RAYTEL MEDICAL CORP, 10-Q/A, 1996-07-24

RAYTEL MEDICAL CORP
10-Q/A, 1996-07-24
MISC HEALTH & ALLIED SERVICES, NEC

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549

FORM 10-Q/A

AMENDMENT NO. 1

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
-------------------- --------------------
Commission file number 0-27186

RAYTEL MEDICAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 94-2787342
(State of incorporation) (IRS Employer Identification Number)

2755 Campus Drive, Suite 200
San Mateo, California 94403
(415) 349-0800
(Address and telephone number of principal executive offices)
---------------------------
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.

YES X NO
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of January 31, 1996:

Common Stock, $0.001 par value 8,158,899
- ------------------------------ ----------------
Class Number of Shares

This Form 10-Q/A consists of 88 pages of which this is page 1.

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The undersigned registrant hereby amends the following item of its
Quarterly Report for the period ending December 31, 1995 on Form 10-Q, as filed
with the Securities and Exchange Commission on or about February 14, 1996 (the
"Report"), as set forth in the pages attached hereto:

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) List of Exhibits

The exhibits required by Item 601 of Regulation S-K are hereby amended by
filing herewith the following amended exhibits, which reflect a revised redacted
version of such agreement in accordance with an Order for Confidential Treatment
of the Securities and Exchange Commission.

Exhibit Index
-------------
Exhibit
Number Exhibit Title Page No.
- ------- ------------- --------

*10.1 Cardiac Catheterization Laboratory Facility and 5
Administrative Services Agreement dated January 10,
1996 between the Company and Stanford Health
Services.

*10.2 Letter Agreement dated January 9, 1996 between the 26
Company and International Philanthropic Hospital
Foundation, doing business as Granada Hills Community
Hospital.
- -----------------
*Confidential treatment has been granted for portions of this Exhibit.

(b) Reports on Form 8-K

No report on Form 8-K was filed during the quarter ended December 31, 1995.

2
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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.

RAYTEL MEDICAL CORPORATION

Dated: July 24 , 1996 By: \s\ E. Payson Smith, Jr.
-- -------------------------------------
E. Payson Smith, Jr.
Senior Vice President, Chief
Financial Officer and Secretary
(duly authorized officer and
principal financial officer)

3
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Exhibit Index
-------------

Exhibit
Number Exhibit Title Page No.
- ------- ------------- --------

*10.1 Cardiac Catheterization Laboratory Facility and
Administrative Services Agreement dated January 10,
1996 between the Company and Stanford Health
Services.

*10.2 Letter Agreement dated January 9, 1996 between the
Company and International Philanthropic Hospital
Foundation, doing business as Granada Hills Community
Hospital.
*Confidential treatment has been granted for portions of this Exhibit.

(b) Reports on Form 8-K

No report on Form 8-K was filed during the quarter ended December 31, 1995.

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EXHIBIT 10.1

CERTAIN CONFIDENTIAL INFORMATION CONTAINED HEREIN HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS SUBJECT TO AN
APPLICATION FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

CARDIAC CATHETERIZATION LABORATORY FACILITY
AND ADMINISTRATIVE SERVICES AGREEMENT

THIS CARDIAC CATHETERIZATION LABORATORY FACILITY AND ADMINISTRATIVE
SERVICES AGREEMENT (the "Agreement") is made and entered into on the [ ] day of
January, 1996, but shall be effective as of the date set forth in paragraph 8
("Effective Date"), by and between RAYTEL MEDICAL CORPORATION, a Delaware
corporation ("Administrator"), and STANFORD HEALTH SERVICES, a California
non-profit public benefit corporation ("Medical Provider"), with respect to the
following facts:

RECITALS

A. As of the Effective Date, Administrator will have a Heart
Center, which will include a cardiac catheterization laboratory facility
located at 3300 Capital Avenue, Fremont, California consisting of
approximately 4,000 square feet (the "Medical Facility"). Prior to the
Effective Date, Administrator will place, in the Medical Facility all
appropriate equipment, furnishings and supplies for a freestanding cardiac
catheterization laboratory at the Medial Facility. Prior to the Effective
Date, Administrator hire personnel to provide non-physician administrative
and medical services to support the freestanding cardiac catheterization
laboratory.

B. Medical Provider is duly licensed and desires to utilize the
Medical Facility for the purpose of rendering professional medical services
at the freestanding cardiac catheterization laboratory.

C. Administrator is responsible for the initial and continuing
licensure of the Medical Facility as a freestanding cardiac catheterization
laboratory under applicable California statutes and administrative regulations.

D. The name of the Medical Facility will be The Raytel Heart Center.
Professional services will be provided by certain members of the Stanford
University School of Medicine faculty.

E. Administrator will be responsible for and will bill for the
technical component of cardiac catheterization services rendered in the Medical
Facility. Medical Provider will be responsible for and will bill for the
professional component of such services.

F. The parties intend to enter into discussions concerning expansion
of the Medical Facility into a full service diagnostic cardiovascular center
within six (6) months of the execution of this Agreement.

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AGREEMENT

Now, THEREFORE, in consideration of the foregoing, the parties hereto
mutually agree as follows:

1. ADMINISTRATORS MEDICAL FACILITY.

1.1 SPACE, FACILITIES AND EQUIPMENT. Administrator agrees to allow
Medical Provider access to the space, facilities and equipment located in the
Medical Facility for use by Medical Provider in providing cardiac
catheterization services and such other diagnostic cardiovascular services as
may be offered at the Medical Facility in the future, subject to the
applicable terms and provisions set forth herein. The space and facilities
are described on Exhibit 1.1-a. to this Agreement (Catheterization
Laboratory"). The equipment is described on Exhibit 1.1-b. to this Agreement
("Catheterization Equipment"). Administrator will repair or replace the
space, facilities and equipment described on Exhibits 1.1-a and 1.1-b as
necessary to comply with the applicable legal and regulatory standards, as
determined by Administrator in consultation with the Medical Director
identified below. The parties agree and acknowledge that for purposes of
supporting the provision of high quality medical services in the professional
component of cardiac catheterization the space, facilities and equipment
being made available under this Agreement are on an exclusive basis to
physicians credentialed by or through Medical Provider, as agent of
Administrator, in the manner mutually determined by the parties. Where
Administrator reasonably requests, the parties shall meet and confer to
identify and consider initiation of credentialing of additional providers not
affiliated with Medical Provider; PROVIDED, HOWEVER, that this shall only be
done with the consent of the Medical Provider, and PROVIDED FURTHER that such
additional providers shall be clearly identified to the public as not
affiliated with Medical Provider unless otherwise agreed to by Medical
Provider. Administrator shall have no obligation to provide any equipment
other than that equipment located in the Medical Facility as of the Effective
Date as described in Exhibit 1.1-b., except as shall be mutually agreed
between the parties or as set forth above.

1.2 USE. Medical Provider shall use the Catheterization Laboratory
solely for the purpose of providing the professional component of Cardiac
Catheterization services in the Medical Facility, including any activities
necessary and incidental thereto. Administrator shall have reasonable use of
the Medical Facility for the purpose of providing the technical component of
cardiac catheterization services, performing Administrator's services
pursuant to this Agreement and such other related activities as may be
appropriate under this Agreement. Administrator reserves the right to
introduce additional cardiovascular services ("Additional Services") in the
Medical Facility; PROVIDED, HOWEVER, that any Additional Services in the
Medical Facility shall only be offered with the consent of the Medical
Provider.

1.3 UTILITIES. Administrator agrees to furnish to the Medical
Facility utilities, including electricity for lighting, machines and
equipment used pursuant to this Agreement and heat, air conditioning, water,
gas, and power, including appropriate backup and emergency power.
Administrator shall not be liable for stoppage or interruption of any such
services or

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utilities caused by riots, strikes, labor disputes, accidents, necessary
repairs or any conditions beyond Administrator's control. In no event shall
Administrator be liable for any consequential damages resulting from stoppage
or disruption, unless such damamges arise as a result of Administrator's
negligent act or omission.

1.4 MAINTENANCE AND REPAIRS. Administrator shall provide appropriate,
ordinary and routine housekeeping, maintenance, repair and janitorial services
to maintain the Medical Facility and the equipment located therein in a clean,
and safe operating condition and in good repair, allowing for normal wear and
tear. Medical Provider shall use reasonable efforts to promptly notify
Administrator of any defect requiring maintenance or repair which is noted by
Medical Provider in the course of providing professional services; PROVIDED,
HOWEVER, that such responsibilities shall not mitigate Administrator's duty
pursuant to this Agreement to maintain the Medical Facility and all equipment in
safe operating condition.

1.5 SUPPLIES AND EQUIPMENT SERVICING. Administrator shall provide and
arrange for the provision of medical supplies and for routine maintenance of all
medical equipment for Medical Provider's operation at the Medical Facility.
Medical Provider will consult with Administrator as to medical supplies upon
reasonable request.

1.6 PERSONNEL.

1.6.1 ADMINISTRATOR PERSONNEL. Administrator shall provide the
services of non-physician medical and administrative staff and personnel for the
proper operation of the Catheterization Laboratory to support Medical Provider's
provision of the professional component of cardiac catheterization at the
Medical Facility. Administrator shall have sole responsibility for payment of
all wages, salaries or other benefits for such personnel. Such personnel shall
operate under the direction and control of Administrator, in consultation with
Medical Provider, provided that all medical activities will be under appropriate
supervision by Medical Provider. All hiring and termination of such personnel
shall be done by Administrator, in consultation with Medical Provider; PROVIDED,
HOWEVER, that nothing herein shall be construed as creating any
employer-employee relationship between Medical Provider and Administrator's
employees.

1.6.2 MEDICAL PERSONNEL. Licensed non-physician medical
personnel involved in patient care in the Catheterization Laboratory will be
employed by Administrator, including all such medical staff and other
personnel as shall be appropriate for the proper operation of the
Catheterization Laboratory, and which is otherwise required by applicable law
and regulations. Administrator will have the sole responsibility for payment
of all wages, salary or other benefits for such personnel. Such personnel
shall operate under the direction and control of Administrator, except as to
any patient care related activities which, by law or regulation, require
general or specific supervision or direction by a licensed physician, in
which case such direction or supervision shall be the responsibility of
Medical Director or of the physician responsible for the specific cardiac
catheterization procedure. All hiring and termination of such personnel
shall be done by Administrator, in consultation with Medical Provider and
with the

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approval of the Medical Director as to the professional qualifications of all
licensed non-physician medical personnel.

1.7 SITE SELECTION. Administrator will consult with Medical Provider
upon the selection of the site for the Medical Facility, within the general
Fremont, California area. The parties recognize that location of the site will
be a factor for licensure of the Medical Facility, and will be weighted
accordingly.

1.8 STANDARDS. The space, facilities and equipment provided by
Administrator under paragraph 1.1 above and the supporting services provided
under paragraphs 1.3, 1.4, 1.5 and 1.6 shall be consistent with industry
standards and appropriate to support the provision of professional cardiac
catheterization services by Medical Provider of an appropriate level of quality.

2. ADMINISTRATIVE SERVICES.

2.1 ACCOUNTING. Each party shall provide its own billing services,
collection services, and related accounting services relating to its component
of the cardiac catheterization services provided at the Medical Facility. In
addition, Administrator will provide a monthly accounting of services rendered
in the Medical Facility to Medical Provider. In addition, Administrator (with
the cooperation of Medical Provider) will capture and make available to Medical
Provider on a timely basis patient, procedure, insurer and other demographic
information reasonably required for billing for services performed.

2.2 MEDICAL RECORDS. Administrator shall provide services to maintain
patient medical records, but Medical Provider is obligated to prepare the
patient records in accordance with the customary medical practice procedures.
Appropriate medical records will be provided in duplicate original or in such
other form as may be needed by Medical Provider to maintain a separate system of
medical records of patients treated at the Medical Facility.

2.3 ANCILLARY SERVICES. Administrator shall provide or arrange for
clinical services to support Medical Provider's cardiac catheterization services
at the Medical Facility as mutually agreed.

2.4 TECHNICAL SUPPORT. Administrator shall provide or arrange for the
provision of technical manuals, operating procedures and instructions on the
equipment used in the Medical Facility, and certain other policies or procedures
determined reasonably necessary by Administrator for the operation of the
Medical Facility; PROVIDED, HOWEVER, that none of the foregoing shall interfere
with the medical judgment and responsibility of Medical Provider and the
physicians providing services at the Medical Facility.

2.5 OTHER. Administrator shall provide such other administrative or
support services as may be reasonably required from time to time.

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3. MARKETING SERVICES.

3.1 MARKETING AND SALES. Administrator agrees to undertake the
marketing of the Medical Facility. Such marketing shall include, promotional
materials, support brochures, patient information brochures, physician
brochures, direct physician contact and other patient literature and general
education among physicians in the community regarding the Medical Facility and
freestanding cardiac catheterization. General marketing activities are set
forth on Exhibit 3.1, and all marketing activities actually undertaken by
Administrator shall be subject to the approval of Medical Provider, and
Administrator will, as an express condition of this Agreement, perform such
activities and Medical Provider will, as an express condition of this Agreement,
support such activities by permitting certain physicians associated with Medical
Provider to meet with managed care and other payors as well as other clinicians
for purposes of educating them about free-standing cardiac catheterization
services, and the Medical Facility. In addition, Administrator and Stanford
Health Services, Department of Health Plan Services shall each be responsible
for negotiation of appropriate agreements with managed care organizations for
the provision of services to members or beneficiaries of such organizations at
the Medical Facility. Notwithstanding the foregoing, it is the intent of both
parties to, where requested by payors, jointly present a program of services to
managed care organizations and other buyers of healthcare services; PROVIDED,
HOWEVER, that no party shall have the authority to commit the other to any
contract obligation or agreement. The parties will use the names of Stanford
faculty and their respective clinical titles at Stanford University School of
Medicine in connection with marketing relating to the Medical Facility; PROVIDED
that such name use is limited to identifying that such Stanford faculty are
providing the physician professional component of cardiac catheterization
services at the Medical Facility. Administrator may similarly use such
information in connection with its application for licensure of the Medical
Facility; PROVIDED, HOWEVER, that in no way will such name be used in the name
or licensure status of the Medical Facility and PROVIDED FURTHER that Medical
Provider shall have the right of prior review and approval of such license
applications and materials. Medical Provider shall have a right of prior
approval of all marketing materials, which approval shall not be unreasonably
delayed or withheld. Any such request for approval by Administrator shall be
returned to Administrator within 10 business days of such request by Medical
Provider. No party shall issue any public announcement or press release
concerning the terms of this Agreement or the relationship of the parties,
without the prior approval of the other party, PROVIDED, HOWEVER, that where in
the opinion of counsel of either party, such announcement or press release is
required by applicable law such announcements or press releases may be made,
without such prior approval, provided that a draft of such announcement or press
release and the reasonable opportunity to comment thereto is provided to the
other party. Administrator and Medical Provider shall comply with all laws and
regulations or other requirements of any and all governmental and/or
quasi-governmental authorities directly or indirectly affecting the marketing,
sale or education regarding medical care provided at the Medical Facility. In
addition, where required by applicable law, rule or regulations, the parties
will make reasonable and appropriate disclosure to patients or payors of their
relationship as to the technical and the professional component of Cardiac
Catheterization services. Notwithstanding the foregoing, Administrator
understands that any use of the Stanford name is subject to the approval of the
Dean of the Stanford University School of Medicine and that any use of the
Stanford name in

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connection with this Agreement shall cease, without penalty, upon thirty (30)
days' prior notice from Medical Provider.

4. MEDICAL PROVIDER'S MEDICAL ACTIVITIES.

4.1 PROFESSIONAL MEDICAL SERVICES. Medical Provider shall provide
the professional component of cardiac catheterization services at the Medical
Facility, for patients whose patient profile indicates that treatment in a
freestanding facility is appropriate, as determined by Medical Provider in
consultation with the patient's attending cardiologist ("Medical Services").
Medical Provider shall ensure that one board certified and otherwise
qualified cardiologist is physically present in the Medical Facility,
consistent with a schedule mutually agreed to by the parties. These Medical
Services shall be performed in accordance with the applicable standards of
professional skill and conduct. Medical Provider may provide one or more
physicians to help Medical Provider perform the Medical Services. Medical
Provider shall not use interns or residents to provide medical services in
the Medical Facility as the sole or primary provider of such services, but
may involve interns or residents as assistants or as observers in the course
of medical education functions, subject to appropriate patient consent.
Medical Provider shall supply a medical director acceptable to Administrator,
expert in cardiac catheterization ("Medical Director"). The Medical Director
may be changed, from time to time, by Medical Provider with consultation with
the Administrator. Medical Director shall be responsible for ensuring that
the Medical Services are performed by appropriately qualified physicians, as
appropriate and required by applicable law, regulations and customary medical
standards. Medical Director's duties shall include those services described
on Exhibit 4.1 hereto and such other duties as the parties shall mutually
determine to be appropriate and as added from time to time to Exhibit 4.1
hereto. Administrator shall pay Medical Provider an amount equal to the
fixed sum of [ ] per year for the services of the Medical Director, in
equal monthly installments without withholding for taxes.

4.2 LICENSURE. Medical Provider shall establish operating, technical
and medical standards and procedures for the professional component of Medical
Services and shall enforce same through credentialing and quality assurance
programs.

4.3 COOPERATION WITH OVERSIGHT ACTIVITIES. The parties acknowledge
that Administrator has no control under this Agreement over the professional
component of Medical Services at the Medical Facility or of the practice of
medicine by licensed physicians and that Medical Provider has no control under
this Agreement over the technical component of services at the Medical Facility;
however, the parties agree that Administrator shall have the right to
periodically review the operations of the Medical Facility to ensure that the
health needs of the community with respect to cardiac catheterization in a
freestanding facility are being adequately served. Medical Provider agrees to
cooperate with Administrator in periodic oversight reviews of the operations of
the Medical Facility.

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4.4 SCHEDULING. The administrative component of patient consultation,
diagnostic workup, scheduling of procedures and other steps in evaluation and
pre-catheterization shall be the responsibility of Administrator, based on
procedures mutually agreed to by the parties.

5. PATIENT RECORDS.

Subject to paragraph 2.2 above, all patient medical records shall be
maintained by each party for such periods of time as may be legally required.
Each party shall provide copies of such patient medical records to third parties
in accordance with applicable law.

6. INDEPENDENT PARTIES.

It is understood and agreed that Medical Provider is acting as an
independent provider of medical services with respect to performing all
Medical Services at the Medical Facility and that no relationship of
employer-employee, joint venture or agency shall be implied or created by
this Agreement. Each party shall be fully responsible for its own taxes,
salaries, vacation pay, sick leave, retirement, social security, workers
compensation, disability, unemployment insurance and deferred compensation
plans, for the party and for any employees of the party. Neither party shall
control or direct the methods by which the other party performs its duties
and obligations pursuant to this Agreement, subject to enforcement of the
rights and obligations set forth herein.

7. BILLING AND COMPENSATION.

7.1 BILLING FOR SERVICES. Administrator will bill for and collect
the technical component for all cardiac catheterization services rendered at
the Medical Facility. Medical Provider will bill for and collect the
professional component for cardiac catheterization services rendered at the
Medical Facility by credentialed physicians for whom Medical Provider is
lawfully entitled to bill; other credentialed physicians, who have been
credentialed and otherwise approved by Medical Director to provide services
at the Medical Facility, will bill and collect directly or through an agent
for the professional component in their own names.

7.2 MANAGED CARE CONTRACTING. The parties shall cooperate in the
entry into managed care contracts for cardiology services in the Medical
Facility, including (where mutually agreed to) contracts for capitated,
bundled or global payment for such services; PROVIDED, HOWEVER, that neither
party shall have the authority to commit the other to any such contract, each
party being responsible for negotiating and executing each of their
respective contracts. Appropriate disclosure will be made to payors of the
allocation between Administrator and Medical Provider of any global,
capitated or similar payment.

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7.3 COMPENSATION TO ADMINISTRATOR. The parties acknowledge that
Administrator's marketing activities provided by Administrator under paragraph
3.1 are not paid for by technical component reimbursement. Accordingly, Medical
Provider agrees to pay to Administrator the sum of [ ] annually,
in twelve equal monthly installments of [ ] for the first twelve (12)
months after the Effective Date as fair market value consideration for marketing
services provided to Medical Provider.

8. TERM.

8.1 This Agreement shall begin on the Effective Date for a term of one
(1) year ("Initial Term") and shall automatically thereafter renew for
successive one (1) year terms ("Successive Terms"), subject to termination in
accordance with the following:

8.2 EFFECTIVE DATE. This Agreement shall become effective as of the
day the Medical Facility is licensed, open and available for the provision of
cardiac catheterization services ("Effective Date").

8.3 TERMINATION WITHOUT CAUSE. Notwithstanding the foregoing, either
party may terminate this Agreement effective at the end of each 12 month period
beginning with the Effective Date without cause by giving the other party sixty
(60) days advance written notice, during the Initial Term and ninety (90) days
during any Successive Term subject to paragraph 8.7.

8.4 TERMINATION WITH CAUSE. Either party may terminate this Agreement
upon thirty (30) days prior written notice for any material breach under this
Agreement, if said breach is not cured within such thirty (30) day period.

8.5 IMMEDIATE TERMINATION. This Agreement shall, at the option of
either party, terminate immediately upon written notice (i) upon the loss of
licensure of the Medical Facility to perform freestanding cardiac
catheterization services, or Medical Facility's or Administrator's failure to
obtain or maintain Medicare certification to supply freestanding cardiac
catheterization services at the Medical Facility; (ii) upon the suspension,
curtailing or revocation of Medical Provider's right to provide medical
services in the State of California; (iii) if Administrator determines, on or
before March 31, 1996 that appropriate state licensure of the Medical
Facility, consistent with the terms and conditions of this Agreement, will
not be obtained; (iv) if Administrator determines, on or before March 31,
1996 that appropriate certification by the Medicare Program of the Medical
Facility, consistent with the terms and conditions of this Agreement, will
not be obtained; (v) if licensure of the Medical Facility by the Department
of Health Services of the State of California as a freestanding cardiac
catheterization Laboratory is not obtained effective prior to June 30, 1996
or (vi) if Administrator does not have sole ownership and control of the
legal entity holding the license under which cardiac catheterization services
are provided at the Medical Facility June 30, 1996.

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8.6 EFFECT OF TERMINATION. The termination of this Agreement shall
not release or discharge either party from any obligation, debt or liability
which shall have previously accrued and remains to be performed on the effective
date of termination. The provisions of Sections 5, 8.7, 9.4 and 11.7 shall
expressly survive the termination.

8.7 RESTRICTIVE COVENANT. The party who invokes termination without
cause under paragraph 8.3 during the Initial Term or any Subsequent Term (but
not the other party) shall not compete for [ ] years within the Service
Area as described in Exhibit 8.7, in the case of Administrator, by providing
the administrative or technical component of cardiac catheterization
services, at any location other than the Medical Facility or, in the case of
the Medical Provider, by providing the professional component of cardiac
catheterization services in or to any freestanding cardiac catheterization
facility within the Service Area.

9. INSURANCE:INDEMNIFICATION.

9.1 PREMISES AND GENERAL LIABILITY INSURANCE. During the term of this
Agreement, Administrator, at its expense, shall maintain adequate and customary
casualty insurance, premises liability insurance and general liability insurance
for the Medical Facility as well as liability insurance covering Administrator
as to the provision of the technical component of cardiac catheterization
services at the Medical Facility, each such policy maintaining coverage limits
in a minimum amount of Five Million Dollars.

9.2 PROFESSIONAL LIABILITY INSURANCE. During the term of this
Agreement, Medical Provider shall maintain and pay for Medical Provider's
malpractice liability insurance coverage in an amount of two million dollars per
occurrence and six million dollars in the aggregate, for any medical practice by
Medical Provider at the Medical Facility. Such insurance may be obtained
through a policy of self-insurance.

9.3 EVIDENCE OF COVERAGE. Each party shall furnish the other with
written evidence of its compliance with paragraph 9.1 and 9.2, respectively,
annually and/or upon reasonable request and will provide the other with
immediate written notice of any material change, alteration, modification or
cancellation of such coverages.

9.4 INDEMNIFICATION. Each party agrees to indemnify and hold
harmless the other party from any claim, liability, or loss resulting from
the willful, wrongful or negligent act or omission of the indemnifying party,
its agents or employees. Each party shall notify the other immediately in
writing of any claim of injury or damage related to activities performed
pursuant to this Agreement, whether the claim is verbal or written, or
whether informal or by summons and complaint. The parties shall cooperate
with each other in the investigation and disposition of any claim arising out
of the activities pursuant to this Agreement, provided that nothing shall
require either party to disclose any documents, records or communications
which are protected under the peer review privilege, the attorney-client
privilege or the attorney work-product privilege. The provisions of this
Section 9.4 shall survive the termination of this Agreement.

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10 OTHER SITES AND OTHER SERVICES AND LICENSURE.

10.1 OTHER SITES. While this Agreement remains in effect,
Administrator will not provide services similar to those provided under this
Agreement to any other freestanding cardiac catheterization laboratory which is
operated within the Service Area described in Exhibit 8.7. During the term of
this Agreement, Medical Provider will not, directly or indirectly, own, operate,
or provide medical services at any other freestanding Cardiac Catheterization
Laboratory which is within the Service Area described in Exhibit 8.7.

10.2 OTHER SERVICES. Not later than six (6) months after the execution
of this Agreement, the parties shall enter into discussions concerning the
expansion of the Medical Facility into a full service diagnostic cardiovascular
facility.

10.3 LICENSURE. Administrator will keep Medical Provider apprised of
the licensure process for the Medical Facility in a timely manner and
appropriate representatives of Medical Provider may be involved in such process
where appropriate. Notwithstanding the foregoing, to the extent that Medical
Provider's associated physicians' names are to be used in connection with the
licensure process, Medical Provider shall have a right to preapprove all such
references.

11. GENERAL PROVISIONS.

11.1 ENTIRE AGREEMENT: MODIFICATION. This Agreement contains the
entire agreement between the parties relating to the subject matter contained
herein. This Agreement may be changed or supplemented only by a written
instrument signed by both parties.

11.2 NOTICES. All notices, requests, demands and other communications
required or permitted to be given under the terms of this Agreement shall be in
writing and shall be deemed to have been duly given if delivered personally
delivered by messenger service with confirmation or if given by registered or
certified mail at the addresses of the parties as set forth on the signature
page.

11.3 SEVERABILITY. If any term, provision, covenant or condition of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the provisions hereof shall remain in full
force and effect and shall in no way be effected, impaired or invalidated.

11.4 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of California.

11.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed an original; such
counterparts shall together constitute but one agreement.

10.

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11.6 ATTORNEYS' FEES. Should any party hereto employ an attorney for
the purpose of enforcing or construing this Agreement, or any judgment based on
this Agreement, in any legal proceedings whatsoever, including insolvency,
bankruptcy, arbitration, declaratory relief or other litgation, the prevailing
party shall be entitled to receive from the other party thereto reimbursement
for reasonable attorneys' fees and all costs, including but not limited to
service of process, filing fees, court and court reporter costs, investigative
costs, expert witness fees, and the cost of any bonds whether taxable or not,
and that such reimbursement shall be included in any judgment or final order
issued in that proceeding. The "prevailing party" means the party determined
by the court or arbitrator to most prevail and not necessarily the one in whose
favor a judgment is rendered.

11.7 CONFIDENTIAL INFORMATION. During the term of this Agreement, each
of the parties may have access to certain confidential or proprietary
information of the other party. Confidential and proprietary information
includes, but is not limited to, this Agreement, the materials referred to in
paragraph 2.4 above and in 3.1 above. The parties may, where reasonable,
designate other documents or information as confidential or trade secrets. As
to any such information, the parties agree that: (i) the information will not be
disclosed to third parties, except where required by law; (ii) the information
will not be used during the term of this Agreement other than for purposes of
the Medical Facility as contemplated by this Agreement; and (iii) upon
termination of this Agreement, each party will return to the other all originals
and all copies of such information. Nothing in paragraph 3.1, this paragraph
11.7, or elsewhere in this Agreement shall prevent either party from disclosing
the existence, nature or terms of this Agreement and the identity of the
parties, as and to the extent required in any governmental or regulatory agency
filing, including but not limited to state or federal securities filings,
subject only to Medical Provider's specific rights hereunder to review and
approve of licensure materials related to the Medical Facility and to review and
have an opportunity to comment on any and all public announcements or press
releases that are required by law (as described in Section 3.1 hereof), and in
all other cases, approve such public announcements or press releases concerning
the terms of this Agreement or the relationship of the parties.

11.8 DISPUTE RESOLUTION. Any disputes between the parties which
cannot be mutually resolved shall be submitted to arbitration in accordance with
the California Arbitration Act (C.C.P. Section 1280, ET. SEQ.).

11.9 ASSIGNMENT. This Agreement may not be assigned and duties
hereunder may not be delegated without the prior written consent of the other
party, except that Administrator may assign this Agreement to a subsidiary,
provided only that either the subsidiary has assets and net worth satisfactory
to Medical Provider or Administrator executes a guarantee, in a form reasonably
satisfactory to Medical Provider, of its subsidiary's obligations under this
Agreement. In the event a majority or greater stock interest or all or
substantially all of a party's assets are sold or transferred in a single
transaction or in a series of related transactions within one (1) year, the
other party shall be entitled to written notice describing the general terms of
the sale or transfer and detailed information about the purchaser or purchasers
("Notice of Sale") and shall have the right to terminate this Agreement by
written notice, provided such notice is given within ninety (90) days of receipt
of the Notice of Sale.

11.

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11.10 COMPLIANCE WITH LAW. In the event any federal, state or local
legislative or regulatory authority adopts a law, rule, regulation or policy,
procedure or interpretation thereof which would require a material change in the
parties' obligations under this Agreement or the subject matter of this
Agreement, upon the request of either party, the parties shall enter into good
faith negotiations for the purpose of establishing such amendments or
modifications as may be appropriate to accommodate the new requirements or
change in circumstances while preserving the original intent of this Agreement
to the greatest extent possible. If, after thirty (30) days of such
negotiations, the parties are unable to reach an agreement as to how or whether
this Agreement, shall continue, either party may terminate this Agreement upon
thirty (30) days prior written notice.

IN WITNESS WHEREOF, the parties have executed this Agreement, which
Agreement shall be effective as of and on the date as set forth above.

STANFORD HEALTH SERVICES RAYTEL MEDICAL CORPORATION
MEDICAL PROVIDER ADMINISTRATOR

By /s/ Illegible By /s/ Allen Zinberg
--------------------------------- ------------------------------------
Its Its President

Address: 300 Pasteur Drive Address: 7 Waterside Crossing
Stanford, California 94305 Windsor, Connecticut 06095
Attn: Chief Executive Officer Attn: President

12.

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EXHIBIT 1.1a

SPACE AND FACILITIES

The space within a building tentatively to be located at 3300 Capital
Avenue, Fremont, California, consisting of approximately 4,000 square feet
and containing:

Cardiac Cath Lab
Control Room
Patient Holding Area
Recovery
Exam Rooms
Consultation Room
Physician Office
Viewing Room
Processing Room
Bathrooms
Dressing
Administrative Space
Reception

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EXHIBIT 1.1b

Philips H3000 Cardiac Cath Lab

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EXHIBIT 3.1

MARKETING PLAN FOR THE RAYTEL HEART CENTER

The attached document is an outline of the activities Raytel Medical Corporation
and John Goodman & Associates intend to undertake in the formulation and
implementation of a comprehensive marketing plan for the Raytel Heart Center.
Approximate time frames are included which coincide with the projected schedule
to open the facility.

The formulation of the marketing/business plan will be divided into two steps:

1. Comprehensive Market Assessment
2. Strategic Marketing & Business Plan

Market Assessment

The first step of the market assessment will be for the parties and the
consultant engaged by Raytel to have a general meeting to discuss the focus and
objectives of the assessment. The goal of the assessment will be for the
consultant to develop, and obtain information from third parties and based on
its own resources like the following:

1. Utilization profiles
2. Population profiles
3. Physician population
4. Patient origins
5. List of all managed care contracts
utilization
reimbursement
length of stay
costs

Most demographic, population, financial, ethnic, growth, utilization and general
volume information is available through either California or Federal census
publication data.

The next phase of the market assessment is the physician interviews. Primary
care physicians and cardiologists in the primary and secondary service areas
will be surveyed. This will be accomplished where possible through individual
interviews. Telephone surveys may also be used to reach some physicians. It is
expected that approximately 200 individual doctors will be contacted. The
assessment and all surveys will be conducted by John Goodman & Associates.

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Some of the basic questions for primary care physicians are:

1. Preference for cardiac services
2. Preference for interventional services
3. How local services compare
4. Managed care relations/contracts
5. Use of new facility

A similar survey will be developed for all specialists we identify in the
service area that we both feel appropriate to contact, with a view to see who
might be a candidate to work with the center.

In addition to primary care physicians and specialists, a separate managed care
survey plan will be developed. The state of California HMO agency can provide a
list of all area carriers. Some of the basic managed care information required
is:

Total subscribers
Subscribers by zip code
Areas of penetration
Desired new penetration/growth plans
Spectrum of contract types
Capitation arrangements

The Managed Care Marketing Team will be composed of:

Geoff Fisher - Raytel National Accounts Manager/Managed Care Marketing

Tom Mattusch - Clinical Marketing Director, San Francisco

Conrad Vernon - John Goodman & Associates, Cardiology Consultants

Bill McKeon - Stanford/Raytel Marketing Director

Initial Managed Care Survey Activities

Survey primary/secondary market

1. Develop carrier demographics

Primary payors - penetration, plan types, expansion
strategies, growth opportunities

Subscribers - age, economics, plan types

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2. Survey Hospital Diagnostic Cath providers to determine standard
cardiology charges for the area

Washington Hospital - Fremont
St. Rose Hospital - Hayward
Eden Hospital Medical Center - Castro Valley
Valley Medical Center - Pleasanton

3. Develop Pricing Model

Package Pricing - discounted fee for service
Capitation Pricing
Business/Industry/Self-Insured Package

4. Contact Carriers (provider relations) to discuss needs/present
cost benefits.

Determine:
current service providers
costs of service
volumes
needs
capitation possibilities

A separate survey of all business and industry over 500 employees will be
completed. The intent is to develop a profile of services provided, HMO and
participation and other relevant data.

The results of the surveys from the client, primary care physicians,
specialists, managed care, business and industry will be used to develop a
comprehensive business plan and volume forecast.

Included is a summarized list of the major components that make up the two
phases of the Heart Center marketing plan.

COMPONENTS OF THE MARKET ASSESSMENT

1. Geographical definition of the service area

Primary, Secondary

2. Population growth analysis

3. Demographics and socio-economics analysis

4. Managed care penetration, presence and contracting strategy

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5. Business and industry review

6. Physician population analysis

7. Patient origin analysis

8. Competition analysis

9. Mortality rate review

10. Payor mix review

11. Cardiac procedure utilization review

12. Hospital presence review

13. Projection of potential patients

14. Projection of diagnostic and therapeutic cath procedure volumes

15. Identification of areas of expanding the market

16. Identification of strategies for success

17. Expanded service alternatives

COMPONENTS OF THE CARDIOVASCULAR MARKETING & BUSINESS PLAN

1. Mission statement

2. Background

3. General community and provider objectives

4. Marketing objectives & strategies

Physicians
Managed Care
Business & industry
Consumer

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5. Operational objectives

Facilities
Equipment
Services
Expansion

6. Organization

7. Outside physician participation

8. Capital requirements

9. Projections for patients, procedures and revenues

10. Implementation plan

11. Timeline

Schedule

To complete the Market Assessment will require between 90 and 120 days from the
time we begin. The Business Plan will be completed within 30 to 60 days
following the completion of the Market Assessment and the decisions derived from
it.

Also included is a list of existing Raytel/Managed Care referral relationships
in the bay area.

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EXHIBIT 4.1

DUTIES OF THE MEDICAL DIRECTOR

Staffing

Schedule of coverage
On call coverage
Lab technicians

Reports

Physician Relationships
Statistics for Managed Care
Outcome analysis

Supervision

Maintenance of medical standards
QC & QA Programs
Patient Protocols
Clinical Protocols
Professional Staff
Incident and/or accident reports
Interpretation of procedures/reading

Budgets

Preparation of annual budgets

General Duties

Marketing with Administration & Stanford Health Services
Training & Education - Seminars/Conferences
Selection of Supplies/disposables
Selection of alternate person when unable to perform
Drugs & Medications
Community Education/Awareness programs
Credentialing
Selection of additional or replacement equipment

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EXHIBIT 8.7

SERVICE AREA DESCRIBED AS METROPOLITAN

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EXHIBIT 10.2

LETTER AGREEMENT

BY AND BETWEEN

INTERNATIONAL PHILANTHROPIC HOSPITAL FOUNDATION

A CALIFORNIA NONPROFIT CORPORATION

(DBA GRANADA HILLS COMMUNITY HOSPITAL)

AND

RAYTEL MEDICAL CORPORATION

A DELAWARE CORPORATION

DATED JANUARY 9, 1996

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GRANADA HILLS
COMMUNITY HOSPITAL

January 9, 1996

Mr. Richard Bader, President
Raytel Medical Corporation
2755 Campus Drive, Suite 200
San Mateo, California 94403-2515

Re: Letter Agreement
----------------

Dear Mr. Bader:

This letter agreement (this "Agreement") is made and entered into by and
between INTERNATIONAL PHILANTHROPIC HOSPITAL FOUNDATION, a California
nonprofit corporation doing business as GRANADA HILLS COMMUNITY HOSPITAL
("Hospital"), with its principal place of business at 10445 Balboa Boulevard,
Granada Hills, CA 91344, and RAYTEL MEDICAL CORPORATION, a Delaware
corporation ("Management Company"), with its principal place of business at
San Mateo, California.

Hospital owns and operates a general acute care hospital licensed by the
State of California and provides a heart program which includes, but is not
limited to, cardiovascular and cardiothoracic surgical procedures,
catheterization laboratory services, cardiac rehabilitation center, Pacemaker
Clinic, stress testing services and noninvasive cardiology diagnostic testing
services (the "Program"). Management Company has the experience necessary to
operate and manage all aspects of the Program, subject to the ultimate
control of Hospital.

Hospital and Management Company currently are negotiating a Management
Services and Lease Agreement ("Definitive Agreement"). The parties have
agreed on all terms of the Definitive Agreement except the standard hospital
profit margin (the "Hospital Profit"). The parties, however, contemplate that
the Hospital Profit, once definitively agreed upon by the parties, shall not
exceed the average profit margin for the four largest hospital corporations
in the public market for the year 1995. Once definitively agreed upon, the
Hospital Profit shall be integrated into the payment provisions of the
Definitive Agreement. The parties agree to use good faith efforts to agree
upon the Hospital Profit.

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January 9, 1996
Page 2

Prior to execution of the Definitive Agreement, Hospital desires to
commence the Program under Management Company's management and operation
(collectively, the "Services"), and lease space to Management Company for
operation of the Program and for Program Physicians, and Management Company
desires to provide such Services, and lease such space for the Program and
for Program Physicians, for such period ("Phase One of the Program").

Hospital hereby appoints Management Company as the sole and exclusive
manager of Phase One of the Program for and on behalf of Hospital and hereby
grants to Management Company the authority and responsibility, as set forth
herein, to provide the Services. Management Company hereby accepts such
appointment and agrees to perform such Services.

Except as otherwise provided in this paragraph, the term of this
Agreement shall commence upon February 1, 1996. If, prior to February 1,
1996, Hospital reasonably believes that the written consent of Banque Paribas
to the terms of this Agreement is necessary pursuant to the terms of that
certain Letter of Credit and Reimbursement Agreement between Hospital and
Banque Paribas dated October 13, 1994, Hospital shall notify Management
Company in writing of Hospital's intent to seek such written consent and
shall make good faith efforts to obtain such written consent. If such written
consent of Banque Paribas is sought by Hospital pursuant to this paragraph
and such written consent is not obtained by February 29, 1996, either party
hereto may terminate this Agreement upon delivery of written notice to the
other party hereto.

This Agreement shall terminate, without any action by either party, on
the earlier of (a) the execution of the Definitive Agreement by the parties
hereto, or (b) August 31, 2006. The parties may extend such term by their
written agreement.

Hospital and Management Company agree to be bound by the provisions of
Schedule 1, attached hereto and incorporated herein by this reference, during
Phase One of the Program. In the event of any conflict between the provisions
of Schedule 1 and the other terms of this Agreement, the other terms of this
Agreement shall govern. Once the Hospital Profit provisions are added to the
Definitive Agreement and the Definitive Agreement is executed by the parties,
the Definitive Agreement shall govern and shall supersede the term of this
Agreement. The Definitive Agreement is set forth as Schedule 2, attached
hereto and incorporated herein by this reference.

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January 9, 1996
Page 3

Please confirm your agreement with the foregoing by signing and
returning to the undersigned the enclosed duplicate copy of this letter
agreement. This Agreement shall not become effective if Hospital does not
receive at or before 5:00 p.m. on Tuesday, January 8, 1996, a copy of this
Agreement duly executed and dated by Management Company.

Sincerely,

INTERNATIONAL PHILANTHROPIC
HOSPITAL FOUNDATION, a California
nonprofit corporation doing business
as GRANADA HILLS COMMUNITY HOSPITAL

By: /s/ Dennis Coleman
----------------------------------
Dennis Coleman, President and
Chief Executive Officer

Management Company hereby accepts and agrees to be bound by the terms of this
Agreement as of the date written below.

RAYTEL MEDICAL CORPORATION,
a Delaware corporation

By: /s/ Richard F. Bader
-----------------------------------

Title: CEO, CHAIRMAN OF THE BOARD
--------------------------------

Date: 1/12/96
---------------------------------

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SCHEDULE 1

TERMS OF AGREEMENT

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TERMS OF AGREEMENT

ARTICLE 1
APPOINTMENT OF MANAGEMENT COMPANY

1.1 APPOINTMENT OF MANAGEMENT COMPANY AND ACCEPTANCE. Hospital hereby
appoints Management Company as the sole and exclusive management company of
the Program for and on behalf of Hospital and hereby grants to Management
Company the authority and responsibility, as specifically set forth herein,
to supervise and manage the day-to-day operation of the Program. Management
Company hereby accepts such appointment and agrees, as specifically set forth
herein, to supervise and direct the management and operation of the Program.

ARTICLE 2
DUTIES OF MANAGEMENT COMPANY

The following Program management services shall be performed by
Management Company on behalf of Hospital.

2.1 GENERAL MANAGEMENT AND ADMINISTRATION.

2.1.1 SUPERVISION. Management Company shall supervise and
coordinate all day-to-day aspects of the Program.

2.1.2 GOALS AND OBJECTIVES. In conjunction with Hospital,
Management Company shall establish goals and objectives for the operation of
the Program.

2.1.3 INTERFACE WITH PHYSICIANS. Management Company shall provide
administrative support for daily interface with physicians.

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2.1.4 QUALITY. Management Company shall assure a consistent level
of high quality services to patients requiring services in the Program,
consistent with requirements of the State of California and other Joint
Commission on Accreditation of Health Care Organization ("JCAHO").

2.1.5 PUBLIC IMAGE. Management Company shall make best efforts to
establish an excellent public image for the Program.

2.1.6 NAME. The Program and its facilities shall be called "The
Raytel Heart Center at Granada Hills Community Hospital." In the event of a
continued relationship with UCLA, Heart Center shall be called "The
UCLA/Raytel Heart Center at GHCH" or alternatively "The Raytel/UCLA Heart
Center at GHCH."

2.2 FISCAL MATTERS

2.2.1 PREPARATION AND ADOPTION OF ANNUAL BUDGET. In cooperation
with Hospital Administration, Management Company shall prepare an annual
budget which sets major operating goals, priorities and objectives, revenues,
expenses and the capital budget of the Program ("Annual Budget"). The Annual
Budget shall be presented to Hospital's Board of Directors or its designee
prior to the commencement of each fiscal year for acceptance which shall not
be unreasonably withheld. Upon adoption, the Annual Budget shall serve as a
guide for the operation of the Program during the ensuing fiscal year. The
Annual Budget shall not obligate Management Company to expend money. Failure
to comply with the Annual Budget or the capital budget shall not be deemed a
breach of Agreement nor grounds for termination of this Agreement.

2.2.2 GOVERNMENT REPORTS. As requested by Hospital, Management
Company shall prepare and deliver Program cost data for the preparation and
filing of (i) Medicare cost reports, (ii) Medicaid Cost reports and (iii) all
other governmental disclosure reports. Such cost data shall be in the form
specified by Hospital for the preparation and filing of such reports.

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such account. Hospital shall also have the ability to withdraw money from the
account when an authorized person at Management Company approves in writing
such withdrawal request. Management Company may hire employees of Hospital at
an hourly charge to carry out the activities set forth in this section 2.2.3,
provided that the hourly charge represents at least the actual direct and
indirect cost of Hospital to provide the services of such employees.

2.2.4 CHARGES FOR SERVICES. Management Company recognizes the
importance of maintaining rates to the patients of Hospital which contain the
cost of health care. Prior to the opening of the Program, Management Company
and Hospital shall meet to establish charge structures for the services
provided to Hospital patients which take into account the financial
obligations of Hospital, the level of rates at other comparable hospitals
and outpatient surgery centers, and the importance of provided quality health
care at a reasonable cost.

2.2.5 CAPITATION. Management Company shall administer capitation
distribution from prepaid health plans in connection with the Program, if
any, including but not limited to: receiving and depositing capitation
payments in the Program Bank Account; reconciling capitation payments;
distributing capitation payments; distributing capitation payments; providing
third party payor information for coordination of benefits; and distributing
payments to all ancillary and administrative providers.

2.3 SYSTEMS AND PROCEDURES. Management Company shall review the
systems and procedures of Hospital and make recommendations to Hospital
relating to existing and/or proposed data processing systems and any changes
in such systems which may be advisable for the operation of the Program. Such
recommendations shall not be unreasonably denied. Management Company at its
election and expense shall be able to install separate data processing
equipment compatible with other Management Company installations for the
Program at its sole discretion, provided that Management Company shall use
its best efforts to coordinate the use of such equipment with the systems and
equipment of Hospital. Management Company at its election and expense shall
be able to install separate data processing equipment compatible with other
Management Company installations for Program at its sole discretion.
Management Company shall not be obligated to finance or pay for any data
processing systems Hospital may choose to install.

2.4 COMMUNICATIONS AND REPORTS

2.4.1 ANNUAL BUDGET. Management Company shall present to Hospital
periodic written progress reports regarding the Annual Budget summarizing
Management Company's management actions and results, steps being taken to
implement improvements and such other reports as Management Company or
Hospital considers appropriate to keep Hospital informed as to the status and
condition of the Program.

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2.4.2 MEETINGS. Management Company shall be available to report
and consult with Hospital or its designated representatives, on such matters
and at such times as Hospital shall reasonably request. Hospital agrees to
meet with Management Company to discuss any problems or difficulties in the
management of the Program or Management Company's performance under this
Agreement as Management Company shall reasonably request.

2.4.3 MANAGEMENT COMPANY'S REPRESENTATIVE. Management Company
shall designate one person to serve as Management Company's principal
representative and liaison with Hospital and its Medical Staff. Such person
shall be subject to approval by Hospital and shall be available to attend all
meetings of Hospital (including administrative meetings and meetings of the
Board of Directors or its Committees) and Medical Staff regarding the Program.

2.4.4 MANAGEMENT COMPANY'S RELATIONSHIP WITH OTHER HOSPITAL
DEPARTMENTS. Hospital hereby agrees to comply with Management Company's
requests regarding the protocols to be used in the ER/ICU/CCU Patient Care
regarding cardiac patients, subject to review and approval of such protocols
by the Hospital Medical Staff and provided that such protocols are consistent
with government law and regulation, the rules of the JCAHO and the Bylaws,
rules and regulations of the Hospital's Medical Staff. This protocol shall
include those cardiologists who are to be considered on rotation as well as
the credentialing of cardiologists for referrals from the ER. Hospital also
agrees to use its best efforts in fulfilling requests from Management Company
for support from other Hospital departments. The charges for this support
will be consistent with the charges Management Company is paying for other
Hospital services.

2.5 PERSONNEL

2.5.1 OF MANAGEMENT COMPANY AND HOSPITAL. Program personnel shall
be employees of Management Company or Hospital as set forth in Exhibit A to
this Agreement.

2.5.2 EQUAL OPPORTUNITY. Neither Hospital nor Management Company
shall discriminate against any person on the grounds of race, color, national
origin, handicapped conditions, religion or sex in the recruitment or
employment of personnel.

2.6 PLANNING, MARKETING AND PUBLIC RELATIONS. Management Company
shall: establish a strategic business plan, marketing plan and public
relations program upon consultation with Hospital's Chief Executive Officer;
produce and supply marketing materials; purchase and place media advertising
programs; design, develop and implement new managed care products upon
consultation with Hospital's Chief Executive Officer; and coordinate health
education and wellness programs.

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2.7 MANAGED CARE AND THIRD PARTY PAYOR CONTRACTING.

2.7.1 CONTRACTING WHICH INCLUDES PROGRAM AND OTHER SERVICES.
Hospital shall be responsible for all Program managed care and third party
payor contracting, including but not limited to, prepaid health plans,
preferred provider organizations, exclusive provider organizations, self
insured employers, employee unions, indemnity carriers, networks of ancillary
service providers and out-of-area hospital and ancillary providers. Such
contracting shall take into account the profitability and long term viability
of the Program. Hospital shall coordinate with Management Company in all
such contracting. Such coordination shall include written FAX notice by
Hospital to Management Company of financial terms of each proposed contract
as such terms relate to the Program. Management Company shall have three (3)
working days to dispute such financial terms as being of a lesser rate,
charge or remuneration for Program services than any existing contract with
Hospital ("Contract Lesser Rate"). If the Management Company fails to
respond to Hospital in writing by FAX transmission within such three (3)
working day period, the Management Company shall be deemed to have approved
the rates contained in such contract. If Management Company disputes the
financial terms of any such contract and Hospital nonetheless accepts the
Contract Lesser Rate, then Hospital shall pay to Management Company upon the
termination of this Agreement an amount determined as follows:

a. the Contract Lesser Rate, less

b. the Program contract rate per procedure or the equivalent,
times

c. the number of such procedures under such contract during
the term of this Agreement.

If the Contract Lesser Rate cannot be determined as of the termination of
this Agreement, time for payment pursuant to this Section 2.7.1 shall be
extended until sufficient information is available to make such determination.

2.7.2 CONTRACTING INVOLVING ONLY THE PROGRAM. In the case in
which such contracting involves only the Program, Management Company shall be
responsible for such contracting, subject to Hospital's approval which shall
not be unreasonably withheld.

2.8 PATIENT ELIGIBILITY.

2.8.1 DETERMINATION. Management Company shall assist with
determination of eligibility of patients for health care coverage prior to
provision of Hospital services.

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2.8.2 DENIALS. Management Company shall reconcile retroactive
denial of eligibility against provision of medical services and authorization
process by Hospital against appropriate health care benefit agreement.

2.8.3 RETROACTIVE ELIGIBILITY. Management Company shall
administer system for retroactive eligibility determination and assisting in
collection of outstanding accounts receivable from ineligible patients.

2.8.4 HOSPITAL PATIENT ADMISSION. In the event Management Company
refuses a patient for any reason, including courtesy discount patients,
consistent with the laws and regulations governing such patients, Hospital
shall have the right to accept the patient into Program but will be
financially responsible for paying for any services rendered to the patient
at the median of Program's managed care rates.

2.9 UTILIZATION REVIEW, QUALITY ASSURANCE AND MEDICAL POLICY COMMITTEE
FUNCTIONS.

2.9.1 REFERRAL AUTHORIZATION. Management Company shall administer
managed care medical and hospital referral authorization procedures.

2.9.2 IMPLEMENT PROGRAMS. Management Company shall design,
develop and implement an outcome management program, a physician education
program and a claims analysis program, upon consultation with Hospital's
Chief Executive Officer.

2.9.3 ASSISTANCE. Management Company shall provide administrative
assistance prior to and at all managed care Utilization Review, Quality
Assurance and Medical Policy Committee Meetings (e.g. meeting schedules,
set-up, agenda, minutes). Hospital shall use its best efforts to incorporate
any suggestions Management Company may have on this paragraph 2.9.3 as well
as paragraphs 2.9.4 and 2.9.5.

2.9.4 UTILIZATION REVIEW COMMITTEES. Management Company shall
provide administrative support at each managed care Utilization Review
Committee meeting pertinent to health benefits, billing information, referral
authorization process, referral and practice patterns, compliance with
referral authorization process, referral limitations, monitoring of coding
procedures and utilization guidelines. Management Company may appoint a
physician member of the Hospital's Medical Staff to the Hospital's Medical
Staff Utilization Review Committee.

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documentation of findings, monitoring of Hospital developed requirements for
medical record documentation.

2.10 LIAISON WITH PROVIDERS AND THIRD PARTY PAYORS CONTRACTING WITH
HOSPITAL.

2.10.1 COORDINATION. Management Company shall coordinate
communications with providers and third party payors.

2.10.2 FACILITATION. Management Company shall facilitate Hospital
network and office expansion to meet requirements of third party payors.

2.10.3 GRIEVANCES. Management Company shall assist in resolving
any grievances between Hospital and providers, third party payors or patients.

2.11 COMPLIANCE WITH REQUIREMENTS.

2.11.1 LICENSING. Management Company shall assist Hospital in its
compliance with licensing, certification and accreditation reviews, audits and
issues.

2.11.2 MEDICARE. Management Company shall assist Hospital in its
compliance with Medicare conditions for coverage and accreditation standards.

2.11.3 PROGRAM PHYSICIANS. All physicians applying for Hospital
Medical Staff privileges in the Program shall be reviewed by the Management
Company's credentialing committee. The results of such review shall be
forwarded in writing to the appropriate Hospital Medical Staff committtee for
consideration as part of Hospital's credentialing process consistent with time
frames contained in Hospital's Medical Staff Bylaws.

2.12 OTHER DUTIES. Management Company shall take such other actions
and perform such other duties as are consistent with the terms of this
Agreement and as may be requested by Hospital in order to comply with
government regulations except that nothing in this section shall imply that
Management Company is obligated to undertake any expenditures.

ARTICLE 3
MANAGEMENT OF PROGRAM

3.1 RELATIONSHIP OF PARTIES. It is mutually understood and agreed that
each party is at all times acting and performing as an independent contractor
with respect to the other and that no relationship of partnership, joint
venture or employment is created by this Agreement. Neither party, nor any
other person performing services on behalf of either party pursuant to this
Agreement, shall have any right or claim against the other party under this
Agreement for

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social security benefits, workers' compensation benefits, disability
benefits, unemployment insurance benefits, health benefits, vacation pay,
sick leave or any other employee benefits of any kind.

3.2 PATIENT SERVICES. From time to time and as appropriate, Management
Company shall make recommendations to Hospital concerning changes in the
scope of services offered in the Program as set forth in Exhibit B to this
Agreement. In formulating its recommendations, Management Company shall
confer with and seek the advice and recommendations of Hospital and members
of the Hospital's Medical Staff.

3.3 MEDICAL AND PROFESSIONAL MATTERS. All medical and professional
matters shall be the responsibility of Hospital and its Medical Staff.
Management Company shall provide advice and consultation in matters relating
to the Medical Staff. Hospital and the Medical Staff shall use their best
efforts to follow such advice and consultation and shall not unreasonably
reject the advice and consultation. Management Company shall at all time use
its best efforts and devote the resources necessary to maintain excellent
working relations with both Hospital and its Medical Staff.

3.4 MAINTENANCE OF STANDARDS

3.4.1 STANDARDS OF HEALTH CARE MANAGEMENT. Management Company
shall manage the Program in accordance with generally accepted health care
management techniques for a general acute care hospital licensed in the
community, with reasonable exercise of its judgment and consistent with the
policies adopted by Hospital and the resources available to it, including,
but not limited to, availability of services in the Program to all inpatients
and outpatients presenting in the Program without regard to the ability to
pay in accordance with Hospital's policy.

3.4.2 QUALITY CONTROLS. Management Company shall assist in
activating and maintaining on a continuing basis its quality assurance
program to provide objective measurements of the quality of health care
provided in the Program and to promote full compliance with the Quality
Assurance Standards of JCAHO. Management Company shall further encourage and
assist the Medical Staff to meet JCAHO standards with respect to medical
practices and procedures.

3.4.3 OPERATIONAL PLANNING. Management Company shall provide an
annual report to assist Hospital and the Medical Staff in reviewing short,
medium and long range objectives for the Program and in formulating
recommendations with respect thereto. For purposes of this Agreement, the
term "short range objective" is intended to mean _______________ the term
"medium range objective" means _______________ and the term "long range
objective" means ______________ or longer. If Hospital desires Management
Company to develop a master

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plan, Management Company shall make a presentation to Hospital explaining the
justification for development of such a plan.

3.4.5 GOVERNMENT REGULATIONS. Management Company, in the
performance of its duties under this Agreement, shall comply with all
applicable local, state and federal rules and regulations governing Hospital
and the Program.

3.4.6 CONFIDENTIALITY OF RECORDS. Management Company shall
assure that the confidentiality of all records of Hospital is maintained in
accordance with the standards of the JCAHO and shall comply with all
applicable local, state and federal laws and regulations relating to records
of Hospital.

3.4.7 MEDICARE DISCLOSURE OF BOOKS AND RECORDS. To the extent
required by Section 1395x(V)(1)(I) of Title 42 of the United States Code:

a. Until the expiration of four years after the termination
of this Agreement, Management Company shall make available, upon written
request to the Secretary of the United States Department of Health and Human
Services, or upon request to the Comptroller General of the United States
General Accounting Office or any of their duly authorized representatives, a
copy of this Agreement and such books, documents and records as are necessary
to certify the nature and extent of the costs of the services provided by
Management Company under this Agreement.

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

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ARTICLE 4
CAPITAL IMPROVEMENTS, EQUIPMENT, SUPPLIES AND SERVICES

4.1 CAPITAL IMPROVEMENTS AND EQUIPMENT.

4.1.1 Management Company shall pay the costs of capital
improvements and new equipment for the Program. Within one hundred
twenty (120) days of the execution of this Agreement, Management Company
shall make recommendations to Hospital regarding proposed capital
improvements and equipment or purchases or leases. If approved by
Hospital, whose approval shall not be unreasonably withheld, Management
Company shall negotiate the contracts and supervision of the
installation of such capital improvements or equipment. Management
Company shall thereafter as part of the Annual Budget make
recommendations to Hospital as to further capital improvements for the
Program.

4.1.2 Management Company shall make available sufficient funds to
pay for such capital improvements and equipment during the term of this
Agreement to achieve the following:

a. Consolidation of the operations of all services and functions of
the Program.

b. Upgrading the catheterization laboratory equipment to present
standard of care.

c. Providing new management information systems.

d. Maintaining a high level of Program quality and outcomes.

4.1.3 Management Company shall retain ownership of equipment
purchased subsequent to the termination of this Agreement, subject to
Hospital's right to purchase equipment under section 10.2.2 of this
Agreement.

4.1.4 In the event Management Company recommends to Hospital the
construction of a new building on Hospital property or the need for
Program to occupy more than ____ of the total Hospital building,
Management Company shall present to Hospital a comprehensive planning
and development document for expansion. Hospital shall evaluate any
proposed expansion of the Program and shall not reasonably withhold
approval unless such expansion violates government law or regulation,
present Hospital policy including the master plan. JCAHO requirements or
unless the expansion impinges on the financial viability of Hospital.

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4.2 SUPPLIES AND SERVICES.

4.2.1 RESPONSIBILITY. Hospital shall supply the Program with all
utilities, including in-house and local telephone service, existing
Program medical equipment, services except where specialized equipment
maintenance is required, central supply, maintenance and security
services required to operate the Program as agreed upon by Hospital and
Management Company. Management Company will pay for this as part of the
lease price. Where usage can be established, Management Company will pay
Hospital on a fee-for-services basis.

4.2.2 CONTRACTS. Hospital shall negotiate all contracts for
supplies and services to be provided by it pursuant to the terms of this
Agreement, including, but not limited to, group purchasing contracts.
Management Company shall assist Hospital in such negotiations upon
request and advise Hospital of purchasing contracts available to
Management Company.

ARTICLE 5
PROGRAM SPACE

5.1 HOSPITAL RESPONSIBILITIES. During the term hereof, Hospital
shall lease to Management Company the space described in Exhibit C to
this Agreement under rates set forth in Article 8 of this Agreement.
Such space shall be used for the operation of the Program by Management
Company and for Hospital Medical Staff physicians practicing in the
Program ("Program Physicians") as provided in this Agreement and for no
other purposes. Any changes to such space may be made only upon the
written agreement of Hospital and Management Company. Hospital shall
provide to Management Company and its personnel access to all common
areas and departments in Hospital necessary to carry out the operation
of the Program on a basis similar to all Hospital personnel for other
Hospital departments, including, but not limited to, parking, admitting,
waiting rooms, toilet facilities and cafeteria.

5.2 MAINTENANCE. Hospital shall maintain and promptly repair the
physical property in the Program as shall be requested by Management
Company and determined necessary by Hospital in order to maintain the
same in good working order and condition.

ARTICLE 6
PROGRAM SERVICES

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Company may apply for licensure include all heart related diagnostic and
therapeutic activities including, without limitations, surgery,
catheterization, rehabilitation, patient rooms and ICU.

ARTICLE 7
MANAGEMENT OF PROGRAM PHYSICIANS

7.1 BY MANAGEMENT COMPANY. Management Company intends to provide
management services to Program Physicians.

7.2 LEASE OF SPACE FOR PROGRAM PHYSICIANS. Pursuant to Article 5 of
this Agreement, Management Company shall lease space from Hospital to be
used as medical offices by Program Physicians.

7.3 ADDITIONAL SPACE. In the event during the term of this
Agreement Management Company requires additional Space, Hospital agrees
to provide such space at a proportional increase in the rate presently
charged for the facilities, unless provision of such space requires
additional expenditures in which case Management Company shall pay the
cost of such expenditures.

ARTICLE 8
PAYMENT BY MANAGEMENT COMPANY TO HOSPITAL

8.1 ONE TIME PAYMENT. Management Company shall pay to Hospital the
lump sum of one hundred fifty thousand dollars ($150,000.00) on or before
February 1, 1996.

8.2 PROGRAM SPACE. INCLUDING CATH LAB SPACE. During the term of this
Agreement, Management Company shall pay to Hospital the following
amounts for Program Space as set forth in Section 5.1 of this Agreement:

8.2.1 PROGRAM SPACE. For Program Space, excluding cath lab space,
of approximately four thousand eight hundred and eight (4,880) square
feet, the rental amount of ____________________ per square foot per
month, plus an additional amount of _________________ per square foot
per month for services provided by Hospital under Section 4.2.1 of this
Agreement.

8.2.2 CATH LAB SPACE. For Cath Lab Space of approximately eight
hundred and twenty (820) square feet, the rental amount of ___________
per square foot per month, plus an additional amount of ____________ per
square foot per month for services provided by Hospital under Section
4.2.1 of this Agreement, provided that such rent of _____________ per
square foot per month shall be reduced to _____________

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______________ per square foot per month upon installation of new cath
lab equipment by Management Company.

8.2.3 ANNUAL ADJUSTMENT IN RENTAL AMOUNT. The rental amounts set
forth in Sections 8.2.1 and 8.2.2 of this Agreement shall be annually
increased by the greater of the following: _________________ established
for the previous calendar year.

8.2.4 EFFECTIVE DATE. The amounts set forth in Sections 8.2.1 and
8.2.2 shall be effective only upon integration of the Program Space by
Management Company into the Program.

8.2.5 TENANT IMPROVEMENTS. Management Company shall pay the cost of
all tenant improvements to Program and Cath Lab Space.

8.2.6 RELOCATION. Management Company shall pay Hospital for its
costs of vacating and relocating its activities consistent with this
Agreement, provided that such costs are approved by Management Company
in writing in advance of such costs.

8.3 GOODWILL. Management Company shall pay to Hospital the amount
of _____________________ during each year of the term of this Agreement
for good will established by Hospital in its existing heart program.
Such payment shall commence on the earlier of the following dates:
_____________________________________________________________________
__________________________________________________________

8.4 ICU AND MED/SURG BEDS. An amount for ICU and Med/Surg Beds
shall be paid by Management Company to Hospital at a bed rate as follows:

8.4.1 NON-PRIME CARDIOVASCULAR DRGs. for Non-Prime Cardiovascular
DRGs __________________ of the average rate per bed collected by
Hospital during the last ninety (90) days of 1995, as detailed in the
Hospital's "Product Line Analysis", a sample of which is set forth in
Exhibit D to this Agreement.

8.4.2 PRIME CARDIOTHORACIC DRGs. For Prime Cardiothoracic DRGs _____
_______________ of the average rate per bed collected by Hospital during
the last ninety (90) days of 1995, as detailed in the Hospital's
"Product Line Analysis", a sample of which is set forth in Exhibit D to
this Agreement.

8.4.3 REDUCTION IN BED RATE. In any calendar year in which the
ICU and Med/Surg bed days reaches ________________________________ the
percentages set forth in sections 8.4.1 and 8.4.2 shall be reduced to
___________________ for Med/Surg Beds and _________________________ for
ICU Beds, effective the date that the Med/Surg beds days reaches such
level.

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8.5 ANCILLARY SERVICES AND SUPPLIES. Management Company shall pay
to Hospital for ancillary services and supplies used in the Program,
amounts equal to ____________ of the average rate collected by the
Hospital during the last ninety (90) days of 1995 for services and
supplies for Non-Prime Cardiovascular DRGs and _____________ of the
average rate collected by the Hospital during the last ninety (90) days
of 1995 for services and supplies for Prime Cardiothoracic DRGs.

8.6 NET REVENUE SHARING. Management company shall pay to Hospital
an amount equal to ________________ of the net case collected from
Program activities in excess of the net cash collected by Hospital for
Program activities during 1995.

8.7 UCLA PROGRAM. Management Company shall assume all costs incurred
by Hospital under that certain unsigned Cardiothoracic Surgery Services
Agreement by and between Hospital, University Cardiothoracic Associates
and The Regents of the University of California.

8.8 OPERATIONAL AND DIRECT EXPENSES. Management Company shall
assume all operational and direct expenses associated with services set
forth in Exhibit B.

8.9 ADDITIONAL PAYMENTS. Management Company shall pay to Hospital a
"Net Revenue Monthly Shortfall Payment" of up to _______________________
per month for months _________________ of this Agreement, if this
Agreement is in effect during such months and if a "Net Revenue Monthly
Shortfall" exists in any such month. For the purposes of this Agreement,
Net Revenue Monthly Shortfall shall mean any month in which compensation
to Hospital under Sections 8.2, 8.3 (the payment therefrom prorated
monthly), 8.4, 8.5, 8.7 and 8.8 of this Agreement, less _________________
for such month is a _____________________________________________________
____________________. For each Net Revenue Monthly Shortfall month,
Management Company shall pay to Hospital a Net Revenue Monthly Shortfall
Payment within fifteen (15) days of receipt of invoice and supporting
documents from Hospital.

ARTICLE 9
TERMINATION

9.1 GROUNDS FOR TERMINATION BY EITHER PARTY. During the term
hereof, either party may terminate this Agreement for cause at any time
upon receipt of written notice as set forth below to the other party.
For the purposes of this Agreement, "cause" is defined solely as any one
or more of the following:

9.1.1 MATERIAL COVENANT. A default in the performance of any
material covenant, agreement, term or provision, when such default
continues for a period of thirty

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(30) days after written notice is given to the defaulting party by the
non-defaulting party, which notice shall set forth the specific incidents of
default and the provisions in this Agreement which the defaulting party has
breached. For the purposes of this Agreement, "material covenant, agreement,
term or provision" is defined as a covenant, agreement, term or provision
contained in this Agreement which constitutes substantially the consideration
of the Agreement or without which the Agreement would not have been made.

9.1.2 LOSS OF LICENSE. This Agreement may be immediately
terminated if: the Hospital or Management Company fails to maintain any
material license for the Hospital or the Program or if any such license is
suspended, terminated or revoked and is not reinstated within a reasonable
period of time; the Hospital or Management Company fails to maintain JCAHO
accreditation of Hospital; or if the Hospital or Management Company fails to
maintain the Hospital's Medicare certification.

9.2 GROUNDS FOR TERMINATION BY HOSPITAL. During the term hereof,
Hospital may terminate this Agreement if:

9.2.1 SURGICAL PROCEDURES. The Program has fewer than ________
(___) surgical procedures or _____________ diagnostic catheterization per
year measured annually from the date of the Agreement for _____________.

9.2.2 DAMAGE TO HOSPITAL. Material damage occurs to the
Hospital or any portion thereof relating to the operation of the Program by
fire or other casualty, but only if Hospital fails to commence the activities
that will lead to the repair, restoration, rebuilding, or replacement of any
such damage or destruction within sixty (60) days after such fire or other
casualty, or shall fail to complete such work within a reasonable period of
time. In the event Hospital elects not to rebuild Hospital, Management Company
may, at its expense, rebuild all or a portion of Hospital. Until such
expenses have been repaid, Management Company would have the responsibility
of running Hospital.

9.2.3 FAILURE OF PAYMENTS. Management Company fails to pay to
Hospital any sum required pursuant to this Agreement, and such failure is not
cured within three (3) days after written notice of such failure is received
by Management Company.

9.3 GROUNDS FOR TERMINATION BY MANAGEMENT COMPANY. During the term
hereof, Management Company may terminate this Agreement if:

9.3.1 CHANGE OF OWNERSHIP. The ownership of Hospital changes.

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9.4 EFFECT OF TERMINATION

9.4.1. FURTHER OBLIGATIONS. Upon termination of this Agreement
pursuant to this Article 9, or upon expiration of the term of this Agreement,
neither party shall have any further obligation hereunder except for
obligations occurring prior to the date of termination and obligations,
promises, or covenants contained herein which are expressly made to extend
beyond the term of this Agreement.

9.4.2 PURCHASE OF EQUIPMENT, INVENTORIES AND SUPPLIES. Upon
termination of this Agreement by Hospital, Hospital shall be required to
purchase from Management Company, at a price equal to Management Company's
depreciated book value:

a. All equipment owned by Management Company which are
used in the Program; and

b. All inventories and supplies owned by Management
Company for use in the Program.

c. All leasehold improvements made to the Premises by
Management Company and approved by Hospital; and

d. All equipment upgrades made by Management Company
to existing equipment in Program.

(Items a., b., c. and d. above are hereinafter referred to as the
"Acquisition Assets".)

Hospital shall pay Management Company the purchase price for
the Acquisition Assets as follows: either full payment within sixty (60)
days following the effective date of termination of this Agreement; or in
sixty (60) days equal monthly payments including interest at ten percent (10%)
per annum and a security interest subordinated to existing Hospital debt. This
Section 9.4.2 shall be subject to the terms of the Hospital's bond indenture
and related documents.

9.4.3 OPTION TO PURCHASE ACQUISITION ASSETS. Upon termination
or this Agreement by Management Company for any reason, Hospital shall have
the option to purchase from Management Company, at a price equal to Management
Company's depreciated book value, the Acquisition Assets. If Hospital
exercises its option under this Section 9.4.3, Hospital shall pay Management
Company the purchase price for said equipment, inventories and supplies as
follows: either full payment within sixty (60) days following the effective
date of termination of this Agreement; or in sixty (60) equal monthly
payments including interest at ten percent (10%) per annum and a security
interest subordinated to existing Hospital debt.

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This Section 9.4.3 shall be subject to the terms of the Hospital's bond
indenture and related documents.

9.4.4 USE OF EQUIPMENT, INVENTORIES AND SUPPLIES. Upon
termination of this Agreement by either party, for at least one hundred twenty
(120) days following the effective date of termination, Management Company
shall allow Hospital the use of the Acquisition Assets.

9.4.5 ASSUMPTION OF MANAGEMENT COMPANY'S EQUIPMENT LEASE. Upon
termination of this Agreement for any reason, Hospital shall have the option
to assume Management Company's leases of all equipment leased by Management
Company for Program.

9.4.6 PERSONAL PROPERTY. Upon termination of this Agreement for
any reason, Management Company shall vacate the Hospital premises on the
effective date thereof, removing at such time any and all of its personnel
and personal property. Any personal property which is not so removed, shall
become the property of the Hospital.

ARTICLE 10
INSURANCE

10.1 HOSPITAL. Hospital, at its sole cost, shall maintain the following
insurance coverages during the term of this Agreement, with a licensed
insurance company admitted to do business in the state of California rated
"A" or better in A.M. Best ratings of insurance carriers:

10.1.1 GENERAL AND PROFESSIONAL LIABILITY. General and
professional liability with limits of not less than three million dollars
($3,000,000) per occurrence and ten million dollars ($10,000,000) in the
aggregate;

10.1.2 WORKERS' COMPENSATION. Statutory coverage for workers'
compensation; and

10.1.3 FIRE. Fire and extended coverage of Hospital-owned
contents in amounts not less than full replacement costs.

10.2 MANAGEMENT COMPANY. Management Company, at its sole cost, shall
maintain the following insurance coverages during the term of this Agreement,
with a licensed insurance company admitted to do business in the state of
California rated "A" or better in A.M. Best ratings of insurance carriers;

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10.2.1 GENERAL AND PROFESSIONAL. General and professional
liability with limits of not less than three million dollars ($3,000,000) per
occurrence and ten million dollars ($10,000,000) in the aggregate;

10.2.2 WORKERS' COMPENSATION. Statutory coverage for workers'
compensation; and

10.2.3 FIRE. Fire and extended coverage for Management
Company's equipment located in Hospital in an amount not less than full
replacement cost.

10.3 TAIL COVERAGE. With respect to the insurance policies which the
parties are required to purchase and maintain pursuant to this Article 8, in
the event that either party procures a "claims made" policy as distinguished
from an "occurrence" policy, that party shall procure and maintain, prior to
termination of such insurance, continuing "tail" coverage acceptable to the
other party.

10.4. EVIDENCE OF INSURANCE. Each party shall provide the other party
with a minimum of thirty (30) days' prior written notice in the event any of
the policies set forth in this Article 8 are canceled, changed or amended.
Each party shall, from time to time, upon a reasonable request of the other
party, furnish to the requesting party written evidence that the policies of
insurance required pursuant to this Article 8 are in full force and effect,
and valid and existing in accordance with the provisions of said paragraphs.

ARTICLE 11
INDEMNIFICATION

11.1 INDEMNIFICATION BY MANAGEMENT COMPANY. Management Company shall
indemnify and hold Hospital harmless from any and all claims, loss, liability
or damage of any kind whatsoever, including but not limited to reasonable
attorneys' fees and court costs, arising out of or in any manner occasioned
by the negligence or intentional torts of Management Company or its employees,
servants and subcontractors, arising out of their duties under this Agreement
or their presence in Hospital.

11.2 INDEMNIFICATION BY HOSPITAL. Hospital shall indemnify and hold
Management Company harmless from any and all claims, loss, liability or
damage of any kind whatsoever, including but not limited to, reasonable
attorneys fees and court costs arising out of or in any manner occasioned by
the negligence or intentional torts of Hospital or its employees, servants
and subcontractors, arising out of their duties under this Agreement or their
use and occupancy of Hospital.

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ARTICLE 12
SUCCESSORS AND ASSIGNS

12.1 This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto, and their respective heirs, legal
representatives, successors and assigns. Notwithstanding the foregoing,
Management Company may not assign any of its respective rights or delegate
any of its respective duties hereunder without receiving the prior written
consent of Hospital.

ARTICLE 13
ATTORNEY FEES

13.1 In the event of any dispute between the parties hereto relating to
the terms, covenants or conditions of this Agreement, whether or not an
action is filed, the prevailing party in any such dispute shall be entitled
to recover the costs thereof, including, without limitation, the reasonable
attorney fees (whether trial or appellate), so incurred.

ARTICLE 14
BUSINESS, FINANCIAL AND PATIENT MEDICAL RECORDS

14.1 ACCESS TO INFORMATION. Hospital hereby authorizes and grants to
Management Company full and complete access to all information, instruments
and documents relating to the Program which may be reasonably requested by
Management Company in order to perform its duties under this Agreement.

14.2 OWNERSHIP AND INSPECTION OF RECORDS.

14.2.1 PATIENT MEDICAL RECORDS. At all times during and after
the term of this Agreement, all patient medical records shall be and remain the
sole property of Hospital. The patient medical records shall be maintained and
kept at Hospital and upon termination of this Agreement, all such patient
medical records shall be and remain in the possession of Hospital. Hospital
will cooperate and allow Management Company to access such records in the event
of any government actions or legal actions where Management Company is a named
party.

14.2.2 LISTS. At all times during and after the term of this

Agreement, financial, corporate and personnel records and information,
including but not limited to all lists of patients and managed care contracts
relating exclusively to the business and activities of Hospital, shall be and
remain the sole property of Hospital. Notwithstanding the foregoing, Hospital
shall at all times during the term of this Agreement make available to
Management Company for inspection by its authorized representatives, during
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principal place of business of Hospital, any Hospital records determined by
Management Company to be necessary to perform its duties under this Agreement.

14.2.3 BANKRUPTCY. In the event either party makes a decision to
enter voluntary bankruptcy, the other party shall be notified at least
forty-eight (48) hours prior to the filing of bankruptcy documents, during
which time the notified party may exercise any and all legal remedies it may
have under law and this Agreement. In the event Hospital is forced into
involuntary bankruptcy, this Agreement shall remain in force and shall be
binding in accordance with the laws of the State of California.

ARTICLE 15
NON-COMPETITION: CONFIDENTIAL INFORMATION

15.1 NON COMPETITION. Management Company and all of the affiliated
entities of Management Company agree for the duration of this Agreement not
to develop, manage, acquire any ownership interest in or establish any
affiliation with any person or entity offering services offered by the Program
or related services within fifteen (15) miles of Hospital. Further,
Management Company agrees that the shareholders, directors and officers of
Management Company for the duration of this Agreement shall not develop,
manage, acquire any ownership interest in or establish any affiliation with
any person or entity offering services offered by the Program or related
services within fifteen (15) miles of Hospital.

Hospital agrees for the duration of this Agreement not to develop,
manage, acquire any ownership interest in or establish any affiliation with
any person or entity offering services offered by the Program or related
services; provided, however, that this provision shall not in any way
prohibit or restrict Hospital from entering into any transaction involving
the operation of Hospital or the sale, merger or change of ownership of
Hospital; and further provided that this provision shall not in any way be
deemed to limit the provision of services offered by the Program and related
services at Hospital by any qualified physician who is a member of the
Hospital's Medical Staff with appropriate clinical privileges.

15.2 CONFIDENTIAL INFORMATION. For purposes of this paragraph 12.2, the
term confidential information shall include (i) all proprietary documents and
other materials of Management Company and Hospital which contain information
relating to the operation of the Program or Hospital and (ii) all methods,
techniques and procedures utilized by Management Company and Hospital in
operating the Program or Hospital which are not readily available through
sources in the public domain.

15.2.1 Hospital agrees and acknowledges that confidential
information of Management Company will be disclosed to it in the course of
performing this Agreement. Hospital shall not without the prior written
consent of Management Company, use confidential

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information of Management Company for any purpose other than the performance
of this Agreement. Hospital further agrees to keep strictly confidential and
to hold in trust all confidential information of Management Company and not
to disclose or reveal such information to any third party without the express
prior written consent of Management Company.

15.2.2 Management Company agrees and acknowledges that confidential
information of Hospital will be disclosed to it in the course of performing
this Agreement. Management Company shall not without the prior written
consent of Hospital, use confidential information of Hospital for any purpose
other than the performance of this Agreement. Management Company further
agrees to keep strictly confidential and to hold in trust all confidential
information of Hospital and not to disclose or reveal such information to any
third party without the express prior written consent of Hospital.

15.2.3 Upon termination of this Agreement, each party shall retain
in its exclusive possession all confidential information, in whatever form,
developed or provided by that party in the performance of its duties under
this Agreement, and each party shall return all confidential information of
the other party which may be in its possession. Each party agrees that it
shall not use any confidential information of the other party following
termination of this Agreement. This paragraph shall not apply to information
required to be maintained by either party under Federal or State law or
regulation.

ARTICLE 16
ARBITRATION

16.1 Any controversy, dispute or claim arising out of the
interpretation, performance or breach of this Agreement shall be resolved by
binding arbitration at the request of either party, in accordance with the
rules of the American Arbitration Association. There shall be one arbitrator
who shall apply California substantive law and federal substantive law where
state law is preempted. Civil discovery for use in such arbitration may be
conducted in accordance with the California Code of Civil Procedure and the
California Evidence Code, and the arbitrator selected shall have the power to
enforce the rights, remedies, duties, liabilities, and obligations of
consequences, liabilities, sanctions, and penalties as can be or may be
imposed in like circumstances in a civil action by a superior court of the
State of California. The provisions of California Code of Civil Procedure
Section 1283 and 1283.05 concerning the right to discovery and the use of
depositions in arbitration are incorporated herein by reference and made
applicable to this Agreement. The arbitrator shall have the power to grant
all legal and equitable remedies and award damages provided by California
law, and judgment upon the award rendered by the arbitrator may be entered by
any court having jurisdiction thereof. The arbitrator shall prepare in
writing and provide to the parties an award including factual findings and
the legal reasons on which the decision is based. The arbitrator shall not

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have the power to commit errors of law or legal reasoning, and the award may
be vacated or corrected pursuant to California Code of Civil Procedure
Sections 1286.2 or 1286.6 for any such error. Notwithstanding the above, in
the event either party wishes to obtain injunctive relief or a temporary
restraining order, such party may initiate an action for such relief in a
court of law and the decision of the court of law with respect to the
injunctive relief or temporary restraining order shall be binding upon both
parties.

ARTICLE 17
MISCELLANEOUS

17.1 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter contained herein and
correctly sets forth the rights, duties and obligations of each to the other
as of its date. Any prior agreement, promises, proposals, negotiations or
representations, whether written or oral, which are not expressly set forth
in this Agreement are hereby superseded and are of no force or effect.

17.2 GOVERNING LAW. The terms of this Agreement shall be governed by
the laws of the State of California. Venue for any action arising out of
this Agreement shall be in the State of California.

17.3 INTERPRETATION. The terms of this Agreement shall not be
construed for or against either party by reason of the drafting hereof and
shall not be interpreted by reference to any of the titles or headings to the
paragraphs or subparagraphs which have been inserted for convenience purposes
only and are not deemed a part hereof.

17.4 EXHIBITS. The terms of this Agreement are deemed to include all
of the schedules and exhibits hereto, which are made a part hereof by this
reference.

17.5 AMENDMENTS/WAIVER. This Agreement may only be amended in writing
and any provision hereof may be waived only in writing by the party entitled
to the benefit of such provision. No waiver of the breach of any provision
shall be deemed or constructed to be a waiver of any other or the same
provision.

17.6 SEVERABILITY. In the event any provision of this Agreement is
found to be invalid, illegal or unenforceable, any such provision shall be
stricken and the remaining provisions shall remain in full force and effect
provided the stricken provisions are not material to the consideration
provided by either party hereto.

17.7 ASSIGNABILITY. This Agreement shall not be assignable by either
party.

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17.8 NOTICES. Any notices by either party to the other shall be in
writing and shall be deemed to have been given on the earlier of (a) the date
on which it is delivered personally, or (b) one (1) business day after it is
sent via Federal Express or other overnight courier to the party at its
address as set forth on page 1 of this Agreement, or (c) three (3) days after
it is deposited in the U.S. mail, postage prepaid, certified with return
receipt requested and addressed to the party at its address as set forth on
page 1 of this Agreement. Either party may change its address by providing
notice to the other party as provided herein.

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EXHIBIT A
PROGRAM PERSONNEL

All full-time, part-time and/or per diem personnel assigned to the
following cost centers and/or departments including

- Catheterization Laboratory Services;

- Cardiac Rehabilitation Services;

- Stress Testing Services:

- Non-Invasive Cardiology Diagnostic Testing Services;

- Cardiovascular and cardiothoracic Surgery Services; and

- Pacemaker Clinic.

(Actual personnel attached to this Exhibit A)

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Strictly Confidential
SUBJECT TO ATTORNEY-CLIENT PRIVILEGE

Grenada Hills Community Hospital
Raytel Project

PROGRAM PERSONNEL

<TABLE>

EMPLOYEE DEPT POSITION FTE DATE BASE
NUMBER OF RATE
HIRE
- -------- ---------------------- ---------------------------------------- ---- -------- -----
<S> <C> <C> <C> <C> <C>
02550 Pacemaker Clinic Pacemaker Technician (LVN) 11/18/65
43286 Cardiac Rehab Cardiopulmonary Rehab Coordinator 6/19/95
41301 Cardiac Rehab Cardiopulmonary Exercise Specialist 6/11/90
43208 Cardiac Rehab Cardiopulmonary Exercise Specialist 9/21/94
43241 Cardiovascular Services Cardiothoracic Surgery Program Coord (RN) 1/16/95
43115 Cardiovascular Services Administrative Assistant 2/14/94
39099 Cath/Angiography Special Procedures Tech 7/31/89
04242 Cath/Angiography Special Procedures RN 8/1/72
05173 Cath/Angiography Cath Lab Monitor Tech 6/21/80

NOTE: PAY RATES IN BOLD INDICATE FACTORED 12-HOUR RATES.
</TABLE>

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EXHIBIT B
SCOPE OF SERVICES

-- Catheterization Laboratory Services;

-- Cardiac Rehabilitation Services;

-- Stress Testing Services;

-- Non-Invasive Cardiology Diagnostic Testing Services;

-- Cardiovascular and Cardiothoracic Surgery Services; and

-- Pacemaker Clinic.

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EXHIBIT C
PROGRAM SPACE

See attached diagram.

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[FLOOR/SPACE LAYOUT]

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EXHIBIT D
DRGs

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PRODUCT LINE ANALYSIS -

CARDIOVASCULAR AND THORACIC - MEDICAL AND SURGICAL

<TABLE>
# OF PATIENT TOTAL TOTAL REIMB
DRG DESCRIPTION DSCHGS DAYS CHARGES REIMB PERCENT
- ------- ------------------------------------------------------- ------- ------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
3 EXTRACRANIAL VASCULAR PROC
14 CEREBROVASC DISO EXT1
15 TIA & RECEREBRAL OC
16 NONSPECIFIC CEREBROVASCULAR
17 NONSPECIFIC CEREBROVASCULAR
75 MAJOR CHEST PROC
76 OTHER RESPIRATORY SYSTEM
104 CARDIAC VALVE PROC W CARDIAC CATH
105 CARDIAC VALVE PROC W PUMP
106 CORONARY BYPASS W/CARD CATH
107 CORONARY BYPASS W/O CARD CATH
108 OTHER CARDIOTHOR OR VASC PROC
110 MAJOR RECONS VASC PROC W/O PUMP
112 PERCUTANEOUS CARDIOVASCULAR PROCEDURES
113 AMP FOR CIRC SYS DISO EXCEPT
114 UPPER LIMB & TOE AMPUTATION
115 PERM CARDIAC PACEMAKER IMPLANT VALVE W/AMI HEA
116 OTHER PERM CARD PACEMAKER IMPLANT OR AICD LEA
117 CARDIAC PACEMAKER REVISION EXCEPT DEVICE REPL
118 CARDIAC PACEMAKER DEVICE REPLACEMENT
120 OTHER CIRC SYSTEM OR PROCEDURE
121 CIRCULATORY DISORDERS WITH AMI & C.V. COMP
122 CIRCULATORY DISORDERS WITH AMI W/O C.V. COMP
123 CIRC DISORDERS WITH AMI EXPIRED
124 CIR DISORDERS EXC AMI, WITH CARD
125 CIR DISORDERS EXC AMI, WITH CARD CATH
126 ACUTE AND SUBACUTE ENDOCARDITIS
127 HEART FAILURE & SHOCK
128 DEEP VEIN THROMBOPHLEBITIS
129 CARDIAC ARREST UNEXPLAINED
130 PERIPHERAL VASC DISORDERS W/CC
131 PERIPHERAL VASC DISORDERS W/O CC
132 ATHEROSCLEROSIS WITH CC
133 ATHEROSCLEROSIS W/O CC
134 HYPERTENSION
135 CARD CONGENITAL & VALVULAR DISORDERS AGE
136 CARD CONGENITAL & VALVULAR DISORDERS AGE W/CC
138 CARD ARRHYTHMIA & CONDUCTION DISORDERS W/CC
139 CARD ARRHYTHMIA & CONDUCTION DISORDERS W/O CC
140 ANGINA PECTORIS
141 SYNCOPE & COLLAPSE W/CC
142 SYNCOPE & COLLAPSE W/O CC
143 CHEST PAIN
144 OTHER CIRC SYSTEM DIAG WITH CC
145 OTHER CIRC SYSTEM DIAG W/O CC
478 OTHER VASCULAR PROCEDURES W/CC
479 OTHER VASCULAR PROCEDURES W/O CC

TOTAL

AVERAGE LENGTH OF STAY
AVERAGE CHARGES PER DISCHARGE

<CAPTION>
# OF PATIENT TOTAL TOTAL REIMB
BY FINANCIAL CLASS DSCHGS DAYS CHARGES REIMB PERCENT
------- ------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
MEDICARE
MEDI-CAL
HMO/PPO
OTHER

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SCHEDULE 2

DEFINITIVE AGREEMENT

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MANAGEMENT SERVICES AND LEASE AGREEMENT

The Management Services and Lease Agreement (the "Agreement") is made
and entered into at Granada Hills, California this ____ day of ________, 199_,
by and between INTERNATIONAL PHILANTHROPIC HOSPITAL FOUNDATION, a California
nonprofit corporation doing business as GRANADA HILLS COMMUNITY HOSPITAL
("Hospital"), with its principal place of business at 10445 Balboa Boulevard,
Granada Hills, CA 91344, and RAYTEL MEDICAL CORPORATION, a Delaware
corporation ("Management Company"), with its principal place of business at
San Mateo, California.

RECITALS

A. Hospital owns and operates that certain general acute care hospital
licensed by the State of California and known as GRANADA HILLS COMMUNITY
HOSPITAL.

B. The Hospital provides a heart program of excellence which includes,
but is not limited to, cardiovascular and cardiothoracic surgical procedures;
catheterization laboratory services; rehabilitation center; stress testing
services; and ultrasound services (the "Program").

C. Management Company has the experience necessary to operate and
manage all aspects of a cardiovascular and cardiothoracic program.

D. Hospital desires to retain the services of Management Company to
provide its experience, skills, supervision and certain personnel in the
management and operation of the Program, and Management Company desires to
provide such management services under the terms of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:

ARTICLE 1
APPOINTMENT OF MANAGEMENT COMPANY

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1.2 ULTIMATE AUTHORITY AND CONTROL. Hospital shall at all times
exercise ultimate control over the operations of the Program and shall retain
the ultimate authority and responsibility regarding the powers, duties and
responsibilities vested in Hospital by law and regulation. Notwithstanding
this authority, Hospital will endeavor to approve those programs which
Management Company may, from time to time, institute, except in those
instances where those programs are found to be in violation of government
regulations or law, the Hospital Articles, Bylaws, Medical Staff Bylaws,
rules or regulations, bond instrument or cause financial loss to the Hospital's
other programs. Subject to the foregoing, Hospital hereby grants to
Management Company the general authority to supervise and manage the
day-to-day operations of the Program and to perform the specific functions
set forth in this Agreement. The parties understand and agree that some
program services may at some time in the future be licensed in addition to
the management duties of Management Company as defined in this Agreement.
When such licensure is granted by the appropriate agency Hospital hereby
agrees that the relationship between Management Company and Hospital will
revert to a lessor/lessee arrangement and Hospital will relinquish all
authority over Heart Center and Management as set forth in Article 6.

ARTICLE 2
DUTIES OF MANAGEMENT COMPANY

The following Program management services shall be performed by
Management Company on behalf of Hospital.

2.1 GENERAL MANAGEMENT AND ADMINISTRATION.

2.1.1 SUPERVISION. Management Company shall supervise and
coordinate all day-to-day aspects of the Program.

2.1.2 GOALS AND OBJECTIVES. In conjunction with Hospital,
Management Company shall establish goals and objectives for the operation of
the Program.

2.1.3 INTERFACE WITH PHYSICIANS. Management Company shall provide
administrative support for daily interface with physicians.

2.1.4 QUALITY. Management Company shall assure a consistent
level of high quality services to patients requiring services in the Program,
consistent with requirements of the State of California and the Joint
Commission on Accreditation of Health Care Organizations ("JCAHO").

2.1.5 PUBLIC IMAGE. Management Company shall make best efforts to
establish an excellent public image for the Program.

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2.2 FISCAL MATTERS

2.2.3 COLLECTION OF ACCOUNTS. Subject to the terms of this
Agreement, Management Company shall bill and collect all Program charges
which shall be deposited and maintained in an interest-bearing account
designated by Hospital and Management Company in Hospital's name ("Program
Bank Account"). Management Company agrees to use its best effort to maximize
collections of charges for services rendered in this Program. Management
Company shall have signature authority in the account as agent of Hospital.
Management Company shall have the authority to disburse funds in the Program
Bank Account as appropriate and to keep those balances that are deemed
appropriate by Management Company for Program, provided that Management
Company may not withdraw funds from the Program Bank Account if funds are due
and owing to Hospital in the normal course of business from such account.
Hospital shall also have the ability to withdraw money from the account when
an authorized person at Management Company approves in writing such
withdrawal request. Management Company may hire employees of Hospital at an
hourly charge to carry out the activities set forth in this section 2.2.3,
provided that the hourly charge represents at least the actual direct and
indirect cost of Hospital to provide the services of such employees.

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structures for the services provided to Hospital patients which take into
account the financial obligations of Hospital, the level of rates at other
comparable hospitals and outpatient surgery centers, and the importance of
provided quality health care at a reasonable cost.

2.2.5 CAPITATION. Management Company shall administer capitation
distribution from prepaid health plans in connection with the Program, if any,
including but not limited to: receiving and depositing capitation payments in
the Program Bank Account; reconciling capitation payments; distributing
capitation payments; providing third party payor information for coordination
of benefits; and distributing payments to all ancillary and administrative
providers.

2.4 COMMUNICATIONS AND REPORTS

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meetings of the Board of Directors or its Committees) and Medical Staff
regarding the Program.

2.5 PERSONNEL

2.5.1 OF MANAGEMENT COMPANY AND HOSPITAL. Program personnel shall
be employees of Management Company or Hospital as set forth in Exhibit A to
this Agreement.

2.7 MANAGED CARE AND THIRD PARTY PAYOR CONTRACTING.

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(3) working days to dispute such financial terms as being of a lesser rate,
charge or remuneration for Program services than any existing contract with
the Hospital ("Contract Lesser Rate"). If the Management Company fails to
respond to Hospital in writing by FAX transmission with such three (3) day
working period, the Management Company shall be deemed to have approved the
rates contained in such contract. If Management Company disputes the
financial terms of any such contract and the Hospital nonetheless accepts the
Contract Lesser Rate, the Hospital shall pay to Management Company upon the
termination of this Agreement an amount determined as follows:

a. the Contract Lesser Rate, less

b. the Program contract rate per procedure or the equivalent,
times

c. the number of such procedures under such contract during
the term of this Agreement.

2.7.2 CONTRACTING INVOLVING ONLY THE PROGRAM. In the case in
which such contracting involves the Program, Management Company shall be
responsible for such contracting, subject to Hospital's approval which shall
not be unreasonably withheld.

2.8 PATIENT ELIGIBILITY.

2.8.1 DETERMINATION. Management Company shall assist with
determination of eligibility of patients for health care coverage prior to
provision of Hospital services.

2.8.2 DENIALS. Management Company shall reconcile retroactive
denial of eligibility against provision of medical services and
authorization process by Hospital against appropriate health care benefit
agreement.

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2.9 UTILIZATION REVIEW, QUALITY ASSURANCE AND MEDICAL POLICY COMMITTEE
FUNCTIONS.

2.9.1 REFERRAL AUTHORIZATION. Management Company shall administer
managed care medical and hospital referral authorization procedures.

2.9.4 UTILIZATION REVIEW COMMITTEES. Management Company shall
provide administrative support at each managed care Utilization Review
Committee meeting pertinent to health benefits, billing information, referral
authorization process, referral and practice patterns, compliance with
referral authorization process, referral limitations, monitoring of coding
procedures and utilization guidelines. Management Company may appoint a
physician member of Hospital's Medical Staff to Hospital's Medical Staff
Utilization Review Committee.

2.9.5 QUALITY ASSURANCE ACTIVITIES. Management Company shall
provide administrative support for all managed care Quality Assurance
activities as they relate to non-medical policy and procedure development,
data collection, meeting administration, documentation of findings,
monitoring of Hospital developed requirements for medical record
documentation.

2.10 LIAISON WITH PROVIDERS AND THIRD PARTY PAYORS CONTRACTING WITH
HOSPITAL.

2.10.1 COORDINATION. Management Company shall coordinate
communications with providers and third party payors.

2.10.2 FACILITATION. Management Company shall facilitate Hospital
network and office expansion to meet requirements of third party payors.

2.10.3 GRIEVANCES. Management Company shall assist in resolving
any grievances between Hospital and providers, third party payors or
patients.

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2.11 COMPLIANCE WITH REQUIREMENTS.

2.11.1 LICENSING. Management Company shall assist Hospital in its
compliance with licensing, certification and accreditation reviews, audits
and issues.

2.11.2 MEDICARE. Management Company shall assist Hospital in its
compliance with Medicare conditions for coverage and accreditation standards.

2.11.3 PROGRAM PHYSICIANS. All physicians applying for Hospital
Medical Staff privileges in the Program shall be reviewed by the Management
Company's credentialing committee. The results of such review shall be
forwarded in writing to the appropriate Hospital Medical Staff committee for
consideration as part of the Hospital's credentialing process consistent with
time frames contained in Hospital's Medical Staff Bylaws.

2.12 OTHER DUTIES. Management Company shall take such other actions and
perform such other duties as are consistent with the terms of this Agreement
and as may be requested by Hospital in order to comply with government
regulations except that nothing in this section shall imply that Management
Company is obligated to undertake any expenditures.

ARTICLE 3
MANAGEMENT OF PROGRAM

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its best efforts and devote the resources necessary to maintain excellent
working relations with both the Hospital and its Medical Staff.

3.4 MAINTENANCE OF STANDARDS

3.4.2 QUALITY CONTROLS. Management Company shall assist in
activating and maintaining on a continuing basis its quality assurance
program to provide objective measurements of the quality of health care
provided in the Program and to promote full compliance with the Quality
Assurance Standards of the JCAHO. Management Company shall further encourage
and assist the Medical Staff to meet JCAHO standards with respect to medical
practices and procedures.

3.4.3 OPERATIONAL PLANNING. Management Company shall provide an
annual report to assist Hospital and the Medical Staff in reviewing short,
medium and long range objectives for the Program and in formulating
recommendations with respect thereto. For purposes of this Agreement, the
term "short range objective" is intended to mean ______________ the term
"medium range objective" means __________________ and the term "long range
objective" means _______________ or longer. If Hospital desires Management
Company to develop a master plan, Management Company shall make a
presentation to Hospital explaining the justification for development of such
a plan.

3.4.6 CONFIDENTIALITY OF RECORDS. Management Company shall assure
that the confidentiality of all records of the Hospital is maintained in
accordance with the standards of the JCAHO and shall comply with all
applicable local, state and federal laws and regulations relating to records
of the Hospital.

3.4.7 MEDICARE DISCLOSURE OF BOOKS AND RECORDS. To the extent
required by Section 1395x(V)(1)(I) of Title 42 of the United States Code:

a. Until the expiration of four years after the termination
of this Agreement, Management Company shall make available, upon written
request to the

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Secretary of the United States Department of Health and Human Services, or
upon request to the Comptroller General of the United States General
Accounting Office or any of their duly authorized representatives, a copy of
this Agreement and such books, documents and records as are necessary to
certify the nature and extent of the costs of the services provided by
Management Company under this Agreement.

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

ARTICLE 4
CAPITAL IMPROVEMENTS, EQUIPMENT, SUPPLIES AND SERVICES

4.1 CAPITAL IMPROVEMENTS AND EQUIPMENT.

4.1.1 Management Company shall pay the costs of capital
improvements and new equipment for the Program. Within one hundred twenty
(120) days of the execution of this Agreement, Management Company shall make
recommendations to Hospital regarding proposed capital improvements and
equipment purchases or leases. If approved by Hospital, whose approval shall
not be unreasonably withheld, Management Company shall negotiate the
contracts and supervision of the installation of such capital improvements or
equipment. Management Company shall thereafter as part of the Annual Budget
make recommendations to Hospital as to further capital improvements for the
Program.

4.1.2 Management Company shall make available sufficient funds to
pay for such capital improvements and equipment during the term of this
Agreement to achieve the following:

a. Consolidation of the operations of all services and
functions of the Program.

b. Upgrading the catheterization laboratory equipment to
present standard of care.

c. Providing new management information systems.

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d. Maintaining a high level of Program quality and outcomes.

4.1.4 In the event Management Company recommends to Hospital
the construction of a new building on Hospital property or the need for
Program to occupy more than __________ of the total Hospital building,
Management Company shall present to Hospital a comprehensive planning and
development document for such expansion. Hospital shall evaluate any proposed
expansion of the Program and shall not reasonably withhold approval unless
such expansion violates government law or regulation, present Hospital policy
including the master plan, JCAHO requirements or unless the expansion
impinges on the financial viability of Hospital.

4.2 SUPPLIES AND SERVICES.

4.2.1 RESPONSIBILITY. Hospital shall supply the Program with
all utilities, including in-house and local telephone services, existing
Program medical equipment, services except where specialized equipment
maintenance is required, central supply, maintenance and security services
required to operate the Program as agreed upon by Hospital and Management
Company. Management Company will pay for this as part of the lease price.
Where usage can be established, Management Company will pay Hospital on a
fee-for-service basis.

4.2.2 CONTRACTS. Hospital shall negotiate all contracts for
supplies and services to be provided by it pursuant to the terms of this
Agreement, including, but not limited to, group purchasing contracts.
Management Company shall assist Hospital in such negotiations upon request and
advise Hospital of purchasing contracts available to Management Company.

ARTICLE 5
PROGRAM SPACE

5.1 HOSPITAL RESPONSIBILITIES. During the term hereof, Hospital shall
lease to Management Company the space described in Exhibit C to this
Agreement under rates set forth in Article 11 of this Agreement. Such space
shall be used for the operation of the Program by Management Company and for
Hospital Medical Staff Physicians practicing in the Program ("Program
Physicians") as provided in this Agreement and for no other purposes. Any
changes to such space may be made only upon the written agreement of Hospital
and Management Company. Hospital shall provide to Management Company and its
personnel access to all common areas and departments in the Hospital
necessary to carry out the operation of the Program on a basis similar to all
Hospital personnel for other Hospital

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departments, including, but not limited to, parking, admitting, waiting
rooms, toilet facilities and cafeteria.

5.2 MAINTENANCE. Hospital shall maintain and promptly repair the
physical property in the Program as shall be requested by Management Company
and determined necessary by Hospital in order to maintain the same in good
working order and condition.

ARTICLE 6
PROGRAM SERVICES

6.1 LICENSURE BY MANAGEMENT COMPANY. It is anticipated by the parties
that Management Company may apply for and obtain licensure from the State of
California to exclusively operate certain Program services. Hospital agrees
to use its best efforts to cooperate with the separate license applications
and the necessary actions required to ascertain such a license. The parties
agree that Program services for which Management Company may apply for
licensure include all heart related diagnostic and therapeutic activities
including, without limitations, surgery, catheterization, rehabilitation,
patient rooms and ICU.

6.2 AGREEMENT REGARDING OWNERSHIP OF PROGRAM SERVICES BY MANAGEMENT
COMPANY. Upon the granting of such license, Hospital agrees to lease all
facilities involved in the license to Management Company at the same rates as
presently exist in this Agreement. Hospital also agrees to continue to supply
to Management Company those services presently supplied to Heart Center at
the same rates as agreed to in this Agreement.

6.3 AGREEMENT REGARDING HOSPITAL APPROVAL REQUIRED UNDER SEPARATE
LICENSE. Upon separate licensure of Program activities, Management Company
agrees to continue to coordinate changes in Program with Hospital. Nothing in
this Agreement shall be construed to unreasonably constrain Management
Company from operation of its licensed services, except that such operation
may not interfere with the legal activities of the Hospital consistent with
government law, regulation or the Hospital's Bylaws, rules and regulations.

ARTICLE 7
MANAGEMENT OF PROGRAM PHYSICIANS

7.1 BY MANAGEMENT COMPANY. Management Company intends to provide
management services to Program Physicians.

7.2 LEASE OF SPACE FOR PROGRAM PHYSICIANS. Pursuant to Article 5 of
this Agreement, Management Company shall lease space from Hospital to be used
as medical offices by Program Physicians.

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7.3 ADDITIONAL SPACE. In the event during the term of this Agreement
Management Company requires additional space, Hospital agrees to provide such
space at a proportional increase in the rate presently charged for the
facilities, unless provision of such space requires additional expenditures
in which case Management Company shall pay the cost of such expenditures.

ARTICLE 8
PURCHASE OF MEALS AND SUPPLIES BY MANAGEMENT COMPANY

Hospital shall provide to Management Company the meals and supplies set
forth in Exhibit D to this Agreement.

ARTICLE 9
TERM

Subject to earlier termination as provided in ARTICLE 10, the initial
term of this Agreement shall be for ten (10) years, commencing as of August 1,
1996 and expiring on July 31, 2006. Management Company shall have the option
of extending this Agreement for an additional five (5) years.

ARTICLE 10
TERMINATION

10.1 GROUNDS FOR TERMINATION BY EITHER PARTY. During the term hereof,
either party may terminate this Agreement for cause at any time upon receipt
of written notice as set forth below to the other party. For the purposes of
this Agreement, "cause" is defined solely as any one or more of the following:

10.1.1 MATERIAL COVENANT. A default in the performance of any
material covenant, agreement, term or provision, when such default continues
for a period of thirty (30) days after written notice is given to the
defaulting party by the non-defaulting party, which notice shall set forth
the specific incidents of default and the provisions in this Agreement which
the defaulting party has breached. For the purposes of this Agreement,
"material covenant, agreement, term or provision" is defined as a covenant,
agreement, term or provision contained in this Agreement which constitutes
substantially the consideration of the Agreement or without which the
Agreement would not have been made.

10.1.2 LOSS OF LICENSE. This Agreement may be immediately
terminated if: the Hospital or Management Company fails to maintain any
material license for the Hospital or the Program or if any such license is
suspended, terminated or revoked and is not reinstated

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within a reasonable period of time; the Hospital or Management Company fails
to maintain JCAHO accreditation of Hospital; or if the Hospital or Management
Company fails to maintain the Hospital's Medicare certification.

10.2 GROUNDS FOR TERMINATION BY HOSPITAL. During the term hereof,
Hospital may terminate this Agreement if:

10.2.1 SURGICAL PROCEDURES. The Program has fewer than
__________ surgical procedures or __________ diagnostic catheterization per
year measured annually from the date of the Agreement for _________________.

10.2.2 DAMAGE TO HOSPITAL. Material damage occurs to the
Hospital or any portion thereof relating to the cooperation of the Program by
fire or any other casualty, but only if Hospital fails to commence the
activities that will lead to the repair, restoration, rebuilding, or
replacement of any such damage or destruction within sixty (60) days after
such fire or other casualty, or shall fail to complete such work within a
reasonable period of time. In the event Hospital elects not to rebuild
Hospital, Management Company may, at its expense, rebuild all or a portion of
Hospital. Until such expenses have been repaid, Management Company would have
the responsibility of running Hospital.

10.2.3 FAILURE OF PAYMENTS. Management Company fails to pay to
Hospital any sum required pursuant to this Agreement, and such failure is not
cured within three (3) days after written notice of such failure is received
by Management Company.

10.3 GROUNDS FOR TERMINATION BY MANAGEMENT COMPANY. During the term
hereof, Management Company may terminate this Agreement if:

10.3.1 CHANGE OF OWNERSHIP. The ownership of Hospital changes.

10.4 EFFECT OF TERMINATION

10.4.1 FURTHER OBLIGATION. Upon termination of this Agreement
pursuant to this Article 10, or upon expiration of the term of this
Agreement, neither party shall have any further obligation hereunder except
for obligations occurring prior to the date of termination and obligations,
promises, or covenants contained herein which are expressly made to extend
beyond the term of this Agreement.

10.4.2 PURCHASE OF EQUIPMENT, INVENTORIES AND SUPPLIES. Upon
termination of this Agreement by Hospital, Hospital shall be required to
purchase from Management Company, at a price equal to _______________________.

a. All equipment owned by Management Company which are
used in the Program; and

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b. All inventories and supplies owned by Management
Company for use in the Program.

c. All leasehold improvements made to the Premises by
Management Company and approved by Hospital; and

d. All equipment upgrades made by Management Company to
existing equipment in Program.

(Items a., b., c. and d. above are hereinafter referred to as the
"Acquisition Assets".)

Hospital shall pay Management Company the purchase price for
the Acquisition Assets as follows: either full payment within sixty (60) days
following the effective date of termination of this Agreement; or in sixty
(60) equal monthly payments including interest at ten percent (10%) per annum
and a security interest subordinated to existing Hospital debt. This Section
10.4.2 shall be subject to the terms of the Hospital's bond indenture and
related documents.

10.4.3. OPTION TO PURCHASE ACQUISITION ASSETS. Upon
termination of this Agreement by Management Company for any reason, Hospital
shall have the option to purchase from Management Company, at a price equal
to ___________, the Acquisition Assets. If Hospital exercises its option
under this Section 10.4.3, Hospital shall pay Management Company the purchase
price for said equipment, inventories and supplies as follows: either full
payment within sixty (60) days following the effective date of termination of
this Agreement; or in sixty (60) equal monthly payments including interest at
ten percent (10%) per annum and a security interest subordinated to existing
Hospital debt. This Section 10.4.3 shall be subject to the terms of the
Hospital's bond indenture and related documents.

10.4.4 USE OF EQUIPMENT, INVENTORIES AND SUPPLIES. Upon
termination of this Agreement by either party, for at least one hundred
twenty (120) days following the effective date of termination, Management
Company shall allow Hospital the use of the Acquisition Assets.

10.4.5 ASSUMPTION OF MANAGEMENT COMPANY'S EQUIPMENT LEASE. Upon
termination of this Agreement for any reason, Hospital shall have the option
to assume Management Company's leases of all equipment leased by Management
Company for Program.

10.4.6 PERSONAL PROPERTY. Upon termination of this Agreement
for any reason, Management Company shall vacate the Hospital premises on the
effective date thereof, removing at such time any and all of its personnel
and personal property. Any personal property which is not so removed, shall
become the property of the Hospital.

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ARTICLE 11
COMPENSATION

[to be completed by parties]

ARTICLE 12
INSURANCE

12.1 HOSPITAL. Hospital, at its sole cost, shall maintain the
following insurance coverages during the term of this Agreement, with a
licensed insurance company admitted to do business in the state of California
rated "A" or better in A.M. Best ratings of insurance carriers:

12.2.1 GENERAL AND PROFESSIONAL LIABILITY. General and
professional liability with limits of not less than three million dollars
($3,000,000) per occurrence and ten million dollars ($10,000,000) in the
aggregate;

12.2.2 WORKERS' COMPENSATION. Statutory coverage for workers'
compensation; and

12.2.3 FIRE. Fire and extended coverage of the Hospital-owned
contents in amounts not less than full replacement costs.

12.2 MANAGEMENT COMPANY. Management Company, at its sole cost, shall
maintain the following insurance coverages during the term of this Agreement,
with a licensed insurance company admitted to do business in the state of
California rated "A" or better in A.M. Best ratings of insurance carriers:

12.2.1 GENERAL AND PROFESSIONAL. General and professional
liability with limits of not less than three million dollars ($3,000,000) per
occurrence and ten million dollars ($10,000,000) in the aggregate;

12.2.2 WORKERS' COMPENSATION. Statutory coverage for workers'
compensation; and

12.2.3 FIRE. Fire and extended coverage Management Company's
equipment located in the Hospital in an amount not less than full replacement
cost.

12.3 TAIL COVERAGE. With respect to the insurance policies which the
parties are required to purchase and maintain pursuant to this Article 12, in
the event that either party procures a "claims made" policy as distinguished
from an "occurrence" policy, that policy shall

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procure and maintain, prior to termination of such insurance, continuing
"tail" coverage acceptable to the other party.

12.4 EVIDENCE OF INSURANCE. Each party shall provide the other party
with a minimum of thirty (30) days' prior written notice in the event any of
the policies set forth in this Article 12 are canceled, changed or amended.
Each party shall, from time to time, upon a reasonable request of the other
party, furnish to the requesting party written evidence that the policies of
insurance required pursuant to this Article 12 are in full force and effect,
and valid and existing in accordance with the provisions of said paragraphs.

ARTICLE 13
INDEMNIFICATION

13.1 INDEMNIFICATION BY MANAGEMENT COMPANY. Management Company shall
indemnify and hold Hospital harmless from any and all claims, loss, liability
or damage of any kind whatsoever, including but not limited to reasonable
attorneys' fees and court costs, arising out of or in any manner occasioned
by the negligence or intentional torts of Management Company or its
employees, servants and subcontractors, arising out of their duties under
this Agreement or their presence in the Hospital.

13.2 INDEMNIFICATION BY HOSPITAL. Hospital shall indemnify and hold
Management Company harmless from any and all claims, loss, liability or
damage of any kind whatsoever, including but not limited to, reasonable
attorneys fees and court costs arising out of or in any manner occasioned
by the negligence or intentional torts of Management Company or its
employees, servants and subcontractors, arising out of their duties under
this Agreement or their use and occupancy of the Hospital.

ARTICLE 14
SUCCESSORS AND ASSIGNS

This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto, and their respective heirs, legal representatives,
successors and assigns. Notwithstanding the foregoing, Management Company
may not assign any of its respective rights or delegate any of its respective
duties hereunder without receiving the prior written consent of Hospital.

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ARTICLE 15
NOTES

Any notices by either party to the other shall be in writing and shall
be deemed to have been given on the earlier of (a) the date on which it is
delivered personally, or (b) one (1) business day after if is sent via
Federal Express or other overnight courier to the party at its address as set
forth on page 1 of this Agreement, or (c) three (3) days after it is deposited
in the U.S. mail, postage prepaid, certified with return receipt requested
and addressed to the party at its address as set forth on page 1 of this
Agreement. Either party may change its address by providing notice to the other
party as provided herein.

ARTICLE 16
ATTORNEY FEES

In the event of any dispute between the parties hereto relating to the
terms, covenants or conditions of this Agreement, whether or not an action is
filed, the prevailing party in any such dispute shall be entitled to recover
the costs thereof, including, without limitation, the reasonable attorney
fees (whether trial or appellate), so incurred,

ARTICLE 17
BUSINESS, FINANCIAL AND PATIENT MEDICAL RECORDS

17.1 ACCESS TO INFORMATION. Hospital hereby authorizes and grants to
Management Company full and complete access to all information, instruments
and documents relating to the Program which may be reasonably requested by
Management Company in order to perform its duties under this Agreement.

17.2 OWNERSHIP AND INSPECTION OF RECORDS.

17.2.1 PATIENT MEDICAL RECORDS. At all times during and after
the term of this Agreement, all patient medical records shall be and remain
the sole property of Hospital. The patient medical records shall be
maintained and kept at the Hospital and upon termination of this Agreement,
all such patient medical records shall be and remain in the possession of
Hospital. Hospital will cooperate and allow Management Company to access
such records in the event of any government actions or legal actions where
Management Company is a named party.

17.2.2 LISTS. At all times during and after the term of this
Agreement, financial, corporate and personnel records and information,
including but not limited to all lists of patients and managed care contracts
relating exclusively to the business and activities of Hospital, shall be and
remain the sole property of Hospital. Notwithstanding the foregoing,

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Hospital shall at all times during the term of this Agreement make available
to Management Company for inspection by its authorized representatives,
during regular business hours, at the principal place of business of
Hospital, any Hospital records determined by Management Company to be
necessary to perform its duties under this Agreement.

17.2.3 BANKRUPTCY. In the event either party makes a decision to
enter voluntary bankruptcy, the other party shall be notified at least
forty-eight (48) hours prior to the filing of bankruptcy documents, during
which time the notified party may exercise any and all legal remedies it may
have under law and this Agreement.

17.2.3.1 In the event Hospital is forced into involuntary
bankruptcy, this Agreement shall remain in force and shall be binding in
accordance with the laws of the State of California.

17.2.4 RIGHT OF FIRST NEGOTIATION. If, at any time during the
term of this Agreement, Hospital desires to sell or substantially all of the
assets of the Hospital (the "Assets") to a third party which is unaffiliated
with the Hospital and which is not a nonprofit entity or organization,
Hospital shall notify the Management Company of such desire and, for a period
of thirty (30) days thereafter, Hospital and Management Company shall
negotiate in good faith with respect to the purchase of the Assets by the
Management Company. During such thirty (30) day period, Hospital may not
solicit a buyer for the Assets other than the Management Company. If the
parties are unable to reach an agreement with respect to the purchase of the
Assets by the Management Company by the expiration of the thirty (30) day
period, Hospital shall be free to sell the Assets under more favorable terms
to any person and Management Company shall have no further rights in respect
to the Assets or the purchase thereof. For the purposes of this Agreement the
phrase "more favorable terms" shall mean those terms, conditions, covenants,
and restrictions which best meet the goals and purposes of the Hospital as
may be set forth in Hospital's Articles and Bylaws and as may be set forth
from time to time by resolution of the Hospital's Board of Directors.

ARTICLE 18
NON-COMPETITION: CONFIDENTIAL INFORMATION

18.1 NON-COMPETITION. Management Company and all of the affiliated
entities of Management Company agree for the duration of this Agreement not
to develop, manage, acquire any ownership interest in or establish any
affiliation with any person or entity offering services offered by the
Program or related services within fifteen (15) miles of the Hospital.
Further, Management Company agrees that the shareholders, directors and
officers of Management Company for the duration of this Agreement shall not
develop, manage, acquire any ownership interest in or establish any
affiliation with any person or entity offering services offered by the
Program or related services with fifteen (15) miles of the Hospital.

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Hospital agrees for the duration of this Agreement not to develop,
manage, acquire any ownership interest in or establish any affiliation with
any person or entity offering services offered by the Program or related
services; provided, however, that this provision shall not in any way prohibit
or restrict Hospital from entering into any transaction involving the
operation of the Hospital or the sale, merger or change of ownership of the
Hospital; and further provided that this provision shall not in any way be
deemed to limit the provision of services offered by the Program and related
services at the Hospital by any qualified physician who is a member of the
Hospital's Medical Staff with appropriate clinical privileges.

18.2 CONFIDENTIAL INFORMATION. For purposes of this paragraph 18.2,
the term confidential information shall include (i) all proprietary documents
and other materials of Management Company and Hospital which contain
information relating to the operation of the Program or Hospital and (ii)
all methods, techniques and procedures utilized by Management Company and
Hospital in operating the Program or Hospital which are not readily
available through sources in the public domain.

18.2.1 Hospital agrees to and acknowledges that confidential
information of Management Company will be disclosed to it in the course of
performing this Agreement. Hospital shall not without the prior written
consent of Management Company, use confidential information of Management
Company for any purpose other than the performance of this Agreement. Hospital
further agrees to keep strictly confidential and to hold in trust all
confidential information of Management Company and not to disclose or reveal
such information to any third party with the express prior written consent of
Management Company.

18.2.2 Management Company agrees and acknowledges that
confidential information of Hospital will be disclosed to it in the course of
performing this Agreement. Management Company shall not without the prior
written consent of Hospital, use confidential information of Hospital for any
purpose other than the performance of this Agreement. Management Company
further agrees to keep strictly confidential and to hold in trust all
confidential information of Hospital and not to disclose or reveal such
information to any third party without the express prior written consent of
Hospital.

18.2.3 Upon termination of this Agreement, each party shall retain
in its exclusive possession all confidential information, in whatever form,
developed or provided by that party in the performance of its duties under
this Agreement, and each party shall return all confidential information of
the other party which may be in its possession. Each party agrees that it
shall not use any confidential information of the other party following
termination of this Agreement. This paragraph shall not apply to information
required to be maintained by either party under Federal or State law or
regulation.

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ARTICLE 19
ARBITRATION

Any controversy, dispute or claim arising out of the interpretation,
performance or breach of this Agreement shall be resolved by binding
arbitration at the request of either party, in accordance with the rules of
the American Arbitration Association. There shall be one arbitrator who shall
apply California substantive law and federal substantive law where state law
is preempted. Civil discovery for use in such arbitration may be conducted in
accordance with the California Code of Civil Procedure and the California
Evidence Code, and the arbitrator selected shall have the power to enforce
the rights, remedies, duties, liabilities, and obligations of consequences,
liabilities, sanctions, and penalties as can be or may be imposed in like
circumstances in a civil action by a superior court of the State of
California. The provisions of California Code of Civil Procedure Section 1283
and 1283.05 concerning the right to discovery and the use of depositions in
arbitration are incorporated herein by reference and made applicable to this
Agreement.

The arbitrator shall have the power to grant all legal and equitable
remedies and award damages provided by California law, and judgment upon the
award rendered by the arbitrator may be entered by any court having
jurisdiction thereof. The arbitrator shall prepare in writing and provide to
the parties an award including factual findings and the legal reasons on
which the decision is based. The arbitrator shall not have the power to
commit errors of law or legal reasoning, and the award may be vacated or
corrected pursuant to California Code of Civil Procedure Sections 1286.2 or
1286.6 for any such error.

Notwithstanding the above, in the event either party wishes to obtain
injunctive relief or a temporary restraining order, such party may initiate
an action for such relief in a court of law and the decision of the court of
law with respect to the injunctive relief or temporary restraining order
shall be binding upon both parties.

ARTICLE 20
MISCELLANEOUS

20.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter contained
herein and correctly sets forth the rights, duties and obligations of each to
the other as of its date. Any prior agreement, promises, proposals,
negotiations or representations, whether written or oral, which are not
expressly set forth in this Agreement are hereby superseded and are of no
force or effect.

20.2 GOVERNING LAW. The terms of this Agreement shall be governed by
the laws of the State of California. Venue for any action arising out of this
Agreement shall be in the State of California.

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20.3 INTERPRETATION. The terms of this Agreement shall not be
construed for or against either party by reason of the drafting hereof and
shall not be interpreted by reference to any of the titles or headings to the
paragraphs or subparagraphs which have been inserted for convenience purposes
only and are not deemed part hereof.

20.4 EXHIBITS. The terms of this Agreement are deemed to include all
of the schedules and exhibits hereto, which are made a part hereof by this
reference.

20.5 AMENDMENTS/WAIVER. This Agreement may only be amended in writing
and any provision hereof may be waived only in writing by the party entitled
to the benefit of such provision. No waiver of the breach of any provision
shall be deemed or construed to be a waiver of any other or the same
provision.

20.6 EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

20.7 SEVERABILITY. In the event any provision of this Agreement is
found to be invalid, illegal or unenforceable, any such provision shall be
stricken and the remaining provisions shall remain in full force and effect
provided the stricken provisions are not material to the consideration
provided by either party hereto.

20.8 ASSIGNABILITY. This Agreement shall not be assignable by Hospital
to a third party whether related or not without the expressed written
approval of Management Company, provided, however, there shall be no
restriction on assignment of this Agreement by the Hospital in the event the
assignment results from a purchase of assets of the Hospital which gives rise
to a right of first negotiation by Management Company under Section 17.2.4 of
this Agreement.

20.9 NOTICES. Any notices by either party to the other shall be in
writing and shall be deemed to have been given on the earlier of (a) the date
on which it is delivered personally, or (b) one (1) business day after it is
sent via Federal Express or other overnight courier to the party at its
address as set forth on page 1 of this Agreement, or (c) three (3) days after
it is

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deposited in the U.S. mail, postage prepaid, certified with return
receipt requested and addressed to the party at its address as set forth on
page 1 of this Agreement. Either party may change its address by providing
notice to the other party as provided herein.

IN WITNESS WHEREOF, the parties have hereunto set their hands this
9th day of January, 1996.

Management Company: HOSPITAL:

RAYTEL MEDICAL CORPORATION INTERNATIONAL PHILANTHROPIC
HOSPITAL FOUNDATION, dba
GRANADA HILLS COMMUNITY
HOSPITAL

By: /s/ Richard Bader By: /s/ Thomas Wallace
---------------------------- --------------------------
RICHARD BADER THOMAS WALLACE
Chairman Chairman

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EXHIBIT A
PROGRAM PRESONNEL

All full-time, part-time and/or per diem personnel assigned to the
following cost centers and/or departments including

- Catheterization Laboratory Services;

- Cardiac Rehabilitation Services;

- Stress Testing Services;

- Non-Invasive Cardiology Diagnostic Testing Services;

- Cardiovascular and Cardiothoracic Surgery Services; and

- Pacemaker Clinic.

[names to be inserted]

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EXHIBIT B
SCOPE OF SERVICES

- Catheterization Laboratory Services;

- Cardiac Rehabilitation Services;

- Stress Testing Services;

- Non-Invasive Cardiology Diagnostic Testing Services;

- Cardiovascular and Cardiothoracic Surgery Services; and

- Pacemaker Clinic.

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EXHIBIT C
PROGRAM SPACE

See attached diagram.

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EXHIBIT D
MEALS AND SUPPLIES

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