<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1996
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Commission File Number 0-17401
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OPTIMUMCARE CORPORATION
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(Exact name of registrant 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, Ste 219
Laguna Niguel, CA 92677
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(714) 495-1100
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if
changed since last report)
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 periods
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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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Number of Shares Outstanding
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<S> <C>
Common Stock, $.001 par value 4,963,509
</TABLE>
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INDEX
OPTIMUMCARE CORPORATION
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
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Page
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<S> <C>
Item 1. Financial Statements (Unaudited)
Balance Sheets as of March 31, 1996 and 3
December 31, 1995
Statements of Income for the Three Months 4
Ended March 31, 1996 and 1995
Statements of Cash Flows for the Three 5
Months Ended March 31, 1996 and 1995
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
PART II OTHER INFORMATION 10
SIGNATURE 12
</TABLE>
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OPTIMUMCARE CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) MARCH 31 DECEMBER 31
1996 1995
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<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH $ 102,005 $ 170,932
ACCOUNTS RECEIVABLE, NET 1,775,975 1,536,693
PREPAID EXPENSES 28,194 31,487
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TOTAL CURRENT ASSETS 1,906,174 1,739,112
NOTES RECEIVABLE FROM OFFICER 155,000 155,000
FURNITURE AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION OF $37,336 AT MARCH 31, 1996
AND $34,382 AT DECEMBER 31, 1995 22,501 25,617
DEFERRED ACQUISITION COSTS 176,062 138,753
TRADENAME, LESS ACCUMULATED AMORTIZATION
OF $1,070 AT MARCH 31, 1995 AND $1,020 AT
DECEMBER 31, 1995 1,004 1,055
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TOTAL ASSETS $ 2,260,741 $ 2,059,537
=========== ===========
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 194,461 $ 192,743
ACCRUED LIABILITIES 278,905 188,788
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TOTAL CURRENT LIABILITIES 473,367 381,531
NOTE PAYABLE TO BANK 240,334 166,000
STOCKHOLDERS' EQUITY
COMMON STOCK, $.001 PAR VALUE; AUTHORIZED
20,000,000 SHARES, 4,963,509 SHARES
ISSUED AND OUTSTANDING AT MARCH 31, 1996
AND 4,923,509 SHARES ISSUED AND
OUTSTANDING AT DECEMBER 31, 1995 4,964 4,924
PAID-IN-CAPITAL 2,953,054 2,927,593
ACCUMULATED DEFICIT (1,410,977) (1,420,511)
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TOTAL STOCKHOLDERS' EQUITY $ 1,547,040 $ 1,512,006
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,260,741 $ 2,059,537
=========== ===========
</TABLE>
See notes to financial statements.
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OPTIMUMCARE CORPORATION
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 MARCH 31
1996 1995
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<S> <C> <C>
REVENUES $2,220,445 $1,489,372
INTEREST INCOME 1,562 1,505
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$2,222,007 $1,490,877
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OPERATING EXPENSES:
COSTS OF SERVICES PROVIDED $1,935,925 $1,117,818
PROVISION FOR DOUBTFUL ACCOUNTS 0 0
GENERAL AND ADMINISTRATIVE 265,831 221,249
INTEREST 5,717 612
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2,207,473 1,339,679
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INCOME BEFORE INCOME TAXES 14,534 151,198
INCOME TAXES 5,000 17,800
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NET INCOME $ 9,534 $ 133,398
========== ==========
NET INCOME
PER COMMON SHARE $ 0.00 $ 0.03
========== ==========
</TABLE>
See notes to financial statements.
<PAGE> 5
OPTIMUMCARE CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDING
MARCH 31 MARCH 31
1996 1995
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 9,534 $133,397
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & Amortization 3,005 2,043
Changes in operating assets and liabilities:
(Increase)/Decrease in accounts receivable, net (239,282) 39,814
Decrease in notes receivable from officers 0 6,628
(Increase)/Decrease in prepaid expenses 3,293 (455)
Increase in accounts payable 1,718 12,624
Increase in accrued liabilities 90,117 43,604
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CASH AND CASH EQUIVALENTS (USED)/
PROVIDED BY OPERATING ACTIVITIES (131,615) 237,655
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of furniture & equipment 0 (1,800)
Proceeds from sale of furniture & equipment 163 0
Deferred acquisition costs (37,309) 0
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CASH AND CASH EQUIVALENTS (USED)
IN INVESTING ACTIVITIES (37,146) (1,800)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 25,500 0
Note payable from bank 74,334 0
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CASH AND CASH EQUIVALENTS PROVIDED BY
FINANCING ACTIVITIES 99,834 0
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (68,927) 235,855
Cash and cash equivalents at beginning of period 170,932 36,657
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 102,005 $272,512
========= ========
</TABLE>
See notes to financial statements.
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OPTIMUMCARE CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements for the three month period ended
March 31, 1996 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1996. For further
information, refer to the financial statements and footnotes thereto included in
the Company's Form 10-K for the year ended December 31, 1995.
NOTE B -- INCOME TAXES
The provision for income taxes represent current Federal and State income taxes.
At March 31, 1996, the Company has unused Federal and State net operating loss
carryforwards of approximately $1,179,000 and 16,000 respectively which begin to
expire in 2003. The provision for Federal income taxes is computed on annualized
alternative minimum taxable income at the alternative minimum tax rate. The
provision for State income taxes is computed on annualized taxable income at
current rates.
NOTE C -- 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 5,514,993 and 5,321,855 at March 31, 1996 and March 31, 1995
respectively.
NOTE D -- NEW BUSINESS
On April 17, 1996, the Company entered into an agreement with Coast Plaza
Doctor's Hospital to manage a partial hospitalization program in Norwalk,
California.
On April 25, 1996, the Company entered into an agreement with Friendship
Community Mental Health Center to manage a partial hospitalization program in
Phoenix, Arizona.
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NOTE E -- SUBSEQUENT EVENT
On April 19, 1996, the Company entered into an agreement with Professional
CareSource, Inc. to form a limited liability company, Optimum Care Source, LLC
(LLC). In exchange for a 70% ownership interest in the LLC, the Company agreed
to contribute a maximum of $200,000 of working capital to the LLC. In connection
with the formation of the LLC, the Company has paid $11,000 in cash. The Company
is required to purchase all of Professional CareSource, Inc.'s interest in the
LLC by April 29, 2001, but may elect to purchase the interest at any time after
April 29, 2000 at a specified price, which approximates Professional
CareSource's ownership percentage in the LLC multiplied by five (5) times the
LLC's net profit after taxes as reflected on its most recent Form 1065 after
agreed upon taxes.
Three principals of Professional CareSource, Inc. were each given one year
employment contracts with the LLC. In connection with the employment agreement,
the Company granted non-qualified stock options to purchase 33,000 shares of
common stock at $.92 per share, which vest over five years, to each of the
principals of Professional Care Source, Inc. Optimum Care Source, LLC,
headquartered in Southern California, provides mental health services at long
term care facilities.
The purchase method of accounting will be used to record the transaction. The
deferred acquisition costs associated with the purchase will be amortized under
the straight line method over five years.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
MATERIAL CHANGES IN FINANCIAL CONDITION
At March 31, 1996 and December 31, 1995, the Company's working capital was
$1,432,807 and $1,357,581 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 ($131,615) and $237,655 for the periods ended
March 31, 1996 and 1995, respectively. The decrease was attributable to
increased corporate marketing and development costs and cash flow deficiencies
from two programs which the Company began managing in November, 1995 and
January, 1996 respectively. Positive cash flow from these two new programs
should begin during the second quarter of 1996.
Cash flows used in investing activities were ($37,146) and $1,800 for the
periods ended March 31, 1996 and 1995, 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. One of which was consummated on April 24, 1996.
The cash flows from financing activities were $99,834 and $0 for the periods
ended March 31, 1996 and 1995, respectively. The increase was due to draws on
the Company's line of credit agreement with a bank and the exercise of stock
options by two employees. The credit agreement expires July 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 April 25, 1996, approximately
$221,000 is available for future draws on 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.
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MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 compared to Three Months Ended March 31, 1995
The Company operated thirteen (13) programs during the three months ended March
31, 1996 and 1995. The Company currently has fifteen (15) operating programs.
Net Revenues were $2,220,445 and $1,489,372 for the three months ended March 31,
1996 and 1995, respectively. The increase in revenues in 1996 over 1995 is due
to the different mix of operating programs among periods. The Company is
currently earning a larger fee for managing the programs which exist at March
31, 1996 versus those which existed at March 31, 1995. In addition, the volume
of patient days treated through programs at March 31, 1996 is greater than those
treated through programs which existed at March 31, 1995.
Cost of services provided were $1,935,925 and $1,117,818 for the three months
ended March 31, 1996 and 1995 respectively. The increase in the cost of services
provided among periods is primarily due to the increase in treating patient
volume among periods and an expanded scope of services provided in connection
with certain contracts such as nursing, transportation and lease costs.
Selling, general and administrative expenses for the three months ending March
31, 1996 have increased over the three months ending March 31, 1995 due to
increased corporate marketing wages and activities, and various professional
fees incurred with the Company's contract and business acquisition efforts.
Net income was $9,534 and $133,398 for the three months ending March 31, 1996
and 1995, 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 the gross profit on Programs which
have matured, are typically greater than those in the early stages of
development. Historically, Programs begin to reach their maturity within 90 to
120 days of initial operation. During the three months ending March 31, 1996 and
1995, the mix of programs changed significantly. As the newly obtained programs
continue to mature and the mix of individual operating programs begins to
stabilize, revenues should increase and gross profit should rise favorably and
disproportionately to the increase in cost for such Programs. 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 for the remainder of 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
currently exist and are being implemented. 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 and one community mental health
center, the loss of any of its customers could have a significant adverse effect
on the Company's operations.
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PART II
OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not applicable.
ITEM 2 CHANGES IN SECURITIES
Not applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 OTHER INFORMATION
On April 17, 1996, the Company entered into a five year agreement with Coast
Plaza doctor's Hospital to manage a twenty (20) chair partial hospitalization
program in Norwalk, California.
On April 19, 1996, the Company entered into an agreement with Professional
CareSource, Inc. to form a limited liability company, Optimum Care Source, LLC
(LLC). In exchange for a 70% ownership interest in the LLC, the Company agreed
to contribute a maximum of $200,000 of working capital to the LLC. In connection
with the formation of the LLC, the Company has paid $11,000 in cash. The Company
is required to purchase all of Professional CareSource, Inc.'s interest in the
LLC by April 29, 2001, but may elect to purchase the interest at any time after
April 29, 2000 at a specified price, which approximates Professional
CareSource's ownership percentage in the LLC multiplied by five (5) times the
LLC's net profit after taxes as reflected on its most recent Form 1065 after
agreed upon taxes.
Three principals of Professional CareSource, Inc. were each given one year
employment contracts with the LLC. In connection with the employment agreement,
the Company granted non-qualified stock options to purchase 33,000 shares of
common stock at $.92 per share, which vest over five years, to each of the
principals of Professional Care Source, Inc. Optimum Care Source, LLC,
headquartered in Southern California, provides mental health services at long
term care facilities.
On April 25, 1996, the Company entered into a three year agreement with
Friendship Community Mental Health Center to manage a twenty-five (25) chair
partial hospitalization program in Phoenix, Arizona.
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ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
10.76 Agreement between Coast Plaza Doctor's Hospital and the Company dated
April 17, 1996.
10.77 Operating Agreement for Optimum Care Source, LLC.
10.78 Master Joint Venture Agreement between Professional CareSource, Inc.
and the Company dated April 19, 1996.
10.79 Employment Agreement between Margaret M. Minnick and Optimum Care
Source, LLC.
10.80 Employment Agreement between Teri L. Jolin and Optimum Care Source,
LLC.
10.81 Employment Agreement between Joseph H. Dadourian and Optimum Care
Source, LLC.
10.82 Registration Agreement between Professional CareSource, Inc. and the
Company dated April 24, 1996.
10.83 Non-qualified stock option Agreement between Joseph H. Dadourian and
the Company dated April 24, 1996.
10.84 Non-qualified stock option Agreement between Teri L. Jolin and the
Company dated April 24, 1996.
10.85 Non-qualified stock option Agreement between Margaret M. Minnick and
the Company dated April 24, 1996.
10.86 Agreement between Friendship Community Mental Health Center and the
Company dated April 25, 1996.
27 Financial Data Schedule.
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SIGNATURE
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 authorized.
OPTIMUMCARE CORPORATION
A Delaware Corporation
Dated May 10, 1996 By: /s/ Edward A. Johnson
------------------------------------
Edward A. Johnson
President & Principal
Financial Officer
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EXHIBIT 10.76
AGREEMENT
THIS AGREEMENT is entered into as of this day of , 1996, by
and between COAST PLAZA DOCTORS HOSPITAL, ("Hospital") and OPTIMUMCARE(R)
CORPORATION ("Manager"), a Delaware Corporation.
RECITALS
A. Hospital operates an acute care facility in Norwalk, 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.
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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 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 ,
1996 and terminating , 2001.
(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
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standard out-patient services to Out-Patient Program patients,
including available diagnostic facilities as directed by each
Out-Patient Program patient's attending physician. 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 twenty (20) chairs.
(b) Provide support activities including: i) (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 ii) 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. Manager agrees
to notify Hospital's fiscal intermediary regarding Manager's
involvement with the program.
(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.
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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).
(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 which will be approved
by Manager.
(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. It is understood that this function is paid
for by Manager.
(l) Maintain professional and comprehensive general liability insurance
for itself and its
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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 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) If appropriate, with the assistance of Manager, obtain appropriate
California state license to operate the Out-Patient Program.
(n) With assistance of Manager, 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)
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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 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 but Hospital shall be deemed to have accepted such
personnel unless it informs Manager otherwise in writing within five
(5) business days of receipt of all such required information. 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.
(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
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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 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. 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. 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
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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 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 a 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 (m) of Section (3).
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<PAGE> 9
(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 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.
(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
-9-
<PAGE> 10
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
affect the performance of Manager's obligations hereunder.
7. MANAGEMENT FEE
(a) Hospital shall pay to Manager a management fee of Ninety Two Dollars
and Fifty Cents ($92.50) per patient day for each patient attending
the Out-Patient Program. Manager will be paid its management fee by
the 15th of the month following the month for which the fee is due.
For example, the management fee for March, 1996 will be due on April
15, 1996.
For the initial 120 days of this contract, Hospital agrees to remit
to Manager minimum deposits against future partial hospitalization
program receivables according to the following schedule.
For the initial 30 days of the contract period, Hospital agrees to
remit to Manager $18,000.
31 through 60 days of the initial contract period - $20,000
61 through 90 days of the initial contract period - $22,000
91 through 120 days of the initial contract period - $25,000
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<PAGE> 11
The deposits for the initial 120 period, will be due 5 days after
the month in which the management services are rendered. After the
initial 120 day period, assuming Hospital has begun collecting
reimbursement from its fiscal intermediary for the past 120 days of
patient treatment, Manager and Hospital will reconcile fees owed
based on actual patient treatment days. If cash flow from the fiscal
intermediary has not begun within the initial 120 day period,
Manager and Hospital will develop a mutually agreed upon management
fee payment schedule. The fiscal viability of the Program shall then
be re-evaluated.
8. 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.
(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
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<PAGE> 12
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.
9. 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 two (2) years after the
cessation of the employment or agency relationship between the
Manager and the employee or agent or two (2) years 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 in the 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 way retain the
services of any employee, former employee, or contracted personnel
or former agent of Hospital without Hospital's prior written consent
thereto.
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<PAGE> 13
(c) Provided, however, that paragraph 9 shall not apply in the event
Manager terminates this contract without cause pursuant to paragraph
10C.
10. 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.
(2) In the event Hospital has failed to comply with the terms of
this Agreement in any material respect, 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.
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<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.
(c) Termination Without Cause:
1. Either party may terminate this Agreement without cause
providing at least (90) days notification in writing to the
other party. Upon termination under this section, all fees
owed to Manager from Hospital are payable on demand.
11. MISCELLANEOUS PROVISIONS
(a) Compulsory Arbitration: Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled
by binding arbitration in accordance with the rules of the American
Arbitration Association, and judgement on the award rendered my be
entered in any court having jurisdiction. However, this shall not
apply with respect to any claim for indemnity for bodily injury or
death.
(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) UCC1: Hospital agrees to allow Manager, at Manager's expense, file a
UCC1 payment
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<PAGE> 15
promise against the Hospital's psychiatric outpatient accounts
receivables referred to in this agreement. Manager understands it
may have to secure a "next in line" position.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
(h) Binding Effect: This Agreement shall be binding on the successors,
and assigns of the respective parties, provided, however, neither
party may assign or otherwise transfer
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<PAGE> 16
this Agreement or delegate obligations hereunder without the other's
written consent.
(i) 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.
(j) 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.
(k) 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.
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<PAGE> 17
Hospital's Address: Coast Plaza Doctor's Hospital
13100 Studebaker Road
Norwalk, CA 90650-2531
cc: Mr. Maurice Lewitt
Attorney at Law
16633 Ventura Blvd., 11th Floor
Encino, CA 91436-1870
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 ,
1996, at Laguna Niguel, California.
Manager: Hospital:
OPTIMUMCARE CORPORATION COAST PLAZA DOCTOR'S HOSPITAL
By: By:
---------------------------- ----------------------------
Edward A. Johnson Gerald Garner
President Chairman
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<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
<CAPTION>
11-20 PATIENTS/DAY - (MONDAY - FRIDAY ONLY)
-------------------------------------------
FTE
---
<S> <C>
PSYCH R.N. 1.5
RD/NUTRITIONIST PER DIEM
MENTAL HEALTH WORKER 1.0
UNIT SECRETARY 1.0
<CAPTION>
21-30 PATIENTS/DAY - (MONDAY - FRIDAY ONLY)
-------------------------------------------
FTE
---
<S> <C>
PSYCH R.N. 2.0
RD/NUTRITIONIST PER DIEM
MENTAL HEALTH WORKER 1.5
UNIT SECRETARY 1.0
<CAPTION>
31-40 PATIENTS/DAY - (MONDAY - FRIDAY ONLY)
-------------------------------------------
FTE
---
<S> <C>
PSYCH R.N. 2.0
LVN .5
RD/NUTRITIONIST PER DIEM
MENTAL HEALTH WORKERS 2.0
UNIT SECRETARY 1.0
</TABLE>
<PAGE> 1
EXHIBIT 10.77
OPERATING AGREEMENT
FOR
OPTIMUM CARE SOURCE, LLC,
A CALIFORNIA LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I INTRODUCTORY MATTERS................................ 1
1.1 FORMATION OF LIMITED LIABILITY COMPANY.............. 1
1.2 REGULATION OF INTERNAL AFFAIRS BY OPERATING
AGREEMENT........................................... 1
1.3 LAWS GOVERNING OPERATING AGREEMENT.................. 1
1.4 TERM OF OPERATING AGREEMENT......................... 2
1.5 USE OF FULL LEGAL NAME REQUIRED..................... 2
1.6 NO INDIVIDUAL AUTHORITY FOR A MEMBER................ 2
1.7 REQUIRED MAINTENANCE OF REGISTERED OFFICE IN
CALIFORNIA.......................................... 2
1.8 FILING OF FICTITIOUS BUSINESS NAME STATEMENT........ 2
1.9 PURPOSE OF COMPANY.................................. 2
1.10 OTHER FORMATION MATTERS............................. 3
1.11 DEFINITIONS OF GENERAL TERMS........................ 3
ARTICLE II MEMBERS, CAPITAL CONTRIBUTIONS AND
WITHDRAWALS, LIMITATIONS ON LIABILITIES AND
RESPONSIBILITIES OF MEMBERS......................... 6
2.1 INITIAL MEMBERS AND INITIAL CAPITAL
CONTRIBUTIONS....................................... 6
2.2 ADDITIONAL CAPITAL CONTRIBUTIONS.................... 6
2.3 LIMITATIONS ON WITHDRAWALS OF CAPITAL
CONTRIBUTION........................................ 6
2.4 ADMISSION OF ADDITIONAL MEMBER...................... 7
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
2.5 LIMITATION ON LIABILITY OF MEMBERS AND
MANAGERS............................................ 7
ARTICLE III MANAGEMENT.......................................... 7
3.1 MANAGEMENT OF COMPANY............................... 7
3.2 SPECIFIC DUTIES OF MANAGERS......................... 7
3.3 POWERS OF MANAGERS.................................. 8
3.4 ANNUAL MEETINGS OF MEMBERS.......................... 9
3.5 SPECIAL MEETINGS OF MEMBERS......................... 9
3.6 NOTICES, VOTING AND PROCEDURES AT MEETINGS.......... 9
3.7 TRANSACTIONS BETWEEN THE COMPANY AND THE
MANAGER............................................. 10
3.8 PAYMENTS TO MANAGER................................. 11
3.9 LIMITED LIABILITY................................... 11
3.10 OFFICERS OF COMPANY................................. 11
ARTICLE IV CAPITAL ACCOUNTS.................................... 11
4.1 CAPITAL ACCOUNT FOR EACH MEMBER..................... 11
4.2 INTEREST ON CAPITAL................................. 13
4.3 POWER TO MODIFY CAPITAL ACCOUNTS TO COMPLY
WITH TREASURY REGULATIONS........................... 13
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS....................... 13
5.1 DISTRIBUTIONS....................................... 13
5.2 ALLOCATIONS OF NET PROFIT AND NET LOSS.............. 14
5.3 TAXABLE INCOME AND LOSS............................. 15
5.4 ALLOCATION UPON SALE OR EXCHANGE OF MEMBER
INTEREST OR WITHDRAWAL OF A MEMBER.................. 16
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE VI ACCOUNTING, RECORDS, REPORTING BY MEMBERS........... 16
6.1 ACCOUNTING DECISIONS AND RELIANCE ON OTHERS......... 16
6.2 RECORDS AND ACCOUNTING MAINTAINED................... 16
6.3 ACCESS FOR MEMBERS TO ACCOUNTING RECORDS............ 17
6.4 ANNUAL TAX INFORMATION FOR MEMBERS.................. 17
6.5 TAX MATTERS FOR COMPANY HANDLED BY MANAGERS......... 17
6.6 FEDERAL INCOME TAX ELECTIONS MADE BY
MANAGERS............................................ 17
6.7 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS........ 18
ARTICLE VII CONSEQUENCES OF DEATH, DISSOLUTION,
RETIREMENT OR BANKRUPTCY OF MEMBER.................. 18
7.1 UNANIMOUS CONSENT TO CONTINUE BUSINESS OF
COMPANY............................................. 18
7.2 PURCHASE OF MEMBER'S INTEREST....................... 18
7.3 VALUATION OF INTEREST OF MEMBER..................... 19
7.4 PAYMENT OF PURCHASE PRICE........................... 19
7.5 PURCHASE TERMS VARIED BY AGREEMENT.................. 19
ARTICLE VIII TRANSFER AND ASSIGNMENT OF INTERESTS................ 20
8.1 TRANSFER AND ASSIGNMENT OF INTERESTS................ 20
8.2 OPTIMUMCARE BUY-OUT OF CARE SOURCE.................. 20
ARTICLE IX DISSOLUTION AND WINDING UP.......................... 21
9.1 CONDITIONS OF DISSOLUTION........................... 21
9.2 STATEMENT OF INTENT TO DISSOLVE..................... 22
9.3 WINDING UP.......................................... 22
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
9.4 ORDER OF PAYMENT OF LIABILITIES UPON
DISSOLUTION......................................... 22
9.5 COMPLIANCE WITH REGULATIONS......................... 22
9.6 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION......... 23
ARTICLE X INDEMNIFICATION..................................... 23
10.1 INDEMNIFICATION OF MEMBERS AND MANAGERS............. 23
10.2 UNDERTAKINGS FOR INDEMNIFICATION.................... 23
10.3 REQUIRED TO BE GENERAL OBLIGATION................... 23
10.4 ADVANCEMENT OF EXPENSES............................. 24
10.5 INDEMNIFICATION OF OTHERS........................... 24
10.6 STANDARDS OF CONDUCT FOR INDEMNIFICATION............ 24
10.7 PROCEDURES TO DETERMINE INDEMNIFICATION............. 24
10.8 INSURANCE FOR INDEMNIFICATION....................... 24
ARTICLE XI MISCELLANEOUS....................................... 25
11.1 COMPLETE AGREEMENT.................................. 25
11.2 BINDING EFFECT...................................... 25
11.3 NO THIRD PARTY BENEFICIARY.......................... 25
11.4 GENDER AND NUMBER IN NOUNS AND PRONOUNS............. 25
11.5 EXHIBITS............................................ 25
11.6 SEVERABILITY........................................ 26
11.7 ADDITIONAL DOCUMENTS AND ACTS....................... 26
11.8 NOTICES............................................. 26
11.9 AMENDMENTS.......................................... 26
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
EXHIBIT A CAPITAL CONTRIBUTION OF MEMBERS AS OF
April 19, 1996...................................... 28
SCHEDULE 1 FACILITIES CONTRACTS................................ 29
EXHIBIT B ALLOCATION OF NET PROFITS AND NET LOSSES............ 30
</TABLE>
<TABLE>
<S> <C> <C>
EXHIBIT C-1 OPTIMUMCARE ACTIVITIES NOT SUBJECT TO
SECTION 8.C . . . . . . . . . . . . . . . . . 33
EXHIBIT C-2 OPTIMUMCARE ACTIVITIES NOT SUBJECT TO
SECTION 8.3(C). . . . . . . . . . . . . . . . 34
</TABLE>
v
<PAGE> 7
OPERATING AGREEMENT
FOR
OPTIMUM CARE SOURCE, LLC,
A CALIFORNIA LIMITED LIABILITY COMPANY
RECITAL
This Operating Agreement governs the relationship among
Members of Company and between Company and the Members, both as defined herein,
pursuant to the Act and the Articles, as defined herein, as either may be
amended from time to time. In consideration of their mutual promises, covenants,
and agreements, the parties hereto do hereby promise, covenant, and agree as
follows:
ARTICLE I
INTRODUCTORY MATTERS
1.1 FORMATION OF LIMITED LIABILITY COMPANY
Pursuant to the Beverly-Killea Limited Liability Company Act,
codified in the California Corporations Code, Section 17000 et seq., as the same
may be amended from time to time (the "Act"), OPTIMUMCARE CORPORATION, a
Delaware corporation ("OptimumCare"), and PROFESSIONAL CARE SOURCE, INC., a
California corporation ("Care Source"), have formed a California limited
liability company under the Act, effective the date of the filing of the
Articles of Organization ("Articles") for Optimum Care Source, LLC, a California
limited liability company ("Company"). The business of Company shall be
conducted under such name until such time as all the Members shall hereafter
designate otherwise and file amendments to the Articles in accordance with
applicable law.
1.2 REGULATION OF INTERNAL AFFAIRS BY OPERATING AGREEMENT
Consistent with the Articles and the Act, the internal affairs
of Company shall be regulated by the Agreement as it shall be amended by the
Members from time to time.
1.3 LAWS GOVERNING OPERATING AGREEMENT
The Agreement is subject to, and governed by, the mandatory
provisions of the Act and the Articles filed with the Secretary of State of the
State of California, as both may be amended from time to time. In the event of a
direct conflict between the provisions of the Agreement and the mandatory
provisions of the Act or the provisions of the Articles, such provisions of the
Act or the Articles, as the case may be, will be controlling.
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<PAGE> 8
1.4 TERM OF OPERATING AGREEMENT
The term of the Agreement shall be co-terminus with the period
of duration of Company provided in the Articles unless Company is earlier
terminated upon its voluntary or involuntary dissolution or as otherwise
provided herein.
1.5 USE OF FULL LEGAL NAME REQUIRED
The denomination "LLC" shall always appear as part of the name
of Company on all correspondence, stationery, checks, invoices and any and all
documents and papers executed by Company and as otherwise required by the Act.
1.6 NO INDIVIDUAL AUTHORITY FOR A MEMBER
No Member that is not a Manager, acting alone, shall have any
authority to act for, or to undertake or assume, any obligation, debt, duty or
responsibility on behalf of any other Member of Company.
1.7 REQUIRED MAINTENANCE OF REGISTERED OFFICE IN CALIFORNIA
Company shall continuously maintain a registered office in the
State of California and a registered agent whose business office is identical
with the registered office in the State of California as required by the Act.
The Members may identify other places of business of Company within or without
the State of California, appoint agents for service of process and make filings
as may be required or desirable under the laws of such other places.
1.8 FILING OF FICTITIOUS BUSINESS NAME STATEMENT
The Managers shall file or cause to be filed such fictitious
business name statements as may be required or desirable under the laws of the
State of California or under the laws of such places outside the State of
California in which it holds assets or conducts business activities.
1.9 PURPOSE OF COMPANY.
The purpose of the Company is to engage in any lawful activity
for which a limited liability company may be organized under the Act.
Notwithstanding the foregoing, without the consent of the Members, the Company
shall not engage in any business other than the following:
A. the business of providing management and other
administrative services to behavioral health care and counseling practices and
clinics (the "Services") at skilled nursing and other similar bed and board
health care facilities (the "Facilities") in California; and
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<PAGE> 9
B. such other activities directly related to the foregoing
business as may be necessary, advisable, or appropriate, in the reasonable
opinion of the Managers to further the foregoing business.
1.10 OTHER FORMATION MATTERS
A. MAINTENANCE OF COMPANY MINUTE BOOK. The Members hereby
authorize the maintenance of a Company Minute Book to include the Articles, the
Agreement and any amendments thereto and the minutes of meetings (or consents in
lieu of meetings) of Members and Managers and other important documents of
Company.
B. ESTABLISHMENT OF BANK ACCOUNTS. The Members hereby
authorize the establishment of one or more depository accounts for the funds of
Company and designate the Managers to draw against such accounts on behalf of
Company.
C. REIMBURSEMENT OF EXPENSES OF ORGANIZATION. The Members
hereby authorize Company to pay its expenses of organization and to reimburse
any person or entity advancing funds for this purpose.
1.11 DEFINITIONS OF GENERAL TERMS
The terms used in the Agreement with their initial letters
capitalized, shall, unless the context otherwise requires, have the meanings
specified in this Paragraph 1.13 or, if not defined in this Paragraph 1.13,
elsewhere in the Agreement. When used in the Agreement, the following terms
shall have the meanings set forth below:
"AFFILIATE" shall mean any individual, partnership,
corporation, trust, or other entity or association, directly or indirectly,
through one or more intermediaries, controlling, controlled by, or under common
control with the Members. The term "control," as used in the immediately
preceding sentence, means, with respect to a corporation the right to exercise,
directly or indirectly, more than 50 percent of the voting rights attributable
to the controlled corporation, and, with respect to any individual, partnership,
trust, other entity or association, the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of the
controlled entity.
"AGREEMENT" shall mean this Operating Agreement, as originally
executed and as amended from time to time, and shall refer to the Agreement as a
whole, unless the context otherwise requires.
"BANKRUPTCY" shall mean, and a Member shall be deemed a
"Bankrupt Member" upon (i) the entry of a decree or order for relief against the
Member by a court of competent jurisdiction in
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<PAGE> 10
any involuntary case brought against the Member under any bankruptcy, insolvency
or other similar law (collectively, "Debtor Relief Laws") generally affecting
the rights of creditors and relief of debtors now or hereafter in effect; (ii)
the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or other similar agent under applicable Debtor Relief Laws for the
Member or for any substantial part of its assets or property; (iii) the ordering
of the winding up or liquidation of the Member's affairs; (iv) the filing of a
petition in any such involuntary bankruptcy case, which petition remains not
dismissed for a period of 180 days or which is not dismissed or suspended
pursuant to Section 305 of the Federal Bankruptcy Code (or any corresponding
provision of any future United States bankruptcy law); (v) the commencement by
the Member of a voluntary case under any applicable Debtor Relief Law now or
hereafter in effect; (vi) the consent by the Member to the entry of an order for
relief in an involuntary case under any such law or to the appointment of or the
taking of possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar agent under any applicable Debtor Relief Laws for
the Member or for any substantial part of its assets or property; or (vii) the
making by a Member of any general assignment for the benefit of its creditors.
"CAPITAL ACCOUNT" shall mean the account maintained for each
Member in accordance with Section 4.1 hereof.
"CAPITAL CONTRIBUTION" shall mean the amount of cash or other
property contributed by a Member to the capital of Company pursuant to Article
II hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended. All references herein to sections of the Code shall include any
corresponding provision or provisions of succeeding law.
"DISSOLUTION EVENT" for Company means with respect to any
Member one or more of the following: the bankruptcy, dissolution or occurrence
of any other event which terminates the continued membership of any Member
unless the other remaining Members consent to continue the business of Company.
"INTEREST" in Company shall mean the entire ownership interest
of a Member in Company at any particular time, including the right of such
Member to any and all benefits to which a Member may be entitled as provided in
the Agreement and under the Act, together with the obligations of such Member to
comply with all terms and provisions of the Agreement.
"MANAGERS" shall be persons who are appointed as such
under the Agreement.
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<PAGE> 11
"MASTER JOINT VENTURE AGREEMENT" means that certain Agreement
between OptimumCare and Care Source of even date herewith.
"MEMBERS" shall mean OptimumCare and Care Source, which shall
be the initial signatories to the Agreement, and any Person admitted to such
status thereafter.
"NET PROFIT OR NET LOSS" shall mean the taxable income or
loss, respectively, of Company for any year as computed for federal income tax
purposes, but determined without regard to any item of income or expense that is
specially allocated pursuant to Section 5.2(B), and determined with the
following adjustments:
(a) Income that is excludible from gross income for
income tax purposes shall be included in determining
Net Profit or Net Loss;
(b) Expenditures that are not deductible for income tax
purposes and that may not be properly capitalized for
income tax purposes, as well as expenditures that are
described in Section 705(a)(2)(b) of the Code or that
are treated as expenditures described in that Section
pursuant to Section 1.704(b)(2)(iv)(i) of the
Treasury Regulations shall be included in determining
Net Profit or Net Loss; and
(c) If any Company property is reflected in the Capital
Accounts of the Partners at a value that differs from
Company's adjusted tax basis in such property,
whether as a result of the contribution of property,
a revaluation of Company property pursuant to Section
4.1(B) or otherwise, items of income, gain, loss,
depreciation and other deductions respecting such
property shall be determined in a manner consistent
with Section 1.704-1(b)(2)(iv)(g) of the Treasury
Regulations.
"PERCENTAGE INTEREST" shall mean the interest of a Member in
the profits or capital of Company, expressed as a percentage of the interests in
profits or capital of all Members, as set forth in Exhibit "A" hereto, as such
percentage may be adjusted from time to time pursuant to the terms of the
Agreement.
"PERSON" includes individuals, general partnerships, limited
partnerships, other limited liability companies, corporations, trusts, estates,
real estate investment trusts and any other association.
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"TREASURY REGULATIONS" shall mean the regulations promulgated
by the U.S. Department of the Treasury and codified at Title 26 of the Code of
Federal Regulations.
ARTICLE II
MEMBERS, CAPITAL CONTRIBUTIONS AND WITHDRAWALS, LIMITATIONS ON
LIABILITIES AND RESPONSIBILITIES OF MEMBERS
2.1 INITIAL MEMBERS AND INITIAL CAPITAL CONTRIBUTIONS
Members, their respective addresses, the amount of their
respective initial Capital Contributions and their respective Percentage
Interests in Company are set forth on Exhibits "A" and "B" as the same may be
amended from time to time.
2.2 ADDITIONAL CAPITAL CONTRIBUTIONS
In the event the Managers determine by unanimous vote that
additional capital is necessary for the proper operation of the Company, then
the Managers may make a call upon each of Care Source and OptimumCare for an
additional capital contribution to the Company by giving written notice to each
of them (a "Capital Call"). Additional capital contributions shall be made in
accordance with each party's ownership interest in the Company. In the event
that Care Source fails to make an additional capital contribution within thirty
(30) days of a Capital Call, OptimumCare may, in its sole and absolute
discretion, either (A) make an additional capital contribution to the Company,
or (B) loan to the Company the funds which would otherwise be payable by Care
Source, and such loan shall bear interest at the greater of (i) the prime rate
(as published in the Wall Street Journal, West Coast Edition, on the date of the
Capital Call, or if such date is not a business day, on the next succeeding
business day) plus two percent (2%) or (ii) the then current borrowing rate
available to OptimumCare on an unsecured basis, and shall be secured by the
assets of the Company, and OptimumCare shall be entitled to receive repayment on
any such loan prior to any cash distributions to the parties. In the event a
Member makes an additional Capital Contribution pursuant to this Section 2.2,
the Percentage Interest of all Members shall be adjusted to the extent necessary
to reflect such additional Capital Contribution(s). Any such adjustment of a
Member's Percentage Interest shall be reflected in an amendment to Exhibit A.
2.3 LIMITATIONS ON WITHDRAWALS OF CAPITAL CONTRIBUTION
No Member shall have the right to withdraw its Capital
Contributions or to demand and receive property of Company or any distribution
in return for his Capital Contributions, except as may be specifically provided
in the Agreement or required by law.
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2.4 ADMISSION OF ADDITIONAL MEMBER
The following are the conditions of admission of any
additional Members: (i) the Members may admit to Company additional Member(s)
who will participate in the profits, losses, available cash flow, and ownership
of the assets of Company on such terms as are determined by all of the Members;
(ii) admission of any such additional Member(s) shall require the written
consent of all the Members then having any Interest in Company; and (iii)
admission of such additional Member(s) may result in a dilution of the Interests
of the then Members.
2.5 LIMITATION ON LIABILITY OF MEMBERS AND MANAGERS
No Member or Manager shall be liable under a judgment, decree
or order of a court, or in any other manner, for a debt, obligation or liability
of Company, except as provided by law.
ARTICLE III
MANAGEMENT
3.1 MANAGEMENT OF COMPANY
All powers of Company shall be exercised by or under the
authority of, and the business and affairs of Company shall be managed under the
direction of a five (5) person committee of Managers (the "Management
Committee"). Three (3) Managers shall be appointed by OptimumCare and two (2)
Managers shall be appointed by Care Source. Each Manager shall be appointed at
each annual Members' meeting (as described below and shall serve for a term
expiring at the later of (i) the following annual Members' meeting, (ii) the
date on which a successor is appointed, or (iii) the date on which he/she
resigns or becomes disabled and unable to serve. A Manager whose term has
expired shall continue to serve until a successor is appointed by the
appropriate member. Any Manager elected to fill a vacancy shall serve as a
Manager until a successor is elected and qualifies. The Management Committee, by
majority vote, shall designate persons from among the Managers to act as
President, Secretary and Treasurer of the Company (the "Officers"), and the
Officers shall oversee the day to day operations of the Company. A Member,
unless also appointed (or hired) as a Manager, Officer or other employee, shall
not participate in the day to day operation of the business affairs of Company
and if so appointed (or hired), shall participate only within the scope of
authority of such position as defined in the Agreement or elsewhere.
3.2 SPECIFIC DUTIES OF MANAGERS
A. MANAGERS TO DETERMINE TIME AND PLACE OF ANNUAL MEETINGS OF
MEMBERS. The annual meeting of the Members shall be held each year at such a
place as the Managers may determine as provided in Section 3.4.
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B. MANAGERS TO SAFEKEEP FUNDS OF COMPANY. The Managers shall
have fiduciary responsibility for the safekeeping and use of all funds and
assets of Company, whether or not in their immediate possession or control. The
funds of Company shall not be commingled with the funds of any other person and
the Managers shall not employ, or permit any other person to employ, such funds
in any manner except for the benefit of Company. The bank accounts of Company
shall be maintained in such banking institutions as are approved by the Managers
and withdrawals shall be made only in the regular course of Company business and
as otherwise authorized in the Agreement on such signature or signatures as the
Managers may determine.
C. MANAGERS TO HIRE EMPLOYEE FOR RECORD KEEPING. The Managers
shall employ a competent person to be an employee of Company who shall be
responsible for: authenticating the records of Company, including keeping
correct and complete books of account which show accurately at all times the
financial condition of Company, safeguarding all funds, notes, securities, and
other valuables which may from time to time come into possession of Company,
depositing all funds of Company with such depositories as the Managers shall
designate. Such employee shall have such other duties as the Managers may from
time to time prescribe, but under no circumstance shall such employee have any
of the rights, powers, responsibilities or duties of a Manager or Member of
Company as prescribed herein or by law.
3.3 POWERS OF MANAGERS
A. POWERS OF MANAGERS. The Managers shall have all necessary
powers to carry out the purposes, business and objectives of Company, including,
but not limited to, the right to enter into and carry out contracts of all
kinds; to employ employees, agents, consultants and advisors on behalf of
Company; to lend or borrow money and to issue evidences of indebtedness; to
bring and defend actions in law or at equity; to buy, own, manage, sell, lease,
mortgage, pledge or otherwise acquire or dispose of Company property. Decisions
of the Management Committee shall be made by majority vote except as otherwise
set forth in this Agreement. The Managers may deal with any related person, firm
or corporation on terms and conditions that would be available from an
independent responsible third party that is willing to perform. Each Manager
shall have the authority to sign agreements and other documents on behalf of
Company without joinder of any other Manager provided that if the Manager is
appointed as an Officer he/she shall act within the customary scope of the
authority of the office, unless he, she or it obtains the consent of the other
Managers.
B. LIMITATIONS ON POWER OF MANAGERS. Notwithstanding the
provisions of Section 3.3 A., the Managers shall not have authority hereunder to
cause Company to engage in the following transactions without the unanimous
consent of the Members:
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(i) The sale, exchange or other disposition of all or
substantially all of Company's assets occurring as part of a single transaction
or plan;
(ii) The merger of Company with any other limited
liability company or limited partnership;
(iii) Amendment of the Agreement; or
(iv) Admission of any additional Members.
C. MANAGERS AS AGENTS OF COMPANY. Every Manager is an agent of
Company for the purpose of its business, and the act of every Manager, including
the execution in name of Company of any instrument for apparently carrying on in
the usual way the business of Company, binds Company, unless such act is in
contravention of the Articles or the Agreement or unless the Manager so acting
otherwise lacks the authority to act for Company and the person with whom he,
she or it is dealing has knowledge of the fact that he, she or it has no such
authority.
3.4 ANNUAL MEETINGS OF MEMBERS
The Members shall appoint Managers and transact any other
business that may properly come before the meeting at the annual meeting. The
annual meeting of Members shall be held at such date, time and place within the
State of California as the Managers may fix from time to time.
3.5 SPECIAL MEETINGS OF MEMBERS
Special meetings of the Members for any purpose or purposes,
unless otherwise prescribed by the Act or by the Articles, may be called by any
Manager or upon written demand of either Member, on any issue proposed to be
considered. Special meetings of Members for any purpose other than the election
of Managers may be held at such date, time and place within or without the State
of California as shall be stated in the notice of the meeting or in a duly
executed and delivered waiver of notice.
3.6 NOTICES, VOTING AND PROCEDURES AT MEETINGS
A. REQUIRED NOTIFICATION OF MEETINGS OF MEMBERS. The Managers
or any Member shall deliver or mail written notice stating the date, time, and
place of any meeting of Members and, in the case of a special meeting of Members
or when otherwise required by law, a description of the purposes for which the
meeting is called, to each Member of record entitled to vote at the meeting, at
such address as appears in the records of Company, such notice to be mailed at
least ten, but not more than sixty, days before the date and time of the
meeting. A Member may waive notice of any meeting, before or after the date of
the
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meeting, by delivering a signed waiver to Company for inclusion in the minutes
of Company. A Member's attendance at any meeting, in person or by proxy (a)
waives objection to lack of notice or defective notice of the meeting, unless
the Member at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting, and (b) waives objection to consideration
of a particular matter at the meeting that is not within the purposes described
in the meeting notice, unless the Member objects to considering the matter when
it is presented.
B. RELATIVE WEIGHT OF VOTES OF MEMBERS AT MEETING. At any
meeting of Members, each Member entitled to vote shall have a number of votes
equal to the product of (i) its Percentage Interest as set forth on Exhibit "A"
hereto, as the same may be amended from time to time, times (ii) one-tenth. At
any meeting of Members, presence of a majority of voting power of the Members
constitutes a quorum. Action on a matter is approved if it receives approval by
a majority of voting power of the Members present and entitled to vote on a
matter, except as set forth in Section 3.3.B, above. Upon the occurrence of a
Dissolution Event (as defined herein), a Former Member shall not be entitled to
any vote in determining, whether Company shall purchase the interest of such
Former Member as permitted in Paragraph 7.2 hereof.
C. TELEPHONIC PARTICIPATION BY MEMBER AT MEETING. Any or all
Members may participate in any annual or special Members' meeting by, or through
the use of, any means of communication by which all Members participating may
simultaneously hear each other during the meeting. A Member so participating is
deemed to be present in person at the meeting.
D. CONSENT BY MEMBERS IN LIEU OF MEETING. Any action required
or permitted to be taken at a Members' meeting may be taken without a meeting if
the action is taken by all of the Members entitled to vote on the action. The
action must be evidenced by one or more written consents describing the action
to be taken, signed by all the Members entitled to vote on the action, and
delivered to Company for inclusion in the minutes. The record date for
determining Members entitled to take action with a meeting is the first date a
Member signs the consent to such action.
3.7 TRANSACTIONS BETWEEN THE COMPANY AND THE MANAGER
Notwithstanding that it may constitute a conflict of interest,
a Manager may, and may cause its Affiliates to, engage in any transaction
(including, without limitation, the purchase, sale, lease, or exchange of any
property or the rendering of any service, or the establishment of any salary,
other compensation, or other terms of employment) with the Company so long as:
(1) such transaction is not expressly prohibited by this Agreement or the Act;
(2) the terms and conditions of such transaction, on an overall basis, are fair
and reasonable to the
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Company and are at least as favorable to the Company as those terms and
conditions generally available from Persons capable of similarly performing them
in similar transactions between parties operating at arm's length; and (3) a
majority of the Managers having no interest in such transaction affirmatively
vote or consent in writing to approve the transaction, after full disclosure to
all Managers.
3.8 PAYMENTS TO MANAGER
Except as specified in this Agreement, neither the Manager nor
any Affiliate of the Manager is entitled to remuneration for services rendered
or goods provided to the Company.
3.9 LIMITED LIABILITY
No Manager shall be personally liable under any judgment of a
court, or in any other manner, for any debt, obligation, or liability of the
Company, whether that liability or obligation arises in contract, tort, or
otherwise, solely by reason of being a Manager of the Company.
3.10 OFFICERS OF COMPANY
Each officer shall hold office for the term for which he/she
is appointed until his/her successor has been elected. The officers shall
exercise such powers and perform such duties as specified in the Agreement and
as shall be determined from time to time by the Managers. Any officer appointed
by the Managers may be removed at any time by the unanimous agreement of all
Managers. An officer may not be removed as an Officer unless and until he or she
is removed as a Manager or his or her term as Manager expires. Any vacancy
occurring in any office of Company shall be filled by a majority vote of the
Managers, provided that only a person who is a Manager may be appointed as an
Officer.
ARTICLE IV
CAPITAL ACCOUNTS
4.1 CAPITAL ACCOUNT FOR EACH MEMBER
Company shall establish and maintain a Capital Account for
each Member in accordance with the provisions of Section 1.704-1(b)(2)(iv) of
the Treasury Regulations, or any lawful successor thereto, as the same may be
amended from time to time.
A. By way of explanation and without limiting the generality
of or contradicting the foregoing, each Member's Capital Account:
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(i) Shall be increased by:
(a) The amount of money and the fair
market value of property (net of liabilities secured by such property that
Company is considered to assume or take subject to under Section 752 of the
Code) contributed by the Member to Company capital;
(b) The amount of Company liabilities
assumed by the Member (exclusive of the Member's share of Company liabilities
determined under Section 752 of the Code and of any liabilities referred to in
clause (b)(1) of this Section 4.1(A)); and
(c) Allocations to the Member of Net
Profit (or items of income or gain allocated pursuant to Section 5.2 hereof);
and
(ii) Shall be decreased by:
(a) The amount of money and the fair
market value of property (net of liabilities secured by such property that the
Member is considered to assume or take subject to) distributed to the Member by
Company;
(b) The amount of the Member's
liabilities that are assumed by Company (exclusive of any liabilities referred
to in clause (a)(1) of this Section 4.1(A)); and
(c) Allocations to the Member of Net Loss
(or items of loss or expense allocated pursuant to Section 5.2 hereof).
B. In addition, Company shall observe the following principles
in maintaining the Members' respective Capital Accounts, to the extent not
inconsistent with Section 1.704-1(b)(2)(iv) of the Treasury Regulations:
(i) Immediately prior to the distribution of Company
property to a Member, the unrealized gain or unrealized loss that would have
been realized had the property been sold at fair market value in a taxable
transaction shall be allocated among the Members as though there had been a
taxable transaction and otherwise in accordance with Section
1.704-1(b)(2)(iv)(e) of the Treasury Regulations: and
(ii) If there is a contribution to Company capital by
a new or existing Member or there is a distribution from Company capital to a
Member (other than a de minimis amount in either case) in exchange for an
interest in Company, then, to the extent and in the manner determined by the
Managers: (i) all Company property shall be restated on the books of Company at
the current fair market value of such property; and (ii) the
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unrealized gain or loss that would have been realized had the property been sold
at fair market value in a taxable transaction shall be allocated among the
Members as though there had been a taxable transaction, and otherwise in
accordance with Section 1.704-1(b)(2)(iv)(f) of the Treasury Regulations.
(iii) In the event of an adjustment to the tax basis
of Company property pursuant to Section 754 of the Code, the Capital Accounts of
the Members shall be adjusted only in the manner specified in Section
1.704-1(b)(2)(iv)(m) of the Treasury Regulations.
4.2 INTEREST ON CAPITAL
No interest shall accrue or be paid to any Member with respect
to its Capital Account, nor shall any Member have the right to demand or receive
cash or other property in satisfaction of its Capital Account except to the
extent otherwise expressly provided herein.
4.3 POWER TO MODIFY CAPITAL ACCOUNTS TO COMPLY WITH
TREASURY REGULATIONS
The provisions of this Agreement relating to the maintenance
of Capital Accounts are intended to comply with Section 1.704-1(b)(2)(iv) of the
Treasury Regulations, and shall be interpreted and applied in a manner
consistent therewith. In the event the Managers determine that it is necessary
to modify the manner in which the Capital Accounts are adjusted in order either
to comply with the Treasury Regulations or to accommodate an unanticipated event
in accordance with the Treasury Regulations, the Managers shall have authority
to make such modifications.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 DISTRIBUTIONS
Except as otherwise provided in Article IX with respect to the
liquidation of Company, after all current debts and obligations of Company have
been paid or otherwise provided for, and a reasonable reserve for normal
operating expenses and working capital has been set aside by the Members or the
Managers, Company shall distribute the remaining cash, determined in their sole
and absolute discretion, to and among the Members, but only in proportion to and
to the extent of the positive balances of their respective Capital Accounts.
Notwithstanding the foregoing, however, Company shall make no distributions if,
after giving effect to such distribution, the assets of Company are in excess of
the liabilities of Company (other than liabilities to Members on account of
their Capital Accounts). Members shall be liable for the return to Company of
any
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distributions made to them pursuant to this Section 5.1 to the extent provided
by California law.
5.2 ALLOCATIONS OF NET PROFIT AND NET LOSS
A. Except as is otherwise provided in the second and third
sentences of this Section 5.2(A) and Section 5.2(B), the Net Profit or Net Loss
for any year shall be allocated to and among the Members in proportion to their
respective Percentage Interests. Notwithstanding the foregoing, however, no Net
Loss shall be allocated to a Member to the extent that such allocation would
create or increase a deficit balance in the Capital Account of that Member
(determined after the adjustments specified in paragraphs (4), (5) and (6) of
Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations) and to the extent that
such Net Loss may be allocated to other Members without creating or increasing a
deficit balance in the Capital Accounts of such Members (determined after the
adjustments specified in paragraphs (4), (5) and (6) of Section
1.704-1(b)(2)(ii)(d) of the Treasury Regulations). Any such Net Loss that is not
allocated to a Member due to the application of the second sentence of this
Section 5.2(A) shall be allocated among such Members with positive Capital
Account balances in proportion to their respective Percentage Interests, but
only to the extent that such allocation does not create or increase a deficit
balance in the Capital Account of such Members (determined after the adjustments
specified in paragraphs (4), (5) and (6) of Section 1.704-1(b)(2)(ii)(d) of the
Treasury Regulations).
B. Notwithstanding Section 5.2(A), the following provisions,
in the following order or priority, shall control the allocation of items of
Company income and expense to the extent applicable:
First, if there is a net increase in the minimum gain
of Company (determined in accordance with Section 1.704-2(d) and related
provisions of the Treasury Regulations), Company shall allocate items of expense
to all Members in proportion to their respective Percentage Interests in the
manner, in the form and in the amounts specified in Section 1.704-2(c) of the
Treasury Regulations.
Second, if there is a net increase in the "partner
nonrecourse debt minimum gain" of Company (as the quoted term is determined in
accordance with Section 1.704-2(i) and related provisions of the Treasury
Regulations), Company shall allocate items of expense to the Members who bear
the economic risk of loss for such debt in the proportions that they bear such
economic risk of loss, and otherwise in the manner, in the form and in the
amounts specified in Section 1.704-2(i) of the Treasury Regulations.
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Third, if there is a net decrease in Company minimum
gain for a taxable year (determined in accordance with Section 1.704-2(f) and
related provisions of the Treasury Regulations), the Members shall be allocated
items of income or gain in the amount and in the proportions specified in
Section 1.704-2(f) of the Treasury Regulations.
Fourth, if there is a net decrease in "partner
nonrecourse minimum gain" for a taxable year (as the quoted term is determined
in accordance with Section 1.704-2(i) and related provisions of the Treasury
Regulations), the Members shall be allocated items of income or gain in the
amount and in the proportions specified in Section 1.704-2(i) of the Treasury
Regulations.
Fifth, to the extent an allocation of an item of
expense (other than an expense referred to in paragraphs First or Second of this
Section 5.2(B)) would create or increase a deficit balance in the Capital
Account of any Member (determined after the adjustments specified in paragraphs
(4), (5) and (6) of Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations) in
excess of that Member's share of "minimum gain" (determined in accordance with
Section 1.704-2(g) of the Treasury Regulations), but may be allocated to one or
more other Members without creating or increasing a deficit balance in the
Capital Accounts of such other Member (determined after the adjustments
specified in paragraphs (4), (5) and (6) of Section 1.704-1(b)(2)(ii)(d) of the
Treasury Regulations) then such item of expense shall be allocated to such other
Members in proportion to their respective Percentage Interests, but only to the
extent that such allocation does not create or increase a deficit balance in the
Capital Account of any such Member (determined after the adjustments specified
in paragraphs (4), (5) and (6) of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations).
Sixth, if the second or third sentences of Section
5.2(A) or the Fifth paragraph of this Section 5.2(B) result in the allocation of
Net Profit or Net Loss or item of expense in any year that is different than the
results that would have obtained under Section 5.2(A) alone, then Net Profit or
Net Loss (or item of income, gain, loss or expense) shall be allocated in
subsequent years, to the extent possible without once again causing the
application of such second or third sentences of Section 5.2(A) or the Fifth
paragraph of this Section 5.2(B), so that the net sum of all allocations of Net
Profit, Net Loss and items of income, gain, loss or expense to each Member since
the beginning of Company equal the results that would have been obtained under
Section 5.2(A) alone.
5.3 TAXABLE INCOME AND LOSS
Except as is otherwise provided in this Section 5.3, the
taxable income or loss of Company for any taxable year,
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together with each item of income, gain, loss, deduction or credit that is
separately stated for income tax purposes, shall be allocated to and among the
Members in the same proportions that Net Profit or Net Loss, increased or
decreased by items of income, gain, loss or expense that are separately
allocated pursuant to Section 5.2(B) hereof, are allocated for such year.
Notwithstanding the foregoing, in the event Company property is reflected in the
Members' Capital Accounts at a value that differs from Company's adjusted tax
basis for the property, whether as a result of the contribution of property, a
revaluation of Company property pursuant to Section 4.1(B) or otherwise, gain,
loss and expense derived from the property for purposes of determining taxable
income or loss shall be allocated to and among the Members in a manner
consistent with the requirements of Section 704(c) of the Code and the Treasury
Regulations thereunder, notwithstanding any other provision of this Agreement.
Unless the Managers otherwise determine in their sole discretion, Company shall
use the method identified as the "traditional method" in the Treasury
Regulations for complying with the principles of Section 704(c).
5.4 ALLOCATION UPON SALE OR EXCHANGE OF MEMBER INTEREST OR
WITHDRAWAL OF A MEMBER
In the event of a sale or exchange of an Interest in Company
or the withdrawal of a Member (to the extent permitted by the terms of this
Agreement), Net Profit or Net Loss (and any separately allocated items of
income, gain, loss or expense under Section 5.2(B)) shall be allocated between
the transferor and transferee Members to the withdrawing Member, as the case may
be, either by making an interim closing of the Company books or by making a per
diem allocation, as the Managers may determine in their sole discretion, except
as is otherwise required by Section 706 of the Code.
ARTICLE VI
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
6.1 ACCOUNTING DECISIONS AND RELIANCE ON OTHERS
All decisions as to accounting matters, except as otherwise
specifically set forth herein, shall be made by the Managers. The Members or the
Managers may rely upon the advice of their accountants as to whether such
decisions are in accordance with accounting methods followed for federal income
tax purposes.
6.2 RECORDS AND ACCOUNTING MAINTAINED
The books and records of Company shall be kept, and the
financial position and the results of its operations recorded, in accordance
with the accounting methods followed for federal income tax purposes. The books
and records of Company shall
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reflect all Company transactions and shall be appropriate and adequate for
Company's business. The fiscal year of Company for financial reporting and for
federal income tax purposes shall be the calendar year.
6.3 ACCESS FOR MEMBERS TO ACCOUNTING RECORDS
All books and records of Company shall be maintained at any
office of Company or at Company's principal place of business, and each Member,
and its duly authorized representative, shall have access to them at such office
of Company and the right to inspect and copy them at reasonable times.
6.4 ANNUAL TAX INFORMATION FOR MEMBERS
Company shall use its best efforts to deliver to each Member
within 90 days after the end of each fiscal year all information necessary for
the preparation of such Member's federal income tax return. Company shall also
use its best efforts to prepare, within 120 days after the end of each fiscal
year, a financial report of Company for such fiscal year, containing a balance
sheet as of the last day of the year then ended, an income statement for the
year then ended, a statement of cash flows, and a statement of reconciliation of
the Capital Accounts of Members.
6.5 TAX MATTERS FOR COMPANY HANDLED BY MANAGERS
One of the Managers shall be designated as "Tax Matters
Partner" (as defined in Code Section 6231), to represent Company (at Company's
expense) in connection with all examinations of Company's affairs by tax
authorities, including resulting judicial and administrative proceedings, and to
expend Company funds for professional services and costs associated therewith.
In its capacity as "Tax Matters Partner", the designated Manager shall oversee
Company tax affairs in the overall best interests of Company.
6.6 FEDERAL INCOME TAX ELECTIONS MADE BY MANAGERS
The Managers on behalf of Company may make all elections for
federal income tax purposes, including but not limited to, the following:
A. USE OF ACCELERATED DEPRECIATION METHODS. To the extent
permitted by applicable law and regulations, Company may elect to use an
accelerated depreciation method on any depreciable unit of the assets of
Company.
B. ADJUSTMENT OF BASIS OF ASSETS. In case of a transfer of all
or part of the Interest of any Member, Company may elect, pursuant to Code
Sections 734, 743, and 754 of the
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Code, as amended (or corresponding provisions of future law) to adjust the basis
of the assets of Company.
C. ACCOUNTING METHOD. For financial reporting purposes, the
books and records of Company shall be kept on the accrual method of accounting
applied in a consistent manner and shall reflect all transactions of Company and
be appropriate and adequate for the purposes of Company.
6.7 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS
The Members are aware of the income tax consequences of the
allocations made by Articles V and VI and hereby agree to be bound by the
provisions of this Paragraph 6.7 in reporting their shares of Company income and
loss for income tax purposes.
ARTICLE VII
CONSEQUENCES OF DEATH, DISSOLUTION,
RETIREMENT OR BANKRUPTCY OF MEMBER
7.1 UNANIMOUS CONSENT TO CONTINUE BUSINESS OF COMPANY
Upon the occurrence of any Dissolution Event, Company shall
dissolve unless the remaining Members agree to the continuation of the business
of Company. If the Member whose actions or conduct result in the Dissolution
Event ("Former Member") or such Former Member's trustees or heirs, rightfully
demands the return of its Capital Account by a written notice to the remaining
Members, Company (with unanimous consent in writing of the remaining Members)
may, within six (6) months following such written notice, purchase the Former
Member's Interest as provided in Paragraph 7.2 to avoid dissolution of Company.
7.2 PURCHASE OF MEMBER'S INTEREST
Upon the occurrence of any Dissolution Event and the agreement
of the remaining Members to continue the business of Company, and if applicable,
the rightful demand for the return of its Capital Account by the Former Member
or such Former Member's trustee or heirs, or upon the inheritance or transfer by
operation of law to any Person, the remaining Members ("Remaining Affiliated
Members") shall have an option to purchase such Membership Interest. Within
ninety (90) days of the agreement or within ninety (90) days of the receipt of
the rightful demand for the return of its Capital Account by the Former Member
or by such Former Member's trustee or heirs, or within ninety (90) days of the
inheritance or transfer by operation of law to a person, the Remaining
Affiliated Members shall notify the Managers in writing of their desires to
purchase a portion of the Former Member's Interest.
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<PAGE> 25
7.3 VALUATION OF INTEREST OF MEMBER
The Former Member's Interest shall be valued according to its
Capital Account for federal income tax purposes, provided, however, if the
Former Member or such Former Member's trustee or heirs or the Remaining
Affiliated Members electing to purchase or Company if it elects to purchase,
deems the Capital Account to vary from fair market value by more than ten
percent (10%), such Person shall be entitled to require an appraisal. In such
event, the value of the Former Member's Interest shall equal the fair market
value of the Interest as determined by agreement within ninety (90) days after
the notice to the remaining Member or, in case of a failure to agree within such
ninety (90) day period, as determined by three appraisers, one selected by the
Former Member or such Former Member's trustee(s) or heir(s), one selected by the
remaining Member or Members or Company, as the case may be, and one selected by
the two appraisers so named. The fair market value of the Former Member's
interest in Company shall be the average of the two appraisals closest in amount
to each other. In the event the fair market value is determined to be within ten
percent (10%) of the Capital Account, the party requesting such appraisal shall
pay all expenses of the same otherwise incurred by the parties offering to enter
into the transaction at the Capital Account valuation, and otherwise the
expenses shall be paid by Company.
7.4 PAYMENT OF PURCHASE PRICE
The purchase price shall be paid by Company or the Remaining
Affiliated Member, as the case may be, either: (i) in ten (10) equal annual
installments of principal together with interest, commencing to accrue from the
date of closing, at the then current Applicable Federal Rate (the "AFR") under
Section 1274(d) of the Code for the month in which the first payment is made (or
a rate per annum equal to what the AFR would be for such month under IRC Section
1274(d) of the Code if the AFR is no longer published) to fully amortize such
purchase price over such ten (10) payments with the first payment being due and
payable 60 days after the determination of the fair market value of the Former
Member's Interest in Company, or (ii) within 60 days after the determination of
the fair market value of the Former Member's Interest in Company, as Company or
the Remaining Affiliated Members, as the case may be, may elect in their sole
discretion.
7.5 PURCHASE TERMS VARIED BY AGREEMENT
Nothing contained herein is intended to prohibit Members from
agreeing upon terms and conditions for the purchase by Company or any Member of
the Interest of any Member in Company desiring to retire, withdraw or resign, in
whole or in part, as a Member (on such terms and conditions as may be agreed
upon by the selling Member and Company or the remaining Member as the case may
be), nor is anything herein intended to limit or otherwise
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<PAGE> 26
affect the ability of a Member to demand a return of its contribution to Company
as provided in the Act.
ARTICLE VIII
TRANSFER AND ASSIGNMENT OF INTERESTS
8.1 TRANSFER AND ASSIGNMENT OF INTERESTS
No Member shall be entitled to assign, convey, sell, encumber
or in any way alienate all or any part of its Interest in Company and as a
Member except as provided in this Agreement or with the prior written consent of
the other Members, which consent may be given or withheld as the other Members
may determine in their sole discretion.
8.2 OPTIMUMCARE BUY-OUT OF CARE SOURCE.
A. MANDATORY BUY-OUT IN 5TH YEAR. After the fifth (5th)
anniversary of the filing of the Articles, but before the sixth (6th)
anniversary of the filing of the Articles, OptimumCare shall purchase all of
Care Source's interest in the Company (the "Mandatory Buy-Out") for the price
and on the terms set forth in paragraph D below.
B. 4TH YEAR BUY-OUT. At any time following the fourth (4th)
anniversary of the filing of the Articles, but no later than the fifth (5th)
anniversary of the filing of the Articles, the parties shall have the following
rights (the "4th Year Options"):
(i) OptimumCare may purchase all of Care Source's
interest in the Company at the price and on the terms described in paragraph D
below; and
(ii) Care Source may request that OptimumCare
purchase all of Care Source's interest in the Company, in which case,
OptimumCare shall be obligated to purchase all of Care Source's interest in the
Company within one hundred eighty (180) days of delivery of Care Source's
request at the price and on the terms set forth in paragraph D below.
The 4th Year Options may be exercised only by giving written
notice to the other party, which notice shall specify the date upon which the
purchase of Care Source's interest shall occur.
C. CHANGE OF CONTROL. In the event that there is any single
sale, transfer, assignment, or other disposition, or any series (whether or not
related) of sales, transfers, assignments or other dispositions of any of the
issued and outstanding capital stock of OptimumCare which results in changing
the "ownership" or "control" of OptimumCare, OptimumCare shall, as soon as
practicable but in no event later than the effective date
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<PAGE> 27
of such change, give written notice thereof to Care Source and within thirty
(30) days of delivery of such notice, Care Source may request that OptimumCare
or its successor in interest purchase all of Care Source's interest in the
Company, in which case, OptimumCare (or its successor in interest) shall be
obligated to purchase all of Care Source's interest in the Company (a "Change of
Control Buy-Out") within one hundred eighty (180) days of Care Source's request
at the price and on the terms set forth in paragraph d below. "Control" means
possession, direct or indirect, of the power to elect or designate more than
fifty percent (50%) of the governing board, or to direct or cause the direction
of the management and policies of an entity, whether through the ownership of
voting securities, as a general partner, by contract, or otherwise. "Ownership"
means the possession, direct or indirect, of more than fifty percent (50%) of
the beneficial ownership interests of an entity.
D. BUY-OUT PRICE AND TERMS OF PAYMENT. The purchase price for
a Mandatory Buy-Out, the exercise of a 4th Year Option, or a Change of Control
Buy-Out (in any such case referred to as the "Buy-Out") shall be determined by
multiplying Care Source's percentage ownership in the Company on the last day of
the month immediately preceding the month in which the purchase occurs by the
product of five (5) times the amount of the Company's Net After-Tax Profit (as
defined below). For purposes of this Section 8.2D, "Net After-Tax Profit" shall
mean the product of: (i) the Company's Net Profit as reflected on its Form 1065
for the Company's taxable year most recently ended prior to the anniversary date
that triggered the Buy-Out multiplied by (ii) the lesser of 40% or the
percentage obtained by subtracting from 100% the sum of (A) the income tax rate
then applicable to corporate income of $1,000,000 under the Internal Revenue
Code plus (B) the product obtained by multiplying the income tax rate then
applicable to corporate income of $1,000,000 under the law of the state in which
the principal office of Care Source is located by the difference between 100%
and the percentage described in "(A)" above. The Buy-Out Price shall be payable
in full by OptimumCare upon the consummation of the purchase in cash, or, at the
sole and absolute discretion of OptimumCare, in such number of shares of common
stock of OptimumCare with a value equal to the Buy-Out Price (as shall be
determined by dividing the Buy-Out price with the average of the highest and
lowest trading closing prices for OptimumCare's stock as reported on the last
ten (10) days of the month immediately preceding the day the Buy-Out Price is
paid), or any combination of cash and OptimumCare common stock. Notwithstanding
the foregoing, OptimumCare shall pay the Buy-Out Price entirely in cash, unless
on the date of payment of the Buy-Out Price (the "Payout Date"): (i) the common
stock of OptimumCare (or its successor in any merger or reorganization) is
registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended, and (ii) OptimumCare's common stock (or the common stock of its
successor
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<PAGE> 28
in any merger or reorganization) is listed and traded on the OTC Bulletin Board
or another national market or exchange.
8.3 CONFIDENTIALITY; NO COMPETITION.
A. CONFIDENTIALITY. The parties hereto shall hold in
confidence the information contained in this Agreement and each of them hereby
acknowledges and agrees that all information related to this Agreement, not
otherwise known to the public, is confidential and proprietary and is not to be
disclosed to third persons without the prior written consent of each of the
parties, except:
(i) To the extent necessary to comply with any law,
rule or regulation, including, without limitation, any rule or regulation
promulgated by the SEC, or the valid order of any governmental agency or any
court of competent jurisdiction;
(ii) As part of its normal reporting or review
procedure, to its auditors and its attorneys;
(iii) To the extent necessary to obtain appropriate
insurance, to its insurance agent; or
(iv) As necessary to enforce its rights and perform
its agreements and obligations under this Agreement.
B. NONCOMPETITION BY CARE SOURCE AND CARE SOURCE PRINCIPALS.
Care Source and each Care Source Principal hereby agrees that at all times
during which Care Source has an ownership interest in the Company, and for a
period of three (3) years following (i) termination of such ownership interest
for any reason whatsoever or (ii) dissolution of the Company, neither Care
Source nor any Care Source Principal shall, except as set forth on Exhibit "C-1"
to this Agreement, either alone or with others, own in interest in, operate,
manage, be a partner, director, stockholder, advisor or consultant to any entity
which provides Services to Facilities within the State of California, or
otherwise conducts an operation within the State of California which is similar
in nature and/or scope to that of the Company (a, "Competing Business").
C. NONCOMPETITION BY OPTIMUMCARE. OptimumCare hereby agrees
that at all times during which OptimumCare has an ownership interest in the
Company, and for a period of three (3) years following (i) termination of such
ownership interest for any reason whatsoever or (ii) dissolution of the Company,
OptimumCare shall not, except as set forth on Exhibit "C-2" to this Agreement,
either alone or with others, own in interest in, operate, manage, be a partner,
director, stockholder, advisor or consultant to a Competing Business.
-22-
<PAGE> 29
D. REMEDIES. OptimumCare, Care Source and each Care Source
Principal acknowledges that the remedies at law for breach of the covenants
herein contained are inadequate and that in the event of a breach or of a
threatened breach by them of the provisions of this Agreement, the Company shall
be entitled to preliminary and permanent injunctive relief to the fullest extent
available under applicable law. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies available to the Company for such
breach or threatened breach, including the recovery of damages from OptimumCare,
Care Source or any of the Care Source Principals.
E. ACKNOWLEDGEMENTS OF OPTIMUMCARE, CARE SOURCE AND THE CARE
SOURCE PRINCIPALS. OptimumCare, Care Source and each Care Source Principal
agrees that (a) their respective covenants and agreements under this Agreement
have been given for adequate and valuable consideration; and (b) the
restrictions and prohibitions contained in this Agreement applicable to them are
reasonable in geographic scope, duration and in all other respects and are
necessary for the protection of the legitimate business and commercial interests
of the Company; and (c) each has and will have ample opportunity to obtain
suitable employment with businesses other than a Competing Business and in
fields otherwise not affected by this Agreement.
F. SAVINGS CLAUSE. If any one or more of the provisions
contained in this paragraph F shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the validity, legality or unenforceability of
any other provisions of this Agreement. Such invalid, illegal or unenforceable
provision or provisions shall be deemed to be modified to the extent necessary
to render it, or them, valid, legal and enforceable, and if no such modification
shall render it, or them, valid, legal and enforceable, then this paragraph F
shall be construed as not containing the provision or provisions held to be
invalid, illegal or unenforceable, and the rights and obligations of the parties
shall be construed and enforced accordingly.
ARTICLE IX
DISSOLUTION AND WINDING UP
9.1 CONDITIONS OF DISSOLUTION
Company shall be dissolved, its assets shall be disposed of,
and its affairs wound up on the first to occur of the following:
A. A determination by the unanimous written agreement of the
Members that Company should be dissolved;
B. The occurrence of a Dissolution Event and the failure of
Company or the remaining Member to purchase the
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<PAGE> 30
Interest of the Former Member as provided in such Paragraph 7.2 or provide
unanimous consent for a transfer resulting in the occurrence of the Dissolution
Event;
C. Sale of all or substantially all of the assets of Company;
D. The expiration of the period for the duration of Company
term as stated in its Articles;
E. Upon such terms as provided in the Master Joint Venture
Agreement; or
F. At such earlier time as may be provided by the Act.
9.2 STATEMENT OF INTENT TO DISSOLVE
As soon as possible following the occurrence of any of the
events specified in this Article effecting the dissolution of Company, the
Managers shall execute a statement of intent to dissolve in such form as shall
be prescribed by the Secretary of State and file the statement as required by
the Act.
9.3 WINDING UP
Upon the occurrence of a liquidating event for purposes of
Regulations Section 1.704-1(b), Company shall continue solely for the purpose of
winding up its affairs in an orderly manner, liquidating its assets, and
satisfying the claims of its creditors. No Member shall take any action that is
inconsistent with, or not necessary to or appropriate for, winding up the
business and affairs of Company. To the extent not inconsistent with the
foregoing, all covenants and obligations in the Agreement shall continue in full
force and effect until such time as the assets have been distributed and Company
has terminated.
9.4 ORDER OF PAYMENT OF LIABILITIES UPON DISSOLUTION
In settling accounts of Company after dissolution, the assets
of Company shall be entitled to be paid and distributed in the following order,
all as required by the Act:
(i) To creditors other than Members, in the order of
priority as provided by law;
(ii) To Members on account of any loans to Company;
and
(iii) To Members in accordance with the positive
balances of their respective Capital Account Balances.
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<PAGE> 31
9.5 COMPLIANCE WITH REGULATIONS
All payments to the Members upon the winding and dissolution
of Company shall be strictly in accordance with the positive capital account
balance limitation and other requirements of Regulations Section
1.704-1(b)(2)(ii)(d).
9.6 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION
Except as otherwise specifically provided in the Agreement,
each Member shall only be entitled to look solely at the assets of Company for
the return of its positive capital account balance.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION OF MEMBERS AND MANAGERS
To the greatest extent not inconsistent with the laws and
public policies of California, Company may, and when required by law shall,
indemnify any Member or Manager made a party to any proceeding because such
Person is or was a Member or Manager, against all liability incurred by such
individual in connection with any proceeding; provided that it shall be
determined in the specific case in accordance with Paragraph 10.7 of this
Article that indemnification of such Person is permissible and appropriate, or
mandatory, in the circumstances because the individual has met the standard of
conduct for indemnification set forth in this Article X.
10.2 UNDERTAKINGS FOR INDEMNIFICATION
Company may pay for or reimburse the reasonable expenses
incurred by a Member or Manager in connection with any such proceeding in
advance of final disposition thereof if (i) the Person furnishes Company a
written affirmation of the individual's good faith belief that he, she or it has
met the standard of conduct for indemnification described in Paragraph 10.6,
(ii) the Person furnishes Company a written undertaking, executed personally or
on such Person's behalf, to repay the advance if it is ultimately determined
that such Person did not meet such standard of conduct, and (iii) a
determination is made in accordance with Paragraph 10.7 that based upon facts
then known to those making the determination, indemnification would not be
precluded under this Article.
10.3 REQUIRED TO BE GENERAL OBLIGATION
The undertaking described above must be a general obligation
of the Person, subject to such reasonable limitations as Company may permit, but
need not be secured and may be
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<PAGE> 32
accepted without reference to financial ability to make repayment.
10.4 ADVANCEMENT OF EXPENSES
Upon demand by a Member or Manager for indemnification or
advancement of expenses, as the case may be, Company shall expeditiously
determine whether the Member or Manager is entitled thereto in accordance with
this Article. The indemnification and advancement of expenses provided for under
this Article shall be applicable to any proceeding arising from acts or
omissions occurring before or after the adoption of this Article.
10.5 INDEMNIFICATION OF OTHERS
Company shall have the power, but not the obligation, to
indemnify any Person who is or was an employee or agent of Company to the same
extent as if such Person was a Member or Manager.
10.6 STANDARDS OF CONDUCT FOR INDEMNIFICATION
Indemnification is permissible under this Article only if (i)
the person conducted himself in good faith, (ii) reasonably believed that his
conduct was in or at least not opposed to Company's best interest, and (iii) in
the case of any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of a proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent is
not, of itself, determinative that the Person did not meet the standard of
conduct described in this Paragraph 10.6.
10.7 PROCEDURES TO DETERMINE INDEMNIFICATION
A determination as to whether indemnification or advancement
of expenses is permissible shall be made by any one of the following procedures:
(i) By agreement of the Members if the Members are
not parties to the proceedings;
(ii) By special legal counsel selected by the
Members.
10.8 INSURANCE FOR INDEMNIFICATION
Company may purchase and maintain insurance for its benefit,
the benefit of any Person who is entitled to indemnification under this Article,
or both, against any liability asserted against or incurred by such individual
in any capacity or arising out of such individual's service with
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<PAGE> 33
Company, whether or not Company would have the power to indemnify such Person
against such liability.
ARTICLE XI
MISCELLANEOUS
11.1 COMPLETE AGREEMENT
The Agreement, the Articles and the Master Joint Venture
Agreement constitute the complete and exclusive statement of agreement among the
Members. The Agreement, the Articles and the Master Joint Venture Agreement
replace and supersede all prior written and oral agreements by and among the
Members, and to the extent a provision of the Master Joint Venture Agreement
conflicts with the Agreement or the Articles, then the terms of the Agreement or
the Articles, as the case may be, shall govern.
11.2 BINDING EFFECT
Subject to the provisions of the Agreement relating to
transferability, the Agreement will be binding upon and inure to the benefit of
the Members, and their respective distributees, successors and assigns, but only
to the extent that assignment and approval by the Members is in accordance with
the Act, the Articles and the Agreement.
11.3 NO THIRD PARTY BENEFICIARY
The Agreement is made solely and specifically among and for
the benefit of the parties hereto, and their respective successors and assigns
subject to the express provisions hereof relating to successors and assigns, and
no other person will have any rights, interest, or claims hereunder or be
entitled to any benefits under or on account of the Agreement as a third party
beneficiary or otherwise.
11.4 GENDER AND NUMBER IN NOUNS AND PRONOUNS
Common nouns and pronouns will be deemed to refer to the
masculine, feminine, neuter, singular and plural, as the identity of the person
or persons, firm or corporation may in the context require. The singular shall
include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, as the context requires. Any reference to the Code,
Regulations, the Act, California Statutes or other statutes or laws will include
all amendments, modifications, or replacements of the specific sections and
provisions concerned.
11.5 EXHIBITS
All Exhibits attached to the Agreement are incorporated and
shall be treated as if set forth herein.
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<PAGE> 34
11.6 SEVERABILITY
If any provision of the Agreement is held to be illegal,
invalid, or unenforceable under the present or future laws effective during the
term of the Agreement, such provision will be fully severable; the Agreement
will be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part of the Agreement; and the remaining
provisions of the Agreement will remain in full force and effect and will not be
affected by the illegal, invalid, or unenforceable provision or by its severance
from the Agreement. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision, there will be added automatically as a part of the
Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
11.7 ADDITIONAL DOCUMENTS AND ACTS
Each Member agrees to execute and deliver such additional
documents and instruments and to perform such additional acts as may be
necessary or appropriate to effectuate, carry out and perform all of the terms,
provisions, and conditions of the Agreement and the transactions contemplated
hereby.
11.8 NOTICES
Any notice to be given or to be served upon Company or any
party hereto in connection with the Agreement must be in writing and will be
deemed to have been given and received when delivered to the address specified
by the party to receive the notice. Such notices will be given to a Member at
the address specified in Exhibit A hereto. Any Member or Company may, at any
time by giving 5 days' prior written notice to the other Member and Company,
designate any other address in substitution of the foregoing address to which
such notice will be given.
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<PAGE> 35
11.9 AMENDMENTS
All amendments to the Agreement will be in writing and signed
by all of the Members.
IN WITNESS WHEREOF, all of the Members of OPTIMUM CARE SOURCE,
LLC, a California limited liability company, have executed the Agreement,
effective the 24th day of April, 1996.
OptimumCare Corporation,
a Delaware corporation
By: /s/ Edward A. Johnson,
----------------------------------
Edward A. Johnson, President
Date: April 24, 1996
----------------------------
Professional Care Source, Inc.,
a California corporation
By: /s/ Teri L Jolin
----------------------------------
Name: Teri L. Jolin
-----------------------------
Title: President/CEO
----------------------------
Date: April 24, 1996
-----------------------------
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<PAGE> 36
EXHIBIT A
CAPITAL CONTRIBUTION OF MEMBERS
AS OF OPTIMUM CARE SOURCE, 1996
<TABLE>
<CAPTION>
MEMBER'S
MEMBER'S MEMBER'S PERCENTAGE
NAME MEMBER'S ADDRESS CAPITAL CONTRIBUTION INTEREST
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OptimumCare 30011 Ivy Glenn Drive (1) The sum of fifty thousand 70%
Corporation Laguna Niguel, CA 92677 dollars ($50,000) in cash upon
the filing of the Articles and
(2) an additional sum, which
together with the sum set forth
in clause (1) of this
subparagraph (i), shall not
exceed in the aggregate the sum
of two hundred thousand dollars
($200,000), which sum shall be
calculated in accordance with
the Business Plan (as
hereinafter defined) and
contributed at such times and in
such amounts during the twenty
four (24) month period following
the filing of the Articles as
determined by the management
committee of the Company in its
sole and absolute discretion.
Professional Care c/o Teri L. Jolin, All of its rights and obligations 30%
Source, Inc.Pro 11328 Elderwood St., under those certain agreements
Los Angeles CA 90049 to provide Services at Facilities
which are identified on Schedule
1 hereto (the "Facilities
Contracts"), which are valued at
twenty one thousand dollars
($21,000).
</TABLE>
<PAGE> 37
SCHEDULE 1
FACILITIES CONTRACTS
Alcott Rehabilitation Hospital
3551 West Olympic Boulevard
Los Angeles, California 90019
Citrus Nursing Center
9440 Citrus Avenue
Fontana, California 92335
Citrus Retirement Center
9448 Citrus Avenue
Fontana, California 92335
Extended Care Hospital of Riverside
8171 Magnolia
Riverside, California 93504
Del Mar Convalescent Hospital
3136 North Del Mar Avenue
Rosemead, California 91770
Fountain Care Center
1835 West La Veta Avenue
Orange, California 92668-4196
Garden Park Care Center
12681 Haster Street
Garden Grove, California 92640
Laurel Convalescent Hospital
7509 North Laurel Avenue
Fontana, California 92336
Monterey Park Convalescent Hospital
416 North Garfield Avenue
Monterey Park, California 91754
North Valley Nursing Center
7660 Wyngate Street
Tujunga, California 91042
Paramount Convalescent Center
8558 East Rosecrans Avenue
Paramount, California 90723
Park Regency Retirement Center
1750 West La Habara Boulevard
La Habra, California 90631
<PAGE> 38
Schedule 1
Page 2
Sun Mar Nursing Center
1720 West Orange Avenue
Anaheim, California 92804
Sunset Manor Convalescent Hospital
2720 Nevada Avenue
El Monte, California 91733
<PAGE> 39
EXHIBIT B
ALLOCATION OF NET PROFITS AND NET LOSSES
<TABLE>
<CAPTION>
Net Profits Net Losses
Name of Member Percentage Percentage
<S> <C> <C>
OptimumCare 70% 70%
Care Source 30% 30%
100% 100%
==== ====
</TABLE>
<PAGE> 40
EXHIBIT C-1
OPTIMUMCARE ACTIVITIES NOT SUBJECT TO SECTION 8.C
(1) Associated Medical Psychiatrists
Lakewood, California
(2) Psychological Healthcare
Lakewood, California
(3) Aegis Psychological Corp.
Mission Hills, California
(4) Behavioral Health Information Management
Systems Mission Hills, California
(5) Valley Oaks Behavioral Medical Group
Westlake, California
(6) Center for Behavioral Services
West Los Angeles, California
(7) Northern California Group Practice Alliance
Northern California
(8) College Health I.P.A.
Cerritos, California
<PAGE> 41
EXHIBIT C-2
OPTIMUMCARE ACTIVITIES NOT SUBJECT TO SECTION 8.3(C)
Peggy Minnick
1. Positions as CEO-CPC and consultant of Alhambra Hospital- acute
psychiatric hospital.
2. Consultation regarding management and clinical issues of operating
acute psychiatric hospitals and acute psychiatric units.
3. Consultation regarding nursing management and regulatory agency
compliance for skilled nursing facilities.
4. Owning/operating adult board and care facilities and residential care
facilities for the elderly.
Joseph H. Dadourian
1. Consultation to Psychiatric Hospitals on Behavioral Health Systems:
identifying and developing new business opportunities in the area of
mental health services.
2. Consultation and training to med/surg and SNF hospital's related to
patient care, employee issues, violence in the workplace and critical
incident stress management.
3. Consultation and training programs to residential care facilities,
board and care and group homes related to clinical issues, employee
issues, violence in the workplace and critical incident stress
management.
4. Rendering of psychological care in all appropriate settings, i.e.,
hospital outpatient, board and care, skilled nursing facilities,
residential care facilities, etc.
5. Rendering of all aspects of employee assistance services.
6. Behavioral health consultation to business and industries related to a
variety of issues involving employees.
7. Professional trainer on issues related to behavioral health in the
workplace.
8. Partner in A Accredited Psychiatric Medical Group, Inc., a
multidisciplinary psychiatric/psychological private practice offering a
full range of services from outpatient to inpatient to residential
facilities.
<PAGE> 42
EXHIBIT C-2
Page 2
Teri L. Jolin
1. Consultation to health care clients regarding marketing and business
development in areas outside of behavioral health services in skilled
nursing facilities.
2. Conducting sales training as an independent contractor to Vital
Learning for all industry clients.
<PAGE> 1
EXHIBIT 10.78
MASTER JOINT VENTURE AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Joint Venture........................................................................................ 1
a. Formation................................................................................... 1
b. Initial Capitalization...................................................................... 1
c. Operating Agreement......................................................................... 2
d. Business Plan............................................................................... 2
2. Collection of Accounts............................................................................... 2
3. Facilities Contracts................................................................................. 2
4. Payment to Care Source Principals.................................................................... 3
5. Employment of Care Source Principals................................................................. 3
6. OptimumCare Stock Options............................................................................ 3
7. Company's Principal Place of Business................................................................ 3
8. Confidentiality; No Competition...................................................................... 3
a. Confidentiality............................................................................. 3
b. Noncompetition by Care Source and Care Source
Principals.................................................................................. 4
c. Noncompetition by OptimumCare............................................................... 4
d. Remedies.................................................................................... 4
e. Acknowledgements of OptimumCare, Care Source and the
Care Source Principals...................................................................... 4
f. Savings Clause.............................................................................. 5
9. Representations and Warranties of Care Source........................................................ 5
a. Status; Authority........................................................................... 5
b. Facility Contracts.......................................................................... 5
c. Adverse Claims.............................................................................. 5
d. Financial Condition......................................................................... 5
e. No Misrepresentations....................................................................... 6
10. Representations and Warranties of OptimumCare........................................................ 6
a. Status; Authority........................................................................... 6
b. No Misrepresentations....................................................................... 6
11. Survival of Representations and Warranties........................................................... 6
</TABLE>
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<TABLE>
<S> <C> <C>
12. Indemnification...................................................................................... 6
a. Care Source................................................................................. 6
b. OptimumCare................................................................................. 7
c. No Representations and Warranties Made as to Legal
Effect of Agreement......................................................................... 7
13. OptimumCare Buy-Out of Care Source................................................................... 7
a. Mandatory Buy-Out in 5th Year............................................................... 7
b. 4th Year Buy-Out............................................................................ 7
c. Change of Control........................................................................... 8
d. Buy-Out Price and Terms of Payment.......................................................... 8
14. Rights of First Refusal.............................................................................. 9
a. OptimumCare Grant of Rights of First Refusal................................................ 9
b. Care Source and Care Source Principals Grants of
Rights of First Refusal..................................................................... 9
15. Termination.......................................................................................... 10
16. Mandatory Repurchase................................................................................. 10
17. Miscellaneous........................................................................................ 11
a. Notices..................................................................................... 11
b. Headings.................................................................................... 11
c. Governing Law............................................................................... 11
d. Partial Invalidity.......................................................................... 11
e. Successors and Assigns...................................................................... 12
f. Waiver...................................................................................... 12
g. Time of the Essence......................................................................... 12
h. Expenses.................................................................................... 12
i. Attorneys Fees.............................................................................. 12
j. Further Assurances.......................................................................... 12
k. Exhibits.................................................................................... 13
l. Integration................................................................................. 13
m. Amendments.................................................................................. 13
n. Counterparts................................................................................ 13
o. Authority................................................................................... 14
</TABLE>
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EXHIBITS
Exhibit A - Articles of Organization
Exhibit B - Operating Agreement
Exhibit C - Form of Employment Agreement
Exhibit D - Terms of Options
Exhibit E-1 - Care Source and Care Source Principals
Activities Not Subject to Section 8.b
Exhibit E-2 - OptimumCare Activities Not Subject
to Section 8.c
Exhibit F - Service Area
SCHEDULES
Schedule 1 - Facilities Contracts
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MASTER JOINT VENTURE AGREEMENT
THIS MASTER JOINT VENTURE AGREEMENT ("Agreement") is entered into by
and among OPTIMUMCARE CORPORATION, a Delaware corporation ("OptimumCare"), and
PROFESSIONAL CARE SOURCE, INC., a California corporation ("Care Source"), Peggy
Minnick, R.N. ("Minnick"), Teri Jolin, M.B.A. ("Jolin"), and Joseph H.
Dadourian, Ed.D. ("Dadourian"), effective April 19, 1996 (the "Effective Date").
RECITALS
A. OptimumCare and Care Source are each in the business, among
other things, of providing management and other administrative services to
behavioral health care and counseling practices and clinics (the "Services").
B. Minnick, Jolin and Dadourian are all of the Shareholders of
Care Source (the "Care Source Principals").
C. The parties desire to enter into a joint venture for the
purpose of jointly providing Services at skilled nursing and other similar bed
and board health care facilities (the "Facilities").
D. The parties desire to form and operate the joint venture and
to enter into such other arrangements as more fully described herein.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Joint Venture. The parties agree to form a limited liability company
(the "Company") under California law for the purpose of providing Services at
Facilities. In order to accomplish the foregoing:
a. Formation. The parties shall file with the Secretary of State
of the State of California Articles of Organization for the Company pursuant to
Title 2.5 of the California Corporations Code (the "Limited Liability Company
Act") in substantially the same form as Exhibit "A" hereto (the "Articles")
within ten (10) days of the Effective Date.
b. Initial Capitalization. In exchange for their respective
ownership interests, the parties shall make capital contributions to the Company
as follows:
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i) OptimumCare. OptimumCare shall contribute (1) the sum
of fifty thousand dollars ($50,000) in cash upon the filing of the Articles and
(2) an additional sum, which together with the sum set forth in clause (1) of
this subparagraph (i), shall not exceed in the aggregate the sum of two hundred
thousand dollars ($200,000), which sum shall be calculated in accordance with
the Business Plan (as hereinafter defined) and contributed at such times and in
such amounts during the twenty four (24) month period following the filing of
the Articles as determined by the management committee of the Company in its
sole and absolute discretion. In return for the cash contributions described
above and services rendered by OptimumCare during the organizational period of
the Company, OptimumCare shall receive a seventy percent (70%) interest in the
Company as more particularly described in the operating agreement of the Company
(the "Operating Agreement").
ii) Care Source. Upon the filing of the Articles, Care
Source shall contribute all of its rights and obligations under those certain
agreements to provide Services at Facilities which are identified on Schedule 1
hereto (the "Facilities Contracts"), which are valued at twenty one thousand
dollars ($21,000). In return for the assignment of the Facilities Contracts
described above, Care Source shall receive a thirty percent (30%) interest in
the Company as more particularly described in the Operating Agreement.
c. Operating Agreement. The affairs of the Company shall be
managed in accordance with the terms of the Operating Agreement which is
attached hereto as Exhibit "B" (the "Operating Agreement"), which the parties
shall execute concurrently with the execution of this Agreement.
d. Business Plan. Upon the execution of this Agreement, Care
Source shall submit to OptimumCare a written business plan for the Company and
proposed budget for the first two (2) years of the Company's operations
(collectively, the "Business Plan")..
2. Collection of Accounts. The parties agree that under this Agreement,
Care Source is not contributing to the Company and neither the Company nor
OptimumCare is acquiring from Care Source any assets of Care Source not
specified in Section 1, paragraph b above, and all other assets of Care Source
shall remain the sole property of Care Source, including, without limitation,
any contract, agreement, lease of any nature or any cash or any of the accounts
receivable of Care Source in existence as of the date upon which the Articles
are filed.
3. Facilities Contracts. From and after the date upon which the Articles
are filed, the Company shall assume and perform all of Care Source's rights,
duties, and obligations under the Facility Contracts (other than obligations
relating to any period
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prior to the date upon which the Articles are filed). Other than as provided in
the preceding sentence, the Company shall not assume any obligations or
liabilities of Care Source of any kind or nature, including, without limitation,
contracts, leases, security agreements, trade payables, claims for malpractice,
employee claims or liabilities or any other debts or liabilities of Care Source,
all of which shall remain the obligations of Care Source.
4. Payment to Care Source Principals. Upon the filing of the Articles,
OptimumCare shall pay each of the Care Source Principals eleven thousand dollars
($11,000) in cash. In addition, the Company shall pay Care Source two thousand
five hundred dollars ($2,500) in cash for legal expenses incurred by Care
Source.
5. Employment of Care Source Principals. Upon the filing of the Articles,
the Care Source Principals shall become employees of the Company and Care Source
shall cause each Care Source Principal to enter into an Employment Agreement
with the Company in substantially the same form as Exhibit "C" hereto.
6. OptimumCare Stock Options. Upon the execution of the Employment
Agreements, OptimumCare shall grant to each of the Care Source Principals
options to purchase up to thirty three thousand (33,000) shares of OptimumCare
common stock on the terms and conditions set forth therein. OptimumCare shall
register the issuance of the shares issuable upon exercise of the stock options
pursuant to the Stock Option Agreement on a registration statement on Form S-8.
7. Company's Principal Place of Business. OptimumCare agrees to make
available to the Company up to two offices of leasable space at OptimumCare's
Playa del Rey facility (the "OptimumCare Space") for use as the Company's
principal place of business at no charge to the Company during the one (1) year
period following the filing of the Articles. Thereafter, OptimumCare agrees that
so long as the OptimumCare space is vacant or otherwise available, as determined
in OptimumCare's sole and absolute discretion, OptimumCare shall make the
OptimumCare space available to the Company at the then prevailing market rental
rate for similar commercial space.
8. Confidentiality; No Competition.
a. Confidentiality. The parties hereto shall hold in confidence
the information contained in this Agreement and each of them hereby acknowledges
and agrees that all information related to this Agreement, not otherwise known
to the public, is confidential and proprietary and is not to be disclosed to
third persons without the prior written consent of each of the parties, except:
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<PAGE> 8
(i) To the extent necessary to comply with any law, rule
or regulation, including, without limitation, any rule or regulation promulgated
by the SEC, or the valid order of any governmental agency or any court of
competent jurisdiction;
(ii) As part of its normal reporting or review procedure,
to its auditors and its attorneys;
(iii) To the extent necessary to obtain appropriate
insurance, to its insurance agent; or
(iv) As necessary to enforce its rights and perform its
agreements and obligations under this Agreement.
b. Noncompetition by Care Source and Care Source Principals. Care
Source and each Care Source Principal hereby agrees that at all times during
which Care Source has an ownership interest in the Company, and for a period of
three (3) years following termination of such ownership interest for any reason
whatsoever, neither Care Source nor any Care Source Principal shall, except as
set forth on Exhibit "D-1" to this Agreement, either alone or with others, own
in interest in, operate, manage, be a partner, director, stockholder, advisor or
consultant to any entity which provides Services to Facilities within the State
of California, or otherwise conducts an operation within the State of California
which is similar in nature and/or scope to that of the Company (a, "Competing
Business").
c. Noncompetition by OptimumCare. OptimumCare hereby agrees that
at all times during which OptimumCare has an ownership interest in the Company,
and for a period of three (3) years following termination of such ownership
interest for any reason whatsoever, OptimumCare shall not, except as set forth
on Exhibit "D-2" to this Agreement, either alone or with others, own in interest
in, operate, manage, be a partner, director, stockholder, advisor or consultant
to a Competing Business.
d. Remedies. OptimumCare, Care Source and each Care Source
Principal acknowledges that the remedies at law for breach of the covenants
herein contained are inadequate and that in the event of a breach or of a
threatened breach by them of the provisions of this Agreement, the Company shall
be entitled to preliminary and permanent injunctive relief to the fullest extent
available under applicable law. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies available to the Company for such
breach or threatened breach, including the recovery of damages from OptimumCare,
Care Source or any of the Care Source Principals.
e. Acknowledgements of OptimumCare, Care Source and the Care
Source Principals. OptimumCare, Care Source and each Care Source Principal
agrees that (a) their respective covenants and
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<PAGE> 9
agreements under this Agreement have been given for adequate and valuable
consideration; and (b) the restrictions and prohibitions contained in this
Agreement applicable to them are reasonable in geographic scope, duration and in
all other respects and are necessary for the protection of the legitimate
business and commercial interests of the Company; and (c) each has and will have
ample opportunity to obtain suitable employment with businesses other than a
Competing Business and in fields otherwise not affected by this Agreement.
f. Savings Clause. If any one or more of the provisions contained
in this paragraph (f) shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the validity, legality or unenforceability of any other
provisions of this Agreement. Such invalid, illegal or unenforceable provision
or provisions shall be deemed to be modified to the extent necessary to render
it, or them, valid, legal and enforceable, and if no such modification shall
render it, or them, valid, legal and enforceable, then this paragraph (f) shall
be construed as not containing the provision or provisions held to be invalid,
illegal or unenforceable, and the rights and obligations of the parties shall be
construed and enforced accordingly.
9. Representations and Warranties of Care Source. As of the Effective
Date, Care Source represents and warrants as follows:
a. Status; Authority. Care Source is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Care Source has the power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby, and has obtained all
necessary approvals therefor. Care Source has all requisite corporate power and
authority to own, lease and operate its properties and to carry out its business
as now being conducted. The Care Source Principals are the only shareholders of
Care Source.
b. Facility Contracts. Care Source is a party to all of the
Facilities Contracts which are identified on Schedule 1, each of which is in
full force and effect and all consents necessary for the assignment of the
Facilities Contracts have been obtained or will be obtained prior to the filing
of the Articles.
c. Adverse Claims. To the best of Care Source's knowledge, there
are no claims, actions, suits, litigation, administrative or governmental
proceedings or investigations pending or threatened against Care Source which
would materially affect Care Source's obligations hereunder.
d. Financial Condition. There have been no material adverse
changes in Care Source's financial condition since October 17, 1995.
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<PAGE> 10
e. No Misrepresentations. To the best of the knowledge of Care
Source and each of the Care Source Principals, after reasonable investigation,
no representation or warranty by Care Source, and no statement or certificate
furnished by Care Source to OptimumCare pursuant hereto or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
10. Representations and Warranties of OptimumCare. As of the Effective
Date, OptimumCare represents and warrants as follows:
a. Status; Authority. OptimumCare is a corporation duly
organized, and validly existing under the laws of the State of Delaware, and is
authorized to do business in the State of California. OptimumCare has the power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby, and has obtained all necessary approvals therefor.
b. No Misrepresentations. To the best of OptimumCare's knowledge
after reasonable investigation, no representation or warranty by OptimumCare,
and no statement or certificate furnished by OptimumCare to Care Source pursuant
hereto or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein not misleading.
11. Survival of Representations and Warranties. The representations and
warranties of each of the parties as set forth herein shall expressly survive
the filing of the Articles.
12. Indemnification.
a. Care Source. Care Source and each of the Care Source
Principals shall indemnify, defend and hold OptimumCare and each of its
directors, officers, shareholders, employees and agents harmless from and
against any and all liabilities, losses, damages, claims, causes of action,
costs and expenses (including, without limitation, reasonable attorneys' fees),
arising out of or relating to:
i) any actions or omissions of Care Source or any of
its directors, officers, shareholders (including the Care Source Principals)
employees or agents acting on its behalf;
ii) all debts, liabilities or obligations of Care Source
other than those expressly assumed by the Company under Section 4 above; and
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<PAGE> 11
iii) any inaccuracy in or breach or non-performance of any
representation, warranty, covenant or agreement of Care Source contained in this
Agreement or any agreement or document referred to herein or delivered in
writing pursuant to this Agreement.
b. OptimumCare. OptimumCare shall indemnify, defend and hold Care
Source and its directors, officers, shareholders (including the Care Source
Principals), employees and agents harmless from and against any and all
liabilities, losses, damages, claims, causes of action, costs and expenses
(including, without limitation, reasonable attorneys' fees), arising out of any
inaccuracy in or breach or non-performance of any representation, warranty,
covenant or agreement of OptimumCare contained in this Agreement or any
agreement or document referred to herein or delivered in writing pursuant to
this Agreement.
c. No Representations and Warranties Made as to Legal Effect of
Agreement. No representation, warranty or recommendation is made by either party
to this Agreement regarding the legal sufficiency, legal effect or tax
consequences of this Agreement or the transactions contemplated hereby.
13. OptimumCare Buy-Out of Care Source.
a. Mandatory Buy-Out in 5th Year. After the fifth (5th)
anniversary of the filing of the Articles, but before the sixth (6th)
anniversary of the filing of the Articles, OptimumCare shall purchase all of
Care Source's interest in the Company (the "Mandatory Buy-Out") for the price
and on the terms set forth in paragraph d below.
b. 4th Year Buy-Out. At any time following the fourth (4th)
anniversary of the filing of the Articles, but no later than the fifth (5th)
anniversary of the filing of the Articles, the parties shall have the following
rights (the "4th Year Options"):
i) OptimumCare may purchase all of Care Source's
interest in the Company at the price and on the terms described in paragraph d
below; and
ii) Care Source may request that OptimumCare purchase all
of Care Source's interest in the Company, in which case, OptimumCare shall be
obligated to purchase all of Care Source's interest in the Company within one
hundred eighty (180) days of delivery of Care Source's request at the price and
on the terms set forth in paragraph d below.
The 4th Year Options may be exercised only by giving written notice to
the other party, which notice shall specify the date upon which the purchase of
Care Source's interest shall occur.
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<PAGE> 12
c. Change of Control. In the event that there is any single sale,
transfer, assignment, or other disposition, or any series (whether or not
related) of sales, transfers, assignments or other dispositions of any of the
issued and outstanding capital stock of OptimumCare which results in changing
the "ownership" or "control" of OptimumCare, OptimumCare shall, as soon as
practicable but in no event later than the effective date of such change, give
written notice thereof to Care Source and within thirty (30) days of delivery of
such notice, Care Source may request that OptimumCare or its successor in
interest purchase all of Care Source's interest in the Company, in which case,
OptimumCare (or its successor in interest) shall be obligated to purchase all of
Care Source's interest in the Company (a "Change of Control Buy-Out") within one
hundred eighty (180) days of Care Source's request at the price and on the terms
set forth in paragraph d below. "Control" means possession, direct or indirect,
of the power to elect or designate more than fifty percent (50%) of the
governing board, or to direct or cause the direction of the management and
policies of an entity, whether through the ownership of voting securities, as a
general partner, by contract, or otherwise. "Ownership" means the possession,
direct or indirect, of more than fifty percent (50%) of the beneficial ownership
interests of an entity.
d. Buy-Out Price and Terms of Payment. The purchase price for a
Mandatory Buy-Out, the exercise of a 4th Year Option, or a Change of Control
Buy-Out (in any such case referred to as the "Buy-Out") shall be determined by
multiplying Care Source's percentage ownership in the Company on the last day of
the month immediately preceding the month in which the purchase occurs by the
product of five (5) times the amount of the Company's Net After-Tax Profit (as
defined below) (the "Buy-Out Price"). For purposes of this Section 12, d, "Net
After-Tax Profit" shall mean the product of: (i) the Company's Net Profit as
reflected on its Form 1065 for the Company's taxable year most recently ended
prior to the anniversary date that triggered the Buy-Out multiplied by (ii) the
lesser of 40% or the percentage obtained by subtracting from 100% the sum of (A)
the income tax rate then applicable to corporate income of $1,000,000 under the
Internal Revenue Code plus (B) the product obtained by multiplying the income
tax rate then applicable to corporate income of $1,000,000 under the law of the
state in which the principal office of Care Source is located by the difference
between 100% and the percentage described in "(A)" above. The Buy-Out Price
shall be payable in full by OptimumCare upon the consummation of the purchase in
cash, or, at the sole and absolute discretion of OptimumCare, in such number of
shares of common stock of OptimumCare with a value equal to the Buy-Out Price
(as shall be determined by dividing the Buy-Out Price with the average of the
highest and lowest trading closing prices for OptimumCare's stock as reported on
the last ten (10) days of the month immediately preceding the day the Buy-Out
Price is paid), or any combination of cash and OptimumCare common stock.
Notwithstanding the
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foregoing, OptimumCare shall pay the Buy-Out Price entirely in cash, unless on
the date of payment of the Buy-Out Price: (i) the common stock of OptimumCare
(or its successor in any merger or reorganization) is registered under Section
12(g) of the Securities Exchange Act of 1934, as amended; and (ii) OptimumCare's
common stock (or the common stock of its successor in any merger or
reorganization) is listed and traded on the OTB Bulletin Board Market or another
national market or exchange.
14. Rights of First Refusal.
a. OptimumCare Grant of Rights of First Refusal. During the term
of this Agreement and for a period of two (2) years following expiration or
termination thereof, OptimumCare hereby irrevocably and unconditionally grants
to the Company a continuing right of first refusal to participate on an equal
basis with OptimumCare in the event that OptimumCare is offered an opportunity
to acquire, own or enter into a contractual or investment relationship, directly
or indirectly, in or with any person, corporation, partnership or other business
entity (whether as an operator, owner, partner, shareholder, creditor,
contractor, consultant or otherwise) which provides Services at Facilities
(each, an "Opportunity") within the Service Area (as hereinafter defined). In
the event that OptimumCare is offered an Opportunity, OptimumCare shall promptly
deliver a true, complete and legible copy of the terms of such Opportunity (the
"Offer") to the Company. The Company shall then have thirty (30) days following
receipt of the Offer to either elect to exercise its right of first refusal to
participate in the Opportunity in accordance with the terms of the Offer, or to
refuse to exercise such right. In the event that the Company exercises its right
of first refusal, the Company shall participate in the Opportunity in accordance
with the provisions of the Offer. In the event that the Company elects not to
exercise its right of first refusal, then OptimumCare shall be entitled for a
period of sixty (60) days following the Company's election not to exercise its
right of first refusal to participate in the Opportunity on its own or with any
person, corporation, partnership or other business entity strictly in accordance
with the terms of the Offer. In the event that the Opportunity is not
consummated within said sixty (60)-day period, or the Offer is amended in any
fashion whatsoever, the Company's right of first refusal shall automatically be
reinstated hereunder. As used herein, the term "Service Area" shall mean the
geographic area described on Exhibit "F."
b. Care Source and Care Source Principals Grants of Rights of
First Refusal. In consideration for the rights granted pursuant to paragraph a
above, during the term of this Agreement and for a period of two (2) years
following expiration or termination thereof, Care Source and each of the Care
Source Principals (for purposes of this paragraph b, each of the foregoing is
hereinafter defined as an "Offeree") hereby
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<PAGE> 14
irrevocably and unconditionally grant to the Company a continuing right of first
refusal to participate on an equal basis with them in the event that any of them
is offered the an Opportunity within the Service Area. In the event that an
Offeree is offered an Opportunity, the Offeree shall promptly deliver a true,
complete and legible copy of the Offer to the Company. The Company shall then
have thirty (30) days following receipt of the Offer to either elect to exercise
its right of first refusal to participate in the Opportunity in accordance with
the terms of the Offer, or to refuse to exercise such right. In the event that
the Company exercises its right of first refusal, the Company shall participate
in the Opportunity in accordance with the provisions of the Offer. In the event
that the Company elects not to exercise its right of first refusal, then the
Offeree shall be entitled for a period of sixty (60) days following the
Company's election not to exercise its right of first refusal to participate in
the Opportunity on its own or with any person, corporation, partnership or other
business entity strictly in accordance with the terms of the Offer. In the event
that the Opportunity is not consummated within said sixty (60)-day period, or
the Offer is amended in any fashion whatsoever, the Company's right of first
refusal shall automatically be reinstated hereunder.
15. Termination. Notwithstanding any other provision of this Agreement,
this Agreement shall automatically terminate without notice in the event that
Care Source fails to assign the Facilities Contracts to the Company in
accordance with Section 1(b)(ii) of this Agreement.
16. Mandatory Repurchase. In the event the registration statement (the
"Registration Statement") prepared and filed by the OptimumCare with the
Securities Exchange Commission ("SEC") for the resale of the shares of common
stock to be issued as a part of the Buy-Out Price (the "Buy-Out Shares") as
required by the Registration Agreement set forth in Exhibit "D" has not been
declared effective by the SEC on the date six (6) months following the payment
of the Buy-Out Price, OptimumCare shall immediately purchase twenty percent
(20%) of the Buy-Out Shares for cash at a price equal to the price at which the
Buy-Out Shares were issued, namely the average of the highest and lowest trading
closing prices for OptimumCare's stock as reported on the last ten (10) days of
the month immediately preceding the day the Buy-Out Price was originally paid
(the "Share Price"). Thereafter and until such time as the Registration
Statement has been declared effective, OptimumCare shall have the obligation to
repurchase, at Holder's election, twenty percent (20%) of the Buy-Out Shares at
the Share Price on each one year anniversary of the initial mandatory repurchase
pursuant to this paragraph 16. In the event in any year Holder does not elect
for OptimumCare to repurchase twenty percent (20%) of the Buy-Out Shares,
OptimumCare's obligation to repurchase twenty percent (20%) of the Buy-Out
Shares for that year shall terminate. At such time
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as the Registration Statement has been declared effective, and has been kept
effective and available for resales of Registrable Securities (as defined in the
Registration Agreement) for the entire period required by Section 5(a) of the
Registration Agreement, any and all obligation of OptimumCare to repurchase
Buy-Out Shares pursuant to this paragraph shall immediately terminate and
thereafter be of no further force and effect.
17. Miscellaneous.
a. Notices. All notices which are required or permitted to be
given pursuant to this Agreement shall be in writing and shall be sufficient in
all respects if delivered personally, by electronic facsimile (with a
confirmation by registered or certified mail placed in the mail no later than
the following day), or by registered or certified mail, postage prepaid,
addressed to a party as indicated below:
If to OptimumCare:
OptimumCare Corporation
30011 Ivy Glenn Drive
Laguna Niguel, CA 92677
Attention: Edward A. Johnson
Facsimile No.: (714) 495-4316
If to Care Source or a Care Source Principal:
Professional Care Source, Inc.
c/o Teri L. Jolin
11328 Elderwood Street
Los Angeles, California 90049
Notice shall be deemed to have been given upon transmittal thereof as
to communications which are personally delivered or transmitted by electronic
facsimile and, as to communications made by United States mail, on the third
(3rd) day after mailing. The above addresses may be changed by giving notice of
such change in the manner provided above for giving notice.
b. Headings. The headings of the sections of this Agreement are
included for the purposes of convenience only and shall not affect the
interpretation of any provision hereof.
c. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
agreements made and to be performed wholly within that state, irrespective of
such state's choice-of-law principles.
d. Partial Invalidity. If any provision of this Agreement is
found to be invalid or unenforceable by any court or other
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<PAGE> 16
lawful forum, such provision shall be ineffective only to the extent that it is
in contravention of applicable laws without invalidating the remaining
provisions of this Agreement, unless such invalidity or unenforceability would
defeat an essential business purpose of this Agreement.
e. Successors and Assigns. This Agreement and the rights,
privileges, duties and obligations of the parties hereunder, shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assignees.
f. Waiver. No waiver of or failure by any party to enforce any of
the provisions, terms, conditions, or obligations herein shall be construed as a
waiver of any subsequent breach of such provision, term, condition, or
obligation, or of any other provision, term, condition, or obligation hereunder,
whether the same or different in nature. No extension of time for performance of
any obligations or acts shall be deemed an extension of the time for performance
of any other obligations or acts.
g. Time of the Essence. The parties agree that time is of the
essence throughout the term of this Agreement and any extension or renewal
thereof, and of every provision hereof in which time is an element. No extension
of time for performance of any obligations or acts shall be deemed an extension
of time for performance of any other obligations or acts.
h. Expenses. Except as may be specifically provided for in this
Agreement, all parties shall bear their own expenses incurred in connection with
this Agreement and the transactions contemplated herein, including, but not
limited to, legal and accounting fees.
i. Attorneys Fees. Should either party institute any action or
proceeding arising out of this Agreement the substantially prevailing party in
any such action or proceeding shall be entitled to receive from the other party
all costs and expenses, including reasonable attorneys' fees, incurred by the
substantially prevailing party in connection with such action or proceeding. The
determination of which party is the "substantially prevailing party," shall be
made by the court or arbitrator, as applicable, at the time of the action or
proceeding, as the case may be. Notwithstanding the foregoing, attorneys' fees
incurred in enforcing any judgment are recoverable as a separate item and such
agreement of the parties is intended to be severable from the other provisions
of this Agreement and is intended to survive any judgment and is not to be
deemed merged into any judgment.
j. Further Assurances. Each party agrees, at its own cost, to do
such further acts and things and to execute and deliver such additional
agreements and instruments as the other
-12-
<PAGE> 17
may reasonably require to consummate, evidence or confirm the agreements
contained herein in the manner contemplated hereby.
k. Exhibits. All exhibits and schedules referred to in this
Agreement are incorporated herein by this reference.
l. Integration. This Agreement and all Exhibits and Schedules
hereto constitute the entire agreement between the parties with regard to the
subject matter hereof and thereof. This Agreement supersedes all previous
agreements between or among the parties, expressly including that certain letter
of intent from OptimumCare to Care Source dated December 18, 1995. There are no
agreements, representations, or warranties between or among the parties other
than those set forth in this Agreement or the documents and agreements referred
to in this Agreement.
m. Amendments. No amendment, modification, or supplement to this
Agreement shall be binding on any of the parties unless it is reduced to writing
and signed by each of the parties.
n. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
-13-
<PAGE> 18
o. Authority. Any individual signing this Agreement on behalf of
an entity hereby represents and warrants in his/her individual capacity that
he/she has full authority to do so on behalf of such entity.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the Effective Date.
OptimumCare Corporation,
a Delaware corporation
By: /s/ Edward A. Johnson
--------------------------------
Edward A. Johnson, President
Date: April 24, 1996
---------------------------
Professional Care Source, Inc.,
a California corporation
By: /s/ Teri L. Jolin
--------------------------------
Name: Teri L. Jolin
---------------------------
Title: President/CEO
--------------------------
Date: April 24, 1996
---------------------------
Care Source Principals:
/s/ Peggy Minnick
-------------------------------------
Peggy Minnick, R.N.
/s/ Teri Jolin
-------------------------------------
Teri Jolin, M.B.A.
/s/ Joseph H. Dadourian
-------------------------------------
Joseph H. Dadourian, Ed.D.
-14-
<PAGE> 19
EXHIBIT A
Articles of Organization
[Attached]
<PAGE> 20
STATE OF CALIFORNIA
ACTING SECRETARY OF STATE
TONY MILLER
LIMITED LIABILITY COMPANY
ARTICLES OF ORGANIZATION
IMPORTANT - Read instructions before completing the form.
This document is presented for filing pursuant to Section 17050 of the
California Corporations Code.
1. Limited liability company name: Optimum Care Source, LLC
2. Latest date on which the limited liability company is to dissolve:
May 1, 2025
3. The purpose of the limited liability company is to engage in any lawful act
or activity for which a limited liability company may be organized under the
Beverly-Killea Limited Liability Company Act.
4. Enter the name of initial agent for service of process and check the
appropriate provision below:
Edward A. Johnson, which is
[XX] an individual residing in California. Proceed to Item 5.
[ ] a corporation which has filed a certificate pursuant to Section
1505 of the California Corporations Code. Skip Item 5 and proceed
to Item 6.
5. If the initial agent for service of process is an individual, enter a
business or residential street address in California:
Street address: 30011 Ivy Glenn Drive, Suite 219
City: Laguna Niguel State: CALIFORNIA Zip Code: 92677
6. The limited liability company will be managed by: (check one)
[ ] one manager [ ] more than one manager [XX] limited liability
company members
7. If other matters are to be included in the articles of organization attach
one or more separate pages. Number of pages attached, if any: None
8. It is hereby declared that I am the person who executed this instrument,
which execution is my act and deed.
---------------------------------
Signature of organizer
EDWARD A. JOHNSON
---------------------------------
Type or print name of organizer
Date: , 19
---------------------
<PAGE> 21
INSTRUCTIONS FOR COMPLETING THE ARTICLES OF ORGANIZATION (LLC-1)
All references are to the California Corporations Code
unless otherwise indicated.
Type or legibly print in black ink.
DO NOT ALTER THE FORM
Item 1. Enter the name of the limited liability company which must end with the
words "LLC" or "Limited Liability Company." Do not enter periods
between the letters in "LLC." The words "Limited" and "Company" may be
abbreviated to "Ltd." and "Co." Section 17051(a)(1). The name of the
limited liability company may not contain the words "bank",
"insurance", "trust", "trustee", "incorporated", "inc.", "corporation",
or "corp." Section 17052(d).
PROFESSIONAL LIMITED LIABILITY COMPANIES ARE PROHIBITED FROM FORMING OR
REGISTERING IN CALIFORNIA.
Item 2. Enter the latest date on which the limited liability company is to
dissolve. Section 17051(a)(2).
Item 3. The articles of organization must contain the following statement of
purpose which is preprinted on the form and may not be altered: "The
purpose of the limited liability company is to engage in any lawful act
or activity for which a limited liability company may be organized
under the Beverly-Killea Limited Liability Company Act." Section
17051(a)(3). If provisions limiting or restricting the business of the
limited liability company are desired refer to Item 7 for instructions
on attaching additional pages.
Item 4. Enter the name of the initial agent for service of process. Check the
appropriate provision indicating whether the initial agent is an
individual residing in California or a corporation which has filed a
certificate pursuant to Section 1505. If an individual is designated
proceed to Item 5. If a corporation is named skip Item 5 and proceed to
Item 6. Section 17051(a)(5).
Item 5. If an individual is designated as the initial agent for service of
process, enter a business or residential street address in California.
Box number and "in care of" (c/o) are not acceptable. Do not enter an
address if a corporation is designated as the initial agent for service
of process. Section 17051(a)(5).
Item 6. Check the appropriate provision indicating whether the limited
liability company is to be managed by one manager, more than one
manager, or the limited liability company members. Section 17051(a)(6).
Item 7. The articles of organization may contain additional provisions
including, but not limited to, provision limiting or restricting the
business in which the limited liability company may engage, powers that
the limited liability company may exercise, admission of members,
events that will cause a dissolution, or limitations on the authority
of managers or members to bind the limited liability company. Such
matters must be submitted on single-sided, standard white paper. Number
and identify each page as an attachment to the articles of
organization. Enter the number of pages attached to the form, if any,
in Item 7. Section 17051(c).
Item 8. The articles of organization must be executed with an original
signature. Facsimiles and photocopies of the articles of organization
are not acceptable for the purpose of filing with the Secretary of
State. The person executing the articles of organization need not be a
member or manager of the limited liability company. Section 17051(a).
- - The fee for filing the articles of organization with the Secretary of State is
eighty dollars ($80). Section 17701(b).
<TABLE>
<CAPTION>
<S> <C>
- - Return the acknowledgement of filing to: - Send the executed document and filing fee to:
Name: Clare Richardson, Esq. Office of the Secretary of State
----------------------------------------- Limited Liability Company Unit
Firm/Company: Foley Lardner Weissburg & Aronson P.O. Box 944228
--------------------------------- Sacramento, California 94244-2280
Address: 2049 Century Park East, Suite 3200
--------------------------------------
City: Los Angeles
-----------------------------------------
State: California Zip Code: 90067-3271
-------------- ---------------
</TABLE>
Page 2
<PAGE> 22
JOSEPH H. DADOURIAN
244 ST. ALBANS AVENUE
SOUTH PASADENA, CA 91030
April 24, 1996
OptimumCare Corporation
30011 Ivy Glenn Drive, Suite 219
Laguna Niguel, CA 92677
RE: Acquisition of OptimumCare Corporation Securities
Gentlemen:
Pursuant to the Master Joint Venture Agreement by and among OptimumCare
Corporation ("OptimumCare"), Professional Care Source, Inc., Peggy Minnick,
R.N., Teri Jolin, M.b.A. and Joseph H. Dadourian effective April 24, 1996,
OptimumCare may issue to the undersigned an undetermined number of shares of
restricted OptimumCare common stock (the "Securities") in connection with the
purchase of the undersigned's interest in the limited liability company being
formed pursuant to the joint venture.
In connection with the acquisition of the Securities by the undersigned, the
undersigned acknowledges and represents that:
1. The undersigned is in a financial position to hold the Securities for
an indefinite period of time and is able to bear the economic risk and
withstand a completed loss of the undersigned's investment in the
Securities;
2. The undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the
merits and risk of an investment in the Securities;
3. The undersigned believes that an investment in the Securities is
suitable for the undersigned based upon the undersigned investment
objectives and financial needs, and the undersigned has adequate means
for providing for the undersigned's current financial needs and
personal contingencies and has no need for liquidity of investment with
respect to the Securities;
4. The undersigned has received and had the opportunity to review the
Annual Report on Form 10-K for the period ended December 31, 1995 as
filed with the Securities and Exchange Commission and has been given
full and complete access to information regarding OptimumCare and has
utilized such access to the undersigned's satisfaction for the purpose
of obtaining such information regarding OptimumCare as the undersigned
has reasonably requested; and, particularly, the undersigned has been
given reasonable opportunity to ask questions of, and receive answers
from, representatives of OptimumCare concerning the terms and
conditions of the Securities and to obtain any additional information ,
to the extent reasonable available;
<PAGE> 23
5. The undersigned realizes that (i) the acquisition of the Securities is
a long-term investment; and (ii) the undersigned must bear the economic
risk of investment for not less that two (2) years and the undersigned
may still be unable to liquidate the undersigned's investment in the
event of an emergency, or pledge the Securities as collateral for a
loan thereafter.
6. The undersigned has been advised that at the time of issuance, the
Securities will not be registered under the Securities Act of 1933 or
applicable state securities laws and that the securities are being
offered and sold pursuant to exemptions from such laws and that
OptimumCare's reliance upon such exemptions is predicated in part on
the undersigned's representations as contained herein. The undersigned
represents and warrants that the Securities will be acquired for the
undersigned's own account and for investment purposes only, and without
the intention of reselling or redistributing the same; the undersigned
has made no agreement with others regarding any of the Securities and
the undersigned's financial condition is such that it is not likely
that it will be necessary to dispose of any of such Securities in the
foreseeable future. The undersigned is aware that, in the view of the
Securities and Exchange Commission, a purchase of the Securities with
an intent to resell by reason of any foreseeable specific contingency
or anticipated change in market value, or any change in the condition
of OptimumCare, or in connection with a contemplated liquidation
settlement of any loan obtained for the acquisition of such Securities
and for which such securities were pledged, would represent an intent
inconsistent with the representations set forth above.
7. A legend shall be placed on any certificate representing the Securities
substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993,
AS AMENDED (THE "ACT"), AND HAS BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REQUIREMENTS FOR SUCH REGISTRATION PROVIDED IN THE
ACT. AS SUCH, THE PURCHASE OF THIS SECURITY WAS MADE WITH THE INTENT OF
INVESTMENT AND NOT WITH A VIEW FOR DISTRIBUTION.
8. The undersigned is informed of the significance to OptimumCare of the
foregoing representations, agreements and consents, and they are made
with the intention that OptimumCare will rely on them.
9. The undersigned represents and warrants that the undersigned is a bona
fide resident of, is domiciled in and received the offer and made the
decision to invest in the Securities in the State of California.
Very truly yours,
JOSEPH H. DADOURIAN
<PAGE> 24
TERI L. JOLIN
11328 ELDERWOOD STREET
LOS ANGELES, CA 90049
April 24, 1996
OptimumCare Corporation
30011 Ivy Glenn Drive, Suite 219
Laguna Niguel, CA 92677
RE: Acquisition of OptimumCare Corporation Securities
Gentlemen:
Pursuant to the Master Joint Venture Agreement by and among OptimumCare
Corporation ("OptimumCare"), Professional Care Source, Inc., Peggy Minnick,
R.N., Teri Jolin, M.b.A. and Joseph H. Dadourian effective April 24, 1996,
OptimumCare may issue to the undersigned an undetermined number of shares of
restricted OptimumCare common stock (the "Securities") in connection with the
purchase of the undersigned's interest in the limited liability company being
formed pursuant to the joint venture.
In connection with the acquisition of the Securities by the undersigned, the
undersigned acknowledges and represents that:
1. The undersigned is in a financial position to hold the Securities for
an indefinite period of time and is able to bear the economic risk and
withstand a completed loss of the undersigned's investment in the
Securities;
2. The undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the
merits and risk of an investment in the Securities;
3. The undersigned believes that an investment in the Securities is
suitable for the undersigned based upon the undersigned investment
objectives and financial needs, and the undersigned has adequate means
for providing for the undersigned's current financial needs and
personal contingencies and has no need for liquidity of investment with
respect to the Securities;
4. The undersigned has received and had the opportunity to review the
Annual Report on Form 10-K for the period ended December 31, 1995 as
filed with the Securities and Exchange Commission and has been given
full and complete access to information regarding OptimumCare and has
utilized such access to the undersigned's satisfaction for the purpose
of obtaining such information regarding OptimumCare as the undersigned
has reasonably requested; and, particularly, the undersigned has been
given reasonable opportunity to ask questions of, and receive answers
from, representatives of OptimumCare concerning the terms and
conditions of the Securities and to obtain any additional information ,
to the extent reasonable available;
<PAGE> 25
5. The undersigned realizes that (i) the acquisition of the Securities is
a long-term investment; and (ii) the undersigned must bear the economic
risk of investment for not less that two (2) years and the undersigned
may still be unable to liquidate the undersigned's investment in the
event of an emergency, or pledge the Securities as collateral for a
loan thereafter.
6. The undersigned has been advised that at the time of issuance, the
Securities will not be registered under the Securities Act of 1933 or
applicable state securities laws and that the securities are being
offered and sold pursuant to exemptions from such laws and that
OptimumCare's reliance upon such exemptions is predicated in part on
the undersigned's representations as contained herein. The undersigned
represents and warrants that the Securities will be acquired for the
undersigned's own account and for investment purposes only, and without
the intention of reselling or redistributing the same; the undersigned
has made no agreement with others regarding any of the Securities and
the undersigned's financial condition is such that it is not likely
that it will be necessary to dispose of any of such Securities in the
foreseeable future. The undersigned is aware that, in the view of the
Securities and Exchange Commission, a purchase of the Securities with
an intent to resell by reason of any foreseeable specific contingency
or anticipated change in market value, or any change in the condition
of OptimumCare, or in connection with a contemplated liquidation
settlement of any loan obtained for the acquisition of such Securities
and for which such securities were pledged, would represent an intent
inconsistent with the representations set forth above.
7. A legend shall be placed on any certificate representing the Securities
substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993,
AS AMENDED (THE "ACT"), AND HAS BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REQUIREMENTS FOR SUCH REGISTRATION PROVIDED IN THE
ACT. AS SUCH, THE PURCHASE OF THIS SECURITY WAS MADE WITH THE INTENT OF
INVESTMENT AND NOT WITH A VIEW FOR DISTRIBUTION.
8. The undersigned is informed of the significance to OptimumCare of the
foregoing representations, agreements and consents, and they are made
with the intention that OptimumCare will rely on them.
9. The undersigned represents and warrants that the undersigned is a bona
fide resident of, is domiciled in and received the offer and made the
decision to invest in the Securities in the State of California.
Very truly yours,
TERI L. JOLIN
<PAGE> 26
MARGARET M. MINNICK
531 VALLOMBROSA
PASADENA, CA 91107
April 24, 1996
OptimumCare Corporation
30011 Ivy Glenn Drive, Suite 219
Laguna Niguel, CA 92677
RE: Acquisition of OptimumCare Corporation Securities
Gentlemen:
Pursuant to the Master Joint Venture Agreement by and among OptimumCare
Corporation ("OptimumCare"), Professional Care Source, Inc., Peggy Minnick,
R.N., Teri Jolin, M.b.A. and Joseph H. Dadourian effective April 24, 1996,
OptimumCare may issue to the undersigned an undetermined number of shares of
restricted OptimumCare common stock (the "Securities") in connection with the
purchase of the undersigned's interest in the limited liability company being
formed pursuant to the joint venture.
In connection with the acquisition of the Securities by the undersigned, the
undersigned acknowledges and represents that:
1. The undersigned is in a financial position to hold the Securities for
an indefinite period of time and is able to bear the economic risk and
withstand a completed loss of the undersigned's investment in the
Securities;
2. The undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the
merits and risk of an investment in the Securities;
3. The undersigned believes that an investment in the Securities is
suitable for the undersigned based upon the undersigned investment
objectives and financial needs, and the undersigned has adequate means
for providing for the undersigned's current financial needs and
personal contingencies and has no need for liquidity of investment with
respect to the Securities;
4. The undersigned has received and had the opportunity to review the
Annual Report on Form 10-K for the period ended December 31, 1995 as
filed with the Securities and Exchange Commission and has been given
full and complete access to information regarding OptimumCare and has
utilized such access to the undersigned's satisfaction for the purpose
of obtaining such information regarding OptimumCare as the undersigned
has reasonably requested; and, particularly, the undersigned has been
given reasonable opportunity to ask questions of, and receive answers
from, representatives of OptimumCare concerning the terms and
conditions of the Securities and to obtain any additional information ,
to the extent reasonable available;
<PAGE> 27
5. The undersigned realizes that (i) the acquisition of the Securities is
a long-term investment; and (ii) the undersigned must bear the economic
risk of investment for not less that two (2) years and the undersigned
may still be unable to liquidate the undersigned's investment in the
event of an emergency, or pledge the Securities as collateral for a
loan thereafter.
6. The undersigned has been advised that at the time of issuance, the
Securities will not be registered under the Securities Act of 1933 or
applicable state securities laws and that the securities are being
offered and sold pursuant to exemptions from such laws and that
OptimumCare's reliance upon such exemptions is predicated in part on
the undersigned's representations as contained herein. The undersigned
represents and warrants that the Securities will be acquired for the
undersigned's own account and for investment purposes only, and without
the intention of reselling or redistributing the same; the undersigned
has made no agreement with others regarding any of the Securities and
the undersigned's financial condition is such that it is not likely
that it will be necessary to dispose of any of such Securities in the
foreseeable future. The undersigned is aware that, in the view of the
Securities and Exchange Commission, a purchase of the Securities with
an intent to resell by reason of any foreseeable specific contingency
or anticipated change in market value, or any change in the condition
of OptimumCare, or in connection with a contemplated liquidation
settlement of any loan obtained for the acquisition of such Securities
and for which such securities were pledged, would represent an intent
inconsistent with the representations set forth above.
7. A legend shall be placed on any certificate representing the Securities
substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993,
AS AMENDED (THE "ACT"), AND HAS BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REQUIREMENTS FOR SUCH REGISTRATION PROVIDED IN THE
ACT. AS SUCH, THE PURCHASE OF THIS SECURITY WAS MADE WITH THE INTENT OF
INVESTMENT AND NOT WITH A VIEW FOR DISTRIBUTION.
8. The undersigned is informed of the significance to OptimumCare of the
foregoing representations, agreements and consents, and they are made
with the intention that OptimumCare will rely on them.
9. The undersigned represents and warrants that the undersigned is a bona
fide resident of, is domiciled in and received the offer and made the
decision to invest in the Securities in the State of California.
Very truly yours,
MARGARET M. MINNICK
<PAGE> 28
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") is entered into as of this 24th day of
April, 1996 by and between OPTIMUMCARE CORPORATION, a Delaware corporation
("Corporation"), and ____________ ("Optionee").
A G R E E M E N T
It is hereby agreed as follows:
1. GRANT OF OPTIONS The Corporation hereby grants to Optionee, Options
("Options") to purchase all or any part of Thirty-Three Thousand
(33,000) Shares, upon and subject to the terms and conditions of the
Plan, which is incorporated in full herein by this reference, and upon
the other terms and conditions set forth herein.
2. OPTION PERIOD The Options shall be exercisable at any time during the
period commencing on the following dates (subject to the provisions of
Section 10) and expiring on the following dates:
<TABLE>
<CAPTION>
Number of Options Exercisable Effective Expiration Date
----------------- --------------------- ---------------
<S> <C> <C>
6,660 April 24, 1997 April 23, 2001
6,660 April 24, 1998 April 23, 2001
6,660 April 24, 1999 April 23, 2001
6,660 April 24, 2000 April 23, 2001
6,660 April 24, 2001 April 23, 2002
</TABLE>
3. METHOD OF EXERCISE The Options shall be exercisable by Optionee by
giving written notice to the Corporation of the election to purchase
and of the
1
<PAGE> 29
number of shares Optionee elects to purchase, such notice to be
accompanied by such other executed instruments or documents as may be
required by the Committee pursuant to this Agreement, and unless
otherwise directed by the Committee, Optionee shall at the time of such
exercise tender the purchase price of the share he has elected to
purchase. An Optionee may purchase less than the total number of shares
for which the Option is exercisable, provided that a partial exercise
of an Option may not be for less than One Hundred (100) shares . If
Optionee shall not purchase all of the shares which he is entitled to
purchase under the Options, his right to purchase the remaining
unpurchased shares shall continue until expiration of the Options. The
Options shall be exercisable with respect of whole shares only, and
fractional share interests shall be disregarded.
4. AMOUNT OF PURCHASE PRICE The purchase price per share for each share
which Optionee is entitled to purchase under the Options shall be $.92
per Share, which is eighty five percent (85%) of the fair market value
per share on the date of the grant of the Options as determined in good
faith by the Board of Directors of the Corporation.
5. PAYMENT OF PURCHASE PRICE At the time of Optionee's notice of exercise
of the Options, Optionee shall tender in cash or by certified or bank
cashier's check payable to the Corporation, the purchase price for all
shares then being purchased.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. As used herein, the
2
<PAGE> 30
term "Adjustment Event" means an event pursuant to which the
outstanding Shares of the Corporation are increased, decreased or
change into, or exchanged for a different number or kind of shares or
securities, without receipt of consideration by the Corporation,
through reorganization, merger, recapitalization, reclassification,
stock split, reverse stock split, stock dividend, stock consolidation
or otherwise. Upon the occurrence of an Adjustment Event, (i)
appropriate and proportionate adjustments shall be made to the number
and kind and exercise price for the shares subject to the Options, and
(ii) appropriate amendments to this Agreement shall be executed by the
Corporation and Optionee if the Corporation determines that such an
amendment is necessary or desirable to reflect such adjustments. The
determination by the Corporation as to what adjustments, amendments or
arrangements shall be made pursuant to this Section 6, and the extent
thereof, shall be final and conclusive. No fractional Shares shall be
issued on account of any such adjustment or arrangement.
7. NO RIGHTS TO CONTINUED RELATIONSHIP. Nothing contained in this
Agreement shall obligate the Corporation to have any relationship with
Optionee for any period or interfere in any way with the right of the
Corporation to terminate the relationship with Optionee at any time.
8. TIME OF GRANTING OPTIONS The time the Options shall be deemed granted,
sometimes referred to herein as the "date of grant", shall be April 18,
1996.
3
<PAGE> 31
9. PRIVILEGES OF STOCK OWNERSHIP Optionee will not be entitled to the
privileges of stock ownership as to any shares not actually issued and
delivered to Optionee. No shares shall be purchased upon the exercise
of any Options unless and until, in the opinion of the Corporation's
counsel, any then applicable requirements of and laws, or governmental
or regulatory agencies having jurisdiction, and of any exchanges upon
which the stock of the Corporation may be listed shall have been fully
complied with.
10. SECURITIES LAWS COMPLIANCE The Corporation will diligently endeavor to
comply with all applicable securities laws before any stock is issued
pursuant to the Options. Without limiting the generality of the
foregoing, the Corporation may require from the Optionee such
investment representation or such agreement, if any, as counsel for the
Corporation may consider necessary in order to comply with the
Securities Act of 1933 as then in effect, and may require that the
Optionee agree that any sale of the shares will be made only in such
manner as is permitted by the Committee. The Committee may in its
discretion cause the shares underlying the Options to be registered
under the Securities Act of 1933 as amended by filing a Form S-8
Registration Statement covering the Options and the shares underlying
the Options. Optionee shall take any action reasonably requested by the
Corporation in connection with registration or qualification of the
shares under federal or state securities laws.
11. SHARES SUBJECT TO LEGEND If deemed necessary by the Corporation's
4
<PAGE> 32
counsel, all certificates issued to represent Shares purchased upon
exercise of the Options shall bear such appropriate legend conditions
as counsel for the Corporation shall require.
12. COMPLIANCE WITH APPLICABLE LAWS. The Corporation's obligation to issue
shares of its Common stock upon exercise of the Options is expressly
conditioned upon the completion by the Corporation of any registration
or other qualification of such shares under state and/or federal laws
or rulings or regulations of any governmental regulatory body, or the
making of such investment representations or other representations and
undertakings by the Optionee or any person entitled to exercise the
Option in order to comply with the requirements of any exemption from
any such registration or other qualification of such shares which the
committee shall, in its sole discretion, deem necessary or advisable.
Such required representations and undertakings may include
representations and agreements that the Optionee or any person entitled
to exercise the Option (i) is not purchasing such shares for
distribution and (ii) agrees to have placed upon the face and reverse
of any certificates a legend setting forth any representations and
undertakings which have been given to the Committee or a reference
thereto.
13. MISCELLANEOUS
13.1 Binding Effect. This Agreement shall bind and inure to the benefit
of the successors, assigns, transferees, agents, personal
representatives, heirs and legatees of the respective parties.
5
<PAGE> 33
13.2 Further Acts. Each party agrees to perform any further acts and
execute and deliver any documents which may be necessary to carry out
the provisions of this Agreement.
13.3 Amendment This Agreement may be amended at any time by the written
agreement of the corporation and the Optionee.
13.4 Syntax. Throughout this Agreement, whenever the context so
requires, the singular shall include the plural, and the masculine
gender shall include the feminine and neuter genders. The headings and
captions of the various Sections hereof are for convenience only and
they shall not limit, expand or otherwise effect the construction or
interpretation of this Agreement.
13.5 Choice of Law. The parties hereby agree that this Agreement has
been executed and delivered in the State of California and shall be
construed, enforced and governed by the laws thereof. This Agreement is
in all respects intended by each party hereto to be deemed and
construed to have been jointly prepared by the parties and the parties
hereby expressly agree that any uncertainty or ambiguity existing
herein shall not be interpreted against either of them.
13.6 Severability. In the event that any provision of this Agreement
shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be
construed to have any effect on the
6
<PAGE> 34
remaining provisions of this Agreement.
13.7 Notices. All notices, requests, demands, and other communications
given, or required to be given pursuant to the terms of this Agreement
shall be in writing and may be delivered in person (by hand, messenger,
or other confirmable form of delivery), or be sent by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows, or by Federal Express or other nationally recognized overnight
courier service, addressed as follows, or by facsimile transmission, to
the following respective numbers, followed by a copy being delivered in
person, by mail, or by overnight courier as specified herein:
If to Optionee:
If to Corporation: OptimumCare Corporation
30011 Ivy Glenn Drive, Suite 219
Laguna Niguel, California 92677
Either party may, by written notice to the other, specify a different
address or number for notice purposes. Any notice sent to the party to
whom it is addressed in accordance with this paragraph will be deemed
to have been given (i) when received, if personally delivered; (ii) if
sent by registered or certified mail, return receipt requested, upon
the date of delivery shown on the receipt card, or if no date is shown,
the postmark thereon; (iii) if sent via Federal Express or other
nationally recognized overnight courier, one (1) business day after
deposit with such overnight courier; or (iv) if sent by facsimile
transmission, on the day on which it is sent, if receipt of
transmission is confirmed by telephone. If notice is received on a
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<PAGE> 35
Saturday, Sunday or legal holiday, it will be deemed to have been given
and received on the next following business day.
13.8 Entire Agreement. This Agreement constitutes the entire Agreement
between the parties hereto pertaining to the subject matter hereof,
this Agreement supersedes all prior and contemporaneous Agreements and
understandings of the parties, and there are no warranties,
representations or other Agreements between the parties in connection
with the subject matter hereof except as set forth or referred to
herein. No supplement, modification or waiver or termination of this
Agreement shall be binding unless executed in writing by the party to
be bound thereby. No waiver of any of the provisions of this Agreement
shall constitute a waiver of any other provision hereof (whether or not
similar) nor shall waiver constitute a continuing waiver.
13.9 Attorney's Fees. In the event that any party to this Agreement
institutes any action or proceeding, including but not limited to,
litigation or arbitration, to preserve, to protect or to enforce any
right or benefit created by or granted under this Agreement, the
prevailing party in each respective such action or proceeding shall be
entitled, in addition to any and all other relief granted by a court or
other tribunal or body, as may be appropriate, to an award in such
action or proceeding of that sum of money which represents the
attorneys' fees reasonably incurred by the prevailing party therein in
filing or otherwise instituting and in prosecuting or otherwise
pursuing or defending such action or proceeding, and additionally, the
8
<PAGE> 36
attorneys' fees reasonable incurred by such prevailing party in
negotiating any and all matters underlying such action or proceeding
and in preparation for instituting or defending such action or
proceeding.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first set forth above.
"CORPORATION"
OPTIMUMCARE CORPORATION,
a Delaware Corporation
By:__________________________
EDWARD A. JOHNSON
PRESIDENT
"OPTIONEE"
__________________________
9
<PAGE> 37
EXHIBIT E-2
EXHIBIT E-1
OptimumCare Activities Not Subject to Section 8.c
(1) Associated Medical Psychiatrists
Lakewood, California
(2) Psychological Healthcare
Lakewood, California
(3) Aegis Psychological Corp.
Mission Hills, California
(4) Behavioral Health Information Management Systems
Mission Hills, California
(5) Valley Oaks Behavioral Medical Group
Westlake, California
(6) Center for Behavioral Services
West Los Angeles, California
(7) Northern California Group Practice Alliance
Northern California
(8) College Health I.P.A.
Cerritos, California
<PAGE> 38
EXHIBIT E-2
EXHIBIT E-2
Care Source Principals' Activities Not Subject to Section 8.b
Peggy Minnick
1. Positions as CEO-CPC and consultant of Alhambra Hospital-acute
psychiatric hospital.
2. Consultation regarding management and clinical issues of operating
acute psychiatric hospitals and acute psychiatric units.
3. Consultation regarding nursing management and regulatory agency
compliance for skilled nursing facilities.
4. Owning/operating adult board and care facilities and residential care
facilities for the elderly.
Joseph H. Dadourian
1. Consultation to Psychiatric Hospitals on Behavioral Health Systems:
identifying and developing new business opportunities in the area of
mental health services.
2. Consultation and training to med/surg and SNF hospital's related to
patient care, employee issues, violence in the workplace and critical
incident stress management.
3. Consultation and training programs to residential care facilities,
board and care and group homes related to clinical issues, employee
issues, violence in the workplace and critical incident stress
management.
4. Rendering of psychological care in all appropriate settings, i.e.,
hospital outpatient, board and care, skilled nursing facilities,
residential care facilities, etc.
5. Rendering of all aspects of employee assistance services.
6. Behavioral health consultation to business and industries related to a
variety of issues involving employees.
7. Professional trainer on issues related to behavioral health in the
workplace.
EXHIBIT E-2
Page 2
<PAGE> 39
EXHIBIT E-2
8. Partner in A Accredited Psychiatric Medical Group, Inc., a
multidisciplinary psychiatric/psychological private practice offering a
full range of services from outpatient to inpatient to residential
facilities.
Teri L. Jolin
1. Consultation to health care clients regarding marketing and business
development in areas outside of behavioral health services in skilled
nursing facilities.
2. Conducting sales training as an independent contractor to Vital
Learning for all industry clients.
<PAGE> 40
SCHEDULE 1
Facilities Contracts
Alcott Rehabilitation Hospital
3551 West Olympic Boulevard
Los Angeles, California 90019
Citrus Nursing Center
9440 Citrus Avenue
Fontana, California 92335
Citrus Retirement Center
9448 Citrus Avenue
Fontana, California 92335
Extended Care Hospital of Riverside
8171 Magnolia
Riverside, California 93504
Del Mar Convalescent Hospital
3136 North Del Mar Avenue
Rosemead, California 91770
Fountain Care Center
1835 West La Veta Avenue
Orange, California 92668-4196
Garden Park Care Center
12681 Haster Street
Garden Grove, California 92640
Laurel Convalescent Hospital
7509 North Laurel Avenue
Fontana, California 92336
Monterey Park Convalescent Hospital
416 North Garfield Avenue
Monterey Park, California 91754
North Valley Nursing Center
7660 Wyngate Street
Tujunga, California 91042
Paramount Convalescent Center
8558 East Rosecrans Avenue
Paramount, California 90723
Park Regency Retirement Center
1750 West La Habara Boulevard
La Habra, California 90631
<PAGE> 41
Schedule 1
Page 2
Sun Mar Nursing Center
1720 West Orange Avenue
Anaheim, California 92804
Sunset Manor Convalescent Hospital
2720 Nevada Avenue
El Monte, California 91733
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<PAGE> 1
EXHIBIT 10.79
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on the
Effective Date (as hereinafter defined) by and between OPTIMUM CARE SOURCE, LLC,
a California limited liability company ("Employer"), and MARGARET M. MINNICK
("Employee").
RECITALS
A. Employer provides administrative and management services in
connection with behavioral health care services and counseling at skilled
nursing facilities and similar health care facilities (the "Services").
B. Employee is a shareholder of Professional Care Source, Inc.
("Care Source"), which is a member of Employer.
C. Employer desires to retain the services of Employee as
described herein.
D. The parties hereto each desire to enter into an employment
agreement to set forth the terms and conditions of Employee's employment
relationship with Employer, to recognize and compensate the contributions of
Employee, and to assure continuous harmonious management of the affairs of
Employer.
AGREEMENT
IN CONSIDERATION of the facts set forth above and the mutual covenants
set out below, the parties agree as follows:
1. EMPLOYEE'S OBLIGATIONS.
1.1 Employment Relationship. Employer hereby employs Employee and
Employee hereby accepts and agrees to such employment on the terms and
conditions set forth in this Agreement. Employee's employment shall begin on the
date of the filing of the Articles of Organization of Employer (the "Effective
Date"). Employee shall perform all such duties and responsibilities for Employer
and shall occupy such positions and offices in Employer as Employer may from
time to time determine. In addition, Employee shall have the specific duties set
forth on Exhibit "A" hereto.
1.2 Scope of Duties. Employee agrees that, during the term of
employment under this Agreement, Employee will devote so much of his/her
productive time, attention and energies as may be necessary to perform his/her
duties hereunder. Nothing in this Section 1.2 shall prohibit Employee from
spending reasonable amounts of time in teaching, charitable and professional
activities, provided that such activities do not materially
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<PAGE> 2
interfere with the services Employee agrees to render to Employer under this
Agreement and do not violate Section 5.2, below.
2. EMPLOYER'S RESPONSIBILITIES.
2.1 Compensation. For all services rendered by Employee under this
Agreement, including any services as an officer or director of Employer, and
performing any other duties assigned by Employer, Employer shall pay to Employee
the compensation set forth on Exhibit "B" (the "Salary"), which is incorporated
herein by reference. Such Salary shall be paid in accordance with Employer's
regular payroll procedures.
2.2 Bonuses. In addition to the Salary, Employee may receive a
bonus or bonuses if voted by the Management Committee of Employer, as set forth
in the initial business plan of Employer and in each annual budget using
criteria developed from time to time by the Management Committee.
2.3 Benefits. Employer agrees to pay Employee such benefits as the
Board of Directors of Employer may, in its sole discretion, determine from time
to time, as set forth in the initial business plan of Employer and in each
annual budget, and or as Employee may become entitled to receive or participate
in under any employees' hospital and surgical benefits plan or other incentive
or benefit plan of Employer as may now or hereafter exist.
2.4 Deductibility of Compensation. Any payments made to Employee
as an employee of Employer as a Salary or other compensation payment (if any)
which shall be disallowed, in whole or in part, as a deductible expense to
Employer for federal, state, local or any other tax purpose by the Internal
Revenue Service or any state tax authority shall be reimbursed by Employee to
Employer to the full extent of such disallowance within six (6) months after the
date on which Employer received notice of such disallowance. Employer shall not
be required to legally defend any such proposed disallowance, and the amount
required to be reimbursed by Employee shall be the amount, as finally determined
by agreement or otherwise, which is actually disallowed as a deduction. In lieu
of payment to Employer by Employee, the Board of Directors of Employer, in its
discretion, may withhold amounts from Employee's future compensation payments
until the amount owed to Employer has been fully recovered.
2.5 Reimbursement for Expenses. Employer shall, upon presentation
of receipts or other appropriate documentation, reimburse Employee for
reasonable expenses incurred on behalf of Employer for transportation, travel,
entertainment or similar items incurred in the promotion and maintenance of
Employer's business and the furtherance of Employee's professional capability,
but only to the extent that the same are specifically approved by Employer.
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<PAGE> 3
2.6 Leave. During the term of this Agreement, Employee shall be
entitled to be absent from employment for such total periods of vacation,
continuing education, annual leave, sick leave, disability leave,
maternity/paternity leave or other leave time during each fiscal year in
accordance with Employer's leave policies as may be determined by Employer from
time to time, which policies shall be subject to change in the sole discretion
of Employer. Employee shall schedule vacation and continuing education leave at
such time as will least interfere with the business of Employer. Unused vacation
or education leave may be carried over from year to year only if permitted by,
and in accordance with, such leave policies as may be adopted by Employer from
time to time.
2.7 Deductions. The salary payable to Employee under this
Agreement shall be subject to federal and state income tax withholding, social
security and state disability insurance withholding, and such other tax
deductions as are required by federal, state and/or local law.
3. RIGHTS OF EMPLOYER.
3.1 Control by Employer. In rendering services on behalf of
Employer pursuant to this Agreement, Employee shall at all times be subject to
the full control and authority of Employer.
3.2 Records. All business records and documents pertaining to
Employer or its activities, are and shall remain exclusively the property of
Employer. Employee shall not have or acquire any interest or right in or to any
of such records, documents, files or materials whatsoever, other than the right
to access during reasonable business hours during the term of this Agreement in
order to review and copy Employer's records for any reasonable business purpose.
4. TERM AND TERMINATION.
4.1 Term. The initial term of this Agreement shall commence on the
Effective Date and continue for a period of one (1) year. This Agreement shall
thereafter automatically renew for consecutive additional one (1) year terms,
unless sooner terminated as provided for in this Agreement.
4.2 Termination.
4.2.1 By Either Party Without Cause. Following the initial
term of this Agreement, this Agreement may be terminated by either party at any
time, without cause, upon no less than 90 days' written notice to the other
party. During the initial term of this Agreement, this Agreement may not be
terminated except as described in Sections 4.2.2 and 4.2.3 below. In the event
that Employer terminates this Agreement other than as described in Sections
4.2.2 and 4.2.3 below, Employee shall be entitled to the
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<PAGE> 4
Salary for the remaining period of the initial term following termination by
Employer. In consideration of the payment of the Salary, Employee shall execute
and deliver a settlement and release in such form as is acceptable to Employer.
4.2.2 With Cause. This Agreement may be terminated by
Employer at any time upon thirty (30) days' written notice if a majority of the
Board of Directors of Employer determines that Employee has failed to perform
his/her duties according to generally accepted professional standards in the
community in which Employer conducts its business, or that Employee is in
material breach or violation of any of the terms of this Agreement, or other
good cause exists. Good cause shall include, without limitation:
(a) The conviction of Employee of a crime that
would, in the opinion of Employer, have a material adverse effect on the
performance of Employee's duties hereunder or on the reputation or business of
Employer;
(b) The disability of Employee for a cumulative
period of sixty (60) days during any twelve (12) month period. For purposes of
this Agreement, the term "disability" shall mean the inability of Employee, by
reason of physical or mental illness or debilitation, to perform substantially
all of Employee's duties hereunder, determined by Employer in its sole and
absolute discretion;
(c) Employee commits a breach of any term,
covenant or condition of this Agreement.
4.2.3 Automatic Termination. Notwithstanding any other
provision of this Agreement, this Agreement shall automatically terminate
without notice upon the happening of any of the following events:
(a) the death of Employee; or
(b) the sale, transfer or other disposition of
all of Employee's stock in Care Source.
4.3 Termination Date. The date upon which this Agreement
terminates pursuant to this Section 4 is referred to in this Agreement as the
"Termination Date." Upon the termination of this Agreement, Employer shall pay
to Employee all amounts of Salary due for services already rendered to or on
behalf of Employer pursuant to Section 2.1.
5. CONFIDENTIAL INFORMATION; UNFAIR COMPETITION
5.1 Unfair Competition. Employee acknowledges that as an employee
of Employer, Employee has a fiduciary duty to act in Employer's best interests
while Employee maintains Employee's
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<PAGE> 5
employment with Employer. Employee further acknowledges that as and when that
relationship is terminated, Employee will continue to have a fiduciary duty not
to engage in unfair conduct which would damage Employee's former employer by
wrongfully interfering with its business. Such unfair conduct would include,
without limitation, (a) attempting to persuade any contractors of Employer to
become contractors of Employee or of another company in which Employee has an
interest or contemplates having an interest; (b) soliciting employees of
Employer to leave and work elsewhere; (c) using for the benefit of or disclosing
to any third party any proprietary information of Employer. Proprietary
information includes any type of information which is used in Employer's
business and gives it an opportunity to obtain any advantage or benefit over
competitors who do not know or use it.
5.2 Agreement Not to Compete. At all times during the period that
Employee is an employee of Employer and for a period of three (3) years
following termination of such employment, Employee hereby agrees that he/she
will not, either alone or with others, directly or indirectly be employed by,
own an interest in, manage, or be a partner, director, stockholder, advisor or
consultant of, any entity which provides and/or conducts an operation, service
or business similar in nature and/or scope to that of Employer within the State
of California.
6. NOTICES.
Any and all notices or other communications provided for herein shall
be given in writing, either: (i) in person, to the President of Employer (or, if
Employee is then President, to the Secretary of Employer) or to Employee, as the
case may be or (ii) by registered or certified mail, return receipt requested,
which shall be addressed as follows:
To Employer:
OPTIMUM CARE SOURCE, LLC
428 Culver Boulevard
Playa del Rey, California 90293
To Employee: At the address set forth on
the signature page hereto
Either party may change its address for purposes of this Agreement by giving
written notice of the new address in the manner provided in this Section.
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<PAGE> 6
7. OptimumCare Stock Options.
Upon the execution of this Agreement, OptimumCare shall grant to each
of the Care Source Principals options to purchase up to thirty three thousand
(33,000) shares of OptimumCare common stock on the terms and conditions set
forth in Exhibit "C" hereto. OptimumCare shall register the issuance of the
shares issuable upon exercise of the stock options pursuant to the Stock Option
Agreement on a registration statement on Form S-8.
8. MISCELLANEOUS.
8.1 Governing Law. This Agreement shall be subject to and
governed by the laws of the State of California.
8.2 Invalid Provision. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
8.3 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of Employer and Employee, and their respective heirs, legal
representatives, executors, administrators, successors and assigns.
8.4 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto, and contains all of the agreements between
the parties hereto with respect to the subject matter hereof. This Agreement
supersedes any and all other agreements, either oral or in writing, between the
parties hereto with respect to the subject matter hereof.
8.5 Amendment and Waiver. This Agreement may be amended or revoked
at any time by a written agreement executed by Employee and Employer. No change
or modification of this Agreement shall be valid unless the same be in writing
and signed by Employee and Employer. No waiver of any provision of this
Agreement shall be valid unless in writing and signed by the party granting such
waiver, and in no event shall any such waiver be deemed to be a waiver of any
other term, covenant or condition of this Agreement.
8.6 Headings. The headings of the articles, sections, subsections
or paragraphs of this Agreement are inserted solely for convenience of
reference, and shall not be deemed to govern, limit or aid in the construction
or interpretation of any term of this Agreement.
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<PAGE> 7
IN WITNESS WHEREOF, Employer has caused this Agreement to be signed by
its duly authorized President, and Employee has signed this Agreement, all on or
as of the day and year first above written.
EMPLOYER
OPTIMUM CARE SOURCE, LLC
a California limited liability company
By: OptimumCare Corporation, as
representative of Manager
By: /s/ Edward A. Johnson
-----------------------------------
Edward A. Johnson, President
EMPLOYEE
/s/ Margaret M. Minnick
---------------------------------------
Name: MARGARET M. MINNICK
Address: 531 Vallombrosa
Pasadena, CA 91107
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<PAGE> 8
EXHIBIT A
DUTIES
Margaret M. ("Peggy") Minnick, RN, Executive Vice President, Operations
Peggy Minnick will be responsible for assisting with scheduling and monitoring
the day to day provision of clinical services; identifying and resolving
performance improvement concerns and communicating with Dr. Dadourian regarding
such concerns; responding to facility needs through ongoing account management
and "troubleshooting"; scheduling and providing inservice education to clinical
psychologist and facility staff in her area of expertise.
She will work closely with the five person committee of managers and act as
Executive Vice President of Operations for the new company. She will keep
managers informed of key developments and accomplishments and work with them to
identify new opportunities, establish goals and priorities, and monitor both
clinical and financial outcomes proactively making operational adjustments as
indicated.
Peggy will assist in recruitment of psychologists and CareSource staff and will
assist in the training of psychologist as directed by Dr. Dadourian. She will
interface with the fiscal intermediary regarding reimbursement issues and
develop and implement both clinical and financial policies and procedures to
ensure ongoing maximum reimbursement.
She will share day to day operational responsibilities with Teri Jolin including
personnel, financial, accounting and account management.
<PAGE> 9
EXHIBIT B
SALARY
Margaret M. ("Peggy") Minnick, RN $4,944 per month/$59,328 per year
<PAGE> 10
EXHIBIT C
NON-QUALIFIED STOCK OPTION AGREEMENT
<PAGE> 1
EXHIBIT 10.80
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on the
Effective Date (as hereinafter defined) by and between OPTIMUM CARE SOURCE, LLC,
a California limited liability company ("Employer"), and TERI L. JOLIN
("Employee").
RECITALS
A. Employer provides administrative and management services in
connection with behavioral health care services and counseling at skilled
nursing facilities and similar health care facilities (the "Services").
B. Employee is a shareholder of Professional Care Source, Inc.
("Care Source"), which is a member of Employer.
C. Employer desires to retain the services of Employee as
described herein.
D. The parties hereto each desire to enter into an employment
agreement to set forth the terms and conditions of Employee's employment
relationship with Employer, to recognize and compensate the contributions of
Employee, and to assure continuous harmonious management of the affairs of
Employer.
AGREEMENT
IN CONSIDERATION of the facts set forth above and the mutual covenants
set out below, the parties agree as follows:
1. EMPLOYEE'S OBLIGATIONS.
1.1 Employment Relationship. Employer hereby employs Employee and
Employee hereby accepts and agrees to such employment on the terms and
conditions set forth in this Agreement. Employee's employment shall begin on the
date of the filing of the Articles of Organization of Employer (the "Effective
Date"). Employee shall perform all such duties and responsibilities for Employer
and shall occupy such positions and offices in Employer as Employer may from
time to time determine. In addition, Employee shall have the specific duties set
forth on Exhibit "A" hereto.
1.2 Scope of Duties. Employee agrees that, during the term of
employment under this Agreement, Employee will devote so much of his/her
productive time, attention and energies as may be necessary to perform his/her
duties hereunder. Nothing in this Section 1.2 shall prohibit Employee from
spending reasonable amounts of time in teaching, charitable and professional
activities, provided that such activities do not materially
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<PAGE> 2
interfere with the services Employee agrees to render to Employer under this
Agreement and do not violate Section 5.2, below.
2. EMPLOYER'S RESPONSIBILITIES.
2.1 Compensation. For all services rendered by Employee under this
Agreement, including any services as an officer or director of Employer, and
performing any other duties assigned by Employer, Employer shall pay to Employee
the compensation set forth on Exhibit "B" (the "Salary"), which is incorporated
herein by reference. Such Salary shall be paid in accordance with Employer's
regular payroll procedures.
2.2 Bonuses. In addition to the Salary, Employee may receive a
bonus or bonuses if voted by the Management Committee of Employer, as set forth
in the initial business plan of Employer and in each annual budget using
criteria developed from time to time by the Management Committee.
2.3 Benefits. Employer agrees to pay Employee such benefits as the
Board of Directors of Employer may, in its sole discretion, determine from time
to time, as set forth in the initial business plan of Employer and in each
annual budget, and or as Employee may become entitled to receive or participate
in under any employees' hospital and surgical benefits plan or other incentive
or benefit plan of Employer as may now or hereafter exist.
2.4 Deductibility of Compensation. Any payments made to Employee
as an employee of Employer as a Salary or other compensation payment (if any)
which shall be disallowed, in whole or in part, as a deductible expense to
Employer for federal, state, local or any other tax purpose by the Internal
Revenue Service or any state tax authority shall be reimbursed by Employee to
Employer to the full extent of such disallowance within six (6) months after the
date on which Employer received notice of such disallowance. Employer shall not
be required to legally defend any such proposed disallowance, and the amount
required to be reimbursed by Employee shall be the amount, as finally determined
by agreement or otherwise, which is actually disallowed as a deduction. In lieu
of payment to Employer by Employee, the Board of Directors of Employer, in its
discretion, may withhold amounts from Employee's future compensation payments
until the amount owed to Employer has been fully recovered.
2.5 Reimbursement for Expenses. Employer shall, upon presentation
of receipts or other appropriate documentation, reimburse Employee for
reasonable expenses incurred on behalf of Employer for transportation, travel,
entertainment or similar items incurred in the promotion and maintenance of
Employer's business and the furtherance of Employee's professional capability,
but only to the extent that the same are specifically approved by Employer.
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<PAGE> 3
2.6 Leave. During the term of this Agreement, Employee shall be
entitled to be absent from employment for such total periods of vacation,
continuing education, annual leave, sick leave, disability leave,
maternity/paternity leave or other leave time during each fiscal year in
accordance with Employer's leave policies as may be determined by Employer from
time to time, which policies shall be subject to change in the sole discretion
of Employer. Employee shall schedule vacation and continuing education leave at
such time as will least interfere with the business of Employer. Unused vacation
or education leave may be carried over from year to year only if permitted by,
and in accordance with, such leave policies as may be adopted by Employer from
time to time.
2.7 Deductions. The salary payable to Employee under this
Agreement shall be subject to federal and state income tax withholding, social
security and state disability insurance withholding, and such other tax
deductions as are required by federal, state and/or local law.
3. RIGHTS OF EMPLOYER.
3.1 Control by Employer. In rendering services on behalf of
Employer pursuant to this Agreement, Employee shall at all times be subject to
the full control and authority of Employer.
3.2 Records. All business records and documents pertaining to
Employer or its activities, are and shall remain exclusively the property of
Employer. Employee shall not have or acquire any interest or right in or to any
of such records, documents, files or materials whatsoever, other than the right
to access during reasonable business hours during the term of this Agreement in
order to review and copy Employer's records for any reasonable business purpose.
4. TERM AND TERMINATION.
4.1 Term. The initial term of this Agreement shall commence on the
Effective Date and continue for a period of one (1) year. This Agreement shall
thereafter automatically renew for consecutive additional one (1) year terms,
unless sooner terminated as provided for in this Agreement.
4.2 Termination.
4.2.1 By Either Party Without Cause. Following the initial
term of this Agreement, this Agreement may be terminated by either party at any
time, without cause, upon no less than 90 days' written notice to the other
party. During the initial term of this Agreement, this Agreement may not be
terminated except as described in Sections 4.2.2 and 4.2.3 below. In the event
that Employer terminates this Agreement other than as described in Sections
4.2.2 and 4.2.3 below, Employee shall be entitled to the
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<PAGE> 4
Salary for the remaining period of the initial term following termination by
Employer. In consideration of the payment of the Salary, Employee shall execute
and deliver a settlement and release in such form as is acceptable to Employer.
4.2.2 With Cause. This Agreement may be terminated by
Employer at any time upon thirty (30) days' written notice if a majority of the
Board of Directors of Employer determines that Employee has failed to perform
his/her duties according to generally accepted professional standards in the
community in which Employer conducts its business, or that Employee is in
material breach or violation of any of the terms of this Agreement, or other
good cause exists. Good cause shall include, without limitation:
(a) The conviction of Employee of a crime that
would, in the opinion of Employer, have a material adverse effect on the
performance of Employee's duties hereunder or on the reputation or business of
Employer;
(b) The disability of Employee for a cumulative
period of sixty (60) days during any twelve (12) month period. For purposes of
this Agreement, the term "disability" shall mean the inability of Employee, by
reason of physical or mental illness or debilitation, to perform substantially
all of Employee's duties hereunder, determined by Employer in its sole and
absolute discretion;
(c) Employee commits a breach of any term,
covenant or condition of this Agreement.
4.2.3 Automatic Termination. Notwithstanding any other
provision of this Agreement, this Agreement shall automatically terminate
without notice upon the happening of any of the following events:
(a) the death of Employee; or
(b) the sale, transfer or other disposition of
all of Employee's stock in Care Source.
4.3 Termination Date. The date upon which this Agreement
terminates pursuant to this Section 4 is referred to in this Agreement as the
"Termination Date." Upon the termination of this Agreement, Employer shall pay
to Employee all amounts of Salary due for services already rendered to or on
behalf of Employer pursuant to Section 2.1.
5. CONFIDENTIAL INFORMATION; UNFAIR COMPETITION
5.1 Unfair Competition. Employee acknowledges that as an employee
of Employer, Employee has a fiduciary duty to act in Employer's best interests
while Employee maintains Employee's
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<PAGE> 5
employment with Employer. Employee further acknowledges that as and when that
relationship is terminated, Employee will continue to have a fiduciary duty not
to engage in unfair conduct which would damage Employee's former employer by
wrongfully interfering with its business. Such unfair conduct would include,
without limitation, (a) attempting to persuade any contractors of Employer to
become contractors of Employee or of another company in which Employee has an
interest or contemplates having an interest; (b) soliciting employees of
Employer to leave and work elsewhere; (c) using for the benefit of or disclosing
to any third party any proprietary information of Employer. Proprietary
information includes any type of information which is used in Employer's
business and gives it an opportunity to obtain any advantage or benefit over
competitors who do not know or use it.
5.2 Agreement Not to Compete. At all times during the period that
Employee is an employee of Employer and for a period of three (3) years
following termination of such employment, Employee hereby agrees that he/she
will not, either alone or with others, directly or indirectly be employed by,
own an interest in, manage, or be a partner, director, stockholder, advisor or
consultant of, any entity which provides and/or conducts an operation, service
or business similar in nature and/or scope to that of Employer within the State
of California.
6. NOTICES.
Any and all notices or other communications provided for herein shall
be given in writing, either: (i) in person, to the President of Employer (or, if
Employee is then President, to the Secretary of Employer) or to Employee, as the
case may be or (ii) by registered or certified mail, return receipt requested,
which shall be addressed as follows:
To Employer:
OPTIMUM CARE SOURCE, LLC
428 Culver Boulevard
Playa del Rey, California 90293
To Employee: At the address set forth on
the signature page hereto
Either party may change its address for purposes of this Agreement by giving
written notice of the new address in the manner provided in this Section.
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7. OptimumCare Stock Options.
Upon the execution of this Agreement, OptimumCare shall grant to each
of the Care Source Principals options to purchase up to thirty three thousand
(33,000) shares of OptimumCare common stock on the terms and conditions set
forth in Exhibit "C" hereto. OptimumCare shall register the issuance of the
shares issuable upon exercise of the stock options pursuant to the Stock Option
Agreement on a registration statement on Form S-8.
8. MISCELLANEOUS.
8.1 Governing Law. This Agreement shall be subject to and
governed by the laws of the State of California.
8.2 Invalid Provision. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
8.3 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of Employer and Employee, and their respective heirs, legal
representatives, executors, administrators, successors and assigns.
8.4 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto, and contains all of the agreements between
the parties hereto with respect to the subject matter hereof. This Agreement
supersedes any and all other agreements, either oral or in writing, between the
parties hereto with respect to the subject matter hereof.
8.5 Amendment and Waiver. This Agreement may be amended or revoked
at any time by a written agreement executed by Employee and Employer. No change
or modification of this Agreement shall be valid unless the same be in writing
and signed by Employee and Employer. No waiver of any provision of this
Agreement shall be valid unless in writing and signed by the party granting such
waiver, and in no event shall any such waiver be deemed to be a waiver of any
other term, covenant or condition of this Agreement.
8.6 Headings. The headings of the articles, sections, subsections
or paragraphs of this Agreement are inserted solely for convenience of
reference, and shall not be deemed to govern, limit or aid in the construction
or interpretation of any term of this Agreement.
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IN WITNESS WHEREOF, Employer has caused this Agreement to be signed by
its duly authorized President, and Employee has signed this Agreement, all on or
as of the day and year first above written.
EMPLOYER
OPTIMUM CARE SOURCE, LLC
a California limited liability company
By: OptimumCare Corporation, as
representative of Manager
By: /s/ Edward A. Johnson
----------------------------------
Edward A. Johnson, President
EMPLOYEE
/s/ TERI L. JOLIN
--------------------------------------
Name: TERI L. JOLIN
Address: 11328 Elderwood Street
Los Angeles, CA 90049
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<PAGE> 8
EXHIBIT A
DUTIES
Teri L. Jolin, MBA - Chief Executive Officer
The goals and responsibilities of Teri Jolin will include day to day operations,
as well as the responsibility for the Marketing and Business Development
functions. She is responsible for leading and coordinating the organization's
efforts to effectively communicate and develop relationships with potential
customers. The two broad market segments include, Skilled Nursing Facilities and
Adult Residential Care Facilities. Teri will serve a the liaison with affiliated
outside resources supporting the marketing efforts of the organization an
coordinate professional recruitment with the designed individual from
OptimumCare.
Teri will interface closely with the five person committee of managers and act
as Chief Executive Officer of the new company. The managers will work to
establish priorities, new opportunities and the monitoring of clinical outcomes.
Job functions will include designing and implementing an effective sales and
marketing program to add a minimum of 2.5 new facility contracts to the company
each month beginning month six. The strategies will include public relations,
direct mail, telemarketing and various other communication programs designed to
increase the number of facility contracts. The marketing programs will be
designed to be cost effective, while maximizing results. The program will also
include identifying new potential sources of revenue.;
Day to day operational responsibilities will be shared with Peggy Minnick. These
duties will include personnel, fiscal management and account management.
<PAGE> 9
EXHIBIT B
SALARY
Teri Jolin, MBA $8,475 per month/$101,700 per year
<PAGE> 10
EXHIBIT C
NON-QUALIFIED STOCK OPTION
AGREEMENT
<PAGE> 1
EXHIBIT 10.81
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on the
Effective Date (as hereinafter defined) by and between OPTIMUM CARE SOURCE, LLC,
a California limited liability company ("Employer"), and JOSEPH H. DADOURIAN
("Employee").
RECITALS
A. Employer provides administrative and management services in
connection with behavioral health care services and counseling at skilled
nursing facilities and similar health care facilities (the "Services").
B. Employee is a shareholder of Professional Care Source, Inc.
("Care Source"), which is a member of Employer.
C. Employer desires to retain the services of Employee as
described herein.
D. The parties hereto each desire to enter into an employment
agreement to set forth the terms and conditions of Employee's employment
relationship with Employer, to recognize and compensate the contributions of
Employee, and to assure continuous harmonious management of the affairs of
Employer.
AGREEMENT
IN CONSIDERATION of the facts set forth above and the mutual covenants
set out below, the parties agree as follows:
1. EMPLOYEE'S OBLIGATIONS.
1.1 Employment Relationship. Employer hereby employs Employee and
Employee hereby accepts and agrees to such employment on the terms and
conditions set forth in this Agreement. Employee's employment shall begin on the
date of the filing of the Articles of Organization of Employer (the "Effective
Date"). Employee shall perform all such duties and responsibilities for Employer
and shall occupy such positions and offices in Employer as Employer may from
time to time determine. In addition, Employee shall have the specific duties set
forth on Exhibit "A" hereto.
1.2 Scope of Duties. Employee agrees that, during the term of
employment under this Agreement, Employee will devote so much of his/her
productive time, attention and energies as may be necessary to perform his/her
duties hereunder. Nothing in this Section 1.2 shall prohibit Employee from
spending reasonable amounts of time in teaching, charitable and professional
activities, provided that such activities do not materially
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<PAGE> 2
interfere with the services Employee agrees to render to Employer under this
Agreement and do not violate Section 5.2, below.
2. EMPLOYER'S RESPONSIBILITIES.
2.1 Compensation. For all services rendered by Employee under this
Agreement, including any services as an officer or director of Employer, and
performing any other duties assigned by Employer, Employer shall pay to Employee
the compensation set forth on Exhibit "B" (the "Salary"), which is incorporated
herein by reference. Such Salary shall be paid in accordance with Employer's
regular payroll procedures.
2.2 Bonuses. In addition to the Salary, Employee may receive a
bonus or bonuses if voted by the Management Committee of Employer, as set forth
in the initial business plan of Employer and in each annual budget using
criteria developed from time to time by the Management Committee.
2.3 Benefits. Employer agrees to pay Employee such benefits as the
Board of Directors of Employer may, in its sole discretion, determine from time
to time, as set forth in the initial business plan of Employer and in each
annual budget, and or as Employee may become entitled to receive or participate
in under any employees' hospital and surgical benefits plan or other incentive
or benefit plan of Employer as may now or hereafter exist.
2.4 Deductibility of Compensation. Any payments made to Employee
as an employee of Employer as a Salary or other compensation payment (if any)
which shall be disallowed, in whole or in part, as a deductible expense to
Employer for federal, state, local or any other tax purpose by the Internal
Revenue Service or any state tax authority shall be reimbursed by Employee to
Employer to the full extent of such disallowance within six (6) months after the
date on which Employer received notice of such disallowance. Employer shall not
be required to legally defend any such proposed disallowance, and the amount
required to be reimbursed by Employee shall be the amount, as finally determined
by agreement or otherwise, which is actually disallowed as a deduction. In lieu
of payment to Employer by Employee, the Board of Directors of Employer, in its
discretion, may withhold amounts from Employee's future compensation payments
until the amount owed to Employer has been fully recovered.
2.5 Reimbursement for Expenses. Employer shall, upon presentation
of receipts or other appropriate documentation, reimburse Employee for
reasonable expenses incurred on behalf of Employer for transportation, travel,
entertainment or similar items incurred in the promotion and maintenance of
Employer's business and the furtherance of Employee's professional capability,
but only to the extent that the same are specifically approved by Employer.
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<PAGE> 3
2.6 Leave. During the term of this Agreement, Employee shall be
entitled to be absent from employment for such total periods of vacation,
continuing education, annual leave, sick leave, disability leave,
maternity/paternity leave or other leave time during each fiscal year in
accordance with Employer's leave policies as may be determined by Employer from
time to time, which policies shall be subject to change in the sole discretion
of Employer. Employee shall schedule vacation and continuing education leave at
such time as will least interfere with the business of Employer. Unused vacation
or education leave may be carried over from year to year only if permitted by,
and in accordance with, such leave policies as may be adopted by Employer from
time to time.
2.7 Deductions. The salary payable to Employee under this
Agreement shall be subject to federal and state income tax withholding, social
security and state disability insurance withholding, and such other tax
deductions as are required by federal, state and/or local law.
3. RIGHTS OF EMPLOYER.
3.1 Control by Employer. In rendering services on behalf of
Employer pursuant to this Agreement, Employee shall at all times be subject to
the full control and authority of Employer.
3.2 Records. All business records and documents pertaining to
Employer or its activities, are and shall remain exclusively the property of
Employer. Employee shall not have or acquire any interest or right in or to any
of such records, documents, files or materials whatsoever, other than the right
to access during reasonable business hours during the term of this Agreement in
order to review and copy Employer's records for any reasonable business purpose.
4. TERM AND TERMINATION.
4.1 Term. The initial term of this Agreement shall commence on the
Effective Date and continue for a period of one (1) year. This Agreement shall
thereafter automatically renew for consecutive additional one (1) year terms,
unless sooner terminated as provided for in this Agreement.
4.2 Termination.
4.2.1 By Either Party Without Cause. Following the initial
term of this Agreement, this Agreement may be terminated by either party at any
time, without cause, upon no less than 90 days' written notice to the other
party. During the initial term of this Agreement, this Agreement may not be
terminated except as described in Sections 4.2.2 and 4.2.3 below. In the event
that Employer terminates this Agreement other than as described in Sections
4.2.2 and 4.2.3 below, Employee shall be entitled to the
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<PAGE> 4
Salary for the remaining period of the initial term following termination by
Employer. In consideration of the payment of the Salary, Employee shall execute
and deliver a settlement and release in such form as is acceptable to Employer.
4.2.2 With Cause. This Agreement may be terminated by
Employer at any time upon thirty (30) days' written notice if a majority of the
Board of Directors of Employer determines that Employee has failed to perform
his/her duties according to generally accepted professional standards in the
community in which Employer conducts its business, or that Employee is in
material breach or violation of any of the terms of this Agreement, or other
good cause exists. Good cause shall include, without limitation:
(a) The conviction of Employee of a crime that
would, in the opinion of Employer, have a material adverse effect on the
performance of Employee's duties hereunder or on the reputation or business of
Employer;
(b) The disability of Employee for a cumulative
period of sixty (60) days during any twelve (12) month period. For purposes of
this Agreement, the term "disability" shall mean the inability of Employee, by
reason of physical or mental illness or debilitation, to perform substantially
all of Employee's duties hereunder, determined by Employer in its sole and
absolute discretion;
(c) Employee commits a breach of any term,
covenant or condition of this Agreement.
4.2.3 Automatic Termination. Notwithstanding any other
provision of this Agreement, this Agreement shall automatically terminate
without notice upon the happening of any of the following events:
(a) the death of Employee; or
(b) the sale, transfer or other disposition of
all of Employee's stock in Care Source.
4.3 Termination Date. The date upon which this Agreement
terminates pursuant to this Section 4 is referred to in this Agreement as the
"Termination Date." Upon the termination of this Agreement, Employer shall pay
to Employee all amounts of Salary due for services already rendered to or on
behalf of Employer pursuant to Section 2.1.
5. CONFIDENTIAL INFORMATION; UNFAIR COMPETITION
5.1 Unfair Competition. Employee acknowledges that as an
employee of Employer, Employee has a fiduciary duty to act in Employer's best
interests while Employee maintains Employee's
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<PAGE> 5
employment with Employer. Employee further acknowledges that as and when that
relationship is terminated, Employee will continue to have a fiduciary duty not
to engage in unfair conduct which would damage Employee's former employer by
wrongfully interfering with its business. Such unfair conduct would include,
without limitation, (a) attempting to persuade any contractors of Employer to
become contractors of Employee or of another company in which Employee has an
interest or contemplates having an interest; (b) soliciting employees of
Employer to leave and work elsewhere; (c) using for the benefit of or disclosing
to any third party any proprietary information of Employer. Proprietary
information includes any type of information which is used in Employer's
business and gives it an opportunity to obtain any advantage or benefit over
competitors who do not know or use it.
5.2 Agreement Not to Compete. At all times during the period that
Employee is an employee of Employer and for a period of three (3) years
following termination of such employment, Employee hereby agrees that he/she
will not, either alone or with others, directly or indirectly be employed by,
own an interest in, manage, or be a partner, director, stockholder, advisor or
consultant of, any entity which provides and/or conducts an operation, service
or business similar in nature and/or scope to that of Employer within the State
of California.
6. NOTICES.
Any and all notices or other communications provided for herein shall
be given in writing, either: (i) in person, to the President of Employer (or, if
Employee is then President, to the Secretary of Employer) or to Employee, as the
case may be or (ii) by registered or certified mail, return receipt requested,
which shall be addressed as follows:
To Employer:
OPTIMUM CARE SOURCE, LLC
428 Culver Boulevard
Playa del Rey, California 90293
To Employee: At the address set forth on
the signature page hereto
Either party may change its address for purposes of this Agreement by giving
written notice of the new address in the manner provided in this Section.
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<PAGE> 6
7. OptimumCare Stock Options.
Upon the execution of this Agreement, OptimumCare shall grant to each
of the Care Source Principals options to purchase up to thirty three thousand
(33,000) shares of OptimumCare common stock on the terms and conditions set
forth in Exhibit "C" hereto. OptimumCare shall register the issuance of the
shares issuable upon exercise of the stock options pursuant to the Stock Option
Agreement on a registration statement on Form S-8.
8. MISCELLANEOUS.
8.1 Governing Law. This Agreement shall be subject to and
governed by the laws of the State of California.
8.2 Invalid Provision. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
8.3 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of Employer and Employee, and their respective heirs, legal
representatives, executors, administrators, successors and assigns.
8.4 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto, and contains all of the agreements between
the parties hereto with respect to the subject matter hereof. This Agreement
supersedes any and all other agreements, either oral or in writing, between the
parties hereto with respect to the subject matter hereof.
8.5 Amendment and Waiver. This Agreement may be amended or revoked
at any time by a written agreement executed by Employee and Employer. No change
or modification of this Agreement shall be valid unless the same be in writing
and signed by Employee and Employer. No waiver of any provision of this
Agreement shall be valid unless in writing and signed by the party granting such
waiver, and in no event shall any such waiver be deemed to be a waiver of any
other term, covenant or condition of this Agreement.
8.6 Headings. The headings of the articles, sections, subsections
or paragraphs of this Agreement are inserted solely for convenience of
reference, and shall not be deemed to govern, limit or aid in the construction
or interpretation of any term of this Agreement.
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<PAGE> 7
IN WITNESS WHEREOF, Employer has caused this Agreement to be signed by
its duly authorized President, and Employee has signed this Agreement, all on or
as of the day and year first above written.
EMPLOYER
OPTIMUM CARE SOURCE, LLC
a California limited liability company
By: OptimumCare Corporation, as
representative of Manager
By: /s/ Edward A. Johnson
-----------------------------------
Edward A. Johnson, President
EMPLOYEE
/s/ JOSEPH H. DADOURIAN
----------------------------------------
Name: JOSEPH H. DADOURIAN
Address: 244 St. Albans Avenue
South Pasadena, CA 91030
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<PAGE> 8
EXHIBIT A
DUTIES
Joseph H. Dadourian, Ed.D.
Executive Vice President, Clinical Systems
Dr. Dadourian will be responsible for providing clinical leadership to the
company. He will be actively involved in training and monitoring recruited
professionals in the delivery of psychological services as well as identifying
and resolving performance improvement concerns. Dr. Dadourian will also keep
abreast of changes in regulatory agency requirements and payor requirements in
the context of the delivery of clinically efficient and cost effective
psychological services.
He will work closely with the five person committee of managers and act as
Executive Vice President of Clinical Systems for the company. He will keep
managers informed of key developments and accomplishments as well as working
with them to identify new opportunities, establish goals and priorities, monitor
clinical outcomes and take action as indicated.
Dr. Dadourian will attend seminars and conferences which have the potential of
enhancing services. Attendance at these seminars and conferences will be
approved by the Board of Directors of the company.
<PAGE> 9
EXHIBIT B
SALARY
Joseph H. Dadourian, Ed.D. $3,414 per month/$40,968 per year
<PAGE> 10
EXHIBIT C
NON-QUALIFIED STOCK OPTION AGREEMENT
<PAGE> 1
EXHIBIT 10.82
REGISTRATION AGREEMENT
This REGISTRATION AGREEMENT ("Agreement") is entered into as of April
24, 1996, by and between OPTIMUMCARE CORPORATION, a Delaware corporation
("Company"), and PROFESSIONAL CARE SOURCE, INC., a California corporation
("Holder").
R E C I T A L S:
WHEREAS, Company and Holder have entered into that certain Master Joint
Venture Agreement dated April 24, 1996 (the "Joint Venture Agreement") pursuant
to which Company has the right and obligation to acquire all of Holder's
interest in the California limited liability company to be formed in accordance
with the Joint Venture Agreement (the "Interest");
WHEREAS, Company may pay for the Interest with cash, shares of
Company's restricted Common Stock or a combination of cash and shares of
Company's Common Stock, at the sole election of Company;
WHEREAS, Company has agreed to register the shares of restricted Common
Stock issued to Holder as consideration for purchase of the Interest (the
"Shares"); and
WHEREAS, Company and Holder desire to set forth in this Agreement the
terms of registration of the Shares.
NOW THEREFORE, in consideration of the mutual agreements, covenants,
conditions and releases contained herein, Company and Holder hereby agree as
follows:
A G R E E M E N T
1. Agreement to Register Shares. Company hereby agrees to
register the Registrable Securities (as hereinafter defined) which may be
acquired by Holder, subject to the terms and conditions set forth in this
Agreement.
2. Definitions. As used in this Agreement:
(a) The terms "register," "registered," and
"registration" refer to a registration effected by filing with the Securities
and Exchange commission (the "SEC") a registration statement (the "Registration
Statement") in compliance with the Securities Act of 1933, as amended (the "1933
Act"), and the declaration or ordering by the SEC of the effectiveness of such
Registration Statement.
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<PAGE> 2
(b) The term "Registrable Securities" means (i) any
shares of Common Stock which are issued by Company to Holder as consideration
for purchase of the Interest and (ii) any Common Stock issued as (or issuable
upon the conversion or exercise of any warrant, right, or other security that is
issued as) a dividend or other distribution with respect to, or in exchange or
in replacement of, Registrable Securities. In the event of any recapitalization
by Company, whether by stock split, reverse stock split, stock dividend or the
like, the number of shares of Registrable Securities used throughout this
Agreement for various purposes shall be proportionately increased or decreased.
3. Registration.
(a) Company shall, not later than the 90th day prior to
the closing date of Company's purchase of the Interest from Holder (such
required filing date shall be referred to as the "Filing Date"), prepare and
file with the SEC a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 (or any appropriate similar rule that may
be adopted by the SEC) under the Securities Act covering the Registrable
Securities. The registration shall be on a Form S-3, if Company is eligible for
use of such form in connection with registration of the Registrable Securities
for resale, or, if the Company is not so eligible, on any other available form
permitting registration of such Registrable Securities for resale by Holder in
the manner or manners reasonably designated by Holder (including, without
limitation, one or more underwritten offerings). Notwithstanding the foregoing,
Company shall not be obligated to take any action to effect any such
registration, pursuant to this Section 3:
(i) Within 120 days immediately following the
effective date of any registration statement pertaining to an
underwritten public offering of securities of Company for its own
account (other than a registration on Form S-4 relating solely to a
Commission Rule 145 transaction, or a registration on Form S-8 relating
solely to options or benefit plans), in which case the Registration
Statement shall be filed upon expiration of such 120 day period; or
(ii) If Company shall furnish to Holder a
certificate signed by the President of Company, stating that in the
good faith judgment of the board of directors of Company it would be
seriously detrimental to Company and its shareholders for such
Registration Statement to be filed at the date filing would, if not for
this Section 3(a)(ii), be required hereunder, in which case Company
shall have the right to delay the filing of the Registration Statement
for a period of not more than 90 days.
In no event shall Company be required to file more than one Registration
Statement or effect more than one registration pursuant to this Section 3.
(b) If Holder intends to distribute Registrable
Securities by means of an underwriting, Holder shall so advise Company at least
thirty (30) days prior to the Filing Date. Company and Holder shall enter into
an underwriting agreement in customary form
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<PAGE> 3
with the underwriter or underwriters selected by Holder and reasonably
satisfactory to Company.
If the number of shares of Common Stock represented by the Registrable
Securities, or any other factor, would result in the Holder beneficially owning
more than ten percent (10%) of the outstanding shares of Common Stock or Holder
is an executive officer or director of Company and Holder is not distributing
the Registrable Securities by means of an underwritten offering, then Holder
shall limit the number of Registrable Securities sold for the account of Holder
during each consecutive three (3) month period, beginning with the three (3)
month period commencing on the later of the Buy-Out Date (as defined in the
Joint Venture Agreement) or the effective date of Registration Statement (the
"Effective Date") to two (2) times the amount of restricted or other securities
permitted to be sold by an affiliate of OptimumCare pursuant to Rule 144(e) of
the 1933 Act.
In the case of an underwritten offering, if the underwriter has not
limited the number of Registrable Securities to be underwritten, Company may
include securities for its own account (or for the account of other
stockholders) in such registration if the underwriter so agrees and if the
number of Registrable Securities that would otherwise have been included in such
registration and underwriting will not thereby be limited.
4. Expenses of Registration. All expenses incurred in connection
with the registration effected pursuant to Section 3, including, without
limitation, all registration, filing, and qualification fees (including blue sky
fees and expenses for the States of California and New York), printing expenses
(including printing expenses pertaining to fifty (50) prospectuses) and fees and
disbursements of counsel for Company, shall be borne by Company; provided,
however, that Company shall not be required to pay stock transfer taxes or
underwriters' discounts, or commissions relating to Registrable Securities.
5. Obligations of Company. In effecting the Registration, Company
shall, as expeditiously as reasonably possible:
(a) Use its best efforts to cause the Registration
Statement to become effective, and keep the Registration Statement effective and
available for resales of the Registrable Securities for the longer of: (i) the
period beginning on the later of the Buy-Out Date or the Effective Date and
ending (A) one (1) year after the later of the Buy-Out Date or the Effective
Date if the Registration Statement is on Form S-3, or (B) one hundred eighty
(180) days after the later of the Buy-Out Date or the Effective Date if the
Registration Statement is on any other form, or (ii) such minimum number of
three (3) month consecutive periods as shall allow Holder to sell all of the
Registrable Securities pursuant to the Registration Statement in compliance with
the restriction on resales of the Registrable Securities set forth in Section 3
above assuming Holder is selling the maximum number of shares of the Registrable
Securities permitted by such limitation; provided, however, that notwithstanding
the foregoing, (x) if the Registrable Securities are being sold in an
underwritten public offering, Company shall only be obligated to keep the
Registration Statement effective and available for resales of the Registrable
Securities for ninety (90) days and (y) the Company may terminate the
effectiveness of the Registration Statement at such time as Holder has sold all
of the Registrable Securities pursuant thereto.
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<PAGE> 4
(b) Prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to keep the Registration
Statement effective for the period provided in Section 5(a) and to comply with
the provisions of the 1933 Act with respect to the disposition of the
Registrable Securities covered by the Registration Statement.
(c) Promptly notify Holder of the effectiveness of the
Registration Statement and furnish to the Holder fifty (50) copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, at least one copy of the Registration Statement,
and such other documents as Holder may reasonably request in order to facilitate
the disposition of Registrable Securities owned by Holder.
(d) Use its best efforts to register and qualify the
securities covered by the Registration Statement under the Blue Sky laws of
California and New York, provided that Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in such states.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Holder shall
also enter into and perform its obligations under such an agreement.
(f) Furnish, at the request of Holder, on the date that
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Agreement, if such securities are being
sold through underwriters, on the date that the Registration Statement with
respect to such securities becomes effective, (i) an opinion, dated such date,
of the counsel representing Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to Holder, and (ii)
a letter dated such date, from the independent accountants of Company, in form
and substance as is customarily given by independent accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
to Holder.
(g) Promptly notify Holder after the Company shall
receive notice or obtain knowledge of, (i) the issuance of any stop order by the
SEC suspending the effectiveness of the Registration Statement or the initiation
or threatening of any proceeding for such purposes and promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued, or (ii) the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purposes and will promptly use its
best efforts to prevent such suspension or have such suspension lifted if it
should be effected, if in California or New York, at its sole cost and expense,
or if in any other jurisdiction, at the sole cost and expense of Holder.
(h) Promptly notify Holder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act, in the event of
and upon Company's discovery that, or upon the happening of any event as a
result of which, the prospectus
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<PAGE> 5
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and at the request of
Holder promptly prepare, file with the SEC and furnish to Holder and each
underwriter, if any, up to fifty (50) copies in the aggregate of a supplement to
or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made.
(i) Promptly notify Holder (i) when a prospectus or any
prospectus supplement or post-effective amendment to the Registration Statement
has been filed, and, with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the SEC for amendments or supplements to the Registration Statement
or related prospectus or for additional information, (iii) of the receipt by
Company of any notification with respect to the suspension of the qualification
of any of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, and (iv) of
Company's reasonable determination that a post-effective amendment to the
Registration Statement would be appropriate.
(j) Cause of all the Registrable Securities to be listed
on each securities exchange, market or inter-dealer quotation system on which
similar securities are then listed and pay all fees and expenses in connection
therewith.
(k) Take all such other actions as Holder or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of the Registrable Securities.
6. Indemnification and Contribution.
(a) Company will, and does hereby undertake to, indemnify
and hold harmless Holder, each of Holder's officers, directors, partners and
agents, and each person controlling Holder, with respect to any registration,
qualification, or compliance effected pursuant to this Agreement, and each
underwriter, if any, and each person who controls any underwriter, of the
Registrable Securities held by or issuable to Holder, against all claims,
losses, damages, and liabilities (or actions in respect thereto) to which it may
become subject under the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), or other federal or state law arising out of or based
on (i) any untrue statement (or alleged untrue statement) of a material fact
contained in the Registration Statement, any prospectus, offering circular, or
other similar document (including any related notification, or the like)
incident to any such registration, qualification, or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) any violation or alleged violation by Company of any federal, state or
common law rule or regulation applicable to Company in connection with any such
registration, qualification, or compliance, and will reimburse, as incurred,
Holder, each such underwriter, and each such director, officer,
-5-
<PAGE> 6
partner, agent and controlling person, for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action; provided that Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to Company by an instrument
duly executed by Holder or underwriter and stated to be specifically for use
therein.
(b) Holder will indemnify Company and each of its
directors, and each officer who signs the Registration Statement including
Registrable Securities, and each person controlling Company, each underwriter,
if any, and each person who controls any underwriter of Company's securities
covered by such a Registration Statement, against all claims, losses, damages,
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such Registration Statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse, as incurred, Company, each such underwriter, and
each such director, officer, partner, and controlling person, for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability, or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) was made in such
Registration Statement, prospectus, offering circular, or other document, in
reliance upon and in conformity with written information furnished to Company by
an instrument duly executed by Holder and stated to be specifically for use
therein.
(c) Each party entitled to indemnification under this
Agreement (the "Indemnified Party") shall give notice to the party required to
provide such indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom, provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be reasonably withheld) and the Indemnified Party may
participate in such defense at the Indemnifying Party's expense if
representation of such Indemnified Party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement, except
to the extent that such failure to give notice shall materially adversely affect
the Indemnifying Party in the defense of any such claim or any such litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff therein, to such
Indemnified Party, of a release from all liability in respect to such claim or
litigation.
-6-
<PAGE> 7
(d) If the Indemnification provided for in this Section 6
shall for any reason be held by a court to be unavailable to an indemnified
party under subparagraph (a) or (b) hereof in respect of any claims, losses,
damages or liabilities ("Damages"), then, in lieu of the amount paid or payable
under subparagraph (a) or (b) hereof, the Indemnified Party and the Indemnifying
Party under subparagraph (a) or (b) hereof shall contribute to the aggregate
Damages, in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and the Indemnified Party with respect to the statements
of omissions which resulted in such Damages, as well as any other relevant
equitable considerations. No person guilty of fraudulent misrepresentations
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party
against the Indemnifying Party or others, and (ii) any liabilities to which the
Indemnifying Party may be subject pursuant to the law.
7. Information by Holder. Holder shall furnish to Company such
information regarding Holder and the distribution proposed by Holder as Company
may reasonably request in writing and as shall be required in connection with
any registration, qualification, or compliance referred to in this Agreement.
8. Transfer of Interest. In the event that the Interest, or the
right to receive the proceeds from Company's purchase of the Interest, is
assigned by Holder, the rights contained in this Agreement may also be assigned
or otherwise conveyed to such transferees or assignees; provided, however, that
if there is more than one transferee or assignee then the holders of a majority
of the Interest shall be entitled to exercise all rights hereunder on behalf of
all such holders and all such holders shall be bound by the provisions hereof;
provided further, that Holder shall provide Company with an opinion of counsel
that the assignment or transfer of the Interest (or the right to receive
proceeds from the sale thereof) is exempt from registration under the 1933 Act
and applicable blue sky laws and Company shall be given written notice by Holder
prior to said assignment or transfer, stating the name and address of said
transferees or assignees.
9. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by
and construed under the laws of the State of California as applied to agreements
among California residents made and to be performed entirely with the State of
California.
(b) Entire Agreement; Amendment. This Agreement
constitutes the full and entire understanding and agreement between the parties
with respect to the subject matter hereof. This Agreement may be amended,
waived, discharged or terminated only by written consent of Company and Holder.
(c) Notices. Any notices, request or other communication
required or permitted hereunder shall be given in writing and shall be deemed to
have been duly given
-7-
<PAGE> 8
if personally delivered or if telegraphed or mailed by registered or certified
mail, postage prepaid, at the respective addresses of the parties as set forth
below:
If to Company: OptimumCare Corporation
30011 Ivy Glenn Drive, Suite 219
Laguna Niguel, California 92677
Attn: Edward A. Johnson
If to Holder: Professional Care Source
c/o Teri L. Jolin
11328 Elderwood Street
Los Angeles, CA 90049
Any party hereto may by notice so given change its address for future notices
hereunder. Notice shall conclusively be deemed to have been given when
personally delivered or three (3) days after deposited in the mail or
telegraphed in the manner set forth above and shall be deemed to have been
received when delivered.
(d) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(e) Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision.
(f) Captions. The captions and headings to Sections of
this Agreement have been inserted for identification and reference purposes only
and shall not be used to construe the meaning or the interpretation of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties as of the date first above written.
OPTIMUMCARE CORPORATION,
a Delaware corporation
By: /s/ Edward A. Johnson
---------------------------------
Edward A. Johnson, President
PROFESSIONAL CARE SOURCE, INC.,
a California corporation
By: /s/ Teri L. Jolin
---------------------------------
Teri L. Jolin, President
-8-
<PAGE> 1
EXHIBIT 10.83
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") is entered into as of this
24th day of April, 1996 by and between OPTIMUMCARE CORPORATION, a Delaware
corporation ("Corporation"), and JOSEPH H. DADOURIAN ("Optionee").
A G R E E M E N T
It is hereby agreed as follows:
1. GRANT OF OPTIONS. The Corporation hereby grants to Optionee,
options ("Options") to purchase all or any part of Thirty-Three Thousand
(33,000) Shares, upon and subject to the terms and conditions set forth herein.
2. OPTION PERIOD. The Options shall be exercisable at any time
during the period commencing on the following dates (subject to the provisions
of Section 10) and expiring on the following dates:
<TABLE>
<CAPTION>
Number of Options Exercisable Effective Expiration Date
----------------- --------------------- ---------------
<S> <C> <C>
6,660 April 24, 1997 April 23, 2001
6,660 April 24, 1998 April 23, 2001
6,660 April 24, 1999 April 23, 2001
6,660 April 24, 2000 April 23, 2001
6,660 April 24, 2001 April 23, 2002
</TABLE>
3. METHOD OF EXERCISE. The Options shall be exercisable by
Optionee by giving written notice to the Corporation of the election to purchase
and of the number of
1
<PAGE> 2
Shares Optionee elects to purchase, such notice to be accompanied by such other
executed instruments or documents as may be required by the Corporation pursuant
to this Agreement. Optionee shall at the time of such exercise tender the
purchase price of the Shares Optionee has elected to purchase. Optionee may
purchase less than the total number of Shares for which the Option is
exercisable, provided that a partial exercise of an Option may not be for less
than One Hundred (100) Shares. If Optionee shall not purchase all of the Shares
which Optionee is entitled to purchase under the Options, Optionee's right to
purchase the remaining unpurchased Shares shall continue until expiration of the
Options. The Options shall be exercisable with respect of whole Shares only, and
fractional Share interests shall be disregarded.
4. AMOUNT OF PURCHASE PRICE. The purchase price per Share for
each Share which Optionee is entitled to purchase under the Options shall be
$.92 per Share, which is eighty five percent (85%) of the fair market value per
share on the date of the grant of the Options as determined in good faith by the
Board of Directors of the Corporation.
5. PAYMENT OF PURCHASE PRICE. At the time of Optionee's notice of
exercise of the Options, Optionee shall tender in cash or by certified or bank
cashier's check payable to the Corporation, the purchase price for all Shares
then being purchased.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. As used herein,
the term "Adjustment Event" means an event pursuant to which the outstanding
Shares of the Corporation are increased, decreased or changed into, or exchanged
for a different number
2
<PAGE> 3
or kind of shares or securities, without receipt of consideration by the
Corporation, through reorganization, merger, recapitalization, reclassification,
stock split, reverse stock split, stock dividend, stock consolidation or
otherwise. Upon the occurrence of an Adjustment Event, (i) appropriate and
proportionate adjustments shall be made to the number and kind and exercise
price for the shares subject to the Options, and (ii) appropriate amendments to
this Agreement shall be executed by the Corporation and Optionee if the
Corporation determines that such an amendment is necessary or desirable to
reflect such adjustments. The determination by the Corporation as to what
adjustments, amendments or arrangements shall be made pursuant to this Section
6, and the extent thereof, shall be final and conclusive. No fractional Shares
shall be issued on account of any such adjustment or arrangement.
7. NO RIGHTS TO CONTINUED RELATIONSHIP. Nothing contained in this
Agreement shall obligate the Corporation to have any relationship with Optionee
for any period or interfere in any way with the right of the Corporation to
terminate the relationship with Optionee at any time.
8. TIME OF GRANTING OPTIONS. The time the Options shall be deemed
granted, sometimes referred to herein as the "date of grant," shall be April 18,
1996.
9. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not be entitled
to the privileges of stock ownership as to any Shares not actually issued and
delivered to Optionee. No Shares shall be purchased upon the exercise of any
Options unless and until, in the opinion of the Corporation's counsel, any then
applicable requirements of any laws,
3
<PAGE> 4
or governmental or regulatory agencies having jurisdiction, and of any exchanges
upon which the stock of the Corporation may be listed shall have been fully
complied with.
10. SECURITIES LAWS COMPLIANCE. The Corporation will diligently
endeavor to comply with all applicable securities laws before any stock is
issued pursuant to the Options. Without limiting the generality of the
foregoing, the Corporation may require from the Optionee such investment
representation or such agreement, if any, as counsel for the Corporation may
consider necessary in order to comply with the Securities Act of 1933 as then in
effect, and may require that the Optionee agree that any sale of the Shares will
be made only in such manner as is permitted by the Corporation. The Corporation
shall cause the Shares underlying the Options to be registered under the
Securities Act of 1933 as amended by filing a Form S-8 Registration Statement
(or other applicable form) covering the Options and the Shares underlying the
Options. Optionee shall take any action reasonably requested by the Corporation
in connection with registration or qualification of the Shares under federal or
state securities laws.
11. SHARES SUBJECT TO LEGEND. If deemed necessary by the
Corporation's counsel, all certificates issued to represent Shares purchased
upon exercise of the Options shall bear such appropriate legend conditions as
counsel for the Corporation shall require.
12. COMPLIANCE WITH APPLICABLE LAWS. THE CORPORATION'S OBLIGATION
TO ISSUE SHARES OF ITS COMMON STOCK UPON EXERCISE OF THE OPTIONS IS EXPRESSLY
CONDITIONED UPON THE COMPLETION BY THE CORPORATION OF ANY REGISTRATION OR OTHER
QUALIFICATION OF SUCH
4
<PAGE> 5
SHARES UNDER ANY STATE AND/OR FEDERAL LAW OR RULINGS OR REGULATIONS OF ANY
GOVERNMENTAL REGULATORY BODY, OR THE MAKING OF SUCH INVESTMENT REPRESENTATIONS
OR OTHER REPRESENTATIONS AND UNDERTAKINGS BY THE OPTIONEE OR ANY PERSON ENTITLED
TO EXERCISE THE OPTION IN ORDER TO COMPLY WITH THE REQUIREMENTS OF ANY EXEMPTION
FROM ANY SUCH REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES WHICH THE
CORPORATION SHALL, IN ITS SOLE DISCRETION, DEEM NECESSARY OR ADVISABLE. SUCH
REQUIRED REPRESENTATIONS AND UNDERTAKINGS MAY INCLUDE REPRESENTATIONS AND
AGREEMENTS THAT THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE OPTION (i)
IS NOT PURCHASING SUCH SHARES FOR DISTRIBUTION AND (ii) AGREES TO HAVE PLACED
UPON THE FACE AND REVERSE OF ANY CERTIFICATES A LEGEND SETTING FORTH ANY
REPRESENTATIONS AND UNDERTAKINGS WHICH HAVE BEEN GIVEN TO THE CORPORATION OR A
REFERENCE THERETO.
13. MISCELLANEOUS.
13.1 Binding Effect. This Agreement shall bind and inure to
the benefit of the successors, assigns, transferees, agents, personal
representatives, heirs and legatees of the respective parties.
13.2 Further Acts. Each party agrees to perform any further
acts and execute and deliver any documents which may be necessary to carry out
the provisions of this Agreement.
5
<PAGE> 6
13.3 Amendment. This Agreement may be amended at any time by
the written agreement of the Corporation and the Optionee.
13.4 Syntax. Throughout this Agreement, whenever the context
so requires, the singular shall include the plural, and the masculine gender
shall include the feminine and neuter genders. The headings and captions of the
various Sections hereof are for convenience only and they shall not limit,
expand or otherwise affect the construction or interpretation of this Agreement.
13.5 Choice of Law. The parties hereby agree that this
Agreement has been executed and delivered in the State of California and shall
be construed, enforced and governed by the laws thereof. This Agreement is in
all respects intended by each party hereto to be deemed and construed to have
been jointly prepared by the parties and the parties hereby expressly agree that
any uncertainty or ambiguity existing herein shall not be interpreted against
either of them.
13.6 Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be construed
to have any effect on, the remaining provisions of this Agreement.
13.7 Notices. All notices, requests, demands, and other
communications given, or required to be given pursuant to the terms of this
Agreement shall be in writing and may be delivered in person (by hand,
messenger, or other confirmable form of
6
<PAGE> 7
delivery), or be sent by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows, or by Federal Express or other nationally
recognized overnight courier service, addressed as follows, or by facsimile
transmission, to the following respective numbers, followed by a copy being
delivered in person, by mail, or by overnight courtier as specified herein:
If to Optionee: Joseph H. Dadourian
244 St. Albans Avenue
South Pasadena, CA 91030
If to Corporation: OptimumCare Corporation
30011 Ivy Glenn Drive, Suite 219
Laguna Niguel, California 92677
Either party may, by written notice to the other, specify a different address or
numbers for notice purposes. Any notice sent to the party to whom it is
addressed in accordance with this paragraph will be deemed to have been given
(i) when received, if personally delivered; (ii) if sent by registered or
certified mail, return receipt requested, upon the date of delivery shown on the
receipt card, or if no date is shown, the postmark thereon; (iii) if sent via
Federal Express or other nationally recognized overnight courier, one (1)
business day after deposit with such overnight courier; or (iv) if sent by
facsimile transmission, on the day on which it is sent, if receipt of
transmission is confirmed by telephone. If notice is received on a Saturday,
Sunday or legal holiday, it will be deemed to have been given and received on
the next following business day.
13.8 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof,
this Agreement
7
<PAGE> 8
supersedes all prior and contemporaneous agreements and understandings of the
parties, and there are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof except as set
forth or referred to herein. No supplement, modification or waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver.
13.9 Attorneys' Fees. In the event that any party to this
Agreement institutes any action or proceeding, including, but not limited to,
litigation or arbitration, to preserve, to protect or to enforce any right or
benefit created by or granted under this Agreement, the prevailing party in each
respective such action or proceeding shall be entitled, in addition to any and
all other relief granted by a court or other tribunal or body, as may be
appropriate, to an award in such action or proceeding of that sum of money which
represents the attorneys' fees reasonably incurred by the prevailing party
therein in filing or otherwise instituting and in prosecuting or otherwise
pursuing or defending such action or proceeding, and, additionally, the
attorneys' fees reasonably incurred by such prevailing party in negotiating any
and all matters underlying such action or proceeding and in preparation for
instituting or defending such action or proceeding.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties have entered into this
Agreement as of the date first set forth above.
"CORPORATION"
OPTIMUMCARE CORPORATION,
a Delaware corporation
By: /s/ Edward A. Johnson
--------------------------------
Edward A. Johnson, President
"OPTIONEE"
/s/ Joseph H. Dadourian
-----------------------------------
JOSEPH H. DADOURIAN
9
<PAGE> 1
EXHIBIT 10.84
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") is entered into as of this
24th day of April, 1996 by and between OPTIMUMCARE CORPORATION, a Delaware
corporation ("Corporation"), and TERI L. JOLIN ("Optionee").
A G R E E M E N T
It is hereby agreed as follows:
1. GRANT OF OPTIONS. The Corporation hereby grants to Optionee, options
("Options") to purchase all or any part of Thirty-Three Thousand (33,000)
Shares, upon and subject to the terms and conditions set forth herein.
2. OPTION PERIOD. The Options shall be exercisable at any time during
the period commencing on the following dates (subject to the provisions of
Section 10) and expiring on the following dates:
<TABLE>
<CAPTION>
Number of Options Exercisable Effective Expiration Date
----------------- --------------------- ---------------
<S> <C> <C>
6,660 April 24, 1997 April 23, 2001
6,660 April 24, 1998 April 23, 2001
6,660 April 24, 1999 April 23, 2001
6,660 April 24, 2000 April 23, 2001
6,660 April 24, 2001 April 23, 2002
</TABLE>
3. METHOD OF EXERCISE. The Options shall be exercisable by Optionee by
giving written notice to the Corporation of the election to purchase and of the
number of
1
<PAGE> 2
Shares Optionee elects to purchase, such notice to be accompanied by such other
executed instruments or documents as may be required by the Corporation pursuant
to this Agreement. Optionee shall at the time of such exercise tender the
purchase price of the Shares Optionee has elected to purchase. Optionee may
purchase less than the total number of Shares for which the Option is
exercisable, provided that a partial exercise of an Option may not be for less
than One Hundred (100) Shares. If Optionee shall not purchase all of the Shares
which Optionee is entitled to purchase under the Options, Optionee's right to
purchase the remaining unpurchased Shares shall continue until expiration of the
Options. The Options shall be exercisable with respect of whole Shares only, and
fractional Share interests shall be disregarded.
4. AMOUNT OF PURCHASE PRICE. The purchase price per Share for each
Share which Optionee is entitled to purchase under the Options shall be $.92 per
Share, which is eighty five percent (85%) of the fair market value per share on
the date of the grant of the Options as determined in good faith by the Board of
Directors of the Corporation.
5. PAYMENT OF PURCHASE PRICE. At the time of Optionee's notice of
exercise of the Options, Optionee shall tender in cash or by certified or bank
cashier's check payable to the Corporation, the purchase price for all Shares
then being purchased.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. As used herein, the term
"Adjustment Event" means an event pursuant to which the outstanding Shares of
the Corporation are increased, decreased or changed into, or exchanged for a
different number
2
<PAGE> 3
or kind of shares or securities, without receipt of consideration by the
Corporation, through reorganization, merger, recapitalization, reclassification,
stock split, reverse stock split, stock dividend, stock consolidation or
otherwise. Upon the occurrence of an Adjustment Event, (i) appropriate and
proportionate adjustments shall be made to the number and kind and exercise
price for the shares subject to the Options, and (ii) appropriate amendments to
this Agreement shall be executed by the Corporation and Optionee if the
Corporation determines that such an amendment is necessary or desirable to
reflect such adjustments. The determination by the Corporation as to what
adjustments, amendments or arrangements shall be made pursuant to this Section
6, and the extent thereof, shall be final and conclusive. No fractional Shares
shall be issued on account of any such adjustment or arrangement.
7. NO RIGHTS TO CONTINUED RELATIONSHIP. Nothing contained in this
Agreement shall obligate the Corporation to have any relationship with Optionee
for any period or interfere in any way with the right of the Corporation to
terminate the relationship with Optionee at any time.
8. TIME OF GRANTING OPTIONS. The time the Options shall be deemed
granted, sometimes referred to herein as the "date of grant," shall be April 18,
1996.
9. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not be entitled to the
privileges of stock ownership as to any Shares not actually issued and delivered
to Optionee. No Shares shall be purchased upon the exercise of any Options
unless and until, in the opinion of the Corporation's counsel, any then
applicable requirements of any laws,
3
<PAGE> 4
or governmental or regulatory agencies having jurisdiction, and of any exchanges
upon which the stock of the Corporation may be listed shall have been fully
complied with.
10. SECURITIES LAWS COMPLIANCE. The Corporation will diligently
endeavor to comply with all applicable securities laws before any stock is
issued pursuant to the Options. Without limiting the generality of the
foregoing, the Corporation may require from the Optionee such investment
representation or such agreement, if any, as counsel for the Corporation may
consider necessary in order to comply with the Securities Act of 1933 as then in
effect, and may require that the Optionee agree that any sale of the Shares will
be made only in such manner as is permitted by the Corporation. The Corporation
shall cause the Shares underlying the Options to be registered under the
Securities Act of 1933 as amended by filing a Form S-8 Registration Statement
(or other applicable form) covering the Options and the Shares underlying the
Options. Optionee shall take any action reasonably requested by the Corporation
in connection with registration or qualification of the Shares under federal or
state securities laws.
11. SHARES SUBJECT TO LEGEND. If deemed necessary by the Corporation's
counsel, all certificates issued to represent Shares purchased upon exercise of
the Options shall bear such appropriate legend conditions as counsel for the
Corporation shall require.
12. COMPLIANCE WITH APPLICABLE LAWS. THE CORPORATION'S OBLIGATION TO
ISSUE SHARES OF ITS COMMON STOCK UPON EXERCISE OF THE OPTIONS IS EXPRESSLY
CONDITIONED UPON THE COMPLETION BY THE CORPORATION OF ANY REGISTRATION OR OTHER
QUALIFICATION OF SUCH
4
<PAGE> 5
SHARES UNDER ANY STATE AND/OR FEDERAL LAW OR RULINGS OR REGULATIONS OF ANY
GOVERNMENTAL REGULATORY BODY, OR THE MAKING OF SUCH INVESTMENT REPRESENTATIONS
OR OTHER REPRESENTATIONS AND UNDERTAKINGS BY THE OPTIONEE OR ANY PERSON ENTITLED
TO EXERCISE THE OPTION IN ORDER TO COMPLY WITH THE REQUIREMENTS OF ANY EXEMPTION
FROM ANY SUCH REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES WHICH THE
CORPORATION SHALL, IN ITS SOLE DISCRETION, DEEM NECESSARY OR ADVISABLE. SUCH
REQUIRED REPRESENTATIONS AND UNDERTAKINGS MAY INCLUDE REPRESENTATIONS AND
AGREEMENTS THAT THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE OPTION (i)
IS NOT PURCHASING SUCH SHARES FOR DISTRIBUTION AND (ii) AGREES TO HAVE PLACED
UPON THE FACE AND REVERSE OF ANY CERTIFICATES A LEGEND SETTING FORTH ANY
REPRESENTATIONS AND UNDERTAKINGS WHICH HAVE BEEN GIVEN TO THE CORPORATION OR A
REFERENCE THERETO.
13. MISCELLANEOUS.
13.1 Binding Effect. This Agreement shall bind and inure to
the benefit of the successors, assigns, transferees, agents, personal
representatives, heirs and legatees of the respective parties.
13.2 Further Acts. Each party agrees to perform any further
acts and execute and deliver any documents which may be necessary to carry out
the provisions of this Agreement.
5
<PAGE> 6
13.3 Amendment. This Agreement may be amended at any time by
the written agreement of the Corporation and the Optionee.
13.4 Syntax. Throughout this Agreement, whenever the context
so requires, the singular shall include the plural, and the masculine gender
shall include the feminine and neuter genders. The headings and captions of the
various Sections hereof are for convenience only and they shall not limit,
expand or otherwise affect the construction or interpretation of this Agreement.
13.5 Choice of Law. The parties hereby agree that this
Agreement has been executed and delivered in the State of California and shall
be construed, enforced and governed by the laws thereof. This Agreement is in
all respects intended by each party hereto to be deemed and construed to have
been jointly prepared by the parties and the parties hereby expressly agree that
any uncertainty or ambiguity existing herein shall not be interpreted against
either of them.
13.6 Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be construed
to have any effect on, the remaining provisions of this Agreement.
13.7 Notices. All notices, requests, demands, and other
communications given, or required to be given pursuant to the terms of this
Agreement shall be in writing and may be delivered in person (by hand,
messenger, or other confirmable form of
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delivery), or be sent by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows, or by Federal Express or other nationally
recognized overnight courier service, addressed as follows, or by facsimile
transmission, to the following respective numbers, followed by a copy being
delivered in person, by mail, or by overnight courtier as specified herein:
If to Optionee: Teri L. Jolin
11328 Elderwood Street
Los Angeles, CA 90049
If to Corporation: OptimumCare Corporation
30011 Ivy Glenn Drive, Suite 219
Laguna Niguel, California 92677
Either party may, by written notice to the other, specify a different address or
numbers for notice purposes. Any notice sent to the party to whom it is
addressed in accordance with this paragraph will be deemed to have been given
(i) when received, if personally delivered; (ii) if sent by registered or
certified mail, return receipt requested, upon the date of delivery shown on the
receipt card, or if no date is shown, the postmark thereon; (iii) if sent via
Federal Express or other nationally recognized overnight courier, one (1)
business day after deposit with such overnight courier; or (iv) if sent by
facsimile transmission, on the day on which it is sent, if receipt of
transmission is confirmed by telephone. If notice is received on a Saturday,
Sunday or legal holiday, it will be deemed to have been given and received on
the next following business day.
13.8 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof,
this Agreement
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supersedes all prior and contemporaneous agreements and understandings of the
parties, and there are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof except as set
forth or referred to herein. No supplement, modification or waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver.
13.9 Attorneys' Fees. In the event that any party to this
Agreement institutes any action or proceeding, including, but not limited to,
litigation or arbitration, to preserve, to protect or to enforce any right or
benefit created by or granted under this Agreement, the prevailing party in each
respective such action or proceeding shall be entitled, in addition to any and
all other relief granted by a court or other tribunal or body, as may be
appropriate, to an award in such action or proceeding of that sum of money which
represents the attorneys' fees reasonably incurred by the prevailing party
therein in filing or otherwise instituting and in prosecuting or otherwise
pursuing or defending such action or proceeding, and, additionally, the
attorneys' fees reasonably incurred by such prevailing party in negotiating any
and all matters underlying such action or proceeding and in preparation for
instituting or defending such action or proceeding.
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IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first set forth above.
"CORPORATION"
OPTIMUMCARE CORPORATION,
a Delaware corporation
By:
Edward A. Johnson, President
"OPTIONEE"
TERI L. JOLIN
9
<PAGE> 1
EXHIBIT 10.85
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") is entered into as of this
24th day of April, 1996 by and between OPTIMUMCARE CORPORATION, a Delaware
corporation ("Corporation"), and MARGARET M. MINNICK ("Optionee").
A G R E E M E N T
It is hereby agreed as follows:
1. GRANT OF OPTIONS. The Corporation hereby grants to Optionee, options
("Options") to purchase all or any part of Thirty-Three Thousand (33,000)
Shares, upon and subject to the terms and conditions set forth herein.
2. OPTION PERIOD. The Options shall be exercisable at any time during
the period commencing on the following dates (subject to the provisions of
Section 10) and expiring on the following dates:
<TABLE>
<CAPTION>
Number of Options Exercisable Effective Expiration Date
----------------- --------------------- ---------------
<S> <C> <C>
6,660 April 24, 1997 April 23, 2001
6,660 April 24, 1998 April 23, 2001
6,660 April 24, 1999 April 23, 2001
6,660 April 24, 2000 April 23, 2001
6,660 April 24, 2001 April 23, 2002
</TABLE>
3. METHOD OF EXERCISE. The Options shall be exercisable by Optionee by
giving written notice to the Corporation of the election to purchase and of the
number of
1
<PAGE> 2
Shares Optionee elects to purchase, such notice to be accompanied by such other
executed instruments or documents as may be required by the Corporation pursuant
to this Agreement. Optionee shall at the time of such exercise tender the
purchase price of the Shares Optionee has elected to purchase. Optionee may
purchase less than the total number of Shares for which the Option is
exercisable, provided that a partial exercise of an Option may not be for less
than One Hundred (100) Shares. If Optionee shall not purchase all of the Shares
which Optionee is entitled to purchase under the Options, Optionee's right to
purchase the remaining unpurchased Shares shall continue until expiration of the
Options. The Options shall be exercisable with respect of whole Shares only, and
fractional Share interests shall be disregarded.
4. AMOUNT OF PURCHASE PRICE. The purchase price per Share for each
Share which Optionee is entitled to purchase under the Options shall be $.92 per
Share, which is eighty five percent (85%) of the fair market value per share on
the date of the grant of the Options as determined in good faith by the Board of
Directors of the Corporation.
5. PAYMENT OF PURCHASE PRICE. At the time of Optionee's notice of
exercise of the Options, Optionee shall tender in cash or by certified or bank
cashier's check payable to the Corporation, the purchase price for all Shares
then being purchased.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. As used herein, the term
"Adjustment Event" means an event pursuant to which the outstanding Shares of
the Corporation are increased, decreased or changed into, or exchanged for a
different number
2
<PAGE> 3
or kind of shares or securities, without receipt of consideration by the
Corporation, through reorganization, merger, recapitalization, reclassification,
stock split, reverse stock split, stock dividend, stock consolidation or
otherwise. Upon the occurrence of an Adjustment Event, (i) appropriate and
proportionate adjustments shall be made to the number and kind and exercise
price for the shares subject to the Options, and (ii) appropriate amendments to
this Agreement shall be executed by the Corporation and Optionee if the
Corporation determines that such an amendment is necessary or desirable to
reflect such adjustments. The determination by the Corporation as to what
adjustments, amendments or arrangements shall be made pursuant to this Section
6, and the extent thereof, shall be final and conclusive. No fractional Shares
shall be issued on account of any such adjustment or arrangement.
7. NO RIGHTS TO CONTINUED RELATIONSHIP. Nothing contained in this
Agreement shall obligate the Corporation to have any relationship with Optionee
for any period or interfere in any way with the right of the Corporation to
terminate the relationship with Optionee at any time.
8. TIME OF GRANTING OPTIONS. The time the Options shall be deemed
granted, sometimes referred to herein as the "date of grant," shall be April 18,
1996.
9. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not be entitled to the
privileges of stock ownership as to any Shares not actually issued and delivered
to Optionee. No Shares shall be purchased upon the exercise of any Options
unless and until, in the opinion of the Corporation's counsel, any then
applicable requirements of any laws,
3
<PAGE> 4
or governmental or regulatory agencies having jurisdiction, and of any exchanges
upon which the stock of the Corporation may be listed shall have been fully
complied with.
10. SECURITIES LAWS COMPLIANCE. The Corporation will diligently
endeavor to comply with all applicable securities laws before any stock is
issued pursuant to the Options. Without limiting the generality of the
foregoing, the Corporation may require from the Optionee such investment
representation or such agreement, if any, as counsel for the Corporation may
consider necessary in order to comply with the Securities Act of 1933 as then in
effect, and may require that the Optionee agree that any sale of the Shares will
be made only in such manner as is permitted by the Corporation. The Corporation
shall cause the Shares underlying the Options to be registered under the
Securities Act of 1933 as amended by filing a Form S-8 Registration Statement
(or other applicable form) covering the Options and the Shares underlying the
Options. Optionee shall take any action reasonably requested by the Corporation
in connection with registration or qualification of the Shares under federal or
state securities laws.
11. SHARES SUBJECT TO LEGEND. If deemed necessary by the Corporation's
counsel, all certificates issued to represent Shares purchased upon exercise of
the Options shall bear such appropriate legend conditions as counsel for the
Corporation shall require.
12. COMPLIANCE WITH APPLICABLE LAWS. THE CORPORATION'S OBLIGATION TO
ISSUE SHARES OF ITS COMMON STOCK UPON EXERCISE OF THE OPTIONS IS EXPRESSLY
CONDITIONED UPON THE COMPLETION BY THE CORPORATION OF ANY REGISTRATION OR OTHER
QUALIFICATION OF SUCH
4
<PAGE> 5
SHARES UNDER ANY STATE AND/OR FEDERAL LAW OR RULINGS OR REGULATIONS OF ANY
GOVERNMENTAL REGULATORY BODY, OR THE MAKING OF SUCH INVESTMENT REPRESENTATIONS
OR OTHER REPRESENTATIONS AND UNDERTAKINGS BY THE OPTIONEE OR ANY PERSON ENTITLED
TO EXERCISE THE OPTION IN ORDER TO COMPLY WITH THE REQUIREMENTS OF ANY EXEMPTION
FROM ANY SUCH REGISTRATION OR OTHER QUALIFICATION OF SUCH SHARES WHICH THE
CORPORATION SHALL, IN ITS SOLE DISCRETION, DEEM NECESSARY OR ADVISABLE. SUCH
REQUIRED REPRESENTATIONS AND UNDERTAKINGS MAY INCLUDE REPRESENTATIONS AND
AGREEMENTS THAT THE OPTIONEE OR ANY PERSON ENTITLED TO EXERCISE THE OPTION (i)
IS NOT PURCHASING SUCH SHARES FOR DISTRIBUTION AND (ii) AGREES TO HAVE PLACED
UPON THE FACE AND REVERSE OF ANY CERTIFICATES A LEGEND SETTING FORTH ANY
REPRESENTATIONS AND UNDERTAKINGS WHICH HAVE BEEN GIVEN TO THE CORPORATION OR A
REFERENCE THERETO.
13. MISCELLANEOUS.
13.1 Binding Effect. This Agreement shall bind and inure to
the benefit of the successors, assigns, transferees, agents, personal
representatives, heirs and legatees of the respective parties.
13.2 Further Acts. Each party agrees to perform any further
acts and execute and deliver any documents which may be necessary to carry out
the provisions of this Agreement.
5
<PAGE> 6
13.3 Amendment. This Agreement may be amended at any time by
the written agreement of the Corporation and the Optionee.
13.4 Syntax. Throughout this Agreement, whenever the context
so requires, the singular shall include the plural, and the masculine gender
shall include the feminine and neuter genders. The headings and captions of the
various Sections hereof are for convenience only and they shall not limit,
expand or otherwise affect the construction or interpretation of this Agreement.
13.5 Choice of Law. The parties hereby agree that this
Agreement has been executed and delivered in the State of California and shall
be construed, enforced and governed by the laws thereof. This Agreement is in
all respects intended by each party hereto to be deemed and construed to have
been jointly prepared by the parties and the parties hereby expressly agree that
any uncertainty or ambiguity existing herein shall not be interpreted against
either of them.
13.6 Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable, such provision shall be
severable from, and such invalidity or unenforceability shall not be construed
to have any effect on, the remaining provisions of this Agreement.
13.7 Notices. All notices, requests, demands, and other
communications given, or required to be given pursuant to the terms of this
Agreement shall be in writing and may be delivered in person (by hand,
messenger, or other confirmable form of
6
<PAGE> 7
delivery), or be sent by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows, or by Federal Express or other nationally
recognized overnight courier service, addressed as follows, or by facsimile
transmission, to the following respective numbers, followed by a copy being
delivered in person, by mail, or by overnight courtier as specified herein:
If to Optionee: Margaret M. Minnick
531 Vallombrosa
Pasadena, CA 91107
If to Corporation: OptimumCare Corporation
30011 Ivy Glenn Drive, Suite 219
Laguna Niguel, California 92677
Either party may, by written notice to the other, specify a different address or
numbers for notice purposes. Any notice sent to the party to whom it is
addressed in accordance with this paragraph will be deemed to have been given
(i) when received, if personally delivered; (ii) if sent by registered or
certified mail, return receipt requested, upon the date of delivery shown on the
receipt card, or if no date is shown, the postmark thereon; (iii) if sent via
Federal Express or other nationally recognized overnight courier, one (1)
business day after deposit with such overnight courier; or (iv) if sent by
facsimile transmission, on the day on which it is sent, if receipt of
transmission is confirmed by telephone. If notice is received on a Saturday,
Sunday or legal holiday, it will be deemed to have been given and received on
the next following business day.
13.8 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof,
this Agreement
7
<PAGE> 8
supersedes all prior and contemporaneous agreements and understandings of the
parties, and there are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof except as set
forth or referred to herein. No supplement, modification or waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver.
13.9 Attorneys' Fees. In the event that any party to this
Agreement institutes any action or proceeding, including, but not limited to,
litigation or arbitration, to preserve, to protect or to enforce any right or
benefit created by or granted under this Agreement, the prevailing party in each
respective such action or proceeding shall be entitled, in addition to any and
all other relief granted by a court or other tribunal or body, as may be
appropriate, to an award in such action or proceeding of that sum of money which
represents the attorneys' fees reasonably incurred by the prevailing party
therein in filing or otherwise instituting and in prosecuting or otherwise
pursuing or defending such action or proceeding, and, additionally, the
attorneys' fees reasonably incurred by such prevailing party in negotiating any
and all matters underlying such action or proceeding and in preparation for
instituting or defending such action or proceeding.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first set forth above.
"CORPORATION"
OPTIMUMCARE CORPORATION,
a Delaware corporation
By:/s/ Edward A. Johnson
-------------------------------------
Edward A. Johnson, President
"OPTIONEE"
/s/ Margaret M. Minnick
----------------------------------------
MARGARET M. MINNICK
9
<PAGE> 1
EXHIBIT 10.86
AGREEMENT
THIS AGREEMENT is entered into as of this 25th day of April, 1996, by and
between FRIENDSHIP COMMUNITY MENTAL HEALTH CENTER (CMHC), and OptimumCare(R)
Corporation (Manager), a Delaware Corporation.
RECITALS
A. CMHC operates a Community Mental Health Center in Phoenix, Arizona,
including a 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. CMHC desires to retain Manager, and Manager desires to be retained,
to provide the services described herein; and
D. CMHC 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.
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<PAGE> 2
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 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. An outpatient visit is defined as a
patient attending at least two (2) therapy sessions a day.
(d) "Out-Patient Program" shall mean the out-patient partial
hospitalization psychiatric program managed by Manager at CMHC.
2. TERM
(a) This Agreement shall have an initial term of three (3) years
commencing (effective) on April 29, 1996 and terminating April 29,
1999.
(b) Termination provisions are in Section (10) of this Agreement.
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<PAGE> 3
3. COVENANTS OF CMHC
CMHC will:
(a) Furnish necessary and identified program space as per Exhibit A and
rent said space to the Manager for the duration of this agreement as
described in Addendum 1. CMHC will cooperate with Manager in
providing appropriate program space for a potential capacity of at
least twenty-five (25) chairs.
(b) Provide support activities including: i) maintenance of or
installation of carpet and decorating of patient treatment areas as
needed; (ii) furniture, (iii) clerical support and (iv) all
telephone expenses at CMHC. (For illustration see Addendum 3)
(c) Bill and collect all Out-Patient Program charges due for Out-Patient
Program services, and (i) provide record keeping as customary in the
ordinary course of CMHC's business.
(d) Staff the Out-Patient Program with qualified Administrator,
Assistant Administrator and Unit Secretary and be solely liable to
those personnel who are CMHC employees for their wages, compensation
and employee benefits. CMHC personnel shall comply with the
Out-Patient Program policies and procedures as mutually agreed upon
in writing by CMHC and Manager. CMHC shall not, without Manager's
prior written consent (which shall not be unreasonably withheld),
deviate, change or otherwise decrease the agreed staffing.
(e) Maintain license from the Arizona Department of Health Services and
pay all related fees associated with this license.
(f) Provide Manager's employees and contracted personnel with copies of
all relevant
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CMHC Policies and Procedures, as amended from time to time.
(g) 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
CMHC or its employees or contracted personnel.
(h) Maintain professional and comprehensive general liability insurance
for itself and its employees and contracted personnel in an amount
not less than $1,000,000 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 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. CMHC
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.
4. COVENANTS OF MANAGER
Manager will do the following at its own cost and expense: (For
illustration see Exhibits and Addendums).
(a) Rent facility as described on Exhibit A from CMHC for the duration
of this agreement.
(b) Pay for all supplies and materials necessary for operating CMHC's
partial hospitalization program.
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(c) Pay for the dietary and transportation services for all patients.
(d) Provide for Out-Patient Program management and direction.
(e) Provide for Out-Patient Program marketing including community
awareness and liaison concerning the care and treatment of the
Out-Patient Program's patients.
(f) Provide housekeeping services for patients and manager's offices at
CMHC.
(g) Provide the following: (i) A full-time Partial Hospitalization
Program Director; (ii) Social Services; (iii) Psychological
Services; (iv) Therapy/Activities and other services as appropriate.
(v) A Medical Director (who shall be a physician duly licensed in
the state of Arizona (vi) registered nurse services (vii) and
professional counseling staff as needed to provide 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 CMHC approval but CMHC shall be deemed
to have accepted such personnel unless it informs Manager otherwise
in writing within five (5) business days of receipt of all such
required information. Such personnel shall not be deemed employees
or contracted personnel or borrowed servants of CMHC. Manager shall
have full responsibility for their wages, compensation and employee
benefits and acts or omissions.
(h) Provide to CMHC an accounting of Manager's expenses in operating
program.
(i) Provide Out-Patient Program orientation and training for all
appropriate personnel.
(j) Indemnify, save harmless, and defend CMHC 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)
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arising out of CMHC 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.
(k) 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.
(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 CMHC with a certificate from the
insurer stating that such insurance is in effect and which also
states that CMHC 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
CMHC's approval which shall not be unreasonably withheld. CMHC
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 CMHC 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.
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(m) 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.
(n) Comply with all applicable laws (including but not limited to 42
U.S.C. 1395 (nn) (b) or any similar law or regulation), regulations,
CMHC policies and procedures, Program policies and procedures and
any applicable standards of care.
(o) Use reasonable efforts to resolve any issues regarding acceptability
of Out-Patient Program personnel to CMHC personnel and to
Out-Patient Program patients which may arise with respect to any of
Manager's employees or contracted personnel.
(p) Provide monthly written reports to CMHC regarding all aspects of the
operation of the Out-Patient Program.
(q) Commit no act or omission which adversely affects the CMHC license.
(r) Admit patients to the Out-Patient Program (including but not limited
to Medicare and Medicaid patients) only if the admission is ordered
by a physician on the Out-patient Program staff with admitting
privileges.
(s) Provide appropriate utilization review and quality assessment
services for all outpatient program patients. Utilization and review
extends to filing and pursuing clinical appeals with the fiscal
intermediary, Aetna of Petaluma, CA.
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<PAGE> 8
5. REPRESENTATION AND WARRANTS OF CMHC
CMHC hereby represents to Manager as follows:
(a) CMHC is a corporation duly organized and validly existing in good
standing under the laws of the State of Arizona 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 maintaining
the license described in subpart (e) of Section (3).
(b) The execution of this Agreement and the performance of the
obligations of the CMHC hereunder will not result in any breach of
any of the terms, conditions or provisions of any agreement or other
instrument to which CMHC is a party or by which it may be bound or
affected, or any governmental license, franchise, permit or other
authorization possessed by the CMHC, 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 CMHC (nor is the CMHC subject to any
judgement, order, decree or regulation of any court or other
governmental administrative agency) which would materially adversely
affect the performance of CMHC's obligations hereunder.
(d) No Certificate of Need is required by CMHC from any state regulatory
agency for the operation of the Out-Patient Program.
6. REPRESENTATIONS OF MANAGER
Manager hereby represents to CMHC 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
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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
affect the performance of Manager's obligations hereunder.
7. MANAGEMENT FEE
(a) CMHC shall pay to Manager a management fee of one hundred forty
seven dollars ($147.00) per patient day for each patient attending
the Out-Patient Program.
(b) CMHC shall be entitled to a one hundred forty seven dollars
($147.00) per day credit against the management fee otherwise due
with respect to each Patient Day of any Medicare or Medicaid patient
for which Medicare or Medicaid has finally denied payment for
clinical reasons, as further described in Addendum 2.
(c) CMHC shall pay Manager within five (5) working days of the date CMHC
receives payment.
8. CONFIDENTIAL AND PROPRIETARY INFORMATION
(a) CMHC agrees and acknowledges that Confidential Information is
disclosed to it in
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confidence with the understanding that it constitutes business
information developed by Manager. CMHC further agrees that it shall
not use such Confidential Information for any purpose other than in
connection with the Out-Patient Program. CMHC 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.
(b) Manager hereby grants to CMHC 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 CMHC business or Out-Patient Program patients except as
required by law or regulation or as permitted by written
authorization of CMHC or the respective patient as the case may be.
9. RECRUITMENT OF EMPLOYEES AND AGENTS
(a) CMHC 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 CMHC will have access to and
possess Confidential Information of Manager. CMHC, therefore, agrees
that for the earlier of two (2) years after the cessation of the
employment or agency relationship between the Manager and the
employee or agent or two (2) years after termination of this
Agreement, it will not knowingly (and it will not induce any of its
affiliates to)
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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 in the Out-Patient Program unless Manager gives
CMHC prior written consent thereto or unless this Agreement is
terminated by CMHC 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 way retain the
services of any employee, former employee, or contracted personnel
or former agent of CMHC without CMHC's prior written consent
thereto.
10. TERMINATION
(a) Termination by Manager:
(1) By written notice to CMHC, if CMHC should have a bankruptcy,
reorganization or similar action filed by or against it,
become insolvent, go into liquidation for any purpose.
(2) In the event CMHC 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 CMHC shall have thirty (30) days to cure such
breach or else the Agreement will thereupon be terminated upon
written notice to CMHC.
(3) By written notice to CMHC if CMHC fails to maintain any
license granted to it by a regulatory agency without which the
Out-Patient Program would be materially and adversely
affected.
-11-
<PAGE> 12
(4) By written notice to CMHC if CMHC fails to maintain
professional and general liability insurance in the minimum
amount of $1,000,000.
(b) Termination by CMHC:
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.
2. In the event Manager has failed to comply with the terms of
this Agreement in any material respect, CMHC 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.
(c) Termination by either party:
1. Within six months of the date of this agreement, if Manager
does not maintain an average daily census of 10 patients over
a three (3) consecutive month period.
2. In the event that Medicare, Medicaid, a third party payor or
other Federal, State, Local laws, rules, regulations, or
interpretations thereof at any time during this agreement
duration; prohibit, restrict or substantially change the
method, payment or amount of reimbursement or the like for
services provided under this agreement, then the CMHC and
Manager in good faith shall amend the agreement to provide for
payment of compensation to each other in a manner consistent
with any such prohibition restriction and/or limitation. If
this agreement is not or
-12-
<PAGE> 13
cannot be amended prior to any event as above or to the mutual
satisfaction of the CMHC and Manager, then this agreement may
be terminated by either party with thirty (30) days written
notice.
(d) Manager agrees not to affiliate with other providers of partial
hospitalization services within a ten (10) mile radius of CMHC.
(e) Prior to Managing another partial hospitalization outpatient program
in Maricopa or Pinal County, Manager will give CMHC three (3) months
in which to make reasonable progress towards opening a facility in
that area, therein providing CMHC first right of refusal and a time
frame. Any future agreement for another partial hospitalization
outpatient program will be identical to this agreement unless
mutually agreed otherwise.
(f) 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.
(g) 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.
(h) 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
-13-
<PAGE> 14
notwithstanding the part found void or unenforceable.
(i) 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.
(j) Binding Effect: This Agreement shall be binding on the successors,
and assigns of the respective parties, provided, however, neither
party may assign or otherwise transfer this Agreement or delegate
obligations hereunder without the other's written consent.
(k) 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.
(l) No Agency or Partnership: The relationship between Manager and CMHC
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.
(m) 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
-14-
<PAGE> 15
(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.
11. MISCELLANEOUS PROVISIONS
(a) Compulsory Arbitration: Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled
by binding arbitration in accordance with the rules of the American
Arbitration Association, and judgement on the award rendered my be
entered in any court having jurisdiction. However, this shall not
apply with respect to any claim for indemnity for bodily injury or
death.
(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) UCC1: CMHC agrees to allow Manager, at Manager's expense, file a
UCC1 payment promise against the CMHC's psychiatric outpatient
accounts receivables referred to in this agreement.
CMHC's Address: Friendship Community Mental Health Center
3201 North 16th Street #6
P.O. Box 16846
Phoenix, AZ 85011-8646
Manager's Address: OptimumCare Corporation
30011 Ivy Glenn Drive, Suite 219
Laguna Niguel, CA 92677-5018
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<PAGE> 16
IN WITNESS WHEREOF, this Agreement has been executed
at Laguna Niguel, California at Phoenix, Arizona
Manager:
OPTIMUMCARE CORPORATION CMHC
FRIENDSHIP COMMUNITY
MENTAL HEALTH CENTER
By: ________________________________ By: ______________________________
Edward A. Johnson Steve Nelson
President Administrator
Date: ______________________________ Date: ____________________________
-16-
<PAGE> 17
EXHIBIT A
Approximately 3300 Sq. Ft. of office space in commercial building located at
3201 North 16th Street, Phoenix, AZ 85011-6846.
Described further as follows:
Cheery Lynn Executive Office Building
<TABLE>
<CAPTION>
Approx.
Sq. Ft.
-------
<S> <C>
Suite 6 1,452
Suite 14 & 15 1,920
Suite 11 200
</TABLE>
-17-
<PAGE> 18
ADDENDUM 1
1. Manager will rent from CMHC the program space described in Exhibit A for
the duration of this agreement. Said rent shall be paid monthly from the
effective date of this agreement. Payment will be made to the building
owner or as requested by CMHC. The figures below will include local and
State sales tax additions.
<TABLE>
<CAPTION>
APPROX.
MONTHLY RENT SQUARE FT.
------------ ----------
<S> <C> <C>
Suite 6 $1,089.00/month 1,452
Suite 14 & 15 $1,477.50/month 1,920
Suite 11 $ 200.00/month 200
</TABLE>
2. Manager will honor the Medical Director contract (Exhibit B) as follows:
Manager will pay the $2,000 per month fee for services to Dr. D. Mac or as
requested by CMHC. However, such fee will only be honored for 90 days from
the effective date of this agreement or until an alternate arrangement
between Dr. D. Mac and Manager is established, if any.
3. Manager will rent from CMHC the vehicles and pay the monthly insurance
premiums as described below for a period of 4 months from the effective
date of this agreement. Payments will be made to CMHC or to appropriate
parties as requested by CMHC. Manager and CMHC agree to make a decision on
further use or not of vans by June 29, 1996.
<TABLE>
<CAPTION>
VEHICLE VEHICLE
VEHICLE PAYMENT INSURANCE
------- ------- ---------
<S> <C> <C>
Chevy Astro Mini Van, 1989 $369.00/month $249.00/month
Ford 15 Passenger Van, 1995 $500.00/month $249.00/month
</TABLE>
4. Manager will pay for monthly insurance premiums as shown in Exhibit C for
those employees named in Exhibit C, that transition to employees of
Manager. Such monthly premiums will remain in effect for employees while
employees of Manager, or until such time that they can be brought into a
Manager's insurance program.
5. Manager at CMHC's request will review approximately 40 past billings and
clinical services documentation of the CMHC. Such review shall be within
45 days of this agreement's effective date. Manager has no responsibility
for such past documentation.
-18-
<PAGE> 19
ADDENDUM 2
CMHC will not pay Manager for initial clinical denials until such denials (if
any) have been paid for by intermediary.
CMHC will receive credit for retroactive clinical denials (if any) which will be
adjusted off credit once such denials have been paid for by intermediary.
A. EXAMPLE:
1. Claim paid by Medicare
2. CMHC pays management fee
3. Medicare retroactively denies claim
4. CMHC adjusts management fee accordingly during the next month
5. Medicare approves claim
6. Management fee is paid accordingly during the next month
-19-
<PAGE> 20
ADDENDUM 3
ILLUSTRATION
1. CMHC pays for the following:
A. Telephone
B. Office Supplies
C. Postage
D. Clerical Support
E. Furniture
F. Copy Machine/Fax
G. Two Computers
H. Billing Services
I. Stationary
J. Admin. Business Cards
K. Accounting Fees
L. Annual Audit
M. Preparation of Cost Reports
N. General Liability Insurance
O. Educational Costs for Admin. Employees
2. Manager pays for following expenses as Manager deems necessary or
appropriate for program management.
A. Yellow Page Advertising
B. Therapy Supplies
C. Housekeeping Services
D. Clinical Business Cards
E. Printing of Brochures
F. Beverages - Soft Drinks and Coffee
G. Meals for Clients
H. Nursing Supplies
I. Transcription Services
J. Toilet Paper, Paper Towels and Kleenexes
K. Salaries and Benefits of all Clinical Staff
L. All costs associated with transporting patients
-20-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 102,005
<SECURITIES> 0
<RECEIVABLES> 1,775,975
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,906,174
<PP&E> 22,501
<DEPRECIATION> 37,336
<TOTAL-ASSETS> 2,260,741
<CURRENT-LIABILITIES> 473,367
<BONDS> 240,334
0
0
<COMMON> 4,954
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,260,741
<SALES> 2,220,445
<TOTAL-REVENUES> 2,222,007
<CGS> 1,935,925
<TOTAL-COSTS> 2,207,473
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,717
<INCOME-PRETAX> 14,534
<INCOME-TAX> 5,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,534
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0
<FN>
See notes to financial statements
</FN>
</TABLE>
