FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-14049
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
(Name of small business issuer in its charter)
California 94-2669749
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9811 Bigge Avenue, Oakland, California 94603
(Address of principal executive offices, zip code)
Issuer's telephone number: (510) 639-2100
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained herein, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10KSB or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year were: $3,995,274.
The aggregate market value of voting stock held by non-affiliates on
October 31, 1995 was approximately $20,156 (computed on the basis of the
average of the highest and lowest bid prices of a share of common stock on
that date as reported in Over The Counter trading).
The number of shares outstanding of each of the registrant's classes of
Common Stock at November 21, 1995, was 2,519,550 shares of Common Stock, no
par value.
Transitional Small Business Disclosure Format Yes; X No
<PAGE>
PART I
Item 1. Description of Business
General
Occupational Medical Corporation of America, Inc. (the "Company" or
"OMCOA") is a medical services company primarily providing health care for
industrial and other employment-related illnesses and injuries. During the
past year, the Company has been positioning itself to provide group and
family health care to a broader spectrum of patients within its existing
facilities. The Company was incorporated as a professional medical
corporation in February 1980 and became a general business corporation in
January 1984, operates five medical facilities (the "Medical Centers") and a
rehabilitation clinic under an agreement with the Medical Corporations (see
discussion below).
On April 1, 1989, the Company purchased Work Fitness Institute ("WFI"),
which engages in the testing, treatment and prevention of industrial and
employment related injuries. WFI offers a Back School program that educates
patients in prevention as well as management of chronic spinal and upper and
lower extremity dysfunction. Computer-enhanced testing equipment is used by
WFI for measuring strength and functional work capacity. Rehabilitation and
work hardening services for work related injuries are enhanced by the use of
this equipment and by objectively measuring progress and consistency of
effort. Presently, WFI shares facilities with the Medical Center in Oakland,
California. The former WFI facility in Seattle, Washington has been combined
with the Company's Medical Center in Seattle.
On March 22, 1995, the Company and the Medical Corporations changed the
names of its clinics to "Spectrum Medical Care." The new name identifies the
Medical Centers as health care providers to groups and families as well as
employers and employees. Groups and families are initially being targeted
through the MediCal, Medicare, and CHAMPUS programs. However, work-related
health care will still be the primary focus of the Company's and Medical
Corporation's Medical Centers.
The Company's Medical Centers are designed to contain the costs of work
related medical expenses by providing treatment which is medically sound but
not unnecessary or excessive. The systemized procedures developed by the
Company promote the efficient delivery of quality medical services and
prevent abuses of the worker's compensation reimbursement process. In
addition to providing services for the treatment and prevention of industrial
and other employment-related injuries and illnesses, the Company assists
employers and employees in designing modified work and rehabilitation
programs to enable injured employees to return to work as soon as possible
and to minimize the payment of disability benefits.
In the last several years, health care expenditures have increased at a
rate of approximately twice the rate of inflation. Total health care costs
in 1983 were estimated to be $357 billion (10.5% of the Gross National
Product) and in 1988 were over $458 billion (10.9% of the Gross National
Product). Health care expenditures are projected to be slightly less than 1
trillion dollars or one-seventh of the U.S. economy. The U.S. Census Bureau
has projected growth of the age group generally constituting the nation's
work force, the age group between 20-65, by 33% from 1978 to 2003. As a
result, federal, state and local governments, employers and third party
health insurers are seeking ways to control rising health care costs.
Advances in medical technology have made it possible to provide, on an
out-patient basis and at a cost substantially below that charged by
hospitals, many services that were formerly available only in a hospital. As
a result, medical and health care providers, such as health maintenance
organizations ("HMOs"), which charge a fixed prepaid rate for comprehensive
medical care; preferred provider organizations ("PPOs"), which offer
discounted services in exchange for a directed pool of patients; surgi-
centers, at which minor surgery is performed on an out-patient basis; and
urgent care centers or emergicenters, which offer primary health care during
extended hours of operation, have been established for the treatment of
nonlife threatening ailments. The same trend has fostered the establishment
of occupational medical facilities, which differ in many important respects
from these other medical and health care providers.
The principal source of revenue for HMOs, PPOs, surgicenters, urgent
care centers or emergicenters, hospital rooms and private doctor's offices is
outpatient treatment of general illnesses and injuries, the payment for which
is the primary responsibility of a patient who may or may not be covered by
medical insurance. In contrast, the principal source of revenues for an
occupational medical facility is outpatient treatment of industrial and other
employment related illnesses and injuries, the payment for which is generally
covered by worker's compensation insurance. Because employers are generally
required by law to compensate their employees for work related injuries,
substantially all the medical charges for patients treated in occupational
medical facilities are reimbursed in full by worker's compensation funds and
other third-party payers based on approved fee schedules.
Although many medical and health care providers must rely primarily on
mass media advertisements to reach individual patients in the community, the
services provided by occupational medical facilities are marketed primarily
to employers, each of which may account for a significant number of patients.
Occupational medical facilities treat lacerations, abrasions and orthopedic
and other types of injuries arising from work related accidents, but
generally do not treat minor ailments such as colds and sore throats and
other illnesses of the type normally treated by urgent care centers and
family physicians. Accordingly, because of the more serious nature of the
illnesses and injuries treated, the average charge per patient for nonlife
threatening injuries is approximately $15 per patient visit higher in
occupational medicine than in most other fields of primary outpatient health
care. Moreover, because occupational medical facilities do not treat life
threatening injuries, they do not incur the substantial costs associated with
life saving equipment and the larger staff and overhead required for hospital
emergency care.
OMCOA Medical Centers
The Medical Centers typically provide the full range of services
necessary to treat industrial and other employment related injuries and
illnesses, including the following:
Surgical treatment of cuts, lacerations and abrasions; suturing and
dressing of wounds; removal of foreign bodies.
Orthopedic treatment of fractures, sprains and back injuries; placement
and removal of casts.
Physical therapy ultrasound treatment and diathermy; pelvic and cervical
traction; transcutaneous nerve stimulation; whirlpool for upper and
lower extremities.
Diagnostics and radiology; clinical laboratory; audiometry and pulmonary
function studies; dispensation of pharmaceutical.
Preventive medicine cardio pulmonary resuscitation and counseling
training; treatment of substance abuse; pre placement physicals; stress
management and cardiac stress testing; back care seminars;
rehabilitation services; medical surveillance programs.
Systemized procedures in the usage of authorization forms; supplemental
medical reports and work status reports which are supplied to employee
clients and third party payers in order to promote the efficient
delivery of quality medical services and to prevent abuse of the
worker's compensation reimbursement process.
The physicians employed at the Medical Centers are well trained and
experienced in the treatment of occupational medical injuries and illnesses.
The Medical Centers seek to contain the costs of employment related medical
expenses by providing treatment which is medically sound and thorough but not
unnecessary or excessive. Since the Medical Centers do not have to pass on
significant hospital overhead costs to patients, costs are further contained.
Convenient locations, minimal waiting periods and accessibility to
specialists tend to reduce some of the costs attributable to work related
injuries and illnesses. The Company assists employers and employees in
developing modified work and rehabilitation programs that enable injured
employees to return to work as soon as possible, thereby minimizing
disability benefit expenditures which constitute more than half of all
worker's compensation costs.
Fees and Reimbursement
The Medical Centers receive substantially all of their patient revenues
from third party payers, the majority of which are commercial indemnity
insurers and other insurance programs including state worker's compensation
funds. The typical physician charge for an employee visit to the Medical
Centers ranges between $64 for a routine physical or work evaluation to $250
for an orthopedic consultation for the back and neck.
Under California law, employers may designate the treatment centers for
work related injuries for a period of 30 days after the injury unless the
employee notifies the employer in writing prior to the injury of a preference
to be treated elsewhere or unless the employee requests a change of physician
at any time after the injury. In Washington, an injured employee may elect
to be treated by the facility or physician of his choice; however, the
employer has a right to send the injured employee to its preferred treatment
center for a consultation to determine the extent and nature of the
employee's injuries.
Services provided at the Medical Centers are generally reimbursed in
full based on approved fee schedules. The scale of reimbursement for medical
services provided by the Medical Centers is, for the most part, in accordance
with the Official California Workers' Compensation Medical Fee Schedule
adopted by the State of California and the Medical Aid Rules and Fee Schedule
adopted by the State of Washington. This system is utilized by the worker's
compensation insurance carriers in California and Washington as a schedule
for reimbursement for medical services rendered to injured employees and
typically represent 85% of the usual and customary fees charged by private
practitioners for similar procedures. There can be no assurance that
existing worker's compensation or similar laws will remain in effect
requiring employers to compensate employees for work related injuries or
illnesses or that approved fee schedules will keep pace with inflation and
rising health care costs or continue to reflect the current percentages of
usual and customary fees.
Marketing and Customers
Unlike HMOs and PPOs, the Medical Centers generally do not have
contractual arrangements with employer clients. Employers retain the freedom
of directing their employees to the Medical Centers or to other medical and
health care providers, and frequently provide their employees with an
employer approved list of occupational medical facilities from which to
choose.
The services provided by the Medical Centers are marketed directly to
employers and insurance companies. The Company's efforts to contain medical
and disability costs and its occupational injury and illness prevention
seminars have enabled the Company to establish and maintain close working
relationships with many of the employers and insurance companies which
utilize the Medical Centers. Management believes that these relationships
form a basis for increasing the volume of its business.
The Company assists the Medical Centers in marketing their services
through a combination of mailings, print advertising and personal contacts
with employers. The Company employs two full time and one part time
marketing representatives. The marketing representatives contact prospective
industrial and commercial clients to inform them of the quality of medical
care, overall cost savings and ancillary services that distinguish the
Medical Centers in the occupational health care field. The Company also
sponsors such ancillary services as health and safety educational programs,
certification programs and topical health care classes. The central themes
of OMCOA's marketing are the high quality of medical care provided at the
Medical Centers, the convenience to employer and employee of the Medical
Centers' locations and the relatively low cost to employers of its services.
Competition
The market for the provision of health care services is extremely
competitive. The Company believes that such competition is intensifying as a
result of increased efforts by employers to contain the cost of health care
services for work related injuries and that price, convenient locations,
aggressive marketing and quality of service are important elements of
competition in the occupational health care industry. Furthermore, the
entrance into the market by group health and workers' compensation insurers
and hospitals has added significantly to the number of competitors.
Management believes that a combination of lower fees, high quality of
service, and location provide significant advantages for the Company over its
competition.
Agreements with Medical Corporations
Under the laws of most states, general business corporations are
prohibited from practicing medicine or providing medical care. Although the
Company incorporated as a professional medical corporation in February 1980
and had been operated as such, it became a general business corporation in
January 1984. Accordingly, the Company entered into agreements with the
Medical Corporations, which were organized expressly for the purpose of
providing all medical services at the Medical Centers. The Medical
Corporations include: Spectrum Medical Care, A Medical Group, Inc. (formerly
known as "Interstate Environmental Medical Group, Inc."), a California
corporation, and Interstate Environmental Medical Group, P.S. Inc., a
Washington corporation. Until the sale of the Oregon clinic in January 1992,
Interstate Environmental Medical Group, Physicians and Surgeons, a
Professional Corporation, Inc., an Oregon corporation, was one of the Medical
Corporations, but was dissolved in 1992.
The physicians of each Medical Center are employed, generally on a full
time basis, by local affiliated Medical Corporations which are organized
under the laws of the state in which the Medical Center is located. For each
Medical Center, the Company enters into a Sublease and Facilities Management
Agreement with one of the Medical Corporations whereby the Company provides
all nonphysician clinic staff and nonmedical administrative, accounting,
management and similar services. The Company maintains all nonmedical
records of the Medical Centers, provides the necessary forms and brochures
utilized by the Medical Centers and provides and pays for supplies, telephone
and utility charges and cleaning services for the Medical Centers.
The Medical Corporations have absolute authority over the medical
services rendered and the fees charged to patients. The Company manages all
billing and collection for the Medical Centers. The Medical Corporations pay
the Company monthly for the nonmedical services, equipment and facilities
provided to them.
Each Sublease and Facilities Management Agreement calls for the Medical
Corporations to retain each month a base amount of the gross revenue (which
totalled $1,374,950 or 34.4% of the revenues of the Company for the year
ended June 30, 1995) sufficient to compensate the physicians and pay for
their malpractice and personal health insurance. The Company has also agreed
to make working capital loans to the Medical Corporations as needed, up to
the base amount plus an amount to cover the costs of premises and equipment,
from time to time for each Medical Center in the event that the revenues from
the Medical Center's operations do not cover the Medical Corporation's
expenses. As of June 30, 1995, the Company had advanced $77,098 to the
Medical Corporations for an advance to Dr. Livingston, one of the two sole
shareholders of the Medical Corporations.
During 1991, the Company loaned a total of $49,808 to the Medical
Corporations and Spectrum Medical Care, A Medical Group, Inc. executed an 8%
unsecured promissory note that was due on or before June 30, 1992 and remains
outstanding. The Medical Corporations purchased 36,000 shares of the
Company's common stock with the proceeds of the loan. The notes are
classified as a reduction of the Company's shareholders' equity.
Management believes that the terms of the Sublease and the Facilities
Management Agreements are at least as favorable to the Company as those that
could be negotiated with unrelated parties. Each agreement is renewed on an
annual basis unless the Company or the Medical corporation gives prior notice
of nonrenewal. Each year a majority of disinterested board members
considers, reviews and approves the renewal of the agreements. Drs.
Livingston and Harikian are the sole shareholders of the Medical
Corporations; Dr. Livingston is the chairman, chief executive officer and
president of the Company.
The Company has borrowed funds from the Medical Corporations, which were
obtained from the sale of accounts receivables by the Medical Corporations to
accounts receivable financing companies. See discussion under "Management's
Discussion and Analysis of Financial Condition and Results of Operations,
Liquidity and Capital Resources," below.
Governmental Regulation
The health care industry is one of the most heavily regulated in the
United States. The practice of medicine is regulated by state statutes,
rules and regulations and state medical boards and state and local boards of
health, and codes established by various medical associations. Although the
Company itself is prohibited from and does not intend to engage in the
practice of medicine, its operations are directly affected by the laws that
apply to the Medical Corporations to which the Company renders services and
from which the Company derives revenues. The Company believes that its
relationships with the Medical Corporations do not violate any legal
prohibition; however, no opinions of counsel to such effect have been
obtained and no rulings to such effect have been sought from any governmental
agency. There is also the possibility of future state or federal legislation
or regulation that could have an adverse impact on the Company by directly
regulating or curtailing its business or by adversely affecting the
physicians who contract with the Company.
State law prohibits physicians from paying for the referral of patients.
Interpretations of this law indicate that fees paid for medical facilities
and for managing medical facilities and providing non-physician services do
not constitute payments for patient referrals if the fees under all the facts
and circumstances are not excessive compensation for the management, facili-
ties and services provided. The Company believes that its charges for
services rendered to the Medical Corporations are reasonable, but no
assurance can be given that a contrary view would not be adopted by a court
or governmental agency.
The Medical Centers are currently operated without approvals or licenses
from governmental health authorities that would be required for the operation
of a hospital or hospital emergency room. Management believes that neither
OMCOA nor the Medical Corporations require such approvals or license for the
operation of the Medical Centers. There can be no assurance, however, that
existing laws or regulations will not be interpreted or modified to require
the Company or the Medical Corporations to obtain such approvals or licenses
or, if required, that they will be obtainable.
The State of California and State of Washington have made significant
revisions to its workers compensation laws relating to maximum reimbursement
for occupational health care services and regulation of such services. The
Company continues to review its procedures to assure compliance with the
legislation, appropriate health care for injured workers, and proper billing
for care provided. Revisions to workers compensation laws may negatively
impact the Company.
The MediCal, Medicare and CHAMPUS programs require certification of
health care providers in their respective programs. Spectrum Medical Care, A
Medical Group, Inc. (the Medical Corporation in California) has been
certified as a health care provider for MediCal, Medicare, and CHAMPUS
programs. However, no patients were treated under these programs during
fiscal year 1995, and patients treated to date under these programs have been
minimal.
Spectrum Medical Care has qualified as a health care provider with
Alameda Alliance for Health, a public entity formed pursuant to the
California Health and Safety Code and the California Welfare and Institutions
Code. The Alliance expects to provide medical services to Alameda County
MediCal beneficiaries beginning in January 1996. However, there is no
assurance as to the number or extent of beneficiaries who may be assigned to
Spectrum Medical Care.
Employees
At June 30, 1995, the Company had 44 full-time employees, consisting of
4 officers, 12 corporate employees and 28 nonphysician staff members located
in the Medical Centers. The Medical Centers are currently staffed by 6 full
time physicians and additional on-call physicians, all of whom are employed
by the Medical Corporations. None of the Company's employees is subject to a
collective bargaining agreement, and the Company has experienced no work
stoppages.
Loss on Sale or Disposal of Facilities
During the third quarter of fiscal year 1994, the Company closed its San
Francisco, Tacoma and Northwest facilities. Certain leasehold improvements,
previously acquired customer lists and other intangible assets, and other
assets of these facilities were written off at the time of closure. Selected
assets, primarily medical equipment and office furnishings and equipment,
were transferred to other Company facilities. The future rent payment of the
noncancellable lease for the Northwest facility, which expires in December
1997, net of the future rental income from the sublease agreement, was
recorded at June 30, 1994. The closures resulted in a loss of $409,252.
Item 2. Description of Property
Facilities
The Medical Centers
Each Medical Center has been designed to provide high volume, quality
medical care without sacrificing patient comfort, convenience and privacy,
and is equipped with medical equipment and supplies of the type needed for
the treatment of occupational injuries or illnesses. Fully equipped patient
examination rooms, minor surgery and trauma rooms, radiology suites and
physical therapy departments surround a centrally located nurse's station
within each Medical Center.
Each Medical Center is typically staffed by a physician, a nurse or
medical assistant (who also serves as an administrative supervisor), a
licensed radiology technician, a registered physical therapist, and a
receptionist. The physician supervises and has complete control over all
aspects of the provision of medical services, including the review of patient
charts, medical records and laboratory and radiology results as well as other
diagnostic tests and the dispensation of pharmaceuticals. As patient volume
increases, staffing is expanded to include additional physicians, nurses and
medical assistants.
The Medical Centers are open from 8:00 a.m. to 5:00 p.m. five days a
week.
The Company currently operates five Medical Centers, four in California
and one in Washington. The Medical Centers in California are now operated
under the name "Spectrum Medical Care." All of the Company's facilities are
leased from unaffiliated parties.
The Rehabilitation Center
The Company presently operates a Rehabilitation Center under the name
"Work Fitness Institute" ("WFI") for the testing, treatment and prevention of
industrial and employment related injuries. WFI offers a Back School program
that educates patients in prevention as well as management of chronic spinal
and upper and lower extremity dysfunction by WFI. Objective computer
enhanced testing equipment are used for measuring strength and functional
work capacity. Rehabilitation and work hardening services for work related
injuries are enhanced by the use of this equipment and by objectively
measuring progress and consistency of effort. WFI shares facilities with the
Medical Center at the Oakland Airport location in California and is open from
8:00 a.m. to 5:00 p.m., five days a week. the former Rehabilitation Center
in Seattle, Washington has been absorbed into the medical Center in Seattle.
The following table sets forth certain information regarding each of the
facilities operated by the Company:
Date Approx- Number Lease
Facility Opened imate of Expira-
and or Area Exam Annual tion
Location Acquired (sq. ft.) Rooms Rent(1) Date(2)
Present Facilities:
Spectrum Medical Care Opened 6,000 8 $76,680 Month to
- Port Oakland 2/80 Month Lease
Oakland, California
Spectrum Medical Care Opened 7,342 7 $81,706 3/31/96
- Airport 4/81
Oakland, California
Spectrum Medical Care Acquired 3,427 4 $33,156 2/28/96
- Hayward 2/29/92
Hayward, California
Spectrum Medical Care Acquired 4,168 4 $60,261 3/31/96
- Berkeley 3/28/91
Berkeley, California
Seattle Occupational Opened 4,898 5 $54,892 9/30/97
Medical Center 8/84
Seattle, Washington
Footnotes
(1) Generally, rent is subject to annual increases based upon inflation.
(2) Subject to an option to extend for an additional five-year term in the
case of the Berkeley and the Seattle facilities.
Item 3. Legal Proceedings
Cummings Medical Corporation, A California corporation; and Joseph H.
Cummings, M.D., Plaintiffs v. Occupational Medical Corporation of America,
Inc., A California corporation; Don R. Livingston; Larry L. Harikian; and
Does 1 through 20, Inclusive, Defendants; Los Angeles County Superior Court
Case No. C 596715.
The Company purchased the assets of Valley Medical Industrial Clinic in
Sepulveda, California from Cummings Medical Corporation ("CMC") in 1985 by
paying $700,000 in cash and issuing a $700,000 promissory note ("Note"). The
Note gave the Company the right of offset if CMC or its sole shareholder,
Joseph R. Cummings ("Cummings"), breached any of the covenants or included
inaccurate representations or warranties in the CMC purchase agreement. The
Company subsequently discovered information which it believed demonstrated
covenant violations and certain grossly inaccurate representations and
warranties, received acknowledgement from CMC and Cummings of certain
violations, and attempted to resolve the matters with CMC and Cummings.
These attempts were not successful and the right of offset under the Note was
exercised. The litigation identified above followed. On May 31, 1990, the
Superior Court entered its judgment on default in favor of the Company and
against Cummings in the amount of $4.4 million plus attorneys' fees in excess
of $500,000 and dismissed all claims against the Company. Cummings appealed
and, on October 19, 1990, filed for protection under Chapter 11 of the
Bankruptcy Code (Case No. LA 90-26646-VZ). In November 1992, the Appellate
Court sustained the original judgment against Cummings and reduced the
judgement to $4 million plus attorneys' fees of $556,000. Cummings had
petitioned the Supreme Court of the State of California, which declined to
accept the petition. The Appellate Court judgement and the awards are now
final.
The Bankruptcy Court appointed a trustee to liquidate the assets of
Cummings' estate. The Company is the largest unsecured creditor in the
bankruptcy. It is expected but not known whether the Company will recover
anything from the bankruptcy. Administrative fees of the trustee, insurance
reimbursements and certain attorneys' fees incurred by the trustee must be
paid prior to the time it can be determined what amounts, if any, the
creditors will receive from the estate.
The Company's general liability insurance carrier paid attorneys' fees
associated with Cummings' and CMC's actions and has notified the Company that
it wishes to recoup a portion of the attorneys' fees paid, although the
carrier has not indicated the basis for its potential claim. The carrier has
indicated that it may proceed against the Company and its attorneys. At this
time, the Company and its attorneys believe there is no merit to any
potential claim against them and will vigorously defend any such claims
pursued by the carrier.
In order to avoid potential time consuming and expensive litigation,
there have been ongoing settlement negotiations. The parties are in the
process of negotiating a resolution whereby the Company will assign to the
carrier most of any liquidation proceeds that the Company may be entitled to
out of the bankruptcy estate of Cummings.
The Company is not a party to any other material pending legal
proceedings, other than ordinary routine litigation incidental to the
business, nor is the property of the Company subject to any such proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year ended June 30, 1995.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
(a) Market Information. The Company's Common Stock began trading in the
over-the-counter market on April 4, 1985. As of February 22, 1993, the
Company's Common Stock was no longer reported on the NASDAQ and the trading
information is from the National Daily Quotation Service and NASD, non-NASDAQ
OTC Bulletin Board beginning February 23, 1993. These prices represent
prices between dealers, do not include retail markup, markdown or
commissions, and do not necessarily represent actual transactions.
Since February 22, 1993, the Company's common stock has traded in the
over-the-counter market, and is no longer quoted on NASDAQ. There is a
limited trading market in the Company's common stock. The following table
summarizes high and low bid prices of the Company's common stock of which the
Company has knowledge, based upon information provided by the principal stock
brokerage firms handling transactions for the Company stock for the periods
shown, without retail mark-up, mark-down or commissions. These bid and ask
prices do not necessarily represent actual trades.
Period High Bid Low Bid High Ask Low Ask
July 1, 1993 to September 30, 1993 .312 .125 1.000 .500
October 1, 1993 to December 31, 1993 .250 .031 .750 .187
January 1, 1994 to March 31, 1994 .070 .020 .250 .120
April 1, 1994 to June 30, 1994 .050 .020 .218 .120
July 1, 1994 to September 30, 1994 .040 .010 .140 .100
October 1, 1994 to December 31, 1994 .040 .010 .140 .050
January 1, 1995 to March 31, 1995 .030 .010 .120 .050
April 1, 1995 to June 30, 1995 .030 .010 .120 .050
(b) Holders. The approximate number of record holders of the Company's
Common Stock as of October 31, 1995 was 130.
(c) Dividends. The Company has never paid any cash dividends on its
Common Stock and does not anticipate that it will do so in the foreseeable
future.
Item 6. Management's Discussion and Analysis or Plan of Operation
Selected Financial Data
Year Ended June 30
1995 1994 1993 1992 1991
Revenues $3,995,274 $5,295,691 $5,740,841 $6,423,905 $6,374,284
Income (Loss)
Before Income
Taxes (Benefit)
and Extra-
ordinary Item $(2,389,514) $(1,806,612) $(1,818,140) $(748,770) $(120,330)
Income (Loss)
Before Extra-
ordinary Item $(2,391,114) $(1,738,212) $(1,883,900) $(493,770) $(154,330)
Extraordinary Item,
Gain From Debt
Forgiveness - $125,000 - - -
Net Income
(Loss) $(2,391,114) $(1,613,212) $(1,883,900) $(493,770) $(154,330)
Net Income
(Loss) Per
Share Before
Extraordinary
Item $(0.95) $(0.69) $(0.75) $(0.20) $(0.06)
Extraordinary Item - $0.05 - - -
Net Income (Loss)
Per Share $(0.95) $(0.64) $(0.75) $(0.20) $(0.06)
Balance Sheets
(June 30) 1995 1994 1993 1992 1991
Total Assets $2,080,965 $3,106,337 $3,573,639 $4,528,929 $5,020,554
Long-Term Debt
and Capital Lease
Obligations (less
current portion) $-0- $218,750 $-0- $33,000 $89,630
Shareholders'
Equity (capital
deficit) $(3,007,676) $(616,562) $996,650 $2,880,550 $3,374,320
Results of Operations
The following table is included as an aid to understanding the Company's
operating results, in addition to the Selected Financial Data and the
Financial Statements. The table sets forth the percentages which each item
bears to net revenues and the percentage change in dollar amounts from year
to year.
Percentage Relation- Period to Period Percent-
ship to Gross Revenue age Increase(Decrease)
Percent Percent Year Year
of of Ended Ended
Revenue Revenue 1993- 1994-
Account Name 1994 1995 1994 1995
Revenues 100% 100% -8% -25%
Less fees
to medical
corporations 30% 34% -12% -14%
Net Revenues 70% 66% -6% -29%
Operating Expenses
Salaries 42% 49% -13% -12%
Medical & Office
Supplies 10% 9% -10% -29%
Other operating
expenses 35% 46% -5% 1%
Depreciation and
amortization 5% 4% -23% -39%
Interest Expense-net 5% 17% -17% 149%
Loss on sale or
disposal of
facilities 8% 0% n/a n/a
104% 125% -4% -9%
Income (loss) before
income taxes (benefit)
and extraordinary
item -34% -60% -1% 32%
Income taxes (benefit) -1% 0% 204% -102%
Net income (loss) before
extraordinary item -33% -60% -8% 38%
Extraordinary Item,
gain on debt
forgiveness 2% 0% n/a n/a
Net income (loss) -30% -60% -14% 48%
Fiscal Year ended June 30, 1995 compared
to Fiscal Year ended June 30, 1994
The Company had five Medical Centers and a Rehabilitation Center at June
30, 1995. Net loss for the year ended June 30, 1995 was $(2,391,114) or
$(0.95) per share compared to a net loss of $(1,613,212) or $(0.64) per share
for the year ended June 30, 1994. The 1994 net loss was after recognizing a
$125,000 or $0.05 per share extraordinary gain from the extinguishment of
certain debt.
Revenues for fiscal year 1995 were $3,995,274, representing a decrease
of $1,300,417 or 25% from fiscal year 1994 revenues of $5,295,691. The
closure of three Medical Centers during the third quarter of fiscal year 1994
accounted for $839,000 of the decrease in revenues in fiscal year 1995. The
continuing operations suffered a $461,000 or 10% decrease in revenues with
the California operations suffering a $561,000 or 15% decrease and the
Medical Center in Seattle, Washington experiencing a $100,000 or 15%
increase. A decrease of $352,000 in the California operations was
attributable to the immediate recognition of fee adjustments by insurance
companies and other payers in California, while the remaining decrease was
attributable to lower fees primarily for drugs and medical supplies as
required by the workers' compensation fee schedule and additional
competition. The improvement at the Medical Center in Seattle is primarily
due to retention of employer/clients through quality care and service and
additional marketing efforts.
Net fees to Medical Corporations of $1,374,950 decreased by $229,174 or
14% due to a $244,000 decrease in fees for the closed clinics.
Salaries and benefits of $1,958,397 decreased by $258,240 or 12% due to
a $262,000 decrease relating to the closed clinics. Staffing levels at the
continuing operations have remained fairly stable with some new positions
offset by deletions of former positions. Benefit programs have not changed.
Medical and office supplies of $358,474 decreased by $146,806 or 29% due
to a $155,000 decrease relating to the closed clinics.
Other operating expenses of $1,840,964 increased by $18,908 or 1%. The
closed clinics accounted for a $256,000 decrease, while the continuing
operations experienced a $275,000 increase primarily attributable to a
$409,000 increase in the provision for doubtful accounts. During fiscal year
1995, management made an exhaustive review of outstanding accounts
receivable, which included re-billing of long past-due accounts and following
up on responses from payers. This review resulted in write-offs of $754,000
and a provision for doubtful accounts of $684,000, of which $196,000 was
reported in the fourth quarter of fiscal year 1995 after a final review of
the re-billing effort. A substantial amount of the accounts written off
related to fee adjustments made by insurance companies and other payers.
Offsetting the $409,000 increase in the provision for doubtful accounts was a
decrease of $138,000 in insurance and professional fees relating primarily to
the closure of three clinics in fiscal year 1994 and other general expense
reductions. Insurance and professional fees were charged to the
corporate/administrative department and, therefore, were not included in the
discontinued operations' expenses.
Interest expense (net of interest income) of $687,715 increased by
$411,075 or 149% due to a $1.6 million increase in short-term financing and a
$231,000 default fee relating to the overfunding of the short-term financing.
See discussion under Liquidity and Capital Resources section, below.
During fiscal year 1994, the closure of three Medical Centers resulted
in a $409,252 loss on disposal of facilities.
Income tax expense of $1,600 consists of the minimum California tax. A
tax benefit relating to the Company's net loss is not recorded since there is
no assurance that such benefit will be realized.
Fiscal Year ended June 30, 1994 compared
to Fiscal Year ended June 30, 1993
The Company had five medical facilities and two Work Fitness
Rehabilitation Centers at June 30, 1994. Net loss for the year ended June 30,
1994 was $(1,613,212) or $(0.64) per share compared to a net loss of
$(1,883,900) or $(0.75) per share for the year ended June 30, 1993. The 1994
net loss was after recognizing a $125,000 or $(0.05) per share extraordinary
gain from the extinguishment of certain debt.
Revenues for fiscal year 1994 were $5,295,691 representing a decrease of
$445,150 (8%) from 1993 revenues of $5,740,841 and reflects the net effect of
the closure of three clinics: Northwest Occupational Medical Center in
Seattle in January 1994, San Francisco Port Medical Service in San Francisco
in February 1994 and Tacoma Occupational Medical Center in Tacoma in March
1994. The slowing local economies in both Washington and California also
affected OMCOA's revenue. In California, fiscal year 1994 revenues decreased
by $170,000 from fiscal year 1993, while in Washington, revenues decreased by
$275,150. Hayward Industrial Medical Group clinic had the largest decrease
in revenue from 1993 to 1994 of $74,305. Work Fitness Rehabilitation -
Airport revenues decreased by $68,830, Berkeley Industrial Medical Center
decreased by $61,918, and Port Medical Services, Oakland decreased by
$42,745. However, Airport Occupational and Emergency Care Center increased
its revenues from fiscal year 1993 to fiscal year 1994 by $172,985 and
Seattle Occupational Medical Center increased revenues by $53,148. The net
fees to Medical Corporations decrease was primarily due to a reduction in
physician payroll commensurate with the decline in revenue.
The Company accrued losses from the closure of the three medical
facilities at Northwest Occupational Medical Center, San Francisco Port
Medical Services and Tacoma Occupational Medical Center of approximately
$409,000 which represents 25% of the net loss for the year ended June 30,
1994.
Salaries and benefits decreased by $343,670 or 13%. Medical and office
supplies decreased by $55,080 or 10%. Depreciation and amortization
decreased by $78,477 or 23%. Other operating expenses decreased by 104,664
or 5%. The decreases primarily result from the closure of the three medical
facilities and reductions in certain administrative expenses. Net interest
expense decreased by $58,149 or 17% due to a reduction in interest rate and
financing fee structure from the financing obtained in July 1993.
Inflation
Inflation is a factor in our economy and the Company continues to seek
ways to cope with its impact. To the extent permitted by competition and by
state worker's compensation regulatory agencies, in general, the Company
passes increased costs on by increasing its rates and prices over time.
However, management believes that inflation does not have a material impact
on its financial statements.
Liquidity and Capital Resources
The Company's cash balance at June 30, 1995 was $117,815, an improvement
of $19,166 over the cash balance at June 30, 1994. However, the Company's
working capital balance at June 30, 1995 was a deficit of $(3,742,448) or
$2,483,700 worse than the working capital balance at June 30, 1994. During
the fiscal year, short-term financing (as described below) provided
$1,574,490 in cash which was applied toward cash requirements of $1,488,450
for operating activities and $66,874 for investing activities (primarily
acquisition of property and equipment and advances to Medical Corporations).
This additional short-term financing and a $218,750 increase in the current
portion of long-term debt more than offset significant reductions in other
current liabilities and were the primary factors causing the decline in
working capital.
The Company's banking arrangements expired in October 1992. In order to
adequately fund its cash needs in fiscal year 1993, the Company attempted to
negotiate additional financing with other banks and receivables financing
companies. The Company and Medical Corporations considered selling or
factoring some or all of their accounts receivable. On October 15, 1992, the
Medical Corporations sold approximately $2,000,000 of its receivables and the
Company sold $90,000 of its receivables to Towers Financial Corporation
("Towers") in exchange for a cash payment of 50% of the "Reimbursable Value"
of the receivables pursuant to the contract with Towers. An additional 45% of
the Reimbursable Value of the receivables was to be paid as the receivables
were collected. The remaining 5% was retained by Towers with adjustment for
accrued financing charges of 2% per month. The transaction was accounted for
as a loan. The Medical Corporations lent the funds received from Towers to
the Company under the same terms and with an adjustment to the Management
Fees charged by the Company to the Medical Corporations to reflect the cost
of these funds. The Company used these funds to repay the Bank of America
and to meet current obligations.
Towers initially indicated that it would purchase additional receivables
on a revolving basis. However, in February 1993, Towers stopped purchasing
additional receivables. The Company attempted to find alternate sources of
financing and negotiated with other financing companies to obtain additional
funds to replace Towers and to fund the Company's future cash needs.
As of July 2, 1993, the Medical Corporations and the Company entered
into a Sale and Subservicing Agreement ("Agreement") with NPFII-W, Inc.
("Purchaser") to replace Towers. The Purchaser agreed to purchase from the
Medical Corporations up to 85% of eligible accounts receivable with recourse,
as defined in the Agreement, up to a total commitment of $2 million. The
financing fee for this arrangement is 13.5% per annum of the outstanding
accounts receivable. The transfers of the receivables to the Purchaser are
accounted for as sales of the accounts receivable. As of June 30, 1994, the
total funding received by the Medical Corporations, net of cash receipts from
the collection of accounts receivable, was $2,735,906, or $735,906 above the
commitment amount.
During fiscal year 1995, the Purchaser has continued funding above the
commitment amount. Furthermore, as of August 1994, the Purchaser has
provided the Medical Corporations and the Company, on a weekly basis,
additional funding in excess of the amount represented by the transfer of the
accounts receivable. As of June 30, 1995, the total funding received by the
Medical Corporations, net of cash receipts from the collection of accounts
receivable, was $4,310,396, or $2,310,396 above the initial commitment amount
and approximately $3 million above the amount represented by accounts
receivable transferred. As of June 30, 1995, the Medical Corporations
extended $4,310,396 to the Company as short-term borrowings from the cash
received from the Purchaser.
The additional funding has continued subject to periodic reviews of the
Company's performance. However, the Purchaser has recently indicated that
the amount of the weekly additional funding will be reduced and the Company
and the Medical Corporations will be required to execute a security agreement
relating to the additional funding. The amount of the reduction in
additional funding and the terms of the security agreement are now being
discussed.
The Company is dependent upon the continuation of the Agreement with
Purchaser as well as the additional funding for its cash requirements.
Although the Company expects the Purchaser to continue to provide additional
funding to the Company while the Company seeks alternative sources of working
capital, there is no assurance that the amount of such funding will meet the
Company's requirements or that alternative funding will be available. The
Company also continues to focus on business development, productivity, cost
containment, and other opportunities to improve operations and cashflow.
As of July 22, 1993, the Company, Medical Corporations and Towers
entered into a Settlement Agreement pursuant to which the Company and Medical
Corporations paid Towers $725,000 and delivered promissory notes for
$350,000, which results in a net debt forgiveness of $125,000 by Towers, so
long as the terms of the Settlement Agreement are fulfilled. The funds to
pay Towers were obtained pursuant to the accounts receivable financing
agreement with Purchaser. The promissory notes are for three years with
interest at 3% per annum in excess of prime rate as reported by the Wall
Street Journal and are personally guaranteed by Drs. Harikian and Livingston.
The principal amounts of the Notes are $13,562.50 for the Company,
$238,665.00 for Interstate Environmental Medical Group, Inc., a California
corporation, and $97,772.50 for Interstate Environmental Medical Group, P.S.,
Inc., a Washington corporation. None of the interest and principal payments
have been made and Towers has not initiated collection action.
The reduction of these Medical Corporations' obligations will
proportionately reduce the amount owed by the Company to the Medical
Corporations for the Towers funds that were originally lent by the Medical
Corporations to the Company.
On July 16, 1993, the State of California made significant revisions to
its workers compensation laws. Although the Company does not anticipate any
significant financial impact from these changes, it continues to review its
procedures to assure compliance with the legislation, appropriate health care
for injured employees, and proper billing for care provided.
As of June 30, 1995 and 1994, the Company determined that it was more
likely than not that they would be unable to utilize the benefits of the
available net operating loss carryforward in the near future. Accordingly,
the Company recorded a 100% valuation allowance in the financial statements.
The Medical Corporation contract with one of its major clients expired
as of June 30, 1995. The contract was awarded to another health care
provider. The Company anticipates a reduction of 17% in revenues as a result
of the expiration of this contract and has eliminated direct and certain
indirect costs relating to that contract. Furthermore, since late 1994, the
Company has increased its marketing program (including staff, brochures,
advertising, promotion, etc.) to increase its client base.
The report of the Company's independent certified public accountants
contains an explanatory paragraph as to the Company's ability to continue as
a going concern. According to the report, the Company has experienced
recurring losses, capital deficit, cash flow deficiencies and the overfunding
of certain debt received by the Medical Corporations from operations that
raise substantial doubt about the Company's ability to continue as a going
concern. Certain of the Company's assets might be worth substantially less
than the amounts shown on the Company's balance sheets if the Company is
unable to continue as a going concern and the financial statements have not
been adjusted to reflect the outcome of this uncertainty. There can be no
assurance that future revenues will exceed operating expenses and enable the
Company to continue as a going concern.
To reduce the operating loss and improve operating cash flows, the
Company implemented or is in the process of implementing the following plan:
reduction of expenses primarily through elimination of positions and
reduction of management salaries; expansion of health care services to family
care initially through MediCal, Medicare and CHAMPUS programs; renegotiation
of agreements with Medical Corporations to transfer operating risks to
Medical Corporations; and consideration of merger and/or divestiture plans.
Although the results of these actions cannot be predicted, the Company
believes that the steps are appropriate and will help the Company effectively
reorganize its operations at a level adequate to meet current obligations as
they become due.
Item 7. Financial Statements
(a) Financial Statements. Set forth below are the audited financial
statements of the Company for the years ended June 30, 1994 and 1995. The
financial statements of the Company as of June 30, 1994 and 1995 and for the
year then ended have been audited by BDO Seidman, LLP, Independent Certified
Public Accountants, as indicated in their report thereon which contained an
explanatory paragraph as to a going concern uncertainty. The notes to the
financial statements which are also set forth below are an integral part of
the financial statements. The financial statements included in this section
are as follows:
Page
Report of Independent Certified Public Accountants 18-19
Consolidated Balance Sheets, June 30, 1994 and 1995 20-21
Consolidated Statements of Loss for each of the years
ended June 30, 1993, 1994 and 1995 22
Consolidated Statements of Shareholders' Equity (Capital
Deficit) for each of the years ended June 30, 1993, 1994
and 1995 23
Consolidated Statements of Cash Flows for each of the years
ended June 30, 1993, 1994 and 1995 24-25
Summary of Accounting Policies 26-28
Notes to Consolidated Financial Statements 29-40
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Occupational Medical Corporation
of America, Inc.
Oakland, California
We have audited the accompanying consolidated balance sheets of Occupational
Medical Corporation of America, Inc. and subsidiary as of June 30, 1994 and
1995 and the related consolidated statements of loss, shareholders' equity
(capital deficit) and cash flows for each of the three years in the period
ended June 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Occupational Medical Corporation of America, Inc. and subsidiary as of
June 30, 1994 and 1995 and the consolidated results of their operations and
their cash flows for each of the three years in the period ended June 30,
1995, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company's capital
deficit, recurring losses, working capital deficiency and the over-funding
related to short-term financing received by the Medical Corporations raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/BDO Seidman, LLP
BDO Seidman, LLP
Certified Public Accountants
San Francisco, California
September 29, 1995
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1994 1995
Assets (Note 2)
Current
Cash $ 98,649 $ 117,815
Management fee receivable, less
allowance for doubtful
accounts of $500,000 and $430,000 1,690,557 887,699
Operating supplies 213,871 148,760
Refundable income taxes (Note 6) 70,000 -
Prepaid and other assets 50,292 51,182
Advances to Medical Corporations (Note 4) 51,593 77,098
Advances to shareholder (Note 4) 18,541 11,741
Short-term note receivable from
shareholder (Note 4) 51,898 51,898
Total current assets 2,245,401 1,346,193
Property and equipment
Equipment and furnishings 1,039,442 1,053,637
Leasehold improvements 490,835 488,835
Medical equipment 836,142 841,228
2,366,419 2,383,700
Less accumulated depreciation
and amortization 2,039,896 2,101,032
326,523 282,668
Other
Deposits and other 46,752 44,035
Goodwill, less accumulated amortization
of $194,188 and $232,132 374,735 336,791
Other intangible assets, less accumulated
amortization of $144,539 and $185,819 112,926 71,278
534,413 452,104
$ 3,106,337 $ 2,080,965
See accompanying summary of accounting policies and notes to consolidated
financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1994 1995
Liabilities and Shareholders' Equity (Capital Deficit)
Liabilities
Accounts payable and accrued expenses $ 434,236 $ 225,699
Short-term financing (Note 2) 2,735,906 4,310,396
Current portion of long-term debt (Note 3) 131,250 350,000
Accrued compensation 115,432 137,285
Other accruals 87,325 65,261
Total current liabilities 3,504,149 5,088,641
Long-term debt (Note 3) 218,750 -
Total liabilities 3,722,899 5,088,641
Commitments and contingencies (Notes 2, 3, 5, and 8)
Shareholders' equity (capital deficit)
Common stock, no par value,
authorized 10,000,000 shares,
issued and outstanding,
2,519,550 shares (Note 12) 3,571,805 3,571,805
Additional paid-in capital 62,704 62,704
Accumulated deficit (4,201,263) (6,592,377)
(566,754) (2,957,868)
Notes receivable, Medical
Corporations (Note 4) (49,808) (49,808)
(616,562) (3,007,676)
$ 3,106,337 $ 2,080,965
See accompanying summary of accounting policies and notes to consolidated
financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF LOSS
Year ended June 30, 1993 1994 1995
Revenues (Note 4) $ 5,740,841 $ 5,295,691 $ 3,995,274
Less net fees to Medical
Corporations (Note 4) 1,815,924 1,604,124 1,374,950
Net revenues 3,924,917 3,691,567 2,620,324
Costs and expenses
Salaries and benefits 2,560,397 2,216,637 1,958,397
Medical and office supplies 560,360 505,280 358,474
Other operating expenses 1,940,720 1,822,056 1,840,964
Depreciation and amortization 346,791 268,314 164,288
Interest (net of interest
income of $14,000, $1,000
and $15,000) 334,789 276,640 687,715
Loss on disposal of
facilities (Note 9) - 409,252 -
Total costs and expenses 5,743,057 5,498,179 5,009,838
Loss before income tax expense
(benefit) and extraordinary item (1,818,140) (1,806,612) (2,389,514)
Income tax expense (benefit)
(Note 6) 65,760 (68,400) 1,600
Net loss before extraordinary item (1,883,900) (1,738,212) (2,391,114)
Extraordinary item, gain on debt
forgiveness (Note 2) - 125,000 -
Net loss ($1,883,900) $(1,613,212) $(2,391,114)
Net loss per share before
extraordinary item $(.75) $(.69) $(.95)
Extraordinary item - .05 -
Net loss per share (Note 7) $(.75) $(.64) $(.95)
See accompanying summary of accounting policies and notes to consolidated
financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY CAPITAL(CAPITAL DEFICIT)
Notes
Addi- Receiv-
tional Accumu- able,
Common Stock Paid-in lated Medical
Shares Amount Capital deficit Corps. Total
Balance,
July 1,
1992 2,519,550 $3,571,805 $62,704 $(704,151) $(49,808) $2,880,550
Net loss - - - (1,883,900) - (1,883,900)
Balance,
June 30,
1993 2,519,550 3,571,805 62,704 (2,588,051) (49,808) 996,650
Net loss - - - (1,613,212) - (1,613,212)
Balance,
June 30,
1994 2,519,550 3,571,805 62,704 (4,201,263) (49,808) (616,562)
Net loss - - - (2,391,114) - (2,391,114)
Balance,
June 30,
1995 2,519,550 $3,571,805 $62,704 $(6,592,377) $(49,808)$(3,007,676)
See accompanying summary of accounting policies and notes to consolidated
financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASHFLOWS
Year ended June 30, 1993 1994 1995
Cash flows from operating activities
Net loss $ (1,883,900) $ (1,613,212) $ (2,391,114)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 346,791 268,314 164,288
Provision for doubtful
accounts 99,000 275,000 684,000
Loss on disposal of facilities - 409,252 -
Loss on disposal of equipment - - 7,328
Deferred income taxes 80,000 - -
Changes in assets and liabilities:
Management fee receivable 137,466 (378,559) 118,858
Operating supplies and other
current assets (16,815) 91,277 64,221
Refundable income taxes 175,000 (70,000) 70,000
Restricted cash (90,000) 90,000 -
Deposits and other 24,145 9,985 2,717
Accounts payable and
other accrued expenses 436,924 (788,996) (208,748)
Net cash used in operating activities (691,389) (1,706,939) (1,488,450)
Cash flows from investing activities
Acquisition of property and equipment (47,937) (7,074) (48,169)
Payment for disposal of facilities - (37,357) -
Decrease (increase) in advance to
and note receivable from
shareholder, net 11,945 (11,533) 6,800
Increase in advances to Medical
Corporations (51,593) - (25,505)
Net cash used in investing activities (87,585) (55,964) (66,874)
See accompanying summary of accounting policies and notes to consolidated
financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASHFLOWS
Year ended June 30, 1993 1994 1995
Cash flows from financing activities
Proceeds from short-term financing,
net $ 1,200,000 $ 1,885,906 $ 1,574,490
Payments on long-term debt and
capital lease obligations (308,314) (33,000) -
Payments under line of credit (400,000) - -
Net cash provided by financing
activities 491,686 1,852,906 1,574,490
Net (decrease) increase in cash (287,288) 90,003 19,166
Cash, beginning of year 295,934 8,646 98,649
Cash, end of year $ 8,646 $ 98,649 $ 117,815
See accompanying summary of accounting policies and notes to consolidated
financial statements.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
SUMMARY OF ACCOUNTING POLICIES
Nature of Business Occupational Medical Corporation of America, Inc. (the
Company) was incorporated as a professional medical
corporation in February 1980 for the purpose of providing
medical services for work-related conditions. In
January 1984, the Articles of Incorporation were amended
to change the Company to a general business corporation.
As a result, the Company contracted with Spectrum Medical
Care, A Medical Group Inc. (formerly known as Interstate
Environmental Medical Group, Inc.) a California
Corporation, Interstate Environmental Medical Group
Physicians and Surgeons, P.C. of Oregon and Interstate
Environmental Medical Group, P.S., Inc. of Washington,
(the "Medical Corporations"), to provide medical services
to its network of occupational medical centers (the
Medical Centers) in California, Washington, and Oregon;
since January 1984, its business has been limited to the
development and management of such Medical Centers (see
Note 4). The Company and the Medical Corporations closed
two clinics in Washington and one clinic in California in
fiscal 1994 and sold their Oregon facility in fiscal
1992. Subsequent to the sale of the Oregon facility,
Interstate Environmental Medical Group Physicians and
Surgeons, P.C. of Oregon was dissolved in fiscal 1992.
The Company currently manages five Medical Centers and
one rehabilitation center. The Medical Corporations
receive substantially all of their revenues from third
party payers, the majority of which are commercial
indemnity insurers and other insurance programs,
including state workers' compensation funds.
Consolidation The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary,
Occupational Health & Wellness Centers, Inc. (the
Subsidiary). The Subsidiary managed a Medical Center in
Washington which was closed in fiscal 1994. The
Subsidiary remains as a legal entity with no substantial
business activities, other than being party to a facility
lease and related sublease. All significant intercompany
accounts and transactions have been eliminated in
consolidation.
Operating Supplies Operating supplies consist of purchased medical and
office supplies valued at cost (first-in, first-out
basis).
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
SUMMARY OF ACCOUNTING POLICIES
Property and
Equipment Property and equipment are stated at cost. Depreciation
and amortization are computed using the straight-line
method over estimated useful lives of three to ten years
or, for leasehold improvements, over the term of the
lease if shorter.
Goodwill The excess of cost over net assets of acquired medical
centers and facilities is amortized over a period of 15
years. At each balance sheet date, the Company evaluates
the realizability of goodwill based upon expectations of
non-discounted cash flows and operating income for each
acquired medical center having a material goodwill
balance.
Other Intangible
Assets Other intangible assets, consisting primarily of
covenants not to compete and customer lists, are
amortized over periods ranging from five to seven years.
Insurance
Coverage The Company carries malpractice insurance coverage on a
claims made basis and is self-insured for aggregate
claims in excess of $3,000,000 during the annual policy
period. There are no material claims outstanding at
June 30, 1995.
Concentrations
of Credit The patient revenues earned by the Medical Corporations
are derived principally from commercial indemnity
insurers and other insurance programs, including state
workers compensation funds of Washington and California.
Substantially all of the receivables earned by the
Medical Corporations are sold, with recourse, to a third
party. The Medical Centers are principally located in the
San Francisco Bay Area with one facility in Seattle,
Washington. Amounts billed are generally based on
approved fee schedules. The Medical Corporations had one
significant contract with the City of Oakland which
accounted for approximately 15% to 17% of revenues for
1993, 1994 and 1995. Generally, collateral is not
obtained in support of accounts receivable. Allowance for
credit losses are recorded when revenues are recognized
and when specific credit problems arise.
Income Taxes Income taxes are calculated using the liability method
specified by Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes".
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
SUMMARY OF ACCOUNTING POLICIES
Reclassification Certain amounts in the 1993 and 1994 consolidated
financial statements have been reclassified to conform
with the 1995 presentation.
New Accounting
Standards In March, 1995, the Financial Accounting Standards Board
(FASB) issued SFAS No. 121, "Accounting for the
Impairment of long-lived Assets", which is effective for
fiscal years beginning after December 15, 1995. This
statement requires that long-lived assets, such as
property and equipment, goodwill and certain identifiable
intangibles be reviewed for impairment when events or
changes indicate that the carrying amount of the asset
may not be recoverable. The recoverability of an asset is
to be based on its estimated future cash flows from its
use and disposition. Compliance is not expected to have a
material impact on the Company's financial condition or
results of operations.
In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock Based Compensation", effective for
fiscal year beginning after December 15, 1995. This
statement establishes accounting and reporting for stock
based employee compensation plans. The statement defines
a fair value based method of employee stock options. The
statement, however, allows entities to continue to
measure compensation cost as prescribed in Opinion 25,
provided that pro forma disclosures of net income and
earnings per share are made, as if the fair value based
method under SFAS No. 123 had been applied. Compliance is
not expected to have a material impact on the Company's
financial condition or results of operations.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
1. Going
Concern and
Management's
Plans The accompanying consolidated financial statements have
been prepared assuming that the Company will continue as
a going concern; they do not include adjustments relating
to the recoverability of recorded asset amounts and
classification of recorded assets and liabilities.
The Company has an accumulated deficit of $6.6 million at
June 30, 1995, at which date its total liabilities
exceeded its total assets by $3 million and its current
liabilities exceeded its current assets by $3.7 million.
The Company incurred aggregate net losses of approxi-
mately $5.9 million from fiscal years 1993 to 1995. In
addition, as discussed in Notes 2 and 4, the Purchaser of
the patients' receivables from the Medical Corporations
has over-funded the Medical Corporations by approximately
$3.7 million; these funds have been loaned to the
Company. Furthermore, the Medical Corporations' contract
with the City of Oakland, which accounted for about 17%
of revenues, expired on June 30, 1995. Also, as discussed
in Notes 2 and 3, $350,000 of short term financing is in
default. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. In
August 1994, the Company's management held a meeting with
the Purchaser to discuss the funding situation. As a
result of the meeting, the Purchaser agreed to provide
additional funding to the Company through the end of
November 1994 and subsequently agreed to continue the
additional funding subject to periodic reviews.
Additional funding has continued through the current
period.
To reduce the operating loss and improve operating cash
flows, the Company implemented or is in the process of
implementing the following plan:
expansion of health care services to family care
initially through MediCal, Medicare, and CHAMPUS
programs;
renegotiation of sublease and facilities management
agreements with the Medical Corporations to transfer
operating risks to the Medical Corporations; and
consideration of merger and/or divestiture plans.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONT.)
Although the results of these actions cannot be
predicted, the Company believes that the steps are
appropriate and will help improve the operating results
and cash flows.
2. Short-Term
Financing In October 1992, the Company and the Medical Corporations
(see Note 4) entered into a Healthcare Purchase Contract
(the Contract) with Towers Financial Corporation
(Towers). Under the Contract, Towers agreed to purchase
certain approved accounts receivable from the Medical
Corporations. The Contract could be terminated with 90
days notice by either party and expired December 31,
1994. No accounts receivable were purchased by Towers.
The Contract was collateralized by substantially all of
the Company's and the Medical Corporations' assets.
As of October 31, 1992, Towers extended a $1.2 million
loan to the Medical Corporations, with interest payable
at 2% per month. The Medical Corporations then loaned the
$1.2 million to the Company. In late February 1993,
Towers was placed under the trusteeship by the Securities
and Exchange Commission. In July 1993, Towers, the
Medical Corporations and the Company entered into a
Settlement Agreement, which required a $725,000 cash
payment and the issuance of $350,000 in notes payable
guaranteed by the two majority shareholders (see Note 3).
The remaining $125,000 was recorded as a forgiveness of
debt by the Company in the first quarter of fiscal 1994.
In July 1993, the Medical Corporations and the Company
entered into a Sales and Subservicing Agreement
(Agreement) with NPFII-W, Inc. (Purchaser). The Purchaser
agreed to purchase from the Medical Corporations up to
85% of eligible accounts receivable with recourse, as
defined in the Agreement, up to a total commitment of $2
million. In accordance with the guidelines of Statement
of Financial Accounting Standards No. 77, "Reporting by
Transferors for Transfers of Receivables with Recourse",
the transfers of the receivables from the Medical
Corporations to the Purchaser are accounted for as sales
of accounts receivable (see Note 4). As of June 30, 1994
and 1995, the total funding received by the Medical
Corporations, net of the cash receipts from the accounts
receivable, was $2,735,906 and $4,310,396. The base fee
for this arrangement is 13.5% per annum of the outstand-
ing accounts receivable. As of June 30, 1994 and 1995,
the Medical Corporations extended $2,735,906 and
$4,310,396 to the Company as short term borrowings from
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONT.)
the cash they received from the Purchaser (see Note 4).
The Company incurs interest on these borrowings equal to
the fees incurred by the Medical Corporations under the
Agreement.
3. Long-Term
Debt Long-term debt consists of the following:
June 30, 1994 1995
Notes payable to Towers, payable in
quarterly installments of $43,750,
beginning October 31, 1994,
interest at prime rate plus 3%
(10.25% and 12% at June 30, 1994
and 1995) payable quarterly
beginning October 31, 1993,
maturing July 1996 (see Note 2) $ 350,000 $ 350,000
350,000 350,000
Less current portion 131,250 350,000
$ 218,750 $ -
As of June 30, 1995, no quarterly installments on
principal have been made. The entire unpaid principal
with accrued interest, at the option of Towers, become
immediately due. The note agreement provides that
interest on principal which is not paid when due be
accrued at 24% per annum. Accrued interest as of June 30,
1995 was approximately $78,000.
4. Related Party
Transactions MEDICAL CORPORATIONS - In 1984, the Company entered into
sublease and facilities management agreements with the
Medical Corporations under which the Medical Corporations
provide all medical services at the Medical Centers. The
Company's principal shareholders are the sole
shareholders of the Medical Corporations.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONT.)
Under terms of the agreements, the Company leases or
subleases to the Medical Corporations fully equipped
occupational medical facilities and provides all
nonmedical administrative, accounting, management and
similar services for the facility. All non-physician
personnel of the Medical Centers are hired, trained and
paid by the Company. In addition, the Company is
responsible for all operating expenses other than
malpractice insurance and compensation and related
benefits paid to the physicians.
Each sublease and facilities management agreement calls
for the Medical Corporations to retain each month a base
amount from gross revenues sufficient to compensate the
physicians and pay malpractice insurance. The Medical
Corporations also retain a percentage of gross revenues
above the base amount. The percentage of gross revenues
retained is subject to quarterly adjustments by mutual
agreement to reflect changes in the Medical Centers'
operations.
The Company has agreed to make working capital loans to
the Medical Corporations, as needed, to cover the
physician salaries, medical malpractice insurance (base
amount) and the cost of equipment and medical facilities
in the event that revenues from the Medical Centers'
operations do not cover such Medical Corporations' cost.
In addition, the Company advances funds to pay the
expenses of the Medical Corporations until patient
receivables are collected. As of June 30, 1994 and 1995,
the Company advanced $51,593 and $77,098 to the Medical
Corporations for an advance to a major shareholder. The
advances are non-interest bearing and are due on demand.
During 1991, the Company loaned a total of $49,808 to the
Medical Corporations. The notes are unsecured, bear
interest at 8% per annum, and were due on June 30, 1992.
The notes are currently past due. The Medical
Corporations purchased 36,000 shares of the Company's
stock with the proceeds of the loan. Accordingly, the
notes are classified as a reduction of the Company's
shareholders' equity.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONT.)
The combined unaudited balance sheets of the Medical
Corporations are as follows:
June 30, 1994 1995
Assets:
Accounts receivable
from patients (1) $ 253,583 $ 270,000
Loan to the Company (Note 2) 2,735,906 4,310,396
Due from shareholders 126,593 152,098
Investment in the Company 49,808 49,808
Organization costs 6,704 6,704
$ 3,172,594 $ 4,789,006
June 30, 1994 1995
Liabilities and shareholders' equity:
Management fees payable $ 1,707,557 $ 904,699
Advances from the Company 51,593 77,098
Short-term financing
(Note 2) (1) 1,298,932 3,692,697
Notes payable, the Company 49,808 49,808
Shareholders' equity 64,704 64,704
$ 3,172,594 $ 4,789,006
(1) In July, 1993, NPFII-W, Inc. (Purchaser) agreed
to purchase from the Medical Corporations up to
85% of eligible accounts receivables from
patients with recourse (see Note 2). Net
proceeds from sales of patients receivable
totalled approximately $4.3 million and $4.4
million during the years ended June 30, 1994
and 1995. During the fiscal years 1994 and
1995, proceeds from sales exceeded patients
receivable sold to the Purchaser. The excess
approximated $1.3 million and $3.7 million at
June 30, 1994 and 1995, and was recorded by the
Medical Corporations as short-term financing
from the Purchaser.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONT.)
The combined unaudited statements of operations for the
Medical Corporations are as follows:
Year ended June 30, 1993 1994 1995
Patient revenues $ 5,740,841 $ 5,295,691 $ 3,995,274
Costs and expenses:
Medical profes-
sional fees and
malpractice
insurance 1,815,924 1,604,124 1,374,950
Management fees 3,426,136 3,143,491 2,295,788
Rent expense 498,781 548,076 324,536
Total costs and
expenses 5,740,841 5,295,691 3,995,274
Net income $ - $ - $ -
ADVANCES TO SHAREHOLDER - Advances to shareholder are
non-interest bearing and are due on demand.
NOTE RECEIVABLE, SHAREHOLDER - Note receivable from
shareholder is unsecured, bear interest at 10% and is
currently past due.
5. Leases The Company leases, under noncancelable operating leases
expiring in various years through 1999, the facilities
and certain equipment that it subleases to the Medical
Corporations. Such subleases are cancelable by either the
Company or the Medical Corporations under 120 days
notice. Certain of the Company's leases may be renewed
for periods ranging from five to ten years and contain
provisions for periodic rent adjustments to reflect
inflation.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONT.)
Future minimum lease payments, by year and in the
aggregate, under noncancelable operating leases with
initial or remaining terms of one year or more consisted
of the following at June 30, 1995:
Operating
Year ending June 30, Leases
1996 $ 240,300
1997 86,600
1998 57,700
1999 5,000
Total minimum lease payments $ 389,600
Rent expense, including facilities and equipment which
are subleased to the Medical Corporations, was $576,000,
$535,000 and $401,000 for the years ended June 30, 1993,
1994 and 1995.
In July 1994, the Company subleased the Northwest
facility to a third party. As of June 30, 1995, future
annual minimum sublease rental income, under the
noncancellable operating sublease for the years ending
June 30, 1996, 1997 and 1998 were $30,000, $30,000 and
$15,000. The aggregate expected future sublease income
reduced the loss on disposal recorded in 1994.
Accordingly, the loss on disposal of facilities would be
increased by $75,000 if the sublessor is unable to meet
its lease commitments.
6. Income Taxes The components of income tax expense (benefit) are as
follows:
Year ended June 30, 1993 1994 1995
Current $ (14,240) $ (68,400) $ 1,600
Deferred 80,000 - -
$ 65,760 $ (68,400) $ 1,600
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONT.)
The provision for income taxes differs from an amount
computed at the U.S. federal statutory tax rate of 34% as
a result of the following differences:
Year ended June 30, 1993 1994 1995
Federal income taxes
at statutory rate $ (618,200) $ (571,600) $ (813,000)
State income tax
at statutory rate 1,600 1,600 1,600
Operating losses with
no current tax
benefit 712,000 613,000 793,000
Tax benefit of net
operating loss
carryback - (70,000) -
Other (29,640) (41,400) 20,000
$ 65,760 $ (68,400) $ 1,600
The tax benefit recorded in 1994 principally relates to
the carryback of net operating losses to prior years.
The deferred income tax assets are comprised of the
following items:
1994 1995
Net operating losses $ 985,000 $ 1,910,000
Allowance for doubtful
accounts 216,000 186,000
Other 149,000 197,000
1,350,000 2,293,000
Less valuation
allowance 1,350,000 2,293,000
$ - $ -
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONT.)
At June 30, 1995, the Company had a net operating loss
carryforward available to offset future federal taxable
income of approximately $5 million, expiring in 2010. The
net operating loss carryforward for California purposes
was approximately $2 million at June 30, 1995 and expires
through 2000.
The Company has recorded a 100% valuation allowance since
management cannot determine that it is more likely than
not that the deferred tax asset can be realized.
7. Net Loss
Per Share Net loss per share is computed by dividing net loss by
the number of average outstanding shares of common stock
(2,519,550 shares for all periods). Common stock
equivalents (stock options and warrants) were not
included in the computation of average shares outstanding
because their inclusion would be anti-dilutive.
8. Litigation The Company purchased the assets of Valley Medical
Industrial Clinic (Valley) from Cummings Medical
Corporation (CMC) in 1985 by paying $700,000 cash and
issuing a $700,000 promissory note (Note). The Note gave
the Company the right of offset if CMC or its sole
shareholder (Cummings) breached any covenants or included
inaccurate representations or warranties in the CMC
purchase agreement. The Company subsequently discovered
information which it believed demonstrated covenant
violations and certain grossly inaccurate representations
and warranties, received acknowledgment from CMC and
Cummings (the Sellers) of certain violations, and
attempted to resolve the matters with the Sellers. These
attempts were not successful and the right of offset
under the Note was exercised. Legal actions followed. On
May 31, 1990, the Superior Court entered its judgment in
favor of the Company in the amount of $4.4 million plus
attorneys' fees in excess of $500,000 and dismissed all
claims against the Company. Cummings appealed and, on
October 19, 1990, filed for protection under Chapter 11
of the Bankruptcy Code. In November 1992, the Appellate
Court sustained the original judgment against Cummings
and reduced the judgment to $4 million plus attorneys'
fees of $556,000. Cummings had petitioned the Supreme
Court of the State of California, which declined to
accept the petition. The Appellate Court judgment and
awards are now final.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONT.)
The Bankruptcy Court appointed a trustee to liquidate the
assets of Cummings estate. The Company believes that it
may receive some amount upon final liquidation of the
estate, but is unable to estimate the amount of any
potential recovery; accordingly, no account receivable
has been recorded.
The Company's general liability insurance carrier
(carrier) paid attorneys' fees associated with the Sellers
actions; the Company's two workers' compensation insurance
carriers declined to participate in Company's defense. The
carrier notified the attorneys involved with the Company's
defense that it wishes to recover a portion of the
attorneys' fees paid, although the carrier has not
indicated the basis for any claim. The carrier has
indicated that it may proceed against the Company and its
attorneys if a resolution cannot be reached. In order to
avoid potential time consuming and expensive litigation,
there have been ongoing settlement negotiations. The
parties are in the process of negotiating a resolution
whereby the Company will assign to the carrier most of
any liquidation proceeds that the Company may be entitled
to out of the bankruptcy estate of Cummings.
9. Loss on
Disposal of
Facilities During the third quarter of fiscal year 1994, the Company
closed its San Francisco, Tacoma and Northwest
facilities. Certain leasehold improvements, previously
acquired customer lists and other intangible assets, and
other assets of this facility were written off at the
time of closure. Selected assets, primarily medical
equipment and office furnishings and equipment, were
transferred to other Company facilities. The future rent
payments on the noncancellable lease for the Northwest
facility, which expires in December 1997, net of the
future rental income from the sublease agreement, was
recorded at June 30, 1994 as part of the loss on
disposal. The closures resulted in a loss of $409,252.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONT.)
10. Supplemental
Disclosures of
Cash Flow
Information
Year ended June 30, 1993 1994 1995
Cash paid during the year for:
Interest $ 349,000 $ 243,000 $ 702,000
Income taxes $ 1,600 $ 2,400 $ 800
Supplemental non-cash investing activities were as
follows:
In July 1993, as a result of the Settlement Agreement
with Towers, $350,000 of short-term borrowings from
Towers were converted into three term notes which
totalled $350,000 (see Notes 2 and 3).
11. Fourth
Quarter
Adjustments In the fourth quarter of fiscal year 1995, the Company
determined that an allowance of $430,000 should be
provided for doubtful accounts receivable. This resulted
in a $196,000 charge to operations in the fourth quarter.
Certain fees and expenses billed by NPFII-W to the
Medical Corporations were previously in dispute. An
understanding was reached in the fourth quarter and,
accordingly, an additional fee of $231,000 incurred under
the Agreement was recorded by the Company.
12. Stock Option
Plan At the 1994 annual shareholders meeting on December 22,
1994, the Company's shareholders approved the 1994 Stock
Options Plan (the Plan) which provides for the grant of
incentive stock options and non-statutory options to
certain employees, officers, directors and consultants of
the Company. Pursuant to the Plan, 250,000 shares of the
Company's common stock are reserved for issuance upon
exercise of stock options. The exercise price for incen-
tive stock options must be at least 100% of the fair
market value per share of common stock on the date of
grant, as determined by the Board. Options may be exer-
cisable for a term determined by the Board, which shall
not be greater than 10 years from the date of the grant.
<PAGE>
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONT.)
As of June 30, 1995, non-statutory options to purchase
100,000 shares of common stock are outstanding at an
exercise price of $0.11 per share. No incentive stock
options have been granted and no options have been
exercised for the period from the inception of the Plan
to June 30, 1995.
The 1984 Incentive Stock Option Plan and the 1984
Nonstatutory Stock Option Plan were terminated on August
13, 1994 according to the terms of these plans. No
options previously granted under these plans were
exercised during the years ended June 30, 1993, 1994 and
1995. Any unexercised options as of August 13, 1994
ceased to be effective.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The Company's Officers and Directors are elected annually to serve until
the next annual meeting of shareholders and thereafter until their successors
are elected. The number of Directors presently authorized by the Bylaws of
the Company is five.
Name, Offices and Position First
with the Company or Principal Became a
Occupation and Directorships Age Director
Don R. Livingston* 49 1980
Chairman of the Board of the Company since April 1983. Director of the
Company since 1980. Chief Executive Officer from 1980 through May 1987 and
from September 1987 until May 1990. Chief Financial Officer from June 15,
1988 until October 14, 1988 and Secretary from June 15, 1988 until May
1990. From 1979 to 1980, Regional Medical Director of California
Industrial Medical Clinic, Inc. From 1978 to 1979, Medical Director of
East Bay Industrial Medical Center, Oakland, California, an affiliate of
California Industrial Medical Clinic, Inc. **
Harry W. Brooks, Jr. 67 1984
Director of the Company. Chief Executive Officer, Advanced Consumer
Marketing Corp., Burlingame, California since 1985. Director since 1984.
From 1984 to 1990, Chairman of the Board and Chief Executive Officer of
Gurney Seed and Nursery Corporation. From 1982 to 1984, Chairman and
Executive Vice President of the Horticulture Group of Amfac, Inc., a
publicly owned financial services company. From 1978 to 1982, Senior Vice
President, Public Affairs of Amfac, Inc.
Frederick Foston* 44 1986
Director of the Company. Senior health care consultant to British Airport
Authority and General Motors Corporation, Packard Electric Division. Since
1981, President and owner of Frederick Foston, M.D. a professional
corporation (health care consulting and provider of physician medical
services).
Milton Sanders*** 61 1994
Director of the Company. Vice President of the Company since September,
1994. Healthcare consultant and provider of physical therapy and
rehabilitation services from 1980 to 1994. Since 1989, Vice President of
the Pan African Development Corporation, Washington, DC, a nonprofit
corporation involved in business development in Africa. Since 1992, Vice
President and Director of the Pearl-of-Africa Islands Enterprise, Inc., a
privately held corporation involved in business development in Uganda.
Since 1992, Board member of Plus Fifteen, Inc., a privately held company
that sponsors a high blood pressure control program.
George Fujikawa 52 N/A
Chief Financial Officer and Vice President of the Company since December
22, 1994. From 1990 - 1992, Vice President and General Manager of PRL
Corp., a real estate development and management company. From 1992 to
1994, Chief Financial Officer of Kowa Bussan U.S.A., Inc., a real estate
development company.***
Dr. Larry A. Harikian resigned as a director of the Company Effective January
1, 1995. A replacement director has not been elected or nominated at this
time. Dawn Schwartz was elected to replace Dr. Harikian as Secretary.
* Member of the Executive Committee.
** Dr. Livingston is the majority shareholder, and a director and executive
officer of the following corporations (the "Medical Corporations"):
Spectrum Medical Care, A Medical Group, Inc. (f.k.a. Interstate
Environmental Medical Group, Inc.), a California corporation; and
Interstate Environmental Medical Group, P.S., a Washington corporation.
The Company has entered into sublease and facilities management
agreements with each of the Medical Corporations under which the Medical
Corporations provide all medical services at the Company's medical
centers.
*** As of December 22, 1994, Andry Yonathan, resigned as the chief financial
officer of the Company and Mr. Fujikawa was appointed as vice president
and chief financial officer by the Board of Directors.
Section 16(a) of the Exchange Act
Director Foston is a co-trustee and co-beneficiary of the Arthur and
Mary Foston Trust. Prior to Dr. Foston's becoming a director, the trust
acquired 500 shares of common stock of the Company. Dr. Foston is in the
process of filing a late report pursuant to Section 16(a) of the Exchange Act
to reflect this indirect beneficial ownership.
Item 10. Executive Compensation.
Cash Compensation
The following table sets forth the cash compensation paid or accrued
during the fiscal year ended June 30, 1995 to each of the Company's highest
paid officers whose aggregate cash compensation exceeded $100,000 (other than
persons who have served as chief executive officer in last fiscal year).
(a) (b) (c) (d) (e)
Name and Other Annual
Principal Fiscal Compen-
Position Year Salary($) Bonus ($) sation ($)
Don R. Livingston
Chief Executive
Officer and
President from
January 1995 1994-95 $75,000 none none
1993-94 $78,000 none none
1992-93 $52,000 none none
Larry A. Harikian
Chief Executive
Officer and
President through
December 1994 1994-95 $0 none none
1993-94 $85,019 none none
1992-93 $42,749 none none
1994 Stock Option Plan
At the 1994 annual shareholders meeting, the shareholders approved the
Company's 1994 Stock Option Plan and related issuance of stock options to
officers and directors of the corporation pursuant to said plan.
The Plan provides for the grant of incentive stock options ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and non-qualified stock options ("NQSOs") to certain
employees, officers, directors, consultants and agents of the Company. The
purpose of the Stock Option Plan is to attract and retain qualified
employees, agents, consultants, officers and directors.
The total number of shares of Common Stock with respect to which options
may be granted under the Plan is 250,000. The shares subject to, and
available under, the Plan may consist, in whole or in part, of authorized but
unissued stock or treasury stock not reserved for any other purpose. Any
shares subject to an option that terminates, expires or lapses for any
reason, and any shares purchased upon exercise of an option and subsequently
repurchased by the Company pursuant to the terms of the option, become
available for grant under the Plan.
The Stock Option Plan is administered by the Board of Directors of the
Company, which determines, in its discretion, among other things, the
recipients of grants, whether a grant will consist of ISOs or NQSOs, or a
combination thereof, and the number of shares of Common Stock to be subject
to such options. The Board may, in its discretion, delegate its power,
duties and responsibilities under the Stock Option Plan to a committee
consisting of two or more directors who are "disinterested persons" within
the meaning of Rule 16b-3 promulgated under the Exchange Act. The exercise
price for ISOs must be at least 100% of the fair market value per share of
Common Stock on the date of grant, as determined by the Board. ISOs are not
transferable other than by will or the laws of descent and distribution.
NQSOs may be transferred to the optionee's spouse or lineal descendants,
subject to certain restrictions. Options may be exercised during the
holder's lifetime only by the holder or his or her guardian or legal
representative.
Options may be exercisable for a term determined by the Board, which may
not be less than one year or greater than 10 years from the date of grant.
No options may be granted under the Stock Option Plan later than 10 years
after the Stock Option Plan's effective date as of the date of shareholder
approval. ISOs are not transferable other than by will or the laws of
descent and distribution. NQSOs may be transferred to the optionee's spouse
or lineal descendants, subject to certain restrictions. Options may be
exercised during the holder's lifetime only by the holder or his or her
guardian or legal representative. Options may be exercised only while the
original optionee has a relationship with the Company which confers
eligibility to be granted options or within 90 days after termination of such
relationship with the Company, or up to six months after death or total and
permanent disability. In the event the Company terminates such relationship
between the original optionee and the Company for cause (as defined in the
Plan), all options granted to the optionee terminate immediately. In the
event of certain basic changes in the Company, including a change in control
of the Company (as defined in the Plan), at the discretion of the Board, the
Board may make certain adjustments to the outstanding stock options.
The Board may modify, suspend or terminate the Plan; provided, however,
that certain material modifications affecting the Plan must be approved by
the shareholders, and any change in the Plan that may adversely affect an
optionee's rights under an option previously granted under the Plan requires
the consent of the optionee.
Option/SAR Grants in Last Fiscal Year 1995
Individual Grants
Percent of
Total Options
SARs granted Exercise or
Options/SARs to employees base price Expiration
Name Granted in fiscal year ($/Sh) date
(a) (b) (c) (d) (e)
George Fujikawa
Vice President & Chief
Financial Officer(1) 50,000 50% $.11 12/22/04
Milton Sanders
Vice President
and Director(1) 50,000 50% $.11 12/22/04
(1)Options authorized on December 22, 1994 and issued on September 1, 1995.
Aggregated Option/SAR Exercises in Last Fiscal Year 1995 and
1995 Fiscal Year-End Option/SAR Values
(a) (b) (c) (d) (e)
Number of Securi- Value of
Shares ties Underlying Unexercised
Acquired on Value Unexercised Options In-the-Money Options
Exercise Realized /SARs at FY-End (#) /SARs at FY-End ($)
Name (#)(1) ($) Unexble Exble Unexble Exble
George Fujikawa
Vice President &
Chief Financial
Officer 0 $0 50,000 0 $0(1) $0
Milton Sanders
Vice President
and Director 0 $0 50,000 0 $0(1) $0
(1) Based on market value of $.015 per share as of June 30, 1995.
In the last three fiscal years, the Company has not paid or awarded any
other stock awards, options, stock appreciation rights, or other long term
incentive plan compensation.
Directors
Outside directors receive a fee of $1,000 per Board and Audit Committee
meeting attended.
Pension Plans
The Company has a 401(k) profit sharing plan under which employees may
defer a portion of their salary. Such amounts are disclosed and included in
the cash compensation table above with regard to the chief executive officer.
The Company has no other retirement, pension, profit sharing or similar
program at the present time. The creation of any such program will be at the
discretion of the Board of Directors of the Company. The Board of Directors
may adopt such employee benefit and executive compensation plans in the
future as it deems advisable and consistent with the best interests of the
shareholders and the financial condition and potential of the Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth as of November 10, 1995, information
regarding the ownership of the Company's Common Stock by (i) each person
known by the Company to be the beneficial owner of more than five percent of
the outstanding shares of Common Stock, (ii) each of the Directors of the
Company, and (iii) the Officers and Directors of the Company as a group:
Amount and Nature
of Beneficial Percentage
Name of Beneficial Owner(1) Ownership(2) of Class(2)
Don R. Livingston(3) 1,158,000 44.2%
Harry W. Brooks, Jr. 1,000 (4)
Frederick Foston(5) 500 (4)
Milton Sanders(6) 50,000 1.9%
All directors and officers 1,259,510 48.1%
as a group (six persons)
Renaissance VI Ltd.(7) 251,700 9.6%
Larry A. Harikian(8) 281,200 10.7%
(1) The address of Drs. Livingston and Foston and Mr. Brooks and Mr. Sanders
is c/o Occupational Medical Corporation of America, Inc., 9811 Bigge
Avenue, Oakland California 94603.
(2) All shareholders reflected in the table are sole owners of record and,
to the knowledge of the Company, beneficially, except as otherwise
specified.
(3) Dr. Livingston is a 75% shareholder of the Medical Corporations which
own 36,000 shares.
(4) Less than one percent.
(5) Dr. Foston is a co-trustee and co-beneficiary of the Arthur and Mary
Foston Trust which acquired 500 shares of common stock prior to Dr.
Foston's becoming a director of the Company.
(6) Mr. Sanders was issued an option to purchase 50,000 shares of common
stock on September 1, 1995 which vests 20% on December 22, 1995 and each
anniversary thereafter and which expires on December 22, 2004.
(7) The address of Renaissance VI, Ltd is 8080 N. Central Expressway,
Dallas, Texas 75206.
(8) The address of Larry A. Harikian is P.O. Box 15316, Fritz Creek, Alaska
99603.
Item 12. Certain Relationships and Related Transactions.
In June 1983, the Company made a personal loan to Dr. Livingston. Such
loan bears interest at the rate of ten percent (10%) per annum and is
repayable, in the aggregate, in five substantially equal annual installments
of $34,029 each, with the remaining balance due in June 1995. During the
fiscal year ended June 30, 1995, the largest principal amount owed to the
Company by Dr. Livingston on account of this loan was $51,898. During the
fiscal year ended June 30, 1995, Dr. Livingston made no payments to the
Company on this loan. On June 30, 1995, the Company had an outstanding loan
to Dr. Livingston of $51,898. During the fiscal year ended June 30, 1994,
the largest principal amount owed to the Company by Dr. Livingston on account
of this loan was $51,898 (the June 30, 1994 balance has been restated from
the $58,906 amount previously stated to state a reclassification of accrued
interest). During the fiscal year ended June 30, 1994, Dr. Livingston made
no payments to the Company on this loan. On June 30, 1994, the Company had
an outstanding loan to Dr. Livingston of $51,898.
Under the laws of most states, the Company, as a general business corpo-
ration, is prohibited from practicing medicine or providing medical care.
Accordingly, the Company has entered into agreements with the Medical Cor-
porations, which were organized expressly for the purpose of providing all
medical services at the Medical Centers. The Company provides non-medical
administrative, accounting, management and other services to the Medical
Centers, which retain absolute authority over the medical services rendered
and the fees charged to patients. Dr. Livingston and Dr. Larry Harikian
(former director and chief executive officer of the Company until January
1995) are the sole shareholders of the Medical Corporations and receive
compensation as practicing physicians from the Medical Corporations. During
the fiscal years ended June 30, 1993, 1994 and 1995, Dr. Livingston received
annual compensation of $212,292, $277,101 and $285,190, respectively, as a
practicing physician of the Medical Corporations. During the fiscal years
ended June 30, 1993 and 1994, Dr. Harikian received annual compensation of
$108,000 for each fiscal year as practicing physician of the Medical
Corporations. Dr. Harikian received no compensation as a practicing
physician of the Medical Corporations for the fiscal year ended June 30,
1995.
Any transactions between the Company and its Directors, Officers or
other affiliates are on a basis no less favorable to the Company than could
be obtained from unaffiliated parties on an arm's length basis and are
approved by a majority of the Company's disinterested Directors.
During 1991, the Company loaned a total of $49,808 to Spectrum Medical
Care, A Medical Group, Inc. (formerly known as "Interstate Environmental
Medical Group, Inc."), which executed an 8% unsecured promissory note that
was due on or before June 30, 1992. Spectrum Medical Care, A Medical Group,
Inc., purchased 36,000 shares of the Company's common stock with the proceeds
of the loan. The note is past due and has been classified as a reduction of
the Company's shareholders' equity.
As of June 30, 1994, the Company had an outstanding advance of $18,541
to Dr. Livingston. During fiscal year 1995, the Company made advances of
$59,200 to Dr. Livingston who made payments of $66,000 toward those advances
leaving a balance as of June 30, 1995 of $11,741.
Also, the Company made advances of fees to the Medical Corporations of
$51,593 during fiscal year 1993 and $25,505 during fiscal year 1995. No
payments were made on these advances in fiscal year 1995. On June 30, 1995,
the Company had outstanding advances to the Medical Corporations of $77,098.
PART IV
Item 13. Exhibits and Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements.
The following financial statements have been filed as part of this
Report under Part II, Item 7:
Report of BDO Seidman, LLP, Independent Certified Public
Accountants;
Consolidated Balance Sheets, June 30, 1994 and 1995;
Consolidated Statements of Loss for the years ended June 30, 1993,
1994 and 1995;
Consolidated Statements of Shareholders' Equity (Capital Deficit)
for the years ended June 30, 1993, 1994 and 1995;
Consolidated Statements of Cash Flows for the years ended June 30,
1993, 1994 and 1995;
Summary of Accounting Policies;
Notes to Consolidated Financial Statements.
Exhibits.
The following exhibits are filed as part of this Report:
3.1(1) Articles of Incorporation, as amended to date.
3.2(1) Bylaws as amended to date.
4.1(1) Specimen certificate of Common Stock.
4.2(1) Form of Common Stock Purchase Warrant.
10.1 Agreements to lease occupational medical
facilities in:
(a)(1) Oakland Airport, California, dated September 30, 1980;
(b)(1) Seattle, Washington, dated March 1984;
(c) Seattle, Washington, Lease dated May 19, 1992;
(d) Seattle, Washington, Consent to Sublease and Nondisturbance
Agreement, dated July 1, 1994;
(e) Oakland, California, dated May 23, 1994;
(f)(3) Seattle, Washington, Amendment dated August 2, 1989;
(g)(4) Seattle, Washington, Amendment dated October 23, 1989
extending lease dated March 5, 1984;
(h)(5) Berkeley, California, dated March 28, 1991;
(i)(5) Oakland Airport, California, dated April 5, 1991 extending
lease dated September 30, 1980;
(j)(8) Hayward, California, for 20900 Corsair Blvd., dated February
14, 1994.
(k) Third Amendment to Lease for Seattle, Washington dated
December 9, 1994.
(l) Fourth Amendment to Lease for Seattle, Washington dated June
15, 1995.
10.2 Sublease and Facilities Management Agreements between Occupational
Medical Corporation of America, Inc. and the Medical Corporations
for:
(a)(1) Port Medical Service, Oakland, dated January 1, 1984;
(b)(1) Airport Occupational and Emergency Care Center, dated
January 1, 1984;
(c)(1) Seattle Occupational Medical Center, dated August 15, 1984;
10.3(1) Promissory Notes made by Don Livingston and Larry Harikian in favor
of Occupational Medical Corporation of America, Inc. dated June 15,
1983 and June 30, 1984.
10.4(2) Lease for computer equipment dated May 1987 between Occupational
Medical Corporation of America, Inc. and Pacific First Leasing,
Inc.
10.5(5) Promissory Note of Medical Corporation.
10.6(6) Form of Promissory Note from Company to Medical Corporations
regarding funds received from Towers Financial Corp.
10.7(6) Form of agreements with Towers Financial Corp.
10.8(6) Form of Amendment to Sublease and Facilities Management Agreements
between the Company and Medical Corporations.
10.9(7) Settlement Agreement by and between Towers Financial Corporation
and the Company, Interstate Environmental Medical Group, Inc.,
Interstate Environmental Medical Group, P.S., Inc., Larry A.
Harikian, M.D. and Don R. Livingston, M.D. dated July 22, 1993.
10.10(7) Sale and Subservicing Agreement by and among the Company,
Interstate Environmental Medical Group, Inc., Interstate
Environmental Medical Group, P.S., Inc., NPFII-W, Inc., and
National Premier Financial Services, Inc., dated July 2, 1993.
Exhibits not listed above have been omitted because they are inapplicable or
because the required information is given in the financial statements or
notes thereto.
(b) Reports on Form 8-K.
Not applicable.
(c) Financial Data Schedule.
(1)These exhibits which are incorporated herein by reference were previously
filed by the Company as exhibits to its Registration Statement on Form S-l
and Amendments Nos. 1 and 2 (File No. 2-93579).
(2)These exhibits which are incorporated herein by reference were previously
filed by the Company as exhibits to its Annual Report on Form 10-K for the
year ended June 30, 1987.
(3)The exhibits which are incorporated herein by reference were previously
filed by the Company as exhibits to its Annual Report on Form 10-K for the
year ended June 30, 1989.
(4)The exhibits which are incorporated herein by reference were previously
filed by the Company as exhibits to its Annual Report on Form 10-K for the
year ended June 30, 1990.
(5)The exhibits which are incorporated herein by reference were previously
filed by the Company as exhibits to its Annual Report on Form 10-K for the
year ended June 30, 1991.
(6)The exhibits which are incorporated herein by reference were previously
filed by the Company as exhibits to its Amendment No. 1 to its Annual Report
on Form 10-K/A for the year ended June 30, 1992.
(7)The exhibits which are incorporated herein by reference were previously
filed by the Company as exhibits to its Annual Report on Form 10-KSB for the
year ended June 30, 1993.
(8)The exhibits which are incorporated herein by reference were previously
filed by the Company as exhibits to its Annual Report on Form 10-KSB for the
year ended June 30, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized, on this 22nd day of November, 1995.
OCCUPATIONAL MEDICAL CORPORATION OF
AMERICA, INC.
By: /s/ Don R. Livingston
Don R. Livingston
Chief Executive Officer and
President
Pursuant on the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons in the capacities
and on the dates indicated.
/s/ Don R. Livingston November 22, 1995
Don R. Livingston
(Principal Executive Officer)
Chief Executive Officer,
President, Chairman of
the Board and Director
/s/Harry W. Brooks, Jr. November 22, 1995
Harry W. Brooks, Jr.
Director
/s/ Frederick Foston November 22, 1995
Frederick Foston
Director
/s/ Milton Sanders November 22, 1995
Milton Sanders
Director
/s/ George Fujikawa November 22, 1995
George Fujikawa
(Principal Financial Officer and
Principal Accounting Officer)
Chief Financial Officer
<PAGE>
EXHIBIT LIST
Description Page
10.1(c) Seattle, Washington, Lease dated May 19, 1992. 54
10.1(d) Seattle, Washington, Consent to Sublease and Nondisturbance
Agreement, dated July 1, 1994. 71
10.1(e) Oakland, California, dated May 23, 1994. 78
10.1(k) Third Amendment to Lease for Seattle, Washington dated
December 9, 1994. 97
10.1(l) Fourth Amendment to Lease for Seattle, Washington dated
June 15, 1995. 99
10.1(c) Seattle, Washington, Lease dated May 19, 1992.
After Recording, Return To:
Riddell, Williams, Bullitt
& Walkinshaw
1001 Fourth Avenue Plaza
Suite 4400
Attn: Douglass A. Raff
LEASE
THIS LEASE is entered into by and between J. LEON SEALEY and
JANE SEALEY, husband and wife ("Lessor"), and THE OCCUPATIONAL
MEDICAL CORPORATION OF AMERICA, INC., a California corporation
("Lessee").
WITNESSETH:
1. Premises.
1.1 Lease of Premises. In consideration of the rents,
covenants and agreements hereinafter set forth, Lessor does by these presents
lease and demise to Lessee upon the terms and conditions set hereinafter set
forth those certain premises described as:
The Medical Clinic Building, (5600 square feet), commonly known as 1500
First Avenue South, Seattle, Washington, situated on the West sixty (60)
feet of Lots 1 and 2, Block 321, Seattle Tidelands, Less the North 15
feet of Lot 2 leased to the pharmacy and physical therapist. (See
attached sketch).
(hereinafter "Premises"); together with all the rights, privileges, and
appurtenances thereunto belonging.
1.2 Parking. Lessor shall provide Lessee with parking
stalls during normal clinic business hours in the parking lot located
adjacent to the Premises, at no additional rent.
2. Term. The term of this Lease (hereinafter "Term") shall be for a
period of five (5) years commencing as of the 1st day of January, 1993 and
ending at the expiration of the 31st day of December, 1997.
3. Improvements by Lessee. Lessee may, at its election, make additional
improvements, additions and alterations to the Premises to adapt it for the
intended business purposes hereinafter set forth and may install furniture,
fixtures and equipment therein.
3.1 Approval. Lessee shall submit to Lessor for Lessor's approval,
detailed plans, specifications and working drawings for all improvements,
additions and alterations which Lessee proposes to make at least thirty (30)
days prior to the date on which work is expected to begin. Lessor shall not
arbitrarily or unreasonably withhold approval of such plans, drawings and
specifications, nor shall Lessee arbitrarily or unreasonably refuse to
consent to modifications requested by Lessor. Lessee shall have the
obligation to obtain the approval of all appropriate governmental agencies,
and all applicable permits and authorizations for Lessee's improvements
before the commencement of any additions, alterations or improvements.
3.2 Warranties. Lessee warrants that all additions, alterations and
improvements shall be completed with due diligence in compliance with the
plans, specifications and working drawings which have been approved by
Lessor, and in compliance with all applicable laws. Lessee warrants that
prior to the commencement of the improvements and alterations, Lessee shall
submit written evidence that Lessee or its general contractor has in effect
general commercial liability insurance, on an occurrence basis, with minimum
limits of liability in a combined amount of $1,000,000.00.
3.3 Indemnification. Lessee shall indemnify Lessor and hold Lessor
harmless from any damage, loss or expense arising from the performance of any
additions, alterations and improvements made by Lessee.
3.4 Ownership. All additions, alterations and improvements which
shall be made, shall be at the sole cost and expense of Lessee, shall become
the property of the Lessor, and shall remain in and be surrendered with the
premises as a part thereof at the termination of this Lease. Lessee agrees
that Lessor has the right to make alterations to the Premises and to the
building in which the Premises are located and Lessor shall not be liable for
any damage which Lessee might suffer by reason of such undertaking.
4. Rent.
4.1 Rent. Lessee covenants and agrees to pay as rent for said
Premises for the period commencing January 1, 1993 and terminating December
31, 1997, a monthly rental, payable in advance on or before the first day of
each month during said period as follows:
PERIOD MONTHLY RENT
January - December 1993 $4244.00
January - December 1994 $4371.00
January - December 1995 $4371.00
January - December 1996 $4502.00
January - December 1997 $4502.00
4.2 Place Where Rent Payable. The rentals hereinabove specified
shall be paid to Lessor as follows:
J. Leon and Jane Sealey
1225 Evergreen Point Road
Bellevue, Washington 98004
or at such other place as Lessor may from time to time designate in writing.
5. Personal Property Taxes. In addition to the rentals provided for
herein, Lessee will pay all personal property taxes on all personal property
in the Premises.
6. Business Purpose. Lessee shall utilize the Premises for the operation
of a medical clinic and related professional services and no other purpose.
6.1 Warranties. Lessee warrants and covenants as follows:
(a) Not to use said Premises for any illegal purpose whatsoever.
(b) To observe and comply with all lawful rules, regulations, laws
and ordinances of all legally constituted authorities with respect to
Lessee's use and occupation of the Premises. Lessee will further save
and hold harmless Lessor from all costs and damages, including
reasonable attorneys' fees, that may result to Lessor or be incurred by
Lessor by reason of any default of failure of Lessee in performance of
the foregoing covenants and agreements with respect to the use of the
Premises.
(c) Not to do or permit on the Premises anything that will increase
any presently applicable rates of insurance thereon, or which will void
any insurance with respect to the Premises, or maintain any dangerous
conditions.
7. Condition and Repair of Premises: Indemnification of Lessor. Lessor
has examined the Premises and accepts said Premises in their present
condition. Lessee agrees to keep the Premises in good order and repair,
excepting reasonable wear and tear, and to return the Premises in as good a
condition as said Premises were on the date of commencement of the term of
this Lease. Lessee shall perform, at its own expense, all necessary repairs
to the Premises, other than those which are the responsibility of Lessor
under Paragraph 8 and which are not caused by any willful or negligent act of
or omission of Lessee, its employees, agents, invitees or concessionaires.
7.1 Surrender of the Premises. At the expiration or sooner
termination of this Lease, Lessee will quit and surrender the Premises in a
neat and broom clean condition, and will deliver up all keys belonging to the
Premises to the Lessor, or Lessor's agent. Should Lessee fail to tender
possession of the Premisses to Lessor as provided herein, Lessor shall have
the right to perform the work necessary to restore the Premisses and to put
the Premises in a broom-clean condition, at Lessee's expense, and Lessee
agrees to reimburse Lessor a reasonable sum therefor.
7.2 Personal and Property Damage. Lessee covenants and agrees to
indemnify and hold harmless Lessor from any and all damages, costs, including
reasonable attorneys' fees, or suits for damages on account of any injury to
persons or property on the Premises or on account of any business, or
occupation of the Premises by Lessee, provided such injury is not caused by
Lessor.
7.3 Liens and Encumbrances. Lessee covenants and agrees not to
permit any liens or encumbrances of any nature to attach to the Premises
because of any work done or materials furnished to or for the Premises at the
instance of the Lessee, including but not limited to work done or materials
furnished in connection with the alterations and improvements by Lessee under
Article 3 above.
8. Landlord's Maintenance. Lessor, at its sole cost, shall
maintain in good condition, the following structural systems to the extent
that a specific structural repair exceeds $1,000 in any calendar year:
(a) The structural parts of the building and other improvements
that are a part of the Premises, which structural parts include only
foundations, bearing and exterior walls (excluding glass and doors),
subflooring, and roof (excluding skylights);
(b) The unexposed electrical, plumbing, and sewage systems,
including, without limitations, those portions of the systems lying
outside the Premises;
(c) Window frames, gutters, and downspouts on the building and
other improvements that are a part of the Premises; and
(d) HVAC systems servicing the Premises.
9. Taxes and Utilities.
9.1 Real Estate Taxes. Lessor shall pay all ad valorem real estate
taxes assessed against the Premises.
9.2 No Warranty. Lessee is responsible for making all arrangements
for the supply of desired utilities to the Premises. All costs associated
with such utilities will be the sole responsibility of Lessee. Lessor does
not warrant that the services provided for, including utilities, will be free
from any slowdown, interruption, or stoppage pursuant to the requirement of
any governmental body and/or regulatory agency caused by the maintenance,
repair, substitution, renewal, replacement or improvement of any of the
equipment involved in the furnishing of any such services or caused by
changes of service, alterations, strikes, lockouts, labor controversies, fuel
shortages, accidents, acts of God or the elements or any other cause beyond
the reasonable control of Lessor, and specifically no slowdown, interruption,
or stoppage of any of such services shall ever be construed as an eviction,
actual or constructive, of Lessee nor shall same cause any abatement of the
rent payable hereunder or in any manner or for any purpose relieve Lessee
from any of its obligations hereunder, and in no event shall Lessor be liable
for damage to persons or property, or be in default hereunder, as a result of
such slowdown, interruption or stoppage. Lessor agrees to use diligence to
resume the service upon any such slowdown, interruption or stoppage.
9.3 Additional Taxes. Lessee covenants and agrees to promptly pay
when due all license fees, excises and charges that are now or may hereafter
be levied, assessed, charged or imposed upon or in connection with the
Lessee's use and occupancy of the-Premises.
10. Insurance. Lessee shall maintain at its own cost and expense (a)
fire and extended coverage, vandalism, malicious mischief and special
extended coverage insurance, in an amount equal to the replacement cost of
all inventory, improvements, decorations, trade fixtures, equipment and
appliances used in the operation of Lessee's business in the Premises; (b)
general commercial liability insurance on an occurrence basis, with
reasonable and prudent minimum limits of liability. Lessee agrees to obtain
endorsements on all insurance obtained on the coverage above provided under
(a) and (b) requiring that proceeds thereof be remitted jointly to Lessor and
Lessee to assure the application of such proceeds to the performance of
Paragraph 12 hereof relating to damage and destruction. Lessor shall be named
as additional insured on all policies, and Lessee shall provide Lessor, upon
commencement of the Term, with certificates of insurance on all of the
coverages required above.
11. Awnings Drapes and Signs. Lessee shall not put up any signs or
symbols on the windows or the exterior of the Premises nor install any awning
on the outside of the building in which the Premises are located without the
written consent of Lessor, which consent shall not be unreasonably withheld.
12. Destruction. If the Premises shall be partially damaged by any
casualty insurable under Lessor's insurance policy, Lessor may upon receipt
of the insurance proceeds diligently repair the same and, until the Premises
are repaired, the rent shall be reduced by an amount that is the same ratio
to the base monthly rental as the total number of square feet in the
untenable portion of the Premises bears to the total number of square feet in
the Premises immediately before the occurrence of the damage. If the Premises
shall be partially damaged by any casualty not insured under Lessor's
insurance policy, the base monthly rental shall be reduced in the same amount
as if the casualty had been insured. If the Premises (a) by reason of such
occurrence should be rendered wholly untenantable, or (b) should be damaged
as a result of a risk which is not covered by Lessor's insurance, or (c)
should be damaged in whole or in part during the Term of this Lease or of any
renewal term hereof, or (d) if the building of which the Premises are a part
(whether the Premises are damaged or not) should be damaged to the extent of
fifty percent or more of the monetary value thereof then or in any of such
events, Lessor may either elect to repair the damage or to cancel this Lease
by notice of cancellation within thirty (30) days after such event, and
thereupon this Lease shall expire and Lessee shall vacate and surrender the
Premises to Lessor. Lessee's liability for rent upon the termination of this
Lease as provided in this Article shall cease as of the date of termination.
In the event Lessor elects to repair the damage insurable under Lessor's
policies, any abatement of rent shall end five days after notice by Lessor to
Lessee that the Premises shall have been repaired. If the damage is caused by
the negligence of Lessee, its employees, agents, invitees, or
concessionaires, there shall be no abatement of rent. Unless this Lease is
terminated by Lessor, and promptly upon notice by Lessor of its intent not to
terminate the Lease if given prior to the expiration of thirty (30) days,
Lessee shall immediately proceed to repair and refixture the interior of the
Premises in a manner and to at least a condition equal to that existing prior
to its destruction or casualty, and the proceeds of all insurance carried by
Lessee on its property and improvements shall be held by the parties in trust
for the purpose of said repair and replacement.
13. Assignment. Lessee shall not assign this Lease (voluntarily or
otherwise), or any part thereof, or sublet all or any portion of the
Premises, without the prior written consent of Lessor. It shall not be
unreasonable of Lessor to withhold its consent if Lessee wishes to assign
this Lease or sublet the Premises or a portion thereof to a party less
creditworthy than Lessee or to a party which will not conduct the same
business as Lessee. Any attempted assignment or sublease without Lessor's
written consent shall be voidable at Lessor's election and shall constitute a
default.
13.1 Binding on Successors. Subject to the preceding paragraph, the
covenants and warranties herein and the rights and obligations created hereby
shall be binding upon, and inure to the benefit of, each party's heirs,
executors, administrators, successors, and assigns.
14. Insolvency and Bankruptcy. If at the date fixed as the commencement
of the Term of this Lease, or if at any time during the
hereunder, or for breach of any provisions of this Lease, or to enforce
Lessee's compliance with any covenant herein, or to recover possession of the
Premises, or if Lessee shall bring any action for any relief against Lessor
arising out of this Lease, then and in any of such events, the prevailing
party shall be paid by the other party a reasonable attorneys' fee and all
costs and expenses expended or incurred by the prevailing party in connection
with such default or action. In the event that Lessee defaults in the payment
of rental, Lessee agrees to pay for the cost of any collection agency, or
attorney employed by Lessor to collect said unpaid rental.
19. Removal on Termination. At the expiration or earlier termination of
this Lease as herein provided, the Lessee covenants and agrees to remove from
the Premises all goods and effects of the Lessee, except improvements,
additions and alterations, at its own cost and expense, and to restore any
damage caused by virtue of such removal and to peaceably yield up the
Premises, all in accordance with the terms hereof. Upon any termination of
this Lease, or if extended or renewed on any terms, then at the termination
of such extension or renewal, all structural alterations, repairs or
improvements to or upon the leased Premises shall become the property of
Lessor without liability on its part to pay for same, except, however, that
any trade fixtures, equipment, appliances, and other of Lessee's improvements
placed in or upon said building by Lessee which do not actually become
permanently affixed and attached to said building or which may be removed
without structural damage or defacement thereof may be removed by Lessee or
its assigns upon such termination; provided all the rental accruing under the
Lease shall have thereupon been fully paid.
20. Access for Inspection. Lessee covenants and agrees that Lessor or
Lessor's agents shall be allowed free access at all reasonable times to the
Premises upon prior notice to Lessee for the purpose of examining or
inspecting the same, or for the purpose of correcting the default of any
obligation which may have been imposed upon Lessee hereunder.
21. Holdover. If Lessee shall, with the written consent of Lessor, hold
over after the expiration of the term of this Lease, such tenancy shall be
for an indefinite period of time on a month to month tenancy, which tenancy
may be terminated upon thirty (30) days written notice by Lessor. During such
tenancy, Lessee agrees to pay to Lessor the same rate of rental, including
Additional Rent as set forth herein, or as set forth in Lessor's Written
consent to Lessee's holdover, and to be bound by all the terms, covenants and
conditions herein specified so far as applicable.
22. Operation of Business. Lessee covenants in good faith, commencing
with the date of the commencement of the term of this Lease to operate its
business as described in Article 6 on the Premises during reasonable business
hours on Mondays through Fridays, holidays excluded, subject to Lessee's
being prevented from doing same in good faith by virtue of strikes, riots,
casualty, or acts of God.
23. Abandonment and Vacation. In the case of abandonment or vacation of
the Premises by Lessee, Lessor may, without notice to Lessee, relet the
Premises in its own name and at such rent and upon such terms as Lessor may
see fit, for the account of Lessee, and if the full rental hereinabove named
shall not be realized, Lessee agrees to pay the deficiency, including the
cost of restoring said Premises to the condition required at any termination
of the Lease. Lessee agrees that, except for the causes set forth in Article
22, its failure to keep the Premises open for business as stated in Article
22 of this Lease or its keeping the Premises locked for eight (8) consecutive
business days without the prior written approval of Lessor shall be
conclusive evidence that Lessee has abandoned and vacated the same.
24. Default. In case Lessee shall fail to make the rental payment
required hereunder, or fail to keep and perform any of the other covenants
and agreements contained in this Lease after notice of default is given as
provided at law, then Lessor may, at its option, terminate this Lease and
upon the termination of this Lease at the option of Lessor, as aforesaid, or
at the expiration by lapse of time of the term hereby demised, Lessor may
re-enter the Premises and repossess itself thereof as of its former estate,
and remove all persons and effects therefrom using such force as may be
necessary without being deemed guilty of any manner of trespass or forcible
entry or detainer. Notwithstanding such re-entry by Lessor the liability of
Lessee for the full rental provided for herein shall not be extinguished for
the balance of the term of this Lease, and Lessee covenants and agrees to
make good to Lessor any deficiency arising from a re-entry and reletting of
the Premises at a lesser rental than the monthly rental herein agreed to. No
receipt of moneys by Lessor from Lessee after the termination of the Lease,
or after giving of any notice shall reinstate, continue or extend the term of
this Lease or affect any notice given to Lessee prior to the receipt of such
moneys.
25. Interest. In the event that Lessee fails to make any payment due to
Lessor hereunder on the date when such payment is due, all delinquent amounts
shall accrue interest at the rate of fourteen percent per annum.
26. Mutual Release and Waiver. Lessor and Lessee do each herewith and
hereby release and relieve the other, and waive their entire claim of
recovery for loss or damage to property arising out of or incident to fire,
lightning and the perils included in the extended coverage endorsement, in,
on or about the Premises, whether due to the negligence of any of said
parties, their agents or employees or otherwise provided such waiver is
permitted by both parties' insurance carriers.
27. Subordination. This Lease is subject and is hereby subordinated to
all present and future mortgages, deeds of trust and other encumbrances
affecting the Premises or the property of which said Premises are a part.
Lessee agrees to execute, at no expense to Lessor, any instrument which may
be deemed necessary or desirable by Lessor to further effect the
subordination of this Lease to any mortgage, deed of trust or encumbrances
provided Lessee's rights herein shall not be diminished. Lessee agrees to
execute Estoppel Letters upon request.
28. Covenants and Conditions. All of the obligations of the Lessee
herein shall be effective both as covenants and conditions.
29. Condemnation.
29.1 Definitions.
(a) "Condemnation" means (i) the exercise of any governmental
power, whether by legal proceedings or otherwise, by a condemnor and
(ii) a voluntary sale or transfer by Lessor to any condemnor, either
under threat of condemnation or while legal proceedings for condemnation
are pending.
(b) "Date of taking" means the date the condemnor has the right to
possession of the property being condemned.
(c) "Award" means all compensation, sums, or anything of value
awarded, paid, or received on a total or partial condemnation.
(d) "Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of condemnation.
29.2 Parties' Rights and Obligations to Be Governed by Lease. If,
during the term or during the period of time between the execution of this
Lease and the date the term commences, there is any taking of all or any part
of the building, other improvements, or land of which the Premises are a part
of any interest in this Lease by condemnation, the rights and obligations of
the parties shall be determined pursuant to the terms of this article.
29.3 Total Taking. If the Premises are totally taken by
condemnation, this Lease shall terminate on the date of taking.
29.4 Partial Taking.
(a) Effect on Lease. If any portion of the Premises is taken by
condemnation this Lease shall remain in effect, except that Lessee can
elect to terminate this Lease if the remaining portion of the Premises
is rendered unsuitable for Lessee's continued use of the Premises. If
Lessee elects to terminate this Lease, Lessee must exercise its right to
terminate pursuant to this paragraph by giving notice to Lessor within
30 days after the nature and extent of the taking have been determined
by entry of a final and enforceable judgment. If Lessee elects to
terminate this Lease as provided in this paragraph, Lessee also shall
notify Lessor of the date of termination, which date shall not be
earlier than 30 days nor later than 90 days after Lessee has notified
Lessor of its election to terminate; except that this Lease shall
terminate on the date of taking if the date of taking falls on a date
before the date of termination as designated by Lessee. If Lessee does
not terminate this Lease within the 30-day period, this Lease shall
continue in full force and effect, except that minimum monthly rent
shall be reduced pursuant to Subsection (b) below.
(b) Effect on Rent. If any portion of the Premises is taken by
condemnation and this Lease remains in full force and effect, on the
date of taking the minimum monthly rent shall be reduced by an amount
that is in the same ratio to base monthly rent as the total number of
square feet in the Premises taken bears to the total number of square
feet in the Premises immediately before the date of taking.
29.5 Restoration of and Addition to Premises and Other Areas.
(a) Lessor's Election to Prevent Lease Termination. If, within 30
days after the date that the nature and extent of the taking are
determined by entry of a final enforceable judgment, Lessor notifies
Lessee that Lessor at its cost will add on to the remaining Premises so
that the area and the approximate layout of the Premises will be
substantially the same after the date of taking as they were before the
date of taking, and Lessor commences the restoration immediately and
completes the restoration within 90 days after Lessor notifies Lessee,
this Lease shall continue in full force and effect without any reduction
in minimum monthly rent, except the temporary abatement or reduction
made pursuant to Article 29.4(b) and Article 29.5(b).
(b) Temporary Abatement or Reduction of Rent. The monthly rent in
effect shall be abated or reduced during the period from the date of
taking until the completion of restoration, but all other obligations of
Lessee under this Lease shall remain in full force and effect. The
abatement or reduction of rent shall be based on the extent to which the
restoration interferes with Lessee's use of the Premises.
29.6 Award Distribution. The award shall belong to and be paid to
Lessor, except that Lessee shall receive from the award any sum paid to
Lessee from the condemnor for loss of goodwill or representing the fair
market value of Lessee's unexpired leasehold interest, if the Lease is
terminated.
29.7 Temporary Taking. The taking of the Premises or any part of
the Premises by military or other public authority shall constitute a taking
of the Premises by condemnation only when the use and occupancy by the taking
authority has continued for longer than 180 consecutive days. During the
180-day period all the provisions of this Lease shall remain in full force
and effect, provided that base monthly rent shall be abated or reduced during
such period of taking based on the extent to which the taking interferes with
Lessee's use of the Premises, and Lessor shall be entitled to whatever award
may be paid for the use and occupation of the Premises for the period
involved.
30. Right of First Refusal. In the event Lessor shall receive from a
third party at any time during the term of this Lease a bona fide offer to
purchase the Premises for a specified consideration, whether such
consideration be first fixed by Lessor or the third party, and Lessor shall
decide to sell the same for such consideration, Lessor shall promptly give to
Lessee notice of the terms of such offer and of Lessor's willingness to sell
for the terms offered, and Lessee shall have the first refusal and privilege
(which will hereafter be referred to as an "option") of purchasing said
premises at such terms (or if such terms are not for full payment in cash,
their cash equivalent); such option to be exercised within thirty (30) days
after Lessee receives notice from Lessor, by Lessee's notifying Lessor that
it will purchase said premises at the terms specified in said offer. In the
event Lessee shall not give Lessor notice within said thirty-day period of
its election to purchase at the terms specified in said offer, Lessee shall
not be obligated to purchase, and Lessor may thereafter sell said premises to
the party making the offer; subject, however, to this Lease and to the
leasehold estate herein granted. If for any reason said premises are not sold
to such party, notice of any subsequent bona fide offers, acceptable to
Lessor, shall be given to Lessee upon the same terms and conditions for
acceptance or rejection as hereinabove provided.
The giving by Lessee of notice of the exercise of any purchase option
hereinbefore granted shall fix or determine the right of Lessee to purchase
the property included in the option which Lessee elects to exercise, and the
obligation of Lessor to sell the same. Lessor shall furnish, free of expense
to Lessee, within fifteen (15) days after the receipt of said notice, a
preliminary commitment for title insurance, showing good merchantable title
in Lessor as of a date not earlier than the date of said notice. Lessee shall
have thirty (30) days to examine such preliminary commitment, and if the same
does not then show good merchantable title in Lessor, Lessor shall have
thirty (30) days to cure defects and clear the title preparatory to delivery
of deed and any other instruments required to effect the transfer and
conveyance. Upon acceptance by Lessee of said title, and payment to Lessor of
the purchase price herein specified, Lessor shall convey to Lessee or its
nominee, by Statutory Warranty Deed, a fee simple title in and to said real
estate and the appurtenances thereunto belonging, free and clear of all
liens, encumbrances, and charges of whatsoever character; and shall also
deliver to Lessee, free of expense to Lessee, a policy of title insurance,
showing good merchantable title to said premises in Lessor at the time of
delivery of deed.
31. Hazardous Substances: Lessee shall not cause "Hazardous Substances"
as defined below to be brought upon, kept or used in or about the Premises by
Lessee, its agents, employees, contractors or invitees, unless such Hazardous
Substances are necessary for Lessee's business and will be used, kept, and
stored in a manner that complies with this Lease and all laws, regulations
and ordinances regulating any such Hazardous Substances, provided that Lessee
first obtains the written consent of Lessor and provided further that Lessee
indemnifies Lessor from and against any and all liability with respect to
such Hazardous Substances as more particularly described below. If Lessee
breaches the covenants and obligations set forth herein or, if the presence
of Hazardous Substances on, in or about the Premises or any other property
caused or permitted by Lessee, its agents, employees, contractors or
invitees, results in contamination of the Premises or any other property or,
if contamination of the Premises or any other property by Hazardous
Substances otherwise occurs for which Lessee is legally liable to Lessor,
then Lessee shall indemnify and hold Lessor harmless from and against any and
all claims, judgments, damages, penalties, fines, costs, liabilities and
losses (including, without limitation, diminution in the value of the
Premises, damages for the loss or restriction on use of rentable or usable
space or of any amenity of the Premises, and sums paid in settlement of
claims, attorneys' fees, consultant fees and expert fees) which arise during
or after the Lease term as a result of such contamination. The provisions of
this section shall survive the expiration and earlier termination of this
Lease.
"Hazardous Substances" means (a) petroleum or petroleum products,
natural or synthetic gas, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, polychlorinated biphenyls, and
radon gas; (b) any substance defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials", "dangerous
wastes", "toxic substances", "contaminants" or "pollutants" or words of
similar import, under any federal, state or local statute, law, rule,
regulation, ordinance code, policy or rule of common now or hereafter in
effect and in each case as amended, and any judicial or administrative order,
consent decree or judgment, relating to the environment, health safety or
Hazardous Substances, and (c) any other substance, exposure to which is
regulated by any governmental agency.
32. Time of the Essence. Time is of the essence of each provision of
this Lease.
33. Severability. The unenforceability, invalidity, or illegality of any
provisions herein shall not render any other provision unenforceable, invalid
or illegal.
34. Washington Law and Venue. This Lease shall be construed and
interpreted in accordance with the laws of the State of Washington. Any
action to enforce the terms of this Lease or for breach of this Lease shall
be brought in the Superior Court for the State of Washington in King County.
35. No Partnership or Joint Venture. It is not the intention of the
parties hereto to establish any form of partnership or joint venture, and no
provision of this Lease shall be construed to create a partnership or joint
venture between Lessor and Lessee for any purpose.
36. Authority. Lessee warrants that it is a duly organized California
corporation, that it has paid all fees owed to the State of Washington, that
it has authority to enter into this Lease and that its execution and deliver
of this Lease has been duly authorized. The individuals executing this Lease
on behalf of Lessee warrant that he or she is duly authorized to execute and
deliver this Lease on behalf of Lessee.
37. Notices. Any notice to Lessee as provided for herein shall be
accomplished either by delivery thereof at the Premises to Lessee or any
agent, employee or representative of Lessee or by mailing the same, postage
prepaid, to Lessee at the Premises. Notices to Lessor shall be accomplished
by delivery thereof to Lessor at the address set forth in Article 4.2 or at
such other address as Lessor may from time to time designate in writing.
38. Headings. The article headings in this instrument are for
convenience and reference only, and the words contained therein shall in no
way be held to explain, modify, amplify or aid in the interpretation,
construction or meaning of the provisions of this Lease.
39. Entire Agreement. This Lease constitutes the entire agreement
between the parties. There are no agreements, representations, or warranties
between the parties other than those contained in this Lease.
DATED this 19th day of May, 1992.
LESSOR:
/s/ J. Leon Sealey
J. Leon Sealey
/s/ Jane Sealey
Jane Sealey
LESSEE:
THE OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
By: /s/ Alfonso S. Reyes, Jr.
Its: VP, CFO
<PAGE>
STATE OF WASHINGTON
COUNTY OF KING
I certify that I know or have satisfactory evidence that J. Leon Sealey
and Jane Sealey signed this instrument and acknowledged it to be their free
and voluntary act for the uses and purposes mentioned in the instrument.
DATED: May 19, 1992.
(Seal or stamp) /s/ Mergot E. Fiut
Notary Public in and for the State of
Washington, residing at Seattle
My appointment expires 9-10-95
STATE OF CALIFORNIA
COUNTY OF ALAMEDA
I certify that I know or have satisfactory evidence that
Al Reyes signed this instrument, on oath stated that he was authorized to
execute the instrument and acknowledged it as the chief financial officer of
The Occupational Medical Corporation of America, Inc. to be the free and
voluntary act of such corporation for the uses and purposes mentioned in the
instrument.
DATED: May 14, 1992.
(Seal or stamp)
/s/ Dawn Schwartz
Notary Public in and for the State of
California, residing at Danville, CA
My appointment expires 1993
<PAGE>
10.1(d) Seattle, Washington, Consent to Sublease and Nondisturbance
Agreement, dated July 1, 1994.
CONSENT TO SUBLEASE AND NONDISTURBANCE AGREEMENT
THIS AGREEMENT is made as of July 1, 1994, between Jane Sealey,
individually and as Executrix of the Estate of J. Leon Sealey, deceased
(hereafter "Prime Lessor"), The Occupational Medical Corporation of America,
Inc., a California corporation (hereafter "Sublessor"), and Visions
Financial, Inc., d.b.a. Espresso Northwest, a Washington corporation
(hereafter "Sublessee").
WHEREAS Prime Lessor is the owner of premises in the City of Seattle,
State of Washington, as more particularly described in the Sublease attached
herein and in the lease attached to the Sublease as Exhibit A thereto (which
lease is referred to hereafter as the "Prime Lease" and which Sublease is
referred to hereafter as the "Sublease"); and
WHEREAS Sublessor, as lessor, and Sublessee, as lessee, under the
Sublease have entered into a sublease of the premises described in the Prime
Lease (the "Leased Premises"), all as more particularly set forth in
Attachment A; and
WHEREAS the parties desire to assure Sublessee's possession of the
premises upon the terms and conditions set forth in the Sublease:
NOW, THEREFORE, in condition of the mutual agreements set forth below,
the parties hereby agree as follows:
1. Consent. Prime Lessor consents to the execution and delivery of the
Sublease in the form attached as Attachment A and, notwithstanding the
provisions of the first sentence of Section 6 of the Prime Lease to the use
of the premises by Espresso Northwest, Inc. and Visions Espresso Service, a
sole proprietorship, in accordance with the terms of the Sublease.
2. Payment of Rent. Sublessee covenants and agrees to pay to Sublessor
the rent set forth in Attachment A and Sublessor covenants and agrees to pay
to the Prime Lessor the rent set forth in Section 4 of the Prime Lease.
3. Nondisturbance. Provided Sublessee complies with this Agreement and
the Prime Lease and provided Sublessor is not in default, beyond any period
of time given Sublessor to cure, of its obligations to pay rent under the
Prime Lease, Prime Lessor shall treat the Sublease as a lease between Prime
Lessor and Sublessee with the same force and effect as if Prime Lessor, as
lessor, and Sublessor, as lessee, had entered into a lease containing the
terms and provisions of the Prime Lease, for a term equal to the unexpired
term of the Prime Lease.
IN WITNESS WHEREOF, the parties have executed this Agreement as of July
1, 1994.
/s/ Jane Sealey
Jane Sealey, individually and as Executrix of the Estate
of Jay Leon Sealey
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
By: /s/ Andre Yonathan
Its: CFO
VISIONS FINANCIAL, INC. DBA ESPRESSO NORTHWEST
By: /s/ Pat Lorass
Its: Owner
ATTACHMENT A
SUBLEASE
THIS AGREEMENT is made as of the 1st day of July, 1994, between The
Occupational Medical Corporation of America, Inc., a California corporation
("Sublessor"), and Visions Financial, Inc., d b.a. Espresso Northwest
("Sublessee").
WITNESSETH:
WHEREAS Sublessor, as lessee, entered into a lease with J. Leon Sealey
and Jane Sealey, husband and wife, as lessor (the "Prime Lessor"), dated May
19, 1992, for certain premises (the "Leased Premises") described as The
Medical Clinic Building (5,600 square feet), commonly known as 1500 First
Avenue S., Seattle, Washington, and legally described as the west 60 feet of
lots 1 and 2, block 321, Seattle, Tidelands, less the north 15 feet of lot 2
leased to other tenants. A true copy of the lease (the "Prime Lease") is
attached hereto as Exhibit A and by this reference made a part hereof.
Reference is hereby made to the Prime Lease as if the same were set forth in
this sublease at length; and
WHEREAS the parties have agreed that Sublessor shall sublet the Leased
Premises co Sublessee:
NOW, THEREFORE, the parties hereby agree as follows:
1. Sublease. Sublessor hereby leases to Sublessee the Leased Premises
for a term beginning on July 1, 1994 and ending on December 31, 1997, unless
sooner terminated in accordance with this Sublease, for lease as an office
and for repair of espresso equipment.
2. Rent. In consideration of this Sublease, Sublessee shall pay to
Sublessor rent at the rate of Two Thousand Five Hundred Dollars ($2,500.00)
monthly rental payable in advance on or before the first day of each month
during said tenancy, all rent to be payable to Sublessor as follows:
OMCOA
9811 Bigge Street
Oakland, California 94603
or at such other place as Sublessor may from time to time designate in
writing.
3. Deposit. Sublessee has paid the Sublessor on the execution and
delivery of this Sublease the sum of One Thousand Dollars ($1,000.00) as
security for the full and faithful performance of the terms, covenants and
conditions of this Sublease on Sublessee's part to be performed or observed,
including but not limited to payment of rent or for any other sum which
Sublessor may expend or be required to expend by reason of Sublessee's
default If Sublessee shall fully and faithfully comply with all the terms,
covenants and conditions of this Sublease on Sublessee's part to be performed
or observed, the security, or any unapplied balance thereof, shall be
returned to Sublessee after the time fixed as the expiration of the lease
term and after the removal of Sublessee and surrender of possession of the
Leased Premises.
4. Use. The leased premises shall be used for offices for the businesses
of Sublessee and its affiliate, Visions Espresso Service, and for no other
purposes.
5. No Assiqnment. Sublessee shall not assign this sublease nor sublet
the Leased Premises in whole or in part; and shall not permit Sublessee's
interest in this Sublease to be vested in any third party by operation of law
or otherwise.
6. Compliance With Prime Lease. If Sublessor shall be charged for
additional rent or other sums pursuant to the provisions of the Prime Lease
because of Sublessee's failure to comply with the terms and conditions of the
Prime Lease, including, but not limited to failure to observe the covenan~s
of Sections 5, 7, 9.2, 9.3 and 10 of the Prime Lease, Sublessee shall be
liable to Sublessor for such additional rent or sums.
7. Sublect to Prime Lease. This Sublease is subject to and subordinate
to the Prime Lease. Except as may be inconsistent with the terms hereof, all
of the terms, covenants and conditions of the Prime Lease contained shall be
applicable to this Sublease with the same force and effect as if Sublessor
were the lessor under the Prime Lease and Sublessee were the lessee
thereunder; and in case of any breach hereof by Sublessee, Sublessor shall
have all the rights against Sublessee as would be available to the Prime
Lessor against the lessee under the Prime Lease if such breach were by the
lessee thereunder.
8. Services. Notwithstanding anything herein contained, the only
services or right to which the Sublessee is entitled under this Sublease are
those to which Sublessor is entitled under the Prime Lease and for all such
services and rights Sublessee will look to the Prime Lessor under the Prime
Lease.
9. Indemnity. Sublessee shall neither do nor permit anything to be done
which would cause the Prime Lease to be terminated or forfeited by reason of
any right of termination or forfeiture reserved or vested in the Prime Lessor
under the Prime Lease, and Sublessee shall indemnify and hold Sublessor
harmless from and against all claims of any kind whatsoever by reason of any
breach or default on the part of Sublessee by reason of which the Prime Lease
may be terminated or forfeited.
10. Sublessee Has Read Prime Lease. Sublessee represents that it has
read and is familiar with the terms of the Prime Lease.
11. No Other Aqreements. All prior understandings and agreements
between the parties are merged within this Sublease, which alone fully and
completely sets forth the understanding of the parties; and this Sublease may
not be changed or terminated orally or in any manner other than by an
agreement in writing and signed by the party against whom enforcement of the
change or termination is sought.
12. Notices. Any notice or demand which either may or must give to the
other hereunder shall be in writing and delivered personally or sent by
registered mail, addressed if to Sublessor as follows:
OMCOA
9811 Bigge Street
Oakland, California 94603
and if to Sublessee, as follows:
Visions Financial, Inc., d.b.a.
Espresso Northwest
Attn: Pat Loraas
1500 First Avenue S.
Seattle, Washington 98134
Either party may, by notice in writing, direct that future notices or demands
be sent to a different address.
13. Successors. The covenants and agreements contained in this Sublease
shall bind and inure to the benefit of Sublessor, Sublessee and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be
executed as of July 1, 1994.
OCCUPATIONAL MEDICAL CORPORATION OF AMERICA, INC.
By: /s/ Andre Yonathan
Its: CFO
VISIONS FINANCIAL, INC. DBA ESPREESSO NORTHWEST
By: /s/ Pat Lorass
Its: Owner
<PAGE>
10.1(e) Oakland, California, dated May 23, 1994.
Approved as to Form
by General Counsel
October 6, 1990
COMMERCIAL LEASE
(LESSOR-OWNED IMPROVEMENTS)
Terminates Lease Dated 6/21/88 M.P. D-4.513-R (N)
THIS LEASE is made and entered into this 23rd day of May 1994, by and between
SOUTHERN PACIFIC TRANSPORTATION COMPANY, a Delaware corporation, (herein
"Lessor"), and PORT MEDICAL SERVICES, INC., a California corporation doing
business as OMCOA, (herein "Lessee").
PART I
BASIC LEASE TERMS
I. PREMISES:
The term "Premises" shall refer to the land and all improvements and all
facilities owned or controlled by Lessor in the City of Oakland, County
of Alameda, State of California, as shown on Drawing No. 0-4797, Sheet
No. 1, dated February 2, 1988, attached hereto as Exhibit "A" and made a
part hereof. Where this Lease involves multiple tenancy the term
"Premises" shall refer only to that space occupied solely by Lessee
under this Lease, together with any loading dock, parking space, or any
other portion of the building or structure appurtenant to the building
which Lessee has exclusive use of.
II. EFFECTIVE DATE:
This Lease shall take effect on June 1, 1994, ("Effective Date").
III. TERM:
This Lease shall be for a term of one (1) year ("Lease Term") from
Effective Date hereof and shall continue on a month-to-month tenancy
basis until terminated hereunder.
IV. TERMINATION:
This Lease shall be terminable by either party at any time without cause
on thirty (30) days' advance written notice to the other.
V. USE:
The Premises shall be used by Lessee solely and exclusively for
operation of a medical and treatment facility and for parking purposes.
VI. RENT:
Commencing as of the Effective Date hereof, Lessee shall pay to Lessor
as rent for the Premises ("Base Rent") the sum of SIX THOUSAND TWO
HUNDRED TWENTY-TWO DOLLARS ($6,222) per month, payable monthly in
advance.
VII. BASIS OF RENT ADJUSTMENT:
Base Rent shall be adjusted based on the higher of the CPI Factor
(defined in Section 5 of the General Lease Terms) as indicated on the
Consumer Price Index, Urban Wage Earners and Clerical Workers, U. S.
City Average, All Items (1982-84 = 100), ("Index"), published by the
United States Department of Labor, Bureau of Labor Statistics, or any
successor or substitute index published as a replacement for the Index
by any United States governmental agency; or the fair rental value of
the Premises at the time of said revision.
VIII. INSURANCE:
On or before the execution of this Lease, Lessee, subject to the
requirements of Section 10 of the General Lease Terms, shall furnish the
following insurance to Lessor, with the effective date of insurance
coverage to be no later than the Effective Date of this Lease:
(1) Comprehensive General Liability Insurance and. Automobile Liability
Insurance, each with limits of $2,000,000 or more combined single
limit per occurrence.
(2) Workers' Compensation Insurance in at least the statutory amount.
(3) Employers' Liability Insurance with limit of $1,000,000 or more.
(4) "All-Risk" property insurance with full replacement cost coverage.
Items (2) and (3) shall be automatically waived if Lessee does not have
any employees working for Lessee upon the Premises.
IX. LAND TAXES:
For as long as this Lease is in effect, Lessee shall pay to Lessor as
additional rent commencing as of the Effective Date hereof all taxes
levied against the land included in this Lease during the life hereof.
X. ADDRESSES FOR NOTICES:
All notices to either Lessor or Lessee shall be addressed as follows:
To Lessor: SOUTHERN PACIFIC TRANSPORTATION COMPANY San Francisco
Regional Office - Real Estate One Market Plaza,.Suite 912
San Francisco, CA 94105
To Lessee: PORT MEDICAL SERVICES, INC.
9811 Bigge Street
Oakland, CA 94603
XI. ADDRESS FOR PAYMENTS TO LESSOR:
Checks shall be made payable to Lessor and shall be mailed to File
61860, P. O. Box 60000, San Francisco, California 94160-1860.
XII. NONEXCLUSIVE ROADWAY
Lessor, subject to the terms, covenants, and conditions of this Lease,
hereby permits Lessee to use the area of Lessor's property illustrated
on the attached print for access roadway purposes only. The use of the
area shall be nonexclusive, it being under-stood that Lessor reserves
for itself, its agents, employees, and licensees the right to use the
area jointly with Lessee. Lessor shall not be required to assume any
expense in connection with the maintenance of the roadway area. The word
"Lessor" as used in this section shall include the successors, assigns,
and affiliated companies of Lessor, and any other railroad company
(including its officers and employees) that may be lawfully operating
upon and over any tracks that may be located adjacent to the roadway,
and the officers and employees thereof.
Lessee hereby acknowledges that the Port of Oakland and/or Caltrans
and/or other public entities will be rerouting traffic in the vicinity
of the leased Premises. Although Lessor does not believe that such
rerouting will impact access to the leased Premises, Lessor has not and
can not guarantee that such rerouting will not interfere with access.
If, in Lessee's reasonable good faith business judgment, its access is
impacted/interfered with in a material way, Lessee may terminate this
lease upon thirty (30) days written notice; Lessee hereby agrees that
this right to terminate the lease shall be its sole remedy under the
terms of this Lease should there be any interference with access and
Lessee hereby waives all claims against Lessor for any access problems
with the Premises.
XIII. TERMINATION OF EXISTING LEASE
Lease No. 208458, dated June 21, 1988, between the parties hereto,
relating to the use of Lessor's property located in the City of Oakland,
State of California, for the operation of a medical treatment facility
and parking, is hereby terminated.
The foregoing Basic Lease Terms and the General Lease Terms set forth in
attached Part II are incorporated into and made parts of this Lease.
IN WITNESS WHEREOF, the parties hereto have executed, or have caused to
be executed, this Lease in duplicate the day and year first above written.
SOUTHERN PACIFIC TRANSPORTATION COMPANY
By: /s/ J. B. Horstruan
Title: Assistant Regional Director - Property Management
PORT MEDICAL SERVICES, INC.
DBA OMCOA
By: /s/ Don Livingston
Title: President
File Reference: Oakland-OMCOA Date: April 13, 1994
PART II
GENERAL LEASE TERMS
1. PREMISES AND TERM
Lessor hereby leases to Lessee the Premises for the tenancy shown in the
Basic Lease Terms, subject to the terms and conditions as set forth in
this Lease.
2. USE
Lessee shall not use the Premises for any use other than that stated in
the Basic Lease Terms, and shall not make any alterations to the
Premises except as required for such use. LESSEE SPECIFICALLY
ACKNOWLEDGES THAT THIS IS A 30-DAY LEASE AND THAT LESSEE HAS NOT RELIED
ON ANY REPRESENTATIONS BY ANY AGENT OR EMPLOYEE OF LESSOR TO THE
CONTRARY IN MAKING ANY IMPROVEMENTS TO THE PREMISES.
Lessee shall not permit to be placed on the Premises or improvements any
signs or notices not solely related to the business of Lessee conducted
on the Premises.
Lessee shall not permit any damage, nuisance or waste on the Premises;
nor permit to be placed upon the Premises any gasoline, diesel fuel,
oil, and other petroleum products, or any hazardous or explosive
material, waste or substance.
Lessee, at Lessee's expense, shall arrange for the filing of any map
required under any subdivision map act and of any environmental impact
report required by any governmental body having jurisdiction in the
matter.
If any governmental body seeks to impose any condition on approval of
Lessee's use of the Premises, Lessor may terminate this Lease forthwith
if any such condition shall affect any other property of Lessor or shall
affect the Premises after this Lease is no longer in effect.
3. CONDITION OF PREMISES
Lessee acknowledges that neither Lessor nor any agent of Lessor has made
any representation or warranty with respect to the condition of the
Premises or with respect to the suitability of the same for the conduct
of Lessee's business, nor has Lessor or any agent of Lessor agreed to
undertake any modification, alteration or improvement to the Premises.
Lessee further acknowledges that Lessee has independently investigated
the Premises and is satisfied that the Premises are suitable for
Lessee's intended use and that the Premises meet all governmental and
quasi governmental requirements for such intended use. By taking
possession of the Premises, Lessee shall be deemed to have accepted the
Premises as being in good and sanitary order, condition and repair and
to have accepted the Premises in their condition existing as of the date
of such possession, subject to all applicable laws, covenants,
conditions, restrictions, easements and other matters of public record
and any rules and regulations from time to time promulgated by Lessor
governing the use of the Premises. Lessee acknowledges that there may be
subterranean facilities within the Premises, notwithstanding the absence
of markers, monuments or maps indicating their existence.
4. RENT
4.1 Base Rent. Lessee shall pay to Lessor as Base Rent for the Premises
the amount shown as rent in the Basic Lease Terms, payable at the times
set forth therein, without deduction, offset, prior notice or demand.
Lessor currently issues rent invoices but Lessee hereby acknowledges its
affirmative obligation to pay the rent as set forth heretofore (or as
adjusted from time to time) when due irrespective of whether Lessee has
received an invoice. Lessor may discontinue its practice of issuing
invoices at any time in its sole discretion.
4.2 Refund of Base Rent. Upon the termination of this Lease, unless
Lessee is then in default, any unearned portion of the Base Rent paid in
advance shall be refunded to Lessee upon Lessee's written demand
therefor if made within thirty (30) days after termination.
4.3 Late Charge. Lessee hereby acknowledges that the late payment by
Lessee to Lessor of Base Rent will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Accordingly, Lessee shall pay to Lessor, as
Additional Rent (as the term "Additional Rent" is defined in
Subsection 4.4 hereof), without the necessity of prior notice or
demand, a late charge equal to ten percent (10%) of any installment of
Base Rent which is not received by Landlord within ten (10) days after
the due date for such installment. The parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs
Lessor will incur by reason of the late payment by Lessee. In no event
shall this provision for a late charge be deemed to grant Lessee a grace
period or extension of time within which to pay any installment of Base
Rent or prevent Lessor from exercising any right or remedy available to
Lessor upon Lessee's failure to pay such installment of Base Rent when
due, including, without limitation, the right to terminate this Lease.
4.4 Additional Rent. All taxes, charges, costs and expenses which Lessee
is required to pay under this Lease, and all interest and charges that
may accrue thereon in the event of Lessee's failure to pay the same and
all damages, costs and expenses which Lessor may incur by reason of any
default by Lessee shall be deemed to be additional rent hereunder
("Additional Rent"). In the event of nonpayment by Lessee of any
Additional Rent, Lessor shall have all the rights and remedies with
respect thereto as Lessor has for the nonpayment of Base Rent. The term
"Rentals" as used in this Lease shall mean the Base Rent and Additional
Rent. All Rentals and other monies due under this Lease shall survive
the termination of this Lease or the expiration of the Lease Term, as
applicable ("Lease Termination").
4.5 Accord and Satisfaction. No payment by Lessee or receipt by Lessor
of any lesser amount than the Rentals then due shall be deemed to be
other than on account of such Rentals then due, nor shall any
endorsement or statement on any check or any letter accompanying any
check or payment as Rentals be deemed an accord and satisfaction, and
Lessor may accept such check or payment without prejudice to Lessor's
right to recover the balance of such Rentals then due or pursue any
other remedy provided in this Lease.
5. RENTAL REVISION
The Base Rent shall automatically and without notice to Lessee be
adjusted, upwards only, on each anniversary of the Effective Date, by
the CPI Factor. The "CPI Factor" is the percentage of adjustment stated
in the Consumer-Price Index-(indicated in the Basic Lease Terms)
established during the last available twelve-month period immediately
preceding each anniversary of the Effective Date, adjusted to the
nearest one-tenth of one percent.
In lieu of the above, Lessor may, at any time, increase the Base Rent
without reference to the CPI Factor by giving Lessee thirty (30) days'
notice of such adjustment and its effective date.
The Base Rent, as so increased, shall be effective as of each
anniversary of the Effective Date if increased by the CPI Factor and as
of the effective date of any other increase, notwithstanding Lessor's
acceptance of a lesser amount and notwithstanding any billing by Lessor
for a lesser amount.
6. TAXES
6.1 Lessee shall pay, before they become delinquent, all taxes, charges,
and assessments which are levied upon, or assessed against any
improvement or personal property placed upon the Premises by Lessee.
6.2 In addition to the taxes and assessments specified above, Lessee
shall pay to Lessor any privilege, sales, gross income or other tax (not
including federal or state income tax) imposed upon the rent received by
Lessor by any agency having the authority to do so.
7. UTILITIES
Lessee shall arrange and pay for all utilities, including without
limitation, water, power, heat, garbage, communications and sewer
services, to be used in connection with this Lease.
If Lessor contracts with a utility company to provide access for service
to Lessee at the Premises for Lessee's sole use, Lessee shall pay to
Lessor a minimum sum of $350 upon receipt of a bill therefor to
partially defray administrative costs.
8. INDEMNIFICATION
Lessee shall release, hold harmless, defend (with counsel satisfactory
to Lessor) and indemnify Lessor from and against all liability, cost and
expense for loss of or damage to property and for injuries to or death
of any person (including, but not limited to, the property and employees
of each party hereto) when arising or resulting from:
(a) the use of the Premises by Lessee, its agents, employees, or
invitees;
(b) breach of this Lease by Lessee; or
(c) the location or condition of the Premises or any part thereof;
regardless of whether such liability, cost or expense is caused or
contributed to by the negligence, active or passive, of Lessor.
The term "Lessor," as used in this Section 8 and Sections 9, 10 and 11,
shall include the successors, assigns and affiliated companies of
Lessor, and, if applicable, any other railroad company that may be
lawfully operating on Lessor's tracks.
9. COMPLIANCE WITH LAW AND ENVIRONMENTAL IMPAIRMENT
Lessee, at Lessee's expense, shall comply with all applicable laws,
regulations, rules and orders with respect to the use of the Premises,
regardless of when they become or became effective including, without
limitation, those relating to construction, grading, signage, health,
safety, noise, environmental protection, waste disposal, and water and
air quality, and shall furnish satisfactory evidence of such compliance
upon request of Lessor.
Should any discharge, leakage, spillage, emission, or pollution of any
type occur upon or from the Premises due to Lessee's use and occupancy
thereof, Lessee, at Lessee's expense, shall clean all property affected
thereby, to the satisfaction of Lessor (insofar as the property owned or
controlled by Lessor is concerned) and any governmental body having
jurisdiction thereover.
Lessee shall release, hold harmless, defend (with counsel satisfactory
to Lessor) and indemnify Lessor from and against all liability, claim,
cost or expense (including, without limitation, any fines, penalties,
judgments, litigation costs, attorneys' fees, and consulting,
engineering and construction costs) incurred by Lessor as a result of
Lessee's breach of this section, or as a result of any such discharge,
leakage, spillage, emission or pollution, regardless of whether such
liability, cost or expense arises during or after he Lease Term and
regardless of whether such liability, cost or expense is caused or
contributed to by the negligence, active or passive, of Lessor.
10. INSURANCE
While this Lease is in effect, Lessee, at Lessee's expense, shall
maintain and furnish evidence to Lessor of insurance written through an
insurance company having a Best's rating of B + 13 or better and
licensed to do business in the state in which the Premises are located,
meeting the requirements stated below in form satisfactory to Lessor,
for each of the following types of insurance in amounts not less than
the amounts shown on the Basic Lease Terms:
10.1 Comprehensive General Liability Insurance shall:
(1) be primary, without right of contribution from other insurance
which may be in effect;
(2) not be invalidated by the acts or omissions of other insureds;
(3) not be modifiable or cancelable without thirty (30) days' prior
written notice to Lessor (except in the case of cancellation for
nonpayment of premium in which case cancellation shall not take
effect until at least ten (10) days' notice has been given to
Lessor), herein referred to as "Notice of Modification or
Cancellation";
(4) name Lessor as additional insured;
(5) provide for contractual liability coverage;
(6) provide for broad form property damage, products/completed
operations, and personal injury endorsements; and
(7) include a severability-of-interest clause.
10.2 Comprehensive Automobile Liability Insurance shall:
(1) be primary, without right of contribution from other insurance
which may be in effect;
(2) not be invalidated by the acts or omissions of other insureds;
(3) provide for Notice of Modification or Cancellation; and
(4) name Lessor as additional insured.
10.3 Workers' Compensation Insurance (if required under this Lease)
shall cover all persons employed by Lessee in the conduct of Lessee's
operations on the Premises and shall be endorsed to provide for (1)
waiver of subrogation against Lessor and (2) Notice of Modification or
Cancellation.
10.4 Employer's Liability Insurance (if required under this Lease) shall
be endorsed to provide for (1) Notice of Modification or Cancellation
and (2) waiver of subrogation against Lessor.
10.5 Any Umbrella or Excess Liability Insurance shall provide that if
the underlying aggregate is exhausted, the excess coverage shall drop
down as primary insurance.
10.6 "All-Risk" Property Insurance shall include coverage for vandalism,
earthquake, boiler and machinery, sprinkler damage, malicious mischief
and flood coverage on all alterations installed on or in the Premises by
Lessee at its expense, and all equipment, trade fixtures, inventory,
fixtures and personal property of Lessee located on or in the Premises.
Such insurance shall be in an amount equal to the full replacement cost
of all the aggregate of the foregoing and shall:
11. NOISE LEVELS NEAR RAILROAD TRACKS
Lessee hereby recognizes and acknowledges that railroad tracks are
located on or adjacent to the Premises.
Lessee recognizes that the operation of trains over the tracks does and
shall produce noise levels which may be considered objectionable by the
employees, agents, tenants, or invitees of Lessee. Therefore, Lessee
agrees that no legal action or complaint of any kind whatsoever shall be
instituted against Lessor on Lessee's behalf as a result of such noise
levels and to indemnify and save harmless Lessor against any loss,
damage, liability or expense either might incur as a result of such
action being taken by Lessee's employees, agents, tenants or invitees.
If the Premises are classified by Lessor as non-operating property, this
Section 11 shall not apply.
12. PRIOR APPROVAL OF WORK
Lessee shall not construct, reconstruct or alter structures of any
character, new or existing, upon or beneath the Premises without the
prior written consent of Lessor. Lessee shall not commence any repairs
(except emergency repairs) until after fifteen (15) days' advance
written notice to Lessor.
Any construction, reconstruction or altering of structures consented to
by Lessor shall, at Lessee's expense, be installed, constructed and
maintained in accordance with applicable building and other codes, in a
good and workmanlike manner to the satisfaction of Lessor, and in
accordance with all requirements of all departments, boards, bureaus,
officials and authorities having jurisdiction in the matter. All
necessary permits for such construction (including any permits required
to cross public streets) shall be obtained by Lessee at Lessee's sole
expense.
For all subterranean improvements installed or constructed by Lessee on
the Premises, Lessee shall install and maintain monuments and markers at
such locations and intervals, and in form and size satisfactory to
Lessor, warning of Lessee's improvements (and any unmonumented or
unmarked facilities of others discovered by Lessee during construction)
at Lessee's sole cost and expense. Monuments and markers indicating
Lessee's improvements shall be promptly relocated or removed upon
written request of Lessor at no expense to Lessor. If Lessee shall fail
to relocate or remove any such monument within two (2) weeks of such
written request, Lessor shall have the right to remove or relocate the
same at Lessee's sole cost and expense which Lessee agrees to pay on
demand. Lessee agrees that all work upon or in connection with
improvements shall be done at such times and in such manner as not to
interfere in any way whatsoever with Lessor's operations or the
facilities or operations of any other party holding prior right or
rights to the Premises.
13. EXTENSION OF ELECTRICAL WIRES
Lessee shall not install or extend any electrical wires in or to any
Lessor-owned improvements on the Premises without the prior written
consent of Lessor.
14. LOAD RESTRICTION
It shall be Lessee's obligation to limit its operations to the
weight-sustaining capability of the floor of Lessor's improvement(s).
15. MAINTENANCE AND REPAIR
Lessee hereby accepts the Premises in their present condition. Lessee,
at Lessee's expense and to Lessor's satisfaction, shall keep the
Premises neat and safe at all times and shall maintain the same in good
condition and repair, improving or repairing the Premises or any part
thereof as may be required by law, including, but not limited to,
plumbing and plumbing fixtures, sprinkler system, wiring, light
fixtures, and related electrical facilities, including replacement of
light bulbs or fluorescent tubes, doors, glass, all air-conditioning
facilities, if present and regardless of the ownership thereof, and all
heating facilities. Lessor, however, shall be obligated at its expense
to maintain the roof and structural components of the Premises.
Lessee waives the right, statutory or otherwise, to perform work of any
type or nature to Lessor's improvement(s) at Lessor's expense, or to
withhold rent due hereunder to apply to such work. . Lessee specifically
waives any rights it might have under California Civil Code Sections
1941 and 1942.
If at any time during the life of this Lease Lessor's improvements or
any part thereof may require altering, renewing, repairing, or
rebuilding due to any improper maintenance by Lessee, notwithstanding
anything to the contrary herein contained, Lessee, at Lessee's expense,
shall be obligated to perform such work, unless otherwise mutually
agreed upon in writing between the parties hereto.
Upon the expiration or termination of this Lease, any and all altering,
repairing, renewing, replacing, or rebuilding by Lessee of Lessor's
improvement(s) shall be and remain Lessor's property and shall be
surrendered therewith as part thereof without disturbance, molestation,
or injury thereto, except as may be mutually agreed upon in writing
between the parties hereto.
The Premises or any part thereof shall not be used for displaying signs
and notices not solely related to Lessee's business contemplated by this
Lease. All notices and signs upon the Premises shall be neat and
properly maintained. Lessor shall have the right to enter the Premises
at all reasonable times to inspect the same.
16. DAMAGE OR DESTRUCTION
The term "Total Destruction" shall mean damage to the Premises to the
extent that they cannot be used for the use authorized under Section E
of the Basic Lease Terms. The term "Partial Destruction" shall mean
damage to the Premises which does not render the Premises unusable for
the use authorized in Section E of the Basic Lease Terms. Lessee shall
notify Lessor immediately of any event of Total Destruction or Partial
Destruction of the Premises.
In the event of Partial Destruction of the Premises, Lessee, at Lessee's
expense and without any abatement of Rentals, shall restore the Premises
to their condition before the Partial Destruction. Such restoration
shall include restoration of Lessor's improvement(s), (normal wear and
tear excepted), unless Lessor notifies Lessee within ten (10) days after
receipt of-Lessee's notice of Partial Destruction not to restore such
improvement(s). If Lessor gives such notice, Lessee shall remove such
improvement(s) and debris and clean up the Premises.
In the event of Total Destruction of the Premises, this Lease shall
terminate thirty (30) days after the date of the Total Destruction or
upon completion of removal of debris and cleanup of the Premises if such
removal and cleanup are completed sooner. If such removal and cleanup
are not completed within thirty (30) days after the date of Total
Destruction, Lessor shall have the right to perform such removal and
cleanup as provided in Section 18 of the General Lease Terms. Unless the
Total Destruction was caused by the act or omission of Lessee or any of
its employees, agents or invitees, Rentals shall abate as of the date of
Total Destruction. Lessee shall remove all debris and leave the Premises
in a neat and clean condition.
Lessee waives the provisions of California Civil Code Sections 1932(2)
and 1933(4)
17. USE OF COMMON AREAS
Where the Premises are a portion of a larger building or structure,
Lessee is hereby granted a nonexclusive right to use common areas within
the building such as lobbies, hallways, and parking areas. Such areas
shall not be considered part of the Premises for the purpose of this
Lease except where such areas are designated as the part of the Premises
under the Basic Lease Terms.
18. SURRENDER OF PREMISES
Upon the expiration or termination of this Lease, Lessee, without
further notice, shall deliver up to Lessor possession of the Premises.
Lessee, if not in default hereunder, shall, at any time prior to such
expiration or termination, remove from the Premises any personal
property owned or controlled by Lessee. Lessee shall, to the
satisfaction of Lessor, restore the Premises to the condition in which
they existed at the time Lessee took possession, ordinary wear and tear
excepted. Upon the failure or refusal of Lessee to remove from the
Premises such personal property owned by Lessee prior to the expiration
or termination of this Lease, said personal property shall thereupon, at
the option of Lessor, become the sole property of Lessor or, if Lessor
so elects, Lessor may remove from the Premises Lessee's personal
property and restore the Premises to substantially the same condition in
which they existed at the time Lessee took possession, in which case,
Lessee shall pay Lessor within thirty (30) days after demand therefor
(a) an amount equal to the rent (as in effect immediately before
termination) for the period during which such removal is accomplished to
compensate Lessor for the loss of rent to Lessor resulting from the
unavailability of the Premises for leasing to another tenant during such
time and (b) the cost of removal of Lessee's personal property and
restoration of the Premises.
In the event of such failure or refusal of Lessee to surrender
possession of the Premises, Lessor shall have the right to reenter the
Premises and remove therefrom Lessee or any other person, firm, or
corporation claiming by, through, or under Lessee.
19. LIENS
Lessee shall not commence any repairs (except emergency repairs),
changes or alterations on or to the Premises until fifteen (15) days
after Lessor has received notice stating the date the installation of
the alterations is to commence. Lessor shall have the right to enter the
Premises to post notices of nonresponsibility.
Lessee shall not permit any mechanics' or materialmen's liens or other
liens to be filed against the Premises nor against Lessee's leasehold
interest therein by reason of labor or materials furnished to the
Premises at Lessee's instance or request. If any such liens are filed
against the Premises, Lessee shall cause the same to be discharged of
record, either by payment of the claim or by posting and recording the
bond contemplated by California Civil Code Section 3143, within twenty
(20) days after demand by Lessor. Lessee shall indemnify, hold harmless,
and defend Lessor from and against any such liens.
20. RESERVATIONS
Lessor hereby reserves the right, to be exercised by Lessor and by any
other who has obtained or may obtain permission or authority from Lessor
so to do, to:
(a) operate, maintain, review and relocate any and all existing pipe,
track (if any), power and communication (including without
limitation fiber optic) lines and appurtenances and other
facilities of like character upon, over or under the surface of the
Premises; and
(b) construct, operate, maintain, review and relocate such additional
facilities of the same character as shall not unreasonably
interfere with Lessee's use of the Premises as specified in Section
E of the Basic Lease Terms.
Any such construction, operation, relocation or maintenance shall not be
done at Lessee's expense unless such work is requested by Lessee or done
for the benefit of Lessee.
21. MINERAL RIGHTS
Lessor excepts from the Premises and reserves unto itself, its
successors and assigns all of the minerals and mineral rights,
interests, and royalties, including, without limiting, the generality
thereof, oil, gas and other hydrocarbon substances, as well as metallic
or other solid minerals, in and under the Premises; however, Lessor or
its successors and assigns shall not have the right for any purpose
whatsoever to enter upon, into, or through the surface of the Premises
in connection therewith.
22. BARRICADES
In addition to any barricades, fences or gates which may be specified
elsewhere in this Lease, Lessee, if requested by Lessor, shall install
and maintain barricades, fences, and fence gates of a size and form
satisfactory to Lessor at such locations as may be designated by Lessor
at any time while this Lease is in effect, all at Lessee's expense and
to Lessor's satisfaction.
23. TERMINATION OF LEASE
Termination of this Lease for any reason whatsoever shall not release
either party from any liability or obligation hereunder resulting from
an event which may have occurred prior to Lease Termination, or
thereafter in case by the terms of this Lease it is provided that
certain things shall or may have to be done after Lease Termination.
24. EMINENT DOMAIN
In the event of the taking or condemnation of all or any part of the
Premises (including conveyance by deed in lieu of, or in settlement of,
condemnation proceedings), Lessee shall receive that portion of any
award specifically allocated to any business loss Lessee might suffer as
a result of such taking; the remaining award balance and interest
thereon, as well as the award for the land value and interest thereon,
shall belong to Lessor. Under no circumstances shall Lessee be entitled
to any "bonus value" for the remaining unexpired Lease Term.
25. DEFAULT
If Lessee fails to pay the Rentals or to make any other payment required
to be made by Lessee hereunder within three (3) days after written
notice by Lessor or fails to perform any other term or condition of this
Lease within fifteen (15) days after written notice by Lessor or
abandons or vacates the Premises, then Lessor may, in addition to any
other remedies Lessor may have at law or equity, terminate this Lease
forthwith.
26. ASSIGNMENT AND SUBLETTING
Lessee shall not assign or encumber Lessee's interest in this Lease or
in the Premises, or sublease all or any part of the Premises.
27. DISPOSSESSION
If Lessee is lawfully deprived of the possession of all or any part of
the Premises by a party other than Lessor, Lessor may, upon receipt of
notice from Lessee setting forth the circumstances, either install
Lessee in possession of the Premises or terminate this Lease and refund
to Lessee the pro rata amount of any prepaid but unearned Base Rent
after receipt of such notice. Lessor shall not be liable to Lessee for
any loss, damage or claim resulting from such deprivation of possession.
28. NOTICES
All notices shall be in writing and shall be deemed to have been given
when delivered personally or deposited in the United States mail,
registered or certified, postage prepaid, and addressed to the party to
whom the notice is directed at the address set forth in the Basic Lease
Terms. Payments to Lessor shall be made at the address for payments set
forth in the Basic Lease Terms. Either party may change the address for
notices or Lessor may change the address for payments by giving the
other party notice to that effect.
29. ATTORNEYS' FEES
If either party brings any action against the other to enforce or
collect any sum due under this Lease or if Lessor brings an action for
unlawful detainer of the Premises, the losing party shall pay .the
reasonable attorneys' fees of the prevailing party in addition to the
judgment and court costs.
30. LESSOR'S RIGHT-OF-ENTRY
Lessee shall permit Lessor and the agents and employees of Lessor to
enter into and upon the Premises at all reasonable times for the purpose
of inspecting, posting notices of nonresponsibility, or exhibiting the
Premises to prospective tenants or buyers.
31. ENVIRONMENTAL TESTING
Lessee shall not under any circumstances authorize any environmental
testing of the Premises without having obtained the prior written
consent of Lessor (which may be withheld at Lessor's sole discretion)
and without having executed Lessor's standard right of entry permit for
such testing.
32. NON-WAIVER
Lessor's failure to enforce or exercise its rights with respect to any
provision hereof shall not be construed as a waiver of such rights or of
such provision. Acceptance of rent or any other sum shall not be a
waiver of any preceding breach by Lessee of any provision hereof,
regardless of Lessor's knowledge of such preceding breach at the time of
acceptance of such rent; nor shall such acceptance be a waiver in any
way of Lessor's right to terminate at any time under Section D of the
Basic Lease Terms.
33. TIME OF ESSENCE
Time is of the essence of each provision of this Lease.
34. ENTIRE AGREEMENT AND AMENDMENT
This Lease sets forth the entire agreement between the parties with
respect to the leasing of the Premises and supersedes all prior
agreements, communications, and representations, oral or written,
express or implied, since the parties intend that this be an integrated
agreement. This Lease shall not be modified except by written agreement
of the parties.
EXHIBIT A
[MAP SHOWING LOCATION OF PREMISES.]
EXHIBIT B
COMPREHENSIVE GENERAL AND AUTOMOBILE LIABILITY ENDORSEMENT
Attached to certificate of insurance for and hereby certified to be a part of
the following policy or policies having the following expiration dates:
Policy No. Company Providing Policy Expiration Date
The scope of the insurance afforded by the policy designated in the
attached certificate is not less than that which is afforded by the
Insurance Service Organization. (The term "policy" as used herein
includes the plural number if there is more than one policy listed above.)
Such policy provides or is hereby amended to provide that:
1. The named insured is PORT MEDICAL SERVICES, INC. ("Named Insured").
2. SOUTHERN PACIFIC TRANSPORTATION COMPANY ("Lessor") is hereby included as
additional insured with respect to liability arising out of the ownership,
maintenance or use of the Premises by the Named Insured under or in
connection with that certain lease ("Lease") dated ,
between SOUTHERN PACIFIC TRANSPORTATION COMPANY and PORT MEDICAL SERVICES,
INC. relating to property located in the City of Oakland, County of Alameda,
State of California.
The insurance provided hereunder applies as though separate policies are in
effect for both the Named Insured and Lessor, but does not increase the
limits of liability set forth in said policy.
3. The limits of liability under the policy is not less than those shown on
the certificate to which this endorsement is attached.
4. Cancellation or material reduction of insurance coverage hereunder is not
effective until thirty (30) days [ten (10) days in the case of cancellation
for nonpayment of premium] following written notice to Lessor at:
Southern Pacific Transportation Company
San Francisco Regional Office - Real Estate
One Market Plaza, Suite 912
San Francisco, CA 94105
The policy includes contractual liability coverage for liability assumed by
the Named Insured under the Lease.
6. The insurer is not entitled to any contribution from insurance in effect
for Lessor.
7. The insurance is not invalidated by the acts or omissions of other
insureds.
8. The insurance has Broad Form Property Damage endorsement.
9. The insurance has Products/Completed Operations endorsement.
10. The insurance has Personal Injury endorsement.
11. All policy or endorsement limitations relating specifically to operations
on or near Lessor's property or tracks are eliminated.
12. In the event of reduction or exhaustion of the applicable aggregate limit
or limits of liability under the primary policy referred to in the attached
certificate of insurance solely by reason of losses paid thereunder on
account of occurrences during the policy period, the excess policy, if any,
referred to herein, shall (1) in the event of reduction, apply as excess of
the reduced limit of liability thereunder; and (2) in the event of
exhaustion, continue in force as though it were primary insurance.
Insurance Company
Date: , 19 By:
Signature of
Authorized Representative
<PAGE>
10.1(k) Third Amendment to Lease for Seattle, Washington dated December 9,
1994.
Third Amendment to Lease
This Third Amendment to Lease is made
and entered into this 9th day of December 1994,
By and Between
HIP-1 Limited Partnership, a Washington Limited Partnership,
(Hereinafter called "Landlord") and
Occupational Medical Corporation of America, Inc., A California
Corporation, (Hereinafter called "Tenant")
WHEREAS, Landlord and Tenant entered into a Lease Agreement dated March 5,
1984 and subsequently amended August 2, 1989 and October 23, 1989, for
approximately 4,898 square feet of rentable space located in Suite E-120 and
Suite C-107 in South Seattle Business Park located at 4634 East Marginal Way
South, Seattle, Washington (the "Premises") as more fully described in the
Lease and;
WHEREAS, Landlord and Tenant desire to extend the term of the Lease and amend
the base monthly rent.
NOW, therefore, the parties hereby agree as follows:
1. Term: The term of this Lease shall be extended for a three (3) year
period commencing January 1, 1995 and continuing thereafter until
December 31, 1997.
2. Rent: The Tenant shall pay to Landlord as rent for the Premises in
advance on the first day of each calendar month during the amended term
of this Lease without deduction, offset, prior notice or demand in
lawful money of the United States the sum of $4,574.30 per month, (the
"Base Monthly Rent"). Additionally, Tenant shall pay $90.00 per month
for covered parking spaces. All other sums due under the Lease including
the monthly payment of operating expenses shall continue as outlined in
the original Lease document and subsequent amendments.
3. Rental Increases: Commencing January 1, 1996 the Base Monthly Rent shall
be increased by three percent (3%). Additionally, on January 1, 1997,
the Base Monthly Rent will also be increased by an additional three
percent (3%).
Except as expressly provided for herein, all of the terms, covenants and
conditions of the Lease shall remain in full force and effect.
In witness hereof, the parties hereto have executed this Third Amendment
to Lease as of the day and year first written above.
LANDLORD: TENANT:
HIP-1 Limited Partnership Occupational Medical Corporation
By: /s/G. A Henkens By: /s/ Don Livingston
Its: General Partner Its: President & CEO
Date: 1-12-95 Date: 1/4/95
CORPORATE ACKNOWLEDGEMENT:
State of California }
}
County of Alameda }
On this 5th day of January , in the year 1995, before me
personally appeared Don R. Livingston to me known to be
the Chairman and President of the corporation that executed the within and
foregoing instrument, and acknowledged the same instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oat stated that they were authorized to execute said
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed by official
seal the day and year first written above.
/s/ Dawn Schwartz
Notary Public,
State of California
PARTNERSHIP ACKNOWLEDGEMENT:
State of Washington }
}
County of King }
On this 12th day of January , in the year 1995, before
me personally appeared G. Arthur Henkens to me known to be the
partner of HIP-1 Limited Partnership the partnership that executed the
foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said partnership, for the uses and purposes therein
mentioned, and on oat stated that he is auhtoized on behalf of the
partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed by official
seal the day and year first written above.
/s/ Dawn Schwartz
Notary Public,
State of California
<PAGE>
10.1(l) Fourth Amendment to Lease for Seattle, Washington dated
June 15, 1995.
FOURTH AMENDMENT TO LEASE
This Fourth Amendment to Lease is made and entered into
this 15th day of June 1995
by and between
HIP-1 Limited Partnership, a Washington Limited partnership,
(hereinafter called "Landlord") and
Occupational Medical Corporation of America, Inc., a California
Corporation (hereinafter call "Tenant")
WHEREAS, Landlord and Tenant entered into a Lease Agreement dated March 5,
1984, and subsequently amended August 2, 1989, October 23, 1989, and December
9, 1994, for approximately 4,898 square feet of rentable space located in
Suite E-120 and Suite C-107 in South Seattle Business Park located al 4634 E.
Marginal Way South, Seattle, Washington (the "Premises"). As more fully
described in the Lease and;
WHEREAS, Landlord and Tenant desire to expand the Premises and amend the base
monthly rent. Now, therefore, the parties hereby agree as follows:
1. Premises: The Premises shall be expanded to include approximately 1,086
rentable square feet of office space located in Suite C-102, as shown on
the attached Exhibit A. The revised total area leased by Landlord to
Tenant is now 5,984 rentable square feet located in Suites E-120, C-107
and Suite C-102.
2. Condition of Premises: Tenant accepts Suite C-102 in its "as is"
condition.
3. Term: The commencement date for the occupancy and payment of rent for
Suite C-102 is May 15, 1995, and will continue thereafter until December
31, 1997.
4. Rent: Tenant shall pay to Landlord as rent for the expansion area in
Suite C- 102 in accordance with the following payment schedule:
May 15, 1995-November 30, 1995 $475.00 per month
December 1, 1995 - April 30, 1996 $712.50 per month
May 1, 1996 - December 31, 1996 $859.00 per month
There shall be no additional rent increases for that part or the Premises
known as Suite C-102 except that commencing January 1, 1997 the base monthly
rent will be increased by 3% in accordance with the Lease and previous
amendments.
5. Use: This space will be used by Tenant for storage of records and
materials. Tenant will be responsible for its own janitorial services
within the new expansion area of Suite C-102.
Except as expressly provided for herein, all of the terms, covenants and
conditions or the Lease shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment to
Lease, as of the day and year first written above.
LANDLORD: TENANT:
HIP-1 Limited Partnership, Inc. Occupational Medical Corpora-
tion of America, Inc.
By: By: /s/ Milton Sanders
Its: Its:
EXHIBIT A
[Drawing/Building layout of South Seattle Business Park - Office Level
dated January 28, 1991, showing floor space and identifying the leased
premises]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S JUNE 30, 1995, 1994 AND 1993 FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1994 JUN-30-1993
<PERIOD-END> JUN-30-1995 JUN-30-1994 JUN-30-1993
<CASH> 117,815 98,649 0<F1>
<SECURITIES> 0 0 0
<RECEIVABLES> 1,317,699 2,1690,557 0
<ALLOWANCES> 430,000 500,000 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 1,346,193 2,245,401 0
<PP&E> 2,383,700 2,366,419 0
<DEPRECIATION> 2,101,032 2,039,896 0
<TOTAL-ASSETS> 2,080,965 3,106,337 0
<CURRENT-LIABILITIES> 5,080,641 3,504,149 0
<BONDS> 0 218,750 0
<COMMON> 3,571,805 3,571,805 0
0 0 0
0 0 0
<OTHER-SE> 62,704 62,704 0
<TOTAL-LIABILITY-AND-EQUITY> 2,080,965 3,106,337 0
<SALES> 3,995,274 5,295,691 5,740,841
<TOTAL-REVENUES> 3,995,274 5,295,691 5,740,841
<CGS> 0 0 0
<TOTAL-COSTS> 1,374,950 1,604,124 1,815,924
<OTHER-EXPENSES> 5,009,838 5,498,179 5,743,057
<LOSS-PROVISION> 684,000 275,000 99,000
<INTEREST-EXPENSE> 687,715 276,640 334,789
<INCOME-PRETAX> (2,389,514) (1,806,612) (1,818,140)
<INCOME-TAX> 1,600 (68,400) 65,760
<INCOME-CONTINUING> (2,391,114) (1,738,212) (1,883,900)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 125,000 0
<CHANGES> 0 0 0
<NET-INCOME> (2,391,114) (1,613,212) (1,883,900)
<EPS-PRIMARY> (.95) (.69) (.75)
<EPS-DILUTED> (.95) (.69) (.75)
<FN>
<F1>BALANCE SHEETS FOR JUNE 30, 1993 IS INCLUDED IN THE REGISTRANT'S FINANCIAL
STATEMENTS AND IS CONSEQUENTLY NOT INCLUDED IN THIS FINANCIAL DATA SCHEDULE.
</FN>
</TABLE>
