PHYCOR INC /TN/
MANAGEMENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>8
<FILENAME>g68354ex10-16.txt
<DESCRIPTION>MANAGEMENT AGREEMENT
<TEXT>

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                                                                   EXHIBIT 10.16


                              MANAGEMENT AGREEMENT

         This Management Agreement ("Agreement") is made and entered into this
1st day of April 2000 by and between Northwest Community Capco Inc., (the
"Company") organized under the laws of the State of Illinois, and North American
Medical Management - Illinois, Inc., a corporation organized under the laws of
the State of Illinois ("NAMM"). This Agreement shall take effect as of April 1,
2000 ("Effective Date").

                                  WITNESSETH:

         WHEREAS, NAMM operates in the State of Illinois to provide management
services to physicians and hospitals participating in Medicare-risk management
and other types of services which may be agreed to from time to time, and to
arrange for the provision of efficient and effective health care services;

         WHEREAS, the Company requires certain staffing and management expertise
to provide it with administrative services in connection with Company's
obligations relating to Risk Contracts (as defined in this Agreement) entered
into by Northwest Community Hospital d/b/a Northwest Community Health Partners
("PHO"):

         WHEREAS, NAMM is an organization with personnel who have expertise in
managed care contracting, with particular expertise in the area of Medicare-risk
management and related claims processing, financial, business and medical
services management and administration; and

         WHEREAS, the Company desires to retain NAMM, and NAMM desires to be
retained by the Company, all on terms and provisions mutually desirable to the
respective parties and for compensation to be paid by the Company to NAMM, on
such terms, provisions and compensation arrangements as are described in this
Agreement.

         NOW, THEREFORE, in consideration of the mutual agreements, covenants
and conditions hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which the parties hereby
acknowledge, the parties agree as follows.

                                   ARTICLE I

                          RELATIONSHIP OF THE PARTIES

1.01     RELATIONSHIP OF THE PARTIES

         Except as otherwise provided in this Agreement, neither this Agreement
         nor any of its provisions shall be construed to create any partnership,
         joint venture, principal/agent or employer/employee relationship
         between the Company and NAMM, or to in any way make one party
         responsible for the debts, liabilities or any other legal obligations
         of the other party. It is expressly understood and agreed by the
         parties that the Company and NAMM shall at all times be acting as
         entities

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         independently contracting with each other for the performance of
         services described in this Agreement. Neither party shall have the
         power to bind or obligate the other party except as set forth in this
         Agreement. Unless the Parties otherwise agree, this Agreement and all
         references to the Company in this Agreement are limited to services
         provided by NAMM, solely with respect to Risk Contracts and related
         services, rather than all services and contracts entered into by the
         Company. The Company does not report to NAMM and retains its separate
         autonomy and direct reporting relationship to Northwest Community
         Hospital.


                                   ARTICLE II

                   REPRESENTATIONS, WARRANTIES AND AGREEMENTS

2.01     NAMM REPRESENTATIONS, WARRANTIES AND AGREEMENTS

         As a material inducement for Company to enter into this Agreement, NAMM
         hereby represents, warrants and agrees as follows:

         (A)      NAMM has the legal power, right and authority to consummate
                  the transactions contemplated hereby.

         (B)      NAMM has been duly formed and is validly existing under the
                  laws of Illinois and has made all filings with governmental
                  authorities required by such laws.

         (C)      NAMM is a wholly owned subsidiary of North American Medical
                  Management, Inc. ("NAMM Parent") a Tennessee corporation that
                  is the parent of a number of comparable corporate subsidiaries
                  operating in seven states. NAMM Parent is a wholly owned
                  subsidiary of PhyCor, Inc., a Tennessee corporation that is
                  publicly traded on the Nasdaq stock exchange.

         (D)      This Agreement, and all other documents and instruments which
                  have been executed and delivered pursuant to this Agreement,
                  or, if not yet executed or delivered will when so executed and
                  delivered, constitute valid and binding obligations of NAMM
                  enforceable in accordance with their respective terms, subject
                  to the provisions of all laws relating to bankruptcy and
                  insolvency and other laws relating to creditors' rights
                  generally. Neither the execution and delivery of this
                  Agreement, nor the incurrence of the obligations herein set
                  forth, nor the consummation of the transactions herein
                  contemplated, nor compliance with the terms of this Agreement
                  will conflict with or result in a breach of any of the terms,
                  conditions or provisions of, or constitute a default under
                  any, bond, note or other evidence of indebtedness or any
                  contract, indenture, mortgage, deed of trust, loan agreement,
                  lease or other agreement or instrument to which NAMM or NAMM
                  Parent is a party.

         (E)      To the best of their knowledge NAMM and NAMM Parent have
                  complied with all laws, ordinances and regulations applicable
                  to them. NAMM and NAMM Parent have filed all required tax
                  returns or other tax notices.


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         (F)      There is no suit, action or other proceeding pending against
                  NAMM, NAMM Parent or any NAMM Affiliate (A NAMM Affiliate is
                  any party controlled by NAMM, under common control with NAMM
                  or in a joint venture with NAMM or other similar contractual
                  relationship), of such a magnitude or character as to put NAMM
                  at risk of being unable to meet fully and in good faith the
                  obligations imposed on NAMM by this Agreement.

         (G)      To the best of the knowledge of NAMM, none of the information
                  contained in the representations and warranties of NAMM set
                  forth in this Agreement or in any of the certificates,
                  exhibits and schedules, lists, documents or other instruments
                  delivered or to be delivered to Company pursuant to this
                  Agreement contain any untrue statement of a material fact or
                  omit to state a material fact regarding the operation of NAMM
                  which would make the statements contained herein or therein
                  misleading.

                                  ARTICLE III

                              OBLIGATIONS OF NAMM

3.01     AUTHORITY OF NAMM

         The Company has entered into a PHO Management Agreement with PHO,
         pursuant to which the Company agrees to manage the affairs and provide
         administration services to the PHO for the PHO's commercial HMO and
         Medicare HMO contracts which provide for the PHO to accept capitation
         for at least the majority of professional services ("Risk Contracts") -
         and such other business as the PHO shall specifically authorize in
         writing for the Company to perform for it ("Business"). The Company
         authorizes NAMM to manage the affairs and provide administration
         services to the Company in order to enable the Company to satisfy its
         obligations to the PHO with respect to the PHO Management Agreement.
         NAMM shall be authorized, without further approval of the Company, to
         commit funds of the Company to perform the services and to staff the
         Company as described hereunder, and to contract for services for the
         Company, provided all such actions are within the operating budgets
         previously approved by the Company's Board of Directors and provided
         further that NAMM shall require in its agreements with any third
         parties who may perform services on behalf of NAMM that such
         contractors perform their duties in accordance with this Agreement. The
         Company shall cooperate with and shall use its best efforts to cause
         its employees, agents and independent contractors to cooperate with
         personnel provided by NAMM hereunder so that NAMM may perform its
         duties under this Agreement. NAMM shall manage and administer the
         Business of the Company in accordance with the terms and conditions of
         this Agreement.

         Without limiting the need for NAMM to obtain prior written approval of
         the Company for other matters, NAMM will not take the following actions
         on behalf of the Company, without the approval of the Company:

         (A)      endorse any note, or act as an accommodation party, or
                  otherwise become surety with respect to any amount;


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         (B)      borrow or lend money, or make, deliver or accept any
                  commercial paper or execute any mortgage, bond, or lease,
                  purchase or contract to purchase any property, or sell or
                  contract to sell any property or assets of the Company;

         (C)      enter into any agreement as a result of which any person shall
                  obtain an interest in the Company;

         (D)      assign, transfer, pledge, compromise or release any of the
                  Company's claims or debts, except upon payment in full of such
                  claim or debt, or arbitrate or consent to the arbitration of
                  any of the company's debts or claims;

         (E)      change the nature of the Company's Business;

         (F)      distribute surplus amounts other than as agreed upon with the
                  Company;

         (G)      enter into any agreement or transaction on behalf of the
                  Company with NAMM or a NAMM Affiliate

         (H)      do any other act that would make it impossible to carry on the
                  ordinary business of the Company; or

         (I)      enter into any agreement involving the sale, lease, assignment
                  of use of any real estate, property or other assets owned,
                  operated, leased, managed by or otherwise related to the
                  Company or any of its affiliates.

3.02     MANAGEMENT SERVICES

         NAMM will work in close cooperation with Company staff to provide those
         management services specified in Exhibit A of this Agreement. In
         addition, NAMM will perform the following services:

         (A)      CONTRACT NEGOTIATIONS. NAMM will provide its expertise and
                  contacts in the managed care industry to facilitate
                  negotiation of Risk Contracts for the Company.

         (B)      FINANCIAL SERVICES. NAMM will assist the Company to manage the
                  funds paid under the Risk Contracts and ensure that any
                  surplus funds are distributed in accordance with the PHO
                  Management Agreement between the Company and PHO. As more
                  particularly described in Exhibit A, NAMM will provide
                  financial services to Company, including the management of
                  bank accounts and the distribution of funds to the PHO and PHO
                  providers. NAMM will also prepare operating budgets for risk
                  contracts for the PHO in a timely fashion, NAMM will recommend
                  reasonable working capital requirements for the PHO.

         (C)      PHYSICIAN SERVICE MANAGEMENT. As more particularly described
                  in Exhibit A, NAMM, through the auspices of the Company, will
                  manage the PHO's Business. As part of its duties for Risk
                  Contracts, NAMM will negotiate and manage agreements with
                  physicians and other providers ("PHO Providers"), which may
                  include fee-for-service and capitation agreements. NAMM
                  acknowledges that the PHO currently has agreements with
                  various PHO Providers, and that the provisions relating to
                  Risk Contracts may be implemented as amendments to the PHO's
                  provider contracts.


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         (D)      SPECIFIC SERVICES FOR RISK CONTRACTS. As more particularly
                  described in Exhibit A, NAMM will provide the following
                  services to the company with respect to Risk Contracts
                  Performance of these services will be in compliance with
                  parameters outlined in the HMO agreements between any HMO and
                  the PHO. The parties agree that certain services are "core"
                  services which will in all cases be provided by NAMM
                  (including those set forth in paragraphs (i), (ii), (iii),
                  (iv), (v), (vi), (vii), (viii), and (ix) below). NAMM will
                  also look to existing affiliated Physician Organization and
                  PHO standards when providing any of the services listed below
                  and will try, to the extent reasonably possible, to coordinate
                  standards it implements or recommends with such PHO standards.
                  In addition, any such significant changes and/or additional
                  standards will be communicated to the PHO and Company prior to
                  being implemented by NAMM.


                  (i)      Prepare and adopt initial benchmark utilization
                           review and quality management procedures.

                  (ii)     Perform claims processing for providers.

                  (iii)    Perform provider contracting services.

                  (iv)     Perform utilization management and quality assurance
                           services, which will include utilization
                           authorization, concurrent review, case management,
                           and discharge planning, and establish credentialing
                           criteria and grievance procedures.

                  (v)      Perform member services relating to claims matters.

                  (vi)     Establish and maintain financial management for the
                           PHO including risk-sharing administration only with
                           respect to the Risk contracts and program.

                  (vii)    Administer provider education programs as reasonably
                           necessary.

                  (viii)   Prepare semi-annual individual and aggregate
                           physician profiling reports comparing physician
                           performances to adopted utilization review standards.

                  (ix)     Recommend and administer quality outcome standards
                           and accompanying reports comparing physician
                           performance to standards required by the applicable
                           HMOs.


         (E)      PROVIDING PHYSICIANS. NAMM will use its best efforts to
                  encourage physicians, including a sufficient number of primary
                  care physicians, to provide leadership to the PHO and to
                  participate in the PHO'S Risk Contracts, where payments on a
                  capitated basis will be accepted by primary care physicians

         (F)      PRICING AND SERVICE COVERAGE ISSUES. NAMM will assist the
                  Company, and provide the Company with guidance, in negotiating
                  which services should be the financial responsibility of the
                  Hospital and which should be the financial responsibility of
                  the PHO physicians, as well as which prices the PHO Providers
                  will charge. NAMM will provide a suggested allocation of
                  services and suggested prices based on actuarially determined
                  market basket pricing figures for the Hospital and PHO
                  physicians providing medical services under the Risk
                  Contracts.


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3.03     REPORTING

         NAMM shall provide to the Company the reports and compilations
         described in Exhibit A which, together with any other reports referred
         to in this Agreement, the parties believe are all of the reports
         necessary for the management and administration of the Business. NAMM
         shall provide additional extraordinary reports and compilations upon
         request by the Company, which are reasonably necessary for management
         and administration of the Business of the company, consistent with the
         Company's then current goals, objectives, financial condition and
         business plan.

3.04     NAMM STAFFING

         NAMM, will, through its own employees in the Chicago area and
         elsewhere, provide management of all aspects of the Risk Contract
         business associated with the Company in exchange for its participation
         is the Company's profits as described in Article V of this Agreement.
         Where such expertise is not provided by full-time personnel of NAMM in
         the Chicago area, the expertise of other NAMM personnel or consultants
         may be obtained.

         NAMM shall make available a sufficient number of its (or its
         Affiliates') employees to fulfill its duties under this Agreement, as
         such number is determined by NAMM. Such personnel shall be drawn from
         such locations as deemed appropriate at the sole discretion of NAMM;
         provided, however that the Company shall have the right to interview
         and approve (which approval shall not be unreasonably withheld) any
         NAMM personnel who will be assigned to Company on a full-time basis.
         NAMM shall be solely responsible for performing job evaluations for all
         personnel hired by NAMM (or its Affiliate) to carry out the terms of
         this Agreement, provided that the Company retains the right to evaluate
         NAMM'S overall performance and to provide informal input to NAMM
         regarding the Company's evaluation of NAMM personnel. NAMM shall also
         have in its sole discretion the authority to hire and fire all NAMM (or
         its Affiliates') employees. Notwithstanding the foregoing, the Company
         shall have the right to request that NAMM remove or reassign a NAMM
         employee who is providing services to the Company, and NAMM shall
         replace such employee within sixty (60) days of such request.

3.05     KEY CONTACT

         One of NAMM's (or its Affiliates') employees shall serve as the key
         contact for the Company. The key contact will be the President of NAMM
         Illinois, who will be principally responsible for managing NAMM's
         duties under this Agreement. While NAMM shall retain in its sole
         discretion the authority to replace the key contact, the Company shall
         have the right to provide informal input into NAMM'S selection of a
         replacement.

3.06     OWNERSHIP OF AND ACCESS TO RECORDS

         All records relating to the Company's and PHO's operations and Business
         (including, but not limited to, all book of account and general
         administrative records, and all of the following, to the extent such
         are non-proprietary to NAMM and relate solely to (or were purchased
         solely for) the Company's operations: software programs, MIS data,
         utilization management policies, credentialing guidelines, case
         management, quality assurance information and all other related
         documents and policies), shall be and remain the property of the
         Company, except as the parties


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         may otherwise agree in writing. All such information, data and records
         may be used by NAMM to perform the services hereunder. All property of
         this nature which was the proprietary property of the Hospital or PHO
         which the Company or NAMM was allowed to utilize in its management of
         the Company or the risk business shall remain the proprietary property
         of the Hospital or PHO, as the case may be. The Parties understand that
         the Company will contract with a variety of health care providers and
         that certain financial and medical record information from these
         individual provider entities will be kept confidential and may not be
         shared with the owners of the Company.

         All records relating to NAMM'S operations including, but not limited
         to, the following, to the extent such are non-proprietary to the
         Company and relate solely to (or were purchased solely for) NAMM'S
         operations: IBNR models, software programs, MIS data, utilization
         management policies, credentialing guidelines, case management, quality
         assurance information and all other related documents and policies),
         shall be and remain the property of NAMM, except as the parties may
         otherwise agree in writing. All such information, data and records may
         be used by the Company with respect to the services hereunder. All
         property of this nature which was the proprietary property of NAMM or
         which the Company or the PHO was allowed to utilize in the Business
         shall remain the proprietary property of NAMM.

         Notwithstanding the ownership of any of the records and information
         described above, or termination of this Agreement for any reason, the
         Company and the PHO may continue to use, in connection with the
         operations of the Company and PHO, all records relating to the
         Company's and the PHO's operations and business, including all policies
         and procedures used by the Company and the PHO, provider files and
         other information specific to the Company and the PHO.

3.07     DISCLOSURE OF INFORMATION

         NAMM agrees to make available information contained in the records of
         the Company to parties to whom the Company has authorized such
         disclosure. All non-proprietary records shall be available to the
         Company at all times during normal business hours. NAMM agrees to
         protect the confidentiality of such records and will only disclose
         confidential data upon written consent of the affected parties or when
         subpoenaed or otherwise required by law or compelled by legal process.
         NAMM agrees to disclose to the Company any subpoena or other legal
         request for documents prior to the disclosure of such documents in
         order to permit the Company to intervene or file appropriate legal
         documents contesting their disclosure. These obligations shall survive
         the termination of this Agreement.

3.08     MEDICAL CONFIDENTIALITY

         NAMM agrees to comply with applicable federal, state and local laws for
         handling confidential medical information and shall take all
         appropriate and reasonable action in developing technological and
         contractual methods of maintaining confidentiality for any medical or
         other confidential information converted to electronic data.

3.09     PERFORMANCE STANDARDS AND GOALS

         In performing its obligations under this Agreement, NAMM shall act at
         all times in a professional manner, devoting its efforts in good faith
         and with reasonable


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         diligence to the performance of this Agreement. NAMM shall provide
         services in conformity with all applicable standards set forth in the
         HMO contract pursuant to which Medical services are being arranged for
         the PHO, as managed by the Company.

         NAMM's overall performance hereunder will be evaluated by reference to
         goals the Parties have established including the following (provided
         that except as specifically provided in Section 5.02 or unless
         otherwise agreed to by the Parties, the amount of NAMM's compensation
         provided for in Article V below is not dependent on meeting such goals
         but may lead to termination for Cause under Section 7.02. The Company
         understands and accepts that NAMM's ability to comply with these
         standards is based, at least in part, on its willingness to accept and
         implement NAMM's recommendations made pursuant to this Agreement):

         (A)      Eligibility processing: (a) Electronic eligibility shall be
                  loaded within the greater of five (5) days or beginning of the
                  next capitation cycle and (b) Paper eligibility shall be
                  loaded within the greater of fourteen (14) days or the
                  beginning of the next capitation cycle following NAMM's
                  receipt of eligibility.

         (B)      Claims processing and turnaround: (a) NAMM shall maintain
                  processing and financial accuracy of 95%, (b) 90% of clean
                  claims shall be processed within 21 days, and (c) 100% of
                  clean claims shall be processed within 30 days of receipt by
                  NAMM.

         (C)      Referral processing and turnaround: (a) Routine referrals
                  shall be turned around within 24 hours of submission of
                  complete medical information and (b) urgent referrals shall be
                  turned around on the same day as receipt of complete medical
                  information.

                                   ARTICLE IV

                           OBLIGATIONS OF THE COMPANY

4.01     AUTHORITY OF THE COMPANY

         The Board of Directors of the Company ("Board") shall be the governing
         body of the Company and shall at all times exercise ultimate control
         over the financial assets, operations and Business of the Company and
         shall have the right under this Agreement to direct NAMM on how to
         expend any funds or assets of the Company. The responsibilities of the
         Company include, but are not limited to, managing and administering the
         Company's operations not delegated to NAMM hereunder, and accepting or
         rejecting recommendations by NAMM therefore. The Company shall continue
         to exercise general responsibility for the operation and affairs of the
         Company. NAMM shall administer the Company's adopted plans and criteria
         and perform the services identified in this Agreement and in Exhibit A,
         consistent with the directives and approvals of the Company.

4.02     OWNERSHIP OF ASSETS

         The Company will own all of its assets purchased specifically for the
         Company for purposes of managing the Business, subject to the
         limitations thereon set forth in


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         Section 3.06 above. Upon termination of this Agreement as described in
         Article VII, Company shall retain title and ownership of all said
         assets.

4.03     THE COMPANY'S RESPONSIBILITIES

         HOSPITAL COOPERATION. The Board of the Company will use its best
         efforts to assure that the management personnel of the Hospital
         cooperate and give full support to the provisions of this Agreement.

         PROVIDING PHYSICIANS. The Board of the Company will use its best
         efforts to encourage physicians, including a sufficient number of
         primary care physicians, to participate in the PHO and to accept Risk
         Contracts where payments are made on a capitated basis to primary care
         physicians.

         ANCILLARY SERVICES. NAMM shall arrange for the PHO to contract for the
         provision of ancillary and non-hospital services through entities
         affiliated with the Hospital, or other similarly situated providers
         willing to contract. The Company shall cause the entities affiliated
         with the Hospital to price those ancillary and other non-hospital
         services which they wish to provide through HMO contracts covered by
         the PHO's Risk Agreements at prices which are competitive with those
         otherwise available to HMOs in the same or similarly situated community
         in the Chicago Metropolitan area at the time the Risk Contracts are
         executed. Unless otherwise agreed to by the parties, the Company shall
         cause the ancillary providers affiliated with a Hospital to provide
         such services at prices that are at least equal to the lowest prices
         that the affiliated entity offers, at the time the Medicare-risk
         contracts are executed, to any other payors (other than reimbursements
         received from Medicaid) in the community. To implement this pricing
         process, NAMM will actuarially determine a market-competitive price
         based on its assessment of the market and will discuss with the
         Company, Hospital and affiliated entity the basis for its
         recommendations and will obtain input from the Hospital; the Hospital
         affiliated entity will then have a right of first refusal to contract
         to provide such services at the price so established by NAMM.

         HOSPITAL SERVICES. The Company, the PHO, and NAMM shall discuss and
         agree on appropriate and fair rates to be paid by the PHO for services
         provided by the Hospital. NAMM agrees that the Hospital rates to be
         paid by the PHO may provide for adjustments in per diem rates based on
         actual Hospital costs, in order to provide incentives for physicians to
         control Hospital costs.

         DISTRIBUTION OF SURPLUS FUNDS. The distribution of PHO surplus funds
         relating to Risk Contracts shall be made as set forth in Exhibit B
         hereto. The Company, or at its instruction, NAMM shall be responsible
         for making the actual distribution of any such funds.

4.04     THE COMPANY'S FINANCIAL RESPONSIBILITIES

         Deficits of the two risk service fund accounts are dealt with as set
         forth in Exhibit B.

         The other financial responsibilities of the Company shall include, but
         not be limited to, directly providing or paying the cost of providing
         the following:

         (A)      Processing all payments to health care providers.


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         (B)      interest expense for monies borrowed by the Company.

         (C)      Repayment of principal for monies borrowed by the Company.

         (D)      Attorneys' fees and expenses incurred by or on behalf of the
                  Company, relating to litigation by or against the Company or
                  otherwise directly relating to the Company's operations or
                  Business.

         (E)      Fees for accountants or consultants retained to audit the
                  Company and/or prepare and submit tax forms for the Company.

         (F)      A program of property, liability and other forms of insurance
                  coverage, limits and carriers acceptable to NAMM.

         (G)      All costs associated with investments or loans made by the
                  Company.

         (H)      Any dividends or distributions paid to shareholders of the
                  Company.

         (I)      Remuneration, if any, of the Company's officers and Board
                  members.

         (J)      Any other fees, costs, expenses or taxes paid by NAMM (in all
                  cases in conformity with the budget approved by the Company)
                  relating to the Business or operations of the Company.

4.05     BOARD COMMITTEE MEETINGS

         The Company Board and the PHO Operating Committee shall schedule and
         hold regular, periodic meetings. NAMM shall provide reports, which it
         is required to provide by the terms of this Agreement, to the Board and
         Operating Committee prior to such meetings. Representatives of NAMM may
         be invited to be present at such meetings and shall be given prior
         notice of all regular and special meetings of the Board and Operating
         Committee, provided that the Board shall have the right to request that
         NAMM be excluded from any meeting in which NAMM's performance will be
         discussed, or otherwise as determined by the Board. Representatives of
         NAMM shall also attend such Company and PHO committee meetings as NAMM
         and the Company agree are necessary for a NAMM representative to
         attend.

                                   ARTICLE V

                              COMPENSATION TO NAMM

5.01     BASIS FOR ACCOUNTING

         The accounting year for the Company shall be October 1 through
         September 30. Revenue and expenses shall be determined on an accrual
         basis and be consistent with generally accepted accounting principles.

5.02     NAMM'S PARTICIPATION IN ANY COMPANY PROFITS

         NAMM shall be paid a management fee for its services related to risk
         contracts hereunder ("Management Fee") as outlined in Exhibit C.


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                                   ARTICLE VI

                                  EXCLUSIVITY

6.01     COMPANY EXCLUSIVITY

         For the term of this Agreement, the Company, the Hospital affiliated
         with the Company and its affiliated hospital entities will use NAMM to
         manage their Risk Contracts unless otherwise agreed to by NAMM. For the
         term of this Agreement, the Company, the Hospital affiliated with the
         Company and its affiliated hospital entities will not joint venture
         with, or otherwise engage, any third party company (other than NAMM)
         for the management of their risk business unless otherwise agreed to by
         NAMM.

6.02     NAMM EXCLUSIVITY

         During the term of this Agreement and for a period of six months
         thereafter, NAMM shall not provide capitation management services to
         any physician organization that is comprised in whole or in part of PHO
         primary care physicians without the express written consent of the
         Company. NAMM shall have no other exclusivity restrictions.

6.03     NON-SOLICITATION

         During the term of this Agreement and for a one-year period thereafter,
         NAMM will not solicit for employment or services any person employed by
         Company nor the Hospitals, Physician Organizations and PHOs affiliated
         with the Company. During the term of this Agreement and for a one-year
         period thereafter, neither the Company nor the Hospitals, Physician
         Organizations and PHOs affiliated with the Company will solicit for
         employment or services any person employed by NAMM.

                                  ARTICLE VII

                              TERM AND TERMINATION


7.01     TERM

         The term of this Agreement shall be from the Effective Date for a term
         of two (2) years and shall automatically renew for another one year
         term (and shall continue to automatically renew for additional one year
         terms thereafter) unless (1) either party to this Agreement gives at
         least one year's prior written notice prior to the expiration of the
         term to the other that this Agreement will not be renewed, or (2) this
         Agreement is otherwise terminated as provided for herein.


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7.02     TERMINATION FOR CAUSE

         A party may terminate this Agreement by giving notice of termination to
         the other party, specifying the effective date of such termination, for
         the causes and within the time period set forth below:

         (A)      Thirty days following notice if such other party: (1)
                  generally does not pay its debts as they become due or admits
                  in writing its inability to pay its debts, or makes a general
                  assignment for the benefit of creditors; (ii) commences any
                  case, proceeding or other action seeking to have an order for
                  relief entered on its behalf as a debtor or to adjudicate it
                  as bankrupt or insolvent, or seeking reorganization,
                  arrangement, adjustment, liquidation, dissolution or
                  composition of it or its debts under any law relating to
                  bankruptcy, insolvency, reorganization or relief of debtors,
                  or seeking appointment of a receiver, trustee, custodian or
                  other similar official for it or for all or any substantial
                  part of its property; or (iii) takes any corporate or other
                  action to authorize or in contemplation of any of the actions
                  set forth in this Section 7.02 (B);

         (B)      Thirty days following notice if any case, proceeding or other
                  action against such other party hereunder is commenced seeking
                  to have an order for relief entered against it as debtor or to
                  adjudicate it as bankrupt or insolvent, or seeking
                  reorganization, arrangement, adjustment, liquidation,
                  dissolution or composition of it or its debts under any law
                  relating to bankruptcy, insolvency, reorganization or relief
                  of debtors, or seeking appointment of a receiver, trustee,
                  custodian or other similar official for it or for or any
                  substantial part of its property;

         (C)      Except with respect to criminal conduct, as to which there is
                  no cure period, termination of the Agreement may occur under
                  the following circumstances, provided the non breaching party
                  provides thirty (30) days' written notice to the breaching
                  party describing the breach, and at the end of such thirty
                  (30) day period the breaching party has not corrected the
                  breach to the reasonable satisfaction of the non breaching
                  party:

                  (i)      Criminal conduct, violation of law or breach of
                           fiduciary duty by a party to this Agreement.

                  (ii)     Material breach of a substantive provision of this
                           Agreement by a party or failure of NAMM to meet two
                           of the three performance standards set forth in
                           Section 3.09.

                  (iii)    Continuing failure of NAMM to maintain adequate
                           experienced staffing sufficient to provide
                           appropriate oversight to the Company or failure of
                           NAMM to manage the Company in an appropriate manner.

                  (iv)     Continuing failure of a party to use its best efforts
                           to enlist sufficient support of enough primary care
                           physicians to provide adequate levels of physician
                           services for Risk contracts entered into by the
                           Company.


                                       15
<PAGE>   13


                  (v)      Change in law as described in Article VII, provided
                           that the attempt to address such change, as also
                           described in such section, is unsuccessful.

                  (vi)     Breach of a representation or warranty as described
                           in Article II.

         (D)      Upon an assignment or change of ownership which is not
                  authorized pursuant to Article VIII;

7.03     TERMINATION BY MUTUAL AGREEMENT

         This Agreement may be terminated upon the mutual agreement of the
         Parties, which termination agreement shall specify all of the terms of
         such termination.

7.04     CONSEQUENCES OF TERMINATION

         In the event of termination of this Agreement, the parties shall
         cooperate with one another to prevent a disruption of the Company's
         operations. The procedures to govern the conduct of the parties hereto
         after termination of this Agreement are as follows:

         (A)      NAMM shall conduct its affairs prior to the effective date of
                  the termination of this Agreement in such a manner that it
                  protects the interests of the Company and allows an orderly
                  takeover of NAMM's duties.

         (B)      On the effective date of the termination of this Agreement:
                  (1) NAMM shall return all property (including, but not limited
                  to, equipment, manuals and supplies) of the Company in a
                  manner that is reasonably requested by the Company, that can
                  be accommodated by NAMM using existing NAMM equipment and that
                  will allow the Company to continue its operations, and (2) the
                  Company shall return all property (including, but not limited
                  to, equipment, manuals, programs of NAMM and supplies) of NAMM
                  in a manner that is reasonably requested by NAMM, that can be
                  accommodated by Company using existing Company equipment and
                  that will allow the Company to continue its operations further
                  provided, however, that the Company shall not be required to
                  return any records or documents which, the Company is entitled
                  to use in connection with its operations, pursuant to Section
                  3.06. NAMM will consult with the Company after the date of
                  termination with regard to the above mentioned materials.

         (C)      Within 180 days following the effective date of the
                  termination of this Agreement, either party may review any
                  records or documents of the other party relating to the
                  Company and the services provided by NAMM hereunder, in order
                  that an accounting may be conducted to settle all claims that
                  each party hereto may have against the other party.

         (D)      Company shall make one surplus payment to NAMM following the
                  end of the Agreement. This payment will be equal to five
                  percent (5%) of the surplus earned through the end of the
                  contract term. This surplus payment will be based on net
                  income recorded for the period, and shall include income from
                  the professional services fund, reinsurance recoveries, and
                  any HMO incentive funds received through the end of the
                  contract term.


                                       16


<PAGE>   14


         (E)      NAMM shall cooperate with Company or its designee in
                  transitioning the claims processing, claims payment and
                  surplus fund management of any other management activity which
                  obligations shall survive the termination of this Agreement.
                  Except as specified elsewhere in this Agreement or as required
                  by law, NAMM shall have no obligations to the Company after
                  the date of termination of this Agreement.

         (F)      In the event of termination of this Agreement, either party
                  hereto shall be entitled to all remedies provided in this
                  Agreement in addition to any other remedies that are available
                  to it under law or equity, including the remedies of specific
                  performance, injunctions or any other measures that either
                  party hereto shall believe necessary to take to protect its
                  interests under this Agreement, including but not limited to
                  its rights to protect the exclusivity provisions hereof.

         (G)      In the event of termination of this Agreement NAMM will at the
                  Company's option, continue to pay claims for Dates of Services
                  prior to the termination date for a fee of $2.00 per
                  commercial equivalent member per month for every month that
                  the company desires claims payment RUNOUT services.

                                  ARTICLE VIII

                                 MISCELLANEOUS

8.01     ASSIGNMENT

         This Agreement shall not be assigned by either Party hereto without the
         prior written consent of the other Party provided, however, that the
         Company consents to NAMM assigning or subcontracting any of the
         services hereunder to a subsidiary of NAMM, or any or its subsidiaries
         or Affiliates, so long as such assignee or subcontractor agrees to be
         bound by the terms and conditions of this Agreement, NAMM agrees to
         continue to be bound by the terms of this Agreement and the conditions
         of the third paragraph of this Section 8.01 continue to be met.

         ORGANIZATIONAL CHANGE. It is recognized that NAMM, the Company or its
         affiliated Hospitals, Physician Organizations and/or PHOs may undergo
         organizational changes during the term of this Agreement for good and
         valid reasons that are important to their future success. It is also
         recognized that the obligations and relationships established by this
         Agreement implement important strategies for the Parties and must,
         therefore, be protected from any harmful influence that might be caused
         by organizational evolution.

         NAMM. If NAMM or NAMM Parent is sold by PhyCor, Inc. to another company
         ("New Owner) or is spun off as a separate company ("Newco"), except as
         provided in the next sentence of this paragraph, the Company may
         terminate this Agreement with NAMM for Cause. However, without
         providing the Company with a right to terminate this Agreement with
         NAMM for Cause, a New Owner or a Newco may result from an organization
         change or may assign this Agreement to such a New Owner or a Newco
         provided that New owner or Newco is not a hospital network,


                                       17


<PAGE>   15


         payor, Physician organization or other entity which could be considered
         a competitor of Company or its affiliated Hospitals, entities, or PHO.

         COMPANY. The Company may assign this Agreement to any new entity
         created through merger, acquisition, or other organizational change
         without the consent of NAMM unless such third party entity is a
         competitor of NAMM providing the same services to third parties that
         NAMM is providing to the Company. The Company shall be entitled to
         assign this Agreement to any subsidiary or affiliate corporation of the
         Company, which is authorized to conduct business, and is duly formed as
         a for-profit or not-for-profit corporation in the State of Illinois.

         APPROVAL. If there is an assignment that is not approved as described
         herein, there shall be a termination of this Agreement as described
         above (unless the Parties agree otherwise). Notwithstanding the
         foregoing, the Parties agree that such approval will not be
         unreasonably withheld without good reason, which shall be based on the
         anticipation of harm to the non-assigning Party. These reasons may
         include, without limitation, consideration of the reputation of the
         party to which the agreement is proposed to be assigned, whether such
         party or a related party has sufficient experience in the area, whether
         such party or a related party is a competitor or a Hospital or
         affiliated Physician Organization or PHO, or is such party's operations
         are otherwise incompatible with those of the non-assigning Party.

8.02     BINDING ON SUCCESSORS AND PERMITTED ASSIGNS

         The terms, covenants, conditions, provisions and agreements herein
         contained shall be binding upon and inure to the benefit of the parties
         hereto, and to their permitted successors and assignees.


8.03     NON-ASSUMPTION OF LIABILITIES AND INDEMNIFICATION

         The parties agree to indemnify each other as follows:

         (A)      NAMM does not assume any of the obligations, liabilities or
                  debts of the Company to third parties (except for the PHO, to
                  the extent provided in this Agreement) and shall not, by
                  virtue of its performance hereunder assume or become liable
                  for any such obligations, liabilities or debts of the Company.
                  The Company agrees to indemnify and hold NAMM harmless from
                  and against any and all such obligations, liabilities and
                  debts of the Company.

         (B)      The Company does not assume any of the obligations,
                  liabilities or debts of NAMM and shall not, by virtue of its
                  performance hereunder, assume or become liable for any such
                  obligations, liabilities or debts of NAMM. NAMM agrees to
                  indemnify and hold the Company harmless from and against any
                  such obligations, liabilities and debts of NAMM.

         (C)      Company and NAMM are independent contractors. Except as
                  otherwise provided in this Agreement, neither Company nor NAMM
                  nor any of their respective agents or employees shall be
                  liable for any act or omission of the other party; and each
                  party shall remain responsible for or liable for its own acts
                  or actions.


                                       18


<PAGE>   16


8.04     INSURANCE

         (A)      Company and PHO shall purchase and maintain, at the sole cost
                  and expense of Company, policies of comprehensive general
                  liability insurance and such other insurance in such amounts
                  as shall be agreed upon between the Company and NAMM as is
                  necessary to ensure Company and its agents and employees,
                  acting within the scope of their duties, against any claim or
                  claims arising by reason of personal injuries or death
                  occasioned directly or indirectly in connection with their
                  performance of any services by the Company or by such agents
                  or employees and in connection with any other coverage in
                  effect for Company as the date of this Agreement. The Company
                  shall provide NAMM with prior notification of any
                  cancellation, termination, or material alteration of any such
                  insurance policies. Prior to the expiration and/or
                  cancellation of any such policy Company shall secure
                  replacement of such insurance coverage upon the same terms and
                  provisions and furnish NAMM with a certificate of insurance
                  for such replacement insurance coverage. In the event any
                  insurance required under this section is maintained and in
                  claims-made form, subject to applicable provisions of law, the
                  party required to maintain such insurance shall ensure the
                  tall period for not less than two years after the expiration
                  of the application policy.

         (B)      NAMM shall purchase and maintain, at the sole cost and expense
                  of NAMM, policies of insurance in such amounts that shall be
                  necessary to ensure NAMM and its agents and employees acting
                  within the scope of their duties against any claim or claims
                  arising by reason of personal injuries or death occasioned
                  directly or indirectly in connection with the performance of
                  any services by NAMM or by such agents or employees and in
                  connection with any other coverage in effect for NAMM as of
                  the date of this Agreement. NAMM shall provide Company with
                  prior notification of any cancellation, termination or
                  material alteration of any such insurance policies. Prior to
                  the expiration and/or cancellation of any such policy, NAMM
                  shall secure replacement of such insurance coverage upon the
                  same terms and provisions and furnish Company with a
                  certificate of insurance for such replacement insurance
                  coverage. In the event any insurance required under this
                  section is maintained and in claims-made form, subject to
                  applicable provisions of law, the party required to maintain
                  such insurance shall ensure the tall period for not less than
                  two years after the expiration of the application policy. NAMM
                  shall name the Company and the Hospital as an additional
                  insured under such policies. NAMM will maintain these
                  coverages (or such additional coverages as the Company and
                  NAMM shall agree to) for the Company and, to the extent NAMM
                  manages other Management Companies it will obtain additional
                  coverage for those purposes.

8.05     LAWS, REGULATIONS, LICENSES

         (A)      The parties agree that they shall at all times operate in a
                  lawful manner in accordance with all requirements of
                  applicable laws, rules and regulations. NAMM shall assist the
                  Company and the PHO managed by the Company, in accordance with
                  the terms of this Agreement, in complying with all applicable
                  federal, state, and local laws, rules, and regulations
                  relating to the Company or PHO and shall use its best efforts
                  to manage and provide administrative services to the Company
                  so that it and the PHO shall maintain any necessary licenses,
                  permits, consents, and approvals from all


                                       19


<PAGE>   17


                  governmental agencies that have jurisdiction over the
                  operations of the Company or PHO. NAMM shall not be obligated
                  to the Company for failure of the Company or PHO to comply
                  with any such laws, rules, and regulations or for failure of
                  the Company or PHO to maintain any such licenses, permits,
                  consents and approvals, if the failure of the Company or PHO
                  to comply is not solely caused by an act or failure to act by
                  NAMM or its employees, agents, representatives or contractors.

         (B)      Neither party shall knowingly, purposely or negligently take
                  any action that shall cause any government authority having
                  jurisdiction over the operation of the Company, the PHO, or
                  NAMM to institute any proceeding for the rescission or
                  revocation of any necessary license, permit, consent or
                  approval.

         (C)      NAMM shall, with the written approval of the Company, have the
                  right, but not the obligation, to contest by appropriate legal
                  proceedings, diligently conducted in good faith in the name of
                  the Company, the validity or application of any law,
                  ordinance, rule, ruling, regulations, order or requirement of
                  any government agency having jurisdiction over the operation
                  of the Company. After having given its written approval, the
                  Company shall cooperate with NAMM with regard to the contest,
                  and the Company shall pay the reasonable attorney's fees,
                  costs or fines incurred with regard to the contest.

8.06     RIGHTS CUMULATIVE

         No right or remedy herein conferred upon or reserved to either NAMM or
         the Company is intended to be exclusive of any other right or remedy,
         and each and every right and remedy shall be cumulative and in addition
         to any other right or remedy given hereunder, or now or hereafter
         legally existing upon the occurrence of any event of default hereunder.

8.07     WAIVER

         The failure of either NAMM or the Company to insist at any time upon
         the strict observance or performance of any of the provisions of this
         Agreement or to exercise any right or remedy as provided in this
         Agreement shall not impair any such right or remedy or be construed as
         a waiver or relinquishment thereof. Every right and remedy given by
         this Agreement to the parties hereto may be exercised from time to time
         and as often as may be deemed expedient by the parties hereto, as the
         case may be.

8.08     CAPTIONS AND HEADINGS

         The captions and headings throughout this Agreement are for convenience
         and reference only, and the words contained therein shall in no way be
         held or deemed to define, limit, describe, explain, modify, amplify, or
         add to the interpretation, construction or meaning of any provision of
         or to the scope or intent of this Agreement nor in any way affect this
         Agreement.


                                       20


<PAGE>   18


8.09     IMPOSSIBILITY OF PERFORMANCE

         Neither the Company nor NAMM shall be deemed to be in violation of this
         Agreement if prevented from performing any obligations hereunder for
         any reasons beyond its control including, without limitation, acts of
         God or of any public enemy, flood, storm, strike, or action or inaction
         of any federal, state or local regulatory agency. Nothing in this
         Section 8.09 shall be construed to relieve NAMM or the Company, as the
         case may be, of its duty to provide the Company or NAMM, as the case
         may be, with notices it may receive of any action necessary for
         compliance with federal, state or local requirements.

8.10     NOTICE

         All notices, demands, and requests required hereunder shall be in
         writing and shall be deemed given when mailed, postage prepaid, via
         registered or certified mail or via overnight courier service, return
         receipt requested, to the following address, and/or to such other
         address or to such other person as may be designated by written notice
         given from time to time during the term of this Agreement by one party
         to the other:


         (A) to the Company at:  Northwest Community Capco, Inc.
                                 Attention: President
                                 800 W. Central Rd.
                                 Arlington Heights, IL 60005

         (B) to NAMM at:         North American Medical Management -
                                    Illinois, Inc.
                                 Attention: President
                                 High Point Plaza
                                 4415 West Harrison Street, Suite 300
                                 Hillside, IL 60162


8.11     GOVERNING LAW

         This Agreement has been executed and delivered In the State of Illinois
         and all of the terms and provisions thereof and the rights and
         obligations of the parties hereto shall be interpreted and enforced in
         accordance with the laws thereof, without regard to the conflicts of
         laws sections thereof. Notwithstanding anything contained in this
         Agreement to the contrary, the parties agree to the exclusive
         jurisdiction of any local or state court located in Cook County,
         Illinois, or the United States District Court for the Northern District
         of Illinois, and the parties waive any objection which it may have
         based on improper venue or forum non convenience to the conduct of any
         proceeding in such court; provided, further nothing contained in this
         Agreement shall affect the right of the parties to serve legal process
         in any manner permitted by law.

8.12     INVALIDITY OF PROVISIONS

         The invalidity or unenforceability of any term or condition contained
         herein shall in no way affect the validity or enforceability of the
         remainder of this Agreement. Any such provision held or declared by a
         court of competent jurisdiction to be invalid, illegal or unenforceable
         under any law applicable thereto, shall be deemed deleted from this
         Agreement without impairing or prejudicing the validity, legality, or
         enforceability of the remaining provisions hereof.


                                       21


<PAGE>   19


8.13     CHANGE OF LAW

         In the event that there shall be a change in applicable state or
         federal law or specifically in Medicare or Medicaid statutes,
         regulations, or instructions (or in the application thereof), the
         adoption of new legislation, judicial interpretations, or a change in
         any other third party payor reimbursement system, or any similar matter
         which, in a party's opinion materially and adversely affects such
         Party's (or a Hospital's or affiliated Physician Organization's or
         PHO's) rights or obligations or materially changes the economic or
         legal relationships between the Parties as set forth in the Agreement
         (a "Change") a Party may request that this Agreement shall terminate
         upon at least thirty (30) days prior advance written notice to the
         other Parties, provided that (i) the Parties will attempt in good faith
         to amend the provisions of this Agreement to comply with such Change so
         as to not materially change the economic or legal relationships between
         the Parties as set forth in this Agreement, and (ii) any such
         termination cannot occur before the effective date of the Change relied
         upon to terminate this Agreement under this Section. If the Parties and
         their attorneys do not agree that the Change materially adversely
         affects their financial operations, and/or whether proposed changes to
         this Agreement can be made which address the Change in a way which does
         not materially and adversely affects such Party's (or a Hospital's or
         affiliated Physician Organization's or PHO's) rights or obligations or
         materially change the economic or legal relationships between the
         Parties as set forth in this Agreement, an arbitrator, chosen in the
         manner described in the ADR, shall decide such undetermined matters;
         provided, however, that if the ADR process has not been completed by
         the effective date of the Change no Party shall be required to take
         actions which it reasonably believes would no longer be legal following
         the change, subject to completion of the ADR process.


8.14     DISPUTE RESOLUTION

         If during this contract, the parties are unable to resolve a dispute or
         controversy among themselves, prior to instituting any court action,
         they shall first endeavor to settle such dispute in a non-binding
         voluntary manner by referring same to mediation according to the rules
         of the American Arbitration Association.

8.15     THIRD PARTY BENEFICIARIES

         The parties to this Agreement intend that there be no third party
         beneficiaries of this Agreement.

8.16     ENTIRE AGREEMENT: CONFLICTS

         This Agreement contains the entire agreement between the parties hereto
         with regard to this subject matter, and no representations or
         agreements, oral or otherwise, between the parties not embodied herein
         or attached hereto shall be of any force and effect. Any additions or
         amendments to this Agreement subsequent hereto shall be of no force and
         effect unless in writing and signed by the parties hereto.


                                       22


<PAGE>   20


8.17     EXHIBITS

         All Exhibits to this Agreement are to be considered part of this
         Agreement, as if incorporated herein, and all terms, provisions and
         conditions stated in such Exhibits shall be binding on the parties to
         this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the date and
year set forth above.

                              NORTHWEST COMMUNITY CAPCO, INC.

                              BY: /s/
                                 -----------------------------------------------

                              Its:  President

                              Date:  5/31/2000
                                   ---------------------------------------------


                              NORTH AMERICAN MEDICAL MANAGEMENT - ILLINOIS, INC.

                              BY:  /s/ Wayne Aardsma
                                 -----------------------------------------------
                                       Wayne Aardsma


                              Its:  President

                              Date:  5/15/2000
                                   --------------------------------------------


                                       23
</TEXT>
</DOCUMENT>
