 

Internal Management of Provider

   3

ARTICLE III        POLICY BOARD

   3

3.1

 

Formation and Operation of Policy Board

   3

3.2

 

Responsibilities of the Policy Board

   4

3.3

 

Dental Decisions

   5

ARTICLE IV        RESPONSIBILITIES OF SERVICE COMPANY

   6

4.1

 

Clinics

   6

4.2

 

Equipment

   6

4.3

 

Laboratory Services

   7

4.4

 

Supplies

   7

4.5

 

Capital Investment

   7

4.6

 

Support Services

   7

4.7

 

Quality Assurance, Risk Management, and Utilization Review

   8

4.8

 

Licenses and Permits

   8

4.9

 

Personnel

   8

4.10

 

Contract Negotiations

   8

4.11

 

Billing and Collection

   8

4.12

 

Provider Account

   10

4.13

 

Financial Matters

   11

4.14

 

Reports and Records

   12

4.15

 

Recruitment of Provider Dentists

   13

4.16

 

Service Company’s Insurance

   13

4.17

 

License of Name and Marks

   13

4.18

 

No Warranty

   14

ARTICLE V        RESPONSIBILITIES OF PROVIDER

   14

 

-i-

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TABLE OF CONTENTS

(continued)

 

         Page

5.1

 

Organization and Operations

   14

5.2

 

Provider Personnel

   15

5.3

 

Professional Standards

   15

5.4

 

Dental Care

   15

5.5

 

Peer Review and Quality Assurance

   16

5.6

 

Provider’s Insurance

   17

5.7

 

Noncompetition

   18

5.8

 

Use of Names

   19

ARTICLE VI        CONFIDENTIALITY

   19

6.1

 

Confidential and Proprietary Information

   19

6.2

 

Exceptions

   20

6.3

 

Legally Required Disclosure

   20

6.4

 

Use of Practice Statistics

   20

6.5

 

Trading in Parent Securities

   21

ARTICLE VII      FINANCIAL ARRANGEMENTS

   21

7.1

 

Clinic Expense Reimbursement

   21

7.2

 

Repayment of Advances

   21

7.3

 

Service Fee

   21

7.4

 

Fair Value

   21

7.5

 

Payment

   22

7.6

 

Accounts Receivable; Security Interest

   22

ARTICLE VIII    TERM AND TERMINATION

   23

8.1

 

Initial and Renewal Term

   23

8.2

 

Termination

   23

8.3

 

Effects of Termination

   25

8.4

 

Purchase Obligation

   25

8.5

 

Closing of Purchase

   26

ARTICLE IX      GENERAL

   27

9.1

 

Nature of Services

   27

9.2

 

Relationship of Parties

   27

 

-ii-

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TABLE OF CONTENTS

(continued)

 

         Page

9.3

 

Notices

   27

9.4

 

Further Assurances

   28

9.5

 

Governing Law

   28

9.6

 

Severability

   28

9.7

 

Setoff

   29

9.8

 

Remedies

   29

9.9

 

Non-waiver

   29

9.10

 

Indemnification

   29

9.11

 

No Third Party Benefit

   29

9.12

 

Captions

   30

9.13

 

Genders and Numbers

   30

9.14

 

References to Law

   30

9.15

 

Complete Agreement

   30

9.16

 

Counterparts

   30

9.17

 

Assignment

   30

9.18

 

Successors

   30

9.19

 

Force Majeure

   31

9.20

 

Interpretation

   31

9.21

 

Covenant Not to Sue

   31

9.22

 

Mutually Negotiated

   31

9.23

 

Arbitration

   31

9.24

 

Exclusion of Indirect Damages

   33

9.25

 

Limitation of Liability

   33

Exhibit A, Definitions

   A-1

 

-iii-

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SECOND AMENDED AND RESTATED

SERVICE AGREEMENT

This Second Amended and Restated Service Agreement (the “Agreement”) is made
March 10, 2010, to be effective January 1, 2010 (the “Effective Date”), among
Northland Dental Partners, PLLC, a Minnesota professional limited liability
company (“Northland”), its wholly owned subsidiaries, Family Periodontic
Specialists, P.L.C., Family Oral Surgery Specialists, PLC, and Family Endodontic
Specialists, PLC, all Minnesota professional limited liability companies (the
“Subsidiaries,” and with Northland, collectively “Provider”), and American
Dental Partners of Minnesota, LLC, a Delaware limited liability company, as
successor in interest to PDHC, Ltd., a Minnesota corporation (“Service
Company”).

Background Information

A. Provider operates dental practices providing dental services to the general
public in and around the Minneapolis, Minnesota area through individual dentists
who are licensed to practice dentistry in the State of Minnesota and who are
employed or otherwise retained by Provider.

B. Service Company is engaged in the business of providing non-clinical
administrative and management services to dental practices, including obtaining
dental offices and providing those offices, other assets, working capital,
systems, certain personnel, and a variety of business services, but not
including services that are directly related to or would improperly influence
the practice of dentistry.

C. Provider acknowledges that there is a distinction between the clinical and
non-clinical, or business, aspects of a dental practice and has retained Service
Company to manage the business aspects of Provider’s dental practice pursuant to
an Amended and Restated Service Agreement dated January 1, 2009 (the “Original
Agreement”) between Provider and Service Company (the “Parties”), so that
Provider and its dentists can focus their efforts primarily on providing quality
dental care. In addition, Provider acknowledges that since it is practicing in
offices provided by Service Company, is using trade names and marks owned by
Service Company, and is supervising certain of Service Company’s employees,
cooperation between the Parties is necessary for the efficient and effective
operation of their respective businesses, and that Service Company has an
interest in ensuring that Provider operates its dental practice in a safe and
high quality manner and in compliance with applicable law.

D. The Parties desire to continue their relationship, but to modify the Original
Agreement in certain respects, and they are entering into this Agreement to
accomplish those purposes.

Statement of Agreement

The Parties hereby acknowledge the accuracy of the foregoing Background
Information and agree as follows:

ARTICLE I

DEFINITIONS

Capitalized terms used but not otherwise defined in the main body of this
Agreement shall have the respective meanings given those terms in the attached
Exhibit A.

 

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ARTICLE II

ENGAGEMENT AND AUTHORITY OF SERVICE COMPANY

2.1 Engagement. Provider hereby engages Service Company as Provider’s exclusive
provider of the Services, and Service Company hereby accepts such engagement.
Subject at all times to the other express provisions of this Agreement, Service
Company shall have the authority to provide the Services in any reasonable
manner Service Company deems appropriate. Without limiting the foregoing,
Provider acknowledges that Service Company may arrange for certain of the
Services to be performed by employees of Parent or other subsidiaries of Parent
who are located in other states, including without limitation certain Services
related to payroll processing and benefits administration, risk management, and
information technology support. Unless an expense is expressly designated as a
Service Company Expense in this Agreement, all expenses incurred by Service
Company, Parent, or such other subsidiaries of Parent in providing the Services
shall be Clinic Expenses.

2.2 Limitations On Service Company Authority. The Parties acknowledge and agree
that: (a) Service Company is not authorized or qualified to engage in the
practice of dentistry; (b) Service Company is not employing or engaging Provider
or any of its dentists or other clinical personnel to practice dentistry; and
(c) notwithstanding anything in this agreement to the contrary: (i) Provider,
through its dentists, shall be solely responsible for and shall have complete
authority, responsibility, supervision, and control over the practice of
dentistry and provision of Dental Care in the Clinics, and all Dental Care shall
be provided and performed exclusively by or under appropriate supervision of
dentists as such dentists, in their sole discretion, deem appropriate,
(ii) Service Company shall not have or exercise any control or supervision over
the practice of dentistry or provision of Dental Care, (iii) this Agreement does
not permit Service Company to interfere in the independent professional judgment
of Provider’s dentists in their practice of dentistry, and (iv) to the extent
any act or service required of Service Company under this Agreement is
reasonably likely to be construed by a court of competent jurisdiction or by any
applicable governmental agency, board, or authority to constitute the practice
of dentistry, the requirement that Service Company perform that act or service
shall be deemed waived and unenforceable. For purposes of this Agreement and as
the context permits, the term “dentist” shall be deemed to include those
individuals licensed by the Board of Dentistry of the State of Minnesota to
practice general dentistry or a dental care specialty such as orthodontics,
endodontics, periodontics, prosthodontics, pediatric dentistry, oral surgery,
public health dentistry, and oral pathology.

2.3 Patient Referrals. The Parties acknowledge and agree that: (a) the benefits
to Provider under this Agreement do not require, are not payment for, and are
not in any way contingent upon the referral, admission, treatment, or any other
arrangement for the provision of any item or service offered by Service Company
to patients of Provider in any facility, laboratory, or dental care-related
operation controlled, managed, or operated by Service Company; and (b) Service
Company is not engaging, does not intend to engage, and is not

 

2

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required to engage in any referrals of patients to Provider or any similar
activities, or any other activities designed or intended to result in referrals
of patients to Provider, and neither the Service Fee nor any other amount paid
to Service Company by Provider pursuant to this Agreement is being paid as
consideration for or in connection with any such activities.

2.4 Internal Management of Provider. Provider has its own internal governance
structure, which is not controlled in any way by Service Company, and matters
involving the tax planning, investment planning, and internal management,
control, or finances of Provider, including without limitation the compensation
of dentists employed or retained by Provider, shall remain the sole and
exclusive responsibility of Provider and its members. However, notwithstanding
the foregoing or any other provisions of this Agreement to the contrary,
Provider acknowledges that it has elected to participate in certain employee
benefit plans and programs sponsored or made available by Service Company,
including without limitation the 401(k) plan established by Parent. Provider has
reviewed the terms of such plans and programs, has found them satisfactory, and
shall abide by all requirements of such plans and programs.

The operations of Northland and the Subsidiaries, as Provider under this
Agreement, shall to the extent practicable be treated as one operation for
purposes of this Agreement, including without limitation for purposes of
budgeting. Northland and the Subsidiaries shall be jointly and severally liable
for all of Provider’s obligations to Service Company under this Agreement.
However, Northland shall have the sole responsibility and authority for all
decisions, consents, appointments, and other actions (hereinafter simply
“actions”) to be made, taken, or given by Provider pursuant to or in connection
with this Agreement, and each Subsidiary hereby irrevocably appoints Northland
as such Subsidiary’s attorney-in-fact and agent, with full power of
substitution, to take all such actions without any further involvement of such
Subsidiary. All such actions shall be binding on the Subsidiaries, and Service
Company shall have the absolute right to rely on all such actions taken by
Northland.

ARTICLE III

POLICY BOARD

3.1 Formation and Operation of Policy Board. The Parties hereby establish a
policy board (the “Policy Board”) which shall be responsible for developing and
implementing management and administrative policies for the overall operation of
Clinics, subject to Section 3.3, below. The Policy Board shall initially consist
of six members, of which three members shall be designated by Service Company,
in its sole discretion, and three members shall be designated by Provider, in
its sole discretion; provided that, unless otherwise agreed by the Parties the
Policy Board members designated by Provider shall be licensed dentists employed
by Provider. Each Party shall have the right to designate, remove, and replace
its Policy Board designees at any time and from time to time upon notice to the
other Party.

Any decision made by a Party’s Policy Board representatives shall be binding on
that Party. Except as may otherwise be expressly provided in this Agreement or
any rules, bylaws, or regulations adopted by the Policy Board, the act of a
majority of the members of the Policy Board shall be the act of the Policy
Board. The Policy Board’s decisions may be evidenced by either minutes of a
Policy Board meeting or written action taken by the Policy Board members making
the decision; provided that no written action signed by less than all of the
Policy Board

 

3

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members shall be effective unless notice of such action is given to each Policy
Board member who is not signing such action at least two business days prior to
the effective date of such action. The decisions, resolutions, actions or
recommendations of the Policy Board within its authority shall be implemented by
Service Company or Provider, as appropriate.

The Policy Board shall hold regular meetings at such places and at such times
(not less often than quarterly) as the Policy Board may determine from time to
time. Special Policy Board meetings may be called by either Party or any two
Policy Board members; provided that notice of any meeting which is not a
regularly scheduled meeting shall be given to all Policy Board members at least
five business days prior to the meeting, unless such notice is waived by the
Policy Board members. Policy Board meetings may be held through the use of
remote communications equipment so long as all members can participate with each
other clearly during the meeting.

3.2 Responsibilities of the Policy Board. The Policy Board shall have the
following duties, responsibilities, and authority:

(a) Capital Improvements and Expansion. Any renovation and expansion plans and
capital equipment expenditures with respect to Clinics shall be reviewed and
approved by the Policy Board and shall be based upon economic feasibility,
dentist support, productivity, and then-current market conditions.

(b) Annual Budgets. All annual capital and operating budgets prepared in
accordance with Section 4.13(a) by Service Company (in consultation with
Provider) shall be subject to the review, comment, and approval of the Policy
Board. Notwithstanding the foregoing sentence, such budgets shall be subject to
the review, comment, and approval of Parent.

(c) Marketing and Advertising. All advertising and other marketing of the dental
services performed at any Clinic shall be subject to the prior review and
approval of the Policy Board.

(d) Patient Fees; Collection Policies. Subject to Section 3.3, as a part of the
annual operating budget, in consultation with Provider and Service Company, the
Policy Board shall review and make recommendations concerning the fee schedules
and collection policies for all dental and ancillary services rendered by
Provider. Approval of the fee schedules shall be a Dental Decision.

(e) Provider and Payor Relationships. Subject to Section 3.3: (i) decisions
regarding the establishment or maintenance of contractual relationships between
Provider and outside or institutional dental care providers and third-party
payors shall be subject to the review and recommendations of the Policy Board;
and (ii) all discounted fee practices and schedules, including individual
provider or specialty discount arrangements, preferred provider organization
discounts and capitated fee arrangements, shall be subject to the review and
recommendations of the Policy Board. Where there is no clear methodology for the
allocation of capitated fees among Provider’s Dental Care Professionals, the
Policy Board shall recommend the methodology intended to result in the equitable
and appropriate allocation of all related fees consistent with the type and
utilization of Dental Care covered under the capitation arrangement.

 

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(f) Strategic and Operational Planning. The Policy Board shall review and
approve the long-term strategic and short-term operational goals, objectives and
plans developed by Service Company.

(g) Capital Expenditures. The Policy Board shall determine the priority of major
capital expenditures. Notwithstanding the preceding sentence or any other
provisions of this Agreement to the contrary, all capital expenditures must be
approved by Parent.

(h) Personnel Planning. The Policy Board shall review and approve personnel
manpower plans for Provider and Clinic-level support personnel developed by
Service Company.

(i) Risk Management. The Policy Board shall cause to be developed and
implemented claims reporting procedures intended to ensure timely reporting to
each Party of all patient claims made against either Party or its employees or
independent contractors, as well as procedures for the timely review and
monitoring of such claims, including without limitation reporting the resolution
of such claims, including any Provider reimbursement decisions (collectively,
the “Risk Management Procedures”); provided that any Dental Care related patient
concern or claims reimbursement decision shall be a Dental Decision.

(j) Environmental Health and Safety. The Policy Board shall review, approve and
monitor environmental and workplace health and safety guidelines, the goal of
which is to achieve compliance with current national, state and local laws and
regulations regarding environmental and workplace health and safety.

(k) Emergency Care Services. The Policy Board shall review, approve and
periodically make suggestions for improving (i) the organization and delivery of
emergency Dental Care by Provider, and (ii) the process and guidelines for
ensuring an appropriate response by Provider to dental and in-Clinic medical
emergencies as they may occur from time to time.

(l) Financial Review. The Policy Board shall review and monitor the financial
performance of Provider with respect to the attainment of its budgeted goals.

(m) Provider Acquisitions. The Policy Board shall have the authority to approve
or disapprove any merger or combination with or acquisition of any dental
practice by Provider.

(n) Other. The Policy Board shall have such other duties, responsibilities, and
authority as may be set forth in this Agreement or agreed upon by the Parties
from time to time.

3.3 Dental Decisions. Notwithstanding the preceding section or any other
provisions of this Agreement to the contrary, all Dental Decisions (defined
below) shall be made solely by Provider, its members of the Policy Board, or its
individual dentists, as appropriate; provided that non-dentist members of the
Policy Board may participate in the related analysis and discussion. For
purposes of this Agreement, “Dental Decisions” shall mean decisions relating
directly to: (a) types and levels of Dental Care to be provided and
methodologies and techniques for the provision of Dental Care, including without
limitation the selection of a course of treatment for a patient, the procedures
or materials to be used as part of such course of treatment, and the manner in
which such course of treatment is carried out; (b) recruitment of dentists for
Provider,

 

5

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including evaluating the background, experience, qualifications, specialties,
and other credentials of such individuals; (c) fee schedules for Provider’s
services, including without limitation Provider’s usual and customary fee
schedule and related pricing, credit, warranty and refund policies;
(d) advertising and marketing activities relating to Provider’s services;
(e) care, custody, and control of (i) dental materials and equipment when used
for the provision of Dental Care, and (ii) patient records of Provider’s
patients; (f) third party payor contracting; (g) hours of operation of
Provider’s dental practice; and (h) any other Dental Care related functions or
decisions agreed upon by the Parties.

ARTICLE IV

RESPONSIBILITIES OF SERVICE COMPANY

During the Term, Service Company shall provide all such Services as are
necessary and appropriate for the day-to-day administration of the business
aspects of Provider’s operations, including without limitation those services
set forth in this Article, provided that all such Services shall be subject to
the applicable Budget.

4.1 Clinics

(a) Service Company shall lease, acquire or otherwise procure Clinics at such
locations as are approved by the Policy Board, taking into consideration the
professional concerns of Provider. The expenses associated with any such
leasing, acquisition, or procurement shall be Clinic Expenses; provided that
Service Company shall exercise commercially reasonable efforts to procure
Clinics at commercially reasonable rates. Any move from a present Provider
practice location shall be made only after Service Company has received Provider
Consent.

(b) In the event Provider is the lessee of a Clinic under a lease with an
unrelated and nonaffiliated lessor, Service Company may require Provider to
assign such lease to Service Company upon receipt of consent from the lessor.
Provider shall exercise all commercially reasonable efforts to assist in
obtaining the lessor’s consent to the assignment. Any expenses incurred in
connection with the assignment shall be Clinic Expenses.

(c) Service Company shall be responsible for the repair and maintenance of each
Clinic, in a manner consistent with Service Company’s responsibilities under the
terms of any lease or other use arrangement relating to that Clinic, the costs
and expenses of which shall be a Clinic Expense; provided that the costs and
expenses of any repairs or maintenance necessitated by the negligence or willful
misconduct of dentists or other personnel employed or otherwise retained by
Provider shall be a Provider Expense, but one that is ignored for purposes of
calculating the Calculated Margin and that therefore must be paid out of the
Provider Retained Earnings.

4.2 Equipment

(a) Service Company shall provide all non-dental equipment, fixtures, office
supplies, furniture and furnishings that Service Company deems reasonably
necessary for the operation of each Clinic or reasonably necessary for the
provision of Dental Care.

 

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(b) Service Company shall provide, finance, or cause to be provided or financed
such dental equipment as is reasonably required by Provider for the provision of
Dental Care. Subject to the preceding sentence and to economic feasibility as
set forth in the Budgets approved pursuant to this Agreement, Provider shall
have final authority in all dental equipment selections. Service Company may,
however, advise Provider on the relationship between its dental equipment
decisions and the overall administrative and financial operations of the
Clinics. Except for Special Dental Supplies, all dental and non-dental equipment
acquired for the use of Provider shall be owned by Service Company.

(c) Service Company shall be responsible for repairing, maintaining, and keeping
in reasonably good condition, and replacing (as reasonably necessary), all
equipment provided by Service Company under this Agreement, ordinary wear and
tear excepted in all cases, the costs and expenses of which shall be Clinic
Expenses; provided that the costs and expenses of any repairs, maintenance and
replacement necessitated by the negligence or willful misconduct of dentists or
other personnel employed or otherwise retained by Provider shall be a Provider
Expense, but one that is ignored for purposes of calculating the Calculated
Margin and that therefore must be paid out of the Provider Retained Earnings.

4.3 Laboratory Services. Unless otherwise prohibited by federal or state law,
Service Company shall arrange for laboratory services (on a basis consistent
with this Agreement and the requirements of applicable law), including without
limitation dental appliance laboratory service, pathology laboratory service,
medical laboratory service, and such other laboratory services as are reasonably
necessary and appropriate for the operation of each Clinic and the provision of
Dental Care therein.

4.4 Supplies. Service Company shall order, procure, purchase, own, and provide a
reasonable inventory of Ordinary Dental Supplies and office supplies as are
reasonably necessary and appropriate for the operation of each Clinic and the
provision of Dental Care therein. Unless otherwise prohibited by federal or
state law, Service Company shall also order, procure, purchase and provide on
behalf of and as agent for Provider all Special Dental Supplies reasonably
required by Provider to provide Dental Care, the cost of which shall be a Clinic
Expense. Service Company shall exercise commercially reasonable efforts to
ensure that each Clinic is at all times adequately stocked with all such
supplies. The supervision and ownership of (a) all office and Ordinary Dental
Supplies is and shall remain the sole responsibility of Service Company, and
(b) all Special Dental Supplies is and shall remain the sole responsibility of
Provider.

4.5 Capital Investment. Access to all needed working capital and capital
expenditures included in the then-current Budget or otherwise approved by the
Policy Board will be provided by Service Company. Service Company shall
determine the source of capital to be invested, which may include
(a) inter-company borrowings from Parent, and (b) borrowings, leases, or other
financing methods through independent third-party financial institutions.

4.6 Support Services. Service Company shall provide or arrange for all printing,
stationery, forms, postage, duplication, facsimile, photocopying, and data
transmission and processing services, information services (including providing
a computer system for clinic functions, billing, communications, and
management), and other support services as are reasonably necessary and
appropriate for the operation of each Clinic and the provision of Dental Care
therein.

 

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4.7 Quality Assurance, Risk Management, and Utilization Review. Service Company
shall assist Provider in Provider’s establishment and implementation of
procedures to ensure the consistency, quality, appropriateness, and necessity of
Dental Care provided by Provider, and shall provide administrative support for
Provider’s overall quality assurance, risk management, and utilization review
programs. Service Company shall assist Provider by monitoring Provider’s level
of compliance with such procedures and to report its findings to Provider.

4.8 Licenses and Permits. Although Provider shall be solely responsible for
obtaining and maintaining all federal, state, and local licenses and regulatory
permits required for or in connection with the operation of Provider and in
connection with the operation of all dental equipment located in each Clinic,
Service Company shall assist Provider with the implementation of a plan designed
to ensure that all such licenses and permits are obtained and shall provide
reasonable assistance to Provider in obtaining the same. Service Company also
shall maintain all licenses and permits required for all equipment (existing and
future) located at each Clinic.

4.9 Personnel. Except as provided in Section 5.2(d): (a) Service Company shall
employ or otherwise retain and shall be responsible for recruiting, hiring, and
terminating all management, administrative, supervisory, clerical, secretarial,
bookkeeping, accounting, and payroll personnel, laboratory technicians and
personnel, dental hygienists, dental assistants, and other non-dentist personnel
as Service Company deems necessary and appropriate for Service Company’s
performance of its duties and obligations under this Agreement; and (b) the
selection, training and supervision of all such personnel to be employed by
Service Company shall be the responsibility of Service Company; provided that,
consistent with reasonably prudent personnel management policies, Service
Company shall seek and consider the advice, input, and requests of Provider in
regard to personnel matters. Service Company shall have sole responsibility for
determining the compensation and fringe benefits of such personnel and for
withholding all appropriate amounts for income taxes, unemployment insurance,
social security, workers’ compensation, and any other withholding required by
applicable law.

4.10 Contract Negotiations. To the extent reasonably requested by Provider,
Service Company shall advise Provider with respect to, and negotiate, either
directly or on Provider’s behalf, as appropriate, such contractual arrangements
with third parties as are reasonably necessary and appropriate for Provider’s
provision of Dental Care, including without limitation negotiated price
agreements with third party payors, alternative delivery systems, or other
purchasers of group dental care services.

4.11 Billing and Collection. Service Company shall assist Provider with the
establishment and maintenance of credit, billing, and collection policies and
procedures, and shall exercise reasonable efforts to bill and collect on behalf
of Provider in a timely manner (and to the extent permitted by applicable law)
all professional and other fees for all billable Dental Care provided by
Provider. Service Company shall advise and consult with Provider regarding the
fees for Dental Care provided by Provider (including any related discounting
policy). In connection with the billing and collection services to be provided
under this Agreement, Provider hereby grants to Service Company, to the fullest
extent permitted by applicable law, throughout

 

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the Term (and thereafter as provided in Section 8.3), an exclusive special power
of attorney and appoints Service Company, to the fullest extent permitted by
applicable law, as Provider’s exclusive true and lawful agent and
attorney-in-fact, and Service Company hereby accepts such special power of
attorney and appointment, for the following purposes:

(a) To bill Provider’s patients, in Provider’s name and on Provider’s behalf,
for all billable Dental Care provided by or on behalf of Provider to patients.

(b) To bill, in Provider’s name and on Provider’s behalf, all claims for
reimbursement or indemnification from insurance companies and plans, all state
or federally funded dental benefit plans, and all other third party payors or
fiscal intermediaries for all covered billable Dental Care provided by or on
behalf of Provider to patients.

(c) To collect and receive, in Provider’s name and on Provider’s behalf, all
accounts receivable generated by such billings and claims for reimbursement, to
administer such accounts including, but not limited to, extending the time of
payment of any such accounts for cash, credit or otherwise; discharging or
releasing the obligors of any such accounts; suing, assigning or selling at a
discount such accounts to collection agencies; or taking other measures to
require the payment of any such accounts; provided, however, that extraordinary
collection measures, such as filing lawsuits, discharging or releasing obligors,
or assigning or selling accounts at a discount to collection agencies shall not
be undertaken without Provider Consent.

(d) To deposit all amounts collected into the Provider Account which shall be
and at all times remain in Provider’s name. Provider shall transfer and deliver
to Service Company all funds received by Provider from patients or third party
payors for Dental Care. Upon receipt by Service Company of any funds from
patients or third party payors or from Provider for Dental Care pursuant to this
Agreement, Service Company shall promptly deposit the same into the Provider
Account.

(e) To take possession of, endorse in the name of Provider, and deposit into the
Provider Account any notes, checks, money orders, insurance payments, and any
other instruments received in payment of accounts receivable for Dental Care.

(f) To sign checks, drafts, bank notes or other instruments on behalf of
Provider, and to make withdrawals from the Provider Account for payments
specified in this Agreement and as requested from time to time by Provider.

(g) To designate, remove, and change such signatories on the Provider Account as
Service Company deems necessary or appropriate from time to time.

Upon request of Service Company, Provider shall execute and deliver to the
financial institution at which the Provider Account is maintained such
additional documents or instruments as Service Company may reasonably request to
evidence or effect the special power of attorney granted to Service Company by
Provider pursuant to this section and Section 4.12. The special power of
attorney granted herein is coupled with an interest and shall be irrevocable
except with Service Company’s written consent. The irrevocable power of attorney
shall expire when this Agreement has been terminated, all accounts receivable
purchased by Service Company pursuant to Section 7.6, if any, have been
collected, and all amounts due to Service Company as described in Article VII
have been paid.

 

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4.12 Provider Account

(a) Power of Attorney. Service Company shall have access to the Provider
Account, and shall use all funds on deposit therein, solely in accordance with
the terms of this Agreement. Provider hereby grants to Service Company an
exclusive special power of attorney and appoints Service Company as Provider’s
true and lawful agent and attorney-in-fact, throughout the Term (and thereafter
as provided in Section 8.3), and Service Company hereby accepts such special
power of attorney and appointment, to make or cause to be made withdrawals from
the Provider Account for: (i) payments described in this Agreement; and
(ii) such other purposes as Service Company deems appropriate (consistent with
this Agreement), including without limitation daily transfers to one or more
accounts owned by Service Company or Parent as part of cash management
procedures established or adopted by Service Company or Parent from time to
time; provided that to the extent that the aggregate funds withdrawn by Service
Company from the Provider Account pursuant to this section exceed the aggregate
amounts paid or payable to Service Company under this Agreement, then such
excess shall be deemed to be held by Service Company as agent for Provider.
Without limiting the foregoing, Provider acknowledges that under the cash
management procedures currently utilized by Service Company and Parent, funds in
the Provider Account shall be transferred on a daily basis to one or more
accounts of Parent at a bank located in Boston, Massachusetts. Notwithstanding
this exclusive special power of attorney, Provider may, upon reasonable advance
notice to Service Company, request that Service Company use funds in the
Provider Account or held by Service Company as agent for Provider to pay
Provider Expenses and such other amounts as may be due to Provider under this
Agreement, subject to Section 4.12(b); provided that the amount that may be
requested by Provider under this sentence shall be reduced by reserves
sufficient to satisfy the reasonably anticipated needs of Provider’s business
operations and its reasonably foreseeable obligations under this Agreement,
including without limitation reserves reflecting differences in timing between
the receipt of cash and financial statement accruals, including, to the extent
applicable, a reserve appropriate to fund future expenses associated with
deferred revenue for situations in which Provider’s receipt of cash, recognition
of revenue, and/or related expenses occur in different accounting periods.

(b) Priority of Payments. Payments described in this Agreement to be made from
funds in the Provider Account shall be applied (to the extent available) in the
following order of priority:

 

  (i)

Reimbursement of Clinic Expenses to Service Company;

 

  (ii)

Repayment of advances made by Service Company to Provider;

 

  (iii)

Payment of the Service Fee to Service Company;

 

  (iv)

Payment of Provider Expenses other than those to be paid out of Provider
Retained Earnings; and

 

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  (v)

Payment of remaining Provider Expenses and, to the extent requested by Provider,
distribution of the remaining Provider Retained Earnings.

(c) Further Assurances. Promptly upon request by Service Company, Provider shall
execute a separate power of attorney in form reasonably satisfactory to Service
Company for the purpose of further confirming or evidencing the rights granted
to Service Company under Sections 4.11 and 4.12.

4.13 Financial Matters

(a) Annual Budget. The Parties shall reasonably cooperate to develop the Budget
for each calendar year during the Term. To accomplish this: (i) Provider shall
exercise commercially reasonable efforts to provide to Service Company, not less
than 90 days prior to each calendar year, Provider’s anticipated hours for
providing Dental Care, gross production per hour goals for each dentist and
dental hygienist to be utilized by Provider to provide Dental Care, and Provider
Expenses for that calendar year; and (ii) Service Company, in consultation with
Provider, shall exercise commercially reasonable efforts to prepare and deliver
to the Policy Board, not less than 30 days prior to each calendar year (assuming
Provider has timely provided the information as required under the immediately
preceding clause), a proposed Budget for that calendar year, setting forth an
estimate of Provider’s revenue and expenses for that year (including without
limitation the Service Fee). Each Budget shall be subject to the approval of the
Policy Board. Each Budget also shall be subject to the approval of Parent since
Parent is the primary source of working capital and other capital for Provider’s
and Service Company’s operations.

If a proposed Budget is not approved by either the Policy Board or Parent,
Service Company, in consultation with Provider and Parent, shall promptly revise
such proposed Budget, taking into consideration the comments of the Policy Board
and Parent, and shall deliver such revised Budget to the Policy Board and Parent
for approval. Notwithstanding any other provisions of this Agreement to the
contrary, if a proposed Budget has not been approved by both the Policy Board
and Parent for a calendar year, then, until a new Budget has been approved by
both the Policy Board and Parent, the Budget in effect for the prior calendar
year shall be deemed to be adopted as the Budget for the then-current year
except that (i) the Budget for Clinic Expenses and all related items shall be
adjusted to account for any changes beyond the reasonable control of Service
Company, including without limitation changes in laboratory fees or supply costs
and automatic increases in rent or other occupancy costs, (ii) Service Company
shall have the right to adjust the Budget for reasonable compensation increases
for its employees, for changes in employee benefits or related costs, and for
expenses related to new employees reasonably necessary for Service Company to
perform the Services, and (iii) the Budget for capital expenditures shall
include only expenditures for maintenance or emergency needs and any other
capital expenditures expressly approved by both the Policy Board and Parent from
time to time.

Notwithstanding any provisions of this Agreement to the contrary, for purposes
of all calculations related to the Service Fee for any period the amount of
Provider Expense used in such calculations for that period shall be determined
by applying the methodology for compensating dentists and paying other budgeted
Provider Expenses contained in the then-applicable

 

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Budget (e.g., if the Budget requires a dentist to be paid a base salary, that
salary shall be used for purposes of such calculations, and if the Budget
requires that a dentist be paid formula-based compensation, that formula shall
be used for purposes of such calculations); provided that the Parties shall
exercise reasonable efforts to adjust the Budget from time to time as necessary
to reflect changes in Provider’s staff of dentists and/or compensation and/or
other budgeted Provider Expenses (it being understood that neither Party shall
be obligated to agree to Budget adjustments deemed by such Party to be
unreasonable under the then-relevant circumstances).

(b) Accounting and Financial Records. Service Company shall establish and
administer accounting policies and procedures, internal controls, and systems
for the development, preparation and safekeeping of administrative or financial
records and books of account relating to the business and financial affairs of
Provider. Service Company shall prepare and deliver to Provider, within 45 days
after the end of each of the first three calendar quarters during each year and
within 90 days after the end of each calendar year, a balance sheet and an
income statement reflecting the financial status of Provider in regard to the
provision of Dental Care as of the end of each such calendar quarter and each
such calendar year, as applicable, all of which shall be prepared in accordance
with GAAP; provided that the financial statements for the first three quarters
of any calendar year shall be subject to normal year-end adjustments, and all
financial statements may omit footnotes and other presentation items that are
required by GAAP. In addition, Service Company shall prepare or assist in the
preparation of any other financial statements or records that Provider may
reasonably request.

(c) Review of Expenditures. One of Provider’s representatives to the Policy
Board shall review all expenditures related to the operation of Provider, but
such representative shall not have the power to prohibit or invalidate any
expenditure.

(d) Tax Matters

(i) General. Service Company shall prepare or arrange for the preparation of all
tax returns and reports of Provider required by applicable law, which returns
and reports shall be prepared by an accountant reasonably acceptable to
Provider. Provider’s tax returns shall be prepared on the accrual basis.

(ii) Sales and Use Taxes. The Parties acknowledge and agree that to the extent
that any of the Services to be provided by Service Company under this Agreement
may be subject to any state sales and use taxes, Service Company may have a
legal obligation to collect such taxes from Provider and to remit the same to
the appropriate tax collection authorities. Provider shall pay any and all
applicable state sales, use, gross receipts, and other similar taxes and charges
(other than taxes on Service Company’s net income) with respect to any amount
paid to Service Company under this Agreement, and such amounts shall be Clinic
Expenses.

4.14 Reports and Records

(a) Dental Records. Service Company shall: (i) establish, monitor and maintain
procedures and policies for the timely preparation, filing and retrieval of all
dental records generated by Provider in connection with Provider’s provision of
Dental Care; and (ii)

 

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subject to applicable law, ensure that dental records are promptly available to
dentists and any other appropriate persons. All such dental records shall be
retained and maintained in accordance with all applicable state and federal laws
relating to the confidentiality and retention thereof.

(b) Other Reports and Records. Subject to applicable law, Service Company shall
(i) timely prepare and file such additional reports and records as are
reasonably necessary and appropriate for Provider’s provision of Dental Care;
and (ii) analyze and interpret such reports and records upon the reasonable
request of Provider.

(c) Business Associate Addendum. The Parties acknowledge that as a result of
Service Company’s services under this Agreement, Service Company will have
access to individually identifiable protected health information regarding
Provider’s patients, and that such information is subject to the requirements of
the Health Insurance Portability and Accountability Act of 1996 and other laws
and regulations protecting the privacy of such information. As a result, the
Parties have entered into a Business Associate Addendum to this Agreement having
the same date as this Agreement (the “BAA”) to set forth additional rights and
obligations regarding use and disclosure of such information.

4.15 Recruitment of Provider Dentists. Upon Provider’s request, Service Company
shall perform all services reasonably necessary and appropriate in connection
with the recruitment of dentists. However, it shall be and remain the sole and
complete responsibility of Provider to interview, select, contract with (subject
to Section 5.2, below), supervise, control and terminate all dentists performing
Dental Care or other professional dental services, and Service Company shall
have no authority whatsoever with respect to such activities. In addition,
Provider shall be solely responsible for determining whether dentists with whom
it might contract for the provision of Dental Care on its behalf should be
retained as employees or independent contractors, and Provider shall be
responsible for, indemnify Service Company against, and hold it harmless from,
any and all Damages that may result from such determinations by Provider.

4.16 Service Company’s Insurance. Throughout the Term, Service Company shall, as
a Clinic Expense, obtain and maintain with commercial carriers, or through
self-insurance, or some combination thereof: (a) appropriate worker’s
compensation coverage for the employees of Service Company provided pursuant to
this Agreement; and (b) professional, casualty and comprehensive general
liability insurance covering Service Company, Service Company’s personnel, and
all of Service Company’s equipment in such amounts and on such terms and
conditions as Service Company deems appropriate. Service Company shall cause
Provider to be named as an additional insured on Service Company’s property and
casualty insurance policies. Upon the request of Provider, Service Company shall
provide Provider with a certificate evidencing such insurance coverage.

4.17 License of Name and Marks.

(a) License. Service Company hereby grants to Provider, for the Term, a
non-exclusive royalty-free license to use the Approved Names (as defined in
Section 5.8) and all related marks and logos owned by Service Company for the
purpose of fulfilling its obligations under this Agreement, including without
limitation providing Dental Care to its patients.

 

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Provider shall not at any time: (i) do or permit any act to be done that may in
any way impair the rights of Service Company in the Approved Names or related
marks and logos; (ii) challenge (or assist others in challenging) Service
Company’s intellectual property rights in the Approved Names or related marks or
logos, or the registration thereof; (iii) register any marks confusingly similar
to the Approved Names or related marks or logos; (iv) form, or change the name
of, any corporation or other entity under or to a name, or do business under any
name, that incorporates any Approved Name or related mark; or (v) modify any
Approved Name or related mark or logo in any way. The prohibitions set forth in
the preceding sentence shall survive expiration or termination of this
Agreement.

(b) Quality Control Standards. In order to comply with Service Company’s quality
control standards, Provider shall: (i) use the Approved Names and related marks
and logos in compliance with all relevant laws and regulations; (ii) comply with
any applicable usage standards and guidelines that Service Company may establish
from time to time with respect to the Approved Names and related marks and
logos; and (iii) provide, at Service Company’s request, reasonable quantities of
samples of advertisements and other promotional materials on which the Approved
Names and related marks and logos are affixed, in order to allow Service Company
to confirm that Provider’s use is in compliance with any such applicable
standards and guidelines.

4.18 No Warranty. PROVIDER ACKNOWLEDGES THAT SERVICE COMPANY HAS NOT MADE, WILL
NOT MAKE, AND HEREBY EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, REGARDING SERVICE COMPANY’S SERVICES UNDER THIS AGREEMENT OR
THE RESULTS OF THOSE SERVICES, INCLUDING WITHOUT LIMITATION ANY REPRESENTATIONS
OR WARRANTIES THAT THE SERVICES WILL RESULT IN ANY PARTICULAR AMOUNT OR LEVEL OF
DENTAL PRACTICE REVENUE OR INCOME TO PROVIDER.

ARTICLE V

RESPONSIBILITIES OF PROVIDER

5.1 Organization and Operations. Provider shall at all times during the Term:
(a) be and remain legally organized and operated to provide Dental Care in a
manner consistent with all state and federal laws; (b) operate within the
Practice Territory a full time practice of dentistry providing Dental Care in
compliance with all applicable federal, state, and local laws, rules,
regulations, ordinances, and orders; (c) not, without Service Company Consent,
(i) engage in any transaction constituting a merger, consolidation,
reorganization, sale or purchase of assets outside of the ordinary course of
business because such a transaction could have a material impact on Service
Company’s obligations under this Agreement, or (ii) cause or permit itself to be
liquidated or dissolved. Provider shall pay to Service Company, in addition to
the amounts set forth in Article VII, any damages, compensation, payment, or
settlement amounts received by Provider from a dentist who receives
consideration directly or indirectly from Service Company or Parent as an
inducement to become or remain affiliated with Service Company through his or
her employment or engagement by Provider and who thereafter terminates his
employment or engagement in violation of his or her applicable agreement, or
whose employment or engagement is terminated by Provider for cause.

 

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5.2 Provider Personnel

(a) Dentist Personnel. Provider shall retain, as a Provider Expense and not as a
Clinic Expense, that number of dentists during the Term which are necessary and
appropriate, in Provider’s sole discretion, to provide Dental Care to reasonably
meet the demand therefor. Provider shall cause each dentist retained by Provider
to hold and maintain a valid and unrestricted license to practice dentistry in
the State of Minnesota, including without limitation any licenses required for
the provision of any specialty dental services, together with all necessary or
appropriate board or other certifications (the “Required Licenses”). Provider
shall be responsible for paying the compensation and benefits, as applicable,
for all dentists and any other dentist personnel or other contracted or
affiliated dentists, and for withholding all sums for income tax, unemployment
insurance, social security, or any other withholding required by applicable law.
Service Company may, on behalf of Provider, administer the compensation and
benefits with respect to such individuals in accordance with the written
agreement between Provider and each dentist. Service Company shall neither
control nor direct any dentist in the performance of Dental Care for patients.
Provider shall provide to Service Company evidence of such licensing,
certifications, and other credentials of the dentists retained by Provider as
Service Company may request from time to time.

(b) Provider and Patient Scheduling. Provider shall, with the reasonable
assistance of Service Company: (i) develop a set of Provider and patient
scheduling guidelines and a corresponding scheduling system; and (ii) support
Service Company in the implementation of such guidelines and effective operation
of such system.

(c) Paid Hours Reporting. To facilitate Service Company’s efficient performance
of its Services, Provider shall report to Service Company the hours of Dental
Care provided and to be provided by Provider pursuant to a system reasonably
established by Service Company for that purpose.

(d) Non-Dentist Dental Care Personnel. Notwithstanding any other provision of
this Agreement to the contrary, all non-dentist personnel who provide Dental
Care, including without limitation dental hygienists, dental assistants and
other clinical staff (whether licensed or unlicensed), and other licensed or
certified personnel, shall be under such control, supervision and direction of
Provider and the dentists retained by Provider in the performance of or in
connection with Dental Care for patients as is required under applicable state
law and regulations.

5.3 Professional Standards. As a continuing condition of Service Company’s
obligations under this Agreement, each dentist retained by Provider to provide
Dental Care must: (a) have and maintain the Required Licenses; and (b) comply
with, be controlled and governed by, and otherwise provide Dental Care in
accordance with applicable federal, state, and municipal laws, rules,
regulations, ordinances and orders, and the ethics and standard of care of the
dental profession.

5.4 Dental Care. With the assistance of the Service Company, Provider and the
dentists shall be responsible for scheduling dentist and non-dentist Dental Care
personnel

 

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coverage of all dental procedures. Provider shall organize and maintain a high
quality, cost-effective process for ensuring that patients will have timely
access to emergency Dental Care on a 24-hour per day, seven day per week basis.

5.5 Peer Review and Quality Assurance. Provider shall conduct its peer review
and quality assurance activities in a manner that is consistent with maintaining
the confidentiality of the related processes, actions, and documentation.

(a) Provider shall designate a committee of dentists to function as a dental
peer review committee to review credentials of potential dentist recruits,
periodically review the credentials of Provider’s existing dentists, determine
the practice privileges of the dentists retained by Provider, perform quality
assurance, utilization review, and Provider profiling functions, and otherwise
resolve dental competency issues. The dental peer review committee shall
function pursuant to formal written policies and procedures established by
Provider upon consultation with and assistance of Service Company.

(b) Provider also shall adopt a quality assurance program to monitor and
evaluate the quality and cost-effectiveness of the Dental Care provided by
Provider’s dentists and by non-dentist personnel providing Dental Care under the
supervision of Provider’s dentists. Upon request of Provider, Service Company
shall provide administrative assistance to Provider in performing its quality
assurance activities. All costs and expenses incurred in connection with this
Section 5.5(b) shall be deemed Clinic Expenses.

(c) Provider shall cooperate fully with Service Company in an effort to achieve
and maintain full accreditation status for Provider with AAAHC or such other
accrediting body as Service Company may reasonably designate.

Provider shall support the Risk Management Procedures implemented pursuant to
this Agreement or otherwise agreed upon by the Parties, take all actions related
to such Risk Management Procedures as may be reasonably requested by Service
Company, and cause all personnel retained by it to comply fully with such
process at all times. Without limiting the preceding sentence: (i) Provider
shall reasonably cooperate in the risk management program and practices operated
by Parent from time to time; and (ii) if, at any time, Service Company
reasonably determines that any of Provider’s dentists or other personnel is or
is likely to be engaging in any activity that presents a material risk to the
health or safety of patients, Service Company’s employees, or others, may create
unacceptable legal risks to Service Company, or is otherwise inconsistent with
the Risk Management Procedures or Parent’s risk management program, Service
Company shall have the right to request that Provider cause that activity to be
terminated, and Provider shall comply with that request. In addition, Service
Company shall not be obligated to provide Services in support of any such
activity.

(d) Provider shall, with the assistance of Service Company, develop a set of
quality standards and utilization, process monitoring, and reporting guidelines.
Provider shall cause all personnel retained by it to comply with such standards
and guidelines.

(f) Provider shall, with the assistance of Service Company, develop patient
grievance procedures to the extent not specifically addressed in this Agreement.
Provider shall cause all personnel retained by it to comply with such
procedures.

 

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5.6 Provider’s Insurance.

(a) Provider shall obtain and maintain with commercial carriers reasonably
acceptable to Service Company or through self insurance or some combination
thereof (reasonably acceptable to Service Company) appropriate workers’
compensation coverage for Provider’s employed personnel (which, with respect to
dental hygienists and other non-dentist licensed dental personnel employed by
Provider, shall be a Clinic Expense, and which, with respect to all other
employees of Provider, including without limitation dentists, shall be a
Provider Expense) and professional liability and comprehensive general liability
insurance covering Provider and each of the dentists, dental hygienists, and
other licensed dental personnel Provider retains to provide Dental Care (which,
including any applicable deductibles, shall be a Clinic Expense). All costs,
expenses, and liabilities incurred by Provider or Service Company in excess of
the limits of such policies shall be a Provider Expense. Provider shall actively
support the participation of all dentists, dental hygienists, and other licensed
dental personnel retained by Provider in training and continuing education
programs in order to reduce the risk of exposure to and the related cost of
obtaining and maintaining such coverage. The comprehensive general liability
coverage and professional liability coverage shall be in such minimum amounts
and with such deductibles as Service Company may establish from time to time. In
addition, Provider shall cause each dentist retained by Provider as an
independent contractor to obtain comparable professional and comprehensive
general liability insurance coverage.

(b) All insurance policies described in the preceding subsection (a) shall:
(i) name Service Company as an additional insured and be primary to and
non-contributory with insurance or self-insurance carried by Service Company,
and include a waiver of subrogation in favor of Service Company, as its interest
may appear with respect to this Agreement, and with respect to policies provided
by independent contractors under the preceding sentence, name Provider as
additional insured as well, and (ii) provide for at least 30 days advance
written notice to Provider and Service Company from the insurer with respect to
any alteration of coverage, cancellation, or proposed cancellation for any
reason. Provider shall cause to be issued to Service Company by such insurer or
insurers a certificate reflecting such coverage.

(c) Provider shall enter into employment or other agreements with all dentists
employed or otherwise retained by Provider which provide, among other things,
that (i) upon the termination of the employment or retention of any such
dentist, such dentist shall be required to (A) purchase, at such dentist’s
expense, “tail” professional liability coverage meeting the requirements of this
§5.6, including without limitation those relating to coverage amounts and
insureds, for an unlimited extended reporting period, or (B) obtain retroactive
coverage meeting the same requirements from such dentist’s new employer, and
(ii) if such dentist does not provide satisfactory evidence of such coverage
prior to such termination, Provider shall have the right, without limiting any
other rights of Provider, to withhold the cost of the “tail” coverage described
in the immediately preceding clause (i)(A) from any amounts owed to such dentist
by Provider and purchase such “tail” coverage on such dentist’s behalf; provided
that if Provider does not have such agreements in place with dentists employed
or otherwise retained by Provider as of the Effective Date, Provider shall not
be in breach of this Agreement so long as it (1) exercises commercially
reasonable efforts to enter into such agreements with the dentists currently
employed or retained by Provider, and (2) enters into such agreements upon
hiring with all new dentists employed or retained by Provider.

 

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(d) Upon the termination of this Agreement for any reason, Provider shall
continue to carry professional liability insurance in the amounts specified in
this §5.6 for 10 years after termination and shall provide evidence of such to
Service Company upon request, or, if Provider dissolves or ceases to practice
dentistry, Provider shall obtain and maintain as a Provider Expense “tail”
professional liability coverage in the amounts specified in this §5.6 for an
unlimited extended reporting period. Provider shall be responsible for paying
all premiums for such “tail” insurance coverage. Notwithstanding the foregoing,
if Provider fails to obtain such “tail” insurance coverage, Service Company
shall have the right, without limiting any other rights of Service Company, to
purchase such coverage on Provider’s behalf out of funds otherwise owed to
Provider under this Agreement.

(e) In no event shall a professional liability insurance carrier be replaced or
changed without Service Company Consent. Service Company shall provide
reasonable assistance to Provider to obtain the insurance coverages described in
this §5.6.

(f) Provider may elect to fulfill its obligations to obtain and maintain the
insurance coverages required of Provider or its dentists as described above by
participating in insurance programs arranged by Service Company or Parent, as
such programs may be in effect from time to time (to the extent such programs
involve insurance coverage required of Provider and its dentists). If Provider
elects to participate in such programs, such election shall constitute
Provider’s acknowledgement that it has reviewed such programs and found them to
be acceptable, and Provider shall comply, and cause its dentists to comply, with
all applicable requirements of such programs.

(g) Each Party shall, and shall cause it employees, agents, and other
representatives to, cooperate in all ways reasonably requested by the other
Party in connection with the handling and disposition of claims covered by the
insurance described in this §5.6. This requirement shall continue,
notwithstanding any termination of this Agreement, until all such claims have
been resolved.

5.7 Noncompetition. Provider acknowledges that Service Company will incur
substantial costs in providing the equipment, support services, personnel, and
other items and services that are the subject matter of this Agreement and that
in the process of providing services under this Agreement, Provider will learn
or have access to financial and other Confidential Information of Service
Company to which Provider would not otherwise be exposed. Provider also
recognizes that the services to be provided by Service Company will be feasible
only if Provider operates an active practice. Accordingly, Provider further
agrees as follows:

(a) During the Term, except for any Clinic made available to Provider for its
use pursuant to this Agreement, Provider shall not establish, operate, or
provide Dental Care at any dental office, clinic or other dental care facility
anywhere within the Practice Territory nor have any ownership interest, direct
or indirect, in any entity, or participate in any joint venture, which operates
any such office, clinic or facility; and

(b) Except as specifically approved by Service Company in writing, during the
Term and for a period of five years immediately following the date this
Agreement is terminated for any reason, Provider shall not directly or
indirectly own (excluding ownership of

 

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less than one percent (1%) of the equity of any publicly traded entity), manage,
operate, control, lend funds to, lend its name to, maintain any interest in, or
otherwise enter into, engage in, or promote or assist (financially or otherwise)
any entity, business, or enterprise which (i) provides, distributes, or promotes
any type of management or administrative services or products to third parties
in competition with Service Company in the Practice Territory, or (ii) offers
any type of service or product to third parties substantially similar to those
offered by Service Company to Provider in the Practice Territory.
Notwithstanding the above restriction, nothing herein shall prohibit Provider or
any of its members from providing management and administrative services to its
or their own dental practices after the termination of this Agreement, and
nothing herein shall prohibit Provider or its members from contracting with a
third party manager to provide administrative or management services for its or
their dental practices after termination of this Agreement as long as such
relationship complies with the provisions of this section.

5.8 Use of Names. At all times during the Term, Provider shall operate its
dental practice under the names “Metro Dentalcare,” “Family Orthodontic
Specialists,” “Metro Dentalcare Orthodontics,” Riverdale Family Orthodontics,”
“Midway Family Orthodontics,” “Woodlake Family Orthodontics,” “Burnsville Family
Orthodontics,” Family Periodontic Specialists,” “Metro Dentalcare Periodontics,”
“Family Pediatric Dental Specialists,” “Metro Dentalcare Children’s Dentistry,”
“Family Oral Surgery Specialists,” “Focus Dental Management,” and “Family
Endodontics Specialists,” or such other trade name or names as may be agreed
upon by the Parties from time to time (all such names, the “Approved Names”),
including without limitation using the related marks and logos as are licensed
to Provider pursuant to Section 4.17, above. Provider shall file appropriate
assumed or fictitious name applications or registrations with all appropriate
governmental agencies. Notwithstanding the preceding provisions of this section,
Provider shall, immediately upon the expiration of the Term, abstain from using
such names, marks and logos and shall take such steps as are necessary to
terminate such applications and registrations and Provider’s rights thereunder,
except to the extent otherwise provided in Article VIII, below. Provider
acknowledges that Service Company or one of its affiliates is the owner of all
Approved Names and all related marks and logos, and nothing in this agreement
grants Provider any ownership rights therein.

ARTICLE VI

CONFIDENTIALITY

6.1 Confidential and Proprietary Information. All Confidential Information
disclosed by a Party in connection with this Agreement shall be held in
confidence by the receiving Party and shall be used solely in connection with
the performance of the receiving Party’s obligations under this Agreement. The
receiving Party shall protect the confidentiality of such Confidential
Information with at least the same degree of care as the receiving Party uses to
protect the confidentiality of its own Confidential Information, but in no event
less than reasonable care. Neither Party shall, in any manner or at any time,
directly or indirectly, disclose any of the Confidential Information of the
other Party to any person, firm, association, organization, or entity
(hereinafter, simply “person”), or use, or permit or assist any person to use,
any such Confidential Information, excepting only: (a) disclosures (i) permitted
under Section 6.3, or (ii) made on a confidential basis to a Party’s members,
shareholders, directors, officers, employees, and legal, accounting, and other
professional advisors who need to know such information in connection with that
Party’s performance under this Agreement, and who are similarly bound by

 

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written agreement with, or otherwise owe a professional duty to, such Party to
protect the confidentiality of such Confidential Information (collectively, the
“Permitted Recipients”); or (b) use of such Confidential Information by
Permitted Recipients in connection with this Agreement; provided that each Party
shall (i) make its Permitted Recipients aware of the requirements of this
Agreement, (ii) take reasonable steps to prohibit disclosure of such
Confidential Information by any Permitted Recipient to any other person or
entity except another Permitted Recipient, including without limitation taking
such steps as that Party customarily takes to protect its own Confidential
Information, and (iii) be responsible and liable for any disclosure or use of
such Confidential Information by any of its Permitted Recipients, except
disclosures or uses permitted by this Agreement.

6.2 Exceptions. The preceding section notwithstanding, the receiving Party shall
have no confidentiality obligations with respect to any Confidential Information
to the extent that such Confidential Information (i) is or becomes generally
known to the public without the receiving Party or its Permitted Recipients
violating this Agreement; (ii) is rightfully in the receiving Party’s possession
at the time of disclosure without the receiving Party having any confidentiality
obligations to the disclosing Party with respect thereto; (iii) becomes known to
the receiving Party through disclosure by sources other than the disclosing
Party or its Permitted Recipients without such sources, to the knowledge of the
receiving Party, violating any confidentiality obligations to the disclosing
Party; or (iv) is independently developed by the receiving Party without
reference to or reliance upon the disclosing Party’s Confidential Information.

6.3 Legally Required Disclosure. If the receiving Party or any of its Permitted
Recipients is requested or required (by oral questions, interrogatories,
requests for information or documents in legal proceedings, subpoena, civil
investigative demand or other similar process, or by the rules or regulations of
any regulatory authority having jurisdiction over the receiving Party or a stock
exchange on which the receiving Party’s securities are traded) to disclose any
of the disclosing Party’s Confidential Information, the receiving Party shall,
except as prohibited by law, provide the disclosing Party with prompt written
notice of any such request or requirement so that the disclosing Party may seek,
at the disclosing Party’s expense, a protective order or other remedy and/or
waive compliance with the confidentiality provisions of this Agreement. If the
disclosing Party seeks a protective order or other remedy, the receiving Party
shall provide such cooperation as the disclosing Party shall reasonably request.
If, in the absence of a protective order or other remedy or the receipt by the
receiving Party of a waiver from the disclosing Party, the receiving Party or
any of its Permitted Recipients is legally required to disclose the disclosing
Party’s Confidential Information to any person or entity, the receiving Party or
its Permitted Recipients may, without liability hereunder, disclose to such
person or entity only that portion of the disclosing Party’s Confidential
Information that is legally required to be disclosed, provided that the
receiving Party and its Permitted Recipients shall exercise reasonable efforts
to minimize the disclosure of the disclosing Party’s Confidential Information.

6.4 Use of Practice Statistics. Notwithstanding Section 6.1, but subject to the
restrictions of this section and applicable law, Service Company or its
affiliates may: (a) share with other professional corporations, associations,
dental practices, or dental care delivery entities, or their representatives,
the practice statistics and other information relating to the operation of
Provider’s dental practice, including utilization review data, quality assurance
data,

 

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revenue and cost data, outcomes data, or other practice data or information,
provided that such information shall only be disclosed to (i) affiliates of
Service Company, (ii) other dental groups with whom Service Company or any of
its affiliates has a management or service relationship, (iii) managed care
dental benefit providers and other third party payors for the purpose of
obtaining or maintaining third party payor contracts, (iv) financial analysts
and underwriters, (v) employers and employee benefit associations, (vi) quality
assurance and accrediting organizations, or (vii) financial institutions; and
(b) disclose all practice-related information necessary or desirable in
connection with any public or private offering of any security of Service
Company or any of its affiliates. In addition, subject to the restrictions of
this section and applicable law (including without limitation federal and state
law and regulation relating to confidentiality), Service Company or its
affiliates may disclose practice-related information and data in connection with
any survey, presentation, published material, study, or research project which
Service Company deems appropriate for the purpose of gaining insight into
existing and changing patterns in the organization and delivery of Dental Care
and related issues. In no event will any such data disclose or divulge the
identity of any patient or, to the extent reasonably practicable, any dentist.

6.5 Trading in Parent Securities. Provider acknowledges that it is aware (and
that it will make all of its personnel aware) that applicable securities laws
prohibit any person who is aware of material, non-public information about
Parent obtained directly or indirectly from Parent or its affiliates from
purchasing or selling securities of Parent or from communicating such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.

ARTICLE VII

FINANCIAL ARRANGEMENTS

7.1 Clinic Expense Reimbursement. Service Company shall be reimbursed for the
amount of all Clinic Expenses incurred by Service Company.

7.2 Repayment of Advances. Service Company shall be reimbursed for any and all
amounts advanced to Provider by Service Company pursuant to the terms and
conditions of this Agreement.

7.3 Service Fee. Provider shall pay Service Company an annual Service Fee equal
to a percentage of the Calculated Margin, which shall be calculated and be
earned and accrue daily, and shall be payable monthly. Until the Debt Payoff
Date, the Service Fee shall be 89% of the Calculated Margin. For the period
beginning with the first full calendar month following the Debt Payoff Date and
ending the last day of the calendar year that includes such month, the Service
Fee shall be 95% of the Calculated Margin. For each calendar year thereafter,
the Service Fee shall be a percentage of the Calculated Margin determined as
provided in the attached Exhibit B.

7.4 Fair Value. Provider acknowledges and agrees that the Service Fee and other
amounts to be paid by Provider to Service Company under this Agreement are fair,
equitable, and reasonable in all respects and constitute fair market value for
the substantial commitment of resources made by Service Company and Parent under
or in connection with this Agreement, including without limitation (a) the
extensive nature and volume of the Services performed and

 

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other items provided by Service Company and Parent, and (b) the capital made
available to Provider by Service Company. Provider further acknowledges and
agrees that: (i) Service Company’s business and administrative expertise will
provide value to Provider’s operations; and (ii) Service Company and Parent will
incur substantial costs and business risks in providing the Services, capital
and other items and services that are the subject matter of this Agreement.

7.5 Payment. The amounts to be paid to Service Company under this Article shall
be calculated by Service Company on the accrual basis of accounting and paid
monthly. To facilitate the payments due to Service Company under this Article,
Provider hereby expressly authorizes Service Company to make withdrawals of such
amounts from the Provider Account during the Term in accordance with
Section 4.12(b), and after termination as provided in Section 8.3.

7.6 Accounts Receivable; Security Interest. To assure that Provider receives the
entire amount of professional fees for its services and to assist Provider in
maintaining reasonable cash flow for the payment of Clinic Expenses, Service
Company may, during the Term, purchase, with recourse to Provider for the amount
of the purchase, the accounts receivable of Provider arising during the previous
month, except for any receivables due to Provider from Medicaid or any other
governmental health care reimbursement program that Service Company is not
permitted to receive under applicable law (the “Restricted Receivables”), by
transferring the amount set forth below into the Provider Account. The
consideration for the purchase shall be an amount equal to the Adjusted Gross
Revenue recorded each month, less the Adjusted Gross Revenue related to
Restricted Receivables. Service Company shall be entitled to offset Clinic
Expense reimbursement plus all fees and advances due to Service Company under
this Article against the amount payable for such accounts receivable. All
collections in respect of such accounts receivable purchased by Service Company
shall be received by Provider as the agent of Service Company and shall be
endorsed to Service Company and deposited in a bank account at a bank designated
by Service Company. To the extent Provider comes into possession of any payments
in respect of such accounts receivable, Provider shall direct such payments to
Service Company for deposit in bank accounts designated by Service Company.

In addition, to secure Provider’s present and future payment and performance
obligations to Service Company under this Agreement, Provider hereby grants to
Service Company a first-priority security interest under the Uniform Commercial
Code as the same may be in effect from time to time in the State of Minnesota
(the “Minnesota UCC”) in the following property, whether Provider’s interest
therein is as owner, co-owner, lessee, consignee, secured party or otherwise,
and whether now owned or existing or hereafter arising or acquired (collectively
referred to herein as the “Collateral”):

All of Provider’s Accounts, Accounts receivable, contract rights, General
intangibles, income tax refunds, Instruments, Notes, Notes receivable, and other
forms of obligations and receivables arising from or in connection with the
operation of Provider’s business, together with all substitutions, replacements,
additions and accessions therefor or thereto, all instruments and negotiable
documents relating thereto, all products thereof, and all Cash and Noncash
Proceeds thereof.

 

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To perfect such security interest, Provider hereby authorizes Service Company to
prepare and file one or more Financing Statements describing the Collateral and
naming Provider as Debtor and Service Company as the Secured Party, as the
Service Company may determine are necessary to perfect the security interest
granted by Provider to Service Company covering the Collateral. Provider also
shall execute and deliver to Service Company such documents as may be reasonably
requested by Service Company from time to time to further evidence, confirm,
protect, or perfect such security interest or Service Company’s rights related
thereto. This Agreement is intended to be a security agreement under the
Minnesota UCC. All capitalized terms used in this Section 7.6 that are not
otherwise defined in this Agreement shall have the respective meanings given
those terms in the Minnesota UCC.

ARTICLE VIII

TERM AND TERMINATION

8.1 Initial and Renewal Term. The Term of this Agreement shall be for an initial
period beginning on the date of this Agreement and continuing to and including
December 31, 2047 (the “Initial Term”), and shall renew automatically for
successive five-year periods thereafter (the “Renewal Terms”) unless and until
terminated as permitted under Section 8.2.

8.2 Termination

(a) Termination By Agreement Or By Either Party. This Agreement may be
terminated at any time by the mutual written agreement of the Parties. In
addition, either Party may terminate this Agreement at the end of the Initial
Term or any Renewal Term by giving the other Party notice of such termination at
least 120 days prior to the expiration of the then-current term.

(b) Termination By Service Company. Service Company may terminate this Agreement
upon notice to Provider, specifying as the termination date the date of that
notice or any future date selected by Service Company, upon the occurrence of
any one of the following events:

(i) The dissolution of Provider;

(ii) Provider admits in writing its inability to pay generally its debts as they
become due or makes an assignment for the benefit of creditors;

(iii) A receiver, trustee, liquidator, or conservator is appointed for Provider
or to take possession of all or substantially all of Provider’s property or a
petition for insolvency, dissolution, liquidation, or reorganization, or order
for relief in which Provider is named as debtor, is filed by, against, or with
respect to Provider pursuant to any federal or state statute, regulation, or law
for the protection of debtors, and, with respect to any such appointment or
filing, Provider fails to secure a stay or discharge thereof within 45 days
after such appointment or filing;

(iv) Provider fails to pay when due any payment to be made by Provider under
this Agreement, which failure continues for 10 days after notice is given by

 

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Service Company to Provider thereof, provided that such failure is not directly
attributable to Service Company’s failure to apply available funds in the
Provider Account according to Section 4.12(b);

(v) Provider fails to comply with or perform any of its other material duties or
obligations under this Agreement, which failure continues for 30 days after
notice is given by Service Company to Provider thereof, or if because of the
nature of such failure it cannot reasonably be corrected within such 30 day
period, failure by Provider to commence such correction promptly following its
receipt of notice from Service Company and thereafter to expeditiously and
continuously prosecute the correction to completion; or

(vi) Provider violates any provision of Section 5.7.

(c) Termination By Provider. Provider may terminate this Agreement upon notice
to Service Company, specifying as the termination date the date of that notice
or any future date selected by Provider, upon the occurrence of any of the
following events:

(i) A receiver, trustee, liquidator, or conservator is appointed for Service
Company or to take possession of all or substantially all of Service Company’s
property or a petition for insolvency, dissolution, liquidation, or
reorganization, or order for relief in which Service Company is named as debtor,
is filed by, against, or with respect to Service Company pursuant to any federal
or state statute, regulation, or law for the protection of debtors, and, with
respect to any such appointment or filing, Service Company fails to secure a
stay or discharge thereof within 45 days after such appointment or filing; or

(ii) Service Company fails to comply with or perform any of its material duties
or obligations under this Agreement, which failure continues for 30 days after
notice is given by Provider to Service Company thereof, or if because of the
nature of such failure it cannot reasonably be corrected within such 30 day
period, failure by Service Company to commence such correction promptly
following its receipt of notice from Provider and thereafter to expeditiously
and continuously prosecute the correction to completion.

Notwithstanding the foregoing, any termination by Provider under this section
shall require the affirmative unanimous approval of all members of Provider
entitled to vote on or otherwise approve or consent to such a matter.

(d) Legislative, Regulatory or Administrative Change. If (i) there is (A) any
change in any federal, state, or local statute, law, regulation, legislation,
rule, policy, or general instruction, or a change in any third party
reimbursement system, or (B) any ruling, judgment, decree, or interpretation by
any court, agency, or other governing body having jurisdiction over either Party
(in any such case, for purposes of this Agreement, a “Regulatory Matter”), and
(b) such Regulatory Matter materially and adversely affects, or is reasonably
likely to affect, the manner in which either Party is to perform or be
compensated for its services under this Agreement or which shall make this
Agreement or any portion hereof unlawful, the Parties shall immediately use
their best efforts to enter into a new service arrangement or basis for
compensation for the Services furnished pursuant to this Agreement that complies
with such Regulatory Matter and approximates as closely as possible the economic
position of the Parties prior to such Regulatory Matter.

 

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If the Parties are unable to reach a new agreement within a reasonable period of
time following the date upon which it becomes reasonably certain that such
Regulatory Matter will arise, then either Party may submit the issue to
arbitration, which shall be conducted as provided in Section 9.23.

8.3 Effects of Termination. Upon termination of this Agreement as herein
provided, neither Party shall have any further obligations under this Agreement,
except for: (a) obligations accruing prior to the date of termination, including
without limitation payment of the amounts set forth in Article VII relating to
periods prior to the termination of this Agreement; (b) obligations set forth in
this Agreement that expressly extend beyond the Term, including without
limitation indemnities and noncompetition provisions, which provisions shall
survive the expiration or termination of this Agreement; (c) the obligations of
each Party set forth in Article VI; and (d) the obligation of Provider described
in Section 8.4. Provider specifically acknowledges and agrees that Service
Company shall continue to collect and receive on behalf of Provider all cash
collections from accounts receivable in existence at the time this Agreement is
terminated (which have not otherwise been purchased by Service Company pursuant
to Section 7.6), and that all such cash collections shall be disbursed in
accordance with Section 4.12(b), it being understood that such cash collections
will represent, in part, compensation to Service Company for Services already
rendered and compensation on accounts receivable purchased by Service Company,
if any. Upon the expiration or termination of this Agreement for any reason or
cause whatsoever, Service Company shall surrender to Provider all books and
records owned by Provider that are in Service Company’s possession; provided
that Service Company may retain copies of such documents to the extent
reasonably necessary for Service Company to complete its post-termination
obligations and activities under this Agreement.

In addition, if either Party terminates this Agreement as permitted under
Section 8.2, then, beginning on the date on which such Party gives its
termination notice, each Party shall have the right to engage in all activities
it reasonably deems necessary or appropriate in connection with preparing to
operate its business following termination of this Agreement; provided that such
activities do not violate other provisions of this Agreement or applicable law.
Without limiting the preceding sentence: (i) Service Company shall have the
right to make arrangements with one or more other dental group practices to
practice in Service Company’s Clinics following termination of this Agreement,
and (ii) such practices shall have the right to solicit and offer employment to
Provider’s personnel, so long as such activities do not violate any written
agreements between Provider and such personnel.

8.4 Purchase Obligation. Upon termination of this Agreement for any reason
Provider shall, at Service Company’s option (subject to any consent rights of
Parent’s senior creditor):

(a) Purchase from Service Company at book value the intangible assets, deferred
charges, goodwill, and all other amounts on the books of the Service Company
relating to this Agreement or the items or services provided by Service Company
pursuant to this Agreement, including without limitation the amount, if any, for
the covenants described in Section 5.7, above, as adjusted through the last day
of the month most recently ended prior to the date of such termination in
accordance with GAAP to reflect amortization or depreciation of all such
amounts, provided the foregoing shall not apply to any trade names, trademarks,
service marks, or similar items owned by Service Company or its affiliates and
used at any time during the term of this Agreement in connection with the
operation of Provider’s dental practice (the “Marks”);

 

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(b) Purchase from Service Company any real estate owned by Service Company and
used as a Clinic at the greater of the appraised fair market value thereof or
the then book value thereof;

(c) Purchase, at the greater of the appraised fair market value or the then book
value, all improvements, additions, or leasehold improvements that have been
made by Service Company at any Clinic and that relate to the performance of
Service Company’s obligations under this Agreement;

(d) Assume all debt, and all contracts, payables, and leases that are
obligations of Service Company and that relate to the performance of Service
Company’s obligations under this Agreement or the properties leased or subleased
by Service Company in connection with its obligations under this Agreement;

(e) Purchase from Service Company, at the greater of the appraised fair market
value or the then book value, all of the equipment then being supplied by
Service Company pursuant to Service Company’s obligations under this Agreement,
and all other assets, including inventory and supplies, tangibles and
intangibles (other than the Marks), set forth on the books of Service Company as
adjusted through the last day of the month most recently ended prior to the date
of such termination in accordance with GAAP to reflect operations of each
Clinic, depreciation, amortization, and other adjustments of assets shown on the
books of the Service Company; and

(f) Purchase from Service Company, at the greater of appraised fair market value
or then book value, all Marks designated by Service Company.

For purposes of subsections (b), (c), (e), and (f) above, the appraised value
shall be determined by an appraiser mutually agreed upon by the Parties. In the
event the Parties are unable to agree upon an appraiser within 10 days following
the date upon which either Party requests the other Party to agree to an
appraiser, then each Party shall appoint an appraiser, who shall in turn select
a third appraiser who shall serve as the appraiser hereunder. In the event
either Party fails to select an appraiser within 15 days of the selection of an
appraiser by the other Party, the appraiser selected by the other Party shall
serve as the appraiser hereunder. The determination of the appraised value of
the assets identified in such subsections, by the appraiser or appraisers
selected hereunder shall be binding on both Parties.

8.5 Closing of Purchase. If Provider purchases assets pursuant to Section 8.4,
Provider shall pay cash for the purchased assets; provided that the amount of
the purchase price allocable to an asset shall be reduced by the amount of debt
and liabilities of Service Company, if any, relating directly to those assets
that are assumed by Provider in connection with such purchase. Any asset which
is purchased by Provider pursuant to Section 8.4 and with respect to which the
purchase price reduction described in the preceding sentence does not apply
shall be transferred to Provider free and clear of all liens and encumbrances at
closing. Provider and any dentist associated with Provider shall execute such
documents as may be required for Provider to assume the liabilities set forth in
Section 8.4(d) and to remove Service Company from any

 

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liability with respect to such purchased asset and with respect to any property
leased or subleased by Service Company. The closing date for the purchase shall
be determined by the Parties but shall in no event occur later than 180 days
from the date of the notice of termination. Provider shall be released from the
covenants described in Section 5.7 upon the successful consummation of such
closing.

ARTICLE IX

GENERAL

9.1 Nature of Services. Nothing in this Agreement is intended or shall be
construed to allow Service Company to exercise control or direction over the
manner or method by which Provider and its dentists or the dental hygienists and
other licensed dental personnel and unlicensed dental assistants and other
personnel supervised by Provider or its dentists, perform Dental Care or other
professional dental care services. The rendition of all Dental Care shall be the
sole responsibility of Provider and its dentists and the dental hygienists and
other licensed dental personnel and unlicensed dental assistants supervised by
Provider and its dentists, and Service Company shall not interfere in any manner
or to any extent therewith. Nothing contained in this Agreement shall be
construed to permit Service Company to engage in the practice of dentistry, it
being the sole intention of the Parties hereto that the Services to be rendered
to Provider by Service Company are solely for the purpose of providing
non-dental administrative and management services to Provider so as to enable
Provider to devote its full time and energies to the professional conduct of its
dental practice and provision of Dental Care to its patients and not to
administration or practice management.

9.2 Relationship of Parties. The relationship of the Parties is and shall be
that of independent contractors, and nothing in this Agreement is intended, and
nothing shall be construed, to create an employer/employee, partnership, or
joint venture relationship between the Parties, or to allow either to exercise
control or direction over the manner or method by which the other performs the
services that are the subject matter of this Agreement; provided always that the
services to be provided hereunder shall be furnished in a manner consistent with
the standards governing such services and the provisions of this Agreement.

9.3 Notices. All notices and other communications under this Agreement to either
Party shall be in writing and shall be sent to that Party at its address set
forth below, (a) by personal delivery; (b) by facsimile (which is confirmed);
(c) by certified mail (return receipt requested); or (d) by delivery to Federal
Express, UPS, or any similar reputable express delivery service for delivery to
that Party the next business day. Each such notice or communication shall be
deemed duly delivered upon actual receipt by the Party for which it is intended.

 

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  (a)

If to Service Company:

American Dental Partners of Minnesota, LLC

c/o American Dental Partners, Inc.

401 Edgewater Place, Suite 430

Wakefield, Massachusetts 01880-1249

Attention: Gregory A. Serrao, President

                     and Chief Executive Officer

Facsimile No.: (781) 224-0837

with a copy to:

Baker & Hostetler, LLP

65 East State Street, Suite 2100

Columbus, Ohio 43215

Attention: Gary A. Wadman, Esq.

Facsimile No.: (614) 462-2616

 

  (b)

If to Provider:

Northland Dental Partners, PLLC

3030 Centre Pointe Drive

Roseville, Minnesota 55113-1115

Attention: Dr. James Ludke

Facsimile No.: 651-633-6811

Either Party may change the address or facsimile number to which notices and
other communications are to be given by giving the other Party notice of such
change.

9.4 Further Assurances. Each Party shall execute, acknowledge or verify, and
deliver any and all documents, and take any and all other actions, which from
time to time may be reasonably requested by the other Party to carry out the
purposes and intent of this Agreement.

9.5 Governing Law. All questions concerning the validity, intention, or meaning
of this Agreement or relating to the rights and obligations of the Parties with
respect to performance under this Agreement shall be construed and resolved
under the laws of Minnesota without reference to conflict of law principles.

9.6 Severability. The intention of the Parties is to comply fully with all
applicable laws and public policies, and this Agreement shall be construed
consistently with all laws and public policies to the extent possible. If and to
the extent that any arbitration panel (as defined in Section 9.23) or court of
competent jurisdiction determines that it is impossible to construe any
provision of this Agreement consistently with any law or public policy and
consequently holds that provision to be invalid, such holding shall in no way
affect the validity of the other provisions of this Agreement, which shall
remain in full force and effect. With respect to any provision in this Agreement
finally determined by such arbitration panel or court to be invalid or
unenforceable, such arbitration panel or court shall have jurisdiction to reform
this Agreement (consistent with the intent of the Parties) to the extent
necessary to make such provision valid and enforceable, and, as reformed, such
provision shall be binding on the Parties.

 

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9.7 Setoff. Notwithstanding any provision of this Agreement to the contrary,
Service Company shall have the right to setoff from time to time any amounts
owed by Service Company to Provider against any amounts owed by Provider to
Service Company.

9.8 Remedies. All rights and remedies of each Party under this Agreement,
including without limitation termination, are cumulative and in addition to all
other rights and remedies which may be available to that Party from time to
time, whether under any other agreement, at law, or in equity.

Each Party hereby acknowledges that: (a) the provisions of Sections 5.7 and 6.1
of this Agreement are fundamental for the protection of the other Party’s
legitimate business interests; (b) such provisions are reasonable and
appropriate in all respects; and (c) in the event it violates any such
provisions, the other Party would suffer irreparable harm and its remedies at
law would be inadequate. Accordingly, in the event either Party violates or
attempts to violate any such provisions, the other Party shall be entitled to a
temporary restraining order, temporary and permanent injunctions, specific
performance, and other equitable relief without any showing of irreparable harm
or damage or the posting of any bond, in addition to any other rights or
remedies which may then be available to the other Party.

9.9 Non-waiver. No failure by any Party to insist upon strict compliance with
any term of this Agreement, to exercise any option, enforce any right, or seek
any remedy upon any default of any other Party shall affect, or constitute a
waiver of, the first Party’s right to insist upon such strict compliance,
exercise that option, enforce that right, or seek that remedy with respect to
that default or any prior, contemporaneous, or subsequent default; nor shall any
custom or practice of the Parties at variance with any provision of this
Agreement affect or constitute a waiver of, any Party’s right to demand strict
compliance with all provisions of this Agreement.

9.10 Indemnification. To the extent not covered by and paid from its insurance
coverage, each Party (the “Indemnifying Party”) shall indemnify and hold
harmless the other Party and its shareholders, members, managers, directors,
officers, employees, agents, representatives, and affiliates (the “Indemnified
Parties”) from and against any and all Damages asserted against, imposed upon,
or incurred or suffered by the Indemnified Parties, directly or indirectly, as a
result of or arising from any failure by the Indemnifying Party to perform and
observe fully all obligations and conditions to be performed or observed by the
Indemnifying Party under this Agreement. In addition, Provider shall indemnify
Service Company and its shareholders, members, managers, directors, officers,
employees, agents, representatives, and affiliates from and against any and all
Damages asserted against, imposed upon, or incurred or suffered by any of them,
directly or indirectly, as a result of or arising from the acts or omissions of
Provider or its employees, contractors, or other agents or representatives.

9.11 No Third Party Benefit. This Agreement is intended for the exclusive
benefit of the Parties and their respective successors and assigns, and nothing
contained in this Agreement shall be construed as creating any rights or
benefits in or to any third party, except for the rights and benefits accruing
to Parent or the Indemnified Parties.

 

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9.12 Captions. The captions of the various sections of this Agreement are not
part of the context of this Agreement, are only labels to assist in locating and
reading those sections, and shall be ignored in construing this Agreement.

9.13 Genders and Numbers. When permitted by the context, each pronoun used in
this Agreement includes the same pronoun in other genders or numbers and each
noun used in this Agreement includes the same noun in other numbers.

9.14 References to Law. Any reference in this Agreement to any federal, state or
local law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.

9.15 Complete Agreement. This document (including its exhibits and all other
documents referred to herein, including without limitation the BAA, all of which
are hereby incorporated herein by reference) contains the entire agreement
between the Parties with respect to the subject matter of this Agreement and
supersedes all prior or contemporaneous discussions, negotiations,
representations, or agreements relating to the subject matter of this Agreement.
No changes to this Agreement shall be made or be binding upon any Party unless
made in writing and signed by each Party to this Agreement.

9.16 Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same Agreement, and any photocopy, facsimile, or
electronic reproduction of the executed Agreement shall constitute an original.

9.17 Assignment. Provider shall not have the right to assign this Agreement
without the prior written consent of Service Company, which consent may be
withheld for any reason or no reason. Any assignment made in violation hereof
shall be wholly void and invalid, the assignee shall acquire no rights
whatsoever, and Service Company shall not recognize, nor shall it be required to
recognize, the assignment. The sale, transfer, pledge, or assignment of any of
the membership interests of Provider held by any member of Provider, the
issuance by Provider of voting membership interests to any other person, or any
combination of such transactions within any period of two years, such that the
members in Provider at the beginning of that two-year period fail to maintain a
majority of the voting interest in Provider, shall be deemed an attempted
assignment by Provider, and shall be null and void unless consented to in
writing by Service Company prior to any such transfer or issuance. Any breach of
this provision, whether or not void or voidable, shall constitute a material
breach of this Agreement, and in the event of such breach, Service Company may
terminate this Agreement upon 24 hours notice to Provider. Service Company shall
have the right to (i) assign its rights and obligations hereunder to any third
party and (ii) collaterally assign its interest in this Agreement and its right
to collect the amounts set forth in Article VII hereunder to any financial
institution or other third party without the consent of Provider. Service
Company shall notify Provider of any assignment of this Agreement of the type
described in the immediately preceding clause (i).

9.18 Successors. Subject to Section 9.17, this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by and against the successors and
assigns of each Party.

 

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9.19 Force Majeure. Neither Party shall be liable or deemed to be in default for
any delay or failure in performance under this Agreement or other interruption
of service deemed to result, directly or indirectly, from acts of God, civil or
military authority, acts of public enemy, war, accidents, fires, explosions,
earthquakes, floods, failure of transportation, strikes or other work
interruptions by either Party’s employees, or any other similar cause beyond the
reasonable control of either Party unless such delay or failure in performance
is expressly addressed elsewhere in this Agreement.

9.20 Interpretation. This Agreement supersedes the Original Agreement in its
entirety from and after the date of this Agreement; provided any payment
obligations of Provider under the Original Agreement shall survive.

9.21 Covenant Not to Sue. Provider shall not make, assert, maintain, or
initiate, or cause to be made, asserted, maintained, or initiated, any claim,
charge, demand, action, or proceeding of any type, the basis of which is, in
whole or in part, that this Agreement, any portion of this Agreement, or the
relationship created by the Agreement is illegal, or that the Service Fee or
other amount payable by Provider to Service Company under this Agreement is
unreasonable, does not represent fair market value for the Services and other
items provided by Service Company, or constitutes unjust enrichment. If Provider
takes any action which is inconsistent with the preceding sentence, then
Provider shall pay all costs and expenses (including without limitation
attorneys’ fees) incurred by Service Company in defending such claim, which
payment shall be made promptly upon the request of Service Company.

9.22 Mutually Negotiated. The Parties agree that this Agreement reflects their
mutual intent and that no rule of strict construction shall be applied against
either Party with respect to the interpretation of this Agreement.

9.23 Arbitration.

(a) Binding Arbitration. Except as expressly provided in Section 9.23(f), any
claim or dispute, whether sounding in contract, tort, or otherwise, arising out
of, in connection with, related to, or incidental to this Agreement, the
Services, or the relationship established pursuant to this Agreement shall be
subject to binding arbitration, pursuant to the Federal Arbitration Act, which
shall be held in Boston, Massachusetts and be conducted in accordance with the
Federal Rules of Civil Procedure (including without limitation the mandatory
disclosure requirements of Federal Rule of Civil Procedure 26(a)) and the
Federal Rules of Evidence, but in each case only to the extent such act or any
such rule is not inconsistent with this Section 9.23.

(b) Selection of Arbitrators. In any arbitration, the arbitrators shall consist
of a panel of three arbitrators, which shall act by majority vote, and which
shall consist of one arbitrator selected by the Party on one side of the issue
subject to the arbitration, one arbitrator selected by the Party on the other
side of the issue, and a third arbitrator selected by the two arbitrators so
selected, who shall (i) be either (A) a former Federal District Court judge or
(B) a former state court judge who presided over a court of general jurisdiction
for no less than five years, and (ii) act as chairman of the arbitration panel;
provided that if the Party on one side of the issue selects its arbitrator for
the panel and the other Party fails so to select its arbitrator within 10
business days after being requested by the first Party to do so, then the sole
arbitrator shall be the arbitrator selected by the first Party.

 

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(c) Costs of Arbitration. All costs and expenses of arbitration shall be borne
by the Parties as determined by the arbitration panel, except that the fees of
any arbitrator on the arbitration panel who is selected individually by a Party
shall be borne separately by the Party appointing that arbitrator; provided that
if one Party fails to select an arbitrator for a panel, and the sole arbitrator
is the arbitrator selected by the other Party, then the fees of that arbitrator
shall be borne by the Parties as determined by that arbitrator. As hereafter
used in this Section 9.23, the term “arbitration panel” shall mean the
arbitration panel or sole arbitrator selected as provided in Section 9.23(b).

(d) Authority of Arbitration Panel. The arbitration panel shall have only the
authority to interpret, apply, or determine compliance or non-compliance with
the provisions of this Agreement (including without limitation the exhibits
hereto and other documents referred to herein which have been incorporated
herein by reference). The arbitration panel shall not have the authority to add
to, remove, modify, or otherwise alter any terms of this Agreement except as
expressly provided in this Agreement. The arbitration panel shall be limited in
its authority to reviewing and making a determination of the specific dispute or
claim submitted for arbitration. The arbitration panel shall provide a reasoned
decision setting forth the analysis and legal basis for its award, addressing
each claim or disputed issue separately. The arbitration panel may proceed to an
award notwithstanding the failure of the other Party to participate in the
proceedings. Except for the temporary and preliminary relief described in
Section 9.23(f), the arbitration panel shall be authorized to grant injunctive
or other equitable relief, including without limitation in connection with the
actual or threatened breach of Section 4.17, 5.7, 5.8, or 6.1, or to prevent the
destruction of goods or documents involved in the dispute, to protect trade
secrets, or to provide for security for a prospective monetary award.

The limitations on liability set forth in this Agreement shall apply to an award
of the arbitration panel. Except as expressly provided in Section 9.23(f), the
award of the arbitration panel shall be the sole and exclusive remedy of the
Parties with respect to any claim or dispute, whether sounding in contract,
tort, or otherwise, arising out of, in connection with, related to, or
incidental to this Agreement, the Services, or the relationship established
pursuant to this Agreement.

(e) Enforcement of Arbitration Award; Jurisdiction. Either Party shall be
entitled to apply to a court for a judicial acceptance of the ruling of the
arbitration panel or an order of enforcement relating thereto. Each Party hereby
(i) designates the state and federal courts sitting in Boston, Massachusetts
(the “Designated Courts”) as the exclusive courts of proper jurisdiction and
venue for purposes of enforcing any ruling of the arbitration panel, or seeking
injunctive relief as permitted in Section 9.23(f), and for any and all other
legal proceedings relating to this Agreement; (ii) irrevocably consents to such
designation, jurisdiction, and venue, and (iii) waives any objections or
defenses relating to jurisdiction or venue with respect to any legal proceeding
initiated in or transferred to a Designated Court.

(f) Injunctive Relief. Each Party acknowledges that the time required to select
an arbitration panel and conduct an arbitration pursuant to this Section 9.23 in
the event of an actual or threatened breach of Section 4.17, 5.7, 5.8, or 6.1
would likely result in irreparable harm to the aggrieved Party before such Party
could obtain relief through arbitration. Therefore,

 

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in any such event, either Party may commence an action, only in a Designated
Court, for the sole and limited purpose of seeking a temporary restraining order
and/or preliminary injunction to prevent irreparable injury or harm. Any order
issued by a Designated Court granting a temporary restraining order or
preliminary injunction shall be binding upon each Party, shall remain in full
force and effect until such time as an arbitration panel is selected as provided
in Section 9.23(b) and shall be subject to review or appeal only by that
arbitration panel.

(g) Jury Trial Waiver. IF ANY ARBITRATOR OR COURT HOLDS THAT ANY CLAIM OR
DISPUTE BETWEEN THE PARTIES IS NOT SUBJECT TO BINDING ARBITRATION AS AGREED TO
BY THE PARTIES HEREIN, THEN TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
EACH PARTY HEREBY (I) AGREES THAT THE CLAIM OR DISPUTE SHALL BE SUBMITTED FOR
DECISION TO THE JUDGE OF A DESIGNATED COURT ONLY, AND (II) WAIVES ANY AND ALL
RIGHT OR CLAIM TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE BETWEEN THEM,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, IN CONNECTION
WITH, RELATED TO, OR INCIDENTAL TO THIS AGREEMENT, THE SERVICES, OR THE
RELATIONSHIP ESTABLISHED PURSUANT TO THIS AGREEMENT.

(h) Confidentiality of Arbitration Decision. Any decision of the arbitration
panel shall be deemed to be Confidential Information of each Party (and not
subject to the exceptions set forth in clauses (i), (ii), (iii), and (iv) of
Section 6.1). To facilitate judicial enforcement of any arbitration decision
without compromising the confidentiality of such decision, the Parties shall
instruct the arbitration panel to issue an order succinctly setting forth the
affirmative and negative responsibilities of the Parties, separate from the
reasoned decision provided for in the first paragraph of Section 9.23(d), and
such order shall be used to enforce the arbitration panel’s decision under
Section 9.23(e).

9.24 Exclusion of Indirect Damages. EXCEPT FOR BREACH BY PROVIDER OF SECTION 5.7
OR BREACH BY EITHER PARTY OF SECTION 6.1, TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR
ANY INCIDENTAL, SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT
LIMITATION DAMAGES FOR LOST PROFITS, HOWEVER CAUSED, REGARDLESS OF THE THEORY OF
LIABILITY (CONTRACT, TORT, NEGLIGENCE, OR OTHER), AND EVEN IF THE OTHER PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

9.25 Limitation of Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
HEREIN, IN NO EVENT SHALL SERVICE COMPANY’S TOTAL LIABILITY TO PROVIDER FOR ANY
AND ALL DAMAGES EXCEED AN AMOUNT EQUAL TO THE AGGREGATE AMOUNT OF THE SERVICE
FEE PAID TO SERVICE COMPANY DURING THE PERIOD OF TWELVE CALENDAR MONTHS
IMMEDIATELY PRECEDING THE DATE OF CALCULATION OF SUCH DAMAGES.

 

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EACH PARTY REPRESENTS AND WARRANTS THAT SUCH PARTY HAS BEEN ADVISED BY ITS OWN
INDEPENDENT LEGAL COUNSEL IN CONNECTION WITH THIS AGREEMENT, AND THAT SUCH PARTY
HAS READ AND FULLY UNDERSTANDS THIS AGREEMENT.

 

PROVIDER:

   

SERVICE COMPANY:

NORTHLAND DENTAL PARTNERS, PLLC(1)

   

AMERICAN DENTAL PARTNERS OF MINNESOTA, LLC

By:

 

/s/ James Ludke

   

By:

 

Ian H. Brock

 

James Ludke, DDS, President

   

Its:

 

Vice President

 

(1)

For itself and on behalf of each Subsidiary as its sole member

 

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Exhibit A

DEFINITIONS

Adjusted Gross Revenue. The term “Adjusted Gross Revenue” shall mean Gross
Revenue less Adjustments.

Adjusted Pre-Tax Earnings. The term “Adjusted Pre-Tax Earnings” shall mean, for
any period, Service Company’s earnings from operations resulting from its
Services to Provider for that period, less the Allocable Share of Parent’s
interest expense and the non-allocated expenses of Parent’s National Resource
Group for that period.

Allocable Share. The term “Allocable Share” shall mean, for any period, a
fraction having as its numerator Provider’s Adjusted Gross Revenue for that
period and having as its denominator the Adjusted Gross Revenue for that period
of all dental group practices affiliated with Parent or its subsidiaries.

Adjustments. The term “Adjustments” shall mean all adjustments on the accrual
basis for (a) third party payor contractual allowances, adjustments, discounts,
and professional courtesies, (b) uncollectible accounts and related expenses,
and (c) other activities that do not result in collectible charges.

Ancillary Revenue. The term “Ancillary Revenue” shall mean all other revenue
actually recorded each month that is not Professional Service Revenue.

Budget. The term “Budget” shall mean an operating budget and capital expenditure
budget for each calendar year as prepared by Service Company, in consultation
with Provider, and approved by each of the Policy Board and Parent.

Calculated Margin. The term “Calculated Margin” shall mean, for any period, the
actual Adjusted Gross Revenue for that period, less the sum of (a) the actual
Clinic Expense for that period and (b) the actual Provider Expense for that
period to the extent included as described in the definition of Provider Expense
below.

Capitation Revenue. The term “Capitation Revenue” shall mean all revenue
recorded under GAAP from managed care organizations or third party payors where
such revenue is recorded periodically on a per member basis for the partial or
total dental needs of an enrolled patient.

Clinic. The term “Clinic” shall mean any of the facilities, including satellite
facilities, that Service Company owns, leases or otherwise procures and provides
for the use of Provider for the provision of Dental Care.

Clinic Expense. The term “Clinic Expense” shall mean any operating or
nonoperating expense incurred by Service Company or Parent in the provision of
services to Provider and any

 

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expense incurred by Provider which is expressly identified in this Agreement as
a Clinic Expense, including without limitation any expense described in this
definition for which Provider is required by applicable law to be financially
liable. Clinic Expense shall not include any state or federal income tax of
Provider, any expense related to any Dental Assets or the maintenance or
protection of the same, or any other expense reasonably designated by Service
Company as a Provider Expense. Without limiting the foregoing, Clinic Expense
shall include:

(a) The salaries, benefits, and other direct costs of all employees of Provider
or Service Company at a Clinic, but not the salaries, benefits, or other direct
costs of the dentists;

(b) The cost of any employee or consultant that provides services at or in
connection with a Clinic for improved Clinic performance, such as management,
billing and collections, business office consultation, accounting and legal
services, including salaries, benefits, other compensation, travel costs, and
other expenses, but only when such services are coordinated by Service Company;

(c) Reasonable recruitment costs and out-of-pocket expenses of Service Company
or Provider associated with the recruitment of additional dentists, dental
hygienists, or other licensed dental personnel or unlicensed dental assistants;

(d) Dental malpractice liability insurance expenses for dentists, dental
hygienists, or dental assistants, Service Company employees, and non-dentist
employees; workers’ compensation premiums for Service Company employees at each
Clinic; and comprehensive general liability insurance expenses covering each
Clinic and employees of Provider and Service Company at each Clinic;

(e) The cost of laboratory services;

(f) The cost of dental supplies (including but not limited to products,
substances, items, or dental devices), and office supplies;

(g) The expense of using, leasing, or otherwise procuring Clinics and related
equipment, including utilities, depreciation, and repairs and maintenance,
provided that such expense shall not include the cost of acquiring goodwill,
noncompete covenants, or other intangible assets in connection with such
procurement;

(h) Without limiting the foregoing, expenses related to the practice management
and other information systems provided, made available, or arranged for by
Service Company for use in connection with Provider’s practice, including
without limitation expenses associated with third party systems, amortization of
internal development costs, costs of facilities and hardware (including
occupancy costs and hardware for off site data centers), costs of establishing
and maintaining a wide area network and similar expenses, costs and expenses of
personnel involved in any system conversion, and costs and expenses of the
helpdesk and database administrator personnel;

(i) Personal property and intangible taxes assessed against Service Company’s
assets which are provided or otherwise employed by Service Company for the
benefit of Provider;

 

A-2

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(j) The reasonable travel expenses (except for the corporate staff of Service
Company and Parent) associated with attending meetings, conferences, or seminars
to benefit Provider;

(k) Other expenses incurred by Service Company or Parent in carrying out its
obligations under this Agreement in accordance with the policies and budgets
established by the Policy Board, including without limitation the write-off of
any tangible or intangible assets on the balance sheet of Service Company or any
portion thereof other than costs incurred in connection with the execution of
this Agreement and the issuance by Parent of stock options to Provider or its
dentists;

(l) Any tax assessed against Service Company (other than income taxes) in
connection with the services provided by Service Company hereunder; and

(m) Any other cost or expense designated as a Clinic Expense pursuant to this
Agreement.

To the extent any cost or expense of the type includable in Clinic Expense
results from a service or other item provided by Service Company or Parent to
multiple dental practices affiliated with Service Company or Parent (including
Provider), the costs and expenses of such services or other items included in
Clinic Expense under this Agreement shall be limited to a reasonable allocation
of a portion of the total of such costs and expenses.

Committed Capital. The term “Committed Capital” shall be the amount of capital
invested by Service Company, Parent, or any other subsidiary of Parent
(hereinafter, for purposes of this definition, simply “Parent”) in the
operations related to Provider’s practice, including the consideration paid in
connection with the transactions resulting in the affiliation by Parent with
Provider, its current or former subsidiaries, and any other dental practices
which may become part of Provider’s operations (the “Affiliated Group”), all
capital expenditures made by Parent for the benefit of any member of the
Affiliated Group, and the net working capital invested for the benefit of the
members of the Affiliated Group.

Confidential Information. The term “Confidential Information” shall mean, with
respect to any person, all trade secrets, proprietary data, and other
information (whether written or oral) of a confidential nature relating directly
or indirectly to that person or its business, including without limitation all
business management, marketing, and economic studies and methods, patient lists,
proprietary forms, marketing data, fee schedules, customer lists, financial,
tax, accounting, and other information regarding business operations or
structure, business plans, ideas, concepts, policies, and procedures, and any
other information which that person is obligated to treat as confidential
pursuant to any law, agreement, or course of dealing by which that person is
bound, whether or not such Confidential Information is disclosed or otherwise
made available pursuant to this Agreement. In addition, Service Company’s
Confidential Information shall include all information relating to Parent’s
proprietary Improvis practice management system, including any accompanying
written materials, and all other Confidential Information of or relating to
Parent.

 

A-3

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Damages. The term “Damages” shall mean any and all losses, liabilities, damages,
demands, claims, suits, actions, judgments, assessments, costs and expenses,
including without limitation interest, penalties, attorneys’ fees, and any and
all expenses incurred in investigating, preparing, or defending against new
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation.

Debt Payoff Date. The term “Debt Payoff Date” shall mean the date on which all
of the following have been paid, or repaid, by Provider in full: (a) all
advances made by Service Company to Provider to fund (i) the Guaranteed
Payments, or (ii) compensation paid to Provider’s dentists for non-clinical
services (“Non-Chair Side Compensation”) prior to the Effective Date (other than
any such Non-Chair Side Compensation included in the Guaranteed Payments);
(b) advances made by Service Company to Associated Dental Care, P.A., a
Minnesota professional association, dba Assure Dental (“Assure Dental”), and
Assure Dental’s obligations under notes payable by it to Wisconsin Dental Group,
S.C., to the extent any such indebtedness is assumed by Provider in connection
with its anticipated acquisition of Assure Dental or its dental practice
(including any refinancings of any such indebtedness); and (c) any indebtedness
of Family Orthodontic Specialists, P.L.C., a Minnesota professional limited
liability company in which Provider has a 50% membership interest (FOS”), to
Service Company that is assumed by Provider in connection with the anticipated
dissolution or reorganization of FOS.

Dental Assets. The term “Dental Assets” shall mean the following assets of
Provider:

(a) All of Provider’s rights, title and interest in, to or under, or possession
of, all drugs, pharmaceuticals, products, substances, items or devices whose
purchase, possession, maintenance, administration, prescription or security
requires the authorization or order of a Dental Care Professional or requires a
permit, registration, certification or any other governmental authorization held
by a Dental Care Professional as specified under any federal or state law, or
both;

(b) All of Provider’s rights, title and interest in and to records of identity,
diagnosis, evaluation or treatment of patients;

(c) All of Provider’s rights, title and interest in, to or under insurance
policies covering or relating to dental malpractice;

(d) The name of Provider;

(e) All franchises, licenses, permits, certificates, approvals and other
governmental authorizations necessary or desirable to own and operate any of the
other Dental Assets;

(f) All of Provider’s rights, title and interest in, to or under any contract or
agreement that requires performance by a licensed dental care provider under
federal or applicable state law.

Dental Care. The term “Dental Care” shall mean such intra-oral diagnostic and
therapeutic procedures, operations, and services as are included under the
definition of the

 

A-4

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“practice of dentistry” under the laws and regulations of the state in which
such procedures, operations, and services are performed and that are provided by
Provider to its patients through Provider’s dentists and through dental
hygienists, dental assistants, and other professional dental care personnel
operating under the supervision of Provider’s dentists, including but not
limited to the practice of general dentistry, endodontics, periodontics,
orthodontics, prosthodontics, pediatric dental care, and oral surgery, and all
dental care associated with any of the foregoing.

Dental Care Professional. The term “Dental Care Professional” shall mean any
individual holding a current, unrestricted license issued by the appropriate
dental licensing board in the state in which the Dental Care Professional
renders Dental Care, which permits such individual to provide Dental Care,
including without limitation dentists and denturists, dental hygienists, and
dental assistants.

First Group Employment Agreements. The term “First Group Employment Agreements”
shall mean Northland’s initial employment agreements with dentists identified on
the attached Schedule A-1 as contemplated by the Initial Agreement.

GAAP. The term “GAAP” shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board and the Securities
and Exchange Commission or in such other statements by such other entity or
other practices and procedures as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of the determination. All financial definitions in this exhibit are
intended to be construed in accordance with GAAP, whether or not expressly so
stated.

Gross Revenue. The term “Gross Revenue” shall mean the sum of all Professional
Service Revenue and Ancillary Revenue before Adjustments.

Guaranteed Payments. The term “Guaranteed Payments” shall mean (a) the
Guaranteed Payments as defined in the Initial Agreement, except that, for any
period, such term shall include Minimum Base Compensation (as defined in the
First Group Employment Agreements) only to the extent the Minimum Base
Compensation for that period exceeds the actual Base Compensation for that
period (as defined in the First Group Employment Agreements), plus (b) $5,000 a
month.

Initial Agreement. The term “Initial Agreement” shall mean the Agreement
Regarding Service Agreement dated July 17, 2007 between Northland and Service
Company.

Ordinary Dental Supplies. The term “Ordinary Dental Supplies” shall mean all
products, substances, items, or devices that (a) are necessary or appropriate
for Provider’s provision of Dental Care, and (b) are not Special Dental
Supplies.

Parent. The term “Parent” shall mean American Dental Partners, Inc., a Delaware
corporation, and its successors.

Practice Territory. The term “Practice Territory” shall mean the geographic area
within which Provider provides Dental Care, which geographic area shall include
all of the following

 

A-5

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territories: (a) with respect to each Clinic which offers general dentistry
services only, the geographic area within a radius of 30 miles of such Clinic,
and (b) with respect to each Clinic which offers specialty dental services, the
geographic area within a radius of 50 miles of such Clinic.

Professional Service Revenue. The term “Professional Service Revenue” shall mean
the sum of all (a) professional fees actually recorded each month on an accrual
basis under GAAP as a result of the Dental Care rendered by the Dental Care
Professionals retained by Provider, and (b) Capitation Revenue.

Provider Account. The term “Provider Account” shall mean the bank account of
Provider established by Provider promptly following the execution of this
Agreement at a financial institution reasonably acceptable to Service Company,
which account shall be administered by Service Company according to Sections
4.11 and 4.12 of this Agreement.

Provider Consent. The term “Provider Consent” shall mean the consent granted by
a majority of Provider’s representatives who serve on the Policy Board. When any
provision of this Agreement requires Provider Consent, Provider Consent shall
not be unreasonably withheld and shall be binding on Provider.

Provider Expense. The term “Provider Expense” shall mean any expense (other than
an expense for which Provider is required by applicable law to be financially
liable and which is expressly identified in this Agreement as a Clinic Expense)
incurred by the Service Company or Provider and for which Provider, and not the
Service Company, is financially liable. Provider Expense shall include dentist
salaries, benefits (which includes workers’ compensation coverage), and other
direct costs related to the dentists employed or otherwise retained by Provider
for the provision of its Dental Care (including professional dues,
subscriptions, continuing dental education expenses, and travel costs for
continuing dental education or other business travel, but excluding business
travel requested by Service Company, which shall be a Clinic Expense), together
with any expense related to any Dental Assets or the maintenance or protection
of the same and any other cost or expense designated as a Provider Expense in or
pursuant to this Agreement. In the event Provider incurs any consulting,
accounting, legal or other similar fee without Service Company’s approval of
such engagement through Service Company, any fee or expense so incurred shall be
a Provider Expense, but one that is ignored for purposes of calculating the
Calculated Margin and therefore must be paid out of Provider Retained Earnings.
Notwithstanding the foregoing, any Provider Expense which is not within the
then-applicable Budget or the parameters described in the third paragraph of
Section 4.13(a) and is not approved by either the Policy Board or Service
Company shall be ignored for purposes of calculating the Calculated Margin and
therefore must be paid out of Provider Retained Earnings.

In addition, and notwithstanding any other provisions of this Agreement or the
Initial Agreement to the contrary: (a) the Guaranteed Payments shall not be
deemed to be Provider Expenses for purposes of calculating the Calculated Margin
and also must be paid out of Provider Retained Earnings, provided that to the
extent Provider Retained Earnings are insufficient for Provider to make the
Guaranteed Payments, Service Company shall advance funds to Provider in an
amount equal to such insufficiency (which advances shall be deemed

 

A-6

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made under Section 7.2); and (b) Provider shall have the right to use Provider
Retained Earnings to fund distributions to Provider’s members from time to time
(including without limitation in periodic installments during a calendar year)
in amounts reasonably estimated by Provider as the aggregate individual income
tax liabilities incurred by its members as a result of their membership in
Provider (the “Tax Distributions”), or (ii) such additional amounts, if any, as
the Parties may agree upon from time to time for Non-Chair Side Compensation
payable after the Effective Date, instead of, in either case, first applying
such funds to repayment of advances made by Service Company or funding
Guaranteed Payments; and (c) if the Provider Retained Earnings are insufficient
for Provider to make the Tax Distributions or pay such Non-Chair Side
Compensation, Service company shall advance funds to Provider in an amount equal
to such insufficiency (which advances shall be deemed to be made under
Section 7.2).

Provider Retained Earnings. The term “Provider Retained Earnings” shall mean,
for any period, the Calculated Margin for that period, less the Service Fee for
that period.

ROCC. The term “ROCC” shall mean return on committed capital and, for any
period, shall be calculated by dividing the annualized Adjusted Pre-Tax Earnings
for that period by the total Committed Capital as of the end of that period,
with the result expressed as a percentage.

Service Company Consent. The term “Service Company Consent” shall mean the
consent granted by a majority of Service Company’s representatives who serve on
the Policy Board. When any provision of this Agreement requires Service Company
Consent, Service Company Consent shall not be unreasonably withheld and shall be
binding on Service Company.

Service Company Expense. The term “Service Company Expense” shall mean an
expense or cost incurred by Service Company or Parent and for which Service
Company or Parent, and not Provider, is financially liable. Without limiting the
generality of the foregoing, Service Company Expense shall specifically include:

(a) The costs of Service Company’s and Parent’s corporate personnel and the
travel costs of such corporate personnel; and

(b) General overhead costs of Service Company or Parent that neither directly
benefit Provider nor are otherwise incurred by Service Company or Parent in
providing services pursuant to this Agreement, such as (by way of illustration
and not limitation) rent expense for Parent’s corporate headquarters.

Service Company Expense shall specifically exclude any expense incurred by
Service Company or Parent that directly benefits Provider or is otherwise
incurred by Service Company or Parent in providing services pursuant to this
Agreement.

Service Fee. The term “Service Fee” shall mean the fee payable to Service
Company by Provider as described in Section 7.3.

Services. The term “Services” shall mean the business, administrative, and
management services to be provided or arranged by Service Company as set forth
in this Agreement, including without limitation the provision of equipment,
supplies, support services, non-dentist

 

A-7

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personnel, office space, financial recordkeeping and reporting, billing and
collection and other business office services. Services shall not include the
provision of Dental Care to patients of the Provider or the supervision or
control of persons while they are providing Dental Care to patients.

Special Dental Supplies. The term “Special Dental Supplies” shall mean all
products, substances, items or devices, the purchase, possession, maintenance,
administration, prescription or security of which requires the authorization or
order of a Dental Care Professional or requires a permit, registration,
certification or other governmental authorization held by a Dental Care
Professional as specified under any federal or state law (or both).

Term. The term “Term” shall mean the Initial Term and any Renewal Terms, subject
to termination pursuant to Section 8.2.

 

A-8

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SCHEDULE A-1

DENTISTS WITH FIRST GROUP EMPLOYMENT AGREEMENTS

 

  

Davis, Dr. Bart

Elvecrog, Dr. Mark

Gearhart, Dr. Kyle

Giddings, Dr. Nicole

Haas, Dr. Thomas

Hamilton, Dr. Craig

Healy, Dr. James

Hom, Dr. Michael

Kottas, Dr. Katherine

Kottke, Dr. Steven

Le, Dr. Mai-Trinh

Ludwig, Dr. Cobi

Rounds, Dr. Noah

Sawyer, Dr. Stephen

Siskoff, Dr. Luke

Tran, Dr. Thomas

Welch, Dr. Sarah

Wilcox, Dr. Andrew

  

 

Schedule A-1

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Exhibit B

SERVICE FEE

The percentage of the Calculated Margin to be used for the Service Fee for a
calendar year (or partial calendar year, if applicable) shall be determined with
reference to the ROCC for the prior calendar year as follows:

 

Prior Year ROCC

   Calculated
Margin %  

Less than 10%

   95 % 

At least 10%, but less than 13%

   94 % 

At least 13%, but less than 15%

   93 % 

At least 15%, but less than 17%

   92 % 

At least 17%, but less than 19%

   91 % 

At least 19%, but less than 20%

   90 % 

20% or more

   89 % 

 

B-1