exv10w10



 




Exhibit
10.10

SECOND AMENDMENT

TO

MANAGEMENT AND SUPPORT SERVICES AGREEMENT



This Second Amendment (this “Second Amendment”) to the Management and Support Services Agreement
between the Parties (as defined below) dated November 15, 2005 (“Agreement”) is dated and effective
November 15, 2006, (“Second Amendment Effective Date”) by and between Hythiam, Inc. (“Hythiam”) and
David E. Smith, M.D. Medical Group, Inc. (“PC”) (each a “Party” and collectively, the “Parties”).



WHEREAS, the Parties entered into that certain First Amendment to Management and Support Services
Agreement dated and effective December 1, 2005 (the “First Amendment”); and



WHEREAS, the Parties wish to further amend the Agreement as set forth in this Second Amendment.



NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set
forth in this Second Amendment, the Parties agree as follows:



1. All capitalized terms used and not otherwise defined in this Second Amendment shall have the
definitions set forth in the Agreement.



2. The Parties hereby amend the Agreement by adding the following definitions to Section
1.1:





     “Continuing Care” has the meaning set out in Exhibit B.




     “Continuing Care Services” has the meaning set out in Section 3.16.6.




     “San Francisco Premises” has the meaning set out in Section 3.2.1.




     “Santa Monica Premises” has the meaning set out in Section 3.2.1.


3. The Parties hereby amend the Agreement by:





     (a) deleting the definitions of “Aftercare” and “Aftercare Services” from
Section 1.1;




     (b) replacing the defined term “Aftercare” throughout the Agreement with the defined
term “Continuing Care”; and




     (c) replacing the defined term “Aftercare Services” throughout the Agreement with
the defined term “Continuing Care Services”.



 









 




4. The Parties hereby amend the Agreement by deleting the first sentence of Section 3.2.1
and replacing it with the following language:



          The Manager hereby agrees to provide, or cause an affiliate to provide, to the PC, on a
non-exclusive and non-assignable basis, office space at 1315 Lincoln Boulevard, Santa Monica, CA
90401 (the “Santa Monica Premises”), and at 1700 Montgomery Street, Suite 215, San Francisco, CA,
94111 (the “San Francisco Premises”) for the conduct of the practice of the PC (the Santa Monica
Premises and the San Francisco Premises are referred to herein collectively as the “Premises”).



5. The Parties hereby amend the Agreement by deleting Section 6.4 (as amended by the First
Amendment) in its entirety and replacing it with the following new Section 6.4:




     6.4 Authorization to Pay Invoices



          The PC hereby authorizes and directs the Manager to make the following payments on behalf
of the PC from any Bank Account, in the order specified: (1) the Medical Fee; (2) any obligations
of PC related to PC’s employees (e.g., salary, benefits and administrative expenses specifically
approved by PC); (3) all third party obligations, including but not limited to Continuing Care; and
(4) any invoice owed by the PC to the Manager and all other monetary obligations of the PC to the
Manager hereunder on the date such amount is due and payable (including, without limitation, the
Management Fee), (subparagraphs (1) through (4) above are referred to collectively as the
“Obligations”). In the event there are not sufficient monies in the Bank Account(s) to pay any of
the Obligations, Manager shall provide the PC a revolving line of credit to be available as a
working capital loan up to a maximum amount of two million five hundred thousand dollars
($2,500,000) (“Working Capital Loan”) to allow PC to pay such Obligations. PC shall execute and
deliver to Manager a promissory note, dated the Second Amendment Effective Date and payable to the
order of Manager (including as further amended, modified, restated or replaced from time to time),
evidencing PC’s unconditional obligation to repay Manager for the Working Capital Loan. The
Working Capital Loan shall be repaid by PC, with interest equal to prime plus two percent (2%), as
funds become available; provided, however, upon termination of this Agreement, the entire
principal balance and all other costs, fees and expenses, if any, shall be due and payable in full.
The Working Capital Loan shall be secured as provided in Section 6.7.1. The Manager
agrees that all third party obligations shall be paid prior to any payments of the Management Fee
each month.



6. The Parties hereby amend the Agreement by deleting Section 6.8.1 in its entirety and
replacing it with the following new Section 6.8.1:




          PC shall pay Manager the license fees set forth on Exhibit B-1 or Exhibit B-2,
as amended from time to time, as applicable to the locality of the Premises (“License Fees”).




 









 







7. The Parties hereby amend the Agreement by deleting Section 6.8.2 in its entirety and
replacing it with the following new Section 6.8.2:




     6.8.2 Payment Terms



          PC will deliver within three business days following the end of every calendar month during the Term to Manager a report
identifying the number and type of patients treated using the Licensed Technology during the monthly period covered by the report, the total fees charged to those patients, the amounts collected to date with respect to those patients, and License
Fees payable to Manager based on those treatments. Within ten days after receipt of each report, Manager will invoice PC for the License Fees (computed as provided in this Section 6.8.2 and
Exhibit B) that may have accrued since the cutoff date for the previous report (or from the
Effective Date in the case of the first report), and PC will pay any undisputed invoices within ten
days after receipt by PC by mailing or delivering a check or other readily available funds payable
to Manager in the amount of the License Fees to the Manager’s address and person identified on the
first page of this Agreement (unless and until otherwise directed by Manager). Within ten (10)
days following each reconciliation meeting (as defined in Section 6.8.3), Manager will
invoice PC for any additional License Fees due under this Agreement, and PC will pay any undisputed
invoices within thirty (30) days after receipt by PC. Notwithstanding any other provision of this
Agreement and subject to the terms of the Continuing Care Services set forth in Exhibit B,
Manager in no event or circumstance is or shall be responsible for any costs of, or related to,
patient care provided by PC, or extended or unanticipated care required for patients treated using
the Licensed Technology.



8. The Parties hereby amend the Agreement by deleting the third sentence of Section 6.8.3
and replacing it with the following language:



          Any such unreported uses of the Licensed Technology shall be included by PC in the next
monthly report (as defined in Section 6.8.2).



9. The Parties hereby amend Exhibit B by deleting paragraph 6 in its entirety and replacing
it with the following language:




          The term 
“Continuing Care”
, as used in this 
Exhibit B
and otherwise in the Agreement, refers to a program of follow-up care provided to a patient treated using the Licensed Technology where services are provided by a certified or licensed health care provider (which may be PC). All on behalf of PC,
Manager shall arrange, and pay up to $1,500 from a PC Bank Account for, Continuing Care for each patient treated using the Licensed Technology, provided that within thirty (30) days after receiving that treatment, the patient enrolls in an
appropriate Continuing Care program.  Manager shall provide PC and treating Medical Contractors with options for Continuing Care  providers for their patients from a list maintained by Manager. Notwithstanding the foregoing, Manager does not and shall not endorse or
recommend any specific provider and is not and shall not be responsible or accountable in any way for the care provided by any Continuing Care provider.  Manager, at its discretion and for its own behalf, with


 









 







appropriate patient authorization, may
collect data (for a period of up to two years following treatment) concerning the recovery
follow-up treatment for PC patients provided treatment using the Licensed Technology. Nothing in
this Agreement shall limit a patient’s ability to choose a provider other than PC for Continuing
Care, nor shall this Agreement require any Party to refer patients or otherwise generate business
for the other Party.



10. The Parties hereby amend Exhibit B to the Agreement to delete in its entirety paragraph
7 and replace it with the following:




     7. License Fees



     License Fees: PC shall pay Manager the License Fees set forth on Exhibit B-1
or Exhibit B-2, as applicable to the locality of the Premises.


11. The Parties hereby amend Exhibit B to the Agreement to add Exhibit B-1 as set
forth on Schedule 1 to this Second Amendment.



12. The Parties hereby amend Exhibit B to the Agreement to add Exhibit B-2 as set
forth on Schedule 2 to this Second Amendment.



13. Except as amended by this Second Amendment, all other terms and conditions of the Agreement
shall remain unchanged and in full force and effect. In the event that any terms or conditions of
the Agreement are inconsistent with the terms of this Second Amendment, the provisions of this
Second Amendment shall control. Any reference to the Agreement from and after the Second Amendment
Effective Date shall mean the Agreement as amended by this Second Amendment.




 









 




The Parties have executed this Second Amendment by their duly authorized representatives whose
signatures appear below.




	 	 	 	 	 
	 

	 	Hythiam, Inc.	 	 
	 
	 	 	 	 
	 

	 	BY: /s/ ANTHONY M. LAMACCHIA
 

	 	 
	 
	 	 
	 	 
	 

	 	Printed Name: Anthony M. LaMacchia	 	 
	 
	 	 	 	 
	 

	 	Title: Senior Executive Vice President	 	 
	 
	 	 	 	 
	 

	 	David E. Smith, M.D. Medical Group, Inc.	 	 
	 
	 	 	 	 
	 

	 	BY: /s/ DAVID E. SMITH
 

	 	 
	 
	 	 
	 	 
	 

	 	Printed Name: David E. Smith, M.D.	 	 
	 
	 	 	 	 
	 

	 	Title: President	 	 






 









 






Schedule 1




EXHIBIT B-1




License Fees




Santa Monica Premises




     The following License Fees shall apply with respect to patients treated at the Santa Monica
Premises using the Licensed Technology:



          License Fees: PC shall pay Manager the following License Fees for any patient treated
at the Santa Monica Premises, who is not covered by, eligible for coverage by, or reimbursed by, on
a primary or secondary basis, Medicare, Medicaid, or any other federal healthcare payer or funding
source (“Self Pay Patient”):




	 	 	 	 	 
	Self Pay Patients	 	Manager	 
	Treated Using Licensed Technology	 	Fee	 
	Each episode of treatment for alcohol dependency (2 day) 
	 	$	4,500	 
	Each episode of treatment for severe alcohol dependency (3 day)
	 	$	5,000	 
	(applicable when 3 infusions prescribed in advance)
	 	 	 	 
	Each episode of treatment for psycho-stimulant dependency
	 	$	6,000	 
	Each additional “booster” infusion provided within twelve (12) months
	 	$	1,000	 
	(applicable to treatment for alcohol or psycho-stimulant dependency)
	 	 	 	 






          The License Fees set forth in this Exhibit B-1 are for treatment of Self Pay Patients
only and not for treatment of commercially insured patients or patients reimbursed, on a primary or
secondary basis, by Medicare or Medicaid or any other governmental payer or funding source. Before
treating any such excluded patient, PC will advise Manager of its desire so to do, whereupon the
Parties will meet and attempt in good faith to negotiate appropriate fees for such treatments, and
will advise the patient in advance of the non-covered status of the treatment and obtain an
appropriate waiver therefrom.




          For purposes of this Exhibit B-1, any treatment provided to any patient by, at or on
behalf of the PC using all or any part of the Licensed Technology shall be included in the
calculation of the License Fees with respect to such patient.




          For purposes of this Agreement, an Episode of Treatment shall include:





	 	•	 	Alcohol dependency- two or three administrations of the PROMETATM for alcohol
protocol provided during a consecutive two-day or three-day treatment period.
	 
	 	•	 	Psycho-stimulant dependency or poly-addictions — Five administrations of the
PROMETATM for cocaine, crack cocaine or methamphetamines




 









 






	 	 	 	protocol provided during a consecutive three-day initial treatment period plus a
follow-up treatment three weeks later for two consecutive days.




 









 











Schedule 2




EXHIBIT B-2




License Fees




San Francisco Premises




     The following License Fees shall apply with respect to patients treated at the San Francisco
Premises using the Licensed Technology:



          License Fees: PC shall pay Manager the following License Fees for any patient treated
at the San Francisco Premises, who is not covered by, eligible for coverage by, or reimbursed by,
on a primary or secondary basis, Medicare, Medicaid, or any other federal healthcare payer or
funding source (“Self Pay Patient”):




	 	 	 	 	 
	Self Pay Patients	 	Manager	 
	Treated Using Licensed Technology	 	Fee	 
	Each episode of treatment for alcohol dependency (2 day)
	 	$	4,500	 
	Each episode of treatment for severe alcohol dependency (3 day)
	 	$	5,000	 
	(applicable when 3 infusions prescribed in advance)
	 	 	 	 
	Each episode of treatment for psycho-stimulant dependency
	 	$	6,000	 
	Each additional “booster” infusion provided within twelve (12) months
	 	$	1,000	 
	(applicable to treatment for alcohol or psycho-stimulant dependency)
	 	 	 	 






          The License Fees set forth in this Exhibit B-2 are for treatment of Self Pay Patients
only and not for treatment of commercially insured patients or patients reimbursed, on a primary or
secondary basis, by Medicare or Medicaid or any other governmental payer or funding source. Before
treating any such excluded patient, PC will advise Manager of its desire so to do, whereupon the
Parties will meet and attempt in good faith to negotiate appropriate fees for such treatments, and
will advise the patient in advance of the non-covered status of the treatment and obtain an
appropriate waiver therefrom.




          For purposes of this Exhibit B-2, any treatment provided to any patient by, at or on
behalf of the PC using all or any part of the Licensed Technology shall be included in the
calculation of the License Fees with respect to such patient.




          For purposes of this Agreement, an Episode of Treatment shall include:





	 	•	 	Alcohol dependency- two or three administrations of the PROMETATM for alcohol
protocol provided during a consecutive two-day or three-day treatment period.
	 
	 	•	 	Psycho-stimulant dependency or poly-addictions — Five administrations of the
PROMETATM for cocaine, crack cocaine or methamphetamines




 









 






	 	 	 	protocol provided during a consecutive three-day initial treatment period plus a
follow-up treatment three weeks later for two consecutive days.