Document:

Exhibit
10.10

 

MANAGEMENT
SERVICES AGREEMENT

 

This
Management Services Agreement (“Agreement”) is made and entered into as of
August 1, 1999 by and between PROSPECT MEDICAL SYSTEMS, INC., a Delaware
corporation (“Manager”), and Nuestra Familia Medical Group, a California
Professional Corporation (“Group”).

 

RECITALS

 

A.                                   Group is a California Professional
Corporation duly organized under the laws of the State of California and
operated as a medical group and independent Group association.

 

Group has entered into agreements with various
Health Plan for the arrangement of the provision of health care services to
subscribers or enrollees of the Health Plan (“Health Plan”).

 

B.                                     Manager has special expertise and experience
in the operation, management and marketing aspects of independent Group
associations and medical groups of the type operated or intended to be operated
by Group.  Manager has made a
significant investment in the development of a system of operations, management
and marketing necessary for management of the functions desired by Group to be
undertaken by Manager; and

 

C.                                     Group desires to devote all of its time to
arranging for the delivery of health care services to Health Plan subscribers
or enrollees, and in connection therewith desires to obtain the professional
assistance of Manager in managing the business aspects of the Group.

 

D.                                    Manager proposes to provide Group with the
necessary support to manage the business aspects of the Group, including but
not limited to clerical and billing services, claims pursuit and collection,
capitation payments, cash flow management, marketing and general administrative
services (collectively, “Management Services”), to enable Group to concentrate
on the development of the professional aspects of the Group.

 

NOW, THEREFORE, in consideration of the mutual
covenants and conditions hereinafter set forth and in exchange for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

 

AGREEMENT

 

1.                                      MANAGER’S RESPONSIBILITIES.

 

1.1.                              During the term of this Agreement, Group
appoints and engages Manager to serve as its exclusive manager and
administrator of all non-physician functions and services relating to the
operation of the Group, and Manager agrees to furnish to Group those

 

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Management
Services set forth below. 
Notwithstanding such appointment and engagement, Group will have
exclusive authority and control over the professional aspects of the
Group.  The spirit of this agreement
sets forth the Manager’s responsibilities, and those responsibilities shall be
performed to the standard of the community, regulatory and health plan
requirements and to the Group’s satisfaction. 
The Manager shall also be responsible for meeting all appropriate
regulatory requirements.

 

1.1.1.                     General Administrative
Services.  Manager shall provide general business
management, administration and supervision for the business operations of
Group, which shall include secretarial and other office personnel support
services, staff support for GROUP’S Board of Directors and committee meetings,
administrative record keeping, and other similar administrative services
required in the day-to-day operation of Group.

 

1.1.2.                     Accounting and Financial
Management Services.  Manager shall, with Group approval not
unreasonably withheld, provide the following accounting and financial
management services:

 

1.1.2.1.            Manager shall, with Group’s approval
establish bank accounts in the name of Group (“Accounts”) for the deposit of
all sums received by Group for services provided to Members.  Group agrees that Manager shall have the
authority to endorse all checks made payable to Group and deposit checks and
funds received by Group in aforementioned accounts.  Manager shall further have the authority to make transfers of
funds to aforementioned accounts and further, Manager shall have the authority
to sign checks and stop payment on any checks drawn on aforementioned accounts.

 

1.1.2.2.            Manager agrees to reconcile checks written
with bank statements on a monthly basis;

 

1.1.2.3.            Manager agrees to make recommendations
regarding check signature approvals and banking procedures of Group;

 

1.1.2.4.            Manager agrees to prepare balance sheets and
income statements on a monthly basis during the term of this Agreement.  Such financial statements shall not be
audited statements.  Manager agrees to
cooperate with any annual audit Group obtains at its sole cost and expense by
an independent public accountant selected by Group;

 

1.1.2.5.            Manager shall receive and deposit on a timely
basis capitation and other payments received by Group;

 

1.1.2.6.            Manager shall, in a timely fashion, calculate
primary care capitation and specialty, ancillary and other payable claims based
on the records

 

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provided
by Health Plan and shall prepare checks to pay such amounts due and shall mail
said payments to the respective providers; pursuant to their respective
contracts.

 

1.1.2.7.            Manager shall monitor Health Plan subscribers
or enrollees exceeding stop loss deductibles and communicate with health plans
in writing to seek reimbursement on behalf of Group;

 

1.1.2.8.            Manager shall bill other payors for
coordination of benefits and other third party liability payments according to
the terms of the Health Plan/GROUP Agreements;

 

1.1.2.9.            Manager shall administer capitation and other
distributions from Health Plan including auditing and monitoring of risk pools,
negotiation settlement of Group’s share of such pools and establishment and
maintenance of incurred but not reported (“IBNR”) reserves for Group;

 

1.1.2.10.      Manager shall monitor any other revenue
receipt programs Health Plan may have, including but not limited to
pre-existing pregnancy recovery, and seek reimbursement from Health Plan;

 

1.1.2.11         Manager shall establish and adjust reserves
for medical expenses.

 

1.1.2.12         Manager will provide to the Board of Directors financial reports,
quarterly or otherwise as appropriate, identifying revenues, any earned
interest, and IBNR reserves.  A
reporting on the status of the shared risk pool will be made as available to
the manager and as appropriate. 
Information concerning risk pool distributions will be forwarded to the
Board no later than four months past the close of the business year.

 

1.1.2.13         Manger shall have the authority to write
checks on behalf of the Group to
carry out the Group’s business pursuant to this agreement, and any other
agreements that may be arrived at in the future.

 

1.1.2.14         Manager shall have the authority to commit to
expenditures up to $2,500 in any areas appropriate to carry on the business of
the Group.  Any expenditures over $2,500
shall have Board approval.  This shall
apply to all areas except provider payments, facility payments, ancillary
health care provider payments and other approved contractual obligations, for
which Manager shall not have a limit or restriction applied.

 

1.1.3.  Office Service; Billing.  Manager shall provide bookkeeping and accounting
services, including, without limitation, maintenance, custody and supervision
of Group’s business records, papers and documents, ledgers, journals and
reports, and the preparation, distribution and recording of all bills and
statements for professional services

 

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rendered
by Group, as well as all reports and forms required by applicable third party
payors.  Group shall at all times have
the ultimate responsibility for setting all fees for all professional services
rendered to patients of the Group.  All
billings for services rendered to patients by the Group shall be made under
Group’s name and provider number(s), and Manager shall act as Group’s agent in
the preparation, rendering and collection of such billings.  Group hereby appoints Manager for the term
hereof as its true and lawful agent for the following purposes:

 

1.1.3.1.            to collect accounts receivable generated by
billings in Group’s name and on Group’s behalf;

 

1.1.3.2.            to submit, process and collect all claims for
payment to, and receive on behalf of Group payments from Health Plan;

 

1.1.3.3.            to operate the account, endorse and deposit
in the name and on behalf of Group to one or more Accounts designated by Group
any notes, checks, money orders, and insurance payments.

 

1.1.3.4.            to collect in Group’s name and on its behalf
all collections of Gross Revenues (as defined in Exhibit “B” hereto).

 

1.1.4.                     Claim Settlement; Exculpation.  Group acknowledges and agrees
that Manager shall have discretion to compromise, settle, write off or
determine not to appeal a denial of any claim for payment for any particular
professional service rendered at the Group.

 

1.1.5.                     Financial Reports.  Manager shall furnish to Group monthly and annual financial reports
reflecting the Group’s financial status, provided that Manager shall have no
obligations with respect to any shareholder’s of Group personal finances or any
tax returns of the Group or any shareholder of Group.

 

1.1.6.                     Provider Contract Administration.  During the term of this
Agreement, Manager shall provide the following provider contract administration
services to Group:

 

1.1.6.1.            Identify and solicit participation of health
care providers identified by the Group as necessary for health plan
contracting;

 

1.1.6.2.            Identify and execute the business terms of
agreements between Group and Participating Providers;

 

1.1.6.3.            Identify and execute agreements regarding
compensation to Participating Providers;

 

1.1.6.4.            Make recommendations regarding the definition
of primary, specialty and ancillary services;

 

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1.1.6.5.            Instruct all Participating Providers and
their office staff regarding established Group policies and procedures at least
annually during the term of this Agreement.

 

1.1.6.6.            With Group approval not unreasonably
withheld, coordinate and execute the preparation, negotiation and renewal of
Group Participating Provider Agreements.

 

1.1.7.                     Administer Member
Eligibility Process.  Manager shall provide the following services
regarding administration of the member eligibility process:

 

1.1.7.1.            Maintain, update and reconcile a current
eligibility list to Health Plan subscribers and enrollees under the Health Plan
agreement.

 

1.1.7.2.            Verify eligibility on claims and referrals
based on the most current information provided by Health Plan;

 

1.1.7.3.            Administer system for retroactive eligibility
determination and assist Group in identifying outstanding accounts receivable
from ineligible patients.

 

1.1.8.                     Utilization Management/Quality
Assurance.  Manager agrees to provide the following
services regarding utilization management and quality assurance.

 

1.1.8.1.            Manager shall develop a policy outlining the
structure and functions of a Group utilization and quality management plan
after reviewing Health Plan’s requirements. 
Group agrees, following review of Manager’s recommendations, to adopt a
Group utilization and quality management plan that includes a list of services
for which Manager has received authority from Group to authorize services
provided.  In authorizing said services,
Manager shall be the agent of Group;

 

1.1.8.2.            Manager shall implement systems, programs and
procedures necessary for Group and Participating Providers to perform
utilization and quality management.

 

1.1.8.3.            Manager shall recommend procedures for prior
authorization of elective, urgent and emergent outpatient ambulatory surgery
and hospital procedures;

 

1.1.8.4.            Manager shall assist Group with prospective,
concurrent and retrospective review of medical procedures in accordance with
Group policies and Health Plan requirements;

 

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1.1.8.5.            Manager shall provide data regarding the use
of outpatient and inpatient services by provider to Group;

 

1.1.8.6.            Manager shall provide data regarding the use
of non-contracting providers;

 

1.1.8.7.            Manager shall provide secretarial support,
logs, and minutes to the Medical Director and the UR/QA Committee of Group;

 

1.1.8.8.            Manager shall assist Medical Director and the
UR/QA Committee in responding to Health Plan Member grievances based on the
instructions of the Medical Director;

 

1.1.8.9.            Manager shall provide the credentialing
process to the Group to conduct and to assure that providers have current
licenses and medical staff privileges.

 

1.2.                              Personnel.  Manager shall employ or contract with and provide all necessary
non-physician personnel, including quality assurance, utilization review,
claims processing, secretarial and clerical personnel as are reasonably necessary
for the conduct of the Group (collectively, “Manager Personnel”).  Manager shall, in its sole and absolute
discretion, determine the types and numbers of personnel and the number of
hours and schedules of said personnel it determines are necessary or appropriate
to provide the administrative and management services to be provided pursuant
to this Agreement.  Manager shall
provide such personnel at its sole cost and expense and such personnel may, at
the sole and absolute discretion of Manager, be employees or independent
contractors of Manager.  Manager shall
have sole control over promotion and employee disciplinary and termination
matters with respect to Manager Personnel, and shall not be responsible for any
accrued vacation, paid time off or other benefits to such individuals that have
accrued prior to the date that Manager engages them as its  employees.

 

1.3.                              All professional medical and health care
services provided to subscribers or enrollees shall be the ultimate
responsibility of the Group’s Participating Providers.  Group shall use its best efforts to cause
Participating Providers to cooperate with Manager in the implementation of the
protocols, programs, policies, and procedures developed for Group by Manager.

 

1.4.                              Manager is hereby expressly authorized by
Group to perform all services required of Manager pursuant to the terms of this
Agreement.  To the extent required or
desirable to enable Manager to perform such services, Group hereby appoints
Manager for the term hereof as its true and lawful agent.  Group acknowledges and agrees that Manager
may subcontract with other persons or entities, including entities related to
Manager by ownership or control, to perform any part of the services required
of Manager hereunder.  Manager

 

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agrees
that the entire contract may not be subcontracted out to another unrelated
party.  In such a case, Group reserves
the right to decline such an assignment.

 

1.5.                              Notwithstanding any other provision contained
herein, Manager shall not be liable to Group and shall not be deemed to be in
default hereunder for the failure to perform or provide any of the services,
personnel or other obligations to be performed or provided by Manager pursuant
to this Agreement if such failure is a result of an act(s) of God, or any other
event which is beyond the reasonable control of Manager or which was not
reasonably foreseeable by Manager.

 

2.                                      RESPONSIBILITIES OF GROUP.

 

2.1.                              Group covenants and agrees that, at all times
during the term of this Agreement and any extension thereof, it shall conduct
all activities required by its Group Agreement.  In addition, Group agrees to appoint a Medical Director.  Group shall be solely responsible for
payment of any and all compensation, payroll taxes, fringe benefits, disability
insurance, workers’ compensation insurance and any other benefits of such
Medical Director.

 

2.2.                              Group shall not enter into any agreements
with Participating Providers unless such Participating Providers have: (i)
current unrestricted licenses to practice their respective professions in the
State of California and (ii) current unrestricted Federal Drug Enforcement
Agency (“DEA”) numbers.  In addition,
where Group contracts with individual physicians, such physicians shall have
medical staff membership at the hospitals required by Health Plan and where
Group contracts with licensed clinics and medical groups, at least one primary
care physician practicing at each clinic or medical Group shall have medical
staff membership at the hospitals required by Participating Plans.  Group further agrees to establish policies
that Manager can carry out to ensure that Participating Providers meet these
requirements on an ongoing basis.

 

2.3.                              Group acknowledges and agrees that it is solely
responsible for making all required reports to the Medical Board of California
under Section 805 of the California Business and Professions Code and the
National Practitioner Data Bank.

 

2.4.                              Group shall, at its sole cost and expense,
procure and maintain at all times during the term of this Agreement
comprehensive general and professional liability insurance coverage for all
activities of Group directly or indirectly relating to Group.  Each policy in a minimum amount of
$1,000,000 per occurrence and $3,000,000 in the aggregate.  The aforedescribed comprehensive general and
professional liability insurance shall be issued by a company or companies
authorized to do business in California with a financial rating of at least
A:12 or better in “Best’s Key Rating Guide” or its equivalent.  In the event Group procures a “claims made”
policy as distinguished from an “occurrence” policy, Group shall procure and
maintain at its sole cost and expense, prior to termination of such insurance,
“tail” coverage to continue and extend coverage complying with this Agreement
after the end of the

 

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“claims
made” policy.  Upon reasonable request
from Manager, Group shall cause to be issued to Manager proper certificates of
insurance, evidencing that the foregoing provisions of this Agreement have been
complied with, and said certificates shall provide that prior to any
cancellation or change in the underlying insurance during the policy period,
the insurance carrier shall first give thirty (30) calendar days written notice
to Manager.

 

2.5.                              Group shall, at its sole cost and expense,
including, but not limited to, the payment of all salaries or independent
contractor fees, benefits, medical malpractice insurance, employ or contract
with such physicians as shall be reasonably necessary for the conduct of the
Group.

 

2.6.                              Group shall require that Participating
Providers procure and maintain professional liability insurance with minimum
coverage amounts of $1,000,000 per occurrence and $3,000,000 in the
aggregate.  Group shall ensure that any
Participating Provider who procures insurance required hereunder on a “claims
made” rather than an “occurrences” form will obtain either extended reporting
insurance coverage (“tail coverage”) with liability limits equal to those most
recently in effect prior to the day of termination of such Participating
Provider’s contract with Group, or will enter into such other arrangements as
shall reasonably assure the maintenance of coverage for such Provider, Group,
and Manager against the risk of loss in respect of professional services
rendered by such provider while this Agreement was in effect and for a period
of not less than seven (7) years after the date of termination of this
Agreement.

 

2.7.                              Group acknowledges and agrees that it shall
reasonably assist and cooperate with Manager to meet all of Manager’s
obligations under this Agreement, including approval of agreements and
provision of information.  Group acknowledges
and agrees that Manager shall have no liability for Group’s failure to pay any
and all of Group’s debts and expenses, unless that failure to pay its debts and
expenses is directly related to a material breach of this contract by the
manager.

 

3.                                      TERMS; TERMINATION.

 

3.1.                            Term.  The term of this Agreement (the “Term”) shall
commence on the date hereof and shall expire on July 31, 2009, the tenth
(10th) annual anniversary hereof unless earlier terminated as provided
below.  The term of this Agreement shall
be automatically extended for additional terms of one (1) year each, unless
either party delivers to the other party, not less than one hundred eighty
(180) days prior to the expiration of the preceding term, written notice of
such party’s intention not to extend the term of this Agreement.

 

3.2.                            Termination for Cause.

 

3.2.1.                     Manager may terminate this Agreement for
cause at any time during the Term upon sixty (60) days written notice (except
as otherwise provided below).  For
purposes of this Section 3.2.1 “cause” shall include, without limitation,
the following:

 

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3.2.1.1.            If Group fails to materially perform any
obligation required hereunder, and such default shall continue for sixty (60)
calendar days after written notice from Manager specifying the nature and
extent of failure to materially perform such obligation, this Agreement shall
terminate automatically and immediately upon the expiration of said sixty (60)
calendar day period; provided, however, that if the obligation which Group
fails to perform is other than the failure to make payment of money, and
greater than sixty (60) calendar days are required to perform said obligation,
then such party shall not be in default of this Agreement and the Agreement
shall not terminate as provided hereinabove if such party commences performance
within said sixty day period and diligently pursues said obligation to
completion.

 

3.2.1.2.            In the event the performance by either party
hereto of any term, covenant, condition or provision of this Agreement should
be determined by a state or federal court or governmental agency or court of
law to be in violation of any statute, ordinance, or be otherwise deemed
illegal (“Jeopardy Event”), then the parties shall use their best efforts to
meet forthwith and attempt to negotiate an amendment to this Agreement to
remove or negate the effect of the Jeopardy Event.  In the event the parties are unable to negotiate such an
amendment within thirty (30) days following written notice by either party of
the Jeopardy Event, then either party may terminate this Agreement immediately
upon written notice.

 

3.2.2.                     Group may terminate this Agreement for cause
at any time during the Term immediately upon written notice (except as
otherwise provided below).  For purposes
of this Section 3.2.2 “cause” shall include, without limitation, the
following:

 

3.2.2.1.            If Manager fails to materially perform any
obligation required hereunder, and such default shall continue for sixty (60)
calendar days after written notice from Group specifying the nature and extent
of failure to materially perform such obligation, this Agreement shall
terminate automatically and immediately upon the expiration of said sixty (60)
calendar day period; provided, however, that if the obligation which Manager
fails to perform is other than the failure to make payment of money, and
greater than sixty (60) calendar days are required to perform said obligation,
then such party shall not be in default of this Agreement and the Agreement
shall not terminate as provided hereinabove if such party commences performance
within said sixty day period and diligently pursues said obligation to
completion.

 

3.2.3.                     Either party may terminate this Agreement for
cause at any time during the Term immediately upon written notice.  For purposes of this Section 3.2.3
“cause” shall include, without limitation, the following:

 

3.2.3.1.            If either party shall apply for or consent to
the appointment of a receiver, trustee or liquidator in bankruptcy, make a
general assignment for the benefit of creditors, file a petition or answer
seeking reorganization or arrangement with creditors, or take advantage of any
bankruptcy, insolvency, reorganization, moratorium or

 

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other
law for the benefit of creditors, or if any order, judgment, or decree shall be
entered by any court of competent jurisdiction on the application of a creditor
or otherwise adjudicating either party, bankrupt or approving a petition
seeking reorganization of either party or appointment of a receiver, trustee or
liquidator of either party of all or a substantial part of its assets, and such
order, judgment or decree shall continue stayed and in effect for sixty (60)
calendar days after its entry, termination shall be effective automatically and
immediately upon the occurrence of the foregoing.

 

3.3.                              Jeopardy.  In the event the performance by either party hereto of any term,
covenant, condition or provision of this Agreement should be determined by a
state or federal court or governmental agency to be in violation of any
statute, ordinance, or be otherwise deemed illegal (“Jeopardy Event”), then the
parties shall use their best efforts to meet forthwith and attempt to negotiate
an amendment to this Agreement to remove or negate the effect of the Jeopardy
Event.  In the event the parties are
unable to negotiate such an amendment within thirty (30) days following written
notice by either party of the Jeopardy Event, then either party may terminate
this Agreement immediately upon written notice.

 

3.4.                              Automatic Termination.  This Agreement shall automatically terminate upon the dissolution of
Group.

 

4.                                      RIGHTS OF MANAGER UPON
TERMINATION.

 

4.1.                              In the event of the termination of this
Agreement for any reason, including without limitation the breach of this
Agreement by either party, Manager shall be entitled to recover (out of the
Accounts (as defined in Section 1.1.2.2 hereof) or otherwise) from Group
all fees, and any and all advances and other charges owed to Manager that had accrued
but were unpaid as of the date of termination.

 

4.2.                              In the event of termination of this Agreement
for any reason, Manager shall remain entitled to its Management Fee with
respect to all Gross Revenues (as defined in Exhibit “B” hereto) that have accrued
on or before the effective date of termination, which shall be payable, without
limitation, out of Net Revenues attributable thereto whether received before,
on or after the effective date of termination.

 

5.                                        REPRESENTATIONS AND
WARRANTIES OF GROUP.  The following representations and warranties
of Group are made to Manager for the purpose of inducing Manager to enter into
this Agreement.  Group represents and
warrants as follows:

 

5.1.                              Group is a Group duly organized, validly
existing and in good standing under the laws of the State of California and has
all necessary powers to own its properties and to operate pursuant to its Group
Agreement.

 

5.2.                              Group’s partners have all requisite power to
execute, deliver and perform this Agreement. 
Neither the execution and delivery of this Agreement, nor the

 

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consummation
and performance of the transaction contemplated in this Agreement, shall
constitute a default or an event that would constitute a default under, or
violation or breach of, Group’s Group Agreement or any license, lease,
franchise, mortgage, instrument, or other agreement to which Group may be
bound.

 

5.3.                              Group has furnished Manager full and complete
copies of all contracts and agreements affecting Group including, but not
limited to, all contracts to which Group is a party.

 

5.4.                              Group and any and all physicians providing
services to Health Plan have each complied with, and are not in violation of,
applicable federal, state or local statutes, laws and regulations including,
but not limited to, statutes, laws and regulations regarding the Group of
medicine and surgery in California, participation in the Medicaid and Medicare
programs or the operation of Group and all applicable standards of Group
relating to the provision of professional services hereunder.

 

5.5.                              Group and any and all Participating Providers
providing services for the Group have each obtained and currently maintain all
necessary licenses, permits, contracts, and approvals required by federal,
state or local statutes and regulations for the proper conduct of the business
of the Group as it is now being conducted and have been approved by the Board
of Directors or its properly designated committee, as documented by written
committee minutes.

 

5.6.                              There is no action, suit, proceeding,
investigation or litigation outstanding, pending or, to the best of Group’s
knowledge, threatened, affecting Group other than routine patient collection
matters and professional liability cases adequately covered by insurance.

 

5.7.                              Group represents and warrants that each Group
Participating Provider is as of the date hereof, and shall at all times during
the term hereof be and remain:

 

5.7.1.                     duly licensed to Group medicine within the
State of California and in possession of a federal DEA number, all without
limitation, restriction or condition whatsoever;

 

5.7.2.                     entitled to receive Medicare and Medicaid
reimbursement without limitation, restriction or condition whatsoever;

 

5.7.3.                     in compliance with the insurance requirements
set forth in Section 2.6 hereof.

 

5.8.                              Group represents and warrants that it and
each Group Participating Provider shall (i) comply with all applicable
governmental laws, regulations, ordinances, and directives and (ii) perform his
or her work and functions at all times in strict accordance with currently
approved methods and Groups in his or her field.

 

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6.                                      REPRESENTATIONS AND
WARRANTIES OF MANAGER.  The following representations and warranties
of Manager are made to Group for the purpose of inducing Group to enter into
this Agreement.  Manager represents and
warrants as follows:

 

6.1.                              Manager is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has all necessary corporate powers to own its properties and to operate
pursuant to its corporate purposes.

 

6.2.                              Manager has all requisite power to execute,
deliver and perform this Agreement. 
Neither the execution and delivery of this Agreement, nor the
consummation and performance of the transaction contemplated in this Agreement,
shall constitute a default, or an event that would constitute a default under,
or violation or breach of, Manager’s Articles of Incorporation, Bylaws or any
license, lease, franchise, mortgage, instrument, or other agreement to which
Manager may be bound.

 

6.3.                              There is no action, suit, proceeding,
investigation or litigation outstanding, pending or, to the best of Manager’s
knowledge, threatened, affecting Manager.

 

7.                                      MANAGER’S COMPENSATION.

 

7.1.                              As compensation for its services hereunder,
Manager shall be reimbursed a management fee (the “Management Fee”) in the
amount set forth on Exhibit B attached hereto and incorporated herein by
reference.

 

7.2.                              After
deduction of management fees to Manager and which are retained by Manager as
Management Fee compensation, all remaining Gross Revenues shall be remitted to
Group.  From such sums, Manager shall
pay, on Group’s behalf, the Cost of Medical Services (as defined in Exhibit B
attached hereto) such other payments or disbursement which Manager may be
authorized or required to make pursuant to this Agreement and such payments or
disbursements which Group shall direct Manager to make.  Should the funds in Group’s accounts not be
sufficient at any time during the term of this Agreement to make such
disbursements and to meet the Group’s financial obligations, Manager shall have
the right (but not the obligation) to loan to Group funds in an amount
sufficient to allow Group to meet its financial obligations.  Such loan shall bear interest at a rate that
is at or above fair market value and shall have such other terms as the parties
may agree from time to time.  Manager
shall not lend any funds to Group for such purposes without the prior approval
of Group’s Board of Directors or the officer(s) of Group delegated such power
of approval by Group’s Board of Directors.

 

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8.                                      RECORDS.

 

8.1.                              All medical records and documents, including
reports, x-rays, and other similar types of reports for patients of Group
providers shall be the property of Group’s providers.  Group agrees to require Group providers to allow Manager and its
duly authorized representatives to inspect, audit and duplicate any data or
records necessary for Manager to perform its duties pursuant to this
Agreement.  Group and Manager shall
comply with all applicable federal, state, and local laws and regulations pertaining
to the confidentiality of said medical records.

 

8.2.                              All business records, information, software
and systems of the Manager relating to the provision of its services under this
Agreement shall remain the property of the Manager and may be removed by the
Manager upon any termination of this Agreement.

 

9.                                       INDEMNIFICATION.  Each party shall indemnify, defend and hold harmless the other, its
officers, directors, agents, contractors, representatives and employees, and
each of its affiliates from and against any and all liability, loss, damages,
claims, causes of action, and expenses associated therewith (including, without
limitation, attorneys’ fees) caused or asserted to have been caused, directly
or indirectly, by or as a result of any acts, errors or omissions hereunder of
the other, its contractors, shareholders, employees or agents during the term
hereof.  The provisions of this
section shall survive the expiration or earlier termination of this
Agreement.

 

10.                               PROPRIETARY INFORMATION.

 

10.1.                        At all times during the term hereof and
following the expiration or earlier termination of this Agreement, all trade
secrets and proprietary confidential information of Manager, including without
limitation, all forms of contracts and other business documents or information
of Manager, whether currently or in the future developed or maintained by
Manager and including any and all deletions, additions, modifications and
amendments thereto and further including the amount of compensation to be paid
to Manager for its services hereunder (collectively, “Manager’s Proprietary
Materials”), shall be the exclusive, sole and absolute property of
Manager.  Both parties acknowledge and
agree that Manager has developed Manager’s Proprietary Materials at significant
expense, and that said Proprietary Materials are not available for review or
use by members of the public.  All of
Manager’s Proprietary Materials are and shall at all times remain confidential
and proprietary and constitute valuable trade secrets of Manager.  Except in the ordinary course of performing
its obligations under this Agreement and except upon Manager’s prior written
consent, Group shall not disclose to anyone, use, copy, or take any such trade
secrets or confidential and proprietary information for Group’s benefit or gain
either during the term of this Agreement or at any time after the termination
hereof.  Upon any expiration or earlier
termination of this Agreement for any reason, Group shall not, without the
prior written consent of Manager, take

 

13

 

or
use any of Manager’s Proprietary Materials, and shall return to Manager all of
Manager’s Proprietary Materials in Group’s possession or control.

 

10.2.                        At all times during the term hereof and
following the termination of this Agreement, Group shall not, directly or
indirectly, interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between Manager and any health care provider or
supplier (including, without limitation, any physician or osteopath), or any
employee, independent contractor, consultant or agent of Manager.  Group further agrees not to hire, engage or
contract with, either as an independent contractor, employee or in any other
capacity, any personnel of Manager, during the first twelve (12) months following
the effective expiration or termination date hereof without Manager’s prior
written consent.

 

10.3.                        The provisions of this Section 10 shall
survive the termination of this Agreement.

 

11.                             INDEPENDENT
CONTRACTORS.  The parties hereto acknowledge and agree that
the relationship created between Manager and Group is strictly that of
independent contractors.  Nothing
contained herein shall be construed as creating a Group or joint venture
relationship between the parties.  Each
party hereto shall be responsible for all compensation, salaries, taxes,
withholdings, contributions, benefits, and workers’ compensation insurance with
respect to all personnel employed or contracted by said party and shall
indemnify, defend and hold harmless the other party and its officers,
directors, agents, contractors, representatives and employees (and, in the case
of Group’s indemnification of Manager, Manager’s affiliates and subcontractors)
from and against any and all liability, loss, damages, claims, causes of
action, and expenses associated therewith (including, without limitation,
attorneys’ fees) caused or asserted to have been caused, directly or
indirectly, by or as a result of same. 
The provisions of this Section shall survive the expiration or
earlier termination of this Agreement.

 

12.                               MISCELLANEOUS.

 

12.1.                        No Third Party
Beneficiaries.  The parties intend that the benefits of this
Agreement shall inure only to Manager and Group and not to any third person,
except as expressly so stated herein. 
Notwithstanding anything contained herein, or any conduct or course of
conduct by any party hereto, before or after signing this Agreement, this
Agreement shall not be construed as creating any right, claim or cause of
action against either Manager or Group by any other person or entity.

 

12.2.                        Entire Agreement.  This Agreement, together with all exhibits and schedules hereto, and
all documents referred to herein, constitutes the entire agreement between the
parties with respect to the subject matter hereof, supersedes all other and
prior agreements on the same subject, whether written or oral, and contains all
of the covenants and agreements between the parties with respect to the subject
matter hereof.  Each party to this

 

14

 

Agreement
acknowledges that no representations, inducements, promises, or agreements,
orally or otherwise, have been made by the other party(ies), or by anyone
acting on behalf of any party, that are not embodied herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be valid
or binding.

 

12.3.                        Successors and Assigns.  All of Manager’s operational rights and duties under this Agreement may
be assigned or delegated by Manager, including but not limited to, an assignment
to Imperial Bank, a California banking corporation.  Notwithstanding any other provision of this Agreement, neither
this Agreement nor the rights and duties of this Agreement may be assigned or
delegated by Group.  This Agreement
binds the successors, heirs, and authorized assignees of the parties.

 

12.4.                        Counterparts.  This Agreement, and any amendments thereto, may be executed in
counterparts, each of which shall constitute an original document, but which
together shall constitute one and the same instrument.

 

12.5.                        Headings.  The section headings contained in this Agreement are inserted for
convenience only and shall not effect in any way the meaning or interpretation
of this Agreement.

 

12.6.                        Notices.  Any notices required or permitted to be given hereunder by either party
to the other shall be in writing and shall be deemed delivered upon personal
delivery or delivery by electronic facsimile; twenty-four (24) hours following
deposit with a courier for overnight delivery; or seventy-two (72) hours following
deposit in the U.S.  Mail, registered or
certified mail, postage prepaid, return-receipt requested, addressed to the
parties at the following addresses or to such other addresses as the parties
may specify in writing:

 

If to Group:                                   Nuestra Familia Medical Group
Chairman
Board of Directors

 

 

If to Manager:                    Prospect Medical Systems, Inc.

1920 East 17th Street

Suite 200

Santa Ana, CA 92705-8626

Attention: CEO

 

12.7.                              Governing Law. 
This Agreement shall be governed by and construed in accordance with the
laws of the State of California.

 

15

 

12.8.                        Amendment.  This Agreement may be amended at any time by agreement of the parties,
provided that any amendment shall be in writing and executed by both parties.

 

12.9.                        Severability.  If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions will
nevertheless continue in full force and effect, unless such invalidity or
unenforceability would defeat an essential business purpose of this Agreement.

 

12.10.                  Exhibits and Schedules.  All exhibits and schedules attached to this Agreement are incorporated
herein by this reference and all references herein to “Agreement” shall mean
this Agreement together with all such exhibits and schedules.

 

12.11.                  Time of Essence.  Time is expressly made of the essence of this Agreement and each and
every provision hereof of which tune of performance is a factor.

 

12.12.                  Dispute Resolution.

 

12.12.1.         Subject to the terms of Section 12.12.2,
in the event the parties hereto are unable to resolve any and all disputes in
connection with this Agreement, either party may commence arbitration by
sending a written demand for arbitration to the other party, setting forth the
nature of the matter to be resolved by arbitration.  Except as may be expressly provided to the contrary herein, the
arbitration procedure described in this Section shall be the sole means of
resolving any disputes hereunder.

 

12.12.2.         Notwithstanding the foregoing, it is
expressly understood by the parties that the arbitration procedure described in
this Section shall not be applicable to any disputes between the parties
as to matters over which Manager has exclusive decision-making authority pursuant
to the terms hereof, including the Manager’s exclusive decision-making
authority with respect to the development of guidelines for the selection,
hiring and firing of any of Manager’s employees.

 

12.12.3.         There shall be one arbitrator.  If the parties shall fail to select a
mutually acceptable arbitrator within ten (10) days after the demand for
arbitration is mailed, then the parties stipulate to arbitration before a
retired judge sitting on the Los Angeles Judicial Arbitration Mediation
Services (JAMS) panel.

 

12.12.4.         The parties shall share all costs of
arbitration.  The prevailing party shall
be entitled to reimbursement by the other party of such party’s attorneys’ fees
and costs and any arbitration fees and expenses incurred in connection with the
arbitration hereunder.

 

12.12.5.         The substantive law of the State of
California shall be applied by the arbitrator. 
The parties shall have the rights of discovery as provided for in Part 4
of the

 

16

 

California
Code of Civil Procedure and as provided for in Section 1283.05 of said
Code.  The California Code of Evidence
shall apply to testimony and documents submitted to the arbitrator.

 

12.12.6.         Arbitration shall take place in Los Angeles,
California unless the parties otherwise agree. 
As soon as reasonably practicable, a hearing with respect to the dispute
or matter to be resolved shall be conducted by the arbitrator.  As soon as reasonably practicable
thereafter, the arbitrator shall arrive at a final decision, which shall be
reduced to writing, signed by the arbitrator and mailed to each of the parties
and their legal counsel.

 

12.12.7.         All decisions of the arbitrator shall be
final, binding and conclusive on the parties and shall constitute the only
method of resolving disputes or matters subject to arbitration pursuant to this
Agreement.  The arbitrator or a court of
appropriate jurisdiction may issue a writ of execution to enforce the
arbitrator’s judgment.  Judgment may be
entered upon such a decision in accordance with applicable law in any court
having jurisdiction thereof.

 

12.12.8.         Notwithstanding the foregoing, because time
is of the essence of this Agreement, the parties specifically reserve the right
to seek a judicial temporary restraining order, preliminary injunction, or
other similar short term equitable relief, and grant the arbitrator the right
to make a final determination of the parties’ rights, including whether to make
permanent or dissolve such court order.

 

12.12.9.         Notwithstanding the foregoing, any and all
arbitration proceedings are conditional upon such proceedings being covered
under the parties’ respective risk insurance policies.

 

12.13.                  Attorneys’ Fees.  Should either party institute any action or procedure to enforce this
Agreement or any provision hereof, or for damages by reason of any alleged
breach of this Agreement or of any provision hereof, or for a declaration of
rights hereunder (including, without limitation, arbitration), the prevailing
party in any such action or proceeding shall be entitled to receive from the
other party all costs and expenses, including without limitation reasonable
attorneys’ fees, incurred by the prevailing party in connection with such
action or proceeding.

 

12.14.                  Further Assurances.  The parties shall take such actions and execute and deliver such
further documentation as may reasonably be required in order to give effect to
the transactions contemplated by this Management Services Agreement and the
intentions of the parties hereto.

 

12.15.                  Rights Cumulative.  The various rights and remedies herein granted to Manager or Group
shall be cumulative and in addition to any other rights Manager or Group,
respectively, may be entitled to under law. 
The exercise of one or more rights or remedies

 

17

 

shall
not impair the right of Manager or Group to exercise any other right or remedy,
at law or equity.

 

12.16.                  Federal Social Security
Requirements.  Pursuant to Section 1395x (V)(1)(I) of
Title 42 of the United States Code, with respect to any services furnished
under the terms of this Agreement if the value or cost of which is Ten Thousand
Dollars ($10,000) or more over a twelve (12) month period, until the expiration
of four (4) years after the termination of this Agreement, Manager shall make
available upon written request to the Secretary of the United States Department
of Health and Human Services, or upon request by the Comptroller General of the
United States General Accounting Office, or any of their duly authorized
representatives, a copy of this Agreement and such books, documents and records
as are necessary to certify the nature and extent of the costs of the services
provided by Manager under this Agreement.

 

Manager further agrees that in the event Manager carries out any of its
duties under this Agreement through a subcontract, with a value or cost of Ten
Thousand Dollars ($10,000) or more over a twelve (12) month period, such
subcontract shall contain a clause to the effect that until the expiration of
four (4) years after the furnishing of such services pursuant to such
subcontract, the subcontractor shall make available, upon written request to
the Secretary of the United States Department of Health and Human Services, or
upon request to the Comptroller General of the United States General Accounting
Office, or any of their duly authorized representatives, the subcontract and
such books, documents and records of such organization as are necessary to
verify the nature and extent of such costs.

 

18

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.

 

 

	
  For:
  “MANAGER”

  	
   

  	
   For: “GROUP”

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PROSPECT
  MEDICAL SYSTEMS, INC.

  	
  NUESTRA
  FAMILIA MEDICAL GROUP

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ [Illegible]

  	
   

  	
  By:

  	
  /s/ [Illegible]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
  CEO

  	
   

  	
  Its:

  	
  PRESIDENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
  3-1-2000

  	
   

  
								

 

19

 

EXHIBIT “A”

 

POWER OF
AGENCY

 

This Power of Agency is made and entered into in
connection with that certain Management Services Agreement (the “Agreement”)
dated as of the 1st day of August, 1999, between Prospect Medical Systems,
Inc., a Delaware Corporation (“Manager”), and Nuestra Familia Medical Group, a
California Professional Corporation. 
(“Group”).

 

1.                                        Definitions.  Capitalized terms used herein
and not otherwise defined herein shall have the meaning assigned to them in the
Agreement.

 

2.                                        Power of Manager. 
Group hereby appoints the Manager or its designee, as Group’s agent
(“Agent”) to act for Group and in Group’s name, place and stead for the
purposes of carrying out those duties prescribed in this Management Services
Agreement as well as other operational duties and responsibilities consistent
with this Agreement.  Additionally the
Manager shall be delegated the authority for the following: (a) administering
executed Contracts, as approved; (b) negotiating and executing all business
agreements and leases on Group’s behalf in accordance with the Agreement; (c)
endorsing all checks made payable to Group for services provided to Members;
(d) taking all steps required or desirable to submit, process and collect all
claims for payment to Health Plan; and (e) receiving and depositing capitation
and other payments received by Group.

 

3.                                        Administration. 
Agent shall maintain in his/her files a copy of the Health Plan
contract.  Notwithstanding anything
herein to the contrary, Group shall look solely to Health Plan for payment for
medical services and supplies and neither Manager nor any officer, employee,
agent or affiliate of Manager shall be liable for such payment.

 

4.                                        Term.  The term of this Power of
Agency shall coexist and be coterminous with the term of the Agreement.

 

5.                                        Full Authority. 
Agent is hereby granted full authority to act in any manner proper or
necessary to exercise the foregoing powers.

 

20

 

EXHIBIT “B”

 

MANAGEMENT
FEE

 

 

The
management fee payable to Manager under this contract shall be 12% of Gross
Collections of all HMO revenue received.

 

22Exhibit 10.11

 

MANAGEMENT SERVICES AGREEMENT

 

THIS MANAGEMENT SERVICES AGREEMENT (“Agreement”)
is made and entered info as of July 1, 1999, by and between PROSPECT
MEDICAL SYSTEMS, INC., a Delaware corporation (“Manager”), and AMVI/Prospect Medical Group, a California
professional partnership (“Partnership”).

 

RECITALS

 

A.                                   Partnership is a California partnership
created by that certain Partnership Agreement dated July I, 1999 (the “Partnership Agreement”), comprised of two
partners, both professional medical corporations duly organized under the laws
of the State of California.  The
partners in the Partnership are AMVI/IMC Health Network, Inc., A Medical
Corporation and Santa Ana/Tustin Physicians Group, Inc.

 

B.                                     Partnership has entered into an agreement (the
“CalOPTIMA Agreement”) with
CalOPTIMA (“CalOPTIMA”) for the
arrangement of the provision of health care services to enrollees of CalOPTIMA
(the “CalOPTIMA Practice”).

 

C.                                     Manager has special expertise and experience
in the operations and management aspects of independent practice associations
and medical groups of the type operated or intended to be operated by
Partnership.

 

D.                                    Partnership desires to devote all of its time
to arranging for the delivery of health care services to CalOPTIMA enrollees,
and in connection therewith desires to obtain the professional assistance of
Manager in managing the business aspects of the CalOPTIMA Practice.

 

E.                                      Manager desires to provide Partnership with
the necessary support to manage the business aspects of the CalOPTIMA Practice,
including but not limited to clerical and billing services, claims pursuit and
collection, cash flow management, and general administrative services
(collectively, “Management Services”),
to enable Partnership to concentrate on the development and implementation of
the professional aspects of the CalOPTIMA Practice.

 

NOW, THEREFORE, in consideration of the mutual covenants and conditions hereinafter
set forth and in exchange for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

AGREEMENT

 

1.                                      MANAGER RESPONSIBILITIES.

 

1.1.                              During the term of this Agreement,
Partnership appoints and engages Manager to serve as its exclusive manager and
administrator of all non-physician or non-professional functions and services
relating to the operation of the CalOPTIMA Practice, and Manager agrees to
furnish to Partnership those management services set forth below.  Notwithstanding such appointment and
engagement, Partnership will have exclusive authority and control over the
professional aspects of the CalOPTIMA Practice.

 

 

1.1.1.                     General Administrative
Services.  Manager shall provide general business
management, administration and supervision for the business operations of the
CalOPTIMA Practice, which shall include secretarial and other office personnel
support services, administrative record keeping, and other similar
administrative services required in the day-to-day operations of the CalOPTIMA
Practice.

 

1.1.2.                     Accounting and Financial
Management Services.  Manager shall provide the following
accounting and financial management services:

 

1.1.2.1.            Manager shall, in consultation with
Partnership, recommend an annual budget for the Partnership’s CalOPTIMA
Practice, which budget shall reflect in reasonable detail anticipated revenues
and expenses;

 

1.1.2.2.            Manager shall, in consultation with
Partnership, establish bank accounts in the name of Partnership (“Accounts”) for the deposit of all sums
received by Partnership for services provided to CalOPTIMA enrollees.  Partnership agrees that Manager shall have
the authority to endorse all checks made payable to Partnership and deposit
checks and funds received by Partnership in the Divisional Accounts of the
Partnership, and Manager shall endorse and deposit such checks and funds, as
directed by the Partnership.  Manager
shall further have the authority to make transfers of funds to Accounts and,
further, Manager shall have the authority to sign checks and, with the consent
of the Partnership’s Managing Partner, stop payment on any checks drawn on
Accounts.  Notwithstanding anything in
the foregoing to the contrary, all checks drawn on Partnership’s Accounts shall
require the consent of Partnership’s Managing Partner;

 

1.1.2.3.            Manager agrees to reconcile checks written
with bank statements on a monthly basis and notify the Partnership’s Managing
Partner of any problems;

 

1.1.2.4.            Manager agrees to make recommendations
regarding check signature approvals and banking procedures of Partnership;

 

1.1.2.5.            Manager agrees to prepare balance sheets and
income statements on a monthly basis for the Partnership and each of the
Partnership’s divisions in accordance with the terms of the Partnership
Agreement.  Such financial statements
shall not be audited statements. 
Manager agrees to cooperate fully with any annual or other audit
Partnership or any of Partnership’s partners obtains (at its or their sole cost
and expense) by an independent public accountant selected by Partnership or any
partner;

 

1.1.2.6.            Manager shall receive and deposit on a timely
basis into the Partnership Account capitation and other payments received by
Partnership;

 

1.1.2.7.            Manager shall calculate primary care
capitation and specialty, ancillary and other payable claims based on the
records provided by CalOPTIMA and shall prepare checks to pay such amounts due
and shall mail said payments to the respective providers;

 

1.1.2.8.            Manager shall monitor CalOPTIMA enrollees
exceeding stop loss deductibles and communicate with CalOPTIMA in writing to
seek reimbursement on behalf of Partnership;

 

1.1.2.9.            Manager shall bill on behalf of Partnership
other payors for coordination of benefits and other third party liability
payments according to the terms of the CalOPTIMA Agreement;

 

2

 

1.1.2.10.      Manager shall administer capitation and other distributions from
CalOPTIMA including, without limitation, auditing and monitoring of risk pools,
negotiating settlement of Partnership’s share of such pools and establishment
and maintenance of incurred but not reported (“IBNR”) reserves for Partnership;

 

1.1.2.11.      Manager shall monitor any other revenue receipt programs CalOPTIMA and
others may have (such as California Children’s Services) including, but not
limited to, pre-existing pregnancy recovery, and seek reimbursement from
CalOPTIMA on behalf of Partnership;

 

1.1.2.12.      Manager shall assist Partnership in establishing and administering a
system to establish and adjust reserves for medical expenses.

 

1.1.3.                     Office Service; Billing. 
Manager shall provide bookkeeping and accounting services, including,
without limitation, maintenance, custody and supervision of Partnership’s
business records, papers and documents, ledgers, journals and reports, and the
preparation, distribution and recording of all bills and statements for
professional services rendered by Partnership, as well as all reports and forms
required by applicable third party payors. 
Partnership shall at all times have the ultimate responsibility for
setting all fees for professional services provided to patients of the
CalOPTIMA Practice, as well as negotiating with CalOPTIMA.  All billings for services rendered to
patients by the CalOPTIMA Practice shall be made under Partnership’s name and
provider number(s), and Manager shall act as Partnership’s agent in the
preparation, rendering and collection of such billings.  Partnership hereby appoints Manager for the
term hereof as its true and lawful agent for the following purposes:

 

1.1.3.1.            to bill patients, if appropriate per
CalOPTIMA guidelines, in Partnership’s name and on its behalf;

 

1.1.3.2.            to collect accounts receivable generated by
such billings in Partnership’s name and on Partnership’s behalf;

 

1.1.3.3.            to submit, process and collect all claims for
payment to, and receive on behalf of Partnership payments from, CalOPTIMA;

 

1.1.3.4.            to take possession of, endorse and deposit in
the name and on behalf of Partnership to one or more Accounts designated by
Partnership any notes, checks, money orders, insurance payments, and any other
instruments received as payment of accounts receivable;

 

1.1.3.5.            Manager shall regularly determine which of
Partnership’s accounts receivable are past due and shall perform appropriate
follow-up procedures to collect on those accounts.

 

1.1.3.6.            Manager shall take such steps as are
necessary or appropriate to ensure that all claims are complete and accurate,
and are prepared and submitted in accordance with all applicable, laws, rules
and regulations;

 

1.1.3.7.            Manager shall assist Partnership in
developing an accounts receivable policy;

 

3

 

1.1.3.8.            Manager shall respond to all patient and
third party correspondence and telephone calls related to accounts receivables
management and billing services, except for complaints concerning medical care
which is responsibility of the Partnership. 
Manager shall promptly advise the Partnership of complaints concerning
medical care in order to assist in the preparation of a response from the
Partnership;

 

1.1.3.9.            Partnership or its designee and any partner
or such partner’s designee has the right to review, audit or examine Manager’s
books and records relating to the Partnership and/or the CalOPTIMA Practice at
the office of Manager during normal business hours;

 

1.1.3.10.      Manager shall reconcile amounts received to determine under-payments
and to recoup over-payments; and

 

1.1.3.11.      Manager shall establish and implement the voluntary compliance program
for third party medical billing companies published November 30, 1998 by
the United States Department of Health and Human Services, Office of the
Inspector General.

 

1.1.4.                     Claim Settlement;
Exculpation.  Manager shall provide the Partnership with a
weekly report of those claims which Manager recommends to compromise, settle,
write off or not to appeal a denial thereof, and the Partners shall make a
determination of the disposition thereof which shall be communicated to, and
implemented by, Manager.

 

1.1.5.                     Financial Reports.  Manager shall furnish to Partnership monthly and annual financial
reports reflecting the Partnership’s financial status including, but not
limited to, aging reports, balance sheets, income statements, writeoffs, adjustments
and settlements, and such other reports as Partnership reasonably determines to
be necessary.

 

1.1.6.                     Provider Contract
Administration.  During the term of this Agreement, Manager
shall provide the following provider contract administration services to
Partnership:

 

1.1.6.1.            Identify and solicit participation of health
care providers identified by the Partnership as necessary for Partnership
operations, if and as requested by the Partnership;

 

1.1.6.2.            Review and make recommendations regarding the
business terms of agreements between Partnership and Participating Providers,
if and as requested by the Partnership;

 

1.1.6.3.            Make recommendations regarding compensation
to Participating Providers;

 

1.1.6.4.            Make recommendations, in consultation with
the Partnership, for the development of guidelines for the selection, hiring or
firing of Participating Providers;

 

1.1.6.5.            Make recommendations regarding the definition
of primary, specialty and ancillary services;

 

1.1.6.6.            Instruct all Participating Providers and
their office staffs regarding established Partnership policies and procedures
at least annually, or more frequently as such policies and procedures may be
changed;

 

4

 

1.1.6.7.             Coordinate, with the approval of the
Partnership, the preparation, negotiation and renewal of Partnership
Participating Provider Agreements with Participating Providers.

 

1.1.7.                     Administer Enrollee
Eligibility Process.  Manager shall provide the following services
regarding administration of the enrollee eligibility process:

 

1.1.7.1.            Maintain and update a current eligibility
list of CalOPTIMA enrollees under the CalOPTIMA Agreement.

 

1.1.7.2.            Verify eligibility on claims and referrals
based on the most current information provided by CalOPTIMA;

 

1.1.7.3.            Administer system for retroactive eligibility
determination and assist Partnership in identifying outstanding accounts
receivable from ineligible patients, and bill for services to any ineligible
patients.

 

1.1.8.                     Utilization
Management/Quality Assurance.  Manager agrees to provide the following
administrative services regarding utilization management and quality assurance.

 

1.1.8.1.            Manager shall develop and recommend a
utilization and quality management plan that meets CalOPTTMA’s
requirements.  Partnership agrees,
following review of Manager’s recommendations, to adopt a Partnership
utilization and quality management plan.

 

1.1.8.2.            Manager shall implement systems, programs and
procedures necessary for Partnership and Participating Providers to perform
utilization and quality management.

 

1.1.8.3.            Manager shall recommend procedures for prior
authorization of elective, urgent and emergent out-patient ambulatory surgery
and hospital procedures in accordance with the utilization and quality
management plan;

 

1.1.8.4.            Manager shall assist Partnership with
prospective, concurrent and retrospective review of medical procedures in
accordance with the utilization and quality management plan;

 

1.1.8.5.            Manager shall provide the Partnership data
regarding the use of outpatient and inpatient services by Participating
Providers and economic profiling on each Participating Provider;

 

1.1.8.6.            Manager shall provide data regarding the use
of noncontracting providers;

 

1.1.8.7.            Manager shall provide secretarial and
administrative support to the Medical Director and the Divisional and Plan
UR/QA Committees of Partnership and such other committee of the Partnership as
the Partnership requests;

 

1.1.8.8.            Manager shall assist Medical Director and the
UR/QA Committee in responding to CalOPTIMA enrollee grievances based on the
instructions of the Medical Director;

 

5

 

1.1.8.9.            Manager shall provide staff assistance to
Partnership in the credentialing process Partnership is required to conduct to
assure that providers have current licenses and medical staff privileges.

 

1.1.9.                     Equipment and Supplies.  Manager shall be responsible, at its sole cost and expense, for all
equipment, supplies and personnel necessary for it to perform its duties under
this Agreement.

 

1.1.10.               [Intentionally Omitted]

 

1.1.11.               Professional and Other
Services.  Manager shall be responsible for arranging
and paying for payroll, legal and accounting services related to Partnership
operations in the ordinary course of business (but excluding any expense
incurred in any contract disputes or malpractice suits (if any)).                  •.

 

1.1.12.               Enrollee and Provider
Services.  Manager shall be responsible for providing
adequate staffing and other resources, as appropriate, to ensure adequate
responses to enrollee and Provider concerns, questions, grievances, etc.

 

1.2.                           Personnel.  Manager shall employ or contract with and provide all necessary
nonphysician personnel, including administrative, bookkeeping, quality
assurance, utilization review, claims processing, secretarial and clerical
personnel as are reasonably necessary for the conduct of the CalOPTIMA Practice
(collectively, “Manager Personnel”).  Manager shall be responsible for hiring and
firing all Manager Personnel and shall determine and be responsible for the
payment of all compensation, withholding requirements, fringe benefits and
insurance coverage to or for the benefit of all Manager Personnel.  Manager shall prepare and file all forms, reports,
and returns required by law in connection with unemployment insurance, workers’
compensation insurance, disability benefits, social security, and other similar
laws now in effect or hereafter imposed for all Manager Personnel.  Manager shall, in its sole and absolute
discretion, determine the types and numbers of personnel and the number of
hours and schedules of said personnel it determines are necessary or
appropriate to provide the administrative and management services to be
provided pursuant to this Agreement. 
Manager shall provide such personnel at its sole cost and expense and
such personnel may, at the sole and absolute discretion of Manager, be
employees or independent contractors of Manager.  Manager shall have sole control over promotion and employee
disciplinary and termination matters with respect to Manager Personnel,
Notwithstanding anything to the contrary stated herein, Partnership shall have
the right to require Manager to remove immediately from performing services for
or on behalf of Partnership any Manager Personnel that Partnership determines,
in its sole discretion, is detrimental to the Partnership or the CalOPTIMA
Practice.

 

1.3.                               Insurance.  Manager shall maintain, at its, sole cost and expense, general
liability insurance and errors and omissions insurance in coverage amounts of
not less than One Million Dollars ($1,000,000) per occurrence and Ten Million
Dollars ($10,000,000) in the aggregate. 
The aforedescribed insurance shall be issued by a company or companies
authorized to do business in California with a financial rating of at least
A:12 or better in “Best’s Key Rating Guide” or its equivalent.  At Partnership’s request, Manager shall
provide such proof as Partnership shall request that such insurance is in
effect.

 

1.4.                               Manager is hereby expressly authorized by
Partnership to perform all services required of Manager pursuant to the terms
of this Agreement in the manner Manager deems reasonable and appropriate to
meet the day-to-day requirements of Partnership.

 

6

 

1.5.                             Upon the written request of Partnership,
Manager shall provide or arrange for the provision of additional services,
beyond those described or referred to herein. 
Any additional services provided by Manager are subject to Manager’s
capacity and availability to provide the services so requested.  Should Manager provide such additional
services, Partnership agrees to pay Manager for such services at a mutually
agreed upon rate of compensation.

 

1.6.                             Notwithstanding any other provision contained
herein, Manager shall not be liable to Partnership and shall not be deemed to
be in default hereunder for the failure to perform or provide any of the
services, personnel or other obligations to be performed or provided by Manager
pursuant to this Agreement if such failure is a result of collective
bargaining, a labor dispute, act(s) of God, or any other event which is beyond
the reasonable control of Manager or which was not reasonably foreseeable by
Manager.

 

2.                                      RESPONSIBILITIES OF
PARTNERSHIP.

 

2.1.                                Partnership covenants and agrees that, at all
times during the term of this Agreement and any extension thereof, it shall
conduct all activities required by its Partnership Agreement.

 

2.2.                                 Partnership shall, at its sole cost and
expense, procure and maintain at all times during the term of this Agreement
comprehensive general and professional liability insurance covering all
activities of Partnership directly or indirectly relating to Partnership, each
policy in a minimum amount of One Million Dollars ($1,000,000) per occurrence
and Three Million Dollars ($3,000,000) in the aggregate.  The aforedescribed comprehensive general and
professional liability insurance shall be issued by a company or companies
authorized to do business in California with a financial rating of at least
A:12 or better in “Best’s Key Rating Guide” or its equivalent.  In the event Partnership procures a “claims
made” policy as distinguished from an “occurrence” policy, Partnership shall
procure and maintain at its sole cost and expense, prior to termination of such
insurance, “tail” coverage to continue and extend coverage complying with this
Agreement after the end of the “claims made” policy.  Upon reasonable request from Manager, Partnership shall cause to
be issued to Manager proper certificates of insurance, evidencing that the
foregoing provisions of this Agreement have been complied with.

 

3.                                      TERM; TERMINATION.

 

3.1.                                  Term.  The term of this Agreement (the “Term”)
shall commence on the date hereof and shall expire on the first annual anniversary
hereof (i.e., as of the close of
business on June 30, 2000) unless earlier terminated as provided
below.  The term of this Agreement shall
be automatically extended for additional terms of one (1) year each (subject to
earlier termination as hereafter provided), unless either party delivers to the
other party, not less than thirty (30) days prior to the expiration of the
preceding term, written notice of such party’s intention not to extend the term
of this Agreement.

 

3.2.                              Termination for Cause.

 

3.2.1.                     Either party may terminate this Agreement for
cause at any time during the Term effective immediately upon written notice
(except as otherwise provided below) to the other party.  For purposes of this Section 3.2.1
“cause” shall include, without limitation, a material breach of this Agreement
by the other party (including, without limitation, by failing to perform any
material obligation required by such party hereunder) which breach is not cured
as provided hereafter in Section 3.2.2.

 

7

 

3.2.2.                     In the event of a breach of this Agreement,
the breaching party shall have ten (10) business days from notice thereof to
cure the breach; provided, however, that if the nature of such
breach is such that more than ten (10) business days reasonably are required
for its cure, then the breaching party shall not be considered to be in breach
if such party commenced such cure efforts immediately within said ten (10)
business day period and thereafter diligently and in good faith prosecutes such
cure to completion not later than thirty (30) calendar days after the breach; and
provided  further, that for a breach by a party of any obligation
to pay money, only a five (5) day cure period shall apply.

 

Furthermore,
notwithstanding anything in the foregoing to the contrary: (i) the breaching
party shall commence to cure immediately and shall attempt to complete a cure
as quickly as possible; (ii) should a party cease such party’s efforts to cure,
the cure period shall terminate one (1) business day after such cessation;
(iii) no party shall have the right to cure or undertake to cure a breach if
the breach is of such a materially adverse nature as to cause substantial harm
to the nonbreaching party which may not be fully and completely cured within
the time periods provided; (iv) the breaching party shall be liable in damages
to the nonbreaching party for any damages caused by the breach which damages
are not fully and completely cured within the applicable time period; (v) no party
shall have the right to avail itself of the cure provisions hereunder more than
two (2) times for any and all breaches of any obligation to pay money; and (vi)
except as provided in the immediately preceding subsection (v) regarding
breaches of obligations to pay money, no party shall have the right to avail
itself of the cure provisions hereunder more than one (1) time for a material
breach of this Agreement, it being the express understanding and agreement of
the parties that no party shall have the right, either intentionally or
unintentionally, to engage in recurring material breaches of this Agreement
regardless of such party’s ability or success in curing each such breach.

 

3.3.                              Termination for
Jeopardy.  In the event the performance by either party hereto
of any term, covenant, condition or provision of this Agreement should be
determined by a state or federal court or governmental agency or court of law
to be in violation of any statute, ordinance, or be otherwise deemed illegal (“Jeopardy Event”), then the parties shall
use their best efforts to meet forthwith and attempt to negotiate an amendment
to this Agreement to lawfully remove or negate the effect of the Jeopardy
Event.  In the event the parties are unable
to negotiate such an amendment within thirty (30) days following written notice
by either party of the Jeopardy Event, then Partnership may terminate this
Agreement immediately upon written notice.

 

3.4.                               Termination for
Insolvency.  Either party may terminate this Agreement if
the other party shall apply for or consent to the appointment of a receiver,
trustee or liquidator in bankruptcy, make a general assignment for the benefit
of creditors, file a petition or answer seeking reorganization or arrangement
with creditors, or take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other law for the benefit of creditors, or if any
order, judgment, or decree shall be entered by any court of competent
jurisdiction on the application of a creditor or otherwise adjudicating the other
party bankrupt or approving a petition seeking reorganization of the other
party or appointment of a receiver, trustee or liquidator of the other party of
all or a substantial part of its assets, and such order, judgment or decree
shall continue in effect for sixty (60) calendar days after its entry,
termination shall be effective automatically and immediately upon the
occurrence of the foregoing.

 

3.5.                                 Automatic Termination.  This Agreement shall automatically terminate upon the dissolution of
Partnership, or effective upon the effective date of the termination (if any)
of the CalOPTIMA Agreement.

 

8

 

3.6.                               Termination Without Cause.  Either party may terminate this Agreement at any time
without cause upon ninety (90) days’ advance written notice to the other
party.  The parties acknowledge and
agree that this Agreement and the relationship created hereby is “AT WILL.”

 

4.                                      EFFECT
OF TERMINATION.

 

4.1.                              In
the event of termination of this Agreement for any reason, Manager shall be
entitled to any portion of its Management Fee for the period through the
effective date of termination which remains unpaid at such time, and to recover
from Partnership any unrecouped advances that may have been made by Manager to Partnership
as of the date of termination.  All such
amounts shall be paid to Manager within thirty (30) days following
termination.  Except as provided herein,
Manager shall not be entitled to any other amounts whatsoever on account of its
services under this Agreement.

 

4.2.                              Notwithstanding
anything in the foregoing to the contrary, Partnership shall have the right to
offset any damages suffered by reason of Manager’s breach of this Agreement
against any amounts due to Manager from Partnership hereunder.

 

4.3.                              Upon
termination of this Agreement, Manager shall return to Partnership all books,
records, charts, fee slips, remittances, EOB’s, billing statements, patient
account information, utilization and quality management data, encounter data,
bank deposit slips, checks, Participating Provider data, accounting and
financial data, correspondence, notes, reports, and any other information or
data, in any form or format, related to Partnership’s business, the CalOPTIMA
Practice and the services provided by Manager (collectively, the “Records”) which are in Manager’s
possession, custody or control.  Manager
shall also provide a computer tape and printout of all Partnership’s records
maintained in Manager’s computer system and shall convert such computerized
records to a computer disk that translates the information into a program
compatible with Partnership’s computer system, along with all accompanying
documents.  Manager shall not retain any
Records without Partnership’s prior written consent (signed by a representative
of both Partners), except that Manager may maintain copies of records to the
extent required by applicable law. 
Manager shall at all times maintain in strictest confidence and shall
not disclose to anyone, use or copy, whether directly or indirectly, any of
such Records except as required by law.

 

5.                                       REPRESENTATIONS
AND WARRANTIES OF PARTNERSHIP.  The
following representations and warranties of Partnership are made to Manager for
the purpose of inducing Manager to enter into this Agreement.  Partnership represents and warrants as
follows:

 

5.1.                                 Partnership
is a partnership duly organized, validly existing and in good standing under
the laws of the State of California and has all necessary powers to own its
properties and to operate pursuant to its Partnership Agreement.

 

5.2.                                 Partnership
has all requisite power to execute, deliver and perform this Agreement.  Neither the execution and delivery of this
Agreement, nor the consummation and performance of the transaction contemplated
in this Agreement, shall constitute a default or an event that would constitute
a default under, or violation or breach of, Partnership’s Partnership Agreement
or any license, lease, franchise, mortgage, instrument, or other agreement to
which Partnership may be bound.

 

5.3.                                 Partnership
has furnished Manager a full and complete copy of: (i) Partnership’s
Partnership Agreement, and (ii) a sample Physician Provider Agreement for
participating

 

9

 

providers.  Following execution thereof, Partnership
shall provide, or cause to be provided to Manager, a copy of Partnership’s
agreement with CalOPTIMA and copies of all executed physician provider
agreements which Manager may not already have in its possession.

 

5.4.                              Partnership has materially complied with, and
is not in material violation of, applicable federal, state or local statutes,
laws and regulations relating to Partnership’s business the failure to comply
with which would have a material adverse affect upon Manager.

 

5.5.                                 Partnership has obtained and currently
maintains all necessary licenses, permits, contracts, and approvals required by
federal, state or local statutes and regulations for the proper conduct of the
business of the Partnership as it is now being conducted, except that the
Partnership has not obtained approval from the Medical Board of California to
use the name AMVI/ Prospect Medical Group.

 

5.6.                                 There is no action, suit, proceeding,
investigation or litigation outstanding, pending or, to the best of
Partnership’s knowledge, threatened against or involving Partnership, affecting
Partnership other than routine patient collection matters and professional
liability cases adequately covered by insurance.

 

5.7.                                 Partnership represents and warrants that it
shall materially comply with all material applicable governmental laws,
regulations, ordinances, and directives, the failure to comply with which would
have a material adverse affect on Partnership’s business

 

6.                                       REPRESENTATIONS
AND WARRANTIES OF MANAGER.  The
following representations and warranties of Manager are made to Partnership for
the purpose of inducing Partnership to enter into this Agreement.  Manager represents and warrants as follows:

 

6.1.                                 Manager is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified to do business in California, and has all necessary corporate
powers to own its properties and to operate pursuant to its corporate purposes.

 

6.2.                                 Manager has all requisite power to execute,
deliver and perform this Agreement. 
Neither the execution and delivery of this Agreement, nor the
consummation and performance of the transaction contemplated in this Agreement,
shall constitute a default, or an event that would constitute a default under,
or violation or breach of, Manager’s Articles of Incorporation, Bylaws or any
license, lease, franchise, mortgage, instrument, or other agreement to which
Manager may be bound.

 

6.3.                                 Manager has materially complied with, and is
not in material violation of, applicable federal, state or local statutes, laws
and regulations relating to Manager’s business the failure to comply with which
would have a material adverse affect upon Partnership.

 

6.4.                                 Manager has obtained and currently maintains
all necessary licenses, permits, contracts, and approvals required by federal,
state or local statutes and regulations for the proper conduct of the business
of Manager as it is now being conducted.

 

6.5.                                 There is no action, suit, proceeding,
investigation or litigation outstanding, pending or, to the best of Manager’s
knowledge, threatened, against or involving Manager.  Manager agrees to immediatly notify Partnership, in writing, of
any actual future suits, proceedings, investigations or litigation or any
regulatory inquiries or any potential or threatened investigation, suit,
proceeding, action or litigation of or involving Manager or Partnership.

 

10

 

6.6.                               Manager represents and warrants that it shall
materially comply with all material applicable governmental laws, regulations,
ordinances, and directives, the failure to comply with which would have a
material adverse affect on Manager’s business

 

6.7.                              All of Manager’s computer systems are Y2K
compliant.

 

6.8.                               Manager is and shall be responsible for the
acts and omissions of its employees, contractors, agents, and
representatives.  In the event
Partnership is required to pay any interest, penalties, fees, fines, expenses,
settlements, or judgments (collectively, “Liabilities”)
due to the acts or omissions of Manager’s employees, contractors, agents or
representatives, Manager shall immediately reimburse Partnership in the amount
of such Liabilities including, without limitation, Partnership attorneys’ fees
in litigating, defending, negotiating or otherwise dealing with such
Liabilities.

 

7.                                      MANAGER COMPENSATION.

 

7.1.                            As Manager’s total compensation under this
Agreement (the “Management Fee”)
for Manager’s performance of all of its obligations and responsibilities as
designated or referred to in this Agreement, Manager shall be entitled solely
and exclusively to an amount equal to Four Dollars and 70/100 ($4.70) per
CalOPTIMA enrollee per month; provided however as follows: the amount of such
compensation due to Manager shall be calculated on a Partnership Divisional
basis so that each Partner shall be responsible for paying its share of such
fee based upon the number of CalOPTIMA enrollees attributable to such Partner’s
division of the Partnership, and provided, further, that in the event there is
any reduction in such rate payable by any division of the Partnership, such as
pursuant to any risk sharing agreements between the Partnership or any division
of the Partnership reducing such rate, the rate payable to Manager by such
division shall also be reduced on a comparable basis.  (For example, if the AIH and SATPG divisions of the Partnership
each have 1000 enrollees (i.e., the Partnership has a total of 2,000 CalOPTIMA
enrollees), Manager’s monthly fee for that month shall be a total of Nine
Thousand Four Hundred Dollars ($9,400) (i.e., 2000 enrollees multiplied by
$4.70).  If, subsequently, the AIH
division of the Partnership negotiates a reduction in a risk sharing agreement
with the hospitals resulting in an increased institutional/hospital management
fee of $3.34 per enrollee per month, then the new Management Fee for the AIH
Division of the Partnership shall be reduced from $4.70 to $4.36 per enrollee
per month so that if each division remains with 1,000 enrollees then Manager’s
total Management Fee shall be reduced to $9,060 per month of which the AIH
division shall pay $4,360 and the SATPG division shall pay $4,700.)).  In the event of any retroactive reduction,
the adjustment to the Management Fee shall also be retroactive and shall reduce
any future Management Fee payments until the full amount of the adjustment has
been effectuated.  The Management Fee
shall not include any percentage or portion of any other funds recovered or
CalOPTIMA bonuses such as stop loss, CCS, COB, etc., or any other amounts.

 

7.2.                               In exchange for Manager’s compensation,
Manager shall be accountable to ensure Partnership achieves the acceptable
scores on all audits and regulatory requirements (such as an 80% score on the
annual CalOPTIMA audit).  The
Partnership’s Managing Partner shall have the option to impose financial and
other sanctions on Manager should Manager fail to meet such standards.

 

8.                                      RECORDS.

 

8.1.                              All medical records and documents, including
reports, x-rays, and other similar types of reports for patients of
Partnership’s Participating Providers shall be the property of Partnership’s
Participating Providers.  Partnership
agrees to require Partnership’s Participating

 

11

 

Providers to allow Manager
and its duly authorized representatives to inspect, audit and duplicate any
data or records necessary for Manager to perform its duties pursuant to this
Agreement.  Partnership and Manager
shall comply with all applicable federal, state, and local laws and regulations
pertaining to the confidentiality of said medical records.

 

8.2.                               All records, information, and other data
contained in any systems of Manager relating to the Partnership’s business is
and shall be and remain the property of the Partnership and shall be
immediately returned to Partnership upon any termination of this Agreement.

 

9.                                      INDEMNIFICATION.  Each party shall indemnify, defend and hold harmless the other and its
partners, and their respective officers, directors, agents, contractors,
representatives and employees, from and against any and all liability, loss,
damages, claims, causes of action, and expenses associated therewith
(including, without limitation, attorneys’ fees) caused, directly or
indirectly, by or as a result of any breach or inaccuracy in the
representations or warranties of such parry contained in this Agreement and any
failure by such party to perform its obligations contained in this
Agreement.  The provisions of this
section shall survive the expiration or earlier termination of this
Agreement.

 

The
indemnified party shall promptly notify the indemnifying party or parties of
the existence of any claim, demand, or other matter to which the
indemnification obligations would apply (the “Indemnified
Claim”), and shall give the indemnifying party or parties a
reasonable opportunity to defend the same at its or their own expense and with
counsel of its or their own selection, provided that the indemnified party
shall at all times also have the right to participate fully in the defense of
the Indemnified Claim, at the indemnified party’s own expense.  If the indemnifying party shall, within a
reasonable time after such notice fail to defend such claim, the indemnified
party shall have the right, but not the obligation, to undertake the defense
of, and to compromise or settle (exercising reasonable business judgment) such
Indemnified Claim on behalf, for the account, and at the risk and expense, of
the indemnifying party.

 

10.                               PROPRIETARY INFORMATION;
CONFIDENTIALITY.

 

10.1.                      At all times during the term hereof and
following the expiration or earlier termination of this Agreement, all trade
secrets and proprietary confidential information of Partnership including,
without limitation, all information regarding patient volumes, the names and
addresses of all patients and referral sources and all other patient
information, all business and financial information relating to Partnership’s
business (including, without limitation, financial statements, business plans,
expansion plans, marketing and public relations plans, the substance of any and
all strategic planning or other business meetings), all methods of operation of
the Partnership, all utilization and quality assurance, data, policies and
protocols, the contents and terms of the Partnership Agreement, and the terms,
contents and forms of all contracts and other business documents or information
of Partnership, whether currently or in the future developed or maintained by
Partnership and including any and all deletions, additions, modifications and
amendments thereto (collectively, “Partnership’s
Proprietary Materials”), whether prepared in whole or in part by
Manager, is and shall be the exclusive, sole and absolute property of
Partnership.  Both parties acknowledge and
agree that Partnership has developed Partnership’s Proprietary Materials at
significant expense, and that said Proprietary Materials are not available for
review or use by enrollees or the public. 
All of Partnership’s Proprietary Materials are and shall at all times
remain confidential and proprietary and constitute valuable trade secrets of
Partnership.  Except in the ordinary
course of performing its obligations under this Agreement and except upon
Partnership’s prior written consent (which consent must be signed by duly
authorized officers of both Partners of the Partnership), Manager shall not
disclose to anyone, use or copy, or take any such trade secrets or confidential
and proprietary information for Manager’s benefit or gain, either during the term
of

 

12

 

this Agreement or at any
time after the termination hereof.  Upon
any expiration or earlier termination of this Agreement for any reason, Manager
shall not, without the prior written consent of Partnership (which consent must
be signed by duly authorized officers of both Partners of the Partnership),
take or use any of Partnership’s Proprietary Materials, and shall return to
Partnership all of Partnership’s Proprietary Materials in Manager’s possession,
custody or control.

 

10.2.                        At all times during the term hereof and
following the termination of this Agreement, Manager shall not, directly or
indirectly, interfere with, disrupt or attempt to interfere with or disrupt the
relationship, contractual or otherwise, between Partnership and any health care
provider or supplier, or between Partnership or any CalOPTIMA enrollees, or
between Partnership or any employee, independent contractor, consultant, agent
or contracting party of Partnership.

 

10.3.                         Manager acknowledges, understands and agrees
that Manager’s continuing breach of this provision would cause substantial and
irreparable harm to Partnership. 
Accordingly, in the event Manager breaches this provision, Partnership
shall be entitled to preliminary and permanent injunctive relief preventing any
further breaches by Manager and enforcing this provision and Manager hereby
consents to the issuance of such relief and hereby waives any requirements that
Partnership secure or post a bond in connection with Partnership’s obtaining
any injunctive or other equitable relief. 
In addition, Partnership shall be entitled to such damages from Manager
as Partnership can demonstrate it suffered by reason of Manager’s breaches
prior to the issuance of injunctive relief.

 

10.4.                         In the event that any part of the provisions
set forth above in this Section 10 shall be finally determined by any
court of competent jurisdiction to be invalid or unenforceable by reason of
extending for too great a period of time or by reason of being too extensive in
any other respect, and if such determination is upheld on appeal or no appeal
from such determination is taken, then these provisions shall automatically be
deemed amended so that the affected part of this Section 10 shall be interpreted
to extend only over the maximum period of time for which it may be enforceable
and/or to the maximum extent in all other respects as to which it may be
enforceable, all as determined by such court in such action.  Notwithstanding the foregoing, the
unaffected parts of this Section 10 shall remain in full force and effect
at all times during the period specified herein.

 

10.5.                         Except in the ordinary course of performing
its obligations under this Agreement and except upon Manager’s prior written
consent, Partnership shall not disclose to anyone, use or copy, or take any
trade secrets or confidential and proprietary information of Manager for
Partnership’s benefit or gain, either during the term of this Agreement or at
any time after the termination hereof. 
Upon any expiration or earlier termination of this Agreement for any
reason, Partnership shall not, without the prior written consent of Manager,
take or use any of Manager’s trade secret or confidential or proprietary
information, and shall return to Manager all such materials in Partnership’s
possession, custody or control, except that Partnership and any Partner may
retain copies and use such information and materials to the extent required by
law or as necessary to continue to perform its functions under the CalOPTIMA
Agreement or for other patient care.

 

10.6.                         Partnership agrees not to hire, engage or
contract with, either as an independent contractor, employee or in any other
capacity, any personnel of Manager, during the first twelve (12) months
following the effective expiration or termination date hereof, without
Manager’s prior written consent.

 

10.7.                         The provisions of this Section 10 shall
survive the termination of this Agreement.

 

13

 

11.                           INDEPENDENT
CONTRACTORS.  The parties hereto acknowledge and agree that
the relationship created between Manager and Partnership is strictly that of
independent contractors.  Nothing
contained herein shall be construed as creating an employer/employee, partnership
or joint venture relationship between the parties.  Each party hereto shall be responsible for all compensation,
salaries, taxes, withholdings, contributions, benefits, and workers’
compensation insurance with respect to all personnel employed or contracted by
said party and shall indemnify, defend and hold harmless the other party and
its partners, officers, directors, agents, contractors, representatives and
employees from and against any and all liability, loss, damages, claims, causes
of action, and expenses associated therewith (including, without limitation,
attorneys’ fees) caused or asserted to have been caused, directly or
indirectly, by or as a result of same. 
The provisions of this Section shall survive the expiration or
earlier termination of this Agreement.

 

12.                               MISCELLANEOUS.

 

12.1.                        No Third Party
Beneficiaries.  The parties intend that the benefits of this
Agreement shall inure only to Manager and Partnership and not to any third
person, except as expressly so stated herein. 
Notwithstanding anything contained herein, or any conduct or course of
conduct by any party hereto, before or after signing this Agreement, this
Agreement shall not be construed as creating any right, claim or cause of
action against either Manager or Partnership by any other person or entity.

 

12.2.                        Entire Agreement.  This Agreement, together with all exhibits and schedules hereto, and
all documents referred to herein, constitutes the entire agreement between the
parties with respect to the subject matter hereof, supersedes all other and
prior agreements on the same subject, whether written or oral, and contains all
of the covenants and agreements between the parties with respect to the subject
matter hereof.  Each party to this
Agreement acknowledges that no representations, inducements, promises, or
agreements, orally or otherwise, have been made by the other party(ies), or by
anyone acting on behalf of any party, that are not embodied herein, and that no
other agreement, statement, or promise not contained in this Agreement shall be
valid or binding.

 

12.3.                        Successors and Assigns.  Notwithstanding any other provision of this Agreement, neither party
may assign this Agreement or assign its rights or delegate its duties under
this Agreement without the prior written consent of the other party.  This Agreement binds the successors, heirs,
and authorized assignees and delagees of the parties.

 

12.4.                        Counterparts.  This Agreement, and any amendments thereto, may be executed in
counterparts, each of which shall constitute an original document, but which
together shall constitute one and the same instrument.

 

12.5.                        Headings.  The section headings contained in this Agreement are inserted for
convenience only and shall not effect in any way the meaning or interpretation
of this Agreement.

 

12.6.                        Notices.  Any notices required or permitted to be given hereunder by either party
to the other shall be in writing and shall be deemed delivered upon personal
delivery or delivery by electronic facsimile; twenty-four (24) hours following
deposit with a courier for overnight delivery; or seventy-two (72) hours
following deposit in the U.S. Mail, registered or certified mail, postage
prepaid, return-receipt requested, addressed to the parties at the following
addresses or to such other addresses as the parties may specify in writing:

 

14

 

If to Partnership:       AMVI/Prospect Medical Group

10362 Bolsa Avenue

Westminster, CA 92683

Attention: Co D.L.  Pham, M:D.

 

If to Manager:                    Prospect Medical Systems, Inc.

1920 East 17th Street, Suite 200

Santa Ana, CA 92705-8626

Attention: President

 

12.7.                        Governing Law.  This Agreement shall be governed by and construed in accordance with
the laws of the State of California.

 

12.8.                        Amendment.  This Agreement may be amended at any time by agreement of the parties,
provided that any amendment shall be in writing and executed by both parties.

 

12.9.                        Severability.  If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions will
nevertheless continue in full force and effect, unless such invalidity or
unenforceability would defeat an essential business purpose of this Agreement.

 

12.10.                  Exhibits and Schedules.  All exhibits and schedules attached to this Agreement are incorporated
herein by this reference and all references herein to “Agreement” shall mean
this Agreement together with all such exhibits and schedules.

 

12.11.                  Time of Essence.  Time is expressly made of the essence of this Agreement and each and
every provision hereof of which time of performance is a factor.

 

12.12.                  Attorneys’ Fees.  In the event of any dispute or disagreement arising under or in any way
relating to this Agreement (including, without limitation, any lawsuit, arbitration,
mediation or any other proceeding or action), unless otherwise provided or
authorized by statute, each party shall bear its attorneys’ fees and other
professional fees, costs and/or expenses and no party shall be entitled to
recover any such fees, costs and/or expenses from any other party for any
reason including, without limitation, regardless of whether a party is the
prevailing party in any legal action.

 

12.13.                  Further Assurances.  The parties shall take such actions and execute and deliver such
further documentation as may reasonably be required in order to give effect to
the transactions contemplated by this Management Services Agreement and the
intentions of the parties hereto.

 

12.14.                  Rights Cumulative.  The various rights and remedies herein granted to Manager or
Partnership shall be cumulative and in addition to any other rights Manager or
Partner ship, respectively, may be entitled to under law.  The exercise of one or more rights or
remedies shall not impair the right of Manager or Partnership to exercise any
other right or remedy, at law or equity.

 

12.15.                  Federal Social Security
Requirements.  Pursuant to Section 1395x(v)(l)(I) of
Title 42 of the United States Code, with respect to any services furnished
under the terms of this Agreement if the value or cost of which is Ten Thousand
Dollars ($10,000) or more over a twelve (12) month period, until the expiration
of four (4) years after the termination of this Agreement, Manager shall make
available upon written request to the Secretary of the United States Department
of Health and Human Services, or upon request by the Comptroller General of the
United States

 

15

 

General Accounting Office,
or any of their duly authorized representatives, a copy of this Agreement and
such books, documents and records as are necessary to certify the nature and
extent of the costs of the services provided by Manager under this Agreement.

 

Manager
further agrees that in the event Manager carries out any of its duties under
this Agreement through a subcontract, with a value or cost of Ten Thousand
Dollars ($10,000) or more over a twelve (12) month period, such subcontract
shall contain a clause to the effect that until the expiration of four (4)
years after the furnishing of such services pursuant to such subcontract, the
subcontractor shall make available, upon written request to the Secretary of
the United States Department of Health and Human Services, or upon request to
the Comptroller General of the United States General Accounting Office, or any
of their duly authorized representatives, the subcontract and such books,
documents and records of such organization as are necessary to verify the
nature and extent of such costs.

 

[text and signature block continued on next page]

 

16

 

12.16.              Mediation of Disputes.

 

12.16.1.         Prior to initiating litigation the party intending to commence
litigation shall give notice of its intention to do so (the “Litigation Notice”) to the other party and
the other party shall have the right to submit the issue to mediation before a
recognized independent mediation service in Los Angeles or Orange County,
California, Each party hereby agrees to actively participate in such mediation
and cooperate in good faith to resolve the dispute by mediation as quickly as
possible.  To this end the mediator
shall be directed to meet and confer with the parties and attempt to resolve
the dispute forthwith after his or her appointment and, if possible, within
five (5) business days.  In the event
the dispute is not resolved by mediation within thirty (30) days from the
Litigation Notice, the party which gave the Litigation Notice shall have the
right to commence legal action in a court of competent jurisdiction.

 

12.16.2.         Notwithstanding anything in the foregoing to the contrary, it is
expressly understood and agreed that neither party shall be required to
participate in mediation if the nature of the breach by the other party would
cause irreparable harm to the nonbreaching party or if mediation is
impracticable under the circumstances.

 

12.16.3..      Subject
to subsection 12.12 above regarding legal fees, etc., the cost of the
mediator (and any related costs incident thereto required by the mediator or
mediation service) shall be shared equally by the parties.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and
year first above written.

 

 

	
  “MANAGER”

  	
  “PARTNERSHIP”
  

  
	
   

  	
   

  
	
  PROSPECT
  MEDICAL SYSTEMS, INC.

  	
  AMVI/PROSPECT
  MEDICAL GROUP

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jacob
  Terner

  	
   

  	
  By:

  	
  SANTA ANA/TUSTIN

  	
   

  
	
   

  	
  Jacob
  Terner, M.D.

  	
   

  	
   

  	
  PHYSICIANS
  GROUP, INC.  

  	
   

  
	
   

  	
  Its:

  	
  a.v

  	
   

  	
   

  	
  (Partner)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Jacob
  Terner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jacob
  Terner, M.D.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  AMVI/IMC
  HEALTH NETWORK,

  INC., A MEDICAL

  CORPORATION

  (Partner)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  [Illegible] Pharm

  	
   

  
	
   

  	
   

  	
   

  	
  Co D.L.  Pham, M.D

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
  President

  	
   

  
											

 

 

LIST OF EXHIBITS AND SCHEDULES

 

Exhibits

 

A                                      Power of Agency

 

 

EXHIBIT “A”

 

POWER OF AGENCY

 

 

EXHIBIT “A”

 

POWER OF AGENCY

 

This
Power of Agency is made and entered into in connection with that certain
Management Services Agreement (the “Agreement”)
dated as of the      day of
            , 1999,
between Prospect Medical Systems, Inc., a Delaware corporation (“Manager”), and AMVI/IMC Health Network,
Inc., a Medical Corporation, a California partnership (“Partnership”).

 

1.                                       Definitions.  Capitalized
terms used herein and not otherwise defined herein shall have the meaning
assigned to them in the Agreement.

 

2.                                        Power of Manager.  Partnership
hereby appoints the Manager as Partnership’s agent (“Agent”) to act for
Partnership and in Partnership’s name, place and stead solely for the purposes
of: (a) endorsing all checks made payable to Partnership for services provided
to CalOPTIMA enrollees; (b) taking all steps required to submit, process and
collect all claims for payment to CalOPTIMA; (c) receiving and depositing
capitation and other payments received by Partnership; and (d) engaging in such
other actions as may be approved in advance in writing by the Partnership’s
Managing Partner.

 

3.                                        Administration.  Agent
shall maintain in its files a copy of the CalOPTIMA contract.  Notwithstanding anything herein to the
contrary, Partnership shall look solely to CalOPTIMA for payment for medical
services and supplies and neither Manager nor any officer, employee, agent or
affiliate of Manager shall be liable for such payment.

 

4.                                        Term.  The term of this Power of Agency shall be
coextensive with the term of the Agreement

 

5.                                        Full Authority.  Agent
is hereby granted full authority to act in any manner proper and necessary or
convenient for the exercise of the foregoing powers.

 

IN
WITNESS WHEREOF, this Power of Agency is executed effective as of the day and
year first above written.

 

 

	
  “MANAGER”

  	
   

  	
  “PARTNERSHIP”
  

  
	
   

  	
   

  	
   

  
	
  PROSPECT
  MEDICAL SYSTEMS, INC.

  	
   

  	
  AMVI/PROSPECT
  MEDICAL GROUP

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  [Illegible]

  	
   

  	
  By:

  	
  SANTA ANA/TUSTIN
  PHYSICIANS 

  
	
   

  	
  Its:

  	
  CEO

  	
   

  	
   

  	
  GROUP, INC.  (Partner)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  [Illegible]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  AMVI/IMC HEALTH NETWORK,

  INC., A MEDICAL CORPORATION

  (Partner)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  [Illegible]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  President

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