Case 24-90533 Document 827-1 Filed in TXSB on 01/07/25 Page 2 of 27
EXECUTION VERSION
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (the “Agreement”) dated December 31, 2012 is between
California Forensic Medical Group, Incorporated, a California professional corporation (the “Company”)
and California Forensic Management Group, Inc., a Delaware corporation (the “Management Company”).
The Company and the Management Company are collectively referred to herein as the “Parties”.
RECITALS
A.
The Company is engaged in the provision of professional medical services (the
“Practice”) and operates practice sites (the “Practice Sites”) for the practice of medicine in the
jurisdictions listed on Exhibit A (the “Applicable States”), and the Company’s physician employees and
contractors (the “Physicians”) hold all licenses and permits necessary to practice medicine in the
Applicable States in which they practice medicine; and
B.
The Company desires to engage the Management Company to provide and arrange
certain management and administrative services.
AGREEMENT
The Parties hereby agree as follows:
ARTICLE I
ENGAGEMENT AND AUTHORITY
1.1
Engagement of the Management Company. On the terms and subject to the conditions
contained in this Agreement, the Company hereby engages the Management Company, and the
Management Company hereby accepts engagement by the Company, to provide and/or to arrange for the
provision of the Management Services described in Article II and Exhibit B to the Company. The
Company expressly acknowledges that the Management Company may subcontract with third-parties for
the performance of certain Management Services.
1.2
Relationship of Parties. In performing their respective duties and obligations under this
Agreement, the Parties are independent contractors, and as such they will remain professionally and
economically independent of each other. The Parties will not be deemed to be joint venturers, partners or
employees of each other.
1.3
Conduct of Medical Practice. The Company will be solely and exclusively in control of
the provision of professional medical services, and the Management Company will neither have nor
exercise any control or discretion over the methods by which the Physicians practice medicine pursuant to
this Agreement. Nothing in this Agreement will be construed to alter or otherwise affect the legal, ethical
or professional relationships between and among the Company, the Physicians and their patients, nor does
anything in this Agreement abrogate any right, privilege or obligation arising from or related to the
physician-patient relationship.
1.4
Company Action. Unless otherwise specified in this Agreement, when this Agreement
calls for the approval, consent, direction or other action by the Company, the action of the person
designated as the “Chief Executive Officer” of the Company pursuant to the Company’s bylaws (the
“Company Designee”) will constitute the action of the Company. In each instance, the Management
Company may assume that all consents and approvals required by the Company’s articles of
incorporation and bylaws (the “Company Governing Documents”) have been obtained.

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ARTICLE II
MANAGEMENT SERVICES
2.1

General Authority.

(a)
The Management Company will provide or arrange for the provision of the
management services set forth in Exhibit B (the “Management Services”) and the Management Company
will be the Company’s exclusive provider of Management Services. Notwithstanding the foregoing, the
Management Company will not provide any service which would constitute the clinical practice of
medicine or the provision of professional medical services.
(b)
The Company expressly authorizes the Management Company to perform the
Management Services in the manner that the Management Company deems reasonably appropriate to
meet the day-to-day business needs of the Company, including the performance of specific business
office functions at locations other than the Practice Sites. The Company will not prevent the Management
Company from providing, or causing to be provided, and the Management Company will provide or
cause to be provided, the Management Services in a business-like manner and in compliance with (i) all
applicable Laws, (ii) all Orders by which the Parties are bound or to which the Parties are subject, and
(iii) the standards, rules and regulations of the United States Department of Health and Human Services
and any other federal, state or local governmental agency or third-party payor exercising authority with
respect to, accrediting, or providing reimbursement for, the Company or the Practice).
2.2
Services the Management Company May Not Provide. The Management Company
will not provide any of the following services to the Company:
(a)

assigning or designating clinical providers to treat patients;

(b)

assuming responsibility for the care of patients;

(c)

serving as a party to whom bills or charges are made payable on the Company’s

behalf;
(d)
engaging in any activity that involves the practice of medicine or that would
cause either Party to be subject to licensure under applicable state licensure Laws; or
(e)
providing the Company with any inducement or remuneration in exchange for
recommending to patients any services provided by the Management Company.
ARTICLE III
GENERAL OBLIGATIONS
3.1
Duty to Cooperate. The Parties acknowledge that mutual cooperation is critical to the
performance of their respective duties and obligations under this Agreement. To ensure the
communication necessary for mutual cooperation, the Company will permit a representative designated
by the Management Company (the “Management Company Representative”) to attend and participate (in
a non-voting capacity) in all meetings of the Company Designee and all meetings of the Company’s
equityholders called pursuant to the Company Governing Documents or as otherwise required by
applicable Law. The Company will give the Management Company at least five days prior written notice
of each such meeting, specifying the date, time and place of the meeting and, if the meeting is a special
meeting, the purposes for which the meeting is called.
3.2
Physicians. The Company will employ or engage all Physicians necessary to conduct,
manage and operate in a proper and efficient manner the medical practice conducted at the Practice Sites.
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3.3
Business Associate Provisions. The Management Company acknowledges and agrees
that: the Company is a “covered entity” (as defined in the Administrative Simplification section of the
Health Insurance Portability and Accountability Act of 1996, P.L. 104-191, and its implementing
regulations (45 C.F.R. parts 160-164) (collectively “HIPAA”); and the Management Company is a
“business associate” (as defined under HIPAA) of the Company when the Management Company
provides services to the Company involving “protected health information” (as defined under HIPAA)
pursuant to this Agreement. The Management Company agrees to perform all services involving
protected health information in accordance with the Business Associate Provisions set forth on Exhibit C.
3.4

Quantity, Service and Specialty Requirements; Standards.

(a)
The Management Company will periodically review, and make recommendations
to the Company regarding, the appropriate number of full and part-time Physicians needed by the
Company to operate the Practice Sites and treat patients presenting themselves at the Practice Sites (the
“Physician Staffing Levels”). Final determinations with respect to the Physician Staffing Levels will at
all times be the responsibility of the Company.
(b)
The Company, in consultation with the Management Company, will be
responsible for (i) developing and implementing utilization review and quality assurance guidelines
(consistent with guidelines imposed by third-parties), (ii) supervising the Physicians’ submission to the
Company of complete, accurate and timely documentation for coding and billing services provided in the
Practice, (iii) supervising the taking of corrective action by Physicians when Physicians do not satisfy
guidelines and standards, (iv) credentialing of Physicians for the performance of specific procedures, (v)
handling impaired Physicians, and (vi) overseeing, developing and implementing policies of a purely
medical nature (including medical records documentation, clinical communications with patients and the
determination of resources to be used for particular patients).
3.5

Employment and Independent Contractor Agreements.

(a)
The Company will employ each Physician who is or becomes an employee of the
Company pursuant to a written employment agreement substantially in a form prepared by the
Management Company and approved by the Company (the “Employment Agreement”). The Company
may not amend the form of Employment Agreement without the Management Company’s prior written
approval.
(b)
The Company will engage each Physician who is or becomes an independent
contractor of the Company pursuant to a written independent contractor agreement substantially in a form
prepared by the Management Company and approved by the Company (the “Independent Contractor
Agreement”). The Company may not amend the form of Independent Contractor Agreement without the
Management Company’s prior written approval.
3.6

Regulatory Matters.

(a)
The Physicians will be free, in their sole discretion, to exercise their professional
judgment on behalf of patients of the Company. Nothing in this Agreement permits the Management
Company to affect or influence the professional judgment of any Physician. To the extent that any act or
service required or permitted of the Management Company under any provision of this Agreement is
deemed to constitute the practice of medicine, the ownership or control of a medical practice or the
operation of a clinic, such provision of this Agreement will be void ab initio and the performance of such
act or service by the Management Company will be deemed waived by the Company.
(b)
The Parties agree to cooperate with one another in the fulfillment of their
respective obligations under this Agreement, and to comply with (i) all Laws applicable to the Company
and all Orders by which the Company is bound or to which the Company is subject (including Laws and
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Orders relating to the practice of medicine, institutional and professional licensure, pharmacology and
dispensing medicines or controlled substances, medical documentation, medical record retention,
laboratory services, unprofessional conduct, fee-splitting. referrals, billing and submission of false or
fraudulent claims, claims processing, quality, safety, medical necessity, medical privacy and security,
patient confidentiality and informed consent and the hiring of employees or acquisition of services or
supplies from Persons excluded from participation in government healthcare programs), and (ii) the
requirements of any insurance company insuring the Company or the Management Company against
liability for injury or accident in or on the premises of the Company or the Practice.
3.7
Books and Records. The Company will retain and provide the Management Company
with full and unrestricted access to its books and records (including work papers in the possession of its
accountants) with respect to all transactions and the Company’s financial condition, assets, liabilities,
operations and cash flows.
ARTICLE IV
COMPENSATION OF THE MANAGEMENT COMPANY AND DEFICIT FUNDING
4.1
Management Fee. Upon the terms and subject to the conditions contained in this
Agreement, the Company will pay the Management Company the fee (the “Management Fee”) set forth
in Exhibit D during the Term in consideration of the Management Services rendered by the Management
Company pursuant to this Agreement.
(a)
The Parties have determined the Management Fee to be equal to the fair market
value of the Management Services, without consideration of the proximity of the Company to any referral
sources or the volume or value of any referrals from the Management Company or any of its Affiliates to
the Company or from the Company to the Management Company or any of its Affiliates, that is
reimbursed under any governmental or private health care payment or insurance program.
(b)
Payment of the Management Fee is not conditioned upon a requirement that the
Company make referrals to, be in a position to make or influence referrals to, or otherwise generate
business for the Management Company or any of its Affiliates or a requirement that the Management
Company or any of its Affiliates make referrals to, be in a position to make or influence referrals to, or
otherwise generate business for the Company. The Management Fee does not include any discount,
rebate, kickback, or other reduction in charge.
(c)

The Management Fee may not be changed except by written agreement of the

Parties.
(d)
Remittances to the Company of monies collected will be made net of that portion
of the Management Fee then due and owing to the Management Company pursuant to this Agreement.
4.2
Expense Reimbursement. In addition to the Management Fee, the Company will
reimburse the Management Company for all reasonable expenses (including travel, meals and lodging
expenses) incurred by the Management Company in connection with the provision of the Management
Services; provided that such expenses are approved in advance by the Company or are included in the
Company’s budget for the applicable fiscal year (the “Budget”). Remittances to Company of monies
collected will be made net of amounts for which the Management Company is then due to reimbursement
from the Company pursuant to this Agreement.
4.3
Failure to Pay. The Company’s failure to pay any portion of the Management Fee or
reimbursable expenses when due will be a material breach of this Agreement by the Company.
4.4
Deficit Funding Loan Agreement. If the Company does not have sufficient cash to pay
for its liabilities or financial obligations that are permitted to be incurred by the Company (including any
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portion of the Management Fee or reimbursable expenses owed to the Management Company hereunder),
by that certain Deficit Funding Loan Agreement of even date herewith (“Deficit Funding Loan
Agreement”), then the Management Company may, in its sole discretion, make “Advances” (as defined in
the Deficit Funding Loan Agreement) to the Company upon request for the purpose of enabling the
Company to pay such liabilities and meet such financial obligations. Such Advances will bear interest as
set forth in the Deficit Funding Loan Agreement. The Company will repay such Advances in accordance
with the terms of the Deficit Funding Loan Agreement.
4.5
No Recourse or Personal Liability. All amounts due and owing under this Agreement
are repayable solely from the assets of the Company, and the Management Company will have no
recourse against any equityholder, director, manager, officer or employee of the Company for any such
amounts and under no circumstances shall any equityholder, director, manager, officer or employee of the
Company have personal liability for any such amounts. For the avoidance of doubt, the Management
Company acknowledges and agrees that no equityholder, director, manager, officer or employee of
Company shall have personal liability for liability under or sums that may be due and owning pursuant to
this Agreement.
4.6
Collateral Assignment. The Company hereby agrees, upon notice from the Collateral
Agent under that certain Credit Agreement, dated as of November ___, 2012, among the Management
Company, certain of the Management Company’s affiliates, the lenders from time to time party thereto,
and Ares Capital Corporation, as administrative agent and collateral agent (in such capacity, the
“Collateral Agent”), as the same may be amended, restated, refinanced, supplemented or otherwise
modified from time to time hereafter (the “Credit Agreement”), that all amounts payable to the
Management Company in connection with this Agreement shall be deposited into a deposit account
subject to a control agreement in favor of the Collateral Agent, notwithstanding any contrary instruction
or direction for payment provided by the Management Company.
ARTICLE V
TERM AND TERMINATION
5.1
Initial Term; Automatic Renewals. The initial term of this Agreement commences on
the date of this Agreement and ends on the tenth anniversary of the date of this Agreement, subject to
earlier termination in accordance with Section 5.2 (the “Initial Term” and, together with all Renewal
Terms, the “Term”). After the Initial Term, this Agreement will automatically renew for successive fiveyear terms (each a “Renewal Term”) unless this Agreement is otherwise terminated in accordance with
Section 5.2.
5.2

Termination. This Agreement may be terminated during the Term:
(a)

by mutual agreement of the Parties;

(b)
by the Company immediately and without notice if (i) the Management Company
breaches this Agreement and fails to cure such breach within 45 days after receiving written notice from
the Company describing in reasonable detail the nature of the breach (provided, however, that any such
notice from the Company must be executed by the Company Designee to be effective), and such breach is
material and has a materially adverse impact on the Company or (ii) the Management Company admits in
writing its inability to pay its debts generally when due, applies for or consents to the appointment of a
trustee, receiver or liquidator of all or substantially all of its assets, files a petition in voluntary bankruptcy
or makes an assignment for the benefit of creditors, or otherwise, voluntarily or involuntarily, takes or
suffers action taken under any applicable Law for the benefit of debtors, except for the filing of a petition
in involuntary bankruptcy against the Management Company which is dismissed within 60 days
thereafter;
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(c)
by the Management Company immediately and without notice if (i) the Company
breaches this Agreement and fails to cure such breach within 45 days after receiving written notice from
the Management Company describing in reasonable detail the nature of the breach, (ii) the Company
admits in writing its inability to pay its debts generally when due, applies for or consents to the
appointment of a trustee, receiver or liquidator of all or substantially all of its assets, files a petition in
voluntary bankruptcy or makes an assignment for the benefit of creditors, or otherwise, voluntarily or
involuntarily, takes or suffers action taken under any applicable Law for the benefit of debtors, except for
the filing of a petition in involuntary bankruptcy against the Company which is dismissed within 60 days
thereafter, or (iii) the Company fails to provide notice to the Management Company of a meeting
pursuant to Section 3.1; or
(d)
by the Management Company immediately and without notice upon termination
of the Deficit Funding Loan Agreement.
5.3

Effect of Expiration or Termination.

(a)
The expiration or termination of this Agreement in accordance with Section 5.2
will automatically relieve and release each Party from the executory portion of such Party’s obligations
under this Agreement; provided, however, that all obligations expressly extended beyond the Term by the
terms of this Agreement (including this Article V, Article VI, Article VII and Article IX) will survive the
expiration or termination of this Agreement.
(b)
Promptly (but in any event within 10 days) after the expiration or termination of
this Agreement, the Company will, and will cause its Affiliates, directors, managers, officers,
equityholders, employees, agents, successors and permitted assigns to, either return to the Company or
destroy, delete or erase all written, electronic or other tangible forms of Confidential Information as
required under Section 6.2.
(c)
Promptly (but in any event within 10 days) after the termination or expiration of
this Agreement, the Company will pay to the Management Company all Management Fees earned or
accrued under this Agreement through the termination date, reimburse all reimbursable expenses incurred
before the termination date and repay all Advances funded pursuant to the Deficit Funding Loan
Agreement before the termination date thereunder; provided, however, that if the Management Company
terminates this Agreement pursuant to Section 5.2(c) or the Company terminates this Agreement in
breach of this Agreement, then such payment will include the immediate payment of all Management
Fees owed to the Management Company for the remainder of the Term.
(d)
After the expiration or termination of this Agreement, the Company will retain
and provide the Management Company with full and unrestricted access to its books and records
(including work papers in the possession of its accountants) with respect to all transactions and the
Company’s financial condition, assets, liabilities, operations and cash flows during the Term.
ARTICLE VI
RESTRICTIVE COVENANTS
6.1
Restrictive Covenants. In the course of receiving the Management Services, the
Company will have access to the most sensitive and most valuable trade secrets, proprietary information
and other confidential information, including management reports, marketing studies, marketing plans,
business plans, financial statements, feasibility studies, financial, accounting and statistical data, price and
cost information, customer lists, contracts, policies and procedures, internal memoranda, reports and other
materials or records of a proprietary or confidential nature (collectively, “Confidential Information”) of
the Management Company, which constitute valuable business assets of the Management Company and
its Affiliates, and the use, application or disclosure of such Confidential Information will cause substantial
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and possibly irreparable damage to the business and asset value of the Management Company. Therefore,
as an inducement for the Management Company to enter into this Agreement and to protect the
Confidential Information and other business interests of the Management Company, the Company agrees
to be bound by the restrictive covenants contained in this Article VI.
6.2
Disclosure of Confidential Information. After the date of this Agreement, the
Company will, and will cause its Affiliates, directors, managers, officers, equityholders, employees,
agents, successors and permitted assigns to, keep confidential and not disclose to any other Person or use
for their own benefit or the benefit of any other Person any Confidential Information; provided, however,
that the obligations under this Section 6.2 will not apply to Confidential Information that (i) is or becomes
generally available to the public without breach of the commitments contemplated by this Section 6.2, (ii)
was available to the Company or its Affiliates, directors, managers, officers, equityholders, employees or
agents on a non-confidential basis before the date of this Agreement or (iii) is required to be disclosed by
any Law or Order; provided that as soon as practicable before such disclosure, the Company gives the
Management Company prompt written notice of such disclosure to enable the Management Company to
seek a protective order or otherwise preserve the confidentiality of such information. Promptly after the
expiration or termination of this Agreement, the Company will, and will cause its Affiliates, directors,
managers, officers, equityholders, employees, agents, successors and permitted assigns to, (i) either return
to the Company or destroy, delete or erase (with written certification of such destruction, deletion or
erasure provided to the Management Company by the Company) all written, electronic or other tangible
forms of Confidential Information. After the expiration or termination of this Agreement, the Company
will not, and will cause its Affiliates, directors, managers, officers, equityholders, employees, agents,
successors and permitted assigns not to, retain any copies, summaries, analyses, compilations, reports,
extracts or other materials containing or derived from any Confidential Information. Notwithstanding
such return, destruction, deletion or erasure, all oral Confidential Information and the information
embodied in all written Confidential Information will continue to be held confidential pursuant to the
terms of this Section 6.2.
6.3
Covenant Not to Solicit. Until the fifth anniversary of the expiration or termination of
this Agreement, the Company will not, directly or indirectly:
(a)
solicit or induce or attempt to solicit or induce (including by recruiting,
interviewing or identifying or targeting as a candidate for recruitment) any director, limited liability
company manager, partner, officer, employee, independent contractor or other agent of the Management
Company or any of its Affiliates (including the other professional practice groups to which the
Management Company provides business, administrative and back office services) other than the
Company (collectively, the “Company Group”)), who is acting in such capacity or acted in such capacity
at any time within the 12-month period immediately preceding the date of such solicitation, inducement
or attempt, (a “Business Associate”) to terminate, restrict or hinder such Business Associate’s association
with any Company Group entity or interfere in any way with the relationship between such Business
Associate and any Company Group; provided, however, that after the termination or expiration of this
Agreement, general solicitations published in a journal, newspaper or other publication or posted on an
internet job site and not specifically directed toward Business Associates will not constitute a breach of
the covenants in this Section 6.3(a);
(b)
hire or otherwise retain the services of any Business Associate as equityholder,
director, limited liability company manager, partner, officer, employee, independent contractor, licensee,
consultant, advisor, agent or in any other capacity, or attempt or assist anyone else to do so; or
(c)
interfere with the relationship between any Company Group entity and any
Person who is a supplier, lessor, lessee, dealer, distributor, licensor, licensee, proprietor, partner, joint
venturer, investor, lender, consultant, agent, customer, patient, physician referral source or any other
Person having a business relationship with the Company Group, or attempt or assist anyone else to do so.
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6.4
Non-Disparagement. After the date of this Agreement, the Company will not, directly
or indirectly, make any disparaging, derogatory, negative or knowingly false statement about any
Company Group entity or any of their respective directors, managers, officers, equityholders, employees,
agents (including the Management Company Representative), successors and permitted assigns, or any of
their respective businesses, operations, financial condition or prospects, except as required by applicable
Law or Order.
6.5
Scope of Covenants; Equitable Relief. The Company acknowledges and agrees that (i)
the restrictive covenants contained in this Article VI and the territorial, time, activity and other limitations
set forth herein are commercially reasonable and do not impose a greater restraint than is necessary to
protect the goodwill and legitimate business interests of the Company Group and its businesses, (ii) any
breach of the restrictive covenants in this Article VI will cause irreparable injury to the Company Group
and that actual damages may be difficult to ascertain and would be inadequate, and (iii) if any breach of
any such covenant occurs, then the Management Company will be entitled to injunctive relief in addition
to such other legal and equitable remedies that may be available (without limiting the availability of legal
or equitable, including injunctive, remedies under any other provisions of this Agreement), and (iv) the
Company hereby waives the claim or defense that an adequate remedy at law exists for such a breach.
6.6
Equitable Tolling. If the Company breaches any covenant in this Article VI, then the
duration of such covenant will be tolled for a period of time equal to the time of such breach and, if the
Management Company seeks injunctive relief or other remedies for any such breach, then the duration of
such covenant will be tolled for a period of time equal to the pendency of such proceedings (including all
appeals).
ARTICLE VII
INDEMNIFICATION
7.1
Indemnification. The Company will indemnify, defend and hold harmless the
Management Company, its Affiliates and their respective directors, managers, officers, equityholders,
employees, agents (including the Management Company Representative), successors and permitted
assigns (collectively, the “Management Company Indemnified Parties”) from and against all losses,
liabilities, demands, claims, actions or causes of action, regulatory, legislative or judicial proceedings or
investigations, assessments, levies, fines, penalties, damages, costs and expenses (including reasonable
attorneys’, accountants’, investigators’ and experts’ fees and expenses) incurred in connection with the
defense or investigation of any claim (“Damages”) sustained or incurred by any Management Company
Indemnified Party arising from or related to illegal activity, intentional misconduct, negligence or breach
of this Agreement by the Company and its directors, managers, officers, equityholders, employees,
agents, successors and permitted assigns (the “Company Indemnified Parties”). Provided further, that the
Management Company will indemnify, defend and hold harmless the Company Indemnified Parties from
and against all Damages sustained or incurred by the Company Indemnified Parties arising from or
related to illegal activity, intentional misconduct, negligence or breach of this Agreement by the
Management Company Indemnified Parties.
7.2
Cooperation and Settlement. The Company and the Management Company will
coordinate the defense and settlement of actions in which they are named. To the extent consistent with
insurance policies, the Company will not settle an action in which both are named, unless the
Management Company agrees to the terms and conditions of the settlement.
7.3
Advancement of Expenses. During the pendency of any suit, action or proceeding with
respect to which the Management Company is entitled to indemnification under this Article VII, the
Company will pay or reimburse the Management Company for reasonable defense expenses incurred in
advance of final disposition of such suit, action or proceeding. If the Management Company ultimately is
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not entitled to indemnification under this Article VII, then the Management Company will promptly repay
to the Company the full amount of all such expenses paid or reimbursed by the Company.
7.4
Other Remedies. The provisions of this Article VII are in addition to, and not in
derogation of, any statutory, equitable or common law remedies that the Management Company may have
with respect to this Agreement or the subject matter of this Agreement.
7.5
Survival. The Company’s indemnification obligations under this Article VII will survive
the termination or expiration of this Agreement.
ARTICLE VIII
DEFINITIONS
For purposes of this Agreement, the following terms have the following meanings:
“Advances” is defined in Section 4.4.
“Affiliate” means, with respect to a particular Person, (i) any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such Person, and (ii) any of such
Person’s spouse, siblings (by law or marriage), ancestors and decedents and (iii) any trust for the primary
benefit of such Person or any of the foregoing. The term “control” means possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of another Person, whether
through the ownership of voting securities or equity interests, by contract or otherwise.
“Agreement” is defined in the preamble to this Agreement.
“Applicable States” is defined in Recital A.
“Budget” is defined in Section 4.2.
“Business Associate” is defined in Section 6.3(a).
“Business Day” means a day that is not a Saturday, Sunday or legal holiday on which
banks are authorized or required to be closed in New York, New York.
“Company” is defined in the preamble to this Agreement.
“Company Designee” is defined in Section 1.4.
“Company Group” is defined in Section 6.3(a).
“Company Governing Documents” is defined in Section 1.4.
“Confidential Information” is defined in Section 6.1.
“Damages” is defined in Section 7.1.
“Deficit Funding Loan Agreement” is defined in Section 4.4.
“Employment Agreement” is defined in Section 3.5(a).
“HIPAA” is defined in Section 3.3.
“Independent Contractor Agreement” is defined in Section 3.5(b).
“Initial Term” is defined in Section 5.1.
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“Law” means any federal, state, local, municipal, foreign, international, multinational or
other constitution, statute, law, rule, regulation, ordinance, code, principle of common law or treaty.
“Management Company” is defined in the preamble to this Agreement.
“Management Company Indemnified Parties” is defined in Section 7.1.
“Management Company Representative” is defined in Section 3.1.
“Management Fee” is defined in Section 4.1.
“Management Services” is defined in Section 2.1(a).
“Order” means any order, injunction, judgment, decree, ruling, assessment or arbitration
award of any governmental authority or arbitrator.
“Parties” is defined in the preamble to this Agreement.
“Person” means any natural individual, corporation, partnership, limited liability
company, joint venture, association, bank, trust company, trust or other entity, whether or not legal
entities, or any governmental entity, agency or political subdivision.
“Physician Staffing Levels” is defined in Section 3.4(a).
“Physicians” is defined in Recital A.
“Practice” is defined in Recital A.
“Practice Sites” is defined in Recital A.
“Renewal Term” is defined in Section 5.1.
“Term” is defined in Section 5.1.
ARTICLE IX
GENERAL PROVISIONS
9.1
Practice of Medicine. Nothing in this Agreement will be interpreted as prohibiting the
Company or any Physician from (a) obtaining or maintaining membership on the medical staff of any
hospital or health care provider, (b) obtaining or maintaining clinical privileges at any hospital or health
care provider, or (c) referring patients to any hospital or health care provider.
9.2
Force Majeure. Neither Party will be liable for any failure or inability to perform, or
delay in performing, such Party’s obligations under this Agreement if such failure, inability or delay
arises from an extraordinary cause beyond the reasonable control of the non-performing Party; provided
that such Party diligently and in good faith attempts to cure such non-performance as promptly as
practicable.
9.3
Notices. All notices and other communications required or permitted under this
Agreement (a) must be in writing, (b) will be duly given (i) when delivered personally to the recipient, (ii)
one Business Day after being sent to the recipient by nationally recognized overnight private carrier
(charges prepaid), or (iii) four Business Days after being mailed to the recipient by certified or registered
mail (postage prepaid and return receipt requested), and (c) addressed as follows (as applicable):

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If to the Company:

with a copy (not constituting notice) to:

California Forensic Medical Group,
Incorporated
300 Foam Street, #B
Monterey, CA 93940
Attn: Chief Executive Officer
If to the Management Company:

McDermott Will & Emery LLP
227 West Monroe Street
Chicago, Illinois 60606
Attn: Brooks Gruemmer
with a copy (not constituting notice) to:

California Forensic Management Group, Inc.
300 Foam Street, #B
Monterey, CA 93940
Attn: Chief Executive Officer

McDermott Will & Emery LLP
227 West Monroe Street
Chicago, Illinois 60606
Attn: Brooks Gruemmer
and a copy (not constituting notice) to:
H.I.G. Capital, LLC
One Market – Spear Tower, 18th Floor
San Francisco, CA 94105
Attn: Rob Wolfson; Justin Reyna

or to such other respective address as each Party may designate by notice given in accordance with this
Section 9.3.
9.4
Entire Agreement.
This Agreement constitutes the complete agreement and
understanding among the Parties regarding the subject matter of this Agreement and supersedes any prior
understandings, agreements or representations regarding the subject matter of this Agreement.
9.5
Amendments. The Parties may amend this Agreement only pursuant to a written
agreement executed by the Parties.
9.6
Non-Waiver. The Parties’ respective rights and remedies under this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any Party in exercising any right,
power or privilege under this Agreement will operate as a waiver of such right, power or privilege, and no
single or partial exercise of any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or privilege. No waiver will be
effective unless it is in writing and signed by an authorized representative of the waiving Party. No
waiver given will be applicable except in the specific instance for which it was given. No notice to or
demand on a Party will constitute a waiver of any obligation of such Party or the right of the Party giving
such notice or demand to take further action without notice or demand as provided in this Agreement.
9.7
Assignment. The Company may not assign this Agreement or any rights under this
Agreement, or delegate any duties under this Agreement, without the Management Company’s prior
written consent. The Management Company may freely assign this Agreement or any rights under this
Agreement, or delegate any duties under this Agreement without the Company’s consent.
9.8
Binding Effect; Benefit. This Agreement will inure to the benefit of and bind the Parties
and their respective successors and permitted assigns. Nothing in this Agreement, express or implied,
may be construed to give any Person other than the Parties and their respective successors and permitted
assigns any right, remedy, claim, obligation or liability arising from or related to this Agreement. This
Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the Parties and
their respective successors and permitted assigns.
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9.9
Severability. If any court of competent jurisdiction holds any provision of this
Agreement invalid or unenforceable, then the other provisions of this Agreement will remain in full force
and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
9.10
References. The headings of Sections are provided for convenience only and will not
affect the construction or interpretation of this Agreement. Unless otherwise provided, references to
“Section(s)” and “Exhibit(s)” refer to the corresponding section(s) and exhibit(s) of this Agreement.
Reference to a statute refers to the statute, any amendments or successor legislation and all rules and
regulations promulgated under or implementing the statute, as in effect at the relevant time. Reference to
a contract, instrument or other document as of a given date means the contract, instrument or other
document as amended, supplemented and modified from time to time through such date.
9.11
Construction. Each Party participated in the negotiation and drafting of this Agreement,
assisted by such legal and tax counsel as it desired, and contributed to its revisions. Any ambiguities with
respect to any provision of this Agreement will be construed fairly as to all Parties and not in favor of or
against any Party. All pronouns and any variation thereof will be construed to refer to such gender and
number as the identity of the subject may require. The terms “include” and “including” indicate examples
of a predicate word or clause and not a limitation on that word or clause.
9.12
Governing Law. THIS AGREEMENT IS GOVERNED BY THE LAWS OF THE
STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
9.13
Consent to Jurisdiction. Each Party hereby (a) agrees to the exclusive jurisdiction of
any state court within Monterey County, California or, if it can obtain jurisdiction, the United States
District Court for the Northern District of California sitting in San Jose California (and the appropriate
appellate courts) with respect to any claim or cause of action arising under or relating to this Agreement,
(b) waives any objection based on forum non conveniens and waives any objection to venue of any such
suit, action or proceeding, (c) waives personal service of any and process upon it, and (d) consents that all
services of process be made by registered or certified mail (postage prepaid, return receipt requested)
directed to it at the address stated in Section 9.3 and service so made will be complete when received.
Nothing in this Section 9.13 will affect the rights of the Parties to serve legal process in any other manner
permitted by law.
9.14
Waiver of Trial by Jury. EACH PARTY HEREBY WAIVES ITS RIGHT TO A JURY
TRIAL IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING IN CONNECTION WITH
ANY MATTER RELATING TO THIS AGREEMENT.
9.15
Counterparts. The Parties may execute this Agreement in multiple counterparts, each of
which will constitute an original and all of which, when taken together, will constitute one and the same
agreement. The Parties may deliver executed signature pages to this Agreement by facsimile or e-mail
transmission. No Party may raise as a defense to the formation or enforceability of this Agreement, and
each Party forever waives any such defense, either (a) the use of a facsimile or email transmission to
deliver a signature or (b) the fact that any signature was signed and subsequently transmitted by facsimile
or email transmission.
[SIGNATURE PAGE IMMEDIATELY FOLLOWS]

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The Parties execute this Agreement as of the date first written above.

THE COMPANY :

CALIFORNIA
FORENSIC
INCORPORATED

By:

THE MANAGEM ENT COMPANY :

--"-J)_\
Dan Hustedt,

MEDICAL

GROUP,

_c.-._--'--"~< =-=~"""',-·- - -

its Chief Executive Officer

CALIFORNIA FORENSIC MANAGEMENT GROUP,
INC.

jJ_bo-__J ~ - - - - - -

By: _ _
Dan Hustedt, its Chief Executive Officer

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EXHIBIT A
APPLICABLE STATES

California

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EXHIBIT B
MANAGEMENT SERVICES

The Management Company will provide the Management Services in consultation with the Company and
at the Company’s ultimate direction and discretion. The Management Services include, the following:
1.
services:

The Management Company will provide or obtain for the Company the following legal

(a)
maintenance of all filings, licenses, permits, notices and other approvals required
of the Company under applicable Laws and Orders for the operation of the Practice;
(b)
regulatory compliance counseling and oversight of audits, investigations and
accreditation processes;
(c)

regulatory compliance counseling;

(d)

risk management and education;

(e)

professional liability and other insurance consulting; and

(f)

assistance in responding to demands for payment, allegations of liability and

lawsuits.
2.
The Management Company will provide or obtain for the Company the following
financial services:
(a)

general accounting services and maintenance of accounting books;

(b)
preparation of monthly, quarterly and annual profit and loss statements, income
statements, balance sheets, cash flow statements and other financial statements and analyses;
(c)
preparation and processing of client invoices, receivables and payables and the
management of receipts;
(d)
assistance in the handling and preparation of payroll and payroll tax-related
statements and documents (including completion of K-1, W-2, and 1099 forms);
(e)
preparation of tax returns and other tax forms for the Company and its medical
director(s), as necessary;
(f)
processing of expense accounts for the Company’s employees (including IRS
compliance and related services);
(g)
assistance with cash management, bank reconciliation and banking relations
(including establishing bank accounts for the sole use and benefit of the Company);
(h)

management of the lockbox and deposit functions;

(i)

assistance with Budget preparation and services; and
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(j)
assistance with the administration of Physician and employee benefit and bonus
plans, including, without limitation, any profit sharing, pension, or 401K plan.
3.
The Management Company will provide all administrative personnel reasonably
necessary to manage the business and administrative aspects of the Practice and manage all decisions
regarding work assignments, scheduling, hiring, firing and disciplining of administrative personnel and
determinations of compensation levels and other terms of employment or engagement for all
administrative personnel (including determinations of salaries, wages, bonuses, fringe benefits, retirement
benefits and health, disability and workers’ compensation insurance).
4.
The Management Company will provide or obtain for the Company the following human
resources services for non-Physician personnel, including, without limitation, social workers, physician
assistants, nurses, dentists, psychologists, dental assistants, pharmacy technicians, widwives, and clerks
who are on-site at the customer:
(a)
development, administration and provision of guidance regarding employment
policies and procedures;
(b)

preparation of employment agreements for non-Physician employees;

(c)

background checks and verification;

(d)

orientation, fob, database entry and computer access to new employees;

(e)

benefit enrollment, administration and process management services;

(f)
implementation of workers compensation, equal employment opportunity and
other employment-related regulatory requirements; and
(g)

coordination of the Company non-Physician personnel.

5.
The Management Company will provide or obtain for the Company the following human
resources and other services for Physicians:
(a)
development, administration and provision of guidance regarding employment
policies and procedures;
(b)

preparation of employment agreements for Physician employees;

(c)

background checks and verification;

(d)

orientation, fob, database entry and computer access to new employees;

(e)

benefit enrollment, administration and process management services;

(f)
implementation of workers compensation, equal employment opportunity and
other employment-related regulatory requirements;
(g)

non-clinical coordination of Company Physicians;

(h)

assistance with the preparation of new Physician welcome packets;

(i)

provision of software education services for Physicians;

(j)

maintenance of a Physician database;
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(k)
assistance with the development and production of printed communications
intended for physicians and patients.
6.
The Management Company will provide or obtain for the Company the following
information management services:
(a)
management, maintenance and administration of hardware/software programs,
databases and interfaces;
(b)

communications resources and internet client connections;

(c)
management of information technology service connections, security and
connectivity maintenance;
(d)

management of outside hardware and software vendor maintenance;

(e)

planning and evaluation of new technology;

(f)

design, management and integration of web sites;

(g)

access to document copying and scanning interfaces;

(h)

emergency power and database back-up;

(i)

electronic medical records implementation and systems maintenance; and

(j)

development and production of printed materials for external marketing

purposes.
7.
The Management Company will provide or obtain for the Company the following
collection services for the Company’s accounts (“Client Accounts”):
(a)
receipt, crediting, depositing and recording payment of invoices for professional
services (in cash, check, money order or wire transfer) into the Company’s bank account (“Company
Account”) in accordance with the Management Company’s procedures; and
(b)

negotiate compromises and settlements of Client Accounts with responsible

parties.
8.
The Management Company will provide or obtain for the Company the following billing
services for the professional services rendered by Physicians and other health care professionals
employed by or under contract with the Company (collectively, “Professionals”):
(a)
review of incoming patient care forms to verify the accuracy and completeness of
information required for billing purposes;
(b)
editing the Company’s patient care and charge collection forms as necessary to
ensure that the Company collects information necessary to submit claims for professional services;
(c)
review, as appropriate, of the coding submitted by Professionals for purposes of
billing, consistent with applicable Laws, the billing and coding requirements under any contracts between
the Company and third-party payors, including, without limitation, insurance companies, government
bodies, and providers (“Third-Party Payors”), and/or as required by applicable Third-Party Payor rules
and procedures;

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(d)
preparation and submission to primary and secondary Third-Party Payors and
other persons responsible for payment for professional services of the Physicians, all claims and invoices
for payment for the professional services in the name and under the provider number of the Company
engaging the Physicians or, if required by the Third-Party Payor, the provider number of the Physicians
rendering or supervising the professional service;
(e)
issuing, with respect to client invoices, monthly invoices before instituting
collection procedures, the last of which will incorporate an overdue, pre-collection notice (unless other
procedures are required to comply with applicable Law or Third-Party Payor requirements);
(f)
reference of any unpaid Client Account to debt collection agencies (which may,
but need not be, affiliates of the Management Company), with all necessary supporting documentation, or
to a collection attorney (whose services would be provided at an additional cost not included in the
Management Fees);
(g)
receipt and response to telephone communications and written or electronic
correspondence received from clients with reference to invoices;
(h)
appeals, corrections and rebilling, in the Management Company’s commercially
reasonable discretion, of claims for reimbursement filed by the Management Company with any ThirdParty Payor that are denied or disputed by such Third-Party Payor;
(i)
claim adjudication of disputed claims and resolution of outstanding billing events
with Third-Party Payors;
(j)
receipt, crediting, depositing and recording payment of invoices and claims for
professional services (in cash, check, money order or wire transfer) into the Company Account in
accordance with the Management Company’s procedures;
(k)

reconciliation of all bank deposits and deposit records;

(l)
review of accounts receivable of the Company to determine the status of Client
Accounts (i.e., current or delinquent), adjustment of account balances for partial payments received
during the preceding month and correction of entries when required;
(m)
process, issuance, mailing and recording of checks or electronic funds transfers
for refunds due on Client Accounts;
(n)
maintenance of professional fee schedule entries and creation and maintenance of
physician fee schedules in the Management Company’s practice management system;
(o)
administration of database/payor interfaces, maintenance of Client Account
history, interaction with Third-Party Payors for resolution of accounts (including eligibility inquiry, claim
submission, status inquiry and appeals);
(p)
PR write off processing; administration of public relations and complaint
processes (including account review, appeal and adjustment of Client Account balances);
(q)
assistance in the negotiation, on behalf of the Company, of provider agreements
with Third-Party Payors and management, on behalf of the Company, of such contracts and relationships;
(r)
Physician documentation and coding guidance upon the reasonable request of the
Company or in response to changes to applicable Laws, CPT codes or Third-Party Payor rules;

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(s)
billing, coding and compliance education to newly-hired Physicians and conduct
of follow-up chart audits and reviews of patient documentation for such Physicians consistent with past
practice;
(t)
conduct of Physician chart audits when the Management Company has evidence
of recurring non- compliance with applicable coding, documentation or billing Laws or Third-Party Payor
rules or when reasonably requested by the Company; and
(u)
preparation of provider enrollment, reassignment of benefits and credentialing
applications and forms required by governmental and nongovernmental Third-Party Payors.
9.
The Management Company will assist the Company in administering its relationships
with Physicians and other healthcare professionals, including consulting with the Company as to
performance standards, reviewing and proposing changes to the Company’s standard employment and
independent contractor agreements, participating in deliberations as to appropriate Physician Staffing
Levels and other healthcare professional staffing levels, reviewing staffing and coverage schedules, and,
in consultation with the Company, recruiting additional Physicians and healthcare professionals. The
Management Company will recommend Physician and other healthcare professional compensation
models and determine Physician and other healthcare professional base and incentive compensation.
10.
The Management Company, on behalf of the Company, as appropriate, will negotiate all
agreements between the Company and third-parties for the provision of professional services that may be
necessary or appropriate for the proper and efficient operation of the Practice.
11.
The Management Company, on behalf of the Company, will negotiate all agreements
between the Company and its clients.
12.
The Management Company, on behalf of the Company, will negotiate and arrange for all
medical and administrative office space, with all leases and other office arrangements executed and
delivered by the Management Company in its name.
13.
The Management Company, on behalf of the Company, will acquire for the benefit of the
Company all leasehold improvements and furniture, fixtures and equipment reasonably necessary for the
operation of the Practice and repair, maintain and replace such furniture, fixtures and equipment
necessitated by the negligence of the Company or any Physician. Title to the Equipment and other capital
assets acquired by the Management Company for the benefit of the Practice will be in the name of the
Management Company.
14.
The Management Company will purchase and maintain, on behalf of the Company, all
insurance policies reasonable and customary for enterprises engaged in the Practice (including, without
limitation, professional liability insurance for the Company and the Physicians, comprehensive general
liability insurance, extended coverage insurance and workers’ compensation insurance), naming the
Company as named insureds and the Management Company as an additional insured under all such
policies.
15.
The Management Company will supervise the Company’s continuous efforts to create,
update, maintain and store all files and records relating to the operation of the Practice, including
accounting, billing, patient medical records and collection records.
16.
The Management Company will purchase, for the account of the Company, all support
services reasonably required for the day-to-day operation of the Practice (including all utilities, laundry,
janitorial and cleaning, security, printing, postage, coping, telephone and internet services) and all
supplies that are reasonably necessary for the day-to-day operation of the Practice.
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17.
The Management Company will make recommendations to the Company regarding the
acquisition of medical equipment, instruments, medical fixtures, office equipment, telephones, computers,
office furniture and supplies that the Management Company determines to be necessary or appropriate for
the proper and efficient operation of the Practice.
18.
The Management Company will manage equipment installation, testing and maintenance
for the Company.
19.
The Management Company will assist the Company in obtaining insurance policies
required or appropriate to protect the financial interest of the Company and the Physicians, and assist the
Company will establishing risk compliance, loss prevention and risk management functions.
20.
The Management Company will provide additional legal management, financial
management, human resource-related, billing and collection-related and information technology-related
services at Company’s reasonable request and if necessary or appropriate for the proper management and
administration of the Company; provided, however, that the Company will compensate the Management
Company for the performance of such additional services at pre-determined, mutually-agreed-upon rate
reflecting the fair market value of such additional services, all of which the Parties will set forth in a
written amendment of this Agreement.
21.
The Management Company will assist the Company with purchasing, advertising, sales,
bidding, and marketing services for programs established by the Company.
22.
The Management Company will provide leased office space to the Company necessary
for the conduct of its business.

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EXHIBIT C
BUSINESS ASSOCIATE PROVISIONS

The Management Company will perform any Management Services involving Protected Health
Information received from, or created or received by the Management Company on behalf of the
Company (“PHI”), in accordance with the following Business Associate Provisions.
1.

General Provisions.

(a)
Effect. To the extent that the Management Company receives PHI to perform
Business Associate activities, the terms and provisions of this Exhibit C supersede all conflicting or
inconsistent terms and provisions of this Agreement to the extent of such conflict or inconsistency.
(b)
Capitalized Terms. Capitalized terms used in this Exhibit C without definition
in this Agreement (including this Exhibit C) are defined in the administrative simplification section of the
Health Insurance Portability and Accountability Act of 1996 and its implementing regulations as amended
by HITECH (defined below) (collectively, “HIPAA”).
(c)
No Third Party Beneficiaries. The Parties have not created and do not intend to
create by this Agreement any third party rights (including third party rights for Patients), except with
respect to the Collateral Agent under the Credit Agreement (as such terms are defined in the Agreement).
(d)
Amendments. The Parties acknowledge that the Health Information Technology
for Economic and Clinical Health Act and its implementing regulations (collectively, “HITECH”) impose
new requirements with respect to privacy, security and breach notification and contemplates that such
requirements will be implemented by regulations to be adopted by HHS. The HITECH provisions
applicable to business associates (as defined under HIPAA) will be collectively referred to as the
“HITECH BA Provisions”. A HITECH BA Provision is effective on the later of (i) the date of this
Agreement and (ii) the date specified in HITECH.
2.

Obligations of the Management Company.

(a)
Use and Disclosure of Protected Health Information. The Management
Company may use and disclose PHI as permitted or required under this Agreement (including this Exhibit
C) or as Required by Law, but may not otherwise use or disclose any PHI. The Management Company
will not, and will assure that its employees, other agents and contractors do not use or disclose PHI in any
manner that would constitute a violation of HIPAA if so used or disclosed by the Company. Without
limiting the generality of the foregoing, the Management Company is permitted to use or disclose PHI as
set forth below:
(i)
The Management Company may use PHI internally for the Management
Company’s proper management and administration or to carry out its legal responsibilities.
(ii)
The Management Company may disclose PHI to a third party for the
Management Company’s proper management and administration, provided that the disclosure is Required
by Law or the Management Company obtains reasonable assurances from the third party to whom such
PHI is to be disclosed that the third party will (A) protect the confidentially of the PHI, (B) only use or
further disclose the PHI as Required by Law or for the purpose for which the PHI was disclosed to the
third party, and (C) notify the Management Company of any instances of which such third-party is aware
in which the confidentiality of the PHI has been breached.
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(iii)
The Management Company may use PHI to provide Data Aggregation
services relating to the Health Care Operations of the Company if required or permitted under this
Agreement.
(iv)
The Management Company may de-identify PHI consistent with
applicable HIPAA requirements.
(b)
Safeguards. The Management Company will use appropriate safeguards to
prevent the use or disclosure of PHI other than as permitted or required by this Exhibit C. The
Management Company will implement Administrative Safeguards, Physical Safeguards and Technical
Safeguards that reasonably and appropriately protect the Confidentiality, Integrity and Availability of
electronic PHI that it creates, receives, maintains or transmits on behalf of the Company.
(c)
Minimum Necessary Standard. To the extent required by the “minimum
necessary” requirements of HIPAA, the Management Company will only request, use and disclose the
minimum amount of PHI necessary to accomplish the purpose of the request, use or disclosure.
(d)
Mitigation. The Management Company will take reasonable steps to mitigate,
to the extent practicable, any harmful effect (that is known to the Management Company) of a use or
disclosure of PHI by the Management Company in violation of this Exhibit C.
(e)
Trading Partner Agreement. The Management Company will not change the
definition, Data Condition, or use of a Data Element or Segment in a Standard; add any Data Elements or
Segments to the maximum defined Data Set; use any code or Data Elements that are either marked “not
used” in the Standard’s Implementation Specification or are not in the Standard’s Implementation
Specification(s); or change the meaning or intent of the Standard’s Implementation Specification(s).
(f)
Agreements by Third Parties. The Management Company will obtain and
maintain an agreement with each agent or subcontractor that has or will have access to PHI, pursuant to
which such agent or subcontractor agrees to be bound by the same restrictions, terms and conditions that
apply to the Management Company pursuant to this Agreement with respect to such PHI.
(g)

Reporting of Improper Disclosures of PHI.

(i)
If the Management Company becomes aware of a use or disclosure of
PHI in violation of this Agreement by the Management Company or a third party to which the
Management Company disclosed PHI, then the Management Company will report the use or disclosure to
the Company without unreasonable delay.
(ii)
Any actual, successful Security Incident involving PHI of which the
Management Company becomes aware must be reported to the Company in writing without unreasonable
delay, and
(iii)
any attempted, unsuccessful Security Incident involving PHI of which
the Management Company becomes aware must be reported to the Company within a reasonable time. If
the HIPAA security regulations are amended to remove the requirement to report unsuccessful attempts at
unauthorized access, the preceding requirement to report such unsuccessful attempts will no longer apply
as of the effective date of the amendment.
(h)
The Management Company will, following the discovery of a Breach of
Unsecured PHI, notify the Company of the Breach in accordance with 45 C.F.R. § 164.410 without
unreasonable delay (and in any event within 60 days after discovery of the Breach).

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(i)
Access to Information. Within 15 Business Days after receipt of a request from
the Company for access to PHI about an Individual contained in any Designated Record Set of the
Company maintained by the Management Company, the Management Company will make available to
the Company such PHI for so long as the Management Company maintains such information in the
Designated Record Set. If the Management Company receives a request for access to PHI directly from
an Individual, then the Management Company will forward such request to the Company within 10
Business Days.
(j)
Availability of PHI for Amendment. Within 15 Business Days after receipt of
a request from the Company for the amendment of an Individual’s PHI contained in any Designated
Record Set of the Company maintained by the Management Company, the Management Company will
provide such information to the Company for amendment and incorporate any such amendments in the
PHI (for so long as the Management Company maintain such information in the Designated Record Set)
as required by 45 C.F.R. §164.526. If the Management Company receives a request for amendment to
PHI directly from an Individual, then the Management Company will forward such request to the
Company within 10 Business Days.
(k)
Accounting of Disclosures. Within 15 Business Days after receipt of notice
from the Company stating the Company has received a request for an accounting of disclosures of PHI
(other than disclosures to which an exception to the accounting requirement applies), the Management
Company will make available to the Company such information as is in the Management Company’s
possession and required for the Company to make the accounting required by 45 C.F.R. §164.528.
(l)
Availability of Books and Records. The Management Company will make its
internal practices, books and records relating to the use and disclosure of PHI available to the [Secretary]1
for purposes of determining the Company’s and the Management Company’s compliance with HIPAA.
3.

Obligations of Company.

(a)
Permissible Requests. The Company will not request that the Management
Company use or disclose PHI in any manner that would not be permissible under HIPAA if done directly
by the Company.
(b)
Minimum Necessary Information. The Company represents that, to the extent
the Company provides PHI to the Management Company, such information is the minimum necessary
PHI for the accomplishment of the Management Company’s purpose.
(c)
Consents/Authorizations. The Company represents that, to the extent the
Company provides PHI to the Management Company, the Company has obtained the consents,
authorizations and other forms of legal permission required under HIPAA and other applicable Law,
including any necessary authorizations for the use of PHI for Marketing purposes, if applicable.
4.

Termination of this Agreement.

(a)
Right to Report. If termination of this Agreement is not feasible following the
Management Company’s failure to cure a material breach of this Exhibit C, then the Company may report
such breach to the Secretary.

1

Term is not defined.

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(b)
Return or Destruction of PHI. Promptly after the expiration or termination of
this Agreement, the Management Company will either return to the Company or destroy, delete or erase
all PHI then in the Management Company’s possession; provided, however, that to the extent that the
Management Company reasonably determines that the return or destruction of such PHI is not feasible,
then the terms and provisions of this Exhibit C will survive the expiration or termination of this
Agreement and such PHI may be used or disclosed only for the purposes that prevented the Management
Company’s return or destruction of such PHI.

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EXHIBIT D
MANAGEMENT FEE

1.

Percentage Based Fee. In consideration of the Management Services to be furnished by the
Management Company under this Agreement, the Company shall pay the Management Company
a monthly fee equal to 18% (the “Management Fee Percentage”) of the Company’s Adjusted
Gross Revenues for the applicable month. “Adjusted Gross Revenues” means the total revenues
of the Company (excluding management and/or professional service fee revenues from the
Management Company) which are payable and derived directly or indirectly by reason of any
medical or health care related services, supplies, devices and equipment, including without
limitation any and all fees for technical or ancillary services and any and all fees for professional
services and other revenues and fees included within the definition of Gross Revenue, minus an
allowance for uncollectible accounts, contractual adjustments, discounts, charity work,
professional courtesies and compromises or cancellations of accounts receivable as may be
customary and appropriate, all determined on an accrual basis plus any extraordinary receipts,
including without limitation, proceeds of any disposition of assets or properties, any cash
received by the Company not in the ordinary course of business consisting of proceeds of
judgments, settlements or other consideration of any kind in connection with any cause of action,
indemnity payments, and any purchase price adjustment received in connection with any
purchase agreement.
The Management Fee shall be payable monthly no later than the 15th day of the month following
the month for which it is due. The Management Fee may be reduced or any portion thereof
waived by the Management Company in its sole discretion so long as no “Event of Default”
under and as defined in the Credit Agreement has occurred and is continuing or would result
therefrom. The Management Company is expressly authorized to, and shall, disburse from the
Company’s bank accounts all amounts owed by the Company to the Management Company
pursuant to this Agreement (which disbursements may be made prior to the date such amounts are
due and payable as an advance on such amounts). As collateral security for all amounts owed by
the Company pursuant to this Agreement, the Company hereby grants a security interest in and
assigns to the Management Company (to the extent permitted by law) all assets of the Company
now owned or created during the Term of this Agreement, together with any and all proceeds
thereof. Upon the Management Company’s request, the Company shall execute a UCC-1
Financing Statement reflecting the security interest granted pursuant to this Agreement. The
Management Company shall have all rights and remedies provided in Article IX of the California
Uniform Commercial Code upon (a) the breach by the Company of any provision contained in
this Agreement or (b) the occurrence of any “Event of Default” under the Credit Agreement (as
such term is defined in the Agreement). All rights and remedies of Manager shall be cumulative
and may be exercised successively or concurrently and, to the extent consistent with the exercise
of such rights, without impairment of the Management Company’s security interest in such
collateral.
The Parties agree to negotiate in good faith to adjust the Management Fee Percentage annually on
a prospective basis with the goal of ensuring that the Company compensates the Management
Company for the Management Services rendered hereunder at fair market value.

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2.

Monthly Bonus. On a monthly basis, the Board of Directors of the Company shall meet to
determine an appropriate bonus to be paid to the Management Company, if any, based upon the
quality, efficiency and satisfaction of the Management Services rendered by the Management
Company for and on behalf of the Company during prior periods.

EXHIBIT TO MANAGEMENT SERVICES AGREEMENT
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