REDACTED COPY

EXHIBIT 10.40

ADMINISTRATIVE SUPPORT SERVICES AGREEMENT

by and between

MIDWEST PHYSICIANS SERVICES, LLC

and

ST. PAUL RADIOLOGY, P.A.

July 16, 2007

 

[***] DESIGNATES PORTIONS OF THE DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.

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TABLE OF CONTENTS

 

          Page

ARTICLE I DEFINITIONS

   1

1.1

  

Agreement

   1

1.2

  

Board of Directors

   1

1.3

  

Business Associate

   1

1.4

  

Confidential Information

   1

1.5

  

Corporate Compliance and Billing Committee

   1

1.6

  

Corporate Compliance and Billing Program

   2

1.7

  

[Intentionally left blank.]

   2

1.8

  

DRT

   2

1.9

  

Effective Date

   2

1.10

  

Federal Health Care Program

   2

1.11

  

Fundamental Provision

   2

1.12

  

Fundamental Regulatory Change

   2

1.13

  

Indemnified Party

   2

1.14

  

Indemnifying Party

   2

1.15

  

Knowledge

   2

1.16

  

Management Fee

   2

1.17

  

Material Adverse Effect

   2

1.18

  

Medicaid

   2

1.19

  

Medicare

   2

1.20

  

MWR

   2

1.21

  

Net Revenues

   2

1.22

  

Radiologists

   3

1.23

  

Reimbursable Expenses

   3

1.24

  

SPRPA

   3

1.25

  

SPRPA Bank Account

   3

1.26

  

SPRPA Employees

   3

1.27

  

Support Services Company

   3

1.28

  

Term

   3

1.29

  

Transition Period

   3

ARTICLE II ENGAGEMENT AND DUTIES OF SUPPORT SERVICES COMPANY

   3

2.1

  

Engagement of Support Services Company

   3

2.2

  

Allocation of Responsibilities; SPRPA Representations and Warranties

   3

2.3

  

Duties

   5

2.4

  

Financial Obligations of Parties

   6

2.5

  

Compensation and Employee Benefit Plans

   6

ARTICLE III COLLECTION AND EXPENDITURE OF SPRPA FUNDS; REIMBURSEMENT

   6

3.1

  

Billing

   6

3.2

  

Expenditures

   6

3.3

  

Accounting

   6

ARTICLE IV INDEMNIFICATION

   7

4.1

  

Indemnification by SPRPA

   7

4.2

  

Indemnification by Support Services Company

   7

4.3

  

Defense of Claims

   7

4.4

  

Survival

   7

 

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ARTICLE V INSURANCE

   7

5.1

  

Insurance to be Maintained by Support Services Company

   7

5.2

  

Insurance to be Maintained by SPRPA

   8

ARTICLE VI CONFIDENTIALITY

   8

6.1

  

Confidentiality

   8

6.2

  

HIPAA

   8

6.3

  

Remedies

   9

ARTICLE VII FINANCIAL ARRANGEMENTS

   9

7.1

  

Management Fee Payable to Support Services Company

   9

7.2

  

Reimbursement of Expenses

   9

7.3

  

Monthly Invoice

   9

7.4

  

Audits

   9

7.5

  

Legal Costs

   9

7.6

  

Disputes

   10

ARTICLE VIII TERM AND TERMINATION

   10

8.1

  

Term

   10

8.2

  

Termination

   10

8.3

  

Intentionally Omitted

  

8.4

  

Fundamental Regulatory Change.

   11

ARTICLE IX LIMITATION ON LIABILITY

   12

ARTICLE X LICENSE OF NAME AND MARKS

   12

10.1

  

License of Name and Marks

   12

ARTICLE XI GENERAL

   12

11.1

  

Relationship of Parties

   12

11.2

  

Notices

   12

11.3

  

Section Captions

   13

11.4

  

Applicable Law

   13

11.5

  

Severability; Interpretation

   13

11.6

  

Binding Effect

   13

11.7

  

Terminology

   14

11.8

  

Amendment

   14

11.9

  

Parties in Interest

   14

11.10

  

Counterparts

   14

11.11

  

Dispute Resolution

   14

11.12

  

Access to Books and Records by Governmental Officials

   15

11.13

  

Entire Agreement

   15

11.14

  

Waiver

   15

 

Exhibit 1.24

  

Reimbursable Expenses

Exhibit 2.2.2

  

Federal Health Care Programs and Other Third Party Payors with which SPRPA
and/or Radiologists Participate

Exhibit 2.2.6

  

SPRPA Corporate Compliance Program

Exhibit 6.2

  

HIPAA Business Associate Agreement

 

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ADMINISTRATIVE SUPPORT SERVICES AGREEMENT

THIS AGREEMENT (“Agreement“) is made and entered into as of this 16 day of July,
2007 (“Effective Date“) by and between Midwest Physicians Services, LLC., a
Minnesota limited liability company (“Support Services Company“), and St. Paul
Radiology, P.A., a Minnesota professional firm (“SPRPA“).

RECITALS

A. Support Services Company is in the business of providing non-medical,
administrative and other support services related to radiology;

B. SPRPA is a professional firm pursuant to Minnesota Statutes, Chapter 319B and
is authorized to practice medicine in Minnesota through employed radiologists
(“Radiologists“); and

C. SPRPA desires to engage Support Services Company to provide certain
non-medical, administrative and other support services as are appropriate for
the day-to-day management of SPRPA, and Support Services Company desires to
provide such non-medical services all upon the terms and subject to the
conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
SPRPA and Support Services Company agree as follows:

ARTICLE I

DEFINITIONS

1.1 “Agreement” shall mean this Administrative Support Services Agreement by and
between Midwest Physicians Services, LLC and St. Paul Radiology, P.A.

1.2 “Board of Directors” shall mean the Board of Directors of SPRPA.

1.3 “Business Associate” shall have the meaning set forth in 45 C.F.R.
§ 160.103.

1.4 “Confidential Information” shall mean confidential information and trade
secrets of the other party that are not generally available to the public or to
the business community, which may include, but are not limited to: marketing
studies, marketing memoranda, data bases, reports, vendor names and
arrangements, products, services, business plans, and patient information and
records (other than de-identified data as provided in Section 6.2 hereof),
SPRPA’s pricing, payor terms and conditions and other materials or records of a
proprietary nature.

1.5 “Corporate Compliance and Billing Committee” shall mean SPRPA’s Corporate
Compliance and Billing Committee or such committee by another name overseeing
SPRPA’s corporate compliance and billing activities.

 

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1.6 “Corporate Compliance and Billing Program” shall mean SPRPA’s corporate
compliance and billing policies and procedures, as adopted by the Board of
Directors or the Corporate Compliance Committee from time to time.

1.7 [Intentionally left blank.]

1.8 “DRT” shall mean Dispute Resolution Team as described in Section 11.11.

1.9 “Effective Date” shall mean July 16, 2007.

1.10 “Federal Health Care Program” shall mean any plan or program that provides
health benefits, whether directly, through insurance, or otherwise, which is
funded directly, in whole or in part, by the United States Government, or any
state health care program either approved under the Social Security Act or
receiving federal funds.

1.11 “Fundamental Provision” is any provision that, if deemed unenforceable,
would deny either party of a material benefit that such party reasonably
anticipated receiving under this Agreement.

1.12 “Fundamental Regulatory Change” shall mean any circumstance in which any
Fundamental Provision or underlying purpose of this Agreement, or the
association of the parties pursuant to this Agreement, becomes violative of the
rules, regulations or reimbursement policies of any applicable federal or state
statute, rule, or regulation, or administrative or judicial decision, as further
described in Section 8.4.

1.13 “Indemnified Party” shall mean a party entitled to indemnification under
Section 4.3.

1.14 “Indemnifying Party” shall mean a party obligated to provide
indemnification to an indemnified party under Section 4.3.

1.15 “Knowledge” shall mean (i) the actual knowledge of any of any of the
following individuals: Mark Kleinschmidt, Joseph Tashjian, Jerry Gehling and
Barry Lindo and (ii) knowledge as would have or should have come to the
attention of any of such named individuals in the course of preparing and
negotiating this Agreement and the related Exhibits, documents, certificates or
other writings or in the course of discharging such individual’s duties with
respect to SPRPA, MWR or Support Services Company in a reasonable and prudent
manner consistent with sound business practice.

1.16 “Management Fee” shall mean the fee SPRPA shall pay to Support Services
Company which is equal to [***] of SPRPA’s Net Revenues.

1.17 “Material Adverse Effect” shall mean any change, event, inaccuracy,
circumstance or effect, individually or when aggregated with other changes,
events, violations, inaccuracies, circumstances or effects, that is materially
adverse to the business, assets, products, liabilities, financial condition,
results of operations or prospects of SPRPA.

1.18 “Medicaid” shall mean the Federal Health Care Program established by Title
XIX of the Social Security Act.

1.19 “Medicare” shall mean the Federal Health Care Program established by Title
XVIII of the Social Security Act.

1.20 “MWR” shall mean Midwest Radiology, LLC, a Minnesota limited liability
company.

1.21 “Net Revenues” shall mean [***]

 

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1.22 “Radiologists” shall mean radiologists employed by SPRPA to provide
professional radiology services through SPRPA, who are licensed in the states in
which the services are provided, in accordance with applicable law.

1.23 “Reimbursable Expenses” shall mean those expenses of SPRPA that are paid by
Support Services Company as further described on Exhibit 1.23.

1.24 “SPRPA” shall mean St. Paul Radiology, P.A., a Minnesota professional firm.

1.25 “SPRPA Bank Account” shall mean a bank account of SPRPA designated by SPRPA
for the deposit of payments for all patient care services provided by
Radiologists or such other accounts of SPRPA to which Support Services Company
shall have access in order to perform services under this Agreement.

1.26 “SPRPA Employees” shall mean all Radiologists, nurses and advance practice
nurses, employees of the SPRPA Vein Center, employees of the Interventional
Clinic that are not MWR employees and three professional assistant employees of
SPRPA who assemble patient data and files to assist the Radiologists.

1.27 “Support Services Company” shall mean Midwest Physicians Services, LLC, a
Minnesota limited liability company.

1.28 “Term” shall mean the initial term and any renewal term of this Agreement.

1.29 “Transition Period” shall mean the 120 days immediately following
termination of this Agreement.

ARTICLE II

ENGAGEMENT AND DUTIES OF SUPPORT SERVICES COMPANY

2.1 Engagement of Support Services Company. SPRPA hereby engages Support
Services Company as the sole and exclusive support services company, to perform
the administrative duties specified in Section 2.3 upon the terms and subject to
the conditions set forth herein, and Support Services Company accepts such
engagement.

2.2 Allocation of Responsibilities; SPRPA Representations and Warranties.
Support Services Company is and shall be principally and primarily responsible
for performing and discharging the duties and responsibilities assigned to
Support Services Company under this Agreement. It is agreed and understood that
SPRPA is relying on Support Services Company to timely and properly perform all
such duties and responsibilities. Notwithstanding the foregoing, SPRPA, through
its Board of Directors and Corporate Compliance and Billing Committee, shall at
all times monitor and exercise control over the affairs of the Radiologists and
SPRPA and discharge SPRPA’s regulatory compliance responsibilities that cannot
be delegated to third parties under state and federal laws (including without
limitation under Chapter 319B of Minnesota Statutes) and accreditation
requirements, with Support Services Company continuing to provide regulatory
advisory services as historically

 

[***] DESIGNATES PORTIONS OF THE DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
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provided to SPRPA, and providing such other services to the extent required
hereunder in each case, to the extent permitted by law. Each party agrees that
in the event that they become aware of a compliance concern that appears to be
related to the other party’s conduct, they will promptly raise the issue with
the other party, who will promptly investigate and report back to the other
party. The following representations and warranties are made as of the date of
this Agreement:

2.2.1 The parties hereto acknowledge and agree that Support Services Company is
not authorized or qualified to engage in any activity that may be construed or
deemed to constitute the practice of medicine, and that nothing herein shall be
construed as the practice of medicine by Support Services Company. SPRPA shall
be solely responsible for assuring that medical professional matters shall be
within the purview of one or more Radiologists. To the extent that any act or
service required of Support Services Company is construed or deemed to
constitute the practice of medicine, Support Services Company is released from
any obligation to provide, and SPRPA shall be deemed not to have requested or
required Support Services Company to provide, such act or service without
otherwise affecting the other terms of this Agreement.

2.2.2 SPRPA hereby represents and warrants that SPRPA and each of the
Radiologists are eligible to receive Medicare and Medicaid reimbursement, SPRPA
and each Radiologist is a provider with valid and current provider agreements
and with one or more provider numbers with Medicare and Medicaid programs either
directly or through intermediaries and have not been excluded, suspended or, to
the Knowledge of SPRPA, notified that SPRPA or any Radiologist is about to be
excluded or suspended from participation in Federal Health Care Programs. SPRPA
and each of the Radiologists are in compliance with the conditions of
participation for the Federal Health Care Programs identified as Exhibit 2.2.2
to this Agreement and have received all licenses, certifications or other
approvals or qualifications necessary for reimbursement or payment by each
Federal Health Care Program identified on Exhibit 2.2.2 to this Agreement, and
there is not pending, nor to the Knowledge of SPRPA threatened, any proceeding
or investigation under any such Federal Health Care Program involving SPRPA, any
Radiologist or, to the Knowledge of SPRPA, any persons who have provided
services through SPRPA. Any forms or reports required to be filed with
governmental authorities on or before the date hereof have been properly filed
and are complete and correct in all material respects. Support Services Company
shall assist SPRPA in obtaining and monitoring all such licenses, certifications
or other approvals and reporting in relation thereto.

2.2.3 The parties hereby agree that the benefits hereunder do not require, and
are not, payment or compensation in cash or in kind for, and are not in any way
contingent upon, any arrangement for the provision of any item or service
offered by Support Services Company to SPRPA or the Radiologists related to
services provided by any Federal Health Care Program ,other than as provided
under this Agreement.

2.2.4 SPRPA hereby further represents and warrants that, for periods on or prior
to the Effective Date of this Agreement, billings, reimbursement claims and
billing practices of SPRPA and the Radiologists, to all patients and to third
party payors, including Federal Health Care Programs and private insurance
companies, are and have been in compliance with all applicable laws and all
policies of such third party payors and Federal Health Care Programs except
where the failure to do so would not have a Material Adverse Effect, and to the
Knowledge of SPRPA neither SPRPA nor the Radiologists, nor any person or entity
acting on their behalf, have billed or received any payment or reimbursement in
excess of amounts allowed by law or by applicable contract, which amounts have
not been repaid or will not be repaid as soon as practicable after the date
hereof. All of SPRPA’s or the Radiologists’ billings and claims were, when
filed, complete and correct except where the failure to do so would not have a
Material Adverse Effect. All of SPRPA’s or the Radiologists’ contracts with
third party payors are listed on Exhibit 2.2.2 to this Agreement. Support
Services Company shall hereafter be responsible for implementing billing
policies and for accurate coding, in accordance with the policies approved by
and under the direction of SPRPA’s Board of Directors or Corporate

 

[***] DESIGNATES PORTIONS OF THE DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
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Compliance and Billing Committee, and based upon documentation supplied by the
Radiologists. Support Services Company shall assist SPRPA in meeting the
requirements for continued qualification to participate with all third party
payors with which SPRPA and the Radiologists participate, including but not
limited to Federal Health Care Programs.

2.2.5 SPRPA represents and warrants that neither SPRPA nor any member,
affiliate, director, officer or employee of SPRPA, including but not limited to
the Radiologists, nor any agent acting on behalf of or for the benefit of any of
the foregoing, has directly or indirectly in connection with SPRPA: (i) offered
or paid any remuneration, in cash or in kind, to or made any financial
arrangements with, any past, present or potential customers, past or present
suppliers, patients, medical staff members, contractors or third party payors of
SPRPA or the Radiologists in order to obtain business or payments from such
persons other than in the ordinary course of business; (ii) given or agreed to
give, or knows that there has been made or that there is any agreement to make,
any gift or gratuitous payment of any kind, nature or description (whether in
money, property or services) to any customer or potential customer, supplier or
potential supplier, contractor or third party other than in connection with
promotional or entertainment activities in the ordinary course of business and
in compliance with SPRPA’s Corporate Compliance Program; (iii) made or agreed to
make, or knows that there has been made or that there is any agreement to make,
any contribution, payment or gift of funds or property to, or for the private
use of, any governmental official, employee or agent where either the
contribution, payment or gift or the purpose of such contribution, payment or
gift is or was illegal under the laws of the United States or under the laws of
any state or any other governmental authority having jurisdiction over such
payment, contribution or gift; (iv) established or maintained any unrecorded
fund or asset for any purpose or made any misleading, false or artificial
entries on any of its books or records for any reason; or (v) made or agreed to
make, or knows that there has been made or that there is any agreement to make,
any payment to any person with the intention or understanding that any part of
such payment would be used for any purpose other than that described in the
documents supporting such payment.

2.2.6 Attached as Exhibit 2.2.6 to this Agreement is a copy of SPRPA’s current
Corporate Compliance Program, including all program descriptions, compliance
officer and committee descriptions, ethics and risk area policy materials,
training and education materials, auditing and monitoring protocols, reporting
mechanisms, and disciplinary policies. SPRPA further represents and warrants
that except as described on Schedule 2.2.6, neither SPRPA nor any Radiologist
(i) is a party to a Corporate Integrity Agreement with the Office of the
Inspector General of the Department of Health and Human Services, (ii) has
reporting obligations pursuant to any settlement agreement entered into with any
governmental authority, (iii) to SPRPA’s Knowledge, has been the subject of any
Federal Health Care Program investigation, (iv) has been a defendant in any qui
tam/False Claims Act litigation (other than by reason of any unsealed complaint
of which SPRPA has no Knowledge), (v) has been served with or received any
search warrant, subpoena or civil investigation demand or to the Knowledge of
SPRPA any other communication alleging wrongdoing of SPRPA or any Radiologist by
or from any governmental body (except in connection with medical services
provided to third parties who may be parties in medical malpractice cases or the
subject of investigation into conduct unrelated to the operations of SPRPA or
the Radiologists), and (vi) has received any complaints from employees,
independent contractors, vendors, physicians or any other person that allege
that SPRPA has violated any law.

2.3 [***]

 

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2.4 Financial Obligations of Parties. Notwithstanding anything herein to the
contrary, Support Services Company shall be under no financial obligation to pay
any debts of SPRPA or to provide or pay for the salary or benefits of the SPRPA
Employees.

2.5 Compensation and Employee Benefit Plans. SPRPA is solely responsible and
liable for SPRPA’s adoption, sponsorship and maintenance of and participation in
any employee benefit plan. Support Services Company will provide only
ministerial services with respect to such employee benefit plans as directed by
SPRPA. Support Services Company is neither a fiduciary of, nor responsible for
any coverage or non-discrimination testing with respect to, any such employee
benefit plan.

ARTICLE III

COLLECTION AND EXPENDITURE OF SPRPA FUNDS; REIMBURSEMENT

3.1 Billing. In connection with the billing and collection services to be
provided hereunder, SPRPA hereby grants to Support Services Company an exclusive
right to bill in SPRPA’s name and on SPRPA’s behalf all claims for reimbursement
from patients and all third-party payors or fiscal intermediaries or carriers
for all patient care services performed by the Radiologists (if approved by the
Radiologists).

3.1.1 For services billed on behalf of SPRPA, the patient shall be directed to
remit payment to SPRPA and, upon receipt of the payments, Support Services
Company shall deposit the proceeds into an SPRPA Bank Account. Any payments that
are made directly to Support Services Company shall be deposited in the SPRPA
Bank Account. Support Services Company shall keep an accurate record of all
receipts for Radiologists’ Services. Support Services Company is hereby
authorized to reasonably administer, on SPRPA’s behalf, all accounts receivable
generated by SPRPA and the Radiologists billings and claims for reimbursement,
including, but not limited to, extending the time of payment of any such
accounts for cash, credit or otherwise; discharging or releasing the obligors of
any such accounts; suing, assigning or selling at a discount such accounts to
collection agencies; and taking other reasonable measures to secure the payment
of any such accounts; provided, however, that extraordinary collection measures,
including but not limited to filing lawsuits, discharging or releasing obligors
or assigning or selling accounts at a discount to collection agencies in
individual amounts in excess of $10,000, shall not be undertaken without the
prior written agreement of SPRPA and Support Services Company.

3.1.2 Support Services Company shall be responsible for reconciling and applying
the deposits related to accounts receivable collections.

3.2 Expenditures. Support Services Company shall prepare checks for expenditures
to be made by SPRPA and obtain the signature of a designated SPRPA
representative on such instruments.

3.3 Accounting. Support Services Company shall make available to SPRPA, within
30-days after the close of each month during the Term, an accounting of all
deposits into and withdrawals from the SPRPA Bank Accounts. Upon request of
SPRPA, Support Services Company shall make available to SPRPA reasonable
documentation evidencing the source of funds deposited into the SPRPA Bank
Accounts and the use of amounts withdrawn from the SPRPA Bank Accounts.

 

[***] DESIGNATES PORTIONS OF THE DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
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ARTICLE IV

INDEMNIFICATION

4.1 Indemnification by SPRPA. SPRPA shall indemnify and hold Support Services
Company and its officers, directors, employees and agents harmless from and
against any and all actions, suits, proceedings, demands, assessments,
judgments, losses, liabilities, damages and costs (including, without
limitation, reasonable attorneys’ fees and expenses) resulting from: [***]

4.2 Indemnification by Support Services Company. Support Services Company shall
indemnify and hold SPRPA and its members, officers, managers, directors,
governors, and agents and SPRPA Employees harmless from and against any and all
actions, suits, proceedings, demands, assessments, judgments, losses,
liabilities, damages and costs (including, without limitation, reasonable
attorneys’ fees and expenses) resulting from: [***]

4.3 Defense of Claims. In the event that any claim is asserted against a party
which is entitled to indemnification hereunder as an Indemnified Party, the
Indemnified Party shall promptly after learning of such claim, notify the
Indemnifying Party thereof in writing; provided, however, that the failure of
the Indemnified Party to give prompt notice of such claim as aforesaid shall not
relieve the obligation of the Indemnifying Party with respect to such claim,
except to the extent that the Indemnifying Party is prejudiced by the failure of
the Indemnified Party to provide such notice. The Indemnifying Party shall have
the right, by giving written notice to the Indemnified Party within ten (10)
calendar days after receipt from the Indemnified Party of notice of such claim
(which notice must include an acceptance of indemnification responsibility for
such claim by the Indemnifying Party in favor of the Indemnified Party), to
conduct at its expense the defense against such claim in its own name, or, if
the Indemnifying Party shall fail to give such notice, it shall be deemed to
have elected not to conduct the defense of the subject claim, and in such event
the Indemnified Party shall have the right to conduct such defense and to
compromise and settle the claim without prior consent of the Indemnifying Party.
In the event that the Indemnifying Party elects to conduct the defense of the
subject claim, the Indemnified Party will cooperate with and make available to
the Indemnifying Party such assistance and materials as may be reasonably
requested by him, all at the expense of the Indemnifying Party, and the
Indemnified Party shall have the right at its expense to participate in the
defense, provided that the Indemnified Party shall have the right to compromise
and settle the claim only with the prior written consent of the Indemnifying
Party. No legal proceeding in which the Indemnified Party is named as a party
shall be settled by the Indemnifying Party without the Indemnified Party’s prior
written consent unless such settlement or compromise (a) affects no substantive
rights of the Indemnified Party, (b) involves a complete release of and no
admission of fault by the Indemnified Party, and (c) creates no obligations or
liabilities for the Indemnified Party. Any judgment entered or settlement agreed
upon in the manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to indemnification hereunder.

4.4 Survival. The provisions of this Article IV shall survive termination of
this Agreement.

ARTICLE V

INSURANCE

5.1 Insurance to be Maintained by Support Services Company. Support Services
Company on its own behalf shall maintain:

5.1.1 Such workers compensation, employer’s liability or similar insurance as
may be required under law to cover Support Services Company’s employees who
provide services to SPRPA pursuant to this Agreement, and such additional
coverages which Support Services Company shall deem advisable; and

 

[***] DESIGNATES PORTIONS OF THE DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
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5.1.2 Such other insurance in type and amount of not less than the following:
general liability – One Million Dollars per claim and Two Million Dollars
aggregate; umbrella liability – Five Million Dollars; fiduciary – One Million
Dollars; which insurance shall protect Support Services Company and its
employees, agents and representatives, against claims, liabilities and losses
which may be asserted or incurred, arising in the course of Support Services
Company’s performance of its duties hereunder and Support Services Company will
provide proof of such coverage upon request. All insurance required hereunder
shall be written with a reputable insurance company or companies.

5.2 Insurance to be Maintained by SPRPA. Support Services Company, pursuant to
Section 2.3, shall assist SPRPA’s broker to obtain and maintain the following
insurance coverages for and on behalf of SPRPA:

5.2.1 Such workers compensation, employer’s liability or similar insurance as
may be required under law to cover SPRPA Employees, and such additional
coverages (including malpractice coverages) which SPRPA and/or Support Services
Company shall reasonably deem advisable; and

5.2.2 Such other insurance in type and amount SPRPA deems appropriate to protect
SPRPA, SPRPA Employees and SPRPA’s agents and representatives, against claims,
liabilities and losses which may be asserted or incurred, arising in the course
of SPRPA’s performance of its duties hereunder. All insurance required hereunder
shall be written with a reputable insurance company or companies.

ARTICLE VI

CONFIDENTIALITY

6.1 Confidentiality. Each party acknowledges, and shall cause each of its
members and owners, for itself and on behalf of its members and owners to
acknowledge, that in connection with this Agreement, each party and its owners
and members may acquire Confidential Information of the other party. In order to
protect the Confidential Information, each party covenants for itself, and shall
cause each of its members and owners to covenant, that: (i) at any time, either
during or subsequent to the Term, each party and its members and owners will
not, without the other party’s prior written consent, disclose to others, use
directly or indirectly for the benefit of others, copy or permit to be copied
the Confidential Information, except in pursuance of their duties and
obligations under this Agreement or except as otherwise required by law; and
(ii) promptly upon the expiration or earlier termination of this Agreement for
any reason, the parties and their owners and members will return to the
respective other party originals and copies of all reports, records, memoranda
and other materials that contain the Confidential Information of the other
party, including originals and copies of all such reports, records, memoranda
and other materials prepared by the other party.

Furthermore, the Support Services Company shall ensure that all pricing and
other payor information it receives in the provision of services for SPRPA under
this Agreement shall be kept private and confidential and shall not be shared
with any other person nor will such information be shared with any individual
who is involved in any negotiations with payors on behalf of other imaging
providers that may compete with SPRPA.

6.2 HIPAA. The Parties acknowledge and agree that in the provision of services
under this Agreement, Support Services Company is a Business Associate of SPRPA
under the Privacy Rule (as defined in the HIPAA Business Associate Agreement,
attached hereto as Exhibit 6.2 and incorporated herein by reference).
Notwithstanding anything to the contrary in this Agreement, SPRPA is the sole
and rightful owner of all data and information that Support Services Company has
generated or will generate, directly or indirectly, in connection with

 

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the provision of services that it has rendered or will render to SPRPA; provided
SPRPA hereby grants Support Services Company a license to access and use (i) all
such data and information to perform its obligations under this Agreement and
(ii) “de-identified” data and information, as defined by the Privacy Rule and as
referenced in attached Exhibit 6.2, pursuant to the data license between the
parties of even date herewith.

6.3 Remedies. Each of the parties acknowledge that a breach of Section 6.1 or
6.2 would result in irreparable damage to the other party, and, without limiting
other remedies which may exist for a breach of Section 6.1 or 6.2, each party
agrees that Section 6.1 or 6.2 may be enforced by temporary restraining order,
temporary injunction, or permanent injunction restraining violation thereof,
pending or following a trial on the merits, and the prevailing party shall be
entitled to reimbursement of all of the prevailing party’s fees and expenses
incurred in connection with any such enforcement. Each party waives the claim or
defense that an adequate remedy at law for such a breach exists. The covenants
and provisions contained in this Article VI shall survive the expiration or
earlier termination of this Agreement.

ARTICLE VII

FINANCIAL ARRANGEMENTS

7.1 Management Fee Payable to Support Services Company. For the administrative
support services rendered by Support Services Company pursuant to this
Agreement, SPRPA shall pay Support Services Company a Management Fee monthly in
arrears (for the previous month) based upon invoices to be provided by Support
Services Company to SPRPA as indicated under Section 7.3 below. The parties to
this Agreement hereby agree that the charges for services hereunder constitute
fair market value for the services provided hereunder and that the benefits to
SPRPA hereunder do not require, and are not payment or compensation in cash or
in kind for, and are not in any way contingent upon the admission, referral or
any other arrangement for the provision of any item or service offered by the
Support Services Company to any patients in any facility controlled, managed or
operated by Support Services Company.

7.2 Reimbursement of Expenses. SPRPA also shall reimburse the Support Services
Company on a monthly basis for Reimbursable Expenses. Support Services Company
shall not be entitled to reimbursement for its general administrative expenses
relating to its employment of its employees providing services hereunder.
Support Services Company shall prepare an itemization of such Reimbursable
Expenses to be submitted to the SPRPA prior to receiving reimbursement for such
expenses.

7.3 Monthly Invoice. Support Services Company shall provide SPRPA with a monthly
invoice for all amounts owed to Support Services Company under this Agreement.
SPRPA shall arrange for payment of this invoice within thirty (30) days of
receipt. Support Services Company has the right to assess interest charges on
invoice balances not paid in full on or before the due date thereof at a rate
equal to the lesser of 1.5% per month or the maximum rate permitted by law until
paid in full.

7.4 Audits. Support Services Company shall have the right to audit SPRPA’s books
and records solely as they relate to payment for Support Services Company’s
services provided under this Agreement, but not more frequently than annually,
and with not less than ten (10) business days’ prior written notice. SPRPA shall
have the right to audit Support Services Company’s books and records solely as
they relate to the services provided under this Agreement, but not more
frequently than annually, and with not less than ten (10) business days’ prior
written notice. Any such audit must be conducted during regular business hours
and in a manner that avoids disrupting business operations. The party initiating
the audit shall pay the reasonable cost of such audit; provided, however, that
if an audit reveals an error in the initiating party’s favor by more than five
percent (5%), the party whose books and records were audited shall pay for the
reasonable cost of such audit. Disputes concerning audit results shall be
resolved under Section 11.11.

7.5 Legal Costs. If Support Services Company initiates legal action to collect
any amounts due from SPRPA, the prevailing party shall be entitled to reasonable
attorney fees and other costs incurred in collection of any amounts not paid on
or before the due date, regardless of whether litigation or other proceedings
have been commenced.

 

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7.6 Disputes. All disputes concerning amounts owed Support Services Company
shall be resolved in accordance with Section 11.11.

ARTICLE VIII

TERM AND TERMINATION

8.1 Term. The initial term of this Agreement shall commence on the Effective
Date and shall continue for a period of twenty (20) years, unless earlier
terminated pursuant to the provisions of Section 8.2 of this Agreement. The
initial term and any renewal term shall be referred to herein as the “Term.”

8.2 Termination. This Agreement may be terminated as follows:

8.2.1 By mutual written agreement of the parties.

8.2.2 By either party if the other party: (i) either admits in writing its
inability to pay its debts as they become due or makes an assignment for the
benefit of creditors, and such was not the result of action or inaction on the
part of the other party; or (ii) a receiver, trustee, liquidator or conservator
is appointed for the party, or to take possession of all or substantially all of
that party’s property; or (iii) a petition for insolvency, dissolution,
liquidation or reorganization, or order for relief in which that party is named
as a debtor is filed and that party fails to secure a stay or discharge within
45 days after such appointment or filing and such was not the result of action
or inaction by the other party.

8.2.3 In the event of a Fundamental Regulatory Change as defined in Section 8.4,
to the extent permitted by Section 8.4.

8.2.4 SPRPA may terminate this Agreement if Support Services Company is in
material breach of its obligations hereunder as a result of the grossly
negligent, or deliberately wrongful, acts or omissions of Support Services
Company, and such material breach has directly resulted in Substantial Harm to
SPRPA (a “Qualifying Breach”); provided, however, that prior to any such
termination (i) SPRPA must send a notice to Support Services Company which
identifies with specificity (a) the nature of the alleged breach by Support
Services Company, (b) SPRPA’s determination as to what Support Services Company
must do to remedy such Qualifying Breach and (c) the damages being suffered by
SPRPA as a result of such Qualifying Breach; and (ii) Support Services shall
have one hundred twenty (120) days following receipt of such notice to cure the
breach or, with respect to a breach that is not capable of being cured within
such one hundred twenty (120) day period, have engaged in a good faith effort to
cure such breach as soon as practicable and cured such breach no later than 1
year following receipt of such notice. If, at the end of such one hundred twenty
day (or 1 year) period, SPRPA believes that Support Services Company has failed
to cure such breach (or engage in good faith efforts to cure such breach, as
applicable), SPRPA shall send to Support Services Company a final notice of
termination, in which case the termination of this Agreement shall be effective
90 days following the receipt of such final notice by Support Services Company
unless Support Services Company objects in writing to SPRPA within such 90 day
period that SPRPA has the right to terminate under this Section 8.2.4. If such
an objection notice is delivered, no such termination will be effective unless
and until SPRPA is determined to have the right to so terminate this Agreement
pursuant to the dispute resolution mechanism set forth in Section 11.11.
“Substantial Harm” means material harm to the financial condition of SPRPA.

In the event that SPRPA has sent Support Services Company a notice that it
believes that there has occurred a Qualifying Breach and Support Services
Company has not, within sixty (60) days of receipt of such notice, disputed in
writing that a Qualifying Breach has occurred, SPRPA shall be entitled to retain
a third party to provide such service(s) that Support Services Company is
alleged to be failing to provide in the manner required hereunder (the
“Deficient Services”)

 

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and Support Services Company shall indemnify SPRPA for its out of pocket costs
and expenses incurred in retaining such third party until such Qualifying Breach
has been remedied (or until this Agreement has been terminated in accordance
with its terms). In the event that SPRPA has sent Support Services Company a
notice that it believes that there has occurred a Qualifying Breach and Support
Services Company, within sixty (60) days of receipt of such notice, disputes in
writing that a Qualifying Breach has occurred, then SPRPA shall be entitled to
retain a third party to provide the alleged Deficient Services, but Support
Services Company shall not be obligated to indemnify SPRPA for its costs and
expenses incurred in retaining such third party unless and until it is
determined, in accordance with the provisions of Section 11.11, that a
Qualifying Breach in fact occurred, in which case Support Services Company shall
be responsible for indemnifying SPRPA for such out of pocket costs and expenses
from the time the notice alleging the Qualifying Breach was received until the
time when it is determined that such breach was remedied.

8.2.5 In the event of the termination of the Professional Services Agreement of
even date herewith by and between SPRPA and Night Hawk Radiology Services LLC,
then either party may terminate this Agreement by giving thirty (30) days
written notice of termination to the other party; provided, however, that SPRPA
may not terminate this Agreement under this Section 8.2.5 if such Professional
Services Agreement was terminated under Section 13.2(a) of such agreement.

8.2.6 In the event that the Administrative Support Service Agreement of even
date herewith by and between Support Services Company and Midwest Radiology, LLC
terminates in accordance with Sections 8.2.1 – 8.2.4 thereto, then either party
can terminate this Agreement by providing the other party with 30 days’ written
notice.

Upon termination of this Agreement as herein provided, neither party shall have
any further obligation hereunder except that: (i) obligations accruing prior to
the date of termination under this Agreement shall survive termination of this
Agreement (including SPRPA’s obligation to pay Support Services Company its
Management Fee and all other amounts owing for past services performed);
(ii) obligations, promises or covenants contained herein that are expressly or
by operation of law made to extend beyond the term of this Agreement (e.g.,
indemnification, insurance, confidentiality, access to records) shall be so
extended; and (iii) all books and records directly or indirectly related to the
operations of SPRPA, and all patient and other records and documents relating to
services provided by the Radiologists shall remain the property of SPRPA and any
such records in the custody of Support Services Company shall be returned to
SPRPA. Notwithstanding anything to the contrary in this Agreement, upon
termination of this Agreement, Support Services Company shall continue to have a
license to use all “de-identified” data and information that it has generated,
directly or indirectly, in connection with services that it has rendered to
SPRPA as and to the extent provided in the data license agreement between the
parties of even date herewith.

8.3 Intentionally Omitted

8.4 [***]

 

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ARTICLE IX

LIMITATION ON LIABILITY

UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY
PUNITIVE DAMAGES.

ARTICLE X

LICENSE OF NAME AND MARKS

10.1 License of Name and Marks. SPRPA will arrange for the Support Services
Company, during the Term of this Agreement, to have a nonexclusive, royalty-free
license to use the name “St. Paul Radiology” and all related marks and logos
owned or licensed by SPRPA; provided any such use by Support Services Company
will be limited solely to and in connection with the provision of administrative
support services hereunder for the benefit of SPRPA. Upon termination of this
Agreement, all such rights shall terminate and revert to SPRPA.

ARTICLE XI

GENERAL

11.1 Relationship of Parties. The relationship of the parties is and shall be
that of independent contractors, and nothing in this Agreement is intended as,
and nothing shall be construed to create, an employer/employee partnership, or
joint venture relationship between the parties, or to allow either to exercise
control or direction over the manner or method by which the other performs the
services that are the subject matter of this Agreement; provided, however, that
the services to be provided hereunder shall always be furnished in a manner
consistent with the standards governing such services and the provisions of this
Agreement. Northing in this Agreement shall be construed to create an
employer-employee relationship between Support Services Company and any SPRPA
Employee.

11.2 Notices. Except as otherwise provided in this Agreement, any notice,
payment, demand or communication required or permitted to be given by any
provision of this Agreement shall be duly given

11.2.1 if delivered in writing, personally to the person to whom it is
authorized to be given,

 

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11.2.2 if sent by certified mail or overnight courier service:

 

If to SPRPA, then to:

St. Paul Radiology, P.A.

166 Fourth Street East

St. Paul, Minnesota 55101

Attention: President

With a copy to: Winthrop & Weinstine, P.A. Suite 3500 225 South Sixth Street
Minneapolis, Minnesota 55402 Attention: Mark T. Johnson If to Support Services
Company, then to: Midwest Physicians Services LLC 166 Fourth Street East St.
Paul, Minnesota 55101 Attention: President and Nighthawk Radiology Holdings,
Inc. 250 Northwest Boulevard, Suite 202 Coeur d’Alene, Idaho 83814 Attention:
General Counsel

Any such notice shall be deemed to be given as of the date so delivered if
delivered personally or by overnight courier, or as of the date on which the
same was deposited in the United States mail, postage prepaid, addressed and
sent as aforesaid.

11.3 Section Captions. Section and other captions contained in this Agreement
are for reference purposes only and are in no way intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provision hereof.

11.4 Applicable Law. This Agreement and the rights of the parties shall be
governed by and construed and enforced in accordance with the laws of the State
of Minnesota.

11.5 Severability; Interpretation. If any provision of this Agreement is held in
a final judgment or determination of any court or administrative agency of
competent jurisdiction to be overly broad or otherwise unenforceable in any
respect, such provisions shall be deemed to be amended, and shall be binding on
the parties to the maximum extent deemed reasonable and enforceable by such
court or administrative agency. If either (i) any such provision is
unenforceable because it cannot be so modified or (ii) any other provision or
application thereof shall be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein and any other application thereof shall not in any way be affected or
impaired thereby. This Agreement shall be construed without regard to any
presumption or other rule requiring construction hereof against the party
causing this Agreement to be drafted.

11.6 Binding Effect. Except as herein otherwise provided to the contrary, this
Agreement shall be binding upon, and inure to the benefit of, the parties and
their respective legal representatives, successors, permitted transferees and
assigns. Support Services Company shall be permitted to assign this Agreement
without the consent

 

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of SPRPA to any third party other than any entity providing professional
radiology services within fifty (50) miles of any hospital at which Radiologists
provide professional radiology services (excluding teleradiology services) at
the time of such assignment, and for purposes of clarity, no Change in Control
of Support Services Company (or any affiliate of Support Services Agreement)
shall require the consent of SPRPA. SPRPA shall not be permitted to assign or
delegate any rights or obligations hereunder without the consent of Support
Services Company, and any such assignment is strictly prohibited except with the
written consent of the other parties hereto; provided, however, that such
consent will not be unreasonably withheld, conditioned or delayed. Any Change in
Control of SPRPA shall be deemed to be an assignment by SPRPA of this Agreement.
A “Change in Control” means, with respect to any entity, (i) the sale, lease,
exchange or other transfer, directly or indirectly, of all or substantially all
of the assets of such entity, in one transaction or in a series of related
transactions, to any third party (which includes for purposes of this
Section 11.6 any affiliate of the party); (ii) the sale or other transfer of
securities in a single transaction or series of related transactions occurring
within a 180 day period representing, (x) in the case of membership units or
partnership interests, units or interests entitling the holder thereof to be
allocated 50% or more of the net income, net loss or distributions of the party,
or, (y) in the case of other securities, securities representing 50% or more of
the combined voting power of the party’s outstanding securities ordinarily
having the right to vote at elections of directors; and/or (iii) the
consummation of any transaction or series of transactions under which party is
merged or consolidated with any other company, other than a merger or
consolidation which would result in the members or security holders of the party
immediately prior thereto continuing to own (either by remaining outstanding or
by being converted into voting securities of the surviving entity) more than 50%
of the combined voting power of the voting securities of the surviving entity
outstanding immediately after such merger or consolidation.

11.7 Terminology. All personal pronouns used in this Agreement, whether used in
the masculine, feminine, or neuter gender, shall include all other genders; and
the singular shall include the plural, and vice versa.

11.8 Amendment. This Agreement may not be amended except by the mutual written
agreement of the parties.

11.9 Parties in Interest. Each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the parties hereto and, to the extent permitted by this Agreement, their
respective legal representatives, successors, permitted transferees and assigns.

11.10 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.

11.11 Dispute Resolution. Except as provided in Section 6.3, any controversy,
disputes or disagreements arising out of or relating to this Agreement shall be
resolved pursuant to and in accordance with this Section 11.11. In the event of
a dispute under this Agreement, the parties shall first attempt to resolve the
dispute by submitting the matter in writing to their respective CEOs or their
designees, collectively the Dispute Resolution Team (DRT). In the event that the
DRT is unable to resolve the dispute within 30 days after submission of the
matter to them, then the parties shall submit the matter in dispute to
nonbinding mediation. The parties hereto shall mutually select the mediator and
shall meet with the mediator at least twice within 30 days following such
selection. If, through mediation, the parties are unable to resolve the matter
at issue within 30 days after selecting a mediator, or if the parties are unable
to agree upon a mediator, then the dispute shall be resolved through final and
binding arbitration pursuant to the arbitration rules of the American Health
Lawyers Association (“AHLA”), without submitting such dispute to be administered
by the AHLA. A judgment upon the arbitration award may be entered in any court
having jurisdiction over the controversy. The arbitration proceedings shall be
held in Minneapolis or St. Paul, Minnesota at a location selected by Support
Services Company. Minnesota law shall govern the resolution of the dispute
pursuant to this Section 11.11. The parties may, if they are able to do so,
agree upon one arbitrator; otherwise, there shall be three arbitrators, one
named in writing by each party within 30 days after arbitration demand is served
upon the other party, and the third arbitrator shall be selected by the two
named arbitrators within 30 days after their appointment. If a party does not
select an arbitrator within 30 days, the arbitrator selected by the other party
shall select such arbitrator. The prevailing party (if reasonably ascertainable)
shall be entitled to reimbursement of all of the prevailing party’s fees and
expenses incurred in connection with the arbitration (including reasonable
attorneys’ fees and payment of the expenses of the arbitrators). If the
prevailing party is not reasonably ascertainable, then each party shall pay its
own expenses of conducting the arbitration and one-half of the expenses of the
arbitrators.

 

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11.12 Access to Books and Records by Governmental Officials. Upon written
request of the Secretary of Health and Human Services or the Comptroller General
or any other duly authorized representatives thereof, Support Services Company
shall make available to the Secretary those contracts, books, documents and
records necessary to verify the nature and extent of the cost of providing its
services to the Radiologists. Such inspection shall be available up to four
years after such services are rendered. If Support Services Company carries out
any of the duties of this Agreement through subcontract with a value of Ten
Thousand Dollars ($10,000) or more over a 12-month period with a related
individual or organization, Support Services Company agrees to include this
requirement in such subcontract. If a request from the Secretary or the
Secretary’s representative is served on Support Services Company, Support
Services Company will notify the SPRPA in writing as soon as reasonably
practicable thereafter and in any event prior to responding to the request.

11.13 Entire Agreement. This Agreement constitutes the entire understanding and
agreement among the parties with respect to the subject matter hereof and
supersedes any prior agreements, understandings, representations or warranties
between the parties, whether written or oral.

11.14 Waiver. No consent to, or waiver of, any breach or default on the part of
any party to this Agreement shall be deemed or construed to be a consent to or
waiver of any other breach or default in the performance by such party of the
same or any other obligations of such party under this Agreement. Failure on the
part of a non-breaching or non-defaulting party to complain of any act or
failure to act on the part of a breaching or defaulting party, or to declare
that party in breach or default, shall not constitute a consent by the
non-breaching or non-defaulting party to such action or inaction or a waiver by
the non-breaching or non-defaulting party of its rights under this Agreement.

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IN WITNESS WHEREOF, the parties have executed this Agreement by their respective
duly-authorized representatives as of the day and year first above written.

 

St. Paul Radiology, P.A. (“SPRPA”)

By:

 

/s/ Joseph Tashjian

  Joseph Tashjian   Chief Manager Midwest Physicians Services, LLC (“Support
Services Company”)

By:

 

/s/ Joseph Tashjian

  Joseph Tashjian   Chief Manager

 

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EXHIBIT 1.23

Reimbursable Expenses

Reimbursable Expenses shall include all amounts paid by Support Services Company
to third parties which are necessary to enable Support Services to fulfill its
obligations hereunder except for the following:

 

1. See Appendix 1.23-1.

 

2. All ongoing third party expenses that are reflected in the historical
financial statements of Support Services Company and that were not reimbursed to
Support Services Company.

 

3. Other expenses agreed to by the parties in writing from time to time as not
being Reimbursable Expenses.

 

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EXHIBIT 2.2.6

SPRPA Corporate Compliance Program

 

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EXHIBIT 6.2

HIPAA Business Associate Agreement

 

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