Exhibit 10(nnn)

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

PDHC, LTD.

Effective Date: January 1, 2009

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TABLE OF CONTENTS

 

          Page

ARTICLE I

  

    DEFINITIONS

   2

ARTICLE II

  

    ENGAGEMENT AND AUTHORITY OF SERVICE COMPANY

   2

2.1

  

Engagement

   2

2.2

  

Authority

   2

2.3

  

Patient Referrals

   2

2.4

  

Internal Management of Provider

   2

2.5

  

Practice of Dentistry

   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

   5

4.1

  

Clinics

   5

4.2

  

Equipment

   6

4.3

  

Laboratory Services

   6

4.4

  

Supplies

   6

4.5

  

Capital Investment

   7

4.6

  

Support Services

   7

4.7

  

Quality Assurance, Risk Management, and Utilization Review

   7

4.8

  

Licenses and Permits

   7

4.9

  

Personnel

   7

4.10

  

Contract Negotiations

   8

4.11

  

Billing and Collection

   8

4.12

  

Provider Account

   9

4.13

  

Financial Matters

   10

4.14

  

Reports and Records

   11

4.15

  

Recruitment of Provider Dentists

   12

4.16

  

Service Company’s Insurance

   12

4.17

  

License of Name and Marks

   12

4.18

  

No Warranty

   12

 

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TABLE OF CONTENTS

(continued)

 

          Page

ARTICLE V

  

    RESPONSIBILITIES OF PROVIDER

   13

5.1

  

Organization and Operations

   13

5.2

  

Provider Personnel

   13

5.3

  

Professional Standards

   14

5.4

  

Dental Care

   14

5.5

  

Peer Review and Quality Assurance

   14

5.6

  

Provider’s Insurance

   15

5.7

  

Noncompetition

   17

5.8

  

Use of Names

   17

ARTICLE VI

  

    CONFIDENTIALITY

   18

6.1

  

Confidential and Proprietary Information

   18

6.2

  

Use of Practice Statistics

   18

ARTICLE VII

  

    FINANCIAL ARRANGEMENTS

   18

7.1

  

Clinic Expense Reimbursement

   18

7.2

  

Repayment of Advances

   19

7.3

  

Service Fee

   19

7.4

  

Reasonable Value

   19

7.5

  

Payment

   19

7.6

  

Accounts Receivable

   19

ARTICLE VIII

  

    TERM AND TERMINATION

   20

8.1

  

Initial and Renewal Term

   20

8.2

  

Termination

   20

8.3

  

Effects of Termination

   22

8.4

  

Purchase Obligation

   22

8.5

  

Closing of Purchase

   23

ARTICLE IX

  

    GENERAL

   24

9.1

  

Nature of Services

   24

9.2

  

Relationship of Parties

   24

9.3

  

Notices

   24

9.4

  

Execution of Documents

   25

 

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TABLE OF CONTENTS

(continued)

 

          Page

9.5

  

Governing Law

   25

9.6

  

Severability

   25

9.7

  

Setoff

   25

9.8

  

Remedies

   25

9.9

  

Non-waiver

   26

9.10

  

Indemnification

   26

9.11

  

No Third Party Benefit

   26

9.12

  

Captions

   26

9.13

  

Genders and Numbers

   26

9.14

  

Complete Agreement

   26

9.15

  

Counterparts

   27

9.16

  

Assignment

   27

9.17

  

Successors

   27

9.18

  

Force Majeure

   27

9.19

  

Interpretation

   27

9.20

  

Jury Trial Wavier

   28 Exhibit A, Definitions    A-1

 

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AMENDED AND RESTATED

SERVICE AGREEMENT

This Amended and Restated Service Agreement (the “Agreement”) is made effective
January 1, 2009, among Northland Dental Partners, PLLC, a Minnesota professional
limited liability company, fka James Ludke, D.D.S., PLLC (“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 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 assets, personnel,
and services to dental practices, other than such services as are directly
related to or would improperly influence the provision of dental care or the
practice of dentistry. Service Company’s services are intended to permit the
dentists in such practices to focus their efforts primarily on rendering quality
dental care.

C. Prior to December 31, 2008, Northland was the sole member in Metro
Dentalcare, P.L.C., a Minnesota professional limited liability company
(“Metro”), and Metro was the sole member in each Subsidiary. On December 31,
2008, Metro was merged with and into Northland, with the result that, among
other things, Northland is now the sole member in each Subsidiary.

D. Metro, the Subsidiaries, and Metropolitan Dental Management, Inc., a
Minnesota corporation (“MDMI”), are the parties to a Service Agreement dated
September 25, 2007 (the “Metro Service Agreement”). Metro, the Subsidiaries, and
MDMI have terminated the Metro Service Agreement as of the date of this
Agreement.

E. Northland and Service Company are the parties to a Service Agreement dated
January 1, 2008 (the “Original Agreement”), pursuant to which Provider engaged
Service Company to provide such services as are necessary and appropriate for
the day-to-day administration of the non-clinical aspects of Provider’s dental
practice.

F. Northland desires to continue focusing its energies, expertise and time on
the practice of dentistry and on the delivery of dental services to patients.
Northland also desires to have Service Company provide its services to the
dental practice formerly operated by Metro, which is now part of Northland’s
practice, and to the dental practices operated by the Subsidiaries. As a result,
Provider and Service Company (the “Parties”) desire to amend and restate the
Original Agreement to provide for Service Company to provide its services to all
of Provider’s dental practices, all as set forth in this Agreement.

 

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Statement of Agreement

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

ARTICLE I

DEFINITIONS

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

ARTICLE II

ENGAGEMENT AND AUTHORITY OF SERVICE COMPANY

2.1 Engagement. Provider hereby engages Service Company as its sole and
exclusive provider of the Services, and Service Company hereby accepts such
engagement, subject at all times to the provisions of this Agreement.

2.2 Authority. Service Company shall have all power, authority, and
responsibility reasonably necessary to provide the Services and carry out
Service Company’s other obligations under this Agreement. Without limiting the
foregoing, Service Company shall have the authority to provide the Services in
any reasonable manner Service Company deems appropriate to meet the day-to-day
requirements of the business functions of Provider. Provider shall give Service
Company 30 days prior written notice of Provider’s intent to execute any
agreement obligating Provider to perform Dental Care or otherwise creating a
binding legal obligation on Provider. Unless an expense is expressly designated
as a Service Company Expense in this Agreement, all expenses incurred by Service
Company in providing Services pursuant to this Agreement shall be Clinic
Expenses.

2.3 Patient Referrals. The Parties agree that the benefits to Provider hereunder
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 operation controlled, managed, or operated
by Service Company. Likewise, the Parties agree that Service Company is not
engaging, does not intend to engage, and is not required to engage in any
referrals of patients to Provider or any similar activities, 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. 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.

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.

 

2

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2.5 Practice of Dentistry. The Parties acknowledge and agree that: (a) Service
Company is not authorized or qualified to engage in any activity that may be
construed or deemed to constitute the practice of dentistry; and
(b) 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 provision of all
Dental Care and that all Dental Care shall be provided and performed exclusively
by or under the supervision of dentists as such dentists, in their sole
discretion, deem appropriate, consistent with applicable law; (ii) Service
Company shall not have or exercise any control or supervision over the provision
of Dental Care; and (iii) 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 to constitute
the practice of dentistry, the requirement to perform that act or service by
Service Company 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 Minnesota Board of Dentistry 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.

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 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.

 

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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.

(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.

 

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(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 the dentist members of the Policy Board; 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; (b) recruitment of dentists for Provider, including the evaluation of the
background, experience, qualifications, specialties, and other credentials of
such recruited individuals; (c) fee schedules for Provider’s services, including
without limitation Provider’s usual and customary fee schedule; (d) to the
extent required by applicable law, third party payor contracting; and (e) 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. Any Clinic
procured by Service Company for use by Provider shall be procured at
commercially reasonable rates. Any move from a present Provider practice
location shall be made only after Service Company has received Provider Consent.

 

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(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 reasonable efforts to assist in obtaining the
lessor’s consent to the assignment. Any expenses incurred in 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 deemed reasonably necessary by Service
Company for the operation of each Clinic and reasonably necessary for the
provision of Dental Care.

(b) Service Company shall provide, finance, or cause to be provided or financed
such dental related equipment as is reasonably required by Provider. Provider
shall have final authority in all dental equipment selections, subject to
economic feasibility as set forth in the budgets approved pursuant to this
Agreement. 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 (ordinary wear and tear excepted), and replacing
(as necessary), all equipment provided by Service Company under this Agreement,
ordinary wear and tear excepted, the cost and expense of which shall be a Clinic
Expense; 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 (consistent with 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
to Provider 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

 

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provide on behalf of and as agent for Provider all reasonable Special Dental
Supplies 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 ultimate oversight, 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 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.

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 have the authority to monitor Provider’s level
of conformance 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) of this Agreement and
subject to Section 3.3: (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. 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 salaries and fringe benefits of
such non-professional personnel and for withholding all appropriate amounts for
income taxes, unemployment insurance, social security, workers’ compensation,
and any other withholding required by applicable law.

 

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4.10 Contract Negotiations. Subject to Section 3.2(e), above, 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; provided that no contract or arrangement regarding the provision
of Dental Care shall be entered into without Provider Consent.

4.11 Billing and Collection. On behalf of and for the account of Provider,
Service Company shall establish and maintain credit and billing and collection
policies and procedures, and shall exercise reasonable efforts to bill and
collect in a timely manner (and to the extent permitted by applicable law) all
professional and other fees for all billable Dental Care provided by Dental Care
Professionals. Service Company shall advise and consult with Provider regarding
the fees for Dental Care provided by Provider (including any related discounting
policy), it being understood, however, that Provider shall establish the fees
(subject to Section 3.2(d), above) to be charged for Dental Care and that
Service Company shall have no authority whatsoever with respect to the
establishment of such fees. In connection with the billing and collection
services to be provided hereunder, Provider hereby grants to Service Company, to
the extent permitted by applicable law, throughout the Term (and thereafter as
provided in Section 8.3), an exclusive special power of attorney and appoints
Service Company, to the 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.

 

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(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.

4.12 Provider Account

(a) Power of Attorney. Service Company shall have access to the Provider Account
solely for the purposes stated herein and shall use all funds on deposit therein
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 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 its affiliates as part of cash management
procedures established or adopted by Service Company or its affiliates 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 (the
“Aggregate Withdrawals”) exceed the aggregate amounts paid or payable to Service
Company under this Agreement (the “Aggregate Payments”), then such excess shall
be deemed to be held by Service Company as agent for Provider. Notwithstanding
this exclusive special power of attorney, Provider may, upon reasonable advance
notice to Service Company, request that Service Company draw checks on the
Provider Account for Provider Expenses and such other amounts as may be due to
Provider under this Agreement, subject to Section 4.12(b) of this Agreement.

(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 pursuant to Section 7.1;

 

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  (ii)

Repayment of advances made by Service Company to Provider pursuant to
Section 7.2;

 

  (iii)

Payment of the Service Fee to Service Company pursuant to Section 7.3;

 

  (iv)

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

 

  (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. At least 30 days prior to the commencement of each calendar
year, Service Company, in consultation with Provider, shall prepare and deliver
to the Policy Board for its review and approval a proposed Budget, setting forth
an estimate of Provider’s revenue and expenses for the upcoming calendar year
(including without limitation the Service Fee associated with the services
provided by Service Company hereunder).

In the event that a proposed Budget is not approved by either the Policy Board
or Parent (pursuant to Section 3.2(b)), Service Company, in consultation with
Provider, shall promptly revise such Budget, taking into consideration the
comments of the Policy Board or Parent, as applicable, and shall deliver such
revised Budget to the Policy Board for approval. In the event that a proposed
Budget has not been approved by both the Policy Board and Parent by the
beginning of the calendar year, then, until a new Budget has been approved by
both the Policy Board and Parent, the Budget for the prior year shall be deemed
to be adopted as the Budget for the then-current year except that (i) the Budget
for Clinic Expenses 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 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

 

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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, all of which shall be prepared and maintained in accordance with GAAP.
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. In addition, Service Company shall prepare or assist in the preparation of
any other financial statements or records as 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.

(ii) Sales and Use Taxes. Service Company and Provider acknowledge and agree
that to the extent that any of the services to be provided by Service Company
hereunder 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 agrees to 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 hereunder and that such amounts shall be a Clinic
Expense.

4.14 Reports and Records

(a) Dental Records. Service Company shall establish, monitor and maintain
procedures and policies for the timely creation, preparation, filing and
retrieval of all dental records generated by Provider in connection with
Provider’s provision of Dental Care; and, subject to applicable law, shall
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. Service Company shall timely create, prepare, and
file such additional reports and records as are reasonably necessary and
appropriate for Provider’s provision of Dental Care and shall analyze and
interpret such reports and records upon the reasonable request of Provider.

 

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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. Service Company shall provide Provider with
model agreements to document Provider’s employment, retention or other service
arrangements with such individuals. 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 services, and Service Company shall have no
authority whatsoever with respect to such activities.

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. Service
Company may also carry, at Service Company’s option and as a Clinic Expense, key
person life and disability insurance on any member or dentist employee of
Provider in amounts determined to be reasonable and sufficient by Service
Company. Service Company shall be the owner and beneficiary of any such
insurance.

4.17 License of Name and Marks. 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 hereunder, including without
limitation providing Dental Care to its patients (it being understood and agreed
that Service Company or one of its affiliates owns such names, marks and logos).

4.18 No Warranty. Provider acknowledges that Service Company has not made and
will not make 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 or
income to Provider.

 

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ARTICLE V

RESPONSIBILITIES OF PROVIDER

5.1 Organization and Operations. As a continuing condition of Service Company’s
obligations under this Agreement, 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 and maintain
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) maintain and use its best efforts to
enforce its articles or certificate of incorporation (or other instrument of
organization), bylaws, member control agreements, and other organizational
documents (hereafter in this Section 5.1 simply “organizational documents”) in
the respective forms provided to Service Company prior to execution of this
Agreement; (d) have at least one executive officer at the level of vice
president or above who is also an active practicing dentist employee of
Provider; (e) maintain and use its best efforts to enforce the written
employment agreements and independent contractor agreements described in
Section 5.2(a), below; and (f) not, without Service Company Consent, (i) amend
any of its employment agreements or organizational documents in any material
respect or waive any material rights thereunder, or (ii) engage in any
transaction constituting a merger, consolidation, reorganization, sale or
purchase of assets outside of the ordinary course of business, liquidation, or
dissolution. Provider hereby acknowledges that Service Company would not have
entered into this Agreement but for Provider’s covenant to maintain such
organizational documents and employment agreements, and 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 employment by Provider and who thereafter terminates his employment
agreement in violation thereof or whose employment agreement is terminated by
Provider for cause.

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. 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.

 

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(c) Paid Hours Reporting. Provider shall support the development and effective
operation by Service Company of a system to monitor and report hours of dental
service provided.

(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 hereunder, each dentist retained by Provider to provide Dental Care
must: (a) have and maintain a valid and unrestricted license to practice
dentistry in the State of Minnesota; 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. All specialty
Dental Care shall be provided by a dentist who is either board certified or
board eligible in that specialty or by another dentist licensed to provide such
specialty Dental Care operating under the general supervision of a dentist who
is either board certified or board eligible in that specialty.

5.4 Dental Care. Subject to Service Company’s responsibilities under §4.9 of
this Agreement, Provider shall ensure that dentists are available in sufficient
numbers as are necessary or appropriate to provide Dental Care to reasonably
meet the demand for such Dental Care. In addition, Provider shall provide
advice, input, and requests to Service Company for its consideration with
respect to the recruiting and staffing of dental hygienists and other licensed
or unlicensed non-dentist dental care personnel (including unlicensed dental
assistants and other clinical staff) necessary or appropriate to provide Dental
Care to reasonably meet the demand for such Dental Care. In the event that
dentists employed by, or members of, Provider are not available to provide
Dental Care coverage, Provider shall engage and retain dentists on a temporary
coverage basis, which dentists shall meet or exceed the qualifications required
for Provider’s Dental Care Professionals under this Agreement. All costs and
expenses associated with the retention of such temporary coverage shall be
Provider Expenses. With the assistance of the Service Company, Provider and the
dentists shall be responsible for scheduling dentist and non-dentist dental care
personnel coverage of all dental procedures. Provider shall cause all dentists
to exert their best efforts to develop and promote Provider in such a manner as
to ensure Provider is able to serve the diverse needs of the community. 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

 

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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. For purposes of
facilitating accreditation and other related processes and without limiting
Provider’s responsibilities under the preceding sentence, subject to
Section 3.3, Provider shall (i) develop and maintain a philosophy of practice
and a set of practice guidelines which are reasonably acceptable to the Policy
Board, and (ii) cause all personnel retained by it to abide by such philosophy
and guidelines at all times.

(d) Provider shall support the Risk Management Procedures implemented pursuant
to this Agreement, and shall take all actions related to such Risk Management
Procedures as may be reasonably requested by Service Company. Provider shall
cause all personnel retained by it to comply fully with such process at all
times.

(e) 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.

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

 

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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 such insurance policies shall (a) name Service Company as an additional
insured and with respect to policies provided by independent contractors under
the preceding sentence, name Provider as additional insured as well, and
(b) 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 date of execution of this Agreement,
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
with all new dentists employed or retained by Provider.

(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, 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) 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.

 

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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 to which the dentists associated
with Provider devote their full time and attention. Accordingly, Provider
further agrees as follows:

(a) During the Term, except for any Clinic or other office or facility covered
by 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 less than five percent (5%) 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,” Family Endodontics
Specialists,” and “Merit Dental Lab” 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.

 

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ARTICLE VI

CONFIDENTIALITY

6.1 Confidential and Proprietary Information. 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, or use, or permit or assist any person, firm, association,
organization, or entity to use, any such Confidential Information, excepting
only: (a) disclosures (i) required by law, as reasonably determined by the
disclosing Party or its legal counsel, or (ii) made on a confidential basis to
the disclosing Party’s shareholders, directors, officers, employees (limited to
those who need to know such Confidential Information), and legal, accounting,
and other professional advisors (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 Use of Practice Statistics. Notwithstanding Section 6.1, above, 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, 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.

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.

 

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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 and Service Company acknowledge and agree that the
compensation set forth in this Article is being paid by Provider to Service
Company in consideration of the substantial commitment being made by Service
Company hereunder and that such fee is fair and reasonable in all respects in
consideration of (a) the services performed by Service Company hereunder, and
(b) the capital being made available by Service Company. Service Company shall
be paid by Provider an annual Service Fee (determined on a calendar year basis)
equal to 89% of the Calculated Margin, which shall be calculated and be earned
and accrue daily, and shall be payable monthly.

7.4 Reasonable Value. Payment of the Service Fee is not intended to be and shall
not be interpreted or applied as permitting Service Company to share in
Provider’s fee for Dental Care or any other services, but is the Parties’
negotiated agreement as to the reasonable fair market value of the equipment,
contract analysis and support, other support services, purchasing, personnel,
office space, management, administration, strategic management, and other items
and services furnished by Service Company pursuant to this Agreement,
considering the nature and volume of the services required and the risks assumed
by Service Company. Provider and Service Company acknowledge that: (a) Service
Company’s administrative expertise will contribute great value to Provider’s
performance; (b) Service Company will incur substantial costs and business risks
in arranging for Provider’s use of each Clinic and in providing the equipment,
support services, personnel, marketing, office space, management,
administration, and other items and services that are the subject matter of this
Agreement; and (c) certain of such costs and expenses can vary to a considerable
degree according to the extent of Provider’s business and services. It is the
intent of the Parties that the Service Fee reasonably compensate Service Company
for the value to Provider of Service Company’s administrative expertise, given
the considerable business risk to Service Company in providing the items and
services that are the subject of this Agreement.

7.5 Payment. The amounts to be paid to Service Company under this Article shall
be 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. 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 which 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. Although
it is the intention of the Parties that Service Company purchase and thereby
become the owner of the accounts receivable of Provider, in the event such
purchase shall be ineffective or prohibited for any reason, Provider hereby

 

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grants to Service Company a security interest in the accounts receivable, to the
extent permitted by applicable law, and Provider shall cooperate with Service
Company and execute all documents which may be reasonably requested by Service
Company in connection with such security interest. 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.

ARTICLE VIII

TERM AND TERMINATION

8.1 Initial and Renewal Term. The Term of this Agreement shall be for an initial
period of 39 years beginning on the date of this Agreement, and shall renew
automatically for successive five-year periods thereafter unless and until
either Party gives notice to the other Party at least 120 days prior to the
expiration of the then-current term of its intent to terminate this Agreement at
the end of the then-current term or unless otherwise terminated as provided in
Section 8.2 of this Agreement.

8.2 Termination

(a) Termination By Service Company. Service Company may terminate this Agreement
immediately upon notice to Provider 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
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); or

(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.

 

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(b) Termination By Provider. Provider may terminate this Agreement immediately
upon notice to Service Company 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;

(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; or

(iii) A court of competent jurisdiction makes a final determination that Service
Company has materially breached a fiduciary duty owed to Provider.

Notwithstanding the foregoing, any termination by Provider under this section
shall require the affirmative vote of three-fourths of the then-outstanding
membership interests of Provider entitled to vote on such a matter.

(c) Termination by Agreement. Provider and Service Company may mutually agree to
terminate this Agreement at any time, such agreement to be in writing and signed
by both Parties.

(d) Legislative, Regulatory or Administrative Change. If (a) there is (i) 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 (ii) 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 clause (d), 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 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.

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 binding on the Parties and subject to the
then-applicable Commercial Arbitration Rules of the American Arbitration
Association. In any such 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 be either a certified public accountant or an attorney at law licensed to
practice in the State of Minnesota and who shall act as

 

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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.

All costs and expenses of arbitration shall be borne by the Parties as
determined by the arbitrator or arbitration panel, except that the fees of any
arbitrator on an arbitration panel who is selected individually by a Party shall
be borne separately by the Party appointing him; 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.

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
services provided 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 pertaining to Provider’s dental practice; 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.

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”);

(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;

 

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(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 that asset
which 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 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, above, upon the successful consummation of such closing.

 

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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 any
Party shall be in writing and shall be deemed given when delivered personally,
transmitted by facsimile (which is confirmed) to that Party at the facsimile
number for that Party set forth below, mailed by certified mail (return receipt
requested) to that Party at the address for that Party set forth below (or at
such other address for such Party as such Party shall have specified in notice
to the other Party), or delivered to Federal Express, UPS, or any similar
express delivery service for delivery to that Party at that address:

(a) If to Service Company:

                      PDHC, Ltd.

                      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

 

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(b) If to Provider:

 

  

Northland Dental Partners, PLLC

     

1717 Paramount Drive

     

Waukesha, WI 53186

      Attention:    James Ludke   

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

9.4 Execution of Documents. 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 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 a court to be invalid or
unenforceable, such 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.

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

 

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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 losses, liabilities, damages, demands,
claims, suits, actions, judgments, assessments, costs and expenses, including
without limitation interest, penalties, attorneys’ fees, any and all expenses
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation (collectively, “Damages”), asserted
against, imposed upon, or incurred or suffered by the Indemnified Parties,
directly or indirectly, as a result of or arising from: (i) any failure of any
representation or warranty of the Indemnifying Party in this Agreement to be
accurate and complete in all material respects when made; or (ii) 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.

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 Complete Agreement. This document (including its exhibits and all other
documents referred to herein, all of which are hereby incorporated herein by
reference) contains the entire agreement among 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.

 

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9.15 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.

9.16 Assignment. Provider may not assign this Agreement without the prior
written consent of Service Company, which consent may be withheld for any
reason. 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).

9.17 Successors. Subject to Section 9.16, above, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by and against the successors
and assigns of each Party.

9.18 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.

9.19 Interpretation. This Agreement supersedes the Original Agreement in its
entirety from and after the date of this Agreement; provided that this Agreement
shall not modify or otherwise affect any rights or obligations of the Parties
under the Original Agreement which are based upon acts or omissions occurring
prior to the date of this Agreement, which rights and obligations shall survive
the execution of this Agreement. If and to the extent any provision of this
Agreement conflicts with the obligations of either Northland or Service Company
under the Definitive Settlement Agreement dated February 29, 2008 among
Northland, Service Company, PDG, P.A., and Dental Specialists of Minnesota,
P.A., or any other agreement or document executed by either of them pursuant to
such Definitive Settlement Agreement, then that Party’s obligation to perform or
observe such provision of this Agreement shall be modified to the extent
necessary for that Party to be in compliance with such Definitive Settlement
Agreement or such other agreement or document.

 

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9.20 JURY TRIAL WAIVER. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH
PARTY HEREBY WAIVES ANY AND ALL RIGHTS 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
OR THE INITIAL AGREEMENT OR THE RELATIONSHIP ESTABLISHED PURSUANT TO THIS
AGREEMENT OR THE INITIAL AGREEMENT.

 

PROVIDER:     SERVICE COMPANY: NORTHLAND DENTAL PARTNERS, PLLC(1)     PDHC, LTD.
By:   /s/ James Ludke     By:   /s/ Gregory A. Serrao   James Ludke, DDS,
President       Gregory A. Serrao, Chairman

 

(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.

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 (provided
that Adjustments for any period beginning on or after the effective date of this
Agreement shall exclude adjustments which relate to (i) Dental Care that was
rendered prior to the effective date of this Agreement, (ii) Capitation Revenue
that was recorded prior to the effective date of this Agreement, or (iii) any
other revenue recorded prior to the effective date of this Agreement).

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 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;

 

A-1

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(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;

(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

 

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(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.

Confidential Information. The term “Confidential Information” shall mean, with
respect to a Party, all trade secrets, proprietary data, and other information
(whether written or oral) of a confidential nature relating directly or
indirectly to that Party 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 Party is obligated to treat as confidential
pursuant to any law, agreement, or course of dealing by which that Party is
bound, whether or not such Confidential Information is disclosed or otherwise
made available pursuant to this Agreement. Confidential Information shall also
include the terms and provisions of this Agreement and any transactions or
documents executed by the Parties pursuant to this Agreement. Confidential
Information shall not include any information which (a) is or becomes known or
available to the public and did not become so known through the breach of this
Agreement by either Party, (b) has been lawfully acquired from a third party
without any breach of any confidentiality restriction, or (c) is already in the
possession of the receiving Party at the time it was disclosed to the receiving
Party by the disclosing Party.

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.

 

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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 “practice of dentistry” under the laws and regulations of the
state in which such procedures, operations, and services are performed and which
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 (as that term is defined in Section 2.5)
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 which (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.

 

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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 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.

Preliminary Settlement Agreement. The term “Preliminary Settlement Agreement”
shall mean the Settlement Agreement dated December 26, 2007, among PDG, P.A.,
Dental Specialists of Minnesota, P.A., Service Company, Parent, and Provider.

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
(as defined in Section 2.5) 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. 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 the 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, 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 made under Section 7.2).

 

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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.

Representatives. The term “Representatives” shall mean a Party’s officers,
directors, managers, employees, and other agents or representatives, and
attorneys, accountants, and other professional advisors.

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 for Provider by Service Company as set forth
in this Agreement, including without limitation the provision of equipment,
supplies, support services, non-dentist 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 periods of
this Agreement as described in Section 8.1, subject to termination pursuant to
Section 8.2.

 

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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

  

 

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