Document:

EXHIBIT 10.21

 

 

DIGIRAD
CORPORATION

 

 

June 11, 2002

 

David M. Sheehan

Co-Chief Executive Officer

Digirad Corporation

9350 Trade Place

San Diego, CA  92126-6334

 

Dear Mr. Sheehan:

 

The
purpose of this letter is to describe the terms and conditions pursuant to
which you and certain other members of senior management of Digirad Corporation
(the “Company”) will be compensated in connection with your continued
employment with the Company and/or its wholly-owned subsidiary, Digirad Imaging
Solutions, Inc. (“DIS”).

 

1.             Cash
Bonus Awards.

 

a.             Payment
of Cash Bonus.  In the event that
you have continued in Service (as hereinafter defined) to the Company and/or
DIS on each of June 17, 2002, September 30, 2002 and December 31, 2002 (each
date, a “Cash Bonus Eligibility Date”), you will be entitled to be paid a cash
bonus in the amount of Twenty-Five Thousand Dollars ($25,000) (the “Cash
Bonus”) on each of June 17, 2002, October 15, 2002 and January 15, 2003,
respectively (each date, a “Cash Bonus Payment Date”).  As used herein, the term “Service” shall
mean the continuous provision of services to the Company and/or DIS by you in
the capacity of an employee, a non-employee member of the board of directors, a
consultant or an independent advisor.

 

b.             Eligibility
for Cash Bonus.  Should your Service
terminate before any Cash Bonus Eligibility Date by reason of (i) your
voluntary resignation or (ii) a Termination for Cause (as hereinafter defined),
you will not be entitled to receive any further Cash Bonus on any future Cash
Bonus Payment Date pursuant this paragraph 1. 
Should your Service terminate before any Cash Bonus Eligibility Date for
any reason other than (i) your voluntary resignation or (ii) a Termination for
Cause, you will still be entitled to receive a Cash Bonus on each remaining
Cash Bonus Payment Date.  Should the
Company consummate an Acquisition (as hereinafter defined) on or before any
Cash Bonus Eligibility Date, you will not be entitled to receive any further
Cash Bonus on any future Cash Bonus Payment Date pursuant to this paragraph 1.

 

 

c.             Termination
for Cause.  As used herein,
“Termination for Cause” shall mean the termination of your Service for one or
more of the following reasons:  (i) your
commission of any act of fraud, embezzlement or dishonesty, (ii) your willful
and material misappropriation of the assets of the Company and/or DIS or (iii)
any other intentional misconduct on your part adversely affecting the business
or affairs of the Company and/or DIS in a material manner.  The foregoing definition will not in any way
preclude or restrict the right of the Company and/or DIS to discharge or
dismiss you for any reason, provided, however, that such reasons will not be
deemed, for purposes of this letter agreement, to constitute grounds for Termination
for Cause.

 

2.             Acquisition
Bonus Awards.

 

a.             Payment
of Acquisition Bonus.  In the event
that at any time on or before June 30, 2004, the Company receives Acquisition
Proceeds (as hereinafter defined) in connection with the consummation by the
Company of one or more Acquisitions (as hereinafter defined), you, John
Dahldorf and other members of senior management (as determined by you and John
Dahldorf in your discretion, with the consent and approval of the Compensation
Committee of the Board of Directors) will be entitled to receive an aggregate
bonus (the “Acquisition Bonus”) in connection with the Company’s receipt of
Acquisition Proceeds.  The aggregate
amount of the Acquisition Bonus to be paid to you, Mr. Dahldorf and other
members of senior management shall be a single amount (i) not less than Four
Hundred Thousand Dollars ($400,000) and (ii) not greater than that amount which
is ten percent (10%) of any Acquisition Proceeds received by the Company in
excess of Thirty Million Dollars ($30,000,000).  Any Acquisition Bonus paid may be distributed among you, Mr.
Dahldorf and the other members of senior management in the discretion of you
and Mr. Dahldorf, with the consent and approval of the Compensation Committee
of the Board of Directors.

 

b.             Eligibility
for Acquisition Bonus.  You and any
member of senior management will only be entitled to receive a portion of any
Acquisition Bonus awarded pursuant to this paragraph 3 if you and/or any such
member of senior management have continued in Service through the effective
closing date of such Acquisition. 
Should your Service terminate before the effective closing date of a
transaction constituting an Acquisition by reason of (i) your voluntary
resignation or (ii) a Termination for Cause (as previously defined), you will
not be entitled to receive any Acquisition Bonus in connection with the
respective Acquisition pursuant to this paragraph 3.  In the event that, during the sixty (60) day period prior to the
effective closing date of an Acquisition, your Service should terminate for any
reason other than (i) your voluntary resignation or (ii) a Termination for
Cause, you will still be entitled to receive the Acquisition Bonus to be paid
in connection with the consummation of the respective Acquisition; provided,
however, that you will not be entitled to receive any portion of an Acquisition
Bonus which may be distributed in connection with any future Acquisition which
is consummated on or before June 30, 2004.

 

c.             Form
of Acquisition Bonus.  Any
Acquisition Bonus awarded pursuant to this paragraph 3 will be paid to you and
any members of senior management in the same form and upon the same date as
Acquisition Proceeds are paid to the Company and/or DIS or to the holders of
the outstanding securities of the Company and/or DIS, as the case may be.

 

2

 

d.             Definitions.

 

(i)            “Acquisition”
shall mean any of the following transactions pursuant to which assets or
securities of the Company and/or DIS are acquired for consideration paid in
cash, securities or other property:

 

(a)           a merger, consolidation or other
similar transaction approved by the stockholders of the Company and/or DIS, as
the case may be, unless securities representing more than fifty percent (50%)
of the total combined voting power of the voting securities of the successor
corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the outstanding voting securities of the Company and/or DIS,
as the case may be, immediately prior to such transaction, or

 

(b)           the sale, transfer or other
disposition of all or substantially all of the property or assets of the
Company and/or DIS, as the case may be (including, without limitation, the
sale, transfer or other disposition of all or substantially all of the
Company’s assets used in the design, manufacture and sale of digital gamma
cameras); provided, however, that the foregoing definition shall not apply to the
sale by the Company of its goods (including, without limitation, its digital
gamma cameras) in the ordinary course of business, or

 

(c)           the direct sale by the stockholders
of the Company and/or DIS, as the case may be, of securities possessing more
than fifty percent (50%) of the total combined voting power of the outstanding
securities of the Company or DIS, as the case may be (except in connection with
capital raising transactions), to a person or persons different from the
persons holding those securities immediately prior to such sale.

 

(ii)           “Acquisition
Proceeds” shall mean the following items of consideration (in cash, securities
or other property) paid by the acquiring person or persons in effecting the
Acquisition:

 

(a)           for an Acquisition effected by a
merger, consolidation, or other similar transaction or by the direct purchase
of the outstanding securities of the Company and/or DIS, as the case may be,
the aggregate amount of consideration (valued at fair market value) paid to the
holders of the outstanding securities of the Company and/or DIS, as the case
may be, in acquisition of their stockholder interests, or

 

(b)           for an Acquisition effected by the
purchase of all or a material portion of the assets of the Company and/or DIS,
the portion of the consideration (valued at fair market value) paid to the
Company for those assets.

 

3.             Performance
Bonus Awards.

 

a.             Payment
of Performance Bonus.  Provided that
you have continued in Service to the Company and/or DIS on and through
December 31, 2002, you will be entitled to be paid a cash bonus (the
“Performance Bonus”), in an amount representing a certain percentage

 

 

3

 

of base salary and determined based upon the Company’s
receiving (a) certain amounts of “revenue” during the year ended December 31,
2002 (as indicated below), and (b) certain amounts of “cashflow” during the
third and fourth quarters for the year ended December 31, 2002 (as indicated
below), such amounts of cash flow not to be increased by expanded borrowing or
extended accounts payable outside of the ordinary course of the Company’s
business:

Revenue Achieved
(FY’2002)                            Amount
of Performance Bonus

90% of $38.66MM                                            (45%
of base salary) times 0.5

100% of $38.66MM                                          (50%
of base salary) times 0.5

105% of $38.66MM                                          (62.5%
of base salary) times 0.5

110% of $38.66MM                                          (75%
of base salary) times 0.5

120% of $38.66MM                                          (87.5%
of base salary) times 0.5

125% of $38.66MM                                          (112.5%
of base salary) times 0.5

130% of $38.66MM                                          (125%
of base salary) times 0.5

 

Cashflow Achieved (Q3 -
Q4)                            Amount
of Performance Bonus

 

                $(3.2)MM                                              (45%
of base salary) times 0.5

                $(2.8)MM                                              (50%
of base salary) times 0.5

                $(2.2)MM                                              (62.5%
of base salary) times 0.5

                $(1.5)MM                                              (75%
of base salary) times 0.5

                $(0.9)MM                                              (87.5%
of base salary) times 0.5

                $(0.3)MM                                              (100%
of base salary) times 0.5

                $0.4MM                                                 (112.5%
of base salary) times 0.5

                $1.0MM                                                 (125%
of base salary) times 0.5

 

The determination as to
whether the Company has achieved the foregoing thresholds relating to “revenue”
or “cashflow” (as accounted for in the V1B plan as approved by the Company’s
Board of Directors) shall be made by reference to the Company’s financial
statements for the year ended December 31, 2002, as prepared in accordance with
generally accepted accounting principals (“GAAP”) and the Company’s standard
accounting practices.

 

b.             Eligibility
for Performance Bonus.  Should your
Service terminate on or before December 31, 2002 by reason of (i) your
voluntary resignation or (ii) a Termination for Cause (as previously defined),
you will not be entitled to receive any Performance Bonus pursuant this
paragraph 3.  Should your Service
terminate on or before December 31, 2002 for any reason other than (i) your
voluntary resignation or (ii) a Termination for Cause, you will still be
entitled to receive a Performance Bonus pursuant to this paragraph 3.

 

4.             Stock
Option Grants.  Upon the final
closing of the Company’s sale and issuance of shares of its Series H Preferred
Stock (“Series H Closing”), and following the appropriate increase to the
Company’s stock option pool, you and other members of senior management (as
determined by you and approved by the board of directors) will be granted stock
options to purchase shares of the Company’s common stock under the Company’s
stock option/stock issuance plan pursuant to the following terms and
conditions.

 

 

4

 

a.             Number
of Options.  The number of shares of
common stock underlying the stock option granted to you shall represent
approximately three percent (3%) of the outstanding shares of the Company’s
common stock (on an as-converted basis) following the Series H Closing.

 

b.             Option
Pool.  The Company’s stock
option/stock issuance pool shall constitute approximately ten percent (10%) of
the outstanding shares of the Company’s common stock (on an as-converted basis)
following the final closing of the Company’s sale and issuance of shares of its
Series H Preferred Stock.

 

c.             Exercise
Price.  Each option will have an exercise
price per share equal to ten percent (10%) of the final price per share of the
Company’s Series H Preferred Stock (as reflected in the Company’s Amended and
Restated Certificate of Incorporation and as adjusted for stock splits and
combinations).

 

d.             Option
Type and Term.  The options granted
hereunder will be incentive stock options under the federal tax laws, to the
maximum extent allowable, and the balance will be a non-statutory options.  The options will have a maximum term of ten
(10) years, subject to earlier termination following cessation of employment.

 

e.             Vesting
of Options.  Fifty percent (50%) of
the shares of common stock covered under the option granted to you will vest as
of December 31, 2002 and the remaining fifty percent (50%) will thereafter vest
beginning January 1, 2003 in equal daily installments over the next two (2)
years.  Notwithstanding the foregoing,
however, one hundred percent (100%) of the shares of common stock covered under
the option granted to you and any other member of senior management will
immediately vest upon an Acceleration Event (as hereinafter defined).

 

f.              Acceleration
Event.  As used herein, an
“Acceleration Event” shall mean the consummation of one of the following
transactions pursuant to which assets or securities of the Company and DIS are
acquired for consideration paid in cash, securities or other property:

 

(i)            a
merger, consolidation or other similar transaction approved by the stockholders
of the Company, unless securities representing more than fifty percent (50%) of
the total combined voting power of the voting securities of the successor
corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the outstanding voting securities of the Company, as the
case may be, immediately prior to such transaction, or

 

(ii)           the
sale, transfer or other disposition of all or substantially all of the property
or assets of the Company and DIS; or

 

(iii)          the
direct sale by the stockholders of the Company of securities possessing more
than fifty percent (50%) of the total combined voting power of the outstanding
securities of the Company (except in connection with capital raising
transactions), to a person or persons different from the persons holding those
securities immediately prior to such sale.

 

 

5

 

5.             Parachute
Payments.  In the event that any
payments to which you or any member of senior management become entitled in
accordance with the provisions of this letter agreement would otherwise
constitute a parachute payment under Section 280G of the Internal Revenue Code,
then such payments will be subject to reduction to the extent necessary to
assure that you receive the greater of (i) the amount of those
payments which would not constitute such a parachute payment or (ii) the
amount which yields you the greatest after-tax amount of benefits after taking
into account any excise tax imposed on the payments provided to you under this
letter agreement pursuant to Section 4999 of the Internal Revenue
Code.  However, provided certain
conditions are met, payments that would otherwise be subject to the provisions
of Sections 280G and 4999 of the Internal Revenue Code may be exempt from those
rules, if the stockholders approve those payments.

 

6.             Miscellaneous.

 

a.             Limitations.  This letter agreement will in no way affect
the right of the Company and/or DIS to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

 

b.             Withholding.  If applicable, all payments under this
letter agreement shall be subject to the Company’s collection of all applicable
federal, state and local income and employment taxes required to be withheld
therefrom.

 

c.             Transfer
of Rights.  Any rights or interests
granted hereunder may not be transferred, assigned, pledged or encumbered,
other than a transfer effected by will or the laws of inheritance following
your death.

 

d.             Amendment
and Termination.  The Board of
Directors may amend or terminate this letter agreement only with your prior
written consent.

 

e.             At
Will Employment.  No provision of
this letter agreement will confer any right upon you to continue in Service for
any period of specific duration or interfere with or otherwise restrict in any
way the right of the Company or your right to terminate your Service at any
time for any reason, with or without cause.

 

f.              Governing
Law.  The provisions of this letter
agreement will be governed by and construed in accordance with the laws of the
State of California without resort to its conflict-of-laws rules.

 

g.             Assignment.  The liabilities and obligations of the
Company under this letter agreement will be binding upon any successor
corporation or entity which succeeds to all or substantially all of the assets
and business of the Company by merger or other transaction, whether or not such
transaction qualifies as an Acquisition.

 

 

[REMAINDER OF THE PAGE
INTENTIONALLY LEFT BLANK]

 

6

 

We ask
that you acknowledge your receipt of this letter agreement and your acceptance
of its terms and conditions by signing and dating this letter agreement as soon
as possible.

 

 

	
  Very truly yours,

  
	
   

  
	
  /s/ Timothy J. Wollaeger

  	
   

  
	
   

  
	
  Timothy J. Wollaeger

  
	
  Chairman of the
  Compensation Committee

  The Board of Directors of Digirad Corporation

  
	
   

  
	
   

  
	
  Acknowledged and Agreed:

  
	
   

  
	
   

  
	
  /s/
  David M. Sheehan

  	
   

  
	
  David M. Sheehan

  
	
   

  
	
  Dated: June 11, 2002

  
			

 

7EXHIBIT 10.25

 

***
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT (INDICATED BY
ASTERISKS) HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER 17
C.F.R. SECTIONS 200.80(B)(4), 200.83 AND 230.406.

 

AGREEMENT FOR
SERVICES

 

THIS AGREEMENT
FOR SERVICES is made and entered into on the 5th day of May, 2003,
but effective for all purposes as of the 1st day of April, 2002 (the “Effective
Date”), by and between DIGIRAD IMAGING SOLUTIONS, INC., a Delaware
corporation (the “Client” or “DIS”), and MBR AND ASSOCIATES, INC., a Florida
corporation (“MBR”).

 

WHEREAS, MBR is a
corporation engaged in the business of providing certain management, financial,
billing, collection, accounting, bookkeeping, regulatory compliance, and other
related consulting financial services for healthcare clients (generally, the
“Services”); and

 

WHEREAS, the Client
is in the healthcare business and has engaged MBR in the past to provide
certain selected Services to the Client, and the Client and MBR are willing to
continue their business relationship on the terms and conditions set forth
herein beginning as of the Effective Date.

 

NOW, THEREFORE, in
consideration of the premises and of the promises and agreements of the parties
set forth below, and for other good and valuable consideration, the parties
agree as follows:

 

1.             SERVICES TO BE RENDERED:

 

A.            As part of the compensation set
forth in section 2.A., MBR agrees to provide billing and collections services,
up to and including the following designated Services to and for the Client:

 

(1)           Prepare and submit insurance claims
to Medicare and other third party payors, as applicable, and bill patients for
applicable copayments.

 

(2)           Prepare and submit bills to all
customers, including physicians, medical groups, facilities, hospitals, MSO’s
and other customers;

 

(3)           Print and mail statements;

 

(4)           Provide month-end billing reports;

 

(5)           Provide HCFA/CMS Forms, envelopes,
statements, and return envelopes;

 

(6)           Update procedure codes;

 

(7)           Post payments and adjustments;

 

(8)           Make bank deposits into Client’s
account;

 

(9)           Review outstanding accounts and
advise Client of status;

 

(10)         Respond to telephone and other
inquiries relating to billing and collection services;

 

(11)         Enter charge data;

 

1

 

(12)         Notify Client immediately in writing of
any notices of audit, requests for medical records or other documentation or
information out of the normal course of business from representatives of
Medicare, Medicaid or private payors, or of any significant pattern of payor
denials or downcodings;

 

(13)         Assist the Client with any reviews or
audits of claims submitted or billing practices by a federal, state or local
regulatory agency or their contractors which occur in the normal course of
business. Additional consulting services required for any extraordinary audits
will be provided under Section 1.C;

 

(14)         Provide electronic and physical reports
and access to data, at a detailed level, in order to properly account for each
transaction, credits and adjustments. All information and access will be agreed
upon by both parties;

 

(15)         Adopt and comply with a compliance
plan, which is consistent with the OIG’s Compliance Program Guidance for Third
Party Billing Companies, to insure that MBR and MBR’s employees abide by all
applicable federal and state statutes, regulations, and rules relating to (i)
its billing and collecting for all applicable services hereunder, and (ii)
maintaining the privacy and confidentiality of patient medical information in
its possession;

 

B.            In addition, as part of the
compensation set forth in section 2.B., MBR agrees to periodically prepare a
list of accounts which, in its judgment, are uncollectible, or in need of
collection action. Upon receipt of such list, the Client shall have the
opportunity to advise MBR as to which accounts on said list are to be
transferred to a collection agency, and MBR will follow any instructions given,
or take such actions as it deems proper if no instructions are given within
five (5) days of the list being delivered to the Client. MBR shall select the
collection agency, including itself, to which such accounts shall be
transferred provided that the Client shall retain the right to approve or
disapprove such selection on a reasonable basis. MBR shall monitor the actions
of the collection agency and provide monthly status summaries to the Client
with any recommendations as to bad debt write offs. MBR shall negotiate a market
fee with the selected collection agency (including MBR, but with Client
approval) for collecting such accounts, and MBR will not be entitled to any fee
under section 2.A. with respect to any amounts collected by such collection
agency.

 

2

 

C.            In addition, as part of the
compensation set forth in section 2.B., MBR agrees to provide the Client with
consultation services in the following areas: 
regulatory compliance (including but not limited to Medicare compliance),
managed care contracting, and credentialing of providers.  All such consulting services shall be
requested at the sole discretion of the Client, in writing and may include
items as listed below:

 

(1)           Prepare and update Medicare 855
enrollment forms with information provided by Client;

 

(2)           Assist and consult the Client with
any extraordinary reviews or audits by a federal, state or local regulatory
agency or their contractors beyond responding to normal course of business
assistance as listed under Section 1.A.

 

D.            During the term of this Agreement,
MBR may retain Client’s records in a secure off-site storage facility. Upon
termination or expiration of this Agreement, Client will notify MBR of where to
have its records delivered after the ninety-day collection period. MBR will not
be responsible for these records after delivery to the Client.

 

2.             COMPENSATION TO MBR:  The Client agrees to pay MBR as follows (all
of which fees may be retained by MBR directly from collections received on
behalf of the Client):

 

A.            For Services under Section 1.A.
above,
(i)                        ***

	
   

  	
   

  	
  ***

  
	
   

  	
   

  	
  ***

  
	
   

  	
   

  	
  ***

  
	
   

  	
   

  	
  ***                      .  Both the Client and MBR will diligently
  work to 

  
	
  further reduce the average days-sales-outstanding (DSO), targeting an
  average level of no more than 70 days. 
  The Client and MBR will review the DSO progress on a quarter basis and
  assess areas of improvement. The Client and MBR, collectively, will establish
  a financial objective and DSO minimum threshold, starting April 1, 2004.

  

 

B.            For Services under Section 1.C.
above and anything outside the other services listed in Section
1,                        ***                      ,
listed on Exhibit A and      
***     for other employees, plus reimbursement
of MBR’s direct expenses (including travel, room and board, telephone calls,
courier charges, equipment, and outside consultants) with respect to such
Services. All such services are to be pre-approved, in writing by the Client.

 

C.            Special projects as agreed between
the parties.

 

MBR will
submit monthly or more frequent statements for its Services under this
Agreement. All amounts billed to the Client under this Section 2 are due and
payable by the Client to MBR within forty-five (45) days from the Client’s
scheduled month-end for the Services performed (or cash collected) by MBR since
the prior scheduled month-end, provided that in no event shall payment be due
less than ten (10) days from the date the invoice is received. Invoices that
are not paid when due will incur a late charge of 1-1⁄2% per month (or part
thereof) of the amount due, except that interest shall not accrue on any amount
which is reasonably disputed, provided that all undisputed amounts are
paid.  In the event any refund or
recoupment occurs after MBR has been

 

***  Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

3

 

paid for such
Services, Client shall be entitled to a refund of the fees paid for such
Services, which refund shall be credited to next bill or recoupment, not to
exceed 30 days, otherwise, refund is to be repaid to Client within thirty
days of such refund or recoupment.

 

In addition to
the foregoing, MBR shall be reimbursed for its out-of-pocket expenses for
postage and overnight courier and delivery charges that are incurred by MBR in
connection with sending and receiving information for and behalf of Client in
connection with MBR’s performing the services described in Section 1,
including, without limitation, for billing and collection purposes.

 

3.             TERM:  The initial term of this Agreement shall be
for three (3) years from the Effective Date, and thereafter the term shall
automatically renew for consecutive one (1) year terms unless either party,
upon ninety (90) days written notice prior to the end of the current one-year
renewal term, informs the other party of its intention to terminate the
Agreement at the end of the current term. Either party shall have the right to
terminate this agreement at anytime, without cause, upon one-hundred eighty
(180) days written notice, but no such notice shall be given prior to October
1, 2003. MBR shall have the right to bill and collect for all of the Services
performed by MBR until the actual date of termination, and MBR agrees to remain
available to render such Services for the compensation set forth in Section 2
for up to one hundred eighty (180) days after expiration of the ninety (90) day
notice period and to cooperate on a reasonable basis to facilitate a smooth
transition of such Services to the Client or to another person designated by
the Client. MBR shall be entitled to its fees on all Services performed by MBR,
including with respect to collections on accounts that were billed by MBR prior
to termination, but received within one hundred twenty (120) days after being
billed by MBR.

 

                After the termination of this Agreement and
the payment of all amounts due MBR, billing and management information and
related nonproprietary software, including, without limitation, PCN licensed
software (if and only if Client has PCN licensed software) shall be sent to
Client with a back-up tape and printed report. A back-up tape of all billing
information relating to this Agreement shall be prepared and stored in a safe
place by MBR on a weekly or more frequent basis. Client, at its expense,
reserves the right to review and audit MBR’s billings and collections
infrastructure, back-up process and any other processes deemed to be more than
di minimis in nature and relating to the Client’s relationship with MBR. Such
review and audit shall be at a time mutually agreed upon by both parties, which
agreement shall not be unreasonably withheld.

 

4.             EXPENSES AND LICENSES:  Each party is responsible for obtaining and
maintaining, at its expense, all licenses, permits, or other items necessary to
conduct its business, including all required insurances and bonding.

 

5.             NON-SOLICITATION; NO HIRING:  Both parties agree that during the term of
this Agreement, and for ninety (90) days thereafter, regardless of the reason
for the termination, neither party (or any affiliate of a party) will hire, or
attempt to hire, or solicit for employment, any employee or independent
contractor of the other party used in performing the Services.

 

6.             CONFIDENTIALITY: Both
parties mutually recognize and acknowledge that the clients, services, and
methods of operation are valuable, special, and unique assets of such business.
The parties further recognize and acknowledge that all business information,

 

 

4

 

proprietary files, records,
analyses, compilations, studies or opinions, financial statements, customer
lists, lists of business acquaintances, processes, techniques, services, intellectual
property, programming, techniques of application, concepts, purchasing,
accounting, marketing, selling, recording of any activity disclosed to each
other in connection with MBR’s performance under this Agreement are
confidential information. Both parties shall keep in strict secrecy and
confidence all information that each part assimilated or obtained or to which
either party had access during the term of this Agreement for any reason or
purpose without the prior written consent of the other party. These terms and
conditions shall survive the term of this Agreement.

 

Each party
shall keep confidential all information relating to billing and financial
information with respect to the Client and its affiliates, except to the extent
reasonably needed to facilitate the services to be rendered under this
Agreement or as required by law.

 

Each party
shall comply with all applicable federal and state statutes, regulations, and
rules relating to privacy and confidentiality of patient medical information.

 

7.             INSURANCE:  At all times during the term of this
Agreement, MBR shall, at its expense, obtain, keep in force and maintain (i)
workers’ compensation and (ii) comprehensive or commercial form general
liability insurance and errors and omission (contractual liability included) in
a form and with an insurance carrier satisfactory to Client, with coverage
limits (in the case of the general liability insurance) of at least One Million
Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) annual
aggregate.  If the above insurance is
written on a claims-made form, it shall continue for no less than three (3)
years following termination of this Agreement. 
The coverage and limits described above shall in no way limit any
liability of MBR. To the extent available without significant surcharge, MBR
will cause Client to be named as an additional insured on MBR’s general
liability insurance policy. As evidence of MBR’s coverage, MBR shall furnish to
Client certificates of insurance under these policies prior to the effective
date and annually thereafter, which shall include a provision for at least a
thirty (30) day prior written notice of cancellation or reduction directed to
the attention of both Client and the Compliance Officer.  MBR shall maintain and provide Client with
evidence of a minimum of One Million Dollars ($1,000,000) fidelity bonding for
itself and its employees and Client Personnel involved in the handling of
accounting for the monies of Client.  The
Client shall furnish MBR proof of general liability insurance, errors and
omissions insurance, directors insurance and fidelity bonding.

 

8.             PERSONNEL:  All personnel providing Services hereunder
shall be trained and qualified to perform their applicable duties, and none of
them shall be excluded or suspended from Medicare, Medicaid or any other
governmental payment program. MBR shall notify Client in the event of the
exclusion or suspension of any such personnel whereupon, Client shall have the
options of demanding that the affected person(s) be removed immediately,
whereupon if MBR does not do so within thirty (30) days, Client may terminate
this Agreement upon written notice.

 

9.             BREACH:  If either party commits a material breach of
this Agreement, then the other party may give written notice specifying the
nature of the breach. If the party receiving sh notice does not substantially
remedy such breach within twenty (20) business days after its receipt of such
notice, then the party who has sent such notice shall have the right
immediately to

 

 

5

 

terminate this Agreement and/or
to seek appropriate remedies as provided in this Agreement or otherwise.

 

10.           CLIENT’S OBLIGATIONS:

 

A.            The Client agrees to make available
to MBR all records necessary for performing the Services hereunder. The Client
will communicate with MBR, in a timely manner, as reasonably necessary for MBR
to perform the Services hereunder, provided that all such communications
between the parties will be in writing.

 

B.            The Client covenants that the
patient account card submitted for billing and collection will contain all
billing information required for the completion and submission of claims,
including, but not limited to, current patient name and address, code numbers,
procedure, time, face sheet and insurance card copies, etc., and including
other information necessary in the billing and collection procedures.

 

C.            The Client agrees to maintain a
checking account reasonably acceptable to MBR to be exclusively for business
purposes and into which collections made hereunder shall be deposited.

 

D.            The Client agrees that MBR is its
exclusive agent for billing and collecting its accounts and that it will
provide to MBR all accounts accumulated in its business during the term of this
Agreement for processing by MBR.  Client
agrees to provide the complete information necessary to bill each physician
flat fee contract, leased physician client, and/or patient/physician mixed
billing method, including, but not limited to, current patient name and
address, copy of insurance cards front and back, written procedures, CPT codes,
HCPCS codes, ICD9M codes, time and date of service and other information
available to Client and necessary in the billing and collection process. Any
information delivered not in compliance shall require the respective facility
to be called or returned to Client for completion.

 

E.             The Client authorizes MBR to
provide training to the employees of Client, identified by Client, who are
responsible for data collection, copying, and forwarding to MBR. Such training
will be part of the set-up cost and be provided at no additional cost to the
Client’s employees at the time of execution of this Agreement. If the Client
hires or replaces staff who require training, the additional training will be
billed at the rate of ***.

 

F.             The Client agrees that it will not
market, broker, sell, or re-sell MBR’s services to any other person (including,
without limitation, customers or clients of the Client) without MBR’s prior
written consent.

 

11.           CLIENT’S REPRESENTATIONS:  Client represents, warrants, and covenants
that:

 

A.            Client is duly organized and exists
in good standing under the laws of the State of Delaware and is qualified to do
business in each state in which Client is required to be so qualified.

 

***  Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

6

 

B.            Neither the execution nor the
consummation of the transactions contemplated by this Agreement will conflict
with or result in a breach of performance required by the provisions for any
other agreement or contract to which the Client is a party.

 

C.            Client has adopted a compliance plan
or plans to insure that Client and Client’s employees abide by all applicable
federal and state statutes, regulations, and rules relating to (i) its
providing or arranging for healthcare services, (ii) its marketing to its
customers and prospective customers, (iii) its billing and collecting for all
such services, and (iv) maintaining the privacy and confidentiality of patient
medical information in its possession.

 

D.            Throughout the term of this
Agreement, Client and Client’s employees shall comply with its compliance plan
or plans and with all applicable federal, state, or local laws governing its
business and professional practice and employees.

 

E.             Throughout the term of this
Agreement, all of Client’s personnel providing information or working with MBR
in connection with the Services hereunder, shall be trained and qualified to
perform their applicable duties.  None
of Client’s personnel shall be excluded or suspended from Medicare, Medicaid or
any other governmental payment programs.

 

F.             None of Client’s employees, contractors,
clients, or customers is, has been, or will be, during the term of this
Agreement, excluded or suspended from Medicare, Medicaid, or any other
governmental payment program. The Client will include in its contracts with all
physicians under which MBR shall bill and collect for such services entered
into after April 15, 2003 physician representation language that the
physicians and any of their participating personnel in the services under
contract, are not excluded or suspended from Medicare, Medicaid or any other
governmental payment programs.

 

12.           INDEPENDENT CONTRACTOR STATUS:  It is understood and agreed that the
services of MBR have been and will be rendered as an independent contractor and
not as an employee, agent, or representative of Client. In this regard, neither
MBR nor any of its employees or agents shall be deemed for purposes of this
Agreement to be employed by Client for purposes of any tax or contribution
levied by the Federal Social Security Act or any corresponding state law with
respect to employment or compensation for employment, and MBR will file all
forms and pay all taxes and other amounts required of an independent
contractor.

 

MBR shall have
complete control over its method of providing services, subject to the
requirements of this Agreement and applicable law.  Client will not exercise direct or implied authority over MBR in
its work nor shall it have supervisory power over MBR or any of its employees
or agents, other than to assure MBR’s adherence to the terms of this Agreement.
Neither party shall have any responsibility for, or liability as a result of,
any action, inaction, error or omission by the other.

 

13.           REVIEWS AND AUDITS: Client shall, upon
reasonable notice and conditions, be allowed to review any and all of the
documentation, procedures and information concerning Client's billing and to
appoint a third party consultant to review such billing on the premises of MBR,
all at Client’s sole expense.  MBR
agrees to cooperate with any review. 
MBR may impose reasonable standards and restrictions on any such audit
and review to insure the

 

 

7

 

privacy or patient medical
information of patients who are not Client’s patients. MBR will review any
reports upon such billing procedures, suggestions for improvement or otherwise
and will exercise good faith in maintaining an acceptable level of efficiency
and accuracy in its billing procedures. 
Any and all information obtained under review shall be kept confidential
except as required to comply with Client’s legal obligations.

 

14.           INDEMNIFICATION:  Each party (the “Indemnifying Party”) hereby
agrees to indemnify and hold the other party, including its directors,
officers, shareholders, employees, and agents (collectively, the “Indemnified
Party”) harmless from and against any losses, claims, damages, or expenses, and
all reasonable costs of prosecution or defense regarding its rights hereunder,
whether in judicial proceedings, including appellate proceedings, or out of
court, including, without limiting the generality of the foregoing, attorneys’
fees and all costs and expenses of litigation (collectively, a “Loss”), arising
from or growing out of a material violation of the terms of this Agreement or
negligent or willful misconduct by the Indemnifying Party.

 

15.           MEDIATION AND ARBITRATION:  It is the intention of all parties that no
dispute under this Agreement or with respect to relationship between parties
will be the subject of any court action or litigation in the local, state, or
federal judicial system. The parties recognize that the problem resolution
processes of mediation and arbitration are appropriate and preferable to
resolve issues between the parties. If any party hereto wishes to resolve an
issue under or relating to this Agreement, then such party must give notice of
a request for mediation to the other parties, which notice shall set forth the
names of not less than three (3) mediators from the panel of JAMS/Endispute or
the American Arbitration Association or other mutually agreed upon alternative
dispute resolution service in Hillsborough County if mediation is commenced by
Digirad or in San Diego County if mediation is commenced by MBR. The party
receiving such notice shall agree upon one or more such mediators with ten (10)
days of receipt of such notice and a mediation will be scheduled as soon as
feasible between the parties and their respective advisors, and the parties and
their advisors will cooperate fully with respect to sharing of information and
attendance at meetings in order to seek resolution.  The parties will share mediation expenses with the party
requesting the mediation, paying one-half of such expense of the mediator fees
and the other party paying the other one-half of such expenses. If resolution
of the matters between the parties cannot be resolved in mediation within
twenty (20) days of the selection of a mediator by the party receiving such
notice, then the matter shall be presented to formal arbitration pursuant to
the rules utilized by the alternative dispute resolution service selected by an
arbitrator from such service’s panel agreed upon by the parties or, if the
parties are unable to agree upon an arbitrator within ten (10) days of the
completion of mediation, by a panel of three (3) arbitrators from such panel
selected by such service’s administrator. Arbitration shall take place in the
venue in which the mediation shall have occurred as soon as possible and the
decision of the arbitrator panel shall be binding upon the parties for all purposes.
The party which does not prevail in such proceeding or in any judicial
proceeding shall pay all reasonable fees and costs, including attorneys’ and
expert witness fees, incurred by the prevailing party relating to such
proceeding, except that the arbitrator shall have discretion to reduce or
eliminate such award of costs and fees if such award would be inequitable or
unreasonable under the circumstances. It is the intention of the parties that
this Agreement shall be construed and interpreted in a fair and equitable
manner based upon the facts and

 

 

8

 

circumstances of the parties
taking into account the present intention of the parties to have a fair and
equitable agreement under the terms and conditions set forth in this Agreement.

 

16.           ENFORCEMENT:  Each covenant shall be construed as a covenant independent of any
other covenant or provision of this Agreement or any other Agreement which MBR
and Client may have, and the existence of any claim or cause of action of one
party against the other, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement of such covenants.

 

17.           TERMINATION:  During the term of this Agreement, MBR may retain Client’s
records in an off-site storage facility. Upon termination or expiration of this
Agreement, Client will notify MBR of where to have its records delivered after
the ninety-day (90) collection period. 
MBR will not be responsible for these records after delivery to the Client.

 

18.           ADDITIONAL COVENANTS OF MBR:  MBR covenants that it has and will maintain
its expertise, procedures and employee training with respect to billing and
reimbursement issues, coding, maximizing revenues in a prudent manner, and
other billing related activities. MBR agrees to provide monthly reporting of
billings, receipts, aged receivables, and such other matters as are requested
by the Client on a reasonable basis. MBR will maintain such insurances with
reputable insurance carriers in such amounts and upon terms that are deemed
reasonable and appropriate.

 

19.           COMPLIANCE WITH THE HEALTH INSURANCE PORTABILITY AND
ACCOUNTABILITY ACT OF 1996. 
The parties acknowledge that Client is subject to the Administrative
Simplification requirements of the Health Insurance Portability and
Accountability Act of 1996 and regulations promulgated thereunder (“HIPAA”),
including but not limited to, the Standards for Privacy of Individually
Identifiable Health Information, 45 CFR Parts 160 and 164; and that HIPAA
mandates that Client require MBR to provide for the protection of the privacy
and security of Health Information. Accordingly, MBR shall provide such
protection as required by this Agreement.

 

A.            Definitions. The following
terms shall be defined as follows:

 

(1)                                  “Disclose”
and “Disclosure” mean, with respect to Health Information, the release,
transfer, provision of access to, or divulging in any other manner of Health
Information outside MBR’s internal operations or to other than its employees.

 

(2)                                  “Health
Information” means information that (a) relates to the past, present or future
physical or mental health or condition of an individual; the provision of
health care to an individual; (b) identifies the individual (or for which there
is a reasonable basis for believing that the information can be used to
identify the individual); and (c) is received by MBR from or on behalf of
Client or is created by MBR, or is made accessible to MBR by Client.

 

 

9

 

(3)                                  “Privacy
Regulations” means the Standards for Privacy of Covered Individually
Identifiable Health Information, 45 CFR Parts 160 and 164, promulgated under
HIPAA.

 

(4)                                  “Services”
means the services provided by MBR pursuant to this Agreement.

 

(5)                                  “Use”
or “Uses” means, with respect to Health Information, the sharing, employment,
application, utilization, examination or analysis of such Health Information
within MBR’s internal operations.

 

B.            Permitted Uses and Disclosures of
Health Information. MBR is authorized to do the following:

 

(1)                                  Use
and Disclose Health Information as necessary to perform Services for, or on
behalf of Client;

 

(2)                                  Use
Health Information to create aggregated or de-identified information (in
accordance with the requirements of the Privacy Regulations);

 

(3)                                  Use
or Disclose Health Information (including aggregated or de-identified
information) as otherwise directed by Client provided that Client shall not
request MBR to Use or Disclose Health Information in a manner that would not be
permissible if done by Client;

 

(4)                                  Use
and Disclose Health Information as required by law.

 

C.            Other Uses of Health Information.  MBR may use Health Information for the
proper management and administration of MBR or to carry out its legal
responsibilities. MBR may Disclose Health Information for the proper management
and administration of MBR, provided that with respect to any such Disclosure
either (1) the Disclosure is required by law (within the meaning of the Privacy
Regulations) or (2) MBR obtains reasonable assurance from the person to whom
the information is to be Disclosed that such person will hold the information
in confidence and will not Use or further Disclose such information except as
required by law or for the purpose(s) for which it was Disclosed by MBR to such
person, and that such person will notify MBR of any instances of which it is
aware in which the confidentiality of the information has been breached.

 

D.            Adequate Safeguards for Health
Information.  MBR warrants that it
shall implement and maintain appropriate safeguards to prevent the Use or
Disclosure of Health Information in any manner other than as permitted herein
or by law.

 

E.             Mitigation.  MBR agrees to mitigate, to the extent
practicable, any harmful effect that is known to MBR of a Use or Disclosure of
Health Information by MBR in violation of the requirements of this Agreement.

 

10

 

F.             Reporting Non-Permitted Use or
Disclosure.  MBR shall not Use or
Disclose Health Information except as permitted by this Agreement or as
required by law. MBR shall report to Client a Use or Disclosure that is made by
MBR that is not permitted by this Agreement or which MBR becomes aware.

 

G.            Availability of Internal
Practices, Books, and Records.  MBR
agrees to make its internal practices, books and records relating to the Use
and Disclosure of Health Information available to the Secretary of the
Secretary for purposes of determining Client’s compliance with the Privacy
Regulations.

 

H.            Access to and Amendment of Health
Information.  MBR shall, to the
extent Client determines that any Health Information constitutes a “designated
records set” of Client under the Privacy Regulations, (a) make the Health
Information specified by Client available to Client or to the individual(s)
identified by Client as being entitled to access and copy that Health
Information, and (b) make any amendments to Health Information that are
requested by Client.

 

I.              Accounting of Disclosures.  Upon Client’s request, MBR shall provide to
Client an accounting of each Disclosure of Health Information made by MBR as
required by the Privacy Regulations. For each Disclosure that requires an
accounting under this Section 19, MBR shall securely maintain the information
for six (6) years from the date of the Disclosure.

 

J.             Use of Subcontractors and Agents.  MBR shall require each of its agents and
subcontractors that receive Health Information from MBR to comply with this
Section 19 of this Agreement with respect to such Health Information.

 

K.            Privacy Notice.  Client shall notify MBR of any
limitations(s) in Client’s notice of privacy practices to the extent such
limitation(s) may affect MBR’s Use or Disclosure of Health Information.

 

L.             Changes or Restrictions.  Client shall notify MBR of any changes in
permission by an individual to use or disclose Health Information to the extent
such change may affect MBR’s Use or Disclosure of Health Information. Client
shall notify MBR of any restriction to which Client agrees that may affect
MBR’s Use or Disclosure of Health Information.

 

M.           Disposition of Health Information
Upon Termination or Expiration. 
Upon termination or expiration of this Agreement, MBR shall either
return or destroy all Health Information in the possession or control of MBR
and its agents and subcontractors. In such event, MBR shall retain no copies of
such Health Information. However, if MBR determines that neither return nor
destruction of Health Information is feasible, MBR shall notify Client of the
conditions that make return or such destruction infeasible, and may retain
Health Information provided that MBR (1) continues to comply with the
provisions related to the protection of Health Information for as long as it
retains Health Information, and (2) further limits the Uses and Disclosures of
Health Information to those purposes that make the return or destruction of
Health Information infeasible.

 

11

 

N.            Amendments to Comply With Law.  The parties acknowledge that state and
federal laws relating to electronic data security and privacy are rapidly
evolving and that amendment of this Agreement may be required to provide for
procedures to ensure compliance with such developments. The parties
specifically agree to take such actions as is necessary to implement the
standards and requirements of HIPAA and other applicable laws relating to the
security or confidentiality of Health Information.

 

20.           MISCELLANEOUS:

 

A.            This Agreement shall constitute the
entire agreement of the parties and takes the p lace o f t he prior written
agreement between the p arties dated January 3 0, 2 001 (the “ Prior
Agreement”) as of the Effective Date. It may not be changed orally, but only by
agreement in writing signed by both parties.

 

B.            Any notice required or permitted to
be given under this Agreement shall be sufficient if in writing and if sent by
(i) certified or registered mail, return receipt requested, (ii) hand delivery
or overnight courier with proof of delivery, or (iii) facsimile transmission
with confirmation of receipt, to the parties as follows:

 

If to MBR:             4519 George Road, Suite 100

Tampa, Florida
33634

Facsimile No.:
(813) 496-8546

ATTENTION:
Becky Cacciatore, President

 

If to Client:            9350 Trade Place

San Diego,
California 92126-6334

Facsimile No.:
(858) 549-7714

ATTENTION:
PRESIDENT OR CHIEF FINANCIAL OFFICER

 

C.            The rights and obligations of the
parties under this Agreement shall inure to the benefit of and shall be binding
upon their respective heirs, executors, administrators, sublessors and assigns.
No party may assign any of its rights, obligations or interest in this
Agreement without the prior written consent of all parties to this Agreement.

 

D.            This Agreement shall be governed by
the laws of the State of Florida.

 

E.             This Agreement shall be deemed to
have been “executed” when the last party to sign this Agreement has affixed
his, her or its signature at the end of this Agreement.

 

F.             All parties to this Agreement
specifically agree to act in good faith in interpreting this Agreement and in
carrying out their respective duties and obligations hereunder.

 

G.            This Agreement may be executed in
multiple counterparts, each of which shall be considered an original, and all
of which shall constitute but a single agreement notwithstanding that each such
counterpart is executed on a different date.

 

H.            Because each party has participated
fully in the drafting and preparation of this Agreement, the Agreement shall
not be construed more strongly against any party.

 

12

 

I.              Each party to this Agreement
hereby acknowledges and confirms that he, she or it has had an opportunity to
retain independent legal counsel to independently advise that part of the legal
consequences of the Agreement to the party. 
Each party to this Agreement further acknowledges and confirms that each
such party received the strong recommendation by all other parties to the
Agreement that each party should retain separate and independent legal counsel
to advise each party of the legal consequences of the Agreement to that party.

 

J.             All prior negotiations and/or oral
agreements between the parties and/or two or more of the parties hereby are
merged and extinguished into this Agreement.

 

K.            Unless otherwise expressly provided
in this Agreement, all rights, obligations and other terms and conditions
specifically stated in this Agreement shall survive the execution of this
Agreement.

 

L.             If any one or more of the
provisions contained in this Agreement for any reason are held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.

 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement on the day and year first set
forth above but effective for all purposes as of April 1, 2002.

 

 

	
  MBR AND ASSOCIATES, INC.

  	
  DIGIRAD IMAGING SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Becky M. Cacciatore

  	
   

  	
  By:

  	
  /s/ Todd P. Clyde

  	
   

  
	
  Name:

  	
  Becky M.
  Cacciatore

  	
  Name:

  	
  Todd P.
  Clyde

  
	
  Title:

  	
  President

  	
  Title:

  	
  CFO

  
								

 

13

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