Charles A. and Marian L. Derby, et al. - Page 23




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          physicians were contained in the employment agreements between              
          SWMG and each SWMG physician, discussed below.                              
               The "Physician Access Bonus" was $35,000 for each of SWMG's            
          full-time physicians, plus a prorated portion of $35,000 for each           
          of up to five part-time physicians.  Forty-four percent of the              
          amount so calculated was payable 2.5 months after the November 1,           
          1994, effective date of the PSA (January 15, 1995), with the                
          balance payable in two 28-percent installments on the first and             
          second anniversaries of the PSA's effective date.  When the PSA             
          was renegotiated for the period after its initial 2-year term,              
          there was no comparable provision for a "Physician Access Bonus".           
          SMF did not pay physician access bonuses in connection with its             
          acquisition of any other physician practices.                               
               The PSA also secured for SWMG a role in the governance of              
          SMF.  Pursuant to the PSA, SWMG was entitled to designate one of            
          its member physicians to serve as a voting member of SMF's board            
          of directors during the first year of the agreement, and one to             
          serve as a nonvoting member for the term of the agreement.18  SWMG          
          was also entitled to designate representatives on various                   
          management and planning committees of SMF and Sutter Health.  In            
          addition, as one of SMF's contracting medical groups, SWMG was              
          entitled to nominate three of the seven members of SMF's Area               

               18 SMF also agreed to "facilitate discussions" between SWMG            
          and Sutter Health to evaluate and restructure provisions                    
          regarding permanent physician members of SMF's board of                     
          directors.                                                                  





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