'i} PALO VERDE HOSPITAl

PALO VERDE HEALTH CARE DISTRICT BOARD OF DIRECTORS

MEETING MINUTES March 29, 2007

5:30 p.m,

Directors Present Derek Copple, President Carmela Garnica, Vice President Mark Bolliger, Secretary/Treasurer Dr. Leonel Rodriguez, Director Dr. Steve Montgomery, Director

BI th e C 't Cen erIyl ommumty t Administrative StafTPresent Mr. Jeff Flood, CEO Mr. Richard Fallon, COO Ms. Lilly Lopez, Assistant Administrator Mr. Lee Holter, CFO Mr. Oscar Garcia, CNO -Ms. Priscilla Wilson, HR Manager Mr. Blaise Jackson, Assistant General Counsel

TOPIC DISCUSSION ACTION 1. Call To Order: Board President Derek Copple called the

meeting to order at 5:30 pm. 2. Flag Salute: The Pledge of Allegiance was led by Board

President Copple. 3. Roll Call: Board President Copple conducted roll call,

all members were present. 4. Approval of Agenda: Board President Copple called for approval of

the March 29, 2007 Agenda. Motion was made by Director Rodriguez, seconded by Director Garcia and unanimously carried to approve the agenda of March 29,2007.

5. Public Comment: Board President Copple called for Public Comment.

Dr. Hossain Sahlolbei voiced his concern that the Board of Directors may go in a negative direction as it had in the past.

6. Consent Action Items: Board President Copple called for review of the February 22nd minutes.

Mr. Richard Fallon, COO, noted changes: to item #6 Chargemaster adjustments not contract, page 3; part-time employee not full-time and page 4; $50,000 allocation to Blue Ribbon Committee not $500,000.

Board President Copple next called for Public Comment. There was no Public Comment.

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Board President calls for a motion to approve the February 22nd Minutes with changes as noted.

Motion was made by Director Rodriguez, seconded Director Garnica and unanimously carried to approve the Minutes of February 22nd as amended.

7.Reports/Possible Action Items:

Dr. Kenneth Lucero reported that the MEC Committee met on March 22nd. The Committee was recommending Dee L' Archeveque, M.D., Paul A. Levitan, M.D. and Bienvenido Alona, M.D. for appointment to the medical Staff. The Committee also reviewed and approved the Medication Reconciliation Policy. Dr. Lucero stated concerns on behalf of the MEC that currently nurses are triaging in ER and the MEC feels that a procedure needs to be developed where the Doctors are doing the triaging.

Board President Copple called for Public Comment:

Mr. Blaise Jackson noted that the Medication Reconciliation Policy will need to be brought back to the Board as it is not listed on the agenda.

Board President Copple called for a motion to approve the Medical Executive Committee Report and recommendations.

Mr. Jeff Flood, CEO reported that the Blue Ribbon Committee had been created to investigate alternatives relating to the type of structure, number of beds and the architectural style of a potential new hospital. Mr. Flood indicated that the next meeting of the Committee is scheduled for April 4th

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It was moved by Director Rodriguez seconded by Director Garnica and unanimously carried to approve the MEC Report and recommendations.

Ms. Peggy Abbs, Lab Manager provided the Palo Verde Healthcare District Foundation report. The Measure I letter was sent out requesting a $32.00 donation with a good response. The Foundation also raffled off a

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large screen TV at the Blue Grass Festival. The Foundation is currently looking into developing grant opportunities.

Mr. Richard Fallon, COO reported that Mr. Ed Smith of Palo Verde Irrigation District contacted the Board and requested that a member attend the Special District LAFCO meeting to be held in Beaumont later this month.

Director Montgomery stated that LAFCO has not had a quorum recently and feels that it would be helpful if a representative from Blythe attended the meeting.

Mr. Blaise Jackson indicated that the second paragraph in the Resolution extends the power of appointment.

Mr. Jeff Flood, CEO reported that one of the chillers has been replaced and that the TV's being placed in patients rooms is a work in progress.

Mr. Oscar Garcia, CNO discussed Emergency Department transfers. Mr. Garcia noted that a PPR was SUbmitted in January and that CMS conducted an unannounced survey on February 26th that showed Palo Verde Hospital to be in compliance with all conditions of participation. Mr. Garcia also reported that the Myers Group was selected by CMS to conduct its 2006 HCAHPS study. The HCAHPS study summarizes inpatient perspectives on the general quality of hospital services. Palo Verde Hospital's stats showed improvement over previous years. Mr. Garcia also introduced Avelina Ortiz who is the new Quality Risk person.

Ms. Lilly Lopez, Assistant Administrator discussed hospital events which included: Soroptomist Health Fair, Daffodil Days and National Volunteers Week from April 15 thru the 21st. Ms. Lopez also indicated that Palo

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Verde Hospital is a silver sponsor for the American Cancer Society Relay for Life to be held the weekend of April 20th and 21st. Ms. Lopez reported that she recently attended a seminar regarding the newest conditions of participation; medication and anesthesia services and the use of patient restraints for acute reasons or behavioral management. Ms. Lopez next provided an Ancillary Departments update; a per diem dietician, Nancy Chen has been hired in the Dietary Department. The Pharmacy is expanding its hours. Mr. Pete Salinas, Pharmacy Director has stepped down and a new Director, Richard Simpson was hired to take Mr. Salinas place effective April 23rd. Ms. Lopez also reported that the Lab and Imaging Department will be expanding their hours also. Ms. Lopez stated that a quarterly newsletter will be provided with an April 2007 distribution date.

Ms. Priscilla Wilson, HR Director next addressed the Board and reported that there were 147 new hires in 2006; 93 involved in direct patient care. Ms. Wilson indicated that out of 72 terms only 9 were for violation of policy making the turnover rate 9%. Ms. Wilson also stated that at the current time every Department has a manager and the goal for 2008 is to retain current staff, keep turnover rate low and hire within the community. Ms. Wilson explained that the 20/40 policy assists LVN's to become RN's with reimbursement for continuing education. On site education includes BLS. ACLS and PALS.

Mr. RichardFallon, COO reiterated the policies that need to be considered for approval and suggested approving them as a group.

Board President Copple noted that the It was moved by Director policies have been reviewed by all of the Rodriguez, seconded by Directors, and called for a motion to approve Director Bolliger and carried

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the policies as listed and the LAFCO unanimously to approve the resolution as listed. policies as listed and the

LAFCO Resolution. 20/40 Educational Program Policy Background Checks Policy Employment References Policy Complaints and Investigations Policy Attendance and Punctuality Policy Problem Solving (Grievance) policy Violation of Hospital Regulations Drug and Alcohol Free Workplace Personnel Records Reduction in Force Searches Fleet Policy LAFCO Resolution

Mr. Lee Holter, CFO presented the Financial report. The Total Assets as of January 31 were $8,029,754.00, Total Liabilities were $3,727,774.00 and Total Liabilities and Net Earnings were $8,029,754.00.The average daily census in January 2007 was 23 and in February 2007 was 21, making cash lower in February. Mr. Holter also reported that the salary increases approved by the Board will take effect in April.

Director Rodriguez questioned how much census is needed to break even?

Mr. Richard, COO stated that the census in January of 23 was a good number.

Mr. Fallon next explained the Credit Card Policy; three cards were issued and required a personal guarantee by Mr. Fallon- the cards were issued to Mr. Lee Holter, CFO, Ms. Lilly Lopez, and Assistant Administrator. The combined limit is $25,000 with an interest rate of 15.2% if the payment is not made.

Director Montgomery left the meeting at 6:45 p.m.

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Board President Copple questions if the invoices and receipts will be attached to the monthly statement and stated that he will sign off on all invoices.

Mr. Richard Fallon, COO responded that the procedure is stated in the policy.

Board President Copple calls for a motion to It was moved by Director approve the Financial Report and Credit Card Bolliger, seconded by Policy. Director Garnica and

unanimously carried with Mr. Richard Fallon, COO reported that Mr. Director Montgomery absent Thomas Camp had applied to complete the to approve the Financial audit for the year ending June 30, 2007. Mr. Report Credit Card Policy. Fallon indicated that the cost will be $22,000 and recommended Mr. Camp as he was successful in completing the previous year's audit.

Board President Copple calls for a motion to It was moved by Director approve the hiring of Mr. Camp. Rodriguez, seconded by

Director Garnica and Director Rodriguez excused himself from the unanimously carried with proceedings as the Medical Office Leases Director Montgomery absent were to be discussed. to retain Mr. Camp to

complete the 2006/2007 Mr. Richard Fallon, COO reported that he Fiscal Year Audit. had been negotiating a lease with Dr. Sahlolbei and Dr. Rodriquez. Based on his research of comparable rental rates in the area, a rate of $1.25 per square foot thru August 2008 was fair and reasonable. In addition, he negotiated the leases in good faith.

Mr. Blaise Jackson, Assistant General Counsel explained that in accordance with Health & Safety Code section 32111 Director Rodriquez could not participate in the discussion and voting on this issue because he is one of the tenants. Mr. Jackson indicated that the leases were fair and were negotiated in the best interest of the District. Mr. Jackson also explains that the lease amounts

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are different because of the different square feet of each office.

Board President Copple calls for Public Comment.

Mr. Randy Weise stated that the negotiated lease is not in the best interest of the District as we are taking on more burden of cost. Mr. Weise questions if there has been any attempt to go Riverside County to reduce the cost to the District of $1.74 per square foot?

Mr. Richard Fallon, COO stated that he will be negotiating with the County to try to obtain a more reasonable rental rate.

Dr. Hossain Sahlolbei stated that he is a tenant in the office building and the office space is not worth $1.75 per square foot and the current occupants only stay there because it is close to the hospital. Dr. Sahlolbei noted that there is office space on Hobsonway that is .95 per square foot and that the current payment benefits the hospital more than an empty office would.

Board President Copple calls for a motion to It was moved by Director approve the newly negotiated lease for Dr. Bolliger, seconded by Rodriguez and Dr. Sahlolbei' s medical Director Garnica and carried offices. 3-1-1 with Director

Montgomery and Director Director Rodriguez returned to the meeting. Rodriquez absent to approve

the newly negotiated medical Mr. Richard Fallon, COO stated that Mr. G.L. office leases for Dr. Hicks a financial planner has been contacted Sahlolbei and Dr. Rodriguez. regarding developing financial options for the Blue Ribbon Committee in regards to the potential construction of a new hospital.

Director Bolliger questioned if the fee for services will come out of the funds allocated for the Blue Ribbon Committee.

Mr. Richard Fallon, COO stated that the fee will come out of funds allocated for the Blue

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Ribbon Committee.

Director Garnica asked if Mr. Hicks has assisted other hospitals in the past.

Director Rodriguez stated that Mr. Hicks has numerous hospitals listed on his resume.

Board President Copple called for a motion to approve the G.L. Hicks Consulting Agreement.

It was moved by Director Rodriguez, seconded by Director Bolliger and unanimously carried with Director Montgomery absent to approve the G.L. Hicks Consulting Agreement.

8. Board Comments: Director Bolliger reported that he represented the District at the Winter Visitors Dinner, and invited winter visitors to come to the hospital and check out the facilities. Director Bolliger stated that some of the Canadian visitors were concerned because with their Canadian coverage plan Emergency visits would be covered but not follow-up visits.

Director Rodriguez reported that it is hard to get payment from the Canadian plan.

Dr. Sahlolbei stated that follow-up visits are free for surgery patients; the costs are included in the surgery cost.

Board President Copple indicated that the Blue Ribbon Committee is off to a good start; he is pleased with the progress so far and encourages the public to attend.

Dr. Lucero stated that San Bernardino County is helping the Needles hospital stay open and questions if any assistance will be coming from Riverside County.

Mr. Richard Fallon, COO indicated that it is reported that it will cost San Bernardino County 20 million per year to operate the hospital in Needles.

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9. Adjournment: The Board convened to Closed Session at 7:15, pursuant to Government Code Section 549956(b) regarding potential litigation.

10. Reconvene/Report After Closed Session:

After the Closed Session the Board reconvened to open session. The next Regular Board Meeting is scheduled for April 26,2007.

Board President Copple stated that no action was taken in closed session. On motion duly made and seconded the meeting was adjourned.

Mark Bolliger Board Secretary/Treasurer

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PALO VERDE HOSPITAL

MANUAL: CLS I Effective Date: 04/06 Revised/Reviewed: 06/06

Number:

Title: Medication Reconciliation - Accurately and completely reconcile medications across the continuum of care

Page 1 of 4

Procedure: Medication Reconciliation - Accurately and completely reconcile medications across the continuum of care

Purpose: Home Medication Lists and the Admission Medication Reconciliation Process help ensure that hospital inpatients are provided with complete and effective medication treatment while they are hospitalized. They do this by ensuring that there are no home medications that are unintentionally omitted or inappropriately continued during patients' hospitalizations.

Definition:

• Reconciliation: A process of identifying the most accurate list of all medications a patient is taking-including name, dosage, frequency, and route-and using this list to provide correct medications for patients anywhere within the health care system © 2005 Institute for Healthcare Improvement

• Requires comparing the patient's list of current medications against the physician's admission, transfer, and/or discharge orders © 2005 Institute for Healthcare Improvement

Policy: It is the policy of Palo Verde Hospital District that all patients will have all medications reconciled on admission; specially and if appropriate per MD orders - Antibiotics, insulin, oral hypoglycemics, antihypertensives, anti-rejection medications, antiarrhythmics, inhalers, anti-seizure, antianginal, and pain medications need to be reconciled prior to the next scheduled dose.

It is the responsibility of the admitting physician to review the Home Medication List and Reconcile. The admitting physician may delegate the responsibility by writing an order on the physician order sheet that identifies the reviewing physician who is credentialed to write orders.

Procedure:

I. Placement of Reconciliation Form in the Chart:

Hospital chart: Under the "Physician Orders" tab

PALO VERDE HOSPITAL

MANUAL: CLS 1 Effective Date: 04/06 Revised/Reviewed: 06/06

Number:

Title: Medication Reconciliation - Accurately and completely reconcile medications across the continuum of care

Page 2 of 4

Procedure: Medication Reconciliation - Accurately and completely reconcile medications across the continuum of care

II. Who can chart on this Form: Registered Nurses, Physicians, and Pharmacists

III. Guidelines for Completion:

1. The Admitting RN (If in ER - ER RN; If Direct Admission RN in Particular unit MS, ICU or Operating Room / PACU, or Maternal Child) via assessment and questioning of patient or significant other, or calling patients pharmacy - will collect and document the name, dosage, route, and frequency of all medications J drugs prescribed and taken by the patient at home.

2. The Admitting Nurse, as per #1 above, will document the patient's home medications on the "ADMISSION JDISCHARGE MEDICATION LIST" section of the reconciliation form.

3. One the Column titled "Visualized (Vis) or Verbalized (Verb)7" The nurse collecting the information will identify by placing a check (-/) off if she/he actually observed the medication bottles by checking the "Vis" box or if the patient or significant other just verbalized the medications. If the information was derived form a verbal report­the "Verb" box will be checked.

4. Once the List is populated by the Registered Nurse, the reconciliation form will be given to the physician for reconciliation. The list should remain in the MD orders section of the chart. The MD may reconcile the admission orders by placing a check (-/) off - on the "Continue (Cont) or Discontinue (DC) boxes. The medications are then ordered in the physician orders.

PALO VERDE HOSPITAL

MANUAL: CLS i Effective Date: 04/06 Revised/Reviewed: 06/06

Number: I

Title: Medication Reconciliation - Accurately and completely reconcile medications across the continuum of care

Page 3 of 4

I

Procedure: Medication Reconciliation - Accurately and completely reconcile medications across the continuum of care

5. If the MD opts not to continue a home medication, a note will be added to "Comments: (If MD did not order med after calli notification - - state RATIONALE" section of the reconciliation form indicating the rationale for not continuing a particular medication.

6. If the MD checks off a medication to "Continue" on the medication reconciliation form - the MD must also write an order for the particular medication on the physician orders.

7. Once the patient becomes and inpatient - the medication list will be reconciled by the RN every time the patient moves from one unit to the next and will inform MD if discontinued home medications should be reconciled.

8. Tracking of patient flow will be achieved by adding the "Date "Date 2nd reconciliation or Date 3rd

reconciliation box". The RN must indicate what department the patient is in and to what department he/she is going via nursing documentation in the nurses notes; or if the patient is being discharged home, and or transferred.

a. A copy may be given to the patient on discharge home.

b. When referred and the provider is known (example: when we (the hospital) is making an appointment for the patient); the medication list will be faxed to the n&xt..,;rovider.

10.A copy of the reconciliation form will be sent with the patient if transferred using the following procedure:

PALO VERDE HOSPITAL

MANUAL: CLS \ Effective Date: 04/06 Revised/Reviewed: 06/06

Number:

Title: Medication Reconciliation - Accurately and completely reconcile medications across the continuum of care

Page 4 of 4

Procedure: Medication Reconciliation - Accurately and completely reconcile medications across the continuum of care

a. Make a copy of the medication reconciliation form and include the copy with the full copy of the chart

11.The pharmacist will clarify any missing, incomplete or questionable orders with the prescribing MD. The clarified order will then be written on a physician order sheet.

IV. Unusual Circumstances:

1. If the patient is a direct admission and the MD is not readily available - the admitting RN will complete the reconciliation list / form and compare to the admission medications orders.

2. The admitting RN will then call the MD; discuss the home medications and obtain an order to continue or discontinue the orders.

3. The admission RN will call the MD to reconcile home medications with admission medication orders and document the outcomes.

APPLICATION SERVICES PROVIDER AGREEMENT

THIS APPUCATION SERVICES PR;!VIDER AGREEMENT (the "Agreement"), is made and entered into as of the ~ day of?n(L :2J;P7 (the "Effective Date"), by and between ehealthcomputing.com, a wholly owned subsidiarYof Healthcare Management Systems, Inc., a Tennessee corporation, with offices at 3102 West End Avenue, Suite 400, Nashville, Tennessee 37203 ("ehealth") and Palo Verde Hospital at 250 North First Street, Blythe, California 92225 ("Hospital").

WITNESSETH:

WHEREAS, ehealth provides certain application support services for utilization by hospitals in connection with management of hospital records and data; and

WHEREAS, Hospital desires to obtain access to certain application support services provided by ehealth for the purpose of allowing Hospital to manage Hospital's data processing activities and ehealth desires to offer such application support services, on a non-exclusion basis, pursuant to the terms and conditions of this Agreement.

NOW, THEREFORE, the premises considered, for and in consideration of the promises and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement do hereby covenant and agree as follows:

1. DEFINITIONS.

As used herein, the following terms shall have the meanings set forth hereafter:

A. "Application Services" shall mean those certain non-exclusive application software and support services provided by ehealth to Hospital more specifically identified on Exhibit A, attached hereto and made a part hereof.

B. "Documentation" shall mean all operator and user manuals, training materials, guides, listings, specifications, and other materials prepared by ehealth for use by Hospital in conjunction with the Application Services provided herein.

C. "Hospital Data" shall mean all information generated by Hospital, which is transmitted to ehealth from time to time in electronic form pursuant to this Agreement, including all such information that is processed utilizing the Application Services.

D. "Intellectual Property Rights" shall mean any and all now known or hereafter known tangible and intangible (a) rights associated with works of authorship throughout the universe, including but not limited to copyrights, moral rights, and mask-works, (b) trademark and trade name rights and similar rights, (c)

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trade secret rights, (d) patents, designs, algorithms, and other industrial property rights, (e) all other intellectual and industrial property rights (of every kind and nature throughout the universe and however designated, including logos, "rental" rights, and rights to remuneration), whether arising by operation of law, contract, license, or otherwise, and (f) all registrations, initial applications, renewals, extensions, continuations, divisions, or reissues hereof now or hereafter in force (including any rights in any of the foregoing).

E. "Technical Standards Exhibit" shall mean Exhibit B attached hereto and incorporated herein by this reference. ehealth reserves the right to amend the Technical Standards Exhibit from time to time in response to Application Services upgrades and changes in hardware, software, and/or telecommunications practices and standards.

2. LICENSE.

A. Rights Granted. Subject to the terms and provisions of this Agreement, ehealth grants Hospital a limited, non-exclusive and nontransferable license to access and use the Application Services and Documentation (the "License"), through ehealth's data center, but only during the Term (as hereinafter defined) of this Agreement and only for the limited purposes specified herein.

B. Ownership and Installation. All Hospital Data is and shall forever remain the sole property of Hospital. Any software owned or controlled by ehealth utilized in connection with the Application Services hereunder as well as any devices such as terminals, printers, or other equipment, if any, supplied by ehealth pursuant hereto, shall remain the sole and exclusive property of ehealth, and ehealth claims and reserves all Intellectual Property Rights and other rights it has or may have therein, notwithstanding the grant of the limited License herein. ehealth shall maintain the software owned or controlled by ehealth utilized in connection with the Application Services hereunder on ehealths' computer systems and server and ehealth shall maintain control over and possession of all components therein.

C. Access. Hospital shall have access to the Application Services via the telecommunications standards set forth in the Technical Standards Exhibit. Hospital shall be responsible for all telecommunications charges as specified in said Exhibit, and shall be responsible for all Hospital Data.

D. Restrictions on Use. The Application Services provided by ehealth hereunder are for the non-exclusive use of Hospital in enabling Hospital to process its Hospital Data as contemplated herein. Hospital agrees not to download or otherwise take possession of any computers, hardware, or any software owned, licensed, or controlled by ehealth, utilized in connection with the Application Services providec hereunder. Hospital agrees that it will not (i) copy or duplicate, or permit anyone else to copy or duplicate, any physical or magnetic version of the software, owned, licensed, or controlled by ehealth, utilized in connection with the Application Services hereunder; (ii) create or attempt to create, or permit others to create or attempt to create by reverse engineering or otherwise, the

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software owned, licensed, or controlled by ehealth utilized in connection with the Application Services hereunder or any part thereof or (iii) create a derivative work of the software owned, licensed, or controlled by ehealth utilized in connection with the Application Services hereunder.

E. Retention of Rights. Any and all rights not specifically granted herein to Hospital are expressly reserved byehealth.

3. ehealth OBLIGATIONS. During the Term of this Agreement, ehealth will provide Hospital with the following services:

A. Application Services. ehealth will during the Term hereof provide the Application Services and will maintain the Application Services such that the Application Services perform according to the specifications set forth in the Documentation and the Technical Standards Exhibit during the Term hereof, as provided herein.

B. Availability of Application Services. ehealth agrees that the Application Services will be operable and available to perform the functions set forth in the Documentation twenty-four (24) hours per day, seven (7) days per week, (subject to normal unavoidable "outages") except for a period of time aggregating not more than nine (9) hours in any rolling period of 168 consecutive hours (approximately 5% of a week). The parties acknowledge that ehealth may make the Application Services unavailable from time to time for maintenance or upgrades. ehealth will use its best efforts to schedule maintenance outages according to the schedule set forth in the Technical Standards Exhibit. The parties may agree to longer periods for major maintenance on a mutually agreeable schedule. The parties acknowledge that ehealth will not be responsible for the unavailability of the Application Services due to telecommunications failures or other circumstances beyond ehealths' control, and such unavailability shall not constitute an event of default herein.

C. Back-up Storage. Once during each consecutive twenty-four (24) hour period, ehealth will back up all Hospital Data on media described in the Technical Standards Exhibit and store such back-up media in a secure place. ehealth will maintain only one (1) copy of such back-up media in storage. Such media will be overwritten with new back-Up data, approximately at the end of each seven (7) day period hereunder.

D. Transmission of Processed Hospital Data. Hospital may transmit Hospital Data (whether processed in connection with the Application Services or not) to such persons and entities as Hospital determines in its sole discretion. Transmission will be made by Hospital in the manner set forth on the Technical Standards Exhibit.

E. SUDoort Services. Maintenance and Modification. During the Term of the Agreement, ehealth will make available to Hospital for use hereunder without additional charge, all patches, updates, releases and new versions of the Application Services generally consistent with the Application Services then being provided by ehealth to ehealths' other customers. If any problems originate in

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Hospital's computer network or in its software, ehealths' responsibility shall be limited to providing assistance and advice to enable Hospital to determine appropriate remedial action to be taken by Hospital or authorized personnel (not by ehealth) to resolve such problems.

F. Compliance. ehealth acknowledges that federal and state governments may mandate compliance by Hospital with various regulatory requirements, some of which may necessitate modifications to the Application Services. As far as technically and commercially feasible and within a reasonable period of time, ehealth will cause the modifications of the Application Services, so as to enable Hospital to comply with any such mandated Federal and State government requirements not referenced in the original Documentation or Technical Standards Exhibit. ehealth reserves the right to charge Hospital a reasonable one-time fee in each such instance for capabilities of the Application Services required by federal or state law beyond that documented in the original Documentation or Technical Standards Exhibit.

G. Installation Services. ehealth will provide installation and training services to Hospital. The timing, scope and definition of these services are more fully defined in Exhibit D and Exhibit A.

H. Initial Data Conversion. ehealth will provide initial conversion of Hospital's data from the current system to existing ehealth data formats. The timing and scope of definition of these services are more fully defined in Exhibit E, Conversion.

4. HOSPITAL OBLIGATIONS. During the Term of this Agreement, Hospital will perform as follows:

A. Hospital Data. Hospital will be responsible to enter Hospital Data, as necessary, into a format compatible for utilization of the Application Services. Hospital shall be solely responsible for the accuracy of all Hospital Data and the completeness of Hospital Data, including but not limited to, specifically the characterization of the clinical treatments and the billing codes and billing amounts contained in Hospital Data, whether or not such data has been processed in connection with the Application Services and shall indemnify, defend and hold harmless ehealth from and with respect to the same.

B. Information Technoloav Equipment. Hospital will acquire, install, maintain and upgrade all of its end user equipment and software as necessary for Hospital to utilize the Application Services provided herein, including but not limited to that set forth in the Documentation and Technical Standards Exhibit (EXhibit B).

5. TERM AND TERMINATION.

A. Term. The term of this Agreement (the "Term'') shall initially be for three (3) years from the Effective Date, ending on ---J 200_. This Agreement shall automatically renew each year for an additional one (1) year period, unless either of the parties hereto notifies the other of its intent to terminate this Agreement, at least Ninety (90) days prior to the end of the then existing Term,

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in which event this Agreement shall terminate upon expiration of the then existing Term. ''Term'' includes the initial Term and all renewals and extensions hereof.

B. Termination. Either party shall have the right to terminate this Agreement without liability to the terminating party, upon the occurrence of any of the followi ng events:

i. immediately upon written notice, if the other party hereto breaches a covenant of confidentiality set forth herein, or if Hospital infringes on ehealths' Intellectual Property Rights hereunder; and/or

ii. if the other party hereto defaults in the performance of any of its material obligations under this Agreement (other than with respect to confidentiality and Intellectual Property Rights) and such default remains uncured for ten (10) days after receipt of written notice specifying the nature of such breach. In the event ehealths' failure to perform under this Agreement is due to circumstances beyond ehealths' control, the time for ehealth to cure such default shall extend until such circumstances have been resolved and for a period of ten (10) days thereafter;

C. Noncompliance.

(1) Legal Event; Consequences. Notwithstanding any other provision of this Agreement, if the governmental agencies that administer the Medicare, Medicaid, or other Federal programs (or their representatives or agents), or any other Federal, State or local governmental or non governmental agency, or any court or administrative tribunal passes, issues or promulgates any law, rule, regulation, standard, interpretation, order, decision or judgment, including but not limited to those relating to any regulations pursuant to State or Federal so called anti-kickback or self­referral statutes (collectively or individually, "Legal Event"), which, in the good faith judgment of one party (the "Noticing Party''), materially and adversely affects either party's licensure, accreditation, certification, or ability to refer, to accept any referral, to bill, to claim, or to present a bill or claim to, or to receive payment or reimbursement from, any Federal, State or local governmental or non-governmental payor, or which subjects the Noticing Party to a risk of prosecution or civil monetary penalty, or which, in the good faith judgment of the Noticing Party, indicates a rule or regulation with which the Noticing Party reasonably desires further compliance, then the Noticing Party may give the other party notice of intent to amend or terminate this Agreement in accordance with the next Subparagraph.

(2) Notice Requirements. The Noticing Party shall give notice to the other party together with an opinion of counsel setting forth the following information:

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(a) The Legal Event(s) giving rise to the notice; (b) The consequences of the Legal Event(s) as to the Noticing Party; (c) The Noticing Party's intention to either:

(i) Terminate this Agreement due to unacceptable risk of prosecution or civil monetary penalty; or

(ii) Amend this Agreement, together with a statement that the purposethereof is one or more of the following:

-to further comply with any statutory provisions or rules or regulations created or affected by the Legal Event(s); and/or

-to satisfy any licensure, accreditation or certification requirements created or affected by the Legal Event(s); and/or

-to eliminate or minimize the risk of prosecution or civil monetary penalty;

(d) (e)

The Noticing Party's proposed amendment(s); and The Noticing Party's request for commencement of the Renegotiation Period (as defined below).

(3) Renegotiation Period; Termination. In the event of notice set forth above, the parties shall have ten (10) days from the giving of such notice C'Renegotiation Period'') within which to attempt to amend this Agreement in accordance with the Noticing Party's proposal (if any) or otherwise as the parties may agree. If this Agreement is not so amended within the Renegotiation Period, this Agreement shall terminate as of midnight on the 10th day after said notice was given. Except as otherwise required by applicable law, any amounts owing to either party hereunder shall be paid, on a pro rata basis, up to the date of such termination, and any obligation hereunder that is to continue beyond expiration or termination shall so continue pursuant to its terms. All opinions of counsel presented by the Noticing Party hereunder, and any corresponding opinions given by the other party in response, shall be deemed confidential and given solely for purposes of renegotiation and settlement of a potential dispute, and shall not be deemed disclosed so as to waive any privileges otherwise applicable to said opinions.

D. Actions Upon Termination. Upon termination of this Agreement for any reason, Hospital shall immediately cease to have access to and use of the Application Services and the software in question herein, and shall return all Documentation and other proprietary information to ehealth.

E. No Obligation to Make Referrals. The parties acknowledge that none of the benefits granted the parties under this Agreement is conditioned on any requirement or expectation that the parties make referrals to, be in a position to make or influence referrals to, or otherwise generate business for the other party. The parties further acknowledge that neither party is restricted from referring any service to, or otherwise generating any business for, any other person, party or entity of its choosing.

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6. PAYMENTS.

A. Access and Rental Fees. In consideration of the Application Services granted herein, Hospital shall pay ehealth the sums set forth on Exhibit C attached hereto and made a part hereof. Monthly payments for Application Services will begin upon completion of system transfer and continue for thirty-five (35) months. One hundred twenty (120) days before each anniversary of the Effective Date, ehealth shall notify Hospital in writing of any change in the amount of the fees to be charged for the License contemplated hereunder during the succeeding twelve (12) month Term of this Agreement. ehealth shall have the right to increase such fees upon thirty (30) days written notice to Hospital, however no more than once every twelve (12) months, and no more than the general seven percent (7%) per annum. In the event that Hospital fails to pay any monthly fees for three (3) successive months within thirty (30) days after such payment is due; ehealth shall have the right to require Hospital to pay said monthly fees via Direct Debit Authorization.

B. Late Fee. Hospital agrees to pay a late fee of one and one-half percent (1 '12 %) per month on all balances owing after forty-five (45) days, or the maximum interest rate allowed by law, whichever is less.

C. Software Support. Software support shall consist of the components set forth in Exhibit A, if any. Support provided via telephone shall be provided to a single point of contact established at Hospital site. The Application services fee shall include any such support services.

Hospital shall (i) maintain a support staff capable of performing problem determinations prior to engaging ehealth's support services, (ii) provide access to world wide web support resources for its internal support organization if not provided by ehealth under Exhibit A (1) of this Agreement, (iii) provide e-mail capabilities to support personnel and (iv) perform an annual support self-assessment.

D. Installation and Training Charges. Installation and training for the Application Services on this Agreement will be billed according to the terms set forth in Exhibit C. Installation and training for applications added within the first twelve (12) months will be billed at ehealth's standard rates therefor which are currently $95 per hour plus any associated out­of-pocket expenses. ehealth reserves the right to change its standard installation and training rates upon thirty (30) days notice to Hospital, after initial twelve (12) month period. Any installation services contracted for, but not performed according to this Agreement, are non­refundable and will be deemed completed after twenty-four (24) months from date of contract execution.

7. PROPRIETARY RIGHTS.

A. Proprietary Rights. Hospital recognizes and acknowledges that the Application Services and the Documentation and any other materials and services supplied by ehealth to Hospital are subject to the proprietary rights of ehealth. Hospital agrees that all such property and all information or data supplied by ehealth are the valuable property of ehealth, that ehealth claims Intellectual Property Rights in such property, and such property is protected by civil and criminal laws. Use and disclosure of such materials shall be permissible only with ehealths' written permission.

3/22/2007 Page 7 of 31

B. Special Remedies. If Hospital attempts to use, copy, license or convey the software owned or controlled by ehealth utilized in connection with the Application Services hereunder or the Documentation in any manner, ehealth shall have, in addition to any other remedies available to it under applicable state or federal laws, the right to injunctive relief enjoining such action, Hospital hereby acknowledging that all other remedies are inadequate.

8. SECURITY AND PRIVACY. The parties acknowledge that the handling and transmission of health care information is subject to a variety of state and federal privacy laws (the "Privacy Laws'') which may require the parties to provide notifications to patients, perform minimum record keeping requirements, and establish certain security measures to safeguard confidential patient information. ehealth and Hospital agree to comply with all such Privacy Laws as well as all applicable privacy policies and procedures of the Health Care Financing Administration and its contracting intermediaries. All Hospital Data shall be kept in a secure place, under access and use restrictions consistent with such Privacy Laws.

9. REPRESENTATIONS AND WARRANTIES OF HOSPITAL.

Hospital hereby represents and warrants to ehealth that:

A. Legal Capacity. Hospital has all necessary legal capacity, right, power, and authority to enter into, execute, deliver, and be bound by this Agreement in accordance with its general conditions, (b) the execution and delivery of this Agreement and performance by Hospital of the obligations under this Agreement does not breach and will not result in a breach or violation of any agreement, lien, security interest, or obligation to which Hospital is bound, nor any law, rule, or regulation, state or federal, applicable to Hospital and (c) there is no demand, claim, suit, action, arbitration, or other proceeding pending or threatened that in any way jeopardizes the ability of Hospital to enter this Agreement or to perform any of Hospital's obligations hereunder.

B. Maintenance. Hospital has and will maintain all hardware and software necessary to use the Application Services compatible with the standards set forth in the Technical Standards Exhibit. Hospital represents and warrants that it will alter or upgrade its Computer equipment and software as may be necessary to continue to be compatible with the Technical Standards Exhibit during the Term hereof.

C. Liens. Hospital shall keep each and every item to which ehealth retains title or has rights, free and clear of all claims, liens and encumbrances, except those of ehealth, and any act of Hospital purporting to create a claim, lien or encumbrance on any such item shall be void.

10. REPRESENTATIONS AND WARRANTIES OF ehealth.

ehealth represents, covenants, and warrants to Hospital as follows:

A. Legal Caoacitv. ehealth has all necessary legal capacity, right, power, and authority to enter into, execute, deliver, and be bound by this Agreement to the extent allowed by law, (b) the execution and delivery of this Agreement and performance by ehealth of the obligations under this Agreement does not breach and will not result in a breach or violation of

3/22/2007 Page 8 of 31

any agreement, lien, security interest, or obligation to which ehealth is bound, nor any law, rule or regulation, state or federal applicable to the ehealth, and (c) there is no demand, claim, suit, action, arbitration, or other proceeding pending or threatened that in any way jeopardizes the ability of ehealth to enter this Agreement or to perform any of ehealth's obligations hereunder.

B. Necessarv Rights. ehealth has all rights to the Application Services and owns or licenses the software necessary to perform under this Agreement.

C. Performance. The Application Services will perform substantially as specified in the Technical Standards Exhibit and Documentation.

11. LIMITATIONS ON ehealths' WARRANTIES.

A. EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT OR ANY AMENDMENTS HERETO, ehealth MAKES NO WARRANTY EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE~

B. ehealth SHALL NOT BE LIABLE FOR PERSONAL INJURY OR PROPERTY DAMAGE ARISING OUT OF THIS AGREEI\1ENT. IN 1\10 EVENT SHALL ehealth HAVE OBLIGATIOI\IS OR LIABILmES FOR DAMAGES OTHER THAN ORDINARY MONETARY DAMAGES AND ORDINARY MONETARY DAMAGES SHALL BE LIMITED TO THE NOT MORE THAN THE AGGREGATE APPLICATION SERVICES LICENSE FEES PAID BY HOSPITAL TO ehealth HEREUNDER. ehealth SHALL NOT BE LIABLE FOR ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS OR OTHER ECONOMIC LOSS OF ANY PARTY.

C. IN NO EVENT SHALL ehealth BE LIABLE FOR ANY DAMAGES, CONSEQUENTIAL OR OTHERWISE, ARISING OUT OF ANY INADVERTENT LOSS OF HOSPITAL DATA, WHETHER CAUSED BY TRANSMISSION OF HOSPITAL DATA, ANY HARDWARE FUNCTION OR THE APPLICATION SERVICES, THE SOFTWARE INCORPORATED THEREIN, OR OTHERWISE.

D. ehealth SHALL NOT BE LIABLE FOR THE ACCURACY OR COtJlPLETENESS OF HOSPITAL DATA AND/OR FOR THE CHARACTERIZATION OF ANY TREATMENT OR BILLING PROCEDURE OR CODE CONTAINED IN HOSPITAL DATA, WHETHER SUCH HOSPITAL DATA HAS BEEN PROCESSED BY THE APPLICATION SERVICES OR NOT.

E. HOSPITAL ACKNOWLEDGES THAT THE APPLICATION SERVICES AND SOFTWARE UTILIZED IN CONNECTION THEREWITH ARE TO BE UTILIZED BY HOSPITAL TO ASSIST HOSPITAL IN CERTAIN OF HOSPITAL'S DATA PROCESSING ACTIVITIES AND ARE NO WAY INTENDED TO REPLACE THEIR PROFESSIONAL SKILL AND JUDGEMENT. HOSPITAL AGREES THAT IT IS SOLELY RESPONSIBLE FOR THE CARE OF ITS PATIENTS AND THAT THE USE OF THE APPLICATION SERVICES AND THE SOFTWARE UTILIZED IN CONNECTION THEREWITH FOR ANY PURPOSE RELATED TO SUCH CARE CANNOT IN ANY WAY BE CONTROLLED BY ehealth. HOSPITAL IS RESPONSIBLE FOR VERIFYING THE ACCURACY AND COMPLETEI\IESS OF ANY MEDICAL OR OTHER SIMILAR INFORMATIOI\I CONTAINED II'l, ENTERED INTO, OR USED PURSUANT HERETO.

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F. HOSPITAL ACCEPTS ALL RESPONSIBILITY FOR DEVELOPMENT AND EXECUTION OF ADMINISTRATIVE PROCEDURES AND OTHER PRUDENT BUSINESS PRACTICES NECESSARY TO CONTROL AND MAINTAIN THE INTEGRITY OF HOSPITAL DATA.

12. CONFIDENTIAL INFORMATION.

A. Confidential Information Relating To ehealth. Hospital acknowledges that during the Term of this Agreement, Hospital may be brought into contact with ehealths' confidential methods of operation, trade-secrets, "know-how", market information, financial records, accounts, and other matters affecting or relating to ehealths' business, all of which are referred to herein as "Proprietary Information". Proprietary Information shall not include, however, information that is otherwise available to the public through no fault of Hospital. Hospital further acknowledges that such Proprietary Information has special and unique value, greatly affecting ehealths' business and good will. Hospital shall not divulge, disclose, or communicate any Proprietary Information to any person, firm, corporation, or other entity, except in the ordinary course of business, and except as otherwise required by law, without the prior written approval of ehealth. Hospital shall not repeat, divulge, publish or otherwise disclose to any person, directly or indirectly, any personal or nonpublic information, data, fact, or allegation regarding ehealth, regardless of how Hospital acquired the same. These covenants shall survive termination of this Agreement. Hospital recognizes and acknowledges that any violation or threatened violation of these covenants could cause irreparable and continUing damage to ehealth for which there will be no adequate remedy at law.

B. Confidential Information Relating To Hospital. ehealth shall not divulge or disclose to any third parties any information concerning the affairs of Hospital which may be communicated to ehealth at any time, unless such information becomes publicly available through no fault of ehealth or unless otherwise required by a court of competent jurisdiction. ehealth shall not exploit, divulge or disclose to third parties any proprietary systems, application programs or any business or economic information or methods of Hospital of which ehealth may gain knowledge in connection with or in the course of performing its obligations under this Agreement. These covenants shall survive termination of this Agreement. ehealth recognizes and acknowledges that any violation or threatened violation of these covenants could cause irreparable and continuing damage to Hospital for which there will be no adequate remedy at law.

13. INDEMNIFICATION.

A. Hospital Indemnity. Hospital does hereby covenant and agree to indemnify, defend and hold harmless ehealth, its officers, directors, shareholders, employees, agents and representatives (the ehealth "Indemnified Parties'') from and against any and all loss, cost and/or expense, liabilities, obligations, claims, causes of action, contingencies, damages, costs and expenses, including without limitation all court costs and attorney fees (whether as a result of direct claims or third party claims that the ehealth Indemnified Parties or any of them may suffer or incur) of any nature arising out of or relating to:

(1) Breach or inaccuracy or any alleged breach or inaccuracy of any of the representations, warranties, covenant or agreements made by or on behalf of Hospital or of anyone acting for and on behalf of Hospital hereunder; or

3/22/2007 Page 10 of 31

(2) Any act or omission of Hospital or anyone acting for or on behalf of Hospital in connection herewith and;

(3) The failure" by Hospital to fully comply with all federal, state or local governmental or non-governmental law, rules, or regulations, including but not limited to those relating to state or federal anti-kickback or self-referral statutes or other so-called "healthcare industry" laws, rules, or regulations.

B. ehealth Indemnitv. ehealth does hereby covenant and agree to indemnify, defend and hold harmless Hospital, its officers, directors, shareholders, employees, agents and representatives (Hospital "Indemnified Parties'') from and against any and all loss, cost and/or expense, liabilities, obligations, claims, causes of action, contingencies, damages, costs and expenses, indudinq without limitation all court costs and attorney fees (whether as a result of direct claims or third party claims that Hospital Indemnified Parties or any of them may suffer or incur) of any nature arising out of or relating to:

(1) Any material breach by ehealth of representations, warranties, covenants or agreements made by ehealth in this Agreement; or

(2) Any act or omission of ehealth in the performance of this Agreement that is found by a court of competent jurisdiction to be grossly negligent, willful or reckless and which directly and proximately results in the injury to the party claiming indemnification;

C. Survival. The provisions of this Paragraph 13 shall survive the termination of this Agreement. ehealth's obligations pursuant to this Paragraph 13 shall terminate, and ehealth shall have no further obligation to any person or entity under this Paragraph, when the aggregate amount paid by ehealth to or on behalf of all parties claiming indemnification equals the total amount of all Application Fees paid by Hospital to ehealth pursuant to this Agreement.

14. ACCESS TO BOOKS AND RECORDS.

A. If the value or cost of services rendered by ehealth pursuant to this Agreement is Ten Thousand Dollars ($10,000) or more over a twelve-month period, ehealth agrees as follows:

(1) Until the expiration of four (4) years after the furnishing of such services, ehealth shall, upon written request, make available to the Secretary of the Department of Health and Human Services (the "Secretary''), the Secretary's duly-authorized representative, the Comptroller General, or the Comptroller General's duly-authorized representative, such books, documents and records as may be necessary to certify the nature and extent of the cost of such services; and

(2) If any such services are performed by way of subcontract with another organization and the value or cost of such subcontracted services is Ten Thousand Dollars ($10,000) or more over a twelve-month period, such subcontract shall contain, and ehealth

"shall enforce, a clause to the same effect as Subparagraph 14(A)(1) immediately above.

B. The availability of ehealth's books, documents, and records shall be subject at all times to all applicable legal requirements, including without limitation, such criteria and

3/22/2007 Page 11 of 31

procedures for seeking and obtaining access that may be promulgated by the Secretary by regulation. The provisions of this Paragraph 14A shall survive expiration or other termination of this Agreement, regardless of the cause of such termination.

15. MISCELLANEOUS. This Agreement and its Exhibits and Schedules herein represent the entire, complete and exclusive statement of the terms and the agreement between the parties, superseding any and all understandings, prior representations and agreements, whether oral or written, and all other communications relating to the subject matter of this Agreement. Hospital and ehealth each agree it has read this Agreement, understands it, and agrees to be bound by its terms and conditions. Each party signing this Agreement has the full authority to bind the principal.

16. NOTICES. All notices given under this Agreement shall be in writing and delivered by a national courier service or by certified mail, return receipt requested, or hand delivered to the address of the recipient shown below. Either party may change its address by notice to the other party, given as provided below:

If to ehealth: 3102 West End Avenue, Suite 400 Nashville, TN 37203 AnN: Thomas M. Stephenson Phone: 615-383-7300 Fax: 615-383-6093

With a copy to: Bone McAllester Norton PLLC Nashville City Center 511 Union Street, Suite 1600 Nashville, TN 37219 Attn: Keith C. Dennen Fax: (615) 238-6301

If to Hospital: PaloVerde Hospital 250 North First Street Blythe, california 92225 Attn: Fax: _

17. MODIFICATION. This Agreement may not be modified except by written amendment executed by an authorized representative of both ehealth and Hospital. No representative of ehealth has any authority to bind ehealth to any affirmation, representation or warranty other than the express terms of this Agreement and its Amendments.

18. PARTIES BOUND. This Agreement binds and inures to the benefit of the parties and their respective successors and permitted assigns. This Agreement binds Hospital and ehealth and each of its employees, affiliated and subsidiary firms, corporations or other organization

3/22/2007 Page 12 of 31

with which Hospital may enter a joint venture or other cooperative enterprise which utilizes the ehealth Software.

19. ASSIGNMENT. Neither this Agreement nor the rights and obligations of the parties hereto may be assigned without the prior express written consent of the other party hereto. The parties agree that the requested consent to any such assignment shall not be unreasonably withheld. Any attempt by either party to assign any portion of this Agreement without the prior express written consent of either party shall render such assignment voidable at the election of either party; provided, however, that either party may assign this Agreement to a parent corporation, subsidiary or affiliate or to an unrelated third party acquiring all or substantially all of the assets of a party.

20. SEVERABILITY. If any provision of this Agreement is declared to be invalid or unenforceable by a court of competent jurisdiction, such provisions shall be severed wherefrom and the remaining provislons shall remain binding with the same effect as if such provislons were deleted.

21. LAW & JURISDICTION. The Agreement shall be construed and governed under the laws of the United States of America and the State of Tennessee, other than the conflict of law principles of Tennessee or any other jurisdiction. Actions for injunctive relief shall be brought in a court of competent jurisdiction in Davidson County, Tennessee, and the parties hereby WAIVE ALL RIGKTSTO ANYTRIAL BYJURY for any such action for injunctive relief.

22. DISPUTE RESOLUTION. Any controversy or claim between ehealth and Hospital arising out of or relating to this Agreement or the making, performance, or interpretation thereof, shall be resolved by arbitration in Nashville, Tennessee in accordance with the rules of the American Arbitration Association then exlstlnq. Judgment on any arbitration award may be entered in any court regularly convened in Nashville, Tennessee having jurisdiction over the subject matter of the controversy. The parties further agree that a restraining order, injunction, writ of possession, and/or writ of attachment may be applied for from a court of competent jurisdiction by any party pending resolution of the dispute. The arbitrators selected shall be persons experienced in negotiating, making, and consummating agreements of the type of this Agreement. The prevailing party shall be entitled to recover all attorneys' fees and other costs. The costs of arbitration are to be paid by the nonprevailing party.

23. INABILITY TO PERFORM. ehealth shall not be liable for any failure to perform under this Agreement if that inability relates to the inability of ehealth to obtain materials, parts, or supplies due to interruption of transportation, government regulation, labor disputes, strikes, war, fire, flood, accident, or any other reasonably unanticipated cause beyond ehealths' control that materially affects ehealths' ability to perform its responsibilities under this Agreement, including specifically telecommunications failures. ehealth agrees to notify Hospital promptly if such situation should arise.

24. TAXES. The fees set forth herein are exclusive of all excise, sales, use, occupational, or like taxes now in force or enacted in the future and, therefore, are subject to an increase equal to the amount of any tax ehealth may be required to collect or pay upon the sale or delivery of services licensed or provided hereunder. If a certificate of exemption or similar document or proceeding is to be utilized in order to exempt the sale or license from sales or use tax liability, Hospital will obtain and pursue such certificate, document or proceeding. Hospital shall pay all

3/22/2007 Page 13 of 31

taxes (however designated, levied, or based on the price or on the services sold or licensed or used under this Agreement, other than taxes base on ehealths' income) levied against Hospital or ehealth, immediately when due.

25. WAIVER. No provision of this Agreement shall be deemed waived unless such waiver is contained in a written instrument signed by the party to be charged therewith. Should either party waive any individual default by the other party in writing, such waiver shall not be construed as a waiver of such party's rights upon subsequent defaults, whether or not similar.

26. INDEPENDENT CONTRACTORS. The parties to this Agreement are independent contractors and no agency, partnership, joint venture, or employee-employer relationship is intended or created by this Agreement. Neither party shall have the power to obligate or bind the other party. The Parties further specifically acknowledge, covenant and agree that Hospital at all times controls Hospital Data and Hospital, rather than ehealth, shall be solely responsible with respect to any coding, request for reimbursement and/or submission to any federal or state agency in question in connection herewith and ehealth shall not be, nor function as, nor be deemed to be functioning as, a so-called "billing agency" or "healthcare clearing house" hereunder.

27. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall be taken together and deemed to be one instrument.

28. HIRING OF EMPLOYEES. During the course of this Agreement, and one (1) year thereafter, neither party will, without the prior written consent of the other party, which may be withheld in that parties sole discretion, offer employment to, employ, or subcontract work to any person employed then, or within the preceding twenty-four (24) months, by the other party. This provision shall be binding upon affiliates of both parties.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the day and year first written above.

Palo Verde Hospital ehealthcomputing.com

By: By: _

Print Name: Print Name: Thomas M. Stephenson

Title: Title: President and Chief Operating Officer

Date of Execution: _ Date of Execution: _

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Exhibit A-l Application services

Monthly ASP Module Estimated Fee Install Hours

Analyzers Installed InstalledAc:c;o~nts P~lable

Installed

~~,:!~ral Ledger. . .. ..

Executive View Installed Installed~~~~!!"_!I!~~~.~!!on ManiJ~elll~rl.!Y"'.it_~ APCs

3M Encoder Installed --"~~--~--""._~-' "._-., -_ .... -.-,...__ ._..._. "-" -_._....~..,...._-_.~ ---_..._,._- -_ ...._. ,

Installed..~~~~P.~~_~.~~i~~_. __ ._ . ..~~-!ie'!.t~~~.!~nJL __._ Installed - ..... - ._-----.---._--_•. __.".

Installed.PiJyroll[ Human Resources Promed Interface Installed HL7 Interface Installed _. _._--_._-._•.._ .._--- .....' ------- - - - -.

InstalledJ~!"~..!'!lil9'_. __ . ..._.. . Installed._~~~l!i.PiI_rl~iJ!abase.5tllPp0r1 for Phil.r:macy Installed.!!~~.!nt~J!iI.~t.0. Dicl:ilph~J1~ (~[)_T, O!:de,:,!,) Installedr-1~!~I.F'II~~~ity Installedt-'JonthlyL.f'IIRP.Updates

Electronic Forms Installed . --- -- -- - ~_ ... - --- --"- ­

InstalledJ:~~onic~i~irl9 837 Time and Attendance Installed ---_.. --- -- - --_.- ------ - - --..- .-

Order Communications Installed- .-.. _- '-" _. _.-- .. - .._- ..' ­

40~~oj~c:t. ,..,~nagem~r1t . Advanced security (Menuing) 32

$11,329 72Total Costs:

3/22/2007 Page 15 of 31

Exhibit B Technical Standards

Telecommunications will be provided via frame relay connection. Hospital shall be responsible for a TCP/ IP connection that must be routable to 172.16.1/24 network to the router or facility. Any PC or Network Station shall be capable of serving the ehealth GUI application.

Data will be stored on magnetic media.

Any report will be available to the user submitting the requested report.

ehealth will setup user profiles via written request only. Hospital will provide ehealth in writing with the name (s) of persons authorized to submit user profile requests. Any request submitted by an authorized person and received via fax or authorized e-mail by 12:00 Noon central time on any business day will be executed on that day, all others will be executed before 12:00 Noon on the next business day.

Hospital will be responsible for maintaining user security via the ehealth menu system.

Hospital is responsible for maintaining all user passwords and security thereto.

Hospital agrees to change user passwords at least each 180 days as determined byehealth. Hospital agrees to notify ehealth immediately of any employee resignations or terminations, such user profiles will be deleted within one (1) business day or less.

Standard backup archival will be: (1) seven days for daily archives (2) twelve months for monthly archives (3) five years for annual archives.

ehealth will provide staffing for execution of dayend processes and archival process and all device and security administration and network problem determination and resolution. All other services requests will be addressed via software support.

Both parties agree that all reports: demand and batch will be printed by the user on Hospital equipment.

Hospital and ehealth agree to the following maximum service events and charges as follows after the first productive month.

Event Maximum Charge thereafter User Profile Setups and Deletions 10 per week $10/profile Device setups 2 per week $50/device Device setups will be performed upon request within two (2) business days except in an emergency.

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Exhibit C-1 Cost Summary

Monthly Fees

Monthly ASP Fee $11,329.00

Description Costs

I IEstimated Installation for New Applic:ations $6,840.00

. ,"" -,.__..•..',- .._", _.,,-_._-.-_ .. ..........•. .- _. - .......... -- _....­ -j$7,fiO()~_()0

.fi.I~.I~~ns.f~~_.___ _ ._..._.. _ ...... ..... . .._ .._. $.~,~()().()() .tI~~~~i:I~~."'!a.!~hro~ghand Go-Live Assistance

_.~

~-~ - "' ..-._-- .-_._-_. "-.. -,. ----.-.-..........,-,----_ ..,.- .... .....

..~I!h_Se_"!!!i"Y. !;etup-l1O!>~!"~~~-~"') ...

_.

t- _j~,.80.ll~OO ..tt~P~!i:I.I_.~~~~~r:..~!l~I!9.~J~!B~_q~~!!!.~). ____.__..__ ..___.__ .____ ......_ .. __.$_~,~9Q~()9. .. .. I··· ..

_!:J.se~. PrC?fi.l~_~'!~~~~5~~!!.~a~!!'.g_F~!!._(!! R~g~~~J. ______ ._ ........ _.._~~l.~QQ'-OQ ... .­

J..!.~'!.~~r..~~cJ!i_~~(JI:)~~.~~~I!~ (!iJ.)_!l_()_~_~_i!t_$~~ .p~!"_!!C?_~r) ___.. . __....$~,Z~Q·OQ .. . ­ ... _ ...

TotalHMS Costs: $31,790.00 I $11,329.00

Notes: 1. Monthly ASP fee payments will begin upon completion of system transfer. 2. File transfer fee of $2,500 is due upon amendment execution. 3. security Setup is estimated at 40 hours and will be billed as incurred at $95 per hour.

3/22/2007 Page 17 of 31

Exhibit C-2 Payment Terms

Monthly payments for Application Services will begin upon completion of system transfer and continue for thirty-five (35) months.

Installation, out-of-pocket expenses and all other fees will be billed as incurred.

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Exhibit 0 Installation and Training

. Upon execution of this Agreement, Hospital shall designate an appropriate senior member of its staff to serve as Hospital's project coordinator ("HPC).

Upon execution of this Agreement, ehealth shall designate an appropriate project manager ("PM") to serve as its installation and coordination contact and representative.

Upon execution of this Agreement, Hospital and ehealth shall prepare an installation schedule showing the schedule activities to be accomplished during the installation of each module of the ehealth Software to be provided hereunder, and setting forth each party's responsibilities with respect thereto.

Coordination of services during the period in which a module is being installed shall be in joint responsibility of the HPC and PM.

Hospital is responsible, at its expense, for making the alterations to its facilities that are required to accommodate the installation of the end user hardware and local network including the acquisition, installation and termination of necessary cabling, and the provision of adequate space and electrical sources as determined necessary by ehealth.

Installation and implementation will proceed according to the schedules referred to herein. The project timetable identifies responsibilities for Hospital and ehealth. Where possible, discrete responsibilities for tasks are identified. Performance milestones will be monitored by both written and oral progress reports. The reports shall be submitted routinely throughout the duration of the project on a schedule mutually agreeable to Hospital and ehealth. Review of work completed to date by Hospital shall be completed at these progress meetings. Responsibility for project management is shared by Hospital and ehealth.

3/22/2007 Page 19 of 31

Exhibit E Conversion

HMS Conversion Process:

Data conversion is a vital step in the successful implementation of the HMS' Monitor System. The following information will help to define some of the steps and responsibilities of both HMS and the converting facility.

• Data Analysis Team: Select Data Analysis Team members. Hospital data analysis team should consist of at least one representative from each of the following areas: Business Office, Medical Records, and Accounting/Financial. The hospital data analysis team will coordinate and work with HMS Implementation and Conversion team.

• Conversion Plan: Discuss current database and hospital expectations to determine which data files need to be converted from their existinq system to the HMS Monitor database. Occasionally, it is easier, more cost effective, and more accurate to manually key specific data into the HMS system than to convert existing data and perform the requisite maintenance to update and complete the files. A final conversion plan will be developed based on the information gathered during the initial discovery period.

• Data Extraction from existing system: Once a conversion plan has been established, a primary complete cut of data will be sent to HMS in valid file format and acceptable media. The following is a list of media types accepted by HMS:

1/4 inch tape cartridge 100 or 250 megabyte Zip disk CD-ROM 3 '12 inch diskette 1600 or 6250 BPI Reel to Reel tape 8 inch diskette 8mm tape - 2 gig to 7 gig uncompressed E-mail attachments if possible (Microsoft Excel, Lotus 123, Quatro Pro)

HMS prefers Text, Delimited, ASCII or EBCDIC Format HMS cannot read 4mm PC backup tapes (DATS), or 14 gig 18mm tapes

HMS will need File formats, descriptions, or definitions that outline the data files being converted. Additionally, Balancing reports showing Accounts Receivable and Bad Debt Totals are required to aid HMS in balancing the facility's Accounts Receivable.

• Data Analysis: HMS will review all incoming data and prepare an analysis sheet that will then be reviewed with the data analysis team and the implementation coordinator. The Conversion plan will be reviewed and updated if necessary based on the results of the data analysis. A File Optimization plan will be determined for the purpose of enhancing conversion reliability, reducing errors and mismatched data.

3/22/2007 Page 20 of 31

Exhibit E (Continued) Conversion

• Programming: Conversion programs will then be written and tested prior to training week. Cross Reference tables must be completed by the facility and will be used to assist in mapping and translation of fields from the previous vendor's software to HMS's system

fields (i.e. Financial Class, Hospital Service Code, Religion Code, etc.). The converted files will be transferred to the training library for review by the Data Analysis Team. A second analysis will be performed on the converted data at this time.

• Completion, Review, Approval: At the Go-Live, the client (vendor or extraction source) will supply HMS with a final cut of data indudinq reports detailing Accounts Receivable and Bad Debt Totals. The newly converted files will be transferred to the facility's training library. A final data analysis will be completed, reviewed, and approved by the facility's Data Analysis Team.

HMS Conversion Files:

The following files are considered part of the HMS standard contract and may be converted based on data availability from current system.

• Charge Master - The Charge Master File contains the charge master file information. All of the information defining each charge code is entered, maintained, and stored in this file.

• Patient History - The Patient History File contains the patient's demographics information. The patient history number accesses this historical data, allowing the recapture of this information during the admission/registration process. The patient history number is created only one time, and is a historical number. The number should not change as the patient has subsequent inpatient or outpatient episodes.

• Guarantor File - The Guarantor File contains all historical information about the guarantor, or person who is responsible for payment. The guarantor number accesses this historical data, allowing the recapture of this information during the admission/registration process. The guarantor number is created only one time, and is a historical number. The number should not change as the guarantor incurs responsibility for subsequent inpatient or outpatient episodes.

• Admission Register File - The Admission Register File contains all of the admission information pertaining to the patient's current admission file. It is also the file used in the Master Patient Index in Medical Records.

• Accounts Receivable Master File - The Accounts Receivable Master File contains information from when the patient was final billed. This file also contains the bad debt information, on all accounts that have been written to bad debt.

3/22/2007 Page 21 of 31

Exhibit E (Continued) Conversion

• Accounts Receivable Accumulation File - The Accounts Receivable Accumulation File contains all payments and adjustments on final billed accounts.

Comments or Notes File - The Comment Master File contains comments or notes• information, which refers to a specific inpatient or outpatient account.

Benefits - The Insurance Benefit File contains the patient's primary, secondary and • tertiary payor benefits information which refers to a specific inpatient or outpatient account. This file is updated with the insurance information during the admission or registration process.

• Abstract - The Abstract Master File contains all of the medical statistical information, related to the patient's visit. All of the Diagnoses, Procedures Codes, CPT Codes, Financial Information, and DRG information is contained within this file.

Additional Conversion Files:

The following files are not a part of the HIlliS standard conversion and may be converted based on cost effectiveness, compatibility and availability and integrity of the data to be converted. Additional conversion expenses will apply.

• Other Rnancial Applications, e.q., Vendor Master (Accounts Payable and Materials Management), Item Master, Payroll Employee Master File, General Ledger.

• Other Clinical Applications, e.g., Pharmacy Formulary, Radiology Jacket/Film File. • Other Hospital or Clinical Based applications.

3/22/2007 Page 22 of 31

Exhibit F Special Provisions

Hardware Requirements and Additional Information

Computer Requirements:

Basic User Java User Minimum Processor/CPU: Iqhz Minimum Processor/CPU: 1.8ghz

Minimum Memory/RAM: 256mb Minimum Memory/RAM: 512mb

Operating System: Windows 2000/XP Pro Operating System: Windows 2000/XP Pro Screen Resolution: 1024 X768 Screen Resolution: 1024 X768 Mouse,Keyboard, and available USB ports Mouse,Keyboard, and available USB ports

Browsers: IE 6.0, Netscape 6.2, Mozilla 1.0 Browsers: IE 6.0, Netscape 6.2, Mozilla 1.0

Thin Client[Terminal Server Environments Thin C1ient{Terminal Server Environments

Printer Requirements:

low to Moderate printing Areas IBM support printer with 32mb of memory

HMS recommended Model: HP2430n

Moderate to High printing Areas IBM support printer with 64mb of memory

HMS recommended Model: HP4250n

3/22/2007 Page 23 of 31

Addendum

HIPAA BUSINESS ASSOCIATE AGREEMENT

This HIPM Business Associate Agreement (the "Agreement'') is entered into by and between Palo Verde Hospital C'Hospital'') and ehealthcomputing.com, a wholly owned subsidiary of Healthcare Management Systems, Inc., a Tennessee corporation, with offices at 3102 West End Avenue, Suite 400, Nashville, Tennessee 37203 ("ehealth"), and is dated this __ day of _______--1, 2007.

ARTICLE I Terms Used In This Agreement

1.01 "Designated Record Set" means a group of records maintained by or for the Hospital that is:

(a) The medical records and billing records about the individuals maintained by or for the Hospital.

(b) The enrollment, payment, claims adjudication, and case or medical management record systems maintained by or for a health plan; or

(c) Used, in whole or in part, by or for the Hospital to make decisions about individuals. As used in this Agreement, the term "record" means any item, collection or grouping of information that includes Protected Health Information and is maintained, collected, used or disseminated by or for the Hospital.

1.02 "Electronic Media" means the mode of electronic transmissions, including the Internet, leased lines, dial-up lines, private networks, and those transmissions that are physically moved from one location to another using magnetic tape, disk, or CD media.

1.03 "Individually Identifiable Health Information" means information that is a subset of health information, including demographic information collected from an individual, and:

(a) Is created or received by Hospital; and

(b) Relates to the past, present or future physical or mental health or conditions of an indiVidual; the provision of health care to an individual; or the past, present or future payment for the provision of health care to an individual; and

(1) Identifies the lndlvidual; or

(2) With respect to which there is a reasonable basis to believe the information can be used to identify the individual.

3/22/2007 Page 250[31

1.04 "Privacy Standards" means the Standards for Privacy of Individually Identifiable Health Information set for in 45 CFR Part 160 and 164 (commonly referred to as HIPAA).

1.05 "Protected Health Information" means Individually Identifiable Health Information that is:

(a) Transmitted by electronic media;

(b) Maintained in any electronic medium; or

(c) Transmitted or maintained in any other form or medium.

1.06 "Security Incident" means the attempted or successful unauthorized access, use, disclosure, modification, destruction of information or interference with system operations in an information system.

ARTICLE II Obligations of ehealth

2.01 Use of Protected Health Information. ehealth shall not use Protected Health Information received from the Hospital in any manner that would constitute a violation of the Privacy Standards if used by the Hospital. ehealth may use and disclose Protected Health Information (1) for the proper management and administration of ehealth, (2) to carry out its legal responsibilities, and (3) as permitted pursuant to this Agreement or as permitted or required by law.

2.02 Disclosure of Protected Health Information. ehealth shall not disclose Protected Health Information received from the Hospital in any manner that would constitute a violation of the Privacy Standards if disclosed by the Hospital, except that ehealth may disclose Protected Health Information in a manner permitted pursuant to this Agreement or as required by law. To the extent ehealth discloses Protected Health Information to a third party, ehealth must obtain, prior to making any such disclosure: (1) reasonable assurances from such third party that such Protected Health Information will be held confidential as provided pursuant to this Agreement and only disclosed as required by law or for the purposes for which it was disclosed to such third party; and (2) an agreement from such third party to immediately notify ehealth of any breaches of the confidentiality of the Protected Health Information to the extent it has obtained knowledgeof that breach.

2.03 safeguards Against Misuse of Information. ehealth agrees that it will implement administrative, physical and technical safeguards that reasonably and appropriately protect the confidentiality, integrity and availability of Protected Health Information, including information in electronic form.

2.04 Reporting of Disclosures of Protected Health Information. If ehealth becomes aware of a use or disclosure of Protected Health Information in violation of this

3/22/2007 Page 26 of 31

Agreement or any security Incident whether by ehealth or by any third party to which ehealth disclosed Protected Health Information pursuant to section 2.02 of this Agreement, ehealth will report that disclosure to the Hospital.

2.05 Agreements with Third Parties. If ehealth provides Protected Health Information received from Hospital to any agent or subcontractor, ehealth shall obtain the agreement of that agent or subcontractor to be bound by the same restrictions, terms and conditions that apply to ehealth pursuant to this Agreement with respect to such Protected Health Information. ehealth specifically agrees that it will ensure that any such agent or subcontractor agrees to implement reasonable and appropriate safeguards to protect the confidentiality, integrity and availability of Protected Health Information, including information in electronic form.

2.06 Access to Information. Within forty-five (45) days of receipt of a request by the Hospital for access to Protected Health Information about an individual contained in a Designated Record set, ehealth will make available to the Hospital that Protected Health Information for so long as that information is maintained by ehealth in the Designated Record Set. ehealth will· provide access to the Hospital or its agents to the Protected Health Information during regular business hours. In the event any individual requests access directly from ehealth to Protected Health Information received from the Hospital, or created or received by ehealth on behalf of the Hospital, ehealth will forward that request to the Hospital within fifteen (15) days of its receipt. Any denials of access to the Protected Health Information requested shall be the responsibility of the Hospital. ehealth shall provide Hospital with that information in such form as the parties may agree, and Hospital shall pay all costs and other expenses incurred by ehealth in responding to any request.

2.07 Availability of Protected Health Information for Amendment. Within forty-five (45) days of receipt of a request from the Hospital for the amendment of an individual's Protected Health Information or a record regarding an individual contained in a Designated Record set (for so long as ehealth maintains the Protected Health Information in the Designated Record Set), ehealth will incorporate any such amendments in the Protected Health Information.

2.08 Accounting of Disclosures. ehealth agrees to provide to the Hospital any information in ehealth's possession as Hospital reasonably requests in order to permit Hospital to make an accounting to the individual required by 45 CFR § 164.528 for disclosures or uses of Protected Health Information by ehealth.

2.09 Availability of Books and Records. ehealth hereby agrees to make its internal practices, books and records relating to the use and disclosure of Protected Health Information received from, or created or received by ehealth on behalf of, the Hospital available to the secretary of the Department of Health and Human Services for purposes of determining the Hospital's and ehealth's compliance with the Privacy Standards. Notwithstanding the foregoing, nothing contained in this Agreement shall waive any applicable privileges to such disclosure, including but not limited to, the attorney-clien privilege.

3/22/2007 Page 27 of 31

ARTICLE III Obligations of Hospital

3.01 Notice of Privacy Practices. Within fifteen (15) days of the execution of this Agreement, Hospital shall provide ehealth with Hospital's notice of privacy practices produced in accordance with 45 CFR § 164.520. Hospital shall provide ehealth with a copy of any changes or amendments to Hospital's notice of privacy practices at least fifteen (15) days prior to the effective date of those amendments.

3.02 Changes to or Revocation of Patient's Authorization. Hospital will notify ehealth within forty-eight (48) hours of its receipt of any change or withdrawal of consent or authorization by any individual that limits or otherwise affects ehealth's ability to use or disclose any Protected Health Information in connection as authorized by this Agreement.

3.03 Restriction of Use or Disclosure of Protected Health Information. Hospital has not agreed, and shall not agree, to any restriction to the use or disclosure of Protected Health Information that affects ehealth's permitted or required uses and disclosures.

3.04 Receipt of Authorizations. Hospital will obtain all necessary authorizations necessary or desirable to permit ehealth to use or disclosure any Protected Health Information in the performance of its obligations pursuant to the License Agreement or otherwise pursuant to applicable law.

ARTICLE IV Term and Termination.

4.01 Term. This Agreement shall be effective as of the date set forth below and shall terminate and shall continue until termination in accordance with the terms of this Agreement. The confidentiality provisions of this Agreement shall survive its expiration or other termination.

4.02 Termination for Cause by Hospital. In the event of a default by ehealth of the material provisions of this Agreement, and provided that the default remains uncured for a period of thirty (30) days after receipt by ehealth of written notice of default from Hospital (or if the default is such that it is not susceptible to cure within such period if ehealth commences efforts to cure the default that are designed to be completed within a reasonable period of time), then Hospital may terminate this Agreement and at its sole option the License Agreement. If Hospital elects to terminate the License Agreement, Hospital shall not possess any other rights or remedies pursuant to the License Agreement, termination being Hospital's sole and exclusive remedy.

4.03 Termination for Cause by ehealth. In the event of a default by Hospital of the material provision of this Agreement, then ehealth may exercise any rights or remedies granted to ehealth pursuant to the License Agreement. In addition, if the default remains uncured for a period of thirty (30) days from the date of receipt by Hospital of a written notice of default, ehealth may terminate this Agreement.

3/22/2007 Page 28 of 31

4.04 Termination Upon Expiration of License Agreement. This Agreement shall terminate without further action of the parties upon the termination or expiration of the License Agreement.

4.05 Effect of Termination.

(a) Except as provided in Section 4.05(b), upon termination of the Software Agreement for any reason, ehealth shall return or destroy all Protected Health Information received from Hospital, or created or received by ehealth on behalf of Hospital. This provision shall also apply to Protected Health Information that is in the possession of subcontractors or agents of ehealth. ehealth and its subcontractors or agents shall retain no copies, of the Protected Health Information.

(b) In the event that ehealth determines that returning or destroying the Protected Health Information is infeasible, ehealth shall provide to Hospital notification of the conditions that make return or destruction feasible. If ehealth notifies Hospital that return or destruction of the Protected Health Information is infeasible, ehealth's responsibilities under this Agreement regarding the Protected Health Information shall continue after the termination of the Software Agreement for so long as ehealth maintains such Protected Health Information.

ARTICLE V Miscellaneous.

5.01 Notices. All notices given under this Agreement shall be in writing and delivered by a national courier service or by certified mail, return receipt requested, or hand delivered to the address of the recipient shown below. Either party may change its address by notice to the other party, given as provided below:

If to ehealth: 3102 West EndAvenue, Suite 400 Nashville, TN 37203 Attention: Thomas M. Stephenson Phone: 615.383.7300 Fax: 615.383.6093

With a copy to: BoneMcAllester Norton PLLC Nashville City Center, Suite 1600 511 Union Street Nashville, TN 37219 Attention: Keith C. Dennen Phone: 615.238.6340 Fax: 615.238.6301

3/22/2007 Page 29 of31

If to the Hospital: Palo Verde Hospital 250 North First Street Blythe, CA 92225 Attention: cE'o Phone: 7Go - <7"2. I· S 'S-I Fax: _

5.02 Parties Bound. This Agreement binds and inures to the benefit of the parties and their respective successors and permitted assigns.

5.03 Assignment. Neither this Agreement nor the rights and obligations of the parties hereto may be assigned without the prior express written consent of the other party hereto. The parties agree that the requested consent to any such assignment shall not be unreasonably withheld. Any attempt by either party to assign any portion of this Agreement without the prior express written consent of either party shall render such assignment voidable at the election of either party; provided, however, that either party may assign this Agreement to a parent corporation, subsidiary or affiliate or to an unrelated third party acquiring all or substantially all of the assets of a party.

5.04 Severability. If any provision of this Agreement is declared to be invalid or unenforceable by a court of competent jurisdiction, such provisions shall be severed wherefrom and the remaining provisions shall remain binding with the same effect as if such provisions were deleted.

5.05 Construction. This Agreement shall not be construed in any way to create any agreement by and among the parties hereto to form any type of partnership, association, business trust, or joint venture. The purpose of this Agreement is solely to provide for the allocation of responsibilities for maintenance of Protected Health Information that Hospital may provide to ehealth in connection with the provision of services by eheafth pursuant to the License Agreement.

5.06 Entire Agreement. This Agreement states the entire agreement of the parties hereto with respect to the subject matter, and is intended to be the complete and exclusive statement of the terms hereof. This Agreement may not be changed orally and may not be modified or rescinded, except in writing, and signed by the parties hereto.

5.07 Choice of Law. This Agreement, the rights and obligations of the parties hereunder, shall be governed by and in strict accordance with the laws of the State of Tennessee. This Agreement and its subject matter have substantial contacts with Tennessee, and all actions, SUits, or other proceedings with respect to this Agreement shall be brought only in a court of competent jurisdiction sitting in Davidson County, Tennessee, or in the Federal District Court haVing jurisdiction over that county. In any such action, suit or proceedings, such court shall have personal jurisdiction of all of the parties hereto, and service of process upon them under any applicable statutes, laws and rules shall be deemed valid and good.

3/22/2007 Page 30 of 31

I~-5.08 Nature of Agreement. This Agreement shall be binding upon and inure to the benefit

of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors, and assigns, guardians and guardians ad litem.

5.09 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original document and all of Which, taken together, shall be deemed to constitute but a single original document.

5.10 Corporate Authorization. Each individual executing this Agreement on behalf of a corporation or other legal entity represents and warrants that he or she is duly authorized to execute and deliver this Agreement on behalf of the entity in accordance with a resolution of the governing body of the entity duly adopted in accordance with the governance documents of the entity; that this Agreement is binding on the entity in accordance with its terms; and that this Agreement is not in violation of or inconsistent or contrary to provisions of any other agreement to which the entity is a party.

5.11 Regulatory Amendment. In the event any federal, state or local laws or regulations, applicable to Hospital (collectively "Regulatory Standards'') are enacted, amended, withdrawn, repealed, or are interpreted by judicial tribunal, regulatory agency, or other body of competent jurisdiction, including without limitation the Health Care Financing Administration, and the Office of Inspector General of the Department of Health and Human Services, in such a manner as to indicate that any provision of this Agreement violates those Regulatory Standards, and the parties agree within sixty (60) days prior to the effective date of such change such Regulatory Standards, to attempt to negotiate mutual agreements between themselves to amend this Agreement so as to comply with the applicable Regulatory Standards and, to the maximum extent possible, to preserve the relationship intended by this Agreement. In the event the parties are unable to reach an agreement, to the satisfaction of ehealth, by the effective date of the provision, ehealth or Hospital may unilaterally terminate this Agreement upon the effective date of the Regulatory Standards.

5.12. Indemnification by Hospital. Hospital shall indemnify and reimburse ehealth, its officers, directors, shareholders, employees, agents and representatives (the "Indemnified Parties'') for any and all claims, losses, liabilities, damages (including, without limitation, fines, penalties, and criminal or civil judgments and settlements), costs (including, without limitation, court costs) and expenses (including, without limitation, attorney's and accountants' fees) (hereinafter "Loss" or "Losses'') suffered or incurred by the Indemnified Parties as a result of, or with respect to:

(a) Any breach or inaccuracyof any representation or warranty of Hospital;

(b) Any violation of any applicable law by Hospital;

(c) The use or disclosure by ehealth of Protected Health Information as permitted by the terms of this Agreement;

(d) Any liability to any person who is the subject of Personal Health Information provided to ehealth by Hospital;

3/22/2007 Page 31 of 31

(e) ehealth's compliance with the provisions of this Agreement, including Sections 2.06 through 2.09 hereof; and

(f) Any and all actions, suits, proceedings, claims, demands, assessments and judgments incident to any of the foregoing.

5.13 Indemnification by ehealth. ehealth shall indemnify and reimburse Hospital, its officers, directors, shareholders, employees, agents and representatives (the "Hospital Indemnified Parties'') for any and all claims, losses, liabilities, damages (including, without limitation, fines, penalties, and criminal or civil judgments and settlements), costs (including, without limitation, court costs) and expenses (including, without limitation, attorney's and accountants' fees) (hereinafter "Loss" or "Losses") suffered or incurred by the Hospital Indemnified Parties as a result of, or with respect to:

(a) Any breach or inaccuracy of any representation or warranty of ehealth;

(b) Any violation of any applicable law by ehealth in the performance of this Agreement;

(c) The use or disclosure by ehealth of Protected Health Information in a manner other than as permitted by the terms of this Agreement;

(d) ehealth's compliance with the provisionsof Section 4.05 of this Agreement; and

(e) Any and all actions, SUits, proceedings, claims, demands, assessments, and judgments incident to any of the foregoing.

5.14 SUlVival. The respective rights and obligations of ehealth and Hospital under this Agreement shall survive the termination of this Agreement.

ehealth: ehealthcomputing.com

By:

Title:

Date: _~ ~ _

Hospital: Palo Verde Hospital

By: ~b -#J /

Title: CO. O·

Date: Y. V-o ?

3/2'))2007 Page 32 of31

taxes (however designated, levied, or based on the price or on the services sold or licensed or used under this Agreement, other than taxes base on ehealths' income) levied against Hospital or ehealth, immediately when due.

25. WAIVER. No provision of this Agreement shall be deemed waived unless such waiver is contained in a written instrument signed by the party to be charged therewith. Should either party waive any individual default by the other party in writing, such waiver shall not be construed as a waiver of such party's rights upon subsequent defaults, whether or not similar.

26. INDEPENDENT CONTRACTORS. The parties to this Agreement are independent contractors and no agency, partnership, joint venture, or employee-employer relationship is intended or created by this Agreement. Neither party shall have the power to obligate or bind the other party. The Parties further specifically acknowledge, covenant and agree that Hospital at all times controls Hospital Data and Hospital, rather than ehealth, shall be solely responsible with respect to any coding, request for reimbursement and/or submission to any federal or state agency in question in connection herewith and ehealth shall not be, nor function as, nor be deemed to be functioning as, a so-called "billing agency" or "healthcare clearing house" hereunder.

27. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall be taken together and deemed to be one instrument.

28. HIRING OF EMPLOYEES. During the course of this Agreement, and one (1) year thereafter, neither party will, without the prior written consent of the other party, which may be withheld in that parties sole discretion, offer employment to, employ, or subcontract work to any person employed then, or within the preceding twenty-four (24) months, by the other party. This provision shall be binding upon affiliates of both parties.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the day and year first written above.

Palo Verde Hospital ehealthcomputing.com

By: _BY:~ Print Name: "I(: ~ ~ r.>.l\.~ Print Name: Thomas M. Stephenson

Title: C.O· O. Title: President and Chief Operating Officer

Date of Execution: Date of Execution:L/ Y0 7 _

3/22/2007 Page 14 of 31

PALO VERDE HOSPITAL Bringing Health e'7 Care Together Medical Staff Office

250 North First Street Blythe, California 92225

760.921.5142 P 760.921.5170 F

www.mypvh.org

April 26, 2007

Mr. Derek Copple, President Board of Directors Palo Verde Hospital 250 N. First Street Blythe, CA 92225

Re: Medical Executive Committee's Report to Board of Directors

Dear Mr. Copple:

The Medical Executive Committee met on March 17,2007. The committee reviewed the activities of the following committees and departments:

>- Credentials Committees (Refer to Separate Report) >- Quality Council Committee >- Bioethics Committee

I will give a report summarizing those meetings at the Board's meeting.

Sincerely,

--- lV' d ;:-.---.C:::.-;:?,ul_~ ""J ~

Hossain Sahlolbei, MD. Chief of Staff

HS/rr

250 N. First Street. Blythe, CA 92225. (760) 921-5142

PALO VERDE HOSPITAL Bringing Health <& Care Together Medical Staff Office

250 North First Street Blythe. California 92225

760.921.5142 P 760.921.5170 F

www.mypvh.org

PALO VERDE HOSPITAL MEDICAL EXECUTIVE COMMITTEE'S REPORT TO BOARD OF DIRECTORS

COVERING CREDENTIAI_ING STANDARDS March 22, 2007

MSC =Motioned, Seconded, and Carried, Training: P =Professional School, M =Medical School, I =Internship, R =Residency, F =Fellowship, BC =Board Certified, A =Affiliations

Applications in Process (Informational Only)

None

Cecil Bowen, Jr., MD, Radiologist

INITIAL APPOINTMENTS (Board approval required)

REAPPOINTMENTS (Board approval Required)

Action: MEC recommends re-appointment to the Medical Staff, Active status. Recommend approval of requested clinical privileges.

NEW/REVISED ORGANIZATION CHART (Board approval required)

1. Standing Order Policy for Provision of Influenza and Pneumococcal Vaccines

NEW / REVISED PRIVILEGE FORMS (Board approval required) NEW / REVISED POLICIES/ PROCEDURES (Board approval required)

Respectfully submitted on behalf of the MEC:

.> ~Al\l.A 1~

1 of 1

PALO VERDE HOSPITAL

MANUAL: CLS I Effective Date: 04/2007 Revised/Reviewed:

Number:

Title: Standing Order Policy for Provision of Influenza and Pneumococcal Vaccines Page 1 of 2

Procedure:

POLICY:

All patients admitted to our facility will be screened to determine if they are current on adult immunizations. Documentation of the patient's immunization status will be maintained in the medical chart. Consent for vaccination should be obtained from the patient or a family member at the time of admission or anytime afterwards and documented in the:

"Inpatient Pneumococcal/Influenza Immunization Screening IConsent Form."

PURPOSE:

Recognizing the major impact and mortality of both Influenza and Pneumococcal disease on elderly or high risk patients, and the effectiveness of vaccines for reducing health care costs and in preventing illness, hospitalizations and death, our facility has adopted the following policy statement.

1. All patients admitted to our facility should receive the influenza vaccine annually unless there is a documented contraindication or patient declination.

2. All patients over the age of 65 years or at "high-risk" should receive the Pneumococcal vaccine at least once unless there is a documented contraindication or patient declination.

3. The vaccines may be administered by any appropriately qualified personnel who are following our facility protocol without the need for an individual physician evaluation or order.

Vaccinations will be administered just prior to Discharge.

PROCEDURE:

1. All patients admitted to our facility will be screened to determine if they are current on adult immunizations (See Inpatient Pneumococcal/Influenza Immunization Form). Documentation of the patient's immunization status will be maintained in the medical record.

2. Beginning each October and going through January, any patient admitted to our facility will be offered the influenza vaccine unless there is documentation of

PALO VERDE HOSPITAL

MANUAL: CLS I Effective Date: 04/2007 Revised/Reviewed:

Number:

Title: Standing Order Policy forProvision of Influenza and Pneumococcal Vaccines Page 2 of 2

Procedure:

previous immunization for that year or the patient has a documented contraindication or declination. (See "Inpatient Pneumococcal/lnfluenza Immunization Screening IConsent Form".

Vaccine will be administered just prior to Discharge.

3. Pneumococcal immunization status of all "high-risk" patients or > 65 years of age will be determined on admission. Vaccination will be offered to all patients who cannot provide documentation of previous vaccination. Those who are unsure or do not know of their vaccination status will be immunized ("Inpatient Pneumococcalllnfluenza Immunization Screening/Consent Form".

4. These vaccines may be administered by any appropriately qualified personnel who are following our facility protocol without the need for an individual physician evaluation or order. Vaccines will be administered just prior to Discharge. All immunizations will be documented in the medical record.

Reference: MMWR 1197:46 (No. RR-8): 1.24, MMWR 202:51 (No. RR-3): 1-32

- -

WPALO VERDE HOSPITAL llrjnJ;in;. Health 6' (arc Tn,'}.>ther

Inpatient Pneumococcal/Influenza Immunization Screening/Consent Form (Pt InformationSticker)

o Risk Assessment: Choose Vaccine(s) (Check all that apply) Pneumococcal Vaccine1 (Offer year round)

Vaccine indicated (if any of the following): Patient is:

0 65 years of age or older; 0 Residentof nursing home or chronic care facility regardless of age: OR

Patient is age 19-64and has ~ of the following high-risk conditions:

0 Serious long-term health problemwith chronic heartor lung disease (includingasthma), diabetes mellitus,or kidneydisease including nephroticsyndrome

0 Compromised immunitysuch as: Hodgkin'sdisease, leukemia, lymphoma, multiplemyeloma,generalizedmalignancy, HIV infectionor AIDS, organ or bone marrow transplant, treatmentwith long-term corticosteroids, cancerdrugs, or radiation therapy

0 Alcoholism, cirrhosis,or chronic liver disease 0 Sickle cell anemiaor prior splenectomy 0 Cerebrospinal fluid leaks; OR

Patient uncertainabout prior vaccination status or history unreliableand meets the above criteria (vaccinationrecommended - discuss with physician)

None of the above (STOP the Assessment)

Influenza Vaccine2 (October through February)

Vaccine Indicated (if any of the following): Patient is:

0 50 years of age or older 0 Resident of nursing home or chronic care facility regardlessof

~: OR

Adult or child that has ~ of the following high-risk conditions:

0 Serious long-term health problemwith chronic heart or lung disease (including asthma),diabetes mellitus, kidney disease, or anemia and other blood disorders

0 Compromisedimmunitysuch as: Hodgkin's disease, leukemia, lymphoma.multiple myeloma, generalized malignancy, HIV infection or AIDS, organ or bone marrow transplant, treatment with long-term corticosteroids, cancer drugs, or radiation therapy

0 Women who will be past the 3rt! month of pregnancy during the Influenzaseason: OR

Patient uncertainabout prior vaccination status or history unreliable and meets the above criteria (vaccination recommended - discuss with physician)

None of the above (STOP the Assessment)

8 Vaccination Status or Contraindications (Check all that apply)

Pneumococcal vaccine Not Indicated (if any of the following):

0 Previously immunized after age 65 0 Previously immunized before age 65, but < 5 years ago 0 Reported allergy to vaccine 0 Physician order not to give vaccine this admission 0 Patient refuses

Influenza vaccine Not Ind icated (if any of the following):

0 Previously immunized this flu season 0 Ever had a serious allergic reaction to eggs 0 Previous serious reaction to influenza vaccine 0 History of Guillain-Barre syndrome (discuss with

physician) 0 Physician order not to give vaccine this admission 0 Patient refuses

C) Vaccination Decision (Check all that apply - both may be given at same time) Pneumococcal vaccine indicated ­ no contraindications identified (Year Round)

Screening Nurse Signature: RN

Administer vaccine 0.5 cc 1M deltoid:

Lot #: Manufacturer:

Expiration Date: __,__,

Date: Time:

Nurse Administering Vaccine:

Signature RNNN

Patient/Caregiver/Guardian Signature Date

MMWR 1997.46(No. RR 8). 1 24

Influenza vaccine indicated - no contraindications identified (October through FebruarY)

Screening Nurse Signature: RN

Administer vaccine 0.5 cc 1M deltoid:

Lot#: Manufacturer:

Expiration Date: __,__,

Date: Time:

Nurse Administering Vaccine:

Slqnature RNNN

PatienUCareaiverfGuardian Signature Date MMWR 2002.51 (No. RR-3). 1-32 "

u Sfd" SICPHYSICIAN'S ORDERS -RoufIDe Insu ID I ID2 ca e overa2e Do Not

Use U or

u ru q.d.

or Q.D.

q.o.d. orQOD

Use Unit International Units

Day Every Other Day

Do Not Use

Trailing "0" (1.0)

No "0" after

decimal PointUse

Hs or MgS04 MS04 or cc Qhs

mJ

MS

At Magnesium Morphine Bedtime Sulfate Sulfate

No zero before decimal dose (.5mg)

Use "0" before decimal when dose is less than

1

x3d

Times 3 Days or Doses

> and < Apothecary Symbols

Greater than and Less

than

Use Metric System

AS, AD, AU, OS, OD, OU

eye, both eyes

left ear, right ear, both ears, left eye, right

**PICK ONE INSULIN TYPE** Ifno specific selection is made. Regular Insulin will be used with the Moderate Scale.

o Regular Insulin SQ (30 minutes before meals and at HS and ifpatient is tolerating >50% diet)

o Lispro (Humalog) Insulin SQ (when food is in front of the patient and Prior to Bedtime)

Check One 0 0 0 0 NIGHT (HS)

For all scales Except NPO, Tube Feeding, or PPNBGM

Mg/dl

MILD SCALE: NPO, thin/elderly Elderly

MODERATE SCALE

AGGRESSIVE SCALE on steroids or infected

CUSTOM SCALE

<70 FOLLOW

HYPOGLYCEMIA PROTOCOL

FOLLOW HYPOGLYCEMIA

PROTOCOL

FOLLOW HYPOGLYCEMIA

PROTOCOL

FOLLOW HYPO GLYCEMIA

PROTOCOL

FOLLOW HYPOGLYCEMIA

PROTOCOL

70 -150 No Insulin No Insulin No Insulin units No Insulin

151 - 200 2 units 3 units 4 units units No Insulin

201- 250 4 units 6 units 7 units units 2 units

251 - 300 6 units 9 units 10 units units 3 units

301- 350 8 units 11 units 15 units units 4 units

351- 400 10 units 13 units 18 units units 5 units

~ 400 Call MD

12 units 15 units 20 units Units 6 units

BEDSIDE GLUCOSE: 0 Every hours Of, 0 AC & Bedtime Of, 0 4 times per day, or before meals and at bedtime - Should be carried out at 0600, 1100, 1600, and 2100

Guidelines:

Bedside Glucose at 1600 reflects the NPH Morning dose before breakfast Bedside Glucose at 0600 reflects the need or effect of the NPH dose before supper. Bedside Glucose 1100 and 2100 are indicative of the action of regular insulin added to (mixed with) long-term insulin in the AM.

Nursing to Contact MD if any of the following occurs: Patient becomes NPO. When Oral feeding is stopped. Patient has any significant change in status. Fever greater than 1010 F. Persistent nausea, vomiting diarrhea. Unresponsive to treatment or change in level of consciousness.

o Diabetes Education Referral

Physician's Signature Date/Time Nurse's Signature Date/Time

Patient Sticker

PaloVerde Hospital

Hypoglycemic protocol

The following protocol is to be used for patients over the age of 16 years exhibiting hypoglycemia.

Hypoglycemia: Is defined as a blood glucose level of 60 mg/dl or less.

Asymptomatic Patients:

1. Give 8 oz fruit drink or milk. Ifnot followed by a scheduled meal within 30-60 minutes provide a snack of crackers and cheese or crackers and peanut butter.

2. Give 8 oz Apple juice for renal patients due to the high potassium in in orange juice.

3. Give juice only to lactose intolerant patients, not milk or milk products. 4. Patients on glucosoidase inhibitors (Precose) will need either oral

glucose gel or milk. Other sugars will not be absorbed quickly enough. 5. Perform a BEDSIDE GLUCOSE in 15 minutes. 6. IfBEDSIDE GLUCOSE after 15 minutes is:

a. 70 mgldl or less, repeat #1 through #4 as appropriate and perform an ACCUCHECK in ~ 15 minutes.

b. >70 mg/dl, monitor patient with Bedside Glucose every 30 minutes until blood sugar> 100 mg/dl for 3 consecutive tests.

c. If blood sugar is still less than 60 mg/dl then follow the "Symptomatic Patients" below.

7. Notify Physician

Symptomatic Patients:

1. Give 1 amp (50 ml) of D50W Intravenously - Push if IV access is readily available or 1 mg Glucagon Intramuscularly immediately.

2. Perform a STAT Bedside Glucose then every 15 minutes

3. Notify Physician

4. IfBedside Glucose in 15 minutes is:

a. 70 mg/dl or less, repeat #1 and #2

b. >70 mg/dl, monitor patient closely with Bedside Glucose 15 minutes until blood sugar is more than 100 mg/dl for 3 consecutive tests over 3 hours.

PatientSticker

Palo Verde Hospital

AUXILIARYIFOUNDATION UPDATE

VERBAL REPORT

LAFCO UPDATE

VERBAL REPORT

-------------

------------

RESOLUTION NO. 04·2007 #1

RESOLUTION OF THE BOARD OF DIRECTORS OF THE PALO VERDE HEALTHCARE DISTRICT TO ESTABLISH A BUSINESS CASH

MANAGEMENT ACCOUNT.

IT IS HEREBY RESOLVED by the Board of Directors of the Palo Verde Healthcare District to authorize the establishment of a Business Cash Management account at Provident Bank located at 350 E. Hobsonway, Blythe, California.

Provident Bank is authorized to honor and pay any and all checks drawn on the Business Cash Management signed by the authorized signatures on file. Any check over $15,000 shall require two signatures.

In case Palo Verde Hospital needs to transfer funds between accounts at Provident Bank, they may do so on the authority of anyone of the signatures on file. This applies only to transferring funds between accounts at Provident Bank. All transactions moving funds outside of the Bank shall follow the rules for writing checks.

PASSED, APPROVED, AND ADOPTED, at a regular meeting of the Board of Directors of the Palo Verde Healthcare District held on April 26, 2007 by the following vote:

AYES: _

NOES:

ABSENT: _

ABSTAIN:

Derek Copple, President

AITEST:

Mark Bolliger, Secretary, Board of Directors Palo Verde Healthcare District

RESOLUTION NO. 04-2007 #2

RESOLUTION OF THE BOARD OF DIRECTORS OF THE PALO VERDE HEALTHCARE DISTRICT TO ESTABLISH AUTHORITY TO TRANSFER

FUNDS AT PROVIDENT BANK.

IT IS HEREBY RESOLVED by the Board of Directors of the Palo Verde Healthcare District to authorize transfer of funds between accounts located and serviced at Provident Bank, 350 E. Hobsonway, Blythe, California.

Provident Bank is authorized to transfer funds between all accounts at Provident Bank on the authority of anyone of the signatures on file. This applies only to transferring funds between accounts at Provident Bank.

All transactions moving funds outside of the Bank shall follow the rules for writing checks. Any transaction over $15,000 originated by signatures on file at Provident bank shall require two authorizations.

PASSED, APPROVED, AND ADOPTED, at a regular meeting of the Board of Directors of the Palo Verde Healthcare District held on April 26, 2007 by the following vote:

AYES: _

NOES: _

ABSENT: _

ABSTAIN: _

Derek Copple, President

ArrEST:

Mark Bolliger, Secretary, Board of Directors Palo Verde Healthcare District

-----------

-----------

RESOLUTION NO. 04-2007 #3

RESOLUTION OF THE BOARD OF DIRECTORS OF THE PALO VERDE HEALTHCARE DISTRICT AUTHORIZING AN APPLICATION TO

CALIFORNIA HEALTH FACILITIES FINANCING AUTHORITY FORA HELP II LOAN

IT IS HEREBY RESOLVED by the Board of Directors of the Palo Verde Healthcare District authorize an application to the HELP II Loan Program offered by the California Health Facilities Financing Authority.

The Board authorizes Richard Fallon, COO as agent to sign the loan on behalf of the Board.

PASSED, APPROVED, AND ADOPTED, at a regular meeting of the Board of Directors of the Palo Verde Healthcare District held on April 26, 2007 by the following vote:

AYES: _

NOES: _

ABSENT:

ABSTAIN:

Derek Copple, President

ATTEST:

Mark Bolliger, Secretary, Board of Directors Palo Verde Healthcare District

OB/GVN SERVICES AGREEMENT

This Agreement ("Agreement") is made and entered into as of May 1, 2007 (the "Effective

Date") between Palo Verde Healthcare District, a public agency organized and operating

pursuant California Health & Safety Code section 32000 et seq., ("Hospital") and Mohammad

Bakhtavar M.D., ("Director").

R-E-C-I-T-A-L-S

A. Hospital operates an acute care hospital known as the Palo Verde Hospital

("Facility"). Hospital desires to assure OB/GYN service coverage in the OB/GYN Department

("Department) at the Facility.

B. Director is dUly licensed to practice medicine in the State of California ("State"),

and is a qualified specialist in obstetrics and gynecology.

D. Pursuant to the provisions of California Health & Safety Code sections 32121.3

and 32126.5, the Hospital Board of Directors has determined that, in order to serve the best

interests of the public health of the community and to provide quality patient care in a cost­

effective and efficient manner it is necessary for Hospital to contract with Director to provide

OB/GYN services at the Facility.

In consideration of the recitals above and the mutual covenants and conditions

contained herein, Hospital and Director agree as follows:

1. Director's Obligations

a. Services. During the term of this Agreement, Director shall provide

OB/GYN services at Facility and shall supervise the operation of the Department in accordance

with the terms of this Agreement. Director shall: (1) attend any and all meetings within the

Facility that Director is asked to attend by Facility's Chief Executive Officer (the "CEO"); and (2)

perform such other duties at the facility as may from time to time be reasonably requested by

Facility's medical staff, and/or the CEO.

b. Coverage. During the term of this Agreement, Director shall be

responsible for ensuring coverage of OB/GYN services at the Facility's Emergency Room on

24-hour/365 days a year basis or as mutually agreed with the Hospital and the Chief of Staff.

Director shall be allowed to use other qualified Physicians to provide the services required in

this Agreement.

c. Director and Physician Qualifications. Director and each Physician who

provides services on behalf of the hospital in the Department shall be duly licensed and

qualified as a doctor of medicine to practice medicine in the State, shall be a participating

physician in Medicare and in the State's Medicaid program, and shall be approved for

membership and/or clinical privileges on the medical staff of Facility in accordance with Facility's

Medical Staff Bylaws and Rules and Regulations. Director and all Physicians shall be Board

Certified or Board Eligible prior to performing services pursuant to this Agreement. Director

shall provide proof of such certification to Hospital upon Hospital's request.

d. Applicable Standards. Director and each Physician agrees that all

OB/GYN services provided pursuant to this Agreement shall be performed in compliance with all

applicable standards set forth by law or established by the rules and regulations of any federal,

state or local agency, department, commission, association or other pertinent governing,

accrediting or advisory body, including the Joint Commission on Accreditation of Healthcare

Organizations ("Joint Commission") having authority to set standards for health care facilities.

Also, Director and each Physician shall perform all OB/GYN services in accordance with all

Facility bylaws, rules, regulations, procedures, and policies and all Facility medical staff bylaws,

rules, regulations, procedures, and policies. Such bylaws, rules, regulations, procedures, and

policies shall include, without limitation, those relating to timely completion of medical records.

e. Representations and Warranties. Director represents and warrants to

Hospital as follows:

(1) Director is not bound by any agreement or arrangement which

would preclude Director from entering into, or from fully performing the services required under,

this Agreement;

2

(2) Director's license to practice medicine in the State or in any other

jurisdiction has never been denied, suspended, revoked, terminated, relinquished under threat

of disciplinary action, or restricted in any way;

(3) Director's medical staff privileges at any health care facility have

never been denied, suspended, revoked, terminated due to disciplinary reasons, relinquished

under threat of disciplinary action, or made subject to terms of probation or any other restriction;

and

(4) Director has not in the past conducted, and is not presently

conducting, his medical practice in such a manner as to cause Director to be suspended,

excluded, debarred or sanctioned under the Medicare or Medicaid Programs, or any

government licensing agency, nor have they ever been convicted of a criminal offense related to

health care, or listed by a federal agency as debarred, excluded or otherwise ineligible for

federal program participation.

g. Collaboration with Facility. The Hospital and Director agree to collaborate

in identifying personnel and equipment needs that are required to provide quality OB/GYN

services to patients. The Hospital acknowledges that it is financially challenged and

circumstances may arise, including providing proper equipment, initial staffing or anesthesia

coverage which may require the transfer of a patient. Every effort will be made to mitigate such

circumstances. Should such a situation arise, Director shall perform his duties in a medically

prudent manner, using professional judgment and knowledge in transferring or referring to

another provider.

2. Director of OB/GYN Services. Director shall serve as the Medical Director of the

Department of OB/GYN services at the Facility while this Agreement is in effect. Director's

duties as Director shall include:

a. Participating in the educational programs conducted by Facility and its

medical staff in order to assure Facility's overall compliance with accreditation and licensing

requirements, and performing such other reasonable teaching functions as Hospital may

request;

3

b. Directing non-physician Department personnel in the performance of

professional services for patients;

c. Advising Hospital with respect to the selection, retention and termination

of all personnel who may be required for the proper operation of the Department; provided,

however, that Hospital shall retain the ultimate decision-making authority regarding the

selection, retention and termination of all such personnel;

d. Establishing schedules for all services provided by Director or other

Physicians in accordance with the terms of this Agreement;

e. Supervising the development and implementation of Facility quality

assurance and quality improvement programs and procedures in the Department;

f. Assisting Facility in the preparation and conduct of surveys by the Joint

Commission and/or any other national, state or local agency; and

g. Performing any other duties that the medical staff and/or the CEO may

reasonably request.

3. Director's Compensation

a. On-Call Fee. Hospital agrees to pay Director $1000 per day for on-call

emergency room coverage at the Hospital on a 24-hour per day basis. The Director shall

provide on-call coverage 24 hours a day, 365 days a year.. Director shall be responsible for

working with the Chief of Staff in arranging the call calendar and for all locum tenens coverage,

in his absence. The Director shall be responsible for payment of locum-tenens coverage.

Should the Director need to take time off and it is agreed by the Hospital and Chief of Staff the

Directors on-call fee shall be adjusted accordingly.

b. Director Fee. As the Medical Director of the Department of Obstetrics

and Gynecology Services at the Facility, Hospital shall pay Director $3,000 per month as a

Directorship fee for the performance and documentation of the services listed in Section 2

above.

4

c. Space, Equipment, and Supplies During the term of this Agreement, the

Hospital will make available, on a leased basis, office space, utilities, equipment, , including

housekeeping, reasonably necessary for the proper operation of the office practice. The

Hospital will maintain all necessary equipment in good order and repair

d. Medical Practice. The Director will use the medical office space, equipment,

and supplies leased from the Hospital solely for the purpose of fulfilling their duties under this

Agreement. The Practitioners will confine their practice of the Specialty to Blythe, CA except

when practice at other institutions or locations does not impair the fulfillment of the Contractor's

obligations under this Agreement. Director shall maintain a full time practice and residence in

Blythe, CA. during the term of this agreement. Additionally the Director shall work in cooperation

with the Hospital and Medical Staff in securing the services of an additional physician or

practioner capable of providing obstetrical services and sharing his office, at Directors expense.

e. Medi-Cal, Indigent, and Managed Care Programs. The parties

acknowledge that the community has Medi-Cal and other indigent patients. The compensation

for Director to provide obstetric and gynecological services for this patient population is

inadequate. Accordingly, Hospital agrees to pay a flat fee of $10,000 per month to assist

Director in recovering the costs of providing obstetric and gynecological services to these

patients. In consideration of this fee, Director agrees to provide emergency obstetric and

gynecological services to all patients regardless of their ability to pay, and accept Medi-Cal

patients into his office practice. Director also agrees to make a reasonable effort to contract

with third-party payment or managed care programs in which Hospital participates.

f. HMO. PPO and Payor Agreements In the event that the Hospital contracts

with or wishes to contract with a preferred provider organization, a health maintenance

organization, or any other purchaser of health care services, and the terms of the proposed

arrangement include an agreement regarding fees for the Directors services, the Directors will

cooperate with the Hospital in negotiating the terms of the contract and will agree to a rate of

payment or reimbursement that is necessary in order for Contractor to be a party to such

contracts.

5

4. Term

a. The term of this Agreement shall be for two (2) years commencing on the

Effective Date.

5. Termination

a. Termination Without Cause. At any time after expiration of the first year

of this Agreement, (May 1, 2008), either party may, in its sole discretion, terminate this

Agreement without cause by giving the other party at least 60 days' prior written notice. If such

notice is given by Hospital, Hospital may, in its sole discretion, at any time prior to the effective

date of such termination, relieve Director of his duties hereunder, provided Hospital shall

continue to perform its obligations under this Agreement until the effective date of such

termination.

b. Disability. In the event that Director becomes injured, sick or disabled and

is unable to perform the duties of the Director the hospital may immediately terminate this

agreement

c. Termination for Breach. Either party may terminate this Agreement upon

breach by the other party of any material provision of this Agreement, provided such breach

continues for thirty (30) days after receipt by the breaching party of written notice of such breach

from the non-breaching party.

d. Immediate Termination by Hospital. Hospital may terminate this

Agreement immediately by written notice to Director upon the occurrence of any of the following:

(1) the denial, suspension, revocation, termination, restriction, lapse

or voluntary relinquishment of Director's medical staff membership and/or privileges at Facility,

or Director's license to practice medicine in the State;

(2) the death of Director;

(3) the termination, revocation, restriction, or relinquishment of

Director's Drug EnforcementAgency number;

6

(4) the failure of Director to make a disclosure in accordance with

Section 11 hereof;

(5) conduct by Director which, in the sole discretion of Hospital, could

affect the quality of professional care provided to Facility patients or the performance of duties

required hereunder, or be prejudicial or adverse to the best interest and welfare of Facility or its

patients;

(6) breach by Director of any of the confidentiality provisions hereof;

(7) failure by Director to maintain the insurance required under this

Agreement;

(8) closure of Facility, cessation of the patient care operations or sale

or lease of Facility or of all, or substantially all, of Facility's assets; or

(9) Director's conviction of a criminal offense related to health care, or

Director's listing by a federal agency as being debarred, excluded or otherwise ineligible for

federal program participation.

(10) At the request of the Chief of Staff to terminate the service due to

poor performance or service, lack of quality, or other unsatisfactory performance issue.

e. Termination for Changes in Law

(1) In the event that any governmental or nongovernmental agency, or

any court or administrative tribunal passes, issues or promulgates any new, or change to any

existing, law, rule, regulation, standard, interpretation, order, decision or judgment (individually

or collectively, "Legal Event"), which, in the good faith judgment of one party (the "Noticing

Party") (i) may result in a material and adverse effect to either party or (ii) indicates a rule or

regulation with which the Noticing Party desires further compliance, then, in either event, the

Noticing Party may give the other party notice of its intent to amend or terminate this

Agreement, as provided below.

7

(2) The Noticing Party shall give notice to the other party, together with

an opinion of counsel, describing the Legal Event(s) and its consequences to the Noticing Party,

and the Noticing Party's intention to either terminate this Agreement or amend this Agreement,

together with a statement of the purposes therefore and the proposed amendment(s).

(3) If the Noticing Party has elected to terminate this Agreement in

accordance with this Section, then this Agreement shall terminate within 30 days of receipt by

the other party of such notice.

(4) If the Noticing Party has elected to amend this Agreement in

accordance with this Section, then the parties shall have 10 days from the receipt of such notice

by the other party to amend this Agreement. If this Agreement is not so amended, then this

Agreement shall terminate immediately thereafter. Except as otherwise required by applicable

law, any outstanding amounts owed pursuant to this Agreement shall be paid to the date of

such termination, and any obligations under this Agreement that are intended to continue

beyond expiration or termination hereof shall so continue. All opinions of counsel delivered in

accordance herewith shall be deemed confidential, given solely for purposes of renegotiation

and settlement of a potential dispute, and shall not be deemed disclosed so as to waive any

privileges otherwise applicable.

f. Effect of Termination. As of the effective date of termination of this

Agreement, neither party shall have any further rights nor obligations hereunder except: (1) as

otherwise provided herein; (2) for rights and obligations accruing prior to such effective date of

termination; and (3) arising as a result of any breach of this Agreement.

6. Director's Status. Director shall act at all times under this Agreement as an

independent contractor. The parties agree that Hospital shall not have and shall not exercise

any control or direction over the manner or method by which Director provides OB/GYN services.

a. Director shall secure and maintain at all times during the Term, at Director's

sole expense, professional liability insurance covering Director, all Physicians and all of

Director's employees, with a carrier licensed to do business in the State and having at least an

"A" BEST rating, at the following limits:

$1,000,000 per claim/occurrence and $3,000,000 aggregate

8

Such insurance shall not be cancelable except upon 30 days' prior written notice. Such

coverage shall be primary and non-contributory. Director shall annually provide Hospital a

certificate of insurance evidencing such coverage and coverage. This coverage shall be either

(1) on an occurrence basis or (2) on a claims-made basis.

7. Access to Books and Records

a. If the value or cost of services rendered to Hospital pursuant to this

Agreement is $10,000 or more over a 12-month period, in accordance with section 1861(v)(1)(I)

of the Social Security Act, Director agrees as follows:

(1) Until the expiration of four years after the furnishing of such services,

Director shall, upon written request, make available to the Secretary of the United States

Department of Health and Human Services (the "Secretary"), the Comptroller General of the

United States, or their respective duly-authorized representatives, such books, documents, and

records as may be necessary to certify the nature and extent of the cost of such services; and

(2) If any such services are performed by way of subcontract with a

related organization and the value or cost of such subcontracted services is $10,000 or more

over a 12-month period, such subcontract shall contain, and Director shall enforce, a clause to

the same effect as Subsection s.a. (1) above.

b. The availability of Director's books, documents, and records shall be subject

at all times to all applicable legal requirements, including, without limitation, such criteria and

procedures for seeking and obtaining access that may be promulgated by the Secretary by

regulation. The provisions of Subsections s.a, and 9.b. shall survive expiration or other

termination of this Agreement, regardless of the cause of such termination.

8. Confidentiality

9

a. Hospital Information. Director recognizes and acknowledges that, by virtue of

entering into this Agreement and providing services to Hospital hereunder, Director, or

Physician's employed or contracted by Director may have access to certain information of

Hospital that is confidential and constitutes valuable, special and unique property of Hospital.

Director agrees that neither Director nor any Physician will at any time, (either during or

subsequent to the term of this Agreement), disclose to others, use, copy or permit to be copied,

without Hospital's express prior written consent, except in connection with the performance of

Director's, or Physicians' duties hereunder, any confidential or proprietary information of

Hospital, including, without limitation, information which concerns Facility's patients, costs, or

treatment methods developed by Hospital for the Facility, and which is not otherwise available

to the public.

b. Patient Information. Neither Director, or Physician shall disclose to any third

party, except where permitted or required by law or where such disclosure is expressly

approved by Hospital in writing, any patient or medical record information regarding Facility

patients, and Director and Physicians shall comply with all federal and state laws and

regulations, and all bylaws, rules, regulations, and policies of Hospital, Facility, and Facility's

medical staff, regarding the confidentiality of such information. Director acknowledges that in

receiving or otherwise dealing with any records or information from Hospital about Facility's

patients receiving treatment for alcohol or drug abuse, Director, and Physicians are bound by

the provisions of the federal regulations governing Confidentiality of Alcohol and Drug Abuse

Patient Records, 42 C.F.R. Part 2, as amended from time to time.

c. HIPAA Compliance. Director agrees to comply with the applicable provisions

of the Administrative Simplification section of the Health Insurance Portability and Accountability

Act of 1996, as codified at 42 U.S.C. § 1320 through d-8 ("HIPAA"), and the requirements of any

regulations promulgated thereunder, including, without limitation, the federal privacy regulations

as contained in 45 C.F.R. Part 164, and the federal security standards as contained in 45 C.F.R.

Part 142 (collectively, the "Regulations"). Director shall not use or further disclose any protected

health information, as defined in 45 C.F.R. 164.504, or individually identifiable health

information, as defined in 42 U.S.C. § 1320d (collectively, the "Protected Health Information"),

other than as permitted by this Agreement and the requirements of HIPAA or the Regulations.

Director will implement appropriate safeguards to prevent the use or disclosure of Protected

Health Information other than as contemplated by this Agreement. Director will promptly report

to Hospital and Facility any use or disclosures, of which Director become aware of Protected

10

Health Information in violation of HIPAA or the Regulations. In the event that Director contracts

with any agents to whom Director provides Protected Health Information, Director shall include

provisions in such agreements pursuant to which Director and such agents agree to the same

restrictions and conditions that apply to Director with respect to Protected Health Information.

Director will make its internal practices, books and records relating to the use and disclosure of

Protected Health Information available to the Secretary to the extent required for determining

compliance with HIPAA and the Regulations. No attorney-client, accountant-client or other legal

or equitable privilege shall be deemed to have been waived by Director, Hospital or Facility by

virtue of this Subsection.

d. Survival. The provisions set forth herein shall survive expiration or other

termination of this Agreement, regardless of the cause of such termination.

9. Arbitration. Any dispute or controversy arising under, out of or in connection with, or

in relation to this Agreement, or any amendment hereof, or the breach hereof shall be

determined and settled by arbitration in Riverside County, California, in accordance with the

American Health Lawyers Association Alternative Dispute Resolution Service Rules of Procedure

for Arbitration and applying the laws of the State. Any award rendered by the arbitrator shall be

final and binding upon each of the parties, and judgment thereon may be entered in any court

having jurisdiction thereof. The costs shall be borne equally by both parties. During the

pendency of any such arbitration and until final judgment thereon has been entered, this

Agreement shall remain in full force and effect unless otherwise terminated as provided

hereunder. The provisions set forth herein shall survive expiration or other termination of this

Agreement regardless of the cause of such termination.

10. Indemnification. Both parties mutually agree to indemnify and hold each other

harmless from and against all liability, losses, damages, claims, causes of action, cost or

expenses (including reasonable attorneys' fees), which directly or indirectly arise from the

performance of the services hereunder by the indemnifying party, its agents, servants,

representatives and/or employees.

11. Entire Agreement: Modification. This Agreement contains the entire understanding

of the parties with respect to the subject matter hereof and supersedes all prior agreements, oral

11

or written, and all other communications between the parties relating to such subject matter.

This Agreement may not be amended or modified except by mutual written agreement.

12. Governing Law. This Agreement shall be construed in accordance with the laws of

the State of California. The provisions set forth herein shall survive expiration or other

termination of this Agreement regardless of the cause of such termination.

13. Counterparts. This Agreement may be executed in one or more counterparts, all of

which together shall constitute only one Agreement.

14. Notices. All notices hereunder shall be in writing, delivered personally, by certified

or registered mail, return receipt requested, or by overnight courier, and shall be deemed to have

been duly given when delivered personally or when deposited in the United States mail, postage

prepaid, or deposited with the overnight courier, addressed as follows:

If to District, addressed to:

Chief Executive Officer

Palo Verde Healthcare District

250 North First Street

Blythe, California 92225

Fax: 760-921-5151

With a copy to: Law Offices of Jeffrey G. Scott

16935 West Bernardo Drive, Suite 170

San Diego, California 92127

If to Director: Mohammad Bakhtavar, M.D.

205 N. First Street

Blythe, CA 92253

or to such other persons or places as either party may from time to time designate by notice

pursuant to this Section.

12

15. Waiver. A waiver by either party of a breach or failure to perform hereunder shall

not constitute a waiver of any subsequent breach or failure.

16. Captions. The captions contained herein are used solely for convenience and shall

not be deemed to define or limit the provisions of this Agreement.

17. Assignment: Binding Effect. Director shall not assign or transfer, in whole or in part,

this Agreement or any of Director's rights, duties or obligations under this Agreement without the

prior written consent of Hospital, and any assignment or transfer by Director without such

consent shall be null and void. This Agreement shall inure to the benefit of and be binding upon

the parties hereto and their respective heirs, representatives, successors and permitted assigns.

This Agreement is assignable by Hospital without consent or notice.

18. Referrals. The parties acknowledge that none of the benefits granted Director

hereunder are conditioned on any requirement that Director make referrals to, be in a position to

make or influence referrals to, or otherwise generate business for Facility or Hospital.

19. Contracting with Physicians. In no event shall this Agreement be construed in any

way to prohibit, limit or restrain Hospital from entering into a contract or agreement, at any time,

with any other Physician for the provision of medical services at Facility. Director agrees that it

shall not enter into any agreement with, or take any action against, any Physician, which would

prohibit, limit or restrain the Physician from entering into any contract or agreement with Hospital

for the provision of medical services at Facility.

20. Non-Compete. As a material inducement for Hospital to enter into this Agreement,

Director agrees that during the term of this Agreement and any renewal hereof: (1) Director will

not enter into any agreement or arrangement with any other entity to provide similar professional

services without the prior written consent of Hospital; (2) Director will not directly or indirectly

own, operate, manage, be employed by or contract with any non-hospital based entity or

organization which provides similar and/or competitive services within the area of the Hospital,

without the prior written consent of Hospital.

21. Assistance in Litigation. Director, shall cooperate in providing information and

testimony and otherwise assist Hospital in defending against litigation brought against Hospital,

its Directors, officers or employees based upon a claim of negligence, malpractice or any other

cause of action, arising under this Agreement, except where Director, is a named adverse party.

13

"DISTRICT" :

IDated: May 1, 200Z

Palo Verde Healthcare District

"DIRECTOR":

Dated: May 1" 2007

By:

Jeffrey Flood Chief Executive Officer

_ By:

Mohammad Bakhtavar M.D.

_

14

LEASE AGREEMENT

THIS LEASE AGREEMENT is made and executed in Blythe, California, this I" day of May, 2007, by and between PALO VERDE HEALTHCARE DISTRICT ("LANDLORD") and Mohammad Bakhtavar M.D. referred to herein as ("TENANT").

1. Description of Premises. LANDLORD agrees to lease to TENANT, and TENANT agrees to lease from LANDLORD, the commercial property located at 205 North First Street, Suite D Blythe, CA 92225.

2. Commencement and Term of Lease. The term of this Lease shall be for fourteen months commencing on May 1, 2007, and ending August 1, 2008.

3. Rent.

3.1 Rental Amount. The rental amount shall be One Thousand, Two Hundred, and Seventy-Three Dollars and Seventy-Five Cents ($1,273.75) per month, in advance, on the first day of each month, commencing May 1,2007. All rent shall be paid without deduction for any claim, demand, or set off against the LANDLORD.

3.2 Liquidated Damages for Late Rent Payment. TENANT has been advised and agrees that it would be extremely difficult for the LANDLORD to affix the actual damages suffered as the result of TENANT's failure to pay rent on the date it is due. Among other things, damages include additional administrative time involved in collecting the rent, loss of the time value of this money, and, in some circumstances, inability of the LANDLORD to meet his own obligations. TENANT therefor agrees that should he fail to pay any rent within five (5) consecutive days of the date it is due, TENANT shall pay an additional amount equal to five percent (5%) [$194.25] of the overdue amount. The parties agree that this additional charge represents a fair and reasonable estimate of the costs the LANDLORD would incur as the result of the TENANT's late payments. Acceptance of this additional charge by the LANDLORD shall in no event constitute a waiver of the TENANT's default with respect to the overdue amount nor prevent the LANDLORD from exercising any other rights or remedies provided by this Lease Agreement or by law.

4. Security Deposit. In addition to prepaid rent, TENANT agrees to deposit Three Hundered Dollars ($300.00) with LANDLORD as a security deposit for the performance by TENANT of the provisions of this Lease. LANDLORD may use the security deposit, or any portion of it, to cure the default or to compensate LANDLORD for damages sustained by LANDLORD resulting from TENANT's default or arising from TENANT's use of the premises beyond normal wear and tear. If TENANT is not in default at the expiration or termination of this Lease or if LANDLORD has not used the deposit for repairs, LANDLORD shall return any unused portion of the security deposit to TENANT. LANDLORD shall not be required to pay TENANT interest on the security deposit.

-1­

5. Rules and Regulations. TENANT agrees to conform to the reasonable rules and regulations imposed by LANDLORD from time to time and after ten (10) days' prior written notice thereof from LANDLORD to TENANT.

6. Use and Acceptance of Premises.

6.1 Use of Premises. The premises shall be used and occupied by the TENANT for office purposes.

6.2 Acceptance of Premises by TENANT. TENANT accepts the premises as being in good and sanitary order, condition, and repair. TENANT further agrees to surrender the leased premises to LANDLORD in the same condition as when received, reasonable wear and tear excluded. LANDLORD shall conduct a physical inspection with TENANT.

6.3 No Representations by LANDLORD. TENANT acknowledges that neither the LANDLORD, nor any of the LANDLORD's agents, servants, brokers, or employees, have made any representations or warranties, whether express or implied. TENANT takes possession of the premises "as is."

6.4 TENANT to Comply with All Laws and Regulations. TENANT agrees not to use any portion of the premises in a manner which is in violation of any applicable law, ordinance, or regulation, or which may be dangerous to life, limb or property.

6.5 Noises and Odors. The TENANT shall not make or permit any noise or odor that is objectionable to other tenants of the building to emanate from any portion of the leased premises, nor shall the TENANT create or maintain any nuisance anywhere on the property.

6.6 Injunctive Relief. The parties mutually agree that, in certain cases, it would be impossible to compensate the LANDLORD in damages for violations by the TENANT of any of the paragraphs specified in this section. These violations may be restrained by the LANDLORD by way of a petition for injunction.

7. Utilities, Maintenance and Repairs.

7.1 Utilities. TENANT Shall be responsible for paying all electric, garbage, and water utility charges for the leased premises. TENANT shall be responsible for installation and maintenance of telephones or any other utility charges. LANDLORD shall be responsible for providing weekly janitorial services for TENENT.

7.2 Maintenance and Repair. TENANT shall be responsible for maintaining and repairing the leased premises. TENANT shall also be responsible for repairing any damage caused by TENANT to the property or leased premises.

8. Alterations, Improvements and Mechanic's Liens. TENANT shall not make any alterations, improvements or additions to any of the leased premises without obtaining the prior

-2­

written consent of the LANDLORD. TENANT shall keep the leased premises free from all liens, encumbrances, or other charges arising from any work performed, materials furnished or obligations incurred by the TENANT and shall hold LANDLORD harmless from any liability.

9. Indemnity. The TENANT shall indemnify and hold the LANDLORD harmless from and against any and all losses, costs, expenses or other fees or charges of whatever type of nature arising from the TENANT's use of the premises.

10. Damage or Destruction.

10.1 Partial Damage - Insured. If the leased premises are partially damaged and the damage was caused by a casualty covered under an insurance policy maintained by LANDLORD, LANDLORD shall repair the damage at LANDLORD's expense as soon as reasonably possible thereafter. LANDLORD's obligation to repair under this paragraph 10.1 shall not include any damage to the TENANT's personal property.

10.2 Partial Damage - Uninsured. If a portion of the leased premises are damaged as a result of the negligent or willful act of the TENANT or TENANT's guests or invitees, it shall be the responsibility of the TENANT to make the repairs at TENANT's own expense, whether or not the damage is insured. If the damage is caused by a casualty not covered by any insurance specified in this Lease, and is not due to the negligence or willful act of the TENANT or TENANT's guests or invitees, the LANDLORD may elect to either terminate this lease or to repair such damage as soon as reasonably possible at the LANDLORD's expense. The Lease shall remain in full force and effect without any abatement of the rent.

11. Assignment and Subletting.

11.1 LANDLORD's Consent Required. TENANT shall not voluntarily or by operation of law assign, transfer, mortgage, sublet or otherwise transfer or encumber all or any portion of the leased premises without obtaining the LANDLORD's prior written consent, which shall not be unreasonably withheld. Any assignment or subletting without the prior written consent of the LANDLORD shall be void and shall, at the option of the LANDLORD, terminate this Lease.

11.2 Effect of Assignment or Sublease on TENANT. Regardless of the LANDLORD's consent, no subletting or assignment shall relieve TENANT of the TENANT's obligations or alter the primary liability of the TENANT to pay the rent and to perform all other obligations to be performed by the TENANT pursuant to this Lease. The acceptance of rent by the LANDLORD from any other person shall not be deemed to be a waiver by the LANDLORD of any provision of this paragraph 11.2.

12. Subordination. This Lease shall be subordinate to any mortgage or deed of trust which the LANDLORD now has or may acquire in the future against the demised premises without further action by any party. The TENANT agrees to execute such additional agreements as may be reasonably required to facilitate the encumbrance or sale of the property by the LANDLORD.

-3­

13. Default - Remedies.

13.1 Events Constituting a Default. The occurrence of any of the following events, singly or in combination, shall constitute a material breach of this Lease:

13.2 Any part of the TENANT's interest is assigned or transferred, except such subletting as may be permitted by this Lease, either voluntarily or by operation of law without the LANDLORD's prior written consent.

13.3 The TENANT abandons the premises. Section 17 shall govern as to when an abandonment has occurred.

13.4 The TENANT fails to make any payment of rent or any other payment required by this Lease for a period of three (3) consecutive days after the TENANT has received written notice of the arrearage from the LANDLORD.

13.5 The TENANT fails to observe or perform any of the covenants, conditions, or provisions of this Lease required of the TENANT where such failure continues for a period of thirty (30) consecutive days after written notice of the breach from the LANDLORD to the TENANT. However, if the TENANT's default is such that more than thirty (30) days are reasonably required to cure the default, the TENANT shall not be deemed to be in default if the TENANT commenced the cure within thirty (30) consecutive days following the notice and thereafter diligently prosecutes the cure to completion.

13.6 Any voluntary or involuntary petition in bankruptcy, or for reorganization, or for an arrangement or for any other chapter proceeding under the Federal Bankruptcy Act as amended from time to time if filed by or against the TENANT, or if the TENANT is adjudged bankrupt or insolvent, or if the received is appointed for any portion of the business or assets of the TENANT, except a receiver appointed at the request of the LANDLORD, or if the TENANT makes a general assignment or any assignment for the benefit of its creditors.

13.7 LANDLORD's Remedies in Event of Default. If the TENANT is in default as specified in paragraph 14.1 above, the LANDLORD may, at any time thereafter, with or without notice of demand, and without limiting the LANDLORD in the exercise of any right or remedy which the LANDWRD may have by reason of such default or breach, terminate the TENANT's right to possession of the premises, in which case the Lease shall terminate and the TENANT shall immediately surrender possession of the premises to the LANDLORD. Thereafter, the LANDLORD shall be entitled to recover from the TENANT damages in the amount equal to any holdover period by TENANT.

14. Surrender of Lease not Merger. A voluntary or other surrender of this Lease by the TENANT, or a mutual cancellation of this Lease, shall not work a merger of the interests of LANDLORD and TENANT without the prior written consent of the LANDLORD.

4

15. Abandonment. California Civil Code section 1951.3 or any successor shall govern with respect to abandonment of the premises by TENANT and with respect to the rights and liabilities of the parties following abandonment.

16. No Waiver. Failure of the LANDLORD to insist upon the strict performance of any agreement, covenant or condition of this Lease, or to exercise any option contained in this Lease, shall not be construed as a waiver or relinquishment of any such agreement, covenant, condition or option. All other agreements shall remain in full force and effect.

17. Notices. All notices to be given to the LANDLORD or the TENANT may be given in writing personally or by depositing the notice in the United States mail, postage prepaid, and addressed to the other party as follows:

LANDLORD: Palo Verde Healthcare District 250 North First Street Blythe, CA 92225 Attn: Chief Executive Officer

TENANT: Mohammad Bakhtavar M.D.

205 N. First Street Suite D

Blythe, Ca. 92225

18. General Provisions.

18.1 Severability. The terms, covenants and conditions of this Lease shall be interpreted wherever possible consistent with applicable laws and regulations. To the extend any such term, covenant or condition, as interpreted, is invalid or unenforceable, the remaining terms, covenants and conditions of this Lease shall remain in full force and effect.

18.2 Time of Essence. Time is of the essence in all obligations required by this Lease.

18.3 Final Agreement. This Lease contains all representations and understandings between the parties with respect to the subject matter of this Lease. No prior agreement or understanding pertaining to any matter specified in this Lease shall be effective. This Lease may be modified in writing only, signed by the parties in interest at the time of the modification.

18.4 Attorney's Fees. If either party brings an action to enforce or interpret the terms of this Lease, the prevailing party in any such action or arbitration proceeding, whether on trial or appeal, shall be entitled to his reasonable attorney's fees in addition to any other relief.

18.5 LANDWRD's Access. LANDLORD and LANDLORD's agents shall have the right to enter the premises at reasonable times for the purpose of inspecting the premises, showing the premises to prospective purchasers or lessees, and to make alterations,

5

repairs, improvements or additions to the premises or to the resident as the LANDLORD deems necessary or desirable in its sole discretion. The LANDLORD may at any time place "For Sale" signs on the premises. The LANDLORD may also place "For Lease" signs on or around the leased premises during the last ninety (90) days of this Lease, all without rebate of rent or liability to the TENANT.

18.6 Meaning of "Consecutive Days". The term "consecutive days" as used in this Lease means each day during the period specified, including all Saturdays, Sundays and holidays.

18.7 Venue. Venue shall lie only in the state or federal courts in our nearest to the City of Blythe, County of Riverside, California.

IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement as of January 1, 2007.

"LANDLORD":

"TENANT":

6

PALO VERDE HOSPITAL KEY STATISTICS

March 2007

CURRENT YTD CURRENT FIXED YTD FIXF;D ACTUAL BUDGET VARIANCE 0/0 ACTUAL BUDGET VARIANCE %-­

Discharges: 209 149 60 40.3% 1,582 1,472 110 7.5%

Patient Days: 693 476 217 45.6% 5,371 4,840 531 11.0%

Average Length of Stay 3.3 3.2 0.1 3.8% 3.4 3.3 0.1 3.3%

Average Daily Census 22.4 15.4 7.0 45.9% 19.6 17.7 1.9 11.0%

Newborns 25 12 13 108.3% 142 143 (1) -0.7%

Emergency Visits 762 775 (13) -1.7% 6,708 6,480 228 3.5%

Outpatient Registrations 2,040 2,051 (11 ) -0.5% 17,614 16,957 657 3.9% (Includes ER Visits)

Surgery Cases: Inpatient 32 14 18 128.6% 190 203 (13) -6.4% Outpatient 60 77 (17) -22.1 % 416 493 (77) -15.6% Endscopic Procedures 23 27 (4) 0.0% 256 240 16 6.7%

Total Surgery Cases 115 139 (24) -17.3% 862 936 (74) -7.9%

Adjusted Patient Days 1,193 847 346 40.9% 9,346 8638 708 8.2%

Productive FTE 169.7 0.0 169.7 0.0% 163.3 0.0 163.28 0.0%

Total FrE 183.2 0.0 183.2 0.0% 175.8 0.0 175.79 0.0%

Productive FTE!Adj. Occ. Bed 4.13 4.13 0 4.46 4.46 0.0%

Total FrE! Adj. Occ. Bed 4.87 4.87 0 5.15 - 5.15 0.0%

Days Cash on Hand 16.5

Days in AR Gross $'s 52.6

Days in AP 21.2

PALO VERDE HOSPITAL

Balance Sheet March,2007

March February ASSETS 2007 2007

Current Assets Cash $ 1,118,806 $ 909,301 Short-term Investments 0 0

Cash and Equivalents 1,118,806 909,301

Patient Accounts Receivable 12,383,258 12,550,128 Accounts Receivable Reserves (8,912,443) (9,010,248)

Net Accounts Receivable 3,470,815 3,539,880

Other Accounts Receivable 205,933 192,848 Inventory 823,769 846,166 Prepaid Expenses 284,749 279,461 Other Assets 0 0

Total Other Assets 1,314,451 1,318,475

Fixed Assets Land 125,926 125,926 Buildings 996,280 996,280 Major Equipment 1,691,237 1,651,859 Work In Progress 186,658 185,933 Total Plant & Equipment 3,000,101 2,959,998 Accumulated Depreciation (902,378) (846,752) Net Fixed Assets 2,097,723 2,113,246 Other Assets 0 0

TOTAL ASSETS $ 8,001,795 $ 7,880,902

LIABILITIES & EQUITY Current Liabilities Accounts Payable $ 1,435,795 $ 984,598 Other Accounts Payable 134,694 249,544 Accrued Payroll & Benefits 884,396 1,103,101 Accrued State & Federal TXs 0 0 Accrued Interest Expense 33,879 29,816 Accrued Other Liabilities 275,706 273,554 Current Portion LT Debt 0 0

Total Current Liabilities 2,764,470 2,640,613

Long- Term Liabilities LifePoint Loan 0 0 City Loan 0 0 Mortgage 975,126 975,126 Capitalized Leases 0 0 Other Long-Term Liability 0 0

Total Long-Term Liabilities 975,126 975,126 TOTAL LIABILITIES 3,739,596 3,615,739

EQUITY RETAINED EARNINGS 4,341,217 4,341,217 CURRENT YEAR PROFIT/(LOSS) (79,018) (76,054)

NET EARNINGS 4,262,199 4,265,163 TOTAL LIAB & NET EARNINGS $ 8,001,795 $ 7,880,902

PALO VERDE HOSPITAL

Statement of Revenues, Expenses & Changes In Net Assets

For the Nine Months Ended March 31, 2007

Current Month· Fixed Budget Year to Date· Fixed Budget

Actual Budget Variance Var% \verage YTD Actual YTD Budget Variance Var 0,10

Operating revenues:

$ 7,075,499 6,747,810 327,689 4.9% Gross Revenue $ 56,118,906 $55,694,091 424,815 0.8%

(4,231,525) (3,576,081) (655,444) 18.3% Less: Contractual Allowances (31,885,971) (29,678,322) (2,207,649) 7.4%

(295,566) (417,298) 121,732 -29.2% Bad Debt (2,475,660) (3,462,773) 987,113 -28.5%

(208,335) (404,509) 196,174 -48.5% Charity (2,894,470) (3,352,920) 458,450 -13.7%

(4,735,426) (4,397,888) (337,538) 7.7% Total contractual Allowances (37,256,102) (36,494,015) (762,086) 2.1%

2,340,073 2,349,922 [9,849) -0.4% Net patient service revenue 18,862,805 19,200,076 (337,271) 2.6%

33.1% 34.8% 33.6% 34.5%

11,868 14,192 (2,324) -16.4% Other revenue 168,842 131,884 36,958 28.0%

2,351,941 2,364,114 (12,173) -0.5% Total operating revenues 19,031,647 19,331,960 (300,313) -1.6% -­

Operating expenses:

1,066,187 1,051,674 14,513 1.4% Salaries and wages 8,224,633 8,648,823 (424,190) -4.9%

178,086 185,261 (7,175) -3.9% Benefits 1,151,864 1,222,054 (70,190) -5.7%

129,268 99,215 30,053 30.3% Contract labor 1,530,947 1,394,956 135,991 9.7%

164,832 180,000 (15,168) -8.4% Physician fees 1,386,203 1,375,356 10,847 0.8%

67,915 74,925 (7,010) -9.4% Professional Fees-Non Medical 605,683 584,398 21,285 3.6%

256,759 196,038 60,721 31.0% Supplies 1,817,870 1,682,349 135,521 8.1%

208,847 161,320 47,527 29.5% Purchased Svcs-Non-Medical 1,931,632 1,896,395 35,237 1.9%

16,972 65,528 (48,556) -74.1% Repairs/maintenance 191,919 350,813 (158,894) -45.3%

40,060 50,895 [10,835) -21.3% Rents & Leases 379,801 406,348 [26,547) -6.5%

45,910 34,406 11,504 33.4% Utilities 381,825 368,960 12,865 3.5%

91,469 61,131 30,338 49.6% Insurance 619,390 611,959 7,431 1.2%

700 100 600 NA Licenses & Taxes 28,335 13,326 15,009 112.6%

5,381 4,830 551 11.4% Interest expense 46,514 40,291 6,223 15.4%

3,443 2,656 787 29.6% Dues & Subscriptions 29,492 25,912 3,580 13.8%

16,939 3,900 13,039 334.3% Travel & Training 111,455 82,039 29,416 35.9%

6,989 9,502 (2,513) -26.4% Other Operating Expense 132,902 120,630 12,272 10.2%

55,626 55,626 0.0% Depreciation and amortization 543,233 543,233 0.0%

2,355,383

(3,442)

2,237,007

127,107

118,376

(130,549)

5.3%

-102.7%

Total operating expenses

Operating gain (loss)

19,113,698

(82,051)

19,367,842

[35,882)

(254,144)

(46,169)

-1.3%

128.7%

476

476

57

57

419

(419)

0.0%

0.0%

0.0%

Non-operating revenues [expenses):

Investment income

Other

Total non-op revenues [expenses)

3,033

3,033

2,300

2,300

(733)

733

0.0%

0.0%

0.0%

12,966)

(2,966)

127,164

127,164

130,130

130,130

102.3% Excess./Ideficit) of revenues over exp

1ncrease/(Decrease) in net assets

(79,018)

(79,018)

(33,582)

(33,582)

[45,436)

(45,436)

135.3%

PALO VERDE HOSPITAL INCOME STATEMENT

FOR THE PERIOD ENDING MARCH 31, 2007

151 Quarter OCTOBER NOVEMBER DECEMBER JANUARY FEBUARY MARCH APRIL MAY JUNE TOTAL OPERATING REVENUES Gross Revenue 17,272,796 5,845,415 5,737,546 6,204,492 7,364,711 6,618,447 7,075,499 0 0 0 56,118,906

Less: Contractual Allowance 11,054,590 3,770,292 3,814,128 4,404,018 4,954,624 4,523,025 4,735,426 0 0 0 37,256,102 -----------­ -----------­ -----------­ -----------­ -----------­ -----------­ -----------­ -----------­ -----------­ -------------­

Net Patient Revenue 6,218,206 2,075,123 1,923,418 1,800,474 2,410,087 2,095,422 2,340,073 0 0 0 18,862,804 Other Revenue 28,632 32,400 8,563 24,934 28,372 34,073 11,868 0 0 0 168,842

----------­ ---------­ -_.._-------­ ----------­ -----------­ ----------­ -----------­ -----------­ ---..------­ -------------­

Total Operating Reve 6,246,838 2,107,523 1,931,981 1,825,408 2,438,459 2,129,495 2,351,941 0 0 0 19,031,646 ---------­ ------- ..._--­ -----------­ -----------­ -----------­ -----------­ ----------..- -----------­ ----------­ ------------­

OPERATING EXPENSES Salaries 2,460,166 851,731 918,042 961,034 1,064,565 902,679 1,066,187 0 0 0 8,224,404 Benefits 334,974 115,316 133,333 78,026 158,721 153,636 178,086 0 0 0 1,152,093 Contract Labor 486,642 270,981 193,622 146,066 166,829 137,539 129,268 0 0 0 1,530,946 Pro Fees - Medical 395,463 176,096 136,342 127,453 215,421 170,596 164,832 0 0 0 1,386,204 Pro Fees - Non-medic 174,114 87,899 54,644 42,966 80,530 97,615 67,915 0 0 0 605,683 Supplies 484,695 226,358 209,919 185,381 225,818 228,940 256,759 0 0 0 1,817,872 Purchase Svcs- Non-m 568,827 232,462 292,470 191,915 193,440 243,671 208,847 0 0 0 1,931,632 Repairs and Maintena 30,604 69,825 23,704 27,571 8,445 14,798 16,972 0 0 0 191,919 Rents and Leases 116,302 50,076 44,979 43,791 36,103 48,490 40,060 0 0 0 379,800 Utilities and Telephone 153,249 49,220 41,017 25,452 34,243 32,734 45,910 0 0 0 381,824 Insurance 188,045 97,419 94,828 48,092 56,469 43,068 91,469 0 0 0 619,390 Licenses and Taxes 3,532 2,790 4,383 2,321 13,871 738 700 0 0 0 28,335 Interest Expense 15,906 5,786 4,063 4,616 5,381 5,381 5,381 0 0 0 46,513 Dues and Subscription 8,237 244 4,367 5,097 6,189 1,915 3,443 0 0 0 29,491 Travel and Training 10,819 15,382 20,832 23,305 15,423 8,755 16,939 0 0 0 111,457 Other Operating Expenses 73,000 8,792 6,477 3,853 13,669 20,122 6,989 0 0 0 132,901 Depreciation and Amort 211,245 53,858 55,626 55,626 55,626 55,626 55,626 0 0 0 543,233

-----------­ -----------­ - .._--------­ -----------­ -----------­ -----------­ -----------­ ----------­ -----------­ -----------­ -------------­Total Operating 5,715,820 2,314,235 2,238,648 1,972,565 2,350,743 2,166,303 2,355,383 0 0 0 19,113,697

-----------­ ----------­ -----------­ -----------­ -----------­ -----------­ ----------­ -------_.....­ ...----------­ -----------­ -------------­Operating Gain 531,018 -206,712 -306,667 -147,157 87,716 -36,808 -3,442 0 0 0 -82,051 NON-OPERATING REVENUES ( Investment Income 219 167 17 57 321 107 476 0 0 0 3,032 Other 0 0 0 0 0 0 0 0 0 0 0

-----------­ -----------­ -----------­ -----------­ -----------­ -------_..._-­ -----------­ -----------­ -----------­ -----------­ --------------InclDec in Net Assets 531,237 -206,545 -306,650 -147,100 88,037 -36,701 -2,966 0 0 0 -79,019

======== ======== ========= ======== ======== ======== ======== ======== ======== ======== ========

February 26, 2007

Mr. Richard Fallon, President Advanced Hospital Management 7343 Ronson Road, Suite J San Diego, CA 92111

PALO VERDE HEALTHCARE DISTRICT

Assessed Valuation and Parcels by Land Use

Local Secured Non-Residential: Agricultural Commercial Vacant Commercial Professional/Office Industrial Recreational Govemment/SocialJInstitutional Vacant DesertIVacant Other Miscellaneous

Subtotal Non-Residential

2005-06 Assessed Valuation

$208,800,073 110,409,853

12,349,518 13,924,038 25,695,683

1,444,612 12,072,176 24,198,012

640,040 $409,534,005

%of Total

26.45% 9,91 l.ll 1.25 2.31 0.13 1.08 2.17 0.06

36.74%

No. of Parcels

1,875 382 299

44 96 39

244 1,854

162 4,995

%of Total

18.13% 3.69 2.89 0.43 0.93 0.38 2.36

17.93 1.57

48.30%

Local Secured Residential: Single Family Residence Condominium/Townhouse Mobile Home Mobile Horne Park 2+ Residential Units Vacant Residential

Subtotal Residential

$253,813,316 4,220,584

36,475,690 7,154,322

58,856,168 19,377,773

$379,897,853

22.77% 0.38 3.27 0.64 5.28 1.74

34.08%

3,091 85

1,219 21

297 ~ 5,346

29.89% 0.82

11.79 0.20 2.87 6.12

51.70%

Total Local Secured Roll $789,431,858 70.83% 10,341 100.00%

Total Utility RollJBlythe Energy $285,929,437 25.65%

Total Unsecured Roll $39,233,753 3.52%

Total 2005-06 Assessed Valuation $1,114,595,048 100.00%

JC

"Equitable Healthcare Accessibility for California"

The Mission of the Office outcomes, assuring the

of Statewide Health Plan­ safety of buildings used

ning and Development in providing healthcare,

(OSHPD) is to promote insuring loans to encour­

healthcare accessibility age the development of

through leadership in healthcare facilities, and

analyzing California's facilitating development

healthcare infrastructure, of sustained capacity for

promoting a diverse and communities to address

competent healthcare local healthcare issues.

workforce, providing infor­

mation about healthcare

Inside this booklet: Cal-Mortgage is a Divi- guaranteed by the "full facilities to develop or

sion of the Office of faith and credit" of the expand their services in

Who is OSHPD? 1 Statewide Health Plan- State of California. This communities throughout

ning and Development guarantee permits bor- California. The Program

Who is Cal-Mortgage? 1 (OSHPD). Cal-Mortgage rowers to obtain lower isdesigned to improve

administers the California interest rates similar to access to needed Who do we Insure? 2 Health Facility Construc- the rates received by healthcare services with­

tion Loan Insurance the State of California. out cost to taxpayers. Why use Cal-Mortgage? 2 Program (Program). The The Cal-Mortgage state

Modeled after federalProgram provides credit Plan, which is available

Steps in the Process 3 home mortgageenhancement for eligi- on request, describes the

insurance programs, theble healthcare facilities Program's goals and

Cal-Mortgage Contact 4 Loan Insurance Program when they borrow objectives.Information has made it possible for money for capital needs.

Cal-Mortgage History 4 nonprofit health care and Accomplishments OSHPD insured loans are

Children's Institute

International

Insured since 1992

Page 2

Esther & Jacques Reutlinger

Community for Jewish Living

Insured since 1997

As a government agency, we

are held accountable for our

actions, In fact, this

accountability is one of the

prime factors that separates

governmental from private

sector organizations. At

OSHPD we are accountable to

the people of California. as

well as to their representatives.

including our Administration

and members of the

Legislature. We are also

accountable to those who

depend on our services. such

as healthcare facilities and

health professionals to name

two examples. This

accountability generates

certain expectations for our

actions.

Lodi Memorial Hospital Insured since 2000

Eligible Health Facilities must be owned and operated by private nonprofit public benefit corporations or politi­cal subdivisions such as cities, counties, health­care districts or joint powers authorities. Health facilities eligible for Cal-Mortgage Loan Insurance include:

• Hospitals, of any type

• Skilled nursing facili­ties

• Intermediate care facilities

• Public health cen­ters

• Clinics and other outpatient facilities

California's unique Loan Insurance Pro­gram can play an im­portant role for eligible health facilities consid­er.ing financing a capi­tal project. The State loan insurance allows non-profit and public health facilities to bor­row using the State's credit rating, thus po­tentially lowering the facility's overall bor­rowing costs. The In­surance provides a guarantee of pay­ment of principal and interest should the health facility be un­able to meet its debt payment obligations.

• Multi-level facilities [which include a residential facility for the elderly oper­ated in conjunction with an intermedi­ate care facility, a skilled nursing facil­ity, or a general acute care hospi­tal)

• Laboratories

• Community mental health centers

• Facilities for the treatment of chemical depend­ency

• Child day care fa­cilities in conjunc­tion with a health facility

• Adult day health centers

Unlike other public bond insurance com­panies, Cal-Mortgage will consider below in­vestment grade bor­rowers for needed health facilities. Cal­Mortgage offers a re­duced premium struc­ture for rated borrow­ers based on their credit rating.

The loan insurance is unconditional and irrevocable for the life of the loan.

Cal-Mortgage staff have a wide range of skill and utilize a vari­ety of consultants when necessary to as-

Cal-Mortgage loan Insurance Program

• Group homes

• Facilities for the developmentally disabled or mentally disordered

• Offices and central service facilities op­erated in connec­tion with a health facility

Loans may be insured to finance or refinance the construction of new facilities; to ac­quire existing buildings; to expand, modernize, or renovate existing buildings; and to fi­nance fixed or move­able equipment needed to operate the facility.

sist insured borrowers in those cases where the continuation of needed health ser­vices is in jeopardy.

Unlike other credit en­hancements that must be periodically re­newed,Ca~Mortgage

Loan Insurance exists for the life of the loan.

As part of this continu­ing relationship, Cal­Mortgage maintains an interest in its insured borrower's operations and stands ready to assist them should the need arise.

Page 3

Preliminary Project potential issues and to sis and advice with re- In an attempt to Review provide guidance on spect to the applica- achieve the lowest

the rest of the applica- tion. After its delibera- market interest rate Upon receipt of an tion process. tion, the ALiC votes available for insured inquiry for loan insur­ whether to recorn- bonds, the California once. Cal-Mortgage Formal Application mend the project to state Treasurer's Of-staff will review the Review the Director for cp- fice acts as "pricing proposed project and proval. agent" for all insured A $500.00 applicationfinancing to deter- loans. The Applicant isfee payable to themine the eligibility of Issuance of responsible for costs "Office of Statewide the Applicant, the Conditional Loan associated with this Health Planning andcommunity need for Insurance service.Development" is re­the facility, and the Commitment

quired when submit-general feasibility of Closing the Insured ting a formal applica- If the Director concurs the project. Loan tion. with the recommen-

To be eligible for loan dation of Staff and the Prior to the closing of After review of the ap­insurance the Appli- ALiC to approve the the insured loan, the plication materials,cant must be a non- application, OSHPD Applicant must satisfy Cal-Mortgage staffprofit public benefit will issuea Conditional all conditions included determines whether orcorporation or a politi- Letter of Commitment in the Conditional Let-not to recommendcal subdivision, and to insure the loan. This ter of Commitment. approval of the pro-assure that its services Letter specifies the fi­[ect. and under what Minimum collateral forwill be available to all nal conditions the Ap­conditions. If approval insured loans includes: persons residing in the plicant must meet is recommended, thefacility's service area. prior to the sale of the A. A first lien on theApplicant will beFor additional detail bonds and the closing Applicant's interestscheduled for a meet-on eligibility require- of the insured loan in real propertying with the Advisoryments, please refer to transaction. The term Loan Insurance Com-Section 129010and of the commitment is B. A pledge of all the mittee (ALlC).Section 129050of the normally 6 months, but Applicant's gross

Health and Safety in no case will it ex- revenueReview by the Code. ceed 12 months. Advisory Loan

Insurance Committee For this initial review, Preparation for the Applicant submits Marketing the Bonds Applications recorn­the Pre-Application mended by staff are In order to assure thatInformation Sheet reviewed by the ALiC the closing of thealong with copies of at a public meeting. transaction will pro-financial and corpora- The ALiC iscomposed ceed as planned, thetion information. of health care industry Applicant submits cer­

and financial profes-Upon receipt of the tain documentation as sionals who provideabove items, a Project outlined in the Condi­the Director of OSHPDOfficer will visit the Ap- tional Letter of Com­with additional analy­plicant to discuss any mitment.

Office of Statewide Health Planning and Development Cal-Mortgage loan Insurance Division 300 Capitol Mall, Suite 1500 Sacramento. California 95814

Phone: 916·324·9957 Fax: 916-445-2837 E-mail: cminsure@oshpd.ca.gov

Cal-Mortgage History and Accomplishments

History

In 1972. OSHPD insured its first loan. with the full faith and credit of the state guaranteeing the loan.

Without cost to the state of California, the Program has operated since 1972, insuring over $5 billion in loans to more than 400 health­care facilities, many of them in rural and un­derserved areas of the state.

The Program is entirely ~If-supporting from its

November 30, 2005

insurance premiums and related income.

OSHPD and the Cal­Mortgage staff are committed to the care­ful management of the Program in order to benefit communities throughout California, at no cost to the state taxpayers.

New Directions

• Project loans greater than $40 million

• Special terms for small borrowers

• 25 to 30 year fixed and variable loans

• Reduced premium for borrowers with a credit rating

• Flexible and cus­tomized covenants

• "Wrap" by commer­cial Loan Insurance [FGIC, Radian, AMBAC)

We are recognized for the quality and consistency of the

services that we provide. Maintaining and even improving upon this level of achievement is a

demanding but achievable goal.

EI Centro Regional Medical Center

Insured since 2001

NBC Northern. Healthcare Ca..pita.l

The Source For Cn:~dive FinQ"cial Solutions nhoapita.l.oom

Email Proposal

April 2, 2007

Lee Holter Palo Verde Healthcare District 250 N. First Street Blythe, Ca. 92225

Dear Lee:

Northern Healthcare Capital, LLC ("NHC") is pleased to confinn in this letter its interest in working on a potential revolving line of credit for Palo Verde Healthcare District ("Borrower") which would be secured by the accounts receivable of Borrower. The tenns set forth below are based on our discussions with the Borrower to date and remains subject to confirmation through our due diligence. We have limited this letter to an identification of the material terms of the financing we have discussed. There will be additional terms, conditions, covenants, representations, warranties, default clauses and other provisions in the definitive documents for such transaction. This letter represents an expression of interest only and is intended to be used as a basis for continued discussions. This letter does not constitute a commitment of NHC to provide the financing described herein or an obligation by NHC to continue discussing such financing, to conduct any due diligence with respect to such financing or to initiate credit approval proceedings for any such financing. The execution of definitive documents will supersede the provisions of the tenns set forth in this letter.

Borrower: Palo Verde Healthcare District

Lender: Northern Healthcare Capital, LLC, its subsidiaries or affiliates ("NHC")

Facility: Revolving line of credit.

Initial Facility Amount: $ 1,000,000.

Purpose: To provide working capital.

Maturity Date: The earlier to occur of (a) 36 months from Closing, or (b) any date detennined in accordance with an event of default.

Repayment: Subject to the Availability Formula, interest-only, monthly in arrears on the outstanding principal balance; principal due in full on the Maturity Date.

Interest Rate: The Prime Rate plus 5% of the ENR per annum. "Prime Rate" means the rate of interest quoted from time to time by JP Morgan Chase Bank as its prime rate or a comparable reference rate designated by Lender. Lender will agree to a reduction in the interest rate of up to 1% based upon the achievement of to-be-determined financial and/or operational benchmarks.

\

Eligible Receivables To detennine the Eligible Receivables Amount, Lender will multiply the gross

amount of Eligible Receivables by the percentage expected to collect within 150 days of invoice ("Net Collectible Value Rate" or "NCV Rate"). The ENR calculation is based on Borrower's actual historical collection percentages for each payor.

Availability Fonnula: Borrowings under the Facility shall at no time exceed 85% of all Eligible Receivables (ENR) Amount.

Fees: The following are the fees associated with the revolving line of credit.

1. Facility Fee: Borrower shall be obligated to pay Lender a Facility Fee in an amount equal to two percent (2.00%) of the Facility Amount payable from the proceeds at closing and one percent (1.00%) annually thereafter on the anniversary of the Closing Date. At such time as the Facility Cap is raised pursuant to "Facility Cap" above, the Seller shall pay an additional origination fee of 2% of the increase in the Facility Cap.

2. Service fee: 0.060% per week of the facility amount to monitor and to service this loan.

3. Unused Fee: None

4. Tennination Fee: Non cancelable the first 12 months. In the event of early tennination of the Facility, Borrower shall pay Lender a Tennination Fee equal to 3% of the Facility Amount during the second year: 1.5% durtnq the third year of the Facility, and four percent (4.00%) of the Facility Amount for an early tennination that is the result of an event of default.

5. Fees & Expenses: Borrower shall pay all of Lender's costs and expenses associated with the documentation and administration of the Facility, induding but not limited to, due diligence, audit expenses, and set-up (up-front and periodic), legal fees (up-front and periodic) and all other internal legal and out-of-pocket expenses, including legal expenses.

Guarantees: Full guarantee of representations and Warranties.

Collections: Borrower shall establish at least one Commercial Lockbox Account and, if necessary, a Government Lockbox Account with a lockbox bank, that in each case is satisfactory to Lender in its sole discretion. Borrower shall instruct all account debtors (other than government account debtors) to remit Collections directly to the address of a lockbox account assigned to and/or under the control of Lender (the "Commercial Lockbox Account"). Borrower shall instruct all government account debtors to remit Collections directly to the address of a lockbox account that is subject to a lockbox agreement that is satisfactory to Lender in its sole discretion (the "Government Lockbox Account. Any Collections received directly by Borrower must be deposited into the applicable Commercial Lockbox Account or the Government Lockbox Account within one business day of receipt.

Page 2

Financial Covenants: Covenants regarding current ratio, EBITDA and minimum collections will be established, subject to Lenders completion of due diligence.

Financial, Legal, and Process Review

Approval of the financing is premised on a satisfactory review of Borrower's financial records including balance sheets, profit and loss statements, cash flow statements, tax returns, and other documents that Lender, in its sole discretion, deems necessary. Lender will also require information pertaining to Borrower's organizational structure, and policy and procedures. Prior to the start of the field audit and/or receipt by Lender of data containing patient names and account numbers, Borrower and Lender will sign a Business Associate ("HIPAA") agreement.

Closing: Shall take place at the offices of Lender's counsel no later than the week of April 30,2007, or such other date on which Borrower and Lender may mutually agree.

Governing Law: Laws of the state of New York.

In consideration of NHC undertaking to work toward providing the above-described financing, the Borrower agrees to pay NHC an Expense Deposit of $ 10,000 which Expense Deposit shall be used by NHC to cover all or a portion of its costs and expenses in connection with its due diligence on Borrower and Borrower's assets, the establishment of a data interface with the and the preparation of the definitive documentation for the transactions described above. Any unused portion of the Expense Deposit shall be applied towards closing or returned to Borrower. Payment of the deposit will indicate that the Borrower desires that NHC proceed with its initial examination and investigation that the terms of the proposed funding outlined above are generally acceptable. In consideration of receiving the Expense Deposit, NHC will use it best efforts to (1) complete all due diligence investigations on or before April 20, 2007, (2) to provide Borrower with written notice of the completion of the due diligence investigations, together with an identification of the Facility Amount, NCV Rates, estimated Eligible Receivables, required Financial Covenants (tangible net worth, coverage ratio and AR turnaround). and any other material terms that may be reasonably requested by Borrower to be confirmed prior to the preparation of definitive agreements. Borrower agrees to reimburse NHC for all of NHC's reasonable and documented costs and expenses in connection with its due diligence on Borrower and Borrower's assets, the establishment of a data interface with the Borrower and the preparation of the definitive documentation for the transactions described above in the event that the Expense deposit is insufficient, which reimbursement shall be due on demand and secured by the collateral described above. The following terms shall apply with respect to the Expense Deposit:

1. If NHC or Borrower declines the proposed transaction, NHC will refund the deposit, less NHC's costs and expenses.

2. If NHC has not declined the proposed financing and the transaction is not closed through no fault of NHC, or if Borrower, prior to executing the definitive agreements, requests that NHC not proceed, the deposit will be retained by NHC to compensate for the time spent, labor and services performed, and other expenses incurred by NHC in connection with the transactions contemplated herein.

Borrower will not disclose the contents of the letter (or that Borrower and Lender are having any discussions related to a possible Loan inclUding the status thereof), to any third party, including, without limitation, any financial institution or intermediary, without Lender's prior written consent, other than to Borrower's officers and advisors on a need-to-know basis. Borrower agrees to inform all such persons who receive information concerning this letter that such information is confidential and may not be disclosed to any other person.

Page 3

Borrower acknowledges that NHC is burdened with certain expenses during the due diligence process and as such, Borrower agrees not to finalize any offers of financing related to Borrower's medical accounts receivable from any individual, company or party for thirty days from the date signed herein by Borrower.

By signing below, Borrower consents to our filing one or more Initial Financing Statements against Borrower in any or all Uniform Commercial Code jUrisdictions, which reflect the collateral as "all assets" or a similarly broad description.

By signing this letter, Borrower agrees to indemnify Lender, its managers, officers, and principals and hold each of them harmless against any and all losses, liabilities and claims arising out of or by reason of any investigation, litigation, or other proceeding brought or threatened relating in connection with the proposed financing, except for any such loss, liabilities or claims arising out of or relating to the gross negligence or unlawful conduct of NHC, its agents or employees.

No term set forth in this letter shall be amended, modified or waived except by an instrument in writing signed by NHC. Delivery of an executed signature page of this letter by facsimile transmission shall be effective as delivery of a manually-executed counterpart thereof.

Sincerely, Read, understood, accepted & agreed,

Northern Healthcare Capital, L.L.C. Palo Verde Healthcare District

By: _ By: Bob Seidenberger Vice-President Name: April 2, 2007 Title:

Date:. _

Page 4

CALIFORNIA HEALTH FACILITIES FINANCING AUTHORITY

Bill Lockyer, Chairman California State Treasurer

HELP II Healthcare Expansion Loan Program II

Overview

3% FIXED INTEREST RATE

LOANS FOR CALIFORNIA'S NON-PROFIT

SMALL AND RURAL HEALTH FACILmES

915 Capitol Mall, Suite 590 Sacramento, California 95814

Phone: (916) 653-2799 Fax: (916) 654-5362

Website: www.treasurer.ca.gov/chffa

Edition: Updated 02/2007

/----""7

Program(08mcnvE~/

The Authority recognizes the difficulty small and rural health facilities have in obtaining adequate fmancing for their capital needs. In 1995 the Authority launched the HELP II Loan Program to provide direct low cost loans. Since the beginning of the program, the Authority has issued over $45 million in loans to over 123 small and rural health facilities.

Our objective is to assist health facilities in expanding and improving services to the people of California by providing low cost financing for much needed

;:::~::K~ General Requirements:

• Must qualify as a health facility under the Authority's enabling legislation. (See "Health Facilities Defined", page v.)

• Must be one of the following: ~ A corporation with no more than $30 million in annual gross revenues, as

shown on most recent audited financials (District Hospitals are exempt from this requirement).

~ Located in a rural Medical Service Study Area as defined by the California Health Manpower Policy Commission.

~ A District Hospital

• Must be a non-profit 501(c)(3) corporation, or a public health facility (e.g. District Hospital).

• Must have been in existence for at least three years performing the same type(s) of services.

• Must provide three years audited financial statements.

• Must demonstrate evidence of fiscal soundness and the ability to meet the terms of the loan.

• Must show readiness to begin projects shortly after funding for construction and remodeling projects.

• Must provide for consumer savings and community benefit.

Page i

AdditionalConsiderations:

• In addition to the General Requirements, consideration may be given to those projects which leverage funds from other sources, are sole providers of services, demonstrate community support, or fill a pressing community need.

• Start-up Facilities - up to $200,000 on a case-by-case basis. (Please contact the Authority for additional information.)

Uses of Funds

Fundsmay be used to:

• Purchase, construct, renovate, or remodel real property.

• Perform feasibility studies, site tests, and surveys associated with real property.

• Pay permit fees, architectural fees, and other pre-construction costs.

• Purchase equipment and furnishings.

• Refinance existing debt, but only where any single obligation is paid in full.

Fundsmay not be used for:

• Day-to-day operational expenses (working capital).

• Reimbursement of prior project expenditures.

• Refinancing part of a single outstanding obligation.

Page ii •

HELP II Loan Information

Terms:

• 3% fixed interest rate.

• Loan amounts of $25,000 to $750,000.

• Maximum loan to value ratio of95%.

• Maximum loan term is fifteen years for real estate. Equipment loans will be limited to a maximum five years.

• Borrowers must contribute a minimum of five percent (5%) toward project costs. This five percent must be in the form of cash or documented project expenditures, subject to approval by the Authority.

• Revenue pledge required. Additional collateral (equipment and/or real estate) may also be required.

• Fully amortized loans.

• No prepayment penalties.

• Loans are funded in approximately 60 days from the application date.

Standard Covenants

Borrowers receiving loans must:

• Submit annual audits, and if requested by the Authority, quarterly unaudited financial statements and budgets.

• Maintain adequate property and business insurance.

• Notify the Authority of any significant changes in corporate existence prior to the occurrence (i.e., mergers, consolidations, structure or name changes).

Page iii

Fees & Charges

• $50 non-refundable application fee.

• For approved loans, there is a one-time fee payable at closing equal to one and one-quarter percent (1.25%) of the loan amount. This one-time fee is used to defray loan administration and closing costs and can be financed as part of the project.

• Title and escrow fees may be required for transactions involving real estate.

• There are no ongoing fees of the program.

Pageiv

Health Facilities

Defined

To be eligible for financing, an applicant must have received non-profit status and qualify as a health facility under the Authority's enabling legislation - Section 15432(d) of the Government Code. An applicant, with a few exceptions, must be licensed by the State of California, typically through the Department of Health Services or Department of Social Services. If an applicant is unsure about their eligibility, please contact the Authority.

Examples of qualifying health facilities include:

Acute care hospitals • • Adult day health centers

• AIDS clinics

Alcoholism recovery facilities (1)• • Blood Banks

• Chemical dependency facilities

Child day care facilities (2)• • Community clinics

• Community mental health facilities (3)

• Community work-activity program (Accredited) (4)

• Developmental disability facilities

• Diagnostic or treatment centers

Group homes (5)• • Multilevel care facilities'f

• Psychiatric facilities

• Public health centers (e.g. District Hospital)

• Rehabilitation facilities

• Skilled nursing / intermediate care facilities

(1) Services must include residential care that provides a 24-hour stay. (2) Must be operated in conjunction with a licensed health facility. (3) State license is not required, however must be certified by the State of California,

Department of Mental Health (4) Includes sheltered workshops. (5) Excludes foster family homes and agencies, adoption agencies, and residential

care facilities for the elderly. (6) Skilled Nursing Facility (SNF) or Intermediate Care Facility (ICF) care in

conjunction with residential care.

Page v

Applying for a loan III The Authority welcomes your application and wishes you success in your financing endeavors. Staff will be pleased to answer any questions you have or to provide technical assistance in preparing the application. A pre-application discussion with Authority staff is recommended to ensure that the borrower and project qualify for fmancing. Please call us at (916) 653-2799.

GENERAL INFORMATION

Applications will be accepted on a continual basis. Generally, applications are due by the first business day of each month.

The Authority staff may require a site visit to evaluate the project and the borrower's operations.

All loans must be approved by the Authority's Board at its regularly scheduled meeting in Sacramento (generally the last Thursday of the month). Visit our website at www.treasurer.ca.gov/chffa. Applicants must attend the meeting to present their proposals and answer any questions from members of the Authority.

PREPARING THE APPLICATION

1. Prepare two report covers (Fig. 1) with two-prong metal fasteners (Fig. 2) , with Tabs 1-8 for the application form and Tabs A-F for attachments.

Fig. I

Fig. 2

2. In Tabs 1-8 of the folders, place the completed written application form as requested (see pages A-I through A-IO and B-1 though B-3). The application must be typed. Incomplete or illegible applications will not be considered for financing.

3. In Tabs A through E, insert the attachments as requested on page ATT-1.

4. In Tab F, insert the completed HELP II Application Checklist, page ATT-2.

Page 1

SUBMITTING THEAPPLICATION

Enclose a check for $50 made payable to the California Health Facilities Financing Authority and forward an original and one copy of the application to:

Califomia Health Facilities FinancingAuthority 915 Capitol Mall, Suite 590

Sacramento, California 95814 Attn. Operations Manager

THE CLOSING PROCESS

All approved borrowers will receive a loan closing package approximately one week after loan approval. The package is fairly self contained and includes most of the documents required for closing. However, there are a few documents each borrower must individually provide for closing. Upon the borrower's completion and submission of the closing package to the Authority, a check will be issued in the total amount of the loan. Each loan closing takes approximately four weeks after loan approval, depending upon the complexity of the transaction.

Page 2