Document:

exhibit10-2.htm

    
      
         

      

      
         

        
          

        

      

      
         

        
          EXECUTION
COPY

        

      

    

    REAFFIRMATION
AGREEMENT

     

    REAFFIRMATION
AGREEMENT, dated as of December __, 2008 (this "Agreement"), made by
Earth Biofuels, Inc., a
Delaware corporation ("EBOF"), and each of the
undersigned existing Subsidiaries (collectively, the "Existing Subsidiaries", and
together with EBOF, each a "Grantor" and, collectively,
the "Grantors"), in
favor of Castlerigg PNG
Investments LLC, a company organized under the laws of the British Virgin
Islands, in its capacity as collateral agent (in such capacity, the "Collateral Agent") for certain
of the holders (each a "Holder" and collectively, the
"Holders") of the 2008
Amendment Notes (as defined  in the Security Agreement defined
below).  Capitalized terms used herein but not specifically defined
herein shall have the meanings ascribed to them in the Security Agreement or the
Amendment Agreement referred to below, as applicable.

     

    WHEREAS,
the Existing Subsidiaries and the Collateral Agent are parties to the Amended
and Restated Guaranty Agreement, dated as of June 25, 2008 (the "Guaranty") pursuant to which
the Existing Subsidiaries guaranteed the payment and performance of the
"Guaranteed Obligations" under the "Documents" (each as defined in the
Guaranty);

     

    WHEREAS,
the Grantors and the Collateral Agent are parties to the Amended and Restated
Pledge and Security Agreement, dated as of June 25, 2008 (the "Security Agreement"), pursuant
to which the Grantors granted to the Collateral Agent a security interest in,
and lien on, certain assets of the Grantors to secure the payments and
performance of the "Obligations" under the "Transaction Documents" (each as
defined in the Security Agreement);

     

    WHEREAS,
pursuant to an Amendment and Exchange Agreement, dated as of the date hereof
(the "Amendment
Agreement"), between EBOF and Castlerigg PNG Investments LLC (the "Investor"), EBOF and the
Investor have agreed to amend and restate a portion of the Investor's "Existing
Series A Note" as the "Series C Note", and to amend and restate the Investor's
"Existing Series B Note" as the "Series D Note", and to amend certain other
Transaction Documents, as such terms are used and defined in the Amendment
Agreement (all of the foregoing, collectively, and as the same may be amended,
restated, modified, supplemented, or replaced, the "Amended Transaction
Documents"); and

     

    WHEREAS,
it is a condition precedent to the effectiveness of the Amended Transaction Documents
that each Grantor shall have executed and delivered to the Agent this
Agreement.

     

    NOW
THEREFORE, in consideration of the premises and for other good and valuable
consideration, the parties hereto hereby agree as follows:

     

    1.      Reaffirmation and
Confirmation.  The Grantors hereby (i) acknowledge and reaffirm
their respective obligations as set forth in the Guaranty and the Security
Agreement, as applicable, (ii) agree to continue to comply with, and be subject
to, all of the terms, provisions, conditions, covenants, agreements and
obligations applicable to them set forth in the Guaranty and the Security
Agreement, which remain in full force and effect, (iii) acknowledge and agree
that, notwithstanding anything to the contrary in the Guaranty, the Security
Agreement or any of the other Transaction Documents, any obligations arising
under any of the Amended Transaction

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (a) Documents
shall constitute Guaranteed Obligations under the Guaranty and Obligations under
the Security Agreement, and (iv) confirm, ratify and reaffirm that the security
interests and liens granted to Collateral Agent, for the benefit of the Holders,
pursuant to the Security Agreement, in all of their right, title, and interest
in all then existing and thereafter acquired or arising Collateral in order to
secure prompt payment and performance of the Obligations, is continuing and is
and shall remain unimpaired and continue to constitute a first priority security
interest (subject only to Permitted Liens) in favor of the Collateral Agent, for
the benefit of the Holders, with the same force, effect and priority in effect
both immediately prior to and after entering into this Agreement and the
Amended Transaction
Documents entered into on or as of the date hereof.  The Collateral
Agent's security interest in and to the Collateral of the Grantors has attached
and continues to attach to all such Collateral and no further act on the part of
the Collateral Agent or the Grantors is necessary to continue such security
interest.

     

    2.      Agreement as a Document or a
Transaction Document.  The parties acknowledge and agree that
this Agreement shall constitute (i) a "Document" under the Guaranty and (ii) a
"Transaction Document" under the Security Agreement.

     

    3.      General
Provisions.

     

    (a)           Each
of the Grantors hereby (i) acknowledges and consents to this Agreement, (ii)
confirms and agrees that each Transaction Document to which it is a party is,
and shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects.  This Agreement does not and shall not
affect any of the obligations of the Grantors under or arising from any
Transaction Document (including, without limitation, the obligations arising
under any guaranty) to which it is a party, all of which obligations shall
remain in full force and effect.  The execution, delivery and
effectiveness of this Agreement shall not operate as a waiver of any right,
power or remedy of the Collateral Agent or any Holder under the Guaranty, the
Security Agreement or any other Transaction Document, nor constitute a waiver of
any provision of the Guaranty, the Security Agreement or any other Transaction
Document.

     

    (b)           Representations and
Warranties.  Each Grantor further represents and warrants that
(i) the execution, delivery and performance of this Agreement have been duly
authorized by all necessary action, (ii) it has duly executed and delivered this
Agreement, and (iii) this Agreement is a legal, valid and binding obligation of
such Person, enforceable against such Person in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement is sought by
proceedings at law or in equity).

     

    (c)           Costs and
Expenses.  The Grantors hereby jointly and severally agree to
pay or reimburse the Collateral Agent for all of its reasonable and customary
out-of-pocket costs and expenses incurred in connection with the preparation,
negotiation and execution of this Agreement, including, without limitation, the
reasonable fees and disbursements of counsel.

     

    (d)           Counterparts.  This
Agreement may be executed by one or more of the parties hereto in any number of
separate counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.  Delivery of an
executed counterpart of this

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Agreement
by facsimile or electronic mail shall be equally effective as delivery of an
original executed counterpart.

     

    (e)           CHOICE OF
LAW.  THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CONFLICTS OR
CHOICE OF LAW PRINCIPLES THEREOF.

     

    (f)           JURY
TRIAL WAIVER.  THE PARTIES HERETO
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THE GUARANTY, THE SECURITY AGREEMENT OR ANY
OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS.  THE PARTIES HERETO REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT
OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.

     

    [SIGNATURE
PAGE FOLLOWS]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.

     

    
      	 
      	
              Earth
      Biofuels, Inc.

              By:                                                                

              Name:

              Title:

               

            
	 
      	
              Earth
      Biofuels Technology Co., LLC

               

               

              By:

              Name:

              Title:

               

            
	 
      	
              The
      Wing Sail Company

              d/b/a
      Earth Biofuels Distribution Company

              By:

              Name:

              Title:

               

            
	 
      	
              Earth
      Biofuels of Cordele, LLC

              By:

              Name:

              Title:

               

            
	 
      	
              B20
      Customs, LLC

              By:

              Name:

              Title:

               

            
	 
      	
              Earth
      Biofuels Operating, Inc.

              By:

              Name:

              Title:

               

            
	 
      	
              Earth
      Biofuels Retail Fuel Company, LLC

              By:

              Name:

              Title:

               

            
	 
      	
              Earth
      Ethanol, Inc.

              By:

              Name:

              Title:

               

            
	 
      	
              Durant
      Biofuels, LLC

              By:

              Name:

              Title:

               

            
	 
      	
              Earth
      Ethanol of Washington L.L.C.

              By:

              Name:

              Title:

               

            

    

    

     

    

     

    
      
        
          
            	 
      	
                    REAFFIRMATION
      AGREEMENT

                  	 
      

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    

    ACCEPTED
BY:

     

    Castlerigg
PNG Investments LLC,

    as
Collateral Agent

    

    By:     
Castlerigg Master Investments Ltd.,

    its managing member and sole
member

    

     

    By:                                                                

    Name:

    Title:

    

    

    
      
        
          
            	 
      	
                    REAFFIRMATION
      AGREEMENTExhibit 10.50

 

***
Confidential Information Omitted and filed separately with the Securities and
Exchange Commission.

 

CONTRACT FOR HOSPITAL INPATIENT SERVICES

 

Amendment No. 18

 

	
  Contract No.

  	
   

  	
  No. 00-83122

  
	
   

  	
   

  	
   

  
	
  Facility:

  	
   

  	
  ALTA LOS ANGELES HOSPITALS, INC.

  
	
   

  	
   

  	
  dba: LOS ANGELES COMMUNITY HOSPITAL

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  4081 East Olympic Boulevard

  
	
   

  	
   

  	
  Los Angeles, CA 90023-3330

  

 

CONFIDENTIAL

DO NOT RELEASE 

Exempt from Public Records Act 

(Government Code Section 6254 [q])

 

PHSF.RD3B

 

 

AMENDMENT NO. 18 TO CONTRACT NO. 00-83122  BETWEEN THE STATE OF CALIFORNIA AND ALTA LOS
ANGELES HOSPITALS, INC., DOING BUSINESS AS LOS ANGELES COMMUNITY HOSPITAL.

 

WHEREAS, the State of California, hereinafter designated “the State”,
and ALTA LOS ANGELES HOSPITALS, INC., doing business as LOS ANGELES COMMUNITY
HOSPITAL, hereinafter designated “the Provider”, entered into a contract
(Contract No. 00-83122) for provision of inpatient hospital services
effective September 14, 2000 and subsequently amended;

 

NOW THEREFORE, in accordance with the provisions for renegotiation and
modification set forth in Article 6, Paragraph 6.11 of the Contract, the
Contract is amended as follows:

 

Paragraph One – Appendix D

 

Appendix D is hereby amended to read as
attached.

 

Paragraph Two – Notice of Termination

 

In accordance with Welfare and Institutions Code section 14166.12 (p),
Provider shall not submit a notice for the purpose of terminating this Contract
as provided in Paragraph 6.15 of this Contract, Termination without Cause,
until on or after

 

1

 

December 31, 2008, unless a later date is specified in Paragraph
6.15.

 

Paragraph Three – Effective Date of Contract Amendment

 

Unless otherwise specified herein, Contract changes agreed to in this
Amendment are effective on February 7, 2008.

 

Paragraph Four - Incorporation of Contract Rights, Duties and
Obligations

 

All other terms and provisions of the Contract shall remain in full
force and effect, so that all rights, duties and obligations, and liabilities of
the parties hereto otherwise remain unchanged.

 

 

/

 

 

/

 

 

/

 

 

/

 

 

/

 

2

 

SIGNATURES

 

 

The signatories to this Amendment warrant that they have full and
binding authority to make the commitments contained herein on behalf of their
respective entities.

 

	
  Provider

  	
  State of California

  Department of Health Care Services

  

 

	
   

  	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  David Topper

  	
   

  	
   

  	
  Sandra Shewry

  
	
  Type Name

  	
   

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
  Chief Executive Officer

  	
   

  	
   

  	
   

  
	
  Type Title

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  February 20, 2008

  	
   

  	
  Date:

  	
  April 1,
  2008

  
					

 

3

 

APPENDIX D

 

PRIVATE HOSPITAL SUPPLEMENTAL FUND

 

This version of Appendix D governs dates of services and related
Medi-Cal supplemental reimbursements for State Fiscal Year 2007-08.

 

Pursuant to the provisions of Welfare and Institutions Code Section 14166.12
relating to negotiations and disbursements from the Private Hospital
Supplemental Fund (Fund), the parties agree as follows:

 

A.                                  Payment

 

In accordance with subdivisions (j) and (m) of Section 14166.12
of the Welfare and Institutions Code, and subject to Section B of this
Appendix D, the State agrees to pay the Provider from the Fund:

 

(1)                                For
services rendered from July 1, 2007 through November 30, 2007:

 

(a)                                  The installment
amount of *** if Provider is listed on the 2007-08 tentative Disproportionate
Share Hospital (DSH) list issued by the California Department of Health Care
Services (Department).

 

4

 

Payment will be made by September 27, 2007, or as soon thereafter
as practicable.

 

(b)                      The installment amount of *** if
Provider is listed on the 2007-08 final DSH list issued by the Department.  Payment shall be made by December 1,
2007, or as soon thereafter as practicable after the issuance of the 2007-08
final DSH list.

 

(2) For services rendered from January 1,
2008 through April 30, 2008 as follows:

 

(a)                                              The
installment amount of *** will be made by April 1, 2008, or as soon
thereafter as practicable.

 

(b)                                             The
installment amount of *** will be made by May 15, 2008, or as soon
thereafter as practicable.

 

B.                                    Recovery,
Right of Offset, and Hold Harmless

 

(1)                                Payment(s) received
by Provider from the Fund for the 2007-08 state fiscal  year may be subject to recovery by the
Department if the Department determines that the Provider fails at any time
during the 2007-08 state fiscal year to meet the eligibility criteria for Fund
disbursements, as specified in

 

5

 

Welfare and Institutions Code Section 14166.12.  If the Provider fails to return the funds
within 30 calendar days from the time of the Department’s notification, the
Department may offset the amount to be recovered against any Medi-Cal payments
which otherwise would be payable by the Department to the Provider, pursuant to
Welfare and Institutions Code Section 14115.5.

 

(a)                                  Provider must
promptly return to the Department all payments received from the Fund for the
2007-08 state fiscal year if the Department determines that the Provider fails
at any time during the 2007-08 state fiscal year to receive and/or maintain
final DSH status, under Welfare and Institutions Code Sections 14166.11,
14105.98, and 14163, for the 2007-08 DSH payment adjustment year.

 

(b)                                 Unless Subparagraph (a) applies,
Provider must promptly return to the Department amounts received from the Fund
for the 2007-08 state fiscal year that equal the pro-rata portion of Provider’s
2002-03 supplement fund amount, plus any payments over the Provider’s 2002-03
supplement fund amount received from the Fund for the 2007-08 state fiscal year
if the Department determines that the Provider failed to meet participation
criteria for the entire 2007-08 state fiscal year, other than DSH status
addressed in Subparagraph (a) above,

 

6

 

specified in Welfare and Institutions Code Sections 14085.6 and
14166.12, which includes, but is not limited to, failed for any reason to
maintain its Emergency Department as operational and licensed at the Basic
Level or higher level.  For purposes of
this Subparagraph (b), the amount equal to the pro-rata portion of Provider’s
2002-03 supplement fund payment, pursuant to Welfare and Institutions Code Section 14166.12
(j), will be calculated on the number of days during the 2007-08 state fiscal
year that the Provider failed to meet participation criteria.

 

(2) It is understood that payment made to the Provider pursuant to
this Appendix D, and all prior versions of Appendix D, include State and
federal funds.  The State shall be held
harmless from any federal disallowance or withholding resulting from payment
made to Provider pursuant to this Appendix D, or any prior version(s) of
Appendix D, and the Provider shall be liable for any reduced federal financial
participation resulting from the payment of funds pursuant to this Appendix D,
or any prior version(s) of Appendix D. 
In the event of federal disallowance or withholding of federal financial
participation for any payments made to the Provider pursuant to this Appendix
D, or any prior versions(s) of Appendix D, at the time of the federal
disallowance or withholding the State, in its sole discretion, may limit its
recovery from the Provider to the amount of funds

 

7

 

disallowed and paid by the State to the Provider.  Provider agrees that the amount of any such
recovery may be recouped by the State by withholding and offsetting, under
Welfare and Institutions Code Section 14115.5, the amount due from what
would otherwise be the State’s liability to the Provider under this Contract or
otherwise, seeking recovery by payment from the Provider, or a combination of
these two methods. If, after federal disallowance or withholding and State
recovery or offset of funds paid to the Provider, the State regains the federal
funds disallowed or withheld, then the federal and related state funds shall be
repaid by the State to the Provider.

 

8

 

00-83122; A-19

 

CONTRACT FOR HOSPITAL INPATIENT SERVICES

 

Amendment No. 19

 

	
  Contract No.

  	
   

  	
  No. 00-83122

  
	
   

  	
   

  	
   

  
	
  Facility:

  	
   

  	
  ALTA LOS ANGELES HOSPITALS, INC

  
	
   

  	
   

  	
  dba: LOS ANGELES COMMUNITY HOSPITAL

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  4081 East Olympic Boulevard

  
	
   

  	
   

  	
  Los Angeles, CA 90023-3330

  

 

CONFIDENTIAL

DO NOT RELEASE 

Exempt from Public Records Act 

(Government Code Section 6254 [q])

 

PHSF.RD4A

 

 

AMENDMENT NO. 19 TO CONTRACT NO. 00-83122  BETWEEN THE STATE OF CALIFORNIA AND ALTA LOS
ANGELES HOSPITALS, INC., DOING BUSINESS AS LOS ANGELES COMMUNITY HOSPITAL.

 

WHEREAS, the State of California, hereinafter designated “the State”,
and ALTA LOS ANGELES HOSPITALS, INC., doing business as LOS ANGELES COMMUNITY
HOSPITAL, hereinafter designated “the Provider”, entered into a contract (Contract
No. 00-83122) for provision of inpatient hospital services effective September 14,
2000 and subsequently amended;

 

NOW THEREFORE, in accordance with the provisions for renegotiation and
modification set forth in Article 6, Paragraph 6.11 of the Contract, the
Contract is amended as follows:

 

Paragraph One – Appendix D

 

Appendix D is hereby amended to read as
attached.

 

Paragraph Two – Notice of Termination

 

In accordance with Welfare and Institutions Code section 14166.12 (p),
Provider shall not submit a 120-day notice for the purpose of terminating this
Contract as provided in Paragraph 6.15 of this Contract, Termination without
Cause, until on or after December 31, 2009, unless a later date is
specified in Paragraph 6.15.

 

2

 

Paragraph Three – Effective Date of Contract Amendment

 

Unless otherwise specified herein, Contract changes agreed to in this
Amendment are effective on October 9, 2008.

 

Paragraph Four – 30 Days to Sign and Return Contract Amendment

 

If this Amendment is not signed and returned to the California Medical
Assistance Commission within 30 days of its effective date, then the California
Medical Assistance Commission may take action to disapprove this Amendment.

 

Paragraph Five - Incorporation of Contract Rights, Duties and
Obligations

 

All other terms and provisions of the Contract shall remain in full
force and effect, so that all rights, duties and obligations, and liabilities
of the parties hereto otherwise remain unchanged.

 

3

 

SIGNATURES

 

 

The signatories to this Amendment warrant that they have full and
binding authority to make the commitments contained herein on behalf of their
respective entities.

 

 

	
  Provider

  	
  State of California

  Department of Health Care Services

  

 

	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  David Topper

  	
   

  	
  Sandra Shewry

  
	
  Type Name

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  
	
  CEO

  	
   

  	
   

  
	
  Type Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  10/17/08

  	
   

  	
  Date:

  	
  10/28/08

  	
   

  
						

 

4

 

APPENDIX D

 

PRIVATE HOSPITAL SUPPLEMENTAL FUND

 

This version of Appendix D governs dates of services and related
Medi-Cal supplemental reimbursements for State Fiscal Year 2008-09.

 

Pursuant to the provisions of Welfare and Institutions Code Section 14166.12
relating to negotiations and disbursements from the Private Hospital
Supplemental Fund (Fund), the parties agree as follows:

 

A.                                   Payment

 

In accordance with subdivisions (j) and (m) of Section 14166.12
of the Welfare and Institutions Code, and subject to Section B of this
Appendix D, the State agrees to pay the Provider from the Fund:

 

(1) For services rendered from July 1, 2008 through October 31,
2008:

 

(a)                                  The installment
amount of *** if Provider is listed on the 2008-09 tentative Disproportionate
Share Hospital (DSH) list issued by the California Department of Health Care
Services (Department).  Payment will be
made by November 1, 2008, or as soon thereafter as practicable.

 

5

 

B. Recovery, Right of Offset, and Hold Harmless

 

(1) Payment(s) received by Provider from the Fund for the
2008-09 state fiscal year may be subject to recovery by the Department if the
Department determines that the Provider fails at any time during the 2008-09
state fiscal year to meet the eligibility criteria for Fund disbursements, as
specified in Welfare and Institutions Code Section 14166.12.  If the Provider fails to return the funds
within 30 calendar days from the time of the Department’s notification, the
Department may offset the amount to be recovered against any Medi-Cal payments
which otherwise would be payable by the Department to the Provider, pursuant to
Welfare and Institutions Code Section 14115.5.

 

(a)                      Provider must promptly return to
the Department all payments received from the Fund for the 2008-09 state fiscal
year if the Department determines that the Provider fails at any time during
the 2008-09 state fiscal year to receive and/or maintain final DSH status,
under Welfare and Institutions Code Sections 14166.11, 14105.98, and 14163, for
the 2008-09 DSH payment adjustment year.

 

(b)                     Unless Subparagraph (a) applies,
Provider must promptly return to the Department amounts received from the Fund
for the 2008-09 state fiscal year that equal the pro-rata portion of Provider’s
2002-03 supplement fund amount, plus any payments over the Provider’s 2002-03
supplement fund amount received from the Fund for the

 

6

 

2008-09 state fiscal year if the Department determines that the
Provider failed to meet participation criteria for the entire 2007-08 state
fiscal year, other than DSH status addressed in Subparagraph (a) above,
specified in Welfare and Institutions Code Sections 14085.6 and 14166.12, which
includes, but is not limited to, failed for any reason to maintain its
Emergency Department as operational and licensed at the Basic Level or higher
level.  For purposes of this Subparagraph
(b), the amount equal to the pro-rata portion of Provider’s 2002-03 supplement
fund payment, pursuant to Welfare and Institutions Code Section 14166.12
(j), will be calculated on the number of days during the 2008-09 state fiscal
year that the Provider failed to meet participation criteria.

 

(2) It is understood that payment made to the Provider pursuant to
this Appendix D, and all prior versions of Appendix D, include State and
federal funds.  The State shall be held
harmless from any federal disallowance or withholding resulting from payment
made to Provider pursuant to this Appendix D, or any prior version(s) of
Appendix D, and the Provider shall be liable for any reduced federal financial
participation resulting from the payment of funds pursuant to this Appendix D,
or any prior version(s) of Appendix D. 
In the event of federal disallowance or withholding of federal financial
participation for any payments made to the Provider pursuant to this Appendix
D, or any prior versions(s) of Appendix D, at the time of the federal
disallowance or withholding the State, in its sole discretion,

 

7

 

may limit its recovery from the Provider to the amount of funds
disallowed and paid by the State to the Provider.  Provider agrees that the amount of any such
recovery may be recouped by the State by withholding and offsetting, under
Welfare and Institutions Code Section 14115.5, the amount due from what
would otherwise be the State’s liability to the Provider under this Contract or
otherwise, seeking recovery by payment from the Provider, or a combination of
these two methods. If, after federal disallowance or withholding and State
recovery or offset of funds paid to the Provider, the State regains the federal
funds disallowed or withheld, then the federal and related state funds shall be
repaid by the State to the Provider.

 

8

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