GYNCOR INC, S-1/A, 1996-07-01

GYNCOR INC
S-1/A, 1996-07-01
MISC HEALTH & ALLIED SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 1996

REGISTRATION NO. 333-3936
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

GYNCOR, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 8099 36-3989422
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code No.) Identification No.)
incorporation or
organization)
</TABLE>

750 NORTH ORLEANS STREET, CHICAGO, ILLINOIS 60610, (312) 397-8200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

NORBERT GLEICHER, M.D.
CHIEF EXECUTIVE OFFICER, PRESIDENT
GYNCOR, INC.
750 NORTH ORLEANS STREET, CHICAGO, ILLINOIS 60610, (312) 397-8200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:

<TABLE>
<S> <C>
HERBERT S. WANDER, ESQ. FREDERICK W. KANNER, ESQ.
JEFFREY R. PATT, ESQ. DEWEY BALLANTINE
KATTEN MUCHIN & ZAVIS 1301 AVENUE OF THE AMERICAS
525 WEST MONROE STREET NEW YORK, NEW YORK 10019
CHICAGO, ILLINOIS 60661 (212) 259-8000
(312) 902-5200
</TABLE>

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
-------------------------

If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /

-------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

GYNCOR, INC.
------------------------

CROSS REFERENCE SHEET

PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING
IN FORM S-1 REGISTRATION LOCATION IN PROSPECTUS
---------------------------------------- ----------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus.............................. Facing Page; Outside Front Cover Page of
Prospectus; Additional Information
2. Inside Front and Outside Back Cover
Pages of Prospectus..................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; The Company; Risk Factors
4. Use of Proceeds......................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price......... Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution................................ Risk Factors; Dilution
7. Selling Security Holders................ Principal and Selling Stockholders
8. Plan of Distribution.................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be
Registered.............................. Description of Capital Stock
10. Interests of Named Experts and
Counsel................................. Legal Matters
11. Information with Respect to the
Registrant.............................. Outside Front Cover Page of Prospectus;
Prospectus Summary; The Company; Risk Factors;
Dividend Policy; Dilution; Capitalization;
Selected Combined and Pro Forma Financial
Data; Unaudited Pro Forma Combined Financial
Information; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling
Stockholders; Description of Capital Stock;
Shares Eligible for Future Sale; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
</TABLE>
<PAGE> 3

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.

SUBJECT TO COMPLETION, DATED JUNE 28, 1996

PROSPECTUS
2,220,000 SHARES

[GYCOR LOGO] GYNCOR INC(SM)
PRACTICE MANAGEMENT IN REPRODUCTIVE MEDICINE

COMMON STOCK
------------------

Of the 2,220,000 shares of Common Stock being offered hereby, 2,000,000
shares are being offered by GynCor, Inc. (the "Company") and 220,000 shares are
being offered by the Selling Stockholders named under "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
shares of Common Stock by the Selling Stockholders.

Prior to this offering, there has been no public market for the Common
Stock. It is currently estimated that the public offering price for the Common
Stock will be between $13.00 and $15.00 per share. See "Underwriting" for
information to be considered in determining the public offering price. The
Common Stock has been approved for quotation on The Nasdaq Stock Market's
National Market under the symbol "GYNC."

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS" BEGINNING ON PAGE 8.

------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Per Share $ $ $ $
- ------------------------------------------------------------------------------------------------
Total(3) $ $ $ $
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses of the offering estimated at $1,400,000 payable by
the Company.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
333,000 additional shares of Common Stock on the same terms as set forth
above solely to cover over-allotments, if any. If the Underwriters exercise
such option in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."

The shares of Common Stock are being offered by the several Underwriters
named herein subject to prior sale, when, as and if accepted by them and subject
to certain conditions. It is expected that certificates for the shares of Common
Stock offered hereby will be available for delivery on or about ,
1996, at the offices of Smith Barney Inc., 333 West 34th Street, New York, New
York 10001.
------------------

SMITH BARNEY INC. THE CHICAGO CORPORATION

, 1996
<PAGE> 4
[GYNCOR INC. LOGO]
Clinic Locations

LOCATIONS OF OPERATIONS AND PENDING TRANSACTIONS

[Map of the United States]

CHR-Illinois
--------------
-River North
Concourse-Chicago
-Howard-Chicago
-Downers Grove
-Evergreen Park
-Glenview
-Hoffman Estates
-Lake Forest
-Naperville
-Oakbrook
-Schaumburg
-Merrillville, Indiana

*Pursuant to pending affiliation with
medical school program
CHR-New Jersey
--------------
-Park Ridge

CHR-Florida
-----------
-Clearwater
-St. Petersburg
-Tampa
CHR-New York
------------
-Mt. Sinai Medical*
-Columbia University
-SUNY, Syracuse*
-Rockland

THE CENTER FOR HUMAN REPRODUCTION (TM)
CLINICAL CARE-RESEARCH-EDUCATION

The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent public accountants and
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial information.

---------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ STOCK MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. See "Risk Factors" for information that should be carefully
considered by prospective investors.

THE COMPANY

GynCor, Inc. (the "Company") provides comprehensive management and clinical
support services to integrated networks of physicians specializing in the field
of reproductive medicine, primarily subspecialties of obstetrics and gynecology
and related areas of human reproduction. The Company currently manages
integrated networks of 17 reproductive medicine centers ("Centers") and 28
physicians in the Chicago, New York City and Tampa/St. Petersburg metropolitan
areas. This includes the results of two acquisitions completed by the Company on
May 1, 1996 for consideration totalling 212,069 shares of Common Stock,
including 32,935 shares subject to the completion of this offering. In addition,
the Company plans to add one Center and five physicians to its networks in the
New York City metropolitan area and Florida and to establish an additional
network of one Center and two physicians in Syracuse, New York in connection
with medical school affiliations for which the Company has entered into
agreements or letters of intent. The Company anticipates that each of these
pending affiliations will commence by September 1996. The first Center was
opened in 1981 as an exclusive faculty affiliation with Mount Sinai Hospital and
Medical Center in Chicago. Since September 1990, when independent operations
began, the Company has grown from one Center and three physicians and scientists
with doctoral degrees to 19 Centers and 44 physicians and scientists after
giving effect to the pending affiliations in New York and Florida. Upon
completion of these pending affiliations, the Company's affiliated physicians
will be on staff at approximately 26 hospitals, including several of the
country's leading teaching hospitals.

Reproductive medicine encompasses several medical disciplines which focus
on male and female reproductive systems and processes. Within the field of
reproductive medicine, there are several subspecialties such as obstetrics and
gynecology which apply only to women and certain subspecialties, such as
reproductive endocrinology, infertility and urology, which apply to both women
and men. The Centers provide reproductive medicine services principally relating
to the subspecialties of obstetrics and gynecology, reproductive endocrinology
and infertility, including traditional drug therapy and surgical therapies,
assisted reproductive technologies ("ART") and specialized laboratory services,
as well as perinatal services (treatment of patients with high risk
pregnancies). The Company intends to expand the range of obstetrics and
gynecology, women's health care and reproductive medicine services offered at
the Centers beyond those currently offered to include the provision of
comprehensive obstetrics and gynecology services. The Company believes that the
addition of these services, coupled with the Company's planned growth and
capitated market experience, will contribute to the Company's ability to
negotiate national and regional shared-risk arrangements with managed care
payors.

The physician practices that the Company currently manages provide
reproductive endocrinology and infertility services to patients insured by 48
third party payors, and maintain three exclusive capitated managed care
contracts covering approximately 478,000 lives. The largest of these contracts
covers approximately 441,000 lives and is with HMO-Illinois, the state's largest
HMO, owned by Blue Cross Blue Shield of Illinois. A subsidiary of Blue Cross
Blue Shield of Illinois owns a Convertible Note which is convertible into 5% of
the outstanding Common Stock of the Company. In addition, one of the Company's
managed practices holds what the Company believes is one of the few capitated
managed care contracts for comprehensive obstetrics and gynecology services.
Certain of the managed practices provide perinatal services to patients insured
by seven third party payors in the Chicago area, and certain of the managed
practices also maintain an exclusive managed care contract relating to the
provision of perinatal services.

The Health Care Financing Administration estimated that national health
expenditures in 1995 were over $1 trillion, and, according to industry sources,
expenditures related to infertility services, one of several subspecialties of
reproductive medicine, exceeded $1 billion. Concerns over the accelerating costs
of health care have resulted in an increased emphasis on managed care and
capitation arrangements and has placed small to mid-sized physician groups,
including physicians practicing medicine in the subspecialties of

3
<PAGE> 6

obstetrics and gynecology, at a significant disadvantage when competing for
patients. As a result, physicians are increasingly abandoning traditional,
independent private practice in favor of affiliation with larger organizations
which manage most of the nonmedical tasks related to the provision of health
care services, including contracting with payors. By providing capital and
informational, managerial and administrative resources, these organizations
enable physicians to concentrate on providing medical services, thereby
providing quality health care at lower costs.

The Company seeks to establish integrated physician networks through
acquisitions of the nonmedical assets, such as accounts receivable, supplies,
instruments, equipment, furniture, proprietary data and contract rights, of
targeted physician practices. The targeted physicians then enter into long-term
employment agreements with a medical practice managed by the Company under a
long-term management services agreement. The typical management services
agreement between the Company and a managed practice has a term of 40 years and
cannot be terminated by the managed practice without cause. In states that
prohibit the splitting of physician fees, the Company receives a fixed
management fee, payable monthly and subject to periodic adjustment if it is
determined that the fee is not commensurate with factors such as costs incurred
and past utilization levels. In other states, the Company agrees to pay all of
the managed practice's expenses, including the physicians' base compensation and
performance-based bonuses, and the Company, in turn, receives the economic
benefit of revenues in excess of expenses generated by the managed practice.

In establishing its presence in the Chicago metropolitan area, the Company
has developed a clinical and academic affiliation with the University of
Illinois College of Medicine in Chicago. Similarly, as part of its strategy for
developing integrated networks in the New York and Tampa/St. Petersburg areas,
the Company has established an affiliation with Columbia University Medical
School and has entered into letters of intent for affiliations with Mount Sinai
Medical Center in New York City, State University of New York-Upstate Medical
Center in Syracuse, New York and the University of South Florida in Tampa,
Florida. A medical school affiliation generally provides that certain faculty
members of the medical school who specialize in reproductive medicine,
infertility and ART medicine provide such services at a Center operated by the
local managed practice and engage in joint research and educational programs
with the managed practice. The Company provides management and administrative
services to the faculty physicians under the management services agreement with
the managed practice. The medical school is reimbursed for the services of the
faculty physicians, and the managed practice receives revenues generated by the
faculty physicians for such services. The Company does not pay any initial
consideration for the establishment of the affiliation. References in this
Prospectus to "transactions" may include both acquisitions of nonmedical assets
of physician practices and affiliations with medical school programs.

The Company's strategy is to develop integrated networks for reproductive
medicine services through practice affiliations that provide high quality,
cost-effective care in targeted geographic markets. The principal elements of
this strategy include: (i) affiliating with leading physician practices by
capitalizing on the professional reputation and experience of the Company and
its affiliated physicians and their relationships with general obstetricians and
gynecologists, primary care physicians and other professionals and academics in
the reproductive medicine field; (ii) developing locally integrated specialty
networks of physicians, including expansion of the range of services offered by
newly affiliated practices; (iii) using the Company's capitated contract
experience and proprietary information system to pursue national and regional
managed care contracts, including capitated contracts; (iv) encouraging the
Company's managed practices to explore and develop ways to improve the delivery
of medical services by improving outcomes and reducing costs of high quality
treatment; and (v) providing a proprietary information system which integrates
all managed practices and enhances the Company's ability to collect and analyze
clinical, patient, administrative and financial data, control expenses,
effectively manage utilization rates, maximize reimbursements and effectively
price and attract managed care contracts.

4
<PAGE> 7

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by:
The Company........................................ 2,000,000 shares(1)(2)
The Selling Stockholders........................... 220,000 shares
Common Stock to be outstanding after this offering... 6,654,509 shares(1)(3)
Use of Proceeds...................................... To repay certain indebtedness and for
general corporate purposes, including
future acquisitions, expansion of
operations and working capital.
Proposed Nasdaq National Market symbol............... GYNC
</TABLE>

- -------------------------

(1) Does not include up to 333,000 shares of Common Stock that may be sold by
the Company pursuant to the Underwriters' over-allotment option. See
"Underwriting."

(2) At an assumed public offering price of $14.00 per share, the net proceeds to
the Company from this offering are estimated to be approximately $24.6
million (approximately $29.0 million if the Underwriters over-allotment is
exercised in full).

(3) Gives effect to (i) the conversion of $2,500,000 principal amount of the
Company's 10% Subordinated Convertible Promissory Note in the original
aggregate principal amount of $5,000,000 due December 1, 2000 (the
"Convertible Note"), and (ii) the exercise of an option to purchase 96,000
shares held by Vishvanath Karande, M.D., a selling stockholder. Does not
include up to 100,667 shares, 708,333 shares and 41,666 shares reserved for
issuance pursuant to a stock option held by Dr. Karande, the Company's
Incentive Compensation Plan and Directors' Stock Option Plan, respectively.
As of June 1, 1996, options to acquire 635,833 shares were outstanding under
the Incentive Compensation Plan and 9,999 shares will automatically be
granted on the effective date of this offering under the Directors' Stock
Option Plan. See "Management -- Incentive Compensation Plan," and "--
Directors' Compensation -- Directors' Option Plan."

5
<PAGE> 8

SUMMARY COMBINED AND PRO FORMA FINANCIAL AND OPERATING DATA

(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)

<TABLE>
<CAPTION>
HISTORICAL(1)(2)
---------------------------------------------------------------------------------------------------------------
PREDECESSOR PREDECESSOR
---------------------------------------------- TWELVE ------------
TWELVE MONTHS ENDED MONTHS SIX MONTHS SIX MONTHS THREE MONTHS ENDED
---------------------------------------------- ENDED ENDED ENDED ------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1991 1992 1993 1994 1995 1994 1995 1995 1996
----------- ----------- --------- --------- --------- ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net patient service
revenue............. $2,280 $2,260 $5,545 $8,785 $13,882 $6,382 $12,060 $ 2,603 $ 5,979
------- ------ ------ ------ --------- ------ --------- --------- ---------
Operating expenses:
Physicians'
salaries(4)....... 247 573 760 1,812 3,014 987 2,954 690 3,674
Clinic salaries,
wages and
benefits.......... 407 440 1,041 1,916 3,883 1,675 2,625 761 1,291
Clinic rent and
lease expense..... 273 472 302 307 1,083 423 881 310 497
Clinic supplies..... 323 299 1,356 2,338 3,531 1,748 1,842 952 791
Other clinic
expenses.......... 261 177 303 574 1,054 658 861 127 367
General corporate
expenses.......... 1,030 493 1,167 1,448 3,215 1,030 2,604 1,128 1,231
Depreciation and
amortization...... 117 156 96 144 651 286 365 131 215
------- ------ ------ ------ --------- ------ --------- --------- ---------
Total operating
expenses........ 2,658 2,610 5,025 8,539 16,431 6,807 12,132 4,099 8,066
------- ------ ------ ------ --------- ------ --------- --------- ---------
Operating income
(loss).............. (378) (350) 520 246 (2,549) (425) (72) (1,496) (2,087)
Other (income)
expense............. (31) -- (37) (357) 32 -- -- (30) --
Net interest
expense............. 53 30 46 68 232 68 165 71 183
------- ------ ------ ------ --------- ------ --------- --------- ---------
Income (loss) before
income taxes........ (400) (380) 511 535 (2,813) (493) (237) (1,537) (2,270)
Income taxes
(benefit)........... (158) (137) 192 73 (454) (34) -- (186) --
------- ------ ------ ------ --------- ------ --------- --------- ---------
Net income
(loss)(5)........... $ (242) $ (243) $ 319 $ 462 $(2,359) $ (459) $ (237) $(1,351) $(2,270)
======= ====== ====== ====== ========= ====== ========= ========= =========
Net income (loss) per
share............... $ 0.09 $ 0.14 $ (.64) $ (.05) $ (.36) $ (.52)
====== ====== ========= ========= ========= =========
Weighted average
outstanding
shares.............. 3,365,444 3,365,444 3,703,619 4,336,884 3,798,627 4,337,185
========= ========= ========= ========= ========= =========
OPERATING DATA:
(at end of period)
Number of affiliated
physicians and
scientists.......... 3 3 4 6 18 11 23 16 27
Number of Centers.... 1 3 5 7 11 7 11 7 11

<CAPTION>
PRO FORMA(1)(3)
-------------------------
TWELVE THREE
MONTHS ENDED MONTHS
DECEMBER 31, ENDED MARCH
1995 31, 1996
------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
STATEMENT OF
OPERATIONS DATA
Net patient service
revenue............. $25,522 $ 7,342
--------- ---------
Operating expenses:
Physicians'
salaries(4)....... 7,216 4,175
Clinic salaries,
wages and
benefits.......... 6,054 1,542
Clinic rent and
lease expense..... 1,890 514
Clinic supplies..... 4,010 897
Other clinic
expenses.......... 1,431 400
General corporate
expenses.......... 5,453 1,526
Depreciation and
amortization...... 741 218
--------- ---------
Total operating
expenses........ 26,795 9,272
--------- ---------
Operating income
(loss).............. (1,273) (1,930)
Other (income)
expense............. 7 --
Net interest
expense............. 161 35
--------- ---------
Income (loss) before
income taxes........ (1,441) (1,965)
Income taxes
(benefit)........... (233) 92
--------- ---------
Net income
(loss)(5)........... $(1,208) $(2,057)
========= =========
Net income (loss) per
share............... $ (.19) $ (.31)
========= =========
Weighted average
outstanding
shares.............. 6,403,407 6,535,161
========= =========
OPERATING DATA:
(at end of period)
Number of affiliated
physicians and
scientists.......... 42 44
Number of Centers.... 19 19
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996(1)
------------------------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(6) ADJUSTED(7)
----------- ------------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................. $ 655 $ 655 $ 18,743
Working capital (deficit)................................................. (1,735) (1,470) 21,039
Total assets.............................................................. 13,938 16,482 33,566
Long-term debt and capital lease obligations, less current portion........ 1,238 1,731 1,096
Subordinated convertible debt............................................. 5,000 5,000 --
Total stockholders' equity (net capital deficiency)....................... (1,972) (547) 26,593

</TABLE>

(See footnotes on following page)

6
<PAGE> 9

(1) All of the Company's financial information set forth in this Prospectus
includes the operations of the Company and CHR-Illinois, CHR-Endoscopic and
CHR-Perinatal (the "Illinois Practices"). The Company was formed in January
1995 as part of the Reorganization. See "The Company." From the
Reorganization through March 31, 1996, the Company and the Illinois
Practices were operated under common control. Accordingly, the combined
financial data as of June 30, 1995, for the six months ended June 30, 1995
(included in the combined financial data for the twelve months ended June
30, 1995) and as of and for the six months and twelve months ended December
31, 1995 and the three months ended March 31, 1996, has been prepared to
reflect the combination of business entities which have been operated under
common control. Effective April 1, 1996, the Company entered into a 40-year
management services agreement with each of the Illinois Practices under
which the Company, as opposed to affiliates of the Company, will have
perpetual, unilateral control over the assets and operations of the Illinois
Practices (other than the practice of medicine). Accordingly,
notwithstanding the lack of technical majority ownership of the stock of
such entities, consolidation of the Illinois Practices and the entities
formed in connection with the Recent Acquisitions will be necessary to
present fairly the financial position and results of operations of the
Company because of control by means other than ownership of stock. See Note
17 of Notes to Audited Combined Financial Statements of the Company.

(2) In 1995, the Company changed its year-end for financial reporting purposes
from June 30 to December 31. Additionally, The Center for Human Reproduction
Northwest, M.D.S.C., an Illinois medical corporation ("CHR-NW"), was
acquired in June 1994 and was merged into CHR-Illinois effective January
1995. The 1994 balance sheet data includes the accounts of CHR-Illinois and
CHR-NW, and the 1994 and 1993 statement of operations data includes only the
accounts of CHR-Illinois. See Note 1 of Notes to Audited Combined Financial
Statements of the Company.

(3) Gives effect to (i) the sale of the 2,000,000 shares of Common Stock offered
by the Company hereby (at an assumed public offering price of $14.00 per
share) and the application of the net proceeds therefrom as described under
"Use of Proceeds," (ii) the acquisitions of the nonmedical assets of the
Fertility Center of Northern New Jersey, P.A. in New Jersey and A Center for
Gynecology, P.A. in Florida (the "Recent Acquisitions"), (iii) the
conversion of $2.5 million principal amount of the Convertible Note, and
(iv) the exercise of an option to purchase 96,000 shares held by Vishvanath
Karande, M.D., a selling stockholder, as if all such events had occurred on
January 1, 1995. The pro forma combined statement of operations data for
1995 does not purport to represent what the Company's results of operations
would have been if such events had actually occurred on January 1, 1995. Pro
forma operating data relating to the number of affiliated physicians and
scientists and the number of Centers also gives effect to the medical school
affiliation entered into as of June 1, 1996 and the three pending medical
school affiliations. The pro forma financial information is presented for
the twelve month period ended December 31, 1995 because, effective December
31, 1995, the Company changed its year end for financial reporting purposes
from June 30 to December 31. See Notes 1 and 17 of Notes to Audited Combined
Financial Statements of the Company.

(4) For the three months ended March 31, 1996, physicians' salaries includes a
charge of approximately $2.0 million attributable to the Company as a result
of the restructuring of an option among the Company's principal
stockholders. See "Certain Transactions -- Restructuring of Miller Option"
and Note 17 of Notes to Audited Combined Financial Statements.

(5) From inception in January 1995, the Company has been an S corporation and
has not been subject to federal (and some state) corporate income taxes. Had
the Company been subject to federal and state income taxes during these
periods, net income (loss) and net income (loss) per share would not have
been impacted because any deferred tax asset resulting from the net losses
reflected during these periods was fully reserved. Prior to the consummation
of this offering, the Company will terminate its S corporation status and
thereafter will be treated as a C corporation.

(6) Gives effect to the Recent Acquisitions as if all such transactions had
occurred on March 31, 1996.

(7) Adjusted to give effect to the sale of the 2,000,000 shares of Common Stock
offered by the Company hereby (at an assumed public offering price of $14.00
per share) and the application of the net proceeds therefrom as described
under "Use of Proceeds" and the conversion of the Convertible Note as if
such event had occurred as of such date.

------------------------

Except as otherwise indicated, the information in this Prospectus assumes
no exercise of the Underwriters' over-allotment option to purchase up to 333,000
additional shares of Common Stock to cover over-allotments, if any, and has been
adjusted to give effect to (i) the reincorporation of the Company in Delaware on
March 8, 1996 by means of a merger in which shareholders of the Illinois
corporation received 4,000 shares of Common Stock for each share of capital
stock of the Illinois corporation then outstanding, (ii) a five-for-six reverse
stock split of the Common Stock that became effective April 24, 1996, and (iii)
the conversion of the Convertible Note into 338,107 shares of Common Stock upon
consummation of this offering.

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<PAGE> 10

RISK FACTORS

In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the factors listed below in
evaluating an investment in the shares of Common Stock offered hereby.

LIMITED OPERATING HISTORY; NET OPERATING LOSSES

Prior to the recent and pending transactions in New York, New Jersey and
Florida, the Company's operations have consisted solely of providing management
services to the 11 Centers in the Chicago metropolitan area. In addition, for
the twelve months ended June 30, 1995, the six months ended December 31, 1995
and the three months ended March 31, 1996, the Company had a net loss of
approximately $2.4 million, $237,000 and $2.3 million, respectively, and at
March 31, 1996 the Company had a net capital deficiency of approximately $2.0
million. There can be no assurance that the Company will achieve profitability.

GROWTH STRATEGY AND LIMITATION ON GROWTH

The Company's strategy involves growth through acquisitions and through the
expansion of services offered by its affiliated practices. Identifying
candidates to become affiliated practices and proposing, negotiating and
implementing economically feasible affiliations with such groups can be a
lengthy, complex and costly process. There can be no assurance that the Company
will successfully establish practice affiliations with additional physician
practices. In particular, there can be no assurance that the Company will be
able to acquire the assets of, execute management services agreements with, or
profitably manage, additional affiliated practices or successfully integrate the
affiliated practices into a network that will provide appropriate incentives for
such practices to improve operating efficiencies and reduce costs while
delivering high-quality patient care. Recently, the Company has experienced
rapid growth in its business and staff. Continued rapid growth may impair the
Company's ability to efficiently provide management services to the affiliated
practices and to adequately manage and supervise its employees. There can be no
assurance that the Company will be able to manage its expanding operations
effectively or that it will be able to maintain or accelerate its planned
growth.

The Company has entered into letters of intent to affiliate with three
medical schools, including seven additional physicians. While the Company
expects that the transactions described in the letters of intent will be
consummated in 1996, there can be no assurance that any or all of these
transactions will be consummated. In addition, delays in consummating future
transactions may create fluctuations in quarterly results. Following this
offering and unless otherwise required by law, the Company does not intend to
seek stockholder approval for future acquisitions. Accordingly, the stockholders
of the Company will be dependent upon management's judgment with respect to such
transactions. These transactions may involve the issuance of a significant
number of additional shares of the Company's capital stock, the incurrence,
assumption or issuance by the Company of substantial indebtedness and the
undertaking by the Company of material obligations including, among others,
long-term employment, consulting or management arrangements.

HEALTH CARE REGULATION AND REFORM

The health care industry is highly regulated at both the state and federal
levels. The Company and its affiliated practices are subject to a number of laws
governing issues as diverse as relationships between health care providers and
their referral sources, prohibitions against a provider referring patients to an
entity with which the provider has a financial relationship, licensure and other
regulatory approvals, corporate practice of medicine, and regulation of
unprofessional conduct by providers, including fee-splitting arrangements. While
the Company believes that its operations materially comply with relevant state
and federal laws, many aspects of the relationships between the Company and each
of the Centers and managed practices have not been the subject of judicial or
regulatory interpretation. An adverse review or determination by any one of such
authorities, or changes in the regulatory requirements, or otherwise, could have
a material adverse effect on the operations and financial condition of the
Company. In addition, expansion of the operations of the Company to certain
jurisdictions may require modifications to the Company's relationships with
physician

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<PAGE> 11

practice groups, which could have a material adverse impact on the Company. The
Company recently introduced a new program under which at least one of the
managed practices will be offering certain medical services over the world wide
web. Although the Company believes that this project complies with the laws of
the states in which it is being offered and federal regulations, given the
innovative nature of this project, no assurance can be given as to how state and
federal regulations will be applied to such services. Such services, however,
are not available to patients in states that expressly prohibit such practices.

In recent years, numerous legislative proposals have been introduced or
proposed in the United States Congress and in some state legislatures that would
effect major changes in the United States health care system at both the
national and state level. It is not clear at this time which proposals, if any,
will be adopted or, if adopted, what effect such proposals would have on the
Company's business. There can be no assurance that currently proposed or future
health care legislation or other changes in the administration or interpretation
of governmental health care programs will not have an adverse effect on the
Company.

DEPENDENCE UPON REIMBURSEMENT BY THIRD PARTY PAYORS

For the 12 months ended December 31, 1995 and the three months ended March
31, 1996, approximately 95% and 97% of the Company's total combined revenue,
respectively, were derived from third party payors. The health care industry is
undergoing cost containment pressures as third party payors seek to impose lower
reimbursement and utilization rates and negotiate reduced payment schedules with
medical service providers. The Company believes that this trend will continue to
result in a reduction from historical levels in per-patient revenue for such
medical providers. Further reductions in payments to physicians or other changes
in reimbursement for health care services could have a direct or indirect
adverse effect on the Company's operations. In addition, a few states, including
Illinois, mandate that insurance companies provide coverage for several of the
types of services offered by the Centers. In several of the states mandating
insurance coverage for certain infertility services, efforts have been made to
limit or repeal these requirements. It cannot be determined what effect, if any,
any change in the levels of state mandated insurance coverage would have on the
Company's revenues and income.

RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS; CAPITATED FEE REVENUE

The Company believes that its success will be dependent, in part, upon the
Company's ability to negotiate, on behalf of the affiliated practices, contracts
with health maintenance organizations ("HMOs"), insurance companies, and other
private third party payors pursuant to which services will be provided on a fee-
for-service or risk-sharing/capitated basis by some or all affiliated practices.
Under certain capitated contracts, the health care provider accepts a
predetermined amount per patient, per month in exchange for providing all
necessary covered services to enrollees. Such contracts shift much of the risk
of providing health care from the payor to the provider. For the 12 months ended
December 31, 1995 and the three months ended March 31, 1996, the Company derived
approximately 34% and 29% of total combined revenue, respectively, from such
capitated contracts. The proliferation of such contracts in markets served by
the Company could result in greater predictability of revenues but also greater
unpredictability of expenses. There can be no assurance that the Company will be
able to negotiate on behalf of the affiliated practices satisfactory
arrangements on a risk-sharing or capitated basis. In addition, to the extent
that patients or enrollees covered by such contracts require more frequent or
extensive care than is anticipated, operating margins may be reduced, or the
revenues derived from such agreements may be insufficient to cover the costs of
the services provided. As a result, affiliated practices may incur additional
costs which would reduce or eliminate any earnings under these contracts.

In addition to the financial risks associated with managed care contracts,
there are certain regulatory risks associated with the Company's role in
negotiating and administering such contracts. If the Company were to contract
with third party payors directly, on behalf of its affiliated practices for
certain capitation or other risk-sharing arrangements, the Company may become
subject to state insurance laws. In some states, regulators may determine that
the Company is engaged in the business of insurance, particularly if the Company
contracts directly with self-insured employees or another entity that is not
licensed to engage in the business of insurance. In addition, the Company will
be subject to state and federal antitrust laws.

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<PAGE> 12

DEPENDENCE ON CERTAIN THIRD PARTY PAYOR

For the twelve months ended December 31, 1995 and the three months ended
March 31, 1996, HMO-Illinois (owned by Blue Cross Blue Shield of Illinois)
accounted for approximately 33% and 28%, respectively, of the Company's total
combined revenues. After giving effect to the Recent Acquisitions, on a pro
forma basis as if such transactions had occurred on January 1, 1995,
HMO-Illinois would have accounted for approximately 26% and 23% of the Company's
pro forma total combined revenues for the twelve months ended December 31, 1995
and the three months ended March 31, 1996, respectively. The loss of or
reduction in revenues from HMO-Illinois could materially adversely affect the
Company. No other third party payor represented more than 5% of the Company's
total combined revenues or pro forma total combined revenues for the same
periods. In addition, as of June 1, 1996, the Company's capitated managed care
contract with HMO-Illinois accounted for approximately 441,000 of the estimated
478,000 covered lives for which the Company holds exclusive capitated risk
contracts. This capitated contract may be terminated by the Company or
HMO-Illinois upon 180 days' prior written notice or, in the event of a breach of
the contract, upon 30 days' prior written notice. Blue Cross Blue Shield of
Illinois, through a wholly-owned subsidiary, beneficially owns the Company's
$5,000,000 10% Subordinated Convertible Promissory Note due December 1, 2000
(the "Convertible Note") of which $2,500,000 will be converted into 5% of the
outstanding common stock of the Company after giving effect to this offering.

COMPETITION

The business of providing health care related services is intensely
competitive, as is the physician practice management industry, and each is
continuing to evolve in response to pressures to find the most cost effective
method of providing quality health care. Although the Company focuses on
physician practices that provide specific types of health care services, it
competes for management contracts with national and regional providers of
physician management services, as well as hospitals and hospital-sponsored
management services organizations. If federal or state governments enact laws
that attract other health care providers to the managed care market, the Company
may encounter increased competition from other institutions which seek to
increase their presence in the managed care market and which have substantially
greater resources than the Company. There can be no assurance that the Company
will be able to compete effectively with its competitors, that additional
competitors will not enter the market, or that such competition will not make it
more difficult to acquire the assets of, and provide management services for,
the managed practices on terms beneficial to the Company.

POTENTIAL LIABILITY AND INSURANCE

The Centers and the Company's managed practices are involved in the
delivery of health care services to the public and, consequently, are exposed to
the risk of professional liability claims. The Company provides only nonmedical
services and does not control or direct the practice of medicine by the
physicians with which it affiliates or the compliance with certain regulatory
and other requirements directly applicable to physicians and physician groups.
However, the Company's managed practices may become subject to claims, suits, or
complaints relating to services and products provided by such practices, and
there can be no assurance that such claims will not be asserted against the
Company. The Company currently does not maintain separate insurance coverage for
professional liability claims; however, pursuant to the management services
agreements, each managed practice is required to maintain comprehensive
professional liability insurance. As of June 1, 1996, the physicians employed by
the managed practices were covered by insurance coverage of $1.0 million on a
per claim basis and ranging from $3.0 million to $25.0 million on an aggregate
basis. The Company is an additional named insured on such insurance policies,
but is not indemnified by affiliated physicians or the managed practices for
liabilities resulting from the performance of medical services. There can be no
assurance that any claims asserted against the Company or the managed practices
will not be successful or, if successful, will not exceed the limits of
insurance coverage maintained by the Company or the managed practices or that
such coverage will continue to be available at acceptable costs.

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<PAGE> 13

RELIANCE ON MANAGED PRACTICES

The Company's revenues will depend on the revenues generated by the medical
practices with which the Company has entered into management services
agreements. The Company provides services pursuant to management services
agreements with five medical practices, including three medical practices formed
in connection with the recent and pending transactions in New York, New Jersey
and Florida. The management services agreements define the responsibilities of
both the physician practices and the Company and govern the principal terms and
conditions of their relationship. There can be no assurance that any managed
practice will maintain a successful medical practice or that any of the key
physicians in a particular managed practice will continue practicing with such
managed practice. As a condition to entering into management services
agreements, managed practices are required to enter into non-competition
agreements with each of their respective physicians; however, there are no
assurances that any such agreement would (i) be enforceable if challenged in
court because courts are hesitant to enforce covenants restricting an
individual's ability to be gainfully employed, or (ii) restrict the physician
from moving his or her practice to another region in the United States.
Moreover, such a covenant would not prevent the physician from abandoning the
medical practice altogether. In addition, these agreements restrict competition
for a limited period of time (which may vary depending upon particular state law
requirements). Therefore, any departing physician may directly compete with his
or her former practice group after the expiration of such time period. Any
resulting loss of revenue by a managed practice could have a material adverse
effect on the Company.

NEED FOR ADDITIONAL FINANCING

The Company anticipates that its expansion strategy will continue to
require substantial capital investment. Capital is needed not only for the
acquisition of the nonmedical assets of physician practices, but also for the
effective integration, operation and expansion of the managed practices. The
managed practices may require capital for renovation and expansion and for the
addition of medical equipment and technology. The Company believes that its
existing cash resources together with the net proceeds from this offering, cash
flow from operations, and available borrowings under the Company's line of
credit with American National Bank of Chicago (the "Secured Credit Agreement")
will be sufficient to meet the Company's anticipated acquisition, expansion, and
working capital needs for the next 24 months. Thereafter, however, the Company
may be required to raise additional financing. The Company may obtain such
financing through additional borrowings or the issuance of additional equity or
debt securities, either of which could have an adverse effect on the value of
the shares of Common Stock offered by this Prospectus. Although the Company
currently believes that it will be able to secure such financing, if necessary,
there can be no assurance that the Company will be able to secure financing on
favorable terms, if at all. If the Company is unable to secure additional
financing in the future or complete a public offering, its ability to pursue its
business strategy and its results of operations for future periods may be
negatively impacted.

DEPENDENCE ON KEY PERSONNEL

The Company is substantially dependent on the efforts and skills of its
executive officers, particularly Norbert Gleicher, M.D., for the management of
the Company and the implementation of its business strategy. Because of the
difficulty in finding adequate replacements for the executive officers, the
loss, incapacity or unavailability of any of these individuals could adversely
affect the Company's operations. In addition, it may be necessary for the
Company to attract and retain additional talented individuals to support
anticipated growth or to replace the executive officers in the event their
employment with the Company is terminated. The Company has entered into an
employment agreement with Dr. Gleicher, dated as of March 1, 1995 and amended as
of April 1, 1996, to serve as the President of the Company for an initial term
of five years, commencing on the effective date of this offering. See
"Management -- Employment Agreements."

VOTING CONTROL

Upon completion of this offering and after giving effect to the automatic
conversion of the Convertible Note, Dr. Gleicher will have sole beneficial
ownership of approximately 21.6% of the outstanding shares of voting capital
stock of the Company. In addition, pursuant to Voting Trust Agreements, dated
April 1, 1996,

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<PAGE> 14

Dr. Gleicher has the right to vote shares owned by Drs. Pratt and Miller
representing approximately 33.9% of the outstanding shares of voting capital
stock of the Company with respect to certain matters, although Drs. Pratt and
Miller retain voting rights with respect to the election of directors other than
Dr. Gleicher and with respect to certain matters involving their own employment
and directorship with the Company. See "Principal and Selling Stockholders."
Consequently, Dr. Gleicher will have beneficial ownership of approximately 55.5%
of the outstanding shares of voting capital stock of the Company and, pending a
further issuance of the Company's voting capital stock, Drs. Gleicher, Pratt and
Miller will be able to control the election of the Board of Directors of the
Company and the determination of the Company's policies and will be able to
determine the outcome of all corporate actions requiring a majority stockholder
approval. Such control may preclude an unsolicited acquisition of the Company
and consequently adversely affect the value of the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

The sale of a substantial number of shares of Common Stock after this
offering, or the perception that such sales could occur, could adversely affect
prevailing market prices for the Common Stock. In addition, any such sale or
perception could make it more difficult for the Company to sell equity
securities or equity related securities in the future at a time and price that
the Company deems appropriate. After giving effect to the shares of Common Stock
offered hereby and the 338,107 shares of Common Stock to be issued upon the
automatic conversion of $2,500,000 principal amount of the Convertible Note upon
the closing of this offering, the Company will have outstanding 6,654,509 shares
of Common Stock. Of these shares, the 2,220,000 shares (2,553,000 shares if the
Underwriters' over-allotment option is exercised in full) of Common Stock sold
in this offering will be freely tradable without restriction or limitation under
the Securities Act of 1933, as amended (the "Securities Act"), except to the
extent such shares are subject to the agreement with the Underwriters described
below, and except for any shares purchased by "affiliates," as that term is
defined under the Securities Act, of the Company. The remaining 4,434,509 shares
are "restricted securities" within the meaning of Rule 144 adopted under the
Securities Act ("Rule 144"). The restricted shares were issued and sold by the
Company in private transactions in reliance upon exemptions from registration
under the Securities Act. The Company and its directors, officers, and certain
stockholders, holding in the aggregate substantially all of the Company's
currently outstanding shares of Common Stock, have agreed not to offer, sell, or
otherwise dispose of any of their restricted shares for a period of 180 days
after the date of this Prospectus without the prior written consent of Smith
Barney Inc.

Following this offering, certain holders will have "piggyback" registration
rights with respect to 550,176 shares of Common Stock held by them, which rights
allow them, subject to certain conditions, to include such shares in a
registered public offering of shares of Common Stock. In addition, the Company
intends to register approximately 749,999 shares of Common Stock reserved for
issuance under the Company's stock option plans as soon as practicable following
the consummation of this offering. See "Principal and Selling Stockholders,"
"Description of Capital Stock," "Management -- Incentive Compensation Plan,"
"Shares Eligible for Future Sale," and "Underwriting."

The Commission has recently proposed reducing the initial Rule 144 holding
period to one year and the Rule 144(k) holding period to two years. There can be
no assurance as to when or whether such rule changes will be enacted. If
enacted, such modification will have a material effect on the time when certain
shares of the Common Stock become eligible for resale.

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Certificate of Incorporation and
By-Laws and of Delaware law could, together or separately, discourage potential
acquisition proposals, delay or prevent a change in control of the Company and
limit the price that certain investors might be willing to pay in the future for
shares of the Common Stock. Certain of these provisions provide for a classified
Board of Directors following this offering, the issuance, without further
stockholder approval, of preferred stock with rights and privileges which could
be senior to the Common Stock, restrictions on the ability of stockholders to
call a special meeting of stockholders, nominate directors and submit proposals
to be considered at stockholders' meetings, and a super-

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<PAGE> 15

majority voting requirement in connection with the adoption of stockholders'
amendments to the By-Laws and to certain provisions of the Certificate of
Incorporation, including provisions relating to the election and removal of
directors. Following this offering, the Company also will be subject to Section
203 of the Delaware General Corporation Law ("DGCL") which, subject to certain
exceptions, prohibits a Delaware corporation from engaging in any of a broad
range of business combinations with any "interested stockholder" for a period of
three years following the date that such stockholder became an interested
stockholder. See "Description of Capital Stock." In the event of a change in
control, Drs. Gleicher, Pratt and Miller are entitled to receive certain
severance payments under their respective employment agreements with the Company
and CHR-Illinois. Dr. Miller's employment agreement with CHR-Endoscopic has a
comparable severance provision. As of June 1, 1996, these agreements would have
provided aggregate severance payments to Drs. Gleicher, Pratt and Miller of
approximately $3,970,000, $1,750,000 and $2,900,000, respectively.

NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or continue after this offering. The initial public offering
price was determined by negotiations among the Company and the Underwriters and
may not be indicative of the market price for the Common Stock after this
offering. See "Underwriting" for factors considered in determining the initial
public offering price. From time to time after this offering, there may be
significant volatility in the market price for the Common Stock. Quarterly
operating results of the Company, timing of practice acquisitions, changes in
general conditions in the economy or the health care industry, or other
developments affecting the Company or its competitors could cause the market
price of the Common Stock to fluctuate substantially. The equity markets have,
on occasion, experienced significant price and volume fluctuations that have
affected the market prices for many companies' securities and that have often
been unrelated to the operating performance of these companies. Concern about
the potential effects of health care reform measures has contributed to the
volatility of stock prices of companies in health care and related industries
and may similarly affect the price of the Common Stock following this offering.
Any such fluctuations that occur following the closing of this offering may
adversely affect the market price of the Common Stock.

IMMEDIATE AND SUBSTANTIAL DILUTION

The purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of their
shares of Common Stock in the amount of $10.22 per share. In the event that
options to purchase Common Stock are exercised or the Company issues additional
shares of Common Stock in the future, including shares that may be issued in
connection with future acquisitions, purchasers of Common Stock in this offering
may experience further dilution in the net tangible book value per share of
Common Stock. See "Dilution."

ISSUANCES OF ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK

Pursuant to its Certificate of Incorporation, the Company has the authority
to issue additional shares of Common Stock and shares of one or more series of
preferred stock (the "Preferred Stock"). Such shares may be issued by the
Company on the authority of the Board of Directors without stockholder action.
The issuance of such shares could result in the dilution of the voting power of
the shares of Common Stock purchased in this offering. At present, no series of
Preferred Stock have been authorized or issued by the Company. The terms of any
series of Preferred Stock established by the Company in the future could
adversely affect the rights of the holders of the Company's Common Stock. The
possible issuance of shares of Preferred Stock may be considered a deterrence to
a change of control. See "Description of Capital Stock -- Preferred Stock" and
"-- Delaware Law and Certain Corporate Provisions."

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THE COMPANY

The Company was formed as an Illinois corporation in January 1995 as part
of a reorganization (the "Reorganization") pursuant to which the Company
succeeded to certain of the nonmedical business of Gleicher, Pratt & Associates,
M.D.S.C. (now known as The Center for Human Reproduction-Illinois, M.D.S.C., an
Illinois medical corporation ("CHR-Illinois")). CHR-Illinois was incorporated as
an Illinois corporation in 1981 under the name "Gleicher, Deppe, Elrad &
Associates, M.D.S.C." Unless the context otherwise requires, all references in
this Prospectus to the Company include CHR-Illinois with respect to the conduct
of its business, other than the practice of medicine, prior to January 1995. On
June 6, 1996, CHR-Illinois was merged with The Center for Human
Reproduction-Perinatal, M.D.S.C., an Illinois medical corporation
("CHR-Perinatal"), with the surviving corporation bearing the CHR-Illinois name.
The Company currently provides physician practice management services to the
following five medical corporations that provide medical services at 17 Centers:
(i) CHR-Illinois; (ii) The Center For Human Reproduction-Endoscopic, M.D.S.C.,
an Illinois medical corporation ("CHR-Endoscopic"); (iii) The Center for Human
Reproduction-Florida, Inc., a Florida corporation ("CHR-Florida"); (iv) The
Center for Human Reproduction-New Jersey, P.C., a New Jersey professional
corporation ("CHR-New Jersey"); and (v) The Medical Offices for Human
Reproduction-New York, P.C., a New York professional corporation ("CHR-New
York"); unless the context requires otherwise references to the Company
contained in this Prospectus include these medical corporations.

Effective March 8, 1996, the Company was reincorporated in the State of
Delaware. From inception, the Company has been treated for federal, and certain
state, income tax purposes as an S corporation under Subchapter S of the
Internal Revenue Code of 1986, as amended (the "Code"), and comparable state tax
laws. As a result, any earnings of the Company during this period have not been
subject to tax at the corporate level but have been included in the taxable
income of the Company's stockholders. Prior to the consummation of this
offering, the Company will terminate its S corporation status and thereafter the
Company will be treated as a C corporation rather than an S corporation and,
accordingly, will be subject to federal, state and local income taxes.
CHR-Endoscopic and CHR-Illinois (formerly known as CHR-Perinatal) will remain S
corporations after the consummation of this offering.

The Company's executive offices are located at 750 North Orleans Street,
Chicago, Illinois 60610, and the Company's telephone number at that address is
(312) 397-8200.

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<PAGE> 17

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$24.6 million (approximately $29.0 million if the Underwriters' over-allotment
option is exercised in full) after deducting the underwriting discounts and
commissions and estimated offering expenses. The Company will not receive any
proceeds from the sale of shares of Common Stock by the Selling Stockholders.
The Company intends to use approximately $2.5 million of the net proceeds to
repay the nonconvertible portion of the Convertible Note, which becomes due upon
the closing of this offering, plus all accrued interest thereon. The remaining
$2.5 million in principal amount of the Convertible Note will convert into
338,107 shares of Common Stock upon the closing of this offering. The
Convertible Note bears interest at an annual rate of 10% and, in December 1995,
the Company used the $5.0 million of proceeds of the Convertible Note to pay
down approximately $2.5 million outstanding under the Company's credit agreement
with Cole Taylor Bank and to retire approximately $2.2 million of various
working capital obligations. The Company intends to use approximately $4.5
million of the net proceeds of this offering to repay existing indebtedness
under the Secured Credit Agreement. The Secured Credit Agreement matures on
February 23, 1997 and bears interest at a rate equal to American National Bank
of Chicago's corporate base rate (8.25% at June 1, 1996). The Company intends to
use approximately $5.1 million for the purchase of medical equipment for future
acquisitions and expansion of services and approximately $12.5 million for
working capital and general corporate purposes. Pending such uses, the net
proceeds will be invested in short-term, interest bearing, investment grade
securities. Other than the proposed transactions disclosed herein, there are no
present commitments or agreements with respect to any material acquisitions.

DIVIDEND POLICY

The Company has never paid or declared a dividend on its Common Stock and
does not anticipate paying cash dividends in the foreseeable future. It is the
present intention of the Board of Directors of the Company to reinvest all
earnings in the business of the Company to support future growth of its
operations.

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<PAGE> 18

DILUTION

As of March 31, 1996, the Company had a net tangible book value of
$(2,515,000), or $(0.63) per share. Net tangible book value per share is
determined by dividing the net tangible book value (tangible assets less
liabilities) of the Company by the number of shares of Common Stock outstanding
at that date. After giving effect to (i) the Recent Acquisitions (excluding the
32,935 shares of Common Stock to be issued upon completion of this offering (the
"Contingent Shares")), (ii) the sale of the shares of Common Stock offered by
the Company hereby (at an assumed public offering price of $14.00 per share) and
(iii) the application of the net proceeds therefrom as described under "Use of
Proceeds" (but without giving effect to the exercise of the option to purchase
96,000 shares of Common Stock held by Dr. Karande, the conversion and redemption
of the Convertible Note and the issuance of the Contingent Shares (the
"Contingent Events")), the pro forma adjusted net tangible book value of the
Company as of March 31, 1996 would have been $22,636,000, or $3.66 per share.
After also giving effect to the Contingent Events, as if such events had
occurred on March 31, 1996, the pro forma adjusted net tangible book value of
the Company as of March 31, 1996 would have been $25,136,000 or $3.78 per share.
This offering and the Contingent Events represent an immediate increase in net
tangible book value of $4.26 per share to existing stockholders and an immediate
dilution of $10.22 per share to new investors. The following table illustrates
this dilution per share.

<TABLE>
<S> <C> <C>
Assumed public offering price per share(1)................................... $14.00
Historical net tangible book value per share as of March 31, 1996.......... $(0.63)
Increase in pro forma net tangible book value per share attributable to:
-- Recent Acquisitions............................................. 0.15
-- the offering.................................................... 4.14
------
Pro forma adjusted net tangible book value per share after the offering,
without giving effect to Contingent Events................................. 3.66
------
Dilution to new investors without giving effect to Contingent Events......... 10.34
------
Increase in pro forma adjusted net tangible book value attributable to
Contingent Events(2)....................................................... 0.12
------
Dilution to new investors after giving effect to Contingent Events........... $10.22
======
</TABLE>

- -------------------------
(1) After deduction of underwriting discounts and commissions and estimated
offering expenses.
(2) Determined by subtracting the adjusted pro forma net tangible book value per
share after this offering from the amount of cash paid by a new investor for
a share of Common Stock.

The following table summarizes, on a pro forma basis as of March 31, 1996,
the difference between existing stockholders (including shares issued in
connection with the Recent Acquisitions, upon conversion of the Convertible Note
and the exercise of the option to purchase 96,000 shares of Common Stock held by
Dr. Karande) and new investors with respect to the number of shares of Common
Stock purchased from the Company, the aggregate net consideration paid (based
upon, in the case of new investors, an assumed public offering price of $14.00
per share), and the average price paid per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders....................... 4,654,509 69.9% $ 4,193,168 13.0% $ 0.90
New investors............................... 2,000,000 30.1 28,000,000 87.0 14.00
--------- ----- ----------- -----
Total..................................... 6,654,509 100.0% $32,193,168 100.0%
========= ===== =========== =====
</TABLE>

The foregoing tables assume no exercise of outstanding options after March
31, 1996, other than the option to purchase 96,000 shares of Common Stock held
by Vishvanath Karande, M.D., which is anticipated to be exercised prior to the
effective date of this offering. At June 1, 1996, there were outstanding options
(other than the portion of Dr. Karande's option referenced above) to purchase
736,500 shares of Common Stock at a weighted average exercise price of $10.64
per share (assuming an initial public offering price of $14.00 per share). None
of these options will vest prior to October 1, 1996. To the extent these options
are exercised at a price below the public offering price, there will be further
dilution to new investors. See "Management -- Incentive Compensation Plan" and
"-- Directors' Compensation -- Directors' Option Plan."

16
<PAGE> 19

CAPITALIZATION

The following table sets forth (i) the capitalization of the Company as of
March 31, 1996, (ii) the pro forma capitalization as of March 31, 1996, giving
effect to the Recent Acquisitions, as if such transactions had occurred on such
date and (iii) the pro forma capitalization as of March 31, 1996, as adjusted to
give effect to the sale of the shares of Common Stock offered by the Company
hereby (at an assumed public offering price of $14.00 per share), the
application of the net proceeds therefrom as described under "Use of Proceeds"
and the issuance of 338,107 shares of Common Stock upon conversion of the
Convertible Note, as if all such events had occurred on March 31, 1996.

<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------------
(IN THOUSANDS)
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
<S> <C> <C> <C>
Short-term debt:
Line of credit.............................................. $ 2,757 $ 2,757 $ --
Note Payable to Blue Cross Blue Shield of Illinois.......... 200 200 --
Current portion of long-term debt and capital lease
obligations.............................................. 638 868 538
------- ------- -------
$ 3,595 $ 3,825 $ 538
======= ======= =======
Long-term debt and capital lease obligations, less current
portion..................................................... $ 1,238 $ 1,731 $ 1,096
Subordinated convertible promissory note...................... 5,000 5,000 --
Stockholders' equity (net capital deficiency):
Preferred stock, $.01 par value, 1,000,000 shares
authorized; no shares issued and outstanding............. -- -- --
Common stock, $.0001 par value; 20,000,000 shares
authorized; 4,008,333, 4,187,467, and 6,654,509 shares
issued and outstanding, respectively(1)(2)............... -- -- 1
Additional paid-in capital.................................... 2,156 3,581 30,444
Accumulated deficit........................................... (4,128) (4,128) (3,852)
------- ------- -------
Total stockholders' equity (net capital deficiency)......... (1,972) (547) 26,593
------- ------- -------
Total capitalization........................................ $ 4,266 $ 6,184 $27,689
======= ======= =======
</TABLE>

- -------------------------
(1) The Convertible Note of the Company will automatically convert into 338,107
shares of Common Stock upon consummation of this offering. See "Description
of Capital Stock."

(2) Does not include up to 100,667 shares, 708,333 shares and 41,666 shares
reserved for issuance pursuant to a stock option held by Dr. Karande, the
Company's Incentive Compensation Plan and Directors' Stock Option Plan,
respectively. See "Management -- Incentive Compensation Plan" and "--
Directors' Compensation -- Directors' Option Plan."

17
<PAGE> 20

SELECTED COMBINED AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected historical financial data of the Company should be read in
conjunction with the related financial statements, notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus. The selected historical
combined financial data set forth below as of December 31, 1995 and for each of
the 12 months ended June 30, 1993, 1994 and 1995 and for the six months ended
December 31, 1995, have been derived from the combined financial statements of
the Company for such periods which have been audited by Ernst & Young LLP,
independent public accountants, whose report thereon is included elsewhere in
this Prospectus. The selected historical combined financial data set forth below
as of and for the three months ended March 31, 1995 and 1996 have been derived
from the Company's unaudited financial statements, which were prepared on the
same basis as the audited financial statements and which, in the opinion of
management, include all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the information set forth below. These
historical results are not necessarily indicative of the results to be expected
in the future. The selected pro forma combined financial data set forth below at
March 31, 1996 and for the year ended December 31, 1995 and for the three months
ended March 31, 1996 have been derived from the unaudited pro forma combined
financial statements of the Company. The pro forma selected financial data are
not necessarily indicative of the actual results of operations or financial
position that would have been achieved had the Recent Acquisitions and this
offering been completed as of January 1, 1995 or March 31, 1996, nor are the
statements necessarily indicative of the Company's future results of operations
or financial position. See "Unaudited Pro Forma Combined Financial Information."

<TABLE>
<CAPTION>
HISTORICAL(1)(2)
--------------------------------------------------------------------------------------------------
PREDECESSOR PREDECESSOR THREE
---------------------------------------------- TWELVE ------------ MONTHS
TWELVE MONTHS ENDED MONTHS SIX MONTHS SIX MONTHS ENDED
---------------------------------------------- ENDED ENDED ENDED -----------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, MARCH 31,
1991 1992 1993 1994 1995 1994 1995 1995
----------- ----------- --------- --------- --------- ------------ ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net patient service
revenue..................... $2,280 $2,260 $5,545 $8,785 $13,882 $6,382 $12,060 $ 2,603
------ ------ ------ ------ ------- ------ ------- -------
Operating expenses:
Physicians' salaries(4)..... 247 573 760 1,812 3,014 987 2,954 690
Clinic salaries, wages and
benefits.................. 407 440 1,041 1,916 3,883 1,675 2,625 761
Clinic rent and lease
expense................... 273 472 302 307 1,083 423 881 310
Clinic supplies............. 323 299 1,356 2,338 3,531 1,748 1,842 952
Other clinic expenses....... 261 177 303 574 1,054 658 861 127
General corporate
expenses.................. 1,030 493 1,167 1,448 3,215 1,030 2,604 1,128
Depreciation and
amortization.............. 117 156 96 144 651 286 365 131
------ ------ ------ ------ ------- ------ ------- -------
Total operating
expenses................ 2,658 2,610 5,025 8,539 16,431 6,807 12,132 4,099
------ ------ ------ ------ ------- ------ ------- -------
Operating income (loss)...... (378) (350) 520 246 (2,549) (425) (72) (1,496)
Other (income) expense....... (31) -- (37) (357) 32 -- -- (30)
Net interest expense......... 53 30 46 68 232 68 165 71
------ ------ ------ ------ ------- ------ ------- -------
Income (loss) before income
taxes....................... (400) (380) 511 535 (2,813) (493) (237) (1,537)
Income taxes (benefit)....... (158) (137) 192 73 (454) (34) -- (186)
------ ------ ------ ------ ------- ------ ------- -------
Net income (loss)(5)......... $ (242) $ (243) $ 319 $ 462 $(2,359) $ (459) $ (237) $(1,351)
====== ====== ====== ====== ======= ====== ======= =======
Net income (loss) per
share....................... $ 0.09 $ 0.14 $ (.64) $ (.05) $ (.36)
====== ====== ======= ======= =======
Weighted average outstanding
shares...................... 3,365,444 3,365,444 3,703,619 4,336,884 3,798,627
========= ========= ========= ========= =========

<CAPTION>
HISTORICAL
(1)(2) PRO FORMA (1)(3)
----------- -------------------------
THREE
MONTHS
ENDED TWELVE THREE
----------- MONTHS ENDED MONTHS ENDED
MARCH 31, DECEMBER 31, MARCH 31,
1996 1995 1996
----------- ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net patient service
revenue..................... $ 5,979 $25,522 $ 7,342
------- ------- -------
Operating expenses:
Physicians' salaries(4)..... 3,674 7,216 4,175
Clinic salaries, wages and
benefits.................. 1,291 6,054 1,542
Clinic rent and lease
expense................... 497 1,890 514
Clinic supplies............. 791 4,010 897
Other clinic expenses....... 367 1,431 400
General corporate
expenses.................. 1,231 5,453 1,526
Depreciation and
amortization.............. 215 741 218
------- ------- -------
Total operating
expenses................ 8,066 26,795 9,272
------- ------- -------
Operating income (loss)...... (2,087) (1,273) (1,930)
Other (income) expense....... -- 7 --
Net interest expense......... 183 161 35
------- ------- -------
Income (loss) before income
taxes....................... (2,270) (1,441) (1,965)
Income taxes (benefit)....... -- (233) 92
------- ------- -------
Net income (loss)(5)......... $(2,270) $(1,208) $(2,057)
======= ======= =======
Net income (loss) per
share....................... $ (.52) $ (.19) $ (.31)
======= ========= =======
Weighted average outstanding
shares...................... 4,337,185 6,403,407 6,535,161
========= ========= =========
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996(1)
------------------------------------------
PRO FORMA AS
DECEMBER 31, 1995 ACTUAL PRO FORMA(6) ADJUSTED(7)
----------------- ----------- ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 133 $ 655 $ 655 $ 18,743
Working capital (deficit)........................................... (411) (1,735) (1,470) 21,039
Total assets........................................................ 11,614 13,938 16,482 33,566
Long-term debt and capital lease obligations, less current portion.. 1,351 1,238 1,731 1,096
Subordinated convertible debt....................................... 5,000 5,000 5,000 --
Total stockholders' equity (net capital deficiency)................. (1,702) (1,972) (547) 26,593

</TABLE>

(See footnotes on following page)

18
<PAGE> 21

(1) All of the Company's financial information set forth in this Prospectus
includes the operations of the Company and the Illinois Practices. The
Company was formed in January 1995 as part of the Reorganization. See "The
Company." From the Reorganization through March 31, 1996, the Company and
the Illinois Practices were operated under common control. Accordingly, the
combined financial data as of June 30, 1995 and for the six months ended
June 30, 1995 (included in the combined financial data for the twelve months
ended June 30, 1995) and as of and for the six months and twelve months
ended December 31, 1995 and the three months ended March 31, 1996, has been
prepared to reflect the combination of business entities which have been
operated under common control. Effective April 1, 1996, the Company entered
into a 40-year management services agreement with each of the Illinois
Practices under which the Company, as opposed to affiliates of the Company,
will have perpetual, unilateral control over the assets and operations of
the Illinois Practices (other than the practice of medicine). Accordingly,
notwithstanding the lack of technical majority ownership of the stock of
such entities, consolidation of the Illinois Practices and the entities
formed in connection with the Recent Acquisitions will be necessary to
present fairly the financial position and results of operations of the
Company because of control by means other than ownership of stock. See Note
17 of Notes to Audited Combined Financial Statements of the Company.

(2) In 1995, the Company changed its year-end for financial reporting purposes
from June 30 to December 31. Additionally, CHR-NW was acquired in June 1994
and was merged into CHR-Illinois effective January 1995. The 1994 balance
sheet data includes the accounts of CHR-Illinois and CHR-NW, and the 1994
and 1993 statement of operations data includes only the accounts of
CHR-Illinois. See Note 1 of Notes to Audited Combined Financial Statements
of the Company.

(3) Gives effect to (i) the sale of the 2,000,000 shares of Common Stock offered
by the Company hereby (at an assumed public offering price of $14.00 per
share) and the application of the net proceeds therefrom as described under
"Use of Proceeds," (ii) the Recent Acquisitions, (iii) the conversion of
$2.5 million principal amount of the Convertible Note, and (iv) the exercise
of an option to purchase 96,000 shares held by Vishvanath Karande, M.D., a
selling stockholder, as if all such events had occurred on January 1, 1995.
The pro forma combined statement of operations data for 1995 does not
purport to represent what the Company's results of operations would have
been if such events had actually occurred on January 1, 1995. The pro forma
financial information is presented for the twelve month period ended
December 31, 1995 because, effective December 31, 1995, the Company changed
its year end for financial reporting purposes from June 30 to December 31.
See Notes 1 and 17 of Notes to Audited Combined Financial Statements of the
Company.

(5) From inception in January 1995, the Company has been an S corporation and
has not been subject to federal (and some state) corporate income taxes. Had
the Company been subject to federal and state income taxes during these
periods, net income (loss) and net income (loss) per share would not have
been impacted because any deferred tax asset resulting from the net losses
reflected during these periods was fully reserved. Prior to the consummation
of this offering the Company will terminate its S corporation status and
thereafter will be treated as a C corporation.

(6) Gives effect to the Recent Acquisitions as if all such transactions had
occurred on March 31, 1996.

19
<PAGE> 22

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following Unaudited Pro Forma Combined Balance Sheet as of March 31,
1996 and the Unaudited Pro Forma Combined Statements of Operations for the
twelve months ended December 31, 1995 and the three months ended March 31, 1996
have been prepared to reflect adjustments to the Company's historical results of
operations and financial positions to give effect to the Recent Acquisitions.
The Unaudited Pro Forma Combined Balance Sheet reflects such transactions as if
they had occurred as of March 31, 1996 and the Unaudited Pro Forma Combined
Statements of Operations reflect such transactions as if they had occurred as of
January 1, 1995.

The Unaudited Pro Forma Combined Balance Sheet as of March 31, 1996 gives
effect to this offering (at an assumed public offering price of $14.00 per
share) and the application of net proceeds therefrom as if this offering
occurred on March 31, 1996. The Unaudited Pro Forma Combined Statements of
Operations for the twelve months ended December 31, 1995 and the three months
ended March 31, 1996 give effect to this offering (at an assumed public offering
price of $14.00 per share) and the application of net proceeds therefrom as if
this offering occurred on January 1, 1995. See "Use of Proceeds."

The pro forma financial statements have been prepared by the Company based
on the financial statements of the Company and the physician groups acquired in
the Recent Acquisitions, the financial statements of which are included
elsewhere in this Prospectus. For purposes of preparing the pro forma financial
statements, the results of operations of the Company have been adjusted to give
effect to the change in the Company's financial reporting year end and to
combine the estimated results of operations for the managed practices based upon
the historical medical practice results of the respective practices. Adjustments
have been made to the operating costs based upon the Company's evaluation of
such costs. These pro forma financial statements are presented for illustrative
purposes only and are not necessarily indicative of the results that would have
been obtained if the transactions had occurred on the dates indicated or that
may be realized in the future. The pro forma information should be read in
conjunction with the Company's Audited Combined Financial Statements and the
notes thereto and the historical financial statements of the acquired physician
groups and the notes thereto included elsewhere in this Prospectus.

20
<PAGE> 23

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

MARCH 31, 1996

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- -------------------------------------------------------
RECENT ACQUISITION OFFERING
COMPANY(A) ACQUISITIONS(B) ADJUSTMENTS(B) COMBINED ADJUSTMENTS AS ADJUSTED
---------- --------------- -------------- -------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash...................... $ 655 $ 225 $ (225) $ 655 $18,088(C) $18,743
Receivables
Patients, net of
allowance............. 4,655 857 -- 5,512 -- 5,512
Other................... 88 10 -- 98 -- 98
Notes receivable from
officers/stockholders... 1,399 -- -- 1,399 -- 1,399
Prepaid expenses,
inventories and other... 483 24 -- 507 -- 507
-------- ------- ------ ------- ------- -------
Total current
assets............. 7,280 1,116 (225) 8,171 18,088 26,259
Property and equipment...... 6,673 643 365 7,681 -- 7,681
Less accumulated
depreciation.............. 2,142 -- -- 2,142 -- 2,142
-------- ------- ------ ------- ------- -------
4,531 643 365 5,539 -- 5,539
Goodwill, net of accumulated
amortization.............. 543 -- 614 1,157 -- 1,157
Deferred taxes.............. -- 9 (9) -- -- --
Other assets................ 1,584 34 (3) 1,615 (1,004)(D) 611
-------- ------- ------ ------- ------- -------
Total assets.......... $ 13,938 $ 1,802 $ 742 $16,482 $17,084 $33,566
======== ======= ====== ======= ======= =======
LIABILITIES AND
STOCKHOLDERS'
EQUITY (NET CAPITAL
DEFICIENCY)
Current liabilities:
Notes payable............. $ 2,957 $ -- $ -- $ 2,957 $(2,957)(E) $ --
Current portion of long
term debt and capital
lease obligations....... 638 230 -- 868 (330)(E) 538
Notes payable to
officers/stockholders... 1,165 8 (8) 1,165 -- 1,165
Accounts payable.......... 2,558 393 (70) 2,881 (1,004)(E) 1,877
Income taxes payable...... -- 106 (106) -- -- --
Accrued liabilities
Compensation............ 973 -- -- 973 -- 973
Other................... 163 121 (48) 236 (130)(E) 106
Deferred revenue.......... 561 -- 561 -- 561
Deferred income taxes..... -- 166 (166) -- -- --
-------- ------- ------ ------- ------- -------
Total current
liabilities........ 9,015 1,024 (398) 9,641 (4,421) 5,220
Long term debt and capital
lease obligations, less
current portion........... 1,238 493 -- 1,731 (635)(E) 1,096
Deferred rent............... 657 67 (67) 657 -- 657
Subordinated convertible
promissory note........... 5,000 -- -- 5,000 (5,000)(F) --
Stockholders' equity (net
capital deficiency):
Common stock................ -- 5 (5) -- 1(G) 1
Additional paid-in
capital................... 2,156 3 1,422 3,581 26,863(G) 30,444
Retained earnings
(accumulated
deficit)(I)............... (4,128) 210 (210) (4,128) 276(H) (3,852)
-------- ------- ------ ------- ------- -------
Total stockholders' equity
(net capital
deficiency)............... (1,972) 218 1,207 (547) 27,140 26,593
-------- ------- ------ ------- ------- -------
$ 13,938 $ 1,802 $ 742 $16,482 $17,084 $33,566
======== ======= ====== ======= ======= =======
</TABLE>

See accompanying notes to Unaudited Pro Forma Combined Balance Sheet.

21
<PAGE> 24

NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET

(A) Represents the combined historical balance sheet of the Company as of
March 31, 1996.

(B) On May 1, 1996, the Company acquired the nonmedical assets of two
physician groups, representing three physicians who are specialists in the field
of reproductive endocrinology and infertility. These physician groups are
located in the New York City metropolitan area in northern New Jersey and the
Tampa/St. Petersburg metropolitan area.

The amounts reflected in Recent Acquisitions represent the combined
historical balance sheets as of March 31, 1996 for the Florida and New Jersey
practices that were acquired.

The estimated fair value of the assets acquired is summarized below:

<TABLE>
<CAPTION>
NEW JERSEY FLORIDA TOTAL
---------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Accounts receivables, net.......................... $ 569 $ 298 $ 867
Prepaid expenses................................... 13 11 24
Property and equipment............................. 274 734 1,008
Excess purchase price over fair value of net assets
acquired......................................... -- 614 614
Other assets....................................... -- 31 31
Liabilities assumed................................ (297) (825) (1,122)
------ ------ -------
$ 559 $ 863 $ 1,422
====== ====== =======
</TABLE>

The acquisition price for each transaction was funded with Common Stock of
the Company. Fertility Center of Northern New Jersey, P.A. ("Fertility Center")
received 71,654 shares with the right to receive an additional 29,778 shares
upon completion of this offering and the attainment of certain financial
targets. A Center for Gynecology, P.A. ("Center for Gynecology") received
107,480 shares, with the right to receive an additional 3,157 shares upon
completion of this offering. The value of shares issued in these transactions is
$558,901 and $862,969, respectively, for Fertility Center and Center for
Gynecology, based upon the fair market value of such shares as of the dates of
the respective purchase agreements of $7.80 per share. The excess of cost over
the fair value of the net assets acquired is amortized over the life of the
management services agreements, which is 40 years.

(C) Includes the issuance of 2,000,000 shares of Common Stock offered by
the Company hereby (at an assumed offering price of $14.00 per share) and the
use of the proceeds therefrom as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Gross proceeds of the offering................................... $ 28,000
Underwriting discounts and commissions........................... 1,960
Expenses related to the offering................................. 1,400
--------
Net proceeds................................................... 24,640
Retirement of Subordinated convertible promissory note; paydown
of notes payable and other liabilities......................... 6,552
--------
Net increase in cash and cash equivalents........................ $ 18,088
========
</TABLE>

The Company intends to use the net increase in cash and cash equivalents
for acquisitions, working capital and other general corporate purposes. Pending
those uses, the net increase in cash and cash equivalents will be invested in
short term, interest bearing, investment grade securities.

(D) The adjustment to other assets reflects the payment of offering costs
previously deferred and offset against the offering proceeds at the time of
completion of this offering.

(E) Reflects the use of $5,056,000 of the net proceeds of this offering to
repay notes payable and other liabilities.

22
<PAGE> 25

(F) Reflects the conversion of $2,500,000 of the principal amount of the
Convertible Note into Common Stock and the retirement of $2,500,000 principal
amount of the Convertible Note plus accrued interest.

(G) Reflects the net proceeds of this offering of $24,640,000, plus
$2,500,000 attributable to the conversion of the Convertible Note, minus the
undistributed losses of the Company (since an S corporation) of $276,000 and
minus the par value for common stock of $1.

(H) The undistributed losses of the Company (since a Subchapter S
Corporation) reclassified to paid in capital.

(I) The combined accumulated deficit at March 31, 1996 includes $2,253,430
of accumulated deficit attributable to CHR-Illinois and CHR-Perinatal in which
the principal officers/stockholders of the Company are principal stockholders
and/or officers. On June 5, 1996, the Company acquired certain assets of CHR-
Illinois for the assumption of certain liabilities. This asset transfer had no
impact on the Financial Statements. After taking into account this transaction,
the combined accumulated deficit at March 31, 1996 would have included
approximately $1,138,462 of accumulated deficit attributable to CHR-Illinois.

23
<PAGE> 26

UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
---------------------------------------------------------------------------
HISTORICAL(A) PRO FORMA(B) PRO FORMA(C)
----------------------- ------------------------ ------------------------
RECENT TRANSACTION OFFERING AS
COMPANY ACQUISITIONS ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
--------- ------------ ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net patient service revenue.... $19,918 $5,604 $ -- $25,522 $ -- $25,522
--------- ------ ----- --------- ------ ---------
Operating expenses:
Physicians' salaries......... 4,982 2,145 89(D) 7,216 -- 7,216
Clinic salaries, wages and
benefits................... 4,833 1,286 (65)(D) 6,054 -- 6,054
Clinic rent and lease
expense.................... 1,540 350 -- 1,890 -- 1,890
Clinic supplies.............. 3,624 386 -- 4,010 -- 4,010
Other clinic
expenses................... 1,257 174 -- 1,431 -- 1,431
General corporate expenses... 4,795 720 (62)(G) 5,453 -- 5,453
Depreciation and
amortization............... 727 154 (73)(H) 808 (67)(I) 741
--------- ------ ----- --------- ------ ---------
Total operating expenses..... 21,758 5,215 (111) 26,862 (67) 26,795
--------- ------ ----- --------- ------ ---------
Operating income (loss)........ (1,840) 389 111 (1,340 ) 67 (1,273)
Other (revenue) expense........ 32 (25) -- 7 -- 7
Net interest expense........... 328 43 -- 371 (210)(J) 161
--------- ------ ----- --------- ------ ---------
Income (loss) before income
taxes........................ (2,200) 371 111 (1,718 ) 277 (1,441)
Income taxes
(benefit).................... (382) 149 -- (233 ) -- (233)
--------- ------ ----- --------- ------ ---------
Pro forma net income (loss).... $(1,818) $ 222 $ 111 $(1,485 ) $ 277 $(1,208
========= ====== ===== ========= ====== =========
Pro forma net income (loss) per
share(K)..................... $ (.47) $ (.37 ) $ (.19)
========= ========= =========
Pro forma weighted average
outstanding shares........... 3,853,231 4,032,365 6,403,407
========= ========= =========

<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1996
------------------------------------------------------------------------------
HISTORICAL(A) PRO FORMA(B) PRO FORMA(C)
--------------------------- ----------------------- ------------------------
RECENT TRANSACTION OFFERING AS
COMPANY ACQUISITIONS ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
----------- ------------ ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net patient service revenue.... $ 5,979 $1,363 $ -- $ 7,342 $ -- $ 7,342
--------- ------ ---- ------- ----- -------
Operating expenses:
Physicians' salaries......... 3,674(E) 383 118(D) 4,175 -- 4,175
Clinic salaries, wages and
benefits................... 1,291 277 (26)(D) 1,542 -- 1,542
Clinic rent and lease
expense.................... 497 84 (67)(F) 514 -- 514
Clinic supplies.............. 791 106 -- 897 -- 897
Other clinic
expenses................... 367 33 -- 400 -- 400
General corporate expenses... 1,231 341 (46)(G) 1,526 -- 1,526
Depreciation and
amortization............... 215 45 (25)(H) 235 (17)(I) 218
--------- ------ ----- ------- ----- ---------
Total operating expenses..... 8,066 1,269 (46) 9,289 (17) 9,272
--------- ------ ----- ------- ----- ---------
Operating income (loss)........ (2,087) 94 46 (1,947) 17 (1,930)
Other (revenue) expense........ -- -- -- -- -- --
Net interest expense........... 183 23 -- 206 (171)(J) 35
--------- ------ ----- ------- ----- ---------
Income (loss) before income
taxes........................ (2,270) 71 46 (2,153) 188 (1,965)
Income taxes
(benefit).................... -- 92 -- 92 -- 92
--------- ------ ----- ------- ----- ---------
Pro forma net income (loss).... $(2,270) $ (21) $ 46 $ (2,24) $ 188 $(2,057)
========= ====== ===== ======= ===== =========
Pro forma net income (loss) per
share(K)..................... $ (.52) $ (.31)
========= =========
Pro forma weighted average
outstanding shares........... 4,337,185 6,535,161
========= =========
</TABLE>

See accompanying notes to Unaudited Pro Forma Combined Statement of Operations.

24
<PAGE> 27

NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS

(A) The historical statements of operations for the Company have been
restated to reflect the change in reporting year end from fiscal year ended June
30, 1995 to a calendar year reporting period. The restatement was accomplished
by adding the six months ended December 31, 1995 to the twelve months ended June
30, 1995 and deducting the six months ended December 31, 1994.

(B) The historical statements of operations data for the physician groups
recently acquired with which the Company has entered into definitive agreements
represents the combined summary results of operations of such groups for January
1, 1995 through December 31, 1995 and the three months ended March 31, 1996. The
transactions will be accounted for as asset purchases. The effects of the
transactions on the Company's results of operations have been reflected as if
the transactions had taken place as of January 1, 1995.

(C) In the pro forma presentation for the year ended December 31, 1995 and
the three months ended March 31, 1996, a substantial part of the operations data
for the Company and the physician groups recently acquired is based on unaudited
financial information that, in the opinion of management, is presented on a
basis consistent with that of the historical results.

(D) Reflects the addition of compensation expenses of $89,000 and $118,000
that would have been incurred under amended employment agreements and the
elimination of pension plan expenses of $65,000 and $26,000 that would not have
been incurred pursuant to the terms of the management services agreements for
the twelve months ended December 31, 1995 and the three months ended March 31,
1996, respectively.

(E) The expense of $3.7 million in the three months ended March 31, 1996
includes a charge of approximately $2.0 million attributable to the Company as a
result of the restructuring of an option among the Company's principal
stockholders. See "Certain Transactions -- Restructuring of Miller Option" and
Note 17 of Notes to Audited Combined Financial Statements of the Company.

(F) Reflects the elimination of deferred rent attributable to the amended
office lease.

(G) Reflects the elimination of billing and management fee expenses and the
addition of malpractice insurance coverage that would be incurred pursuant to
the management services agreements as follows:

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
------------------- ------------------
<S> <C> <C>
Billing Service Expenses................ $ 96,000 $ 39,000
Management Fee Expenses................. 23,000 7,000
Malpractice Insurance Coverage.......... (57,000) --
---------- ---------
$ 62,000 $ 46,000
========== =========
</TABLE>

(H) Reflects the elimination of amortization for the organization costs and
the covenant not to compete, the addition of amortization for goodwill
associated with management services agreements amortized over contractual term
of 40 years and a reduction of depreciation expense attributable to a change in
the estimated useful life of medical equipment from five to seven years.

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
------------------- ------------------
<S> <C> <C>
Amortization:
Organization costs.................... $ (1,000) $ --
Covenant not to compete............... (11,000) (3,000)
Goodwill.............................. 29,000 4,000
Depreciation............................ (90,000) (26,000)
---------- ----------
$ (73,000) $(25,000)
========== ==========
</TABLE>

(I) Reflects the elimination of amortization attributable to deferred
financing costs relating to debt outstanding in 1995 which will be retired upon
consummation of this offering.

25
<PAGE> 28

(J) Reflects the retirement of outstanding interest bearing liabilities of
the Company and the acquired practices based upon the use of proceeds as
described in Note C to the Unaudited Pro Forma Combined Balance Sheet. Interest
expense was decreased by approximately $210,000 and $171,000 for the twelve
months ended December 31, 1995 and the three months ended March 31, 1996,
respectively. The interest was computed using actual interest expense accrued
during the twelve months ended December 31, 1995 and three months ended March
31, 1996. Interest on various components was as follows:

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
------------------- ------------------
<S> <C> <C>
Convertible Note (10%).................. $ 42,000 $125,000
Note Payable (9%, 8.25%)................ 124,000 23,000
Other (8.25%)........................... 1,000 --
Recent Acquisition -- NJ
(7%, weighted average)................ 17,000 3,000
Recent Acquisition -- FL
(8.85%, weighted average)............. 26,000 20,000
--------- ---------
$ 210,000 $171,000
========= =========
</TABLE>

(K) Net income per share is based on the weighted average number of shares
of Common Stock and common stock equivalents outstanding during the period in
accordance with the applicable rules of the Commission. See Notes 1 and 9 to
Audited Combined Financial Statements of the Company. Pro forma net income per
share includes the shares issued in the Recent Acquisitions as if issued on
January 1, 1995. Pro forma net income per share, as adjusted, includes the
2,000,000 shares offered by the Company in this offering and the shares issued
in the Recent Acquisitions.

26
<PAGE> 29

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Company's
Combined Financial Statements and the Notes thereto included elsewhere in this
Prospectus.

OVERVIEW

The Company was formed as an Illinois corporation in January 1995 as part
of a reorganization in which the Company succeeded to the conduct of the
business, other than the practice of medicine, of CHR-Illinois. The Company,
CHR-Illinois, CHR-Perinatal and CHR-Endoscopic were operated under common
control during the three months ended March 31, 1996 and the twelve months ended
December 31, 1995, and the 1995 and first quarter of 1996 combined financial
data has been prepared to reflect the combination of business entities which
have been operated under common control. In 1995, the Company changed its year-
end for financial reporting purposes from June 30 to December 31. Additionally,
CHR-NW was acquired in June 1994 and was merged into CHR-Illinois effective
January 1995. The 1994 balance sheet data includes the accounts of CHR-Illinois
and CHR-NW, and the 1994 and 1993 statement of operations data includes only the
accounts of CHR-Illinois. See Note 1 of Notes to Audited Combined Financial
Statements of the Company. The Company currently provides physician practice
management services to the following five medical corporations that provide
medical services at 17 Centers: (i) CHR-Illinois, (ii) CHR-Endoscopic, (iii)
CHR-New York, (iv) CHR-New Jersey and (v) CHR-Florida. As a result of the
Company's limited period of management of these practices and rapid expansion of
the business, the Company believes that the period to period comparisons and
percentage relationships within periods set forth below may not necessarily be
meaningful.

ACQUISITION AND AFFILIATION SUMMARY

Since March 1995, the Company has completed several transactions, including
acquisitions, medical school program affiliations, key physician hirings and new
Center openings, that solidified its market presence in the Chicago metropolitan
area and increased the number of Chicago area Centers from seven to 11 and the
number of Chicago area affiliated physicians and scientists from 10 to 27. In
March 1995, Charles Miller, M.D., an endoscopic surgeon and infertility
specialist, joined the Company as Medical Director and Director of Endoscopic
Surgery. Dr. Miller also serves as a Director of CHR-Illinois and Vice President
and a Director of CHR-Endoscopic. Prior to joining the managed practices, Dr.
Miller was the founding director of one of the leading hospital based
infertility programs in the Chicago metropolitan area. In March 1995, John
Rinehart, M.D., Ph.D., Rodney Hoxsey, M.D. and Ellen Snowden, M.D. became
affiliated with the managed practices, helping solidify the Centers' presence in
certain targeted geographical areas and adding a nationally known ART team to
complement the existing experience of the managed practices. In March 1995,
Marybeth Gerrity, Ph.D. joined the Company as Vice President of Operations and
Development, adding her clinical and regulatory expertise to the Company. Drs.
Rinehart, Hoxsey, Snowden and Gerrity represent the teaching faculty of the
Evanston-Glenbrook Hospitals, a teaching affiliate of Northwestern University
Medical School. In August 1995, Antonio Scommegna, M.D., and Bert Scoccia, M.D.,
brought their affiliation with the University of Illinois to the managed
practices, and the Centers became the official Reproductive Endocrinology and
Infertility program of the University of Illinois. Dr. Scommegna is Professor
and Chair and Dr. Scoccia is Director of the Division of Reproductive
Endocrinology and Infertility of the Department of Obstetrics and Gynecology of
the University of Illinois at Chicago. In March 1996, Carolyn Coulam, M.D.
joined the Company as National Administrative Director of Reproductive
Immunology, bringing her expertise in repeated pregnancy loss and the diagnosis
and treatment of immunologic infertility from her previous position at the
nationally known Genetics and IVF Institute in Fairfax, Virginia. In addition,
the managed practices have opened two additional Centers in the Chicago
metropolitan area since March 1995.

The Company is in the process of establishing additional networks in the
New York City metropolitan area, including New Jersey, the Syracuse metropolitan
area and the Tampa/St. Petersburg metropolitan area. The Company entered these
areas because of the size of these markets, the presence of high quality,
nationally

27
<PAGE> 30

and internationally known physicians with complementary practices and the
opportunity to establish affiliations with highly regarded medical school
programs. Giving effect to the Recent Acquisitions and the recent and pending
medical school program affiliations in New York, New Jersey and Florida, the
Company would be affiliated with 19 Centers and 44 physicians and scientists.

In 1996, the Company has acquired two medical practices in these targeted
markets. Each of the practice acquisitions was structured as a merger of the
nonmedical assets of the acquired practice into the Company in exchange for a
number of shares of Common Stock determined based upon the value of the accounts
receivable and other assets acquired and an evaluation of the historical
revenues generated by the practice. In the New Jersey acquisition, the physician
became a shareholder of the managed practice and in each case the physician
became an employee of the managed practice formed in that particular state. See
"Business -- Affiliation Process."

In the New York metropolitan area, the Company has acquired the nonmedical
assets of Fertility Center in consideration for 71,654 shares of Common Stock,
plus an additional 29,778 shares upon completion of this offering and the
attainment of certain financial targets. Fertility Center services the New
Jersey suburbs of New York City, and the principal of this practice, Daniel
Navot, M.D., has entered into an employment agreement with CHR-New Jersey. In
addition, the Company has entered into an affiliation agreement with Columbia
University Medical School in New York City and into letters of intent to
establish affiliations with Mount Sinai Medical Center in New York City and
State University of New York-Upstate Medical Center in Syracuse, New York. All
three medical school teaching departments would integrate their respective
reproductive endocrinology and infertility private practice programs into
CHR-New York under the respective leadership of Mark V. Sauer, M.D., of Columbia
University Medical School, Maria Bustillo, M.D., of Mount Sinai Medical Center,
and Shawky Badaway, M.D., of State University of New York-Upstate Medical
Center.

In Florida, the Company has acquired the nonmedical assets of A Center for
Gynecology in consideration for 107,480 shares of Common Stock, plus an
additional 3,157 shares upon completion of this offering. The principal of this
practice, Edward A. Zbella, M.D., has entered into an employment agreement with
CHR-Florida. Dr. Zbella also has become a Director and the Senior Vice President
and Director of General Obstetrics and Gynecology Contracting of the Company. In
addition, the Company has entered into a letter of intent to establish an
affiliation with the University of South Florida in Tampa, pursuant to which
this medical school's teaching department would integrate the principal portion
of its reproductive endocrinology and infertility private practice program into
CHR-Florida under the leadership of Timothy R. Yeko, M.D. who would serve as the
Medical Director of CHR-Florida.

The Company currently is in discussions with a number of physicians and
medical schools for potential future practice affiliations in a number of
states. There can be no assurance that these discussions will result in new
practice affiliations in the near future or at all.

28
<PAGE> 31

RESULTS OF OPERATIONS

The following table sets forth the percentages of revenue represented by
certain items reflected in the Company's Statement of Operations. The
information that follows should be read in conjunction with the Company's
Audited Combined Financial Statements and notes thereto included elsewhere
herein.

<TABLE>
<CAPTION>
PREDECESSOR
------------------------ SIX MONTHS ENDED THREE MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31, MARCH 31,
------------------------ --------------------- ---------------------------
1993 1994 1995 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Patient Revenue(1)....... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- ----- ----- -----
Operating Expenses:
Physician Salaries......... 13.7 20.6 21.7 15.5 24.5 26.7 61.4
Clinical Salaries, Wages
and Benefits............ 18.8 21.8 28.0 26.2 21.8 29.3 21.6
Clinic Rent & Lease
Expense................. 5.4 3.5 7.8 6.6 7.3 11.9 8.3
Clinic Supplies............ 24.5 26.7 25.4 27.4 15.3 36.6 13.2
Other Clinic Expenses...... 5.5 6.5 7.6 10.3 7.1 4.9 6.2
General Corporate
Expenses................ 21.1 16.5 23.0 16.1 21.6 43.3 20.6
Depreciation &
Amortization............ 1.7 1.6 4.7 4.5 3.0 5.0 3.6
----- ----- ----- ----- ----- ----- -----
90.7 97.2 118.2 106.6 100.6 157.5 134.9
----- ----- ----- ----- ----- ----- -----
Operating Income (Loss)...... 9.3 2.8 (18.2) (6.6) (0.6) (57.5) (34.9)
Other (Income) Expense....... (0.7) (4.1) 0.2 -- -- (1.2) --
Net Interest Expense......... 0.8 0.8 1.7 1.1 1.4 2.7 3.1
----- ----- ----- ----- ----- ----- -----
Income (Loss) Before Income
Taxes...................... 9.2 6.1 (20.1) (7.7) (2.0) (59.0) (38.0)
Income Taxes (Benefit)....... 3.5 0.8 (3.2) (.5) -- (7.1) --
----- ----- ----- ----- ----- ----- -----
Net Income (Loss)............ 5.7% 5.3% (16.9)% (7.2)% (2.0)% (51.9)% (38.0)%
===== ===== ===== ===== ===== ===== =====
</TABLE>

- -------------------------
(1) "Net Patient Revenue" is defined as gross clinic charges less discounts for
contractual adjustments.

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995

Changes in results of operations for the three months ended March 31, 1995
as compared to the three months ended March 31, 1996 were caused primarily by
the continued implementation of the Company's acquisition strategy, opening of
additional office locations and product expansion efforts.

REVENUES -- Revenue increased from $2.6 million for the three months ended
March 31, 1995 to $6.0 million for the three months ended March 31, 1996, an
increase of $3.4 million or 131%. This increase primarily was attributable to
the increased number of patient visits resulting from the addition of affiliated
physicians and the opening of additional office locations. Physicians added
since March 31, 1995 accounted for approximately $3.0 million or 50% of the net
patient revenue for the three months ended March 31, 1996.

PHYSICIAN SALARIES -- Physician salaries, which include the salaries and
incentive compensation amounts paid to the affiliated physicians, increased from
$690,000 for the three months ended March 31, 1995 to $3.7 million for the three
months ended March 31, 1996, an increase of $3.0 million or 436%. The increase
was attributable to the addition of eleven affiliated physicians since April 1,
1995. In addition, the Company recognized a charge in the three months ended
March 31, 1996 of $2.0 million attributable to the Company as a result of the
restructuring of an option among the Company's principal stockholders. See
"Certain Transactions -- Restructuring of Miller Option." As a percentage of
revenue, physician salaries increased from 26.7% to 61.4% for the three months
ended March 31, 1995 and 1996, respectively. This increase as a percentage of
revenue was primarily the result of the compensation charge discussed above.
This increase as a

29
<PAGE> 32

percentage of revenue, exclusive of the compensation charge, would be 28% of
revenues, a slight increase from the comparable quarter in 1995.

CLINICAL SALARIES, WAGES AND BENEFITS -- Clinical salaries, wages and
benefits, which include the salaries, wages and benefits of all clinically
related personnel, increased from $761,000 for the three months ended March 31,
1995 to $1.3 million for the three months ended March 31, 1996, an increase of
$539,000 or 71%. The increase was attributable to the addition of 11 affiliated
or employed physicians and scientists and four new locations since April 1,
1995. As a percentage of revenue, clinical salaries decreased from 29.3% to
21.6% for the three months ended March 31, 1995 and 1996, respectively.

CLINIC RENT AND LEASE EXPENSE -- Clinic rent and lease expense, which
includes office rental and related utility costs, increased from $310,000 for
the three months ended March 31, 1995 to $497,000 for the three months ended
March 31, 1996, an increase of $187,000 or 60%. The increase primarily resulted
from the increased facility requirements attributable to the affiliation of
eleven physicians and scientists, the related addition of four new Centers since
April 1, 1995, and the expansion of medical facilities for the practice of
perinatology. As a percentage of revenue, clinic rent and lease expense
decreased from 11.9% to 8.3% of net patient revenue for the three months ended
March 31, 1995 and 1996, respectively.

CLINIC SUPPLIES -- Clinic supplies, which include pharmacy and medical
supplies, lab tests and other supplies used by the affiliated physician groups,
decreased from $952,000 for the three months ended March 31, 1995 to $791,000
for the three months ended March 31, 1996, a decrease of $161,000 or 20%. As a
percentage of revenue, clinic supplies decreased from 36.6% for the three months
ended March 31, 1995 to 13.2% for the three months ended March 31, 1996. This
decrease was primarily a result of improved inventory control and purchasing
guidelines for supplies. The Company is committed to continuing to enforce its
stringent cost and inventory containment efforts; however, the Company believes
that, in light of its limited operating history, it cannot accurately predict
whether clinical supplies as a percentage of revenue will continue at their
current level.

OTHER CLINIC EXPENSES -- Other clinic expenses, which consist of repairs
and maintenance, insurance, consulting fees, medical equipment rental and other
direct practice costs, increased from approximately $127,000 for the three
months ended March 31, 1995 to $367,000 for the three months ended March 31,
1996, an increase of $240,000 or 189%. The increase was attributable to a
significant increase in repairs and maintenance of medical equipment as well as
a general increase in other expenses to the Company's growth in revenues. As a
percentage of revenue, other clinic expenses increased from 4.9% for the three
months ended March 31, 1995 to 6.2% for the three months ended March 31, 1996.

GENERAL CORPORATE EXPENSES -- General corporate expenses increased from
$1.1 million for the three months ended March 31, 1995 to $1.2 million for the
three months ended March 31, 1996, an increase of $100,000 or 9%. As a
percentage of revenue, general corporate expenses decreased from 43.3% for the
three months ended March 31, 1995 to 20.6% for the three months ended March 31,
1996. This decrease as a percentage of revenue is primarily the result of the
Company's ability to achieve operating leverage through the expansion of its
revenue base, as well as the impact of the Company's investment in
infrastructure in the first quarter of 1995.

DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expenses
increased from $131,000 for the three months ended March 31, 1995 to $215,000
for the three months ended March 31, 1996, an increase of $84,000 or 64%. This
increase primarily was attributable to investment in equipment, leases and
leasehold improvements of the facilities of physicians that affiliated with the
Company and, to a lesser extent, to corporate capital expenditures during this
time.

INTEREST EXPENSE -- Net interest expense increased from $71,000 for the
three months ended March 31, 1995 to $183,000 for the three months ended March
31, 1996, an increase of $112,000 or 158%. This increase was attributable to
interest expense on the $5.0 million of convertible subordinated debt
outstanding for the three months ended March 31, 1996. As a percentage of
revenue, net interest expense increased from 2.7% to 3.1% for the three months
ended March 31, 1995 and 1996, respectively.

30
<PAGE> 33

INCOME TAXES -- For the periods presented, the Company was a Subchapter S
corporation for tax purposes and therefore no provision for income taxes was
provided since all tax liability flowed through to the individual stockholders
of the Company. CHR-Illinois, which was organized as a C Corporation, had net
operating losses for both tax and financial reporting purposes and, as a result
of the application of the net operating loss, a tax benefit of approximately
$186,000 was recognized for the three months ended March 31, 1995.

SIX MONTHS ENDED DECEMBER 31, 1995 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1994

The Company's operating results during the six months ended December 31,
1995 were impacted by the Company's acquisition of two practices (Reproductive
Biology Resources, Inc. and Reproductive Medicine Associates) and affiliation
with twelve physicians and scientists during the six months ended December 31,
1994. The Company also initiated its product expansion strategy through the
creation of CHR-Perinatal and CHR-Endoscopic during 1995 and these initial
start-up costs were reflected in 1995 results. Changes in results of operations
for the six months ended December 31, 1994 as compared to the six months ended
December 31, 1995 were caused primarily by these acquisitions, affiliations,
implementation of the Company's capitated contract with Blue Cross Blue Shield
of Illinois and product expansion efforts.

REVENUES -- Revenue increased from $6.4 million for the six months ended
December 31, 1994 to $12.1 million for the six months ended December 31, 1995,
an increase of $5.7 million or 89%. This increase primarily was attributable to
the increased number of patient visits resulting from the addition of affiliated
physicians during 1995 and the inception of a capitated contract with Blue Cross
Blue Shield of Illinois in January 1995. Physicians added since March 31, 1995
accounted for approximately $6.5 million or 54% of the net patient revenue for
the six months ended December 31, 1995.

PHYSICIAN SALARIES -- Physician salaries, which include the salaries and
incentive compensation amounts paid to the affiliated physicians, increased from
$987,000 for the six months ended December 31, 1994 to $3.0 million for the six
months ended December 31, 1995, an increase of $2.0 million or 204%. The
increase was attributable to the addition of twelve affiliated physicians and
scientists since January 1, 1995. As a percentage of revenue, physician salaries
increased from 15.5% to 24.5% for the six months ended December 31, 1994 and
1995, respectively. This increase as a percentage of revenue was primarily the
result of the addition of the affiliated physicians and scientists after January
1, 1995 and proportionately lower revenues being initially generated by the two
new office locations during the start-up phase, as well as the development of
the perinatology practice of CHR-Perinatal.

CLINICAL SALARIES, WAGES AND BENEFITS -- Clinical salaries, wages and
benefits, which include the salaries, wages and benefits of all clinically
related personnel, increased from $1.7 million for the six months ended December
31, 1994 to $2.6 million for the six months ended December 31, 1995, an increase
of $900,000 or 53%. The increase was attributable to the increased number of
clinical personnel necessary to support the additional affiliated physicians and
scientists since January 1, 1995, as well as the opening of two new medical
facilities. As a percentage of revenue, clinical salaries decreased from 26.2%
to 21.8% for the six months ended December 31, 1994 and 1995, respectively.

CLINIC RENT AND LEASE EXPENSE -- Clinic rent and lease expense, which
includes office rental and related utility costs, increased from $423,000 for
the six months ended December 31, 1994 to $881,000 for the six months ended
December 31, 1995, an increase of $458,000 or 108%. The increase primarily
resulted from the increased facility requirements attributable to the
affiliation of eight physicians and the related addition of four new Centers
since January 1, 1995, and the expansion of medical facilities for the practice
of perinatology. As a percentage of revenue, clinic rent and lease expense
increased from 6.6% to 7.3% of net patient revenue for the six months ended
December 31, 1994 and 1995, respectively.

CLINIC SUPPLIES -- Clinic supplies, which include pharmacy and medical
supplies, lab tests and other supplies used by the affiliated physician groups,
increased from $1.7 million for the six months ended December 31, 1994 to $1.8
million for the six months ended December 31, 1995, an increase of $100,000 or
6%. This increase was attributable to the general increase in the level of
patient visits generated by the increased physician and scientist employment
levels after January 1, 1995. As a percentage of revenue, clinic

31
<PAGE> 34

supplies decreased from 27.4% for the six months ended December 31, 1994 to
15.3% for the six months ended December 31, 1995. This decrease was primarily a
result of improved inventory control and purchasing guidelines. In light of the
Company's limited operating history, management does not believe that it can
accurately predict whether clinical supplies as a percentage of revenue will
continue at the current level.

OTHER CLINIC EXPENSES -- Other clinic expenses, which consist of repairs
and maintenance, insurance, consulting fees, medical equipment rental and other
direct practice costs, increased from approximately $658,000 for the six months
ended December 31, 1994 to $861,000 for the six months ended December 31, 1995,
an increase of $203,000 or 31%. The increase was attributable to the overall
increase in patient revenue and related increase in patient care resulting from
the addition of the twelve affiliated physicians and scientists after January 1,
1995. As a percentage of revenue, other clinic expenses decreased from 10.3% for
the six months ended December 31, 1994 to 7.1% for the six months ended December
31, 1995. This decrease was principally due to the Company being able to achieve
economies of scale and operating leverage as the Company expanded its
operations.

GENERAL CORPORATE EXPENSES -- General corporate expenses increased from
$1.0 million for the six months ended December 31, 1994 to $2.6 million for the
six months ended December 31, 1995, an increase of $1.6 million or 160%. This
increase primarily was attributable to the addition of personnel and greater
support costs associated with the Company's rapid growth since January 1, 1995
as well as an increase in the reserve for doubtful accounts. As a percentage of
revenue, general corporate expenses increased from 16.1% for the six months
ended December 31, 1994 to 21.6% for the six months ended December 31, 1995.

DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expenses
increased from $286,000 for the six months ended December 31, 1994 to $365,000
for the six months ended December 31, 1995, an increase of $79,000 or 28%. This
increase primarily was attributable to investment after January 1, 1995 in
equipment, leases and leasehold improvements of the facilities of physicians and
scientists that affiliated with the Company subsequent to January 1, 1995 and,
to a lesser extent, to corporate capital expenditures during this time.

INTEREST EXPENSE -- Net interest expense increased from $68,000 for the six
months ended December 31, 1994 to $165,000 for the six months ended December 31,
1995, an increase of $97,000 or 143%. This increase was attributable to interest
expense on (i) working capital indebtedness of approximately $2.5 million for
the six months ended December 31, 1995 as compared to approximately $800,000 for
the six months ended December 31, 1994 and (ii) the $5.0 million Convertible
Note for one month. As a percentage of revenue, net interest expense increased
from 1.1% to 1.4% for the six months ended December 31, 1994 and 1995,
respectively.

INCOME TAXES -- For the periods presented, the Company was a subchapter S
corporation for tax purposes and therefore no provision for income taxes was
provided since all tax liability flowed through to the individual stockholders
of the Company. CHR-Illinois, which was organized as a C Corporation, had net
operating losses for both tax and financial reporting purposes during the six
months ended December 31, 1994 and, as a result of the application of the net
operating loss, a tax benefit of approximately $34,000 was recognized.

FISCAL YEAR ENDED JUNE 30, 1995 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1994

The Company acquired two practices, completed its merger with an affiliated
company and affiliated with ten physicians during the Company's fiscal year
ended June 30, 1995 ("Fiscal 1995"), the results of which are included in the
Company's operating results from the dates of the respective transactions. In
addition, the Company implemented its product expansion strategy through the
creation of CHR-Perinatal and CHR-Endoscopic during the first quarter of Fiscal
1995 and these initial start-up costs are reflected in Fiscal 1995 results.
Changes in results of operations for Fiscal 1995, as compared to the Company's
fiscal year ended June 30, 1994 ("Fiscal 1994"), were caused primarily by these
acquisitions, affiliations and product expansion efforts. The Company also
entered into a capitated contract with Blue Cross Blue Shield of Illinois in
January 1995.

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REVENUES -- Revenue increased from $8.8 million in Fiscal 1994 to $13.9
million in Fiscal 1995, an increase of $5.1 million or 58%. This increase
primarily was attributable to the increased number of patient visits resulting
from the addition of the ten affiliated physicians during Fiscal 1995 and to the
capitated contract with Blue Cross Blue Shield of Illinois. The ten physicians
added during Fiscal 1995 accounted for approximately $5.9 million or 43% of the
net patient revenue for Fiscal 1995.

PHYSICIAN SALARIES -- Physician salaries, which include the salaries and
incentive compensation amounts paid to the affiliated physicians, increased from
$1.8 million during Fiscal 1994 to $3.0 million in Fiscal 1995, an increase of
$1.2 million or 67%. The increase was attributable to the addition of ten
affiliated physicians since July 1, 1994. As a percentage of revenue, physician
salaries increased from 20.6% to 21.7% for Fiscal 1994 and Fiscal 1995,
respectively.

CLINICAL SALARIES, WAGES AND BENEFITS -- Clinical salaries, wages and
benefits, which include the salaries, wage and benefits of all clinically
related personnel, increased from $1.9 million for Fiscal 1994 to $3.9 million
during Fiscal 1995, an increase of $2.0 million or 105%. The increase was
attributable to the addition of clinical personnel related to the addition of
ten affiliated or employed physicians since July 1, 1994. As a percentage of
revenue, clinical salaries increased from 21.8% to 28.0% for Fiscal 1994 and
Fiscal 1995, respectively. This increase as a percentage of revenue primarily
was caused by the affiliation of ten physicians and the openings of four Centers
by the Company during the period.

CLINIC RENT AND LEASE EXPENSE -- Clinic rent and lease expense, which
includes office rental and related utility costs, increased from $307,000 for
Fiscal 1994 to $1.1 million for Fiscal 1995, an increase of $793,000 or 258%.
The increase was attributable to the affiliation of the ten physicians, the
opening of four new Centers, and the expansion of medical facilities for the
practice of perinatology. As a percentage of revenue, clinic rent and lease
expense increased from 3.5% to 7.8% of revenue for Fiscal 1994 and Fiscal 1995,
respectively. This percentage increase principally was due to the Company's
rapid expansion and costs associated with expanding operations and the related
infrastructure.

CLINIC SUPPLIES -- Clinic supplies, which include pharmacy and medical
supplies, lab tests and other supplies used by the affiliated physician groups,
increased from $2.3 million for Fiscal 1994 to $3.5 million in Fiscal 1995, an
increase of $1.3 million or 52%. This increase was attributable to the addition
of ten affiliated physicians and related increases in patient care since July 1,
1994. As a percentage of revenue, clinic supplies decreased from 26.7% for
Fiscal 1994 to 25.4% during Fiscal 1995.

OTHER CLINIC EXPENSES -- Other clinic expenses, which consist of repairs
and maintenance, insurance, consulting fees, medical equipment rental and other
direct practice costs, increased from approximately $574,000 for Fiscal 1994 to
$1.1 million for Fiscal 1995, an increase of $526,000 or 92%. As a percentage of
revenue, other clinic expenses increased from 6.5% for Fiscal 1994 to 7.6% for
Fiscal 1995. This percentage increase principally was due to the Company's rapid
expansion and costs associated with expanding operations and the related
infrastructure.

GENERAL CORPORATE EXPENSES -- General corporate expenses increased from
$1.5 million for Fiscal 1994 to $3.2 million for Fiscal 1995, an increase of
$1.7 million or 113%. This increase primarily was attributable to the addition
of personnel, greater support costs associated with the Company's rapid growth,
and an increase in bad debt expense. As a percentage of revenue, general
corporate expenses increased from 16.5% during Fiscal 1994 to 23.0% during
Fiscal 1995, primarily as a result of the rapid growth of the Company and its
investment in expanding the corporate infrastructure.

DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expenses
increased from $144,000 during Fiscal 1994 to $651,000 during Fiscal 1995, an
increase of $507,000 or 352%. This increase primarily was attributable to
investments after January 1, 1995 in equipment, leases and leasehold
improvements of the facilities of physicians that affiliated with the Company
subsequent to January 1, 1995 and, to a lesser extent, to corporate capital
expenditures during this time.

OTHER (INCOME) EXPENSE -- Prior to June 30, 1994, the Company owned 50% of
the outstanding stock of CHR-NW. The amount reflected in Other (Income) Expense
represented the pro rata share of the

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Company's interest in the earnings of CHR-NW. This entity was acquired in its
entirety as of June 30, 1994. The expense recognized during Fiscal 1995
represented losses realized on the sale of equipment.

INTEREST EXPENSE -- Net interest expense increased from $68,000 during
Fiscal 1994 to $231,000 during Fiscal 1995, an increase of $163,000 or 240%.
This increase was attributable to interest expense on (i) debt obligations
totaling approximately $4.0 million during Fiscal 1995 as compared to $2.0
million during Fiscal 1994. As a percentage of revenue, net interest expense
increased from 0.8% to 1.7% for Fiscal 1994 and Fiscal 1995, respectively.

INCOME TAXES -- For the periods presented, the Company was a Subchapter S
corporation for tax purposes and therefore no provision for income taxes was
provided since all tax liability flowed through to the individual shareholders
of the Company. CHR-Illinois, which was organized as a C Corporation, had net
operating losses for both tax and financial reporting purposes during Fiscal
1995 and, as a result of the application of the net operating loss, a tax
benefit of approximately $454,000 was recognized during Fiscal 1995. The Company
recognized income tax expense of $73,000 during Fiscal 1994.

FISCAL YEAR ENDED JUNE 30, 1994 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1993

During the period of July 1, 1993 to June 30, 1994 the Company was
successful in obtaining a number of exclusive contracts with third party payors.
In addition the Company opened four new offices which increased the number of
patient visits and revenue during this time frame.

REVENUES -- Revenue increased from $5.5 million in the Company's fiscal
year ended June 30, 1993 ("Fiscal 1993") to $8.8 million in Fiscal 1994, an
increase of $3.3 million or 60%. Revenues increased primarily due to the Company
being successful in obtaining exclusive and semi-exclusive contracts with third
party payors as well as opening four new office locations. These new locations
increased the number of patient visits as well as the level of patient revenue.

PHYSICIAN SALARIES -- Physician salaries, which include the salaries and
incentive compensation amounts paid to the affiliated physicians, increased from
$760,000 during Fiscal 1993 to $1.8 million in Fiscal 1994, an increase of $1.0
million or 137%. As a percentage of revenue, physician salaries increased from
13.7% to 20.6% for Fiscal 1993 and 1994, respectively.

CLINICAL SALARIES, WAGES AND BENEFITS -- Clinical salaries, wages and
benefits, which include the salaries, wages and benefits of all clinical related
personnel, increased from $1.0 million for Fiscal 1993 to $1.9 million for
Fiscal 1994, an increase of $900,000 or 90%. As a percentage of revenue,
clinical salaries increased from 18.8% to 21.8% for Fiscal 1993 and 1994,
respectively. This increase as a percentage of revenue primarily was caused by
the related openings of two offices acquired during the period.

CLINIC RENT AND LEASE EXPENSE -- Clinic rent and lease expense which
includes office rental and related utility costs, increased from $302,000 for
Fiscal 1993 to $308,000 for Fiscal 1994, an increase of $6,000 or 2%. As a
percentage of revenue, clinic rent and lease expense decreased from 5.4% to 3.5%
of net patient revenue for Fiscal 1993 and 1994, respectively.

CLINIC SUPPLIES -- Clinic supplies, which include pharmacy and medical
supplies, lab tests and other supplies used by the affiliated physicians,
increased from $1.4 million for Fiscal 1993 to $2.3 million in Fiscal 1994, an
increase of $900,000 or 64%. This increase was attributable to the overall
increase in patient revenue and related increase in patient care during Fiscal
1994. As a percentage of revenue, clinic supplies increased from 24.5% for
Fiscal 1993 to 26.7% during Fiscal 1994, caused primarily by an increase in
pharmacy and medical supplies.

OTHER CLINICAL EXPENSES -- Other clinical expenses, which consist of
repairs and maintenance, insurance, consulting fees, medical equipment rental
and other direct practice costs, increased from approximately $303,000 for
Fiscal 1993 to $574,000 for Fiscal 1994, an increase of $271,000 or 89%. The
increase was attributable to an increase in insurance costs as well as medical
consulting fees. As a percentage of revenue, other clinic expenses increased
from 5.5% for Fiscal 1993 to 6.5% for Fiscal 1994.

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GENERAL CORPORATE EXPENSES -- General corporate expenses increased from
$1.2 million for Fiscal 1993 to $1.5 million for Fiscal 1994, an increase of
$300,000 or 25%. This increase primarily was attributable to the addition of
personnel and greater support costs associated with the Company's rapid growth,
and an increase in bad debt expense. As a percentage of revenue, general
corporate expenses decreased from 21.1% during Fiscal 1993 to 16.5% during
Fiscal 1994, primarily as a result of achieving economies of scale during the
Company's period of rapid growth.

DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expenses
increased from $96,000 during Fiscal 1993 to $144,000 during Fiscal 1994, an
increase of $48,000 or 50%. This increase primarily was attributable to
investment in equipment, leases and leasehold improvements in the facilities and
to a lesser extent, to corporate capital expenditures during this time.

OTHER (INCOME) EXPENSE -- During Fiscal 1993 and Fiscal 1994, the Company
recorded its share of earnings from CHR-NW using the equity method. The amount
recognized for Fiscal 1993 and Fiscal 1994 is $37,000 and $349,000,
respectively. The increase primarily was caused by an increase in the
profitability of CHR-NW.

INTEREST EXPENSE -- Net interest expense increased from $46,000 during
Fiscal 1993 to $68,000 during Fiscal 1994, an increase of $22,000 or 48%. This
increase was attributable to interest expense on a greater level of debt
outstanding during Fiscal 1994 versus Fiscal 1993. As a percentage of revenue,
net interest expense was constant at 0.8%.

INCOME TAXES -- During Fiscal 1993 and Fiscal 1994, CHR-Illinois, which is
organized as a Subchapter C corporation, incurred $194,000 and $73,000 of income
tax expense, respectively. As a percentage of income, these amounts represent
3.5% and 0.8% for Fiscal 1993 and Fiscal 1994, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company requires capital to acquire the nonmedical assets of physician
practices, to enhance the operations of these practices and to develop and
acquire the requisite management infrastructure necessary to manage physician
practices effectively. To fund this development and growth, the Company
completed the private placement offering of the Convertible Note on December 1,
1995 that provided the Company with net cash proceeds of approximately $5.0
million. As of December 31, 1995, the Company had retired, with a portion of the
proceeds of the Convertible Note, approximately $2.5 million outstanding under
its credit agreement with Cole Taylor Bank as well as reducing its net working
capital obligations by $2.2 million. As of March 31, 1996, the Company had cash
of $655,000 and long term debt and leases of $6.2 million. An important aspect
of the Company's liquidity is the collection of accounts receivable. The Company
has designed its system to maximize collection efforts and to minimize the
average collection period of accounts receivable. On a monthly basis, the
Company's most significant expenditures are for physician and clinical
compensation expense as well as general corporate expenses.

On February 23, 1996, the Company entered into the Secured Credit Agreement
with American National Bank of Chicago. The Secured Credit Agreement provides
for borrowing under a revolving line of credit up to the greater of $5.0 million
or 80% of eligible receivables, as defined, for one year, with interest at the
bank's rate (8.25%, as of April 1, 1996) payable monthly. The borrowings are
collateralized primarily by receivables and are personally guaranteed jointly
and severally by each of Drs. Gleicher, Pratt, Miller and Karande. As of March
31, 1996 the line of credit balance was $3.0 million.

The Secured Credit Agreement contains affirmative and negative covenants
which require the Company to maintain certain financial ratios (including
minimum tangible net worth and maximum indebtedness to cash flow) limit the
amount of additional indebtedness, limit the creation or existence of liens, and
set certain restrictions on mergers and sales of assets.

The Company maintained a similar credit agreement with Cole Taylor Bank
which was terminated in February 1996. The facility provided for borrowings
under a revolving line of credit up to the greater of $2.5 million or 80% of
eligible receivables, as defined, for one year, with interest at the bank's rate
payable

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monthly. This facility was jointly and severally guaranteed by Drs. Gleicher,
Pratt, Miller and Karande. As of December 31, 1995, the Company did not have any
amounts outstanding under this credit facility.

On December 1, 1995, the Company entered into a Note Purchase Agreement
with Nichold Company, a wholly-owned subsidiary of Blue Cross Blue Shield of
Illinois, pursuant to which the Company issued to Nichold Company the $5 million
Convertible Note. See "Description of Capital Stock -- Subordinated Convertible
Promissory Note." The proceeds of the Convertible Note were used to pay down
approximately $2.5 million outstanding under the Cole Taylor Bank Credit
Agreement as well as retire approximately $2.2 million of various working
capital obligations. Upon consummation of this offering, $2.5 million of the
principal amount of the Convertible Note, plus all accrued and unpaid interest,
will become due without demand or notice.

The Recent Acquisitions were funded with shares of Common Stock. The
Company intends to acquire the assets of additional physician practices and to
fund this growth, in part, with existing cash, cash flow from operations and
borrowings under the Secured Credit Agreement. The Company believes that its
existing cash resources together with net proceeds from the offering will be
sufficient to meet the Company's anticipated acquisition, expansion and working
capital needs for the next 24 months. Thereafter, the Company may raise capital
through the issuance of long term or short term indebtedness or the issuance of
securities in private or public transactions to fund future expansions. There
can be no assurance that acceptable financing for future acquisitions or for the
integration and expansion of existing networks can be obtained. See "Unaudited
Pro Forma Combined Financial Information" for additional information concerning
the effects on the financial condition of the Company of the net proceeds of
this offering.

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BUSINESS

GENERAL

The Company provides comprehensive management and clinical support services
to integrated networks of physicians specializing in the field of reproductive
medicine, primarily subspecialties of obstetrics and gynecology and related
areas of human reproduction. The Company currently manages integrated networks
of 17 Centers and 28 physicians in the Chicago, New York City and Tampa/St.
Petersburg metropolitan areas. In addition, the Company plans to add one Center
and five physicians to its networks in New York City and Florida and to
establish an additional network of one Center and two physicians in Syracuse,
New York in connection with medical school affiliations for which the Company
has entered into agreements or letters of intent. The New York City and Florida
networks include the Recent Acquisitions. The Company anticipates that each of
these pending affiliations will commence by September 1996. The first Center was
opened in 1981 as an exclusive faculty affiliation with Mount Sinai Hospital and
Medical Center in Chicago. Since September 1990, when independent operations
began, the Company has grown from one Center and three physicians and scientists
with doctoral degrees to 19 Centers and 44 physicians and scientists after
giving effect to the pending affiliations in New York and Florida. Upon
completion of these affiliations, the Company's affiliated physicians will be on
staff at approximately 26 hospitals, including several of the country's leading
teaching hospitals.

The Centers provide reproductive medicine services principally relating to
the subspecialties of obstetrics and gynecology, reproductive endocrinology and
infertility, including traditional drug therapy and surgical therapies, ART and
specialized laboratory services, as well as perinatal services. The Company
intends to expand the range of obstetrics and gynecology, women's health care
and reproductive medicine services offered at the Centers beyond those currently
offered to include the provision of comprehensive obstetrics and gynecology
services. The Company believes that the addition of these services, coupled with
the Company's planned growth and capitated market experience, will contribute to
the Company's ability to negotiate national and regional shared-risk
arrangements with managed care payors.

The physician practices that the Company currently manages provide
reproductive endocrinology and infertility services to patients insured by 48
third party payors, and maintain three exclusive capitated managed care
contracts covering approximately 478,000 lives. The largest of these contracts
covers approximately 441,000 lives and is with HMO-Illinois, the state's largest
HMO, owned by Blue Cross Blue Shield of Illinois. A subsidiary of Blue Cross
Blue Shield of Illinois owns a Convertible Note which is convertible into 5% of
the outstanding Common Stock of the Company. In addition, one of the Company's
managed practices holds what the Company believes is one of the few capitated
managed care contracts for comprehensive obstetrics and gynecology services.
Certain of the managed practices also provide perinatal services to patients
insured by seven third party payors in the Chicago area, and certain of the
managed practices also maintain an exclusive managed care contract relating to
the provision of perinatal services. In each of 1995 and the first quarter of
1996, revenues derived from Medicare and Medicaid represented less than 1% of
total combined revenues of the Company.

The Company seeks to establish integrated physician networks through
acquisitions of the nonmedical assets of targeted physician practices. The
targeted physicians then enter into long-term employment agreements with a
medical practice managed by the Company under a long-term management services
agreement. In establishing its presence in the Chicago metropolitan area, the
Company has developed a clinical and academic affiliation with the University of
Illinois College of Medicine in Chicago. Similarly, as part of its strategy for
developing integrated networks in the New York and Tampa/St. Petersburg areas,
the Company has entered into an affiliation agreement with Columbia University
Medical School and into letters of intent for affiliations with Mount Sinai
Medical Center in New York City, State University of New York-Upstate Medical
Center in Syracuse, New York and the University of South Florida in Tampa,
Florida.

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INDUSTRY

OVERVIEW -- The health care industry in the United States is undergoing
profound changes in an effort to manage costs more efficiently while continuing
to provide high quality health care services. The United States Health Care
Financing Administration has estimated that national health care expenditures in
1995 were over $1 trillion, with approximately $200 billion directly
attributable to physician services. Physicians have traditionally provided
medical care on a fee-for-service basis which offers few incentives for the
efficient utilization of resources and has contributed to increases in health
care costs that are significantly higher than inflation. Concerns over the
accelerating cost of health care have resulted in the increasing prominence of
managed care which often involves shifting the financial risk of providing
health care services ultimately to the provider, thus creating incentives to
manage costs more efficiently. Health care in the United States historically has
been delivered through a fragmented system of health care providers, including
individual or small groups of primary care physicians and specialists. According
to the American Medical Association ("AMA"), in 1994 there were approximately
685,000 physicians actively involved in providing care in the United States. A
1993 AMA study estimates that there are over 86,000 physicians practicing in
3,600 multi-specialty group practices (consisting of three or more physicians)
and over 82,000 physicians practicing in 12,700 single specialty group practices
in the United States.

PHYSICIAN PRACTICE MANAGEMENT -- In response to reductions in the levels of
reimbursement by third party payors and the corresponding cost-containment
pressures on health care providers, physicians are increasingly seeking to
affiliate with larger organizations which manage the nonmedical aspects of
physician practices, such as billing, purchasing and contracting with payor
entities. Through affiliation with such organizations, including physician
practice management companies, physicians gain access to capital, as well as the
informational, managerial and administrative resources essential to the delivery
of high-quality, cost effective care in the increasingly cost-conscious managed
care environment.

These trends also have resulted in increased pressures from payors on both
primary care and specialist practices. Many payors and their intermediaries,
including governmental entities and HMOs, are increasingly expecting outside
providers of physician services to develop and maintain quality outcomes through
utilization review and quality management programs. In addition, such payors and
intermediaries typically desire to share the risk of providing services through
capitation arrangements which provide for a fixed payment per member for patient
care over a specified period of time. This focus on cost-containment and
financial risk sharing has placed small and mid-size physician groups and solo
practices at a significant competitive disadvantage because they typically have
higher operating costs, limited purchasing power with suppliers, and limited
abilities to purchase expensive state-of-the-art equipment and invest cost
effectively in a sophisticated information system.

REPRODUCTIVE MEDICINE -- Reproductive medicine encompasses several medical
disciplines which focus on male and female reproductive systems and processes.
Within the field of reproductive medicine, there are several subspecialties such
as obstetrics and gynecology which apply only to women and certain
subspecialties, such as reproductive endocrinology, infertility and urology,
which apply to both women and men. According to industry sources, expenditures
related to infertility services, one of several subspecialties of reproductive
medicine, in 1995 exceeded $1 billion.

Within the specialty of obstetrics and gynecology, there are several
subspecialties, including perinatology, reproductive endocrinology, infertility,
gynecology/oncology, and endoscopic surgery. Perinatology is a subspecialty that
focuses on pregnancies that pose a high risk of medical complications for women,
gynecology/oncology focuses on cancer of the female reproductive organs, and
endoscopic surgery is a form of minimally invasive surgery designed to correct a
variety of gynecological, urological and infertility related problems.
Reproductive endocrinology and infertility concern the diagnosis and treatment
of all physiological problems in both the male and female which lead to abnormal
reproductive functions. Reproductive endocrinologists are physicians who have
completed four years of residency training in obstetrics and gynecology and have
at least two years of additional training in an approved subspecialty fellowship
program.

Physicians practicing reproductive medicine, therefore, range from the
primary care obstetrician or gynecologist to the more specialized endoscopic
surgeon, reproductive endocrinologist or urologist. These

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specialists generally complement, rather than compete with, the work performed
by the primary obstetrician or gynecologist. The AMA estimated that in 1994
there were approximately 33,000 obstetricians and gynecologists, 504
reproductive endocrinologists, 2,905 perinatologists and 9,700 urologists board
certified in the United States. As of June 1, 1996, the Company was affiliated
with 24 fellowship trained reproductive endocrinologists, two perinatologists
and one urologist. The Company has entered into agreements or letters of intent
pursuant to which the Company will become affiliated with an additional seven
fellowship trained reproductive endocrinologists. The Company believes that its
affiliated physicians are among the leading physicians in their respective
specialties and that its affiliations with these physicians will enable it to
(i) affiliate with additional leading physicians in these and other specialties,
and (ii) obtain additional managed care contracts, including contracts for
comprehensive obstetrics and gynecology services.

Although the services offered at the Centers currently are being expanded
to include a broader range of services, including general obstetrics and
gynecology, to date substantially all of the Company's revenues have been
derived from reproductive endocrinology and infertility services. According to
The American Society for Reproductive Medicine, it is estimated that one in ten
couples of childbearing age in the United States suffer from infertility, which
is defined as the inability of noncontracepting, sexually active women to become
pregnant after having tried for at least one year. It is estimated that
approximately 1.3 million patients in the United States annually seek treatment
for problems with infertility. The Company believes that multiple factors over
the past several decades have affected fertility levels, including the mother's
age at first-birth and the increasing interval between marriage and first-birth.
Deferral of both marriage and first-birth have caused a shift in demographics of
the United States and consequently explains part of the increase in demand for
assisted reproductive technology. In addition, the technological advances in the
diagnosis and treatment of infertility have enhanced treatment outcomes and the
prognosis for many couples.

Historically, conventional infertility treatment and ART services have not
been covered by insurance plans; however, some third party payors have begun
paying a portion of these services in an effort to offer comprehensive
obstetrics and gynecology services to their members. As of June 1, 1996, ten
states, including Illinois, had laws mandating varying levels of insurance
coverage for infertility services.

The trends which are leading physicians to affiliate with physician
practice management companies are amplified in the field of reproductive
medicine due to several factors, including (i) the increasingly high level of
specialized skills and technology required to effectively utilize and improve
upon new techniques, such as micromanipulation and gynecoradiology, (ii) the
capital intensive nature of acquiring and maintaining state-of-the-art
reproductive medical equipment and laboratory and clinical facilities, (iii) the
need to develop and maintain specialized management information systems to meet
the increasing demands of technological advances, patient monitoring and third
party payors, and (iv) the need for 24 hour, seven days a week service to
respond to patient emergencies and to optimize the outcomes of patient
treatments.

BUSINESS STRATEGY

The Company's strategy is to develop integrated management networks for
human reproductive services through practice affiliations that provide high
quality, cost-effective care in targeted geographic markets. The principal
elements of this strategy include:

AFFILIATE WITH LEADING PHYSICIAN PRACTICES -- The Company seeks to
affiliate with targeted leading physician practices by capitalizing on (i) the
professional reputation of the Company and its affiliated physicians, (ii) the
Company's existing relationships with professionals and academics who practice
in the reproductive medicine field, as well as with medical schools, managed
care companies and other insurance companies, (iii) relationships with general
obstetricians and gynecologists and primary care physicians, and (iv) the
extensive experience of the Company's affiliated physicians in providing
reproductive medicine services. The Company believes that the relationships that
it has formed over the years through its affiliated physicians and nonphysician
professionals and their research, professional involvement and provision of
innovative, high quality care afford the Company the opportunity to attract the
leading physician practices in its targeted markets.

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DEVELOP INTEGRATED PRACTICE NETWORKS -- In connection with its acquisition
and affiliation strategy, the Company seeks to establish locally integrated
specialty networks of physicians. The locally integrated networks provide
individual physicians with access to the collective knowledge and experience of
the Company's affiliated physicians and provide patients with access to a
network of reproductive medical specialists 24 hours a day, seven days a week,
which the Company believes leads to better care and patient satisfaction. The
economies of scale inherent in this network system enable the Company to reduce
the operating costs of its affiliated practices by centralizing certain clinical
functions, billing and collections, payroll and accounting and by negotiating
regional and national contracts for supplies, pharmaceuticals, equipment,
services and insurance. Once practice affiliations are established in a market,
the Company seeks to expand the services offered by the affiliated practices by
assisting the new affiliated practices in offering services which they
previously may have outsourced, such as laboratory and medical imaging services,
or which they previously may not have offered, such as advanced endoscopic
surgery, ART, micromanipulation, gynecoradiology and perinatology. In addition
to the services currently provided, the Company plans to continue to expand the
range of reproductive services offered by physicians practicing in the Company's
networks by adding obstetrics and gynecology, women's health and reproductive
medicine services. The Company believes that it will be able to successfully
apply the management expertise and methodologies the Company has developed with
respect to reproductive endocrinology and infertility to these other medical
areas.

PURSUE NATIONAL AND REGIONAL MANAGED CARE CONTRACTS -- The Company believes
that managed care will play an increasing role in the provision of reproductive
medical services, including obstetrics and gynecology subspecialties. The
Company has focused its efforts on establishing integrated networks of high
quality physicians in metropolitan markets and using its proprietary information
system and existing capitated contract experience to pursue national and
regional managed care contracts by negotiating for and effectively pricing
capitated contracts and managing outcomes and utilization rates. The Company
believes that its current capitated contract experience will enhance its ability
to market its capitated services and negotiate shared-risk arrangements.

REENGINEER THE DELIVERY OF MEDICAL SERVICES -- The Company's approach to
providing physician practice management services includes encouraging its
affiliated practices to explore and develop ways to improve the delivery of
medical services. For example, in the late 1980's, Norbert Gleicher, M.D.,
President, Chief Executive Officer and founder of the Company, developed a
cesarean section reduction program which reengineered the way obstetrical
services were provided within a large hospital department. The Company
continuously monitors and evaluates the delivery of medical services in an
effort to further improve outcomes and reduce costs of high quality treatment.
Key to the affiliated practices' ability to effectively reengineer the provision
of medical services is the collective experience of the Company's affiliated
physicians and nonphysician professionals in providing care and conducting
research, the Company's proprietary data base, the Company's affiliation with
leading academicians and medical schools, and the Company's collaboration with
managed care companies in conducting clinical studies.

PROVIDE A NATIONAL INFORMATION SYSTEM -- The Company collects and analyzes
clinical, patient, administrative and financial data using a proprietary
information system. This system and the acquired data enhance the Company's
ability to control expenses, effectively manage utilization rates and maximize
reimbursements. The Company believes that this system and its related data base
also will contribute to the Company's ability to continue to effectively price
and attract managed care contracts, including capitated contracts. Part of the
Company's process of establishing practice affiliations is to integrate its
affiliated practices into the Company's information system by installing and
maintaining in each Center the technology and skills necessary for each
affiliated practice to effectively utilize the Company's information system and
to allow the Company to incorporate each affiliated practice's historical and
current data into the system. To date, the Company has developed its information
system in the fields of reproductive endocrinology, infertility and
perinatology, and the Company believes that it will be able to effectively apply
this system to other areas of reproductive medicine.

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PHYSICIAN AFFILIATION

AFFILIATION PROCESS -- The Company currently provides management services
to five medical corporations that provide medical services at 17 Centers in
Illinois, New York, New Jersey and Florida and plans to add two Centers and
seven physicians to such markets in connection with medical school affiliations
for which the Company has entered into agreements or letters of intent.
Generally, one or more medical corporations are formed in each state for the
provision of medical services and each affiliated physician becomes a
shareholder and employee of the managed practice in the state in which he or she
practices. To the extent permitted by applicable federal and state laws, the
Company also may acquire and operate medical practices through wholly-owned
subsidiaries. As the Company expands the breadth of services provided by medical
practices under its management, separate medical corporations may be formed in
certain states as the Company and the affiliated physicians deem appropriate.

In establishing a managed practice, the Company typically: (i) acquires the
nonmedical assets of a particular practice, and in certain situations,
laboratory or other ancillary facilities that are either owned by or affiliated
with such practice; (ii) enters into a long-term management services agreement
with such practice or a medical practice with which such practice becomes
affiliated, under which the Company provides comprehensive management services
to the managed practice; (iii) requires that the managed practice enter into
long-term employment agreements containing non-compete provisions with the
affiliated physicians; and (iv) assumes the principal administrative, financial
and general management functions of the physician practices, including
employment of most nonmedical personnel. In establishing a local network, the
Company develops, wherever feasible, clinical and academic affiliations with a
local medical school which has a respected reputation in the field of
reproductive medicine.

The typical management services agreement between the Company and a managed
practice has a term of 40 years and cannot be terminated by the managed practice
without cause. In states that prohibit the splitting of physician fees, the
Company receives a fixed management fee, payable monthly and subject to periodic
adjustment if it is determined that the fee is not commensurate with factors
such as costs incurred and past utilization levels. In other states, the Company
agrees to pay all of the managed practice's expenses, including the physicians'
base compensation and performance-based bonuses, and the Company, in turn,
receives the economic benefit of revenues in excess of expenses generated by the
managed practice.

Generally, the employment agreement between the managed practice and each
shareholder-employee is for an initial term of five years and provides for a
base salary and a performance-based bonus throughout the term. The employment
agreements typically cannot be terminated by the managed practice without cause
during the initial term. If a shareholder-employee voluntarily terminates his or
her employment or is terminated by the managed practice for cause, the physician
is obligated to pay the managed practice an agreed upon amount as liquidated
damages. In addition, the employment agreements generally contain covenants not
to compete for a period of two years following any termination.

The Company's primary geographic focus initially has been in the Chicago
metropolitan area, the New York City metropolitan area, including northern New
Jersey, the Syracuse metropolitan area and the Tampa/St. Petersburg metropolitan
area. The Company believes its business model is adaptable to additional markets
and will allow it to compete nationwide. The Company's success in these and
other markets will depend upon its ability to enhance operating efficiencies and
expand the scope of services at the Centers by (i) achieving successful outcomes
with comparatively low rates of utilization of services and, therefore, at
comparatively low costs, and (ii) increasing patient volume. The Company
believes that affiliation with the Company is attractive to leading physicians
in its target markets because the physicians receive base salaries from the
managed practices tied to historical income levels with incentives to exceed
historical income. In addition, the affiliation provides the managed practices
with managed care expertise in new markets, relieves the physicians of unwanted
management responsibility, provides them with access to a custom designed
proprietary data information system, gives them access to state-of-the-art
technology, reduces costs through national and regional purchase contracts and
provides opportunities to participate in national research efforts to enhance
the scientific knowledge of the field.

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As the Company continues to pursue its strategy of establishing these
integrated networks, the Company also intends to expand the scope of practices
under management to include other product lines in obstetrics and gynecology,
women's health care and/or reproductive medicine, such as neonatal and general
obstetrics and gynecology services, which go beyond the existing product lines
of reproductive endocrinology, infertility and perinatal services currently
offered by the managed practices. In January 1996, the Company and CHR-Illinois
founded CHR Managed Care Contracting, L.L.C. which plans to provide management
services, including managed care contracting services, to a network of
obstetricians and gynecologists in the Chicago metropolitan area. These services
are anticipated to include negotiating managed care contracts.

Since December 31, 1995, the Company has acquired the nonmedical assets of
two physician practices, has entered into an affiliation with one university
medical program and has entered into letters of intent to enter into affiliation
agreements with three university medical programs. These transactions are as
follows:

<TABLE>
<CAPTION>
PHYSICIAN GROUP MARKET COMMENCEMENT DATE
- ---------------------------------------------------------- -------------- -----------------
<S> <C> <C>
Acquisitions:
Fertility Center of Northern New Jersey, P.A. .......... Park Ridge, NJ May 1, 1996
A Center for Gynecology, P.A. .......................... Tampa, FL May 1, 1996
Affiliations:
Columbia University Medical School(A)................... New York, NY June 1, 1996
University of South Florida(A).......................... Tampa, FL August 1, 1996(B)
State University of New York-Upstate Medical
Center(A)............................................ Syracuse, NY August 1, 1996(B)
Mount Sinai Medical Center(A)........................... New York, NY September 1, 1996(B)
</TABLE>

- -------------------------

(A) The results of operations of the affiliated university medical programs are
not reflected in the pro forma results of operations because these
affiliations involve the provision of services on a going-forward basis and
do not represent the acquisition of existing operations.

(B) Reflects anticipated commencement date.

After giving effect to the recent and pending transactions in New York, New
Jersey and Florida, the Company will provide management services to five medical
practices and will have established affiliations with five medical schools
resulting in affiliations with 44 physicians and scientists with doctoral
degrees. These 44 physicians and scientists in the aggregate provide services in
the following areas: reproductive endocrinology, infertility, reproductive
immunology, endoscopic surgery, gynecourology, gynecoradiology, ultrasonography,
ART, maternal/fetal medicine (perinatology), and laboratory services.

The Company has formed a National Advisory Board composed of the Regional
Medical Directors from each of the integrated networks and selected leaders in
the practice areas managed by the Company. The National Advisory Board will meet
at least biannually and will (i) suggest treatment guidelines to the managed
practices, (ii) review outcomes at the managed practices and Centers, (iii)
recommend to the Company administrative changes that may affect outcomes
favorably, and (iv) advise the Company and the managed practices about
additional reproductive medicine services which may be added to existing
services. See "Management -- National Advisory Board Members."

MEDICAL SCHOOL AFFILIATIONS -- As part of developing an integrated network
of physicians in a targeted market, the Company intends to develop, wherever
feasible, a clinical and academic affiliation with a local medical school which
is a leader in human reproductive medicine. The Company believes these
affiliations are important because they (i) provide a source of regional
leadership by including the leading physician of the medical schools'
reproductive medicine or infertility departments, (ii) enhance the Company's and
the managed practices' reputation and credibility in the local market, (iii)
provide access to a pool of qualified physicians, and (iv) provide additional
links with the academic community and research being conducted by the medical
schools. As opportunities arise, the Company also may enter into certain markets
that do not afford such medical school affiliations if the Company believes that
other advantages of such markets make them attractive.

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A medical school affiliation generally provides that certain faculty
members of the medical school who specialize in reproductive medicine,
infertility and ART medicine provide such services at a Center operated by the
local managed practice and engage in joint research and educational programs
with the managed practice. The Company provides management and administrative
services to the faculty physicians under the management services agreement with
the managed practice. The medical school is reimbursed for the services of the
faculty physicians, and the managed practice receives revenues generated by the
faculty physicians for such services. The Company does not pay any initial
consideration for the establishment of the affiliation.

MANAGED CARE CONTRACTS

The Company actively pursues contractual arrangements with managed care
companies, including full-risk capitated contracts. The growth of capitated
reimbursement presents the challenge of projecting costs of care based upon
patient populations, physician treatment patterns, and the specific requirements
of managed care contracts. The Company believes that its information system,
historical data, cooperative studies with managed care companies and experience
in negotiating and managing managed care contracts, including capitated
contracts, provide it with a competitive advantage in pursuing additional
managed care contracts.

In Illinois, the managed care contracts maintained by the Company's
affiliated practices include an exclusive capitated risk contract with
HMO-Illinois, an HMO owned by Blue Cross Blue Shield of Illinois, which covers
approximately 441,000 lives. A subsidiary of Blue Cross Blue Shield of Illinois
owns a Convertible Note which is convertible into 5% of the outstanding common
stock of the Company on a fully-diluted basis. In addition, one of the Company's
affiliated practices holds a full-risk capitated contract covering approximately
26,000 lives to provide a full range of obstetrics and gynecology services
through CHR-Florida. Under this contract, medical services which are outside the
area of reproductive endocrinology and infertility currently are outsourced on a
fee-for-service basis. The Company believes that the experience and data
developed during the two year history of this contract will prove useful in
developing the Company's managed care contracting capabilities for general
obstetrics and gynecology. For the twelve months ended December 31, 1995 and the
three months ended March 31, 1996, HMO-Illinois (owned by Blue Cross Blue Shield
of Illinois) accounted for approximately 33% and 28%, respectively, of the
Company's total combined revenues. For the twelve months ended December 31, 1995
and the three months ended March 31, 1996, HMO-Illinois accounted for
approximately 26% and 23%, respectively, of the Company's pro forma total
combined revenues after giving effect to the Recent Acquisitions, as if such
transactions had occurred January 1, 1995.

The Company believes that physicians practicing at the Centers provide
reproductive medicine services in a more cost effective manner than most
reproductive endocrinology and infertility service providers, while maintaining
the quality of patient care, by providing a mix of services that initially
focuses on diagnostic and non-ART-based services. The Company believes that most
other physician practices specializing in reproductive endocrinology and
infertility rely more heavily upon ART-based services. The Company believes that
the Centers' utilization mix gives the Company a competitive advantage in
pursuing managed care contracts, particularly capitated contracts.

MANAGEMENT INFORMATION SYSTEM

The Company believes that effective and efficient integration of clinical,
patient and financial data enhances the quality of patient care and provides a
competitive advantage in negotiating and bidding for managed care contracts.
Since 1992, the Company has invested significant capital and human resources in
the development of its proprietary data management information system. This
system currently links the existing 11 Centers in the Chicago metropolitan area
to the Company's central administrative offices for patient scheduling, billing,
data assessment, clinical outcome evaluation, utilization review, routine
clinical management and electronic medical records storage and retrieval. With
the closing of the recent transactions in New York, New Jersey and Florida, the
Company has begun integrating each of the new Centers into the Company's
management information system. This system has the capacity to allow patient
information to be immediately accessible system-wide or to designated users,
which enables patients to receive care at any

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Center and permits physicians to consult on cases from different Centers. The
Company believes that this nearly paperless medical records system enables a
relatively small number of physicians to provide cost effective care to a large
number of patients while increasing the quality of care.

In addition to the patient treatment advantages provided by the Company's
data management information system, this system enables the Company to collect
and store data which allows the Company to track and report utilization and
outcomes to insurance carriers. The Company believes that this information also
provides the Company with a competitive advantage in calculating discounted fee
schedules and evaluating the potential cost to the Company of capitation
agreements based on historical utilization rates.

REENGINEERING OF SERVICES

The Company seeks to improve patient outcomes, utilization rates and the
cost effectiveness of treatment by reengineering the way reproductive medical
services are provided. The Company believes that its academic, clinical and
management experience and that of other physicians affiliated with the Company
give the Company a competitive advantage in improving patient outcomes and in
developing and implementing more cost effective services.

Since the formation of the first Center, the Company has (i) moved
fertility services to a large extent out of the hospital setting and into
freestanding centers; and (ii) developed diagnostic and therapeutic techniques
which have reduced the need for surgical procedures compared to levels reported
by other providers in 1993. A recent comparative study conducted by Blue Cross
Blue Shield of Illinois in cooperation with the Company demonstrated that as a
consequence of reengineering the way infertility services are provided, the
total cost per clinical pregnancy achieved was lower under the Centers' care
than under the care of other providers.

Dr. Gleicher has been a leading voice in bringing the issue of excessive
cesarean section rates to national attention. According to published medical
studies, a cesarean section is the most frequently performed surgery in the
United States. In 1988, Dr. Gleicher developed a hospital based cesarean section
reduction initiative at Mount Sinai Hospital and Medical Center in Chicago that
received considerable national attention after the publication of the program's
results in an article by Dr. Gleicher and Stephen A. Myers, M.D. in the New
England Journal of Medicine. This program involved a complete reengineering of
how obstetrical services were provided within a large hospital department and
resulted in a reduction of the cesarean section rate from approximately 17.5% to
11.5%. Quality assurance standards of the American College of Obstetrics and
Gynecology now incorporate a review of cesarean section rates as a performance
criteria. Many experts believe that the current national cesarean section rate
of approximately 23% is excessive and the federal government has set a national
target rate of 15% for the year 2000 in an attempt to reduce current rates.

More recently, the Company has developed a completely reengineered
Perinatal Service Program which was implemented through CHR-Perinatal in the
Chicago metropolitan market in mid-1995. Traditional perinatal services are
based on the referral of high risk obstetrical patients to perinatologists in
tertiary care institutions (Level III hospitals). This frequently results in (i)
transfer of the patient out of her community and out of the care of her primary
obstetrician and local hospital and (ii) increased costs because services at
tertiary care facilities typically are more costly than at community hospitals.
The reengineered Perinatal Service Program developed by the Company is
principally designed to limit each of these disadvantages of current perinatal
care by bringing the perinatologist to the patient, supporting the primary
obstetrician or gynecologist in his or her management of the high risk patient
and providing the required care in the patient's local community. Based upon
preliminary data, the Company believes that this program has greatly improved
patient care quality, patient satisfaction, provider satisfaction, local
hospital satisfaction and overall costs to third party payors.

Physicians at the Centers also have been instrumental in developing the
technique of tubal catheterization to treat diseased fallopian tubes. In a
manner analogous to coronary angioplasty, the fallopian tubes are visualized
using x-ray techniques, and specialized catheters are used to open or repair
blocked tubes. This method permits both diagnosis and treatment of tubal
abnormalities without requiring the use of conventional surgical techniques.

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The Company recently introduced a new program under which at least one of
the managed practices will be offering certain medical services over the world
wide web. Through a home page on the world wide web, interested couples in
certain states who qualify after on-line screening will be able, for a fee, to
obtain specified consulting services from a reproductive endocrinologist similar
to a standard "in-office" visit at a Center. The Company is still in the process
of evaluating the scope and feasibility of the services to be provided under
this program and there can be no assurance that this program will prove to be
viable or profitable. See "-- Government Regulation" and "Risk Factors -- Health
Care Regulations and Reform."

SERVICES

The Company manages physician practices by centralizing many of the
administrative functions such as billings, collections, purchasing and accounts
receivable as well as the laboratory and information systems functions. The
Company also centrally coordinates business hours for each Center to ensure that
at least one Center in each geographic area is open at all times to receive
patients. Other than the centralization of functions mentioned above, the
Centers are managed on a decentralized basis in that physicians are encouraged
to administer their Centers in accordance with the needs of their specific
patient populations as they had before contracting with the Company. The
practice of medicine at each Center is under the exclusive control of the
physicians who practice at such location.

The Chicago metropolitan area Centers currently provide services in the
following areas of human reproductive care: (i) reproductive endocrinology and
infertility, including routine medical and surgical treatment, assisted
reproductive technologies and micromanipulation; (ii) gynecoradiology; (iii)
endoscopic surgery; (iv) perinatology, including antepartum testing; and (v)
laboratory services. The Centers in New York and Florida initially will provide
reproductive endocrinology and infertility related clinical and laboratory
services, assisted reproductive technologies and micromanipulation, with some
general obstetrics and gynecology services in Tampa/St. Petersburg. As physician
networks are developed in these and other markets, the Company intends to expand
the services offered by its affiliated practices, including services that the
affiliated physicians may have previously outsourced, such as laboratory and
imaging services, and to help them introduce services that the affiliated
physicians may not have previously provided, such as advanced endoscopic surgery
and perinatology.

REPRODUCTIVE ENDOCRINOLOGY AND INFERTILITY -- Reproductive endocrinology
refers specifically to the diagnosis and treatment of all hormonal problems
which lead to abnormal reproductive function or have an effect on the
reproductive organs. After giving effect to the recent and pending transactions
in New York, New Jersey and Florida, 31 fellowship trained reproductive
endocrinologists will be employed by or affiliated with the managed practices.
Infertility services encompass all services that enhance the couple's chance of
achieving pregnancy, including various assisted reproduction technologies and
micromanipulation procedures, as well as the use of gynecoradiology and
endoscopic surgery. Assisted reproductive technologies include in vitro
fertilization ("IVF"), gamete intrafallopian transfer ("GIFT"), zygote
intrafallopian transfer ("ZIFT"), and donor egg programs. The IVF technique is
performed by combining an egg and sperm in a laboratory and, if fertilization is
successful, transferring the resulting embryo into the woman's uterus. GIFT is
performed by a doctor using a laparoscope to insert egg and sperm directly into
a woman's fallopian tube with a resulting embryo floating into the uterus. ZIFT
is a procedure in which an egg is fertilized in the laboratory and the resulting
embryo is then transferred to the woman's fallopian tube. Women who are unable
to produce eggs but who otherwise have normal reproductive systems can use the
donor egg program in which a donor is recruited to provide eggs for
fertilization that are transferred to the recipient woman. Micromanipulation
involves techniques that are part of the assisted reproductive technology
services offered by the Centers, in which microsurgery is performed on eggs or
early embryos. These procedures are performed by using a microscopic pipette to
insert a single sperm into an egg and permit fertilization to occur even in
cases where sperm counts are quite low. These new micromanipulation procedures,
such as intracytoplasmic sperm injection ("ICSI"), provide treatment of forms of
male infertility that were not treatable two years ago.

GYNECORADIOLOGY -- The Company believes the Centers have the country's only
fluoroscopy x-ray equipment exclusively dedicated to the diagnosis and treatment
of uterine and fallopian tube disease. This sophisticated equipment allows for a
level of non-invasive diagnostic accuracy that greatly reduces the need for

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<PAGE> 48

more invasive, surgical diagnostic procedures, such as laparoscopies. An
additional advantage of this equipment is that it frequently allows for
immediate therapeutic intervention following the diagnosis of an abnormality.
Since the gynecoradiological procedure is less invasive and does not require
general anesthesia, costs are significantly lower than with similar procedures
performed in operating rooms. These services currently are only offered at five
Centers in the Chicago area.

ENDOSCOPIC SURGERY -- Endoscopic surgery is performed through a laparoscope
which generally reduces patient hospitalization and recovery times and, often,
cost of care. It can be used to treat pelvic pathology, endometriosis, tubal
ligation reversal, pelvic pain, urinary incontinence and a variety of
gynecological and infertility related conditions. It is technically demanding
and requires a skilled surgeon and sophisticated equipment to permit optimal
outcomes.

PERINATOLOGY -- Perinatology is a subspecialty of obstetrics that depends
upon providing high tech, high training consultation and intervention to ensure
optimal outcomes to patients with high risk pregnancies. Perinatology services
are currently provided primarily at four Centers in the Chicago area. Perinatal
care is provided by Center physicians with subspecialty training in maternal
fetal medicine. These highly specialized physicians accept only obstetrical
patients who are diagnosed as high risk patients. High risk patients include,
but are not limited to, those who have had repeated pregnancy losses, are at
risk for premature delivery, or have medical complications in pregnancy. The
Centers also conduct research on repeated pregnancy losses, especially as they
relate to immunological causes. Patients are transferred to the Center
physicians for complete care only if patients cannot be managed in their local
community. In most cases, however, after receiving care from the Center
physicians, these patients are transferred back to their local obstetrician.
Occasionally, Center perinatologists will co-manage patients with local
obstetricians. In cases where a patient is fully transferred to the Center
perinatologist for care, the perinatologist also will perform the delivery at a
perinatal center, or a so-called "Level III hospital."

Antepartum testing is an adjunct to the perinatology services provided and
primarily consists of the Centers performing prenatal evaluations on a
consultation basis to other obstetricians and gynecologists physicians. These
prenatal evaluation services include ultrasound evaluations, amniocenteses,
chorionic villous biopsies, and other forms of antepartum testing.

SPECIALTY LABORATORY SERVICES -- In the Chicago metropolitan area the
Centers maintain a fully licensed clinical laboratory, headed by a full-time
director. The laboratory provides diagnostic services in andrology (male
infertility), endocrinology, genetics and reproductive immunology. The central
and satellite laboratories provide a large majority of the specialized
laboratory requirements of the Centers and also provide services to
non-affiliated organizations. These services are specific to infertility,
pregnancy loss and perinatology. Generally, these are tests and procedures that
national laboratory chains find inefficient to run because of timing issues,
test complexity and interpretation limitations. When it is cost effective, the
Centers utilize the services of national laboratories for less complex and
specialized tests. Laboratory services outside of Chicago will be organized in
central regional laboratories. To the extent that it is cost effective, however,
certain highly specialized services, such as reproductive immunology testing,
will be centralized in the Chicago-based laboratory.

COMPETITION

There is intense competition among practice management companies and other
entities seeking practice affiliations. Although the Company focuses on
physician practices that provide specific types of health care services, it
competes for management contracts with national and regional providers of
physician management services, as well as with hospitals and hospital-sponsored
management services organizations. Many of these other practice management
companies are much larger and have greater access to capital than the Company;
however, the Company believes such other companies have not focused on the
specialized area of reproductive endocrinology and infertility. Certain areas of
obstetrics and gynecology, particularly reproductive endocrinology and
infertility, involve a high degree of specialization. The Company believes that
its expertise in managing these highly specialized practices, along with its
experience in attracting capitated contracts, will allow it to compete
effectively in this area. There can be no assurances, however, that larger
practice

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management companies will not enter the reproductive endocrinology and
infertility market or that the Company would be able to compete effectively with
them. See "Risk Factors -- Competition."

EMPLOYEES

As of June 1, 1996, the Company employed a total of 75 people on a
full-time or part-time basis, and the managed practices employed a total of 149
people on a full-time or part-time basis. The Company has entered into
agreements or letters of intent pursuant to which 10 additional people would be
employed on a full-time or part-time basis by the Company and an additional 20
people would be employed on a full-time or part-time basis by the managed
practices. The Company believes that its relations with its employees are good.
The Company expects that it may need to hire additional personnel to accommodate
the demands prompted by the provision of services to each of the managed
practices under the management services agreements, as well as the needs of the
Company in pursuing its growth strategies. In addition, the Company generally
will employ substantially all of the nonmedical personnel of an affiliated
practice.

PROPERTY

As of the date of this Prospectus, the Company provides physician practice
management services to affiliated practices operating 11 Centers in the Chicago
metropolitan area and the Company is in the process of establishing additional
networks in the New York metropolitan area, including New Jersey (four
locations), and the Tampa/St. Petersburg metropolitan area (three locations). In
addition, the Company has entered into a letter of intent to establish an
additional network in Syracuse, New York (one location). All of the Centers are,
or will be, leased. The Company leases approximately 10,000 square feet at 750
North Orleans Street in Chicago, Illinois, for its executive offices. The lease
expires in 2009. The Company also leases or subleases the clinic and laboratory
facilities for its affiliated practices. The leases for the current 11 Centers
in the Chicago metropolitan area cover approximately 80,000 square feet of
clinic and laboratory space and have varying remaining terms ranging from two to
21 years. The leases for the remaining current six Centers in New York, New
Jersey and Florida cover approximately 19,000 square feet and have varying
remaining terms ranging from four to seven years, except for one of the Florida
leases which has a month-to-month term. In addition, the Company has signed and
submitted to the landlord for approval a lease for a 22,500 square foot Center
on Madison Avenue in New York City. The term of the lease is ten years, with two
five-year options and the Company expects that the Center will open by the end
of 1996. The Company anticipates that as the affiliated practices continue to
grow and add new services, expanded facilities will be required.

The Company believes that its current facilities and facilities planned as
part of the pending transactions will be adequate for the Company's foreseeable
needs in these geographical markets and that adequate replacement space is
readily available in each market.

GOVERNMENT REGULATION

Various state and federal laws regulate the relationship between providers
of health care services and physicians, and as a business in the health care
industry, the Company is subject to these laws and regulations. The Company is
also subject to laws and regulations relating to business corporations in
general. Although many aspects of the Company's business operations have not
been the subject of state or federal regulatory interpretation, the Company
believes its operations are in material compliance with applicable laws. There
can be no assurance, however, that a review of the Company's or the managed
practices' businesses by courts or regulatory authorities will not result in a
determination that could adversely affect the operations of the Company or the
managed practices or that the health care regulatory environment will not change
so as to restrict the Company's or the managed practices' existing operations or
their expansion. Additionally, given the innovative nature of the Company's
on-line consulting program, no assurance can be given as to how state and
federal regulations will be applied to such services. See "Risk Factors --
Health Care Regulation and Reform."

LICENSURE -- Every state imposes licensing requirements on individual
physicians and on certain types of health care providers and facilities. Many
states require regulatory approval, including licenses to render care

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or certificates of need, before establishing certain types of heath care
facilities or offering services which will entail the acquisition of expensive
medical equipment. Some states, such as New York, also impose licensing and
ongoing operating requirements for medical laboratories and/or tissue banks,
such as egg and sperm banks. While the performance of management services on
behalf of a medical practice does not currently require any regulatory approval
on the part of the Company or its affiliated practices, there can be no
assurance that such activities will not be subject to licensure in the future.

CORPORATE PRACTICE OF MEDICINE -- The laws of many states prohibit business
corporations from engaging in the practice of medicine, such as through
employment arrangements with physicians. These laws vary from state to state and
are enforced by the state courts and regulatory authorities with broad
discretion. The Company will not employ physicians to practice medicine, will
not represent to the public that it offers medical services, and will not
control or interfere with the practice of medicine by physicians in the
affiliated practices. Managed practices in states that prohibit the corporate
practice of medicine will be organized as a medical corporation or other entity
that is specifically authorized to employ physicians. Accordingly, the Company
believes that its intended operations will not violate applicable state laws
regulating the unlicensed practice of medicine by a business corporation.
However, because the laws governing the corporate practice of medicine vary from
state to state, any expansion of the operations of the Company to a state with
strict corporate practice of medicine laws may require the Company to modify its
operations with respect to one or more affiliated practices, resulting in
increased financial risk to the Company. Further, there can be no assurance that
the Company's arrangements will not be successfully challenged as constituting
the unauthorized practice of medicine or that certain provisions of the
management services agreements or covenants not to compete will be enforceable.

FEE-SPLITTING PROHIBITIONS -- The laws of some states (including Illinois
and New York) prohibit physicians from splitting professional fees. These
statutes are sometimes quite broad and as a result prohibit otherwise legitimate
business arrangements. New York, for example, prohibits compensation
arrangements under which the amount received in payment for furnishing space,
facilities, equipment or personnel services used by a licensed physician
constitutes a percentage of or is otherwise dependent upon, the income or
receipts of the licensed physician from such physician practice. Other states,
such as Florida, only prohibit fee-splitting arrangements that are based on
referrals. Penalties for violating these fee-splitting statutes or regulations
may include revocation, suspension, or probation of a physician's license, or
other disciplinary action, as well as monetary penalties. Alleged violations of
the fee-splitting laws have also been used successfully by physicians to declare
a contract to be void as against public policy.

Pursuant to the terms of the management services agreements with the
Illinois Practices, CHR-New York and CHR-New Jersey, the Company will receive a
monthly management fee and an absolute assignment of receivables and payables to
be managed on behalf of the managed practices, and will be reimbursed for
certain expenses incurred in the management of the managed practices. While the
Company believes that its compensation arrangements substantially comply with
state fee-splitting laws, there can be no assurance that these compensation
structures will not be construed by state or judicial authorities as being
proscribed by the fee-splitting laws.

STATE ANTI-KICKBACK AND SELF-REFERRAL LAWS -- A number of states (including
Florida, Illinois and New York) have enacted laws that prohibit the payment for
referrals and other types of kickback arrangements. Such state laws typically
apply to all patients regardless of their insurance coverage. In addition, a
number of states (including Florida, Illinois and New York) have enacted laws
which to varying degrees prohibit physician self-referrals. Illinois, for
example, has a broad self-referral law which regulates all health care workers
(including physicians), regardless of the patient's source of payment. Subject
to certain limited exceptions, the Illinois law prohibits referrals for health
services provided by or through licensed health care workers to an entity
outside the health care worker's office or group practice in which the health
care worker is an investor, unless the health care worker directly provides
health services within the entity and will be personally involved with the
provision of care to the referred patient. In April 1992, the State of Florida,
enacted a Patient Self-Referral Act that severely restricts patient referrals
for certain services, prohibits mark-ups of certain procedures and requires
health care providers to disclose ownership in businesses to which patients are
referred. The Company believes it is likely that more states will adopt similar
legislation. The

48
<PAGE> 51

Company believes that its operations comply with current statutory provisions,
although there can be no assurance that state anti-kickback and self-referral
laws will not be interpreted more broadly or amended in the future to be more
expansive. In addition, expansion of the operations of the Company to certain
jurisdictions may require it to comply with such jurisdictions' regulations
which could lead to structural and organizational modifications of the Company's
form of relationships with managed practices. Such changes, if any, could have
an adverse effect on the Company.

STATE REGULATION OF INSURANCE BUSINESS AND HMOS -- Laws in all states
regulate the business of insurance and the operation of HMOs. Many states also
regulate the establishment and operation of networks of health care providers.
Many state insurance commissioners have interpreted their states' insurance
statutes to prohibit entities from entering into risk-based managed care
contracts unless there is an entity licensed to engage in the business of
insurance, such as an HMO, in the chain of contracts. An entity not licensed to
engage in the business of insurance that contracts directly with a self-insured
employer in such a state may be deemed to be engaged in the unlicensed business
of insurance. While these laws do not generally apply to the hiring and
contracting of physicians by other health care providers, there can be no
assurance that regulatory authorities of the states in which the Company
operates would not apply these laws to require licensure of the Company's
operations as an insurer, as an HMO or as a provider network. The Company
believes that it is in compliance with these laws in the states in which it does
business, but there can be no assurance that future interpretations of insurance
and health care network laws by regulatory authorities in these states or in the
states into which the Company may expand will not require licensure or a
restructuring of some or all of the Company's operations.

FEDERAL MEDICARE AND MEDICAID RELATED REGULATION -- There are a number of
federal laws prohibiting certain activities and arrangements relating to
services or items which are reimbursable by Medicare or Medicaid. Certain
provisions of the Social Security Act, commonly referred to as the
"Anti-kickback Amendments," prohibit the offer, payment, solicitation or receipt
of any form of remuneration either in return for the referral of Medicare or
state health program patients or patient care opportunities, or in return for
the recommendation, arrangement, purchase, lease or order of items or services
that are covered by Medicare or state health programs. The Anti-kickback
Amendments are broad in scope and have been broadly interpreted by courts in
many jurisdictions. Read literally, the statute places at risk many otherwise
legitimate business arrangements, potentially subjecting such arrangements to
lengthy, expensive investigations and prosecutions initiated by federal and
state governmental officials. In particular, the Office of the Inspector General
of the U.S. Department of Health and Human Services has expressed concern that
the acquisition of physician practices by entities in a position to receive
referrals of business reimbursable by Medicare or Medicaid from such practices
could violate the Anti-kickback Amendments.

In July 1991, in part to address concerns regarding the Anti-kickback
Amendments, the federal government published regulations that provide
exceptions, or "safe harbors," for certain transactions that will be deemed not
to violate the Anti-kickback Amendments. Among the safe harbors included in the
regulations were provisions relating to the sale of physician practices,
management and personal services agreements and employee relationships.
Additional safe harbors were published in September 1993 offering protections
under the Anti-kickback Amendments to eight new activities, including referrals
within group practices consisting of active investors. Proposed amendments to
clarify these safe harbors were published in July 1994 which, if adopted, would
cause substantive retroactive changes to the 1991 regulations. Violation of the
Anti-kickback Amendments is a felony, punishable by fines up to $25,000 per
violation and imprisonment for up to five years. In addition, the Department of
Health and Human Services may impose civil penalties excluding violators from
participation in Medicare or state health programs. Although the Company
believes that its current operations are not in violation of the Anti-kickback
Amendments, there can be no assurance that regulatory authorities will not
determine that the Company's operations are in violation of the Anti-kickback
Amendments.

Significant prohibitions against physician self-referrals for services
covered by Medicare and Medicaid programs were enacted, subject to certain
exceptions, by Congress in the Omnibus Budget Reconciliation Act of 1993. These
prohibitions, commonly known as "Stark II," amended prior physician
self-referral legislation known as "Stark I" (which applied only to clinical
laboratory referrals) by dramatically enlarging the list of

49
<PAGE> 52

services and investment interests to which the referral prohibitions apply.
Effective January 1, 1995 and subject to certain exceptions, Stark II prohibits
a physician or a member of his immediate family from referring Medicare or
Medicaid patients to any entity providing "designated health services" in which
the physician has an ownership or investment interest, or with which the
physician has entered into a compensation arrangement, including the physician's
own group practice unless such practice satisfies the "group practice"
exception. The designated health services include the provision of clinical
laboratory services, radiology and other diagnostic services (including
ultrasound services), radiation therapy services, physical and occupational
therapy services, durable medical equipment, parenteral and enteral nutrients,
certain equipment and supplies, prosthetics, orthotics, outpatient prescription
drugs, home health services and inpatient and outpatient hospital services. The
penalties for violating Stark II include a prohibition on Medicaid and Medicare
reimbursement and civil penalties of as much as $15,000 for each violative
referral and $100,000 for participation in a "circumvention scheme." The Company
believes that its and the managed practices' operations currently are not in
violation of Stark I or Stark II; however, the Stark legislation is broad and
ambiguous. Interpretative regulations clarifying the provisions of Stark I were
issued on August 14, 1995 and Stark II regulations have yet to be proposed.
While the Company believes it is in compliance with the Stark legislation,
future regulations could require the Company to modify the form of its
relationships with the managed practices. Moreover, the violation of Stark I or
II by the managed practices could result in significant fines and loss
reimbursement which would adversely affect the Company.

LEGAL PROCEEDINGS

There is no past, pending or, to the Company's knowledge, threatened
litigation or administrative action which has or is expected by management to
have a material effect upon the Company's business, financial condition or
operations, including any litigation or action involving the Company's officers,
directors or other key personnel.

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<PAGE> 53

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information concerning the executive
officers and directors of the Company.

<TABLE>
<CAPTION>
NAME AGE TITLE
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Norbert Gleicher, M.D. .................... 47 President and Chief Executive Officer,
Director
Donna Pratt, M.D. ......................... 46 Vice President of Medical Affairs, Director
Marybeth Gerrity, Ph.D..................... 43 Senior Vice President of Operations and
Development
Robert J. Bukala........................... 39 Senior Vice President and Chief Financial
Officer
Edward A. Zbella, M.D. .................... 42 Senior Vice President and Director of
General Obstetrics and Gynecology
Contracting, Director
Donna Havemann............................. 37 Executive Vice President and Director of
Managed Care Contracting
Michael Gonzales........................... 39 Vice President -- Information Systems and
Chief Information Officer
Brian A. Kennedy........................... 52 Director
Uri Elkayam, M.D. ......................... 51 Director
Yehuda Yoked............................... 51 Director
Jack Van Hulst............................. 57 Director
</TABLE>

Norbert Gleicher, M.D., has served as President and Chief Executive Officer
and a Director of the Company since 1981. Dr. Gleicher founded the first Center
in 1981 and has over 21 years' experience in reproductive medicine. Dr. Gleicher
has served as President and a Director of CHR-Illinois since 1981 and President
and a Director of CHR-Perinatal and CHR-Endoscopic since March 1995. Dr.
Gleicher served as the Chairman of Obstetrics and Gynecology at Mount Sinai
Hospital Medical Center in Chicago between 1981 and 1990 and as professor of
Obstetrics and Gynecology and associate professor of Immunology/ Microbiology at
Rush Medical College. Since April 1996, he has been a clinical professor of
Obstetrics and Gynecology at the University of Illinois at Chicago. From 1991 to
1996, he served as professor of Obstetrics and Gynecology and professor of
Immunology at the University of Health Services, the Chicago Medical School.
From 1976 to 1981, Dr. Gleicher was assistant professor and chief of the
sections for Medical Education and Reproductive Immunology of the Department of
Obstetrics and Gynecology at Mount Sinai School of Medicine in New York. He is a
fellow of the American College of Obstetricians and Gynecologists (FACOG) and
the American College of Surgeons ("FACS"), and is a member of the American
Society for Reproductive Medicine (formerly the American Fertility Society) and
various other professional societies. Dr. Gleicher earned his M.D. from Tel Aviv
Medical School and completed his residency at the Mount Sinai School of Medicine
in New York. He has published over three hundred scientific papers, is
editor-in-chief of two scientific journals in the field of obstetrics and
gynecology, The Journal of Assisted Reproduction and Genetics (formerly the
Journal of In Vitro Fertilization and Embryo Transfer) and The American Journal
of Reproductive Immunology, and has been the editor of several textbooks in this
field, including Principles and Practice of Medical Therapy in Pregnancy
(Appelton and Lange) and Cardiac Problems in Pregnancy (Wiley and Liss).

Donna Pratt, M.D., has served as Vice President of Medical Affairs of the
Company since 1995 and has been a Director since 1994. She has over 11 years'
experience in reproductive medicine. Dr. Pratt has served as a Director of
CHR-Illinois since February 1994 and a Director of CHR-Perinatal and
CHR-Endoscopic since March 1995. Prior to joining the Company, Dr. Pratt was a
faculty member at the University of Chicago as a reproductive endocrinologist,
an assistant professor, and director of the residency program. She completed her
subspecialty fellowship in Reproductive Endocrinology and Infertility at Michael
Reese Hospital in

51
<PAGE> 54

Chicago. She is a member of the American College of Obstetricians and
Gynecologists (ACOG), a member of the American Society for Reproductive Medicine
(formerly the American Fertility Society), and has memberships in several other
organizations. Dr. Pratt earned her M.D. from Rush Medical College in Chicago.

Marybeth Gerrity, Ph.D., has been Senior Vice President of Operations and
Development of the Company since March 1996 and joined the Company in March 1995
as the Vice President of Operations and Development. She has 13 years of
experience in the medical industry. Since 1992, Dr. Gerrity has served as the
President of Reproductive Biology Resources, Inc., a laboratory services
company. From 1988 until 1995, she was the Director of the Center for Assisted
Reproductive Technologies at two tertiary care centers. Dr. Gerrity is a member
of the Andrology Laboratories Committee of the American Society of Andrology,
Chairperson of the Reproductive Biology Professional Group of the American
Society for Reproductive Medicine (ASRM), and a member of the Reproductive
Biology Resources Committee of the joint ASRM/College of American Pathologists
Reproductive Laboratory Accreditation Program. She was the senior author of the
ASRM "Guidelines for Human Embryology and Andrology Laboratories." She is board
certified by the American Board of Bioanalysis as both a High Complexity
Laboratory Director and Clinical Consultant, with specialties in Embryology and
Andrology. She received her B.A. (Biology) from the College of New Rochelle, New
York, and her M.S. and Ph.D. (Pharmacology) from New York Medical College. She
is a degree candidate (1997) for Masters in Management at the Kellogg Graduate
School of Business at Northwestern University.

Robert J. Bukala joined the Company in December 1995 as Senior Vice
President and Chief Financial Officer. From 1992 through 1995, Mr. Bukala was
employed by Ernst & Young LLP, an international public accounting and consulting
firm, as a Senior Manager in the Financial Advisory Services Group where he
assisted clients in evaluating restructuring, finance and new business
opportunities. From 1988 to 1992, Mr. Bukala was Chief Financial Officer,
Treasurer and an Executive Committee Member of American Finance Group, a sponsor
of publicly traded equipment lease limited partnerships, where he was
responsible for accounting and finance, treasury, human resources and management
information systems. Mr. Bukala holds a Bachelor of Science degree in Accounting
and a Masters in Business Administration in Finance from DePaul University. He
also is a Certified Public Accountant.

Edward A. Zbella, M.D., joined the Company on May 1, 1996 as Senior Vice
President and Director of General Obstetrics and Gynecology Contracting and has
served as a Director of the Company since June 3, 1996. Since May 1, 1996, he
has been employed as a physician and the Regional Medical Director of CHR-
Florida. From January 1991 to May 1, 1996, Dr. Zbella was the owner and
President of A Center for Gynecology, P.A. From January 1991 to the present, he
has been a part owner and Vice President of Florida CryoBank, a donor and
long-term storage bank for sperm and eggs, and has been a faculty member of the
Bayfront Medical Center and Director of such center's Division of Reproductive
Endocrinology and Infertility. Dr. Zbella also has served as Medical Director,
Obstetrics and Gynecology Services of Av Med Health Plan in the Tampa Bay area
since 1992 and a faculty member of the Laser Center of America since 1990. He
received his M.D. from the University of Illinois in 1980 and completed his
residency at the University of Chicago in 1982. Dr. Zbella is a member of the
American College of Obstetricians and Gynecologists (ACOG), the American Society
for Reproductive Medicine (formerly the American Fertility Society) and other
professional societies.

Donna Havemann has been Executive Vice President and Director of Managed
Care Contracting of the Company since 1995. Prior to 1995, Ms. Havemann served
in various other executive positions of the Company which included third party
contracting and operations and personnel management responsibilities. She has
been instrumental in obtaining and servicing the Company's current managed care
business.

Michael Gonzales joined the Company in January 1996 as Vice President -
Information Systems and Chief Information Officer. From 1990 until joining the
Company, Mr. Gonzales was President of The Focus Group Ltd., where he oversaw
the development of domestic and international large scale, high volume, data
processing projects. Until August 1, 1996, Mr. Gonzales will continue to perform
services for the Focus Group Ltd. on a part-time basis. He is the author of
various books and publications on the computer industry.

52
<PAGE> 55

His most recent books, Informix Store Procedure Programming and Database
Programming & Design were published by Prentice Hall. Mr. Gonzales holds a BBA
in Market Research and an MA in Management Information Systems, and is a
candidate for an MSE in Software Engineering (1997).

Brian A. Kennedy has served as a Director of the Company since December
1995. Mr. Kennedy has been employed by Blue Cross Blue Shield of Illinois since
1977 where he has served as Vice President and Treasurer since 1986. Mr. Kennedy
graduated from Cornell University in 1965 and then studied for two years at
Oxford University, England. He received his MBA in 1985 from the University of
Chicago Graduate School of Business.

Uri Elkayam, M.D., has served as a Director of the Company since March
1996. Dr. Elkayam has served as a Professor of Medicine at the University of
Southern California, Los Angeles ("USC") since July 1989 and has been affiliated
with USC since 1981. Dr. Elkayam has served as Director of Heart Failure Service
at Los Angeles County-USC Medical Center from 1993 through the present and as
Chief of Cardiology at USC School of Medicine from 1990 through 1993. From 1981
to 1991 Dr. Elkayam was Director of In-Patient Cardiology at USC. From 1979 to
1981, Dr. Elkayam was an Assistant Professor of Medicine and the Director of the
Coronary Care Unit at the University of California, Irvine Medical Center. Dr.
Elkayam earned his M.D. from Tel-Aviv University and completed his fellowship in
Cardiology at Albert Einstein College of Medicine and Cedars Sinai Medical
Center.

Yehuda Yoked has served as a Director of the Company since March 1996. Mr.
Yoked has served as Vice President, Operations for Biscayne Apparel Inc., a
designer and manufacturer of high quality apparel goods, since 1991. From 1989
to 1991, Mr. Yoked served as President of Trebron Management Inc., a management
and marketing service company. Mr. Yoked has worked as a business consultant for
major U.S. corporations including General Instrument Corporation and General
Electric Company. Mr. Yoked earned his MBA at Tel-Aviv University in 1973.

Jack Van Hulst has served as a director of the Company since June 1996.
Since 1992, Mr. Van Hulst has been a partial owner and has served as the
President, Chief Executive Officer and a Director of JVL, Inc. From 1992 through
1995, Mr. Van Hulst served as President, Chief Executive Officer and a Director
of Morton Grove Pharmaceuticals ("MGP"), a generic pharmaceutical company and a
wholly-owned subsidiary of JVL, Inc., and from November 1995 to June 1996 he
served as a consultant to MGP. From June 1992 to September 1993, Mr. Van Hulst
was an owner, President and Chief Financial Officer of Pennex Products, a
pharmaceutical company, which filed for relief under Chapter 11 of the United
States Bankruptcy Code in August 1993. From 1989 to 1991, Mr. Van Hulst was
Chief Operating Officer and Executive Vice President of A.L. Laboratories, Inc.
He received a law degree from the University of Utrecht, The Netherlands in
1968.

CLASSIFIED BOARD OF DIRECTORS

Pursuant to the terms of Article V of the Company's Certificate of
Incorporation, the Board of Directors is divided into three classes, with
staggered three-year terms. The initial terms of Dr. Gleicher and Dr. Zbella
expire at the Company's annual meeting of stockholders in 1997; the initial
terms of Mr. Kennedy, Mr. Yoked and Mr. Van Hulst expire at the Company's annual
meeting of stockholders in 1998; and the initial terms of Dr. Pratt and Dr.
Elkayam expire at the Company's annual meeting of stockholders in 1999. Each
director will hold office for the term to which such director is elected and
until such director's successor is duly elected and qualified. At each annual
meeting of stockholders of the Company, the successors to the class of directors
whose terms expire at such meeting will be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election. See "Description of Capital Stock -- Delaware Law
and Certain Corporate Provisions." The Board of Directors elects officers
annually and such officers serve at the discretion of the Board of Directors.

53
<PAGE> 56

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors currently has the following committees:

AUDIT COMMITTEE -- The members of the Audit Committee are Dr. Elkayam and
Mr. Yoked, both of whom are independent outside directors. The Audit Committee
makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the plans for and
results of the audit, approves professional services provided by the independent
public accountants, reviews the independence of the independent public
accountants, considers the range of audit and non-audit fees and reviews the
adequacy of the Company's internal accounting controls.

COMPENSATION COMMITTEE -- The members of the Compensation Committee are Dr.
Gleicher, Mr. Kennedy and Mr. Yoked. The Compensation Committee establishes a
general compensation policy for the Company, reviews the performance of the
officers of the Company, recommends to the Board of Directors the annual salary
and bonus amounts for all officers of the Company and considers other matters
relating to officer compensation.

EQUITY INCENTIVE COMMITTEE -- Currently, the members of the Equity
Incentive Committee are Dr. Gleicher and Dr. Pratt. On the effective date of
this offering, Drs. Gleicher and Pratt will be replaced by Dr. Elkayam and Mr.
Yoked, both of whom are independent outside directors. The Equity Incentive
Committee determines who shall receive awards under the Company's Incentive
Compensation Plan from those officers, employees and consultants who are
eligible to participate in the Incentive Compensation Plan, the type of award to
be made, the number of shares of Common Stock which may be acquired pursuant to
the award and the specific terms and conditions of each award.

ACQUISITION AND AFFILIATION COMMITTEE -- The members of the Acquisition and
Affiliation Committee are Dr. Gleicher and Mr. Kennedy. The Acquisition and
Affiliation Committee is authorized to review and approve, on behalf of the
Company, all acquisitions of medical practices as well as affiliations with
medical schools, university medical programs and other similar entities.
Proposed acquisitions involving the issuance of equity securities of the Company
will be referred to the Board of Directors.

DIRECTORS' COMPENSATION

CASH COMPENSATION -- Directors of the Company do not receive any cash
compensation for serving as a director of the Company other than reimbursement
for travel costs and other out-of-pocket expenses incurred in attending each
directors' meeting and committee meeting.

DIRECTORS' OPTION PLAN -- The Company adopted the Nonemployee Directors'
Stock Option Plan (the "Directors' Option Plan"), effective March 8, 1996. The
Directors' Option Plan provides for the granting of options to purchase an
aggregate of 41,666 shares (subject to adjustment in certain circumstances) of
Common Stock to members of the Board of Directors who are not also employees of
the Company ("Outside Directors").

Each of Dr. Elkayam, Mr. Yoked and Mr. Van Hulst, Outside Directors of the
Company, will be granted non-qualified stock options ("NQSOs") to purchase 3,333
shares of Common Stock as of the effective date of this offering (the "Initial
Grant Date") at the initial public offering price. On each anniversary of the
Initial Grant Date, NQSOs to purchase an additional 1,250 shares of Common Stock
will be granted to each of the Outside Directors if the person is still serving
as a director on such date (with a limit of options to acquire a total of 8,333
shares to be granted to any Outside Director). Upon the appointment of new
Outside Directors, each new Outside Director will be granted NQSOs to purchase
3,333 shares of Common Stock and, thereafter, options to acquire an additional
1,250 shares at each anniversary of such date if the person is still serving as
a director on such date (with a limit of options to acquire a total of 8,333
shares to be granted to any Outside Director). All options granted under the
Directors' Option Plan are exercisable upon the first anniversary of the date of
grant, subject to acceleration of vesting in certain events, and, for options
other than those granted as of the Initial Grant Date, at a price per share
equal to the closing price of the Common Stock as reported on The Nasdaq Stock
Market's National Market on the date of grant or, if no quotations were reported
on such date, the immediately preceding date on which quotations were reported.
All such options

54
<PAGE> 57

expire on the earlier to occur of (i) ten years following the grant date and
(ii) the date on which the Outside Director ceases to serve as a director of the
Company other than due to death or disability.

NATIONAL ADVISORY BOARD MEMBERS

The Company has formed a National Advisory Board composed of Regional
Medical Directors from each of the integrated networks and selected leaders in
the practice areas managed by the Company. The National Advisory Board will
advise the Company, the managed practices and the Centers on various procedural
and administrative matters. The National Advisory Board will meet at least twice
each year and the Company expects that members of such board will be called on
periodically to provide advice as needed between meetings. Members of the
National Advisory Board do not receive any cash compensation for serving on the
National Advisory Board other than reimbursement for travel costs and other
out-of-pocket expenses incurred in attending meetings of such board. Members of
the National Advisory Board may receive options under the Company's Incentive
Compensation Plan as compensation for serving on the National Advisory Board. As
of the date of this Prospectus, however, the Company has not granted any stock
options to members of the National Advisory Board as compensation for serving on
such board. See "-- Incentive Compensation Plan."

The following table sets forth certain information concerning the
individuals who have agreed to serve as members of the National Advisory Board.

<TABLE>
<CAPTION>
NAME AGE
------------------------------------------------------------------------ ---
<S> <C>
Richard L. Berkowitz, M.D. ............................................. 55
Rogerio A. Lobo, M.D. .................................................. 46
Antonio Scommegna, M.D. ................................................ 64
William N. Spellacy, M.D. .............................................. 62
John J. Sciarra, M.D. .................................................. 64
Daniel Mishell, Jr., M.D. .............................................. 65
Arnold L. Widen, M.D. .................................................. 66
</TABLE>

Richard L. Berkowitz, M.D., has served as Chairman of the Department of
Obstetrics, Gynecology and Reproductive Science at Mount Sinai Medical Center in
New York since 1985. From 1985 until 1993, he also served as Director of that
institution's Obstetrics and Gynecology Residency Program, and he has been a
professor at the Mount Sinai School of Medicine in New York since 1982. Dr.
Berkowitz is the author of over 200 scientific papers and seven books in the
field of obstetrics and gynecology. He received his M.D. at New York University
School of Medicine and his M.P.H. in Population Dynamics and International
Health from the Johns Hopkins University School of Hygiene and Public Health.

Rogerio A. Lobo, M.D., has served as the Rappleye Professor and Chairman of
the Department of Obstetrics and Gynecology at Columbia University Medical
School in New York since 1995. From 1984 until 1995, he was Chief of the
Division of Reproductive Endocrinology and Infertility for the Los Angeles
County/University of Southern California Medical Center's Department of
Obstetrics and Gynecology. During that time he also served as Director of that
institution's Reproductive Endocrinology and Infertility Training Program. Dr.
Lobo earned his M.D. from Georgetown University Medical School.

Antonio Scommegna, M.D., has been affiliated with CHR-Illinois since August
1995 and has been the Executive Head of the Department of Obstetrics and
Gynecology at the University of Illinois College of Medicine since 1989. He also
serves as an attending physician for the Department of Obstetrics and Gynecology
for the University of Illinois Hospital and Clinics in Chicago. Dr. Scommegna is
a fellow of the American College of Obstetricians and Gynecologists (FACOG) and
is a member of numerous other professional societies. He received his M.D. from
the University of Bari in Italy and completed his residency in obstetrics and
gynecology at Michael Reese Hospital and Medical Center in Chicago.

55
<PAGE> 58

William N. Spellacy, M.D., has been a Professor and Chairman of the
Department of Obstetrics and Gynecology at the University of South Florida since
1988. Dr. Spellacy has authored over 400 scientific papers in the field of
obstetrics and gynecology and is a member of various professional societies,
including the American Society for Reproductive Medicine (formerly the American
Fertility Society). He earned his M.D. from the University of Minnesota.

John J. Sciarra, M.D., Ph.D., has served as the Thomas J. Watkins Professor
and Chairman of Northwestern University Medical School's Department of
Obstetrics and Gynecology since 1974. He also serves as the Chairman for the
Department of Obstetrics and Gynecology at Prentice Women's Hospital and
Maternity Center of Northwestern Memorial Hospital in Chicago. A member of the
American College of Obstetricians and Gynecologists, the American Fertility
Society and other professional societies, Dr. Sciarra received his M.D. from
Columbia University's College of Physicians & Surgeons and his Ph.D. in Anatomy
from the Faculty of Pure Science at Columbia University.

Daniel R. Mishell, Jr., M.D., has served as Chairman of the University of
Southern California's Department of Obstetrics and Gynecology since 1978. Dr.
Mishell is a member of the American Fertility Society, the American College of
Obstetricians and Gynecologists and various other professional societies, and
also is a member of the American Medical Association's Residency Review
Committee of Obstetrics and Gynecology. In addition, Dr. Mishell serves as an
Associate Editor for the Journal of Reproductive Medicine and is a member of the
editorial board for numerous journals in the field of obstetrics and gynecology.
Dr. Mishell received his M.D. from Stanford University School of Medicine in
1955.

Arnold L. Widen, M.D., has served as the Medical Director of Northwestern
Internists IPA, LLC since June 1, 1996. From February 1989 until June 1996, Dr.
Widen served as the Vice President and Corporate Medical Director of Blue Cross
Blue Shield of Illinois. Prior to February 1989, he served as the medical
director of various managed care companies for 15 years and prior to that he
practiced medicine in the field of general internal medicine and
gastroenterology for 15 years. Dr. Widen has been a member of the faculty of
Northwestern University Medical School since 1959 where he presently serves as
an Associate Professor of Medicine and of Preventive Medicine. He is a fellow of
the American College of Physicians and is a fellow and currently the President
of the Board of Governors of the Institute of Medicine of Chicago. Dr. Widen
earned his M.D. from Northwestern University Medical School in 1953.

EXECUTIVE COMPENSATION

The following table presents certain information regarding compensation
paid or accrued by the Company for services rendered in all capacities during
1995, to the Company's Chief Executive Officer and to each of the Company's
other most highly compensated executive officers whose salary and bonus exceeded
$100,000 during such period (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------------
COMPENSATION SECURITIES
------------ UNDERLYING OPTIONS
NAME AND PRINCIPAL POSITION SALARY ($) (#)
- ----------------------------------------------------------------- ------------ ------------------
<S> <C> <C>
Norbert Gleicher, M.D.,.......................................... $939,472 --
Chief Executive Officer and President
Donna Pratt, M.D.,............................................... 181,947 --
Vice President of Medical Affairs
Marybeth Gerrity, Ph.D.,......................................... 132,255 63,333
Senior Vice President of Operations and Development
</TABLE>

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<PAGE> 59

OPTION GRANTS IN LAST FISCAL YEAR

The following table contains information concerning the grant of stock
options by the Company to the Named Executive Officers during 1995.

<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION FOR OPTION
OPTIONS EMPLOYEES EXERCISE OR TERM(1)
GRANTED IN FISCAL BASE PRICE EXPIRATION --------------------------------
NAME (#) YEAR ($/SH) DATE 0%($) 5%($) 10%($)
- --------------------------------- ---------- ----------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Norbert Gleicher,
M.D. ................ -- -- -- -- -- --
Donna Pratt, M.D. ..... -- -- -- -- -- --
Marybeth Gerrity,
Ph.D.(2)............. 63,333 24.4% (3) May 31, 2000 $199,499 $309,735 $443,091
</TABLE>

- -------------------------
(1) Potential realizable value is presented based on an assumed fair market
value of $6.30 and net of an assumed option exercise price of $3.15 per
share but before any federal or state income taxes associated with exercise.
The assumed exercise price is equal to 50% of $6.30, which represents the
fair market value of the Company's Common Stock at December 31, 1995, as
determined by an independent appraiser. The stated amounts are based upon
assumed appreciation rates of 0%, 5% and 10% prescribed by the Commission
rules and are not intended to forecast possible future appreciation, if any,
of the Company's stock price. The amounts reflected in the table may not
necessarily be achieved.

(2) These options were exercised as of March 31, 1996.

(3) The exercise price is determined based upon 50% of the fair market value of
the Company on the last day of the fiscal year prior to the date that Dr.
Gerrity exercises her option. See "Certain Transactions -- Acquisition of
Reproductive Biology Resources, Inc."

FISCAL YEAR-END OPTION VALUES

The following table contains information regarding the Named Executive
Officers' unexercised options at December 31, 1995. None of the Named Executive
Officers exercised any options during 1995.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END (#) FISCAL YEAR-END ($)(1)
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------------------- ------------------------- -------------------------
<S> <C> <C>
Norbert Gleicher, M.D. ............................ -- --
Donna Pratt, M.D. ................................. -- --
Marybeth Gerrity, Ph.D. ........................... 63,333/-- $199,499/--
</TABLE>

- -------------------------
(1) The value per option is calculated by subtracting the exercise price from
the fair market value of the Company's Common Stock at December 31, 1995 of
$6.30 per share, as determined by an independent appraiser. These options
were exercised as of March 31, 1996.

EMPLOYMENT AGREEMENTS

On March 1, 1995, the Company entered into an employment agreement with Dr.
Gleicher to serve as the President of the Company. This employment agreement
provides that Dr. Gleicher is to receive an annual salary for his services as
President of the Company equal to 5% of total annual revenues of each medical
practice with which the Company maintains a management services agreement,
provided that certain revenues from Medicare or state health programs are
excluded from total revenues. In 1995, Dr. Gleicher received total compensation
of $939,472 under this agreement. On April 1, 1996, this agreement was amended
to provide

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<PAGE> 60

that, for an initial term of five years commencing upon the Registration
Statement being declared effective by the Commission, Dr. Gleicher will receive
an annual base salary of $350,000 plus a bonus of $350,000 for 1996 and a bonus
in 1997 to be based upon the Company achieving certain performance criteria for
total combined net operating income, subject to a maximum bonus of $400,000 per
year. Following 1997, the amount of the bonus to be paid to Dr. Gleicher will be
determined by the Compensation Committee based upon performance criteria
consistent with those used in prior years. In addition, Dr. Gleicher has entered
into an employment agreement with CHR-Illinois pursuant to which he will receive
a base salary of $250,000 for medical services provided and following this
offering he will be entitled to receive a bonus of $250,000 for 1996 and no
bonus thereafter. See "Certain Transactions -- Certain Medical Practice
Employment Agreements."

On March 1, 1995, the Company entered into an employment agreement with Dr.
Pratt to serve as the Vice President of Medical Affairs of the Company for
successive terms of one year. On April 1, 1996, this agreement was amended to
provide that, for an initial term of five years commencing upon the Registration
Statement being declared effective by the Commission, Dr. Pratt will receive an
annual base salary of $100,000. Prior to such date, Dr. Pratt is to receive an
annual salary for her services as Vice President of Medical Affairs equal to 1%
of total annual revenues of each managed practice with which the Company
maintains a management services agreement, provided that revenues from Medicare
or state health programs are excluded from total revenues. In 1995, Dr. Pratt
received total compensation of $181,947 under this agreement. In addition, Dr.
Pratt has entered into an employment agreement with CHR-Illinois pursuant to
which she will receive a base salary of $250,000 and a minimum bonus of $100,000
for medical services provided. See "Certain Transactions -- Certain Medical
Practice Employment Agreements."

Under their amended employment agreements, neither Dr. Gleicher nor Dr.
Pratt may be terminated by the Company without cause during the initial term of
five years. Drs. Gleicher and Pratt may be terminated by the Company for "cause"
on ten days' notice. Each of Drs. Gleicher and Pratt has agreed that during the
term of their employment and for a two year period from the date of termination
of his or her employment, he or she will not directly or indirectly compete
with, solicit or offer employment to any employee of, the Company or any
affiliated medical practice, or employ any such employee who is then currently
employed or has been employed by the Company or any affiliated medical practice
within one year prior to his or her date of termination.

In the event of a change in control of the Company, the amended employment
agreements of Drs. Gleicher and Pratt provide for severance payments. A "change
in control" of the Company is triggered upon the acquisition by any individual,
entity or group of 20% of the then outstanding shares of Common Stock of the
Company, the approval by the stockholders of certain specified types of
corporate transactions or business combinations, or the replacement of a
majority of the incumbent Board of Directors. In the event of a change in
control, if either Dr. Gleicher's or Dr. Pratt's employment with the Company is
terminated by such person for good reason or by the Company without cause during
the next 36 months, the Company is obligated to pay such person a lump sum cash
payment equal to the greater of (i) the remaining salary due over the balance of
the initial term of such person's employment agreement, and (ii) $1.00 less than
three times such person's average annual compensation (including bonus) during
each of the five full fiscal years immediately prior to the effective date of
the Registration Statement. Following a change in control, if either Dr.
Gleicher's or Dr. Pratt's employment with the Company is terminated by such
person for good reason or by the Company without cause during the next 36
months, such person will not be subject to the non-competition and non-
solicitation provisions of his or her amended employment agreement following
such termination. Drs. Gleicher and Pratt also are entitled to gross-up payments
to the extent that the payments described above are subject to the excise tax
imposed by Section 4999 of the Code.

The employment agreements of Drs. Gleicher and Pratt also currently provide
for deferred compensation payments if he or she has been employed by the Company
and its predecessors for a term of ten years. The deferred compensation to be
paid to each of Drs. Gleicher and Pratt is equal to one year's annual salary and
bonus based upon the average amounts for the three years prior to beginning such
payments. Each of Drs. Gleicher and Pratt is to receive an additional one month
of deferred compensation for each full year of employment in excess of ten
years. Upon the Registration Statement being declared effective by the
Commission, each of these deferred compensation arrangements will be terminated
automatically.

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<PAGE> 61

On June 13, 1995, the Company entered into an employment agreement with Dr.
Gerrity to serve as the Vice President of Operations and Development for an
initial term of three years with automatic renewal for successive one year
terms. In 1995, Dr. Gerrity received total compensation of $132,255 under this
agreement. On April 1, 1996, this agreement was amended and restated to provide
that, for an initial term of three years commencing upon the Registration
Statement being declared effective by the Commission, Dr. Gerrity will receive
an annual base salary of $250,000 plus an annual bonus of at least $75,000. The
amended agreement provides that Dr. Gerrity may not be terminated by the Company
without cause during the initial term of three years. The Company may terminate
Dr. Gerrity's employment for "cause" on ten days' notice. Dr. Gerrity is subject
to certain restrictions on competing with the Company and soliciting employees
and third party payors of the Company during the term of her employment and for
a period of one year thereafter. Following a change in control, if Dr. Gerrity's
employment with the Company is terminated by the Company without cause during
the next 36 months, she will not be subject to the non-competition and
non-solicitation provisions of her amended employment agreement following such
termination.

On May 1, 1996, the Company entered into an employment agreement with Dr.
Zbella to serve as Senior Vice President and Director of General Obstetrics and
Gynecology Contracting for an initial term of five years with automatic renewal
for successive one year terms. During the first year of this agreement, Dr.
Zbella will receive an annual salary of $300,000. Following the first year of
this agreement, Dr. Zbella will receive an annual salary based on the revenues
collected by CHR-Florida in a specific area in Florida in the immediately
preceding year ("Managed Revenue"). Such annual salary will be $75,000, $125,000
and $200,000 for Managed Revenues of $2.5 million, $2.7 million and $3.0
million, respectively, and for Managed Revenues in excess of $3.0 million Dr.
Zbella's annual salary will be equal to $200,000 plus $25,000 for each $250,000
of Managed Revenue in excess of $3.0 million. The Company may terminate Dr.
Zbella's employment for "cause" and the agreement automatically terminates with
the termination of Dr. Zbella's employment agreement with CHR-Florida. Dr.
Zbella is subject to certain restrictions on competing with the Company and
soliciting employees and third party payors of the Company during the term of
his employment with the Company.

INCENTIVE COMPENSATION PLAN

The Company has adopted an Incentive Compensation Plan (the "Incentive
Plan"), effective March 8, 1996, pursuant to which 708,333 shares of Common
Stock are reserved and available for issuance upon exercise of options and other
awards to be granted under the Incentive Plan. The purpose of the Incentive Plan
is to promote the overall financial objectives of the Company and its
stockholders by motivating those persons selected to participate in the
Incentive Plan to achieve long-term growth in stockholder equity in the Company
and by retaining the association of those individuals who are instrumental in
achieving this growth. The Incentive Plan is administered by the Equity
Incentive Committee of the Board of Directors that currently consists of Dr.
Gleicher and Dr. Pratt. Upon the Company's completion of this offering, Drs.
Gleicher and Pratt will be replaced by Dr. Elkayam and Mr. Yoked, both of whom
are "disinterested," as such term is used in Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, and "outside directors" for purposes of
Section 162(m) of the Code. See "-- Committees of the Board of Directors --
Equity Incentive Committee."

Subject to certain limits, options to be granted under the Incentive Plan
may be incentive stock options ("ISOs") meeting the requirements of Section 422
of the Code or may be options other than ISOs (non-qualified stock options or
"NQSOs"). The exercise price of an ISO must be at least equal to the fair market
value (as defined in the Incentive Plan) per share of the Common Stock on the
date of the grant, and must be at least 110% of such value if the grantee is a
substantial stockholder of the Company. The exercise price of NQSOs will be
determined by the Equity Incentive Committee and may be greater or less than the
fair market value per share of the Common Stock on the date of grant. The
exercise price is required to be paid in full at the time of exercise in cash or
its equivalent or, upon approval of the Equity Incentive Committee, by
promissory note or in shares of Common Stock. ISOs and NQSOs granted under the
Incentive Plan will be exercisable for a term of not more than 10 years, as
determined by the Equity Incentive Committee, and will become exercisable at
such time or times during the optionee's employment with the Company as may be
determined by the Equity Incentive Committee, subject to acceleration of vesting
at the discretion of the

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<PAGE> 62

Equity Incentive Committee or, if so provided, upon a "change in control" of the
Company. Options that have become exercisable on or prior to the date of
termination of the optionee's employment generally will terminate at the earlier
of: (i) the expiration date of the option; (ii) where such termination of
employment occurs as a result of death or disability, one year after the date of
termination of employment; or (iii) where such termination is as a result of
retirement or by the Company without cause, 90 days after the date of
termination of employment; or (iv) where such termination is voluntary by the
employee (and is not a retirement) or by the Company for cause, the date of
notice of termination. Generally, options granted under the Incentive Plan are
not transferrable by the grantee other than by testament or the laws of descent
and distribution. Prior to the completion of an initial public offering by the
Company, shares acquired by a participant pursuant to an award under the
Incentive Plan generally will be subject to certain restrictions on
transferability. All other terms, including the time or times at which an option
becomes exercisable, may be determined by the Equity Incentive Committee in its
discretion.

The Incentive Plan also authorizes the Equity Incentive Committee to grant
restricted stock, deferred stock and stock appreciation rights ("SARs") in
connection with options granted. SARs entitle the optionee to receive upon
exercise cash or Common Stock, as determined by the Equity Incentive Committee,
equal in value to the differences between the option price and the current fair
market value of the stock subject to the option and related SAR. Exercise of a
SAR is in lieu of exercise of the related option.

As of the date of this Prospectus, the Company has granted awards under the
Incentive Plan covering 635,833 shares of Common Stock, including stock options
granted to the following executive officers of the Company: Norbert Gleicher,
M.D., 390,000 shares; Donna Pratt, M.D., 75,000 shares; Robert Bukala, 33,333
shares; Donna Havemann, 16,667 shares; and Michael Gonzales, 8,333 shares.
Options granted to these executive officers vest 20% per year over five years.
The options granted to Dr. Gleicher and Dr. Pratt were granted on April 15, 1996
and are exercisable at a purchase price equal to the per share offering price to
the public of the shares of Common Stock in this offering. The options granted
to the remaining officers were granted on March 8, 1996 and are exercisable at a
purchase price equal to $7.80 per share.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Certificate of Incorporation contains a provision eliminating
or limiting director liability to the Company and its stockholders for monetary
damages arising from acts or omissions in the director's capacity as a director.
The provision does not, however, eliminate or limit the personal liability of a
director (i) for any breach of such director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under the Delaware
statutory provision making directors personally liable, under a negligence
standard, for unlawful dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which the director derived an improper personal
benefit. This provision offers persons who serve on the Board of Directors of
the Company protection against awards of monetary damages resulting from
breaches of their duty of care (except as indicated above). As a result of this
provision, the ability of the Company or a stockholder thereof to successfully
prosecute an action against a director for a breach of his duty of care is
limited. However, the provision does not affect the availability of equitable
remedies such as an injunction or rescission based upon a director's breach of
his duty of care. The Commission has taken the position that the provision will
have no effect on claims arising under the federal securities laws.

In addition, the Certificate of Incorporation provides for mandatory
indemnification rights, subject to limited exceptions, to any director, officer,
employee, or agent of the Company who by reason of the fact that he or she is a
director, officer, employee, or agent of the Company, is involved in a legal
proceeding of any nature. Such indemnification rights include reimbursement for
expenses incurred by such director, officer, employee, or agent in advance of
the final disposition of such proceeding in accordance with the applicable
provisions of DGCL. The Company has entered into indemnity agreements with each
of its directors and certain of its officers providing for such indemnification.
In addition, the Company has obtained a directors' and officers' insurance
policy.

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<PAGE> 63

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 1995, the Board of Directors, consisting of Drs. Gleicher and Pratt
and, from December 1, 1995, Brian Kennedy, served on the Compensation Committee.
In April 1996, a Compensation Committee of the Board of Directors was formed,
consisting of Dr. Gleicher, Mr. Kennedy and Mr. Yoked. Drs. Gleicher and Pratt
and their affiliates have engaged in a number of transactions with the Company.
See "Certain Transactions -- Reorganization of Predecessor Corporation," "--
Shareholder Agreement," "-- Guarantee of Revolving Line of Credit," "--
Management Agreements," "-- Certain Medical Practice Employment Agreements," and
"-- Promissory Notes." Mr. Kennedy is an officer of Nichold Company, the holder
of the Convertible Note, and its parent company, Blue Cross Blue Shield of
Illinois. The Company is a party to a managed care contract with HMO-Illinois,
an HMO owned by Blue Cross Blue Shield of Illinois. See "Certain Transactions --
Relationship with Blue Cross Blue Shield of Illinois."

CERTAIN TRANSACTIONS

REORGANIZATION OF PREDECESSOR CORPORATION

In connection with the reorganization of the Company's predecessor,
CHR-Illinois, the Company and CHR-Illinois entered into an Asset Purchase
Agreement dated March 1, 1995. Drs. Gleicher, Pratt and Miller are shareholders
and officers of CHR-Illinois. Pursuant to the terms of the Asset Purchase
Agreement, CHR-Illinois transferred certain of its nonmedical assets, including
the trade names "The Center For Human Reproduction" and "CHR" and the goodwill
associated therewith, and certain contract rights. In consideration for such
transfer, the Company assumed liabilities under the assigned contracts and paid
a nominal cash payment aggregating $384,000. Because of the elimination of
intercompany accounts, the reorganization had no impact on the combined
financial statements of the Company. In connection with the reorganization, the
Company and CHR-Illinois also entered into a sublease pursuant to which
CHR-Illinois leases to the Company the nonexclusive use of the Center located at
750 North Orleans Street, Chicago, Illinois 60610. The rent payable under the
sublease is equal to 35% of the base rent, operating expenses, real estate taxes
and insurance, and all other pass-through expenses or charges CHR-Illinois is
obligated to pay under the lease for such premises.

RESTRUCTURING OF ILLINOIS PRACTICES

On June 5, 1996, the Company acquired certain nonmedical assets of
CHR-Illinois in consideration for the assumption of certain liabilities. On June
6, 1996, CHR-Illinois was merged with CHR-Perinatal, with the surviving
corporation bearing the name "The Center for Human Reproduction -- Illinois,
M.D.S.C." Because of the elimination of intercompany accounts, neither of these
transactions had any impact on the consolidated financial statements of the
Company.

SHAREHOLDERS AGREEMENTS

On March 1, 1995, the Company entered into a shareholders agreement with
each of Drs. Gleicher, Pratt, Miller and Karande. By separate adoption
agreement, each of Dr. Gerrity and Ms. Havemann subsequently became a party to
such shareholders agreement. This agreement restricts the ability of the parties
to transfer any shares of the Common Stock and obligates the Company to purchase
the shares held by the shareholder-employees upon their death or termination at
prices calculated in accordance with the shareholders agreement. This agreement
also provides Dr. Gleicher certain rights with respect to the admission of new
shareholders, the sale of assets or merger of the Company and the right to cause
a redemption of shares of the other shareholders if certain disputes arise. In
contemplation of this offering, on March 31, 1996, the parties to the
shareholders agreement amended the shareholders agreement to provide that it
shall immediately terminate in its entirety without any further action by any of
the shareholders upon the Registration Statement being declared effective by the
Commission. Accordingly, none of the provisions described above will remain in
effect after the completion of this offering.

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<PAGE> 64

Effective April 1, 1996, the Company entered into a shareholders agreement
with each of Drs. Gleicher, Pratt, Miller, Karande, Rinehart and Gerrity and Ms.
Havemann. Effective May 1, 1996, each of Drs. Zbella and Navot became a party to
such shareholders agreement. This agreement restricts the ability of the parties
to transfer any shares of the Common Stock and obligates the Company to purchase
the shares held by the parties upon their death or termination at prices
calculated in accordance with the shareholders agreement. This agreement
provides that it shall immediately terminate in its entirety without any further
action by the parties upon the Registration Statement being declared effective
by the Commission. Accordingly, none of the provisions described above will
remain in effect after the completion of this offering.

GUARANTEE OF REVOLVING LINE OF CREDIT

The shareholders agreement provides that each beneficial owner of 5% or
more of the outstanding shares of the Company's common stock that is a party to
the agreement shall be a joint and several guarantor for any obligations of the
Company that are guaranteed by any other shareholder. Each of the other
shareholders that is a party to the shareholders agreement is obligated to
indemnify each of the other parties for any loss incurred under any guarantee
issued on behalf of the Company to the extent such loss exceeds the guaranteeing
shareholder's pro rata share of the guaranteed obligation.

Prior to February 23, 1996, the Company's revolving line of credit was
jointly and severally guaranteed by Drs. Gleicher, Pratt and Miller. On February
23, 1996, the Company replaced this revolving line of credit with a similar
facility established under a Secured Credit Agreement with American National
Bank of Chicago. The new revolving line of credit also is guaranteed jointly and
severally by each of Drs. Gleicher, Pratt and Miller. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."

MANAGEMENT AGREEMENTS

In connection with the Reorganization, the Company entered into management
services agreements with each of CHR-Illinois, CHR-Endoscopic and CHR-Perinatal
(the "Illinois Practices"). Drs. Gleicher, Pratt and Miller are shareholders of
each of the Illinois Practices. In April 1996, the management services agreement
with each of the Illinois Practices was amended and restated. Each of these
Agreements is substantially the same as the form of management services
agreement described under the caption "Business -- Physician Affiliation --
Affiliation Process Structure." In consideration for the provision of management
services, the Company receives a monthly management fee and an absolute
assignment of receivables and payables to be managed by the Company on behalf of
the Illinois Practices and the Company will be reimbursed for certain expenses
incurred in the management of the Illinois Practices. The initial term of each
of the management services agreements is 40 years, with automatic renewal for
successive five year periods thereafter unless either party gives notice that it
will not renew. In 1995, the Company received management fees under these
Agreements from CHR-Illinois, CHR-Endoscopic and CHR-Perinatal of $5,828,993,
$383,529 and $21,258, respectively. In connection with each of these management
services agreements, the Company has entered into a license agreement pursuant
to which it has granted to each of the Illinois Practices the right to use the
trade names and service marks "The Center For Human Reproduction" and "CHR" for
a nominal license fee.

On May 1, 1996, the Company entered into a management services agreement
with CHR-Florida in substantially the same form as the form of management
services agreement described under the caption "Business -- Physician
Affiliation -- Affiliation Process." Dr. Pratt is the sole shareholder of
CHR-Florida and Dr. Zbella is the Regional Medical Director of CHR-Florida. In
consideration for the provision of management services, the Company receives an
absolute assignment of receivables and assumes all payables and is entitled to
be reimbursed for certain expenses incurred in the management of CHR-Florida.
The initial term of this management services agreement is 40 years, with
automatic renewal for successive five year periods thereafter unless either
party gives notice that it will not renew. In connection with this management
services agreement, the Company has entered into a license agreement pursuant to
which it has granted CHR-Florida the right to use the trade names and services
marks "The Center For Human Reproduction" and "CHR" for a nominal license fee.

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<PAGE> 65

CERTAIN MEDICAL PRACTICE EMPLOYMENT AGREEMENTS

Each of Drs. Gleicher, Pratt and Miller (the "Principal Shareholders"), has
entered into an employment agreement with CHR-Illinois. In each case, the
employee is to receive a base salary of $250,000 plus a production bonus based
upon revenues collected by CHR-Illinois for medical services rendered by the
employee or under the employee's supervision, provided that no revenues from
Medicare or state health programs related to the volume or value of referrals by
employee for "designated health services" are included in determining the
production bonus. In 1995, Drs. Gleicher, Pratt and Miller received total
compensation under these agreements of $397,910, $299,074 and $277,366,
respectively. On April 1, 1996, the employment agreements with CHR-Illinois of
each of Drs. Gleicher and Pratt were amended to provide that upon the
Registration Statement being declared effective by the Commission, Dr. Gleicher
would be entitled to receive a bonus of $250,000 for 1996 and no bonus
thereafter, and Dr. Pratt's production bonus would be subject to a minimum bonus
of $100,000 per year.

As amended, each of these employment agreements may not be terminated by
CHR-Illinois without cause during the initial term of five years. CHR-Illinois
has the right to terminate each Principal Stockholder's employment for "cause"
on ten days' notice. Each employee also has covenanted, for a two-year period
following termination, not to compete, directly or indirectly, with the Company
or CHR-Illinois, solicit or offer employment to any employee of CHR-Illinois or
any of its affiliates or employ any such employee who is then currently employed
or has been employed by CHR-Illinois or any of its affiliates within one year
prior to employee's termination. If during the initial term of five years, any
such employee is terminated for cause or voluntarily terminates his or her
employment without good reason, he or she is obligated to pay liquidated
damages.

In the event of a change in control of the Company, the employment
agreements of Drs. Gleicher, Pratt and Miller provide for severance payments. A
"change in control" of the Company is triggered upon the acquisition by any
individual, entity or group of 20% of the then outstanding shares of Common
Stock of the Company, the approval by the stockholders of certain specified
types of corporate transactions or business combinations, or the replacement of
a majority of the incumbent Board of Directors. In the event of a change in
control, if Dr. Gleicher's, Dr. Pratt's or Dr. Miller's employment with the
Company is terminated by such person for good reason or by the Company without
cause during the next 36 months, the Company is obligated to pay such person a
lump sum cash payment equal to the greater of (i) the remaining salary due over
the balance of the initial term of such person's employment agreement, and (ii)
$1.00 less than three times such person's average annual compensation during
each of the five full fiscal years immediately prior to the date of termination
of employment. Following a change in control, if Dr. Gleicher's, Dr. Pratt's or
Dr. Miller's employment with the Company is terminated by such person for good
reason or by the Company without cause during the next 36 months, such person
will not be subject to the non-competition and non-solicitation provisions of
his or her employment agreement following such termination. Drs. Gleicher, Pratt
and Miller also are entitled to gross-up payments to the extent that the
payments described above are subject to the excise tax imposed by Section 4999
of the Code. Each of these employment agreements contains a deferred
compensation provision substantially similar to that contained in such
physician's employment agreement with the Company, and upon the Registration
Statement being declared effective by the Commission, each of these deferred
compensation arrangements will be terminated automatically.

On March 7, 1995, CHR-Endoscopic and Dr. Miller entered into an employment
agreement. Under this agreement, Dr. Miller is to receive annual compensation
equal to 50% of annual collections received by CHR-Endoscopic from surgical
procedures performed by, or under the supervision of, Dr. Miller for
fee-for-service patients, including pre- and post-operative office visits and
testing. The fee schedule for surgical procedures is as agreed upon by Drs.
Gleicher and Miller. In 1995, Dr. Miller received total compensation under this
agreement of $551,165. On April 1, 1996, this agreement was amended to provide
that Dr. Miller may not be terminated by CHR-Endoscopic without cause during the
initial term of five years. CHR-Endoscopic has the right to terminate Dr. Miller
for "cause" on ten days' notice. This employment agreement contains comparable
severance, non-compete and non-solicitation provisions to those contained in Dr.
Miller's employment agreement with CHR-Illinois.

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<PAGE> 66

On May 1, 1996, CHR-Florida entered into an employment agreement with Dr.
Zbella to serve as a physician and the Regional Medical Director of CHR-Florida
for an initial term of five years with automatic renewal for successive one year
terms. Following the initial five-year term, Dr. Zbella also may renew the
agreement for a term of two years subject to certain conditions. Pursuant to
this agreement, Dr. Zbella will receive an annual base salary of $500,000 plus a
production bonus based upon revenues collected by CHR-Florida for medical
services rendered by Dr. Zbella or under his supervision, provided that no
revenues from Medicare or state health programs related to the volume or value
of referrals by Dr. Zbella for "designated health services" are included in
determining the production bonus. This agreement may not be terminated by
CHR-Florida without cause during the initial term of five years. CHR-Florida has
the right to terminate this agreement for "cause" on ten days' notice. Dr.
Zbella also has covenanted, for a two-year period following termination of this
agreement by him without cause or by the Company for cause, not to compete,
directly or indirectly, with the Company or CHR-Florida, solicit or offer
employment to any employee of CHR-Florida or any of its affiliates or employ any
such employee who is then currently employed or has been employed by CHR-Florida
or any of its affiliates within one year prior to Dr. Zbella's termination. If
during the initial term of five years, Dr. Zbella is terminated for cause or
voluntarily terminates his employment with CHR-Florida without good reason, he
is obligated to pay liquidated damages.

Each of the employment agreements described above has been guaranteed by
the Company.

ACQUISITION OF REPRODUCTIVE BIOLOGY RESOURCES, INC.

On June 13, 1995, CHR-Illinois acquired substantially all of the assets of
Reproductive Biology Resources, Inc., a company owned by Dr. Gerrity. In
connection with this acquisition, the Company entered into an employment
agreement with Dr. Gerrity to serve as the Vice President of Operations and
Development of the Company. See "Management -- Employment Agreements." On June
13, 1995, the Company also entered into an Option Agreement with Dr. Gerrity
pursuant to which she was granted the option to purchase up to 63,333 additional
shares of common stock of the Company at an exercise price per share determined
based upon 50% of the fair market value of the Company on the last day of its
fiscal year prior to the date that Dr. Gerrity exercises her option. The option
expires on May 31, 2000, unless her employment is earlier terminated, and she
has the right to exercise the option once each year during the month of May.
This Option Agreement was exercised in full in March 1996 on a cashless basis
for a net 41,667 shares, and the Company agreed to make a loan to Dr. Gerrity in
June 1996 of an amount sufficient for her to pay federal and state income taxes
with respect to the exercise of this option.

ACQUISITION OF A CENTER FOR GYNECOLOGY, P.A.

On March 17, 1996, the Company, Dr. Zbella and A Center for Gynecology,
P.A. entered into an Asset Transfer and Reorganization Agreement pursuant to
which the Company acquired substantially all of the nonmedical assets of A
Center for Gynecology, P.A in exchange for 110,637 shares of Common Stock. This
transaction was closed on May 1, 1996, however, 3,157 shares are contingent upon
the completion of this offering.

RELATIONSHIP WITH BLUE CROSS BLUE SHIELD

On December 1, 1995, the Company has entered into a Note Purchase
Agreement, dated December 1, 1996 and amended April 15, 1996, with Nichold
Company, a wholly-owned subsidiary of Blue Cross Blue Shield of Illinois,
pursuant to which the Company issued to Nichold Company the Convertible Note.
See "Description of Capital Stock -- Subordinated Convertible Promissory Note."
Up to $2,500,000 of the Convertible Note is convertible, in whole or in part, at
any time in increments of no less than $500,000, into a number of shares of
Common Stock equal to 1% of the number of shares of outstanding Common Stock (on
a fully diluted basis) per $500,000 of principal amount to be converted on the
date of such conversion. The convertible portion of the Convertible Note is
subject to automatic conversion upon the closing of an initial public offering
of the Common Stock (including any over-allotment option granted to the
underwriters in connection therewith) having gross proceeds (without giving
effect to commissions or expenses) of no less than $10,000,000 and bearing an
offering price of not less than $5.00 per share (a "Qualifying IPO"). The
$2,500,000 nonconvertible portion of the Convertible Note becomes due and
payable upon the closing of a Qualifying IPO. Accordingly, upon the closing of
this offering, $2,500,000 principal amount of the Convertible Note will
automatically be converted into 338,107 shares of Common Stock and $2,500,000
principal amount of the Convertible Note will become due and payable. See "Use
of Proceeds." Nichold Company has certain

64
<PAGE> 67

"piggyback" registration rights with respect to the Conversion Shares. Nichold
Company also has the right to designate a member of the Company's Board of
Directors so long as the Convertible Note remains outstanding. Brian Kennedy,
the Cashier of Nichold Company and the Treasurer and a Vice President of Blue
Cross Blue Shield of Illinois, currently is serving as the designee of Nichold
Company.

On September 29, 1994, the Company entered into a managed care contract
with HMO-Illinois, an HMO owned by Blue Cross Blue Shield of Illinois. Under the
terms of this agreement, the Company's affiliated practices provide services
related to the diagnosis and treatment of male and female infertility for
HMO-Illinois members on an exclusive basis in the Chicago metropolitan area. For
HMO-Illinois members not eligible for Medicare, HMO-Illinois pays a capitation
rate per member for these services. In 1995, the Company received approximately
$6.2 million in total revenue under this agreement.

PROMISSORY NOTES

On October 4, 1995, the Company entered into a promissory note with Donna
Pratt, M.D. and her husband, James F. Bonick, pursuant to which the Company
loaned Dr. Pratt and Mr. Bonick $123,118.37. Interest on the unpaid principal
accrues at 8% per annum. Beginning on August 1, 1996, and for the next 59
months, Mr. Bonick and Dr. Pratt will make monthly payments of $2,496.40 to the
Company. Any unpaid principal and accrued interest is due and payable in full on
July 1, 2001, or upon default, which includes termination of Dr. Pratt's
employment with the Company. The promissory note is secured by a junior mortgage
on real estate. In April 1996, the promissory note was amended to defer any
principal and interest payment from the date of this offering to the 30th day
following the first day on which Dr. Pratt is eligible to sell her shares of
Common Stock pursuant to Rule 144.

On December 31, 1995, Drs. Gleicher, Pratt and Miller, the Company,
CHR-Perinatal and CHR-Endoscopic entered into a number of unsecured demand
promissory notes bearing interest at the rate of 7% per annum. Under these
notes, the following obligations were created: Drs. Gleicher, Pratt and Miller
owe $500,000, $380,000 and $285,000, respectively, to the Company;
CHR-Endoscopic and CHR-Perinatal owe $150,000 and $350,000, respectively, to Dr.
Gleicher, $120,000 and $260,000, respectively, to Dr. Pratt, and $170,000 and
$115,000, respectively, to Dr. Miller; and the Company owes $440,000 and
$725,000, respectively, to CHR-Endoscopic and CHR-Perinatal. Each of the parties
also entered into an agreement of even date that provides that no person shall
demand payment of principal under any of these notes until all of the payees
make demand and that if Dr. Gleicher makes such demand from the Company, each of
the parties concurrently will make demand.

CENTER LEASE

One of the Centers located in Chicago, Illinois is leased from Dr.
Gleicher. The Company believes that the occupancy costs to the Company under
this lease are no higher than those which would be charged by an unrelated third
party under similar circumstances. The aggregate lease payments for this
location in 1995 were approximately $90,000. See Note 8 to Audited Combined
Financial Statements of the Company.

RESTRUCTURING OF MILLER OPTION

On March 7, 1995, Drs. Gleicher, Pratt and Miller entered into an option
agreement pursuant to which Drs. Gleicher and Pratt granted Dr. Miller the
option to purchase a number of shares from each of them such that their
respective ownership interests would be equal. The exercise price for this
option was to be determined based upon a multiple of earnings before interest
and taxes for a three year period and the option was exercisable beginning in
1998. On March 31, 1996, the parties amended this option to fix the number of
shares covered at 254,167 shares and to reduce the exercise price to $.01 per
share. This resulted in a compensation charge being attributed to the Company of
approximately $2.0 million because Drs. Gleicher and Pratt own in excess of 10%
of the outstanding stock of the Company. Dr. Miller exercised this option on
April 19, 1996.

COMPANY POLICY

It is anticipated that any future material transactions with executive
officers and directors of the Company individually will be approved by the
Compensation Committee and will be made on terms no less favorable to the
Company than could have been obtained from unaffiliated third parties.

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<PAGE> 68

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 1, 1996, before giving effect
to this offering and after giving effect to the sale of shares of Common Stock
in this offering, by (a) each Director or named executive officer of the
Company, (b) each person known by the Company to own beneficially five percent
or more of the Common Stock, (c) all current executive officers and Directors of
the Company as a group, and (d) each Selling Stockholder. Except as indicated in
the footnotes, all of such shares of Common Stock set forth in the following
table are owned directly, and the indicated person has sole voting and
investment power with respect to all Common Stock shown as beneficially owned by
such person.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
-------------------- NUMBER OF --------------------
NUMBER OF SHARES BEING NUMBER OF
NAME SHARES PERCENT OFFERED SHARES PERCENT
- -------------------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Norbert Gleicher, M.D.(1)(2)................ 3,816,667 91.1% -- 3,692,667 55.5%
Donna Pratt, M.D.(1)........................ 1,439,584 34.4 40,000 1,399,584 21.0
Charles E. Miller, M.D.(1)(3)............... 937,499 22.4 84,000 853,499 12.8
Nichold Company(4).......................... 230,744 5.5 -- 338,107 5.1
Edward A. Zbella, M.D....................... 107,480 2.6 -- 110,637 1.7
Marybeth Gerrity, Ph.D...................... 81,667 2.0 -- 81,667 1.2
Brian A. Kennedy............................ -- -- -- -- --
Uri Elkayam, M.D............................ -- -- -- -- --
Yehuda Yoked................................ -- -- -- -- --
Jack Van Hulst.............................. -- -- -- -- --
All directors and executive officers as a
group (11 persons)(2)..................... 4,009,147 95.7 40,000 3,888,304 58.4
OTHER SELLING STOCKHOLDERS
Vishvanath Karande, M.D.(1)(5)............ 200,000 4.6 96,000 104,000 1.5
</TABLE>

- -------------------------
* represents less than 1%.

(1) The address of each of the stockholders listed is c/o GynCor, Inc., 750
North Orleans Street, Chicago, Illinois 60610.

(2) Includes 1,439,584 shares and 937,499 shares prior to this offering, and
1,399,584 shares and 853,499 shares after this offering, beneficially owned
by Drs. Pratt and Miller, respectively, held in voting trusts pursuant to
which Dr. Gleicher has shared voting power; Drs. Pratt and Miller each have
sole investment power over their respective shares that are subject to the
voting trusts. Under the voting trusts, each of Dr. Pratt and Dr. Miller is
entitled to vote the shares in elections of the Board of Directors, except
that Dr. Gleicher is entitled to vote the shares with respect to his own
election as a board member, and Dr. Gleicher is required to vote the shares
against the removal of Drs. Pratt and Miller as members of the Board of
Directors of the Company, and against the termination of Dr. Pratt's and Dr.
Miller's employment, except for cause. The term of each of the voting trusts
is ten years.

(3) Dr. Miller has served as the Medical Director and Director of Endoscopic
Surgery of the Company and has been affiliated with CHR-Illinois and
CHR-Endoscopic since March 1995.

(4) Consists entirely of the beneficial ownership of shares issuable upon the
conversion of $2,500,000 principal amount of the Convertible Note which is
convertible within 60 days of the date of this Prospectus and which will be
converted automatically upon the closing of this offering. Nichold Company's
business address is 233 North Michigan Avenue, Suite 1300, Chicago, Illinois
60601.

(5) Includes 196,667 shares prior to this offering and 100,667 shares after this
offering which may be acquired within 60 days of the date of this Prospectus
pursuant to the exercise of stock option. Dr. Karande has indicated to the
Company that he will exercise a portion of this option for 96,000 shares
prior to or concurrently with this offering. Accordingly, his beneficial
ownership after this offering has been adjusted to give effect to his
partial exercise of this option and the sale of the resulting shares. Dr.
Karande has served as the Director of the Division of GynecoRadiology of the
Company since March 1996 and has been affiliated with CHR-Illinois since
1992.

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<PAGE> 69

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, par value $.0001 per share, and 1,000,000 shares of Preferred
Stock, par value $.01 per share.

The following summary of certain provisions relating to the Common Stock
and Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the Company's Certificate of Incorporation and
By-Laws that are included as exhibits to the Registration Statement of which
this Prospectus is a part, and by the provisions of applicable law.

COMMON STOCK

As of June 1, 1996, there were 4,187,467 shares of Common Stock outstanding
that were held of record by seven stockholders. In addition, an aggregate of
842,499 shares of Common Stock were reserved for issuance upon the exercise of
certain outstanding options and 230,744 shares of Common Stock were reserved for
issuance upon conversion of up to $2,500,000 principal amount of the Convertible
Note. After giving effect to the shares of Common Stock offered hereby, the
exercise of the option for 96,000 shares held by Dr. Karande, and the 338,107
shares of Common Stock to be issued upon the automatic conversion of $2,500,000
principal amount of the Convertible Note upon the closing of this offering,
there will be 6,654,509 shares of Common Stock outstanding after this offering.

Subject to the rights of holders of Preferred Stock, the holders of
outstanding shares of Common Stock are entitled to share ratably in dividends
declared out of assets legally available therefor at such time and in such
amount as the Board of Directors may from time to time lawfully determine. Each
holder of Common Stock is entitled to one vote for each share held, and the
holders of Common Stock are not entitled to cumulative voting rights. Subject to
the rights of holders of any outstanding Preferred Stock, upon liquidation,
dissolution or winding up of the Company, any assets legally available for
distribution to stockholders as such are to be distributed ratably among the
holders of the then outstanding Common Stock. All shares of Common Stock
currently outstanding are and all shares of Common Stock offered hereby, when
duly issued and paid for will be, fully paid and nonassessable, not subject to
redemption and assessment and without conversion, preemptive or other rights to
subscribe for or purchase any proportionate part of any new or additional issues
of any class or series of securities convertible into stock of any class or
series. The Company intends to file an application to have the Common Stock
approved for listing on the Nasdaq National Market, subject to completion of
this offering.

PREFERRED STOCK

The Certificate of Incorporation of the Company provides for an authorized
class of undesignated Preferred Stock consisting of 1,000,000 shares. The
Preferred Stock may be issued at the direction of the Board of Directors,
without stockholder approval, in series from time to time with such
designations, relative rights, priorities, preferences, qualifications,
limitations and restrictions thereon, to the extent that such are not fixed in
the Company's Certificate of Incorporation, as the Board of Directors
determines. The rights, preferences, limitations and restrictions of different
series of Preferred Stock may differ with respect to dividend rates, amounts
payable on liquidation, voting rights, conversion rights, redemption provisions,
sinking fund provisions and other matters. The Board of Directors may authorize
the issuance of Preferred Stock which ranks senior to the Common Stock with
respect to the payment of dividends and the distribution of assets on
liquidation. In addition, the Board of Directors is authorized to fix the
limitations and restrictions, if any, upon the payment of dividends on Common
Stock to be effective while any shares of Preferred Stock are outstanding. The
Board of Directors, without shareholder approval, can issue Preferred Stock with
voting and conversion rights which could adversely affect the voting power of
the holders of Common Stock. The issuance of Preferred Stock to certain holders
under certain circumstances may have the effect of delaying, deferring or
preventing a change in control of the Company and may have a depressive effect
on the market price of the Common Stock. Upon consummation of this offering, no
shares of Preferred Stock will be outstanding.

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<PAGE> 70

SUBORDINATED CONVERTIBLE PROMISSORY NOTE

Nichold Company, a wholly owned subsidiary of Blue Cross Blue Shield of
Illinois, currently holds the Company's 10% Subordinated Convertible Promissory
Note, as amended, in the original principal amount of $5,000,000 due December 1,
2000. Up to $2,500,000 of the Convertible Note is convertible, in whole or in
part, at any time in increments of no less than $500,000, into a number of
Conversion Shares equal to 1% of the number of shares of outstanding Common
Stock per $500,000 of principal amount to be converted on the date of such
conversion. The convertible portion of the Convertible Note is subject to
automatic conversion upon the closing of a Qualifying IPO. The $2,500,000
nonconvertible portion of the Convertible Note becomes due and payable upon the
closing of a Qualifying IPO. Accordingly, upon the closing of this offering,
$2,500,000 principal amount of the Convertible Note will automatically be
converted into 338,107 shares of Common Stock, after giving effect to the Recent
Acquisitions, and $2,500,000 principal amount of the Convertible Note will
become due and payable. See "Use of Proceeds." Nichold Company has certain
"piggyback" registration rights with respect to the Conversion Shares.

DELAWARE LAW AND CERTAIN CORPORATE PROVISIONS

Upon the closing of this offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law. In general,
this statute prohibits a publicly held Delaware corporation from engaging, under
certain circumstances, in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person becomes an interested stockholder, unless either (i) prior to
the date at which the stockholder became an interested stockholder the Board of
Directors approved either the business combination or the transaction in which
the person becomes an interested stockholder, (ii) the stockholder acquires more
than 85% of the outstanding voting stock of the corporation (excluding shares
held by directors who are officers or held in certain employee stock plans) upon
consummation of the transaction in which the stockholder becomes an interested
stockholder or (iii) the business combination is approved by the Board of
Directors and by two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder) at a meeting of the
stockholders (and not by written consent) held on or subsequent to the date of
the business combination. An "interested stockholder" is a person who, together
with affiliates and associates, owns (or at any time within the prior three
years did own) 15% or more of the corporation's voting stock. Section 203
defines a "business combination" to include, without limitation, mergers,
consolidations, stock sales and asset based transactions and other transactions
resulting in a financial benefit to the interested stockholder.

The Company's Certificate of Incorporation and By-Laws contain a number of
provisions relating to corporate governance and to the rights of stockholders.
Certain of these provisions may be deemed to have a potential "antitakeover"
effect in that such provisions may delay, defer or prevent a change of control
of the Company. These provisions include (a) upon the closing of an this
offering, the classification of the Board of Directors into three classes, each
class serving for staggered three year terms; (b) upon the closing of this
offering, elimination of stockholder action by written consent; (c) the
authority of the Board of Directors to issue series of Preferred Stock with such
voting rights and other powers as the Board of Directors may determine; (d) the
requirement that the By-Laws may only be amended (other than by the Board of
Directors) by the vote of greater than 66 2/3% of the votes entitled to be cast
generally by the outstanding Common Stock; (e) the requirement that the
provision in the Certificate of Incorporation creating the classified board may
only be amended by the vote of at least 66 2/3% of the votes entitled to be cast
generally in the election of directors; (f) upon the closing of this offering
the requirement that a director may be removed by the vote of a majority of the
votes entitled to be cast generally in the election of directors only for cause;
and (g) notice requirements in the By-Laws relating to nominations to the Board
of Directors and to the raising of business matters at stockholder meetings.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Company's Common Stock is American
Stock Transfer & Trust, New York, New York.

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<PAGE> 71

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public market
could adversely affect prevailing market prices.

Upon completion of this offering and after giving effect to the conversion
of the Convertible Note, the Company will have 6,654,509 shares of Common Stock
outstanding. Of these shares, the 2,220,000 shares sold in this offering
(2,533,000 shares if the Underwriters exercise their over-allotment option in
full) will be freely tradable without restriction under the Securities Act,
except for any such shares which may be acquired by an "affiliate" of the
Company as that term is defined in Rule 144 (an "Affiliate"). The 4,434,509
remaining shares constitute "restricted securities" within the meaning of Rule
144, and will only be eligible for sale in the open market commencing on the
second anniversary of the later of the date such shares were acquired from the
Company or an Affiliate, subject to the contractual lockup provisions and
applicable requirements of Rule 144 described below. However, of such restricted
securities, 550,176 shares are subject to registration rights which may entitle
the holder thereof to register such shares for resale under the Securities Act
and to sell such shares, after the lockup period, without regard for the
restrictions of Rule 144.

The Company, its officers and directors and certain stockholders of the
Company holding substantially all of the Common Stock have agreed that they will
not directly or indirectly, offer, sell, offer to sell, grant any option to
purchase or otherwise sell or dispose (or approve any offer, sale, offer of
sale, grant of any options to purchase or sale or disposition) of any shares of
Common Stock or other capital stock of the Company, or any securities
convertible into, or exercisable or exchangeable for, any shares of Common Stock
or other capital stock of the Company without the prior written consent of Smith
Barney Inc. on behalf of the Underwriters, for a period of 180 days from the
date of the Prospectus.

In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the Registration Statement of which this Prospectus is a
part, a stockholder, including an "affiliate" of the Company, as that term is
defined in Rule 144 (an "Affiliate"), who has beneficially owned his or her
restricted securities (as that term is defined in Rule 144) for at least two
years from the later of the date such securities were acquired from the Company
or (if applicable) the date they were acquired from an Affiliate is entitled to
sell, within any three-month period, a number of such shares that does not
exceed the greater of one percent of the then outstanding shares of Common Stock
(approximately 66,550 shares immediately after this offering) or the average
weekly trading volume in the Common Stock during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. Affiliates may sell shares not
constituting restricted securities in accordance with the foregoing volume
limitations and other requirements but without regard to the two year holding
period. In addition, under Rule 144(k), if a period of at least three years has
elapsed between the later of the date restricted securities were acquired from
the Company and the date they were acquired from an Affiliate of the Company, a
stockholder who is not an Affiliate of the Company at the time of sale and has
not been an Affiliate for at least three months prior to the sale would be
entitled to sell the shares immediately without regard to the volume limitations
and other conditions under Rule 144 described above.

The Company has granted options to purchase a total of 635,833 shares under
the Company's Incentive Plan prior to the date of this Prospectus and 9,999
shares will automatically be granted on the effective date of this offering
under the Company's Directors' Option Plan as of the effective date of this
offering. An additional 72,500 shares and 31,667 shares are available for future
option grants under the Company's Incentive Plan and Director's Option Plan,
respectively. See "Management -- Incentive Compensation Plan" and "-- Directors'
Option Plan." In addition, upon completion of this offering, Dr. Karande will
retain an option to purchase 100,667 shares of Common Stock from the Company.
The Company intends to file a registration statement under the Securities Act
shortly after the effective date of the Registration Statement covering certain
shares of Common Stock reserved for issuance under the Incentive Plan and
Directors' Option Plan. Upon the effectiveness of that Registration Statement,
most of the shares of Common Stock issued under the Incentive Plan and the
Directors' Option Plan, other than shares held by Affiliates, will be
immediately eligible for resale in the public market without restriction,
subject to the terms of the agreements described above.

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<PAGE> 72

The Securities and Exchange Commission has recently proposed reducing the
initial Rule 144 holding period to one year and the Rule 144(k) holding period
to two years. There can be no assurance as to when or whether such rule changes
will be enacted. If enacted, such modification will have a material effect on
the time when certain shares of the Common Stock become eligible for resale.

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<PAGE> 73

UNDERWRITING

Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company and the Selling Stockholders have agreed to
sell to such Underwriter, the respective number of shares of Common Stock set
forth opposite the name of such Underwriter below.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------------------------------------------------------------------------- ----------------
<S> <C>
Smith Barney Inc. ...........................................................
The Chicago Corporation......................................................

-----------
Total................................................................... 2,220,000
===========
</TABLE>

The Underwriters are committed to take and pay for all shares of the Common
Stock offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc. and The Chicago Corporation
are acting as Representatives, propose initially to offer part of the shares of
Common Stock directly to the public at the public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ per share under the public offering
price. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed by the Underwriters. The Representatives have informed the Company and
the Selling Stockholders that the Underwriters do not expect to confirm sales to
accounts over which they exercise discretionary authority.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an additional 333,000
shares of Common Stock at the price to the public set forth on the cover page
hereof less underwriting discounts and commissions. The Underwriters may
exercise such option to purchase additional shares solely for the purpose of
covering over-allotments, if any, incurred in connection with the sale of the
shares offered hereby. To the extent such option is exercised, each Underwriter
will become obligated, subject to certain conditions, to purchase approximately
the same percentage of such additional shares as the number set forth opposite
each Underwriter's name in the preceding table bears to the total number of
shares listed in such table.

The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

The Company, its directors and executive officers and substantially all of
the stockholders of the Company have agreed that, for a period of 180 days after
the date of this Prospectus, they will not, without the prior written consent of
Smith Barney Inc., offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for any shares of Common Stock, except in the case of the Company,
in certain limited circumstances.

Prior to the offering, there has not been any public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock has been determined by negotiations between the Company and the
Representatives. Among the factors considered in determining the initial public
offering price were the history of, and prospects for, the Company's business
and the industry in which it competes, an assessment of the Company's management
and the present state of the Company's development, its past and present
revenues and earnings and the trend of such revenues and earnings, the prospects
for the growth of the Company's revenues and earnings, the general condition of
the securities market at the time of

71
<PAGE> 74

the offering and the market price and earnings of similar securities of
comparable companies at the time of the offering.

An affiliate of The Chicago Corporation, one of the Representatives of the
Underwriters, has from time to time provided financial advisory services to the
Company, including in connection with the Convertible Note, and has been paid
customary fees in respect thereof.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Katten Muchin & Zavis, a
partnership including professional corporations, Chicago, Illinois and for the
Underwriters by Dewey Ballantine, New York, New York.

EXPERTS

The financial statements and schedule of GynCor, Inc. as of June 30, 1994
(consolidated), June 30, 1995 (combined) and December 31, 1995 (combined), and
for the years ended June 30, 1993, 1994 and 1995, and the six-month period ended
December 31, 1995 appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report with respect thereon, appearing elsewhere herein and in the Registration
Statement and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.

The financial statements of Fertility Center of Northern New Jersey, P.A.
as of December 31, 1994 and 1995 and for the period from February 9, 1994
(inception) to December 31, 1994 and the year ended December 31, 1995, appearing
in this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report with respect thereon,
appearing elsewhere herein and in the Registration Statement and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

The financial statements of A Center for Gynecology, P.A. as of and for the
year ended December 31, 1995, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report with respect thereon, appearing elsewhere herein and in
the Registration Statement and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (including all amendments
thereto, the "Registration Statement") under the Securities Act and the rules
and regulations promulgated thereunder, with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement. Each such statement is qualified in its entirety by
such reference. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement and
exhibits thereto. The Registration Statement, including the exhibits thereto,
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
20549 D.C. and at the Commission's Regional Offices located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of the Registration or any part thereof
may be obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the
Registration Statement and certain exhibits thereto filed through the Electronic
Data Gathering, Analysis, and Retrieval ("EDGAR") system are publicly available
through the Commission's Web site (http://www.sec.gov).

72
<PAGE> 75

GYNCOR, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REGISTRANT
GYNCOR, INC.
Report of Ernst & Young LLP, Independent Auditors.................................... F-2
Consolidated Balance Sheet as of June 30, 1994, and Combined Balance Sheets as of
June 30, 1995, December 31, 1995 and March 31, 1996 (unaudited).................... F-3
Statements of Operations for the years ended June 30, 1993 and 1994, and Combined
Statements of Operations for the year ended June 30, 1995, for the six month period
ended December 31, 1995 and for the three month periods ended March 31, 1995
(unaudited) and 1996
(unaudited)........................................................................ F-4
Statements of Stockholders' Equity for the years ended June 30, 1993 and 1994
(consolidated), and Combined Statements of Net Capital Deficiency for the year
ended June 30, 1995, for the six month period ended December 31, 1995 and for the
three month period ended March 31, 1996 (unaudited)................................ F-5
Statements of Cash Flows for the years ended June 30, 1993 and 1994, and Combined
Statements of Cash Flows for the year ended June 30, 1995, for the six month period
ended December 31, 1995 and for the three month periods ended March 31, 1995
(unaudited) and 1996
(unaudited)........................................................................ F-6
Notes to Financial Statements........................................................ F-7
RECENT ACQUISITIONS
FERTILITY CENTER OF NORTHERN NEW JERSEY, P.A.
Report of Ernst & Young LLP, Independent Auditors.................................... F-22
Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996 (unaudited)....... F-23
Statements of Income and Retained Earnings (Accumulated Deficit) for the period from
February 9, 1994 (inception) to December 31, 1994, the year ended December 31, 1995
and the three months ended March 31, 1996 (unaudited).............................. F-24
Statements of Cash Flows for the period from February 9, 1994 (inception) to December
31, 1994, the year ended December 31, 1995 and the three months ended March 31,
1996 (unaudited)................................................................... F-25
Notes to Financial Statements........................................................ F-26
A CENTER FOR GYNECOLOGY, P.A.
Report of Ernst & Young LLP, Independent Auditors.................................... F-30
Balance Sheet as of December 31, 1995 and March 31, 1996 (unaudited)................. F-31
Statement of Operations and Retained Earnings for the year ended December 31, 1995
and the three months ended March 31, 1996 (unaudited).............................. F-32
Statement of Cash Flows for the year ended December 31, 1995 and the three months
ended March 31, 1996 (unaudited)................................................... F-33
Notes to Financial Statements........................................................ F-34
</TABLE>

F-1
<PAGE> 76

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
GynCor, Inc.

We have audited the accompanying consolidated balance sheet of GynCor, Inc.
as of June 30, 1994, and the combined balance sheets as of June 30, 1995 and
December 31, 1995, and the related statements of operations, stockholders'
equity, and cash flows for the years ended June 30, 1993 and 1994, and combined
statement of operations, net capital deficiency, and cash flows for the year
ended June 30, 1995, and the six month period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of GynCor, Inc. at
June 30, 1994, and the combined financial position at June 30, 1995 and December
31, 1995, and the results of their operations and their cash flows for the years
ended June 30, 1993, 1994 and 1995, and the six month period ended December 31,
1995, in conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Chicago, Illinois
March 22, 1996,
except for the first and second paragraphs
of Note 9 as to which the date is June 5, 1996,
and the first, third, and fourth paragraphs of
Note 17 as to which the date is May 1, 1996

F-2
<PAGE> 77

GYNCOR, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER
JUNE 30, JUNE 30, 31, MARCH 31,
1994 1995 1995 1996
-------------- --------- ----------- -----------
(CONSOLIDATED)
(PREDECESSOR) (COMBINED) (COMBINED) (UNAUDITED)

<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash............................................. $ 331,473 $ 20,207 $ 132,965 $ 655,437
Receivables
Patients, net of allowance for doubtful
accounts of $492,000, $756,000, $590,000 and
$623,000, respectively....................... 2,722,542 2,661,076 3,873,611 4,655,057
Other.......................................... 82,477 47,030 62,455 88,079
Notes receivable from officers/stockholders...... -- 163,318 1,399,046 1,399,046
Prepaid expenses, inventories and other.......... 155,109 515,915 467,614 482,644
---------- ---------- ----------- -----------
Total current assets......................... 3,291,601 3,407,546 5,935,691 7,280,263
Property and equipment:
Leasehold improvements........................... 385,130 1,590,225 1,868,800 1,882,431
Medical equipment................................ 1,665,639 2,387,652 2,716,445 2,803,904
Computer equipment and software.................. 497,566 747,006 954,602 993,753
Furniture and equipment.......................... 534,916 891,676 921,348 993,389
---------- ---------- ----------- -----------
3,083,251 5,616,559 6,461,195 6,673,477
Less accumulated depreciation and amortization... 1,130,519 1,639,652 1,947,630 2,142,511
---------- ---------- ----------- -----------
1,952,732 3,976,907 4,513,565 4,530,966
Goodwill, net of accumulated amortization.......... 567,830 553,635 546,540 542,762
Deferred taxes..................................... 22,000 -- -- --
Other assets....................................... 2,325 22,713 618,599 1,584,081
---------- ---------- ----------- -----------
Total assets................................. $5,836,488 $7,960,801 $11,614,395 $13,938,072
========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)
Current liabilities:
Notes payable.................................... $ 425,000 $2,307,863 $ 200,000 $ 2,956,508
Current portion of long-term debt and capital
lease obligations.............................. 725,817 634,506 681,854 638,318
Notes payable to officers/stockholders........... -- -- 1,165,000 1,165,000
Accounts payable................................. 1,277,019 3,586,529 2,415,461 2,558,360
Accrued liabilities
Compensation................................... 464,406 876,099 1,192,251 973,391
Other.......................................... 124,139 249,225 164,396 162,725
Deferred income taxes............................ 476,000 -- -- --
Deferred revenue................................. -- 400,000 528,280 560,593
---------- ---------- ----------- -----------
Total current liabilities.................... 3,492,381 8,054,222 6,347,242 9,014,895
Long-term debt and capital lease obligations, less
current portion.................................. 1,519,869 1,145,812 1,351,178 1,237,855
Deferred rent...................................... 85,470 343,131 617,735 657,265
Subordinated convertible promissory note........... -- -- 5,000,000 5,000,000
Stockholders' equity (net capital deficiency):
Common stock:
3,333,333, 3,963,333, 3,966,666 and 4,008,333
shares issued and outstanding, respectively.... -- -- -- --
Additional paid-in capital....................... 1,000 38,819 155,820 2,155,620
Retained earnings (accumulated deficit).......... 737,768 (1,621,183) (1,857,580) (4,127,563)
---------- ---------- ----------- -----------
Total stockholders' equity (net capital
deficiency)............................... 738,768 (1,582,364) (1,701,760) (1,971,943)
---------- ---------- ----------- -----------
$5,836,488 $7,960,801 $11,614,395 $13,938,072
========== ========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE> 78
GYNCOR, INC.

STATEMENTS OF OPERATIONS

YEAR ENDED THREE MONTH PERIOD ENDED
-------------------------------------------- SIX MONTH PERIOD MARCH 31,
JUNE 30, JUNE 30, JUNE 30, ENDED -------------------------
1993 1994 1995 DECEMBER 31, 1995 1995 1996
------------- -------------- ----------- ----------------- ----------- -----------
(PREDECESSOR) (PREDECESSOR) (COMBINED) (COMBINED) (UNAUDITED) (UNAUDITED)
(CONSOLIDATED)
<S> <C> <C> <C> <C> <C> <C>
Net patient service
revenue................. $ 5,545,224 $8,784,602 $13,881,508 $12,059,876 $ 2,602,835 $ 5,978,921
Operating expenses:
Physicians' salaries.... 760,330 1,811,736 3,014,252 2,954,179 689,615 3,673,743
Clinic salaries, wages
and benefits.......... 1,041,439 1,916,375 3,883,206 2,624,573 761,391 1,290,457
Clinic rent and lease
expense............... 302,014 307,514 1,082,452 880,806 309,855 497,234
Clinic supplies......... 1,356,358 2,337,872 3,530,619 1,841,666 951,688 790,757
Other clinic expenses... 302,507 573,985 1,054,005 861,002 127,108 366,619
General corporate
expenses.............. 1,166,894 1,447,991 3,215,134 2,604,181 1,128,132 1,231,413
Depreciation and
amortization.......... 96,065 143,871 651,059 365,073 130,679 215,324
---------- ---------- ----------- ----------- ----------- -----------
Total operating
expenses............ 5,025,607 8,539,344 16,430,727 12,131,480 4,098,468 8,065,547
---------- ---------- ----------- ----------- ----------- -----------
Operating income (loss)... 519,617 245,258 (2,549,219) (71,604) (1,495,633) (2,086,626)
Equity in CHRNW........... 37,057 349,142 -- -- -- --
Interest expense, net of
interest income of
$5,872, $8,968, $3,100,
$66,261, $1,429 and
$1,004, respectively.... 46,080 67,980 231,640 164,793 71,200 183,357
Loss (gain) on sale of
equipment............... -- (9,144) 32,092 -- (30,350) --
---------- ---------- ----------- ----------- ----------- -----------
Income (loss) before
income taxes............ 510,594 535,564 (2,812,951) (236,397) (1,536,483) (2,269,983)
Income taxes (benefit) --
deferred................ 192,000 73,000 (454,000) -- (186,000) --
---------- ---------- ----------- ----------- ----------- -----------
Net income (loss)..... $ 318,594 $ 462,564 $(2,358,951) $ (236,397) $(1,350,483) $(2,269,983)
========== ========== =========== =========== =========== ===========
Net income (loss) per
common share............ $ .09 $ .14 $ (.64) $ (.05) $ (.36) $ (.52)
========== ========== =========== =========== =========== ===========
Weighted average number of
common shares
outstanding............. 3,365,444 3,365,444 3,703,619 4,336,884 3,798,627 4,337,185
========== ========== =========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE> 79

GYNCOR, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)

<TABLE>
<CAPTION>
TOTAL
PREDECESSOR GYNCOR, INC. RETAINED STOCKHOLDERS'
COMMON STOCK COMMON STOCK ADDITIONAL EARNINGS EQUITY
------------------ ------------------- PAID-IN (ACCUMULATED (NET CAPITAL
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT) DEFICIENCY)
--------- ------ --------- ------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at July 1,
1992.................... 3,333,333 -- -- $ -- $ 1,000 $ (43,390) $ (42,390)
Net income................ -- -- -- 318,594 318,594
--------- ------ --------- ------ ---------- ----------- -----------
Balances at June 30,
1993.................... 3,333,333 -- -- -- 1,000 275,204 276,204
Net income................ -- -- -- 462,564 462,564
--------- ------ --------- ------ ---------- ----------- -----------
Balances at June 30, 1994
(consolidated).......... 3,333,333 -- -- -- 1,000 737,768 738,768
Issuance of shares --
$.0003 per share........ -- -- 3,963,333 -- 1,189 -- 1,189
Additional paid-in capital
-- Affiliates........... -- -- -- -- 36,630 -- 36,630
Net loss.................. -- -- -- -- -- (2,358,951) (2,358,951)
--------- ------ --------- ------ ---------- ----------- -----------
Balances at June 30, 1995
(combined).............. -- -- 3,963,333 -- 38,819 (1,621,183) (1,582,364)
Issuance of shares --
$.0003 per share........ -- -- 3,333 -- 1 -- 1
Compensation value of
options to purchase
common stock............ -- -- -- -- 117,000 -- 117,000
Net loss.................. -- -- -- -- -- (236,397) (236,397)
--------- ------ --------- ------ ---------- ----------- -----------
Balances at December 31,
1995 (combined)......... -- -- 3,966,666 -- 155,820 (1,857,580) (1,701,760)
Issuance of shares........ -- -- 41,667 -- -- -- --
Compensation value of
options to purchase
common stock............ -- -- -- -- 1,999,800 -- 1,999,800
Net loss.................. -- -- -- -- -- (2,269,983) (2,269,983)
--------- ------ --------- ------ ---------- ----------- -----------
Balances at March 31, 1996
(Unaudited)............. -- -- 4,008,333 $ -- $2,155,620 $ (4,127,563) $ (1,971,943)
========= ====== ========= ====== ========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE> 80

GYNCOR, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTH THREE MONTH PERIOD ENDED
-------------------------------------------- PERIOD ENDED MARCH 31,
JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, -------------------------
1993 1994 1995 1995 1995 1996
------------- -------------- ----------- ------------ ----------- -----------
(PREDECESSOR) (PREDECESSOR) (COMBINED) (COMBINED) (UNAUDITED) (UNAUDITED)
(CONSOLIDATED)
<S> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net income (loss)........... $ 318,594 $ 462,564 $(2,358,951) $ (236,397) $(1,350,483) $(2,269,983)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization............ 96,065 143,871 651,059 365,073 130,679 215,324
Compensation value of
options to purchase
common stock............ -- -- -- 117,000 -- 1,999,800
Equity in CHRNW........... (37,057) (349,142) -- -- -- --
Deferred rent............. (10,551) (69,045) 257,661 274,604 118,471 39,530
Loss (gain) on sale of
equipment............... -- (9,144) 32,092 -- (30,350) --
Deferred income taxes..... 192,000 73,000 (454,000) -- (186,000) --
Changes in assets and
liabilities............. (349,047) (141,055) 2,889,329 (2,637,009) 1,172,810 (1,849,566)
--------- --------- ----------- ----------- ----------- -----------
Total adjustments.... (108,590) (351,515) 3,376,141 (1,880,332) 1,205,610 405,088
--------- --------- ----------- ----------- ----------- -----------
Net cash provided by (used
in) operating
activities................ 210,004 111,049 1,017,190 (2,116,729) (144,873) (1,864,895)
Investing Activities:
Acquisition, net of cash
acquired.................. -- 29,932 -- -- -- --
Proceeds from sale of
equipment................. -- -- 22,000 -- -- --
Capital expenditures........ (316,659) (88,676) (1,954,348) (553,026) (744,110) (212,282)
--------- --------- ----------- ----------- ----------- -----------
Net cash used in investing
activities................ (316,659) (58,744) (1,932,348) (553,026) (744,110) (212,282)
Financing Activities:
Net proceeds from issuance
of common stock and
additional paid-in-capital
from Affiliates........... -- -- 37,819 1 33,703 --
Loans from (repayments to)
officers/stockholders --
net....................... (2,954) 51,919 (163,318) (70,728) -- --
Due to former stockholders
of CHRNW.................. -- -- (202,664) (106,381) (50,530) (37,916)
Net proceeds from notes
payable -- banks.......... 275,000 150,000 2,107,863 -- 977,735 2,756,508
Proceeds from notes payable
-- other.................. -- -- 200,000 -- 200,000 --
Repayment of notes
payable................... -- -- (425,000) (2,107,863) -- --
Proceeds from long-term debt
and subordinated
promissory note........... -- 300,000 300,000 5,300,000 -- --
Principal payments on
long-term debt and capital
lease obligations......... (154,514) (234,669) (1,250,808) (232,516) (272,159) (118,943)
--------- --------- ----------- ----------- ----------- -----------
Net cash provided by (used
in) financing
activities................ 117,532 267,250 603,892 2,782,513 888,749 2,599,649
--------- --------- ----------- ----------- ----------- -----------
Net increase (decrease) in
cash........................ 10,877 319,555 (311,266) 112,758 (234) 522,472
Cash, beginning of period..... 1,041 11,918 331,473 20,207 773 132,965
--------- --------- ----------- ----------- ----------- -----------
Cash, end of period........... $ 11,918 $ 331,473 $ 20,207 $ 132,965 $ 539 $ 655,437
========= ========= =========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE> 81

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

GynCor, Inc. (the Company) was incorporated in January 1995 in Illinois,
and reincorporated in March 1996 in Delaware, to provide management systems and
services, non-healthcare personnel, and facilities and equipment under long-term
management service agreements to certain professional corporations. These
professional corporations are: The Center for Human Reproduction-Illinois,
M.D.S.C. (formerly known as Gleicher, Pratt, Miller, Karande & Associates, M.D.,
S.C.) (CHR-Illinois), incorporated in Illinois in 1981 to focus exclusively on
reproductive medicine; The Center for Human Reproduction-Perinatal, M.D.S.C.
(formerly known as Gleicher, Pratt, Miller, Karande Perinatal Associates, M.D.,
S.C.) (CHR-Perinatal), incorporated in Illinois in January 1995 to focus
exclusively on perinatology; and The Center for Human Reproduction-Endoscopic,
M.D.S.C. (formerly known as Endoscopic Surgery, M.D., S.C.) (CHR-Endoscopic),
incorporated in Illinois in January 1995 to focus exclusively on endoscopic
surgery. CHR-Illinois, CHR-Perinatal and CHR-Endoscopic, collectively the
Affiliates, operate under the name The Center for Human Reproduction (CHR) under
license agreements with the Company. The Company and Affiliates are collectively
referred to as the Companies.

The Company has a long-term management services agreement with the
Affiliates, under which the Company provides substantially all administrative
and management services, in exchange for a stated percentage of collected net
parent service revenue. See Note 17.

Basis of Presentation

The accompanying financial statements include the accounts of the Company
and the professional corporations described above, which have been operated
under common control by two principal stockholders during the three month
periods ended March 31, 1996 and 1995, the six month period ended December 31,
1995 and the period ended June 30, 1995. Effective December 31, 1995, the
Company changed its year end for financial reporting purposes from June 30 to
December 31.

Effective June 30, 1994, the controlling stockholders of CHR-Illinois who
also controlled a 50% interest in The Center for Human Reproduction Northwest
(CHRNW) acquired the remaining 50% from stockholders not affiliated with
CHR-Illinois, and, in January 1995, merged CHRNW into CHR-Illinois. Since
CHRNW's inception to June 30, 1994, the original 50% common control of CHRNW has
been accounted for under the equity method of accounting. The net assets of
CHRNW at June 30, 1994, were approximately $443,000, net of cash acquired of
$330,000. The purchase price for the transaction was approximately $775,000,
consisting of $300,000 cash and a $455,000 obligation to the former
stockholders. The acquisition of CHRNW was accounted for as a purchase by
CHR-Illinois, and the purchase price was allocated to assets acquired and
liabilities assumed based on the estimated fair market value, which approximated
historical net book value, existing at the date of acquisition. The excess of
purchase price over fair market value of net assets acquired is reflected in the
accompanying consolidated/combined balance sheets as goodwill, which was
$567,830 as of June 30, 1994. See Note 2.

F-7
<PAGE> 82

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

The following summarizes certain financial information of CHRNW as of and
for the year ended June 30, 1994 (unaudited):

<TABLE>
<S> <C>
Current assets.................................................... $1,053,000
==========
Noncurrent assets................................................. $ 293,000
==========
Current liabilities............................................... $ 314,000
==========
Noncurrent liabilities............................................ $ 257,000
==========
Net patient service revenue....................................... $2,946,000
==========
Net income........................................................ $ 698,000
==========
</TABLE>

The accompanying 1996 (unaudited) and 1995 combined financial statements
have been prepared to reflect the combination of business entities which have
been operated under common control. The accompanying 1994 consolidated balance
sheet includes the accounts of CHR-Illinois and CHRNW, and the 1994 and 1993
statements of operations and cash flows include only the accounts of
CHR-Illinois. All significant intercompany balances and transactions between the
companies have been eliminated.

Since inception in January 1995, the efforts of CHR-Perinatal have been
primarily devoted to establishing a patient market, recruiting and training
personnel, and starting up the practice. The following summarizes certain
financial information of CHR-Perinatal, which are included in the 1995 and 1996
combined financial statements:

<TABLE>
<CAPTION>
SIX MONTH PERIOD THREE MONTH PERIOD CUMULATIVE
ENDED ENDED SINCE
DECEMBER 31, 1995 MARCH 31, 1996 INCEPTION
----------------- ------------------ ----------
<S> <C> <C> <C>
Net revenue..................................... $ 80,289 $141,080 $ 266,128
Operating expenses.............................. 445,923 254,349 1,135,126
--------- -------- ----------
Net loss and deficit accumulated during the
development stage............................. $ 365,634 $113,269 $ 868,998
========= ======== ==========
Net cash provided by (used in) operating
activities.................................... $(355,509) $ 12,636 $ (752,851)
Net cash provided by (used in repayment of)
loans from affiliates......................... (369,624) (14,907) 26,949
Cash provided by loans from stockholders........ 725,000 -- 725,000
Cash provided by issuance of common stock....... -- -- 1,030
--------- -------- ----------
Net (decrease) increase in cash................. (133) (2,271) 128
Cash, beginning of period....................... 2,532 2,399 --
--------- -------- ----------
Cash, end of period............................. $ 2,399 $ 128 $ 128
========= ======== ==========
</TABLE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Property and Equipment

Property and equipment are recorded at cost. Depreciation and amortization
is provided using the straight-line or double-declining balance methods over the
estimated useful lives of the assets which range from 5 to 7 years based on the
type and condition of the assets. The Companies amortize leasehold improvements
over 20 years which represents the remaining life of the lease, including
options to renew.

F-8
<PAGE> 83

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

Goodwill

Goodwill represents the excess of the purchase price over the fair value of
identifiable net assets acquired and is amortized on a straight-line basis over
the term of the management services agreement of 40 years. See Note 17.
Accumulated amortization is approximately $14,195, $21,290 and $25,068 at June
30, 1995, December 31, 1995 and March 31, 1996, respectively. At each balance
sheet date, the Company assesses the recoverability of goodwill and whether a
change in circumstances has occurred subsequent to an acquisition which would
indicate whether the future useful life of an asset should be revised. The
Company employs a systematic and rational method of assessing the recoverability
of goodwill by considering various factors such as the earnings potential of the
acquired business, the management fees generated under the related management
services agreement, the value of the revenue stream generated under any related
managed care contracts and the strategic value of the office locations acquired
or assumed as a result of the acquisition.

Income Taxes

The liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.

The Company, CHR-Perinatal and CHR-Endoscopic have elected to be taxed as S
corporations under the provisions of the Internal Revenue Code. Accordingly, all
taxes for these companies, except for state replacement taxes, are paid by the
stockholders. See Note 17.

Net Patient Service Revenue

Net patient service revenue is reported at the estimated realizable amounts
from patients and third-party payors, such as health maintenance organizations
(HMOs), for services rendered.

Payment terms under certain HMO contracts are on a capitation basis (a
fixed payment per enrollee per month). Revenue related to HMO arrangements is
recognized when earned.

The Affiliates also have several fee-for-service arrangements with
third-party payors and patients. Revenue under fee-for-service arrangements is
recorded when the service is provided.

Net patient service revenue derived from two third-party payors amounted to
approximately $2,800,000, $6,100,000, $9,000,000, $4,300,000, $1,500,000 and
$2,900,000 for the years ended June 30, 1993, 1994 and 1995, and the six months
ended December 31, 1995 and the three months ended March 31, 1995 and 1996,
respectively. Receivables from these payors totalled approximately $1,529,000,
$405,000, $450,000, $350,000 and $500,000 at June 30, 1994 and 1995, and
December 31, 1995 and March 31, 1995 and 1996, respectively.

Deferred revenue represents payments received from third party payors for
future services. Deferred revenue is recognized as revenue when earned.

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

F-9
<PAGE> 84

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

Advertising

Advertising and promotional costs are expensed when incurred. Advertising
expense was $149,022, $109,113, $45,905 and $87,551 for the periods ended June
30, 1995 and December 31, 1995 and the three months ended March 31, 1995 and
1996, respectively.

Stock-Based Compensation

The Company accounts for stock option grants in accordance with APB Opinion
No. 25, Accounting for Stock Issued to Employees and, accordingly, recognizes
compensation expense at the measurement date when the fair value of the shares
exceed the exercise price.

Net Income (Loss) Per Share

Net income (loss) per share is computed by dividing net income (loss) by
the number of common and common equivalent shares outstanding during the periods
in accordance with the applicable rules of the Securities and Exchange
Commission. All stock options issued have been considered as outstanding common
stock equivalents for all periods presented, even if anti-dilutive, under the
treasury stock method (based on the initial public offering price). Shares of
common stock issuable upon conversion of the subordinated convertible promissory
note are assumed to be common share equivalents for the six months ended
December 31, 1995 and the three months ended March 31, 1996. From inception in
January 1995, the Company has been an S corporation. Had the Company been
subject to federal and state income taxes, net income (loss) and net income
(loss) per share would not have been impacted.

3. CREDIT RISK

Financial instruments that potentially subject the Companies to significant
concentrations of credit risk primarily consist of patient accounts receivable.
The Companies perform ongoing credit evaluations of their patients and major
third-party payors and generally requires no collateral. Reserves maintained for
potential credit losses have, when realized, been within the range of
management's expectations.

4. STOCKHOLDERS' NOTES

As of June 30, 1995, December 31, 1995 and March 31, 1996, the Companies'
notes receivable outstanding from certain stockholders were $163,318, $1,399,046
and $1,399,046, respectively. Notes receivable from officers/stockholders at
December 31, 1995 and March 31, 1996, include $1,165,000 unsecured demand notes
receivable due to the Company from three officers/stockholders, with interest at
7%, and $234,118 notes receivable, including accrued interest, from two
stockholders, with interest at 8% and collateralized by junior real estate
mortgages.

As of December 31, 1995 and March 31, 1996, notes payable to
officers/stockholders of $1,165,000 from CHR-Perinatal and CHR-Endoscopic are
due upon demand, with interest at 7%. The stockholders must jointly and
severally demand payment, with the provision that all stockholders will demand
payment if the majority stockholder demands payment. Concurrently, the Company
will demand payment of the $1,165,000 notes receivable.

Prior to 1994, CHR-Illinois paid $200,000 to an officer/stockholder as a
security deposit for property subleased from the officer/stockholder. During
1994, the stockholder sold the property to an unrelated party, a security
deposit was paid to the new landlord, and the Company received a note from the
officer/stockholder in the amount of the original security deposit in lieu of a
refund of the security deposit. During 1994, the note was forgiven and
recognized as compensation in the accompanying 1994 statement of operations.

F-10
<PAGE> 85

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

5. NOTES PAYABLE

Notes payable consist of the following:

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------ ----------------------------------------
JUNE 30, JUNE 30, DECEMBER 31, MARCH 31,
1994 1995 1995 1996
------------ ---------- ------------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Notes payable to banks:
Revolving loans with interest at bank's rate
of 9%, were repaid in December 1995....... $ -- $2,107,863 $ -- $ --
Line of credit, with interest at bank's rate
of 8.25%, were repaid in May 1995......... 275,000 -- -- --
Term note payable, with interest at bank's
rate of 8.25%, were repaid in July
1994...................................... 150,000 -- -- --
Line of credit, with interest at bank's rate
of 8.25%, as of March 31, 1996............ -- -- -- 2,756,508
Note payable to Blue Cross Blue Shield of
Illinois for start-up costs relating to
managed care contract, due June 1, 1996,
non-interest bearing......................... -- 200,000 200,000 200,000
-------- ---------- -------- ----------
$425,000 $2,307,863 $200,000 $2,956,508
======== ========== ======== ==========
</TABLE>

In May 1995, the Companies entered into a Secured Credit Agreement which
provided for revolving loans up to the greater of $2,500,000 or the borrowing
base, as defined, through April 30, 1996, with interest at a bank's prime rate
payable monthly. The borrowings were collateralized by substantially all the
assets of the Companies and personally guaranteed by the Companies' majority
stockholders. In December 1995, the outstanding loans under this agreement were
repaid from the proceeds of a subordinated, convertible promissory note (see
Note 6). This agreement was cancelled in February 1996.

On February 23, 1996, the Companies entered into the Secured Credit
Agreement with another bank which provides for borrowings under a line of credit
up to the greater of $5,000,000 or 80% of eligible receivables, as defined, for
one year, with interest which varies at the bank's base rate payable monthly.
The borrowings are collateralized primarily by receivables and personally
guaranteed by the Companies' majority stockholders. As of March 31, 1996, the
Companies were in compliance with the reporting and financial covenants set
forth in the Secured Credit Agreement.

F-11
<PAGE> 86

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

6. DEBT

Long-term debt and capital lease obligations consist of the following:

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------ -----------------------------------------
JUNE 30, JUNE 30, DECEMBER 31, MARCH 31,
1994 1995 1995 1996
------------ ---------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Term notes payable to a bank, with interest at
prime rate plus 1%, repaid in May 1995...... $ 514,949 $ -- $ -- $ --
Secured installment note payable to a bank in
monthly payments of $8,333, plus interest at
a bank's prime rate plus 1/2% (8.75% at
March 31, 1996), with final payment due in
August 1998, guaranteed by a principal
stockholder................................. -- -- 266,667 241,667
Due to former stockholders of CHRNW, payable
in equal monthly installments to June 1996,
including interest imputed at 8%............ 420,027 217,362 110,982 73,066
Term notes payable, with interest at a bank's
prime rate plus 1%, repaid in December
1994........................................ 145,833 -- -- --
Capital lease obligations..................... 1,164,877 1,562,956 1,655,383 1,561,440
---------- ---------- ---------- ----------
2,245,686 1,780,318 2,033,032 1,876,173
Less current portion.......................... (725,817) (634,506) (681,854) (638,318)
---------- ---------- ---------- ----------
$1,519,869 $1,145,812 $1,351,178 $1,237,855
========== ========== ========== ==========
</TABLE>

Maturities of long-term debt, excluding capital leases, as of December 31,
1995 and March 31, 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
<S> <C> <C>
1996.................................................. $211,444 $ 173,066
1997.................................................. 100,000 100,000
1998.................................................. 66,205 41,667
-------- ---------
$377,649 $ 314,733
======== =========
</TABLE>

F-12
<PAGE> 87

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

Future minimum lease payments under capital lease obligations, with the
present value of the net minimum lease payments, as of December 31, 1995 and
March 31, 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
1996................................................ $ 625,509 $ 473,444
1997................................................ 532,378 533,319
1998................................................ 473,308 477,766
1999................................................ 281,329 293,092
2000................................................ 80,822 112,068
---------- ----------
Total minimum lease payments.......................... 1,993,346 1,889,689
Less amount representing interest..................... (337,963) (328,249)
---------- ----------
Capital lease obligations............................. 1,655,383 1,561,440
Less current portion of capital lease obligations..... (470,410) (465,252)
---------- ----------
Long-term capital lease obligations................... $1,184,973 $ 1,096,188
========== ==========
</TABLE>

Equipment and accumulated depreciation under capital lease obligations are
as follows:

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
---------- -----------------------------------------
JUNE 30, JUNE 30, DECEMBER 31, MARCH 31,
1994 1995 1995 1996
---------- ---------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cost........................... $1,465,668 $2,115,828 $2,407,438 $ 2,407,438
Accumulated Depreciation....... 423,842 819,068 1,031,790 1,096,467
---------- ---------- ---------- ----------
$1,041,826 $1,296,760 $1,375,648 $ 1,310,971
========== ========== ========== ==========
</TABLE>

In December 1995, the Company entered into a 10% subordinated convertible
promissory note for $5,000,000 with Blue Cross Blue Shield of Illinois (BCBS),
payable in 2000 (promissory note). Interest is payable June 30, 1996, and
semi-annually beginning December 31, 1996. $2,500,000 of the promissory note is
payable upon the sale or merger of the Company which results in the change of
control of the Company's Board of Directors, other than defined parties, or an
initial public offering of no less than $10,000,000 and an offering price of no
less than $5 per share.

At any time, BCBS may convert $2,500,000 of the promissory note, in total
or in increments of no less than $500,000, into a number of shares of common
stock of the Company equal to 1% of the number of outstanding shares of common
stock and common stock equivalents, per $500,000 of the principal balance to be
converted. Additionally, at the time of an effective initial public offering, up
to $2,500,000 of the promissory note automatically converts into 1% of the
number of outstanding shares of common stock and common stock equivalents of the
Company, per $500,000 of the principal balance to be converted, after giving
effect to the initial public offering and not giving effect to any previous
conversion of the promissory note into common stock of the Company.

The promissory note is subordinated to the payment of any senior debt. The
Company has agreed to comply with certain reporting and financial covenants,
including certain restrictions on dividend payments.

7. INCOME TAXES

CHR-Illinois has been subject to federal and state income taxes since its
inception in 1981. At June 30, 1995, CHR-Illinois had net operating tax loss
carryforwards of $392,000, which will expire in 2007 through 2010.

F-13
<PAGE> 88

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

Income taxes (benefit) consist of the following:

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------------- -------------------------------------------------------
THREE MONTH
SIX MONTH PERIOD ENDED
PERIOD ENDED MARCH 31,
JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, --------------------------
1993 1994 1995 1995 1995 1996
-------- ------- --------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Deferred:
Federal..................... $158,000 $59,000 $(375,000) $ -- $(153,000) $--
State....................... 34,000 14,000 (79,000) -- (33,000) --
-------- ------- --------- ---------- --------- ---------
$192,000 $73,000 $(454,000) $ -- $(186,000) $--
======== ======= ========= ========== ========= =========
</TABLE>

A reconciliation between income taxes (benefit) and the amount computed by
applying the statutory federal income tax rate of 35% to income (loss) before
income taxes is as follows:

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
--------------------- -------------------------------------------------------
THREE MONTH
SIX MONTH PERIOD ENDED
PERIOD ENDED MARCH 31,
JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, --------------------------
1993 1994 1995 1995 1995 1996
-------- --------- --------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Income taxes (benefit) at
statutory federal rate... $178,000 $ 183,000 $(976,000) $ (43,000) $(538,000) $ (795,000)
State taxes................ 25,000 10,000 (139,000) (7,000) (77,000) (50,000)
Exempt S Corporation
(income) loss............ -- -- 14,000 (190,000) (116,000) 1,155,000
Excluded equity in CHRNW... (13,000) (122,000) -- -- -- --
Net operating tax loss
carryforwards and other
not recognized........... -- -- 637,000 230,000 535,000 (320,000)
Other...................... 2,000 2,000 10,000 10,000 10,000 10,000
-------- --------- --------- ---------- --------- -----------
$192,000 $ 73,000 $(454,000) $ -- $(186,000) $ --
======== ========= ========= ========== ========= ===========
</TABLE>

Significant components of deferred tax assets (liabilities) consist of the
following:

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
----------- -----------------------------------------
JUNE 30, JUNE 30, DECEMBER 31, MARCH 31,
1994 1995 1995 1996
----------- ---------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net operating tax loss carryforwards....... $ 22,000 $ 156,000 $ 196,000 $ 570,000
Cash basis of accounting for income taxes:
Accounts receivable...................... (1,047,000) (675,000) (1,089,000) (1,582,000)
Other current assets..................... (215,000) (143,000) (113,000) (130,000)
Accounts payable and accrued
liabilities........................... 882,000 1,334,000 2,149,000 1,640,000
Property and equipment................... (67,000) (199,000) (262,000) (262,000)
Other.................................... (29,000) 164,000 (14,000) (14,000)
----------- ---------- ------------ -----------
(454,000) 637,000 867,000 222,000
Less valuation allowance................... -- (637,000) (867,000) (222,000)
----------- ---------- ------------ -----------
$ (454,000) $ -- $ -- $ --
=========== ========== ============ ===========
</TABLE>

F-14
<PAGE> 89

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

The increase in the valuation allowance resulted primarily from the
increase in the net operating tax loss carryforwards and cash basis of
accounting for income taxes.

8. OPERATING LEASES

The Companies lease certain facilities and equipment under operating
leases. Generally, real estate leases are for primary terms of 7 to 20 years
with options to renew for additional periods. Equipment leases have remaining
terms of 1 to 4 years.

Several of the real estate leases have scheduled future rent increases or
current free rental periods. Rental expense is computed on a straight-line basis
over the entire terms of the leases. Deferred rent consists of the following:

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
----------- ----------------------------------------
JUNE 30, JUNE 30, DECEMBER 31, MARCH 31,
1994 1995 1995 1996
----------- -------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current portion............................... $ 8,520 $ 19,173 $ 22,817 $ 22,813
Long-term..................................... 85,470 343,131 617,735 657,265
------- -------- -------- ---------
$93,990 $362,304 $640,552 $ 680,078
======= ======== ======== =========
</TABLE>

CHR-Illinois leases a certain facility from a stockholder. Total rental
expense for all operating leases, except those with terms of one year or less
that were not renewed, are as follows:

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
-------------------- --------------------------------------------------------
THREE MONTH
SIX MONTH PERIOD ENDED
PERIOD ENDED MARCH 31,
JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, --------------------------
1993 1994 1995 1995 1995 1996
-------- -------- ---------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Office space.............. $268,425 $253,506 $1,010,857 $828,185 $ 243,824 $ 344,173
Medical equipment and
vehicles................ 64,112 68,738 80,664 76,514 71,569 32,157
-------- -------- ---------- -------- --------- ---------
Total rent expense...... $332,537 $322,244 $1,091,521 $904,699 $ 315,393 $ 376,330
======== ======== ========== ======== ========= =========
Amount of rent paid to
stockholder.......... $265,991 $ 88,467 $ 100,189 $ 44,620 $ 20,280 $ 21,090
======== ======== ========== ======== ========= =========
</TABLE>

Future minimum rental payments required under operating leases, including
renegotiated leases, that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 1995 and March 31, 1996, are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1996
-------------------------- --------------------------
TOTAL STOCKHOLDER TOTAL STOCKHOLDER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1996........................... $ 987,024 $ 82,740 $ 610,694 $ 63,270
1997........................... 1,236,462 86,052 1,236,462 87,744
1998........................... 1,188,897 43,872 1,188,897 --
1999........................... 1,028,036 -- 1,028,036 --
2000........................... 1,213,996 -- 1,213,996 --
Subsequent years............... 7,657,652 -- 7,657,652 --
----------- --------- ----------- ---------
$13,312,067 $ 212,664 $12,935,737 $ 151,014
=========== ========= =========== =========
</TABLE>

F-15
<PAGE> 90

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

9. COMMON STOCK AND AFFILIATED EQUITY

The Company's authorized common stock was 40,000,000 shares at June 30,
1994 and 1995 and December 31, 1995 and March 31, 1996. All common share and per
share amounts in the financial statements and notes to these financial
statements have been restated to reflect a 4,000-for-1 exchange in connection
with the reincorporation in Delaware effective March 8, 1996 and a reverse stock
split on a five-for-six share basis effective April 24, 1996.

Additional paid-in capital from Affiliates of $37,630 is the net proceeds
from the issuance of shares by the Affiliates. On June 5, 1996, the Company
entered into an asset transfer agreement which resulted in the acquisition of
certain assets of the Affiliates in exchange for the assumption of certain
liabilities. This asset transfer agreement had no impact on the accompanying
financial statements. After taking into account this transaction, the combined
accumulated deficit at December 31, 1995 would have included approximately $1.7
million of an accumulated deficit attributable to the Affiliates in which the
principal officers/stockholders of the Company are principal stockholders and/or
officers of the Affiliates.

At December 31, 1995 and March 31, 1996, authorized but unissued shares of
common stock have been reserved for future issuance as follows:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
Options................................... 260,000 359,167
Subordinated convertible promissory note.. 222,456 221,316
------- -------
482,456 580,483
======= =======
</TABLE>

10. STOCKHOLDERS' AND EMPLOYMENT AGREEMENTS

The Company's stockholders' agreement restricts the ability of the
stockholders to transfer any common shares of the Company and obligates the
Company to purchase the common shares held by stockholders upon termination or
death, at a defined price. The agreement also provides an officer/stockholder
certain additional rights, as defined. Upon the completion of an initial public
offering, this agreement will terminate.

During the year ended December 31, 1995, the Companies entered into or
renegotiated individual employment contracts with certain physicians and
employees, some of whom are officers and/or stockholders of the Companies. The
agreements provide for base salaries ranging from $150,000-$350,000 plus fringe
benefits. Certain agreements also provide for compensation and incentive bonuses
based on collected revenues and deferred compensation (see Note 17).

The employment agreements include covenants not to compete with the
Companies for periods of one to three years subsequent to termination of
employment. The employment agreements are currently for initial terms of one to
ten years and are automatically extended for additional one-year periods until
terminated by either party.

F-16
<PAGE> 91

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

11. CONSULTING AGREEMENTS

The Companies have entered into several agreements with consulting
physicians. The agreements provide for minimum payments totaling $293,020 during
1996 and $100,000 annually over the following four years. Consulting expenses
under these agreements are as follows:

<TABLE>
<CAPTION>
THE COMPANY
---------------------------------------------------------
THREE MONTH
PREDECESSOR SIX MONTH PERIOD ENDED
- --------------------- PERIOD ENDED MARCH 31,
JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, ---------------------------
1993 1994 1995 1995 1995 1996
- -------- -------- -------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
$ 28,708 $186,308 $228,564 $312,981 $120,985 $112,048
======= ======== ======== ======== ======== ========
</TABLE>

12. STOCK OPTIONS

Under a stock option agreement with an officer/stockholder, 63,333 shares
are to be made available commencing June 1, 1995 and ending May 31, 2000. The
price per share is equal to 50% of the fair market value of the common stock of
the Company on the last day of the fiscal year prior to the date of purchase
divided by the total shares outstanding of the Company on the date of purchase.
The stockholder has the right to exercise the option to purchase all or a
portion of the option shares during May of each year beginning in 1996. In March
1996, this option was exercised by the officer/stockholder whereby the Company
issued 41,667 shares of common stock. The Company also agreed to provide a loan
on or before June 12, 1996 in an amount equal to the aggregate Federal and state
income taxes to be paid. Compensation expense of $117,000 and $50,000 was
recorded during the period ending December 31, 1995 and March 31, 1996 in
connection with this option, respectively.

A stockholder entered into an option agreement with a principal
officer/stockholder of both the Company and CHR-Illinois to purchase 196,667
shares of common stock of the Company and 100 shares of common stock of
CHR-Illinois during the option term which commenced on January 1, 1995 and
expires December 31, 2004, unless terminated earlier as defined. This agreement
was designed and agreed to function as a single option agreement and,
accordingly, the option to purchase CHR-Illinois common stock for $2,451 per
share, adjusted annually for interest, must be exercised in full prior to an
option to purchase the Company's common stock is available at an exercise price
for less than $.01 per share. No compensation expense has been recognized, since
the combined exercise price of $1.25 exceeded the fair market value of the
Company's common stock, as determined by the Company's principal stockholders,
at the date the option was granted.

F-17
<PAGE> 92

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

13. CHANGES IN ASSETS AND LIABILITIES

Changes in assets and liabilities included in the statements of cash flows
are as follows:

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------------------ ------------------------------------------------------
SIX MONTH THREE MONTH PERIOD ENDED
PERIOD ENDED MARCH 31,
JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, -------------------------
1993 1994 1995 1995 1995 1996
----------- --------- ---------- ----------- ---------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Receivables........... $(1,273,645) $(398,342) $ 96,913 $(1,227,960) $ 438,436 $ (807,070)
Prepaid expenses,
inventories and
other............... (23,711) (65,201) (397,861) 48,301 (118,834) (31,695)
Accounts payable...... 587,960 39,819 2,309,510 (1,171,068) 826,094 142,899
Accrued liabilities... 360,349 82,039 480,767 231,325 (64,739) (220,531)
Deferred revenue...... -- -- 400,000 128,280 85,503 32,313
Other................. -- 200,630 -- (645,887) 6,350 (965,482)
----------- --------- ---------- ----------- ---------- ---------
$ (349,047) $(141,055) $2,889,329 $(2,637,009) $1,172,810 $(1,849,566)
=========== ========= ========== =========== ========== ===========
</TABLE>

14. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the following periods is as follows:

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
---------------------- ------------------------------------------------------
SIX MONTH THREE MONTH PERIOD ENDED
PERIOD ENDED MARCH 31,
JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, --------------------------
1993 1994 1995 1995 1995 1996
-------- -------- -------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Interest.................. $ 44,402 $ 62,893 $191,082 $215,077 $25,431 $59,739
Income taxes.............. $ 22,104 $ -- $ 2,300 $ -- $ -- $ --
</TABLE>

In June 1995, CHR-Illinois purchased medical and laboratory equipment from
physician practices by assuming liabilities totaling $56,012.

Capital lease obligations of $109,314, $924,154, $688,105 and $291,610 were
incurred for new equipment during the periods ended June 30, 1993, 1994 and
1995, and December 31, 1995, respectively.

In 1994, a $200,000 security deposit held by a stockholder was converted to
a note receivable.

In 1993, CHR-Illinois entered into a $350,000 loan agreement with a bank.
$100,000 of the proceeds were designated to finance construction costs, of which
$42,404 was borrowed as of June 30, 1993. The balance of the proceeds, $247,300,
was used to repay a prior bank debt.

15. CONTINGENCIES

In addition to the general liability and malpractice insurance carried by
the individual physicians, the professional corporations are insured with
respect to general liability and medical malpractice risks on a claims made
basis. Management is not aware of any claims against the professional
corporations in excess of insurance coverage. In addition, the professional
corporations have not accrued a loss for unreported incidents or for losses
gross of insurance coverage, as the amount, if any, cannot be reasonably
estimated and the probability of an adverse outcome cannot be determined at this
time. It is the opinion of management that the

F-18
<PAGE> 93

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

ultimate resolution of any open or unasserted claims will not have a material
adverse effect on the financial position, operating results or liquidity gross
of any anticipated insurance recoveries of the Company.

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of all financial instruments approximated fair value at
June 30, 1994 and 1995 and at December 31, 1995 and at March 31, 1996.

17. SUBSEQUENT EVENTS AND OTHER

Management Services Agreements

On April 1, 1996, the Company entered into a long-term management services
agreement with each of the Affiliates, under which the Company provides
substantially all administrative and management services, including without
limitation, the provision of equipment, supplies, support services, nonmedical
personnel, office space, management, administration, financial record keeping
and reporting, and other business office services, in exchange for a stated
percentage of collected net patient service revenue. Within forty-five (45) days
of the end of each quarter of the Company's fiscal year, the Company shall
evaluate the cost of such services provided and the overall performance of each
Affiliate in relation to the budget for such year to date and the nature and
volume of the services provided by the Company and make any appropriate
adjustments to the initial stated percentage. Each of these agreements is a 40
year management services agreement between the Company and its Affiliates which
replaces former long-term management services agreements.

Through the 40-year management services agreements, the Company will assume
full responsibility for the operating expenses, take an assignment of
substantially all accounts receivable of the professional corporations and
receive a management fee for its services. The Company, as opposed to affiliates
of the Company, will have perpetual, unilateral control over the assets and
operations of the various professional corporations (except with regard to the
practice of medicine), and notwithstanding the lack of technical majority
ownership of the stock of such entities, consolidation of the various
professional corporations will be necessary to present fairly the financial
position and results of operations of the Company because of control by means
other than ownership of stock. Control by the Company will be perpetual rather
than temporary because of (i) the length of the original terms of the
agreements, (ii) the successive extension periods provided by the agreements,
(iii) the continuing investment of capital by the Company, (iv) the employment
of the majority of the nonphysician personnel, and (v) the nature of the
services provided to the professional corporations by the Company.

Acquisitions

On May 1, 1996, the Company entered into definitive agreements to acquire
the nonmedical assets of two physician practices. The total purchase price for
these assets is approximately $1.4 million. Each of these acquisitions will be
accounted for as a purchase, and the purchase price will be allocated to the
assets acquired based on the estimated fair market value at the date of
acquisition. The operations of the practices will be included with the Company's
financial statements beginning on the date of acquisition. Based on unaudited
data, the following table presents selected information for the Company on a pro
forma basis, assuming the

F-19
<PAGE> 94

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

practices had been consolidated for the twelve month period ended December 31,
1995, as the Company changed its fiscal year end to December 31 (see Note 1),
and the three months ended March 31, 1996.

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1995 1996
------------ ---------------
<S> <C> <C>
Net patient service revenue........................ $ 25,522,000 $ 7,342,000
Net income (loss).................................. (1,208,000) $(1,961,000)
Net income (loss) per common share................. $(.19) $(.30)
</TABLE>

Employment Agreements

On April 1, 1996, the Company amended employment agreements with three
officers/stockholders to provide, among other matters, annual base salaries
ranging from $100,000 to $350,000 per individual; fixed and performance bonuses;
termination and covenant not to compete clauses; and severance payments as
defined, for two of the officers/stockholders upon change in control, as
defined, of the Company. Upon an initial public offering, the term of the
agreements range from 3 to 5 years and any deferred compensation agreements are
automatically terminated. Additionally, on April 1, 1996, two
officers/stockholders' employment agreements with CHR-Illinois were amended
effective upon the initial public offering to provide for a production bonus for
one officer/stockholder of $250,000 in 1996 and a minimum annual production
bonus of $100,000 for the other officer/stockholder.

Stock Options

Effective March 8, 1996, the Company adopted the Directors' Stock Option
Plan (the "Plan") for members of the Board of Directors who are not also
employees of the Company. The maximum number of shares issuable under the Plan
is 41,666, subject to adjustment in certain instances. Upon the completion of an
initial public offering, Non-Qualified Stock Options ("NQSOs") to purchase 3,333
shares of common stock will be granted to each of two outside directors at an
exercise price equal to the initial public offering price. Annually, from the
initial public offering effective date, 1,250 shares of common stock will be
granted to each of the outside directors (limited to 8,333 shares per director).
New outside directors will be granted NQSOs for 3,333 shares of common stock
(1,250 shares annually thereafter and limited to 8,333 shares per outside
director). All options are exercisable on the first anniversary after the date
of grant, subject to accelerated vesting, as defined, at the fair market value
at the date of grant and expire at the earlier of 10 years from the grant date
or the date the person ceases to be an outside director.

The Company has adopted an Incentive Compensation Plan (the "Incentive
Plan"), effective March 8, 1996, under which 708,333 shares of common stock are
reserved and available for issuance upon exercise of options and other awards to
be granted under the Incentive Plan. The Incentive Plan is administered by a
Committee (Committee) of the Board of Directors. Subject to certain limits,
options to be granted under the Incentive Plan may be incentive stock options
("ISOs") or NQSOs. The exercise price of an ISO must be at least equal to the
fair market value (as defined in the Incentive Plan) per share of the common
stock on the date of the grant, and must be at least 110% of such value if the
grantee is a principal stockholder of the Company. The exercise price of NQSOs
will be determined by the Committee and may be greater or less than the fair
market value per share of the common stock on the date of the grant. ISOs and
NQSOs granted under the Incentive Plan will be exercisable for a term of not
more than 10 years, as determined by the Committee, and become exercisable as
determined by the Committee, subject to acceleration of vesting at the
discretion of the Committee or, as defined, upon a change in control of the
Company.

F-20
<PAGE> 95

GYNCOR, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTH PERIODS
ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

The Incentive Plan also authorizes the Committee to grant restricted stock,
deferred stock and stock appreciation rights ("SARs") in connection with options
granted. SARs entitle the optionee to receive upon exercise cash or common
stock, as determined by the Committee, equal in value to the difference between
the option price and the current fair market value of the stock subject to the
option and related SAR. Exercise of a SAR is in lieu of exercise of the related
option.

In March 1996, the Company granted awards under the Incentive Plan covering
162,500 shares of common stock, including stock options granted to officers of
the Company. These options are exercisable at a purchase price of $7.80 per
share and vest 20% per year over five years, except that the options granted to
one officer vest in full on October 1, 1996. In April 1996, the Company granted
awards under the Incentive Plan covering 473,333 shares of common stock,
including stock options granted to officers of the Company. These options are
exercisable at a purchase price equal to the initial public offering price and
vest 20% per year over five years.

In March 1996, an officer/stockholder entered into an Amended and Restated
Option Agreement (Agreement) with two other officers/stockholders to purchase an
aggregate 254,167 shares of common stock for $.01 per share. The option expires
in 10 years, unless terminated earlier, as defined in the Agreement.
Compensation expense of $1,950,000 was recorded during the first quarter of 1996
in connection with this option.

Tax Status

Prior to the completion of an initial public offering, the Company will
terminate its S Corporation tax status and, accordingly, will be subject to
income taxes.

F-21
<PAGE> 96

REPORT OF INDEPENDENT AUDITORS

To the Shareholder
Fertility Center of Northern New Jersey, P.A.

We have audited the accompanying balance sheets of Fertility Center of
Northern New Jersey, P.A. as of December 31, 1994 and 1995, and the related
statements of income and retained earnings (accumulated deficit) and cash flows
for the period from February 9, 1994 (date of inception) to December 31, 1994,
and for the year ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fertility Center of Northern
New Jersey, P.A. at December 31, 1994 and 1995, and the results of its
operations and its cash flows for the period from February 9, 1994 (date of
inception) to December 31, 1994, and for the year ended December 31, 1995 in
conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

March 11, 1996
Chicago, Illinois

F-22
<PAGE> 97

FERTILITY CENTER OF NORTHERN NEW JERSEY, P.A.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- -----------
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ -- $ 2,336 $ 200,726
Receivables...............................................
Patients (net of allowance for doubtful accounts of
$22,700 in 1994, $139,200 in 1995 and $141,000 in
1996)................................................ 92,847 565,993 565,116
Other.................................................. -- 3,500 3,500
Prepaid expenses and other................................ 23,387 22,557 13,452
-------- -------- -----------
Total current assets.............................. 116,234 594,386 782,794
Property and equipment, less accumulated depreciation of
$1,602 in 1994, $30,609 in 1995 and $43,802 in 1996....... 70,609 274,534 274,133
Deferred income taxes....................................... -- 10,000 9,000
Organization costs, less accumulated amortization of $1,125
in 1994, $2,353 in 1995 and $2,660 in 1996................ 5,012 3,785 3,478
-------- -------- -----------
Total assets...................................... $191,855 $882,705 $ 1,069,405
======== ======== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
(NET CAPITAL DEFICIENCY)
Current liabilities:
Revolving loan............................................ $ 60,000 $ -- $ --
Due to stockholder........................................ -- 15,000 --
Current portion of long-term debt......................... -- 45,275 46,072
Accounts payable.......................................... 38,921 95,067 111,139
Accrued liabilities....................................... 28,260 83,695 48,118
Income taxes payable...................................... -- -- 106,424
Deferred rent............................................. 4,838 4,838 4,838
Deferred income taxes..................................... -- 180,000 166,000
-------- -------- -----------
Total current liabilities......................... 132,019 423,875 482,591
Long-term liabilities:
Long-term debt, less current portion...................... -- 149,281 138,338
Deferred rent............................................. 67,728 62,890 61,680
-------- -------- -----------
Total long-term liabilities....................... 67,728 212,171 200,018
-------- -------- -----------
Total liabilities................................. 199,747 636,046 682,609
Stockholders' equity (net capital deficiency):
Common stock - No par value; 2,500 shares authorized; 500
shares issued and outstanding in 1994 and 1995......... 5,000 5,000 5,000
Subscription receivable from stockholder.................. (5,000) -- --
Retained earnings (accumulated deficit)................... (7,892) 241,659 381,796
-------- -------- -----------
Total stockholder's equity (net capital
deficiency)..................................... (7,892) 246,659 386,796
-------- -------- -----------
Total liabilities and stockholder's equity........ $191,855 $882,705 $ 1,069,405
======== ======== ===========
</TABLE>

See accompanying notes to financial statements.

F-23
<PAGE> 98

FERTILITY CENTER OF NORTHERN NEW JERSEY, P.A.

STATEMENTS OF INCOME AND
RETAINED EARNINGS (ACCUMULATED DEFICIT)

<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 9, 1994 THREE MONTH
(DATE OF INCEPTION) YEAR ENDED PERIOD ENDED
TO DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31, 1996
-------------------- ----------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Net patient service revenue................ $616,496 $2,496,460 $ 819,926
Other revenue.............................. 2,788 -- --
-------- ---------- ---------
Total revenue......................... 619,284 2,496,460 819,926
Operating expenses:
Physician salaries......................... 190,000 994,834 220,000
Clinic salaries and wages.................. 102,983 244,144 88,558
Administrative salaries and wages.......... 23,847 136,080 21,770
Benefits and payroll taxes................. 49,989 130,224 38,951
Clinic rent and lease expense.............. 72,565 120,974 30,152
Clinic supplies............................ 56,100 113,961 36,435
Other clinic expenses...................... 14,208 20,869 11,022
General corporate expenses................. 112,654 265,265 122,779
Depreciation and amortization.............. 2,727 30,235 13,500
-------- ---------- ---------
Total operating expenses.............. 625,073 2,073,211 583,167
-------- ---------- ---------
Operating income (loss)...................... (5,789) 439,874 236,759
Interest expense............................. -- 16,625 3,198
-------- ---------- ---------
Income (loss) before income taxes............ (5,789) 423,249 233,561
Income taxes:
Current.................................... 2,103 3,698 106,424
Deferred................................... -- 170,000 (13,000)
-------- ---------- ---------
2,103 173,698 93,424
-------- ---------- ---------
Net income (loss)..................... (7,892) 249,551 140,137
Retained earnings (accumulated deficit),
beginning of period........................ -- (7,892) 241,659
-------- ---------- ---------
Retained earnings (accumulated deficit),
end of period.............................. $ (7,892) $ 241,659 $ 381,796
======== ========== =========
</TABLE>

See accompanying notes to financial statements.

F-24
<PAGE> 99

FERTILITY CENTER OF NORTHERN NEW JERSEY, P.A.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 9, 1994 THREE MONTH
(INCEPTION) TO YEAR ENDED PERIOD ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31, 1996
----------------- ----------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Operating activities:
Net (loss) income............................ $ (7,892) $ 249,551 $ 140,137
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization............. 2,727 30,235 13,500
Deferred income taxes..................... -- 170,000 (13,000)
Deferred rent............................. 72,566 (4,838) (1,210)
Changes in operating assets and
liabilities:
Receivables, net........................ (92,847) (476,646) 877
Prepaid expenses and other.............. (23,387) 830 9,105
Organization costs...................... (6,137) -- --
Accounts payable........................ 38,921 56,146 16,072
Income taxes payable.................... -- -- 106,424
Accrued liabilities..................... 28,260 55,435 (35,577)
-------- --------- ---------
Net cash provided by operating
activities...................... 12,211 80,713 236,328
Investing activities:
Purchase of property and equipment........... (299,338) (8,049) (12,792)
-------- --------- ---------
Net cash used by investment
activities...................... (299,338) (8,049) (12,792)
Financing activities:
Proceeds from (payments to) stockholder...... -- 15,000 (15,000)
Proceeds from note payable................... 227,127 -- --
Proceeds from (payments on) revolving loan... 60,000 (60,000) --
Payments on long term debt................... -- (30,328) (10,146)
Issuance of common stock..................... -- 5,000 --
-------- --------- ---------
Net cash provided by (used in)
financing activities............ 287,127 (70,328) (25,146)
-------- --------- ---------
Increase in cash............................... -- 2,336 198,390
Cash at beginning of year...................... -- -- 2,336
-------- --------- ---------
Cash at end of year............................ $ -- $ 2,336 $ 200,726
======== ========= =========
</TABLE>

See accompanying notes to financial statements.

F-25
<PAGE> 100

FERTILITY CENTER OF NORTHERN NEW JERSEY, P.A.

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 (UNAUDITED), DECEMBER 31, 1995 AND 1994

1. ORGANIZATION

Fertility Center of Northern New Jersey, P.A. (the "Company") was
incorporated under the Professional Services Corporation Act on February 9, 1994
in the state of New Jersey. The Company provides services in the field of
reproductive medicine to patients in the Westwood, New Jersey area.

The Company entered into a five year agreement on May 15, 1994 with Life
Key Ventures, Inc. ("Life Key"), whereby Life Key provides management services
to the Company in exchange for a management fee. The Company terminated this
agreement in April 1996 which resulted in certain termination costs (Note 7).

2. SIGNIFICANT ACCOUNTING POLICIES

Property and Equipment

Property and equipment, which principally consists of medical office
equipment and leasehold improvements, are stated at cost. Depreciation of
property and equipment is calculated using the straight-line method over the
estimated useful lives of the assets, which range from five to seven years based
on the type and condition of the assets. The Company amortizes leasehold
improvements over fifteen years which represents the remaining life of the
lease, including options to renew.

Net patient service revenue

Net patient service revenue is reported at the estimated realizable amounts
from patients and various third-party payors for services rendered. The Company
has negotiated agreements with managed care organizations to provide service
based on fee schedules. The Company recognizes revenue when services have been
provided to the patient.

Income taxes

Organization Costs

Organization costs are deferred and are amortized using the straight-line
method over 5 years.

Use of Estimates

3. LINE OF CREDIT

The Company entered into a revolving line of credit agreement effective May
15, 1994 with Life Key. Under the agreement, the Company can borrow up to
$250,000. Interest on borrowings accrues at 7%. The line of credit is secured by
all property, tangible and intangible, owned by or in which the Company has an
interest, which is in the possession or control of Life Key. Amounts outstanding
at December 31, 1994 and 1995 amount to $60,000. There were no amounts
outstanding under this line of credit at December 31, 1995 and March 31, 1996.
On April 30, 1996, this line of credit was terminated.

F-26
<PAGE> 101

FERTILITY CENTER OF NORTHERN NEW JERSEY, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 1996 (UNAUDITED), DECEMBER 31, 1995 AND 1994

4. LONG-TERM DEBT

Long-term debt represents an amount due to Life Key for the purchase of
equipment which was previously leased by the Company from Life Key as part of an
office lease arrangement (see Note 7). The outstanding balance of the note
payable at March 31, 1996 is $184,410 and is payable in monthly installments of
$4,500 (including interest) through January 2000, the life of the office lease.
Interest on the note accrues at 7%.

Interest paid during 1995 and during the three month period ended March 31,
1996 amounted to $14,685 and $3,346.

5. DUE TO STOCKHOLDER

As of March 31, 1996 (Unaudited), the Company has no indebtedness to its
stockholder.

6. INCOME TAXES

Income taxes consist of the following:

<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 9,
1994
(INCEPTION)
TO YEAR ENDED THREE MONTH
DECEMBER DECEMBER PERIOD ENDED
31, 31, MARCH 31,
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Current.................................... $ 2,103 $ 3,698 $106,424
Deferred:
Federal.................................. -- 130,000 (10,000)
State.................................... -- 40,000 (3,000)
------- --------- --------
$ 2,103 $ 173,698 $ 93,424
======= ========= ========
</TABLE>

A reconciliation between income taxes (benefit) and the amount computed by
applying the statutory federal income rate of 35% to income (loss) before income
taxes is as follows:

<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 9,
1994
(INCEPTION)
TO YEAR ENDED THREE MONTH
DECEMBER DECEMBER PERIOD ENDED
31, 31, MARCH 31,
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Income taxes (benefit) at statutory federal
rate..................................... $(2,026) $ 148,137 $ 81,746
State taxes (benefit)...................... (344) 25,141 13,874
Other -- net............................... 4,473 420 (2,196)
------- --------- --------
$ 2,103 $ 173,698 $ 93,424
======= ========= ========
</TABLE>

F-27
<PAGE> 102

FERTILITY CENTER OF NORTHERN NEW JERSEY, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 1996 (UNAUDITED), DECEMBER 31, 1995 AND 1994

Significant components of the Company's deferred tax assets (liabilities),
which principally result from use of the cash basis for income tax purposes, as
of December 31 and March 31, 1996 (Unaudited) are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1994 1995 1996
-------- --------- ---------
<S> <C> <C> <C>
Accounts receivable...................... $ (5,000) $(225,000) $(226,000)
Accounts payable and accrued
liabilities............................ 18,000 56,000 64,000
Other.................................... (13,000) (1,000) 5,000
-------- --------- ---------
$ -- $(170,000) $(157,000)
======== ========= =========
</TABLE>

The Company paid income taxes of $2,326 in 1995.

7. OPERATING LEASE

The Company entered into a five year lease agreement on May 15, 1994 to
lease office space and equipment from Life Key. The lease term commenced upon
occupancy in January 1995. From February 1994 to December 1994, Life Key
provided temporary space to the Company at no charge. Lease expense was
recognized from February 1994 to December 1994 resulting in deferred rent. The
leased equipment was subsequently purchased by the Company in 1995 in exchange
for a note payable. Total rent expense was $72,000, $121,000 and $30,152 in
1994, 1995 and the three month period ended March 31, 1996, respectively. Future
annual minimum lease payments amount to $125,448 through 1999 under this lease
arrangement.

On April 30, 1996 the Company terminated its management agreement and
revolving line of credit with Life Key. The Company is continuing to lease its
office and clinical space from Life Key. As part of the termination agreement,
GynCor has agreed to reimburse Life Key in the amount of $135,000 over 36 months
in equal monthly installments of $3,750 commencing June 1, 1996.

8. CONTINGENCIES

The Company maintains professional liability insurance coverage on a claims
made basis with coverage of $1 million per incident and $3 million annual
aggregate. As of March 31, 1996, there were no asserted professional liability
claims against the Company; accordingly, no amounts for potential losses have
been accrued in the accompanying financial statements. The Company has not
accrued a loss for unreported incidents, or for losses gross of insurance
coverage, as the amount, if any, cannot be reasonably estimated at this time and
the probability of an adverse outcome cannot be determined at this time. It is
the opinion of management that the ultimate resolution of any unasserted claims
will not have a material adverse effect on the financial position, operating
results or liquidity gross of any anticipated insurance recoveries of the
Company.

9. EMPLOYEE BENEFIT PLAN

The Company created a defined benefit pension plan for its eligible
employees in 1995. The Plan currently includes two participants, the Company's
stockholder and his spouse. Benefits vest incrementally over six years of
participation and distribution from the plan is payable upon normal retirement
date or death. Benefits are based on years of service and compensation subject
to certain maximum limitations. No contribution was made to the Plan during
1995.

The accumulated benefit obligation (all vested) and projected benefit
obligation at December 31, 1995 amounted to $37,589 and $58,171, respectively.
There are no plan assets.

F-28
<PAGE> 103

FERTILITY CENTER OF NORTHERN NEW JERSEY, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 1996 (UNAUDITED), DECEMBER 31, 1995 AND 1994

For the plan year ended December 31, 1995, net periodic pension cost which
consisted of service cost, amounted to $58,171. The weighted average discount
rate used in calculating the projected benefit obligation at December 31, 1995
is 6%. The assumed rate of increase in future compensation levels is 3%.

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of all financial instruments approximates carrying value at
December 31, 1994 and 1995 and at March 31, 1996.

11. SUBSEQUENT EVENT

The Company's sole shareholder executed a definitive agreement to sell all
of the nonmedical assets of the Company to GynCor, Inc. in April 1996 and the
sale was closed on May 1, 1996. Simultaneous with the sale, it is anticipated
that the Company will enter into a 40 year clinic services agreement with
GynCor, Inc.

F-29
<PAGE> 104

REPORT OF INDEPENDENT AUDITORS

To the Shareholder
A Center for Gynecology, P.A.

We have audited the accompanying balance sheet of A Center for Gynecology,
P.A. as of December 31, 1995, and the related statements of operations and
retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of A Center for Gynecology,
P.A. at December 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.

/s/ ERNST & YOUNG LLP

March 13, 1996
Chicago, Illinois

F-30
<PAGE> 105

A CENTER FOR GYNECOLOGY, P.A.

BALANCE SHEETS

DECEMBER 31, MARCH 31,
1995 1996
---------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................... $ 59 $ 23,551
Receivables:
Patients (net of allowance for doubtful accounts of $195,000 in
1995 and $193,123 in 1996)..................................... 365,227 291,545
Other........................................................... 6,100 6,386
Prepaid expenses and other......................................... 15,492 11,000
-------- ---------
Total current assets.......................................... 386,878 332,482
Property and equipment, less accumulated depreciation of $438,891 in
1995 and $450,853 in 1996.......................................... 390,158 369,344
Covenant not to compete, less accumulated amortization of $25,732 in
1995 and $28,384 in 1996........................................... 27,298 24,646
Deposits............................................................. 6,783 6,783
-------- ---------
Total assets.................................................. $811,117 $ 733,255
======== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
(NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable................................................... $166,626 $ 281,563
Current portion of long-term debt.................................. 183,930 184,423
Notes payable to stockholder....................................... -- 8,000
Accrued liabilities................................................ 78,448 73,324
-------- ---------
Total current liabilities..................................... 429,004 547,310
Long-term liabilities:
Long-term debt, less current portion............................... 387,757 354,758
Deferred income taxes.............................................. 1,764 --
-------- ---------
Total long-term liabilities................................... 389,521 354,758
-------- ---------
Total liabilities............................................. 818,525 902,068
-------- ---------
Stockholders' equity (net capital deficiency):
Common stock, $5 par value; 100 shares authorized; 100 shares
issued and outstanding, including shares in treasury............ 500 500
Additional paid-in capital......................................... 2,452 2,452
Retained earnings (accumulated deficit)............................ 39,640 (121,765)
-------- ---------
42,592 (118,813)
Treasury stock, at cost -- 50 shares (purchased during 1995)....... (50,000) (50,000)
-------- ---------
Total stockholder's equity (net capital deficiency)........... (7,408) (168,813)
-------- ---------
$811,117 $ 733,255
======== =========
</TABLE>

See accompanying notes to financial statements.

F-31
<PAGE> 106

A CENTER FOR GYNECOLOGY, P.A.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT)

<TABLE>
<CAPTION>
THREE MONTH
PERIOD ENDED
YEAR ENDED MARCH 31, 1996
DECEMBER 31, 1995 --------------
----------------- (UNAUDITED)
<S> <C> <C>
Revenue:
Net patient service revenue.................................. $ 3,107,853 $ 543,203
Other revenue................................................ 27,124 --
----------- ----------
Total revenue............................................. 3,134,977 543,203
Operating expenses:
Officer salaries............................................. 1,150,311 162,500
Clinic salaries and wages.................................... 692,050 100,288
Benefits and payroll taxes................................... 83,511 49,851
Clinic rent and lease expense................................ 228,925 54,251
Clinic supplies.............................................. 271,796 69,647
Other clinic expenses........................................ 152,785 22,430
General corporate expenses................................... 454,558 195,736
Depreciation and amortization................................ 125,998 31,329
----------- ----------
Total operating expenses.................................. 3,186,429 686,032
----------- ----------
Operating loss................................................. (24,957) (142,829)
Interest expense............................................... 26,495 20,340
----------- ----------
Loss before income taxes (benefit)............................. (51,452) (163,169)
Income taxes (benefit)....................................... (24,236) (1,764)
----------- ----------
Net loss.................................................. (27,216) (161,405)
Retained earnings, beginning of year........................... 66,856 39,640
----------- ----------
Retained earnings (accumulated deficit), end of year........... $ 39,640 $ (121,765)
=========== ==========
</TABLE>

See accompanying notes to financial statements.

F-32
<PAGE> 107

A CENTER FOR GYNECOLOGY, P.A.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, MARCH 31,
1995 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
Operating Activities:
Net loss........................................................... $ (27,216) $ (161,405)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 125,998 31,329
Deferred taxes.................................................. (24,236) (1,764)
Equipment transferred as compensation........................... 11,500 10,000
Changes in operating assets and liabilities:
Receivables, net.............................................. (60,014) 73,396
Prepaid expenses and other.................................... 2,660 4,492
Accounts payable.............................................. 13,092 114,937
Accrued liabilities........................................... (14,590) (5,124)
--------- ---------
Net cash provided by operating activities.................. 27,194 65,861
Investing activities:
Purchase of property and equipment................................. (243,576) (17,863)
--------- ---------
Net cash used in investing activities...................... (243,576) (17,863)
Financing activities:
(Repayments to) loans from Stockholder............................. (67,914) 8,000
Purchase of treasury stock......................................... (50,000) --
Proceeds from long-term debt....................................... 400,000 --
Principal payments on long-term debt............................... (68,689) (32,506)
--------- ---------
Net cash provided by (used in) financing activities........ 213,397 (24,506)
--------- ---------
Decrease (Increase) in cash.......................................... (2,985) 23,492
Cash at beginning of year............................................ 3,044 59
--------- ---------
Cash at end of year.................................................. $ 59 $ 23,551
========= =========
</TABLE>

See accompanying notes to financial statements.

F-33
<PAGE> 108

A CENTER FOR GYNECOLOGY, P.A.

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995

1. ORGANIZATION

A Center for Gynecology, P.A. (the "Company") was incorporated under the
Professional Services Corporation Act on November 28, 1988 in the state of
Florida. The Company was incorporated under the name Fertility Institute of West
Florida, P.A. and changed to its current name effective July 29, 1993. The
Company provides various services in the field of reproductive medicine to
patients in the Tampa/ St. Petersburg metropolitan area.

2. SIGNIFICANT ACCOUNTING POLICIES

Property and Equipment

Property and equipment, which principally consists of medical office
equipment and leasehold improvements, are stated at cost. Depreciation of
property and equipment is calculated using the straight-line method over the
estimated useful lives of the assets, which range from 5 to 7 years. The Company
amortizes leasehold improvements over 10 years, the remaining life of the lease,
including options to renew.

Covenant Not to Compete

Amortization of covenant not to compete is calculated using the
straight-line method over five years, which is the term of the underlying
agreement.

Net patient service revenue

Net patient service revenue is reported at the estimated realizable amounts
from patients and various third-party payors for services rendered. The Company
has negotiated agreements with certain managed care and health maintenance
organizations (HMO's) which provide for revenues based on a fee schedule or
capitated basis. For patient and third-party payors on a fee-for-service or fee
schedule basis, revenue is recognized when services are performed for the
patient. For capitated agreements, revenue is recognized by the Company based on
a fixed fee per enrollee member per month in the capitated plan.

Income taxes

Use of Estimates

F-34
<PAGE> 109

A CENTER FOR GYNECOLOGY, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995

3. LONG-TERM DEBT

Long-term debt consists of the following at December 31, 1995 and March 31,
1996 (unaudited):

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
Installment note due South Trust Bank of West Florida;
payable in monthly principal installments of $6,666 through
October 31, 2000, with variable interest rate (9.25% at
December 31, 1995 and March 31, 1996), and collateralized
by substantially all the assets of the Company............. $ 386,668 $ 373,336
Promissory note due AMI Town and Country Hospital; payable in
monthly principal and interest installments of $4,272
through October 1, 1997, including interest at 8%, and
personally guaranteed by the stockholder of the Company.... 87,153 76,005
Other promissory notes related to acquisition of medical
practice assets; payable in quarterly principal
installments of $10,000 through June 30, 1998, with
interest imputed at 8%, and collateralized by accounts
receivable and certain tangible property of the Company.... 97,866 89,840
--------- ---------
571,687 539,181
Less amounts due within one year............................. (183,930) (184,423)
--------- ---------
$ 387,757 $ 354,758
========= =========
</TABLE>

The following is a schedule of principal maturities of long-term debt as of
December 31, 1995 and March 31, 1996 (unaudited):

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
1996.......................................................... $183,930 $ 184,423
1997.......................................................... 141,653 138,267
1998.......................................................... 99,438 89,824
1999.......................................................... 80,000 80,000
2000.......................................................... 66,666 46,667
-------- --------
$571,687 $ 539,181
======== ========
</TABLE>

4. INCOME TAXES

Income tax benefit for the year ended December 31, 1995 and the three month
period ended March 31, 1996 (unaudited) is as follows:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
Deferred:
Federal..................................................... $(22,336) $(1,626)
State....................................................... (1,900) (138)
-------- -------
$(24,236) $(1,764)
======== =======
</TABLE>

F-35
<PAGE> 110

A CENTER FOR GYNECOLOGY, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995

A reconciliation between income taxes (benefit) and the amount computed by
applying the statutory federal income tax rate of 35% to income (loss) before
income taxes is as follows:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
Income taxes (benefit) at statutory federal rate.............. $(18,008) $ (57,109)
State taxes................................................... (1,868) (5,924)
Net operating tax loss carryforwards and other not
recognized.................................................. -- 61,269
Other -- net.................................................. (4,360) --
-------- --------
$(24,236) $ (1,764)
======== ========
</TABLE>

Significant components of the Company's deferred tax assets and liabilities
as of December 31, 1995 and (unaudited) March 31, 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
Net operating tax loss carryforwards......................... $ -- $ 44,067
Accounts receivable.......................................... (125,764) (119,172)
Accounts payable............................................. 121,000 141,955
Other........................................................ 3,000 (18,144)
--------- ---------
(1,764) 48,706
Less valuation allowance..................................... -- (48,706)
--------- ---------
$ (1,764) $ --
========= =========
</TABLE>

5. OPERATING LEASE

The Company entered into a ten year lease agreement on July 1, 1993 to
lease office space from its stockholder. Total rent expense for 1995 was
approximately $228,925 and for the three months ended March 31, 1996 was
approximately $50,979. The following is a schedule of future minimum lease
payments under operating leases as of (unaudited) March 31, 1996:

<TABLE>
<S> <C>
1996.............................................................. $ 100,710
1997.............................................................. 134,280
1998.............................................................. 150,252
1999.............................................................. 166,220
2000.............................................................. 166,220
Thereafter........................................................ 415,552
----------
$1,133,234
==========
</TABLE>

6. EMPLOYMENT CONTRACTS

The Company has entered into individual employment contracts with certain
physicians and employees, some of whom are officers and/or stockholders of the
Company. The contracts provide for base salaries ranging from $44,000 to
$400,000 plus fringe benefits. Certain contracts also provide for compensation
and incentive bonuses based on collected revenues.

The employment contracts include covenants not to compete with the Company
for periods of two to three years subsequent to termination of employment. The
employment contracts are currently for initial

F-36
<PAGE> 111

A CENTER FOR GYNECOLOGY, P.A.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995

terms of one to five years and are automatically extended for additional
one-year periods until terminated by either party.

7. MAJOR CUSTOMER

The Company and the stockholder have an agreement with a managed care
organization, of which the stockholder is an employee, whereby fixed monthly
payments are received by the Company based on the number of managed care
organization enrollees (capitation contract). Revenue generated from this
capitation contract accounts for 29% and 6% of total net patient service revenue
for the year ended December 31, 1995 and the three months ended March 31, 1996,
respectively.

8. CONTINGENCIES

The Company maintains professional liability insurance coverage on a claims
made basis. Coverage limits prior to August 1, 1995 were $1,000,000 per claim
and $3,000,000 annual aggregate. Coverage limits beginning August 1, 1995 were
$250,000 per claim and $750,000 annual aggregate. The Company's stockholder is
provided additional professional liability insurance in the amount of $1,000,000
per claim for services rendered in connection with its capitation contract at
the expense of the managed care organization. As of March 31, 1996 there were no
asserted professional liability claims against the Company; accordingly, no
amounts for potential losses have been accrued in the accompanying financial
statements. The Company has not accrued a loss for unreported incidents, or for
losses gross of insurance coverage, as the amount, if any, cannot be reasonably
estimated at this time and the probability of an adverse outcome cannot be
determined at this time. It is the opinion of management that the ultimate
resolution of any unasserted claims will not have a material adverse effect on
the financial position, operating results or liquidity gross of any anticipated
insurance recoveries of the Company.

9. PROFIT SHARING PLAN

The Company elected to terminate its profit sharing plan effective December
31, 1995. Contributions of approximately $53,500 were made by the Company in
1995 for the 1994 plan year. No contributions were made nor are due for the 1995
plan year. The Company is awaiting qualification from the Internal Revenue
Service on its termination plan.

10. SUBSEQUENT EVENT

The Company's sole shareholder executed a definitive agreement to sell all
of the nonmedical assets of the Company to GynCor, Inc. in 1996. Simultaneous
with the sale, it is anticipated that the Company will enter into a 40 year
management services agreement with GynCor, Inc.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of all financial instruments approximates carrying value at
December 31, 1995 and March 31, 1996.

F-37
<PAGE> 112
[PICTURE]

Pictured are former patients and their children celebrating with the Company the
tenth anniversary of its Infertility Program.

LIFE CYCLE OF REPRODUCTIVE MEDICINE

FEMALE CARE NEEDS TIME LINE
Age-----------------------------------------------------------------------------
| | | | |
0 20 40 60 80

REPRODUCTIVE ENDOCRINOLOGY
ART & MICROMANIPULATION
PERINATOLOGY
ENDOSCOPIC SURGERY
OBSTETRICS AND GYNECOLOGY
LAB SERVICES
UROLOGY

MALE CARE NEEDS TIME LINE
Age-----------------------------------------------------------------------------
| | | | |
0 20 40 60 80

REPRODUCTIVE ENDOCRINOLOGY
LAB SERVICES
UROLOGY

<PAGE> 113

------------------------------------------------------
------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF
COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 8
The Company............................. 14
Use of Proceeds......................... 15
Dividend Policy......................... 15
Dilution................................ 16
Capitalization.......................... 17
Selected Combined and Pro Forma
Financial Data........................ 18
Unaudited Pro Forma Combined Financial
Information........................... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 27
Business................................ 37
Management.............................. 51
Certain Transactions.................... 61
Principal and Selling Stockholders...... 66
Description of Capital Stock............ 67
Shares Eligible for Future Sale......... 69
Underwriting............................ 71
Legal Matters........................... 72
Experts................................. 72
Additional Information.................. 72
Index to Combined Financial
Statements............................ F-1
</TABLE>

------------------

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

------------------------------------------------------
------------------------------------------------------

2,220,000 SHARES

GYNCOR INC LOGO

COMMON STOCK

------------------
PROSPECTUS
, 1996

------------------

SMITH BARNEY INC.

THE CHICAGO CORPORATION

------------------------------------------------------
------------------------------------------------------
<PAGE> 114

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions and discounts) payable by the
Company in connection with the issuance and distribution of the Common Stock
pursuant to the Prospectus contained in this Registration Statement. The Company
will pay all of these expenses.

<TABLE>
<CAPTION>
APPROXIMATE
AMOUNT
-----------
<S> <C>
Securities and Exchange Commission registration fee............... $ 13,206
NASD filing fee................................................... 4,330
Nasdaq National Market listing fee................................ 34,136
Accountants fees and expenses..................................... 600,000
Blue Sky fees and expenses........................................ 20,000
Legal fees and expenses........................................... 450,000
Transfer Agent and Registrar fees and expenses.................... 2,000
Printing and engraving expenses................................... 125,000
Directors' and officers' liability insurance premiums............. 133,000
Miscellaneous expenses............................................ 18,328
----------
Total........................................................ $ 1,400,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article XII of the Company's Certificate of Incorporation provides that the
Company shall indemnify, to the fullest extent permitted by the DGCL, any person
who is or was a director, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or if such person has previously been
designated for indemnification by resolution of the Board of Directors, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Company, provided, however, that
indemnification shall only be made upon a determination that such director,
officer, employee or agent has met the applicable standard of conduct as
determined (1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, or (2) if such a
quorum is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (3)
by the stockholders of the Company. Notwithstanding the foregoing, the Company
shall not be obligated to pay expenses incurred by a director or officer with
respect to any threatened or pending claim, suit or action, whether civil,
criminal, administrative, investigative or otherwise initiated or brought
voluntarily by a director or officer and not by way of defense without the prior
written consent of the Company.

In addition, Article XII provides that no director of the Company shall be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, as the same
exists or hereafter may be amended, or (iv) for any transaction from which the
director derived an improper personal benefit.

Reference is made to Section 145 of the General Corporation Law of the
State of Delaware which provides for indemnification of directors and officers
in certain circumstances.

II-1
<PAGE> 115

The Company has obtained an insurance policy which will entitle the Company
to be reimbursed for certain indemnity payments it is required or permitted to
make to its directors and officers.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The undersigned has sold the unregistered securities described below within
the past three years without registering the securities under the Securities Act
of 1933, as amended:

In connection with the reorganization of a predecessor corporation on March
1, 1995, shares of Common Stock of the undersigned were issued as follows:
Norbert Gleicher, M.D., the Chief Executive Officer, President and a Director of
the Company, purchased 800 shares of Common Stock for $800; Donna Pratt, M.D.,
the Vice President of Medical Affairs and a Director of the Company, purchased
200 shares of Common Stock for $200; Charles E. Miller, M.D., the Medical
Director and Director of Endoscopic Surgery of the Company, purchased 145 shares
of Common Stock for $145; and Vishvanath Karande, M.D., purchased one share of
common stock for $1.00.

On March 21, 1995, John S. Rinehart, M.D. purchased 31 shares of Common
Stock for $31.

On June 13, 1995, Marybeth Gerrity, Ph.D., the Senior Vice President of
Operations and Development of the Company, purchased 12 shares for $12.

On December 1, 1995, the Company issued a 10% subordinated convertible
promissory note in the original principal amount of $5,000,000 due December 1,
2000. Up to $2,500,000 of the convertible note is convertible, in whole or in
part, at any time in increments of no less than $500,000, into a number of
shares of Common Stock equal to 1% of the number of shares of outstanding Common
Stock per $500,000 of principal amount to be converted on the date of such
conversion.

On March 31, 1996, the Company issued 50,000 shares of Common Stock to
Marybeth Gerrity, Ph.D. in satisfaction of outstanding stock options.

On May 1, 1996, the Company issued 71,654 shares to Fertility Center of
Northern New Jersey, P.A., with the right to receive an additional 29,778 shares
upon completion of this offering and the attainment of certain financial
targets, in exchange for all of the nonmedical assets of such company. This
transaction was pursuant to an Asset Transfer and Reorganization Agreement,
dated April 10, 1996, and the purchaser finalized its investment decision on
such date.

On May 1, 1996, the Company issued 107,480 shares to A Center for
Gynecology, P.A., with the right to receive an additional 3,157 shares upon
completion of this offering, in exchange for all of the nonmedical assets of
such company. This transaction was pursuant to an Asset Transfer and
Reorganization Agreement, dated March 17, 1996, and the purchaser finalized its
investment decision on such date.

All of the issuances of unregistered securities described above were made
pursuant to Section 4(2) of the Securities Act of 1933, as amended.

II-2
<PAGE> 116

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

See "Exhibit Index" on page II-6 hereof, following the signature page.

(b) Financial Statement Schedules

Report of Independent Auditors
Schedule II Valuation and Qualifying Accounts

ITEM 17. UNDERTAKINGS

The Registrant hereby undertakes:

(1) To provide to the Underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.

(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the applicable provisions of the DGCL, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(3) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-3
<PAGE> 117

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
and State of Illinois on the 28th day of June, 1996.

GYNCOR, INC.

By: /s/ NORBERT GLEICHER, M.D.
------------------------------------
Norbert Gleicher, M.D.
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on June 28, 1996.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------- --------------------------------------------
<C> <S>
/s/ NORBERT GLEICHER, M.D. President, Chief Executive Officer
- -------------------------------------------- (Principal Executive Officer) and a Director
Norbert Gleicher, M.D.

/s/ ROBERT J. BUKALA Senior Vice President and Chief Financial
- -------------------------------------------- Officer (Principal Financial and Accounting
Robert J. Bukala Officer)

* Vice President of Medical Affairs and a
- -------------------------------------------- Director
Donna Pratt, M.D.

* Director
- --------------------------------------------
Brian A. Kennedy

* Director
- --------------------------------------------
Uri Elkayam, M.D.

* Director
- --------------------------------------------
Yehuda Yoked

*By: /s/ ROBERT J. BUKALA
- --------------------------------------------
ROBERT J. BUKALA
Attorney-in-Fact
</TABLE>

II-4
<PAGE> 118

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated March 22, 1996, except for the first and second
paragraphs of Note 9 as to which the date is June 5, 1996, and the first, third,
and fourth paragraphs of Note 17 as to which the date is May 1, 1996 for GynCor,
Inc., and March 13, 1996, for A Center for Gynecology, P.A., and March 11, 1996
for Fertility Center of Northern New Jersey, P.A., in the Registration Statement
(Form S-1 No. 333-3936) and related Prospectus of GynCor, Inc. for the
registration of 2,220,000 shares of common stock.

/s/ ERNST & YOUNG LLP

Chicago, Illinois

June 28, 1996

II-5
<PAGE> 119

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<C> <S>
* 1 Form of Underwriting Agreement among the Company, the Selling Stockholders, Smith
Barney Inc. and The Chicago Corporation.
* 2.1 Asset Transfer and Reorganization Agreement, dated March 17, 1996 among GynCor,
Inc., A Center for Gynecology, P.A. and Edward Zbella, M.D.
* 2.2 Asset Transfer and Reorganization Agreement, dated April 10, 1996 among GynCor,
Inc., Fertility Center of Northern New Jersey, P.A. and Daniel Navot, M.D.
* 2.3 Asset Transfer Agreement dated June 5, 1996, between GynCor, Inc. and The Center for
Human Reproduction -- Illinois, M.D.S.C.
* 3.1 Certificate of Incorporation of the Company.
* 3.2 By-Laws of the Company.
* 4.1 Specimen stock certificate representing Common Stock.
* 5 Opinion of Katten Muchin & Zavis as to the legality of the securities being
registered (including consent)
*10.1 Comprehensive Infertility Care Service Agreement dated January 1, 1996 between
Health Care Service Corporation d/b/a HMO Illinois and The Center for Human
Reproduction. (Confidential treatment requested as to certain provisions.)
*10.2 GynCor, Inc. Incentive Compensation Plan.
*10.3 GynCor, Inc.'s Nonemployee Directors' Stock Option Plan.
*10.4 Management Services Agreement, dated April 1, 1996 between GynCor, Inc. and The
Center for Human Reproduction -- Illinois, M.D.S.C.
*10.5 Management Services Agreement, dated April 1, 1996 between GynCor, Inc. and The
Center for Human Reproduction -- Perinatal, M.D.S.C.
*10.6 Management Services Agreement, dated April 1, 1996 between GynCor, Inc. and The
Center for Human Reproduction -- Endoscopic, M.D.S.C.
*10.7 Form of Management Services Agreement to be entered into between GynCor, Inc. and
The Center for Human Reproduction -- Florida, Inc.
*10.8 Form of Management Services Agreement to be entered into between GynCor, Inc. and
The Center for Human Reproduction -- New York, P.C.
*10.9 Form of Management Services Agreement to be entered into between GynCor, Inc. and
The Center for Human Reproduction -- New Jersey, P.C.
*10.10 Affiliation Agreement dated March 19, 1996 among GynCor, Inc., The Center for Human
Reproduction -- New York, P.C. and Columbia University Medical School.
*10.11 Form of Affiliation Agreement to be entered into among GynCor, Inc., The Center for
Human Reproduction -- Florida, Inc. and the University of South Florida Medical
School.
*10.12 Medical Director Agreement dated March 19, 1996 between Columbia University Medical
School and Mark V. Sauer, M.D.
*10.13 750 N. Orleans Lease, as amended, dated July 13, 1994 by and between The Union
Central Life Insurance Company and Gleicher Pratt & Associates, M.D.S.C.
*10.14 Form of lease for Columbia University Medical School.
*10.15 Amended and Restated Employment Agreement dated April 1, 1996 between GynCor, Inc.
and Norbert Gleicher, M.D.
*10.16 Amended and Restated Employment Agreement dated April 1, 1996 by and between GynCor,
Inc. and Donna Pratt, M.D.
*10.17 Amended and Restated Employment Agreement dated April 1, 1996 by and between GynCor,
Inc. and Marybeth Gerrity, Ph.D.
*10.18 Employment Agreement dated April 1, 1996 by and between GynCor, Inc. and Robert J.
Bukala.
</TABLE>

II-6
<PAGE> 120

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<C> <S>
*10.19 Employment Agreement dated April 1, 1996 by and between GynCor, Inc. and Michael L.
Gonzales.
*10.20 Form of Executive Employment Agreement to be entered into between GynCor, Inc. and
Edward Zbella, M.D.
*10.21 Form of Executive Employment Agreement to be entered into between GynCor, Inc. and
Daniel Navot, M.D.
*10.22 Employment Agreement dated April 1, 1996 between The Center for Human
Reproduction -- Illinois, M.D.S.C. and Norbert Gleicher, M.D.
*10.23 Employment Agreement dated April 1, 1996 by and between The Center for Human
Reproduction -- Illinois, M.D.S.C. and Donna Pratt, M.D.
*10.24 Employment Agreement dated April 1, 1996 between The Center for Human
Reproduction -- Illinois, M.D.S.C. and Charles Miller, M.D.
*10.25 Employment Agreement dated April 1, 1996 between The Center for Human
Reproduction -- Illinois, M.D.S.C. and Vishvanath Karande, M.D.
*10.26 Employment Agreement dated April 1, 1996 between The Center for Human
Reproduction -- Illinois, M.D.S.C. and John Rinehart, M.D., Ph.D.
*10.27 Employment Agreement dated April 1, 1996 between The Center for Human
Reproduction -- Endoscopic, M.D.S.C. and Charles Miller, M.D.
*10.28 Form of Employment Agreement to be entered into between The Center for Human
Reproduction -- Florida, Inc. and Edward Zbella, M.D.
*10.29 Form of Employment Agreement to be entered into between The Center for Human
Reproduction -- New Jersey, P.C. and Daniel Navot, M.D.
*10.30 Guaranty Agreement dated April 1, 1996 between GynCor, Inc. and Norbert Gleicher,
M.D.
*10.31 Guaranty Agreement dated April 1, 1996 between GynCor, Inc. and Donna Pratt, M.D.
*10.32 Guaranty Agreement dated April 1, 1996 between GynCor, Inc. and Charles Miller, M.D.
for CHR-Illinois employment agreement
*10.33 Amended and Restated Stock Option Agreement dated March 31, 1996 between Norbert
Gleicher, M.D., GynCor, Inc. and Vishvanath Karande, M.D.
*10.34 Amended and Restated Option Agreement dated March 31, 1996 among Charles Miller,
M.D., Norbert Gleicher, M.D. and Donna Pratt, M.D.
*10.35 Option Agreement dated June 13, 1995 between Gleicher, Pratt, Miller, Karande &
Associates I, Inc. and Marybeth Gerrity, Ph.D.
*10.36 Option Agreement effective May 1, 1996 between Daniel Navot, M.D. and Norbert
Gleicher, M.D.
*10.37 Voting Trust Agreement dated April 1, 1996 between Norbert Gleicher, M.D. and
Charles Miller, M.D.
*10.38 Voting Trust Agreement dated April 1, 1996 between Norbert Gleicher, M.D. and Donna
Pratt, M.D.
*10.39 Form of Indemnification Agreement for GynCor, Inc. Officers and Directors.
*10.40 Gleicher, Pratt & Associates I, Inc. Organization and Shareholders Agreement dated
March 1, 1995 among Norbert Gleicher, M.D., Donna Pratt, M.D., Charles Miller, M.D.,
and Vishvanath Karande, M.D.
*10.41 Form of Shareholders Agreement to be entered into among GynCor, Inc. and certain of
its stockholders.
*10.42 Form of GynCor Stock Escrow Agreement to be entered into among GynCor, Inc., Edward
A. Zbella, M.D. and American National Bank and Trust Company of Chicago, as escrow
agent.
*10.43 Form of GynCor Stock Escrow Agreement to be entered into among GynCor, Inc., Daniel
Navot, M.D. and American National Bank and Trust Company of Chicago, as trustee.
</TABLE>

II-7
<PAGE> 121

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<C> <S>
*10.44 Note Purchase Agreement between Gleicher, Pratt, Miller, Karande & Associates I,
Inc. and Nichold Company dated December 1, 1995.
*10.45 10% Subordinated Promissory Note between Gleicher, Pratt, Miller, Karande &
Associates I, Inc. and Nichold Company in the principal amount of $5,000,000 and
form of amendment to be entered into between the parties.
*10.46 Demand Note Agreement, dated December 31, 1995 among Gleicher, Pratt, Miller,
Karande & Associates I, Inc., Endoscopic Surgery, M.D.S.C., Gleicher, Pratt, Miller
& Karande Perinatal Associates, M.D.S.C., Norbert Gleicher, M.D., Donna Pratt, M.D.
and Charles Miller, M.D.
*10.47 Promissory Note dated October 4, 1995 between James F. Bonick and Donna E.
Pratt-Bonick, M.D., and the Company.
*10.48 Deferral Agreement dated April 1, 1996 by and between James F. Bonick and Donna E.
Pratt-Bonick, M.D., and The Center for Human Reproduction-Illinois, M.D.S.C.
*10.49 Registration Rights Agreement dated April 30, 1996 among GynCor, Inc., Donna Pratt,
M.D., Charles Miller, M.D. and Vishvanath Karande, M.D.
*10.50 Loan and Security Agreement dated February 23, 1996 between American National Bank
and Trust Company of Chicago, GynCor, Inc., Gleicher, Pratt, Miller, Karande &
Associates, M.D.S.C., Gleicher, Pratt, Miller, Karande Perinatal Associates,
M.D.S.C. and Endoscopic Surgery, M.D.S.C.
*10.51 Promissory Note (Line of Credit) dated February 1996 between GynCor, Inc., Gleicher,
Pratt, Miller, Karande & Associates, M.D.S.C., Gleicher, Pratt, Miller, Karande
Perinatal Associates, M.D.S.C., Endoscopic Surgery, M.D.S.C., and American National
Bank and Trust Company of Chicago.
*10.52 Guaranty dated February 23, 1996 between American National Bank and Trust Company of
Chicago and Norbert Gleicher, M.D.
*10.53 Guaranty dated February 23, 1996 between American National Bank and Trust Company of
Chicago and Donna E. Pratt, M.D.
*10.54 Guaranty dated February 23, 1996 between American National Bank and Trust Company of
Chicago and Charles Miller, M.D.
*10.55 Guaranty dated February 23, 1996 between American National Bank and Trust Company of
Chicago and Vishvanath C. Karande, M.D.
*10.56 Amendment to Gleicher, Pratt & Associates I, Inc. Organization and Shareholders
Agreement dated March 31, 1996 among Norbert Gleicher, M.D., Donna Pratt, M.D.,
Charles Miller, M.D., Vishvanath Karande, M.D., John S. Rinehart, M.D., Marybeth
Gerrity, Ph.D. and Donna Havemann.
*10.57 2301 Howard Street Office Building Lease.
*10.58 Guaranty Agreement dated April 1, 1996 between GynCor, Inc. and Charles Miller, M.D.
for CHR-Endoscopic employment agreement.
*10.59 Form of Madison Avenue Office Building Lease.
11 Statement Regarding Computation of Earnings Per Share.
23.1 Consent of Ernst & Young LLP. (included on page II-5 of this Registration Statement)
23.2 Consent of Katten Muchin & Zavis (contained in its opinion previously filed as
Exhibit 5 hereto).
*24 Power of Attorney (see signature page).
*27.1 Financial Data Schedule for the twelve months ended June 30, 1995.
27.2 Financial Data Schedule for the six months ended December 31, 1995.
27.3 Financial Data Schedule for the three months ended March 31, 1996.
</TABLE>

- -------------------------

* Previously filed.

II-8
<PAGE> 122

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
GynCor, Inc.

We have audited the financial statements of GynCor, Inc. as of June 30,
1994 (consolidated), June 30, 1995 (combined), and December 31, 1995 (combined),
and for the years ended June 30, 1993, 1994 and 1995, and the six-month period
ended December 31, 1995, and have issued our report thereon dated March 22,
1996, except for the first and second paragraphs of Note 9, as to which the date
is June 5, 1996, and the first, third, and fourth paragraphs of Note 17 as to
which the date is May 1, 1996 (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedule listed in
Item 16(b) of this Registration Statement. This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

Chicago, Illinois
March 22, 1996

except for the first and second paragraphs
of Note 9 as to which the date is June 5, 1996,
and the first, third, and fourth paragraphs of
Note 17 as to which the date is May 1, 1996

S-1
<PAGE> 123

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

GYNCOR, INC.

<TABLE>
<CAPTION>
ADDITIONS
-------------------------
CHARGED TO
OTHER
BALANCE AT CHARGED TO ACCOUNTS DEDUCTIONS BALANCE AT
BEGINNING OF COSTS AND -- -- END OF
PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED
DECEMBER 31, 1995
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful
accounts.................... $ 756,000 $163,000 $ -- $329,000(1) $ 590,000
Deferred taxes -- valuation
allowance................... 637,000 230,000 -- -- 867,000
----------- -------- -------- -------- ----------
$ 1,393,000 $393,000 $ -- $329,000 $1,457,000
----------- -------- -------- -------- ----------
YEAR ENDED JUNE 30, 1995
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful
accounts.................... $ 492,000 $269,000 $ -- $ 5,000(1) $ 756,000
Deferred taxes -- valuation
allowance................... -- 637,000(3) -- -- 637,000
----------- -------- -------- -------- ----------
$ 492,000 $906,000 $ -- $ 5,000 $1,393,000
----------- -------- -------- -------- ----------
YEAR ENDED JUNE 30, 1994
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful
accounts.................... $ 227,000 $115,000 $280,000(2) $130,000(1) $ 492,000
Deferred taxes -- valuation
allowance................... -- -- -- -- --
----------- -------- -------- -------- ----------
$ 227,000 $115,000 $280,000 $130,000 $ 492,000
</TABLE>

- -------------------------
(1) Write offs, net of recoveries.

(2) Effective June 30, 1994, the Company acquired the assets, subject to certain
liabilities, of CHR-NW.

(3) The increase in the valuation allowance resulted primarily from the increase
in the net operating tax loss carryforwards and cash basis of accounting for
income taxes.

S-2

<PAGE> 1

EXHIBIT 11

STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS

<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED
SIX MONTH PERIOD MARCH 31,
YEAR ENDED YEAR ENDED YEAR ENDED ENDED --------------------------
JUNE 30, 1993 JUNE 30, 1994 JUNE 30, 1995 DECEMBER 31, 1995 1995 1996
------------- ------------- ------------- ----------------- ----------- -----------
(COMBINED) (COMBINED) (COMBINED) (COMBINED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Historical:
Weighted average
common shares
outstanding........ 3,333,333 3,333,333 3,671,508 3,966,666 3,428,409 3,967,124
Net effect of stock
options............ 32,111 32,111 32,111 370,218 370,218 370,061
---------- ---------- ------------ ---------- ------------ ------------
Total................ 3,365,444 3,365,444 3,703,619 4,336,884 3,798,627 4,337,185
========== ========== ============ ========== ============ ============
Net income (loss).... $ 318,594 $ 462,564 $(2,358,951) $(236,397) $(1,350,483) $(2,269,983)
========== ========== ============ ========== ============ ============
Net income (loss) per
share.............. $ 0.09 $ 0.14 $ (0.64) $ (0.05) $ (0.36) $ (0.52)
========== ========== ============ ========== ============ ============
</TABLE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS DATED JUNE 7, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH REGISTRATION STATEMENT S-1 DATED JUNE 7, 1996.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 132,965
<SECURITIES> 0
<RECEIVABLES> 4,526,066
<ALLOWANCES> 590,000
<INVENTORY> 467,614
<CURRENT-ASSETS> 5,935,691
<PP&E> 6,461,195
<DEPRECIATION> 1,947,630
<TOTAL-ASSETS> 11,614,395
<CURRENT-LIABILITIES> 6,347,242
<BONDS> 5,000,000
0
0
<COMMON> 0
<OTHER-SE> (1,701,760)
<TOTAL-LIABILITY-AND-EQUITY> 11,614,395
<SALES> 12,059,876
<TOTAL-REVENUES> 12,059,876
<CGS> 0
<TOTAL-COSTS> 11,968,480
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 163,000
<INTEREST-EXPENSE> 164,793
<INCOME-PRETAX> (236,397)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (236,397)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)

</TABLE>

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 655,437
<SECURITIES> 0
<RECEIVABLES> 5,366,136
<ALLOWANCES> 623,000
<INVENTORY> 482,644
<CURRENT-ASSETS> 7,280,263
<PP&E> 6,673,477
<DEPRECIATION> 2,142,511
<TOTAL-ASSETS> 13,938,072
<CURRENT-LIABILITIES> 9,014,895
<BONDS> 5,000,000
0
0
<COMMON> 0
<OTHER-SE> (1,971,943)
<TOTAL-LIABILITY-AND-EQUITY> 13,938,072
<SALES> 5,978,921
<TOTAL-REVENUES> 5,978,921
<CGS> 0
<TOTAL-COSTS> 8,032,547
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 33,000
<INTEREST-EXPENSE> 183,357
<INCOME-PRETAX> (2,269,983)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,269,983)
<EPS-PRIMARY> (.52)
<EPS-DILUTED> (.52)

</TABLE>