MANAGEMENTAND MEDICAL SERVICES AGREEMENT

 

 

THIS MANAGEMENT AND MEDICAL SERVICES AGREEMENT, (the “Agreement”) is made and entered into on this 4th day of May, 2005 to take effect on the 1st day of September, 2005, by and between Northwest Arkansas Primary Care Physicians, P.A., an Arkansas professional association (the “Practice”) and WellQuest Medical & Wellness Centers of Northwest Arkansas, Inc. d/b/a WellQuest, an Arkansas corporation (“WellQuest”).

 

 

WellQuest intends to operate centers (the “WellQuest Centers”) throughout northwestern Arkansas that provide one-stop primary healthcare and wellness services.  WellQuest plans to establish the initial WellQuest Center in Bentonville, Arkansas. Each WellQuest Center will consist of a medical spa, a retail health and wellness shop, and related health and wellness services as WellQuest determines are necessary or desirable.

 

Each WellQuest Center will be located in the same building as and adjacent to a physician practice, so that a patient visiting a WellQuest Center will have a full range of primary care healthcare and preventative and wellness services available to him or her.

 

WellQuest desires to engage Practice to serve as the practice to provide medical direction to the WellQuest Center(s), and Practice wishes to engage WellQuest to provide certain management services to it, upon the terms and conditions as follows.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

 

 

1.1.                      Engagement.  Practice hereby engages WellQuest to manage Practice, and WellQuest hereby agrees to serve as manager of Practice. WellQuest hereby engages Practice, and Practice agrees to be so engaged, to provide medical and supervisory services to WellQuest Centers in Northwest Arkansas designated by WellQuest.  Such engagements of WellQuest and Practice are as set forth herein and subject to the terms and conditions hereof.

 

 

1.2.                      Relationship of the Parties.  WellQuest and Practice intend to act and perform as independent contractors, and the provisions hereof are not intended to create any partnership, joint venture, agency or employment relationship between the parties. Notwithstanding the management authority granted to WellQuest herein, WellQuest and Practice agree that Practice shall retain the authority to direct the medical, professional, and ethical aspects of its medical practice. Each party shall be solely responsible for and shall comply with all state and federal laws pertaining to employment taxes, income withholding, unemployment compensation contributions and other employment related statutes applicable to that party.

 

 

2.1.                      Definitions. For the purposes of this Agreement, the following definitions shall apply:

 

2.1.1.                      “Adjustments” shall mean any projected adjustments to Practice Revenues for insurance contractual allowances, uncollectible accounts, discounts, Medicare and Medicaid disallowances, worker’s compensation, employee/dependent healthcare benefit programs, professional courtesies and other activities that do not generate a collectible fee.  These Adjustments shall also include a reconciliation on a month-to-month basis to reflect the actual on-going collections.

 

2.1.2.                      “Allied Health Professionals” shall mean physician assistants, nurse practitioners, and other such non-physician medical personnel providing services to Practice.

 

2.1.3.                      “Capitation Revenues” shall mean all payments from managed care organizations, where payment is made periodically on a per member basis for the partial or total medical care needs of a patient, co-payments and all HMO incentive bonuses.

 

2.1.4.                      “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 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 determination. For purposes of this Agreement, GAAP shall be applied in a manner consistent with the historic practices used by WellQuest.

 

 

2.1.5.                      “Net Revenues” shall mean the Practice Revenues of the Practice, less Adjustments.

 

2.1.6.                      “Parent” shall mean HQHealthQuest Medical & Wellness Centers, Ltd., an Oklahoma corporation, which is the sole shareholder of WellQuest.

 

2.1.7.                      “Physician Shareholder” shall mean C. Wade Fox, M.D., who is currently, and who shall remain for the term of this Agreement, the sole Shareholder of the Practice.

 

2.1.8                       “Practice” shall mean Northwest Arkansas Primary Care Physicians, P.A.

 

2.1.9                       “Practice Account” shall refer to the account set up in Practice’s name pursuant to Section 5.2 hereof, into which WellQuest shall pay on the tenth day of each month an amount equal to the previous month’s expected accounts receivable of the Practice, and out of which WellQuest shall make all disbursements, including disbursements to fund the Practice Payroll Account.

 

2.1.10.                    “Practice Employees” shall mean (i) those individuals who are employees of Practice or are otherwise under contract with Practice to provide professional services to Practice patients and are duly licensed to provide professional medical services in the State of Arkansas, including physicians and Allied Health Professionals.

 

2.1.11.                    “Practice Lockbox Account” shall refer to the account set up in Practice’s name and under Practice’s control, but subject to a lockbox daily “sweep” order pursuant to Section 5.1 hereof, into which all Practice Revenue collected for the Practice by WellQuest from patients and third party payors shall be deposited.

 

2.1.12.                      “Practice Operating Expenses” shall mean all operating and non-operating expenses incurred in the operation of the Practice, including, without limitation:

 

(a)           Salaries, benefits, and other direct costs of materials, services and employees of WellQuest at the Practice including depreciation and interest expenses and other indirect costs; and

 

(b)           Regional Costs, which shall be defined as material costs and direct costs of all employees or consultants of Parent who provide services at or in connection with the Practice required for improved Practice performance, such as work management, materials management, purchasing, marketing, advertising, and business office consultation; provided, however, only that portion of such material costs or employee’s or consultant’s costs that is allocable to work performed at or for the benefit of the Practice will be a Practice Operating Expense.

 

 

2.1.13.                      “Practice Operating Profit” shall mean for the applicable period Net Revenues, less Practice Payroll Account payments, management fees payable to WellQuest, and Practice Operating Expenses.

 

2.1.14.                      “Practice Payroll Account” shall mean the account established by WellQuest in Practice’s name, and under Practice’s control, into which WellQuest shall deposit $30,000 by the fifteenth day of each month following the month of services (such amount subject to revision by the mutual written consent of the parties).  The primary source of the $30,000 monthly that WellQuest shall deposit into the Payroll Account shall be funds transferred from the Practice Account.  However, if the Practice Account funds are not sufficient to fund the $30,000 deposit into the Practice Payroll Account, then WellQuest shall advance sufficient funds to fully fund the Practice Payroll Account.

 

2.1.15.                      “Practice Payroll Expenses” shall mean salaries, employee benefits, Practice payroll taxes, education, CME, professional workshops, and other professional expenses of Practice’s Employees.

 

2.1.16.                      “Practice Revenues” shall mean (a) all fees and charges actually recorded or booked each month by or on behalf of Practice as a result of professional medical services personally furnished to patients by Physician Shareholder and Practice Employees and other fees or income generated in their capacity as professionals, whether rendered in an inpatient or outpatient setting plus (b) Capitation Revenues.

 

 

 

3.1.                      Professional Services and Supervision. Practice shall provide professional services to patients at the Practice in compliance at all times with ethical standards, laws and regulations applying to the medical profession. Practice shall ensure that each physician associated with Practice to provide medical care to patients of Practice is licensed by the State of Arkansas.  Practice shall provide supervision to the WellQuest Center(s) as requested or directed by WellQuest, including, but not limited to medical supervision of the WellQuest Center medical spa and any ancillary services provided in the WellQuest Centers.  Practice shall have a physician on site at the Practice location or such other site as may be designated by WellQuest, and available to provide the above services during the WellQuest Center’s hours of operation, currently scheduled from 8 a.m. to 8 p.m. Monday through Saturday and noon to 6 p.m. on Sunday.  The WellQuest Center’s hours of operation may be changed by agreement of both parties.  In addition to providing a physician for supervisory services during the WellQuest Center’s hours of operation, Practice shall provide physician coverage for “on-call” telephone services when the WellQuest Center is not open.  Such on-call services shall be provided on a 24-hour/7-day a week, 365 day per year basis during all hours the WellQuest Center is not open for business.

 

 

3.2.                      Medical Practice. Practice shall use and occupy the Practice exclusively for the practice of family and occupational medicine, and shall comply with all applicable local rules, ordinances and all standards of medical care. Practice shall ensure that Physician Shareholder is personally actively involved and regularly present at the Practice location to provide medical services. It is expressly acknowledged by the parties that the medical practice or practices conducted at the Practice shall be conducted solely by physicians associated with Practice, and no other physician or medical practitioner shall be permitted to use or occupy the Practice without the prior written consent of WellQuest.  Practice shall conform its hours of operation to the same hours of operation of the WellQuest Center (currently 8 a.m. – 8 p.m., Monday through Saturday, and noon – 6 p.m. on Sundays).  Practice will ensure that a qualified physician is available at all times on site in the Practice for delivery of medical care and for follow-up medical records and billing submission duties during the Practice’s hours of operation.

 

3.3.                      Employment of Physician Employees. Practice shall have complete control of and responsibility for the hiring, compensation, supervision, evaluation and termination of its Physician employees, although at the request of Practice, WellQuest shall consult with Practice respecting such matters. Practice shall be responsible for the payment of such Physician employees’ salaries and wages, payroll taxes, benefits and all other taxes and charges now or hereafter applicable to them. With respect to physicians, Practice shall only employ and contract with licensed physicians meeting applicable credentialing guidelines established by Practice.

 

3.4.                      Professional Insurance Eligibility. Practice shall cooperate in the obtaining and retaining of professional liability insurance by assuring that its Physician employees are insurable, and participating in an on-going risk management program.

 

3.5.                      Clinical Standards.  Practice shall cause its physician and Allied Health Professional employees to perform clinical duties  consistent with recognized clinical guidelines, protocols, and procedures, including, but not limited to, daily recording of services into electronic medical records and daily submission of all billing information.  Furthermore, Practice will ensure that all of its employees perform within the quality, business, services, and conduct standards and policies set forth by WellQuest and its medical director from time to time, and that neither Practice, Physician Shareholder or Physician Employees take any actions which could reflect adversely on the reputation of WellQuest Center(s).  A violation of this Section 3.5 shall be considered a material breach of the Agreement.

 

3.6.                      Education.  As requested or offered by WellQuest, Practice and its employees shall participate in providing education and training on electronic medical record systems and other practice functions.

 

 

 

4.1.                      General.  In addition to the specific duties outlined below in this Article IV, WellQuest shall generally be responsible for all management services related to the ordinary and usual business affairs of the Practice in accordance with this Agreement and shall provide such services as are necessary to operate and maintain the business affairs of the Practice in an efficient manner.  WellQuest shall have the power and authority to do any and all actions reasonably necessary, advisable, or proper to conduct the business affairs of the Practice.  WellQuest shall have the right to delegate any of its duties or obligations, or subcontract any of its services, or any portion thereof.

 

4.2.                      Location, Establishment and Lease of Practice Facilities. WellQuest shall sublease the practice location to the Practice pursuant to the sublease (the “Sublease”) attached hereto as Exhibit A.

 

4.3.                      Management and Operation.  In carrying out its obligations under this Agreement with respect to the management of Practice’s practice, WellQuest’s services shall include the duties set forth in this Section 4.3:

 

(a)               Equipment and Business Services.  WellQuest shall obtain, at its expense, all equipment which, in the discretion of WellQuest, is needed to equip the Practice; shall advise the Practice as to governmental compliance; shall establish, in cooperation and consultation with the Practice, policies and procedures for the efficient and economical operation of the Practice; shall provide consulting advice about trends in health care and effective alternatives for positioning and marketing the Practice’s services to patients, employers, third-party payors and other providers; shall design, recommend and administer compensation and benefit packages for the Practice and staff at the Practice; and shall, in consultation with the Practice, assist in maintaining an inventory of all necessary drugs and medical and non-medical supplies for the Practice.

 

(b)               Marketing Services.  WellQuest, in consultation with the Practice, shall design and implement an advertising and marketing program designed to promote the Practice’s business at the Practice in a manner that both parties deem appropriate.  The marketing program shall be conducted in compliance with applicable laws and regulations governing advertising by the medical profession.

 

 

(c)               Personnel Services. WellQuest shall employ the personnel WellQuest determines necessary or appropriate to operate the Practice, other than the physicians and other medical staff who must be employed by Practice pursuant to requirements of law.  All such employees will be employed by WellQuest and entitled to such fringe benefits as WellQuest customarily provides for such personnel.  All non-physician personnel required to support and service Practice shall be employed by WellQuest and provided to Practice under the employee lease agreement attached hereto as Exhibit B.

 

(d)               Financial Services.  WellQuest (i) shall be responsible for billing and collecting payments for all medical services rendered by the Practice to its patients (including negotiations with and collections from insurance companies, HMOs, PPOs, CHAMPUS and other third-party payors), with all such billing and collecting to be done in the name of the Practice; (ii) shall manage and, at the Practice’s request, has agreed to finance its accounts receivable through the purchase thereof with recourse on terms acceptable to both parties; (iii) shall administer the Practice’s payroll; (iv) shall be responsible for and have control of the Practice’s financial records and bank accounts; (v) shall prepare and submit to the Practice monthly financial reports with respect to the operation of the Practice; and (vi) shall, from the Practice’s funds, pay all Practice Operating Expenses, with the exception of Practice Payroll Expenses, which Practice shall pay out of the Practice Payroll Account pursuant to Section5.2 hereof.

 

(e)               Preparation of Budgets.  WellQuest shall prepare annual capital and operating budgets for the Practice.  WellQuest shall disclose to Practice all Practice Expenses and Regional Costs expensed to Practice, and where WellQuest deems appropriate, WellQuest may consult with Practice regarding budgets and Regional  Costs.

 

(f)               Accountant Services; Audits and Statements.  WellQuest shall prepare annual financial statements for the operations of the Practice and shall cause the financial statements to be audited by a certified public accountant selected by WellQuest in connection with the audit of the financial statements of Parent.  WellQuest shall prepare monthly unaudited financial statements containing a balance sheet and statements of income from Practice operations, which shall be delivered to Practice within thirty (30) days after the close of each calendar month.  In the event WellQuest’s independent accountants are engaged to prepare the tax return of Practice and the information to be provided by Practice to the Shareholder and to the Practice Employees, such as the firm K-1 and W-2 forms, the cost of preparing such information shall be paid by Practice, and Practice shall be solely responsible for its state and federal income taxes.

 

 

(g)               Records.  WellQuest shall supervise and maintain custody of all files and records relating to the operation of the Practice, including but not limited to accounting, billing, patient medical records, collection records, client lists and addresses. Patient medical records shall be located at the WellQuest Centers  so that they are readily accessible for patient care. The management of all files and records shall comply with applicable state and federal statutes. WellQuest shall use its best efforts to preserve the confidentiality of patient medical records, shall use information contained in such records only for the limited purpose necessary to perform the services set forth herein, and shall be responsible for damages resulting from a breach of the foregoing due to its negligence; provided, however, in no event shall a breach of said confidentiality be deemed a default under this Agreement.  WellQuest shall execute a business associate agreement, attached to this Agreement as Exhibit C, in compliance with the  requirements of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). In order to ensure continuity of care, Practice agrees, that in the event of the termination or expiration of this Agreement, to transfer ownership and custody of the medical records to a successor physician practicing in the same location.

 

(h)               Computer and Clerical Services.  WellQuest shall supply to Practice necessary clerical, accounting, bookkeeping and computer services, printing, postage and duplication services, medical transcribing services and any other ordinary, necessary or appropriate service for the operation of the Practice.

 

(i)                Physician Recruitment. WellQuest shall assist Practice in recruiting additional physicians, carrying out such administrative functions as may be appropriate such as advertising for and identifying potential candidates, checking credentials, and arranging interviews; provided, however, Practice shall interview and make the ultimate decision as to the suitability of any physician to become associated with the Practice. All physicians recruited by WellQuest and accepted by Practice shall be the sole employees of Practice, to the extent such physicians are hired as employees.

 

(j)                CME.  WellQuest shall make payment for the cost of professional licensure fees and board certification fees of physicians associated with Practice and continuing medical education up to an annual amount of $8,000.00.  Any expenses above $8,000 annually shall be the financial responsibility of the Practice.

 

 

4.4.                      Professional Malpractice Liability Insurance. At all times throughout the term of this Agreement, WellQuest will seek to obtain and maintain for Practice, Practice’s Professional Staff, and Practice’s leased employees, professional liability insurance issued in Practice’s name in an amount of no less than $1,000,000 per occurrence and $3,000,000 in the annual aggregate.  WellQuest may amend such policies to add WellQuest and its parent company as additional named insureds.

 

4.5.                      Recruiting of Other Practices.  WellQuest agrees that as long as this Agreement is in effect that WellQuest will not undertake in Northwest Arkansas to: (1) recruit another physician to practice except as requested by Practice; (2) manage another physician practice; or (3) engage another physician practice to provide the medical and supervisory services to its WellQuest Center(s).

 

4.6.                      Contracting Authority.  Practice hereby agrees to permit WellQuest to bind Practice to agreements with third party payors under which Practice will provide medical services to plan enrollees of such third party payors, in a manner consistent with this Agreement.  Practice hereby appoints WellQuest as Practice’s agent and attorney-in-fact to execute agreements with payors binding Practice to provide Practice services, on terms and conditions typically contained in provider agreements with managed care organizations.

 

4.7.                     Compliance with Applicable Laws. WellQuest shall comply with all applicable federal, state and local laws, regulations and restrictions in the conduct of its obligations under this Agreement.

 

4.8.                      Quality Assurance. WellQuest shall assist Practice in fulfilling its obligations to its patients to maintain a high quality of medical and professional services.

 

 

 

5.1.                     Accounts Receivable. WellQuest shall purchase the accounts receivable of Practice on a monthly basis.  The consideration for the purchase shall be the actual collections from the accounts receivable, but WellQuest shall make a monthly deposit toward the purchase of the accounts receivable by depositing, by the 10th day of each month, an amount equal to the expected Practice Revenues for the previous month’s services into the Practice Account.  All collections in respect of such accounts receivable shall be deposited in the Practice’s Lockbox Account, which will be subject to a lockbox agreement, in form and substance as that required by the Medicare reassignment rules, instructing that the accounts be swept daily into WellQuest’s bank account with a qualified bank in Arkansas. To the extent Practice comes into possession of any payments in respect of such accounts receivable, Practice shall direct such payments to WellQuest for deposit in WellQuest’s bank account.

 

 

5.2.                     Flow of Funds.

 

 

 

 

 

(ii) the Practice Expenses.

 

 

(i) WellQuest shall fund the shortfall for the $30,000 Practice Payroll Account monthly deposit and/or shall pay such Practice Expenses (the “Physician Advances”). Physician Advances shall accrue interest until repaid at the rate of one percent (1%) in excess of the “U.S. Prime Rate” published in the “Money Rates” section of the Wall Street Journal as determined on the first business day of each calendar month during the time of the indebtedness; and

 

 

(ii) WellQuest’s management fee, bonuses, and expenses paid by WellQuest shall accrue, and Practice shall pay such accrued but unpaid management fees, bonuses and expenses as the Practice’s cash flow improves.

 

 

5.3.                      Management Fees:  WellQuest shall be compensated for its services as follows:

 

 

 

(i) a performance ratio (the “Performance Ratio”) will be calculated by dividing the Practice Operating Profit by the remainder of the Practice Net Revenue less Physician Advances and base management fee.

 

(ii) Practice shall receive all proceeds of the Practice Operating Profit up to a Performance Ratio of 1%.

 

(iii) WellQuest shall receive a performance bonus equal to $15,000 for each 1% increase in the Performance Ratio above the initial 1%, prorated for any partial percentage increases.

 

(iv) Practice shall receive the remaining amounts in the Practice Operating Profit after payment of the performance bonus to WellQuest.

 

 

 

 

The parties recognize that the services to be provided by WellQuest shall be feasible only if Practice operates an active medical practice to which the physicians associated with Practice devote their full time and attention. To that end:

 

6.1.                      Restrictive Covenants by Practice. During the term of this Agreement and for a period up to twelve (12) months thereafter, neither Practice nor Physician Shareholder shall establish, operate or provide physician services at any medical office, practice or other health care facility providing services substantially similar to those provided by Practice pursuant to this Agreement anywhere within 25 miles of a WellQuest Center in northwestern Arkansas at which Practice provided services pursuant to the terms of this Agreement (wherever located at such time).  Practice and Physician Shareholder jointly and severally agree that in the event of a breach of this Section 6.1, among any and all other remedies that WellQuest may pursue as a result of such breach, Practice shall pay WellQuest an amount equal to the sum of the prior twelve (12) months’ compensation and benefits paid to its employees, as compensation for the investment of time and capital that WellQuest has made in connection with the provision of exclusive management services to the Practice and in recognition of the value of the trade secrets, confidential business information, and patient contacts provided by WellQuest to Practice and Physician Shareholder pursuant to the relationship created by this Agreement.  Physician Shareholder joins this Agreement for purpose of agreeing to this Section 6.1.

 

6.2.                      Restrictive Covenants By Current Physician Shareholder and Physician Employees. Practice shall obtain and enforce formal agreements from its current Physician Shareholder and any current or future physician employees, other than Allied Health Professionals, pursuant to which the Physician Shareholder and physician employees agree not to establish, operate or provide physician services at any medical office, practice or outpatient and/or ambulatory treatment or diagnostic facility providing services substantially similar to those provided by Practice within 25 miles of the any WellQuest Center in northwestern Arkansas at which Practice provided services pursuant to the terms of this Agreement (wherever located at such time) during the term of their employment and for a period of 12 months after any termination of employment with Practice.  In the event of a breach of this Section 6.2, among any and all other remedies that WellQuest may pursue as a result of such breach, the Physician Shareholder or the breaching physician employee, as the case may be, shall pay to WellQuest an amount equal to the prior twelve (12) months’ compensation and benefits paid to such Physician Shareholder or physician employees, as applicable, as compensation for the investment of time and capital that WellQuest has made in connection with the provision of exclusive management services to the Practice, and in recognition of the value of the trade secrets, confidential business information, and patient contacts provided by WellQuest to Practice and the Physician Employees pursuant to the relationship created by this Agreement.  WellQuest shall be a third party beneficiary of any restrictive covenants contained in the employment contracts between Practice and Physician Employees.

 

 

6.4.                      Enforcement. WellQuest and Practice acknowledge and agree that since a remedy at law for any breach or attempted breach of the provisions of this Article VI shall be inadequate, either party shall be entitled to specific performance and injunctive or other equitable relief in case of any such breach or attempted breach, in addition to whatever other remedies may exist by law. All parties hereto also waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief. If any provision of Article VI relating to the restrictive period, scope of activity restricted and/or the territory described therein shall be declared by a court of competent jurisdiction to exceed the maximum time period, scope of activity restricted or geographical area such court deems reasonable and enforceable under applicable law, the time period, scope of activity restricted and/or area of restriction held reasonable and enforceable by the court shall thereafter be the restrictive period, scope of activity restricted and/or the territory applicable to the restrictive covenant provisions in this Article VI. The invalidity or non-enforceability of this Article VI in any respect shall not affect the validity or enforceability of the remainder of this Article VI or of any other provisions of this Agreement.

 

 

 

7.1.                      Insurance to be Maintained by Practice. Throughout the term of this Agreement, subject to the provisions of Article IV providing for malpractice premiums and deductibles to be a Practice Operating Expense, Practice shall maintain comprehensive professional liability insurance with limits of not less than $1,000,000 per claim and with aggregate policy limits of not less than $3,000,000 per physician and a separate limit for Practice. Practice shall be responsible for all such liabilities in excess of the limits of such policies. WellQuest shall have the option of providing such professional liability insurance through an alternative program, provided such program meets the requirements of the Insurance Commissioner of the State of Arkansas. WellQuest shall reimburse Practice for any unearned professional liability insurance premiums paid by Practice to the extent not reimbursed or reimbursable by Practice’s insurance carrier if Practice’s existing professional liability insurance program is cancelled and replaced by a comparable professional liability insurance program initiated by WellQuest.

 

 

7.2.                      Insurance to be Maintained by WellQuest. Throughout the term of this Agreement, WellQuest will use reasonable efforts to provide and maintain, as a Practice Operating Expense, (a) comprehensive professional liability insurance for all professional employees of WellQuest with limits as determined reasonable by WellQuest in its national program and (b) comprehensive general liability and property insurance covering the Practice premises and operations.

 

7.3.                      Tail Insurance Coverage. Practice will cause each individual physician who associates with Practice after the date hereof to enter into an agreement with Practice that upon termination of such physician’s relationship with Practice, for any reason, tail insurance coverage will be purchased by the individual physician. Such provisions may be contained in employment agreements, restrictive covenant agreements or other agreements entered into by Practice and the individual physicians, and Practice hereby covenants with WellQuest to enforce such provisions relating to the tail insurance coverage or to provide such coverage at the expense of Practice. The cost of tail insurance coverage for physicians who are currently associated with Practice shall be a Practice Operating Expense; provided, that the cost of tail insurance coverage for any physician who is an employee of Practice and is serving as a Medical Director under a written contract with WellQuest at the time of termination of this Agreement shall be shared equally by WellQuest and the physician if such termination was pursuant to Section 8.3(c) of this Agreement.

 

7.4.                      Indemnification. Practice shall indemnify, hold harmless and defend WellQuest, its officers, directors, shareholders and employees, from and against any and all liability, loss, damage, claim, causes of action, and expenses (including reasonable attorneys’ fees), whether or not covered by insurance, caused or asserted to have been caused, directly or indirectly, by or as a result of the performance of medical services or any other acts or omissions by Practice and/or its shareholders, agents, employees and/or subcontractors (other than WellQuest) during the term hereof. WellQuest shall indemnify, hold harmless and defend Practice, its officers, directors, shareholders and employees, from and against any and all liability, loss, damage, claim, causes of action, and expenses (including reasonable attorneys’ fees), caused or asserted to have been caused, directly or indirectly, by or as a result of the performance of any intentional acts, negligent acts or omissions by WellQuest and/or its shareholders, agents, employees and/or subcontractors (other than Practice) during the term of this Agreement.

 

 

 

8.1.                      Term of Agreement. This Agreement shall commence on May 4, 2005, with the performance called for hereunder to commence on September 1, 2005, and shall expire on August 31, 2008 unless earlier terminated pursuant to the terms hereof.  Thereafter, this Agreement shall automatically renew for successive two (2) year terms unless either party gives written notice of its intent not to renew at least 90 days prior to the expiration of the then current term.

 

 

8.2.                      Termination by Practice. Practice may terminate this Agreement as follows:

 

(a)               In the event of the filing of a petition in voluntary bankruptcy or an assignment for the benefit of creditors by WellQuest, or upon other action taken or suffered, voluntarily or involuntarily, under any federal or state law for the benefit of debtors by WellQuest, except for the filing of a petition in involuntary bankruptcy against WellQuest which is dismissed within thirty (30) days thereafter, Practice may give notice of the immediate termination of this Agreement.

 

(b)               In the event WellQuest shall materially default in the performance of any duty or obligation imposed upon it by this Agreement and such default shall continue for a period of ninety (90) days after written notice thereof has been given to WellQuest by Practice; provided, that a material default by Well Quest in respect to an obligation to make a payment to Practice (including, but not limited to, WellQuest’s obligation to fund the Practice Payroll Account) shall be grounds for termination of this Agreement if the default is not cured by Well Quest after fifteen (15) days written notice thereof has been given to WellQuest by Practice.

 

8.3.                      Termination by WellQuest. WellQuest may terminate this Agreement as follows:

 

(a)               In the event of the filing of a petition in voluntary bankruptcy or an assignment for the benefit of creditors by Practice, or upon other action taken or suffered, voluntarily or involuntarily, under any federal or state law for the benefit of debtors by Practice, except for the filing of a petition in involuntary bankruptcy against Practice which is dismissed within thirty (30) days thereafter, WellQuest may give notice of the immediate termination of this Agreement.

 

(b)               In the event Practice shall materially default in the performance of any duty or obligation imposed upon it by this Agreement, and such default shall continue for a period of ninety (90) days after written notice thereof has been given to Practice by WellQuest, WellQuest may terminate this Agreement.

 

(c)               At WellQuest’s option, WellQuest may terminate this Agreement immediately upon the termination or expiration of the sublease agreement between WellQuest and the Practice, the lease agreement between WellQuest and its lessor, or the Medical Director Agreement between WellQuest and Physician Shareholder.

 

 

(d)               At WellQuest’s option, WellQuest may terminate this Agreement immediately in the event the Physician Shareholder or the Practice are investigated, sanctioned or excluded from participation in a federal or state healthcare program, or convicted of a crime, or in the event Physician Shareholder’s license to practice medicine is revoked or restricted.

 

(e)               At WellQuest’s option, WellQuest may terminate this Agreement immediately upon the occurrence of any incident in which the Practice, the Physician Shareholder, or any of the Physician Employees has engaged in conduct which would be deemed by a reasonable person to be disruptive, intimidating, coercive, harassing or below the acceptable standard of clinical behavior; or which jeopardizes the health or safety of patients or other HealthQuest Center employees, and, if the conduct is that of an individual Physician Employee other than Physician Shareholder, if the Practice fails to immediately remove and replace such Physician Employee with another Physician Employee acceptable to WellQuest;

 

(f)               At WellQuest’s option, WellQuest may terminate this Agreement upon thirty (30) days notice to Practice in the event that, beginning on the 25th month of the Agreement’s term, the Practice’s net revenue, on a trailing three month basis, does not equal or exceed $500,000.

 

 

 

9.1.                      Whole Agreement; Modification. There are no other agreements or understandings, written or oral, between the parties regarding this Agreement, the Exhibits and the Schedules, other than as set forth herein. This Agreement shall not be modified or amended except by a written document executed by both parties to this Agreement, and such written modification(s) shall be attached hereto.

 

9.2.                      Notices. All notices required or permitted by this Agreement shall be in writing and shall be addressed as follows:

 

To WellQuest:

WellQuest Medical & Wellness Centers of Arkansas, Inc.

5158 Oak Leaf Drive,

Tulsa, Oklahoma 74131-2653

Attn:  Steve Swift

 

 

With copies to:

Newton O’Connor Turner & Ketchum

Bank of America Center

15 West Sixth Street, Suite 2700

Tulsa, Oklahoma  74119-5423

Attn:  John O’Connor, Esq.

 

1005 Golf Course Drive

Searcy, Arkansas 72143

Attn:  C. Wade Fox, M.D.

or to such other address as either party shall notify the other.

 

9.3.                      Binding on Successors. This Agreement shall be binding upon the parties hereto, and their successors and assigns.

 

9.4.                      Waiver of Provisions. Any waiver of any terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof.

 

9.5.                      Governing Law and Venue. The validity, interpretation and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of Oklahoma. The parties acknowledge that WellQuest is not authorized or qualified to engage in any activity which may be construed or deemed to constitute the practice of medicine. To the extent any act or service required of WellQuest in this Agreement should be construed or deemed, by any governmental authority, agency or court to constitute the practice of medicine, the performance of said act or service by WellQuest shall be deemed waived and forever unenforceable.  The exclusive venue for any action shall be Tulsa County, Oklahoma.

 

9.6.                      Severability. The provisions of this Agreement shall be deemed severable and if any portion shall be held invalid, illegal or unenforceable for any reason, the remainder of this Agreement shall be effective and binding upon the parties.

 

9.7                      Additional Documents. Each of the parties hereto agrees to execute any document or documents that may be requested from time to time by the other party to implement or complete such party’s obligations pursuant to this Agreement.

 

 

9.8.                      Attorneys’ Fees. If legal action is commenced by either party to enforce or defend its rights under this Agreement, the prevailing party in such action shall be entitled to recover its costs and reasonable attorneys’ fees in addition to any other relief granted.

 

9.10.                    Confidentiality. Except for disclosure to its bankers, underwriters or lenders, or as necessary or desirable for conduct of business, including negotiations with other acquisition candidates, neither party hereto shall disseminate or release to any third party any information regarding any provision of this Agreement, or any financial information regarding the other (past, present or future) that was obtained by the other in the course of the negotiation of this Agreement or in the course of the performance of this Agreement, without the other party’s written approval; provided, however, the foregoing shall not apply to information which (i) is generally available to the public other than as a result of a breach of confidentiality provisions; (ii) becomes available on a non-confidential basis from a source other than the other party or its affiliates or agents, which source was not itself bound by a confidentiality agreement, or (iii) which is required to be disclosed by law including securities laws, or pursuant to court order.

 

9.11.                    Contract Modifications for Prospective Legal Events. In the event any state or federal laws or regulations, now existing or enacted or promulgated after the effective date of this Agreement, are interpreted by judicial decision, a regulatory agency or legal counsel in such a manner as to indicate that the structure of this Agreement may be in violation of such laws or regulations, Practice and WellQuest shall amend this Agreement as necessary. To the maximum extent possible, any such amendment shall preserve the underlying economic and financial arrangements between Practice and WellQuest.

 

9.12.                    Remedies Cumulative. No remedy set forth in this Agreement or otherwise conferred upon or reserved to any party shall be considered exclusive of any other remedy available to any party, but the same shall be distinct, separate and cumulative and may be exercised from time to time as often as occasion may arise or as may be deemed expedient.

 

9.13.                    Language Construction. The language in all parts of this Agreement shall be construed, in all cases, according to its fair meaning. The parties acknowledge that each party and its counsel have reviewed and revised this Agreement.

 

9.14.                    No Obligation to Third Parties. None of the obligations and duties of WellQuest or Practice under this Agreement shall in any way or in any manner be deemed to create any obligation of WellQuest or of Practice to, or any rights in, any person or entity not a party to this Agreement.

 

 

9.15.                    Communications. Practice and WellQuest agree that good communication between the parties is essential to the successful performance of this Agreement, and each pledges to communicate fully and clearly with the other on matters relating to the successful operation of Practice’s practice.

 

9.16.                    Survival.  Any provisions of this Agreement creating obligations extending beyond the term of this Agreement will survive the expiration or termination of this Agreement, regardless of the reason for such termination.

 

9.17                      Arbitration.

 

(a)       Any dispute or controversy arising among the parties hereto regarding any term, covenant or condition of this Agreement or the breach thereof (other than a dispute arising from Practice’s failure to pay indebtedness owed to WellQuest) shall, upon written demand of any party hereto, be submitted to and determined by arbitration before the American Health Lawyers Association Alternative Dispute Resolution Service or the American Arbitration Association, in Tulsa, Oklahoma, by a single arbitrator qualified and experienced in healthcare law, in accordance with the rules of the Association then in effect in respect to the arbitration of commercial healthcare disputes; provided, that any party hereto may seek injunctive relief from a court and the proceeding for such equitable relief shall not be subject to dismissal or stay as a result of a request for arbitration under this section.  The arbitrator shall have the authority to grand injunctive relief, but the seeking or obtaining of injunctive relief from a court by any party shall not be deemed a waiver by that party of the right to demand arbitration of any dispute arising hereunder.

 

(b)      The arbitrator may not amend, very or invalidate any provision of this Agreement.  Any award or decision rendered shall be made by means of a written opinion explaining the arbitrator’s reasons for the award or decision, and the award or decision shall be final and binding upon the parties hereto.  Judgment upon the award or decision rendered by the arbitrator may be entered in any court of competent jurisdiction.  The parties hereby waive the right to appeal the judgment, award or decision of the arbitrator.

 

(c)       In any such proceeding, the arbitrator shall, after a separate hearing, grant, and the prevailing party shall be entitled to recover, its costs of prosecuting or defending (or both) the claims made, including its reasonable attorneys’ fees and costs, as well as the costs and fees of the arbitrator, shall be borne equally by WellQuest, on the one hand, and Practice, on the other hand, until allocated by the arbitrator as set forth above.

 

 

(d)      THE PARTIES ACKNOWLEDGE THAT THEY ARE WAIVING IMPORTANT RIGHTS, INCLUDING THE RIGHT OT TRIAL BY JURY AND THE RIGHT TO THE RESOLUTION OF THEIR DISPUTES BY A COURT, BY ENTERING THIS AGREEMENT.

 

 

 

 

 

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

 

 

Consented to:

 

C. Wade Fox executes this Agreement

individually for the sole purpose of

consenting to the provisions of Section 6.1:

 

 

C. Wade Fox, M.D.,

In his individual capacity