MANAGEMENT AGREEMENT
THIS AGREEMENT is made this 1st day of January, 1998, by and between
MEDI-CEN MANAGEMENT, Inc., a Maryland corporation, having its principal place of
business at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, Chevy Chase, Maryland (the
"Management Company"), and WASHINGTON NEUROLOGY ASSOCIATES, L.L.P., a Maryland
limited liability partnership, having its principal place of business at ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Partnership").
WHEREAS, the Partnership has been formed under the laws of the State of
Maryland to render medical and related services to patients of the Partnership;
WHEREAS, the Partnership desires to operate a medical practice at ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, Chevy Chase, Maryland, and at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, and/or at other locations (the "Practice") and to obtain
certain management and consulting services for the Practice from the Management
Company; and
WHEREAS, the Management Company is ready, willing, and able to provide
such management and consulting services to the Partnership in connection with
the Practice.
NOW THEREFORE, in consideration of the mutual premises and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Representations and Warranties.
1.1. Representations and Warranties of the Management Company. The
Management Company hereby represents and warrants to the Partnership that at all
times during the term of this Agreement, the Management Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Maryland.
1.2. Representations and Warranties of the Partnership The Partnership
hereby represents and warrants to the Management Company that at all times
during the term of this Agreement:
(a) The Partnership is a limited liability partnership organized,
validly existing and in good standing under the laws of the State of
Maryland and is duly licensed and qualified under all applicable laws and
regulations to engage in the practice of medicine and related services in
the State of Maryland.
(b) Each of the professionals employed or engaged by the Partnership
to render services at the Practice is duly licensed, certified, or
2
registered, as applicable, to render the services for which he or she has
been employed or engaged by the Partnership.
(c) The Partnership will establish and enforce procedures to ensure
that proper and complete medical records are maintained regarding all
patients of the practice as required by applicable law and by the rules and
regulations of any third party payors with which the Partnership may
contract or affiliate. To the extent permitted by law, the Partnership
shall provide access to the Management Company to such books and records of
the Partnership as may be necessary to carry out the terms, conditions, and
purposes of this Agreement.
2. General Responsibilities of the Management Company. The Management
Company shall have responsibility for those certain management and consulting
services described below, exclusive of any medical, professional and ethical
aspects of the Practice. The Management Company shall be the exclusive provider
to the Partnership of such management and consulting services. The Partnership
agrees that is shall not obtain any management or consulting services from any
source other than the Management Company, except with the prior written consent
of the Management Company.
2.1. Management Services. The Management Company shall provide, or
arrange for the provision of, management and administrative services for the
Practice, including but not limited to the following:
3
(i) business planning, including recommending capital, operating
and cash flow budgets;
(ii) financial management, including causing annual financial
statements to be prepared for the Partnership and providing to the
Partnership the data necessary for the Partnership to prepare and file
its tax returns and make any other necessary governmental filings;
(iii) bookkeeping, accounting, data processing and other computer
based information services;
(iv) maintenance of medical records;
(v) administering or causing to be administered, on behalf and in
the name of the Partnership, any welfare, benefit or insurance plan or
arrangement of the Partnership;
(vi) human resources management, including recruitment of all
personnel, training of all nonphysician personnel, and the management
of all non-clinical staff;
(vii) billing and collection, accounts receivable and accounts
payable processing, on behalf and in the name of the Partnership, in
addition to billing and collection services set forth under the
Billing Agent Agreement attached hereto as Exhibit A;
4
(viii) utilization, cost and quality management systems;
(ix) managed care contracting services, including:
(a) evaluating, negotiating and administering, on behalf and
in the name of the Partnership, agreements with employers,
multi-employer welfare trusts, third party administrators and
other third parties, including third party payors, managed care
entities, institutional health care providers and vendors;
(b) developing and marketing bundled health services;
(c) developing fee schedules and setting charges for
risk-sharing payor contracts;
(d) developing risk-sharing arrangements for payor
contracts;
(e) developing clinical protocols and pathways;
(f) credentialing support services consisting of application
processing and information verification;
(g) receiving and allocating payments from payors in
accordance with payor contracts and the rules, regulations and
policies approved by the Management Company;
(h) administering risk pools, withhold funds and
incentive/bonus arrangements;
5
(i) data analysis, including tracking and reporting to the
Partnership on a regular basis the performance of the Partnership
and its physician employees under payor contracts;
(j) risk assumption modeling;
(k) processing prior approval requirements and verifying
member eligibility;
(l) implementing utilization management and quality
assurance procedures, and procedures for determining medical
necessity and compliance with applicable clinical guidelines; and
(m) implementing patient grievance procedures.
Such managed care contracting services shall be performed by Manager
with respect to payor contracts to the extent applicable to such contracts. The
parties recognize that the Management Company's ability to perform any of the
foregoing functions may be limited by the nature and quality of information
provided by, and the systems of, payors. In such cases, the Management Company
will use its best efforts to perform such functions within such limitations.
(x) using best efforts, on behalf and in the name of the Partnership,
to obtain malpractice and other agreed upon insurance coverages;
6
(xi) advertising, marketing and promotional activities;
(xii) arranging for necessary legal services except with respect to
any legal dispute between the Partnership and the Management Company;
(xiii) performing credentialing support services such as application
processing and information verification; and
(xiv) centralized group purchasing, including, at the request of the
Partnership, negotiating and arranging for the Partnership to purchase
medical and non-medical inventory and supplies and other goods and
services, on behalf and in the name of the Partnership, which the
Management Company deems to be necessary for the efficient operation of the
Practice.
2.2. Staff. Subject to the requirements of applicable federal and state
law, the Management Company shall, on the terms and conditions specified in this
Agreement, employ or engage and make available to the Practice, on a
non-exclusive basis, sufficient non-Physician professional and administrative
staff (hereinafter referred to collectively as "Staff"; Staff members who are
licensed, registered or certified by the state to perform professional services
are hereinafter referred to collectively as "Professional Staff") as may be
reasonably necessary to operate the Practice in an efficient manner and meet the
patient care needs of the Practice in a timely manner, during the hours of
operation of the Practice by the Partnership. All Staff assigned by the
Management Company to the Practice shall be subject to the Partnership's
clinical supervision and approval, which approval shall not be unreasonably
withheld. The hiring, firing, disciplining, and determination of compensation
7
and benefits of such Staff in connection with services provided to or on behalf
of the Practice shall be within the sole discretion of the Management Company;
provided, however, that the Management Company shall, at the Partnership's
written request, remove from the Practice any Staff member who does not perform
to the reasonable satisfaction of the Partnership.
2.3 Consulting Services. The Management Company shall:
(i) Identify and investigate potential sites for the establishment of
medical malls by the Partnership;
(ii) Identify individual physicians for employment by the Partnership;
(iii) Identify physician practices for acquisition by the Partnership;
(iv) Where possible, manage practices identified for acquisition by
the Partnership prior to their acquisition;
(v) Prepare financial projections for new locations and acquisition
targets;
8
(vi) Perform financial analyses on proposed new locations and the
business of acquisition targets;
(vii) Assist in the determination of the mix of specialties to be
available at each medical mall;
(viii) Perform market analyses and needs assessments to assist in the
determination of appropriate mall locations and services to be offered
therein; and
(ix)Provide consulting services on an as needed basis with respect to
each medical mall established or acquired by the Partnership for a period
of up to nine (9) months following establishment or acquisition.
2.4 Deposit of Net Practice Revenues. To the extent permitted by law,
and subject to paragraph 2.4.1 herein, during the term of this Agreement, all
Net Practice Revenues, as defined herein, shall be deposited directly into a
bank account at a bank mutually agreed upon by the parties (the "Bank"), from
which the Management Company shall have the sole right to make withdrawals (the
"Account"). The Management Company shall maintain its accounting records in such
a way as to clearly segregate Net Practice Revenues from other funds of the
Management Company. The Partnership hereby appoints the Management Company as
its true and lawful attorney-in-fact to deposit in the Account all Net Practice
Revenues collected and to make withdrawals from the Account. The Partnership and
the Management Company hereby agree to execute from time to time such documents
9
and instructions as shall be required by the Bank and mutually agreed upon to
effectuate the foregoing provisions and to extend or amend such documents and
instructions with respect to payment for the Management Services during any
extended term of this Agreement.
For purposes of this Agreement, "Net Practice Revenues" shall mean all
revenue, calculated on a cash basis (after taking into account adjustments for
refunds and set-offs), collected by or on behalf of the Practice, the
Partnership or their respective employees as a result of professional medical
services personally furnished to patients and other fees or income generated by
such persons in their capacity as members of the Professional Staff (but
excluding any revenues, fees or income generated by or on behalf of any
Professional Staff Members as a result of or in connection with activities of
such Professional Staff member in which Partnership or the other Professional
Staff members, as a group, would have no financial interest under the terms of
their Physician Employment Agreements with the Partnership, as amended from time
to time, and that are not billed, collected or otherwise administered through
the Partnership or the Practice), whether rendered in an inpatient or outpatient
setting and whether rendered to health maintenance organization, preferred
10
provider organization, Medicare, Medicaid or other patients, including, but not
limited to, payments received under any capitation arrangement. The term "Net
Practice Revenues" shall include any ancillary services revenues provided at the
Practice offices.
2.4.1 With respect to Medicare and Medicaid services provided by the
Partnership and its Professional Staff and with respect to other services for
which payments cannot be assigned to the Management Company under applicable law
or payor contracts, the Management Company shall ▇▇▇▇ or collect for such
services as agent for the Partnership pursuant to the Billing Agent Agreement
attached hereto as Exhibit A (the "Billing Agent Agreement"). With respect to
funds deposited in the Practice Account, as defined in the Billing Agent
Agreement, the Partnership shall, effective as of the date hereof, direct
Account Bank, as defined in the Billing Agent Agreement, in writing to transfer
all amounts in the Practice Account at the end of each business day of the
Account Bank to an account designated by the Management Company (the "Manager's
Account"). The Partnership agrees that it will not take any action that
interferes with the transfer of funds from the Practice Account to the Manager's
Account as provided in the Billing Agent Agreement nor will the Partnership or
its agents remove, withdraw or authorize the removal or withdrawal of any funds
11
from the Practice Account for any purpose except to accomplish the transfer of
funds provided pursuant to the Billing Agent Agreement.
2.4.2 The Partnership shall, and shall cause its Professional Staff to,
promptly endorse and deliver to Manager all payments, notes, checks, money
orders, insurance proceeds, remittances and other evidences of indebtedness or
payment received by the Partnership or its Professional Staff, with respect to
all accounts, contract rights, instruments, documents, or other rights to
payment form time to time arising from the rendering of medical services by the
Partnership and its Professional Staff otherwise relating to the business of the
Partnership, together with any guarantees thereof or securities therefor which
are generated during the term of this Agreement.
2.4.3 The Partnership and its Professional Staff hereby authorize the
Management Company to initiate legal proceedings in the name of the Partnership
to collect any accounts and monies owed to the Partnership and its Professional
Staff as creditors under any contract or in connection with the rendering of any
service hereunder, and to contest adjustments and denials by governmental
agencies (or their fiscal intermediaries) as third-party payors. All adjustments
made for uncollectible or doubtful accounts, charity care, professional
12
courtesies and other activities that do not generate a collectible fee shall be
determined by the Management Company in its reasonable judgment for purposes of
financial reporting.
2.5 Non-Operational Expenses. The Management Company shall be solely
responsible for the payment of all Management Company Expenses, defined as those
expenses that are not expressly specified as Operational or Practice Expenses,
as those terms are defined herein. The Management Company shall pay all
Management Company Expenses as they fall due; provided, however, that the
Management Company may contest in good faith any claimed Management Company
Expenses as to which there is any dispute regarding the nature, existence or
validity of such claimed Management Company Expenses.
2.6 Further Obligations of the Management Company. The Management
Company shall cause all work required to be performed pursuant to the terms of
this Agreement to be done in a good and professional manner.
3. Responsibilities of the Partnership
3.1. Professional Services. During the term of this Agreement, the
Partnership shall be solely responsible for all aspects of the medical,
diagnostic, therapeutic and related professional services delivered by the
Practice and for the selection, training, professional direction, supervision
13
and employment or engagement of all physicians. The hiring, firing,
credentialing, disciplining, and determination of compensation and benefits of
such physicians shall be within the sole discretion of the Partnership.
3.2. Time Commitment. The Partnership shall conduct the Practice
fifty-two (52) weeks per year, according to a schedule mutually determined by
the Management Company and the Partnership. The Partnership shall provide
physicians in adequate numbers to meet all of the needs, including emergency
needs, of patients of the Practice in a timely and responsive manner.
3.3. Quality of Service. The Partnership shall establish and enforce
procedures to assure the appropriateness, necessity, consistency, quality, cost
effectiveness and efficacy of all professional services provided to patients of
the Practice. The Partnership shall require each of its physicians, and the
Management Company shall require each member of its Professional Staff, to
participate in and cooperate with any utilization management, quality assurance,
risk management, patient care assessment, continuous quality improvement,
accreditation or other similar program or study to review the performance of the
14
physicians and such Professional Staff as may be required by the Partnership,
governmental agencies, professional review organizations, accrediting bodies, or
third party payors or health care entities with which the Partnership may
contract or affiliate.
3.4. Billing and Collection.
(a) The Partnership, or the Partnership's authorized billing agent,
shall ▇▇▇▇ to and collect from patients, third party payors and others for
all services rendered by the Partnership or any physician or member of the
Professional Staff in connection with the Practice. The Partnership hereby
appoints the Management Company as its agent and attorney-in-fact for
purposes of billing and collecting, in the Partnership's name and on the
Partnership's behalf, for all such professional services rendered in
connection with the Practice, in accordance with this Agreement and with
the Billing Agent Agreement attached hereto as Exhibit A. Subject to the
Billing Agent Agreement, the Management Company shall issue bills for all
such services within thirty (30) days after such services are rendered, and
the Management Company shall use its best, good faith and diligent efforts
to collect for all such services as promptly as may be reasonably
practicable.
(b) The Partnership shall provide written notice to the Management
Company at least thirty (30) days in advance of any proposed change in its
charges. If the Management Company objects in writing to any such proposed
15
revised charge the Partnership shall consult with the Management regarding
the appropriate level of such charge before said charge shall go into
effect.
3.5 Practice Expenses. The Partnership shall be solely responsible for
the payment of all Practice Expenses, as defined herein. The Partnership shall
pay all Practice Expenses as they fall due; provided, however, that the
Partnership may contest in good faith any claimed Practice Expenses as to which
there is any dispute regarding the nature, existence or validity of such claimed
Practice Expenses.
As used in this Agreement, "Practice Expenses" shall mean (a) any
federal, state or local income taxes of the Practice; (b) any salaries,
benefits, or other direct costs with respect to the Professional Staff,
including without limitation, workers' compensation, retirement plan
contributions, health, disability and life insurance premiums, payroll taxes or
compensation paid or payable to physician independent contractors (or other
independent contractors who provide medical services to patients); (c) physician
licensure fees, board certification fees, hospital staff privilege dues, and
costs of membership in professional associations for Professional Staff members;
(d) costs of continuing professional education for Professional Staff members;
(e) insurance premiums for policies of malpractice insurance for the Practice
and Professional Staff members; deductibles under such policies of malpractice
16
insurance; any and all costs and expenses incurred with respect to claims under
such policies of malpractice insurance; liability judgments assessed against the
Practice or Professional Staff members in excess of policy limits; and (f)
direct personal expenses of Professional Staff members of a kind that the
Practice has historically charged to its Professional Staff, e.g., cellular
phone expenses, paging system expenses.
3.6 Further Obligations of the Partnership In order for the Management
Company to perform its duties as described herein, the Partnership shall:
(i) Provide full information regarding its requirements for expansion
and acquisition;
(ii) Designate a representative who shall be fully acquainted with the
Partnership's plans and has authority to render decisions promptly and
furnish information expeditiously; and
(iii) In the event that the Partnership becomes aware of any problems
in any sites or with any acquisition targets, give prompt written notice
thereof to the Management Company.
4. Financial Terms.
(a) Payment of Operational Expenses. The Management Company shall pay,
on behalf and in the name of the Partnership, all Operational Expenses, as
defined herein, as they fall due, out of Net Practice Revenues; provided,
however, that the Management Company may, in the name of and on behalf of the
Partnership, contest in good faith any claimed Operational Expenses as to which
there is any dispute regarding the nature, existence or validity of such claimed
17
Operational Expenses. For purposes of this Agreement, "Operational Expenses"
shall mean the operating and non-operating expenses incurred by the Management
Company in performing its duties hereunder, including, but not limited to: (a)
salaries, benefits, and other direct costs (including, without limitation,
professional liability insurance) of all Staff of the Partnership (but not
including Professional Staff); (b) obligations under leases or subleases for
space and equipment used by the Practice; (c) personal property and intangible
taxes assessed against assets used by the Clinic; (d) charitable contributions
budgeted and approved by the Management Company and the Partnership; (e)
depreciation and amortization; (f) interest expenses; (g) costs and expenses
incurred in recruiting physicians and other Practice personnel; (h) utility
expenses relating to the medical office space, and all other costs relating to
the medical office space, including without limitation, costs of repair,
maintenance, telephone, electric, gas and water utility expenses, general
liability insurance, security, worker's compensation for Management Company
employees, normal janitorial services, refuse disposal, and medical and office
supplies, including pharmaceuticals; (i) actual costs incurred with respect to
billing and collecting; (j) premiums for malpractice and other agreed upon
insurance coverage; and (k) obligations of the Partnership under contracts,
18
including without limitation, that certain contract by and between the
Partnership and Medi-Cen Corporation of Maryland, Inc., dated March 24, 1997,
and any contracts by and between the Partnership and Health Quality Management,
Inc.
(b) Compensation to Management Company. As compensation for services
rendered under this Agreement, the Partnership shall pay to the Management
Company sixty percent (60%) of the Revenue Margin, as defined herein, per
calendar year (the "Management Fee"). The Partnership shall retain the remaining
Revenue Margin. Notwithstanding any other provision of this Agreement, the
Management Fee shall in no event be less than Five Hundred Thousand Dollars
($500,000) per annum (the "Management Fee Floor"), nor exceed a per annum amount
equal to the sum of (1) the product of the number of new Medical Malls
established during the then current year of this Agreement and Five Hundred
Thousand Dollars ($500,000) (the "Management Fee Cap"), and (2) the product of
the number of existing Medical Malls maintained during the then current year of
this Agreement and One Million Dollars ($1,000,000). At such time that Net
Practice Revenues reach $__________, and upon each $____________ increase in Net
Practice Revenues thereafter, the parties shall have the right to renegotiate
the Management Fee, the Management Fee Floor, and the Management Fee Cap to
appropriately reflect the fair market value of management and consulting
services provided by Manager. In the event that the Management Cap is reached in
any year of this Agreement, the Management Company shall remit to the
Partnership any remaining Revenue Margin. In the event that the Management Fee
19
Floor is not reached in any year of this Agreement, the Partnership shall pay to
the Management Company the shortfall. For purposes of this Agreement, "Revenue
Margin" shall mean the amount equal to Net Practice Revenues less all
Operational Expenses.
(c) Draws. Following the end of each month, the Management Company
shall estimate such month's Net Clinic Revenues by multiplying a Historical
Collection Percentage, as defined herein, by such month's gross production. For
purposes of this Agreement, the "Historical Collection Percentage" shall be
determined by averaging the collection percentages for the immediately preceding
six (6) months. Operational Expenses for such month shall then be subtracted
from such estimated Net Clinic Revenues for such month, resulting in an
estimated Revenue Margin, as defined herein. The Management Company shall remit
to the Partnership forty percent (40%) of such estimated Revenue Margin by the
20
fifteenth (15th) day of the following month and shall retain any remaining
amounts as a draw on its Management Fee.
(d) Reconciliation. Within ninety (90) days after the end of each
calendar quarter, the Management Company will reconcile the amounts retained by
the Management Company as draws under subsection (c) above with the actual Net
Clinic Revenues attributable to the gross production for such quarter, and shall
determine the actual Revenue Margin. In the event that the amounts retained by
the Management Company as draws under subsection (c) above are less than sixty
percent (60%) of the actual Revenue Margin for such quarter, the Partnership
shall pay to the Management Company the shortfall. In the event that the draws
paid under subsection (c) above are in excess of sixty percent (60%) of the
actual Revenue Margin for such quarter, the Management Company shall remit to
the Partnership the overdraft.
(e) Fair Market Value of Services Rendered. The Management Fee has been
determined by the parties to equal the fair market value of the consulting,
administrative and management services furnished by the Management Company
hereunder, without taking into account the proximity of the Premises to any
source of referrals, or the volume or value of any referrals of business from
the Management Company (or its affiliates) to the Partnership, or from the
21
Partnership to the Management Company (or its affiliates), that is reimbursed
under any governmental or private health care payment or insurance program.
(f) Arm's Length Transaction. The Management Fee paid by the
Partnership to the Management Company hereunder has been determined by the
parties through good-faith and arm's length bargaining, and consistent with
industry practices. No amount paid hereunder is intended to be, nor shall it be
construed to be, an inducement or payment for referral of, or recommending
referral of, patients by the Partnership to the Management Company (or its
affiliates) or by the Management Company (or its affiliates) to the Partnership.
In addition, the Management Fee charged hereunder does not include any discount,
rebate, kickback, or other reduction in charge, and the Management Fee charged
hereunder is not intended to be, nor shall it be construed to be, an inducement
or payment for referral, or recommendation of referral, of patients by the
Partnership to the Management Company (or its affiliates) or by the Management
Company (or its affiliates) to the Partnership.
5. Regulatory Matters.
(a) The Partnership's physicians and the Professional Staff shall at
all times be free, in their sole discretion, to exercise their
professional/medical judgment on behalf of patients of the Partnership. No
provision of this Agreement is intended, nor shall it be construed, to permit
the Management Company to affect or influence the professional/medical judgment
of any member of the Partnership's Professional Staff. To the extent that any
act or service required or permitted of the Management Company by any provision
22
of this Agreement may be construed or deemed to constitute the practice of
medicine, the ownership or control of a medical practice, or the operation of a
medical or health care facility, said provision of this Agreement shall be void
ab initio and the performance of said act or service by the Management Company
shall be deemed waived by the Partnership.
(b) The parties agree to cooperate with one another in the fulfillment
of their respective obligations under this Agreement, and to comply with the
requirements of law and with all ordinances, statutes, regulations, directives,
orders, or other lawful enactments or pronouncements of any federal, state,
municipal, local or other lawful authority applicable to the Practice, and of
any insurance company insuring the Premises or the parties against liability for
accident or injury in or upon the Premises.
6. Insurance.
6.1. General Comprehensive Liability Insurance. During the term of this
Agreement, the Management Company shall obtain and maintain at its own expense a
comprehensive general liability insurance policy and such other insurance as may
23
be required, in such amounts, with such coverages and with such companies as the
Management Company may reasonably determine.
6.2. Equipment Insurance. The Management Company shall cause to be
carried and maintained insurance against all risks of physical loss or damage to
the Equipment in an amount not less than the original purchase price or the
replacement cost with like kind and quality at the time of loss, with such
companies and as the Management Company shall reasonably determine.
6.3. Malpractice Insurance. During the term of this Agreement, the
Management Company shall use its best efforts to obtain and maintain, at the
Partnership's expense, professional liability insurance covering the
Partnership, the physicians and each Professional Staff member, with limits of
$1 million per occurrence and $3 million in the aggregate. In the event the
Partnership has a "claims made" form of insurance in effect at any time during
the term of this Agreement, the Management Company shall obtain full "tail"
coverage to cover any event that may have occurred during the term of this
Agreement. The Partnership shall provide to the Management Company any
information with respect to the Partnership or the Physicians necessary for the
Management Company to secure such professional liability insurance.
24
7. Indemnification. Except to the extent paid from the proceeds of
available insurance, each party (and its affiliates) agrees to indemnify and
hold the other party (and its affiliates) harmless against any loss, cost, suit,
claim, action, cause of action, damage, obligation, contract, demand, liability,
judgment, verdict, settlement or expense (including reasonable attorney's and
other consultancy fees and court costs) arising out of any act or omission of
the indemnifying party, its employees, agents or affiliates that occurs in
connection with this Agreement.
8. Non-Solicitation. The Partnership agrees, and shall cause its
employees to agree, not to solicit the employment of, or to employ, any employee
of the Management Company or its affiliates, including but not limited to any
member of the Staff provided by the Management Company to the Partnership
hereunder, during the term of this Agreement, and for a period of one (1) year
from the date of termination or expiration of this Agreement.
9. Non-Compete. During the term of this Agreement, the Partnership and
each of the physicians employed or engaged by the Partnership shall not, without
the express written consent of the Management Company, directly or indirectly,
in whole or in part, own, manage, operate, join, control, participate in the
ownership, management, operation or control of, contract with, be employed by,
or be connected with in any manner, any business engaged in the same or similar
25
activities engaged in by the Management Company or the Partnership, or that
directly or indirectly competes with the Management Company or the Partnership.
If any part of paragraph 8 or 9 of this Agreement should be determined
by a court of competent jurisdiction to be unreasonable in nature, duration,
geographic area, or scope, then this Agreement is intended to and shall extend
only for such period of time, in such area and with respect to such activity, as
is determined by said court to be reasonable.
10. Disclosure of Information. The Partnership recognizes and
acknowledges that all records, files, reports, protocols, policies, manuals,
data bases, processes, procedures, computer systems, materials and other
documents used by the Management Company (or its affiliates) in rendering
services hereunder, or relating to the operations of the Management Company (or
its affiliates), belong to and shall remain the property of the Management
Company , and constitute proprietary information and trade secrets that are
valuable, special, and unique assets of the Management Company's business. The
Partnership shall not, and shall assure that each of its physicians shall not,
during or after the term of this Agreement, disclose any proprietary information
26
or trade secrets of the Management Company (or its affiliates) to any other
firm, person, corporation, association, or other entity for any reason or
purpose whatsoever, without the written consent of or its respective affiliate.
11. Enforcement. The Partnership agrees that the covenants set forth in
paragraphs 8, 9 and 10 are reasonable in nature, duration and geographical
scope. The Partnership further acknowledges that any violation of those
covenants will cause the Management Company irreparable damage, which a monetary
award would be inadequate to remedy, and that a court or arbitrator of competent
jurisdiction may, in addition to monetary awards, enjoin any breach of and
enforce such covenants by temporary restraining order, and preliminary and
permanent injunctive relief. If a court or arbitrator of competent jurisdiction
determines that any of the covenants in paragraphs 8, 9 and 10 is unreasonable
in nature, duration or geographic scope, then the Partnership agrees that such
court or arbitrator shall reform such covenant so that such covenant is
enforceable to the maximum extent permitted by law for a covenant of that
nature, and such court shall enforce the covenant to that extent.
12. Effective Date; Term and Termination.
(a) This Agreement shall be effective January 1, 1998, provided that
the Management Company has completed a successful Initial Public Offering (a
"Successful IPO"), as defined herein, by such date, or upon such later date that
27
the Management Company completes a Successful IPO (the "Effective Date"). For
purposes of this Agreement, a "Successful IPO" shall mean ________________. .The
term of this Agreement shall be for thirty (30) years commencing on the date
first written above, unless sooner terminated as set forth herein, and shall
automatically renew for successive five (5) years terms unless either party
gives the other at least ninety (90) days prior written notice of its intention
not to renew prior to the expiration of the then current term.
(b) Either party may terminate this Agreement immediately upon the
occurrence of any of the following events with regard to the other party: (i)
the making of a general assignment for the benefit of creditors; (ii) the filing
of a voluntary petition or the commencement of any proceeding by either party
for any relief under any bankruptcy or insolvency laws, or any laws relating to
the relief of debtors, readjustment of indebtedness, reorganization, composition
or extension; (iii) the filing of any involuntary petition or the commencement
of any proceeding by or against either party for any relief under any bankruptcy
or insolvency laws, or any laws relating to the relief of debtors, readjustment
of indebtedness, reorganization, composition or extension, which such petition
28
or proceeding is not dismissed within ninety (90) days of the date on which it
is filed or commenced; or (iv) suspension of the transaction of the usual
business of either party for a period in excess of thirty (30) days.
(c) The Management Company may terminate this Agreement immediately
upon written notice to the Partnership of any breach of the Partnership Interest
Transfer Restriction Agreement between the Partnership and the partners of the
Partnership.
(d) The Management Company may terminate this Agreement immediately
upon written notice to the Partnership of any breach of paragraph 9 of this
Agreement.
(e) The Management Company may terminate this Agreement at any time,
with or without cause, by giving the Partnership ninety (90) days' prior written
notice; provided, however, that if this Agreement is terminated pursuant to this
paragraph, the parties may not enter into a substantially similar management
agreement within __ days of such termination.
(f) The Partnership may terminate this Agreement upon one year's prior
written notice to the Management Company in the event of a material breach by
the Management Company of any material term or condition hereof, if such breach
is not cured to the reasonable satisfaction of the Partnership within one year
after the Partnership has given notice thereof to the Management Company.
29
(g) Upon termination or expiration of this Agreement by either party,
the Partnership shall pay the Management Company any amounts owed to the
Management Company under paragraph 4 hereof as of the date of termination or
expiration.
(h) Upon termination or expiration of this Agreement, the Partnership
shall return to the Management Company any and all property of Management
Company that may be in the Partnership's possession or under the Partnership's
control.
13. Arbitration.
Any disputes arising under this Agreement or any breach of this
Agreement, shall be determined by arbitration in accordance with the rules of
the American Arbitration Association ("Association"), then in effect, by a
single arbitrator selected by mutual agreement of the parties or, if the parties
are unable to agree on an arbitrator, by the Association; provided that this
paragraph shall not restrict the right of either party to institute a legal
proceeding to enable such party to obtain temporary injunctive relief during the
pendency of any such arbitration. A determination of the dispute by the
arbitrator shall be final and binding on the parties to the extent permitted by
law. The cost of the arbitration, other than attorneys or other consultancy
fees, shall be borne equally by the parties.
30
14. Status of Parties. In the performance of the work, duties and
obligations under this Agreement, it is mutually understood and agreed that each
party is at all times acting and performing as an independent contractor with
respect to the other and that no relationship of Partnership, joint venture or
employment is created by this Agreement.
15. Force Majeure. Neither party shall be deemed to be in default of
this Agreement if prevented from performing any obligation hereunder for any
reason beyond its control, including but not limited to, Acts of God, war, civil
commotion, fire, flood or casualty, labor difficulties, shortages of or
inability to obtain labor, materials or equipment, governmental regulations or
restrictions, or unusually severe weather. In any such case, the parties agree
to negotiate in good faith with the goal of preserving this Agreement and the
respective rights and obligations of the parties hereunder, to the extent
reasonably practicable. It is agreed that financial inability shall not be a
matter beyond a party's reasonable control.
16. Notices. Any notices to be given hereunder by either party to the
other shall be deemed to be received by the intended recipient (a) when
delivered personally, (b) the day following delivery to a nationally recognized
overnight courier service with proof of delivery, or (c) three (3) days after
mailing by certified mail, postage prepaid with return receipt requested, in
31
each case addressed to the parties at the addresses set forth below or at any
other address designated by the parties in writing:
If to the Management Company:
Medi-Cen Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Chevy Chase, Maryland 20815
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇
If to the Partnership:
Washington Neurology Associates, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
17. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the subject matter of this Agreement. This Agreement may not be changed
orally, and may only be amended by an agreement in writing signed by both
parties.
18. No Rights in Third Parties. This Agreement is not intended to, nor
shall it be construed to, create any rights in any third parties, including,
without limitation, in any Physicians employed or engaged by the Partnership in
connection with the Practice.
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland.
32
20. Severability. If any provision of this Agreement shall be held by a
court of competent jurisdiction to be contrary to law, that provision will be
enforced to the maximum extent permissible, and the remaining provisions of this
Agreement will remain in full force and effect, unless to do so would result in
either party not receiving the benefit of its bargain.
21. Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to that term or any other term of
this Agreement.
22. Rights Unaffected. No amendment, supplement or termination of this
Agreement shall affect or impair any rights or obligations that shall have
theretofore matured hereunder.
23. Interpretation of Syntax. All references made and pronouns used
herein shall be construed in the singular or plural, and in such gender, as the
sense and circumstances require.
24. Successors. This Agreement shall be binding upon and shall inure to
the benefit of the parties, their respective heirs, executors, administrators
and assigns.
25. Further Actions. Each of the parties agrees that it shall hereafter
execute and deliver such further instruments and do such further acts and things
as may be required or useful to carry out the intent and purpose of this
Agreement and as are not inconsistent with the terms hereof.
33
26. Assignability. The Partnership may not assign this Agreement except
with the prior written approval of Management Company. Management Company may
assign this Agreement after written notice to the Partnership.
IN WITNESS WHEREOF, and intending to be legally bound, the parties
hereto affix their signatures below and execute this Agreement under seal.
WASHINGTON NEUROLOGY ASSOCIATES, L.L.P.
By: __________________________ Date: _______________________
MEDI-CEN MANAGEMENT, INC.
By: __________________________ Date: _______________________
34
