<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(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 December
31, 1995 or
( ) 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
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Commission File Number: 0-17401
OPTIMUMCARE CORPORATION
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0218003
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30011 Ivy Glenn Drive, Suite 219
Laguna Niguel, California 92677
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (714) 495-1100
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
- ------------------- ----------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
-----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for, such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
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<PAGE> 2
COMMON STOCK, -$.001-PAR-VALUE
(TITLE OF CLASS)
The aggregate market value of the voting stock held by non-affiliates of the
Company on March 11, 1996 (4,094,786 shares of Common Stock) was $4,627,105
based on the bid price of the Company's voting stock on March 11, 1996.*
The number of shares outstanding of each of the Company's classes of Common
Stock, as of March 11, 1996 was:
Common Stock, - 4,938,509 shares
$.001 par value
Documents Incorporated by Reference
None.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will be contained to the best of
registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K./ /
* This value is not intended to make any representation as to value or
worth of the Company's shares of Common Stock. The number of shares
held by non-affiliates of the Company has been calculated by
subtracting shares held by controlling persons of the Company from the
number of issued and outstanding shares of the Company.
<PAGE> 3
PART I
ITEM 1 - BUSINESS
(a) General Development of Business
OptimumCare Corporation (the "Company") was incorporated in California on
November 25, 1986 and was reincorporated in Delaware on June 29, 1987. In
mid-1987, the Company commenced the development and marketing of health care
facility-based programs ("Programs") to be managed by the Company for the
treatment of depression and certain other mental health disorders
("PsychPrograms"), as well as programs for alcohol and drug abuse ("Treatment
Programs"). After the Company obtains a contract for the establishment of one or
more Programs at a host health care facility, the Company recruits and trains
the staff needed to operate its programs. Typically, the host health care
facility provides a specified number of beds for the Program, as well as all
other support services required for the operation of the Program, including
nursing, dietary, housekeeping, billing and other administrative functions. The
Company recruits and trains the staff to operate the Program. The Company's
staffing of a Program will usually include a medical director, a program
director, a psychologist, a chief therapist and one or more counselors or social
workers.
Contracts are individually negotiated with the host health care facility and
usually approximate 20 to 60 beds. Generally, the Company and the host health
care facility negotiate a per patient management fee which depends on the scope
of services provided by the Company number of beds, rates charged and
reimbursements received by the facility, and in some instances, a fixed monthly
administrative fee and reimbursement of certain direct program costs. The health
care facility charges the patient on a daily basis in accordance with a fee
schedule of prescribed rates, except where the insurer provides for payment
which is limited to a maximum number of days per patient. The health care
facility pays the Company a fixed management fee per patient which approximates
$160 per patient day or in some cases, a reimbursement of direct costs plus a
per patient per day incentive fee and a percentage of overhead fee, and a fixed
management fee per visit which approximates $85 per visit or in some cases, a
percentage of collected revenues for outpatient contracts. Certain contracts
contain provisions which deny portions or all of the management fee should
patient days be ultimately appealed and denied by the patient payor.
As of March 11, 1996, the Company has thirteen (13) Programs that are hosted by
six (6) hospitals: Five PsychPrograms through Huntington InterCommunity
Hospital, D/B/A Humana Hospital Huntington Beach, Huntington Beach, California,
two PsychPrograms at St. Francis Medical Center, Lynwood, California, one
PsychProgram at Brotman Medical Center, Culver City, California, one
PsychProgram at Samaritan Health System D/B/A Samaritan Medical Center, San
Clemente, California, two PsychPrograms through Sherman Oaks Hospital and
HealthCenter, Sherman Oaks, California, and two PsychPrograms at Mission
Community Hospital, San Fernando, California.
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(b) Financial Information About Industry Segments
The Company competes in one industry segment which is the development, marketing
and operation of Programs.
(c) Narrative Description of the Business
(i) and (ii) Products
OptimumCare's PsychPrograms ("PsychProgram")
The PsychProgram is a medically-supervised psychiatric care program for certain
types of mental health disorders that is offered on both an inpatient and
outpatient basis. The PsychProgram is directed at assisting the patient to
return to a normal life. The PsychProgram is designed to treat patients with
neuroses and personality disorders; however, the Company's marketing focus is to
attract patients who exhibit symptoms of depression. Patients suffering from
depressive mental illness manifest, among other things, loss of interest in the
world generally, loss of activity and capacity to love, sadness, hopelessness,
fatigue, boredom, restlessness, loss of belief in personal future, anxiety and
feelings of ill-at-ease. At the outset, a patient receives a physical
examination and diagnostic testing to eliminate any physical illnesses which may
evidence some symptoms of mental disorders.
Each PsychProgram also includes individual and group therapy and a full daily
regimen of activities including sessions for relaxation, assertiveness training,
exercise and men's and women's sexual awareness. The Company estimates that the
average stay for a patient in a PsychProgram will be 7-10 days.
OptimumCare's Partial Hospitalization Program ("Partial Hospitalization")
Partial Hospitalization is a new behavioral medicine outpatient product that
provides daytime treatment programs that employ an integrated and individualized
schedule of recognized psychiatric treatment modalities.
Partial Hospitalization is a treatment approach developed as an alternative to
inpatient treatment. It includes the major psychiatric evaluation and treatment
modalities (both psychosocial and biological), which are usually found in a
comprehensive psychiatric inpatient program. It is designed for voluntary
patients with serious mental disorders who require intensive and
multi-disciplinary treatment which cannot be provided in an outpatient setting.
By offering a medically-supervised alternative to inpatient treatment, it
provides a more flexible, less costly and less restrictive form of treatment.
Partial Hospitalization can be utilized by individuals who are mentally or
emotionally impaired, but who are able to be maintained in the community at
least part of each day, and present little risk of imminent danger to themselves
or others. The Company believes that the benefits of partial hospitalization
include: lessening the disruption of social, family, and community ties;
allowing the patient to test new skills in a more natural environment than a
hospital setting; providing a treatment milieu that fosters independence and
self reliance; allowing daily feedback from the home environment thereby closely
involving members of the patient's family or supportive environment in the
treatment program; providing flexibility in the number of treatment days per
week thus allowing a patient to pursue other activities such as a shortening of
the
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inpatient stay or preventing the need for full hospitalization.
Expansion of Products
The Company is seeking to expand the scope of psychological services it offers
by acquiring entities which offer complimentary mental health services.
Negotiations are currently underway to purchase Psychological Healthcare, Inc.
and Care Source, Inc. Psychological Healthcare operates outpatient mental health
clinics. Care Source provides management and other administrative behavioral
healthcare services to skilled nursing and other similar bed and board
facilities. Although there is no definitive agreement as of December 31, 1995,
the Company believes that the transaction will close in the second quarter of
1996.
The Company believes that it can more effectively market its services to managed
care payors by increasing the scope of services it provides.
Staffing
The PsychProgram and Partial Hospitalization Programs are staffed by the Company
with a medical director, a program manager, and in some cases, a psychologist, a
chief therapist, and at least one counselor or social worker. The key staff
members are the medical director and the program manager. The medical director
is a licensed psychiatrist who is a staff member of the host health care
facility and is engaged as an independent contractor charged with the
responsibility for overseeing the administration of the Program from a
medical/regulatory compliance viewpoint. In addition to the medical director who
is responsible for administering the clinical aspects of the contract, the
Company often engages co-medical directors in each community in which a Program
is located. These co-medical directors are licensed psychiatrists or
psychologists. They provide administrative assistance to a Program and represent
it at various professional activities in the local community. The co-medical
directors are compensated at a fixed monthly rate, depending on the amount of
time they commit to supporting the Company's Programs. The Company's employees
and contractors at each program are subject to approval and pre-employment
screening by the host health care facility. The Company has not experienced any
difficulty in locating qualified medical directors from the hospital staff to
affiliate with the Company's Programs. The program manager is a full time
employee of the Company and usually has completed either a bachelor's or
master's degree program in psychology or social work, but is principally a
marketing representative of the Company. Program managers are officed at their
respective Program's facility.
Contract Operations
The Company provides a host health care facility with staff recruitment, a
two-week pre-opening in-service nurse and hospital employee training program,
program management, continuing education, community education, ongoing public
relations and program quality assurance.
The Company provides these training programs to the host health care facility at
no charge. Nursing, dietary, X-ray, laboratory, housekeeping, admissions and
billing are the responsibility of the host health care facility.
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Existing contracts range from a period of one to five years and may be renewed
for subsequent terms, of usually one year periods. In some cases, if the Company
does not maintain a stipulated minimum average daily census for specified
periods the health care facility may terminate the contract on reasonable notice
to the Company.
Payment for Services
Patients are screened by the host healthcare facility prior to admission.
Screening procedures include verification of the existence and extent of
insurance coverage.
It is the host health care facility's responsibility to bill and collect the
fees charged to the patient for all program services. The Company in turn bills
the host health facility for the total patient days of service provided at the
specified contract rate. Generally, the Company bills the host health care
facility fifteen (15) days after the close of the month in which the services
were rendered. Except in the cases where the contracts provide for specific hold
backs for ultimately denied days, the majority of the contracts do not
specifically provide that the Company shall bear any risk of non-payment by the
host healthcare facility. However, industry practice dictates that the Company
acknowledge that a certain percentage of the fees will be uncollected by the
host health care facility. Thus, accommodations are expected to be made on a
case-by-case basis with each host health care facility (except where there is an
express contractual provision which governs this issue) to offset some portion
of Program patients' bad debts experienced by the host health care facility.
Many of the hospitals the Company contracts with have a large number of Medicare
and Medicaid patients. However, the Company has negotiated with these hospitals
whereby they are paid either a flat per diem rate or a per diem rate with a hold
back for days ultimately denied. Thus, the Company is not directly dependent on
Medicare or Medicaid for payment under its contracts. It is unknown, whether in
the future other contracts or programs will be dependent on a disproportionate
amount of Medicare/Medicaid patients.
Marketing
The Company's marketing efforts are primarily directed toward increasing the
number of management contracts by either the takeover of existing programs
operated by others or the establishment of new Partial Hospitalization or
PsychPrograms in geographically desirable areas. The Company believes that their
ability to secure new contracts is based on its reputation as a quality provider
coupled with its history of low length of patient stays resulting in less
uncompensated care.
Sales calls are primarily directed at health care facilities which may be
experiencing a low or declining patient census and facilities in geographically
desirable areas. After a contract is obtained, the Company prepares a detailed
marketing development strategy aimed at attracting patients to the Programs.
The program director for each PsychProgram at the host health care facility
develops a media press kit for each Program. The program director coordinates
all local advertising consistent with the Company's overall marketing plan. Each
program director implements a local market development strategy to increase the
public awareness of the Program, including the establishment of a media
appearance and community speakers bureau which are referred to the broadcast
media for further exposure. The co-medical directors direct local continuing
professional education and community service programs on an as-needed basis. The
host hospital's administrative and medical staffs are also encouraged to
participate in community relations activities.
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Direct marketing to psychiatrists, psychologists and other licensed
professionals by the Company is emphasized because these individuals motivate
potential patients to seek inpatient treatment for their mental health. The
Company's marketing approach to physicians and clinicians emphasizes involvement
through one-on-one communication with the professionals who will provide patient
referrals. These professionals are invited to the Company-sponsored community
relations activities, speaker programs and continuing education seminars.
(iii) Raw Materials
Inapplicable.
(iv) Patents and Trademarks
The Company holds a federal service mark, Registration #1628745, for its
tradename "OptimumCare". The Company has marketed its programs under the names
"OptimumCare PsychProgram" and "OptimumCare Treatment Program".
(v) Seasonality
The Company has noted a trend that its business appears to be susceptible to
some seasonal variation. Census tends to substantially decrease near various
holidays, particularly during the fourth quarter.
(vi) Working Capital Items
The Company expects to experience an initial one-time maximum delay of up to 90
days in receipt of revenues after each Program is opened due to the normal
processing time for the billing/payment cycle of the host health care
facilities.
(vii) Dependence on a Few Customers
The Company presently has thirteen (13) Programs operating through six (6)
hospitals. If any of these Programs were terminated, or if any of the accounts
receivable from these contracts were to become uncollectible, such event could
have a material adverse effect on the Company.
(viii) Backlog
Inapplicable.
(ix) Government Contracts
The Company is not currently a party to any government contract.
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(x) Competition
The Company competes with other health care management companies for contracts
with acute care hospitals. Also, the Company's Programs will compete for
patients with the programs of other hospitals and other health care facilities.
The success of the Company's Programs is also dependent on its ability to
establish relationships with sources of patient referrals.
The Company's principal competitors include Charter Medical Corporation,
Community Psychiatric Centers, Comprehensive Care Corporation, Mental Health
Management and Horizon Health Services, all of which have greater financial and
other resources and more experience than the Company. In addition, some health
maintenance organizations ("HMOs") offer competing programs; however, the
HMO-owned hospitals typically do not provide inpatient psychiatric services, nor
coverage for these services. Most HMOs also do not provide programs for partial
hospitalization or substance abuse, but often provide coverage for these
programs, usually at a reduced rate.
Other health care facilities offer comparable programs which compete with the
Company's Programs in each service area. The Company believes, however, that in
general its marketing efforts are primarily effective within a ten (10) mile
radius around the host hospital and that patients outside such radius are not
directly affected by such advertising unless their personal physician has
admitting privileges and recommends the Company's program at that host hospital.
The Company believes that the principal competitive factors in obtaining
contracts with health care facilities are experience, reputation for quality
programs, the availability of program support services and price. The primary
competitive factors in attracting referral sources and patients are marketing,
reputation, record of success, quality of care and location and scope of
services offered by a host health care facility. The Company implements active
promotional programs and believes it is competitive in attracting referral
sources and patients based on these factors.
(xi) Research and Development
Inapplicable.
(xii) Government Regulation and or Environmental Protection
The health care industry is extensively regulated by federal, state and local
governments. Regulations which affect the Company relate to controlling the
growth of health care facilities, requiring licensure of the host health care
facility, requiring certification of the Program at the host facility and
controlling reimbursement for health care services. Licensure of facilities and
certification of Programs are state requirements, while certification for
Medicare is a federal requirement. Compliance with the licensure and
certification requirements is monitored by annual on-site inspections by
representatives of the licensing agencies. Loss of licensure or Medicare
certification by a host facility could result in termination of such contract.
Certificate of need ("CON") laws in some states require approval for capital
expenditures in excess of certain threshold amounts, expansion of bed capacity
or facilities, acquisition of medical equipment or institution of new services.
If a CON must be obtained, it may take up to 12 months to do so, and in some
instances longer, depending upon the state involved and whether the application
is contested by a competitor or the state agency. CON's usually are issued for
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a specified maximum expenditure and require implementation of the proposed
improvement within a specified period of time. Certain states, including
California, Texas, Utah, Colorado and Arizona, have enacted legislation
repealing CON requirements for the construction of new health care facilities,
the expansion of existing facilities and the institution of new services. Some
states have enacted or have under legislative consideration "sunset" provisions
which require the review, modification or deletion of these statutes when no
longer needed. The Company is unable to predict whether such legislative
proposals will be enacted but believes that the elimination of CON requirements
positively impacts its business.
The Joint Commission on the Accreditation of Healthcare Organizations ("JCAHO"),
at a facility's request, will participate in the periodic surveys which are
conducted by state and local health agencies to ensure continuous compliance
with all licensing requirements by health care facilities. JCAHO accreditation
satisfies certain of the certification requirements for participation in the
Medicare and Medicaid programs. A facility found substantially to comply with
JCAHO standards receives accreditation. A patient's choice of a treatment
facility may be affected by JCAHO accreditation considerations because most
third-party payers limit coverage to services provided by an accredited
facility. All of the hospitals currently under contract with the Company have
received JCAHO accreditation.
The laws of various states in which the Company may choose to operate, including
California, generally prevent corporations from engaging in the practice of
medicine. These laws (e.g., Section 2052 of the California Business and
Professions Code), as well as applicable case law, were enacted to protect the
public from the rendering of unnecessary medical or other services for treatment
of the ill. Although the Company has not obtained a legal opinion, it believes
that the establishment and operation of Programs will not cause it to be engaged
in the "practice of medicine" as that term is used in such laws and regulations.
These laws and regulations are subject to interpretation and, accordingly, the
issue is not free from doubt. Since the Company has not sought or obtained any
rulings, there can be no assurance that state authorities or courts will not
determine that the Company is engaged in the unauthorized practice of medicine.
If such a determination is made and is not overturned, the Company would have to
terminate its operations in that state.
The Company's medical directors are engaged to provide administrative services,
including but not limited to planning the clinical program, supervising the
clinical staff, establishing standards of professional care, advising the
Company and staff on questions of policy. The co-medical directors conduct
public relations activities and assist the Company in marketing. Although the
Company has not obtained a legal opinion, it believes that the proposed
agreements between the Company and its medical and co-medical directors do not
violate any fee-sharing prohibitions. The federal prohibition, as it relates to
the Medicare program, is found at 42 U.S.C. 1320a-7b. Such prohibitions are
found in Section 650 of the California Business and Professional Code and
Section 445 of the California Health and Safety Code, as well as comparable
statutes in other states. However, future judicial, legislative or
administrative interpretations of these arrangements could prohibit the Company
from hiring professionals which could have a materially adverse effect on the
Company.
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Given the recent political mandate for health care reform, it appears likely
that health care cost containment will occur. The Company is practiced in
administrating "managed care type" programs and is familiar with the pressures
of improving productivity and reducing costs.
(xiii) Employees
As of February 29, 1996, the Company employed 121 persons full-time and
fifty-two (52) persons part-time. Those figures do not include physicians and
psychiatrists who are medical directors of the Company's Programs and not
employees.
(d) Financial Information About Foreign and Domestic Operations and Export Sales
Inapplicable.
ITEM 2 - PROPERTIES
The Company maintains its corporate offices in an approximately
2,200-square-foot suite of executive offices in Laguna Niguel, California, under
a lease agreement providing for a monthly base rent of $2,880 which expires June
30, 1996. The Company began leasing an additional satellite corporate office in
Playa Del Rey, California November 1, 1995 under a lease agreement providing for
a monthly base rent of $1,900 which expires October 31, 1996. The Company
believes that this office space is adequate for its reasonably foreseeable
needs. It is expected that the terms will be extended thereafter on similar
terms.
The Company has also leased space under five separate lease agreements for the
operation of its outpatient partial hospitalization programs. One agreement is
on a month to month basis. The remaining agreements expire September 30, 1996,
June 3, 1997, June 23, 1997 and June 30, 1997 respectively. The lease which
expires June 30, 1997 contains five (5) one (1) year options to extend the
lease. Aggregate monthly payments total $10,432,60 and are fully reimbursed
through subleases with the Company's host hospitals.
ITEM 3 - LEGAL PROCEEDINGS
Inapplicable.
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
On December 5, 1995, the Company held its annual Meeting of Stockholders. At the
meeting, Edward A. Johnson, Gary L. Dreher, Jon Jenett and Michael S. Callison
were each elected as Directors of the Company with 4,601,001 shares voting for
the Director nominees and 17,900 shares withholding authority to vote. The
meeting was continued to December 22, 1995 for consideration of the adoption of
the 1994 Stock Option Plan. The adoption of the plan requires a majority vote of
the outstanding shares. The Plan was adopted with 2,503,337 shares voting for
the Plan, 247,604 shares voting against the Plan and 54,974 shares abstaining
from voting.
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PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS
(a) Market Information
The Company's common stock is currently quoted on the over the counter
"OTC" electronic bulletin board under the symbol OPMC.
<TABLE>
<CAPTION>
High Bid Low Bid
-------- -------
<S> <C> <C>
1995:
- ----
Fourth Quarter 1 1/4 1 5/16
Third Quarter 1 1/4 29/32
Second Quarter 1 7/32 21/32
First Quarter 7/8 3/4
- ----------
1994:
- ----
Fourth Quarter 7/8 3/4
Third Quarter 1 23/32
Second Quarter 31/32 3/4
First Quarter 7/8 5/8
</TABLE>
- ----------
The listed prices represent inter-dealer quotations, without retail
mark-up, mark-down or commissions and may not necessarily represent
actual transactions.
(b) Holders
The approximate number of holders of record each class of the Company's
common equity securities as of the close of business on March 11, 1996
is set forth below:
<TABLE>
<CAPTION>
Approximate
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Common Stock, $.001 par value 300
</TABLE>
(c) Dividends
The Company has never paid or declared dividends on its Common Stock.
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ITEM 6 - SELECTED FINANCIAL DATA
The following selected financial data should read in conjunction with
the Financial Statements and Notes thereto of the Company included
elsewhere herein, and such data should be read with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations." The data at December 31, 1995 and December 31, 1994 and
for each of the fiscal years in the three year period ended December
31, 1995 are derived from the Company's Financial Statements for such
years audited by Ernst & Young LLP which Financial Statements are
included elsewhere herein.
STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
================================================================================
1995 1994 1993 1992 1991
================================================================================
<S> <C> <C> <C> <C> <C>
NET REVENUES $6,027,122 $5,596,283 $3,825,613 $2,314,376 $2,222,220
- --------------------------------------------------------------------------------
NET INCOME 2,070 465,045 365,189 127,045 183,037
- --------------------------------------------------------------------------------
NET INCOME PER
SHARE OF COMMON
STOCK .00 .09 .07 .03 .04
- --------------------------------------------------------------------------------
WEIGHTED NUMBER
OF SHARES
OUTSTANDING 5,432,748 5,239,503 5,139,080 4,908,909 4,888,509
================================================================================
</TABLE>
BALANCE SHEET INFORMATION
AS OF DECEMBER 31
<TABLE>
<CAPTION>
================================================================================
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS $2,059,537 $1,814,153 $1,299,215 $917,779 $659,369
- --------------------------------------------------------------------------------
CURRENT ASSETS 1,739,112 1,699,801 1,237,885 904,072 639,857
- --------------------------------------------------------------------------------
CURRENT
LIABILITIES 381,531 333,209 269,343 249,701 118,336
- --------------------------------------------------------------------------------
NET WORKING
CAPITAL 1,357,581 1,366,592 968,542 654,371 521,521
- --------------------------------------------------------------------------------
LONG-TERM
OBLIGATIONS 166,000 0 0 0 0
================================================================================
</TABLE>
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(a) Liquidity and Capital Resources
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994.
At fiscal year end 1995 and 1994, the Company's working capital was $1,357,581
and $1,366,592 respectively. The nature of the Company's business requires
significant working capital to fund operations of its programs as well as to
fund corporate expenditures until receivables can be collected. Moreover,
because each of the existing contracts represents a significant portion of the
Company's business, the inability to collect any of the accounts receivable
could materially and adversely affect the Company's liquidity.
Cash flows from operations were $159,554 and ($191,639) for the years ended
December 31, 1995 and 1994, respectively. The increase was primarily
attributable to increase in program accounts receivable due to an increase in
program volume.
Cash flows used in investing activities were ($215,196) and ($63,362) for the
years ended December 31, 1995 and 1994, respectively. The decrease in cash was
primarily attributable to deferred acquisition costs incurred in connection with
the proposed acquisitions of two companies performing complimentary mental
health services.
The cash flows from financing activities was $189,917 and ($13,973) for the
years ended December 31, 1995 and 1994, respectively. The increase was primarily
due to draws on the Company's line of credit agreement with a bank. The credit
agreement expires May 1, 1996, but is convertible into a one year term loan with
an initial due date of May 1, 1997 but with a five (5) year repayment schedule.
As of March 11, 1996, approximately $260,000 is available for future draws on of
the line of credit agreement. The Company's principal sources of liquidity for
the fiscal year 1996 are cash on hand, accounts receivable, the line of credit
with a bank and continuing revenues from programs.
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993.
At fiscal year end 1994 and 1993, the Company's working capital was $1,366,592
and $968,542 respectively. The increase in working capital at December 31, 1994
over December 31, 1993 was primarily due to the increase in Program accounts
receivable due to the increase in Program volume. The nature of the Company's
business requires significant working capital to fund operations of its Programs
as well as to fund corporate expenditures until receivables can be collected.
Moreover, because each of the existing contracts represents a significant
portion of the Company's business, the inability to collect any of the accounts
receivable would materially and adversely affect the Company's liquidity. During
1994, the Company wrote off approximately $142,000 in billings to an entity who
leased facilities from a hospital which filed bankruptcy in June, 1994.
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The Company's cash flow at fiscal year end 1994 declined due to the significant
increase in receivables. However, through March 7, 1995, the Company collected
approximately $1,000,000 against total receivables which existed at fiscal year
end 1994, thereby improving the Company cash position considerably.
(b) Results of Operations
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
The Company operated seventeen (17) programs during the year ended December 31,
1995 and sixteen (16) programs during the year ended December 31, 1994. The
Company currently has thirteen (13) operating programs. Net Revenues were
$6,027,122 and $5,596,283 for the years ended December 31, 1995 and 1994
respectively. The increase in revenues in 1995 over 1994 is due to the greater
number of total operating programs among years and a greater number of inpatient
psychiatric programs operating for a greater portion of 1995 versus 1994. The
Company typically earns a larger management fee on managing inpatient versus
partial hospitalization programs. In addition, the volume of patient days
treated through inpatient programs is greater than those treated through partial
hospitalization programs.
Cost of services provided were $5,022,040 and $4,238,555 for the years ended
December 31, 1995 and 1994 respectively. The increase in the cost of services
provided among years is primarily due to the increase in program volume among
years and an expanded scope of services provided in connection with certain
contracts such as nursing, transportation and lease costs.
Selling, general and administrative expenses have increased over the prior year
due to increased corporate marketing wages and activities, and various
professional fees incurred with the Company's contract and business acquisition
efforts.
The provision for uncollectible accounts decreased from the prior year due to
the termination of two contracts with one entity which leased facilities from a
hospital which filed bankruptcy in June, 1994.
Net income was $2,070 and $465,045 for the years ended December 31, 1995 and
1994, respectively. The decrease was primarily attributable to increased cost of
services provided and increased sales and marketing efforts.
The Company does not know of any events which are likely to materially change
the costs of operating its Programs; however, if the mix of individual operating
programs remains stable, and revenues increase significantly, gross profit
should rise favorably and disproportionately to the increase in cost for such
Programs. During 1995 and 1994, the mix of programs changed significantly.
Conversely, if the patient census and the resulting revenue decreases
(especially below the minimum break even level) costs will be disproportionately
high in relation thereto which would adversely impact the results of operations
and the Company's available resources. In that event, the Company may not have
enough operating capital to continue operations.
The Company's revenue is expected to increase in 1996 due to higher census under
existing contracts and a larger number of programs operational for the entire
year. Marketing plans for expanding the volume of the business by obtaining new
contracts for programs and expanding the scope of mental health services offered
by the acquisition of complementary businesses
12
<PAGE> 15
currently exist. However, it is uncertain at this time, to what extent the
Company's fixed costs will be impacted by this expansion. Due to the Company's
dependence on a relatively small customer base presently consisting of only six
(6) hospitals, the loss of any of its customers could have a significant adverse
effect on the Company's operations. Hence, there is a special emphasis paragraph
in the report of the Company's independent audit of the financial statements for
the fiscal year ended December 31, 1995. In addition, the Company wrote off
approximately $36,000 in billings to one entity in 1995, and $142,000 in
billings to one hospital in 1994.
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993.
The Company operated sixteen (16) Programs during the year ended December 31,
1994 and fourteen (14) Programs during the year ended December 31, 1993. The
increase in revenues in 1994 over 1993 is due to the greater number of operating
Programs among years, and increased volume at the individual Programs. This
increase was compounded due to the fact that a majority of the new Programs
which were opened in 1993 were opened during the latter half of the year.
The increase in the cost of services provided among years is directly due to the
increase in revenues.
Selling, general and administrative expenses increased over the prior year due
to increased wages and benefits resulting from the addition of a Vice President
of Corporate Marketing and Development in 1994, as well as an executive bonus
program based on the Company's profits.
The provision for uncollectible accounts increased over the prior year due to
the termination of two contracts with one entity which leased facilities from a
hospital which filed bankruptcy in June, 1994.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
OPTIMUMCARE CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
See pages F1 through F11 of this Form 10-K and Item 14.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Inapplicable.
13
<PAGE> 16
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) and (b) Identification of Directors and Executive Officers
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Edward A. Johnson 50 President, Principal Financial
Officer, Secretary and Chairman of the Board
Gary L. Dreher 49 Director
Michael S. Callison 57 Director, Vice President of
Corporate Development
Jon E. Jenett 43 Director
</TABLE>
Each director serves for a term of one year or until his successor has been
elected and qualified. Each executive officer serves at the pleasure of the
Board of Directors. Directors do not receive any director's fees or other
compensation for their services, as such, but receive reimbursement for their
expenses in attending meetings of the Board of Directors.
(c) Identification of Certain Significant Employees
Inapplicable.
(d) Family Relationships
Inapplicable.
(e) Business Experience
Mr. Johnson has been President, Chief Executive Officer and Chairman of the
Board of the Company since co-founding the Company in November 1986. During May,
1990, Mr. Johnson assumed the role of Principal Financial Officer following the
resignation of the former Chief Financial Officer. From August 1985 through July
1986, he was Executive Vice President of Behavioral Medicine Corporation, a
joint venture between The Voluntary Hospital Association of America and
Comprehensive Care Corporation.
Mr. Johnson's duties principally included the development of psychiatric and
substance abuse programs for hospitals throughout the United States. From 1969
until August 1985, Mr. Johnson was employed in various positions with
Comprehensive Care Corporation, a significant provider of management programs
for psychiatric disorders and substance abuse. Mr. Johnson's most recent
position at Comprehensive Care Corporation was the Executive Vice President of
Operations. His principal duties were to develop and implement marketing systems
for that company's programs. Mr. Johnson received a M.S. degree in Psychology
from Colorado State
14
<PAGE> 17
College in 1966 and is licensed in California as a Marriage and Family
Counselor.
Mr. Dreher was elected to the Board of Directors during September, 1993. He
received his B.S. degree in Microbiology and Lab Technology from California
State University in 1971. For the past four years, he has served as Vice
President of International Sales for Apotex Scientific, an international
distributor network for Esoteric Diagnostic Tests. From 1984 to 1991, he was
Vice President of Sales at Ventrex Laboratories, a manufacturer of Diagnostic
Tests for medical and biotechnology markets.
Mr. Callison was elected to the Board of Directors during September, 1993. He
received his B.A. degree in Economics from the University of Puget Sound,
Tacoma, Washington in 1966. In 1994, Mr. Callison was promoted to Vice President
of Marketing and Development. From 1990 to 1993, he was a sales and marketing
consultant to the Company, assisting in business development and responsible for
securing various key management contracts for the Company. From 1984 to 1990,
Mr. Callison was a Senior Account Executive for the Hill-Rom Company,
responsible for marketing hospital patient room furniture.
Mr. Jenett was elected to the Board of Directors during December, 1995. He
received his B.A. degree in Economics from Harvard College in 1974 and his
M.B.A. from Stanford Business School in 1978. For the past five years, he has
served as the Chief Financial Officer of Mission Electronics Corporation, a
wholesale broker of electronic components. From 1981-1990, he was a partner of
Investment Group of Santa Barbara, an investment fund specializing in small
public an private companies.
(f) Involvement in Certain Legal Proceedings
Inapplicable.
15
<PAGE> 18
ITEM 11 - EXECUTIVE COMPENSATION
(a) Cash Compensation
The following table sets forth the elements of compensation paid,
earned or awarded for the sole executive of the Company. All aspects of
executive compensation is determined by the Board of Directors.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
======================================================================================================
ANNUAL COMPENSATION AWARDS PAYOUTS
- ------------------------------------------------------------------------------------------------------
NAME & OTHER ALL OTHER
PRINCIPAL ANNUAL RESTRICTED OPTIONS PAYOUTS COMPEN-
POSITION YEAR SALARY($) BONUS($) COMPEN- STOCK /SARs ($) SATION ($)
SATION($) AWARDS($)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $144,000 $40,259 $11,602 (1)(2)
EDWARD A. JOHNSON, 1994 144,000 61,703 11,196 (1)(2)
PRESIDENT 1993 154,021 32,811 8,626 (1)(2)
MULU G. MICHAEL, 1995 $103,433 $30,833
VICE PRESIDENT OF 1994 67,500 14,072
CLINICAL 1993 26,500 1,692
OPERATIONS
LESTER H. HARMAN 1995 $ 74,218 $38,430 $ 1,800 (1)
REGIONAL 1994 60,000 37,295 1,800 (1)
MARKETING 1993 45,000 11,550 1,350 (1)
MANAGER
======================================================================================================
</TABLE>
# NUMBER OF UNITS
$ DOLLAR AMOUNTS
(1) CAR ALLOWANCE
(2) LIFE INSURANCE PREMIUMS
16
<PAGE> 19
(b) Compensation Pursuant to Plans
Stock Option Plans
The Company's 1987 Stock Option Plan (the "Plan"), adopted by the Board of
Directors on July 28, 1987, and approved by the stockholders on August 28, 1987,
provides for the grant to officers, directors, employees and consultants of
nonqualified stock options and stock options to employees that qualify as
incentive stock options under Section 422A of the Internal Revenue Code of 1986.
The Plan terminates on July 28, 1997. The purpose of the Plan is to enable the
Company to attract and retain qualified persons as employees, officers and
directors and others whose services are required by the Company, and to motivate
such persons by providing them with an equity participation in the Company. A
maximum of 455,000 shares of the Company's Common Stock were reserved for
issuance pursuant to the Plan. Options to purchase 19,000 shares were exercised
during fiscal year ended December 31, 1995. There are currently 317,500 shares
subject to options outstanding under the Plan. The Plan is administered by the
Board of Directors, which has, subject to specified limitations, the full
authority to grant options and establish the terms and conditions under which
they may be exercised.
The exercise price of incentive stock options granted under the Plan is required
to be not less than the fair market value of the common stock on the date of
grant (110% in the case of a greater than 10% stockholder). The exercise price
of nonqualified stock options can be no less than 85% of the fair market value
on the date of grant, although the Company does not intend to grant any such
stock options at less than fair market value. In the discretion of the Board,
the exercise price may be payable in cash, by delivery of a promissory note or
in Common Stock of the Company.
The options are subject to forfeiture upon termination of employment or other
relationship with the Company except by reason of death or disability and are
nonassignable. Options may be granted for terms up to 10 years (five years in
the case of incentive stock options granted to greater than 10% stockholders).
No optionee may be granted incentive stock options such that the fair market
value of the options which first become exercisable in any one calendar year
exceeds $100,000. Options granted under the Plan to officers, employees or
consultants may be exercised only while the optionee is employed or retained by
the Company or within six (6) months after termination of the employment or
consulting relationship by reason of death or permanent disability, and three
months after termination for any other reason.
On December 31, 1991, the Board of Directors granted additional options under
the Plan to Edward A. Johnson to purchase 27,500 shares and Michael S. Callison
to purchase 25,000 shares. The option exercise price is $ .21 per share. The
options have a five year term and vest immediately. On August 23, 1993, the
Board of Directors granted additional options under the Plan to Michael S.
Callison to purchase 25,000 shares and Gary L. Dreher to purchase 25,000 shares.
The option exercise price is $ .30 per share. The options have a five year term
and vest immediately.
On December 20, 1994, the Board of Directors re-adopted the Company's 1994 stock
option plan. The plan was approved by the stockholders on December 22, 1995 and
provides for the grant to officers, directors, employees and consultants of
nonqualified stock options and stock options to employees that qualify as
incentive stock options under Section 422A of the Internal Revenue
17
<PAGE> 20
Code of 1986. The Plan terminates on March 22, 2004. The purpose of the Plan is
to enable the Company to attract and retain qualified persons as employees,
officers and directors and others whose services are required by the Company,
and to motivate such persons by providing them with an equity participation in
the Company. A maximum of 500,000 shares of the Company's Common Stock were
reserved for issuance pursuant to the Plan. Options to purchase an aggregate of
250,000 shares were granted during fiscal year ended December 31, 1995 including
options under the Plan to Jon E. Jenett to purchase 25,000 shares. The option
exercise price is $.93 per share. The options have a five year term and vest
immediately. No options were exercised during fiscal year ended December 31,
1995. There are currently 475,000 shares subject to option outstanding under the
Plan. The Plan is administered by the Board of Directors, which has, subject to
specified limitations, the full authority to grant options and establish the
terms and conditions under which they may be exercised.
The exercise price of incentive stock options granted under the Plan is required
to be not less than the fair market value of the common stock on the date of
grant (110% in the case of a greater than 10% stockholder). The exercise price
of nonqualified stock options can be no less than 85% of the fair market value
on the date of grant, although the Company does not intend to grant any such
stock options at less than fair market value. In the discretion of the Board,
the exercise price may be payable in cash, by delivery of a promissory note or
in Common Stock of the Company.
The options are subject to forfeiture upon termination of employment or other
relationship with the Company except by reason of death or disability and are
nonassignable. Options may be granted for terms up to 10 years (five years in
the case of incentive stock options granted incentive stock options such that
the fair market value of the options which first become exercisable in any one
calendar year exceeds $100,000. Options granted under the Plan to officers,
employees or consultants may be exercised only while the optionee is employed or
retained by the Company or within six (6) months after termination of the
employment or consulting relationship by reason of death or permanent
disability, and three months after termination for any reason.
18
<PAGE> 21
Options/SAR Grants in Last Fiscal Year
The following table sets forth certain information concerning
Options/SARs granted during 1995 to the named executives:
<TABLE>
<CAPTION>
=======================================================================================================
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF STOCK PRICE
APPRECIATION FOR OPTION
TERM
- -------------------------------------------------------------------------------------------------------
% OF TOTAL
OPTIONS/SARs
GRANTED TO EXERCISE OF GRANT DATE
OPTIONS/SARs EMPLOYEES BASE PRICE EXPIRATION PRESENT
NAME GRANTED IN FISCAL ($/SHARE) DATE 5%($) 10%($) VALUE ($)*
YEAR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
JON E. JENETT 25,000 .10% $.93 8/8/2000 6,750 14,500 6,792
=======================================================================================================
</TABLE>
* Present values were calculated using the Black-Scholes options pricing
model which should not be viewed in any way as a forecast of the future
performance of the Company's stock. The estimated present value of each
stock option is $.35 based on the following inputs:
<TABLE>
<CAPTION>
<S> <C>
Stock Price (Fair Market Value) at Grant (8/8/95) $ .9375
Exercise Price .93
Expected Option Term 5 years
Risk-Free Interest Rate 6.25%
Stock Price Volatility 14%
Dividend Yield 0%
</TABLE>
The model assumes: (a) an Expected Option Term of 5 years which
reflects the actual life of the option; (b) a Risk-Free Interest Rate
that represents the interest rate on a U.S. Treasury Note with a
maturity date corresponding to that of the Expected Option Term; and
(c) Stock Price Volatility is calculated using quarterly stock prices
over the period from January 1, 1995 to December 31, 1995.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table summarizes options and SARs exercised during 1995
and presents the value of unexercised options and SARS held by the
named executives at fiscal year end:
19
<PAGE> 22
<TABLE>
<CAPTION>
======================================================================================================
VALUE OF
NUMBER OF UNEXERCISED IN-THE-
UNEXERCISED MONEY OPTIONS/SARs
SHARES ACQUIRED ON OPTIONS/SARS AT AT FISCAL YEAR-END
NAME EXERCISE (#) VALUE REALIZED ($) FISCAL YEAR-END (#)* ($)**
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDWARD A. JOHNSON 0 0 300,000 254,625
- ------------------------------------------------------------------------------------------------------
MICHAEL S. CALLISON 0 0 100,000 68,375
- ------------------------------------------------------------------------------------------------------
GARY L. DREHER 0 0 75,000 45,475
- ------------------------------------------------------------------------------------------------------
JON E. JENETT 0 0 25,000 5,000
======================================================================================================
</TABLE>
* All options are exercisable at fiscal year-end
** The difference between fair market value at 3/11/96 and the
exercise price.
(c) Other Compensation
In Addition to all other options held by him, Mr. Johnson received on
December 31, 1991, five years options to purchase 222,500 shares of the
Company's Common Stock. The option exercise price is $.21 per share.
The options have a five year term and vest immediately. The shares
issuable upon exercise of these options are subject to certain
restrictions. The Company has also obtained life insurance on the life
of Mr. Johnson in the amount of $2,000,000, $1,000,000 for the benefit
of the Company and $1,000,000 for the benefit of his estate.
(d) Compensation of Directors
Directors do not receive compensation for their services although they
are entitled to reimbursement for expenses incurred in attending board
meetings. Michael S. Callison received $84,000 of wages as Vice
President of Marketing and Development in 1995. Mr. Dreher received
$20,000 in marketing fees during 1995 for the marketing of the
Company's programs to the hospitals during 1995.
(e) BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The entire Board of Directors is responsible for determining the Chief
Executive Officer's compensation. The Board's philosophy has been to
offer a stable base salary plus a monthly bonus based on a percentage
of corporate monthly profits before income taxes.
The committee's approach to base compensation is to offer competitive
salaries in comparison with market practices. However, base salaries
have become a relatively smaller element in the total executive officer
compensation package as the Company has introduced incentive
compensation programs which it believes reinforce strategic performance
objectives.
STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return
(assuming reinvestment of dividends) to Company's stockholders during
the five year period ended December 31, 1995 as well as the U.S. NASDAQ
stock market index and the S&P Hospital Management Index.
The Company does not currently meet the standards required for trading
on the NASDAQ exchange, however the Company believes that the
securities traded on this exchange most closely resemble its market
capitalization.
20
<PAGE> 23
[PERFORMANCE GRAPH - PLOT POINTS IN TABLE BELOW]
<TABLE>
<CAPTION>
OPMC S&P NASDAQ
---- --- ------
<S> <C> <C> <C>
DEC 31, 1990 100 100 100
DEC 31, 1991 76 86 57
DEC 31, 1992 38 65 79
DEC 31, 1993 120 96 109
DEC 31, 1994 176 102 126
DEC 31, 1995 225 142 176
</TABLE>
Note: The stock performance graph assumes $100 was invested on January 1, 1990.
21
<PAGE> 24
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) and (b) Security Ownership
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of March 11, 1996, (i) by
each person who is known by the Company to own beneficially more than
5% of the outstanding shares of Common Stock; (ii) by each of the
Company's directors; and (iii) by all directors and officers of the
Company as a group. Unless otherwise indicated below, the person or
persons named have sole voting and dispositive power.
<TABLE>
<CAPTION>
================================================================================
AMOUNT & NATURE OF
NAME (1) BENEFICIAL OWNERSHIP PERCENT OF CLASS
- --------------------------------------------------------------------------------
<S> <C> <C>
EDWARD A. JOHNSON 617,426 (2) 11.6%
- --------------------------------------------------------------------------------
MICHAEL S. CALLISON 430,000 (3) 8.5%
- --------------------------------------------------------------------------------
GARY L. DREHER 138,800 (4) 2.8%
- --------------------------------------------------------------------------------
JON E. JENETT 50,000 (5) 1.0%
- --------------------------------------------------------------------------------
DR. LINDSEY ROSENWALD 282,500 5.7%
- --------------------------------------------------------------------------------
ALL OFFICERS AND
DIRECTORS AS A GROUP (4
PERSONS) 1,236,226 (6) 22.0%
================================================================================
</TABLE>
(1) The addresses of these persons are as follows: Mr. Johnson - 24
South Stonington Road, South Laguna, CA 92677; Mr. Callison - 21972
Summerwind Lane, Huntington Beach, CA 92646; Mr. Dreher - 6301 Acacia
Hill Drive, Yorba Linda, CA 92686; Mr. Jenett - 8 South Vista De La
Luna, South Laguna, CA 92677; Dr. Lindsey Rosenwald - 375 Park Avenue,
Suite 1501, New York, New York 10152.
(2) Includes presently exercisable options to purchase 400,000 shares
of Common Stock.
(3) Includes presently exercisable options to purchase 125,000 shares
of Common Stock.
(4) Includes presently exercisable options to purchase 100,000 shares
of Common Stock.
(5) Includes presently exercisable options to purchase 50,000 shares of
Common Stock.
(6) Includes presently exercisable options to purchase 675,000 shares
of Common Stock.
(c) Changes in Control
Inapplicable.
22
<PAGE> 25
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others
On June 24, 1994, the Company loaned Mr. Johnson and Mr. Dreher $26,400 and
$13,200 respectively to purchase corporate common stock in the open market. The
notes accrued interest at the rate of 7.25% and were payable in monthly
installments due July 1, 1995. On September 19, 1994, Mr. Dreher repaid the
$13,200 note in full with interest. On July 1, 1995, Mr. Johnson repaid the note
in full plus interest.
On December 20, 1994, Mr. Johnson, Mr. Callison and Mr. Dreher were each granted
options to purchase 50,000 shares of the Company's Common Stock at $.6375 per
share. The options vest immediately and expire five years from the date of
grant.
On December 30, 1994, the Company converted a series of short term advances to
Mr. Johnson totaling $47,000 and a promissory note for $50,000 into a $97,000
promissory note due from Mr. Johnson. The note accrues interest at 4.03% and is
payable in monthly installments beginning August 1, 1995.
On May 12, 1995, the Company loaned Mr. Callison $22,800. The note accrued
interest at the rate of 9% and was repaid in full on May 26, 1995.
On August 8, 1995, the Company granted to Mr. Jenett options to purchase 25,000
shares of the Company's common stock at $.93 per share. The options vest
immediately and expire five years from the date of grant.
On December 29, 1995, the Company converted a series of short-term advances to
Mr. Johnson and a $97,000 note dated December 30, 1994 into a $155,000
promissory note due from Mr. Johnson. The note accrues interest at 4.03% and is
due December 30, 1996.
On January 16, 1996, the Company granted to Mr. Johnson options to purchase
100,000 shares of the Company's common stock and granted Mr. Callison, Mr.
Dreher and Mr. Jenett options to each purchase 25,000 shares of the Company's
common stock at $.901 per share. The options vest immediately and expire five
years from the date of grant.
During 1995, Mr. Dreher received $20,000 in marketing fees for the marketing of
the Company's programs to Hospitals during 1995.
(b) Certain Business Relationships
Inapplicable.
(c) Indebtedness of Management
Inapplicable.
(d) Transactions With Promoters
Inapplicable.
23
<PAGE> 26
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a) (1) List of Financial Statements Filed as a Part of this Report
(Filed Under Item 8 above)
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors --
Balance Sheets as of December 31, --
1995 and December 31, 1994
Statements of Income for the years --
ended December 31, 1995, 1994 and 1993
Statements of Stockholders' Equity for the --
years ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the --
year ended December 31, 1995, 1994 and 1993
Notes to Financial Statements. --
</TABLE>
(a) (2) List of Financial Statement Schedules filed as a Part of this
Report
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and
therefore have been omitted.
(a) (3) List of Exhibits Filed as a Part of This Report
3.1 Certificate of Incorporation incorporated by reference from
Form S-18 Registration Statement (Registration No.
0033-16313-LA) filed July 28, 1988, Exhibit 3.1.
3.2 Bylaws incorporated by reference from Form S-18 Registration
Statement (Registration No. 33-16313-LA) filed July 28, 1988,
Exhibit 3.2.
3.3 Certificate of Amendment of Certificate of Incorporation filed
February 29, 1988, incorporated by reference from Form S-18
Registration Statement (Registration No.33-16313-LA) filed July
28, 1988, Exhibit 3.5.
24
<PAGE> 27
3.4 Restated Certificate of Incorporation, filed October 3, 1989.
10.1 Lease between the Company and Laguna Niguel Office Center dated
June 23, 1988 which supersedes lease dated December 15, 1986,
incorporated by reference from Form S-18 Registration Statement
(Registration No. 33-16313-LA) filed July 28, 1988, Exhibit
10.1.
10.2 Agreement between the Company and Costa Mesa Medical Center
Hospital dated April 1, 1987, incorporated by reference from
Form S-18 Registration Statement (Registration No. 33-16313-LA)
filed July 28, 1988, Exhibit 10.2. (Terminated)
10.3 Agreement between the Company and County of Trinity dated May
5, 1987, incorporated by reference from Form S-18 Registration
Statement (Registration No. 33-16313-LA) filed July 28, 1988,
Exhibit 10.3. (Terminated)
10.4 Stock Purchase Agreement dated May 27, 1987, incorporated by
reference from Form S- 18 Registration Statement (Registration
No. 33-16313-LA) filed July 28, 1988, Exhibit 10.4.
(Terminated)
10.5 Agreement between the Company and Corona Community Hospital
dated July 8, 1987, incorporated by reference from Form S-18
Registration Statement (Registration No. 33- 16313-LA) filed
July 28, 1988, Exhibit 10.5.
(Terminated)
10.6 Amended and Restated 1987 Stock Option Plan incorporated by
reference from Form S-18 Registration Statement (Registration
No. 33-16313-LA) filed July 28, 1988, Exhibit 10.6.
10.7 Agreement between Calexico Hospital and the Company dated July
27, 1987, incorporated by reference from Form S-18 Registration
Statement (Registration No. 33-16313-LA) filed July 28, 1988,
Exhibit 10.7.
(Terminated)
10.8 Employment between the Company and Edward A. Johnson dated July
28, 1987, incorporated by reference from Form S-18 Registration
Statement (Registration No. 33-16313-LA) filed July 28, 1988,
Exhibit 10.8.
(Terminated)
10.9 Employment between the Company and John Anthony Whalen dated
July 28, 1987, incorporated by reference from Form S-18
Registration Statement (Registration No. 33-16313-LA) filed
July 28, 1988, Exhibit 10.9.
(Terminated)
10.10 Agreement between Pacific Coast Hospital and the Company dated
July 29, 1987, incorporated by reference from Form S-18
Registration Statement (Registration No. 33- 16313-LA) filed
July 28, 1988, Exhibit 10.10.
(Terminated)
25
<PAGE> 28
10.11 Agreement between Freedom Recovery Center, Inc. and the Company
dated July 31, 1987, incorporated by reference from Form S-18
Registration Statement (Registration No. 33-16313-LA) filed
July 28, 1988, Exhibit 10.11.
(Terminated)
10.12 Agreement between Temple Community Hospital and the Company
dated September 10, 1987, incorporated by reference from Form
S-18 Registration Statement (Registration No. 33-16313-LA)
filed July 28, 1988, Exhibit 10.12.
(Terminated)
10.13 Agreement between Burbank Community Hospital and the Company
dated November 23, 1987, incorporated by reference from Form
S-18 Registration Statement (Registration No. 33-16313-LA)
filed July 28, 1988, Exhibit 10.13.
(Terminated)
10.14 Stock Purchase Warrant between Equity Dynamics, Inc. and the
Company dated January 20, 1988, incorporated by reference from
Form S-18 Registration Statement (Registration No. 33-16313-LA)
filed July 28, 1988, Exhibit 10.14.
(Expired)
10.15 Stock Purchase Warrant between Ventana Growth Fund and the
Company dated January 20, 1988, incorporated by reference from
Form S-18 Registration Statement (Registration No. 33-16313-LA)
filed July 28, 1988, Exhibit 10.15.
(Expired)
10.16 Form of Demand Promissory Note and Stock Purchase Warrant
between the Company and various purchasers, incorporated by
reference from Form S-18 Registration Statement (Registration
No. 33-16313-LA) filed July 28, 1988, Exhibit 10.16.
(Expired)
10.17 Form of Unsecured Promissory Note to Ventana and Equity
Dynamics (issued in the aggregate of $99,700), incorporated by
reference from Form S-18 Registration Statement (Registration
No. 33-16313-LA) filed July 28, 1988, Exhibit 10.17.
(Paid)
10.18 Form of Modification Agreement to Incentive Stock Option
Agreement, dated January 20, 1988, incorporated by reference
from Form S-18 Registration Statement (Registration No.
33-16313-LA) filed July 28, 1988, Exhibit 10.18.
26
<PAGE> 29
10.19 Form of Stock Purchase Warrant issued to Edward A. Johnson
dated April 29, 1988, incorporated by reference from Form S-18
Registration Statement (Registration No. 33-16313-LA) filed
July 28, 1988, Exhibit 10.19.
(Expired)
10.20 Agreement between Midwood Community Hospital and the Company
executed March 11, 1988, incorporated by reference from Form
S-18 Registration Statement (Registration No. 33-16313-LA)
filed July 28, 1988, Exhibit 10.20.
(Terminated)
10.21 Commercial Promissory Note between the Company and American
Valley Bank, dated May 2, 1988, incorporated by reference from
Form S-18 Registration Statement (Registration No. 33-16313-LA)
filed July 28, 1988, Exhibit 10.21.
(Paid)
10.22 Agreement between Middletown Regional Hospital and the Company
dated July 5, 1988, incorporated by reference from Form S-18
Registration Statement (Registration No. 33-16313-LA) filed
July 28, 1988, Exhibit 10.22.
(Terminated)
10.23 Agreement between Bellflower Doctors Hospital and the Company
dated March 10, 1989.
(Terminated)
10.24 Lease amendment between the Company and Laguna Niguel Office
Center dated September 27, 1989 which supersedes lease dated
June 23, 1988.
(Terminated)
10.25 Amendment to Agreement between Midwood Community Hospital and
the Company executed November 1, 1989.
(Terminated)
10.26 Agreement between Middletown Regional Hospital and the Company
dated January 1, 1990, incorporated by reference from Form 10-K
for the year ended December 31, 1990.
(Terminated)
10.27 Amendment to agreement between Bellflower Doctors Hospital and
the Company dated February 19, 1990.
(Terminated)
10.28 Agreement between Washington Medical Center and the Company
dated July 25, 1990.
(Terminated)
10.29 Agreement between Medical Rehabilitation Incorporated and the
Company dated September 1, 1990.
(Terminated)
27
<PAGE> 30
10.30 Lease amendment between the Company and Laguna Niguel Office
Center dated September 24, 1990 which supersedes lease dated
June 23, 1988.
10.31 Commercial Promissory Note between the Company and Monarch Bank
dated March 28, 1991. (Paid)
10.32 Agreement between Phoenix Baptist Hospital and Medical Center,
Inc. and the Company dated May 1, 1991.
(Terminated)
10.33 Promissory Demand Note between the Company and Ventana Growth
Fund L.P. dated August 30, 1991.
(Paid)
10.34 Agreement between Huntington Intercommunity Hospital and the
Company dated November 1, 1991.
10.35 Agreement between Medical Rehabilitation Incorporated and the
Company dated June 1, 1992.
(Terminated)
10.36 Agreement between General-Psych Partners and the Company dated
June 14, 1992.
(Terminated)
10.37 Amendment to Agreement dated June 14, 1992 between
General-Psych Partners and the Company dated October 1, 1992.
(Terminated)
10.38 Agreement between Huntington Intercommunity Hospital and the
Company dated October 1, 1992.
10.39 Agreement between Brotman Medical Center and the Company dated
October 20, 1992.
10.40 Agreement between General-Psych Partners and the Company dated
November 1, 1992.
(Terminated)
10.41 Promissory Note between the Company and Edward A. Johnson dated
December 10, 1992.
(Expired)
10.42 Agreement between GlenComm, Limited, a California Limited
Partnership by Glendora Acquisition Partners, Inc., a
California Corporation, General Partner, d/b/a Glendora
Community Hospital and the Company dated April 20, 1993.
(Terminated)
10.43 Lease amendment between the Company and Laguna Niguel Office
Center dated May 12, 1993 which supersedes lease dated June 23,
1988.
28
<PAGE> 31
10.44 Stipulation for entry of judgement between the Company and
General-Psych Partners; Manohara Healthcare Investments, Inc.;
Good Samaritan Hospital; Alliance Investments for Healthcare
Inc. and Tri-Star Healthcare Corporation dated June 7, 1993.
(Paid)
10.45 Lease agreement between Mt. Carmel Resources and the Company
dated June 16, 1993.
(Expired)
10.46 Sublease agreement between Glendora Community Hospital and the
Company dated July 15, 1993.
(Terminated)
10.47 Agreement between Samaritan Health System, an Arizona
non-profit corporation d/b/a Samaritan Medical Center, San
Clemente dated October 8, 1993.
10.48 Lease agreement between Columbia Healthcare Corporation and the
Company dated October 18, 1993.
10.49 Consulting agreement between the Company and Harbor View Health
Partners, LP, d/b/a Harbor View Medical Center dated December
1, 1993.
(Terminated)
10.50 Unanimous written consent dated December 10, 1993 of the Board
of Directors amending the Promissory Note between the Company
and Edward A. Johnson dated December 10, 1992.
10.51 Agreement between Long Beach Doctors Hospital and the Company
dated January 10, 1994.
(Terminated)
10.52 Lease agreement between Whittier Narrows Business Park and the
Company dated January 10, 1994.
10.53 Sublease agreements between the Company and Medical
Rehabilitation Incorporated dated January 27, 1994.
(Terminated)
10.54 Amendment to agreement dated January 1, 1994 between Long Beach
Doctors Hospital and the Company dated February 23, 1994.
(Terminated)
10.55 1994 Stock Option Plan.
10.56 Lease Agreement between Frank T. Howard and the Company dated
May 4, 1994.
10.57 Promissory note between Edward A. Johnson and the Company dated
June 24, 1994.
(Paid)
10.58 Promissory note between Gary L. Dreher and the Company dated
June 24, 1994.
(Paid)
29
<PAGE> 32
10.59 Sublease Agreements between Long Beach Doctor's Hospital and
the Company dated June 24, 1994.
(Terminated)
10.60 Lease amendment between the Company and Laguna Niguel Office
Center dated July 7, 1994 which supersedes lease dated June 23,
1988.
10.61 Agreement between Pacifica Hospital of the Valley and the
Company dated September 15, 1994.
(Terminated)
10.62 Agreement between Queen of the Angels - Hollywood Presbyterian
Medical Center, Inc. and the Company dated December 6, 1994.
10.63 Agreement between Pacifica Hospital of the Valley and the
Company dated December 6, 1994.
(Terminated)
10.64 Unanimous written consent dated December 30, 1994 of the Board
of Directors amending the Promissory Note between the Company
and Edward A. Johnson dated December 10, 1993.
10.65 Sublease Agreement between Pacifica Hospital of the Valley and
the Company dated January 24, 1995.
(Terminated)
10.66 Agreement between Sherman Oaks Hospital and Health Center dated
March 30, 1995.
10.67 Loan Agreement between the Company and National Bank of
Southern California dated March 31, 1995.
10.68 Lease Agreement between the Company and Laguna Niguel Office
Center dated June 5, 1995 which supersedes lease dated June 23,
1988.
10.69 Sublease Agreements between the Company and Huntington Beach
and Medical Center dated July 1, 1995.
30
<PAGE> 33
10.70 Lease Agreement between the Company and 757 Pacific Partnership
dated July 3, 1995.
10.71 Sublease Agreement between the Company and Huntington Beach
Hospital and Medical Center dated July 24, 1995.
10.72 Lease Agreement between the Company and Columbia Healthcare
Corporation dated September 14, 1995 which supersedes lease
dated October 18, 1993.
10.73 Agreement between San Fernando Community Hospital, Inc. dba
Mission Community Hospital and the Company dated October 6,
1995.
10.74 Lease Agreement between the Company and Solomon, Saltsman &
Jameson dated October 10, 1995.
10.75 Unanimous written consent dated December 29, 1995 of the Board
of Directors amending the promissory note between the Company
and Edward A. Johnson dated December 30, 1994.
23 Consent of Independent Auditors
27 Financial Data Schedule
(b) Reports on Form 8-K
Inapplicable.
31
<PAGE> 34
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.
OPTIMUMCARE CORPORATION
By: /s/ Edward A. Johnson
------------------------
Edward A. Johnson, President
Date: March 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature/Title Date
--------------- ----
<S> <C>
/s/ EDWARD A. JOHNSON March 27, 1996
- -----------------------
EDWARD A. JOHNSON, President &
Principal Financial Officer & Director
/s/ MICHAEL S. CALLISON March 27, 1996
- -----------------------
MICHAEL S. CALLISON, Director
/s/ GARY L. DREHER March 27, 1996
- -----------------------
GARY L. DREHER, Director
/s/ JON E. JENETT March 27, 1996
- -----------------------
JON E. JENETT, Director
</TABLE>
32
<PAGE> 35
Financial Statements
OptimumCare Corporation
Years ended December 31, 1995 and 1994
with Report of Independent Auditors
<PAGE> 36
OptimumCare Corporation
Financial Statements
Years ended December 31, 1995 and 1994
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................... 1
Financial Statements
Balance Sheets............................................................... 2
Statements of Income......................................................... 3
Statements of Stockholders' Equity........................................... 4
Statements of Cash Flows..................................................... 5
Notes to Financial Statements................................................ 6
</TABLE>
<PAGE> 37
REPORT OF INDEPENDENT AUDITORS
The Stockholders and Board of Directors
OptimumCare Corporation
We have audited the accompanying balance sheets of OptimumCare Corporation as of
December 31, 1995 and 1994, and the related statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1995. Our audits also included the financial statements and schedule listed
in the index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 8 to the financial statements, the Company is dependent
upon a small number of contracts, the loss of any of which could have a
significant adverse effect on the Company's operations.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of OptimumCare Corporation at
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
---------------------
Orange County, California
March 18, 1996
<PAGE> 38
OptimumCare Corporation
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 170,932 $ 36,657
Accounts receivable, net 1,536,693 1,642,040
Prepaid expenses 31,487 21,104
----------- -----------
Total current assets 1,739,112 1,699,801
Note receivable from officer 155,000 97,000
Furniture and equipment, less accumulated depreciation
of $34,382 in 1995 and $25,463 in 1994 25,617 16,093
Deferred acquisition costs 138,753 --
Intangibles, less accumulated amortization of $1,020 in
1995 and $816 in 1994 1,055 1,259
----------- -----------
Total assets $ 2,059,537 $ 1,814,153
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 192,743 $ 152,535
Accrued expenses 188,788 180,674
----------- -----------
Total current liabilities 381,531 333,209
Note payable to bank 166,000 --
Commitments
Stockholders' equity:
Common stock, $.001 par value:
Authorized shares - 20,000,000
4,923,509 shares issued and outstanding in 1995;
4,904,509 shares issued and 4,896,009 shares
outstanding in 1994 4,924 4,905
Paid-in-capital 2,927,593 2,919,348
Accumulated deficit (1,420,511) (1,422,581)
Less cost of 8,500 shares in treasury in 1994 -- (5,075)
Note receivable from officer -- (15,653)
----------- -----------
Total stockholders' equity 1,512,006 1,480,944
----------- -----------
Total liabilities and stockholders' equity $ 2,059,537 $ 1,814,153
=========== ===========
</TABLE>
See accompanying notes.
2
<PAGE> 39
OptimumCare Corporation
Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net revenues $6,027,122 $5,596,283 $3,825,613
Interest income 8,741 8,487 1,158
---------- ---------- ----------
6,035,863 5,604,770 3,826,771
Operating expenses:
Costs of services provided 5,022,040 4,238,355 2,877,383
Provision for uncollectible accounts 36,030 141,620 27,460
Selling, general and administrative 964,701 741,919 552,571
Interest 10,222 4,065 2,077
---------- ---------- ----------
6,032,993 5,125,959 3,459,491
---------- ---------- ----------
Income before income taxes 2,870 478,811 367,280
Income taxes 800 13,766 2,091
---------- ---------- ----------
Net income $ 2,070 $ 465,045 $ 365,189
========== ========== ==========
Net income per share $ .00 $ .09 $ .07
========== ========== ==========
</TABLE>
See accompanying notes.
3
<PAGE> 40
OptimumCare Corporation
Statements of Stockholders' Equity
Years ended December 31, 1993, 1994 and 1995
<TABLE>
<CAPTION>
Note
receivable
Common stock Paid-in Accumulated Treasury from
Shares Amount capital deficit Shares Amount officer Total
--------- ------ ---------- ------------ --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 4,888,509 $4,889 $2,916,004 $(2,252,815) -- $ -- $ -- $ 668,078
Exercise of stock options 8,000 8 1,672 -- -- -- -- 1,680
Purchase of treasury stock -- -- -- -- 20,000 (11,646) -- (11,646)
Reissue of treasury stock -- -- -- -- (11,500) 6,571 -- 6,571
Net income -- -- -- 365,189 -- -- -- 365,189
--------- ------ ---------- ----------- ------- -------- -------- ----------
Balance at December 31, 1993 4,896,509 4,897 2,917,676 (1,887,626) 8,500 (5,075) -- 1,029,872
Note receivable from officer -- -- -- -- -- -- (15,653) (15,653)
Exercise of stock options 8,000 8 1,672 -- -- -- -- 1,680
Net income -- -- -- 465,045 -- -- -- 465,045
--------- ------ ---------- ----------- ------- -------- -------- ----------
Balance at December 31, 1994 4,904,509 4,905 2,919,348 (1,422,581) 8,500 (5,075) (15,653) 1,480,944
Payment of note receivable
from officer -- -- -- -- -- -- 15,653 15,653
Exercise of stock options 19,000 19 8,245 -- -- -- -- 8,264
Reissue of treasury stock -- -- -- -- (8,500) 5,075 -- 5,075
Net income -- -- -- 2,070 -- -- -- 2,070
--------- ------ ---------- ----------- ------- -------- -------- ----------
Balance at December 31, 1995 4,923,509 $4,924 $2,927,593 $(1,420,511) -- $ -- $ -- $1,512,006
========= ====== ========== =========== ======= ======== ======== ==========
</TABLE>
See accompanying notes.
4
<PAGE> 41
OptimumCare Corporation
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 2,070 $ 465,045 $ 365,189
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,123 6,826 5,678
Provision for uncollectible accounts 36,030 141,620 27,460
Loss on sale of equipment -- 514 --
Common stock issued as bonuses 5,075 -- 6,571
Changes in operating assets and liabilities:
(Increase) in accounts receivable 69,317 (1,022,363) (190,305)
(Increase) decrease in prepaid expenses (10,383) 152,853 (154,588)
Increase (decrease) in accounts payable 40,208 (2,728) (40,775)
Increase in accrued liabilities 8,114 66,594 60,417
--------- ----------- ---------
Net cash provided by (used in) operating
activities
159,554 (191,639) 79,647
INVESTING ACTIVITIES
Purchases of equipment (18,443) (13,362) (3,301)
Deferred acquisition costs (138,753) -- --
Note receivable from officer (58,000) (47,000) (20,000)
--------- ----------- ---------
Net cash used in investing activities (215,196) (60,362) (23,301)
FINANCING ACTIVITIES
Note payable to bank 166,000 -- --
Note receivable from officer 15,653 (15,653) --
Exercise of stock options 8,264 1,680 1,680
Purchase of treasury stock -- -- (11,646)
--------- ----------- ---------
Net cash provided by (used in) financing
activities
189,917 (13,973) (9,966)
--------- ----------- ---------
Net increase (decrease) increase in cash 134,275 (265,974) 46,380
Cash and cash equivalents at beginning of year 36,657 302,631 256,251
--------- ----------- ---------
Cash and cash equivalents at end of year $ 170,932 $ 36,657 $ 302,631
========= =========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 8,720 $ 4,065 $ 2,077
Cash paid for income taxes $ 31,201 $ 22,065 $ 2,091
</TABLE>
See accompanying notes.
5
<PAGE> 42
OptimumCare Corporation
Notes to Financial Statements
December 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
OptimumCare Corporation (the Company) develops, markets and manages
hospital-based programs for the treatment of psychiatric disorders on both an
inpatient and outpatient basis. The Company's programs are currently being
marketed in the United States, principally California, to independent acute
general hospitals and other health care facilities.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less, when purchased to be cash equivalents.
FURNITURE AND EQUIPMENT
Furniture and equipment is stated at cost. Depreciation is computed by the
straight-line method based upon the estimated useful lives of the related
assets.
INTANGIBLE ASSETS
The Company's trade name became registered during December 1990. It is recorded
at cost and is being amortized over its estimated useful life of 10 years using
the straight-line method. Accumulated amortization is $1,020 and $816 as of
December 31, 1995 and 1994, respectively.
REVENUE RECOGNITION
Revenues are recognized in the period services are provided and are recorded net
of contractual adjustments representing the difference between standard rates
and estimated net realizable amounts under reimbursement agreements with
customers.
INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by FASB
Statement No. 109, Accounting for Income Taxes. As permitted under the new
rules, prior year's financial statements have not been restated. The cumulative
effort of adopting Statement No. 109 as of January 1, 1993 was not material.
6
<PAGE> 43
OptimumCare Corporation
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME PER SHARE
Net income per share is computed using the weighted average number of common
shares outstanding, giving effect to common stock equivalents arising from stock
options, of 5,432,748, 5,239,163 and 5,139,080 in 1995, 1994 and 1993,
respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
about the future that affect the amounts reported in the financial statements.
These estimates include assessing the collectibility of accounts receivable, the
usage and recoverability of long-lived assets. The actual results could differ
from those estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
("SFAS 123"), which requires pro forma disclosures of net income and earnings
per share using a fair value based method of accounting for all employee stock
options or similar equity instrument plans. OptimumCare Corporation will
implement the disclosure provisions of SFAS 123 effective December 31, 1996.
OptimumCare Corporation is required to adopt statement of Financial Accounting
Standards No. 121, Accounting for the impairment of long-lived assets and for
long-lived assets to be disposed of ("SFAS 121") in 1996. SFAS 121 establishes
accounting standards for recording the impairment of long-lived assets, certain
identifiable intangibles and goodwill. Management has not yet determined whether
the adoption of SFAS 121 will have a material impact on OptimumCare Corporations
financial position or the results of its operations.
7
<PAGE> 44
OptimumCare Corporation
Notes to Financial Statements (continued)
2. PROVISION FOR UNCOLLECTIBLE ACCOUNTS
In June 1994, two contracts with one entity which leased facilities from one
hospital were canceled due to the filing of bankruptcy by the hospital. All
unpaid amounts due from the contracts have been written off in full at December
31, 1994, which totaled $141,620.
3. NOTE RECEIVABLE FROM OFFICER
On December 29, 1995, the Company converted a series of short-term advances and
a $97,000 note dated December 30, 1994 into a promissory note from an officer
totaling $155,000. The note accrues interest at the rate of 4.03% and is due
December 30, 1996.
On June 24, 1994, the Company loaned two officers $26,400 and $13,200,
respectively, to purchase corporate common stock in the open market. The notes
accrued interest at the rate of 7.25% and were payable in monthly installments
due July 1, 1995. On September 19, 1994 one officer repaid the $13,200 note in
full. The other note was repaid in full on July 1, 1995.
On May 12, 1995 the Company loaned an officer $22,800. The note accrued interest
at the rate of 9% and was repaid in full on May 26, 1995.
4. NOTE PAYABLE TO BANK
On April 12, 1995, the Company entered into a $500,000 line of credit agreement
with a bank that expires May 1, 1996. At the expiration date, the then principal
balance of the loan shall be convertible into a one year term loan with an
initial due date of May 1, 1997, but with a five (5) year repayment schedule.
The term loan is renewable for an additional term of one year. The loan bears
interest at the rate of 11% per year and is secured by all the assets of the
Company. At December 31, 1995, $334,000 was available for future draws on the
line of credit agreement. During 1996, $72,872 of additional funds were borrowed
under this agreement.
8
<PAGE> 45
OptimumCare Corporation
Notes to Financial Statements (continued)
5. LEASE COMMITMENT
The Company leases two office facilities under lease agreements that expire June
30, 1996 and October 31, 1996, respectively. The Company also leased space under
five separate lease agreements for the operation of four of its outpatient
partial hospitalization psychiatric programs, of which one agreement is on a
month-to-month basis and the remaining agreements expire, September 30, 1996,
June 3, 1997, June 23, 1997 and June 30, 1997, respectively. Aggregate future
minimum lease payments under these leases are as follows:
<TABLE>
<S> <C>
1996 $189,271
1997 59,896
--------
$249,167
========
</TABLE>
The lease which expires June 30, 1997 contains five one-year options to extend
the lease. Subleases with two of the Company's host hospitals exist for the
entire amount of aggregate future minimum lease payments above. Sublease rental
income was $154,621, $48,995 and $14,876 for the years ended December 31, 1995,
1994 and 1993, respectively. Rent expense was $191,251, $119,520, and $49,436
for the years ended December 31, 1995, 1994 and 1993, respectively.
6. STOCKHOLDERS' EQUITY
STOCK OPTIONS
In July 1987, the Company adopted a stock option plan (the Plan) including
incentive stock options and nonqualified stock options. A maximum of 455,000
shares of the Company's common stock has been reserved for issuance under the
plan. Under the Plan, incentive stock options may be granted at an exercise
price which is not less than 100% of the fair market value on the date of grant
(110% for greater than 10% stockholders). In addition, nonqualified stock
options may be granted at an exercise price which is no less than 85% of the
fair market value on the date of grant. Options may be granted for terms up to
10 years (five years for greater than 10% stockholders).
In 1991, the Company granted options to purchase 239,600 shares of its common
stock at $.21 per share that were vested upon grant. Of these options 222,500
were granted to an officer of the Company.
9
<PAGE> 46
OptimumCare Corporation
Notes to Financial Statements (continued)
6. STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTIONS (CONTINUED)
In March 1994, the Company adopted and approved the 1994 Stock Option Plan (the
Plan) including incentive stock options and nonqualified stock options. In
December 1995, the Company readopted and approved the 1994 Stock Option Plan
(the Plan) A maximum of 500,000 shares of the Company's common stock has been
reserved for issuance under the plan. Under the Plan, incentive stock options
may be granted at an exercise price which is not less than 100% of the fair
market value on the date of grant (110% for greater than 10% stockholders). In
addition, nonqualified stock options may be granted at an exercise price which
is no less than 85% of the fair market value on the date of grant. Options may
be granted for terms up to 10 years (five years for greater than 10%
stockholders).
In December 1994, the Company granted non-qualified options to purchase 225,000
shares of its common stock at $.6375 per share that are vested upon grant. No
options have been exercised under these grants.
In 1995, the Company granted options to purchase 200,000 shares of its common
stock at $.65 per share that are vested upon grant. No options have been
exercised under these grants.
During various dates in 1995, the Company granted to certain officers,
directors, employees and consultants, non-qualified options to purchase 250,000
shares of its common stock at prices ranging from $.6375 to $.93 per share that
are vested upon grant. No options have been exercised under these grants.
10
<PAGE> 47
OptimumCare Corporation
Notes to Financial Statements (continued)
6. STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTIONS (CONTINUED)
A summary of incentive stock option activity under the 1987 plan during 1993,
1994 and 1995 is as follows:
<TABLE>
<CAPTION>
1987
Shares under option PLAN
----
<S> <C>
Outstanding at December 31, 1992 305,000
Granted 235,000
Exercised (8,000)
Canceled (187,500)
--------
Outstanding at December 31, 1993 344,500
Granted 50,000
Exercised (8,000)
Canceled (25,000)
--------
Outstanding at December 31, 1994 361,500
Granted --
Exercised (19,000)
Canceled (25,000)
========
Outstanding at December 31, 1995 317,500
========
Exercise price of outstanding options
at December 31, 1993 $.21 to $.375
at December 31, 1994 $.21 to $.67
at December 31, 1995 $.21 to $.67
Options exercisable
at December 31, 1993 294,500
at December 31, 1994 311,500
at December 31, 1995 317,500
</TABLE>
A total of 1,394,600 and 1,194,600 shares of common stock were reserved for
future issuance upon the exercise of stock options at December 31, 1995 and
1994, respectively. A total of 162,500 options were available for future grant
at December 31, 1995.
11
<PAGE> 48
OptimumCare Corporation
Notes to Financial Statements (continued)
7. INCOME TAXES
A reconciliation of the provision for income taxes using the federal statutory
rate to the book provision for income taxes follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory federal provision for income taxes $ 1,000 $ 167,583 $ 124,875
Increase (decrease) in taxes resulting from:
Current use of net operating loss
carryforwards (1,000) (167,583) (124,875)
Federal alternative minimum tax -- 6,000 --
State tax, net of federal benefit 800 7,776 2,091
------- --------- ---------
$ 800 $ 13,766 $ 2,091
======= ========= =========
</TABLE>
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ -- $ 6,000 $ --
State 800 7,766 2,091
---- ------- ------
Total current 800 13,766 2,091
---- ------- ------
Deferred:
Federal -- -- --
State -- -- --
Total deferred -- -- --
---- ------- ------
$800 $13,766 $2,091
==== ======= ======
</TABLE>
At December 31, 1995, the Company has unused net operating loss carryforwards of
approximately $1,179,000 for federal income tax purposes which expire beginning
in the year 2003. The Company has unused net operating loss carryforwards of
approximately $16,000 for state income tax purposes which expire beginning in
the year 2003. A valuation allowance has been recorded to entirely offset the
tax benefits of this attribute.
12
<PAGE> 49
OptimumCare Corporation
Notes to Financial Statements (continued)
7. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The components of the net
deferred tax asset at December 31, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net operating loss carryforwards $ 413,000 $ 401,000 $ 648,000
Alternative minimum tax credit carryforwards 4,000 4,000 --
Reserves and accruals not currently deductible
for tax purposes 17,000 43,000 9,000
Depreciation not currently deductible for tax
purposes -- 1,000 1,000
--------- --------- ---------
Total deferred tax assets 434,000 449,000 658,000
Less valuation allowance (434,000) (449,000) (658,000)
--------- --------- ---------
Net deferred tax asset $ -- $ -- $ --
========= ========= =========
</TABLE>
8. MAJOR CUSTOMERS
Four of the Company's hospitals accounted for $4,726,068 and five of the
Company's hospitals accounted for $4,670,236 of net revenue in 1995 and 1994,
respectively. In addition, these hospitals accounted for approximately
$1,080,633 and $1,467,940 of accounts receivable at December 31, 1995 and 1994,
respectively. As the Company is dependent upon a small number of hospitals, the
loss of any contract could have a significant adverse effect on the Company's
operations. Management intends to use its best efforts to retain existing
contracts and expand the scope of services on these contracts, obtain new
contracts, and maintain patient census at the same or higher levels than has
historically been experienced.
9. DEFERRED ACQUISITION COSTS
Deferred acquisition costs consist of the direct cost of fees paid to outside
consultants and other professionals incurred in assisting with the proposed
acquisitions of Psychological Healthcare, Inc. and Care Source Inc. The specific
terms of the proposed purchases have not yet been finalized. In the event the
acquisitions are not consummated these items will be expensed. The Company plans
to amortize all acquisition costs over the useful life of the Psychological
Healthcare and Care Source products and services.
13
<PAGE> 50
OptimumCare Corporation
Notes to Financial Statements (continued)
9. DEFERRED ACQUISITION COSTS (CONTINUED)
Psychological Healthcare operates outpatient mental health clinics. Care Source
provides management and other administrative behavioral healthcare services to
skilled nursing and other similar board and care facilities.
14
<PAGE> 51
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
OPTIMUMCARE CORPORATION
<TABLE>
<CAPTION>
===================================================================================
COL. A COL. B COL. C COL. D COL. E
===================================================================================
ADDITIONS
Charged
Balance at Charged to Other Balance
Beginning to Costs Accounts Deductions At End
Description of Period & Expenses Describe Describe of Period
===================================================================================
<S> <C> <C> <C> <C>
YEAR ENDED
DECEMBER 31, 1995
Reserves and
allowances deducted
from asset accounts:
Allowance for
uncollectible
accounts $ 0 $ 36,030 $ (36,030) $0
YEAR ENDED
DECEMBER 31, 1994
Reserves and
allowances deducted
from asset accounts:
Allowance for
uncollectible
accounts 0 141,620 (141,620) 0
YEAR ENDED
DECEMBER 31, 1993
Reserves and allowances
from asset accounts:
Allowance for
uncollectible
accounts 2,822 27,460 (30,282)(1) 0
</TABLE>
(1) Uncollectible accounts written off, net of recoveries
33
<PAGE> 1
EXHIBIT 10.66
AGREEMENT
THIS AGREEMENT is entered into as of this 30th day of March , 1995, by and
between SHERMAN OAKS HOSPITAL AND HEALTH CENTER, ("Hospital") and OPTIMUMCARE(R)
CORPORATION ("Manager"), a Delaware Corporation.
RECITALS
A. Hospital operates an acute care facility in Sherman Oaks,
California and desires to develop an outpatient Partial
Hospitalization Program (the "Out-Patient Program") for the
treatment of psychiatric disorders, and
B. Manager is in the business of providing management services
for the treatment of patients with psychiatric disorders; and
C. Hospital desires to retain Manager, and Manager desires to be
retained, to provide the services described herein; and
D. Hospital will provide (subject to the provisions of this
Agreement) appropriate program and office space for the use of
this Out-Patient Program during the term of this Agreement.
THEREFORE, it is mutually agreed as follows:
1. DEFINITIONS
(a) "Confidential Information" of the Manager shall mean
all documents and other materials provided by Manager
not available through sources in the public domain.
Manager's documents and other materials may include,
but are not limited to, memoranda, manuals,
handbooks, production books and audio and visual
recordings, which contain information
-1-
<PAGE> 2
relating to the Out-Patient Program (including
written materials distributed to Out-Patient Program
patients or for promotion of the Out-Patient
Program); and all models, techniques, formulations
and procedures used to provide psychiatric services
to Program patients.
(b) "Employee Benefits" shall include, by way of
illustration and not limitation, the employer's
contribution under the Federal Insurance
Contributions Act, unemployment compensation and
related insurance, payroll and other employment
taxes, pension and retirement plan contributions,
worker's compensation and related insurance, group
life, health, disability and accident insurance,
severance and other benefits.
(c) A "Patient Day" shall be deemed to exist with each
out-patient visit to the Out-Patient
Program
(d) "Out-Patient Program" shall mean the out-patient
partial hospitalization psychiatric program managed
by Manager at the Hospital.
2. TERM
(a) This Agreement shall have an initial term commencing
on March 30, 1995 and terminating March 29, 1998.
(b) Termination provisions are in Section (10) of this
Agreement.
3. COVENANTS OF HOSPITAL
Hospital will:
(a) Furnish necessary and identified program space and
provide support, ancillary, and standard out-patient
services to Out-Patient Program patients, including
available diagnostic facilities as directed by each
Out-Patient Program patient's attending physician.
-2-
<PAGE> 3
Medical treatment shall be provided as directed only
by physicians duly licensed to practice medicine by
the State of California and who are appointees to the
Hospital medical staff with appropriate privileges.
Hospital will cooperate with Manager in providing
appropriate program space for a capacity of at least
thirty (30) chairs.
(b) Provide support activities including: i) maintenance
of or installation of carpet and decorating of
patient treatment areas as needed; ii) (a) dietary
service for patients, (b) housekeeping services for
patients and Manager's offices at the Hospital, (c)
utilities for patient areas and Manager's offices at
the Hospital, (d) staff offices, furniture, clerical
support and office supplies, (e) daily patient
transportation within the normal primary service
area, (f) services of a nutritionist, (g) psychiatric
registered nurse; and iii) other services customarily
provided in the ordinary course of business to
Hospital's patients (e.g. record keeping, etc.).
(c) Charge and collect all Out-Patient Program charges
due from Out-Patient Program patients or third party
payors.
(d) Staff the Out-Patient Program with qualified
personnel in accordance with the Staffing Table
(Exhibit A) and be solely liable to those personnel
who are Hospital employees for their wages,
compensation and employee benefits. Nursing staff
will be supervised by inpatient head nurse. Hospital
personnel shall comply with the Out-Patient Program
policies and procedures as mutually agreed upon in
writing by Hospital and Manager. Hospital shall not,
without Manager's prior written consent (which shall
not be unreasonably withheld), deviate, change or
otherwise decrease the agreed staffing of the
Staffing Table (Exhibit A).
-3-
<PAGE> 4
(e) Provide to Manager's Out-Patient Program staff such
appropriate pre-employment and periodic diagnostic
and health screening procedures as are customarily
provided by Hospital for Hospital employees.
(f) Maintain accreditation by the Joint Commission on
Accreditation of Healthcare Organizations and pay all
related fees.
(g) Provide Manager's employees and contracted personnel
with copies of all relevant Policies and Procedures,
as amended from time to time.
(h) Indemnify, save harmless, and defend Manager from all
claims and liability and expenses (including
reasonable attorney's fees) arising solely from the
negligence of or breach of this Agreement by Hospital
or its employees or contracted personnel.
(i) Provide admissions and billing services. It is
further understood that Hospital may deny admission
to a patient who, in its opinion, is not financially
qualified to meet financial obligations.
(j) Provide appropriate Utilization Review and Quality
Assessment services for all Out-Patient Program
patients.
(k) Allow Manager, if needed and available, to lease
social workers to service the Out-Patient Program at
such rate as the parties may agree upon in writing.
(l) Maintain professional and comprehensive general
liability insurance for itself and its employees and
contracted personnel in an amount not less than
$5,000,000 per occurrence or claim and whenever
reasonably requested provide Manager with a
certificate from the insurer stating that such
insurance is in effect and which also states that
Manager will be given at least ten (10) days advance
written notice of any cancellation, non-renewal, or
-4-
<PAGE> 5
changes in policy limits, deductible, or
co-insurance. Any deductible or co-insurance or
aggregate limits shall be subject to Managers
approval which shall not be unreasonably withheld.
Manager agrees that $100,000 is an acceptable
deductible or co-insurance. Hospital shall use
reasonable efforts to maintain "tail" coverage if
necessary for any terminated "claims made" policy so
as to apply to any of its acts or omissions which
occur during the term of this Agreement until the
expiration of any applicable statute of limitation
but not to exceed seven (7) years.
(m) As a condition precedent to this Agreement, obtain
appropriate California state license to operate the
Out- Patient Program.
(n) Contract with a physician who has appropriate
privileges on the medical staff of the Hospital to be
the Out-patient Program Medical Director.
4. COVENANTS OF MANAGER
Manager will do the following at its own cost and expense:
(a) Provide specialized management, Out-Patient Program
development and marketing for the care and treatment
of the Out-Patient Program's patients.
(b) Out-Patient Program management and direction will be
provided by OptimumCare Corporation's Out-Patient
Program Director.
(c) Provide the following: (i) Partial Hospitalization
Coordinator; (ii) Social Services; (iii)
Psychological Services; (iv) Occupational
Therapy/Activities Services; (v) Medical Director
(who shall be a physician duly licensed in the state
wherein the Hospital is situated and shall be
required to fulfill the requirements to be admitted
as a member of the Hospital's medical staff) and
other professional counseling staff as needed to
provide
-5-
<PAGE> 6
for the professional counseling of Out-Patient
Program patients and to adequately supervise and
operate the Out-Patient Program. All such personnel
shall be subject to Hospital approval. Such personnel
shall not be deemed employees or contracted personnel
or borrowed servants of Hospital. Manager shall have
full responsibility for their wages, compensation and
employee benefits and acts or omissions and shall
indemnify, save harmless and defend Hospital from all
claims and liability expenses (including reasonable
attorneys' fees) arising from any claims, actions,
causes of actions, damages or settlements with
respect to any of the foregoing.
(d) Assist Hospital in its screening, interviewing, and
selecting of employees for the Out-Patient Program
staff.
(e) Provide Out-Patient Program orientation and training
for all appropriate personnel.
(f) Indemnify, save harmless, and defend Hospital from
all claims and liability and expenses (including
reasonable attorney's fees) (1) arising solely from
the negligence of or breach of this Agreement by
Manager or its employees or contracted personnel or
(2) arising out of Hospital negligence if the sole
basis for any such negligence consists of entering
into this Agreement with Manager, failing to properly
supervise, monitor, or oversee Manager or its
employees or agents, or failing to properly review or
act upon its review of the qualifications of Manager
or its employees or contracted personnel.
(g) Consult, manage and support the Out-Patient Program
treatment team's effort to provide quality
psychiatric treatment while maintaining prudent
control of patient length of stay.
(h) Maintain professional and comprehensive general
liability insurance for itself and its employees and
contracted personnel in an amount not less than
$5,000,000 per occurrence
-6-
<PAGE> 7
or claim and whenever reasonably requested provide
Hospital with a certificate from the insurer stating
that such insurance is in effect and which also
states that Hospital will be given at least ten (10)
days advance written notice of any cancellation,
non-renewal, changes in policy limits, deductible, or
co-insurance or aggregate limits. Any deductible or
co-insurance or aggregate limits shall be subject to
Hospital's approval which shall not be unreasonably
withheld.
Hospital agrees that $100,000 is an acceptance
deductible or co-insurance. Manager shall use
reasonable efforts to maintain "tail" coverage if
necessary for any terminated "claims made" policy so
as to apply to any of its acts or omissions which
occur during the term of this Agreement until the
expiration of any applicable statute of limitation
but not to exceed seven (7) years. Manager shall use
reasonable efforts to have Hospital named as an
additional insured on Manager's insurance with
respect to any claim or liability arising solely out
of any act of omission by Manager, its employees, or
contracted personnel.
(i) Until the expiration of four (4) years after the
furnishing of any services to be provided under this
Agreement make available, upon request, to the
Secretary of Health and Human Services or to the
Comptroller General of the United States of America,
or their duly authorized representatives, this
Agreement and books, documents and records which are
necessary to certify the nature and extent of
reimbursable costs under the Medicare laws.
(j) Comply with all applicable laws (including but not
limited to 42 U.S.C. 1395 (nn) (b) or any similar law
or regulation), regulations, medical staff bylaws,
Hospital policies and procedures, Program policies
and procedures and any applicable standards of care.
(k) Use reasonable efforts to resolve any issues
regarding acceptability of Out-Patient
-7-
<PAGE> 8
Program personnel to Hospital personnel and to
Out-Patient Program patients which may arise with
respect to any of Manager's employees or contracted
personnel.
(l) Provide monthly written reports to Hospital regarding
all aspects of the operation of the Out-Patient
Program.
(m) Commit no act or omission which adversely affects the
Hospital license with respect to the psychiatric
chairs.
(n) Admit patients to the Out-Patient Program (including
but not limited to Medicare and MediCal patients)
only if the admission is ordered by a physician on
the Hospital medical staff with admitting privileges.
5. REPRESENTATION AND WARRANTS OF HOSPITAL
Hospital hereby represents to Manager as follows:
(a) Hospital is owned by Triad HealthCare ("Triad)", a
California, non-profit public benefit corporation
duly organized and validly existing in good standing
under the laws of the State of California with the
power and authority to carry on the business in which
it is engaged and to perform its obligations under
this Agreement subject to obtaining the license
described in subpart (n) of Section (3).
(b) The execution of this Agreement and the performance
of the obligations of the Hospital hereunder will not
result in any breach of any of the terms, conditions
or provisions of any agreement or other instrument to
which Hospital is a party or by which it may be bound
or affected, or any governmental license, franchise,
permit or other authorization possessed by the
Hospital, nor will such execution and performance
violate any Federal, State or local law, rule or
regulation. The Hospital is accredited by the Joint
Commission
-8-
<PAGE> 9
on accreditation of Healthcare Organizations.
(c) There is no litigation, administrative proceeding or
investigation pending or threatened against Hospital
(nor is the Hospital subject to any judgement, order,
decree or regulation of any court or other
governmental administrative agency) which would
materially adversely affect the performance of
Hospital's obligations hereunder (except as provided
under section 6(d) as provided hereinafter).
(d) No Certificate of Need is required by Hospital from
any state regulatory agency for the operation of the
Out-Patient Program.
6. REPRESENTATIONS OF MANAGER
Manager hereby represents to Hospital as follows:
(a) Manager is a corporation duly organized and validly
existing in good standing under the laws of the State
of Delaware with the power and authority to carry on
the business in which it is engaged and to perform
its obligations under this Agreement.
(b) The execution of this Agreement and the performance
of the obligations of the Manager hereunder will not
result in any breach of any of the terms, conditions
or provisions of any agreement or other instrument to
which the Manager is a party or by which it may be
bound or affected, or any governmental license,
franchise, permit or other authorization possessed by
the Manager, nor will such execution and performance
violate any Federal, State or local law, rule or
regulation.
(c) There is no litigation, administrative proceeding or
investigation pending or threatened against Manager
(nor is Manager subject to any judgement, order,
decree or regulation of any court or other
governmental administrative agency) which would
materially adversely
-9-
<PAGE> 10
affect the performance of Manager's obligations
hereunder.
(d) Manager hereby acknowledges that Triad has filed for
a reorganization under Chapter 11 of the Federal
Bankruptcy Act which matter is pending as of the date
of this Agreement.
7. MANAGEMENT FEE
(a) With respect to the first three months that the
program is in operation, the Hospital shall pay to
Manager an initial service fee of seventy five
dollars ($75.00) per patient day for each patient
attending the Out-Patient Program. Manager will be
paid its contractual fee forty five (45) days
following the month for which services were
performed. For example, the management fee for April,
1995 will be due on June 15, 1995.
(b) This payment of $75.00 per patient for the first
three months is intended as a loan to bridge the time
between the start of the program and the actual cash
beginning to be collected. Therefore, the loan will
bear interest at 10%. The loan will be repaid by
reducing the amount to be paid to Manager monthly on
the basis of actual cash collections until such time
as the loan and interest are repaid. Until the loan
is repaid, the split of cash collections will be 25%
to Manager and 75% to Hospital with one third (1/3)
of the Hospitals 75% to be applied to interest and
principal of the loan.
(c) When the loan and interest have been repaid to the
Hospital, the formula for paying Manager will revert
to the normal intended split of cash collections of
50% to Manager and 50% to Hospital.
8. PAYMENT BY HOSPITAL
(a) On or before the fifth (5th) day of each calendar
month, Manager will forward to Hospital an invoice
for the fees payable by Hospital under this Section
7. If any amount so
-10-
<PAGE> 11
invoiced is not paid on or prior to the end of the
calendar month in which the invoice is sent, the
outstanding balance shall bear simple interest from
the date of said invoice at a rate of nine percent
(9%) per annum until such amount shall be paid in
full, but in no event will this percentage be greater
than the maximum permitted by law. Any payments made
thereafter and received by Manager shall be applied
first to interest accrued but unpaid and then to the
oldest unpaid invoice. In addition, the parties agree
that a failure by Hospital to pay any such invoice by
the twentieth (20th) day of the calendar month in
which the invoice is sent shall be a material breach
of this Agreement by written notice to Hospital
delivered personally or deposited in the United
States Mail, Certified or Registered, with postage
prepaid and addressed to Hospital as indicated in
Section 10 hereof. If contract is terminated by
Hospital, all management fees are due and payable
prior to the effective date of termination and any
such termination of this Agreement by Manager shall
not affect Hospitals obligation to pay amounts due
Manager under this Agreement, but no such payment
shall affect the effectiveness of such termination.
9. CONFIDENTIAL AND PROPRIETARY INFORMATION
(a) Hospital agrees and acknowledges that Confidential
Information is disclosed to it in confidence with the
understanding that it constitutes business
information developed by Manager. Hospital further
agrees that it shall not use such Confidential
Information for any purpose other than in connection
with the Out-Patient Program. Hospital further agrees
not to disclose such Confidential Information to any
third party except as required by law or regulation
or in order to serve the purposes of the Out-Patient
Program or as permitted by written authorization of
Manager.
-11-
<PAGE> 12
(b) Manager hereby grants to Hospital for the term of
this Agreement, a non-exclusive license to use the
registered service marks of Manager when identifying
the Out-Patient Program. These service marks are the
exclusive property of Manager.
(c) Manager agrees not to disclose confidential
information pertaining to the Hospital business or
Out-Patient Program patients except as required by
law or regulation or as permitted by written
authorization of Hospital or the respective patient
as the case may be.
10. RECRUITMENT OF EMPLOYEES AND AGENTS
(a) Hospital acknowledges that Manager has expended and
will continue to expend substantial time, effort, and
money to train its employees and contracted personnel
in the operation of the Out-Patient Program. The
employees and contracted personnel of Manager who
will operate the Out- Patient Program at the Hospital
will have access to and possess Confidential
Information of Manager. Hospital, therefore, agrees
that for the earlier of one (1) year after the
cessation of the employment or agency relationship
between the Manager and the employee or agent or one
(1) year after termination of this Agreement, it will
not knowingly (and it will not induce any of its
affiliates to) employ or solicit the employment of,
or in any way retain the services of any employee,
former employee, or contracted personnel or former
agent of Manager if such individual has been employed
or retained by Manager int he Out-Patient Program
unless Manager gives Hospital prior written consent
thereto or unless this Agreement is terminated by
Hospital pursuant to paragraph (10) of this
Agreement.
(b) Manager agrees that during the same respective period
of time, it will not knowingly (and it will not
induce any of its affiliates to) employ or solicit
the employment of or in any
-12-
<PAGE> 13
way retain the services of any employee, former
employee, or contracted personnel or former agent of
Hospital without Hospital's prior written consent
thereto.
11. TERMINATION
(a) Termination by Manager:
(1) By written notice to Hospital, if Hospital should
have a bankruptcy, reorganization or similar action
filed by or against it, become insolvent, go into
liquidation for any purpose except as provided under
Section 6(d) hereof.
(2) In the event Hospital has failed to comply with the
terms of this Agreement in any material respect,
including substantial completion of all refurbishing
in the identified program space, Manager shall, in
writing, notify all of the nature of the breach, and
Hospital shall have thirty (30) days to cure such
breach or else the Agreement will thereupon be
terminated upon written notice to Hospital.
(3) By written notice to Hospital if Hospital fails to
maintain its accreditation by the Joint Commission on
Accreditation of Healthcare Organizations or any
license granted to it by a regulatory agency without
which the Out-Patient Program would be materially and
adversely affected.
(4) By written notice to Hospital if Hospital fails to
maintain professional and general liability insurance
in the minimum amount of $5,000,000.
(b) Termination by Hospital:
1. By written notice to Manager if Manager should have a
bankruptcy, reorganization or similar action filed by
or against it, become insolvent, or go into
liquidation for any purpose.
-13-
<PAGE> 14
2. In the event Manager has failed to comply with the
terms of this Agreement in any material respect,
Hospital shall, in writing, notify Manager of the
nature of the breach, and Manager shall have thirty
(30) days to cure such breach or else the Agreement
will thereupon be terminated upon written notice to
Manager.
3. By written notice to Manager if Manager fails to
provide professional and general liability insurance
in the minimum amount of $5,000,000.
12. MISCELLANEOUS PROVISIONS
(a) Dispute Resolution: In the event that any controversy
or dispute arises between the parties hereto with
respect to this Agreement, the parties shall use
their best efforts and due diligence to reach an
agreement for the resolution of such controversy or
dispute. In the event that the parties are unable to
resolve any such controversy or dispute, any action
or proceeding whether in law or in equity, to
interpret or enforce the provision of this Agreement
shall be determined and conducted by reference with
respect to all issues, whether of fact or law, as
provided in California Code of Civil Procedure
("C.C.P.") 638(1). The parties shall jointly select
and appoint a person to act as referee. If the
parties cannot agree on a person to act as referee,
the court shall appoint a referee in accordance with
C.C.P. 645. The prevailing party in any action or
proceeding pursuant to this Section 11(a) shall be
entitled to its costs and expenses (including
reasonable attorney's fees) incurred in connection
with the arbitration from the other party. The
foregoing provisions of this Section 11(a) shall not
be interpreted to restrict either party's right to
pursue equitable relief from a court of competent
jurisdiction at any time or to terminate this
Agreement in accordance with the termination
provisions hereof.
-14-
<PAGE> 15
(b) Attorneys' Fees: If any legal action (including
arbitration) is necessary to enforce the terms of
this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees and costs
awarded against the other party in addition to any
other relief to which that party may be entitled.
(c) Governing Law: The validity of this Agreement and of
any of its terms or provisions, the interpretation of
the rights and duties of the parties hereunder, and
the construction of the terms or provisions hereof
shall be governed in accordance with the laws of the
State of California.
(d) Force Majeure: If either of the parties hereto is
delayed or prevented from fulfilling any of its
obligations under this Agreement by force majeure,
said party shall not be liable for said delay or
failure, "Force majeure" means any cause beyond the
reasonable control of a party, including but not
limited to an act of God, act or omission of civil
military authorities, fire, strike, flood, riot, war,
delay of transportation, or inability due to the
aforementioned causes to obtain necessary labor,
materials, or facilities.
(e) Severability: If any part of this Agreement is held
to be void or unenforceable, such part will be
treated as severable, leaving valid the remainder of
this Agreement notwithstanding the part found void or
unenforceable.
(f) Waiver: A waiver by either party of a breach or
failure to perform shall not constitute a waiver of
any provision hereof or of any other breach or
failure whether or not similar. There shall be no
waiver unless in writing signed by the party against
whom the waiver is sought to be enforced.
(g) Binding Effect: This Agreement shall be binding on
the successors, and assigns of the
-15-
<PAGE> 16
respective parties, provided, however, neither party
may assign or otherwise transfer this Agreement or
delegate obligations hereunder without the other's
written consent.
(h) Complete Agreement: This Agreement constitutes the
complete understanding of the parties and supersedes
all other agreements, either oral or in writing,
between the parties hereto with respect to the
subject matter hereof, and no other agreement,
representation, statement, or promise relating to the
subject matter of this Agreement which is not
contained herein shall be valid or binding. There
shall be no amendment unless in writing signed by
both parties.
(i) No Agency or Partnership: The relationship between
Manager and Hospital is that of independent
contractors and nothing in the Agreement shall be
deemed to create an agency, joint venture,
partnership or similar relationship between the
parties hereto. Neither party shall have the right to
bid for the other or enter into any contract or
commitment in the name of, or on behalf of the other.
(j) Notice: All notices hereunder shall be in writing,
delivered personally or by U.S. Certified or
Registered postal mails, postage prepaid, return
receipt requested, and shall be deemed given when
delivered personally or upon the earlier of actual
receipt or five (5) days after deposit in said United
States Mail, addressed as below with proper postage
affixed, but each party may change his address by
written notice in accordance with this Paragraph.
-16-
<PAGE> 17
Hospital's Address: Sherman Oaks Hospital and Health Center
4929 Van Nuys Blvd.
Sherman Oaks, CA 91403
Manager's Address: OptimumCare Corporation
30011 Ivy Glenn Drive, Suite 219
Laguna Niguel, CA 92677-5018
IN WITNESS WHEREOF, this Agreement has been executed on APRIL 7, 1995, at Laguna
Niguel, California.
Manager Hospital
OPTIMUMCARE CORPORATION SHERMAN OAKS HOSPITAL
AND HEALTH CENTER
By: EDWARD A. JOHNSON By: DAVID LEVINSOHN
----------------- ---------------
President Chief Executive Officer
-17-
<PAGE> 18
EXHIBIT A
STAFFING PATTERN
FOR
OPTIMUMCARE PARTIAL HOSPITALIZATION PROGRAM
================================================================================
<TABLE>
<CAPTION>
0-10 PATIENTS/DAY - (MONDAY - FRIDAY ONLY)
------------------------------------------
FTE
---
<S> <C>
Psych R.N. 1.0
RD/Nutritionist Per Diem
Unit Secretary 1.0
11-20 PATIENTS/DAY - (MONDAY - FRIDAY ONLY)
-------------------------------------------
FTE
---
Psych R.N. 1.5
RD/Nutritionist Per Diem
Mental Health Worker 1.0
Unit Secretary 1.0
21-30 PATIENTS/DAY - (MONDAY - FRIDAY ONLY)
-------------------------------------------
FTE
---
Psych R.N. 2.0
RD/Nutritionist Per Diem
Mental Health Worker 1.5
Unit Secretary 1.0
31-40 PATIENTS/DAY - (MONDAY - FRIDAY ONLY)
-------------------------------------------
FTE
---
Psych R.N. 2.0
LVN .5
RD/Nutritionist Per Diem
Mental Health Workers 2.0
Unit Secretary 1.0
</TABLE>
<PAGE> 1
EXHIBIT 10.67 CORPORATE RESOLUTION TO BORROW
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000 03/31/95 05/01/96 04000928 9740
- --------------------------------------------------------------------------------------
</TABLE>
REFERENCES IN THE SHADED AREA ARE FOR LENDER'S USE ONLY AND DO NOT LIMIT THE
APPLICABILITY OF THIS DOCUMENT TO ANY PARTICULAR LOAN OR ITEM.
- --------------------------------------------------------------------------------
BORROWER:OPTIMUMCARE CORPORATION, LENDER:NATIONAL BANK OF SOUTHERN
A DELAWARE CORPORATION CALIFORNIA NEWPORT REGIONAL OFFICE
30011 IVY GLENN DRIVE #219 4100 NEWPORT PLACE
LAGUNA NIGUEL, CA 92677 NEWPORT BEACH, CA 92660
- --------------------------------------------------------------------------------
I, THE UNDERSIGNED SECRETARY OR ASSISTANCE SECRETARY OF OPTIMUMCARE CORPORATION,
A DELAWARE CORPORATION (THE "CORPORATION"), HEREBY CERTIFY THAT THE CORPORATION
IS ORGANIZED AND EXISTING UNDER BY VIRTUE OF THE LAWS OF THE STATE OF DELAWARE
AS A CORPORATION FOR PROFIT, WITH ITS PRINCIPAL OFFICE AT 30011 IVY GLENN DRIVE
#219, LAGUNA NIGUEL, CA 92677, AND IS DULY AUTHORIZED TO TRANSACT BUSINESS IN
THE STATE OF CALIFORNIA.
I FURTHER CERTIFY THAT AT A MEETING OF THE DIRECTORS OF THE CORPORATION (OR BY
OTHER DULY AUTHORIZED CORPORATE ACTION IN LIEU OF A MEETING), DULY CALLED AND
HELD ON MARCH 31, 1995, AT WHICH A QUORUM WAS PRESENT AND VOTING, THE FOLLOWING
RESOLUTIONS WERE ADOPTED:
BE IT RESOLVED, THAT ANY ONE (1) OF THE FOLLOWING NAMED OFFICERS, EMPLOYEES, OR
AGENTS OF THIS CORPORATION, WHOSE ACTUAL SIGNATURE IS SHOWN BELOW:
<TABLE>
<CAPTION>
NAME POSITION ACTUAL SIGNATURE
- ---- -------- ----------------
<S> <C> <C>
EDWARD A. JOHNSON PRESIDENT EDWARD A. JOHNSON
</TABLE>
ACTING FOR AND ON BEHALF OF THIS CORPORATION AND AS ITS ACTA AND DEED BE, AND HE
OR SHE HEREBY IS, AUTHORIZED AND EMPOWERED:
BORROW MONEY. TO BORROW FROM TIME TO TIME FROM NATIONAL BANK OF
SOUTHERN CALIFORNIA ("LENDER"), ON SUCH TERMS AS MAY BE AGREED UPON
BETWEEN THE OFFICER, EMPLOYEE, OR AGENT AND LENDER, SUCH SUM OR SUMS OF
MONEY AS IN HIS OR HER JUDGMENT SHOULD BE BORROWED; HOWEVER, NOT
EXCEEDING AT ANY ONE TIME THE AMOUNT OF FIVE HUNDRED THOUSAND AND
00/100 DOLLARS ($500,000). IN ADDITION TO SUCH SUM OR SUMS OF MONEY AS
MAY BE CURRENTLY BORROWED BY THE CORPORATION FROM LENDER.
EXECUTE NOTES. TO EXECUTE AND DELIVER TO LENDER THE PROMISSORY NOTE OR
NOTES OF THE CORPORATION, ON LENDER'S FORMS, AT SUCH RATES OF INTEREST
AND ON SUCH TERMS AS MAY BE AGREED UPON, EVIDENCING THE SUMS OF MONEYS
O BORROWED OR ANY INDEBTEDNESS OF THE CORPORATION TO LENDER, AND ALSO
TO EXECUTE AND DELIVER TO LENDER ONE OR MORE RENEWALS, EXTENSIONS,
MODIFICATIONS, REFINANCINGS, CONSOLIDATIONS, OR SUBSTITUTIONS FOR ONE
OR MORE OF THE NOTES, OR ANY PORTION OF THE NOTES.
GRANT SECURITY. TO MORTGAGE, PLEDGE, HYPOTHECATE, OR OTHERWISE ENCUMBER
AND DELIVER TO LENDER, AS SECURITY FOR THE PAYMENT OF ANY LOANS SO
OBTAINED, ANY PROMISSORY NOTES SO EXECUTED, OR ANY OTHER OR FURTHER
INDEBTEDNESS OF THE
<PAGE> 2
CORPORATION TO LENDER AT ANY TIME OWING, HOWEVER THE SAME MAY BE
EVIDENCED, ANY PROPERTY NOW OR HEREAFTER BELONGING TO THE CORPORATION
OR IN WHICH THE CORPORATION NOW OR HEREAFTER MAY HAVE AN INTEREST,
INCLUDING WITHOUT LIMITATION ALL REAL PROPERTY AND ALL PERSONAL
PROPERTY OF THE CORPORATION. SUCH PROPERTY MAY BE MORTGAGED, PLEDGED,
HYPOTHECATED, OR ENCUMBERED AT THE TIME SUCH LOANS ARE OBTAINED OR SUCH
INDEBTEDNESS IS INCURRED, OR AT ANY OTHER TIME OR TIMES, AND MAY BE
EITHER IN ADDITION TO OR IN LIEU OF ANY PROPERTY THERETOFORE MORTGAGED,
PLEDGED, HYPOTHECATED, OR ENCUMBERED.
EXECUTE SECURITY DOCUMENTS. TO EXECUTE AND DELIVER TO LENDER THE FORMS
OF MORTGAGE, DEED OF TRUST, PLEDGE AGREEMENT, HYPOTHECATION AGREEMENT,
AND OTHER SECURITY AGREEMENTS AND FINANCING STATEMENTS WHICH MAY BE
SUBMITTED BY LENDER, AND WHICH SHALL EVIDENCE THE TERMS AND CONDITIONS
UNDER AND PURSUANT TO WHICH SUCH LIENS AND ENCUMBRANCES, OR ANY OF
THEM, AR GIVEN; AND ALSO TO EXECUTE AND DELIVER TO LENDER ANY OTHER
WRITTEN INSTRUMENTS, ANY CHATTEL PAPER, OR ANY OTHER COLLATERAL, OF ANY
KIND OR NATURE, WHICH HE OR SHE MAY IN HIS OR HER DISCRETION DEEM
REASONABLY NECESSARY OR PROPER IN CONNECTION WITH OR PERTAINING TO THE
GIVING OF THE LIENS AND ENCUMBRANCES.
NEGOTIATE ITEMS. TO DRAW, ENDORSE, AND DISCOUNT WITH LENDER ALL DRAFTS,
TRADE ACCEPTANCE, PROMISSORY NOTES, OR OTHER EVIDENCES OF INDEBTEDNESS
PAYABLE TO OR BELONGING TO THE CORPORATION OR IN WHICH THE CORPORATION
MAY HAVE AN INTEREST, AND EITHER TO RECEIVE CASH FOR THE SAME OR TO
CAYUSE SUCH PROCEEDS TO BE CREDITED TO THE ACCOUNT OF THE CORPORATION
WITH LENDER, OR TO CAUSE SUCH OTHER DISPOSITION OF THE PROCEEDS DERIVED
THEREFROM AS THEY MAY DEEM ADVISABLE.
FURTHER ACTS. IN THE CASE OF LINES OF CREDIT, TO DESIGNATE ADDITIONAL
OR ALTERNATE INDIVIDUALS AS BEING AUTHORIZED TO REQUEST ADVANCES
THEREUNDER, AND IN ALL CASES, TO DO AND PERFORM SUCH OTHER ACTS AND
THINGS, TO PAY ANY AND ALL FEES AND COSTS, AND TO EXECUTE AND DELIVER
SUCH OTHER DOCUMENTS AND AGREEMENTS, INCLUDING AGREEMENTS WAIVING THE
RIGHT TO A TRIAL BY JURY, AS HE OR SHE MAY IN HIS OTHER DISCRETION DEEM
REASONABLY NECESSARY OR PROPER IN ORDER TO CARRY INTO EFFECT THE
PROVISIONS OF THESE RESOLUTIONS. T HE FOLLOWING PERSON OR PERSONS ARE
AUTHORIZED TO REQUEST ADVANCES AND AUTHORIZE PAYMENTS UNDER THE LINE OF
CREDIT UNTIL LENDER RECEIVES WRITTEN NOTICE OF REVOCATION OF THEIR
AUTHORITY: EDWARD A. JOHNSON, PRESIDENT.
BE IT FURTHER RESOLVED, THAT ANY AND ALL ACTS AUTHORIZED PURSUANT TO THESE
RESOLUTIONS AND PERFORMED PRIOR TO THE PASSAGE OF THESE RESOLUTIONS ARE HEREBY
RATIFIED AND APPROVED, THAT THESE RESOLUTIONS SHALL REMAIN IN FULL FORCE AND
EFFECT AND LENDER MAY RELY ON THESE RESOLUTIONS UNTIL WRITTEN NOTICE OF THEIR
REVOCATION SHALL HAVE BEEN DELIVERED TO AN RECEIVED BY LENDER. ANY SUCH NOTICE
SHALL NOT AFFECT ANY OF THE CORPORATION'S AGREEMENTS OR COMMITMENTS IN EFFECT AT
THE TIME NOTICE IS GIVEN.
I FURTHER CERTIFY THAT THE OFFICER, EMPLOYEE, OR AGENT NAMED ABOVE IS DULY
ELECTED, APPOINTED, OR EMPLOYED BY OR FOR THE CORPORATION, AS THE CASE MAY BE
AND OCCUPIES THE POSITION SET OPPOSITE THE NAME; THAT HE FOREGOING RESOLUTIONS
NOW STAND OF RECORD ON THE BOOKS OF THE CORPORATION; AND THAT THE RESOLUTIONS
ARE IN FULL FORCE AND EFFECT AND HAVE NOT BEEN MODIFIED OR REVOKED IN ANY MANNER
WHATSOEVER.
<PAGE> 3
IN TESTIMONY WHEREOF, I HAVE THEREUNTO SET MY HAND AFFIXED THE SEAL OF THE
CORPORATION ON MARCH 31, 1995 AND ATTEST THAT THE SIGNATURES SET OPPOSITE THE
NAMES LISTED ABOVE ARE THEIR GENUINE SIGNATURES.
CERTIFIED TO AND ATTESTED BY:
XRANDY GLICKSMAN X
------------------------------- -------------------------------
SECRETARY OR ASSISTANT SECRETARY
CORPORATE SEAL
NOTE: IN CASE THE SECRETARY OR OTHER CERTIFYING OFFICER IS DESIGNATED BY THE
FOREGOING RESOLUTIONS AS ONE OF THE SIGNING OFFICERS, THIS CERTIFICATE SHOULD
ALSO BE SIGNED BY A SECOND OFFICER OR DIRECTOR OF THE CORPORATION.
<PAGE> 4
AGREEMENT TO PROVIDE INSURANCE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000 03/31/95 05/01/96 04000928 9740
- --------------------------------------------------------------------------------------
</TABLE>
REFERENCES IN THE SHADED AREA ARE FOR LENDER'S USE ONLY AND DO NOT LIMIT THE
APPLICABILITY OF THIS DOCUMENT TO ANY PARTICULAR LOAN OR ITEM.
- --------------------------------------------------------------------------------
BORROWER:OPTIMUMCARE CORPORATION, LENDER:NATIONAL BANK OF SOUTHERN
A DELAWARE CORPORATION CALIFORNIA NEWPORT REGIONAL OFFICE
30011 IVY GLENN DRIVE #219 4100 NEWPORT PLACE
LAGUNA NIGUEL, CA 92677 NEWPORT BEACH, CA 92660
- --------------------------------------------------------------------------------
INSURANCE REQUIREMENTS: OPTIMUMCARE CORPORATION, A DELAWARE CORPORATION
("GRANTOR") UNDERSTANDS THAT INSURANCE COVERAGE IS REQUIRED IN CONNECTION WITH
THE EXTENDING OF A LOAN OR THE PROVIDING OF OTHER FINANCIAL ACCOMMODATIONS TO
GRANTOR BY LENDER. THESE REQUIREMENTS ARE SET FORTH IN THE SECURITY DOCUMENTS.
THE FOLLOWING MINIMUM INSURANCE COVERAGES MUST BE PROVIDED ON THE FOLLOWING
DESCRIBED COLLATERAL (THE "COLLATERAL"):
COLLATERAL: ALL INVENTORY, EQUIPMENT AND FIXTURES.
TYPE. ALL RISKS, INCLUDING FIRE, THEFT AND LIABILITY.
AMOUNT. FULL INSURABLE VALUE.
BASIS. REPLACEMENT VALUE.
ENDORSEMENTS. LENDER'S LOSS PAYABLE CLAUSE WITH STIPULATION THAT
COVERAGE WILL NOT BE CANCELED OR DIMINISHED WITHOUT A MINIMUM OF
TEN (10) DAYS' PRIOR WRITTEN NOTICE TO LENDER.
INSURANCE COMPANY. GRANTOR MAY OBTAIN INSURANCES FROM ANY INSURANCE COMPANY
GRANTOR MAY CHOOSE THAT IS REASONABLY ACCEPTABLE TO LENDER. GRANTOR UNDERSTANDS
THAT CREDIT MAY NOT BE DENIED SOLELY BECAUSE INSURANCE WAS NOT PURCHASED THROUGH
LENDER.
FAILURE TO PROVIDE INSURANCE. GRANTOR AGREES TO DELIVER TO LENDER, THIRTY (30)
DAYS FROM THE DATE OF THIS AGREEMENT, EVIDENCE OF THE REQUIRED INSURANCE AS
PROVIDED ABLE, WITH AN EFFECTIVE DATE OF MARCH 31, 1995, OR EARLIER. GRANTOR
ACKNOWLEDGES AND AGREES THAT IF GRANTOR FAILS TO PROVIDE ANY REQUIRED INSURANCE
OR FAILS TO CONTINUE SUCH INSURANCE IN FORCE, LENDER MAY DO SO AT GRANTOR'S
EXPENSE AS PROVIDED IN THE APPLICABLE SECURITY DOCUMENT. THE COST OF ANY SUCH
INSURANCE, AT THE OPTION OF LENDER, SHALL BE PAYABLE ON DEMAND OR SHALL BE ADDED
TO THE INDEBTEDNESS AS PROVIDED IN THE SECURITY DOCUMENT. GRANTOR ACKNOWLEDGES
THAT IF LENDER SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE
LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE
OF THE LOAN; HOWEVER, GRANTOR'S EQUITY INT HE COLLATERAL MAY NOT BE INSURED. IN
ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
AUTHORIZATION. FOR PURPOSES OF INSURANCE COVERAGE ON THE COLLATERAL, GRANTOR
AUTHORIZES LENDER TO PROVIDE TO ANY PERSON (INCLUDING ANY INSURANCE AGENT OR
COMPANY) ALL INFORMATION LENDER DEEMS APPROPRIATE, WHETHER REGARDING THE
COLLATERAL, THE LOAN OR OTHER FINANCIAL ACCOMMODATIONS, OR BOTH.
<PAGE> 5
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE
INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MARCH 31, 1995.
GRANTOR:
OPTIMUMCARE CORPORATION, A DELAWARE CORPORATION
BY: EDWARD A. JOHNSON
----------------------------
EDWARD A. JOHNSON, PRESIDENT
- --------------------------------------------------------------------------------
FOR LENDER USE ONLY
DATE: INSURANCE VERIFICATION PHONE:
------------------- ----------------
AGENT'S NAME:
-------------------------------------------------------------------
INSURANCE COMPANY:
--------------------------------------------------------------
POLICY NUMBER:
------------------------------------------------------------------
EFFECTIVE DATES:
----------------------------------------------------------------
COMMENTS:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 6
NOTICE OF INSURANCE REQUIREMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000 03/31/95 05/01/96 04000928 9740
- --------------------------------------------------------------------------------------
</TABLE>
REFERENCES IN THE SHADED AREA ARE FOR LENDER'S USE ONLY AND DO NOT LIMIT THE
APPLICABILITY OF THIS DOCUMENT TO ANY PARTICULAR LOAN OR ITEM.
- --------------------------------------------------------------------------------
BORROWER:OPTIMUMCARE CORPORATION, LENDER:NATIONAL BANK OF SOUTHERN
A DELAWARE CORPORATION CALIFORNIA NEWPORT REGIONAL OFFICE
30011 IVY GLENN DRIVE #219 4100 NEWPORT PLACE
LAGUNA NIGUEL, CA 92677 NEWPORT BEACH, CA 92660
- --------------------------------------------------------------------------------
TO: DATE: MARCH 31, 1995
---------------------------------- --------------------
DEAR INSURANCE AGENT:
OPTIMUMCARE CORPORATION, A DELAWARE CORPORATION ("BORROWER") IS OBTAINING A LOAN
FROM NATIONAL BANK OF SOUTHERN CALIFORNIA. PLEASE END APPROPRIATE EVIDENCE OF
INSURANCE TO NATIONAL BANK OF SOUTHERN CALIFORNIA, TOGETHER WITH THE REQUESTED
ENDORSEMENTS, ON THE FOLLOWING PROPERTY, WHICH BORROWER IS GIVING AS SECURITY
FOR THE LOAN.
COLLATERAL: ALL INVENTORY, EQUIPMENT AND FIXTURES.
TYPE. ALL RISKS, INCLUDING FIRE, THEFT AND LIABILITY.
AMOUNT. FULL INSURABLE VALUE.
BASIS. REPLACEMENT VALUE.
ENDORSEMENTS. LENDER'S LOSS PAYABLE CLAUSE WITH STIPULATION THAT
COVERAGE WILL NOT BE CANCELED OR DIMINISHED WITHOUT A MINIMUM OF
TEN (10) DAYS' PRIOR WRITTEN NOTICE TO LENDER.
BORROWER:
OPTIMUMCARE CORPORATION, A DELAWARE CORPORATION
BY: EDWARD A. JOHNSON
---------------------------------------
EDWARD A. JOHNSON, PRESIDENT
MAIL TO:
NATIONAL BANK OF SOUTHERN CALIFORNIA
4100 NEWPORT PLACE
NEWPORT BEACH, CA 92660
<PAGE> 7
COMMERCIAL SECURITY AGREEMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000 03/31/95 05/01/96 04000928 9740
- --------------------------------------------------------------------------------------
</TABLE>
REFERENCES IN THE SHADED AREA ARE FOR LENDER'S USE ONLY AND DO NOT LIMIT THE
APPLICABILITY OF THIS DOCUMENT TO ANY PARTICULAR LOAN OR ITEM.
- --------------------------------------------------------------------------------
BORROWER:OPTIMUMCARE CORPORATION, LENDER:NATIONAL BANK OF SOUTHERN
A DELAWARE CORPORATION CALIFORNIA NEWPORT REGIONAL OFFICE
30011 IVY GLENN DRIVE #219 4100 NEWPORT PLACE
LAGUNA NIGUEL, CA 92677 NEWPORT BEACH, CA 92660
- --------------------------------------------------------------------------------
THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN OPTIMUMCARE
CORPORATION, A DELAWARE CORPORATION (REFERRED TO BELOW AS "GRANTOR"); AND
NATIONAL BANK OF SOUTHERN CALIFORNIA (REFERRED TO BELOW AS "LENDER"). FOR
VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER A SECURITY INTEREST IN THE
COLLATERAL TO SECURE THE INDEBTEDNESS AND AGREES THAT LENDER SHALL HAVE THE
RIGHTS STATED IN THIS AGREEMENT WITH RESPECT TO THE COLLATERAL, IN ADDITION TO
ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW.
DEFINITIONS. THE FOLLOWING WORDS SHALL HAVE THE FOLLOWING MEANINGS WHEN USED IN
THIS AGREEMENT. TERMS NOT OTHERWISE DEFINED IN THIS AGREEMENT SHALL HAVE THE
EARNINGS ATTRIBUTED TO SUCH TERMS IN THE UNIFORM COMMERCIAL CODE. ALL REFERENCES
TO DOLLAR AMOUNTS SHALL MEAN AMOUNTS IN LAWFUL MONEY OF THE UNITED STATES OF
AMERICA.
AGREEMENT. THE WORD "AGREEMENT' MEANS THIS COMMERCIAL SECURITY
AGREEMENT, AS THIS COMMERCIAL SECURITY AGREEMENT MAY BE AMENDED OR
MODIFIED FROM TIME TO TIME, TOGETHER WITH ALL EXHIBITS AND SCHEDULES
ATTACHED TO THIS COMMERCIAL SECURITY AGREEMENT FROM TIME TO TIME.
COLLATERAL. THE WORD "COLLATERAL" MEANS THE FOLLOWING DESCRIBED
PROPERTY OF GRANTOR, WHETHER NOW OWNED OR HEREAFTER ACQUIRED, WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHEREVER LOCATED:
ALL INVENTORY, CHATTEL PAPER, ACCOUNT, CONTRACT RIGHTS, EQUIPMENT,
GENERAL INTANGIBLES AND FIXTURES.
IN ADDITION, THE WORD "COLLATERAL" INCLUDES ALL THE FOLLOWING, WHETHER NOW OWNED
OR HEREAFTER ACQUIRED, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHEREVER
LOCATED:
ALL INVENTORY, CHATTEL PAPER, ACCOUNTS, CONTRACT RIGHTS, EQUIPMENT, GENERAL
INTANGIBLES AND FIXTURES
IN ADDITION, THE WORD "COLLATERAL" INCLUDES ALL THE FOLLOWING, WHETHER NOW OWNED
OR HEREAFTER ACQUIRED, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHEREVER
LOCATED:
(A) ALL ATTACHMENTS, ACCESSIONS, TOOLS, PARTS, SUPPLIES, INCREASES, AND
ADDITIONS TO AND ALL REPLACEMENTS OF ALL SUBSTITUTIONS FOR ANY PROPERTY
DESCRIBED ABOVE.
<PAGE> 8
(B) ALL PRODUCTS AND PRODUCE OF ANY OF THE PROPERTY DESCRIBED IN THIS
COLLATERAL SECTION.
(C) ALL ACCOUNTS, CONTRACT RIGHTS, GENERAL INTANGIBLES, INSTRUMENTS, RENTS,
MONIES, PAYMENTS, AND ALL OTHER RIGHTS, ARISING OUT OF A SALE, LEASE,
OR OTHER DISPOSITION OF ANY OF THE PROPERTY DESCRIBED IN THIS
COLLATERAL SECTION.
(D) ALL PROCEEDS (INCLUDING PROCEEDS) FROM THE SALE, DESTRUCTION, LOSS, OR
OTHER DISPOSITION OF ANY OF THE PROPERTY DESCRIBED IN THIS COLLATERAL
SECTION.
(E) ALL RECORDS AND DATA TO ANY OF THE PROPERTY DESCRIBED IN THIS
COLLATERAL SECTION, WHETHER IN THE FORM OF A WRITING, PHOTOGRAPH,
MICROFILM, MICROFICHE, OR ELECTRONIC MEDIA, TOGETHER WITH ALL OF
GRANTOR'S RIGHT, TITLE, AND INTEREST IN AND TO ALL COMPUTER SOFTWARE
REQUIRED UTILIZED, CREATE, MAINTAIN, AND PROCESS ANY SUCH RECORDS OR
DATA ON ELECTRONIC MEDIA.
EVENT OF DEFAULT. THE WORDS "EVENT OF DEFAULT" MEAN AND INCLUDE WITHOUT
LIMITATION ANY OF THE EVENTS OF DEFAULT SET FORTH BELOW IN THE SECTION TITLED
"EVENTS OF DEFAULT".
GRANTOR. THE WORD "GRANTOR" MEANS OPTIMUMCARE CORPORATION, A DELAWARE
CORPORATION, ITS SUCCESSORS AND ASSIGNS.
GUARANTOR. THE WORD "GUARANTOR" MEANS AND INCLUDES WITHOUT LIMITATION EACH AND
ALL THE
INDEBTEDNESS. THE WORK "INDEBTEDNESS" MEANS THE INDEBTEDNESS EVIDENCED BY THE
NOTE, INCLUDING ALL PRINCIPAL AND INTEREST, TOGETHER WITH ALL OTHER INDEBTEDNESS
AND COSTS AND EXPENSES FOR WHICH GRANTOR IS RESPONSIBLE UNDER THIS AGREEMENT OR
UNDER ANY OF THE RELATED DOCUMENTS.
LENDER. THE WORD "LENDER" MEANS NATIONAL BANK OF SOUTHERN CALIFORNIA, ITS
SUCCESSORS AND ASSIGNS.
NOTE. THE WORD "NOTE" MEANS THE NOTE OR CREDIT AGREEMENT DATED MARCH 31, 1995,
IN THE PRINCIPAL AMOUNT OF $500,000.00 FROM GRANTOR TO LENDER, TOGETHER WITH ALL
RENEWALS OF, EXTENSIONS OF, MODIFICATIONS OF, REFINANCINGS OF, CONSOLIDATIONS OF
AND SUBSTITUTIONS FOR THE NOTE OR CREDIT AGREEMENT.
RELATED DOCUMENTS. THE WORDS "RELATED DOCUMENTS" MEANS AND INCLUDE WITHOUT
LIMITATION ALL PROMISSORY NOTES, CREDIT AGREEMENTS LOAN AGREEMENTS,
ENVIRONMENTAL AGREEMENTS, GUARANTIES, SECURITY AGREEMENTS, MORTGAGES, DEEDS OF
TRUSTS, AND ALL OTHER INSTRUMENTS, AGREEMENTS AND DOCUMENTS, WHETHER NOW OR
HEREAFTER EXISTING, EXECUTED IN CONNECTION WITH THE INDEBTEDNESS.
DEPOSIT ACCOUNTS. GRANTOR HEREBY GRANTS LENDER A CONTRACTUAL POSSESSORY SECURITY
INTEREST IN AND HEREBY ASSIGNS, CONVEYS, DELIVER, PLEDGES, AND TRANSFERS ALL OF
GRANTOR'S RIGHT, TITLE AND INTEREST IN AN TO GRANTOR'S ACCOUNTS WITH LENDER
WHETHER CHECKING, SAVINGS, OR SOME OTHER ACCOUNT), INCLUDING ALL ACCOUNTS HELD
JOINTLY WITH SOMEONE ELSE AND ALL ACCOUNTS GRANTOR MAY OPEN IN THE FUTURE,
EXCLUDING HOWEVER ALL IRS, KEOGH, AND TRUST ACCOUNTS.
OBLIGATIONS OF GRANTOR. GRANTOR WARRANTS AND COVENANTS TO LENDER AS FOLLOWS:
PERFECTION OF SECURITY INTEREST. GRANTOR AGREES TO EXECUTE SUCH
FINANCING STATEMENTS AND TO TAKE WHATEVER OTHER ACTIONS ARE REQUESTED
BY LENDER TO
<PAGE> 9
PERFECT AND CONTINUE LENDER'S SECURITY INTEREST IN THE COLLATERAL. UPON
REQUEST OF LENDER, GRANTOR WILL DELIVER TO LENDER ANY AND ALL OF THE
DOCUMENTS EVIDENCING OR CONSTITUTING THE COLLATERAL, AND GRANTOR WILL
NOTE LENDER'S INTEREST UPON ANY AND ALL CHATTEL PAPER IF NOT DELIVERED
TO LENDER FOR POSSESSION BY LENDER. GRANTOR HEREBY APPOINTS LENDER AS
ITS IRREVOCABLE ATTORNEY-IN-FACT FOR THE PURPOSE OF EXECUTING ANY
DOCUMENTS NECESSARY TO PERFECT OR TO CONTINUE THE SECURITY INTEREST
GRANTED IN THIS AGREEMENT. LENDER MAY AT ANY TIME, AND WITHOUT FURTHER
AUTHORIZATION FROM GRANTOR, FILE A CARBON, PHOTOGRAPHIC OR OTHER
REPRODUCTION OF ANY FINANCING STATEMENT OR OF THIS AGREEMENT FOR USE AS
A FINANCING STATEMENT. GRANTOR WILL REIMBURSE LENDER FOR ALL EXPENSES
FOR THE PERFECTION AND THE CONTINUATION OF THE PERFECTION OF LENDER'S
SECURITY INTEREST IN THE COLLATERAL. GRANTOR PROMPTLY WILL NOTIFY
LENDER BEFORE ANY CHANGE IN GRANTOR'S NAME INCLUDING ANY CHANGE TO THE
ASSUMED BUSINESS NAMES OF GRANTOR.
NO VIOLATION. THE EXECUTION AND DELIVERY OF THIS AGREEMENT WILL NOT VIOLATE ANY
LAW OR AGREEMENT GOVERNING GRANTOR OR TO WHICH GRANTOR IS A PARTY, AND ITS
CERTIFICATE OR ARTICLES OF INCORPORATION AND BYLAWS DO NOT PROHIBIT ANY TERM OR
CONDITION OF THIS AGREEMENT.
ENFORCEABILITY OF COLLATERAL. TO THE EXTENT THE COLLATERAL CONSISTS OF ACCOUNTS,
CONTRACT RIGHTS, CHATTEL PAPER, OR GENERAL INTANGIBLES, THE COLLATERAL IS
ENFORCEABLE IN ACCORDANCE WITH ITS TERMS, IS GENUINE, AND COMPLIES WITH
APPLICABLE LAWS CONCERNING FORM, CONTENT AND MANNER OF PREPARATION AND
EXECUTION, AND ALL PERSONS APPEARING TO BE OBLIGATED ONT HE COLLATERAL HAVE
AUTHORITY AND CAPACITY TO CONTRACT AND ARE IN FACT OBLIGATED AS THEY APPEAR TO
BE ON THE COLLATERAL. AT THE TIME ANY ACCOUNT BECOMES SUBJECT TO A SECURITY
INTEREST IN FAVOR OF LENDER, THE ACCOUNT SHALL BE A GOOD AND VALID ACCOUNT
REPRESENTING AN UNDISPUTED, BONA FIDE INDEBTEDNESS INCURRED BY THE ACCOUNT
DEBTOR, FOR MERCHANDISE HELD SUBJECT TO DELIVERY INSTRUCTIONS OR THERETOFORE
SHIPPED OR DELIVERED PURSUANT TO A CONTRACT OF SALE, OR FOR SERVICES THERETOFORE
PERFORMED BY GRANTOR WITH OR FOR THE ACCOUNT DEBTOR; THERE SHALL BE NO SETOFFS
OR COUNTERCLAIMS AGAINST ANY SUCH ACCOUNT; AND NO AGREEMENT UNDER WHICH ANY
DEDUCTIONS OR DISCOUNTS MAY BE CLAIMED SHALL HAVE BEEN MADE WITH THE ACCOUNT
DEBTOR EXCEPT THOSE DISCLOSED TO LENDER IN WRITING.
LOCATION OF THE COLLATERAL. GRANTOR, UPON REQUEST OF LENDER, WILL DELIVERY TO
LENDER IN FORM SATISFACTORY TO LENDER A SCHEDULE OF REAL PROPERTIES AND
COLLATERAL LOCATIONS RELATING TO GRANTOR'S OPERATIONS, INCLUDING WITHOUT
LIMITATION THE FOLLOWING: (A) ALL REAL PROPERTY OWNED OR BEING PURCHASED BY
GRANTOR; (B) ALL REAL PROPERTY BEING RENTED OR LEASED BY GRANTOR; (C) ALL
STORAGE FACILITIES OWNED, RENTED, LEASED, OR BEING USED BY GRANTOR, AND (D) ALL
OTHER PROPERTIES WHERE COLLATERAL IS OR MAY BE LOCATED. EXCEPT IN THE ORDINARY
COURSE OF ITS BUSINESS, GRANTOR SHALL NOT REMOVE THE COLLATERAL FROM ITS
EXISTING LOCATIONS WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER.
REMOVAL OF COLLATERAL. GRANTOR SHALL KEEP THE COLLATERAL (OR TO THE EXTENT THE
COLLATERAL CONSISTS OF INTANGIBLE PROPERTY SUCH AS ACCOUNTS, THE RECORDS
CONCERNING THE COLLATERAL) AT GRANTOR'S ADDRESS SHOWN ABOVE OR AT SUCH OTHER
LOCATIONS AS ARE ACCEPTABLE TO LENDER. EXCEPT IN THE ORDINARY COURSE OF ITS
BUSINESS, INCLUDING THE SALES OF INVENTORY, GRANTOR SHALL NOT REMOVE THE
COLLATERAL FROM ITS EXISTING LOCATIONS WITHOUT THE PRIOR WRITTEN CONSENT OF
LENDER. TO THE EXTENT THAT THE COLLATERAL CONSISTS OF VEHICLES, OR OTHER TITLED
PROPERTY, GRANTOR SHALL NOT TAKE OR PERMIT ANY ACTION WHICH WOULD REQUIRE
<PAGE> 10
APPLICATION FOR CERTIFICATES OF TITLE FOR THE VEHICLES OUTSIDE THE STATE OF
CALIFORNIA, WITHOUT PRIOR WRITTEN CONSENT OF LENDER.
TRANSACTIONS INVOLVING COLLATERAL. EXCEPT FOR INVENTORY SOLD OR ACCOUNTS
COLLECTED IN THE ORDINARY COURSE OF GRANTOR'S BUSINESS, GRANTOR SHALL NOT SELL,
OFFER TO SELL, OR OTHERWISE TRANSFER OR DISPOSE OF THE COLLATERAL. WHILE GRANTOR
IS NOT IN DEFAULT UNDER THIS AGREEMENT, GRANTOR MAY SELL INVENTORY, BUT ONLY IN
THE ORDINARY COURSE OF ITS BUSINESS AND ONLY TO BUYERS WHO QUALIFY AS A BUYER IN
THE ORDINARY COURSE OF BUSINESS. A SALE IN THE ORDINARY COURSE OF GRANTOR'S
BUSINESS DOES NOT INCLUDE A TRANSFER IN PARTIAL OR TOTAL SATISFACTION OF A DEBT
OR ANY BULK SALE. GRANTOR SHALL NOT PLEDGE, MORTGAGE, ENCUMBER OR OTHERWISE
PERMIT THE COLLATERAL TO BE SUBJECT TO ANY LIEN, SECURITY INTEREST, ENCUMBRANCE,
OR CHARGE, OTHER THAN SECURITY INTEREST PROVIDED FOR IN THIS AGREEMENT, WITHOUT
THE PRIOR WRITTEN CONSENT OF LENDER. THIS INCLUDES SECURITY INTERESTS EVEN IF
JUNIOR IN RIGHT TO THE SECURITY INTERESTS GRANTED UNDER THIS AGREEMENT. UNLESS
WAIVED BY LENDER, ALL PROCEEDS FROM ANY DISPOSITION OF THE COLLATERAL (FOR
WHATEVER REASON) SHALL BE HELD IN TRUST FOR LENDER AND SHALL NOT BE COMMINGLED
WITH ANY OTHER FUNDS; PROVIDED HOWEVER,THIS REQUIREMENT SHALL NOT CONSTITUTE
CONSENT BY LENDER TO ANY SALE OR OTHER DISPOSITION. UPON RECEIPT, GRANTOR SHALL
IMMEDIATELY DELIVER ANY SUCH PROCEEDS TO LENDER.
TITLE. GRANTOR REPRESENTS AND WARRANTS TO LENDER THAT IT HOLDS GOOD AND
MARKETABLE TITLE TO THE COLLATERAL, FREE AND CLEAR OF ALL LIENS AND ENCUMBRANCES
EXCEPT FOR THE LIEN OF THIS AGREEMENT. NO FINANCING STATEMENT CONCERNING ANY OF
THE COLLATERAL IS ON FILE IN ANY PUBLIC OFFICE OTHER THAN THOSE WHICH REFLECT
THE SECURITY INTEREST CREATED BY THIS AGREEMENT OR TO WHICH LENDER HAS
SPECIFICALLY CONSENTED. GRANTOR SHALL DEFEND LENDER'S RIGHTS INT HE COLLATERAL
AGAINST THE CLAIMS AND DEMANDS OF ALL OTHER PERSONS.
COLLATERAL SCHEDULES AND LOCATIONS. AS OFTEN AS LENDER SHALL REQUIRE, AND
INSOFAR AS THE COLLATERAL CONSISTS OF ACCOUNTS AND GENERAL INTANGIBLES, GRANTOR
SHALL DELIVER TO LENDER SCHEDULES OF SUCH COLLATERAL, INCLUDING SUCH INFORMATION
AS LENDER MAY REQUIRE, INCLUDING WITHOUT LIMITATION NAMES AND ADDRESSES OF
ACCOUNT DEBTORS AND AGINGS OF ACCOUNTS AND GENERAL INTANGIBLES. INSOFAR AS THE
COLLATERAL CONSISTS OF INVENTORY AND EQUIPMENT, GRANTOR SHALL DELIVER TO LENDER,
AS OFTEN AS LENDER SHALL REQUIRE, SUCH LISTS, DESCRIPTIONS, AND DESIGNATIONS OF
SUCH COLLATERAL AS LENDER MAY REQUIRE TO IDENTIFY THE NATURE, EXTENT, AND
LOCATION OF SUCH COLLATERAL. SUCH INFORMATION SHALL BE SUBMITTED FOR GRANTOR AND
EACH OF ITS SUBSIDIARIES OR RELATED COMPANIES.
MAINTENANCE AND INSPECTION OF COLLATERAL. GRANTOR SHALL MAINTAIN ALL TANGIBLE
COLLATERAL IN GOOD CONDITION AND REPAIR. GRANTOR WILL NOT COMMIT OR PERMIT
DAMAGE TO OR DESTRUCTION OF THE COLLATERAL OR ANY PART OF THE COLLATERAL. LENDER
AND ITS DESIGNATED REPRESENTATIVES AND AGENTS SHALL HAVE THE RIGHT AT ALL
REASONABLE TIMES TO EXAMINE, INSPECT, AND AUDIT THE COLLATERAL WHEREVER LOCATED.
GRANTOR SHALL IMMEDIATELY NOTIFY LENDER OF ALL CASES INVOLVING THE RETURN,
REJECTION, REPOSSESSION, LOSS OR DAMAGE OF OR TO ANY COLLATERAL; OF ANY REQUEST
FOR CREDIT OR ADJUSTMENT OR OF ANY OTHER DISPUTE ARISING WITH RESPECT TO THE
COLLATERAL; AND GENERALLY OF ALL HAPPENINGS AND EVENTS AFFECTING THE COLLATERAL
OR THE VALUE OR THE AMOUNT OF THE COLLATERAL.
TAXES, ASSESSMENTS AND LIENS. GRANTOR WILL PAY WHEN DUE ALL TAXES, ASSESSMENTS
AND LIENS UPON THE COLLATERAL, ITS USE OR OPERATIONS, UPON THIS AGREEMENT, UPON
ANY PROMISSORY NOTE OR NOTES EVIDENCING THE INDEBTEDNESS, OR UPON ANY OF THE
<PAGE> 11
OTHER RELATED DOCUMENTS. GRANTOR MAY WITHHOLD ANY SUCH PAYMENT OR MAY ELECT TO
CONTEST ANY LIEN IF GRANTOR IS IN GOOD FAITH CONDUCTING AN APPROPRIATE
PROCEEDING TO CONTEST THE OBLIGATION TO PAY AND SO LONG AS LENDER'S INTEREST IN
THE COLLATERAL IS NOT JEOPARDIZED IN LENDER'S SOLE OPINION. IF THE COLLATERAL IS
SUBJECTED TO A LIEN WHICH IS NOT DISCHARGED WITHIN FIFTEEN (15) DAYS, GRANTOR
SHALL DEPOSIT WITH LENDER CASH, A SUFFICIENT CORPORATE SURELY BOND OR OTHER
SECURITY SATISFACTORY TO LENDER IN AN AMOUNT ADEQUATE TO PROVIDE FOR THE
DISCHARGE OF THE LIEN PLUS ANY INTEREST COSTS, ATTORNEYS' FEES OR OTHER CHARGES
THAT COULD ACCRUE AS A RESULT OF FORECLOSURE OR SALE OF THE COLLATERAL. IN ANY
CONTEST GRANTOR SHALL DEFEND ITSELF AND LENDER AND SHALL SATISFY ANY FINAL
ADVERSE JUDGMENT BEFORE ENFORCEMENT AGAINST THE COLLATERAL. GRANTOR SHALL NAME
LENDER AS AN ADDITIONAL OBLIGEE UNDER ANY SURETY BOND FURNISHED IN THE CONTEST
PROCEEDINGS.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. GRANTOR SHALL COMPLY PROMPTLY WITH
ALL LAWS, ORDINANCES, RULES AND REGULATIONS OF ALL GOVERNMENTAL AUTHORITIES, NOW
OR HEREAFTER IN EFFECT, APPLICABLE TO THE OWNERSHIP, PRODUCTION, DISPOSITION, OR
USE OF THE COLLATERAL. GRANTOR MAY CONTEST IN GOOD FAITH ANY SUCH LAW, ORDINANCE
OR REGULATION AND WITHHOLD COMPLIANCE DURING ANY PROCEEDING, INCLUDING
APPROPRIATE APPEALS, SO LONG AS LENDER'S INTEREST INT HE COLLATERAL IN LENDER'S
OPINION, IS NOT JEOPARDIZED.
HAZARDOUS SUBSTANCES. GRANTOR REPRESENTS AND WARRANTS THAT THE COLLATERAL NEVER
HAS BEEN, AND NEVER WILL BE SO LONG AS THIS AGREEMENT REMAINS A LIEN ON THE
COLLATERAL, USED FOR THE GENERATION, MANUFACTURE, STORAGE, TRANSPORTATION,
TREATMENT, DISPOSAL, RELEASE OR THREATENED RELEASE OF ANY HAZARDOUS WASTE OR
SUBSTANCE, AS THOSE TERMS ARE DEFINED IN THE COMPREHENSIVE ENVIRONMENTAL
RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980, AS AMENDED, 42 U.S.C. SECTION
9601, ET SEQ. ("CERCLA"), THE SUPERFUND AMENDMENTS AND REAUTHORIZATION ACT OF
1986. PUB. L. NO. 99-499 ("SARA") THE HAZARDOUS MATERIALS TRANSPORTATION ACT, 49
U.S.C. SECTION 1801, ET SEQ. THE RESOURCE CONSERVATION AND RECOVERY ACT 49
U.S.C. SECTION 6901, ET SEQ. CHAPTERS 6.5 THROUGH 7.7 OF DIVISION 20 OF THE
CALIFORNIA HEALTH AND SAFETY CODE, SECTION 25100, ET SEQ. OR OTHER APPLICABLE
STATE OR FEDERAL LAWS, RULES, OR REGULATIONS ADOPTED PURSUANT TO ANY OF THE
FOREGOING. THE TERMS "HAZARDOUS WASTE" AND "HAZARDOUS SUBSTANCE" SHALL ALSO
INCLUDE, WITHOUT LIMITATION, PETROLEUM AND PETROLEUM BY-PRODUCTS OR ANY FRACTION
THEREOF AND ASBESTOS. THE REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN ARE
BASED ON GRANTOR'S DUE DILIGENCE IN INVESTIGATING THE COLLATERAL FOR HAZARDOUS
WASTES AND SUBSTANCES. GRANTOR HEREBY (A) RELEASES AND WAIVES ANY FUTURE CLAIMS
AGAINST LENDER FOR INDEMNITY OR CONTRIBUTION IN THE EVENT GRANTOR BECOMES LIABLE
FOR CLEANUP OR OTHER COSTS UNDER ANY SUCH LAWS, AND (B) AGREES TO INDEMNIFY AND
HOLD HARMLESS LENDER AGAINST ANY AND ALL CLAIMS AND LOSSES RESULTING FROM A
BREACH OF THIS PROVISION OF THIS AGREEMENT. THIS OBLIGATION TO INDEMNIFY SHALL
SURVIVE THE PAYMENT OF THE INDEBTEDNESS AND THE SATISFACTION OF THIS AGREEMENT.
MAINTENANCE OF CASUALTY INSURANCE. GRANTOR SHALL PROCURE AND MAINTAIN ALL RISKS
INSURANCE, INCLUDING WITHOUT LIMITATION FIRE, THEFT AND LIABILITY COVERAGE
TOGETHER WITH SUCH OTHER INSURANCE AS LENDER MAY REQUIRE WITH RESPECT TO THE
COLLATERAL, IN FORM, AMOUNTS, COVERAGES AND BASIS REASONABLY ACCEPTABLE TO
LENDER AND ISSUED BY A COMPANY OR COMPANIES REASONABLY ACCEPTABLE TO LENDER.
GRANTOR, UPON REQUEST OF LENDER, WILL DELIVER TO LENDER FROM TIME TO TIME THE
POLICIES OR CERTIFICATES OF INSURANCE INFORM SATISFACTORY TO LENDER, INCLUDING
STIPULATIONS THAT COVERAGES WILL NOT BE CANCELED OR DIMINISHED WITHOUT AT LEAST
TEN (10) DAYS' PRIOR WRITTEN NOTICE TO LENDER AND NOT INCLUDING ANY DISCLAIMER
OF THE INSURER'S
<PAGE> 12
LIABILITY FOR FAILURE TO GIVE SUCH A NOTICE. EACH INSURANCE POLICY ALSO SHALL
INCLUDE AN ENDORSEMENT PROVIDING THAT COVERAGE IN FAVOR OF LENDER WILL NOT BE
IMPAIRED IN ANY WAY BY ANY ACT, OMISSION OR DEFAULT OF GRANTOR OR ANY OTHER
PERSON. IN CONNECTION WITH ALL POLICIES COVERING ASSETS IN WHICH LENDER HOLDS OR
IS OFFERED A SECURITY INTEREST, GRANTOR WILL PROVIDE LENDER WITH SUCH LOSS
PAYABLE OR OTHER ENDORSEMENTS AS LENDER MAY REQUIRE. IF GRANTOR AT ANY TIME
FAILS TO OBTAIN OR MAINTAIN ANY INSURANCE AS REQUIRED UNDER THIS AGREEMENT,
LENDER MAY (BUT SHALL NOT BE OBLIGATED TO) OBTAIN SUCH INSURANCE AS LENDER DEEMS
APPROPRIATE, INCLUDING IF IT SO CHOOSES "SINGLE INTEREST INSURANCES", WHICH WILL
COVER ONLY LENDER'S INTEREST IN THE COLLATERAL.
APPLICATION OF INSURANCE PROCEEDS. GRANTOR SHALL PROMPTLY NOTIFY LENDER OF ANY
LOSS OR DAMAGE TO THE COLLATERAL. LENDER MAY MAKE PROOF OF LOSS IF GRANTOR FAILS
TO DO SO WITHIN FIFTEEN (15) DAYS OF THE CASUALTY. ALL PROCEEDS OF ANY INSURANCE
ON THE COLLATERAL, INCLUDING ACCRUED PROCEEDS THEREON, SHALL BE HELD BY LENDER
AS PART OF THE COLLATERAL. IF LENDER CONSENTS TO REPAIR OR REPLACEMENT OF THE
DAMAGED OR DESTROYED COLLATERAL, LENDER SHALL, UPON SATISFACTORY PROOF OF
EXPENDITURE, PAY OR REIMBURSE GRANTOR FROM THE PROCEEDS FOR THE REASONABLE COST
OF REPAIR OR RESTORATION. IF LENDER DOES NOT CONSENT TO REPAIR OR REPLACEMENT OF
THE COLLATERAL, LENDER SHALL RETAIN A SUFFICIENT AMOUNT OF THE PROCEEDS TO PAY
ALL OF THE INDEBTEDNESS, AND SHALL PAY THE BALANCE TO GRANTOR. ANY PROCEEDS
WHICH HAVE NOT BEEN DISBURSED WITHIN SIX (6) MONTHS AFTER THEIR RECEIPT AND
WHICH GRANTOR HAS NOT COMMITTED TO THE REPAIR OR RESTORATION OF THE COLLATERAL
SHALL BE USED TO PREPAY THE INDEBTEDNESS.
INSURANCE RESERVES. LENDER MAY REQUIRE GRANTOR TO MAINTAIN WITH LENDER RESERVES
FOR PAYMENT OF INSURANCE PREMIUMS, WHICH RESERVES SHALL BE CREATED BY MONTHLY
PAYMENTS FROM GRANTOR OF A SUM ESTIMATED BY LENDER TO BE SUFFICIENT TO PRODUCE,
AT LEAST FIFTEEN (15) DAYS BEFORE THE PREMIUM DUE DATE AMOUNTS AT LEAST EQUAL TO
THE INSURANCE PREMIUMS TO BE PAID. IF FIFTEEN (15) DAYS BEFORE PAYMENT IS DUE,
THE RESERVE FUNDS ARE INSUFFICIENT, GRANTOR SHALL UPON DEMAND PAY ANY DEFICIENCY
TO LENDER. THE RESERVE FUNDS SHALL BE HELD BY LENDER AS A GENERAL DEPOSIT AND
SHALL CONSTITUTE A NON-INTEREST-BEARING ACCOUNT WHICH LENDER MAY SATISFY BY
PAYMENT OF THE INSURANCE PREMIUMS REQUIRED TO BE PAID BY GRANTOR AS THEY BECOME
DUE. LENDER DOES NOT HOLD THE RESERVE FUNDS IN TRUST FOR GRANTOR, AND LENDER IS
NOT THE AGENT OF GRANTOR FOR PAYMENT OF THE INSURANCE PREMIUMS REQUIRED TO BE
PAID BY GRANTOR. THE RESPONSIBILITY FOR THE PAYMENT OF PREMIUMS SHALL REMAIN
GRANTOR'S SOLE RESPONSIBILITY.
INSURANCE REPORTS. GRANTOR, UPON REQUEST OF LENDER, SHALL FURNISH TO LENDER
REPORTS ON EACH EXITING POLICY OF INSURANCE SHOWING SUCH INFORMATION AS LENDER
MAY REASONABLY REQUEST INCLUDING THE FOLLOWING: (A) THE NAME OF THE INSURER, (B)
THE RISKS INSURED; (C) THE AMOUNT OF THE POLICY; (D) THE PROPERTY INSURED; (E)
THE THEN CURRENT VALUE ON THE BASIS OF WHICH INSURANCE HAS BEEN OBTAINED AND THE
MANNER OF DETERMINING THAT VALUE; AND (F) THE EXPIRATION DATE OF THE POLICY. IN
ADDITION, GRANTOR SHALL UPON REQUEST BY LENDER (HOWEVER NOT MORE OFTEN THAN
ANNUALLY) HAVE AN INDEPENDENT APPRAISER SATISFACTORY TO LENDER DETERMINE, AS
APPLICABLE, THE CASH VALUE OR REPLACEMENT COST OF THE COLLATERAL.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. UNTIL DEFAULT AND EXCEPT
AS OTHERWISE PROVIDED BELOW WITH RESPECT TO ACCOUNTS, GRANTOR MAY HAVE
POSSESSION OF THE TANGIBLE PERSONAL PROPERTY AND BENEFICIAL USE OF ALL THE
COLLATERAL AND MAY USE IT IN ANY LAWFUL MANNER NOT INCONSISTENT WITH THIS
AGREEMENT OR THE RELATED DOCUMENTS, PROVIDED THAT GRANTOR'S RIGHT TO POSSESSION
AND BENEFICIAL USE
<PAGE> 13
SHALL NOT APPLY TO ANY COLLATERAL WHERE POSSESSION OF THE COLLATERAL BY LENDER
IS REQUIRED BY LAW TO PERFECT LENDER'S SECURITY INTEREST IN SUCH COLLATERAL.
UNTIL OTHERWISE NOTIFIED BY LENDER, GRANTOR MAY COLLECT ANY OF THE COLLATERAL
CONSISTING OF ACCOUNTS. AT ANY TIME AND EVEN THOUGH NO EVENT OF DEFAULT EXISTS
LENDER MAY EXERCISE ITS RIGHTS TO COLLECT THE ACCOUNTS AND TO NOTIFY ACCOUNT
DEBTORS TO MAKE PAYMENTS DIRECTLY TO LENDER FOR APPLICATION TO THE INDEBTEDNESS.
IF LENDER AT ANY TIME HAS POSSESSION OF ANY COLLATERAL, WHETHER BEFORE OR AFTER
AN EVENT OF DEFAULT, LENDER SHALL BE DEEMED TO HAVE EXERCISED REASONABLE CARE IN
THE CUSTODY AND PRESERVATION OF THE COLLATERAL IF LENDER TAKES SUCH ACTION FOR
THAT PURPOSE AS GRANTOR SHALL REQUEST OR AS LENDER, IN LENDER'S SOLE DISCRETION,
SHALL DEEM APPROPRIATE UNDER THE CIRCUMSTANCES, BUT FAILURE TO HONOR ANY REQUEST
BY GRANTOR SHALL NOT OF ITSELF BE DEEMED TO BE A FAILURE TO EXERCISE REASONABLE
CARE. LENDER SHALL NOT BE REQUIRED TO TAKE ANY STEPS NECESSARY TO PRESERVE ANY
RIGHTS IN THE COLLATERAL AGAINST PRIOR PARTIES, NOR TO PROTECT, PRESERVE OR
MAINTAIN ANY SECURITY INTEREST GIVEN TO SECURE THE INDEBTEDNESS.
EXPENDITURES BY LENDER. IN NOT DISCHARGED OR PAID WHEN DUE, LENDER MAY (BUT
SHALL NOT BE OBLIGATED TO) DISCHARGE OR PAY ANY AMOUNTS REQUIRED TO BE
DISCHARGED OR PAID BY GRANTOR UNDER THIS AGREEMENT. INCLUDING WITHOUT LIMITATION
ALL TAXES, LIENS, SECURITY INTEREST, ENCUMBRANCES AND OTHER CLAIMS, AT ANY TIME
LEVIED OR PLACED ON THE COLLATERAL. LENDER ALSO MAY (BUT SHALL NOT BE OBLIGATED
TO) PAY ALL COSTS FOR INSURING MAINTAINING, AND PRESERVING THE COLLATERAL. ALL
SUCH EXPENDITURES INCURRED OR PAID BY LENDER FOR SUCH PURPOSES WILL THEN BEAR
INTEREST AT THE RATE CHARGED UNDER THE NOTE FROM THE DATE INCURRED OR PAID BY
LENDER TO THE DATE OF REPAYMENT BY GRANTOR. ALL SUCH EXPENSES SHALL BECOME A
PART OF THE INDEBTEDNESS AND, AT LENDER'S OPTION, WILL (A) BE PAYABLE ON DEMAND,
(B) BE ADDED TO THE BALANCE OF THE NOTE AND BE APPORTIONED AMONG AND BE PAYABLE
WITH ANY INSTALLMENT PAYMENTS TO BECOME DUE DURING EITHER (I) THE TERM OF ANY
APPLICABLE INSURANCE POLICY OR (II) THE REMAINING TERM OF THE NOTE, OR (C) BE
TREATED AS A BALLOON PAYMENT WHICH WILL BE DUE AND PAYABLE AT THE NOTE'S
MATURITY. THIS AGREEMENT ALSO WILL SECURE PAYMENT OF THESE AMOUNTS. SUCH RIGHT
SHALL BE IN ADDITION TO ALL OTHER RIGHTS AND REMEDIES TO WHICH LENDER MAY BE
ENTITLED UPON THE OCCURRENCE OF AN EVENT OF DEFAULT.
EVENTS OF DEFAULT. EACH OF THE FOLLOWING SHALL CONSTITUTE AN EVENT OF DEFAULT
UNDER THIS AGREEMENT.
DEFAULT ON INDEBTEDNESS. FAILURE OF GRANTOR TO MAKE ANY PAYMENT WHEN DUE ONT HE
INDEBTEDNESS.
OTHER DEFAULTS. FAILURE OF GRANTOR TO COMPLY WITH OR TO PERFORM ANY OTHER TERM,
OBLIGATION, COVENANT OR CONDITION CONTAINED IN THIS AGREEMENT OR IN ANY OF THE
RELATED DOCUMENTS OR IN ANY OTHER AGREEMENT BETWEEN LENDER AND GRANTOR.
INSOLVENCY. THE DISSOLUTION OR TERMINATION OF GRANTOR'S EXISTENCE AS A GOING
BUSINESS, THE INSOLVENCY OF GRANTOR, THE APPOINTMENT OF A RECEIVER FOR ANY PART
OF GRANTOR' PROPERTY, ANY ASSIGNMENT FOR THE BENEFIT OF CREDITORS, ANY TYPE OF
CREDITOR WORKOUT, OR THE COMMENCEMENT OF ANY PROCEEDING UNDER ANY BANKRUPTCY OR
INSOLVENCY LAWS BY OR AGAINST GRANTOR.
CREDITOR OR FORFEITURE PROCEEDINGS. COMMENCEMENT OF FORECLOSURE OR FORFEITURE
PROCEEDINGS, WHETHER BY JUDICIAL PROCEEDING, SELF-HELP, REPOSSESSION OR ANY
OTHER METHOD, BY ANY CREDITOR OF GRANTOR OR BY ANY GOVERNMENTAL AGENCY AGAINST
THE COLLATERAL OR ANY OTHER COLLATERAL SECURING THE INDEBTEDNESS. THIS INCLUDES
A
<PAGE> 14
GARNISHMENT OF ANY OF GRANTOR'S DEPOSIT ACCOUNTS WITH LENDER. HOWEVER, THIS
EVENT OF DEFAULT SHALL NOT APPLY IF THERE IS A GOOD FAITH DISPUTE BY GRANTOR AS
TO THE VALIDITY OR REASONABLENESS OF THE CLAIM WHICH IS THE BASIS OF THE
CREDITOR OR FORFEITURE PROCEEDING AND IF GRANTOR GIVE LENDER WRITTEN NOTICE OF
THE CREDITOR OR FORFEITURE PROCEEDINGS AND DEPOSITS WITH LENDER MONIES OR A
SURETY BOND FOR THE CREDITOR OR FORFEITURE PROCEEDING, IN AN AMOUNT DETERMINED
BY LENDER, IN ITS SOLE DISCRETION, AS BEING AN ADEQUATE RESERVE OR BOND FOR THE
DISPUTE.
EVENTS AFFECTING GUARANTOR. ANY OF THE PRECEDING EVENTS OCCURS WITH RESPECT TO
ANY GUARANTOR OF ANY OF THE INDEBTEDNESS OR SUCH GUARANTOR DIES OR BECOMES
INCOMPETENT. LENDER, AT ITS OPTION, MAY, BUT SHALL NOT BE REQUIRED TO, PERMIT
THE GUARANTOR'S ESTATE TO ASSUME UNCONDITIONALLY THE OBLIGATIONS ARISING UNDER
THE GUARANTY IN A MANNER SATISFACTORY TO LENDER, AND, IN DOING SO, CURE THE
EVENT OF DEFAULT.
INSECURITY. LENDER, IN GOOD FAITH, DEEMS ITSELF INSECURE.
RIGHTS AND REMEDIES ON DEFAULT. IN AN EVENT OF DEFAULT OCCURS UNDER THIS
AGREEMENT, AT ANY TIME THEREAFTER, LENDER SHALL HAVE ALL THE RIGHTS OF A SECURED
PARTY UNDER THE CALIFORNIA UNIFORM COMMERCIAL CODE. IN ADDITION AND WITHOUT
LIMITATION, LENDER MAY EXERCISE ANY ONE OR MORE OF THE FOLLOWING RIGHTS AND
REMEDIES:
ACCELERATE INDEBTEDNESS. LENDER MAY DECLARE THE ENTIRE INDEBTEDNESS,
INCLUDING ANY PREPAYMENT PENALTY WHICH GRANTOR WOULD BE REQUIRED TO
PAY, IMMEDIATELY DUE AND PAYABLE, WITHOUT NOTICE.
ASSEMBLE COLLATERAL. LENDER MAY REQUIRE GRANTOR TO DELIVER TO LENDER
ALL OR ANY PORTION OF THE COLLATERAL AND ANY AND ALL CERTIFICATES OF
TITLE AND OTHER DOCUMENTS RELATING TO THE COLLATERAL. LENDER MAY
REQUIRE GRANTOR TO ASSEMBLE THE COLLATERAL AND MAKE IT AVAILABLE TO
LENDER AT A PLACE TO BE DESIGNATED BY LENDER. LENDER ALSO SHALL HAVE
FULL POWER TO ENTER UPON THE PROPERTY OF GRANTOR TO TAKE POSSESSION OF
AND REMOVE THE COLLATERAL. IF THE COLLATERAL CONTAINS OTHER GOODS NOT
COVERED BY THIS AGREEMENT AT THE TIME OF REPOSSESSION, GRANTOR AGREES
LENDER MAY TAKE SUCH OTHER GOODS, PROVIDED THE LENDER MAKES REASONABLE
EFFORTS TO RETURN THEM TO GRANTOR AFTER REPOSSESSION.
SELL THE COLLATERAL. LENDER SHALL HAVE FULL POWER TO SELL, LEASE
TRANSFER, OR OTHERWISE DEAL WITH THE COLLATERAL OR PROCEEDS THEREOF IN
ITS OWN NAME OR THAT OF GRANTOR. LENDER MAY SELL THE COLLATERAL AT
PUBLIC AUCTION OR PRIVATE SALE. UNLESS THE COLLATERAL THREATENS TO
DECLINE SPEEDILY IN VALUE OR IS OF A TYPE CUSTOMARILY SOLD ON A
RECOGNIZED MARKET, LENDER WILL GIVE GRANTOR REASONABLE NOTICE OF THE
TIME AFTER WHICH ANY PRIVATE SALE OR ANY OTHER INTENDED DISPOSITION OF
THE COLLATERAL IS TO BE MADE. THE REQUIREMENTS OF REASONABLE NOTICE
SHALL BE MET IF SUCH NOTICE IS GIVEN AT LEAST TEN (10) DAYS, OR SUCH
LESSER TIME AS REQUIRED BY STATE LAW, BEFORE THE TIME OF THE SALE OR
DISPOSITION. ALL EXPENSES RELATING TO THE DISPOSITION OF THE
COLLATERAL, INCLUDING WITHOUT LIMITATION THE EXPENSES OF RETAKING,
HOLDING INSURING, PREPARING FOR SALES AND SELLING THE COLLATERAL, SHALL
BECOME A PART OF THE INDEBTEDNESS SECURED BY THIS AGREEMENT AND SHALL
BE PAYABLE ON DEMAND, WITH INTEREST AT THE NOTE RATE FROM DATE OF
EXPENDITURE UNTIL REPAID.
<PAGE> 15
APPOINT RECEIVER. TO THE EXTENT PERMITTED BY APPLICABLE LAW, LENDER
SHALL HAVE THE FOLLOWING RIGHTS AND REMEDIES REGARDING THE APPOINTMENT
OF A RECEIVER: (A) LENDER MAY HAVE A RECEIVER APPOINTED AS A MATTER OR
RIGHT, (B) THE RECEIVER MAY BE AN EMPLOYEE OF LENDER AND MAY SERVE
WITHOUT BOND, AND (C) ALL FEES OF THE RECEIVER AND HIS OR HER ATTORNEY
SHALL BECOME A PART OF THE INDEBTEDNESS SECURED BY THIS AGREEMENT AND
SHALL BE PAYABLE ON DEMAND, WITH INTEREST AT THE NOTE RATE FROM DATE OF
EXPENDITURE UNTIL REPAID.
COLLECT REVENUES, APPLY ACCOUNTS. LENDER EITHER ITSELF OR THROUGH A
RECEIVER, MAY COLLECT THE PAYMENTS, RENTS, INCOME, AND REVENUES FROM
THE COLLATERAL. LENDER MAY AT ANY TIME IN ITS DISCRETION TRANSFER ANY
COLLATERAL INTO ITS OWN NAME OR THAT OF ITS NOMINEE AND RECEIVE THE
PAYMENTS, RENTS, INCOME, AND REVENUES THEREFROM AND HOLD THE SAME AS
SECURITY FOR THE INDEBTEDNESS OR APPLY IT TO PAYMENT OF THE
INDEBTEDNESS IN SUCH ORDER OF PREFERENCE AS LENDER MAY DETERMINE.
INSOFAR AS THE COLLATERAL CONSISTS OF ACCOUNTS, GENERAL INTANGIBLES,
INSURANCE POLICIES, INSTRUMENTS, CHATTEL PAPER, CHOOSES IN ACTION, OR
SIMILAR PROPERTY, LENDER MAY DEMAND, COLLECT RECEIPT FOR, SETTLE,
COMPROMISE, ADJUST, SUE FOR, FORECLOSE, OR REALIZE ON THE COLLATERAL AS
LENDER MAY DETERMINE, WHETHER OR NOT INDEBTEDNESS OR COLLATERAL IS THEN
DUE. FOR THESE PURPOSES, LENDER MAY, ON BEHALF OF AND IN THE NAME OF
GRANTOR, RECEIVE, OPEN AND DISPOSE OF MAIL ADDRESSED TO GRANTOR, CHANGE
ANY ADDRESS TO WHICH MAIL AND PAYMENTS ARE TO BE SENT; AND ENDORSE
NOTES, CHECKS, DRAFTS, MONEY ORDERS, DOCUMENTS OF TITLE, INSTRUMENTS
AND ITEMS PERTAINING TO PAYMENT, SHIPMENT OR STORAGE OF ANY COLLATERAL.
TO FACILITATE COLLECTION, LENDER MAY NOTIFY ACCOUNT DEBTORS AND
OBLIGERS ON ANY COLLATERAL TO MAKE PAYMENTS DIRECTLY TO LENDER.
OBTAIN DEFICIENCY. IF LENDER CHOOSES TO SELL ANY OR ALL OF THE
COLLATERAL, LENDER MAY OBTAIN A JUDGMENT AGAINST GRANTOR FOR ANY
DEFICIENCY REMAINING ON THE INDEBTEDNESS DUE TO LENDER AFTER
APPLICATION OF ALL AMOUNTS RECEIVED FROM THE EXERCISE OF THE RIGHTS
PROVIDED IN THIS AGREEMENT. GRANTOR SHALL BE LIABLE FOR A DEFICIENCY
EVEN IF THE TRANSACTION DESCRIBED IN THIS SUBSECTION IS A SALE OF
ACCOUNTS OR CHATTEL PAPER.
OTHER RIGHTS AND REMEDIES. LENDER SHALL HAVE THE RIGHTS AND REMEDIES OF
A SECURED CREDITOR UNDER THE PROVISIONS OF THE UNIFORM COMMERCIAL CODE,
AS MAY BE AMENDED FROM TIME TO TIME. IN ADDITION, LENDER SHALL HAVE AND
MAY EXERCISE ANY OR ALL OTHER RIGHTS AND REMEDIES IT MAY HAVE AVAILABLE
AT LAW, IN EQUITY, OR OTHERWISE.
CUMULATIVE REMEDIES. ALL OF LENDER'S RIGHTS AND REMEDIES, WHETHER
EVIDENCED BY THIS AGREEMENT OR THE RELATED DOCUMENTS OR BY ANY OTHER
WRITING SHALL BE CUMULATIVE AND MAY BE EXERCISED SINGULARLY OR
CONCURRENTLY. ELECTION BY LENDER TO PURSUE ANY REMEDY SHALL NOT EXCLUDE
PURSUIT OF ANY OTHER REMEDY, AND AN ELECTION TO MAKE EXPENDITURES OR TO
TAKE ACTION TO PERFORM AN OBLIGATION OF GRANTOR UNDER THIS AGREEMENT,
AFTER GRANTOR'S FAILURE TO PERFORM, SHALL NOT AFFECT LENDER'S RIGHT TO
DECLARE A DEFAULT AND TO EXERCISE ITS REMEDIES.
MISCELLANEOUS PROVISIONS. THE FOLLOWING MISCELLANEOUS PROVISIONS ARE A PART OF
THIS AGREEMENT:
AMENDMENTS. THIS AGREEMENT, TOGETHER WITH ANY RELATED DOCUMENTS,
<PAGE> 16
CONSTITUTES THE ENTIRE UNDERSTANDING AND AGREEMENT OF THE PARTIES AS TO
THE MATTERS SET FORTH IN THIS AGREEMENT. NO ALTERATION OF OR AMENDMENT
TO THIS AGREEMENT SHALL BE EFFECTIVE UNLESS GIVEN IN WRITING AND SIGNED
BY THE PARTY OR PARTIES SOUGHT TO BE CHARGED OR BOUND BY THE ALTERATION
OR AMENDMENT.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND
ACCEPTED BY LENDER INT HE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT,
GRANTOR, AGREES UPON LENDER'S REQUEST TO THE JURISDICTION OF THE COURTS
OF ORANGE COUNTY, STATE OF CALIFORNIA. (INITIAL HERE E.A.J.) LENDER AND
GRANTOR HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR GRANTOR AGAINST
THE OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
ATTORNEY'S FEES; EXPENSES. GRANTOR AGREES TO PAY UPON DEMAND ALL OF
LENDER'S COSTS AND EXPENSES. INCLUDING ATTORNEY'S FEES AND LENDER'S
LEGAL EXPENSES, INCURRED IN CONNECTION WITH THE ENFORCEMENT OF THIS
AGREEMENT. LENDER MAY PAY SOMEONE ELSE TO HELP ENFORCE THIS AGREEMENT,
AND GRANTOR SHALL PAY THE COSTS AND EXPENSES OF SUCH ENFORCEMENT. COSTS
AND EXPENSES INCLUDE LENDER'S ATTORNEY'S FEES AND LEGAL EXPENSES
WHETHER OR NOT THERE IS A LAWSUIT, INCLUDING ATTORNEYS' FEES AND LEGAL
EXPENSES FOR BANKRUPTCY PROCEEDINGS (AND INCLUDING EFFORTS TO MODIFY OR
VACATE ANY AUTOMATIC TAY OR INJUNCTION), APPEALS, AND ANY ANTICIPATED
POST-JUDGMENT COLLECTION SERVICES. GRANTOR ALSO SHALL PAY ALL COURT
COSTS AND SUCH ADDITIONAL FEES AS MAY BE DIRECTED BY THE COURT.
CAPTION HEADINGS. CAPTION HEADINGS IN THIS AGREEMENT ARE FOR
CONVENIENCE PURPOSES ONLY AND ARE NOT TO BE USED TO INTERPRET OR DEFINE
THE PROVISIONS OF THIS AGREEMENT.
NOTICES. ALL NOTICES REQUIRED TO BE GIVEN UNDER THIS AGREEMENT SHALL BE
GIVEN IN WRITING AND SHALL BE EFFECTIVE WHEN ACTUALLY DELIVERED OR WHEN
DEPOSITED WITH A NATIONALLY RECOGNIZED OVERNIGHT COURIER OR DEPOSITED
IN THE UNITED STATES MAIL FIRST CLASS, POSTAGE PREPAID, ADDRESSED TO
THE PARTY TO WHOM THE NOTICE IS TO BE GIVEN AT THE ADDRESS SHOWN ABOVE.
ANY PARTY MAY CHANGE ITS ADDRESS FOR NOTICES UNDER THIS AGREEMENT BY
GIVING FORMAL WRITTEN NOTICE TO THE OTHER PARTIES, SPECIFYING THAT THE
PURPOSE OF THE NOTICE IS TO CHANGE THE PARTY'S ADDRESS. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, IF THERE IS MORE THAN ONE GRANTOR, NOTICE
TO ANY GRANTOR WILL CONSTITUTE NOTICE TO ALL GRANTORS. FOR NOTICE
PURPOSES, GRANTOR AGREES TO KEEP LENDER INFORMED AT ALL TIMES OF
GRANTOR'S CURRENT ADDRESS(ES).
POWER OF ATTORNEY. GRANTOR HEREBY APPOINTS LENDER AS ITS TRUE AND
LAWFUL ATTORNEY-IN-FACT, IRREVOCABLY WITH FULL POWER OF SUBSTITUTION TO
DO THE FOLLOWING: (A) TO DEMAND, COLLECT, RECEIVE, RECEIPT FOR, SUE AND
RECOVER ALL SUMS OF MONEY OR OTHER PROPERTY WHICH MAY NOW OR HEREAFTER
BECOME DUE, OWING OR PAYABLE FROM T E COLLATERAL; (B) TO EXECUTE, SIGN
AND ENDORSE ANY AND ALL CLAIMS, INSTRUMENTS, RECEIPTS, CHECKS, DRAFTS
OR WARRANTS DUE, ISSUED IN PAYMENT FOR THE COLLATERAL; (C) TO SETTLE OR
COMPROMISE ANY AND ALL CLAIMS ARISING UNDER THE COLLATERAL AND IN THE
PLACE AND SLEAD OF GRANTOR, TO EXECUTE AND DELIVER ITS RELEASE AND
SETTLEMENT FOR THE CLAIM; AND (D) TO FILE ANY CLAIM OR CLAIMS OR TO
TAKE ANY ACTION OR INSTITUTE OR TAKE PART IN ANY PROCEEDINGS, EITHER IN
ITS OWN NAME OR IN THE NAME OF GRANTOR, OR OTHERWISE WHICH IN THE
DISCRETION OF LENDER MAY SEEM TO BE
<PAGE> 17
NECESSARY OR ADVISABLE. THIS POWER IS GIVEN AS SECURITY FORTH
INDEBTEDNESS, AND THE AUTHORITY HEREBY CONFERRED IS AND SHALL BE
IRREVOCABLE AND SHALL REMAIN IN FULL FORCE AND EFFECT UNTIL RENOUNCED
BY LENDER.
PREFERENCE PAYMENTS. ANY MONIES LENDER PAYS BECAUSE OF AN ASSERTED
PREFERENCE CLAIM IN BORROWER'S BANKRUPTCY WILL BECOME A PART OF THE
INDEBTEDNESS AND, AT LENDER'S OPTION, SHALL BE PAYABLE BY BORROWER AS
PROVIDED ABOVE IN THE "EXPENDITURES BY LENDER" PARAGRAPH.
SEVERABILITY. IF A COURT OF COMPETENT JURISDICTION FINDS ANY PROVISION
OF THIS AGREEMENT TO BE INVALID OR UNENFORCEABLE AS TO ANY PERSON OR
CIRCUMSTANCE, SUCH FINDING SHALL NOT RENDER THAT PROVISION INVALID OR
UNENFORCEABLE AS TO ANY OTHER PERSONS OR CIRCUMSTANCES. IF FEASIBLE,
ANY SUCH OFFENDING PROVISION SHALL BE DEEMED TO BE MODIFIED TO BE
WITHIN THE LIMITS OF ENFORCEABILITY OR VALIDITY; HOWEVER, IF THE
OFFENDING PROVISION CANNOT BE SO MODIFIED, IT SHALL BE STRICKEN AND ALL
OTHER PROVISIONS OF THIS AGREEMENT IN ALL OTHER RESPECTS SHALL REMAIN
VALID AND ENFORCEABLE.
SUCCESSOR INTEREST. SUBJECT TO THE LIMITATIONS SET FORTH ABOVE ON
TRANSFER OF THE COLLATERAL, THIS AGREEMENT SHALL BE BINDING UPON AND
INURE TO THE BENEFIT OF THE PARTIES, THEIR SUCCESSORS AND ASSIGNS.
WAIVER. LENDER SHALL NOT BE DEEMED TO HAVE WIVED ANY RIGHTS UNDER THIS
AGREEMENT UNLESS SUCH WAIVER IS GIVEN IN WRITING AND SIGNED BY LENDER.
NO DELAY OR OMISSION ON THE PART OF LENDER IN EXERCISING ANY RIGHT
SHALL OPERATE AS A WAIVER OF SUCH RIGHT OR ANY OTHER RIGHT. A WAIVER BY
LENDER OF A PROVISION OF THIS AGREEMENT SHALL NOT PREJUDICE OR
CONSTITUTE A WAIVER OF LENDER'S RIGHT OTHERWISE TO DEMAND STRICT
COMPLIANCE WITH THAT PROVISION OR ANY OTHER PROVISION OF THIS
AGREEMENT. NO PRIOR WAIVER BY LENDER, NOR ANY COURSE OF DEALING BETWEEN
LENDER AND GRANTOR, SHALL CONSTITUTE A WAIVER OF ANY OF LENDER'S RIGHTS
OR OF ANY OF GRANTOR'S OBLIGATIONS AS TO ANY FUTURE TRANSACTIONS.
WHENEVER THE CONSENT OF LENDER IS REQUIRED UNDER THIS AGREEMENT, THE
GRANTING OF SUCH CONSENT BY LENDER IN ANY INSTANCE SHALL NOT CONSTITUTE
CONTINUING CONSENT TO SUBSEQUENT INSTANCES WHERE SUCH CONSENT IS
REQUIRED AND IN ALL CASES SUCH CONSENT MAY BE GRANTED OR WITHHELD IN
THE SOLE DISCRETION OF LENDER.
WAIVER OF CO-OBLIGATOR'S RIGHTS. IF MORE THAN ONE PERSON IS OBLIGATED
OF THE INDEBTEDNESS, BORROWER IRREVOCABLY WAIVES, DISCLAIMS AND
RELINQUISHES ALL CLAIMS AGAINST SUCH OTHER PERSON WHICH BORROWER HAS OR
WOULD OTHERWISE HAVE BY VIRTUE OF PAYMENT OF THE INDEBTEDNESS OR ANY
PART THEREOF, SPECIFICALLY INCLUDING BUT NOT LIMITED TO ALL RIGHTS OF
INDEMNITY, CONTRIBUTION OR EXONERATION.
GRANTER ACKNOWLEDGES HAVING READ ALL THE PROVISION OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MARCH 31,
1995.
GRANTOR;
OPTIMUMCARE CORPORATION, A DELAWARE CORPORATION
BY:
----------------------------------------------------------------------
EDWARD A. JOHNSON, PRESIDENT
<PAGE> 18
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$500,000 03/31/95 05/01/96 04000928 9740
- --------------------------------------------------------------------------------------
</TABLE>
REFERENCES IN THE SHADED AREA ARE FOR LENDER'S USE ONLY AND DO NOT LIMIT THE
APPLICABILITY OF THIS DOCUMENT TO ANY PARTICULAR LOAN OR ITEM.
- --------------------------------------------------------------------------------
BORROWER:OPTIMUMCARE CORPORATION, LENDER:NATIONAL BANK OF SOUTHERN
A DELAWARE CORPORATION CALIFORNIA NEWPORT REGIONAL OFFICE
30011 IVY GLENN DRIVE #219 4100 NEWPORT PLACE
LAGUNA NIGUEL, CA 92677 NEWPORT BEACH, CA 92660
LOAN TYPE. THIS IS A VARIABLE RATE (2.000% OVER PRIME RATE AS PUBLISHED IN THE
WALL STREET JOURNAL. WHEN A RANGE OF RATES HAS BEEN PUBLISHED, THE LOWER OF THE
RATES WILL BE USED, MAKING AN INITIAL RATE OF 11.000%), NON-REVOLVING LINE OF
CREDIT LOAN TO A CORPORATION FOR $500,000.00 DUE ON MAY 1, 1996.
PRIMARY PURPOSE OF LOAN. THE PRIMARY PURPOSE OF THIS LOAN IS FOR (PLEASE
INITIAL):
PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL INVESTMENT.
--- ---
X EAJ BUSINESS (INCLUDING REAL ESTATE INVESTMENT).
--- ---
SPECIFIC PURPOSE. THE SPECIFIC PURPOSE OF THIS LOAN IS: TO FINANCE LONG TERM
WORKING CAPITAL FOR EXPANSION.
DISBURSEMENT INSTRUCTIONS. BORROWER UNDERSTANDS THAT NO LOAN PROCEEDS WILL BE
DISBURSED UNTIL ALL OF LENDER'S CONDITIONS FOR MAKING THE LOAN HAVE BEEN
SATISFIED. PLEASE DISBURSE THE LOAN PROCEEDS OF $500,000.00 AS FOLLOWS:
<TABLE>
<S> <C>
UNDISBURSED FUNDS: $500,000.00
-----------
NOTE PRINCIPAL: $500,000.00
</TABLE>
CHARGES PAID IN CASH. BORROWER HAS PAID OR WILL PAY IN CASH AS AGREED THE
FOLLOWING CHARGES:
<TABLE>
<S> <C>
PREPAID FINANCE CHARGES PAID IN CASH: $2,500.00
$2,500.00 LOAN FEES
---------
TOTAL CHARGES PAID IN CASH: $2,500.00
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED MARCH 31, 1995.
BORROWER:
OPTIMUMCARE CORPORATION, A DELAWARE CORPORATION
BY: EDWARD A. JOHNSON
--------------------------------------------------
EDWARD A. JOHNSON, PRESIDENT
<PAGE> 19
BUSINESS LOAN AGREEMENT
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT
$500,000.00 3/31/95 05-01-1996 04000928 9740
- -----------------------------------------------------------------------------
OFFICER INITIALS
112
- --------------------
Borrower: OPTIMUMCARE CORPORATION, LENDER: NATIONAL BANK OF SOUTHERN
A DELAWARE CORPORATION CALIFORNIA NEWPORT REGIONAL
30011 IVY GLENN DRIVE #219 OFFICE
LAGUNA NIGUEL, CA 92677 4100 NEWPORT PLACE
NEWPORT BEACH, CA 92660
THIS BUSINESS LOAN AGREEMENT between OPTIMUMCARE CORPORATION, A DELAWARE
CORPORATION ("BORROWER") and NATIONAL BANK OF SOUTHERN CALIFORNIA ("LENDER"), is
made and executed on the following terms and conditions. Borrower has received
prior commercial loans from Lender or has applied to Lender for a commercial
loan or loans and other financial accommodations, including those which may be
described on any exhibit or schedule attached to this Agreement. All such loans
and financial accommodations, together with all future loans and financial
accommodations from Lender to Borrower, are referred to in this Agreement
individually as the "Loan" and collectively as the "Loans". Borrower understands
and agrees that: (a) In granting, renewing, or extending any Loan, Lender is
relying upon Borrower's representations, warranties, and agreements, as set
forth in this Agreement; (b)the granting, renewing, or extending of any Loan by
Lender at all times shall be subject to Lender's sole judgement and discretion;
and (c) all such Loans shall be and shall remain subject to the following germs
and conditions to this Agreement.
TERM. This Agreement shall be effective as of March 31, 1995, and shall continue
thereafter until all Indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.
Borrower. The word "Borrower" means OPTIMUMCARE CORPORATION, A DELAWARE
CORPORATION. The word "Borrower" also includes as applicable, all
subsidiaries and affiliates of Borrower as provided below in the
paragraph titled "Subsidiaries and Affiliates".
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.
Collateral. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan,
whether real or personal property, whether granted directly or
indirectly, whether granted now or in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt,
lien, charge, lien or title retention contract, lease or consignment
intended as a security device, or any other security or lien interest
whatsoever, whether created by law, contract or otherwise.
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT".
<PAGE> 20
03-31-1995 BUSINESS LOAN AGREEMENT Page 2
Loan No. 04000928 (Continued)
- --------------------------------------------------------------------------------
Grantor. The words "Grantor" means and includes without limitation each
and all of the persons or entities granting a Security Interest in any
Collateral for the indebtedness, including without limitation all
borrowers granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodations parties in
connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now or hereafter existing, voluntary or involuntary, due or not
due, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others; whether
Borrower may be obligated as a guarantor, surety, or otherwise; whether
recovery upon such indebtedness may be or hereafter may become barred
by any statute of limitations; and whether such Indebtedness may be or
hereafter may become otherwise unenforceable.
Lender. The word "Lender" means NATIONAL BANK OF SOUTHERN CALIFORNIA,
its successors and assigns.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand
plus Borrower's receivables.
Loan. The word "Loan" or Loans" means and includes without limitation
any and all commercial loans and financial accommodations from Lender
to Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans an financial accommodations
described herein or described on any exhibit or schedule attached to
this Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan
obligations in favor of Lender as well as any substitute, replacement
or refinancing note or notes therefor.
Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the indebtedness.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.
Security Interest. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the form
of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel
mortgage, chattel trust, factor's lien, equipment trust, conditional
sale, trust receipt, lien or title retention contract, lease or
consignment intended as a security device, or any other security or
lien interest whatsoever, whether created by law, contract or
otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" means indebtedness and
liabilities of Borrower which have been subordinated by written
agreement to indebtedness owed by Borrower to Lender in form and
substance acceptable to Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's
total assets excluding all intangible assets (i.e. goodwill,
trademarks, patents, copyrights, organizational expenses, and similar
intangible items, but including leaseholds and leasehold improvements)
less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current
liabilities.
<PAGE> 21
03-31-1995 BUSINESS LOAN AGREEMENT Page 3
Loan No. 04000928 (Continued)
- --------------------------------------------------------------------------------
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as of
the date of this Agreement and as of the date of each disbursement of Loan
proceeds:
Organization. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the State of
Delaware. Borrower has the full power and authority to own its
properties and to transact the businesses in which it is presently
engaged or presently proposes to engage. Borrower also is duly
qualified as a foreign corporation and is in good standing in all
states in which the failure to so qualify would have a material adverse
effect on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extend to be
executed, delivered or performed by Borrower, have been duly authorized
by all necessary action by Borrower; do not require the consent or
approval of any other person, regulatory authority or governmental
body; and do not conflict with, result in a violation of, or constitute
a default under (a) any provision of its articles of incorporation or
organization, or bylaws, or any agreement or other instrument binding
upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as
of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
Legal Effect. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute, legal, valid and binding obligations of Borrower's
enforceable against Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has good title to all
of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled in
Borrower's legal name, and Borrower has not used, or filed a financing
statement under, any other name for at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used in
this Agreement shall have the same meanings as set forth in the
"CERCLA", "SARA," the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 49
U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20
of the California Health and Safety Code, Section 25100, et seq., or
other applicable state or Federal laws, rules, or regulations adopted
pursuant ot any of the foregoing. Except as disclosed to and
acknowledged by Lender in writing, Borrower represents and warrants
that: (a) During the period of Borrower's ownership of the properties,
there has been no use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any hazardous waste or
substance on, under, or about any of the properties; and any such
activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without
limitation those laws, regulations and ordinances described above.
Borrower authorizes Lender and its agents to enter upon the properties
to make such inspections and tests as Lender may deem appropriate to
determine compliance of the properties with this section of the
Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall not be
construed to create any responsibility or liability on the part of
Lender to Borrower or to any other person. The representations and
warranties contained herein are based on Borrower's due diligence in
investigating the properties for hazardous waste. Borrower hereby (a)
releases and waives any future claims against Lender for indemnity or
contribution in the even Borrower becomes liable for cleanup or other
costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer regulating from a breach of this section
of the Agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release occurring
prior to Borrower's ownership or interest in the properties, whether or
not the same was or should have been known to Borrower. The provisions
of this section of the Agreement, including
<PAGE> 22
03-31-1995 BUSINESS LOAN AGREEMENT Page 4
Loan No. 04000928 (Continued)
- --------------------------------------------------------------------------------
the obligation to indemnify, shall survive the payment of the
indebtedness and the termination or expiration of this Agreement and
shall not be affected by Lenders' acquisition of any interest in any
of the properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event
has occurred which may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims or other events.
If any, that have been disclosed to and acknowledged by Lender in
writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports
of Borrower that are or were required to be file, have been files, and
all taxes, assessments and other governmental charges have been paid in
full, except those presently being or to be contested by Borrower in
good faith in the ordinary course of business and for which adequate
reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.
Binding Effect. This Agreement, the Note and all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
are binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance
with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred
with respect to any such plan, (ii) Borrower has not withdrawn from any
such plan or initiated steps to do so, and (iii) no steps have been
taken to terminate any such plan.
Location of Borrower's Offices and Records. The chief place of business
of Borrower and the office or offices where Borrower keeps its records
concerning the Collateral is located at 30011 IVY GLENN DRIVE, #219,
LAGUNA NIGUEL, CA 92677.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
Survival of Representation and Warranties. Borrower understands and
agrees that Lender is relying upon the above representations and
warranties in extending Loan Advances to Borrower. Borrower further
agrees that the foregoing representations and warranties shall be
continuing in nature and shall remain in full force and effect until
such time as Borrower's Loan and Note shall be paid in full, or until
this Agreement shall be terminated in the manner provided above,
whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all
litigation and claims and all threatened litigation and claims
affecting Borrower or any Guarantor which could materially affect the
financial condition of Borrower or the financial condition of any
Guarantor.
<PAGE> 23
03-31-1995 BUSINESS LOAN AGREEMENT Page 5
Loan No. 04000928 (Continued)
- --------------------------------------------------------------------------------
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent
basis, and permit Lender to examine and audit Borrower's books and
records at all reasonable times.
Additional Information. Furnish such additional information and
statements, lists of assets and liabilities, aging of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and
other reports with respect to Borrower's financial condition and
business operations as Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following covenants
and ratios:
Tangible Net Worth. Maintain a minimum Tangible Net Worth of
not less than $1,375,000.00.
Net Worth Ratio. Maintain a ratio of Total Liabilities to
Tangible Net Worth of less than 1.50 to 1.00.
For the purposes of this Agreement and to the extent the following
terms are utilized in this Agreement, the term "Tangible Net Worth"
shall mean Borrower's total asset excluding all intangible assets (i.e.
goodwill, trademarks, patents, copyrights, organizational expenses, and
similar intangible items, but including leaseholds and leasehold
improvements) less total Debt. The term "Debt" shall mean all of
Borrower's liabilities excluding Subordinated Debt. The term
"Subordinated Debt" shall mean indebtedness and liabilities of Borrower
which have been subordinated by written agreement to indebtedness owed
by Borrower to Lender in form and substance acceptable to Lender. The
term "Working Capital" shall mean Borrower's current assets, excluding
prepaid expenses, less Borrower's current liabilities. The term "Liquid
Assets" shall mean Borrower's cash on hand plus Borrower's receivables.
The term "Cash Flow" shall mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.
Except as provided above, all computations made to determine compliance
with the requirements contained in this paragraph shall be made in
accordance with generally accepted accounting principles, applied on a
consistent basis and certified by Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect
to Borrower's properties and operations, in form, amounts, coverages,
and with insurance companies reasonably acceptable to Lender. Borrower,
upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender,
including stipulations that coverage will not be cancelled or
diminished without at least ten (10) day's prior written notice to
Lender. Each insurance policy also shall include an endorsement
providing that coverage in factor of Lender will not be impaired in any
way by any act, omission or default of Borrower or any other person. IN
connection with all policies covering assets in which Lender holds or
is offered a security interest for the Loans, Borrower will provide
Lender with such loss payable or other endorsements as Lender may
require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports
on each existing Insurance policy showing such information as Lender
may reasonable request, including without limitation the following: (a)
the name of the insurer; (b) the risks insured; (c) the amount of the
policy;Agreement or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.
Insolvency. The dissolution or termination Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
<PAGE> 24
03-31-1995 BUSINESS LOAN AGREEMENT Page 6
Loan No. 04000928 (Continued)
- --------------------------------------------------------------------------------
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
Indebtedness, or by any governmental agency. This incudes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower or Grantor, as the case may
be, as to the validity or reasonableness of the claim, which is the
basis of the creditor or forfeiture proceeding, and if Borrower or
Grantor gives Lender written notice of the creditor or forfeiture
proceeding and furnishes reserves or a surety bond for the creditor or
forfeiture proceeding satisfactory to Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor
dies or becomes incompetent or any Guarantor revokes any guaranty of
the indebtedness. Lender, at its option, may, but shall not be required
to, permit the Guarantor's estate to assume unconditionally the
obligations arising under the guaranty in a manner satisfactory to
Lender, and, in doing so, cure the Event of Default.
Change in Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been
given a notice of a similar default within the preceding twelve (12)
months, it may be cured (and no Event of Default will have occurred) if
Borrower or Grantor, as the case may be, after receiving written notice
from Lender demanding cure of such default; (a) cures the default
within five (5) days; or (b) if the cure requires more than five (5)
days, immediately initiates steps which Lender deems in Lender's sole
discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient
to produce compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option, all
Loans Immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of California. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of
the courts of ORANGE County, the State of California. (Initial Here
EAJ). Lender and Borrower hereby waive the right to any jury trial in
any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
<PAGE> 25
03-31-1995 BUSINESS LOAN AGREEMENT Page 7
Loan No. 04000928 (Continued)
- --------------------------------------------------------------------------------
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now, or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, any information or knowledge
Lender may have about Borrower or about any other matter relating to
the Loan, and Borrower hereby waives any rights to privacy it may have
with respect to such matters. Borrower additionally waives any and all
notices of sale of participation interests, as well as all notices of
any repurchase of participation interests. Borrower also agrees that
the purchasers of any such participation interests will be considered
as the absolute owners of such interests in the Loans and will have all
the rights granted under the participation agreement or agreements
governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or
later against Lender or against any purchaser of such a participation
interest and unconditionally agrees that either Lender or such
purchaser may enforce Borrower's obligation under the Loans
irrespective of the failure or insolvency of any holder of any interest
in the Loans. Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any
personal claims or defenses that Borrower may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
out-of-pocket expenses, including without limitation attorneys' fees
incurred in connection with the preparation, execution, enforcement and
collection of this Agreement or in connection with the Loans made
pursuant to this Agreement. Lender may pay someone else to help collect
the Loans and to enforce this Agreement, and Borrower will pay that
amount. This includes, subject to any limits under applicable law,
Lender's attorneys' fees and Lender's legal expenses, whether or not
there is a lawsuit, including attorney's fees for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgement collection
services. Borrower also will pay any court costs, in addition to all
other sums provided by law.
Notices. All notices required to be given under this Agreement shall be
given in writing and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited
in the United States mail, first class, postage prepaid, addressed to
the party to whom the notice is to be given at the address shown above.
Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifying that the
purpose of the notice is to change the party's address. To the extend
permitted by applicable law, if there is more than one Borrower, notice
to any Borrower will constitute notice to all Borrowers. For notice
purposes, Borrower agrees to keep Lender informed at all times of
Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemed to be modified to be
within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be strictest and
all other provisions of this Agreement in all other respects shall
remain valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extend the context of
any provisions of this Agreement make it appropriate, including without
limitation any representation, warranty or covenant,k the word
"Borrower" as used herein shall include all subsidiaries and affiliates
of Borrower. Notwithstanding the foregoing however, under no
circumstances shall this Agreement be construed to require Lender to
make any Loan or other financial accommodations to any subsidiary or
affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent of
Lender.
Survival. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the
making o the Loan and delivery to Lender of the Related Documents,
regardless of any investigation made by Lender or on Lender's behalf.
<PAGE> 26
03-31-1995 BUSINESS LOAN AGREEMENT Page 8
Loan No. 04000928 (Continued)
- --------------------------------------------------------------------------------
Time is of the Essence. Time is of the essence in the performance of
this Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any Lender's rights or of any obligations of
Borrower of any Grantor as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of
such consent by Lender in any instance shall not constitute continuing
consent in subsequent instances where such consent is required, and in
all cases such consent is required, and in all cases such consent may
be granted or withheld in the sole discretion of Lender.
<PAGE> 27
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISION OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF MARCH
31, 1995.
BORROWER:
OPTIMUMCARE CORPORATION, A DELAWARE CORPORATION
BY: EDWARD A. JOHNSON
---------------------------
EDWARD A. JOHNSON, PRESIDENT
LENDER:
NATIONAL BANK OF SOUTHERN CALIFORNIA
BY:
---------------------------
AUTHORIZED OFFICER
- ------------------------------------------------
<PAGE> 28
PROMISSORY NOTE
- ---------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINCIPAL|LOAN |DATE |MATURITY|LOAN NO.|CALL |COLLATERAL|ACCOUNT|OFFICER|INITIALS|
$500,000 |03/31/95|05/01/96|04000928|9740 | | | | | |
</TABLE>
- ---------------------------------------------------
REFERENCES IN THE SHADED AREA ARE FOR LENDER'S USE ONLY AND DO NOT LIMIT THE
APPLICABILITY OF THIS DOCUMENT TO ANY PARTICULAR LOAN OR ITEM.
- ---------------------------------------------------
BORROWER:OPTIMUMCARE CORPORATION, LENDER:NATIONAL BANK OF SOUTHERN
A DELAWARE CORPORATION CALIFORNIA NEWPORT REGIONAL OFFICE
30011 IVY GLENN DRIVE #219 4100 NEWPORT PLACE
LAGUNA NIGUEL, CA 92677 NEWPORT BEACH, CA 92660
PRINCIPAL AMOUNT:$500,000.00 INITIAL RATE:11.000% DATE OF NOTE:MARCH 31, 1995
PROMISE TO PAY. OPTIMUMCARE CORPORATION, A DELAWARE CORPORATION ("BORROWER")
PROMISES TO PAY TO NATIONAL BANK OF SOUTHER CALIFORNIA ("LENDER"), OR ORDER, IN
LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FIVE
HUNDRED THOUSAND & 00/100 DOLLARS ($500,000.00) OR SO MUCH AS MAY BE OUTSTANDING
TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH
ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL
REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN ON DEMAND, OR IF NO DEMAND IS MADE, IN ONE
PAYMENT OF ALL OUTSTANDING PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON MAY 1,
1996. IN ADDITION, BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID
INTEREST BEGINNING MAY 1, 1995, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ONT
HE SAME DAY OF EACH MONTH AFTER THAT. INTEREST ON THIS NOTE IS COMPUTED ON A
365/365 SIMPLE INTEREST BASIS; THAT IS, BY APPLYING THE RATIO OF THE ANNUAL
INTEREST RATE OVER THE NUMBER OF DAYS IN A YEAR, MULTIPLIED BY THE OUTSTANDING
PRINCIPAL BALANCE, MULTIPLIED BY THE ACTUAL NUMBER OF DAYS THE PRINCIPAL BALANCE
IS OUTSTANDING. BORROWER WILL PAY LENDER AT LENDER'S ADDRESS SHOWN ABOVE OR AT
SUCH OTHER PLACE AS LENDER MAY DESIGNATE IN WRITING. UNLESS OTHERWISE AGREED OR
REQUIRED BY APPLICABLE LAW, PAYMENTS WILL BE APPLIED FIRST TO ANY UNPAID
COLLECTION COSTS AND ANY LATE CHARGES, THEN TO ANY UNPAID INTEREST, AND ANY
REMAINING AMOUNT TO PRINCIPAL.
VARIABLE INTEREST RATE. THE INTEREST RATE ON THIS NOTE IS SUBJECT TO CHANGE FROM
TIME TO TIME BASED ON CHANGES IN AN INDEPENDENT INDEX WHICH IS THE PRIME RATE AS
PUBLISHED IN THE WALL STREET JOURNAL. WHEN A RANGE OF RATES HAS BEEN PUBLISHED,
THE LOWER OF THE RATES WILL BE USED (THE "INDEX"). THE INDEX IS NOT NECESSARILY
THE LOWEST RATE CHARGED BY LENDER ON ITS LOANS. IF THE INDEX BECOMES UNAVAILABLE
DURING THE TERM OF THIS LOAN, LENDER MAY DESIGNATE A SUBSTITUTE INDEX AFTER
NOTICE TO BORROWER. LENDER WILL TELL BORROWER THE CURRENT INDEX RATE UPON
BORROWER'S REQUEST. BORROWER UNDERSTANDS THAT LENDER MAY MAKE LOANS BASED ON
OTHER RATES AS WELL. THE INTEREST RATE CHANGE WILL NOT OCCUR MORE OFTEN THAT
EACH DAY. THE INDEX CURRENTLY IS 9.000% PER ANNUM. THE INTEREST RATE TO BE
APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE OF 2.000
PERCENTAGE POINT OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 11.000% PER
ANNUM. NOTICE: UNDER NO CIRCUMSTANCES WILL THE INTEREST RATE ON THIS NOTE BE
MORE THAN THE MAXIMUM RATE ALLOWED BY APPLICABLE LAW.
PREPAYMENT: MINIMUM INTEREST CHARGE. BORROWER AGREES THAT ALL LOAN FEES AND
OTHER PREPAID FINANCE CHARGES ARE EARNED FULLY AS OF THE DATE OF THE LOAN AND
WILL NOT BE SUBJECT TO REFUND UPON EARLY PAYMENT (WHETHER VOLUNTARY OR AS A
RESULT OF DEFAULT), EXCEPT AS OTHERWISE REQUIRED BY LAW. IN ANY EVENT, EVEN UPON
FULL PREPAYMENT OF THIS NOTE, BORROWER UNDERSTANDS THAT LENDER IS ENTITLED TO A
MINIMUM INTEREST CHARGE OF $100.00. OTHER THAN BORROWER'S OBLIGATION TO PAY ANY
MINIMUM INTEREST CHARGE, BORROWER MAY PAY WITHOUT PENALTY ALL OR A PORTION OF
THE AMOUNT OWED EARLIER THAN IT IS DUE. EARLY PAYMENTS WILL NOT, UNLESS AGREED
TO BY LENDER IN WRITING, RELIEVE BORROWER OF BORROWER'S OBLIGATION TO CONTINUE
TO MAKE PAYMENTS OF ACCRUED UNPAID INTEREST. RATHER, THEY WILL
<PAGE> 29
REDUCE THE PRINCIPAL BALANCE DUE.
LATE CHARGE. IF A PAYMENT IS 10 DAYS OR MORE LATE, BORROWER WILL BE CHARGED
5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $10.00, WHICHEVER IS GREATER.
DEFAULT. BORROWER WILL BE IN DEFAULT IF ANY OF THE FOLLOWING HAPPENS: (A)
BORROWER FAILS TO MAKE ANY PAYMENT WHEN DUE, (B) BORROWER BREAKS ANY PROMISE
BORROWER HAS MADE TO LENDER, OR BORROWER FAILS TO PERFORM PROMPTLY AT THE TIME
AND STRICTLY IN THE MANNER PROVIDED IN THIS NOTE OR ANY AGREEMENT RELATED TO
THIS NOTE, OR IN ANY OTHER AGREEMENT OR LOAN BORROWER HAS WITH LENDER, (C)
BORROWER DEFAULTS UNDER ANY LOAN, EXTENSION OF CREDIT, SECURITY AGREEMENT,
PURCHASE OR SALES AGREEMENT, OR ANY OTHER AGREEMENT IN FAVOR OF ANY OTHER
CREDITOR OR PERSON THAT MAY MATERIALLY AFFECT ANY OF BORROWER'S PROPERTY OR
BORROWER'S ABILITY TO REPAY THIS NOTE OR PERFORM BORROWER'S OBLIGATIONS UNDER
THIS NOTE OR ANY OF THE RELATED DOCUMENTS, (D) ANY REPRESENTATION OR STATEMENT
MADE OR FURNISHED TO LENDER BY BORROWER OR ON BORROWER'S BEHALF IS FALSE OR
MISLEADING IN ANY MATERIAL RESPECT, (E) BORROWER BECOMES INSOLVENT, A RECEIVER
IS APPOINTED FOR ANY PART OF BORROWER'S PROPERTY, BORROWER MAKES AN ASSIGNMENT
FOR THE BENEFIT OF CREDITORS, OR ANY PROCEEDING IS COMMENCED EITHER BY BORROWER
OR AGAINST BORROWER UNDER ANY BANKRUPTCY INSOLVENCY LAWS, (F) ANY CREDITOR TRIES
TO TAKE ANY OF BORROWER'S PROPERTY ON OR IN WHICH LENDER HAS A LIEN OR SECURITY
INTEREST. THIS INCLUDES A GARNISHMENT OF ANY OF BORROWER'S ACCOUNTS WITH LENDER,
(G) ANY OF THE EVENTS DESCRIBED IN THIS DEFAULT SECTION OCCURS WITH RESPECT TO
ANY GUARANTOR OF THIS NOTE.
IF ANY DEFAULT, OTHER THAN A DEFAULT IN PAYMENT, IS CURABLE AND IF BORROWER HAS
NOT BEEN GIVEN A NOTICE OF A BREACH OF THE SAME PROVISION OF THIS NOTE WITHIN
THE PRECEDING TWELVE (12) MONTHS, IT MAY BE CURED (AND NO EVENT OF DEFAULT WILL
HAVE OCCURRED) IF BORROWER, AFTER RECEIVING WRITTEN NOTICE FROM LENDER DEMANDING
CURE OF SUCH DEFAULT: (A) CURES THE DEFAULT WITHIN FIVE (5) DAYS; OR (B) IF THE
CURE REQUIRES MORE THAN FIVE (5) DAYS, IMMEDIATELY INITIATES STEPS WHICH LENDER
DEEMS IN LENDER'S SOLE DISCRETION TO BE SUFFICIENT TO CURE THE DEFAULT AND
THEREAFTER CONTINUES AND COMPLETES ALL REASONABLE AND NECESSARY STEPS SUFFICIENT
TO PRODUCE COMPLIANCE AS SOON AS REASONABLY PRACTICAL.
LENDER'S RIGHTS. UPON DEFAULT, LENDER MAY DECLARE THE ENTIRE UNPAID PRINCIPAL
BALANCE ON THIS NOTE AND ALL ACCRUED UNPAID INTEREST IMMEDIATELY DUE, WITHOUT
NOTICE AND THEN BORROWER WILL PAY THAT AMOUNT. UPON BORROWER'S FAILURE TO PAY
ALL AMOUNTS DECLARED DUE PURSUANT TO THIS SECTION, INCLUDING FAILURE TO PAY UPON
FINAL MATURITY, LENDER, AT ITS OPTION, MAY ALSO, IF PERMITTED UNDER APPLICABLE
LAW, DO ONE OR BOTH OF THE FOLLOWING: (A) INCREASE THE VARIABLE INTEREST RATE ON
THIS NOTE TO 7.000 PERCENTAGE POINT OVER THE INDEX, AND (B) ADD ANY UNPAID
ACCRUED INTEREST TO PRINCIPAL AND SUCH SUM WILL BEAR INTEREST THEREFROM UNTIL
PAID AT THE RATE PROVIDED IN THIS NOTE (INCLUDING ANY INCREASED RATE). LENDER
MAY HIRE OR PAY SOMEONE ELSE TO HELP COLLECT THIS NOTE IF BORROWER DOES NOT PAY.
BORROWER ALSO WILL PAY LENDER THAT AMOUNT. THIS INCLUDES, SUBJECT TO ANY LIMITS
UNDER APPLICABLE LAW, LENDER'S ATTORNEY'S FEES AND LENDER'S LEGAL EXPENSES
WHETHER OR NOT THERE IS A LAWSUIT, INCLUDING ATTORNEY'S FEES AND LEGAL EXPENSES
FOR BANKRUPTCY PROCEEDINGS (INCLUDING EFFORTS TO MODIFY OR VACATE ANY AUTOMATIC
STAY OR INJUNCTION), APPEALS, AND ANY ANTICIPATED POST-JUDGMENT COLLECTION
SERVICES. BORROWER ALSO WILL PAY ANY COURT COSTS IN ADDITION TO ALL OTHER SUMS
PROVIDED BY LAW. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER
IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT BORROWER AGREES UPON LENDER'S
REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF ORANGE COUNTY, THE STATE
OF CALIFORNIA, (INITIAL HERE E.A.J.) LENDER AND BORROWER HEREBY WAIVE THE RIGHT
TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER
LENDER OR BORROWER AGAINST THE OTHER. THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
DEPOSIT ACCOUNTS. BORROWER GRANTS TO LENDER A CONTRACTUAL POSSESSORY SECURITY
INTEREST IN, AND HEREBY ASSIGNS, CONVEYS, DELIVERS, PLEDGES, AND TRANSFERS TO
LENDER ALL BORROWER'S RIGHT, TITLE AND INTEREST IN AND TO, BORROWER'S ACCOUNTS
WITH LENDER (WHETHER CHECKING, SAVINGS, OR SOME OTHER ACCOUNT), INCLUDING
WITHOUT LIMITATION ALL ACCOUNTS HELD JOINTLY WITH SOMEONE ELSE AND ALL ACCOUNTS
BORROWER MAY OPEN IN THE FUTURE, EXCLUDING HOWEVER ALL IRA, KEOGH, AND TRUST
ACCOUNTS.
<PAGE> 30
LINE OF CREDIT. THIS NOTE EVIDENCES A STRAIGHT LINE OF CREDIT. ONCE THE TOTAL
AMOUNT OF PRINCIPAL HAS BEEN ADVANCED, BORROWER IS NOT ENTITLED TO FURTHER LOAN
ADVANCES. ADVANCES UNDER THIS NOTE MAY BE REQUESTED ORALLY BY BORROWER OR BY AN
AUTHORIZED PERSON. LENDER MAY, BUT NEED NOT, REQUIRE THAT ALL ORAL REQUESTS BE
CONFIRMED IN WRITING. ALL COMMUNICATIONS, INSTRUCTIONS, OR DIRECTIONS BY
TELEPHONE OR OTHERWISE TO LENDER ARE TO BE DIRECTED TO LENDER'S OFFICE SHOWN
ABOVE. THE FOLLOWING PARTY OR PARTIES ARE AUTHORIZED TO REQUEST ADVANCES UNDER
THE LINE OF CREDIT UNTIL LENDER RECEIVES FROM BORROWER AT LENDER'S ADDRESS SHOWN
ABOVE WRITTEN NOTICE OF REVOCATION OF THEIR AUTHORITY: EDWARD A. JOHNSON,
PRESIDENT. BORROWER AGREES TO BE LIABLE FOR ALL SUMS EITHER: (A) ADVANCED IN
ACCORDANCE WITH THE INSTRUCTIONS OF AN AUTHORIZED PERSON OR (B) CREDITED TO ANY
OF BORROWER'S ACCOUNTS WITH LENDER. THE UNPAID PRINCIPAL BALANCE OWING ON THIS
NOTE AT ANY TIME MAY BE EVIDENCED BY ENDORSEMENTS ON THIS NOTE OR BY LENDER'S
INTERNAL RECORDS. INCLUDING DAILY COMPUTER PRINTOUTS. LENDER WILL HAVE NO
OBLIGATION TO ADVANCE FUNDS UNDER THIS NOTE IF: (A) BORROWER OR ANY GUARANTOR IS
IN DEFAULT UNDER THE TERMS OF THIS NOTE OR ANY AGREEMENT THAT BORROWER OR ANY
GUARANTOR HAS WITH LENDER, INCLUDING ANY AGREEMENT MADE IN CONNECTION WITH THE
SIGNING OF THIS NOTE; (B) BORROWER OR ANY GUARANTOR CEASES DOING BUSINESS OR IS
INSOLVENT; (C) ANY GUARANTOR SEEKS CLAIMS OR OTHERWISE ATTEMPTS TO LIMIT, MODIFY
OR REVOKE SUCH GUARANTOR'S GUARANTEE OF THIS NOTE OR ANY OTHER LOAN WITH
LENDER,; OR (D) BORROWER HAS APPLIED FUNDS PROVIDED PURSUANT TO THIS NOTE FOR
PURPOSES OTHER THAN THOSE AUTHORIZED BY LENDER.
GENERAL PROVISIONS. THIS NOTE IS PAYABLE ON DEMAND. THE INCLUSION OF SPECIFIC
DEFAULT PROVISIONS OR RIGHTS OF LENDER SHALL NOT PRECLUDE LENDER'S RIGHT TO
DECLARE PAYMENT OF THIS NOTE ON ITS DEMAND. LENDER MAY DELAY OR FORGO ENFORCING
ANY OF ITS RIGHTS OR REMEDIES UNDER THIS NOTE WITHOUT LOSING THEM. BORROWER AND
ANY OTHER PERSON WHO SIGNS, GUARANTEES OR ENDORSES THIS NOTE, TO THE EXTENT
ALLOWED BY LAW, WAIVE ANY APPLICABLE STATUTE OF LIMITATIONS, PRESENTMENT, DEMAND
FOR PAYMENT, PROTEST AND NOTICE OF DISHONOR. UPON ANY CHANGE IN THE TERMS OF
THIS NOTE, AND UNLESS OTHERWISE EXPRESSLY STATED IN WRITING, NO PARTY WHO SIGNS
THIS NOTE, WHETHER AS MAKER, GUARANTOR, ACCOMMODATION MAKER OR ENDORSER, SHALL
BE RELEASED FROM LIABILITY. ALL SUCH PARTIES AGREE THAT LENDER MAY RENEW OR
EXTEND (REPEATEDLY AND FOR ANY LENGTH OF TIME) THIS LOAN, OR RELEASE ANY PARTY
OR GUARANTOR OR COLLATERAL; OR IMPAIR, FAIL TO REALIZE UPON OR PERFECT LENDER'S
SECURITY INTEREST IN THE COLLATERAL; AND TAKE ANY OTHER ACTION DEEMED NECESSARY
BY LENDER WITHOUT THE CONSENT OF OR NOTICE TO ANYONE. ALL SUCH PARTIES ALSO
AGREE THAT LENDER MAY MODIFY THIS LOAN WITHOUT THE CONSENT OF OR NOTICE TO
ANYONE OTHER THAN THE PARTY WITH WHOM THE MODIFICATION IS MADE.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPTS OF A COMPLETED COPY OF THE NOTE.
BORROWER:
OPTIMUMCARE CORPORATION, A DELAWARE CORPORATION
BY: EDWARD A. JOHNSON
---------------------------
EDWARD A. JOHNSON, PRESIDENT
<PAGE> 31
STATE OF CALIFORNIA
UNIFORM COMMERCIAL CODE - FINANCING STATEMENT - FORM UCC-1
This financing Statement is presented for filing and will remain effective, with
certain exceptions, for five years from the date of filing, pursuant to Section
9403 of the California Uniform Commercial Code
- ----------------------------------------------------
1. DEBTOR 1A. SOCIAL SECURITY OR FEDERAL TAX NO.
OPTIMUMCARE CORPORATION 33-0218003
- ----------------------------------------------------
1B. MAILING ADDRESS 1C. CITY,STATE 1D. ZIP CODE
30011 IVY GLENN DRIVE #219 LAGUNA NIGUEL, CA 92677
- ----------------------------------------------------
2. ADDITIONAL DEBTOR 2A. SOCIAL SECURITY OR FEDERAL TAX NO.
- ----------------------------------------------------
3. DEBTOR'S TRADE NAMES OR STYLES 3A. FEDERAL TAX NO.
- ----------------------------------------------------
4. SECURED PARTY 4A. FEDERAL TAX. NO.
NATIONAL BANK OF SOUTHERN CALIFORNIA 95-3748495
NEWPORT REGIONAL OFFICE
4100 NEWPORT PLACE
NEWPORT BEACH, CA 92660
- ----------------------------------------------------
5. ASSIGNEE OF SECURED PARTY 5A. FEDERAL TAX NO.
- ----------------------------------------------------
6. THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPE OF PROPERTY: ALL
INVENTORY, CHATTEL PAPER, ACCOUNTS, CONTRACT RIGHTS, EQUIPMENT, GENERAL
INTANGIBLES AND FIXTURES; WHETHER ANY OF THE FOREGOING IS OWNED NOW OR ACQUIRED
LATER; ALL ACCESSIONS, ADDITIONS, REPLACEMENTS, AND SUBSTITUTIONS RELATING TO
ANY OF THE FOREGOING; ALL RECORDS OF ANY KIND RELATING TO ANY OF THE FOREGOING;
ALL PROCEEDS RELATING TO ANY OF THE FOREGOING (INCLUDING INSURANCE, GENERAL
INTANGIBLES AND OTHER ACCOUNTS PROCEEDS).
- ----------------------------------------------------
7A. X PRODUCTS OF COLLATERAL ARE ALSO COVERED
- ----------------------------------------------------
7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH
INSTRUCTION 5(A) ITEM: (1) (2) (3) (4)
- ----------------------------------------------------
8. DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC
SECTION 9105 (1) (n)
- ----------------------------------------------------
9. DATE:03/31/1995 |C| 10. THIS SPACE FOR USE OF
EDWARD A. JOHNSON |O| FILING OFFICER (DATE, TIME,
SIGNATURE OF DEBTOR(S) |D| FILE NUMBER AND FILING
|E| OFFICER)
- ----------------------------------------------------
EDWARD A. JOHNSON, PRESIDENT |1|
|2|
- ----------------------------------------------------
|3|
SIGNATURE(S) OF SECURED PARTY(IES)|4|
|5|
- ----------------------------------------------------
NATIONAL BANK OF SOUTHERN CALIF. |6|
|7|
- ----------------------------------------------------
11. RETURN COPY TO:
NATIONAL BANK OF SOUTHERN CALIF. |8|
4100 NEWPORT PLACE |9|
<PAGE> 32
NEWPORT BEACH, CA 92660 |0|
| |
(1) FILING OFFICER COPY FORM | |
| |
<PAGE> 33
STATE OF DELAWARE
UNIFORM COMMERCIAL CODE - FINANCING STATEMENT - FORM UCC-1
THIS FINANCING STATEMENT IS IF TO BE FILED WITH RECORDER
PRESENTED TO A FILING OF DEEDS INDICATE TAX PARCEL
OFFICER FOR FILING PURSUANT NO.(S).
TO THE UNIFORM COMMERCIAL CODE. NO. OF ADDITIONAL SHEETS
PRESENTED .
- -----------------------------------------------------------
PARTIES | PARTIES
DEBTOR (OR ASSIGNOR) LAST NAME | SECURED PARTY(IES) (LAST NAME
FIRST IF INDIVIDUAL) AND MAILING | FIRST IF INDIVIDUAL) AND
ADDRESS: OPTIMUMCARE CORPORATION | ADDRESS: NATIONAL BANK OF
A DELAWARE CORPORATION, 30011 | SOUTHERN CALIFORNIA, 4100
IVY GLENN DRIVE #219, LAGUNA | NEWPORT PLACE, NEWPORT BEACH,
NIGUEL, CA 92677 | CA 92660
- -----------------------------------------------------------
|
DEBTOR (OR ASSIGNOR) (LAST NAME | ASSIGNEE (IF ANY) OF SECURED
FIRST IF INDIVIDUAL) AND MAILING | PARTY(IES) AND ADDRESS OF
ADDRESS: | ASSIGNEE:
|
- -----------------------------------------------------------
THIS STATEMENT IS FILED WITHOUT | SPECIAL TYPES OF PARTIES (CHECK THE DEBTOR'S
SIGNATURE TO | X IN APPLICABLE BOX(ES) PERFECT A SECURITY INTEREST IN | THE
TERMS "DEBTOR" AND COLLATERAL (CHECK X IN APPLICABLE| "SECURED PARTY" MEAN
"LESSEE" BOX(ES) | AND "LESSOR", RESPECTIVELY.
ALREADY SUBJECT TO A SECURITY | THE TERMS "DEBTOR" AND
INTEREST IN ANOTHER JURISDICTION | "SECURED PARTY" MEAN "COSIGNEE
WHEN IT WAS BROUGHT INTO THIS | AND "COSIGNOR", RESPECTIVELY.
STATE. | DEBTOR IS A TRANSMITTING
ALREADY SUBJECT TO A SECURITY | UTILITY.
INTEREST IN ANOTHER JURISDICTION | DEBTOR ACTING IN REPRESEN-
WHEN THE DEBTOR'S LOCATION | TATIVE CAPACITY (E.G., AS
CHANGED TO THIS STATE. | TRUSTEE).
WHICH IS PROCEEDS OF THE |
ORIGINAL COLLATERAL DESCRIBED | FILED WITH: DEPARTMENT OF
BELOW IN WHICH A SECURITY | OF STATE OF DELAWARE
INTEREST IS PERFECTED. |
ACQUIRED AFTER A CHANGED OF |PREPARED BY (NAME AND ADDRESS):
NAME, IDENTITY OF CORPORATE |
STRUCTURE OF DEBTOR. |
AS TO WHICH THE FILING HAS |
LAPSED. |
|
- -------------------------------
BY: |
SIGNATURE OF SECURED PARTY(IES) |
- -------------------------------
|
TITLE | CHECK TO REQUEST CONTINUATION
(REQUIRED ONLY IF ITEM IS CHECKED|STATEMENT NOTICE FOR ADDITIONAL
|FEE.
- -------------------------------
THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPES (OR ITEMS) OF PROPERTY:
CHECK ONLY IF APPLICABLE. X PRODUCTS OF COLLATERAL ARE ALSO COVERED.
ALL INVENTORY, CHATTEL PAPER, ACCOUNTS, CONTRACT RIGHTS, EQUIPMENT, GENERAL
INTANGIBLES AND FIXTURES; WHETHER ANY OF THE FOREGOING IS OWNED NOW OR ACQUIRED
LATER; ALL ACCESSIONS, ADDITIONS, REPLACEMENTS, AND SUBSTITUTIONS RELATING TO
ANY OF THE FOREGOING; ALL RECORDS OF ANY KIND RELATING TO ANY OF THE FOREGOING;
ALL PROCEEDS RELATING TO ANY OF THE FOREGOING (INCLUDING INSURANCE, GENERAL
INTANGIBLES AND OTHER ACCOUNT PROCEEDS).
<PAGE> 34
- -------------------------------
IF THE COLLATERAL IS CROPS, THE CROPS ARE GROWING OR TO BE GROWN ON THE
FOLLOWING DESCRIBED REAL ESTATE:
- -------------------------------
IF THE COLLATERAL IS (A) GOODS THAT ARE OR ARE TO BECOME FIXTURES; (B|) TIMBER
TO BE CUT; OR (C) MINERALS OR THE LIKE (INCLUDING OIL AND GAS) OR ACCOUNTS
RESULTING FROM THE SALE THEREOF AT THE WELLHEAD OR MINEHEAD, THE DESCRIPTION OF
THE REAL ESTATE CONCERNED IS: (CHECK X IN APPLICABLE BOX(ES)
X FIXTURES TIMBER MINERALS OR ACCOUNTS RESULTING FROM
- --- --- --- SALE THEREOF AT WELLHEAD OR MINEHEAD
AND THIS FINANCING STATEMENT IS TO BE FILED IN THE REAL ESTATE RECORDS WHERE A
MORTGAGE ON SUCH REAL ESTATE WOULD BE RECORDED. IF THE DEBTOR DOES NOT HAVE AN
INTEREST OF RECORD, THE NAME OF A RECORD OWNER IS:
- -------------------------------
| THIS SPACE FOR USE OF FILING
| OFFICER (DATE, TIME, NUMBER, FILING
| OFFICER)
BY: EDWARD A. JOHNSON, |
PRESIDENT |
- -------------------------------
|
SIGNATURE OF DEBTOR (OR |
ASSIGNOR) TITLE |
- -------------------------------
|
BY: EDWARD A. JOHNSON, |
PRESIDENT |
- -------------------------------
|
SIGNATURE OF DEBTOR (OR |
ASSIGNOR) TITLE |
|
<PAGE> 35
ADDENDUM TO BUSINESS LOAN AGREEMENT
This Addendum to Business Loan Agreement amends and replaces in their entirety
the sections on page 3 entitled "NEGATIVE COVENANTS" and "ADDITIONAL
PROVISIONS".
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (a) Create, incur or assume any Indebtedness
other than (i) trade payable incurred in the normal course of business,
(ii) indebtedness to Lender contemplated by this Agreement, (iii)
indebtedness in connection with capital leases in excess of an
aggregate of $40,000 in any calendar year, and (iv) contractual
obligation to suppliers and customers in the ordinary course of
business; (b) sell, transfer, assign, pledge, lease or grant a security
interest or encumber any of Borrower's assets except for purchase money
security interest, if any, granted in the ordinary course of business;
or (c) sell with recourse any of Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged; (b) cease operations, liquidate, merge or consolidate with any
other entity, dissolve or transfer or sell Collateral out of the
ordinary course of business; (c) make any other material change in its
capital structure or operations which would adversely affect the
repayment of the Indebtedness.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance
money or assets in one or more transactions which in the aggregate
exceed $100,000 in any calendar year; (b) purchase, create or acquire
any interest in any other enterprise or entity which transaction
involves a cost in excess of $100,000; or (c) incur any obligation as
surety or guarantor other than in the ordinary course of business.
ADDITIONAL PROVISIONS.
1. Lender agrees that on May 1, 1996, the then principal balance of the
Loan shall be converted to a one year term loan with an initial due
date of May 1, 1997; ("Term Loan"), payable at the same rate as the
Loan, but with a repayment schedule amortized over a full five (5) year
term with all unpaid principal and accrued interest due on May 1, 1997;
provided, however, the Term Loan may be renewed at the Lender's sole
discretion for an additional term of one year until May 1, 1998.
2. Within 90 days after fiscal year end, Borrower shall supply Lender with
audited financial statements and Borrower's Form 10-K and within 45
days after each fiscal quarter Borrower shall supply Lender with
Borrower's Form 10-Q for such quarter (which will include the quarterly
financial statement).
3. Borrower shall maintain its principal depository relationship with
Lender.
4. Borrower shall maintain a ratio of net worth to Indebtedness at the end
of each fiscal year of at least 1.5 to 1.
5. Borrower shall not incur capital expenditures in any fiscal year in an
amount in excess of $50,000 over Borrower's annual depreciation and
amortization expense for such fiscal year.
6. Borrower shall maintain at all times a maximum indebtedness to eligible
receivables margin of 75% to be calculated on a quarterly basis.
Eligible receivables do not include over 90 day accounts, current
affected accounts (25%), concentration (25%), foreign, government or
contra accounts; provided, however, the following accounts are excluded
from the concentration limitation: St. Francis Hospital, Humana
Hospital and Ornda Hospital.
7. In the event Borrower obtains additional equity financing, whether
through a public or private offering or venture capital financing and
such funding exceeds, in one or more transactions, an aggregate of at
least $2 million, Lender may request that the loan be repaid in full
unless Borrower shall satisfy Lender that the disposition of such
funding will not adversely impact the repayment of the Loan.
Borrower: Lender:
OPTIMUMCARE CORPORATION NATIONAL BANK OF SOUTHERN
<PAGE> 36
CALIFORNIA
BY:EDWARD A. JOHNSON BY:
--------------------------- --------------------
EDWARD A. JOHNSON, PRESIDENT
<PAGE> 1
EXHIBIT 10.68
LEASE AMENDMENT
That certain OFFICE BUILDING LEASE dated June 23, 1988 by and between LAGUNA
NIGUEL OFFICE, a California Limited Partnership, as Landlord and OPTIMUMCARE
CORPORATION, a Delaware Corporation, as Tenant, is hereby amended as follows:
1. Lease has been extended for a period of one (1) year.
New termination date shall be June 30, 1996.
2. Rental rate shall remain the same.
3. Suite 218 & 219 touch up paint and carpet cleaned, if
requested at Landlord's expense.
4. All other terms and conditions of the original lease
shall remain unchanged.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of June
5, 1995.
LAGUNA NIGUEL OFFICE CENTER, OPTIMUMCARE CORPORATION,
a California Limited Partnership a Delaware
Corporation
By: CARL J. GREENWOOD, By: EDWARD JOHNSON,
------------------------ -------------------
GENERAL PARTNER PRESIDENT
(LANDLORD) (TENANT)
<PAGE> 1
EXHIBIT 10.69
July 1, 1995
Mr. David Decolati
Huntington Beach Hospital & Medical Center
17772 Beach Blvd.
Huntington Beach, CA 92647-6899
RE: SUBLEASE OF SPACE
UNITS D & E, 1170 DURFEE AVE., S. EL MONTE, CA.
Dear Mr. Decolati:
This letter will outline our understanding of the sublease of the above
mentioned space with OptimumCare Corporation.
Agreement with OptimumCare Corporation:
(a) You shall rent 2,946 square feet on the first floor of the mentioned
location at a base rate of $3,240.60 per month.
(b) You will not be entitled to assign or otherwise transfer interest in
all or any portion of the rented space.
(c) You agree to pay a Security Deposit equal to one month's rent.
(d) Your lease shall commence on July 1, 1995 and terminate February 15,
1996. You will provide OptimumCare Corporation with written notice not
less than thirty (30) days prior to your intention to vacate the rented
space. OptimumCare Corporation will provide you with written notice of
not less than thirty (30) days prior to the last day of your tenancy
providing reasonable cause for such notice exists.
(e) Rent is due on the first day of each month and is payable to
OptimumCare Corporation. You will receive an invoice on the first of
each month which will reflect charges for rent.
(f) You agree to pay sublessee's prorata share of common area operating
expenses.
<PAGE> 2
Mr. David Decolati
July 1, 1995
Page Two
If the terms of this letter meets with your understanding, please execute both
duplicate originals and return them to me along with your check. We will return
a fully executed copy to you for your files.
CAROL FREEMAN, Chief Executive Officer Date
Huntington Beach Hospital and Medical Center
ADAM MILSTEIN, President Date
Whittier Narrow Business Park
Lessors Written Consent for Sublease
EDWARD A. JOHNSON, President Date
OptimumCare Corporation
<PAGE> 3
July 1, 1995
Mr. David Decolati
Huntington Beach Hospital & Medical Center
17772 Beach Blvd.
Huntington Beach, CA 92647-6899
RE: SUBLEASE OF SPACE
14100 E. FRANCISQUITO AVE., SUITES 5 & 12, BALDWIN PARK, CA.
Dear Mr. Decolati:
This letter will outline our understanding of the sublease of the above
mentioned space with OptimumCare Corporation.
Agreement with OptimumCare Corporation:
(a) You shall rent 1,400 square feet on the first floor of the mentioned
location at a base rate of $1,400 per month for Suite #12.
(b) You shall reimburse OptimumCare $2,000 per month payable to Contract
Service Center for Suite #5.
(c) You will not be entitled to assign or otherwise transfer interest in
all or any portion of the rented space.
(d) You agree to pay a Security Deposit equal to one month's rent.
(e) Your lease shall commence on July 1, 1995 and terminate August 31,
1995. You will provide OptimumCare Corporation with written notice not
less than thirty (30) days prior to your intention to vacate the rented
space. OptimumCare Corporation will provide you with written notice of
not less than thirty (30) days prior to the last day of your tenancy
providing reasonable cause for such notice exists.
(f) Rent is due on the first day of each month and is payable to
OptimumCare Corporation. You will receive an invoice on the first of
each month which will reflect charges for rent.
(g) You agree to pay sublessee's prorata share of common area operating
expenses.
<PAGE> 4
Mr. David Decolati
July 1, 1995
Page Two
If the terms of this letter meets with your understanding, please execute both
duplicate originals and return them to me along with your check. We will return
a fully executed copy to you for your files.
CAROL FREEMAN, Chief Executive Officer Date
Huntington Beach Hospital and Medical Center
Columbia Healthcare Corporation Date
EDWARD A. JOHNSON, President
Date
OptimumCare Corporation
<PAGE> 1
EXHIBIT 10.70
July 24, 1995
Ms. Carol Freeman
Huntington Beach Hospital & Medical Center
17772 Beach Blvd.
Huntington Beach, CA 92647-6899
RE: SUBLEASE OF SPACE - 757 PACIFIC AVENUE, LONG BEACH, CA
90813
Dear Ms. Freeman:
This letter will outline our understanding of the sublease of the above
mentioned space with OptimumCare Corporation.
Agreement with OptimumCare Corporation:
(a) You shall rent 3,200 square feet of the mentioned location
at the rate of $2,950.00 per month.
(b) You will not be entitled to assign or otherwise transfer
interest in all or any portion of the rented space.
(c) Your lease shall commence on July 3, 1995 and terminate July 3, 1996.
You will provide OptimumCare Corporation with written notice not less
than thirty (30) days prior to your intention to vacate the rented
space. OptimumCare Corporation will provide you with written notice of
not less than thirty (30) days prior to the last day of your tenancy
providing reasonable cause for such notice exists.
(d) Rent is due on the first day of each month and is payable to
OptimumCare Corporation. You will receive an invoice on the first of
each month which will reflect charges for rent.
If the terms of this letter meets with your understanding, please execute both
duplicate originals and return them to me along with your check. We will return
a fully executed copy for your files.
CAROL FREEMAN 7/24/95
- -------------
Carol Freeman, Chief Executive Officer Date
HELEN TANG 7/25/95
- ----------
Helen Tang, 757 Pacific Partnership Date
EDWARD A. JOHNSON 7/25/95
- -----------------
Edward A. Johnson, President/CEO Date
OptimumCare Corporation
<PAGE> 1
EXHIBIT 10.71
COMMERCIAL LEASE
THIS LEASE is made on the 3rd day of July, 1995.
The Landlord hereby agrees to lease to the Tenant, and the Tenant hereby agrees
to hire and take form the Landlord, the Lease Premises described below pursuant
to the terms and conditions specified herein:
LANDLORD: 757 Pacific Partnership
1250 Pacific Avenue
Long Beach, CA 90813
TENANT(S): OptimumCare Corporation
30011 Ivy Glenn Drive Suite 219
Laguna Niguel, CA 92677
1. Leased Premises. The Leased Premises are those premises
described as: 757 Pacific Avenue, Long Beach, CA 90813
2. Term. The term of the Lease shall be for a period of 2
years commencing on the 3rd day of July, 1995 ending on the
3rd day of June, 1997, unless sooner terminated as
hereinafter provided. If Tenant remains in possession of
the Leased Premises with the written consent of the Landlord
after the lease expiration date stated above, this Lease
will be converted to a month-to-month Lease and each party
shall have the right to terminate the Lease by giving at
least one month's prior written notice to the other party.
3. Rent. The Tenant agrees to pay the ANNUAL RENT of
$35,400.00 Dollars ($35,400.00) payable in equal
installments $2,950.00 in advance on the first day of each
and every calendar month during the full term of this Lease.
4. Rent Adjustment. If in any tax year commencing with the
fiscal year N/A, the real estate taxes on the land and
buildings, of which the Leased Premises are a part, are in
excess of the amount of the real estate taxes thereon for
the fiscal year (hereinafter called the "Base Year"), Tenant
will pay to Landlord as additional rent hereunder, when and
as designated by notice in writing by Landlord, N/A percent
of such excess that may occur in each year of the term of
this Lease or any extension or renewal thereof and
proportionately for any part of a fiscal year.
5. Security Deposit. The sum of
Dollars ($ ) is deposited by the Tenant with the landlord as
security for the faithful performance of all the covenants and
conditions of the lease by the said Tenant. If the Tenant faithfully
performs all the covenants and conditions on his part to be performed,
then the sum deposited shall be returned to the Tenant.
6. Delivery of Possession. If for any reason the Landlord
cannot deliver possession of the leased property to the
Tenant when the lease term commences, this Lease shall not
be
<PAGE> 2
void or voidable, nor shall the Landlord be liable to the
Tenant for any loss or damage resulting therefrom. However,
there shall be an abatement of rent for the period between
the commencement of the lease term and the time when the
Landlord delivers possession.
7. Use of Leased Premises. The Leased Premises may be used
only for the following purpose:
Medical and general office use.
8. Utilities. Except as specified below, the Tenant shall be
responsible for all utilities and services that are
furnished to the Leased Premises. The application for an
connecting of utilities, as well as all services shall be
made by and only in the name of the Tenant: (List
exceptions, if any)
N/A.
9. Condition of Lease Premise; Maintenance and Repair. The
Tenant acknowledges that the Leased Premises are in good
order and repair. The Tenant agrees to take good care of
and maintain the Leased Premises in good condition
throughout the term of the Lease.
The Tenant, at his expense, shall make all necessary repairs and
replacements to the Leased Premises, including the repair and
replacement of pipes, electrical wiring, heating and plumbing systems,
fixtures and all other systems and appliances and their appurtenances.
The quality and class of all repairs and replacements shall be equal to
the original worth. If Tenant defaults in making such repairs or
replacements, Landlord may make them for Tenant's account, and such
expenses will be considered additional rent.
10. Compliance with Laws and Regulations. Tenant, at its
expense, shall promptly comply with all federal, state, and
municipal laws, orders and regulations and with all lawful
directives of public officers, which impose any duty upon it
or Landlord with respect to the Leased Premises. The Tenant
at its expense, shall obtain all required licenses or
permits for the conduct of its business within the terms of
this lease or for the making of repairs, alterations,
improvements, or additions. Landlord, when necessary will
join with the Tenant in applying for all such permits or
licenses.
<PAGE> 3
11. Alterations and Improvements. Tenant shall not make any
alterations, additions or improvements to, or install any
fixtures on the Leased Premises without Landlord's prior
written consent. If such consent is given, all alterations,
additions, and improvements made, and fixtures installed, by
Tenant shall become Landlord's property upon the expiration
or sooner termination of this Lease. Landlord may, however
required Tenant to remove such fixtures, at Tenant's cost,
upon the termination hereof.
12. Assignment/Subletting Restrictions. Tenant nay not assign this
agreement or sublet the Leased Premises without the prior written
consent of the Landlord. Any assignment, sublease or the purported
license to use the Leased Premises by Tenant without the Landlord's
consent shall be void and shall (at Landlord's option) terminate this
Lease.
13. Insurance.
(i) By Landlord. Landlord shall at all times during the
term of this Lease, at its expense, insure and keep in
effect on the building in which the Leased Premises is
located fire insurance with extended coverage. The
Tenant shall not permit any use of the Leased Premises
which will make voidable any insurance on the property
of which the leased Premises are a part, or on the
contents of said property or which shall be contrary to
any law or regulation from time to time established by
the applicable fire insurance rating association.
Tenant shall on demand reimburse the Landlord, and all
other tenants, all extra insurance premiums caused by
the Tenants use of the premises.
14. Indemnification of Landlord. Tenant shall defend, indemnify, and hold
Landlord harmless from and against any claim, loss, expense or damage
to any person or property in or upon the Leased Premises, arising out
of Tenant's use or occupancy of the Leased Premises, or arising out of
any act or neglect of Tenant or its servants, employees, agents, or
invitees.
15. Condemnation. If all or any part of the Leased Premises is
taken by eminent domain, this lease shall expire on the date
of such taking, and the rent shall be apportioned as of that
date. No part of any award shall belong to Tenant.
16. Destruction of Premises. If the building in which the
Leased Premises is located is damaged by fire or other
casualty, without Tenant's fault, and the damage is so
extensive to effectively constitute a total destruction of
the property or building, this Lease shall terminate and the
rent shall be apportioned to the time of the damage. In all
other cases of damage without Tenant's fault, Landlord shall
repair the damage with reasonable dispatch, and if the
damage has rendered the Leased Premises wholly or partially
untenantable, the rent shall be apportioned until the damage is
repaired. In determining what constitutes reasonable dispatch,
consideration shall be given to delays caused by strikes, adjustment of
insurance, and other causes beyond the Landlord's control.
17. Landlord's Rights upon Default. In the event of any breach
of this lease by the Tenant, which shall not have been cured
within TEN (10) DAYS, then the Landlord, besides other
rights or remedies it may have, shall have the immediate
right of reentry and may remove
<PAGE> 4
all persons an property from the Leased Premises; such property may be
removed and stored in a public warehouse or elsewhere at the cost of,
and for the account of, the Tenant.
18. Quiet Enjoyment. The Landlord agrees that if the Tenant shall pay the
rent as aforesaid and perform the covenants and agreements herein
contained on its part to be performed, the Tenant shall peaceably hole
and enjoy the said rented premises without hindrance or interruption by
the Landlord or by any other person or persons acting under or through
the landlord.
19. Landlord's Right to Enter. Landlord may, at reasonable times, enter the
Leased Premises to inspect it, to make repairs or alterations, and to
show it to potential buyers, lenders or tenants.
20. Subordination. This lease, and the Tenant's leasehold interest, is and
shall be subordinate, subject and inferior to any and all liens an
encumbrances now and thereafter placed on the Leased Premises by
Landlord, any and all extensions of such liens and encumbrances and all
advances paid under such liens and encumbrances.
22. Additional Provisions:
N/A
23. Miscellaneous Terms.
(i) Notices. Any notice, statement, demand or other communication
by one party to the other,m shall be given by personal
delivery or by mailing the same, postage prepaid, addressed to
the Tenant at the premises, or to the Landlord at the address
set forth above.
(ii) Severability. If any clause or provision herein shall be
adjudged invalid or unenforceable by a court of competent
jurisdiction or by operation of any applicable law, it shall
not affect the validity of any other clause or provision,
which shall remain in full force and effect.
<PAGE> 5
(iii)Waiver. The failure of either party to enforce any of the
provisions of this lease shall not be considered a waiver of
that provision or the right of the party to thereafter enforce
the provision.
(iv) Complete Agreement. This lease constitutes the entire
understanding of the parties with respect to the
subject matter hereof and may not be modified except by
an instrument in writing and signed by the parties.
(v) Successors. This Lease is binding on all parties who
lawfully succeed to the rights or take the place of the
landlord or Tenant.
IN WITNESS WHEREOF the parties have set their hands and seals on this 13th DAY
OF NOVEMBER, 1995.
HELEN TANG EDWARD A. JOHNSON,
- ---------- ------------------
OptimumCare Corporation
Landlord Tenant
Helen Tang for 757 Pacific Partnership
<PAGE> 1
EXHIBIT 10.72
MEDICAL OFFICE BUILDING LEASE
THIS LEASE is made and entered into this 14th day of September, 1995, by and
between Columbia/HCA Healthcare corporation, a Delaware Corporation
("Landlord"), and OptimumCare Corporation, a California Corporation ("Tenant").
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord Suite
No. 12 on the first floor, containing 1,400 gross rentable square feet
("Premises") in the building located at 14100 E. Francisquito Avenue, Baldwin
Park, CA 91706 ("Building") for the term and upon the conditions and agreements
hereinafter set forth ("Lease"). this Lease shall constitute a binding agreement
between the parties effective as of the date set forth above, which shall be
added by either Landlord or Tenant, whichever party is last to sign the Lease
("Effective Date").
ARTICLE I. TERM
The term of this lease shall begin on the "Commencement Date" (Commencement Date
being defined as the date Tenant occupies the Premises which shall be the 1st
day of October, 1995) and terminate 1 year thereafter on the 30th day of
September, 1996 ("Term"). "Lease Year" shall be defined as each 365 consecutive
day period throughout the Term, beginning on the Commencement Date. If the
Premises are occupied for a fraction of a month at the beginning or the end of
the Term, Tenant shall pay a proportionate part of the applicable monthly
installment.
Schedule B shall apply to this Lease.
SCHEDULE B
First Lease Year Base Rent Monthly Rent Installment
10/1/95 $16,800.00 $1,400.00
ARTICLE III. ADDITIONAL RENT
In addition to the Base Rent reserved in Article II herein, Tenant shall pay
Landlord "Additional Rent", which term shall be defined to include the
following:
(1) any sum owed for costs incurred by Landlord which are in excess of the sum
of any tenant improvement allowance upon which Landlord and Tenant have agreed;
(2) any sum owed for separately metered utilities and/or as a Surcharge, as
defined in Article V, Building Services;
(3) any other sums owed by Tenant in connection with Tenant's occupancy of the
Premises, including, but not limited to, the cost of collection and disposal of
any wastes generated at the Premises.
For purposes of this Lease, Base Rent and Additional Rent shall hereinafter be
collectively referred to as "Rent".
ARTICLE IV. USE OF PREMISES
Tenant shall use and occupy the Premises as a medical office exclusively for
Tenant's practice of medicine and for no other purpose. Tenant shall not use or
occupy the Premises in violation of law or of the Certificate of Use or
Occupancy issued for the Building of which the premises are a part and shall
immediately discontinue any use of the Premises which is declared by either any
governmental authority having jurisdiction or the Landlord to be a violation of
any law, code, regulation or a violation of said Certificate of Use of
occupancy. Tenant shall comply with any direction of any governmental authority
having jurisdiction which shall, by reason of the nature of Tenant's use or
occupancy of the Premises, impose any duty upon Tenant or Landlord with respect
to the Premises or with respect to the use or occupation thereof.
<PAGE> 2
Tenant shall not do nor permit to be done anything which will invalidate or
increase the cost of any fire an extended coverage insurance policy covering the
building and/or property located therein, and shall comply with all rules,
orders, regulations and requirements of the appropriate Fire Rating Bureau or
any other organization performing a similar function. Tenant shall promptly upon
demand reimburse Landlord for any additional premium charged of such policy by
reason of Tenant's failure to comply with the provisions of this paragraph.
Tenant shall not do or permit anything to be done in, on or about the Premises
which would in any way obstruct or interfere with the rights of the tenants or
occupants of the Building, or use or allow the Premises to be used for any
immortal, unlawful or objectionable purpose, nor shall Tenant maintain or permit
any nuisance or commit or suffer to be committed any waste in, on or about the
Premises.
Tenant shall not dispense any drugs or medicines to persons other than Tenant's
own patients. In the practice of medicine at the Premises, Tenant shall have the
right to perform only such laboratory tests and diagnostic procedures which are
ancillary and incidental to the care and treatment of Tenant's patients, and not
for third parties or for an independent profit motive. Prior to the installation
and use of any diagnostic, laboratory or radiology equipment, Tenant shall
provide Landlord with a list of such equipment and its intended use, a list of
any hazardous substances, wastes or materials, as hereinafter defined, which
will be used or generated in connection with such laboratory and/or diagnostic
tests; and Tenant's proposed procedures for the use, storage and disposal of any
hazardous substances, wastes or materials, including but not limited to the
procedure for silver recovery for any radiology equipment.
Tenant shall not cause or permit the release or disposal of any hazardous
substances, wastes or materials, or any medical, special or infectious wastes,
on or about the Premises or the Building of which they are a part. Hazardous
substances, wastes or materials shall include those which are defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 USC Section 9601 et seq; the Resource Conservation and Recovery Act,
as amended, 42 USC Section 6901 et seq; the Toxic Substances Control Act, as
amended, 15 USC Section 2601 et seq; and medical, special or infectious wastes
shall include those which are defined pursuant to the medical waste regulations
which have been promulgated by the state in which the Premises are located, and
as further set forth in any state or local laws and ordinances, and their
corresponding regulations. Tenant shall comply with all rules and policies set
by Landlord, and with all federal, state and local laws, regulations and
ordinances which govern the use, storage, handling and disposal of hazardous
substances, wastes or materials and medical, special or infectious wastes.
Tenant shall indemnify, defend and hold Landlord harmless from and against any
claims or liability arising out of or connected with Tenant's failure to comply
with the terms of this Article IV, which terms shall survive the expiration or
earlier termination of this Lease.
Landlord, may at its option, terminate this Lease int he event Tenant engages in
a prohibited use and fails to cure such violation within thirty (30) days
following Tenant's receipt of written notice form Landlord.
ARTICLE V. BUILDING SERVICES
1. All utilities for the Premises which are not separately metered as
well as all utilities for the common areas of the Building and maintenance
services will be paid for by Landlord. Heat and air-conditioning required to be
furnished by Landlord will be furnished whenever the same shall, in Landlord's
reasonable judgement, be required for Tenant's comfortable use and occupancy of
the Premises during reasonable business hours. If Tenant requires or utilizes
more water or electric power than is considered reasonable or normal by
Landlord, Landlord may reasonably determine and require Tenant to pay as
Additional Rent, the cost incurred as a result of such additional usage
("Surcharge"). Tenant agrees to pay all separately metered utilities required
and used by Tenant in the Premises. Landlord reserves the privilege of stopping
any or all of such services in case of accident or breakdown, or for the purpose
of making alterations, repairs or improvements, and shall not be liable for the
failure to
<PAGE> 3
furnish or delay in furnishing any or all of such services when same is caused
by or is the result of strikes, labor disputes, labor, fuel or material
scarcity, or governmental or other lawful regulations or requirements, or the
failure of any corporation, firm or person with whom the Landlord may contract
for any such service, or for any service incident thereto, to furnish same, or
is due to any cause other than the gross negligence of the Landlord; and the
failure to furnish any of such services in such event shall not be deemed or
construed as an eviction or relieve Tenant from the performance of any of the
obligations imposed upon Tenant by this Lease. Landlord shall not be responsible
to the Tenant for loss of property in or from the Premises, or for any damage
done to furniture, furnishings or effects therein, however occurring, except
where such damages occur through the gross negligence of Landlord; nor shall
Landlord be responsible should any equipment or machinery break down or for any
cause cease to function properly on account of any such interruption of service.
Tenant shall be solely responsible for and shall promptly pay all charges for
telephone and other communication services.
2. At all times during the initial Term or any extension
thereof, Landlord, at no cost or expense to Tenant, shall
promptly and in a workmanlike manner perform all maintenance
and make all repairs and replacements required, in the
opinion of Landlord, to keep the Premises and the Building
in good order, condition and repair, except if the need for
such maintenance, repairs or replacements is caused by the
fault or negligence of Tenant (reasonable wear and tear
excepted), in which event Landlord will perform the
maintenance, repairs or replacements required and charge
Tenant therefore, such changes being due in full upon tenant
being billed for same.
ARTICLE VI. ALTERATIONS
Tenant may not make any changes, additions, alterations, improvements
or additions to the Premises or attach or affix any articles thereto without
Landlord's prior written consent. All alterations, additions, or improvements
which may be made upon the Premises by Landlord or Tenant (except unattached
trade fixtures and office furniture and equipment owned by Tenant) shall not be
removed by Tenant, but shall become and remain the property of landlord. All
alterations, improvements, and additions to the Premises (as permitted by
Landlord) shall be done only by Landlord or contractors or mechanics approved by
Landlord, and shall be at Tenant's sole expense and at such times and in such
manner as Landlord may approve. If Tenant shall make any alterations,
improvements or additions to the Premises, Landlord may require Tenant, at the
expiration of the Lease, to restore the Premises to substantially the same
condition as existed at the commencement of the Term. Any mechanics' or
materialmen's lien for which Landlord has received a notice of intent to file or
which has been filed against the Premises or the Building arising out of work
done for, or materials furnished to Tenant, shall be discharged, bonded over, or
otherwise satisfied by Tenant within ten (10 ) days following the earlier of the
date Landlord receives (1) notice of intent to file a lien or (2) notice that
the lien has been filed. If Tenant fails to discharge, bond over, or otherwise
satisfy any such lien, Landlord may do so at tenant's expense, and the amount
expended by Landlord, including reasonable attorney's fees, shall be paid by
Tenant within ten (10) days following Tenant's receipt of a bill from Landlord.
ARTICLE VII. DAMAGE TO PROPERTY - INJURY TO PERSONS
Tenant shall and hereby does indemnify and hold Landlord harmless form
and against any and all claims arising from: 1) Tenant's use of the Premises or
the conduct of Tenant's business or profession; 2) any activity, work, or thing
done, permitted or suffered by the Tenant in or about the Premises; 3) any
breach or default in the performance of any obligation on Tenant's part to be
performed under the terms of this Lease; or 4) any negligent acts or omissions
of Tenant, or of Tenant's agents or employees. tenant shall and hereby does
further indemnify, defend and hold Landlord harmless from and against all costs,
attorney's fees, expenses and liabilities incurred in connection with any such
claim or any action or proceeding brought thereon. In case
<PAGE> 4
any action nor proceeding is brought against Landlord by reason of any such
claim. Tenant, upon notice from Landlord, shall defend same at Tenant's expense
by counsel reasonably satisfactory to Landlord. Tenant, as a material part of
the consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons in, upon, or about the Premises from any cause other than
Landlord's gross negligence, and Tenant hereby waives all claims in respect
thereof against Landlord.
During the term hereof, Tenant shall maintain comprehensive general
liability insurance on the Premises of at least $100,000 per occurrence,
$300,000 aggregate. As evidence thereof, on or before the Commencement Date.
Tenant shall provide to Landlord Certificates of Insurance evidencing such
coverage during the Term. Tenant shall also maintain All Risk (as defined in
Article XX(v)) property insurance on all property owned or used by Tenant in the
Premises.
Neither Landlord nor its agents shall be liable for any damage to
property entrusted to employees of the Building, nor for loss of or damage to
any property by theft or otherwise, nor for any injury or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building or from
the pipes, appliances or plumbing works therein or from the roof, street or
subsurface, or from any other place or resulting from dampness or any other
cause whatsoever, unless caused by or due to the gross negligence of Landlord,
its agents, servants or employees. Neither Landlord nor its agents shall be
liable for any latent defect in the Premises or in the Building. Tenant shall
give prompt notice to Landlord in case of fire or accidents in the Premises or
in the Building or of defects therein or in the fixtures or equipment. Tenant
hereby acknowledges that Landlord shall not be liable for any interruption to
Tenant's business for any cause whatsoever, and that tenant shall obtain
Business Interruption Insurance coverage should Tenant desire to provide
coverage for such risk.
ARTICLE VIII. ASSIGNMENT AND SUBLETTING
Tenant shall no, either voluntarily or by operation of law, sell,
hypothecate, assign or transfer this Lease, or sublet the premises or nay part
thereof, or permit the Premises or any part thereof to be occupied by anyone
other than Tenant or Tenant's employees, without the prior written consent of
Landlord. Any sale, assignment, mortgage transfer or subletting of this Lease
which is not in compliance with the provisions of this Article VIII shall be
null and void and of no effect and shall constitute a default hereunder. The
consent by Landlord to an assignment or subletting shall not be construed as
relieving Tenant from obtaining the express written consent of Landlord to any
further assignment or subletting. Landlord's consent to any assignment or
subletting shall not release Tenant from its primary liability under the Lease.
ARTICLE IX. DAMAGE OR DESTRUCTION
If the Premises are damaged by fire or other casualty (collectively
"Casualty"), the damage shall be repaired by and at the expense of Landlord,
provided such repairs can, in Landlord's opinion, be made within sixty (60) days
after the occurrence of such Casualty without the payment of overtime or other
premiums. Until such repairs are completed, the Rent shall be abated in
proportion to the part of the Premises which is unusable by tenant in the
conduct of Tenant's practice of medicine. However, three shall be no abatement
to Rent by reason of any portion of the Premises being unusable for a period
equal to one day or less, or if the Casualty is due to the negligent acts or
omissions of Tenant or Tenant's employees.
If such repairs cannot, in Landlord's opinion, be made within sixty
(60) days, Landlord may, at its option, make them within a reasonable time, not
to exceed one hundred twenty (120) days and in such event this Lease shall
continue in effect and the Rent shall be apportioned in the manner provided
above. Landlord's election to make such repairs must be evidenced by written
notice to Tenant within thirty (30) days after the occurrence of the damage.
<PAGE> 5
If Landlord does not so elect to make such repairs which cannot be made
within sixty (60) days, then either party may, by written notice to the other,
cancel this Lease as of the date of the Casualty. A total destruction of the
Building in which the Premises are located shall automatically terminate the
lease.
ARTICLE X. EMINENT DOMAIN
If the whole of the Premises or so much thereof as to render the
balance unusable by Tenant shall be taken under power of eminent domain, this
Lease shall automatically terminate as of the date of such condemnation,
together with any and all rights of Tenant existing or hereafter arising in or
to the same or any part thereof; provided, however, that nothing contained
herein shall be deemed to give Landlord any interest in or require Tenant to
assign to Landlord any award made to Tenant for 1. the taking of personal
property and fixtures belonging to Tenant; 2. the Interruption of or damage to
Tenant's business or profession; 3. the cost of relocation expenses incurred by
Tenant; and 4. Tenant's unamortized cost of leasehold improvements. In the event
of a partial taking which does not result in a termination of the Lease, the
Rent shall be apportioned according to the part of the Premises remaining usable
by Tenant. Landlord may without any obligation or liability to Tenant stipulate
with any condemning authority for a judgement of condemnation without the
necessity of a formal suit or judgement of condemnation, and the date of taking
under this clause shall then be deemed the date agreed to under the terms os
said agreement or stipulation.
ARTICLE XI. DEFAULTS
The occurrence of any of the following shall constitute a material
default and breach of the Lease:
1. The vacating or abandonment of the premisses by Tenant.
<PAGE> 6
2. A failure by Tenant to pay the Rent or to make any other payment
required to be made by Tenant hereunder, when due, or within ten (10) days
thereafter.
3. A failure by Tenant to observe and perform any other
provision of this Lease to be observed or performed by Tenant.
4. The making by Tenant of any general assignment for the benefit of
creditors; the filing by or against Tenant of a petition to have Tenant adjudged
a bankrupt or the filing of a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within sixty (60) days; the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where possession
is not restored to Tenant within thirty (30) days; or the attachment, execution
or other judicial seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where such seizure is not
discharged within thirty (30) days.
Tenant shall not be in default in the performance of any obligation
provided for herein, except with reference to the payment of Rent, unless and
until Tenant has failed to perform such obligation within thirty (30) days after
written notice by Landlord to Tenant specifying wherein Tenant has failed to
perform such obligation.
Landlord shall not be deemed to be in default in the performance of any
obligation required to be performed by it hereunder unless and until it has
failed to perform such obligation within thirty (30) days after written notice
by Tenant to Landlord specifying wherein Landlord has failed to perform such
obligation. Provided however, that if the nature of Landlord's obligation is
such that more than thirty (30) days are required for its performance, then
Landlord shall not be deemed to be in default if it shall commence such
performance within such thirty (30) day period and thereafter diligently
prosecute the same to completion.
<PAGE> 7
ARTICLE XXI. REMEDIES
In the event Tenant commits an act of default as set forth in Article XI,
Landlord may exercise one or more of the following described remedies, inn
addition to all other rights and remedies available at law or in equity, whether
or not stated in this Lease.
1. Landlord may continue this Lease in full force and effect and shall
have the right to collect Rent when due. During the period Tenant is in default,
Landlord may re-enter the Premises with or without legal process nd relet them,
or any part of them, to third parties for Tenant's account, and Tenant hereby
expressly waives any and all claims for damages by reason of such re-entry, as
well as any and all claims for damages by reason of any distress warrants or
proceeding by way of sequestration which Lessor may employ to recover said
rents. Tenants shall be liable immediately to Landlord for all costs Landlord
incurs in reletting the Premises, including, without limitation, broker's
commissions, expenses of remodeling the Premises required by the reletting, and
like costs. Reletting can be for a period of shorter or longer than the
remaining Term of this lease, and in no event shall Landlord be under any
obligation to relet the Premises. On the dates such rent is due, Tenant shall
pay to Landlord a sum equal to the Rent due under this Lease, leaps the rent
Landlord receives from any reletting. No act by Landlord allowed by this
paragraph shall terminate the Lease unless Landlord notifies Tenant in writing
that Landlord elects to terminate the Lease.
2. Landlord may terminate this Lease at any time. Upon termination,
landlord shall have the right to collect an amount equal to: all expenses
incurred by Landlord in recovering possession of the premises, including
reasonable attorney;s fees; all reasonable costs and charges for the care of the
Premises while vacant; all renovation costs incurred in connection with the
preparation of the Premises for a new tenant; and an amount by which the entire
Rent for the remainder of the Term exceeds the loss of Rent that Tenant proves
could have been reasonably avoided.
Should any of these remedies, or any portion thereof, not be
permitted by the laws of the state in which the Building is situate, then such
remedy or portion thereof shall be considered deleted and unenforceable, and the
remaining remedies or portions thereof shall be and remain in full force and
effect, and Landlord may avail itself of these as well as any other remedies or
damages allowed by law. All rights, options and remedies of Landlord stated
herein or elsewhere by law or in equity shall be deemed cumulative and not
exclusive of one another.
ARTICLE XIII. RULES AND REGULATIONS
Tenant shall observe faithfully and comply and comply strictly with the
Rules and Regulations set forth on the back side of the final page of this Lease
and made a part hereof, and such other rules nd regulations as Landlord may from
time to time reasonably adopt of the safety, care and cleanliness of the
Building or the preservation of good order therein. Landlord shall not be liable
to Tenant for violation of any such Roles and Regulations, or for the breach of
any covenant or condition in any lease by any other tenant in the Building. By
the signing of this lease, Tenant acknowledges that Tenant has read and has
agreed to comply with such Rules and Regulations.
ARTICLE XIV. RIGHT OF ACCESS
Upon reasonable notice to Tenant, landlord and its agents shall have
free access to the leased Premises during all reasonable hours for the purpose
of examining the same to ascertain if they are in good repair, to make
reasonable repairs as required hereunder provided, however, Landlord shall have
no obligation as a result of such examination to make any repairs other than
expressly set forth herein), and to exhibit the same to prospective purchasers
or tenants.
ARTICLE XV. END OF TERM
At the termination of this Lease, Tenant shall surrender the Premises
to Landlord
<PAGE> 8
in as good condition and repair as at the Commencement Date, reasonable wear and
tear excepted, and will leave the premises broom-clean. If not then in default,
Tenant shall have the right prior to said termination to remove any equipment,
furniture, trade fixtures or other personal property placed in the Premises by
Tenant, provided that Tenant promptly repairs any damage to the Premises caused
by such removal.
In the event of holding over by Tenant after the expiration of this Lease,
Tenant shall pay a sum equal to one and one-half times the sum of the monthly
installment of Rent which is in effect at the expiration of the Lease. Any
holding over with the written consent of Landlord shall thereafter constitute a
tenancy at sufferance.
ARTICLE XVI. TRANSFER OF LANDLORD'S INTEREST
In the event of any transfer or transfers of Landlord's interest in the
Premises or in the real property of which the Premises are a part, the
transferor shall be automatically relieved of any and all obligations and
liabilities on the part of Landlord accruing from and after the date of such
transfer.
ARTICLE XVII. ESTOPPEL CERTIFICATE, ATTORNMENT, AND NON-DISTURBANCE
Within ten (10) days following receipt of Landlord's written request,
Tenant shall deliver, executed in recordable form, a declaration to any person
designated by Landlord: a) ratifying this Lease; b) stating the commencement and
termination dates of the Lease; and c) certifying (i) that this Lease is in full
force and effect and has not been assigned, modified, supplemented or amended
(except by such writings as shall be stated); (ii) that all conditions under
this lease to be performed by Landlord have been satisfied (stating exceptions,
if any); (iii) that no defenses, credits or offsets against the enforcement of
this Lease by Landlord exist (or stating those claimed); (iv) the sum of advance
Rent, if any, paid by Tenant.; (v) the date to which Rent has been paid; (vi)
the amount of security deposited with Landlord, and such other information as
Landlord reasonably requires. Persons receiving such statements shall be
entitled to rely upon them.
Tenant shall, in the event of a sale or assignment of Landlord's
Interest in the Premises or the Building or this Lease, or if the Premises or
the Building comes into the hands of a mortgage, ground lessor or any other
person whether because of a mortgage foreclosure, exercise of a power of sale
under a mortgage, termination of the ground lease, or otherwise attorn to the
purchaser or such mortgagee or other person and recognize the same as Landlord
hereunder, provided such purchaser, mortgagee or other person shall warrant and
defend Tenant in the quiet enjoyment and possessio of the Premises for the
Duration of the Term, subject to the terms and conditions of this Lease. Tenant
shall execute, at Landlord's request, any reasonable attornment agreement
required by any mortgagee, ground lessor or other such person to be executed,
and containing such provisions as such mortgagee, ground lessor or other person
requires.
Except as otherwise stated herein, this Lease shall be subordinate and
inferior at all times to the lien of any mortgage and to the lien of any deed of
trust or other method of financing or refinancing now or hereafter existing
against all or a part of the real property upon which the Building is located,
and to all renewals, modifications, replacements, consolidations and extensions
thereof. Tenant shall execute and deliver all documents requested by any
mortgage or security holder to effect such subordination. If Tenant fails to
execute and delivery any such documents and take such other reasonable steps as
are necessary to effect such subordination. Landlord is hereby authorized to
execute such documents and take such other reasonable steps as are necessary to
effect such subordination on behalf of Tenant as Tenant's duly authorized
irrevocable agent and attorney-in-fact, it being agreed that such power is one
coupled with an interest. Tenant's failure to execute and deliver such documents
or instruments provided for in this Article XVII within fourteen (14) days after
the receipt by Tenant of a written request shall constitute a default under this
Lease.
<PAGE> 9
ARTICLE XVIII. NOTICES
Any notice required or permitted to be given hereunder shall be
in writing and may be given by: 1) hand delivery and shall be deemed
given on the date of delivery; 2) registered or certified mail and
shall be deemed given the third day following the date of mailing; or
3) overnight delivery and shall be deemed given the following day.
All notices to Tenant shall be addressed to Tenant at the Building of
which the Premises are a part or to Landlord at the Building with a copy to:
Director of Facilities Management
P.O. Box 740033
Louisville, KY 40201-7433
ARTICLE XIX. TERMINATION AS A RESULT OF DEATH OR DISABILITY
Provided that Tenant is a solo practitioner or a professional
corporation with one shareholder, and provided that Tenant, at the time of such
practitioner's or shareholder's death, is not in default under any term or
condition of this Lease, the legal representative of his/her estate shall have
the right to terminate the Lease. Notice of termination being given as a result
of death shall be effective only if it is in writing. Tenant and his/her estate
shall be liable for the Rent due under this Lease through the end of the
calendar month in which such notice of termination is received by landlord and
shall remain liable for the Rent until such date that all of Tenant's personal
property, equipment and fixtures are removed from the Premises, as provided in
Articles VI and XV of this lease.
The right of termination shall exist if such practitioner or
shareholder is medically determined to be permanently disabled. Tenant shall
provide Landlord with written notice thirty (30) days prior to the date of
termination, and Tenant shall be liable forth rent due under this lease
throughout such thirty (30) day period, and shall remain liable until such date
that all of Tenant's personal property, equipment and fixtures are removed from
the Premises, as provided in Articles VI and XV of this Lease.
In the event Tenant is a partnership or a corporation with multiple
shareholders, Tenant shall be released from the Lease only if such death or
disability effects a dissolution of the partnership or corporation as set forth
in the applicable partnership or corporate documents.
In the event the Lease has been executed by two or more persons, only
the deceased or disabled person shall be released from the lease.
(i) ATTORNEY - ATTORNEY'S FEES. In the event that suit is brought by
either party against the other for a breach or default under the terms of this
Lease, the prevailing party shall be entitled to reasonable attorney's fees,
which sum shall be fixed by the court.
(ii) TIME OF ESSENCE. Time is of the essence with respect to the
performance of every provision of this Lease.
(iii) HEADINGS . The article captions contained in this lease are for
convenience only and shall not be considered in the construction or
interpretation of any provision hereof.
(iv) INCORPORATION OR PRIOR AGREEMENTS; AMENDMENTS. This lease contains
all of the agreements of ;the parties hereto with respect to any manner covered
or mentioned in this Lease, and no prior agreement or understanding pertaining
to any such matter shall be effective for any purpose. No provision of this
Lease may be amended or added to except by an agreement in writing signed by the
parties hereto or their respective successors in interest.
<PAGE> 10
(v) WAIVER OF SUBROGATION. Landlord and Tenant hereby mutually waive
any and all rights of recovery against one another based upon the negligence of
either Landlord or Tenant or their agents or employees for real or personal
property loss or damage occurring to the Premises or to the Building or any part
thereof or any personal property located therein from perils which are able to
be insured against standard fire and extended coverage, vandalism and malicious
mischief and sprinkler leakage insurance contracts (commonly referred to as "All
Risk"), whether or not such insurance is actually carried.
(vii) QUIET ENJOYMENT Landlord shall warrant and defend Tenant in the
quiet enjoyment and possession of the Premises throughout the Term, subject to
the terms and conditions of the Lease.
(viii) BINDING EFFECT. This lease shall be binding upon, and inure to
the benefit of the parties hereto, their heirs, successors, assigns, executors
and administrators. However, nothing in this Article shall be deemed to amend
the provisions of Article VIII on Assignment and Subletting.
(ix) GOVERNING LAW. This Leased shall be governed by the laws of
the state where the Building is located.
ARTICLE XXI. CONDITION PRECEDENT
Notwithstanding anything contained herein to the contrary, this Lease shall not
be effective or legally binding upon the parties hereto until it has been
reviewed and approved in writing, in accordance with Landlord's approval
guidelines, by Landlord's Regional Representative and Landlord's Facilities
Management Representative or its Legal Counsel.
<PAGE> 11
IN WITNESS WHEREOF, the parties have duly executed this Lease the day
and year first above written.
WITNESS: TENANT:
MAUREEN ADDIS OPTIMUMCARE CORPORATION
- ------------- -----------------------
BY: EDWARD A. JOHNSON
-----------------
President
WITNESS: LANDLORD:
PENNE J. HILL COLUMBIA/HCA HEALTHCARE
- ------------- CORPORATION
BY: HOWARD K. PATTERSON
(Landlord's Representative)
APPROVED BY:
----------------------------------------
(Landlord's Regional Rep.)
BY:
--------------------------------------
(Landlord's Facilities Management
Rep or Landlord's Legal Counsel)
<PAGE> 12
MEDICAL OFFICE BUILDING LEASE - ADDENDUM 1
THIS ADDENDUM #1 is made this 14th day of September 1995 by and between
Columbia/HCA Healthcare Corporation, a California Corporation as Landlord and
OptimumCare Corporation, a Delaware Corporation as Tenant and amends that
Medical Office Building Lease (the lease between Landlord and Tenant dated
September 14, 1995.
1. Article X of the Lease entitled Damage or Destruction is hereby
amended by adding the following paragraph and thereof:
With respect to any damage which Landlord is obligated to repair or
elects to repair. Tenant waives the provision Section 1932 (2) and 1933 (4) of
the California Civil Code.
2. Articles XIII of the Lease entitled Remedies hereby deleted in
its entirety and the following is substituted
ARTICLE XIII Remedies
Landlord shall have the following remedies if Tenant commits a default.
These remedies are not exclusive; therefore cumulative in addition to any
remedies now or later allowed by law.
1. Landlord can continue this lease in full force and effect,and the
Lease will continue in effect as long as Landlord not terminate Tenant's right
to possession, and Landlord shall have the right to collect rent and Additional
Rent. During the period Tenant is in default, Landlord can enter the Premises
and relet them, or any part of them, to third party for tenants account. Tenant
shall be liable immediately to Landlord for all costs Landlord incurs in
reletting the Premises, including, with limitation, broker's commissions,
expenses of remodeling the Premises required by the reletting and costs.
Reletting can be for a period shorter or longer than the remaining term of this
Lease. Tenant shall pay to Landlord rent and Additional Rent under this Lease on
the dates the rent is due, unless Landlord notifies Tenant that Landlord elects
to terminate this Lease. After Tenant's default and for as long as Landlord does
not terminate Tenant's right to possession of the Premises, if Tenant obtains
Landlord's consent, Tenant shall have the right to assign or sublet its in this
Lease, but Tenant shall not be released from liability. Landlord's consent to a
proposed assignment or subletting not be unreasonably withheld.
2. Landlord can terminate Tenant's right to possession of the Premises
at any time. No act by Landlord other than notice to Tenant shall terminate this
Lease. Acts of maintenance , efforts to relet the Premises, or the appointment
receiver on Landlord's initiative to protect Landlord's interest under this
Lease shall not constitute a terminate of Tenant's right to possession. On
termination, Landlord has the right to recover from Tenant:
a. The worth, at the time of the award, of the unpaid rent and
Additional Rent that had been earned at the time of termination of the Lease.
b. The worth, at the time of the ward, of the amount by which the
unpaid rent and Additional Rent that would have been earned after the date of
termination of this Lease until the time of award exceeds the amount of the loss
of rent Tenant proves could have been reasonably avoided;
c. The worth, at the time of the award, of the amount by which the
unpaid rent and Additional Rent for the balance of the term and after the time
of the award exceeds the amount of the loss of rent that Tenant proves could
have been reasonably avoided;
d. Any other amount, and court costs, necessary to compensate
Landlord for all detriment proximately caused by Tenant's default.
"The worth, at the time of the award", as used in a) and b) of
this paragraph, is to be computed by allowing interest at a rate of
10% per annum. "The worth, at the
<PAGE> 13
time of the award", as referred to in c) of this paragraph, is to be computed by
discounting the amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus
3. Except as specifically amended herein, all terms and
conditions of the Lease shall and do remain in full force effect.
IN WITNESS WHEREOF, the parties shave duly executed this Amendment the day and
year first above written.
WITNESS: TENANT:
MAUREEN ADDIS OPTIMUMCARE CORPORATION
BY: EDWARD A. JOHNSON
----------------------
C.F.O.
WITNESS: LANDLORD:
PENNE A. HILL COLUMBIA/HCA HEALTHCARE
- ------------- CORPORATION
BY: HOWARD K. PATTERSON
---------------------------
(Landlord's Representative)
<PAGE> 14
MEDICAL OFFICE BUILDING LEASE - RULES AND REGULATIONS
1. CONDUCT
Tenant shall not conduct its practice or business, or advertise such
business, profession or activities of Tenant conducted in the Premises in a
manner which violates local, state or federal laws or regulations.
2. HALLWAYS AND STAIRWAYS
Tenant shall not obstruct or use for storage, or for any purpose other
than ingress and egress, the sidewalks, entrance, passages, courts, corridors,
vestibules, halls, elevators and stairways of the Building.
3. NUISANCES
Tenant shall not make or permit any noise, odor or act that is
objectionable to other occupants of the Building to emanate from the Premises,
and shall not create or maintain a nuisance thereon.
4. MUSICAL INSTRUMENTS, ETC.
Tenant shall not install or operate any phonograph, musical instrument,
radio receiver or similar devise in the Building in such manner as to disturb or
annoy any other tenants of the Building or the neighborhood. Tenant shall not
install any antennae, aerial wires or other equipment outside the Building
without the prior written approval of Landlord.
5. LOCKS
No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by Tenant, nor shall any changes by made in existing locks
or the mechanism thereof. Tenant must upon the termination of its tenancy
restore to Landlord all keys to the Premises and toilet rooms either furnished
to or otherwise procured by Tenant, and in the event of loss of any keys so
furnished, Tenant shall pay to Lessor the cost thereof.
6. OBSTRUCTING LIGHT, DAMAGE
The sash door, sashes window glass doors, lights and skylights that
reflect or admit light into the halls or other places of the Building shall not
be covered or obstructed. The toilets nd urinals shall not be used for any
purpose other than those for which they were intended and constructed.
8. WIRING
Electrical wiring of every kind shall be introduced and connected only
as directed by Landlord, and no boring nor cutting of wires will be allowed
except with the consent of Landlord. The location of the telephone, call boxes,
etc. shall be subject to the approval of Landlord.
9. EQUIPMENT, MOVING, FURNITURE, ETC.
Landlord shall approve the weight, size and position of all fixtures,
equipment and other property brought into the Building, and the times of moving
which must be done under the supervision of Landlord. Landlord will not be
responsible for any loss of or damage to any such equipment or property from any
cause, and all damage done in the Building by moving or maintaining any such
property shall be repaired at the expense of Tenant.
10. REQUIREMENTS OF TENANT
The requirements of Tenant will be attended to only upon application at
the office of Landlord. Employees shall not perform any work nor do anything
outside their regular duties unless under special instructions from Landlord. No
employees shall admit any person, Tenant or otherwise, to any other office
without instruction from the office of Landlord.
<PAGE> 15
11. MEDICAL AND HAZARDOUS WASTES
Tenant shall comply with all policies established from time to time by
Landlord regarding the storage and disposal of hazardous substances, wastes and
materials, and medical, special or infectious wastes.
12. ACCESS TO BUILDING
Any person entering or leaving the Building may be questioned by
Building security regarding his/her business in the Building and may be required
to sign in and out. Anyone who fails to provide a satisfactory reason for being
in the Building may be excluded.
13. VEHICLES, ANIMALS, REFUSE
Tenant shall not allow anything to be placed on the outside window
ledges of the Premises or to be thrown out of the windows of the Building. No
bicycles or other vehicle, and no animal shall be brought into the offices,
halls, corridors, elevators or any other parts of the Building by Tenant or the
agents, employees, or invites of Tenant, and Tenant shall not place or permit to
be placed any obstruction or refuse in any public part of the Building.
14. EQUIPMENT DEFECTS
Tenant shall give landlord prompt notice of any accidents to or defects
in the water pipes, gas pipes, electric lights and fixtures, heating apparatus,
or any other service equipment.
15. PARKING
Unless otherwise specified by Landlord, Tenant and its employees may
park automobiles only in spaces designated by Landlord for such purpose and
shall in no event park in spaces reserved for public parking.
<PAGE> 16
16. CONSERVATION AND SECURITY
Tenant will see that all windows and doors are securely locked, and
that all faucets and electric light switches are turned off before leaving the
Building.
17. SIGNAGE
Tenant shall not place any sign upon the Premises or the Building
without Landlord's prior written consent.
<PAGE> 17
ADDENDUM NO. 2 TO MEDICAL OFFICE BUILDING LEASE
THIS ADDENDUM NO. 2 to lease is executed concurrently with and is a
part of that certain Medical Office Building Lease, dated September 14, 1995
which is attached hereto by and between COLUMBIA HEALTHCARE CORPORATION, a
Delaware Corporation, ("Sublessor") and OPTIMUMCARE CORPORATION ("Sublessee")
for those premises located at 14100 East Francisquito Avenue, Suite 12, Baldwin
Park, CA 91706 (referred to herein as the "Sublease" more specifically
identified as Exhibit "B".
THIS ADDENDUM supersedes any and all conflicting provisions in the
Sublease. Unless indicated otherwise, all terms herein are used as defined in
the Sublease.
1. The Medical Office Building Lease attached hereto is in fact a
Sublease Agreement wherein Sublessor, identified therein as
"Lessor" is the Sublessor and Sublessee, identified therein as
"Lessee" is the Sublease, under a lease between Landlord as the
Lessees (originally Human, Inc. and subsequently merged with
Columbia Healthcare, Inc.) and Francisquito Properties, a
Partnership as the Lessor under that certain lease dated as of
August 27, 1979 a true and complete copy of which is attached
hereto as Exhibit "A" and more specifically identified as Exhibit
"B" attached hereto (the Master Lease). Sublessee hereby
subleases the Premises from Sublessor subject to all of the
terms, covenants, conditions, rules and regulations of the Master
Lease. Except as expressly modified herein, and under the
remainder of the Sublease, such terms, covenants, conditions,
rules and regulations are hereby expressly incorporated by
reference into this Sublease and apply to the parties hereto as
if Sublessor was the Lessor thereunder and Sublessee was the
Lessee thereunder; provided, however, to the extent the Master
Lease grants certain lease or purchase options or rights of first
refusal to Sublessor, those options and rights are expressly
retained solely by Sublessor and are not transferred to Sublessee
hereby.
(a) In the event the Sublessor's interest as Lessee under the
Master Lease is terminated, for any reason, this Sublease
shall terminate simultaneously therewith without any liability
of Sublessor to Sublessee.
(b) Except as expressly modified herein, Sublessee shall assume
any and all obligations of and perform any terms, covenants
and conditions applicable to Sublessor as Lessee under the
Master Lease, to the extent said obligations, terms,
covenants and conditions apply to the Premises, specifically
including, but not limited to Paragraph 24
"Indemnification", and any rules and regulations attached to
the Master Lease. Sublessee shall not commit or permit to
permit to be committed on the Premises any act or omission
which violates any term or condition of the Master Lease.
2. Notwithstanding the provisions of Article No. V of the Lease, Tenant
has physically inspected the Premise and knows the condition thereof
and will accept the condition as is and agrees that Landlord shall not
be called upon to make any improvements, alterations or additions
thereto regarding the present condition or future condition of the
Premises.
SUBLESSOR SUBLESSEE
BY: HOWARD K. PATTERSON BY: EDWARD A. JOHNSON
DATED: 9/29/95 DATED: 9/19/95
<PAGE> 18
EXHIBIT "H"
OFFICE BUILDING LEASE
THIS LEASE made and execute this 27th day of August, 1979, between
FRANCISQUITO PROPERTIES, a Partnership, (hereinafter designated the Lessor), and
HUMANA INC., a Corporation, (hereinafter designated the Lessee).
For and in consideration of the covenants hereinafter mentioned, the
Lessor leases to the Lessee and the Lessee hereby leases from the Lessor the
Premises containing an area of approximately 15,923 square feet, delineated in
the attached Schedule A, located in the Building commonly known as 14100 E.
Francisquito Avenue, the City of Baldwin Park, State of California, to be used
by Lessee for any lawful purpose, for a term of eighteen (18) years, commencing
on the date Tenant's first rental payment is due, as provided in Paragraph 1
below.
1. RENT. Lessee agrees to pay Lessor, as base rent for the leased
Premises eighty-five cents ($0.85) per square foot per month.
This rental amount shall be paid, on the first day of each
calendar month, without deduction, offset, prior notice, or
demand, in lawful money of the United States, commencing on the
first day of the month following the month in which Lessor
notifies Lessee that Lessor's work of improvement i s
substantially completed and that Lessee may have physical
possession of the Premises. The exact area leased and the dollar
amount of Base Rent payable monthly shall be determined at the
time the working plans prepared by Lessor's architect, for
Lessor's improvement of the Building and Premises, are received
nd approved by Lessee as provided by paragraph 3. The area
leased shall be determined by measuring from the centers of outer
walls to the centers of inner walls.
2. TERMINATION. This Lease shall terminate on the date, without the necessity of
notice from either party to the other party. If the Lessee shall hold over such
holding shall be construed to be a tenancy only from month-to-month, but
otherwise in accordance with the terms and conditions of this Lease. Lessee
shall continue to pay the monthly rental paid during the last month of the term
of this lease for such further time as Lessee may hold over. Nothing in this
Section shall be construed as a consent by the Lessor to the Occupancy or
possession of the Premises by the Lessee after the expiration of the term of
this Lease.
3. COMPLETION OF PREMISES
3.1 As soon as this Lease is executed by all parties, Lessor
shall order the preparation of Plans and Specifications for conversion
of the existing Building into a medical office building. All Plans
and Specifications shall be submitted to Lessee for Lessee's approval, and shall
meet the "Standards for Improvement" set forth in Schedule B to this Lease, and
such other standards as Lessee shall reasonably require.
3.2 As soon as Lessee has approved the Plans and Specifications, Lessor
shall commence and with reasonable diligence prosecute to completion all
construction of improvements, additions, and alterations required of Lessor.
Construction required at the inception of this Lease shall begin with three (3)
months after Lessee has approved the Plans and Specifications and shall be
completed and ready for use within ten (10) months after its commencement,
provided that the time for completion shall be extended for as long as lessor
shall be prevented from completing the construction by delays beyond Lessor's
control. All work shall be performed in a good and workmanlike manner, shall
<PAGE> 19
SCHEDULE A
DELINEATION OF THE PREMISES SHALL BE ATTACHED TO THE LEASE AT THE TIME THE
"PLANS AND SPECIFICATIONS" FOR CONVERSION OF THE EXISTING BUILDING INTO A
MEDICAL OFFICE BUILDING ARE PREPARED AND APPROVED PURSUANT TO SECTION THREE,
"COMPLETION OF PREMISES", OF THE LEASE.
<PAGE> 20
SCHEDULE B
STANDARDS FOR IMPROVEMENT
Lessor shall perform all tenant improvements following the same standards Lessee
follows when constructing its own medical office buildings. These standards
include, but ar not necessarily limited to:
1. Vinyl wall covering on one wall in each waiting room and each
waiting room and each consultation room, of a quality equal to or greater than
"Type 3", with a weight of fourteen to twenty-six ounces per square yard.
2. Two coats of paint on all other walls.
3. Exposed grid acoustical ceilings in all areas.
4. Carpet in all waiting rooms of a material quality equal to or
greater than "Antron 3", with a weight of twenty-two to thirty-two ounces per
square yard.
5. Vinyl asbestos tile on the floors in all areas not carpeted.
6. A minimum of eight lineal feet of base counters and wall
cabinets in each suite laboratory.
7. A minimum of one 2'x4', four tube fluorescent lighting fixture
in each exam room, and two such fixtures in each consultation room.
8. A minimum of one sink in each examination room and one
stainless steel sink in each laboratory.
9. Electrical convenience outlets as per code, with a minimum
of one outlet on each wall.
10. Each suite shall have its own thermostat for air
conditioning and heating control.
11. Party walls are to have a sound rating of at least 50 stc.
The exterior of the building shall have a pleasing and dignified architecture
acceptable to Lessee. The existing roof shall be rebuilt in accordance with
standards and specifications acceptable to Lessee. Mechanical equipment,
heating, and air conditioning shall be replaced and provide a level of service
acceptable to Lessee.
<PAGE> 21
substantially comply with the plans and specifications submitted to Lessee, and
shall comply with all applicable governmental permits, laws, ordinances, and
regulations.
3.3 As soon as Lessor completes the Premises, Lessor shall notify
Lessee that Lessor's work of improvement is substantially completed, and that
Lessee may have physical possession of the Premises. Unless waived by Lessee,
Lessor's notice shall be accompanied by a certification by the duly licensed
architect in charge of the work that the improvements have been substantially
completed in accordance with the Plans and Specifications and all Authorized
Changes.
3.4 For the purposes of this Section 3, "Plans and Specification and
all Authorized Changes" shall mean only drawings, specifications, and other
contract documents which pertain to the work and have been approved in writing
by Lessee, plus change orders which have been approved in writing by Lessor and
Lessee.
4. ALTERATIONS OF PREMISES BY LESSEE
4.1 After Lessee has taken possession of the Premises, Lessee shall
have the right to and shall be solely responsible for making all of the
nonstructural interior improvements and alterations commonly recognized and
tenant improvements beyond those provided by Lessor as described in Schedule B
required by Lessee or its subtenants.
4.2 Lessee shall hold the Lessor harmless and free from any lien or
claim, and all other liability, claims and demands arising out of any work done
or material supplied to the demised Premises at the instance of the Lessee, and
from all actions, suits and costs of suit by any person to enforce any lien or
claim of lien, liability, claims or demands, together with the costs of suit and
attorney's fees incurred by Lessor in connection therewith. All such
alterations, repairs, additions or improvement except trade fixtures, counters,
appliances, shelving and moveable partitions placed therein by the Lessee for
the requirement of business, shall, unless otherwise provided by written
agreement, become the property of the Lessor and shall remain upon and be
surrendered with the Premises upon the expiration of this Lease or any sooner
determination thereof.
4.3 At the expiration of the term of this Lease, all trade fixtures,
counters, appliance, shelving and moveable partitions installed by Lessee may be
removed as Lessee's personal property, at Lessee's sole expense; provided,
however, Lessee will pay for any damages caused to the demised Premises by the
removal of said items, so that, after the removal of said items, the demised
Premises will be in the same condition as at the time prior to the said
installations, if any, reasonable wear and tear excepted.
<PAGE> 22
5. TAXES AND ASSESSMENTS
5.1 Lessee shall be responsible for and shall pay to Lessor its pro
rata share of all real property taxes, assessments (whether special or general),
fees, city business license, or surcharges including without limitation any tax
or levy for parking privileges or in anyway relating to environmental
protection, or any other tax, levy, assessment or other charge of any nature
whatsoever imposed by any governmental authority having jurisdiction over the
leased Premises and levied upon or payable in connection with the leased
Premise, the operation thereof, or business conducted therein, including any
tax, fee or assessment levied or assessed in lieu of such real property taxes
(all of which are herein referred to as "taxes and assessments"). IN the event
said taxes and/or assessments are not paid, Lessor may, in addition to all other
remedies permitted in this Lease, add an additional charge to the penalty and
interest that would have been due if Lessee had failed to make timely payments
directly to the tax collectors in orders to reimburse Lessor for its
administrative costs incurred as a result of Lessee's failure to pay. Lessor
shall give Lessee notice, within five (5) days after Lessor receives its notice,
of all taxes and assessments, the amounts due, and the date payment is due. If
Lessor fails to give Lessees notice within five (5) days after receiving its
notice, Lessor may not charge Lessees any penalty or interest.
5.2 Lessee shall pay, before delinquency, all property taxes and
assessments on the furniture, fixtures, equipment, merchandise and other
property of Lessees at any time situated or installed in the leased Premises,
and, in addition, on improvements in the leased Premises made or installed by
Lessee subsequent to the commencement date. If at any time during the term of
this Lease any of the foregoing are assessed as a part of the real property of
which the leased premises are a part, Lessee shall pay to Lessor upon demand the
amount of such additional taxes as may be levied against said real property by
reason thereof. For the purpose of determining said amount, figures supplied by
the County Assessor as to the amount so assessed shall be conclusive.
6. UTILITIES. Lessee agrees to pay before delinquency its pro rata share of all
charges for gas, heat, sewer, power, electricity, telephone, storm drain, water
service and water meter charges and all other utility charges including any
hookup or connection fees or charges which may accrue with respect to the leased
Premises during the term of this Lease whether the same be charged or assessed
at flat rates, measured by separate meters or prorated by the utility company or
Lessor. Lessor shall in no event be liable to Lessee for any interruption in the
service of any such utilities to the leased Premises, howsoever such
interruption may be caused; and this Lease shall and effect despite any such
interruptions.
7. REPAIRS AND MAINTENANCE
7.1 Lessee agrees that its acceptance of the Premises, as evidenced by
Lessee's entry into possession of them, shall constitute unqualified proof that
the Premises are, as of the commencement date of the term, in a tenantable and
good condition.
7.2 Lessor shall maintain the Building's roof, walls, gutters,
downspouts, and parking lots and shall bill Lessee for its pro rate share of
Lessor's actual cost for the work performed. Lessor shall perform all cleaning
and gardening required to keep the exterior and parking areas of the Building in
a neat, presentable condition, and shall bill Lessees for its pro rata share of
Lessor's actual cost for the worked performed. Lessor shall perform all
janitorial work required by the Building, and shall bill Lessee for its pro rata
share of Lessor's actual cost of the work performed.
7.3 Lessor shall perform all maintenance and repair work required in
the demised Premises, including, but not limited to, maintenance and repair of
the plumbing, electrical, heating, ventilation, and air conditioning systems,
and the fixtures, pipes, conduits, sewers, floors, flooring, interior walls,
lighting, plate glass and interior ceilings, and shall bill Lessee for its pro
rata share of Lessor's cost of the work performed. All such work required in the
portions of the Building not leased by Lessee shall be performed by Lessor at
Lessor's sole cost and expense. All
<PAGE> 23
such work required outside of the Building, or which applies to the Building as
a whole, shall be performed by Lesser, who shall bill Lessee for its pro rata
share of Lessor's actual cost for the work performed.
<PAGE> 24
8. NOTICES. Any notice which either party is required to or desires to give to
the other shall be in writing, and except for a notice regarding Lessee's
nonpayment shall be deemed given at the time it is placed int he United States
Mail, postage prepaid, certified or registered mail, return receipt requested,
addressed to the party to whom it is to be given as follows;
LESSEE: Executive Director
Baldwin Park Community Hospital
14148 Francisquito Avenue
Baldwin Park, CA 91706
COPY TO: Director of Real Estate
Human, Inc.
P.O. Box 1438
Louisville, KY 40201
COPY TO: Human, Inc.
2049 Century Park East, Ste. 2290
Los Angeles, CA 90067
LESSOR: Francisquito Properties
14100 Francisquito Avenue
Baldwin Park, CA 91706
All notices regarding nonpayment of rent required by Article 24 of this Lease
shall be delivered to Lessee in the same manner and at the same address as all
other notices, except that they shall not be deemed given until actually
received by Lessee.
9. INSURANCE
9.1 At all times during the term of this lease, Lessor shall maintain
in full force and effect the insurance policies listed in this Section, and
shall submit to Lessee certificates of insurance as evidence such insurance has
been obtained. Lessee shall reimburse Lessor for its pro rata share of Lessor's
actual cost of such insurance.
9.2 General public liability insurance against claims for bodily
injury, death or property damage occurring in or upon the common area with
limits of coverage to be mutually agreed upon between the parties, but not less
than FIVE HUNDRED THOUSAND ($500,000) DOLLARS for death or injury to one person,
ONE MILLION ($1,000,000) DOLLARS for death or injury to more than one person in
a common accident or occurrence, and FIFTY THOUSAND ($50,000) DOLLARS for damage
or injury to property.
9.3 Fire, extended coverage, vandalism, malicious mischief, loss of
rental income, and sprinkler leakage insurance, in such form and with such
covered perils as the parties shall jointly determine to be
appropriate and necessary. All fire insurance shall be for the full replacement
value of the Premises. All loss of rental income insurance shall be in an amount
necessary to enable Lessor to service its outstanding secured debts.
9.4 Comprehensive General Liability Insurance insuring all Premises
Operations, Independent Contractors, Products and Completed Operations and
Contractual Liability arising from the operation, possession, maintenance or use
of the leased Premises or ways immediately adjacent thereto with Limits of
Liability to be agreed upon between the parties but not less than FIVE HUNDRED
THOUSAND ($500,000) DOLLARS each person and ONE MILLION ($1,000,000) DOLLARS
Each Occurrence for Bodily Injury and Personal Injury and FIFTY THOUSAND
($50,000) DOLLARS Each Occurrence for Property Damage.
9.5 The proceeds of all insurance described in this Section 9 shall
belong to and be the sole property of Lessor, and Lessee hereby assigns to
Lessor or its nominee all of Lessee's right, title and interest therein. Lessor
shall hold all proceeds paid
<PAGE> 25
to it in trust, and shall use them solely for the repair or replacement of the
damaged portions of the Premises, to the extent Lessor is required to repair
such damage.
9.6 In the event Lessor fails, at any time during the term of this
Lease, to obtain the insurance required by this Lease, or to provide
satisfactory evidence that it has obtained such insurance, Lessee shall have the
right, at its option, to procure such insurance and to bill Lessor for its pro
rata share of Lessee's actual cost of such insurance. Lessor also agrees that
all insurance policies obtained by it shall contain an endorsement, if permitted
by the carrier, showing Lessee as an additional insured under the policy, and an
endorsement that the insurance cannot be cancelled without giving Lessee fifteen
(15) days' notice.
9.7 Lessor and Lessee agree that all insurance policies shall contain a
clause permitting the insured to waive the insurance carrier's right of
subrogation against the other arising out of the occurrence of any casualty
insured against. Lessee and Lessor hereby waive any such right of subrogation
against the other party hereto, subject to approval of the Insurance Carrier.
9.8 Lessee shall also obtain, at its sole cost and expense and for its
sole benefit, Fire, Extended Coverage, Vandalism, and Malicious Mischief
insurance in an amount equal to the full Actual Cash Value of all furniture,
fixtures, stock and equipment installed by Lessee in the Premises.
10. NET LEASE. This is a net Lease. Lessee shall pay its pro rata
share of all costs of operations and maintenance, including but not
limited to: Real and personal property taxes and assessments; water
and sewer charges, insurance premiums; utilities; janitorial services;
air conditioning and heating; supplies; maintenance costs and upkeep
of all parking and common areas. Lessee shall have the right to audit Lessor's
costs of operations and maintenance, as described in this paragraph and in
paragraphs five (5), six (6), seven (7) and nine (9).
11. RIGHTS OF LESSOR. Lessor reserves the following rights: (A) To
change the name of the Building, after obtaining Lessee's approval,
which shall not be unreasonably withheld; (B) To have pass keys to
the Premises; (C) To enter the Premises at any time for inspections,
repairs, alterations, or additions to the Premises or the Building, to
exhibit the Premises to others, to affix and display "For Rent" signs,
and for any other purpose related to the safety, protection,
preservation, or improvement of the Building or Premises; (d) To enter
upon the Premises for the purpose of positing and maintaining such
notices as may be necessary to protect Lessor against any mechanic's,
materialmen's or other liens, or to post any notices that may be
proper and necessary.
12. DESTRUCTION - FIRE OR OTHER CAUSE. If the Building shall be totally
destroyed, this Lease shall immediately terminate. If the Building or demised
Premises are damaged by fire, earthquake, or any other cause, without fault or
neglect of Lessee so that the leased Premises become untenantable, then if such
leased Premises cannot be made tenantable within one hundred and twenty (120)
working days from the date of such damage, this Lease may be terminated by
either party. In any case where the leased Premises are rendered untenantable by
fire, earthquake or other cause, without the fault or neglect of Lessee, then
the Lessee shall not be bound to pay rent for that period during which said
Premises remain untenantable. If the Premises are rendered partially
untenantable, the monthly payments shall be adjusted in the proportion that the
untenantable portion of the demised Premises bears to the whole thereof. As to
any partial destruction of the premises, Lessee hereby waives its rights against
Lessor under Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of
the California Civil Code.
13. EMINENT DOMAIN. Should Lessor at any tine during the term of the lease be
deprived of all or any part of the Building in which the demised Premises are
situated, or any part if the land on which it is situated, by condemnation or
eminent domain proceedings, the parties mutually agree that this Lease shall
terminate on the date when Lessor is actually deprived of possession of said
land or building, or some part
<PAGE> 26
thereof, and thereupon the parties hereto shall be released from all further
obligations hereunder, and Lessor shall thereupon repay to Lessee any rental
paid by Lessee and unearned at the date of such termination. Lessee shall not be
entitled to any compensation, allowance, claim or offset of any kind against the
Lessor, as damages, or otherwise, by reason of such condemnation or eminent
domain proceedings or by reason of being deprived of the demised Premises or the
termination of this Lease and said Lessee does hereby waive, renounce and
quitclaim to Lessor any right in and to any award, judgement, payment or
compensation which shall or may be made or given because of the taking of said
Premises, or any portion thereof, by virtue of any such condemnation or eminent
domain proceedings, whether received in any such action or in settlement or
compromise thereof by said Lessor, except to the extent such sums are directly
attributable to improvements or alterations made to the Premises by Lessee in
accordance with this Lease, are directly allocated to Lessee to reimburse Lessee
for the value of the leasehold taken by the condemnation action, or which are
allocated to Lessee as reasonable relocations costs and moving expenses.
14. SUCCESSORS. The words "Lessor" and "Lessee" as used herein,
include, apply to and bind and benefit the heirs, executors,
administrators, assigns and successors of the Lessor and Lessee,
subject to the aforementioned restrictions on assignment of this Lease
on the part of the Lessee.
15. CO-LESSEES. All persons comprising Lessees are to be held and hereby agree
to jointly and severally be responsible for the payment of rent and the faithful
fulfillment of all the covenants, terms and conditions of this Lease.
16. LIABILITY OF LESSOR. Lessor shall not be liable to Lessee or to any other
person or persons whomsoever, for any damages to the leased Premises or for or
on account of any loss, damage, theft, or injury to any person or property in or
about said Premises or the approaches or entrances thereto or on the streets,
sidewalks, or corridors thereto, caused or occasioned by said Premises being out
of repair, by defects in said building or said Premises or equipment contained
therein, or by the failure of Lessee to keep the demised Premises in good order
and repair or by fire, gas, water, electricity or by the breaking, overflowing
or leaking of roofs, pipes, or walls of said building, or for any other damage
or injury caused by any acts or events whatsoever beyond the control of Lessor.
17. ASSIGNMENT. Lessee may freely assign this Lease or any interest therein
whether voluntarily, by operation of law, or otherwise, provided, as a condition
of any such assignment, Lessee shall not be relieved from liability for payment
of all forms of rental and other charges herein provided or from the obligation
to keep and be bound by the terms, conditions, and covenants of this Lease.
However, if Lessee obtains the written approval of Lessor's lender to the
assignment, then Lessee shall be relieved of its obligations under this Lease.
In connection with any such assignment, Lessee or the assignee of Lessee shall
pay to Lessor a fee of TWO HUNDRED FIFTY ($250) DOLLARS to defray Lessor's costs
in effecting such transfer. The acceptance of rent from any other person shall
not be deemed to be a waiver of any of the provisions of this Lease, or a
consent of the assignment of the leased Premises. Consent to any assignment
shall not be deemed a consent to any future assignment.
18. GENDER. In this Lease, whenever the context so requires, the
masculine gender herein used shall include the feminine or neuter and
the singular number shall include the plural.
19. SUBORDINATION. Lessee expressly agrees that at the sole option of the
Lessor, the Lease may be subject and subordinate or paramount to all mortgages,
Deeds of Trust or any other encumbrances now placed or which may be placed in
the future upon the said real property, of which the demised Premises are a
part, by the owners thereof, and Lessee further agrees that whenever requested
to do so by Lessor, Lessee will execute, sign, acknowledge and deliver any
documents required to effectuate such subordination or superiority. Should
Lessee fail to execute, acknowledge and deliver such instruments within fifteen
(15) days after written notice to do so, Lessee hereby appoints the lessor and
Lessor's successors and assigns Lessee's attorney in fact
<PAGE> 27
irrevocably to execute, acknowledge and deliver any such instrument or
instruments for and on behalf of Lessee.
20. DELAY IN OCCUPANCY. Lessee agrees that in the event Lessor is unable to
deliver to Lessee possession of the Premises at the commencement of the term,
Lessor shall not be liable for any damage caused thereby, nor shall this Lease
be void or voidable if possession is given to Lessee within ninety (90) days
after the date set for completion of the Premises as provided by Section 3 of
this Lease. In no event shall Lessee be liable for rent until such time as
Lessor offers to deliver possession of the premises to Lessee. However, the term
hereof shall be extended by such delay. If Lessee, with Lessor's consent takes
possession of all or part of the Premises prior to the commencement of this
Lease, then as to the part of the Premises occupied, Lessee shall be subject to
all the covenants and conditions hereof, and shall pay rent for the part of the
Premises occupied at the rental rate set forth in Paragraph 1 of this Lease.
<PAGE> 28
21. CONDITIONS AND COVENANTS. It is further expressly understood and agreed that
each and all of the provisions of this Lease are conditions precedent to be
faithfully and fully performed and observed by said Lessee to entitle Lessee to
continue in possession of said Premises hereunder; that said conditions are also
covenants on the part of Lessee; that time of performance of each is of the
essence of this Agreement.
22. ATTORNEY'S FEES. If any action is commenced for the breach of any covenants
or conditions of the Lease or for any rent or for possession of said Premises,
the prevailing party in said action shall recover a reasonable attorney's fee in
such action or actions, which fee shall be fixed by the court as a part of the
cost thereof. If Lessor becomes a party to any action, as a result of the
failure of Lessee to act, in order to protect its rights, if Lessor is the
prevailing party, Lessee will pay Lessor a reasonable attorney's fee in such
action or actions.
23. WAIVER. No modification, alteration or waiver of any term, covenant or
condition of this Lease shall be valid unless in writing subscribed by the
Lessor or by an officer of Lessor, authorized in writing. No waiver of a breach
of any covenant or condition shall be construed to be a waiver of any succeeding
breach. No act, delay or omission done, suffered or permitted by the Lessor
shall be deemed to exhaust or impair any right, remedy or power of the Lessor
hereunder. It is further understood and agreed that this agreement contains the
entire contract between the parties hereto and that no representative or officer
of the Lessor has any power to change, modify or make any other terms or
representations whatsoever than those herein set forth.
24. INDEMNIFICATION. Each party agrees to indemnify and hold the other harmless
from any and all liability, cost, expense, or cause of action, plus any and all
attorney's fees, the other may suffer or incur as a result of a party's
violation of any of the terms of this Lease or any use, misuse, or neglect of
the Premises and appurtenances. Lessee also agrees that it shall not use the
Premises in any manner which will increase the present interest rate of premium
for insurance on the Building, or cause the cancellation of any insurance policy
relating to the Building.
25. DEFAULT.
25.1 In the event of default at any time by Lessee in the payment of
the rent herein provided for, or any part thereof, or in the performance of any
other terms, covenants or conditions to be kept or performed by Lessee, or if
Lessee shall abandon or vacate the Premises without the consent of Lessor, then
after fourteen (14) days' written notice of any default in payment of rent and
after thirty (30) days' written notice of any default other than payment of rent
(if such default is not cured within such period), the Lessor, at its option,
shall have the right to deem this Lease to be in default and Lessor shall have
the right, at its option, to enter upon the Premises or any part thereof, either
with or without process of law, and to expel, remove or put out Lessee or any
other person or persons who may be thereon, together with all personal property
found therein; and Lessor may either terminate this Lease or it may from time to
time without terminating this Lease, re-let said Premises or any part thereof
for such term or terms (which may be for a term extending beyond the term of
this Lease) and at such rental or rentals and upon such other terms and
conditions as Lessor in its sole discretion may deem advisable, with the right
to repair, renovate, remodel, redecorate, alter, and change said Premises; and
at the option of Lessor, rents received by Lessor from such re-letting shall be
applied first to the payment of any indebtedness other than rent due hereunder
from Lessee to Lessor; second, to the payment of any costs and expenses of such
re-letting, including but not limited to attorney's fees, advertising fees and
brokerage fees and to the payment of any repairs, renovations, remodeling,
redecoration, alterations and changes in the Premises; third, to the payment of
rent due and payable hereunder; and if after so applying said rentals there is
any deficiency int he rent to be paid by Lessee under this Lease, Lessee shall
pay any such deficiency to Lessor and such deficiency shall be calculated and
collected by Lessor monthly. In no event shall Lessee be entitled to any excess
rental over an above said obligation of Lessee. No such reentry or taking
possession of said Premises shall be construed as an election on Lessor's part
to terminate this Lease unless a written notice of such intention is given to
Lessee. Notwithstanding any such re- letting without termination, Lessor may at
any time thereafter elect to terminate this
<PAGE> 29
Lease unless a written notice of such intention is given to Lessee.
Notwithstanding any such re-letting without termination, Lessor may at any tine
thereafter to terminate this Lease for such previous breach and default. Should
Lessor at any time terminate this Lease by reason of any default, in addition to
any other remedy it may have, it may recover from Lessee the worth at the time
of such termination of the excess of the amount of rent and charges equivalent
to rent reserved in this Lease for the balance of the term hereof over the then
reasonable rental value of the demised Premises for the same period. All of the
remedies herein provided shall be cumulative to all other rights or remedies
herein given to Lessor or given to Lessor by law. A waiver by Lessor of any
default by Lessee in the performance of any of the covenants, terms or
conditions hereof shall not be considered or treated as a waiver of any
subsequent or other default as to the same or any other matter.
25.2 If Lessor utilizes the services of an attorney at law for the
purpose of collecting any rent due and unpaid by Lessee after fourteen (14)
days' written notice to Lessee of such nonpayment of rent, Lessee agrees to pay
to Lessor a reasonable attorney's fee for such legal services regardless of the
fact that no legal action may be commenced or filed by Lessor. Any unpaid
installment of rent shall bear interest at the maximum legal rate of interest
from the due date of such installment until the payment thereof. Any brokerage
fee payable by Lessee to Lessor, whether Lessor has retained the services of a
broker or has otherwise determine should be payable to Lessor, shall not exceed
the prevailing average rates for Brokers of similar properties.
26. BANKRUPTCY. It is further agreed that if at any time during the term of this
Lease any judicial action or proceeding in any Court against Lessee or any of
Lessee's heirs or assigns, a receiver or other officer or agent be appointed to
take charge of said Premises or the business conducted therein, and shall be in
possession thereof, or if this Lease or the interest or estate created thereby
vests in any other person or persons by operation of law or otherwise, except by
consent, as aforesaid, of Lessor, or in the event of any action taken by or
against Lessee under the Federal Bankruptcy Laws or other applicable statutes of
the United States, or any State, or if Lessee shall make an assignment for the
benefit of creditors, or if an attachment or execution is levied upon the
Lessee's property or interest under this Lease which is not satisfied or
released within thirty (30) days thereafter, the occurrence of any such event
shall be deemed to be a breach of this Lease by Lessee, and Lessor shall have
all the rights herein provided in the event of any such breach, including the
right at Lessor's option to terminate this Lease immediately and enter said
Premises and remove all persons and property therefrom.
27. COMPLIANCE. Lessee and Lessor agree to comply with all laws and ordinances
and all regulations and requirements of Municipal, State and Federal
governments, boards and authorities relative to the Lessee's occupancy of the
said demised premises or to the business to be conducted therein. Lessee will
keep the said Premises in a clean and orderly condition according to all laws
and ordinances and the direction of all public offices, and as far as reasonably
possible will keep all immoral and disreputable persons out of the demised
Premises to the end that the reputation of the demised Premises and the Building
as a first class office building may be preserved.
28. PARAGRAPH HEADINGS. Paragraph headings do not constitute part of
the text of this Lease, but are inserted in this Lease for Paragraph
identification only.
29. LESSEE'S STATEMENT. Lessee agrees during the term of this Lease and any
extension or renewal of the term hereof, within ten (10) days after request
therefore by Lessor, from time to time, to execute, acknowledge and deliver a
certificate or certificates in recordable form to Lessor or to any mortgage,
trust deed beneficiary or proposed mortgage, trust deed beneficiary or
purchaser, certifying that Lessee has accepted its Premises, the commencement
date of the Lease term, that it is in occupancy under this Lease, that the Lease
is in full fore and effect and that there are no defenses or offsets thereto and
no rental offsets or claims by Lessee. If this Lease is assigned by Lessor to
any mortgage or trust deed beneficiary or purchaser, within ten (10) days of
written request by Lessor, Lessee shall acknowledge in writing receipt
<PAGE> 30
of such assignment to the assignee upon receipt of a copy of notice thereof.
30. ATTORNMENT. In the event of an exercise of power of sale or the foreclosure
under any deed of trust or mortgage placed by Lessor against all or any portion
of the demised Premises, or upon the building of which the demised Premises are
a part, or in which the demised Premises are located, Lessee shall upon demand
attorn to the purchaser upon any such foreclosure or sale and recognize such
purchaser as the Lessor under this Lease.
31. SUBLEASE. Lessee shall have the right to sublease all or part of
the premises at its sole discretion.
32. CONDITION PRECEDENT. Notwithstanding anything to the contrary contained in
this Lease, this Lease shall not be effective or legally binding upon the
parties hereto until it has been reviewed and approved in writing by Lessee's
Regional Vice president, or designee, and Lessee's legal counsel. Once signed
and approved, it shall be legally binding upon al parties.
IN WITNESS WHEREOF, the parties have duly executed this Lease the day and year
first above written.
WITNESS: FRANCISQUITO PROPERTIES
BY: CON-AMER REALTY (PARTNER)
NABEL, PRESIDENT
WITNESS: HUMANA, INC., A CORPORATION
BY: BILL WARD
--------------------------------
APPROVED BY: HAROLD L. RIMER
--------------------------------
Regional Vice President
JACK E. SOROKIN
--------------------------------
Hospital Legal Counsel
<PAGE> 1
EXHIBIT 10.73
INPATIENT PSYCHIATRIC MANAGEMENT AGREEMENT
THIS AGREEMENT entered into as of the 6th day of October, 1995 by and
between San Fernando Community Hospital, Inc. dba Mission Community Hospital, a
California non-profit corporation, herein referred to as "Facility", and
OptimumCare Corporation, a Delaware corporation, herein referred to as
"Management Company".
RECITALS
WHEREAS, Facility owns and operates a hospital known as Mission
Community Hospital located at 700 Chatsworth Drive, San Fernando, California;
and
WHEREAS, Management Company is engaged in the business of
providing management services in the operation of psychiatric
programs; and
WHEREAS, the parties desire to cooperate in providing a program in
which physicians provide a consistent level of high quality treatment of
psychiatric patients in Facility, so that these patients may return to a more
satisfactory level of functioning in the community; and
WHEREAS, the parties desire to establish an adult inpatient short-term
crisis intervention psychiatric program at Facility ("Program").
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained
herein, it is mutually agreed as follows:
1. Appointment. Facility does hereby designate and appoint
Management Company to manage and operate an adult inpatient
short-term crisis intervention psychiatric treatment program
at its San Fernando facility subject to Section 23 hereof;
and Management Company does hereby accept such appointment
and agree to provide services in accordance with the terms
of this Agreement. For the purposes of this Agreement, an
adult short-term crisis intervention program shall be
defined as a unit which receives patients eighteen years of
age or older whose length of stay is less than or equal to
eight (8) days.
2. Term; Termination Without Cause.
(a) This Agreement is for a term of three (3) years commencing
October 23, 1995 or such later date as Facility has complied
with the Section 5(b) hereof in terms of execution of such
documents as are required to enable Management Company to
perfect its security interest of a first priority in the
Program Receivables and the Program Payments Account and (ii)
establishing a Program Payments Account ("Effective Date").
Facility shall have the option of renewing this Agreement on
<PAGE> 2
the same terms and conditions for additional one (1) year
periods upon giving written notice to Management Company not
less than ninety (90) days prior to the expiration of the
existing term of this Agreement.
(b) Notwithstanding any other term of this Agreement, this
Agreement may be terminated by either party without cause
effective at any time from and after the second anniversary of
the term of this Agreement upon ninety (90 days prior written
notice to the other party.
(c) Notwithstanding any other term of this Agreement, this
Agreement may be terminated by Facility without cause
effective at any time prior to the second anniversary
of the term of this Agreement upon ninety (90) days
prior written notice to Management Company; provided
however, in the event Facility terminates this
Agreement effective prior to the second anniversary of
the term of this Agreement, and as a condition to the
termination of this Agreement, Facility will pay to the
Management Company as liquidated damages and as the
Management company's exclusive remedy for the early
termination of this Agreement by Facility, an amount
equal to (i) Twenty Thousand dollars ($20,000)
multiplied by (ii) the number of months remaining
between the termination date and the second anniversary
of the term of this Agreement. The parties agree that
in litigation or arbitration resulting form the early
termination of this Agreement by Facility, the amount
of loss which would be incurred by Management Company
would incur in the event of the early termination of
this Agreement by Facility and have established the
foregoing estimate of liquidated damages.
(d) Facility shall have the option to terminate this
Agreement on sixty (60) days prior written notice to
Management Company in the event either (i) the ratio of
patients in the Unit who are covered by Medi-Cal as
compared to the patients in the Unit who are covered by
Medicare is less than three (3) Medi-Cal to one (1)
Medicare; or (ii) less than ninety percent (90%) of the
patients in the Unit are covered by Medicare or Medi-
Cal. Notwithstanding the foregoing, neither Management
company nor Facility shall discriminate against any
patient, including but not limited to any Medicare or
Medi-Cal beneficiary, in any manner.
3. Responsibilities of Facility. Facility shall, to the
extent permitted by law, provide or perform the
following services with respect to the Program:
(a) Provide for the Program a duly licensed psychiatric
unit of fifty-six (56) beds in a contiguous wing
("Unit") which shall be available to the Program for
its patients. The Facility shall provide the Program
with such office space as Facility and Management
Company agree are necessary for the Program. Such
meeting space for counseling, administration and group
activities also shall be made available to the Program
as Facility and Management Company agree are necessary.
Management Company acknowledges the space currently
being provided for office, counseling, administration
and group activities, or comparable space is acceptable
to Management Company. Facility shall furnish the
Program with
<PAGE> 3
inpatient support services, including but not limited to,
housekeeping, dietary, linen, laundry, pharmacy, radiology,
clinical laboratory and Facility's array of diagnostic
facilities, and shall furnish Facility personnel to facilitate
the foregoing services to the extent such facilities, services
and personnel exist from time-to-time and are available to
patients of Facility outside of the Unit.
(b) It is agreed that medical treatment shall be provided only by
physicians duly licensed to practice medicine in the State of
California and who are members of Facility's medical staff.
(c) Prepare all billings and perform all collections for
Program services; provided, however, Facility shall
not bill for professional services provided by
psychiatrists or psychologists. Facility shall be
solely responsible for preparing and submitting its
annual cost report. Charges to the patients and/or
responsible third-party payers for Program services
shall be determined by Facility.
(d) Provide to all Management Company and Facility
personnel working in the Program all necessary pre-
employment and periodic health screening examinations
to the extent such examinations are with the scope of
those required for other Facility personnel.
Management Company shall pay for the examinations at
the rate set forth in Exhibit A, attached hereto and
incorporated with this reference. Management Company
also shall assure that its personnel participate in
Facility's orientation for new employees of Facility.
The provision of such examinations and the
participation in such orientation shall not be deemed
to affect the status of any employee as being an
employee of Facility rather than Management Company.
(e) Maintain professional and public liability insurance
coverage for all beds of the Program under the same terms and
conditions and for the same coverage limits as for other beds
in Facility. Said insurance shall cover claims for negligence
of Facility or its employees. Written certificate of such
coverage shall be provided to Management Company together with
a provision that such coverage may not be cancelled without at
least thirty (30) days notice to Management Company. Facility
shall inform Management Company of any material changes in the
status of its coverage. Facility will have the right to
provide the foregoing coverage through the self-insurance
programs of its parent, sister, or related entities.
(f) Facility shall be free to make any changes it desires to the
Facility or the Unit, or to relocate the Program so long as
such changes do not materially and adversely interfere with
the ability of Management company or facility to carry out
their duties hereunder.
4. Responsibilities of Management Company. Management Company
shall, to the extent permitted by law, provide or perform
the following services with respect to the Program:
(a) Develop, supervise, manage and operate an adult short-
term crisis intervention
<PAGE> 4
inpatient psychiatric treatment program. It is understood and
agreed that Management Company does not provide patient
psychiatric care (including diagnosis, development of
individual treatment plans, determining changes in the care
plan and discharge planning), which care is provided by the
licensed physicians who are members in good standing of
Facility's medical staff with psychiatric privileges.
(b) Provide, at Management Company's expense, a Management
Company employee to serve as Program Director who shall
be assigned full-time exclusively to the Program to
manage the Program, subject to clinical directions
given by the attending physicians and the Program
Medical Director. The Program Director shall have day-
to-day management authority over the Program to
implement policies and procedures which have been
approved by the Facility. The Facility shall have the
right to approve the individual selected to be Program
Director prior to his commencement of Directorship
duties at Facility. The Facility shall have the right
to approve the individual selected to be Program
Director prior to his commencement of Directorship
duties at Facility, to require his replacement on
thirty (30) days prior written notice if at any time
Facility deems him unacceptable to continue as said
Director, and to approve any subsequent Program
Director which approval shall not be unreasonably
withheld. Notwithstanding the foregoing, Facility
shall have the right to require the Program Director's
immediate removal if the Program Director poses a threat to
patient care or the Facility's operations.
(c) Provide, at Management company's expense, social
workers, psychologists (consulting),
occupational/activities therapists, nursing staff and
intake admissions coordinators as required in the
staffing pattern attached hereto as Exhibit B. All
personnel employed or contracted for by Management
company to render services in the Program shall be
approved by Facility prior to the date said individuals
commence providing services to the Program, and a job
description and a resume of their qualifications and
work experience shall be provide dot Facility's Chief
Executive Officer or her designee. Persons employed or
contracted for by Management Company shall in no event
be considered as the employees, agents, or servants of
Facility, and Management Company shall have the full
responsibility for wages, vacation pay, sick leave,
retirement benefits, social security, worker's
compensation, disability insurance,e unemployment
insurance, severance pay, and employee benefits of any
kind for all personnel which it may employ or contract
for hereunder. Any Management company employee or
contractor who Facility determines in its sole
discretion is incompatible with the goals of Facility
and/or its staff will be removed by Management company
upon thirty (30) days written notice. A Management
Company employee or contractor shall be immediately
removed if Facility in its sole discretion determines
that individual's presence is a threat to patient care
or the Facility's operations. Professionals provided
by Management Company pursuant to this Paragraph shall
apply for and maintain appropriate allied health
professional privileges on Facility's medical staff if
so required by the medical staff bylaws of Facility.
<PAGE> 5
(d) Obtain liability insurance coverage, which includes
professional and general liability insurance coverage,
for the negligent acts or omissions of Management
Company and its employees, agents and the contractors
it retains to provide services to the Program, in an
amount of Five Million Dollars ($5,000,000) single
limit coverage with California licensed insurer(s)
reasonably acceptable to Facility. Written certificate
of such coverage shall be provided to Facility together
with an endorsement from the insurer providing that
such coverage may not be cancelled or coverage
decreased without at least thirty (30) days prior
written notice to Facility. Such policy shall be
occurrence coverage and shall name Facility as an
additional insured.
(e) Develop clinical treatment programs that are reflective
of current recognized standards for adult short-term
crisis intervention programs.
(f) Submit monthly status reports for the Program to Facility's
Administration that will review progress made during the
previous month and outline planned activities for the coming
month.
(g) Initiate a comprehensive public information, education,
marketing and referral development effort, which shall
be reviewed periodically in coordination with other
Facility public relations plans. Costs of printing,
air time and other out-of-pocket expenses will be borne
by Management Company. Facility shall have the right
to approve or disapprove all marketing programs, which
approval shall not be unreasonably delayed or withheld.
Management Company shall not be permitted to use
Facility's name, logo, or likeness without Facility's
prior written approval of such usage.
(h) Develop operations policies and procedures for the program.
Any and all Program policies, procedures, programs and
activities are subject to the review and approval by
Facility's Administration and its medical staff.
(i) Assist Facility in working with governmental agencies,
third-party payers and others to enable Facility to secure
necessary licenses, permits, approvals and reimbursements for
the Program.
(j) Apply for and obtain initial TAR's and such other
authorizations for admission and services on behalf of
Facility as are required by the government or any other
third-party payor prior to the patient's admission.
Utilize its best efforts to assure that additional
TAR's and approvals for continued hospitalization
and/or services are timely obtained to assure prompt
payment. Facility shall assist Management company with
respect to the foregoing. All admissions shall be in
compliance with Facility's admission criteria and shall
be subject to Facility's ultimate authority and
control.
(k) Select a Program Medical Director who shall be an
employee or independent contractor of Management
Company and compensated by Management Company.
<PAGE> 6
The Program Medical Director shall be at the Facility and
within the Program's Unit for a minimum of sixteen (16) hours
per week to direct the clinical management of the Program and
shall be available at all other times to respond to problems
within the Program which require his/her direction. The
Program Medical Director shall be a physician duly licensed by
the State of California and a member of Facility's medical
staff with appropriate medical staff privileges. Facility
shall have the right to approve the individual selected to be
Program Medical Director prior to his/her commencement of
Directorship duties at Facility, which approval shall not be
unreasonably withheld, to require his/her removal on thirty
(30) days prior written notice, and to approve nay replacement
Program Medical Director which approval shall not be
unreasonably withheld. Notwithstanding the foregoing, Facility
shall have the right to require the Program Medical Director's
immediate removal if the Program Medical Director poses a
threat to patient care or the Facility's operations.
(l) Obtain and maintain workers compensation insurance for
its employees as required by California law. Facility
will be added as an additional insured on such policy.
5. Compensation to Management Company.
(a) Management Fee. Facility shall pay Management company
a management fee of One Hundred Eighty-Five Dollars
($185) per patient day for each Program patient day
during the first three (3) months of the term of this
Agreement for which Facility is substantially
reimbursed by Medicare, or Medi-Cal or other payer.
Facility shall pay Management Company a management fee
of one Hundred Ninety-Six Dollars an Fifty Cents
($196.50) per patient day for each Program patient day
during the next twenty-one (21) months of the term of
this Agreement for which Facility is substantially
reimbursed by Medicare, Medi-Cal, or other payer. The
management fee shall become One Hundred Ninety Five
Dollars ($195) per patient day for each Program patient
day during the balance of the term of this Agreement
for which Facility is substantially reimbursed by
Medicare, Medi-Cal or other payer. Payment shall be
made within seven (7) business days of the date on
which Facility receives reimbursement.
(b) Security Interest. Facility hereby irrevocably grants
to Management Company a first priority lien and
security interest in (i) all accounts receivable
resulting from services rendered by the Program other
than Disproportionate Share monies received from either
the Medicare or Medi-Cal Programs ("Program
Receivables") and (ii) the Program Payments Account (as
hereinafter defined), together with any and all present
and future additions, replacements and substitutions of
or to the Program Receivables and the Program Payments
Account, together with all advance payments and any and
all rights thereunder and proceeds therefrom (together,
the "Collateral"), to secure the payment of all sums
due by Facility to Management Company under this Agreement.
Facility shall separately bill Medicare, Medi-Cal, third party
payors and patients for all patient services rendered to
patients by the Program. Facility shall establish a separate
bank
<PAGE> 7
account into which payments of the Program Receivables shall
be deposited (the "Program Payments Account"), Facility shall
not deposit any other funds in the Program Payments Account.
It is the intention of the parties that all payments received
by Facility into the Program Payments Account and the failure
of Facility to deposit these accounts upon Facility's receipt
of these amounts shall be a material breach of this Agreement.
In the event of any default, Management Company may exercise
any and all of the rights and remedies of a secured party
under the California Uniform Commercial Code or under any
other applicable law or in equity. For purposes of the
security interest grated hereby, the following shall be deemed
an event of default:
(i) Facility shall default in the payment of any sums due
to Management Company under this Agreement and said
default shall continue for a period of five (5)
business days following notice to Facility; or
(ii) Facility shall breach Section 5(d) of this
Agreement.
Facility agrees to execute a Form UCC-1 Financing Statement
and any additional agreements, financing statements or other
documents reasonably required by Management company to perfect
the security interest granted hereby or to otherwise
effectuate the purpose hereof. Upon termination of this
Agreement and payment in full of all sums due to Management
company hereunder, Management company shall promptly execute
and deliver such documents as may reasonably be requested by
Facility to terminate the security interest.
Prior to the effectiveness of this Agreement, Facility shall
have established the Program Payments Account and shall have
made such filings with the California Secretary of State as
are necessary to provide Management with a security interest
of first priority in the Program Receivables and the Program
Payments Account.
(c) Each party represents and warrants on behalf of itself that
the aggregate benefit exchanged pursuant to this Agreement has
been determined in advance through a process of arms-length
negotiations that were intended to compensate Management
Company at fair market value for the services it provides.
(d) The parties agree, if necessary and appropriate, to alter
their billing arrangements in order to avoid reimbursement
disallowances for Hospital pursuant to the Tax Equity and
Fiscal Responsibility Act of 1982 or 42 C.F.R., Part 405, as
it may be revised from time-to-time.
(e) Acknowledging that a substantial portion of the
Program's services will be reimbursed under the
Medicare and Medi-Cal programs, the parties agree (i)
to take all actions required by such programs and to
generate and maintain all necessary records as may be
required by such programs and (ii) to renegotiate the
<PAGE> 8
terms of this Agreement in good faith in the event of
changes in the Medicare and Medi-Cal programs, the
parties agree (i) to take all actions required by such
programs and to generate and maintain all necessary
records as may be required by such programs and (ii) to
renegotiate the terms of this Agreement in good faith
in the event of changes in the Medicare or Medi-Cal
laws, regulations and/or payment programs which
substantially and adversely affect either party,
including but not limited to changes in Facility's
reimbursement for Program Services and/or
disproportionate share payments. In the event the
parties are unable to renegotiate this Agreement to
eliminate said adverse effect and preserve the parties'
intended benefits hereunder, either party shall have
the right to terminate this Agreement upon the
effective date of such change(s).
(f) On a monthly basis, Facility shall provide Management
Company a summary, in such form and with such content
as is reasonably acceptable to Facility and Management
Company, of the total billings for Program services for
the prior month. Said summary shall be for the sole
purpose and shall contain only such information as is
required to enable Management company to enforce its
security interest in the event enforcement thereof
becomes necessary.
(g) Neither Management company, the Program Medical
Director nor any other physicians or psychologists
associates, employed by or under contract with
Management Company, shall bill or cause to be billed,
the Medicare Program, any Medicare beneficiary, a
Medicare (Part B) carrier or any other third party
payor or patient for any portion of the administrative,
supervisory or other provider services in violation of
42 CFR, Section 405.550. Management Company shall
indemnify and hold harmless Facility from any breach of
this subparagraph 5(v).
6. Covenant Not to Compete. During the term of this Agreement,
except for the programs specifically described on Exhibit C
attached hereto and incorporated with this reference,
neither Management Company nor any of its shareholders,
officers or directors, or any entity controlled by or under
control with or subject to common management with one of the
foregoing, shall directly or indirectly perform or arrange
to perform in any capacity the type of service called for
hereunder by Management Company for any person, entity or
sole proprietorship which has an adult inpatient psychiatric
program. This covenant not to compete shall be effective
within a ten (10 ) mile radius of Facility. Facility shall
have the right to enforce the foregoing through legal or
equitable action, including but not limited to, injunctive
relief, such injunctive relief or equitable relief to be
available without the necessity of posting a bond, cash or
otherwise. In addition to the foregoing, Facility shall
have the right at its option to immediately terminate this
Agreement and to seek damages for such breach or to continue
this Agreement and to recover damages for the breach.
7. Confidential Information
(a) For purposes of this Agreement, the term "Confidential
Information" shall include
<PAGE> 9
the following:
(i) All documents and other materials, including
but not limited to manuals, programs,
handbooks, production books, and audio or
visual recordings which describe the
Program's methods, techniques or procedures
(excluding written materials distributed to
Program patients or as promotion for the
Program and excluding materials which have
become publicly known or known otherwise
than as a consequence of a breach of this
Agreement);
(ii) All methods, techniques and procedures
utilized in providing psychiatric treatment
services to patients in the Program at the
Facility that is not commonly or generally
known within the industry;
(iii) All trademarks, trade names and service
marks of Management Company; and
(iv) This agreement and the terms thereof.
(b) Facility recognizes the proprietary nature of the
foregoing Confidential Information provided to Facility
by Management Company. Such materials remain the
property of Management Company. Facility agrees and
acknowledges that Confidential Information will be
disclosed to it in confidence and with the understanding that
it constitutes valuable business information developed by
Management Company at great expenditure of time, effort and
money. Facility agrees that it shall use reasonable efforts to
the end that Facility's employees and agents do not, without
the express prior written consent of Management Company, use
said Confidential Information for any purpose other than the
performance of this Agreement.
(c) Facility further agrees to use reasonable efforts to
the end that its employees and agents keep as
confidential all Confidential information and not
disclose or reveal such information to any third party
without the express prior written consent of Management
Company unless disclosure thereof is required by law
or authorized by Management Company or to implement the
terms of this Agreement. Upon termination of this
Agreement by either party for any reason whatsoever,
Facility shall forthwith return to Management Company
all material constituting or containing Confidential
Information, and Facility and its affiliates will not
thereafter for any purpose, use, appropriate, or
reproduce such information or disclose such information
to any third party.
(d) The reciprocal of all provisions of this Paragraph 7
shall bear upon and bind Management Company with
respect to Confidential Information of Facility. In
addition to the items referenced as Confidential
Information as defined in this Section 7, Facility's
Confidential Information shall be defined to include
Facility's
<PAGE> 10
financial, marketing, quality assurance and patient
satisfaction monitoring system.
8. Compliance with Facility Regulations. Management Company shall conduct
its activities and operations in compliance with all rules and
regulations of Facility and its medical staff and in compliance with
all applicable federal, state and local laws and regulations, and with
the standards and requirements established by the Joint Commission on
Accreditation of Healthcare Organizations and other relevant
professional organizations pertinent to the operation of the program.
Management company's employees, contractors and representatives shall
be required to comply with and observe all of the foregoing.
9. Limitations on the Transfer of Personnel. The parties hereto agree that
for so long as this Agreement remains in effect and for a period of one
(1) year thereafter, neither party nor any of its subsidiaries,
affiliates or agents will, without the prior written approval of the
other party, hire any employee or former employee of the other party
who has worked at Facility during the preceding twelve (12) months.
10. Relationship. Management Company and Facility are not and
shall not be considered as joint venturers or partners, and
nothing herein shall be construed to authorize either party
to act as agent for the other. There shall be no liability
on the part of Management company to any person for any
debts, liabilities or obligations incurred by or on behalf
of Facility and the business conducted by Facility, and
there shall be no liability on the part of Facility to any
person for any debt, liabilities or obligations incurred by
or on behalf of Management company and the business
conducted by Management Company. The parties understand
that control and direction over all functions of the
Facility shall be in Facility, and that control and
direction over the clinical and medical policies of Facility
shall be in Facility's Board of directors and the medical
staff of Facility. Management Company shall identify
Facility as the owner of the Facility. All parties agree to
disclose in their respective dealings that they are separate
entities.
11. Force Majeure. Either party shall be excused for failures
and delays in performance of its respective obligations
under this Agreement due to any cause beyond the control and
without the fault of such party, including without
limitation, any act of God, war, riot or insurrection, law
or regulation, strike, flood, fire, explosion or inability
due to any of the aforementioned causes to obtain necessary
labor, materials or facilities. This provision shall not,
however, release such party from using its best efforts to
avoid or remove such cause and such party shall continue
performance hereunder with the utmost dispatch whenever such
causes are removed. Upon claiming any such excuse or delay
for non-performance, such party shall give prompt written
notice thereof to the other party, provided that failure to
give such notice shall not in any way limit the operation of
this provision.
12. Termination for Cause. In addition to and without in any
way limiting or impairing its other rights and remedies at
law or in equity, either party shall have the right to
declare this Agreement terminated upon the happening of any
of the following:
(a) Violation by the other party of any provision of this
Agreement, provided such
<PAGE> 11
violation continues for a period of thirty (30) days after
receipt of written notice by the other party specifying such
violation with particularity. The delay or failure of a party
to transmit written notice shall not constitute a waiver by
said party of any default hereunder or of any other or further
default under this Agreement by the other party.
(b) Notwithstanding any other term of this Agreement, in
the event a party ever fails to meet a condition of
this Agreement which breach poses ;a threat to patient
care, the operation, licensure or reimbursement of the
Facility or the Program, the party not in breach may
require the other immediately to take such remedial
steps as are necessary to alleviate said threat to
patient care or operations. If said threat is not
immediately remedied, the other party shall have the
right to immediately terminate this Agreement or take
such remedial steps as such other party deems necessary
to cure the threat.
(c) In the event a party fails to maintain its insurance coverage
required under this Agreement, the other party shall have the
right to terminate this Agreement upon said lapse or
termination of coverage.
(d) Loss of Facility's license, permit and/or other required
authorizations to operate the Program and/or its participation
in the Medicare or Medi-Cal programs.
(e) In the event of a breach of Section 25, Facility shall have
the right to immediately terminate this Agreement.
(f) Exhibit D which is attached hereto and incorporate with
this reference are the proformas for the Program
("Proformas"). Facility shall have the right to
terminate this Agreement on ten (10) days prior written
notice if during any three (3) out of six (6)
consecutive months during the term of this Agreement
(i) the average monthly census for said month as set
forth in the Proformas; (ii) the number of denied days
during the month is more than one hundred ten percent
(110%) of the projected denied days as set forth in the
Proformas; and/or (iii) the monthly average length of
stay for Program inpatients exceeds nine (9) days.
Facility shall notify Management Company within fifteen
(15) days following a month wherein one (1) or more of
the circumstances described herein as (i), (ii) or
(iii) has occurred if during any two (2) out of six (6)
consecutive months one (1) or more of the circumstances
described herein as (i), (ii) or (iii) hereof has
occurred.
(g) Facility experiences a substantial increase in the number
and/or severity of claims alleging liability, loss and/or
damages, including but not limited to, personal injury,
malpractice and/or workers compensation claims.
(h) Substantial uninsured damage to the Facility's premises
which service the Program or the fixtures, equipment
and/or improvements therein.
<PAGE> 12
(i) Management company becomes the subject to an investigation,
action, threatened action or lawsuit which alleges conduct in
violation of any Federal or State law or regulation pertaining
to the delivery of or reimbursement for healthcare services.
13. Indemnification. Management Company shall indemnify and hold Facility
harmless from and against any claims, liabilities, damages, costs and
expenses, including reasonable attorney's fees incurred by Facility in
defending, compromising or satisfying actions brought against Facility
arising out of or in any manner related to, directly or indirectly, the
negligence or willful misconduct of Management Company, its employees,
contractors or agents in connection with this Agreement. Facility shall
indemnify and hold Management Company harmless from and against any
claims, liabilities, damages, costs and expenses, including reasonable
attorney's fees, incurred by Management Company in defending
compromising or satisfying actions brought against Management Company
arising out of or inn any manner related to, directly or indirectly,
the negligence or willful misconduct of Facility, its employees or
agents in connection with this Agreement.
14. Notices. Any notice by any party to the other shall be in writing and
shall be deemed to have been duly given if delivered personally, by
receipted delivery or by certified mail addressed, with respect to
Management Company, to President, 30011 Ivy Glenn Drive, Suite 219,
Laguna Niguel, CA 92677, with respect to Facility, to Chief Executive
Officer, 14850 Roscoe Boulevard, Panorama City, CA 91402, or to such
other address notice of which the parties have advised each other in
writing.
15. Governing Law. This Agreement shall be deemed to have been made and
entered into and shall be interpreted in accordance with the laws of
the State of California.
16. Waiver. A waiver by either party of a breach or failure to perform
shall not constitute a waiver of any subsequent breach or failure.
17. Severability. If any part of this Agreement should be held to be void
or unenforceable, such part shall be treated as severable, leaving
valid the remainder of this Agreement so long as the remainder of the
Agreement maintains each party's reasonably anticipated benefits of the
bargain.
18. Arbitration. Any dispute or controversy arising under, out of, in
connection with, or in relation to this Agreement, and any amendment
hereof, or the breach hereof, shall be determined and settled by
arbitration in accordance with the rules and procedures of the NHLA ADR
Alternative Dispute Resolution Service. Any award rendered therein
shall be final and binding upon each and all of the parties, and
judgement may be entered thereon in any court having jurisdiction
thereof.
19. Access to Records. In accordance with 42 U.S.C. 139x(v) (1)
(1) and 42 C.F.r. Part 420, Subpart D, Section 420.300 et
seq., Management Company shall, until the expiration of four
(4) years after the furnishing of Medicare reimbursable
services pursuant to this Agreement, upon proper written
request, allow the Comptroller General of the United
<PAGE> 13
States, the Secretary of Health and Human Services, and their duly
authorized representatives access to this Agreement and Management
Company books, documents and records necessary to certify the nature
and extent of costs of Medicare reimbursable services provided under
this Agreement.
In accordance with the above-referenced statute and regulations, if
services provided by Management Company under this Agreement are
carried out by means of a subcontract with any organization related to
Management Company, and such related organization provides services the
cost or value of which is Ten Thousand Dollars ($10,000) or more over a
twelve (12) month period, then the subcontract between Management
Company and the related organization shall contain a clause comparable
to the clause specified in the preceding Paragraph.
20. Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute only one
Agreement.
21. Entire Agreement. This Agreement contains the entire
Agreement of the parties with respect to the subject matter
hereof and may not be cancelled or modified except in
writing signed by both parties. All continuing covenants,
duties and obligations herein contained shall survive the
expiration or termination of this Agreement. All prior
agreements are superseded by this Agreement and are of no
force or effect. The terms of this Agreement, and only this
Agreement, shall establish all of the rights and obligations
of the parties during the term of this Agreement, unless
amended by the parties pursuant to a writing executed on a
date subsequent to the date of execution of this Agreement
by both parties hereto.
22. Binding Effect. Management Company shall not assign this
Agreement without the prior written consent of Facility,
except to any subsidiary or affiliate of Management Company
and except, in the event of an acquisition or merger of
Management Company or acquisition of substantially all of
Management Company's assets, to the acquiring or surviving
company; provided, however, the acquiring or surviving
company shall be in compliance with all of the terms and
conditions of this Agreement, including but not limited to,
paragraph 25 hereof. This Agreement is binding upon the
parties hereto and upon all successors and assigns in
interest.
23. Board Authority. Notwithstanding any term or provision of
this Agreement, the Program and all activities, protocols,
policies and procedures within the Facility are subject to
the ultimate authority of Facility.
24. Sale or Lease of the Facility. If the Facility is sold or leased,
regardless of the identity of the purchaser/lessees, the Facility will
have the right to assign the Agreement, delegate all rights and duties
thereunder to the purchaser/lessee, and Facility shall have no further
responsibilities or liabilities pursuant to the Agreement.
25. Representation and Warranty. Management Company represents
and warrants as follows:
<PAGE> 14
(a) that if any physician or physicians has a financial
relationship with or in Management Company, such
relationship at all times shall be in compliance with
the exceptions to OBRA 1993, Social Security Act (42
U.S.C. Section 1395nn) as amended by Section 13562, and
California Business and Professions Code Sections
650.01 et seq., and all amendments and regulations
thereunder (individually and collectively, "Anti-
Referral Legislation") such that Facility shall not be
prohibited from presenting any claims for services
pursuant to said Anti-Referral Legislation;
(b) that Management Company, its agents, employees and
representatives shall not offer any remuneration to any person
or entity to direct, refer or induce referrals or services to
Facility;
(c) that the compensation in management Company's personal
services agreement with the Program Medical Director shall not
be determined in a manner that takes into account the volume
or value of any referrals or business generated to or within
Facility.
In the event of Management Company's breach of any or all of the
foregoing representations, Facility may terminate this Agreement under
terms of Paragraph 12 an Management Company shall indemnify and hold
Facility harmless pursuant to Section 13 hereof to the fullest extent
permitted under law.
26. Attorney's Fees. In any arbitration or other action or proceeding
arising out of this Agreement, the prevailing party shall be entitled
to reasonable attorney's fees and costs.
27. Consents and Approvals. Whenever the consent to or approval of any act
is required to be given or withheld under the terms of this Agreement,
the party required to give or withhold such consent or approval shall
not unreasonably withhold same, and a decision with regard thereto
shall be made and communicated to the other party at the earliest
practicable time, and in any event within a reasonable time.
28. Facility's Licensure and Status. It is understood and
agreed that Facility is a licensed general acute care
facility which is owned by a non-profit corporation which
has tax-exempt financing and participates in the Medicare
and Medi-Cal programs. Hospital is bound by the federal and
state laws, regulations and interpretations thereof
pertaining to the foregoing. The parties agree that this
Agreement shall be interpreted and construed to be in
compliance with all of the foregoing as they may be adopted
or interpreted from time-to-time as they may effect
Facility, its licensure, nonprofit status, tax-exempt
financing and participation in and reimbursement by the
Medicare and Medi-Cal programs. In the event this Agreement
or one or more of the terms or provisions is interpreted by
facility's counsel to pose a risk of violation of any of the
foregoing laws, regulations or interpretations thereof,
Facility's bond covenants, the conditions or restrictions
pertinent to providers who participate in the Medicare and
Medi-Cal programs, or to adversely affect Facility's
reimbursement thereunder, the parties agree (i) to continue
to perform their respective obligations hereunder except for
the offending provisions, and (ii) to negotiate diligently
and in good faith to reach an agreement in good faith
without
<PAGE> 15
the offending provisions. IN the event the parties are unable to
perform without performing the offending provisions, or are unable to
reach an agreement without the offending provisions, then this
Agreement shall terminate immediately upon notice served by either
party in accordance with Paragraph 14 hereof.
29. No Third Party Benefit. This Agreement is not intended by the parties
to create, and it should not be construed to create, any rights for any
persons or entities not a party to this Agreement.
30. No Authority. Not withstanding any term or condition of this Agreement,
neither Management Company, the Program Director or the Program Medical
Director, or any of their agents, employees or representative shall
incur or have authority to incur any financial obligation on behalf of
Facility without the prior written approval of Facility.
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first hereinabove written:
OPTIMUMCARE CORPORATION
Dated: By: EDWARD A. JOHNSON
-------------------
President
SAN FERNANDO COMMUNITY HOSPITAL
dba MISSION COMMUNITY HOSPITAL
Dated: By: CATHY FICKES
-------------------
Acting Chief Executive
Officer
<PAGE> 17
EXHIBIT A
SECTION 3(d)
Pre-employment and Health Screening Examination Charges
Fifty Dollars ($50) for each Pre-Employment Screening and for each periodic
health screening.
<PAGE> 18
EXHIBIT B
SECTION 4(c)
Staffing Pattern
<PAGE> 19
EXHIBIT C
SECTION 6
Exceptions to Covenant Not to Compete
1. Management Agreement for inpatient psychiatric program at
Pacifica Hospital of the Valley.
2. Management Agreement for outpatient partial psychiatric
program at Sherman Oaks Hospital.
3. Management Agreement for outpatient psychiatric program in
Glendale for Pacifica Hospital of the Valley.
<PAGE> 20
EXHIBIT D
SECTION 12(f)
Program Proformas
PROJECTED AVERAGE MONTHLY CENSUS
<TABLE>
<S> <C> <C>
December, 1995 20
January, 1996 24
February, 1996 28
March, 1996 32
April, 1996 34
May, 1996 38
All months thereafter 40 or more
</TABLE>
PROJECTED PERCENT OF DENIED DAYS
12.73 Percent
<PAGE> 1
EXHIBIT 10.74
MONTH-TO-MONTH RENTAL AGREEMENT
MARINA DEL REY/CALIFORNIA, OCTOBER 10, 1995 SOLOMON, SALTSMAN & JAMESON,
landlord and OPTIMUMCARE CORPORATION, Tenant, agree as follows:
1. PROPERTY: Landlord rents to tenant and Tenant rents from
Landlord the real property and improvements described as:
428 CULVER BLVD.
PLAYA DEL REY, CA 90293 ("Premises).
The following personal property is included: N/A
2. RENT: TERM: Tenant agrees to pay rent monthly at the rate
of $1900.00 in advance on the 1st day of each calendar
month. The term begins on November 1, 1995 ("Commencement
Date"), as a
B. Lease ending October 31, 1996 with a total rent of
$1900.00 monthly installments
3. LATE CHARGE: Tenant acknowledges that late payment of rent
may cause Landlord to incur costs and expenses, the exact
amount of which are extremely difficult and impractical to
determine. These costs may include, but ar not limited to,
processing and accounting expenses, late charges that may
be imposed on Landlord by terms of any loan secured by the
Premises, costs for additional attempts to collect rent, and
preparation of notices. Therefore, if any installment of
rent due from Tenant is not received by Landlord within 7
calendar days after date due, Tenant shall pay to Landlord
an additional sum of $95 as a late charge which shall be
deemed additional rent. Landlord and Tenant agree that this
late charge represents a fair and reasonable estimate of the
costs that Landlord may incur by reason of Tenant's late
payments.
4. PAYMENT: The rent shall be paid to: SOLOMON, SALTSMAN AND
JAMESON, 426 Culver Blvd., Playa Del Rey, CA 90293, or at
any other location specified by Landlord.
5. SECURITY DEPOSIT: $1900.00 shall be given by Tenant as a security
deposit. Landlord may use all or any portion of the security deposit
reasonably necessary to (a) cure Tenant' default in payment of rent,
late charges or other sums due; (b) repair damages caused by Tenant, or
by a guest or licensee of Tenant; (c) clean the Premises, if necessary,
upon termination of tenancy; and (d) replace or return personal
property or appurtenances, excluding ordinary wear and tear. If used
during the tenancy, Tenant agrees to reinstate the total security
deposit within five days after written notice delivered to Tenant in
person or by mail. No later than three weeks after Tenant vacates the
Premises, Landlord shall furnish to Tenant an itemized written
statement of the basis for and the amount of, any security received and
the disposition of the security, and shall return any remaining portion
of the security to Tenant.
<PAGE> 2
6. UTILITIES: Tenant agrees to pay for all utilities and services based
upon occupancy of the Premises, and the following charges:
N/A
7. CONDITION: Tenant has examined the Premises, all furniture,
furnishings and appliances, if any, and fixtures, including
smoke detector(s). Tenant acknowledges that those items are
clean and in operative condition, with the following
exceptions:
N/A
8. OCCUPANTS: The Premises are for the sole use as a personal
residence by the following named persons only: OPTIMUMCARE
AND EDWARD JOHNSON
9. PETS: No animal or pet shall be kept on or about the
Premises without Landlord's prior written consent, except:
N/A
10. LIQUID-FILLED FURNITURE: Tenant shall not use or have liquid-filled
furniture on the Premises unless Tenant first gives proof of compliance
to Landlord's reasonable satisfaction, including increased security
deposit, under Civil Code Section 1940.5.
11. RULES/REGULATIONS: Tenant agrees to comply with all covenants,
conditions and restrictions, bylaws, rules, regulations and decisions
of owners association or Landlord, which are at any time posted on the
Premises or delivered to Tenant.
Landlord and Tenant acknowledge receipt of copy of this page, which
constitutes Page 1 of 2 Pages
Landlord's Initials ( ) Tenant's Initials (EAJ)
12. MAINTENANCE/DAMAGE/INSURANCE: Tenant shall properly use, operate, and
safeguard the premises, all furniture, furnishings, and appliance, and
all electrical gas, and plumbing fixtures, and shall keep them as clean
and sanitary as their condition permits. Tenant shall immediately
notify Landlord of any damage, and shall pay for all repairs or
replacements caused by Tenant or the guests or invites of Tenant,
excluding ordinary wear and tear. Tenant's personal property is not
insured by Landlord.
13. ALTERATIONS: Tenant shall not paint, wallpaper, add or change locks, or
make any other alterations to the Premises without Landlord's prior
written consent. Tenant acknowledges receipt of:
2 keys to premises
2 keys to common areas
14. ENTRY: Tenant shall make the Premises available to
Landlord, authorized agent, or representative, for the
purpose of entering to make necessary or agreed repairs,
decorations, alterations, or improvements, or to supply
necessary or agreed services, or
<PAGE> 3
to show the Premises to prospective or actual purchasers, tenants,
mortgages, lenders, appraisers, or contractors. Landlord and Tenant
agree that four hours notice (oral or written) shall be reasonable and
sufficient notice. In an emergency, Landlord, authorized agent, or
representative may enter the Premises, at any time, without prior
notice.
15. ASSIGNMENT/SUBLETTING: Tenant shall not let or sublet all or any part
of the Premises or assign this Agreement or any interest in it. Any
assignment, letting or subletting that violates this paragraph shall be
void.
16. POSSESSION: If Tenant abandons or vacates the Premises, Landlord may
terminate this Agreement and regain lawful possession. If Landlord is
unable to deliver possession of the Premises on the Commencement Date,
the Commencement Date shall be extended to the date on which possession
is made available to tenant.
17. HOLDING OVER: Any holding over after the term of this Agreement
expires, with Landlord's consent, shall create a month-to-month
tenancy, which may be terminated by either party, by giving written
notice to the other, at least 30 days prior to the intended termination
date. Rent shall be at a rate equal to the rent for the immediately
preceding month payable in advance. All other terms and conditions of
this Agreement shall remain in full force and effect.
18. ATTORNEY'S FEES: In any action or proceeding arising out of this
Agreement, the prevailing party shall be entitled to reasonable
attorney's fees and costs.
19. WAIVER: The waiver of any breach shall not be construed as a continuing
waiver of the same or any subsequent breach.
20. NOTICE: Notices to Landlord or Manager may be served at 426 CULVER
BLVD., PLAYA DEL REY. Notices to Tenant may be served at 428 CULVER
BLVD., PLAYA DEL REY.
<PAGE> 4
21. TENANCY STATEMENT: Tenant shall execute and deliver a tenancy statement
(estoppel certificate) submitted by Landlord, within 24 hours after
receipt, acknowledging that this Agreement is unmodified and in full
force, or in full force as modified, and stating the modifications.
22. JOINT AND INDIVIDUAL OBLIGATIONS: If there is more than one Tenant,
each one shall be individually and completely responsible for the
performance of all obligations of Tenant under this Agreement, jointly
with every other Tenant, and individually.
23. SUPPLEMENTs/OTHER TERMS AND CONDITIONS: PARKING CONSISTS OF GARAGE AND
2 OUTSIDE SPACES CLOSEST TO GARAGE
24. TENANT REPRESENTATIONS; CREDIT: Tenant warrants that all statements in
Tenant's rental application are accurate. Tenant authorizes Landlord
and Broker(s) to obtain Tenant's credit report at the time of the
application and periodically during the tenancy in connection with
approval, modification or enforcement of this Agreement. Landlord may
cancel this Agreement (a) before occupancy begins, upon disapproval of
the credit report(s) or (b) at any time, discovery that information in
Tenant's application is false.
25. ENTIRE CONTRACT: Time is of the essence. All prior agreements between
Landlord and Tenant are incorporated in this Agreement which
constitutes the entire contract. It is intended as a final expression
of the parties' agreement with respect to the general subject matter
covered, and may not be contradicted by evidence of any prior agreement
or contemporaneous oral agreement. The parties further intend that this
Agreement constitutes the complete and exclusive statement of its terms
and that no extrinsic evidence whatsoever may be introduced in any
judicial or other proceeding, if any, involving this Agreement.
26. AGENCY CONFIRMATION: The following agency relationship(s) are hereby
confirmed for this transaction:
Listing Agent: THE PRUDENTIAL JON DOUGLAS COMPANY is the
agent of both the Tenant and landlord.
27. ACKNOWLEDGEMENT: The undersigned have read the foregoing prior to
execution and acknowledge receipt of a copy.
Landlord: Date: 10/11/95
-----------------------------
Tenant: EDWARD JOHNSON Date: 10/11/95
--------------
<PAGE> 1
EXHIBIT 10.75
UNANIMOUS WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
OPTIMUMCARE CORPORATION
A Delaware Corporation
- --------------------------------------------------------------------------------
The undersigned, being all of the directors of OptimumCare Corporation, a
Delaware corporation (the "Corporation"), hereby adopt the following resolutions
by their written consent thereto, effective as of December 29, 1995, hereby
waiving all notice of and the holding of any meeting of the board of directors
to act upon such resolutions.
WHEREAS, the Company has previously converted $97,000 of temporary advances of
Mr. Johnson to loans.
WHEREAS, temporary advances of approximately $58,000 exist for 1995.
NOW, THEREFORE, BE IT RESOLVED, that the Company hereby convert a total of
$155,000 of temporary advances into a one year loan with interest deferred for
one year to be computed at the applicable federal statutory rate.
RESOLVED FURTHER, that the officers of the Company be and are hereby authorized,
empowered and directed to do or cause to be done any and all such further acts
and things and to execute any and all such further documents as they may deem
necessary or advisable in order to carry into effect the purposes and intent of
the foregoing resolutions.
RESOLVED, FURTHER, that this transaction be neither void nor voidable, the
interests of Mr. Johnson being known to this Board of Directors and the
transactions being fair and reasonable to the Corporation.
IN WITNESS WHEREOF, the undersigned have executed this Unanimous Written Consent
effective as of December 29, 1995.
EDWARD A. JOHNSON
- -------------------------------
MICHAEL S. CALLISON
- -------------------------------
GARY L. DREHER
- -------------------------------
JOHN E. JENETT
- -------------------------------
<PAGE> 2
[GRAPH]
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement Form S-8
No. 33-78340 dated April 29, 1994 pertaining to the OptimumCare Corporation 1994
Stock Option Plan of our report dated March 18, 1996, with respect to the
financial statements and schedule of OptimumCare Corporation included in the
Annual Report (Form 10-K) for the year ended December 31, 1995
/s/ Ernst & Young LLP
------------------------------
Ernst & Young LLP
Orange County, California
March 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000820474
<NAME> OPTIMUMCARE CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 170,932
<SECURITIES> 0
<RECEIVABLES> 1,536,693
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0
0
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</TABLE>