Exhibit
10.9


 


MANAGEMENT AGREEMENT


 


THIS
MANAGEMENT AGREEMENT (this “Agreement”) is made effective as of JANUARY 1,
2003 (the “Effective Date”), by and between PINNACLE HEALTH RESOURCES INC., a
California corporation (“MANAGER”), and APAC MEDICAL GROUP INC, DBA GATEWAY
PHYSICIANS MEDICAL ASSOCIATES, INC. a California professional corporation that
operates an independent practice association (“IPA”), with respect to the
following:


 


A.                                   IPA/MEDICAL GROUP has entered, or intends to
enter, into contracts with health maintenance organizations, preferred provider
organizations, insurers, independent practice associations, medical groups,
hospital systems, integrated delivery systems and other public and private
payors (“Payors”) to arrange for the provision of medical services to patients
who are members, subscribers, or enrollees under health benefit plans (“Plans”)
of such Payors (“Enrollees”).  IPA has
contracted with individual physicians to provide such medical services as
participating physicians under such plans (“IPA Physicians”) and with providers
of medically-related services who will serve as participating providers under
such Plans (together with IPA Physicians, “IPA Providers”).


 


B.                                     MANAGER is engaged in the business of
administering managed care contracts, as well as providing administrative and
management services to physician networks, independent practice associations
and medical groups.


 


C.                                     IPA desires to retain MANAGER to manage on an
exclusive basis the marketing and sales activities of IPA and to administer
IPA’s managed care contracts with Payors (“Payor Contract(s)”), on behalf of
IPA Providers, and MANAGER desires to provide such administrative and
management services in connection with Payor Contracts;


 


NOW,
THEREFORE, in consideration of the foregoing premises and the mutual covenants
and agreements contained herein, the parties hereto agree as follows:


 


ARTICLE I - SERVICES TO BE PROVIDED BY MANAGER


 


In
consideration of the compensation described in Article II hereof, MANAGER
shall be the exclusive provider of the services described in this
Article I, subject to the management and administrative policies
established by the IPA Executive Committee, more particularly described in
Article III below, in a timely manner and with sufficient staff and
resources.


 


MANAGER
will have no authority, directly or indirectly, to perform, and will not
perform, any medical function.  MANAGER
may, however, advise IPA as to the relationship between its performance of
medical functions and the overall administrative and business functioning of
the IPA.  To the extent that MANAGER may
assist the practice in the credentialing of physicians, the administration of a
utilization review and quality management program, and the implementation of
data processing or programs for analyzing the utilization of health care
services by IPA


 


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Physicians, MANAGER shall have no control or direction over the
delivery or provision of medical services and all such medical services shall
be provided under the professional direction and supervision of IPA
Physicians.  To the extent any act or
service required of MANAGER in this Agreement should be construed or deemed, by
any governmental authority, agency or court to constitute the practice of
medicine, the performance of said act or service by MANAGER shall be deemed
waived and forever unenforceable.


 


1.1       General
Administration and Management


 


MANAGER shall supervise, coordinate and conduct all the day-to-day
non-medical aspects of IPA’s business related to IPA’s performance of its
obligations under its Payor Contracts. 
MANAGER shall provide all necessary secretarial, clerical and technical
support services required to fulfill its obligations hereunder, either through
its own employees or through independent contractors, and MANAGER shall be
responsible for all payroll, personnel, employee benefits, taxes, and insurance
related to them.  MANAGER shall arrange
for space and other facility services as it deems is reasonably required from
time to time for the proper operation of IPA’s business.


 


1.2       Financial
and Reporting Services


 


MANAGER shall: (a) establish recordkeeping, bookkeeping and accounting
systems for, and maintain custody and supervise the preparation of all business
records of, IPA; (b) prepare all financial reports and forms required to be
submitted by IPA to Payors; (c) establish and maintain bank accounts and
supervise short-term investments and money management for IPA; (d) prepare or
supervise the preparation of financial statements on a monthly basis, which
shall include a statement of revenue and expenses, and results of IPA’s
operations for such month; and (e) prepare such other management reports as the
IPA Executive Committee determines are necessary for IPA’s successful operation
and which will not require MANAGER to incur an unreasonable burden or expense
to prepare.


 


1.3       Claims
Administration


 


For any Payor Contract that MANAGER administers under this Agreement:
(a) MANAGER shall be responsible for processing all claims and encounter data
of IPA for services provided to Enrollees and for which IPA is obligated to
pay; (b) MANAGER shall be responsible for distributing payments from Payors;
(c) MANAGER shall administer any risk pools established by such Payors and/or IPA.


 


1.4       Patient
Eligibility


 


MANAGER shall: (a) obtain and maintain current eligibility lists from
the Payors subject to this Agreement; (b) assist in determining eligibility of
patients for coverage prior to the provision of medical or other services; and (c)
reconcile retroactive denials of eligibility with the authorization processes
established by IPA or the applicable Payor with the Payor Contract, and with
applicable provisions of health plan benefit agreement(s) or other evidences of
coverage.


 


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1.5       Liaison
with Payors


 


MANAGER shall act as a liaison to Payors on behalf of IPA, IPA
Physicians and IPA Providers.  MANAGER
shall, among other things: (a) maintain a liaison with Payors as necessary to
obtain or submit data, or to obtain or submit reports, pursuant to IPA’s
contracts with such Payors; (b) coordinate communications between IPA, IPA
Physicians, IPA Providers and Payors; (c) provide Payors with IPA Physician
and/or IPA Provider rosters and inform Payors of roster changes; (d) assist in
resolving any grievances between IPA and Payors; and (e) assist in resolving
Enrollee grievances.


 


1.6       Utilization,
Quality and Case Management


 


MANAGER shall assist and support IPA in the development and administration
of utilization and quality management programs with respect to Payors.  Any disputes between MANAGER and IPA with
respect to the development or administration of such programs shall be resolved
in the sole discretion of the IPA Executive Committee.  MANAGER shall, among other things, assist
IPA to (a) establish utilization guidelines that equal or exceed the minimum
utilization guidelines established by Payors; (b) develop and administer
managed care medical and hospital referral authorization procedures consistent
with requirements of Payors; (c) administer such utilization and quality
management programs in a timely manner, including providing administrative
support to IPA utilization and quality management committees and its Medical
Directors; (d) design, develop and implement a comprehensive credentialing
program, for IPA Physicians, and, if required, for other IPA Providers; and (e)
develop case management activities, including requiring the use by IPA
Physicians and IPA Providers of standard clinical protocols and formularies and
conducting outcomes monitoring and reporting.


 


IPA shall comply with the utilization and quality management programs
that it develops with the assistance of MANAGER.  Further, IPA shall use its best efforts to secure the compliance
and full cooperation of all IPA Physicians with such programs and requirements.


 


1.7       Provider
Relations; Enrollee Relations


 


MANAGER shall enlist IPA to (a) educate IPA Physicians and other IPA
Providers in IPA’s policies and procedures; (b) develop and distribute
appropriate IPA forms to IPA Providers; (c) develop and update IPA Provider
Policies and Procedures Manual; (d) develop and implement health education
programs for Enrollees; and (e) assist IPA to respond to Enrollee complaints or
grievances.


 


1.8       IPA
Provider Contracting and Credentialing


 


(a)                                  The IPA Executive Committee, with the
assistance of MANAGER, shall develop and administer a physician and provider
credentialing and recredentialing program that conforms with the Health Care
Quality Improvement Act of 1986 and the regulations promulgated thereunder and
with the requirements of the Payors, subject to the approval of IPA’s Board of
Directors.  MANAGER’s responsibilities
for administering the programs shall include identifying the need for
appropriate physicians and providers and the specific and interested persons to
fulfill those needs, gathering and reviewing all pertinent credentialing data,
processing all applications for IPA credentials, making recommendations to IPA
with respect to each such


 


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applicant,
and administering, on behalf of IPA, a fair review process for any applicant,
physician or provider who duly presents a grievance arising out of the
foregoing and as may be required by law. 
Any disputes between MANAGER and IPA with respect to the administration
of the credentialing and recredentialing programs shall also be resolved by the
IPA Executive Committee.


 


(b)                                 MANAGER shall be responsible for
administering all IPA Physician and IPA Provider Agreements, including
developing appropriate forms of agreements for approval as to form by IPA’s
legal counsel, negotiating the terms thereof with physicians and providers
including without limitation their agreement to comply with the IPA Provider
Policies and Procedures Manual and all applicable provisions of this Agreement,
and monitoring contract compliance, including renewal dates.  IPA agrees that its President shall at all
times be authorized to execute agreements that are negotiated by MANAGER with
physicians and providers that have received IPA credentials.  IPA also agrees that it will only enter into
agreements with IPA Providers that have been approved as to form by the IPA
Executive Committee.


 


(c)                                  MANAGER shall be responsible for maintaining
current eligibility lists with respect to IPA Physicians and IPA Providers, and
for updating and distributing a roster of IPA Physicians and IPA Providers on a
regular basis.


 


1.9       Managed
Care Contracting


 


(a)                                  MANAGER shall be responsible for managed care
contracting activities of IPA, including, without limitation, identifying,
soliciting, reviewing, evaluating, negotiating and executing Payor Agreements
(including prepaid capitation, exclusive provider and preferred provider
agreements) in the name of IPA, and as directed by IPA, on behalf of IPA
Physicians.  In addition, MANAGER shall
be responsible for negotiating agreements with a network of hospitals and
ancillary service providers; tracking contract renewal dates for agreements with
Payors and IPA Physicians and Providers; establishing and negotiating fee
schedules for IPA Physicians and IPA Providers; and securing appropriate
reinsurance coverage from Payors.  IPA
hereby expressly grants to MANAGER a power of attorney authorizing MANAGER to
negotiate and execute such agreements on behalf of IPA; provided, however, the
authority granted pursuant to such power of attorney shall be limited by the
terms of Section (b) below.  IPA
shall obtain in its written agreements with IPA Providers authorizations for
MANAGER to act as attomey-in-fact for such IPA Providers.


 


(b)                                 MANAGER shall not execute or enter into a
Payor Contract which is not in compliance with the IPA Executive Committee’s
then current Contracting Guidelines without first submitting said agreement to
the IPA Executive Committee for review and approval.  A Payor Contract that is in compliance with the Contracting
Guidelines may be executed by MANAGER, on behalf of IPA and IPA Providers, at
MANAGER’s discretion and without the approval of the IPA Executive Committee,
provided MANAGER shall have furnished IPA with a summary of the essential terms
of such Payor Contract at least five (5) business days prior to its intended
execution date.  If IPA objects to
MANAGER’s execution of the Plan Agreement, IPA shall so notify MANAGER prior to
the expiration of the five (5) business day period and shall convene a meeting
of the IPA Executive Committee.  No
later than five (5) business days after


 


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IPA’s
notice to MANAGER, the IPA Executive Committee may direct MANAGER not to
execute the Agreement or not to execute the Payor Contract until specified
changes have been made to the Agreement and MANAGER shall comply with such
direction.  IPA shall be conclusively
deemed to have granted approval to IPA to execute a Payor Contract if
directions from the IPA Executive Committee are not received by MANAGER within
ten (10) business days after IPA’s receipt of the summary of terms of the
Agreement.


 


1.10                        Marketing
and Public Relations Services


 


MANAGER shall coordinate IPA’s marketing and public relations program,
as it deems necessary to promote and market the services of IPA and develop and
enhance the delivery system for Enrollees and the IPA Provider network.  Any marketing and public relations services
shall be provided in accordance with the standards of medical ethics of the
American Medical Association and the State professional medical associations
and all applicable laws and regulations. 
IPA shall be entitled to review printed marketing or public relations
material or release of any material for dissemination by other media, including
but not limited to radio or television, prior to publication or
distribution.  MANAGER shall be the sole
owner and holder of all right, title and interest in and to any material or
documents acquired, prepared, purchased or furnished by MANAGER pursuant to
this Agreement, including, but not limited to all copyright, service mark and
trademark rights with respect to such material or documents (it being
understood and agreed that such material or documents shall not include (a) the
financial information and reports concerning the IPA’s operations that MANAGER
furnishes to IPA from time to time, or (b) IPA’s trade name “Noble Mid-Medical
Associates” and logo, which MANAGER is authorized to use only during the term
hereof).  IPA shall have no right, title
or interest in or to the aforedescribed material and shall not, in any manner,
distribute or use the same without the prior written authorization of MANAGER;
provided, however, that the foregoing shall not restrict IPA at its sole cost
and expense from distributing managed care informational brochures and
materials to Enrollees without the prior written approval of MANAGER provided
no Proprietary Property of MANAGER is contained therein.


 


1.11                        Insurance
and Risk Management


 


MANAGER shall use reasonable efforts to (a) assist IPA to obtain
appropriate coverage under policies for professional liability insurance,
comprehensive liability insurance, workers’ compensation insurance and
disability insurance and periodically review insurance programs for cost and
appropriateness of coverage limits; and (b) coordinate IPA’s risk management
program.


 


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1.13                        Management Information
Systems


 


MANAGER shall select, acquire, provide and upgrade software and
hardware (hereinafter collectively referred to as a “Management Information
System”) from any vendor (including but not limited to affiliates of MANAGER)
selected by MANAGER; and supervise and manage the use of all software and/or
hardware for the Management Information System utilized by IPA.  The costs associated with such Management
Information Systems shall be borne by MANAGER.


 


1.14                        Audit


 


IPA shall have the right at least once annually to require an audit of
books and records of IPA and MANAGER as they relate to MANAGER’s performance
hereunder in order to determine the accuracy of financial statements and
reports prepared by MANAGER.  A
certified public accounting firm mutually agreed upon by the parties will
conduct such audit.  The audit shall be
completed within ninety (90) days of IPA’s demand therefor and the results
shall be immediately submitted to MANAGER and IPA.  IPA will bear the costs of the audit; provided.


 


ARTICLE II
- COMPENSATION


 


For
services rendered by MANAGER pursuant to this Agreement, IPA shall pay to
MANAGER those amounts set forth on Exhibit A
attached hereto and incorporated herein by this reference, and which
may from time to time be amended by mutual agreement of the parties.  Such compensation shall be paid in the
manner and in accordance with the terms and conditions set forth therein.


 


ARTICLE III
- IPA EXECUTIVE COMMITTEE


 


3.1                               Establishment


 


IPA shall establish an
IPA Executive Committee that shall be responsible for coordinating the
relationship between MANAGER and IPA. 
The IPA Executive Committee shall consist of the duly appointed Board of
Directors of IPA and one (1) ex officio representative designated by
MANAGER.  The ex officio MANAGER
representative shall not participate in any votes involving clinical or peer
review issues.  IPA Executive Committee
action shall be taken by a vote of the majority of IPA Directors, or by written
consent evidencing majority approval.


 


3.13                        Responsibilities


 


In addition to the responsibilities delegated to the IPA Executive
Committee by any other provision of this Agreement, the IPA Executive Committee
shall be responsible for (a) reviewing and approving all contracts with IPA
Providers and Payors, and, subject to applicable law, establishing and
approving any material changes to the fee schedules of IPA Providers; (b)
reviewing and approving the establishment of subcapitation methodologies and
risk pools among subgroups or divisions of the IPA; (c) reviewing and approving
the IPA Provider Policies and Procedures Manual, and any material amendments
thereto; (d) approving the credentialing and recredentialing standards of IPA;
and (e) subject to applicable law on the corporate practice of medicine,
serving as the final arbiter with respect to credentialing, recredentialing,
utilization


 


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management
and quality management issues and disputes which may arise from time to time
with respect to IPA’s policies and procedures or their application.


 


ARTICLE IV
- RESPONSIBILITIES OF IPA


 


IPA
shall, except as otherwise expressly provided herein, arrange to provide all
health care services required pursuant to Payor Contracts and to comply and
cause IPA Providers to comply with all requirements of Plans in connection with
the provision of services to Enrollees, including without limitation the
following:


 


4.1       IPA
Providers


 


IPA shall enter into contracts with IPA Providers.


 


4.2       Reimbursement
Schedule


 


After consultation with
MANAGER, IPA shall establish and give written notice to MANAGER of its
reimbursement schedule (“Reimbursement Schedule”) for capitation and other
compensation payable to IPA Providers for management of the care of, and health
care services provided to, Enrollees, including compensation that is
established and accounted for by divisions. 
After consultation with MANAGER, IPA may amend the Reimbursement
Schedule from time to time, each such amendment to take effect no sooner
than thirty (30) days after notice thereof has been delivered to MANAGER.


 


4.3       Compensation
of IPA Providers


 


IPA shall be liable for payment of all amounts owing to IPA Providers
pursuant to IPA Physician or Provider Contracts for services to Enrollees
pursuant to Plan Agreements.


 


4.4       Compensation
of Out-of-Network Providers


 


IPA shall be liable for payment of all costs and expenses for the
provision of non-contracted health care services by non-IPA Providers, which
services are rendered to Enrollees and are required and covered pursuant to
Plan Agreements.


 


4.5       Medical
Director


 


IPA shall designate one or more medical directors as required for
proper operation of the IPA and as contemplated by Payor Contracts.  IPA shall bear the cost of each such medical
director.


 


4.6       IPA
Committees


 


In addition to the IPA Executive Committee, IPA shall establish and
conduct such committees as may be required for the proper operation of the IPA,
consistent compliance with the IPA’s bylaws.


 


4.7       Taxes


 


IPA shall pay all taxes assessed on personal property, if any, owned by
IPA.


 


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4.8       Encounter
and Billing Information


 


IPA shall timely provide and, as applicable, require IPA Providers to
timely provide MANAGER with (a) all billing, clinical and Enrollee information,
including but not limited to the name of the patient, the date of service, the
nature and extent of services provided and any supporting medical information
necessary to evaluate payment or reimbursement or to make a determination to
authorize payment for services; and (b) all other information and documentation
which IPA or any IPA Provider has or has access to in order to assist MANAGER
to carry out its duties under this Agreement.


 


4.9       Remittance
to MANAGER


 


IPA shall forward to MANAGER any capitation and other payments from the
Plans and Payors owing to IPA that may come into the possession of IPA.


 


4.10                        Stop-Loss
Insurance


 


IPA shall pay for stop-loss insurance.


 


ARTICLE V - COOPERATION; COMPLIANCE


 


5.1       Cooperation


 


IPA covenants and agrees that it shall provide MANAGER with all
information, business records, papers and documents and the use of such
facilities as is required by MANAGER to perform its services hereunder.  IPA further covenants that it shall grant
MANAGER such authority as may be necessary for MANAGER to perform its duties
hereunder.


 


5.2       Sole
Responsibility; Compliance with Law


 


The parties acknowledge and agree that all medical and professional
matters and the delivery of medical and health care services shall be the sole
responsibility of IPA Providers.  IPA
and MANAGER each covenant to comply with all applicable federal, state and
local laws, rules and regulations and the professional standards of the medical
community in the performance of their respective duties and obligations under
this Agreement.


 


ARTICLE VI - RECORDS


 


6.1       Records


 


IPA and MANAGER shall comply with all applicable federal, state and
local laws and regulations pertaining to the confidentiality of medical
information and patient records of Enrollees.


 


6.2       Access
to Records


 


MANAGER shall maintain such books, records and papers and provide such
information to IPA, Payors and applicable regulatory authorities, as may be
necessary for compliance by Payors and IPA with applicable federal and state
laws, including but not limited to Titles XVIII and XIX of the Social Security
Act of 1964 and any regulations promulgated thereto, as such laws and
regulations may be amended.  Such
records and information shall be open to inspection upon request, during normal
business hours, by the California Department of Insurance, the U.S.


 


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Department
of Health and Human Services, the Comptroller General of the United States, or
their duly authorized representatives to the extent required by law.  MANAGER agrees that this obligation shall
not terminate upon termination of the Agreement whether by rescission or
otherwise, and that such records shall be retained by MANAGER for a minimum of
five (5) years.


 


6.1       Confidentiality


 


MANAGER shall hold and maintain in strict confidence any information it
obtains or receives in the course of performing its obligations hereunder
respecting any individual IPA Provider’s compliance or performance in connection
with a Payor Contract, or the financial condition or performance of IPA, and
shall not disclose the same to any third party without the prior consent of
IPA, except as may be required by law, by the terms of any Payor Contract, or
in the fulfillment by MANAGER of its obligations under this Agreement.


 


ARTICLE VII - INSURANCE; INDEMNIFICATION


 


7.1.                            Insurance


 


(a)                                  Throughout the term of this Agreement, IPA
shall obtain and maintain in effect a policy of professional liability
insurance with coverage in the minimum amount of One Million Dollars
($1,000,000) per occurrence and Three Million Dollars ($3,000,000) in the
annual aggregate to insure IPA, its agents and employees against damages and
claims directly or- indirectly related to services arranged or provided by IPA
or IPA Providers under Payor Contracts. 
In its Physician and Provider Contracts, IPA shall require IPA Providers
to obtain and maintain professional liability insurance in the amounts set
forth herein.  IPA shall inform MANAGER
immediately in writing of any reduction or cancellation of insurance coverage
with respect to itself and to any IPA Provider.  IPA shall provide MANAGER with written evidence of DPA’s
compliance with the foregoing provisions upon MANAGER’S request.


 


(b)                                 Throughout the term of this Agreement,
MANAGER shall obtain and maintain such policies of comprehensive general
insurance, Directors and Officers liability insurance, and errors and omissions
or professional liability insurance, to the extent such insurance is customarily
available for management services organizations on a cost-effective basis (as
reasonably determined by MANAGER), with limits of liability, professional
liability insurance (not including coverage for activities in restraint of
trade) covering MANAGER and its employees and IPA and IPA Providers (with
respect only to its and their involvement with committees related to
utilization management, credentialing and quality assurance) against liability
for professional errors and omissions in connection with utilization management
and quality assurance.  The professional
liability insurance procured and maintained by MANAGER shall be in a minimum
amount of Three Million Dollars ($3,000,000) per occurrence and Three Million Dollars
($3,000,000) in the aggregate for all occurrences during a single policy
year.  MANAGER shall provide IPA with
written evidence of compliance hereof.


 


7.2       Indemnification


 


Each party agrees to indemnify and hold the other party harmless from
and against any losses, damages, injuries, claims, costs and expenses,
including reasonable attorneys’ fees and


 


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costs
of suit, arising out of or relating to the parties’ negligence, misconduct or
breach of this Agreement; provided, however, that the foregoing indemnification
shall not apply to any losses, damages, injuries, claims, costs and expenses
attributable to the other party’s own negligence or misconduct or to claims of
professional liability.


 


ARTICLE VIII - CONFIDENTIALITY OF TERMS AND PROPRIETARY
INFORMATION


 


8.1.                            Confidentiality
of Terms and Proprietary Information


 


(a)                                  The terms of this Agreement and in particular
the provisions regarding compensation are confidential and shall not be
disclosed by either party except as necessary to the performance of its duties
and obligations hereunder, or as required by law.


 


(b)                                 IPA acknowledges and agrees that MANAGER has
a proprietary interest in the systems it has established for management of
medical practices and independent practice associations and for administering
managed care contracts, including, without limitation, financial and accounting
systems, claims administration systems, quality assurance and utilization
management systems, and all related documents, forms, policies and procedures,
operating manuals, and software (collectively, “MANAGER’s Proprietary
Information”).  IPA covenants that at no
time during and after the term of this Agreement shall IPA, its officers,
directors, agents or employees, disclose or use any trade secret of MANAGER or
any of Manager’s Proprietary Information, without MANAGER’s prior written
consent, except as required to be disclosed by law or in IPA’s performance of
its duties and obligations hereunder.


 


(c)                                  Upon termination of this Agreement, IPA shall
return all physical embodiments of MANAGER’S Proprietary Information and cease
use of any and all of the Proprietary Information, and upon the request of
MANAGER, shall execute such documents as may be necessary to evidence the IPA’s
abandonment of any claim thereto.


 


(d)                                 Notwithstanding any provision of this
Agreement to the contrary, IPA acknowledges that because any remedy available
at law for any breach by IPA of this Article VIII - CONFIDENTIALITY OF
TERMS AND PROPRIETARY INFORMATION may be inadequate, MANAGER shall be entitled
to specific performance and/or injunctive relief or other equitable relief in
case of any breach of this Article VIII - CONFIDENTIALITY OF TERMS AND
PROPRIETARY INFORMATION in addition to any money damages or any other remedies
which MANAGER may seek and which may exist at law or in equity.


 


8.2       National
Data Base


 


In connection with its responsibilities to negotiate Payor Contracts on
behalf of IPA, MANAGER may review and collect information relating to the
costs, utilization and efficacy of various treatment modalities from encounter
information provided to IPA by IPA Providers. 
The data and information may be collected and stored in a national data
base belonging to MANAGER for the purpose of: (a) understanding care management
with respect to costs, standards and quality of care and clinical outcomes of
various treatment protocols, and developing and improving care management
programs on an ongoing basis; (b) establishing the capacity for evaluating and
measuring over time the efficacy of various treatment protocols in


 


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terms
of cost and clinical outcomes; (c) subject to applicable laws, developing an
appropriate pricing structure for Payor Contracts and IPA Provider agreements;
and (d) better marketing IPA and its products to Payors.  IPA agrees to make available such data and
information, and agrees that all such data and information (other than
individually identifiable patient or provider information), whether in
segregated or aggregated form, entered into MANAGER’s data base, processed by
or produced as a result of MANAGER efforts, shall be considered the work
product and proprietary information of MANAGER.  MANAGER agrees to make this information available to IPA upon
IPA’s request for the purposes of evaluating and enhancing IPA’s clinical
practice guidelines and performance under Payor Contracts.


 


ARTICLE IX - PHYSICIAN AGREEMENTS


 


9.1       Termination
Provisions


 


In its Physician Agreements, IPA shall provide that IPA may terminate a
Physician Agreement immediately upon the occurrence of any of the following
events:


 


(a)                                  The suspension or revocation of an IPA
Physician’s license to practice medicine in any state; the suspension or
termination of an IPA Physician’s membership on the active medical staff of a
participating Payor hospital; or the suspension, revocation or reduction in an
IPA Physician’s clinical privileges at a participating Payor hospital which has
the effect of rendering him or her unable to provide the physician services required
under the Physician- Agreement;


 


(b)                                 An IPA Physician’s death or disability
(“disability” shall mean for this purpose any condition that renders such IPA
Physician unable to carry out his or her responsibilities under the Physician
Agreement);


 


(c)                                  An IPA Physician’s violation or material
failure to comply with policies, procedures and standards adopted by IPA or a
Payor and published in the IPA’s Policies and Procedures Manual;


 


(d)                                 IPA’s good faith determination that
continuation of the Physician Agreement, or such IPA Physician’s participation
with respect to any Payor, would endanger the health, safety or welfare of any
Enrollee; or


 


(e)                                  An IPA Physician’s violation of his or her
Membership Agreement entered into with IPA.


 


ARTICLE X - TERM AND TERMINATION


 


10.1                        Term


 


The term of this Agreement shall commence on the Effective Date and
shall continue in effect for a period of ONE (1) year.  The Agreement shall automatically renew for
successive one (1) year terms unless either party provides written notice to
the other of an intent not to renew at least ninety (90) days prior to the
renewal date.


 


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10.2.                     Termination by Either Party


 


In the event that either party believes that the other party is in
material breach of this Agreement, that party shall provide written notice of
the breach to the breaching party.  The
written notice shall specify the nature of the breach and shall request that it
be cured.  The breaching party shall
have sixty (60) days to cure the breach to the satisfaction of the
non-breaching party.  If the breaching
party does not cure the breach within the sixty (60) days cure period, the
non-breaching party may provide written notice of intent to terminate this
Agreement for cause, which termination shall automatically be effective thirty
(30) days from the date of the delivery of the notice.


 


10.3.                     Immediate
Termination by Either Party


 


(a)                                 This Agreement may be terminated immediately,
at the option of the other party (to
be exercised in the absolute discretion of such other party), upon the
occurrence of any of the following with respect to either IPA or MANAGER: (i)
such party shall dissolve, (ii) such party shall file a bankruptcy petition,
(iii) an involuntary order for relief or bankruptcy petition shall be filed
against such party and the same shall not have been dismissed within sixty (60)
days from the date of entry or filing, (iv) such party shall make a general
filing for the benefit of creditors, or (v) there shall occur the appointment
of a receiver, trustee, custodian, or liquidator of or for any part of the
assets or property of such party.


 


10.4.                     MANAGER’S Obligations Upon
Termination


 


Upon the effective date of termination as set forth in the notice
provided for in Section 10.2 or Section 10.3. , as the case may be,
all of MANAGER’s obligations under this Agreement will cease, except as set
forth in this Section 10.4. 
MANAGER shall return all business records, papers and documents,
including all medical and physician and provider credentialing files that are
the property of IPA.  MANAGER shall be
entitled, pursuant to Article VIII -, to the return of all physical
embodiments of the Proprietary Information in possession of IPA, its employees,
officers and directors.  MANAGER shall
cooperate with IPA and use its best efforts to ensure a smooth transition of
services upon termination.


 


11. MISCELLANEOUS


 


11.1.                     Relationship
of the Parties


 


In the performance of the work, duties and obligations described
hereunder, it is mutually understood and agreed that each party is at all times
acting and performing as an independent contractor with respect to the other
and that no relationship of partnership, joint venture or employment is created
by this Agreement.


 


11.2.                     Exclusivity


 


During the term of this Agreement IPA agrees not to (1) enter into any
management or administrative services agreement, or any similar arrangement,
with any other person or entity for the provision of the same or similar
services as MANAGER provides under this Agreement.


 


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or
(2) solicit any of MANAGER’s employees or independent contractors to provide
services to or become employed by IPA.


 


11.3.                     Assignment


 


Neither party shall have the right to assign this Agreement or any of
its obligations or rights hereunder without the prior written consent of the
other party, which approval shall not be unreasonably withheld; provided,
however, that MANAGER may assign this Agreement or delegate or subcontract some
or all of its obligations hereunder to any Affiliate without IPA’s
consent.  For purposes of this
Agreement, an Affiliate shall mean any entity which, directly or indirectly,
controls, is controlled by or is under a common control with MANAGER.  Any attempted assignment of this Agreement
in contravention of this Section 11.3 shall be null and void and without
any effect whatsoever.


 


11.4.                     Successors
and Assigns


 


Subject to the provisions of this Agreement regarding assignment, the
terms, covenants and conditions contained herein shall be binding upon and
inure to the benefit of the successors and assigns of the parties hereto.


 


11.5.                     Entire
Agreement; Amendment


 


This Agreement, and the attachments, exhibits and schedules attached
hereto, states the entire contract between the parties in respect to the
subject matter of this Agreement and supersedes any oral or written proposals,
statements, discussions, negotiations or other agreements before or
contemporaneous to this Agreement.  This
Agreement may be modified only by mutual agreement of the parties, provided,
that before any modification shall be operative or valid, it be reduced to
writing and signed by both parties.


 


11.6.                     Waiver


 


The waiver by either party to this Agreement of any one or more
defaults, if any, on the part of the other, shall not be construed to operate
as  a waiver of any other or
future defaults, under the same or different terms, conditions or covenants
contained in this Agreement.


 


11.7.                     Severabillty


 


Nothing contained in this Agreement shall be construed to require the
commission of an act contrary to law, and whenever there is any conflict
between any provision of this Agreement and any statue law, ordinance or
regulation, the latter shall prevail. 
In such event, and in any case in which any provision of this Agreement
is determined to be in violation of a stature, law, ordinance or regulation,
the affected provision(s) shall be limited only to the extent necessary to
bring it within the requirements of the law and, insofar as possible under the
circumstances, shall be modified to carry out the purposes of this
Agreement.  The other provision of this
Agreement shall remain in full force and effect, and the invalidity or
unenforceability of any provision thereof shall not affect the validity and
enforceability of the other provisions of this Agreement.


 


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11.8                        Captions
and Headings


 


The captions and headings throughout this Agreement are for convenience
of reference only and shall in no way be held or deemed to be a part of or
affect the interpretation of this Agreement.


 


11.9.                     Third Party Beneficiaries


 


Nothing in this Agreement, expressed or implied, is intended or shall
be construed to confer upon an Enrollee or any other person, firm or corporation
other than the parties hereto and their respective successors or assigns, any
remedy or claim under or by reason of this Agreement or any term, covenant or
condition hereof, as third party beneficiaries or otherwise, and all of the
terms, covenants and conditions hereof shall be for the sole and exclusive
benefit of the parties hereto and their successors and assigns.


 


11.10.              Governing
Law


 


The laws of the State of California shall govern the existence,
validity and construction of this Agreement.


 


11.11.              Attorneys’
Fees


 


In the event that either party to this Agreement shall bring any action
at law or in equity to enforce any term, covenant or condition of this
Agreement, the prevailing party in such action shall be entitled to recover all
costs and expenses, including reasonable attorneys’ fees, incurred by such
party in connection with such action.


 


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11.12.              Notices


 


All notices required to be given hereunder shall be in writing and
shall be delivered personally or dispatched by certified or registered mail,
return receipt requested, postage prepaid, addressed to the parties at the
addresses set forth below its signature. 
Notice shall be deemed given on the date it is personally delivered, or
three (3) days after it is deposited in the mail in accordance with the
foregoing sentence.  Any party may
change the address to which to send notices by notifying the other party of
such change of address in writing in accordance with the foregoing.


 


11.13.              Counterparts


 


This Agreement may be executed in any number of counterparts which,
when read together, shall constitute one Agreement.


 


IN
WITNESS WHEREOF, the parties have executed this Agreement on that day and year
set forth hereinabove.


 


	
  PINNACLE
  HEALTH RESOURCES, INC.,

  	
   

  	
  APAC
  MEDICAL GROUP, INC. DBA

  
	
  A
  California Corporation

  	
   

  	
  GATEWAY
  PHYSICIAN ASSOCIATES

  
	
   

  	
   

  	
  A
  California Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Raj Takhar

  	
   

  	
  By:

  	
    /s/
  [ILLEGIBLE]

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  RAJ TAKHAR

  	
   

  	
  Name:

  	
    [ILLEGIBLE]

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  CEO

  	
   

  	
  Title:

  	
    [ILLEGIBLE]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address
  for Notices:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Phone:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fax:

  	
   

  	
   

  	
   

  
													



 


15

















 


EXHIBIT A


 


COMPENSATION OF MANAGER


 


1.     Definition of IPA Revenue


 


“IPA
Revenue” shall mean the total gross revenues of IPA determined on a accrual
basis, including without limitation the following: all amounts that are payable
to IPA and derived directly or indirectly in connection with Payor Contracts
and services provided by IPA Providers to Enrollees.  Such amounts shall include, by way of example, capitation
payments, amounts received from any policy or policies of stop-loss insurance,
shared risk revenue (whether paid by hospitals or payors) and other amounts
received in connection with Payor Contracts, services provided by IPA Providers
to Enrollees, and third party claims payments, and fee for service
revenue.  Management Fee


 


As compensation for the goods and services provided by MANAGER pursuant
to this Agreement, IPA shall pay MANAGER the a monthly fee (the “Monthly
Management Fee”) in an amount equal to fifteen percent (15%) in the case of IPA
Revenue derived from any source from (i) all IPA Revenue during the term of
this Agreement, and with respect to any month during which IPA has at least
5,000 enrollees.  Except as otherwise
provided in this Agreement, the Management Fee shall be inclusive of all costs
and expenses that may be incurred by MANAGER in connection with its performance
of management and administrative services pursuant to this Agreement.  IPA hereby agrees to provide its Payors with
such authorizations to release financial data to MANAGER following the
termination of this Agreement as MANAGER may reasonably request in order to
monitor the determination of its Monthly Management Fee.  In order to secure IPA’s payment of the fees
payable to MANAGER pursuant to this Agreement and/or in respect of prior
services rendered by MANAGER to IPA


 


Other
Fees Payable to MANAGER


 


In
addition to the Management Fee, IPA shall also pay the following amounts to
MANAGER:


 


c.                                       IPA Responsibility for
Additional Requirements.  The parties acknowledge that the Management
Fee is intended to cover MANAGER’s ordinary expenses of operations on behalf of
IPA and that, from time to time, IPA may be required by “outside agencies” (as
defined below) to meet certain mandates or otherwise to comply with outside
agency directives or new regulations (collectively, “Additional
Requirements”).  The cost of compliance
with such Additional Requirements may exceed the costs of complying with any
mandates, directives and/or regulations from outside agencies that are in
existence before the enactment or promulgation of the Additional
Requirements.  In all such cases, IPA
shall itself be responsible for complying


 


16

















 


with
the Additional Requirements. 
Notwithstanding the foregoing, MANAGER agrees that it shall inform IPA
of such additional requirements as soon as reasonably practicable after MANAGER
learns of the same.  For this purpose,
“outside agencies” shall include without limitation the California Department
of Health Services, the federal Health Care Finance Administration, HEDIS, the
California Department of Corporations, and similar governmental or
quasi-governmental departments and agencies.


 


(ii)                                  IPA shall bear the cost, and reimburse
MANAGER therefor, of any costs incurred by MANAGER to provide or improve the
provision of provider network connectivity.


 


17