Letter from Gerald Barkel of CalaCare, 8/16/96

August 16, 1996 Dr. Charles Balis San Francisco, CA 94104 Dear Dr. Balis: I am in receipt of your rather naive letter, in which you categorically refuse to provide CalaCare and your employer, SII, with the information we need to make informed decisions on your patient's care and the circumstances of their continued employment at SII. Since you seem to have appointed yourself the sole arbiter of these matters, it is only reasonable that you assume full legal responsibility for any adverse outcomes that might result from your willful refusal to provide us with the wherewithal to make these decisions ourselves. By persisting in this course of action, you lay yourself open to claims resulting from negligent, wrongful or dangerous acts by any of the persons of whose mental problems you have not apprised those whose ultimate responsibility they would normally be. You must realize you cannot have it both ways--either you must function as a part of the greater whole, or take on the entire burden yourself. However, if this is your choice (and if you were my client I would advise against it) please sign and date the following and return it to my office as soon as possible. I will cc your malpractice insurance carrier. I'm sure they will be interested. Very truly yours, Gerald Barkel

This indemnification ("Indemnification") of CalaCare HMO, Inc. ("Indemnitee") is made by Dr. Charles Balis, an individual ("Indemnitor") pursuant to that certain Agreement for Services dated July 2, 1996 ("Agreement") between Indemnitor and Indemnitee. All capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Agreement. For good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Indemnitor, at its sole cost and expense, and to the fullest extent permitted by applicable law, hereby agrees to indemnify, defend (with counsel acceptable to Indemnitee), protect and hold harmless Indemnitee, its parent, subsidiary and affiliate corporations, including, without limitation, CalaCare HMO, Inc., CalaCare Holdings LLC, CalaCare Medical Group, CalaCare Bankcorp Ltd., Ardis Investments, Kirchner Pharmaceuticals, Silicon Impressions Inc., all of Indemnitee's predecessors-in-interest, and all of such party's respective officers, directors, shareholders, agents, contractors, employees and attorneys, and their respective successors, heirs, and assigns, and each of them (collectively, the "Indemnified Parties"), from and against any and all "Claims and Liabilities" (as defined below) which arise, directly or indirectly, or could reasonably be seen to arise, from the actions or inaction of the Indemnitor through the Indemnitor's failure to provide relevant information about the Indemnitor's patients to the Indemnified Parties or their representatives. For purposes of this Indemnification, "Claims and Liabilities" shall mean any and all claims, demands, losses, damages, liabilities, fines, penalties, charges, causes of action, administrative and judicial proceedings (including without limitation State Court proceedings, bankruptcy court proceedings and/or appellate court proceedings) and orders, criminal liability, judgments and all costs and expenses (including, without limitation, court costs, actual attorneys' fees, consultant fees and other costs of defense or investigation) of any nature, kind or description. Indemnitor shall promptly advise Indemnitee in writing of any action, administrative or legal proceeding or investigation as to which this Indemnification may apply and Indemnitor, and at Indemnitor's sole expense, shall assume on behalf of Indemnitee (and all of the other Indemnified Parties) and conduct with due diligence and in good faith the defense thereof with counsel satisfactory to Indemnitee in its sole discretion; provided, however, that the Indemnitee shall have the right, at its option, to be represented in such matters by advisory counsel of its own selection. In the event of the failure by Indemnitor to fully perform in accordance with this Indemnification, Indemnitee, or any of the other Indemnified Parties may, at their option, and without relieving Indemnitor of its obligations hereunder, may so perform, but all costs and expenses so incurred by the party taking such action in such event shall be reimbursed by Indemnitor, at the highest non-usurious rate of interest which may be contracted for, charged or received in the State of California at such time. Indemnitor hereby agrees, represents and warrants that it is represented by counsel of its own choosing in negotiations for and in preparation of the within Indemnification, that it has read this Indemnification or has had the same read to it by its counsel, that it has had the within Indemnification fully explained by such counsel, and that Indemnitor is fully aware of its contents and legal effect. The laws of the State of California shall govern the interpretation and validity enforcement of this Indemnification. Dated: August 16, 1996 Indemnitor Dr. Charles Balis By ______________________ Indemnitee CalaCare HMO, Inc. By its General Counsel Gerald Barkel, Esq. By______________

Doctor Balis' Notes on this Letter