<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 17, 1996
REGISTRATION NO. 333-07643
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
--------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
PATIENT INFOSYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8090 16-1476509
(State of other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
</TABLE>
46 PRINCE STREET
ROCHESTER, NEW YORK 14607
(716) 242-7200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
MR. DONALD A. CARLBERG
PRESIDENT AND CHIEF EXECUTIVE OFFICER
46 PRINCE STREET
ROCHESTER, NEW YORK 14607
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
Jeffrey A. Baumel, Esq. Frederick W. Kanner, Esq.
Crummy, Del Deo, Dolan, Dewey Ballantine
Griffinger & Vecchione 1301 Avenue of the Americas
One Riverfront Plaza New York, New York 10019-6092
Newark, New Jersey 07102 (212) 259-8000
(201) 596-4500
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
----------------
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, as amended (the "Securities Act"), 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, please 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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.
<PAGE>
PROSPECTUS (Subject To Completion)
Dated December 17, 1996
2,000,000 SHARES
[LOGO]
COMMON STOCK
---------------
All of the shares of Common Stock, $.01 par value per share (the "Common
Stock"), offered are being sold by Patient Infosystems, Inc. (the "Company").
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering price
will be between $9.00 and $11.00 per share. See "Underwriting" for a discussion
of the factors considered in determining the initial public offering price. The
Common Stock has been approved for listing on the Nasdaq National Market under
the symbol "PATI."
--------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
-------------
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
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share............. $ $ $
Total(3).............. $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated to be $600,000.
(3) The Company has granted to the Underwriters an option, exercisable within 30
days of the date hereof, to purchase an aggregate of up to 300,000
additional shares at the Price to Public less Underwriting Discounts and
Commissions to cover over-allotments, if any. If all such additional shares
are purchased, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
--------------
The Common Stock is offered by the several Underwriters named herein when,
as and if accepted by them and subject to certain conditions. It is expected
that delivery of certificates for the shares will be made at the offices of
Cowen & Company, New York, New York, on or about , 1996.
--------------
COWEN & COMPANY VECTOR SECURITIES INTERNATIONAL, INC.
, 1996
<PAGE>
[GRAPHICS]
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 NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER
THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS."
THE COMPANY
Patient Infosystems, Inc. designs and develops health care information
systems and services to manage, collect and analyze patient-related information
to improve patient compliance with prescribed treatment protocols. The Company's
technology platform integrates treatment algorithms, live telephone operators,
an advanced voice recognition telephone system, high speed data processing and
analysis capability and demand publishing and information distribution
capabilities. The system permits the Company to communicate via telephone
directly with the patient at home in order to gather relevant data about a
patient and his condition. This data is subsequently evaluated and computer
generated reports which are tailored to the specific needs of each recipient are
automatically transmitted to health care payors, providers and patients.
The Company markets its services to pharmaceutical manufacturers, pharmacy
benefit managers ("PBMs") and health care payors and providers to collect data
outside of the physician office and institutional setting. The information can
be used to enhance compliance by patients with prescribed treatment protocols.
The Company's disease state management programs are designed to provide the
following benefits: (i) for patients, improved communication with health care
providers, enhanced self-care skills, increased treatment compliance, resulting
in improved quality of care and reduced expense associated with unscheduled
visits to the doctor; (ii) for health care providers, more information on
patient progress, quicker identification of hard-to-manage patients, enhanced
ability to make timely treatment modifications, triage capability and expanded
information for development of improved treatment protocols; and (iii) for
payors and program sponsors, cost-effective management of diseases, improved
outcomes and enhanced patient and provider satisfaction.
According to the Federal government, national health expenditures have
increased from $540 billion in 1988 (11.1% of gross national product ("GNP")) to
a projected $1 trillion in 1995 (15.7% of projected GNP). One way to achieve
significant savings in health care costs is to change the way that health care
is delivered to patients by focusing on quality and cost efficient clinical
outcomes. Since a substantial portion of most treatment regimens is
self-administered, patient compliance is critical to achieving quality outcomes.
Estimates vary from disease to disease, but generally indicate that between 30%
and 60% of all patients fail to take medications as prescribed. The consequences
of patient non-compliance with prescribed treatment plans represent a
significant portion of health care expenditures. One third-party study indicated
that patient non-compliance results in $100 billion in health care and lost
productivity costs annually. Costs associated with treating patients with
chronic diseases who fail to adhere to prescribed regimens have been
particularly difficult to control. When long-term treatments for chronic disease
have been prescribed, as many as 80% of all patients fail to carry out correctly
at least one element of the disease treatment regimen. Most health care
information systems in use today gather information in the hospital or at the
clinician's office and do not monitor adequately patient condition away from the
point of care. The Company believes that by coupling effective treatment
protocols with the ability to monitor patient condition and treatment regimen
compliance between physician interventions, health care providers and payors can
significantly enhance clinical outcomes while reducing costs.
The Company's strategy is to capitalize on its information technology
platform to become the leading provider of patient-centered health care
information programs. The key elements of this strategy are to: (i) introduce
information system programs for specific diseases on a customized basis for
client-specified disease targets and on a standardized basis for diseases
selected by the Company and marketed to multiple clients; (ii) implement
marketing and awareness programs to establish and demonstrate the expected
clinical benefits and cost-effectiveness of the Company's systems through
clinical studies, protocol development and research publications; (iii) analyze
collected outcomes data with advanced computational intelligence, including
neural networks, fuzzy logic and genetic algorithms, to develop improved
clinical protocols; (iv) develop or acquire additional technologies that enhance
its ability to gather information and interact with patients while the patient
is away from the health care provider; and (v) leverage the Company's technology
platform to develop additional applications, such as clinical trial data
compilation and analysis, patient surveys, clinical outcomes evaluation, demand
management and case management.
The Company was founded in February 1995, signed its first customer contract
in September 1995 and enrolled its first patients in a disease state management
program in October 1996. Bristol-Myers Squibb Company, U.S. Pharmaceuticals
Division and Oncology/Immunology Division (collectively, "Bristol-Myers") has
retained the Company to provide customized disease state management systems for
congestive heart failure, cardiovascular disease, chronic pain and weight
management. The Bristol-Myers agreements call for development fees and per
patient operational fees. The Company has also entered into services agreements
for standardized programs with American HomePatient, Inc. ("American
HomePatient"), Harris Methodist Health Plan ("Harris Methodist"), Equifax
Healthcare Administrative Services, a division of Equifax, Inc. ("Equifax"), and
Health Resources, Inc. ("Health Resources") for patients suffering from asthma
and with Equifax and Health Resources for patients suffering from diabetes. Each
of the Company's agreements for its standardized programs provides for the
Company to receive a per patient fee for services provided to enrolled patients
over the duration of the program.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered........................................... 2,000,000 shares (1)
Common Stock outstanding after this offering................... 7,503,202 shares (1)(2)
Use of proceeds................................................ For expansion of systems capabilities, for sales and
marketing activities and for working capital and
other general corporate purposes
Proposed Nasdaq National Market symbol......................... PATI
</TABLE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
FROM FROM FROM FEBRUARY 22,
FEBRUARY 22, 1995 FEBRUARY 22, 1995 NINE MONTH PERIOD 1995
(INCEPTION) TO (INCEPTION) TO ENDED (INCEPTION) TO
DECEMBER 31, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................. $ 113,000 7,500 $ 644,146 $ 757,146
Total operating expenses............................. 1,255,661 614,995 2,677,089 3,932,750
----------------- ------------------ ------------------ ------------------
Operating loss....................................... (1,142,661) (607,495) (2,032,943) (3,175,604)
Interest income...................................... 26,009 483 53,333 79,342
----------------- ------------------ ------------------ ------------------
Net loss............................................. $ (1,116,652) $ (607,012) $ (1,979,610) $ (3,096,262)
----------------- ------------------ ------------------ ------------------
----------------- ------------------ ------------------ ------------------
Net loss per common and
common share equivalents(3)......................... $ (.18) $ (.10) $ (.32) $ (.50)
----------------- ------------------ ------------------ ------------------
----------------- ------------------ ------------------ ------------------
Weighted average common and common share
equivalents(3)...................................... 5,963,306 5,956,248 6,160,715 6,160,715
----------------- ------------------ ------------------ ------------------
----------------- ------------------ ------------------ ------------------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------------
ACTUAL AS ADJUSTED(4)
------------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................................ $ 2,022,628 $ 20,022,628
Working capital...................................................................................... 1,470,088 19,470,088
Total assets......................................................................................... 2,986,652 20,986,652
Total liabilities.................................................................................... 788,137 788,137
Deficit accumulated during the development stage..................................................... (3,096,262) (3,096,262)
Total stockholders' equity........................................................................... 2,198,515 20,198,515
</TABLE>
- ---------------
(1) Does not include 300,000 shares of Common Stock that may be sold by the
Company pursuant to the Underwriters' over-allotment option. See
"Underwriting."
(2) Based on the number of shares of Common Stock outstanding as of November 15,
1996 and assumes a public offering price of $10.00 per share. The conversion
ratio for the Company's Series B Convertible Preferred Stock (the "Series B
Preferred Stock") is subject to adjustment based upon the public offering
price of the Common Stock. Includes 1,896,000 shares of Common Stock
issuable upon conversion in connection with this offering of all outstanding
shares of the Company's Series A Convertible Preferred Stock (the "Series A
Preferred Stock") and Series B Preferred Stock (collectively with the Series
A Preferred Stock, the "Convertible Preferred Stock"). Excludes (i) 892,320
shares of Common Stock issuable upon the exercise of outstanding options
under the Company's stock option plan (the "Plan") at a weighted average
exercise price of $2.34 per share (and up to 187,680 shares of Common Stock
issuable pursuant to additional options that may be granted under the Plan)
and (ii) 100,440 shares of Common Stock issuable upon the exercise of
outstanding stock purchase warrants at a weighted average exercise price of
$.83 per share. See "Management--Stock Option Plan," "Description of Capital
Stock" and Note 5 of Notes to Financial Statements.
(3) See Note 1 of Notes to Financial Statements for a description of the
calculation of net loss per share.
(4) Gives effect to the conversion of all outstanding shares of Convertible
Preferred Stock into 1,896,000 shares of Common Stock in connection with
this offering and the sale of the shares of Common Stock offered hereby (at
an assumed public offering price of $10.00 per share and after deducting
underwriting discounts and commissions and estimated offering expenses) and
receipt of the estimated net proceeds therefrom.
------------------
UNLESS OTHERWISE INDICATED, INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OPTION TO PURCHASE FROM THE COMPANY UP TO 300,000
ADDITIONAL SHARES OF COMMON STOCK TO COVER OVER-ALLOTMENTS, IF ANY, (II) GIVES
EFFECT TO A .72-FOR-ONE REVERSE STOCK SPLIT WITH RESPECT TO THE COMMON STOCK TO
BE EFFECTED PRIOR TO THE CLOSING OF THIS OFFERING, (III) REFLECTS, UPON THE
CLOSING OF THIS OFFERING, THE AUTOMATIC CONVERSION OF ALL OUTSTANDING SHARES OF
CONVERTIBLE PREFERRED STOCK INTO AN AGGREGATE OF 1,896,000 SHARES OF COMMON
STOCK AND (IV) DOES NOT GIVE EFFECT TO THE ISSUANCE OF 992,760 SHARES OF COMMON
STOCK ISSUABLE UPON THE EXERCISE OF OUTSTANDING OPTIONS AND WARRANTS (AND UP TO
187,680 SHARES OF COMMON STOCK ISSUABLE PURSUANT TO ADDITIONAL OPTIONS THAT MAY
BE GRANTED UNDER THE PLAN). THE CONVERSION RATIO FOR THE SERIES B PREFERRED
STOCK IS SUBJECT TO ADJUSTMENT BASED UPON THE PUBLIC OFFERING PRICE OF THE
COMMON STOCK. ALL SHARE AMOUNTS CONTAINED HEREIN WITH RESPECT TO, OR THAT
INCLUDE, SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE SERIES B
PREFERRED STOCK ASSUME A PUBLIC OFFERING PRICE OF $10.00 PER SHARE. IF THE
PUBLIC OFFERING PRICE IS LOWER, A LARGER NUMBER OF SHARES OF COMMON STOCK WOULD
BE ISSUABLE UPON THE CONVERSION OF THE SERIES B PREFERRED STOCK. SEE
"CAPITALIZATION," "DILUTION," "MANAGEMENT--STOCK OPTION PLAN," "DESCRIPTION OF
CAPITAL STOCK," "UNDERWRITING" AND NOTES 4 AND 5 OF NOTES TO FINANCIAL
STATEMENTS.
4
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CONSIDER THE FOLLOWING RISK FACTORS IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY. THIS
PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE,
BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW AS WELL AS THOSE DISCUSSED
ELSEWHERE IN THIS PROSPECTUS.
DEVELOPMENT STAGE COMPANY WITH LIMITED OPERATING HISTORY; OPERATING LOSSES IN
EACH PERIOD OF OPERATION
The Company was formed on February 22, 1995, is in the development stage and
has a limited operating history from which to evaluate its performance. To date,
the Company has generated limited revenues and through September 30, 1996 had
incurred cumulative losses of $3,096,262, which losses are continuing at an
increasing rate. Although the Company has completed the development of its
integrated information capture and delivery system, and the Company is
developing several disease state management programs for specific diseases,
further development activities may be necessary to implement these programs. No
patients had been enrolled in any disease state management program of the
Company until October 1996, when a limited number of patients were enrolled in
the Company's secondary cardiovascular disease program. The Company anticipates
that its losses will continue at least until it has completed the development of
programs for several customers and has begun providing services to a substantial
number of patients for such customers. The Company may encounter problems and
delays in its research and development or sales and marketing efforts, and the
failure to address these problems and delays successfully could have a material
adverse effect on the Company's business prospects. The Company's prospects must
be considered in light of the numerous risks, expenses, delays and difficulties
frequently encountered in the establishment of a new business in an industry
characterized by intense competition, as well as the risks inherent in the
development of new programs and the commercialization of new services. There can
be no assurance that the Company's development efforts will result in an ability
to provide any services that can be marketed or operated in a commercially
successful manner, or that any such services will be able to compete with other
services that might be in the market at the time that the Company's services are
made available. There can be no assurance that the Company will achieve
recurring revenue or profitability on a consistent basis or at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements.
RELIANCE ON COMMERCIALLY UNTESTED TECHNOLOGY; UNCERTAINTY OF SYSTEM DEVELOPMENT
AND COMMERCIALIZATION
The Company has only engaged in limited use of its integrated information
capture and delivery system, and no assurance can be given that substantial
additional programming and development efforts will not be necessary to allow
the Company to contact patients and to publish and process information with the
required speed and accuracy for commercial use. The Company may be required to
devote considerable additional efforts and resources to enhance and refine its
software and hardware, and such efforts will remain subject to all of the risks
inherent in the development and commercialization of new products and services,
including unanticipated delays, expenses, additional technical problems or
difficulties, changes in customer preferences or needs, as well as the possible
insufficiency of funds which could result in abandonment or substantial change
in the development or commercialization of the Company's services. There can be
no assurance that the Company will be able to complete the development of its
disease management programs or that it will be able to develop the additional
program enhancements needed to keep pace with anticipated changes in customer
preferences and needs. See "Business--Information Capture, Delivery and Analysis
Technologies."
TERMINABILITY OF AGREEMENTS; EXCLUSIVITY PROVISIONS
The Company's current services agreements with its customers generally may
be terminated by those customers without cause upon notice of between 30 and 180
days. In addition, the Company has agreed not
5
<PAGE>
to engage or participate in any project other than those under development for
Bristol-Myers that involve the development or implementation of a program
similar to those developed for Bristol-Myers for specified time periods (the
"Exclusivity Periods"). In general, at the completion of the Exclusivity
Periods, Bristol-Myers has the right to negotiate an exclusive arrangement for
these disease state management programs provided that a specified minimum number
of patients have enrolled in the programs or that it agrees to pay an
exclusivity fee. Bristol-Myers has the further right, in the event exclusive
arrangements cannot be negotiated, to match any bona fide offers made to the
Company for disease state management programs for these categories of patients
for a period of time from the conclusion of the Exclusivity Periods. These
exclusivity provisions could restrict the Company's ability to market its
services to other customers. The Company will charge its customers a per patient
program fee; however, while Bristol-Myers is required to enroll a minimum number
of patients in the congestive heart failure and weight enhancement programs,
there are no such requirements for any of the Company's other programs. In
general, customer contracts may include significant performance criteria and
implementation schedules for the Company. Failure to satisfy such criteria or
meet such schedules could result in termination of the agreements. See
"Business-- Customer Agreements."
SIGNIFICANT CUSTOMER CONCENTRATION
The Company's current contracts are concentrated in a small number of
customers, with five of the Company's 11 contracts being with Bristol-Myers. The
Company expects that its sales of services will be
concentrated in a small number of customers for the foreseeable future.
Consequently, the loss of any one of its customers could have a material adverse
effect on the Company and its operations. There can be no assurance that
customers will enroll a sufficient number of patients in the programs developed
by the Company for the Company to achieve or maintain profitability, or that
customers will renew their contracts upon expiration or on terms favorable to
the Company. See "Business--Customer Agreements."
NEW CONCEPT; UNCERTAINTY OF MARKET ACCEPTANCE; LIMITATIONS OF COMMERCIALIZATION
STRATEGY
In connection with the commercialization of the Company's health information
system, the Company is marketing a new service designed to link patients, health
care providers and payors in order to provide specialized disease state
management for targeted chronic diseases. This is a new business concept in an
industry characterized by an increasing number of market entrants who have
introduced or are developing an array of new services. As is typical in the case
of a new business concept, demand and market acceptance for newly introduced
services are subject to a high level of uncertainty, and there can be no
assurance as to the ultimate level of market acceptance for the Company's
system, especially in the health care industry, in which the containment of
costs is emphasized. The Company has entered into contracts with a very limited
number of customers and has just recently enrolled a limited number of patients
in only one disease state management program. No conclusions can be made with
respect to market acceptance of the Company's services based on this customer
base. Because of the subjective nature of patient compliance, the Company may be
unable, for an extensive period of time, to develop a significant amount of data
to demonstrate to potential customers the effectiveness of its services. Even
after such time, no assurance can be given that the Company's data and results
will be convincing or determinative as to the success of its system. There can
be no assurance that increased marketing efforts and the implementation of the
Company's strategies will result in market acceptance for its services or that a
market for the Company's services will develop or not be limited. See
"Business--Sales and Marketing."
DEPENDENCE ON CUSTOMERS FOR MARKETING AND PATIENT ENROLLMENT
The Company has limited marketing experience and limited financial,
personnel and other resources to undertake extensive marketing activities. One
element of the Company's marketing strategy involves marketing specialized
disease state management programs to pharmaceutical companies and health care
providers, with the intent that those customers will market the program to
parties responsible for the payment of health care costs, who will enroll
patients in the programs. Accordingly, the Company will to a degree be dependent
upon its customers, over whom it has no control, for the marketing and
implementation of its initial programs. The timing and extent of patient
enrollment is completely within the control of the
6
<PAGE>
Company's customers. To the extent that an adequate number of patients are not
enrolled in the program, or enrollment of initial patients by a customer is
delayed for any reason, the Company's revenue may be insufficient to support its
activities. See "Business--Customer Agreements."
UNPREDICTABILITY OF PATIENT BEHAVIOR MAY AFFECT SUCCESS OF PROGRAMS
The ability of the Company to monitor and modify patient behavior and to
provide information to health care providers and payors, and consequently the
success of the Company's disease state management system, will be dependent upon
the accuracy of information received from patients. The Company does not expect
that it will take specific measures to determine the accuracy of information
provided to the Company by patients regarding their medical histories. No
assurance can be given that the information provided to the Company by patients
will be accurate. To the extent that patients have chosen not to comply with
prescribed treatments, such patients might provide inaccurate information to
avoid detection. Because of the subjective nature of medical treatment, it will
be difficult for the Company to validate or confirm any such information. In the
event that patients enrolled in the Company's programs provide inaccurate
information to a significant degree, the Company would be materially and
adversely affected. Furthermore, there can be no assurance that patient
interventions by the Company will be successful in modifying patient behavior,
improving patient health or reducing costs. Many potential customers may seek
data from the Company with respect to the results of its programs prior to
retaining it to develop new disease state management or other health information
programs. The Company's ability to market its system to new customers may be
limited if it is unable to demonstrate successful results for its programs. See
"Business--Sales and Marketing."
UNCERTAINTIES REGARDING ABILITY TO MANAGE RAPID GROWTH AND EXPANSION
The Company is retaining a program development and operating staff
sufficient to handle its current and anticipated business commitments, and
consequently is experiencing a period of rapid growth and expansion. Such growth
and expansion has placed and will continue to place a significant strain on the
Company's development, administrative personnel and other resources. The
Company's ability to manage such growth effectively will require the Company to
continue improving its operational, management and financial systems and
controls and to train, motivate and manage its employees. As a result, the
Company is subject to certain risks of expansion, including the risk that it
will be unable to retain the necessary personnel and acquire other resources
necessary to manage such growth adequately. In addition, to the extent that the
Company commences its expansion activities in anticipation of growth, it may
undertake significant financial commitments for which it will have
responsibility whether or not it enters into any additional services agreements
and regardless of the timing of payment for services. Accordingly, the Company
will likely have significant financial commitments without necessarily having
the revenues to offset such expenses. See "Use of Proceeds."
SIGNIFICANT AND EXTENSIVE CHANGES IN THE HEALTH CARE INDUSTRY
The health care industry is subject to changing political, economic and
regulatory influences that may affect the procurement practices and operations
of health care industry participants. Several lawmakers have announced that they
intend to propose programs to reform the U.S. health care system. These programs
may contain proposals to increase governmental involvement in health care, lower
reimbursement rates and otherwise change the operating environment for the
Company and its targeted customers. Health care industry participants may react
to these proposals and the uncertainty surrounding such proposals by curtailing
or deferring certain expenditures, including those for the Company's programs.
The Company cannot predict what impact, if any, such changes in the health care
industry might have on its business, financial condition and results of
operations. In addition, many health care providers are consolidating to create
larger health care delivery enterprises with greater regional market power. As a
result, the remaining enterprises could have greater bargaining power, which may
lead to price erosion of the Company's programs. The failure of the Company to
maintain adequate price levels could have a material adverse effect on the
Company. See "Business--Industry Overview."
7
<PAGE>
RAPID TECHNOLOGICAL CHANGE AND OBSOLESCENCE
The development and maintenance of the telecommunications and computer
publishing systems through which the Company operates its integrated information
capture and delivery system is a major component of its business. The
communications and information technology industries are subject to rapid and
significant technological change, and the ability of the Company to operate and
compete is dependent in significant part on its ability to update and enhance
its system continuously. In order to do so, the Company must be able to utilize
effectively its research and development capabilities and implement new
technology in order to enhance its systems. At the same time, the Company must
not jeopardize its ability to contact patients and to process and publish
patient information or adapt to customer preferences or needs. There can be no
assurance that the Company will be able to develop and implement technological
changes to its system. In addition, following this offering the Company will
maintain a significant investment in its technology, and therefore is subject to
the risk of technological obsolescence. If the Company's technology were
rendered obsolete, the Company's business and operating results would be
materially adversely affected. See "Business--Information Capture, Delivery and
Analysis Technologies."
EXTENSIVE GOVERNMENT REGULATION
The health care industry, including the current and proposed business of the
Company, is subject to extensive regulation by both the Federal and state
governments. A number of states have extensive licensing and other regulatory
requirements applicable to companies that provide health care services.
Additionally, services provided to health benefit plans in certain cases are
subject to the provisions of the Employee Retirement Income Security Act of 1974
("ERISA") and may be affected by other state and Federal statutes.
Generally, state laws prohibit the practice of medicine and nursing without
a license. Many states interpret the practice of nursing to include health
teaching, health counseling, the provision of care supportive to or restorative
of life and well being and the execution of medical regimens prescribed by a
physician. Accordingly, to the extent that the Company assists providers in
improving patient compliance by publishing educational materials or providing
behavior modification training to patients, such activities could be deemed by a
state to be the practice of medicine or nursing. Although the Company has not
conducted a survey of the applicable law in all 50 states, it believes that it
is not engaged in the practice of medicine or nursing. There can be no
assurance, however, that the Company's operations will not be challenged as
constituting the unlicensed practice of medicine or nursing. If such a challenge
were made successfully in any state, the Company could be subject to civil and
criminal penalties under such state's law and could be required to restructure
its contractual arrangements in that state. Such results or the inability to
successfully restructure its contractual arrangements could have a material
adverse effect on the Company.
The Company is subject to Federal and state laws governing the
confidentiality of patient information. In addition, recent Federal legislation
will result in new national standards for the protection of patient information
in electronic health information transactions. Although the Company intends to
comply with all applicable laws and regulations regarding medical information
privacy, failure to do so could have an adverse effect on the Company's
business.
The Company and its customers may be subject to Federal and state laws and
regulations which govern financial and other arrangements between health care
providers. These laws prohibit certain fee splitting arrangements between health
care providers, as well as direct and indirect payments, referrals or other
financial arrangements that are designed to induce or encourage the referral of
patients to, or the recommendation of a particular provider for, medical
products and services. Possible sanctions for violation of these restrictions
include civil and criminal penalties. Further, criminal violations may result in
mandatory exclusions of up to five years and additional permissive exclusions
from participation in Medicare and Medicaid programs. See "Business--Government
Regulation."
Regulation in the health care field is constantly evolving. The Company is
unable to predict what government regulations, if any, affecting its business
may be promulgated in the future. The Company's
8
<PAGE>
business could be adversely affected by the failure to obtain required licenses
and governmental approvals, comply with applicable regulations or comply with
existing or future laws, rules or regulations or their interpretations.
POTENTIAL LIABILITY AND INSURANCE
The Company will provide information to health care providers and payors
upon which determinations affecting medical care will be made, and it could
share in potential liabilities for resulting adverse medical consequences to
patients. In addition, the Company could have potential legal liability in the
event it fails to record or disseminate correctly patient information. The
Company maintains an errors and omissions insurance policy with coverage of $3
million in the aggregate and per occurrence. Although the Company does not
believe that it will directly engage in the practice of medicine or direct
delivery of medical services and has not been a party to any such litigation, it
maintains a medical liability policy with coverage of $3 million in the
aggregate and per occurrence. There can be no assurance that the Company's
procedures for limiting liability have been or will be effective, that the
Company will not be subject to litigation that may adversely affect the
Company's results of operations, that appropriate insurance will be available to
it in the future at acceptable cost or at all or that any insurance maintained
by the Company will cover, as to scope or amount, any claims that may be made
against the Company.
DEPENDENCE ON DATA PROCESSING AND TELEPHONE EQUIPMENT
The business of the Company is dependent upon its ability to store,
retrieve, process and manage data and to maintain and upgrade its data
processing capabilities. In addition, as the Company expands its commercial
activities and patient contacts increase, an increased burden will be placed
upon the Company's telecommunications equipment to process the large number of
incoming and outgoing telephone calls that will be placed every day.
Interruption of data processing capabilities for any extended length of time,
loss of stored data, programming errors, other computer problems or
interruptions of telephone service could have a material adverse effect on the
business of the Company. See "Business--Information Capture, Delivery and
Analysis Technologies."
SUBSTANTIAL FLUCTUATION IN QUARTERLY OPERATING RESULTS
The Company's results of operations may fluctuate significantly from quarter
to quarter as a result of a number of factors, including the volume and timing
of sales and the rate at which customers implement disease state management and
other health information programs within their patient populations. Accordingly,
the Company's future operating results are likely to be subject to variability
from quarter to quarter and could be adversely affected in any particular
quarter. Due to the foregoing factors, it is possible that the Company's
operating results will be below the expectations of public market analysts and
investors. In such event, the price of the Common Stock could be materially
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
POSSIBLE NEED FOR ADDITIONAL FINANCING
The Company has been substantially dependent upon private placements of its
equity securities, through which the Company has raised $5.3 million to date, to
fund its research and development activities and working capital requirements.
In order to implement programs using the Company's integrated information
capture and delivery system, the Company will be required to devote substantial
additional assets to the development of technology, the construction of physical
facilities and the acquisition of telephone and computer equipment. The Company
will also be required to retain the services of employees in advance of
obtaining contracts to provide services. The Company anticipates, based on
currently proposed plans and assumptions relating to its operations (including
with respect to the timing of research and product development and the costs
associated with marketing and promotion of its system), that the proceeds of
this offering, together with available resources, will be sufficient to satisfy
the Company's contemplated cash requirements for at least 24 months following
the consummation of this offering. In the event that the Company's plans change,
or its assumptions change or prove to be inaccurate, the Company could be
required to seek additional financing or curtail its activities. The Company has
no current arrangements with respect to, or sources of, additional financing.
Any additional equity financing may involve substantial dilution to the
9
<PAGE>
interest of the Company's stockholders, and any debt financing could result in
operational or financial restrictions on the Company. There can be no assurance
that any additional financing will be available to the Company on acceptable
terms or at all. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
INTENSE COMPETITION
The market for health care information products and services is intensely
competitive. Competitors vary in size and in scope and breadth of products and
services offered. Many of the Company's competitors have significantly greater
financial, technical, product development and marketing resources than the
Company. Furthermore, other major information, pharmaceutical and health care
companies not presently offering disease state management or other health
information services may enter into the market in which the Company intends to
compete. With sufficient financial and other resources, many of these
competitors may provide services similar to those of the Company without
substantial barriers. The Company's potential competitors include specialty
health care information companies, health care information system and software
vendors, health care management organizations, pharmaceutical companies and
other service companies within the health care industry that have publicly
stated that they intend to be involved in providing comprehensive disease state
management or other health information services. The Company will also compete
against other companies that provide statistical and data management services,
including clinical trial services to pharmaceutical companies. Many potential
competitors have substantial installed customer bases in the health care
industry and the ability to fund significant product development and acquisition
efforts. There can be no assurance that competitive pressures will not have a
material adverse effect on the Company. See "Business--Competition."
DEPENDENCE ON KEY PERSONNEL
The Company's continued success will depend upon its ability to retain
Donald A. Carlberg, its President and Chief Executive Officer, and a core group
of key officers and employees. The Company has entered into an employment
contract with Mr. Carlberg, expiring on March 1, 1997, but does not have
employment agreements or non-competition agreements with any other employees.
The Company maintains key man life insurance in the amount of $2 million on the
life of Mr. Carlberg and in the amount of $1 million on the life of Gregory D.
Brown, its Senior Vice President and Chief Financial Officer. The loss of
certain key employees or the Company's inability to attract and retain other
qualified employees could have an adverse impact on the Company's business.
Also, the Company's ability to transition from development stage to commercial
operations will depend upon, among other things, the successful recruiting of
highly skilled managerial and marketing personnel with experience in business
activities such as those contemplated by the Company. Competition for the type
of highly skilled individuals sought by the Company is intense. There can be no
assurance that the Company will be able to retain existing employees or that it
will be able to find, attract and retain skilled personnel on acceptable terms.
See "Management."
CONTROL OF THE COMPANY
Following this offering, the Company will be controlled by the executive
officers, directors and certain stockholders of the Company who will
beneficially own in the aggregate approximately 55% of the outstanding Common
Stock. As a result of such ownership, these stockholders, in the event they act
in concert, will have control over the management policies of the Company and
all matters requiring approval by the stockholders of the Company, including the
election of directors. See "Principal Stockholders."
MANAGEMENT'S DISCRETION WITH RESPECT TO USE OF PROCEEDS
The Company intends to use approximately $12 million of the net proceeds of
this offering for capital improvements and to expand telephone and computer
capabilities and approximately $5 million of the net proceeds for sales and
marketing. The balance of the net proceeds have not been designated for any
specific use. Rather, the Company intends to use the net proceeds primarily for
general corporate purposes, including working capital and potential acquisitions
of companies or technologies that complement or expand the Company's business.
Accordingly, management will have significant flexibility in applying the net
proceeds of this offering. See "Use of Proceeds."
10
<PAGE>
NO PRIOR PUBLIC MARKET; 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 trading market will develop
or be sustained after this offering or that the market price of the Common Stock
will not decline below the public offering price. The initial public offering
price of the Common Stock has been determined by negotiations between the
Company and the Representatives of the Underwriters. For a description of the
factors considered in determining the initial public offering price, see
"Underwriting." The market price of the Common Stock following this offering may
be highly volatile, as has been the case with the securities of other start-up
companies. In recent years, the stock market has experienced a high level of
price and volume volatility, and market prices for the stock of many companies
(particularly of small and emerging growth companies) have experienced wide
price fluctuations which have not necessarily been related to the operating
performance of such companies. These broad market fluctuations could have a
material adverse effect on the market price of the Common Stock.
IMMEDIATE AND SUBSTANTIAL DILUTION; ABSENCE OF DIVIDENDS
The initial public offering price per share of the Common Stock will exceed
the net tangible book value per share of the Common Stock. Accordingly, the
purchasers of shares of Common Stock in this offering will experience immediate
dilution in net tangible book value per share of $7.31 (assuming a public
offering price of $10.00 per share and after deducting underwriting discounts
and commissions and estimated offering expenses). The Company has not paid any
dividends on its Common Stock and does not anticipate paying any dividends on
such stock in the foreseeable future. See "Dividend Policy" and "Dilution."
EFFECT ON SHARE PRICE OF SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
7,503,202 shares of Common Stock (based on the number of shares of Common Stock
outstanding as of November 15, 1996). Of these shares, the 2,000,000 shares
offered hereby (2,300,000 shares if the Underwriters' over-allotment option is
exercised in full) will be eligible for immediate sale in the public market
without restriction unless they are held by affiliates of the Company. The
5,503,202 outstanding shares not sold in this offering will be "restricted
securities" within the meaning of Rule 144 ("Rule 144") promulgated under the
Securities Act and may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available. Under current
law, none of these shares will be eligible for sale under Rule 144 until at
least February 22, 1997, when 3,600,000 of these shares will be eligible for
sale pursuant to Rule 144, subject to the volume, manner of sale and other
limitations thereof and to the lock-up agreements with the Underwriters
described below. The holders of the 1,896,000 shares of Common Stock issuable
upon conversion of the Convertible Preferred Stock have demand and piggy-back
registration rights with respect to their shares commencing one year after the
completion of this offering. The holders of substantially all of the 5,503,202
shares of Common Stock outstanding prior to this offering have agreed not to
sell or otherwise dispose of any such shares for at least 180 days after the
date of this Prospectus without the prior written consent of Cowen & Company. No
predictions can be made as to the effect, if any, that public sale of shares of
Common Stock, or the availability for sale of such shares, will have on the
market price prevailing from time to time. Nevertheless, sales of substantial
amounts of the Common Stock in the public market, particularly by directors and
officers of the Company, or the perception that such sales could occur, could
have an adverse impact on the market price of the Common Stock and the Company's
ability to raise additional capital in the future. See "Shares Eligible for
Future Sale."
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's certificate of incorporation and bylaws
may inhibit changes in control of the Company not approved by the Company's
board of directors. The Company will also be afforded the protection of Section
203 of the Delaware General Corporation Law ("Delaware Law"), which could have
similar effects. These provisions could limit the price that investors might be
willing to pay in the future for shares of Common Stock, and consequently could
adversely affect the market for the Common Stock. See "Description of Capital
Stock."
11
<PAGE>
THE COMPANY
The Company was incorporated in the State of Delaware on February 22, 1995
under the name DSMI Corp., changed its name to Disease State Management, Inc. on
October 13, 1995 and then changed its name to Patient Infosystems, Inc. on June
28, 1996. The Company's principal executive offices are located at 46 Prince
Street, Rochester, New York 14607, and its telephone number is 716-242-7200.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby, after deducting underwriting discounts and commissions and
estimated expenses payable by the Company in connection with this offering, are
estimated to be approximately $18,000,000 ($20,790,000 if the Underwriters'
over-allotment option is exercised in full), assuming a public offering price of
$10.00 per share.
The Company intends to use approximately $12 million of the net proceeds of
this offering for capital improvements necessary for expansion of telephone and
computer capabilities, approximately $5 million for sales and marketing and the
balance of the net proceeds for working capital and general corporate purposes,
which may include acquisition of companies or technologies that complement the
Company's business. The Company is not a party to any purchase agreement or
letter of intent with respect to any acquisitions.
The Company anticipates that the net proceeds of this offering, together
with the Company's cash and expected interest income thereon, should be
sufficient to finance the Company's contemplated cash requirements for at least
24 months. The actual amount of the net proceeds of this offering expended for
each purpose may vary significantly depending upon many factors, including the
progress of the Company's commercialization efforts, the success of the
Company's marketing efforts and the timing of the development of specific
programs for potential customers. Pending application of the net proceeds as
described above, the Company intends to invest the net proceeds of the offering
in short-term, interest bearing securities of investment grade or in short-term
bank deposits. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has never paid cash dividends on its capital stock and does not
anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain all future earnings, if any, to fund the development
and growth of its business. Any future determination to pay cash dividends will
be at the discretion of the Board of Directors. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1996 on (i) an actual basis and (ii) an as adjusted basis to
reflect the conversion of the Convertible Preferred Stock into 1,896,000 shares
of Common Stock upon the closing of this offering and receipt of the estimated
net proceeds from the Company's sale of 2,000,000 shares of Common Stock
pursuant to this offering at an assumed initial public offering price of $10.00
per share and after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------
ACTUAL AS ADJUSTED
------------- -------------
<S> <C> <C>
Stockholders' equity:
Series A Convertible Preferred Stock, $0.01 par value; 1,800,000 shares
designated, issued and outstanding, actual; and none issued or outstanding,
as adjusted................................................................ $ 18,000 $ --
Series B Convertible Preferred Stock, $0.01 par value, 600,000 shares
designated, issued and outstanding, actual; and none issued or outstanding,
as adjusted................................................................ 6,000 --
Common Stock, $0.01 par value; 20,000,000 shares authorized; 3,607,202
shares issued and outstanding, actual; and 7,503,202 shares issued and
outstanding, as adjusted(1)................................................ 36,072 75,032
Additional paid-in capital.................................................... 5,234,705 23,219,745
Deficit accumulated during the development stage.............................. (3,096,262) (3,096,262)
------------- -------------
Total stockholders' equity.................................................... $ 2,198,515 $ 20,198,515
------------- -------------
------------- -------------
</TABLE>
- ------------
(1) Excludes (i) 892,320 shares of Common Stock issuable upon the exercise of
options outstanding under the Company's stock option plan at a weighted
average exercise price of $2.34 per share (and up to 187,680 shares of
Common Stock issuable pursuant to additional options that may be granted
under such Plan) and (ii) 100,440 shares of Common Stock issuable upon the
exercise of outstanding stock purchase warrants at a weighted average
exercise price of $.83 per share. See "Management--Stock Option Plan,"
"Description of Capital Stock" and Note 5 of Notes to Financial Statements."
13
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of September 30,
1996 was $2,198,515, or $.40 per share. Pro forma net tangible book value per
share is determined by dividing the net tangible book value of the Company
(total assets less intangible assets and total liabilities) by the number of
shares outstanding, after giving effect to the conversion of all outstanding
shares of Convertible Preferred Stock into 1,896,000 shares of Common Stock.
Without taking into account any changes in pro forma net tangible book value
after September 30, 1996, other than to give effect to the sale of the shares of
Common Stock offered by the Company hereby (at an assumed public offering price
of $10.00 per share and after deducting underwriting discounts and commissions
and estimated offering expenses), the net tangible book value of the Company as
of September 30, 1996 would have been approximately $20,198,515, or $2.69 per
share. This represents an immediate increase in net tangible book value of $2.29
per share to existing stockholders and an immediate dilution of $7.31 per share
to new stockholders. The following table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $ 10.00
Pro forma net tangible book value per share
as of September 30, 1996......................................... $ .40
Increase per share attributable to new investors.................. 2.29
---------
Pro forma net tangible book value per share
after this offering................................................ 2.69
---------
Dilution per share to new investors................................. $ 7.31
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1996 (giving effect to the conversion of all outstanding shares of Convertible
Preferred Stock into 1,896,000 shares of Common Stock), the number of shares
purchased from the Company, the total consideration paid and the average price
per share paid by existing stockholders and new investors (based upon, in the
case of new investors, an assumed public offering price of $10.00 per share and
before deduction of estimated underwriting discounts and commissions and
offering expenses).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------------- ---------------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........................ 5,503,202 73.3% $ 5,303,402 21.0% $ 0.96
New investors................................ 2,000,000 26.7% 20,000,000 79.0% 10.00
------------ ----- ------------- -----
Total.................................... 7,503,202 100.0% $ 25,303,402 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>
The foregoing tables assume no exercise of options or warrants outstanding
as of September 30, 1996. At such date, there were outstanding (i) options to
purchase 892,320 shares of Common Stock at a weighted average exercise price of
$2.34 per share and (ii) warrants to purchase 100,440 shares of Common Stock at
a weighted average exercise price of $.83 per share. Had the exercise of options
and warrants outstanding at September 30, 1996 been reflected in the
computation, the pro forma net tangible book value per share before the offering
would have been $.67, the net tangible book value per share after the offering
would have been $2.63, and the dilution per share to new investors would have
been $7.37. In addition, if the public offering price is lower than $10.00 per
share, the number of shares of Common Stock outstanding after the offering would
be higher than 7,503,202. See "Management--Stock Option Plan," "Description of
Capital Stock" and Note 5 of Notes to Financial Statements.
14
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below as of December 31, 1995 and for
the period from February 22, 1995 (Inception) to December 31, 1995 have been
derived from the Company's financial statements, which have been audited by
Deloitte & Touche LLP, independent auditors, and are included elsewhere in this
Prospectus. The selected financial data set forth below as of September 30,
1996, for the nine months then ended, for the period from Inception to September
30, 1995 and for the period from Inception to September 30, 1996 have been
derived from the Company's unaudited financial statements, have been prepared by
the Company on a basis consistent with the Company's audited financial
statements and in the opinion of management of the Company reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such information. The results of operations for the nine
month period ended September 30, 1996 and for the period from Inception to
September 30, 1995 are not necessarily indicative of results that may be
expected for the full fiscal year or any future period. The financial data for
the Company should be read in conjunction with the Financial Statements and
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FROM FROM FROM FEBRUARY 22,
FEBRUARY 22, 1995 FEBRUARY 22, 1995 NINE MONTH 1995 (INCEPTION)
(INCEPTION) TO (INCEPTION) TO PERIOD ENDED TO
DECEMBER 31, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $ 113,000 $ 7,500 $ 644,146 $ 757,146
Operating expenses:
Cost of sales.................... 111,870 7,621 601,124 712,994
Sales and marketing.............. 375,384 228,466 616,545 991,929
General and administrative....... 678,498 298,998 1,298,801 1,977,299
Research and development......... 89,909 79,910 160,619 250,528
----------------- ------------------ ------------------ ------------------
Total operating expenses....... 1,255,661 614,995 2,677,089 3,932,750
----------------- ------------------ ------------------ ------------------
Operating loss..................... (1,142,661) (607,495) (2,032,943) (3,175,604)
Interest income.................... 26,009 483 53,333 79,342
----------------- ------------------ ------------------ ------------------
Net loss........................... $ (1,116,652) $ (607,012) $ (1,979,610) $ (3,096,262)
----------------- ------------------ ------------------ ------------------
----------------- ------------------ ------------------ ------------------
Net loss per common and common
share equivalents(1).............. $ (.18) $ (.10) $ (.32) $ (.50)
----------------- ------------------ ------------------ ------------------
----------------- ------------------ ------------------ ------------------
Weighted average common and common
share equivalents(1).............. 5,963,306 5,956,248 6,160,715 6,160,715
----------------- ------------------ ------------------ ------------------
----------------- ------------------ ------------------ ------------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995 SEPTEMBER 30, 1996
------------------- ------------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................ $ 1,182,080 $ 2,022,628
Working capital.......................................................... 611,655 1,470,088
Total assets............................................................. 1,763,629 2,986,652
Total liabilities........................................................ 598,464 788,137
Deficit accumulated during the development stage......................... (1,116,652) (3,096,262)
Total stockholders' equity............................................... 1,165,165 2,198,515
</TABLE>
- ------------
(1) See Note 1 of Notes to Financial Statements for a description of the
calculation of net loss per share.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Financial Statements of the Company and Notes thereto appearing elsewhere in
this Prospectus.
OVERVIEW
The Company was formed on February 22, 1995, is in the development stage and
has a limited operating history from which to evaluate its performance. Although
the Company has completed the development of its integrated information capture
and delivery system and is developing several disease state management programs
for specific diseases, further development activities may be necessary to
implement these programs. In October 1996, the Company began enrolling patients
in its first disease state management program. This program was developed for
the treatment of patients suffering from secondary cardiovascular disease.
The Company has generated limited revenues to date and has recorded losses
since inception, totalling $3,096,262 through September 30, 1996, which losses
are continuing to date at an increasing rate. The Company anticipates that its
losses will continue at least until it has completed the development of programs
for several customers and has begun providing services to a substantial number
of patients for such customers.
The Company has entered into services agreements with Bristol-Myers to
develop, implement and operate programs for: (i) patients who have recently
experienced certain cardiovascular events; (ii) patients who have been diagnosed
with primary congestive heart failure; (iii) patients suffering from anorexia or
cachexia secondary to diagnosis of cancer or AIDS; and (iv) patients suffering
from chronic pain. In addition, the Company has entered into services agreements
with American HomePatient, Equifax, Health Resources and Harris Methodist to
operate a program for patients suffering from asthma and with Equifax and Health
Resources to operate a program for patients suffering from diabetes. These
contracts provide for, and the Company anticipates future contracts will provide
for, fees paid by its customers based upon the number of patients participating
in each of its programs, as well as initial program development fees from
customers for the development of a disease-specific program. The Company's
program development contracts typically require payment from the customer at the
time that the contract is executed, with additional payments made as certain
development milestones are met. Development contract revenue is recognized on a
percentage of completion basis, in accordance with the ratio of total
development cost incurred to the estimated total development costs for the
entire project. Losses, if any, related to program development will be
recognized in full as identified. The Company's program operation contracts call
for a fixed fee to be paid by the customer for each patient enrolled for a
series of program services as defined in the contract. The timing of customer
payments varies by contract, but will typically occur in advance of the Company
providing associated services. Revenues from program operations will be
recognized ratably as the program services are delivered. The amount of the per
patient fee is expected to vary from program to program depending upon the
number of patient contacts required, the complexity of the interventions and the
detail of the reports generated. The Company has not capitalized any costs
related to the development of software for use in its disease state management
programs since all of such software has been developed for internal use.
The sales cycle for the Company's programs is expected to extend for periods
of six to nine months from initial contact to contract execution. During these
periods, the Company may expend substantial time, effort and funds to prepare a
contract proposal and negotiate the contract. The Company may be unable to
consummate a commercial relationship after the expenditure of such time, effort
and financial resources.
RESULTS OF OPERATIONS
The Company generated revenue of $113,000 during the period from inception
on February 22, 1995 to December 31, 1995, and $644,146 during the nine months
ended September 30, 1996. During the period from inception to December 31, 1995,
$84,000 of revenue was derived from development fees with respect to
16
<PAGE>
disease state management programs and $29,000 of revenue was derived from fees
with respect to the development and conduct of a patient satisfaction survey and
a patient focus group. During the nine months ended September 30, 1996, $616,697
of revenue was derived from development fees with respect to disease state
management programs, $23,056 of revenue was derived from the licensing fees with
respect to disease state management programs, and $4,393 of revenue was derived
from fees with respect to the development and conduct of a patient satisfaction
survey and a patient focus group. The increase in program development fees
reflects the increase in the level of development activities for the Company's
customized programs. The increase in program licensing fees reflects the
initiation of licensing of the Company's standardized programs. The decrease in
revenues from the development and conduct of a patient satisfaction survey and a
patient focus group is a result of the completion of that project.
Cost of sales include salaries and related benefits, services provided by
third parties, and other expenses associated with the development of disease
state management programs and a patient satisfaction survey and assembly of a
patient focus group. Cost of sales was $111,870 from inception to December 31,
1995, and $601,124 for the nine months ended September 30, 1996. The increase in
these costs reflects an increased level of program development activities.
Sales and marketing expenses from inception to December 31, 1995 were
$375,384, and were $616,545 for the nine months ended September 30, 1996. These
costs consisted primarily of salaries, related benefits and travel costs. These
expenditures allowed the Company to undertake initial marketing efforts to
pharmaceutical companies, payors and other health care services organizations.
The increase in these costs from 1995 to 1996 reflects an increase in the size
of the Company's sales and marketing staff.
General and administrative expenses include the costs of corporate
operations, finance and accounting, human resources and other general operating
expenses of the Company. General and administrative expenses from inception to
December 31, 1995 were $678,498, and were $1,298,801 for the nine months ended
September 30, 1996. These expenditures were incurred to develop the corporate
infrastructure necessary to support anticipated program development and
operations. The increase in these costs from 1995 to 1996 was caused by an
increase in the Company's level of business activity, and the addition of
required administrative personnel.
Research and development expenses consist primarily of salaries and related
benefits and administrative costs allocated to the Company's research and
development personnel for development of certain components of the integrated
information capture and delivery system, as well as development of the Company's
standardized disease state management programs. Research and development
expenses from inception to December 31, 1995 were $89,909, and were $160,619 for
the nine months ended September 30, 1996. The increase in these costs from 1995
to 1996 reflects initiation of development of the Company's standardized disease
state management programs for patients suffering from asthma and diabetes.
The Company had a net loss of $1,116,652 from inception to December 31,
1995, representing a loss of $.18 per share, and a net loss of $1,979,610 for
the nine months ended September 30, 1996, representing a loss of $.32 per share.
See Note 1 of Notes to Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had working capital of $1,470,088. Since
its inception the Company has funded its operations, working capital needs and
capital expenditures from private placements of equity securities. The Company's
initial capitalization of $500,000 was completed in February 1995. The Company
received $1,800,000 from the sale of additional equity securities in a private
placement during the third quarter of 1995, $1,600,000 of which was received in
August 1995, and $200,000 of which was received in September 1995, and
$3,000,000 from the sale of additional equity securities in a private placement
during the second quarter of 1996, $2,825,000 of which was received in May 1996
and $175,000 of which was received in June 1996.
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The Company's development contracts generally require that payments be made
by the customer at the time of contract execution and at the achievment of
certain milestones in the development process. These payments are normally
received in advance of the Company's recognition of the associated revenue. The
timing of customer payments for program operation services varies by contract,
but typically occurs prior to the associated services being provided. The
Company recognizes deferred revenue for amounts billed for these services in
advance of the rendering of the services. The advance payments have been a
source of liquidity for the Company. The Company anticipates that its billing
practices are likely to continue in this manner in the forseeable future.
The Company has been substantially dependent upon private placements of
equity securities to fund its research and development activities and working
capital requirements. In order to implement programs using the Company's
integrated information capture and delivery system, the Company will be required
to devote substantial additional assets to the development of technology, the
construction of physical facilities and the acquisition of telephone and
computer equipment. The Company will also be required to retain the services of
employees in advance of obtaining contracts to provide services. The Company
anticipates, based on currently proposed plans and assumptions relating to its
operations, including the timing of research and product development and the
costs associated with marketing and promotion of its system, that the proceeds
of this offering, together with available resources, will be sufficient to
satisfy the Company's contemplated cash requirements for at least twenty-four
months following the consummation of this offering. In the event that the
Company's plans change or its assumptions change or prove to be inaccurate, the
Company could be required to seek additional financing or curtail its
activities. The Company has no current arrangements with respect to, or sources
of, additional financing. The Company may also deem it desirable to acquire
assets, technologies or other entities in complementary or related fields, or
for other projects which management believes to be in the Company's best
interest, and therefore may reapportion proceeds of this offering to such
acquisition or project.
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BUSINESS
GENERAL
Patient Infosystems, Inc. provides patient-centered health care information
systems and services to proactively manage, collect and analyze information to
improve patient compliance with prescribed treatment protocols. The Company's
technology platform integrates treatment compliance algorithms with an advanced
voice recognition telephone system, high speed data processing and analysis
capability and demand publishing and information distribution capabilities. The
system utilizes trained telephone operators and computerized interactive voice
response technology to communicate via telephone directly with the patient at
home in order to gather relevant patient data. This data is subsequently
evaluated and automatically transmitted via computer generated reports to health
care payors, providers and patients tailored to the specific needs of each
recipient.
The Company markets its services to pharmaceutical manufacturers, PBMs and
health care payors and providers to collect data outside of the physician office
and institutional setting to enhance compliance by patients with prescribed
treatment protocols. The Company's disease state management programs are
designed to provide the following benefits: (i) for patients, improved
communication with health care resources, enhanced self-care skills, increased
treatment adherence resulting in improved quality of care and reduced
inconvenience, risk and expense associated with unscheduled physician
interventions; (ii) for health care providers, more information on patient
progress, quicker identification of hard-to-manage patients, enhanced ability to
make timely treatment modifications, triage capability and expanded information
for development of improved treatment protocols; and (iii) for payors and
program sponsors, cost-effective management of the disease risk, improved
patient compliance and outcomes and enhanced patient and provider satisfaction.
INDUSTRY OVERVIEW
Health care costs have increased significantly in the United States in
recent years despite substantial attempts to control costs by the government and
private payors. According to the Federal government, national health
expenditures have increased from $540 billion in 1988 (11.1% of GNP) to a
projected $1 trillion in 1995 (15.7% of projected GNP). Faced with rapidly
rising health benefit costs, employers are aggressively seeking methods through
managed care techniques to reduce the volume and unit cost of health care
services. The Company believes that payors have achieved substantial health care
cost savings to date through reducing the unit pricing for and utilization of
products and services.
One way to achieve significant additional savings is to change the way that
health care is delivered to patients by focusing on quality and cost efficient
clinical outcomes. In an effort to lower costs, payors and providers have
encouraged the shifting of patient care away from the physician office and
institutional setting. As a result, more and more patients administer their own
medications without direct provider oversight. However, the Company believes
that to date only limited progress has been made in implementing cost-effective
methods to monitor patient compliance with prescribed treatment protocols. The
failure to comply with treatment regimens results in significant unnecessary
costs to the health care system. The Company believes that as cost containment
strategies move the point of care out of the institutional setting, payors will
require information systems that gather data and facilitate behavior
modification outside of the physician office and institutional setting.
Once clinical treatment decisions are made, patients must comply with the
prescribed treatment regimen to achieve the desired outcome. Estimates vary from
disease to disease, but generally indicate that between 30% and 60% of all
patients fail to take medications as prescribed. The consequences of patient
non-compliance with prescribed treatment plans represent a significant portion
of health care expenditures. One industry study indicated that patient
non-compliance results in $100 billion in health care and lost productivity
costs annually. Costs associated with chronic disease patients who fail to
adhere to prescribed treatment regimens have been particularly difficult to
control. When long-term treatments for chronic disease have been prescribed, as
many as 80% of all patients fail to carry out correctly at least one element of
the disease treatment regimen. In addition, a 1990 study indicated that over 5%
of hospital admissions were
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caused by outpatient noncompliance. The Company believes that by coupling
effective treatment protocols with the ability to monitor patient condition and
treatment regimen compliance between physician interventions, health care
providers and payors can significantly enhance clinical outcomes while reducing
costs.
Monitoring patients by telephone can be a cost effective strategy for
improving the treatment of chronic diseases. One industry study, which involved
patient contact by nurses to determine treatment compliance and disease
progress, indicated that the use of telephone follow-up saved an estimated 28%
in health care delivery costs for elderly, ambulatory patients with chronic
diseases. In addition, patients who received follow-up telephone care had 19%
fewer clinic visits, 14% overall less medication utilization, 20% fewer hospital
days and 41% fewer intensive care unit days. Telephone patient monitoring
systems may be used with a broad range of chronic patient treatment programs for
disease state management and outcome evaluation and other health care
applications.
The Company believes that there is a large and growing need among health
care providers, payors and patients for improved, cost-effective treatment and
management of chronic diseases through the use of patient compliance information
systems.
STRATEGY
The Company's strategy is to capitalize on its advanced information
technology platform to become the leading provider of patient-centered health
care information programs. The key elements of this strategy are to:
INTRODUCE DISEASE SPECIFIC INFORMATION SYSTEMS. The Company develops
software systems and identifies treatment protocols to assist in the
management of specific chronic diseases such as secondary cardiovascular
disease, congestive heart failure, diabetes and asthma. The Company designs
and markets these systems for certain clients on a customized basis pursuant
to which the client funds development and implementation of the system for a
specific disease. Alternatively, the Company internally develops
standardized systems for targeted diseases and subsequently markets the
system to multiple end-users. The Company markets its customized systems to
pharmaceutical companies and PBMs interested in sponsoring disease state
management programs to provide their managed care customers with a
value-added service. These programs are designed to modify patient behavior
in order to improve treatment and outcomes and reduce costs associated with
non-compliance.
DEMONSTRATE CLINICAL BENEFITS AND COST-EFFECTIVENESS. The Company
markets its services based on the expected reduction of overall health care
costs that it believes will result from improved treatment compliance. The
Company intends to complement its marketing efforts by conducting or
sponsoring clinical studies and implementing other measures designed to
establish and document the clinical and cost benefits it believes will
result from the application of its integrated information capture and
delivery system. The Company intends to promote the benefits of its system
through publication in clinical journals and presentations at scientific
conferences of the results of these studies.
ANALYZE OUTCOMES DATA USING ARTIFICIAL INTELLIGENCE SYSTEMS TO IMPROVE
CLINICAL PROTOCOLS. As the Company's network of patients expands, so will
its database of relevant information with respect to patient behavior and
disease progression. The Company has designed its system to enable analysis
of data using a variety of technologies, including neural networks, fuzzy
logic and genetic algorithms. The Company intends to use this information to
improve treatment algorithms and compliance behavior in an effort to improve
treatment, and thereby maximize positive patient outcomes and reduce costs.
DEVELOP OR ACQUIRE ADDITIONAL INFORMATION CAPTURE AND DELIVERY
TECHNOLOGIES. The Company plans to develop or acquire additional
technologies that enhance its ability to gather information and interact
with patients. The Company is developing a wireless two-way communication
system to permit the flow of constant, uninterrupted information between the
patient and the Company. Additionally, the Company is developing a
CD-ROM-based educational information system for patient use and an approach
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to using on-line information systems such as e-mail to interact directly
with patients. The Company believes that these additional technologies will
allow the Company to provide and obtain more detailed information as a
supplement to or as a substitute for telephone interactions and printed
materials.
LEVERAGE TECHNOLOGY PLATFORM TO DEVELOP ADDITIONAL APPLICATIONS. The
Company intends to use its expertise in information management and database
technologies to develop additional programs and services, such as clinical
trial data compilation and analysis, patient surveys, clinical outcomes
evaluation, demand management and case management. By gaining access to
certain customers through the provision of one type of information service,
the Company will be well positioned to provide additional services. For
example, the Company believes that as it provides clinical trial information
for pharmaceutical companies in connection with specific products, it will
also be in a position to provide disease state management services in
connection with the use of such drugs.
There can be no assurance that the Company will be able to implement its
business strategy effectively or economically, if at all.
INFORMATION CAPTURE, DELIVERY AND ANALYSIS TECHNOLOGIES
The Company's technology platform integrates treatment algorithms with an
advanced voice recognition telephone system, high speed data processing and
analysis capability and demand publishing and information distribution
capabilities. The system utilizes trained telephone operators and computerized
interactive voice response technology to communicate via telephone directly with
the patient at home in order to gather relevant patient data. In order to
minimize costly live operator interaction, a computer initiates each call to the
patient, which call is automatically transferred to an operator and finally
routed to an automated speech application. Patients respond to the recorded
speech application by speaking normally. This approach is designed to ensure a
more accurate and reliable response than is achievable via telephone key pad.
Depending on the patient's response, situation-specific algorithms are applied
to modify future questions and thus help customize the collection of data.
The Company's system analyzes and prepares the captured data for automatic
delivery to the payor, provider and patient using demand publishing. Demand
publishing technology enables the creation of highly individualized reports by
inserting stored graphic images customized for race, gender and age. These
reports are also customized to the patient's specific situation, and the system
utilizes the information received during contacts with the patient to further
customize the content of the report. The data relevant to the separate report
for health care providers is formatted in a customized report to be
automatically transmitted via mail, fax or on-line.
Each contact with a patient contributes to the establishment of a
longitudinal data base which can be analyzed to provide information about
treatment modalities for patients, providers and payors. The Company's system is
designed to analyze patient compliance to prescribed treatment regimens and
gather additional clinical information so that improvements in such regimens can
be developed.
INTEGRATED DISEASE STATE MANAGEMENT SYSTEM
The Company's first application of its integrated information capture and
delivery technology is its integrated disease state management system. This
system is designed to provide care givers with the ability to monitor, on a
cost-effective basis, patient condition and behavior while the patient is
between physician consultations. The Company believes that this will permit care
givers to improve patient compliance and, as a consequence, improve patient
outcomes.
Each of the Company's integrated disease state management programs is
designed to provide one or more of the following benefits. For patients, these
intended benefits include: (i) improved access to and communication with health
care resources beyond existing hospital care and office and in-home provider
visits; (ii) enhanced self-care skills and knowledge of the disease covered by
the program; (iii) increased treatment compliance, motivation and confidence in
disease self-management resulting in improved quality of life; and (iv) reduced
inconvenience, risk and expense associated with unscheduled office visits,
emergency room interventions and hospitalizations.
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For health care providers, these intended benefits include: (i) more
comprehensive information on patient progress; (ii) earlier identification of
hard-to-manage patients; (iii) enhanced ability to make timely treatment
modifications; (iv) better utilization of health care resources appropriate to
patient needs; and (v) expanded information for development of improved
treatment methods.
For payors and program sponsors, these intended benefits include: (i)
cost-effective management of disease risk; (ii) improved patient compliance;
(iii) improved treatment outcomes; and (iv) enhanced patient and provider
satisfaction.
The Company only recently enrolled its first patients in a disease state
management program, and there can be no assurance that the benefits described
above will be achieved.
The Company's disease state management system has three primary components.
First, using a panel of recognized medical and clinical experts, the Company
develops a disease-specific patient intervention and compliance program that
includes a template for the integration of each patient's history, current
medical status and treatment protocol. If the program is being developed on a
custom basis for a particular customer, the program is developed in consultation
with the customer's clinical staff and consultants. Second, the Company
establishes periodic telephone contacts with each patient to monitor the
patient's compliance with prescribed therapies as well as the patient's
treatment progress. Third, using the information obtained from patient contacts
and other available information regarding the patient and his or her treatment,
such as physician records and pharmacy information, personalized reports are
prepared, typically following each patient contact, for evaluation by the
patient, the patient's health care provider and, on a periodic basis, payors.
DEVELOPMENT OF DISEASE SPECIFIC PROTOCOLS
The Company's disease-specific compliance programs are developed for
targeted diseases either on a customized or standardized basis. The Company
retains an internal clinical staff and panels of independent medical and
clinical experts to identify guidelines of generally accepted treatment
protocols and diagnostic interventions for particular diseases. These guidelines
serve as a template for information to be gathered from each patient. If the
program is being developed on a custom basis for a particular customer, the
program is developed in consultation with the customer's clinical staff and
consultants. In addition, the Company's internal clinical staff conducts
research of available databases and gathers information provided by medical
experts, insurance providers, governmental agencies, Medicare and Medicaid and
other sources to develop with the medical experts the disease-specific program
structure. The resulting compliance protocols are designed to enable the Company
to gather the necessary patient information to determine the extent of a
patient's compliance with his or her prescribed treatment, the effectiveness of
treatment and the progress of the patient's disease. As the Company's database
of disease-specific treatments expands, the Company intends to use that data to
modify, update and enhance its own disease state management compliance programs
and assist health care providers in improving treatment protocols.
PATIENT ENROLLMENT
When a patient is enrolled in one of the Company's disease state management
programs a patient history is obtained, including the histories of the chronic
illness, medications, and surgical procedures as well as other information
deemed relevant by the disease-specific compliance program. This information is
included in the Company's database for each patient and is used to create
customized reports for distribution to each of the patient's health care
provider and payor as well as the patient. The patient report can include
information on the prescribed treatment of the patient's disease as well as the
use of the program and social support services to improve compliance with the
patient's treatment regimen. In addition, the Company's on-demand publishing
technology provides personalized behavior modification and educational materials
for the patient. The health care provider report contains the relevant clinical
and behavioral information gathered from the patient.
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PATIENT CONTACTS
In accordance with a designated patient contact schedule, a patient will
periodically receive telephone calls from a live operator who, after confirming
the identity of the patient, will transfer the patient to an automated system
that will ask specific questions determined in accordance with the
disease-specific compliance program and provide information and motivational
feedback. Patient contact schedules are established for each disease state
management program, with the frequency of patient contact varying with the
disease under management and the goal of the applicable treatment and occurring
as often as daily or as infrequently as on a quarterly basis. The data gathered
from the patient during each contact is processed and stored in the Company's
database.
The compliance program takes into account patient responses to treatment
follow-up questions and initiates specific courses of action which can include
positive reinforcement messages, confirmation of prescription instructions and
scheduled callbacks to remind the patient of the need to take prescribed
medication. In addition, questions to be asked in future calls are modified
based upon the patient's responses during previous calls.
The Company's disease state management system captures and processes the
information obtained from the patient during the contact and integrates this
information with the other data maintained by the Company, including prior
patient responses, patient medical history, treatments administered to date and
the mandated treatment protocols for the disease. This system automatically
prepares distinct reports using the Company's demand publishing technologies for
the patient and for the physician or other care-giver. Each report is tailored
for the particular requirements of each recipient. The patient's report, for
example, may include pictures, diagrams and informative discussions relating to
the treatment course intended to modify or reinforce certain behaviors. The
physician's report would likely be more factual and direct and summarize the
clinical and behavioral information that has been gathered.
On a periodic basis, the Company will provide data to the patient's health
care payor with respect to that patient's progress. The Company will be able to
include information from various data sources in these reports for the purpose
of providing additional information with respect to a patient. For example, the
Company may be able to interact with the pharmacy services division of a payor
to determine the renewal frequency of prescriptions, which provides an
indication of whether a patient is taking his or her medication. In addition,
the system provides the flexibility to allow other information from physicians'
reports and hospital tests to be included in the periodic reports.
COMPLIANCE ASSISTANCE
The Company assists payors and health care providers in monitoring patient
compliance and works with health care providers to develop compliance and
education programs that can be implemented through the Company's system. The
Company's publishing technology enables production of patient-specific
compliance and education literature that is customized for an individual
patient. Once this literature is prepared it may
be delivered to a patient by mail, facsimile or on-line. In addition, the
Company can implement a variety of procedures including medication reminders via
wireless two-way communication and more frequent telephone communications for
non-compliant patients or patients with more difficult treatment regimens. The
Company can provide additional support services, such as an 800 number that will
provide recorded information with respect to a variety of patient education
topics or other support messages.
PATIENT INFOSYSTEMS PROGRAMS
SECONDARY CARDIOVASCULAR DISEASE
It is estimated by the American Heart Association that in 1996, $129 billion
will be spent in the United States for the treatment of cardiovascular disease.
Cardiovascular disease may be treated with a combination of medications, as well
as dietary, lifestyle and behavior modifications. The treatment is on-going and
requires a high level of patient discipline. The Company has entered into a
services agreement with Bristol-Myers to develop, implement and operate a
disease state management program relating to the prevention of
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cardiovascular sequelae in patients who have recently experienced certain
cardiovascular illnesses or treatments such as angina, cardiac bypass surgery or
myocardial infarction. A limited number of patients were enrolled in the
Company's secondary cardiovascular disease program in October 1996.
CONGESTIVE HEART FAILURE
The American Heart Association estimated in 1996 that approximately 4.7
million Americans currently suffer from Congestive Heart Failure. Elderly
patients with heart failure are at increased risk for rehospitalization after
discharge. Behavioral factors such as noncompliance with medications and poor
diet may contribute to hospital admissions. The Company has entered into a
services agreement with Bristol-Myers to develop, implement and operate a
disease state management program to aid in the treatment of patients suffering
from congestive heart failure. A limited number of patients were enrolled in a
Company-funded disease state management program for congestive heart failure in
October 1996.
DIABETES
Diabetes is an incurable disease characterized by elevated blood glucose
levels. The American Diabetes Association estimates that there are over 16
million diabetics in the United States, at least 700,000 of whom are undergoing
insulin therapy. Insulin therapy involves daily sampling of blood and, in many
cases, regular injections of insulin. Currently, it is estimated that $45
billion is spent annually on the treatment of all diabetics and diabetes-related
conditions within the United States. With proper treatment, diabetes should not
be life threatening; however, untreated or improperly treated diabetes can lead
to such complications as blindness, kidney disease, nervous system disorders,
vascular disease and death. The Company is developing a disease state management
program for diabetic patients that it is marketing to payors and other
participants in the health care industry. Equifax and Health Resources have
retained the Company to provide this disease state management program for
patients who are suffering from diabetes and are enrolled in health care
programs for which these companies provide services.
ASTHMA
Asthma affects 12 million people in the United States, with direct costs
related to the disease estimated at $3 billion annually. Noncompliance with
pharmacological therapy is the leading cause of hospitalization among
asthmatics. However, with proper treatment, including high patient compliance,
most asthmatics can control their disease effectively. The Company is developing
a disease state management program for asthmatic patients that is being marketed
to payors. American HomePatient, Equifax, Health Resources and Harris Methodist
have retained the Company to provide disease state management programs for
patients who are suffering from asthma and are enrolled in health care programs
for which these companies provide services. A limited number of patients were
enrolled in a Company-funded disease state management program for asthmatic
patients in November 1996.
CHRONIC PAIN MANAGEMENT
Persons suffering from cancer are often treated with medication to alleviate
constant, severe pain. Bristol-Myers has retained the Company to develop,
implement and update a program to manage patients who are experiencing intense
levels of chronic pain. The Company is developing a disease state management
program for chronic pain management and expects the program to be available for
patient enrollment during the fourth quarter of 1996.
WEIGHT MANAGEMENT
The inability to maintain adequate weight is a serious problem for
individuals afflicted with cancer or AIDS. Bristol-Myers has retained the
Company to develop and implement a program to manage patients suffering from
anorexia or cachexia secondary to a diagnosis of cancer or AIDS. The Company is
developing a disease state management program for weight management and expects
the program to be available for patient enrollment during the fourth quarter of
1996.
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ADDITIONAL DISEASE TARGETS
The Company has identified additional opportunities in large chronic disease
markets, including in the treatment of hypertension, chronic obstructive
pulmonary disease, depression, cancer, osteoporosis, arthritis, HIV infection
and high risk pregnancy. Each of these targets has been identifed as having
characteristics which make them attractive candidates for the Company's
programs. The Company is currently involved in discussions with customers for
the development of programs in connection with the development of programs in a
variety of these areas.
Patient enrollment in each of the Company's programs will depend upon the
identification and referral by the Company's customers of patients to the
Company's system which will vary from program to program.
OTHER APPLICATIONS OF THE INTEGRATED INFORMATION CAPTURE AND DELIVERY TECHNOLOGY
OUTCOMES ANALYSIS
The Company intends to utilize information gathered from patients enrolled
in its programs to serve two purposes. First, information regarding treatment
results, success of the compliance program and patient reaction to differing
treatments or compliance protocols may be used by the Company to further improve
each disease-specific compliance program. Second, this information may be used
by payors, pharmaceutical companies and health care providers to assist in the
development of improved treatment modalities. The Company has developed
analytical methodologies using database management and information technologies,
including neural network systems, fuzzy logic and genetic algorithms. The
Company intends to use these data analysis technologies to predict the best
treatment methodologies for patients.
CLINICAL STUDIES
Many pharmaceutical companies and contract research organizations are
seeking more economical, efficient and reliable methods for compiling and
analyzing clinical data in conducting clinical trials. Furthermore, many drug
development protocols have begun to emphasize upon subjective criteria and
outcomes information. The Company believes that its system will allow it to
develop programs tailored to the measurement of outcomes data relating to the
conduct of later stage clinical trials. The Company believes that its system can
also assist pharmaceutical companies in studying and documenting the efficacy of
approved products in order to provide ongoing information to FDA or for
marketing purposes.
PATIENT SURVEYS
Organizations in many different areas of the health care industry survey
users regarding their products and services for a variety of reasons including
regulatory, marketing and research purposes. The Company's information systems,
with its ability to proactively contact patients in a cost-efficient manner, may
be used for this type of application.
DEMAND MANAGEMENT
Demand management involves assisting providers in evaluating patient
treatment needs to identify those patients who may not require immediate or
intensive services. The goal of demand management is to reduce the need for and
use of costly, often clinically unnecessary, medical services and arbitrary
managed-care interventions while improving the overall quality of life of
patients. The Company believes that its system can be used to provide automated
or semi-automated demand management services.
CASE MANAGEMENT
Patients who are prescribed complex or high cost treatment regimens may
require a higher level of monitoring, interaction, care planning and
reassessment than patients with less complicated treatment regimens. The Company
believes that its system is capable of providing these enhanced services to such
patients to eliminate or minimize the unnecessary costs and medical attention
that result from a patient's lack of compliance with a prescribed treatment
regimen.
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CUSTOMER AGREEMENTS
The Company is developing disease state management and other programs in
conjunction with the following customers:
BRISTOL-MYERS
The Company has entered into four service agreements (the "Service
Agreements") with Bristol-Myers relating to the development, implementation and
operation by the Company of disease state management programs for certain
specified diseases. The Service Agreements provide for development fees to be
paid by Bristol-Myers to the Company upon the achievement of certain milestones.
Bristol-Myers has also agreed to pay the Company operational fees per enrolled
patient, which fees for certain programs vary with the length, complexity and
frequency of patient contact dictated by the respective program protocols.
Each of the Service Agreements provides for an exclusivity period (the
"Exclusivity Period"), during which time the Company is prohibited from engaging
or participating in any other projects involving the specific disease target
that is the subject of the Service Agreements. The Exclusivity Periods extend
from the effective dates of the Service Agreements until, in general, a certain
date or a certain period (ranging from eight to 12 months) following the
achievement of a specified milestone in the development or implementation of the
program (such as the completion of the pilot program). Three of the four Service
Agreements provide that upon conclusion of the Exclusivity Period, Bristol-Myers
has the right to negotiate with the Company for an exclusive arrangement for the
administration of the disease state management program, provided that
Bristol-Myers has enrolled a certain number of patients in the program to date.
In the event that such negotiations prove unsuccessful, Bristol-Myers retains a
right of first refusal with respect to any other offers made to the Company for
such arrangements for a period of nine or 12 months following the Exclusivity
Period.
The Service Agreements generally provide that Bristol-Myers retains
ownership rights to certain materials and other work product created by the
Company pursuant to the Service Agreements and that the Company is entitled to
use other materials and data. The extent of these rights varies by agreement.
The Company and Bristol-Myers have agreed to indemnify each other with respect
to losses arising from willful or negligent acts or omissions or breaches of the
Service Agreements by the indemnifying party pursuant to the Service Agreement.
The Service Agreements are terminable without cause by either party with either
30 or 90 days' notice. The Company has entered into Service Agreements with
Bristol-Myers in the following disease areas:
CONGESTIVE HEART FAILURE. The Company is a party to a service agreement
with Bristol-Myers dated February 1, 1996, to develop, implement and update a
program for patients suffering from congestive heart failure.
SECONDARY CARDIOVASCULAR DISEASE. The Company is party to a service
agreement dated September 18, 1995 with Bristol-Myers to develop, implement and
update a program for patients with cardiovascular disease who have recently
experienced moderate to severe angina or myocardial infarction, or who recently
had cardiac bypass surgery or percutaneous transluminal coronary angioplasty.
CHRONIC PAIN. The Company is a party to a service agreement dated March 30,
1996 with Bristol-Myers to develop, implement and update a program for patients
who are experiencing intense levels of chronic pain. The initial phase of this
program is expected to be a thirty day trial monitoring cancer patients. A
second phase of this program is expected to consist of a twelve week trial
monitoring cancer patients at numerous sites. The final phase of this program
will be the implementation of a program for use in conjunction with products
that Bristol-Myers may market in this area. Upon the earlier of the commencement
of the development of the final phase of the program or December 31, 1996,
Bristol-Myers may extend the Exclusivity Period relating to the chronic pain
management program for successive one-year periods by agreeing to pay the
Company a fee in the event that the program operational fees paid to the Company
by Bristol-Myers during the year fall below certain levels.
26
<PAGE>
WEIGHT MANAGEMENT. The ability to prevent loss of body weight in certain
diseases is a significant quality of life concern. The Company is a party to a
service agreement, dated April 24, 1996, with Bristol-Myers to develop,
implement and update a program for patients suffering from anorexia or cachexia
secondary to a diagnosis of cancer or AIDS.
PATIENT SATISFACTION SURVEY. The Company is also developing a patient
satisfaction survey and a general medication compliance program pursuant to a
services agreement with Bristol-Myers dated October 16, 1995. The patient
satisfaction survey is designed to measure a patient's satisfaction with the
services rendered by their provider. The goal of this program is to improve
compliance with guidelines for using prescribed pharmaceutical products. The
services agreement calls for the payment to the Company of program development
fees as well as fees related to its providing services to enrolled patients
throughout the terms of the program protocols as set forth in the agreement. The
Company and Bristol-Myers have agreed to indemnify each other for losses arising
from willful or negligent acts, omissions or breaches of the services agreement
by the indemnifying party. The services agreement is terminable without cause by
either party with 30 days' notice.
EQUIFAX
The Company is a party to a service agreement dated June 21, 1996 with
Equifax to implement and update a program for patients suffering from asthma.
The agreement provides for the Company to receive a per patient fee for services
provided to enrolled patients over the duration of the program. The agreement
may be terminated by either party without cause upon 30 days' notice.
The Company is also a party to a service agreement dated July 28, 1996 with
Equifax to implement and update a program for patients suffering from diabetes.
The agreement provides for the Company to receive a per patient fee for services
provided to enrolled patients over the duration of the program. The agreement
may be terminated by either party without cause upon 30 days' notice.
AMERICAN HOMEPATIENT
The Company is a party to a services agreement dated June 24, 1996 with
American HomePatient to implement and update a program for patients suffering
from asthma. The agreement provides for the Company to receive a per patient fee
for services provided to enrolled patients over the duration of the program. In
addition, the Company is entitled to receive a joint marketing fee from American
HomePatient payable in stages over a 24 month period if American HomePatient is
successful in marketing the program with three health care payors. The agreement
may be terminated by either party without cause upon 30 days' prior written
notice.
HEALTH RESOURCES, INC.
The Company is a party to a services agreement dated September 13, 1996 with
Health Resources to implement and update a program for patients suffering from
asthma. The agreement provides for the Company to receive a per patient fee for
services provided to enrolled patients over the duration of the program. This
agreement may be terminated by either party without cause upon 180 days' notice.
The Company is also a party to a services agreement dated September 13, 1996
with Health Resources to implement and update a program for patients suffering
from diabetes. The agreement provides for the Company to receive a per patient
fee for services provided to enrolled patients during the duration of the
program. This agreement may be terminated by either party without cause upon 180
days' notice.
HARRIS METHODIST
The Company is a party to a services agreement dated September 24, 1996 with
Harris Methodist Health Plan to implement and update a program for a limited
number of patients suffering from asthma. The agreement provides for the Company
to receive a per patient fee for services provided to enrolled patients over the
duration of the program. The contract has a term of one year. The Company is
negotiating with Harris Methodist to enter into a broader agreement to enable
the introduction of services to a broader group of patients.
27
<PAGE>
SALES AND MARKETING
The Company markets its integrated disease state management system to
organizations within the health care industry that are involved in the treatment
of disease or payment of medical services for patients who require complex or
long-term medical therapies. These industry organizations include five distinct
groups: pharmaceutical companies, medical service companies, PBMs, health care
payors, such as managed care organizations and insurance companies, and employer
groups. The Company employs a sales and marketing staff of six persons to market
the Company's systems and has entered into a consulting agreement for sales and
marketing services with one additional person not employed by the Company. In
addition, the senior members of the Company's management are actively engaged in
marketing the Company's programs.
The Company intends to complement its marketing efforts by conducting
clinical studies and implementing other measures designed to document the
clinical and cost benefits it believes will result from the application of its
integrated information capture and delivery system. In collaboration with the
members of its expert panels who are retained to develop program protocols and
other research and clinical technicians, the Company intends to promote the
benefits of its system through publication in clinical journals and
presentations at scientific conferences of the results of these studies. The
Company is pursuing opportunities to develop programs specifically designed to
produce significant short-term data, such as its chronic pain management
program.
COMPETITION
The market for health care information products and services is intensely
competitive. Competitors vary in size and in scope and breadth of products and
services offered, and the Company will compete with various companies in each of
its disease target markets. Many of the Company's competitors have significantly
greater financial, technical, product development and marketing resources than
the Company. Furthermore, other major information, pharmaceutical and health
care companies not presently offering disease state management or other health
care information services may enter the markets in which the Company intends to
compete. In addition, with sufficient financial and other resources, many of
these competitors may provide services similar to those of the Company without
substantial barriers. The Company does not possess any patents with respect to
its integrated information capture and delivery system, and although it has
filed a provisional patent application with respect to certain aspects of its
integrated information capture and delivery system and its integrated disease
state management system, there can be no assurance that this application will
result in the issuance of a patent, or if issued, that a patent would provide
the Company with any competitive advantage.
The Company's potential competitors include specialty health care companies,
health care information system and software vendors, health care management
organizations, pharmaceutical companies and other service companies within the
health care industry. Many of these competitors have substantial installed
customer bases in the health care industry and the ability to fund significant
product development and acquisition efforts. The Company will also compete
against other companies that provide statistical and data management services,
including clinical trial services to pharmaceutical companies.
The Company is aware of several large pharmaceutical and medical service
companies that have publicly stated that they intend to be involved in providing
comprehensive disease state management services. The Company believes that the
principal competitive factors in its market are the ability to link patients,
health care providers and payors, and provide the relevant health care
information at an acceptable cost. In addition, the Company believes that the
ability to anticipate changes in the health care industry and identify current
needs are important competitive factors.
QUALITY CONTROL
The Company has developed quality control measures designed to insure that
information obtained from patients is accurately transcribed, that reports
covering each patient contact are delivered to health
28
<PAGE>
care providers and patients and that the Company's personnel and technologies
are interacting appropriately with patients and health care providers. Quality
control systems will include random monitoring of telephone calls, patient
surveys to confirm patient participation and effectiveness of the particular
program, and supervisory reviews of telephone agents.
GOVERNMENT REGULATION
The health care industry, including the current and proposed business of the
Company, is subject to extensive regulation by both the Federal and state
governments. A number of states have extensive licensing and other regulatory
requirements applicable to companies that provide health care services.
Additionally, services provided to health benefit plans in certain cases are
subject to the provisions of the Employee Retirement Income Security Act
("ERISA") and may be affected by other state and Federal statutes. Generally,
state laws prohibit the practice of medicine and nursing without a license. Many
states interpret the practice of nursing to include health teaching, health
counseling, the provision of care supportive to or restorative of life and well
being and the execution of medical regimens prescribed by a physician.
Accordingly, to the extent that the Company assists providers in improving
patient compliance by publishing educational materials or providing behavior
modification training to patients, such activities could be deemed by a state to
be the practice of medicine or nursing. Although the Company has not conducted a
survey of the applicable law in all 50 states, it believes that it is not
engaged in the practice of medicine or nursing. There can be no assurance,
however, that the Company's operations will not be challenged as constituting
the unlicensed practice of medicine or nursing. If such a challenge were made
successfully in any state, the Company could be subject to civil and criminal
penalties under such state's law and could be required to restructure its
contractual arrangements in that state. Such results or the inability to
successfully restructure its contractual arrangements could have a material
adverse effect on the Company.
The confidentiality of patient information is subject to regulation by state
law. A variety of statutes and regulations exist safeguarding privacy and
regulating the disclosure and use of medical information. State constitutions
may provide privacy rights and states may provide private causes of action for
violations of an individual's "expectation of privacy." Tort liability may
result from unauthorized access and breaches of patient confidence. The Company
intends to comply with state law and regulations governing medical information
privacy.
In addition, on August 21, 1996, Congress passed the Health Insurance
Portability and Accountability Act of 1996, P.L. 104-191. This legislation
requires the Secretary of Health and Human Services to adopt national standards
for electronic health transactions and the data elements used in such
transactions. The Secretary is required to adopt safeguards to ensure the
integrity and confidentiality of such health information. Violation of the
standards is punishable by fines and, in the case of wrongful disclosure of
individually identifiable health information, imprisonment. The Secretary is
required to issue the standards not later than February 21, 1998. The Company
cannot predict what requirements will ultimately be adopted by the Secretary,
however, such requirements could have an adverse effect on the Company's
business.
The Company and its customers may be subject to Federal and state laws and
regulations which govern financial and other arrangements between health care
providers. These laws prohibit certain fee splitting arrangements between health
care providers, as well as direct and indirect payments, referrals or other
financial arrangements that are designed to induce or encourage the referral of
patients to, or the recommendation of, a particular provider for medical
products and services. Possible sanctions for violation of these restrictions
include civil and criminal penalties. Further, criminal violations may result in
mandatory exclusions of up to five years and additional permissive exclusions
from participation in Medicare and Medicaid programs.
Regulation in the health care field is constantly evolving. The Company is
unable to predict what government regulations, if any, affecting its business
may be promulgated in the future. The Company's business could be adversely
affected by the failure to obtain required licenses and governmental approvals,
comply with applicable regulations or comply with existing or future laws, rules
or regulations or their interpretations.
29
<PAGE>
INTELLECTUAL PROPERTY
The Company considers its methodologies, processes and know-how to be
proprietary. The Company seeks to protect its proprietary information through
confidentiality agreements with its employees. The Company's policy is to have
employees enter into confidentiality agreements containing provisions
prohibiting the disclosure of confidential information to anyone outside the
Company, requiring employees to acknowledge, and, if requested, assist in
confirming the Company's ownership of any new ideas, developments, discoveries
or inventions conceived during employment, and requiring assignment to the
Company of proprietary rights to such matters that are related to the Company's
business.
The Company has filed a provisional patent application with respect to
certain aspects of its integrated information capture and delivery and
integrated disease state management systems. No assurance can be given that a
patent will issue or that if issued such patent will provide the Company with a
competitive advantage.
EMPLOYEES
As of October 31, 1996, the Company had 40 employees.
PROPERTIES
The Company's executive and corporate offices are located in Rochester, New
York in approximately 13,100 square feet of leased office space, under a lease
that expires on November 30, 1999.
LEGAL MATTERS
The Company is not a party to any material legal proceedings.
30
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the Company's
directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Derace Schaffer, M.D................................. 48 Chairman of the Board
Donald A. Carlberg................................... 44 Director, President and Chief Executive Officer
Gregory D. Brown..................................... 35 Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
James D. Turner...................................... 36 Senior Vice President, Sales and Marketing
Kent A. Tapper....................................... 40 Vice President, Systems Engineering
Giancarla C. Miele................................... 52 Vice President, Operations
David B. Nash, M.D., M.B.A........................... 41 Executive Vice President, Medical Affairs
Alvin I. Mushlin, M.D................................ 54 Senior Medical Advisor
John Pappajohn....................................... 68 Director
Barbara J. McNeil, M.D., Ph.D........................ 55 Director
Carl F. Kohrt, Ph.D.................................. 53 Director
</TABLE>
DERACE SCHAFFER, M.D. has been Chairman of the Board and a Director of the
Company since its inception in February 1995. Since 1980, Dr. Schaffer has been
the President of The Ide Group, P.C., a group of physicians providing
radiological services at multiple locations in New York State, and since 1990 he
has also been President of The Lan Group, a venture capital firm specializing in
health care investments. He serves as a Clinical Professor at the University of
Rochester School of Medicine and a Director of NeuralTech, Inc., NeuralMed,
Inc., Preferred Oncology Networks of America, Inc., American Physican Partners,
Inc., The Care Group, Inc., and Medifax, Inc. as well as several not-for-profit
corporations.
DONALD A. CARLBERG has been President, Chief Executive Officer and a
Director of the Company since its inception. From February 1993 to December
1994, Mr. Carlberg served as Chief Executive Officer of Patient Management
Technologies, Inc., a medical services consulting company, which he founded.
From 1992 to 1994, Mr. Carlberg served as Senior Vice President--Sales and
Marketing for Neurocare, Inc./Paradigm Health Corp. From 1990 to 1992, Mr.
Carlberg served as Director of Managed Care for Baxter Healthcare International
where he started managed care initiatives for its Caremark Division. From 1985
to 1990, Mr. Carlberg held several senior level positions in managed care at
Blue Cross/Blue Shield of Rochester, New York and Independence Blue Cross in
Philadelphia, Pennsylvania.
GREGORY D. BROWN has been Senior Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company since May 1995. From 1989 to 1995, Mr.
Brown was Chief Financial Officer of Pappajohn Capital Resources, a venture
capital firm specializing in health care investments, and Equity Dynamics, Inc.,
a financial consulting firm, both located in Des Moines, Iowa. From 1984 to
1989, Mr. Brown was a Senior Accountant with Vroman, McGowen, Hurst, Clark &
Smith, P.C., a certified public accounting firm.
JAMES D. TURNER has been Senior Vice President, Sales and Marketing of the
Company since September 1996. Mr. Turner served as Director of Business
Development for Preferred Oncology Networks of America, Inc. from January 1996
to September 1996. From 1987 to 1995, Mr. Turner held various sales, marketing
and business development positions with divisions of Coram Healthcare, Inc. and
Baxter Healthcare International, most recently as Director of Business
Development.
KENT A. TAPPER has been Vice President, Systems Engineering of the Company
since July 1995. Prior to joining the Company and since 1992, Mr. Tapper was
Product Manager, Audio Response and Call Center Platforms for Northern Telecom,
Inc. From 1983 to 1992, Mr. Tapper held Product Manager, Systems Engineering
Manager and various engineering management positions with Northern Telecom.
31
<PAGE>
GIANCARLA C. MIELE has been Vice President, Operations, of the Company since
October 1995. From 1994 to 1995, Ms. Miele was Director of Operations for
Integrated Medical Delivery Corporation, a medical management firm. From 1992 to
1994, Ms. Miele was the Administrator of Cancer Care, Inc., an MSO in the
metropolitan Washington, D.C. region. From 1989 to 1992, Ms. Miele served as
Senior Consultant to CMA, a medical services consulting firm.
DAVID B. NASH, M.D., M.B.A. has been Executive Vice President, Medical
Affairs of the Company since April 1996. Dr. Nash is Director of Health Policy
and Clinical Outcomes at Thomas Jefferson University Hospital and Associate
Professor of Medicine at Jefferson Medical College. Dr. Nash is the recipient of
the 1995 Clifton Latiolias Prize in Managed Care from the American Managed Care
Pharmacy Association. He also serves as a scientific advisory board member of
iSTAT Corp. Dr. Nash provides his services to the Company on a part-time
consulting basis.
ALVIN I. MUSHLIN, M.D. has been Senior Medical Advisor of the Company since
April 1996. Dr. Mushlin is a Professor of Community and Preventative Medicine at
the University of Rochester, where he has served in various capacities since
1976. He is a member of the National Councils of the Society for General
Internal Medicine and the Society for Medical Decision Making and has served on
the Health Care Technology Study Section of the Agency for Health Care Policy
and Research. Dr. Mushlin provides his services to the Company on a part-time
consulting basis.
JOHN PAPPAJOHN has been a Director of the Company since its inception, and
served as its Secretary and Treasurer from inception through May 1995. Since
1969, Mr. Pappajohn has been the sole owner of Pappajohn Capital Resources, a
venture capital firm specializing in health care investments, and President of
Equity Dynamics, Inc., a financial consulting firm, both located in Des Moines,
Iowa. He serves as a Director for the following public companies: CORE, Inc.,
Drug Screening Systems, Inc., Fuisz Technologies, Ltd., GalaGen, Inc., OncorMed,
Inc., The Care Group, Inc., United Systems Technology, Inc. and Pace Health
Management Systems, Inc.
BARBARA J. MCNEIL, M.D., PH.D. has been a Director of the Company since May
1995. Dr. McNeil is Head of the Department of Health Care Policy and a Professor
of Radiology at Harvard Medical School where she has served in various
capacities since 1971. For four years she has served as Chair of the Blue
Cross-- Massachusetts Hospital Association Fund for Cooperative Innovation and
currently she is a member of the National Council on Radiation Protection, the
American College of Radiology and its Board of Chancellors, the Society of
Nuclear Medicine, the Advisory Council for the Agency for Health Care Policy and
Research, and the National Academy of Sciences' Institute of Medicine where she
is a Council member. She also serves as a Director of CV Therapeutics, Inc.
CARL F. KOHRT, PH.D. has been a Director of the Company since April 1996.
Dr. Kohrt is Executive Vice President and Assistant Chief Operating Officer of
the Eastman Kodak Company, where he has served in various capacities since 1971.
Dr. Kohrt is a recipient of a Sloan Fellowship for study at Massachusetts
Institute of Technology. Dr. Kohrt also serves on the board of governors of The
Genesee Hospital.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has appointed two committees: the
Audit Committee and the Compensation Committee. The members of the Audit
Committee are John Pappajohn, Dr. Barbara McNeil and Dr. Carl Kohrt. The Audit
Committee periodically reviews the Company's auditing practices and procedures,
makes recommendations to management or to the Board of Directors as to any
changes to such practices and procedures deemed necessary from time to time to
comply with applicable auditing rules, regulations and practices, and recommends
independent auditors for the Company to be elected by the stockholders. The
members of the Compensation Committee are Dr. Derace Schaffer, Dr. McNeil and
Dr. Kohrt. The Compensation Committee meets periodically to make recommendations
to the Board of Directors concerning the compensation and benefits payable to
the Company's executive officers and other senior executives. The Company
reimburses directors for their out-of-pocket expenses incurred in attending
Board and Committee meetings.
32
<PAGE>
DIRECTOR COMPENSATION
At present no separate cash compensation or fees are payable to directors of
the Company, other than reimbursement of expenses incurred in connection with
attending meetings. The Company expects, however, that new non-employee
directors not otherwise affiliated with the Company or its stockholders will be
paid in a manner and at a level consistent with industry practice.
On May 20, 1995, the Company granted options to acquire 36,000 shares of
Common Stock at an exercise price of $0.14 per share to Dr. Barbara McNeil, a
director of the Company. On August 25, 1995, the Company granted options to
acquire 36,000 shares of Common Stock to John Pappajohn, a director of the
Company, and options to acquire 36,000 shares of Common Stock to Dr. Derace
Schaffer, Chairman of the Board of Directors of the Company, with both of these
issuances having an exercise price of $0.69 per share. On April 8, 1996, the
Company granted options to acquire 36,000 shares of Common Stock at an exercise
price of $2.08 per share to Dr. Carl Kohrt, a director of the Company.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company for services rendered in all capacities for executive officers of the
Company who received compensation in excess of $100,000 during the period from
inception on February 22, 1995 to December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------ AWARDS SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS($) UNDERLYING OPTIONS (#)
- -------------------------------------------------------- --------- ----------- ----------- ----------------------
<S> <C> <C> <C> <C>
Donald A. Carlberg, President and Chief Executive
Officer................................................ 1995(1) $ 96,417 $ 15,000 216,000
</TABLE>
- ------------
(1) Reflects compensation paid from February 22, 1995 (inception) through
December 31, 1995.
Messrs. Carlberg, Brown, Turner, Tapper and Ms. Miele are currently
compensated at annual rates of $150,000, $110,000, $110,000, $100,000 and
$100,000, respectively.
The following table sets forth certain information regarding options granted
to the Chief Executive Officer and other executive officers of the Company
during the period from inception on February 22, 1995 through December 31, 1995.
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM (2)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED (#)(1) FISCAL YEAR $/SHARE DATE 5% ($) 10% ($)
- -------------------------------------- -------------- ---------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Donald A. Carlberg.................... 180,000 27.3% $ .14 3/1/05 $ 15,722 $ 39,844
Donald A. Carlberg.................... 36,000 5.5 .69 8/25/05 15,722 39,844
Gregory D. Brown...................... 72,000 10.9 .14 5/1/05 6,289 15,937
Gregory D. Brown...................... 18,000 2.7 .69 8/25/05 7,861 19,922
Kent A. Tapper........................ 36,000 5.5 .14 7/24/05 3,144 7,969
Giancarla C. Miele.................... 36,000 5.5 1.04 10/9/05 23,583 59,766
</TABLE>
- -------------
(1) 36,000 of Mr. Carlberg's options vested as of the date of the option grant.
The remainder of his options and all other options will become exercisable
at the rate of 20% per year from the date of grant and have ten- year terms
as long as the optionee's employment with the Company continues. The
exercise price of each option is equal to the fair market value of the
underlying Common Stock on the date of the grant, as determined by the Board
of Directors.
(2) Future value of current year grants assumes appreciation in the market value
of the Common Stock of 5% and 10% per year over the ten-year option period
as required by the rules of the Securities and Exchange Commission and do
not represent the Company's estimate or projection of actual values. The
actual value realized may be greater than or less than the potential
realizable values set forth in the table.
33
<PAGE>
No stock options were exercised by the Chief Executive Officer or other
executive officers of the Company during the period from inception on February
22, 1995 through December 31, 1995. The following table sets forth certain
information regarding unexercised options held by the Chief Executive Officer
and other executive officers of the Company at December 31, 1995.
AGGREGATED OPTION EXERCISES THROUGH DECEMBER 31, 1995 AND
DECEMBER 31, 1995 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1995
AT DECEMBER 31, 1995 (#) ($)(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Donald A. Carlberg................................ 36,000 180,000 $ 57,500 $ 267,500
Gregory D. Brown.................................. 0 90,000 0 133,750
Kent A. Tapper.................................... 0 36,000 0 57,500
Giancarla C. Miele................................ 0 36,000 0 25,000
</TABLE>
- ------------
(1) Calculated based upon $1.74 estimated fair market value of the underlying
securities as of December 31, 1995.
STOCK OPTION PLAN
The Company's Stock Option Plan (the "Plan") was originally adopted by the
Board of Directors and stockholders in June 1995. Up to 1,080,000 shares of
Common Stock have been authorized and reserved for issuance under the Plan.
Under the Plan, options may be granted in the form of incentive stock options
("ISOs") or non-qualified stock options ("NQOs") from time to time to salaried
employees, officers, directors and consultants of the Company, as determined by
the Compensation Committee of the Board of Directors. The Compensation Committee
determines the terms and conditions of options granted under the Plan, including
the exercise price. The Plan provides that the Committee must establish an
exercise price for ISOs that is not less than the fair market value per share at
the date of the grant. However, if ISOs are granted to persons owning more than
10% of the voting stock of the Company, the Plan provides that the exercise
price must not be less than 110% of the fair market value per share at the date
of the grant. The Plan also provides for a non-employee director to be entitled
to receive a one-time grant of a NQO to purchase 36,000 shares at an exercise
price equal to fair market value per share on the date of their initial election
to the Company's Board of Directors. Such NQO is exercisable only during the
non-employee director's term and automatically expires on the date such
director's service terminates. Each option, whether an ISO or NQO, must expire
within ten years of the date of the grant.
There are currently outstanding 892,320 options outstanding which have been
granted under the Plan, 379,260 of which have an exercise price of $.14 per
share, 126,000 of which have an exercise price of $.69 per share, 46,800 of
which have an exercise price of $1.04 per share, 57,240 of which have an
exercise price of $1.74 per share, 130,740 of which have an exercise price of
$2.08 per share, and 152,280 of which have an exercise price of $10.00 per
share. Of these options, 36,000 were granted as of March 1, 1995 to Mr. Carlberg
and vested immediately. The remainder of Mr. Carlberg's options and all other
options granted under the plan vest as to 20% of the option grant on the first
anniversary of the grant, and 20% on each subsequent anniversary.
EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement with Mr. Carlberg as
its President and Chief Executive Officer dated March 1, 1995, which has a term
of one year and is automatically renewed for successive one-year periods unless
either party receives written notice from the other party of such party's
intention not to renew within 60 days of the agreement's expiration date. The
agreement calls for Mr. Carlberg to receive a base salary of $125,000 per year,
which was increased to $150,000 per year in September 1996. Upon execution of
the agreement, Mr. Carlberg received a $15,000 signing bonus and an
34
<PAGE>
option to purchase up to 180,000 shares of Common Stock of the Company at an
exercise price of $.14 per share, and on March 1, 1996, he received a $25,000
bonus. The option has a ten-year term, vests over five years and was 20% vested
upon grant. The remainder of the option vests at a rate of 20% per year, and the
option is therefore fully exercisable after the first five years of employment.
Mr. Carlberg is eligible for any discretionary bonuses and additional option
grants in amounts to be determined by the Company's Board of Directors based
upon the performance of the Company and Mr. Carlberg. The agreement prohibits
Mr. Carlberg from engaging in any business activity involving the measurement of
clinical outcomes for patients with acute or chronic diseases, or the
measurement of patient compliance with prescribed treatments for acute or
chronic diseases within one year of the termination of his employment with the
Company.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Bylaws provide for mandatory indemnification rights, subject
to limited exceptions, to any officer or director of the Company who, by reason
of the fact that he or she is or was an officer or director of the Company, is
involved in a legal proceeding of any nature. In addition, the Restated
Certificate of Incorporation contains provisions limiting the personal liability
of directors to the Company or its shareholders for monetary damages arising
from certain acts or omissions in the director's capacity as a director.
CERTAIN TRANSACTIONS
The Company was initially capitalized on February 22, 1995 through the sale
of 3,600,000 shares of its Common Stock for $.14 per share. Included among the
participants in that transaction were Dr. Derace Schaffer, Chairman of the
Board, who purchased 1,656,000 shares, Dr. Schaffer's spouse who purchased
144,000 shares, John Pappajohn, a director, who purchased 541,800 shares, a sole
proprietorship owned by Mr. Pappajohn which purchased 360,000 shares. Mr.
Pappajohn's spouse, who purchased 360,000 shares, and a sole proprietorship
owned by Mr. Pappajohn's spouse which purchased 360,000 shares.
In August and September of 1995 the Company sold 1,800,000 shares of its
Series A Preferred Stock in a private placement for $1.00 per share. Included
among the participants in that transaction were Gregory D. Brown, Sr. Vice
President, Chief Financial Officer, Secretary and Treasurer, who purchased
10,000 shares, and Mr. Pappajohn who purchased 10,000 shares. In addition,
Edgewater Private Equity Fund II, L.P., ("Edgewater"), a five percent owner of
the Common Stock of the Company, acquired 1,000,000 shares of Series A Preferred
Stock in the Series A Preferred Stock offering.
In May and June of 1996, the Company sold 600,000 shares of its Series B
Preferred Stock in a private placement for $5.00 per share. Included among the
participants in that transaction were Dr. Schaffer, who purchased 20,000 shares,
Mr. Pappajohn, who purchased 40,000 shares, and Edgewater which purchased
200,000 shares. See "Description of Securities".
35
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the shares of the Company's Common Stock as of November 15, 1996,
and as adjusted to give effect to the sale of 2,000,000 shares of Common Stock
in this offering assuming (a) conversion of all outstanding shares of
convertible Preferred Stock into 1,896,000 shares of Common Stock and (b) no
exercise of the Underwriters' over-allotment option (i) by each person the
Company knows to be the beneficial owner of 5% or more of the outstanding shares
of Common Stock, (ii) each named executive officer listed in the Summary
Compensation Table, (iii) each director of the Company and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY OWNED
SHARES -----------------------------
BENEFICIALLY BEFORE THE AFTER
BENEFICIAL OWNER (1) OWNED OFFERING THE OFFERING
- ---------------------------------------------------------------------------- ----------- ------------- --------------
<S> <C> <C> <C>
Derace L. Schaffer (2)...................................................... 1,709,200 31.0% 22.8%
John Pappajohn (3).......................................................... 1,439,680 26.1% 19.2%
Edgewater Private Equity Fund II, L.P., (4) ................................ 920,000 16.7% 12.3%
666 Grand Avenue, Suite 200
Des Moines, IA 50309
Donald A. Carlberg (5)...................................................... 72,000 1.3% 1.0%
Gregory D. Brown (6)........................................................ 23,760 * *
James D. Turner (7)......................................................... -- -- --
Kent A. Tapper (8).......................................................... 7,200 * *
Giancarla C. Miele (9)...................................................... 7,200 * *
David B. Nash (10).......................................................... -- -- --
Alvin I. Mushlin (11)....................................................... -- -- --
Barbara J. McNeil (8)....................................................... 7,200 * *
Carl F. Kohrt (12).......................................................... -- -- --
All directors and executive officers as a
group (11 persons) (13).................................................... 3,266,240 57.9% 42.7%
</TABLE>
- ------------
* Less than one percent.
(1) Unless otherwise noted, the address of each of the listed persons is c/o
the Company at 46 Prince Street, Rochester, New York 14607.
(2) Includes 288,000 shares held by Dr. Schaffer's minor children. Also
includes 10,000 shares which are issuable upon the conversion of 10,000
shares of Series B Preferred Stock into Common Stock upon the closing of
this offering and 7,200 shares which are issuable upon the exercise of
options that are either currently exercisable or which become exercisable
within 60 days of the date of this Prospectus. Does not include 28,800
shares subject to outstanding options which are not exercisable within 60
days of the date of this Prospectus.
(3) Includes 360,000 shares held by Halkis, Ltd., a sole proprietorship owned
by Mr. Pappajohn, 360,000 shares held by Thebes, Ltd., a sole
proprietorship owned by Mr. Pappajohn's spouse, 360,000 shares held
directly by Mr. Pappajohn's spouse and 40,000 shares which are issuable
upon the conversion of 40,000 shares of Series B Preferred Stock into
Common Stock upon the closing of this offering. Mr. Pappajohn disclaims
beneficial ownership of the shares owned by Thebes, Ltd. and by his spouse.
Includes options to purchase 7,200 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Prospectus. Does not include 28,800 shares subject to outstanding options
which are not exercisable within 60 days of the date of this Prospectus.
36
<PAGE>
(4) The included shares are all issuable upon the conversion of shares of
Preferred Stock into Common Stock upon the closing of this offering.
(5) Represents options to purchase 72,000 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Prospectus. Does not include 162,000 shares subject to outstanding options
which are not exercisable within 60 days of the date of this Prospectus.
(6) Includes options to purchase 18,000 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Prospectus and 5,760 shares which are issuable upon the conversion of 8,000
shares of Series A Preferred Stock into Common Stock upon the closing of
this offering. Does not include 82,800 shares subject to outstanding
options which are not exercisable within 60 days of the date of this
Prospectus.
(7) Does not include 72,000 shares subject to outstanding options which are not
exercisable within 60 days of the date of this Prospectus.
(8) Represents options to purchase 7,200 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Prospectus. Does not include 28,800 shares subject to outstanding options
which are not exercisable within 60 days of the date of this Prospectus.
(9) Represents options to purchase 7,200 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Prospectus. Does not include 64,800 shares subject to outstanding options
which are not exercisable within 60 days of the date of this Prospectus.
(10) Does not include 14,400 shares subject to outstanding warrants which are
not exercisable within 60 days of the date of this Prospectus.
(11) Does not include 7,200 shares subject to outstanding warrants which are
not exercisable within 60 days of the date of this Prospectus.
(12) Does not include 36,000 shares subject to outstanding options which are
not exercisable within 60 days of the date of this Prospectus.
(13) Includes options to purchase 126,000 shares which are either currently
exercisable or which become exercisable within 60 days of the date of this
Prospectus and 55,760 shares which are issuable upon the conversion of
58,000 shares of Preferred Stock into Common Stock upon the closing of
this offering. Does not include 554,400 shares subject to outstanding
options and warrants which are not exercisable within 60 days of the date
of this Prospectus.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The Company's Certificate of Incorporation authorizes the issuance of
25,000,000 shares of capital stock, which includes 20,000,000 shares of Common
Stock, $0.01 par value per share, and 5,000,000 shares of Preferred Stock, $0.01
par value per share, in one or more series with such terms as the Board of
Directors may determine. As of the date hereof, there are 3,607,202 shares of
outstanding Common Stock held by sixty record holders, 1,800,000 shares of
Series A Preferred Stock outstanding held by twenty record holders and 600,000
shares of Series B Preferred Stock outstanding held by twenty-six record
holders. All outstanding shares of Convertible Preferred Stock will
automatically convert into an aggregate of 1,896,000 shares of Common Stock as
of the closing of this offering assuming an initial public offering price of
$10.00 per share. The Series A Preferred Stock converts into Common Stock on a
.72-for-one basis. The terms of the Series B Preferred Stock provide for a
conversion rate that is adjusted, under certain circumstances, depending upon
the pricing of this offering. The Series B Preferred Stock converts into Common
Stock on a .72-for-one basis if the public offering price per share in this
offering is equal to $13.89 or greater. If the initial public offering price is
less than $13.89 per share, the Series B Preferred Stock conversion rate shall
be adjusted so that the aggregate market value of the Common Stock into which
the Series B Preferred Stock is converted will equal
37
<PAGE>
$10.00 multiplied by the number of shares of Series B Preferred Stock converted.
Such adjustment would result in a larger number of shares of Common Stock being
issuable upon conversion of the Series B Preferred Stock if the public offering
price is less than $13.89 per share. All share amounts contained herein with
respect to, or that include, shares of Common Stock issuable upon conversion of
the Series B Preferred Stock assume a public offering price of $10.00 per share.
If the initial public offering price is less than $10.00 per share, additional
shares of Common Stock will be issued upon conversion of the Series B Preferred
Stock. For example, if the initial public offering price were $9.00 per share,
an additional 66,667 shares of Common Stock will be issuable upon the conversion
of the Series B Preferred Stock.
The following is a brief summary of the terms of the various classifications
of capital stock giving pro forma effect to the automatic conversion of Series A
Preferred Stock and Series B Preferred Stock into shares of Common Stock at the
closing of this offering.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share held of record at
each meeting of stockholders. Subject to the preferences that may be applicable
to any outstanding Preferred Stock, the holders of the Common Stock are entitled
to receive ratably such dividends, if any, as may be declared from time to time
by the Board of Directors out of funds legally available therefor. See "Dividend
Policy." In any distribution of capital assets, whether voluntary or
involuntary, holders of Common Stock are entitled to receive pro rata the assets
remaining after creditors have been paid in full and holders of Preferred Stock
have received their preferential distribution. No shares of Common Stock are
entitled to preference over any other share, and each share is equal to any
other share in all respects. Holders of the Common Stock have no pre-emptive or
conversion rights or other subscription rights. The outstanding shares of Common
Stock and those issuable upon conversion of the Series A Preferred Stock and the
Series B Preferred Stock will be, when issued, duly authorized, validly issued,
fully paid and non assessable.
PREFERRED STOCK
The Board of Directors is authorized to issue without stockholder approval
5,000,000 shares of Preferred Stock in one or more series and to determine and
alter all rights, preferences and privileges and qualifications, limitations and
restrictions thereof, including with respect to the rate and nature of
dividends, the price and terms and conditions on which shares may be redeemed,
the amount payable in the event of voluntary or involuntary liquidation, the
terms and conditions for conversion or exchange into any other class or series
of stock, voting rights and other terms.
REGISTRATION RIGHTS
Holders owning 50% or more of the aggregate of the shares of Common Stock
into which any shares of the Series A Preferred Stock have been or can be
converted or the Series B Preferred Stock have been or can be converted have the
right on one occasion at any time commencing twelve months from the date of the
initial public offering of the Common Stock of the Company, but not later than
October 31, 2000 or May 31, 2001, respectively, to require the Company to
prepare and file a Registration Statement under the Securities Act covering such
shares of Common Stock, and the Company, at its expense, will use its best
efforts to cause such registration statement to become effective as soon as
possible.
In addition, the holders of Series A Preferred Stock and Series B Preferred
Stock are each entitled, subject to the approval of the underwriter, to two
"piggyback" registrations at the Company's expense as part of a registration by
the Company of its shares of Common Stock at any time commencing twelve months
from the date of the Initial Public Stock Offering, but not later than October
31, 2000 and May 31, 2001, respectively. Holders of Series A Preferred Stock and
Series B Preferred Stock are each granted the right on up to two occasions at
the participating holder's expense, and prior to October 31, 2000 and May 31,
2001, respectively, to have their shares registered on Form S-3 if such is
available for use by the Company and such holder or holders. The registration
rights are subject to a number of terms and conditions, including but not
limited to requirements as to minimum offering size and reaching satisfactory
underwriting terms.
38
<PAGE>
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a company will not be personally liable for monetary damages for
breach of their fiduciary duties as directors, except for liability for (i) any
breach of their duty of loyalty to the company or its stockholders, (ii) acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law, (iii) unlawful payment of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the Delaware General
Corporation Law or (iv) any transaction from which the director derived an
improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its officers,
directors, employees and other agents to the extent permitted by Delaware law.
The Company's Bylaws also permit it to secure insurance on behalf of any
officer, director, employee or other agent for any liability arising out of his
or her actions in such capacity, regardless of whether the Bylaws would permit
indemnification.
TRANSFER AGENT AND REGISTRAR
The Company has appointed Continental Stock Transfer and Trust Company as
its transfer agent and registrar for the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 7,503,202 shares of
Common Stock outstanding (based upon the number of shares outstanding as of
November 15, 1996 and without taking into account the additional shares of
Common Stock that would be issuable upon conversion of the Series B Preferred
Stock if the initial public offering price is lower than $10.00 per share). The
2,000,000 shares sold in this offering (2,300,000 shares if the Underwriters'
over-allotment option is exercised in full) will be freely tradable without
restriction under the Securities Act, except for any such shares held at any
time by an "affiliate" of the Company, as such term is defined under Rule 144
promulgated under the Securities Act.
The remaining 5,503,202 shares (the "Restricted Shares") were issued and
sold by the Company in private transactions and may be publicly sold only if
registered under the Securities Act or sold in accordance with an applicable
exemption from registration, such as Rule 144. In general, under Rule 144, as
currently in effect, a person, including an "affiliate" as that term is defined
in Rule 144, who has held "restricted" shares for a period of at least two years
from the later of the date such shares were acquired from the Company or the
date such shares were acquired from an affiliate, is entitled to sell, within
any three-month period, a number of restricted shares that does not exceed the
greater of one percent (1%) of the then outstanding shares of Common Stock or
the average weekly trading volume during the four calendar weeks preceding such
sale. Sales under Rule 144 are subject to certain manner of sale limitations,
notice requirements and the availability of current public information about the
Company. Rule 144(k) provides that a person who is not deemed an "affiliate" and
who has held restricted shares for a period of at least three years from the
later of the date such shares were acquired from the Company and the date they
were acquired from an affiliate is entitled to sell such shares at any time
under Rule 144 without regard to the limitations described above.
The holders of substantially all of the outstanding shares of Common Stock
have agreed pursuant to certain agreements (the "Lock-up Agreements") that they
will not sell or otherwise dispose of any shares of Common Stock for a period of
180 days from the date of this Prospectus without the prior written consent of
Cowen & Company.
Of the 5,503,202 Restricted Shares, 3,600,000 Restricted Shares will become
eligible for sale in February 1997, subject to compliance with the volume and
other limitations of Rule 144. In addition, 1,296,000 Restricted Shares will
become eligible for sale in August and September 1997 and 607,202 Restricted
Shares will become eligible for sale during or after May 1998, all subject to
compliance with the volume and other limitations of Rule 144.
Rule 701 ("Rule 701") under the Securities Act provides an exemption from
the registration requirements of the Securities Act for offers and sales of
securities issued pursuant to certain compensatory benefit
39
<PAGE>
plans or written contracts of a company not subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act (the
"Exchange Act"). Securities issued pursuant to Rule 701 are defined as
restricted securities for purposes of Rule 144. However, 90 days after the
issuer becomes subject to the reporting provisions of the Exchange Act, the Rule
144 resale restrictions, except for the broker's transaction requirement, do not
apply to shares acquired pursuant to Rule 701 by non-Affiliates. Affiliates are
subject to all Rule 144 restrictions after this 90-day period, but without the
Rule 144 holding period requirement. If all the requirements of Rule 701 are
met, upon expiration of the Lock-up Agreements, an aggregate of 825,480 shares
of Common Stock issued upon the exercise of options granted and issuable on
exercise of currently outstanding options will become eligible for sale pursuant
to such rule (subject to applicable Rule 144 restrictions), substantially all of
which shares are subject to the Lock-up Agreements.
The Securities and Exchange Commission has proposed amendments to Rule 144
and Rule 144(k) that would permit resales of Restricted Shares under Rule 144
after a one-year, rather than a two-year holding period, subject to compliance
with the other provisions of Rule 144, and would permit resale of Restricted
Shares by non-Affiliates under Rule 144(k) after a two-year, rather than a
three-year, holding period. Assuming adoption of such amendments, approximately
4,896,000 of the Restricted Shares will be eligible for sale in the public
market immediately after this offering pursuant to Rule 144 (subject to
compliance with the volume and other limitations of Rule 144), substantially all
of which shares are subject to the Lock-up Agreements.
The Company is unable to estimate the number of shares that may be sold in
the future by its existing stockholders or the effect, if any, that sales of
shares by such stockholders will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock by
existing stockholders could adversely affect prevailing market prices and the
Company's ability to raise additional capital in the future.
40
<PAGE>
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 has agreed to sell to such Underwriter,
shares of Common Stock which equal the number of shares set forth opposite the
name of such Underwriter below.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
- ----------------------------------------------------------------------------------------------------- ----------
<S> <C>
Cowen & Company......................................................................................
Vector Securities International, Inc. ...............................................................
----------
Total............................................................................................ 2,000,000
----------
----------
</TABLE>
The Underwriters are obligated to take and pay for all shares of 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 Cowen & Company and Vector Securities
International, Inc. 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 other Underwriters or 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 that the Underwriters do not intend 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 aggregate of 300,000
additional shares of Common Stock at the public offering price 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 next to
such Underwriter's name in the preceding table bears to the total number of
shares in such table.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
The Company, its officers and directors and certain other stockholders,
holding in the aggregate substantially all of the Company's currently
outstanding equity securities, have agreed that, for a period of 180 days after
the date of this Prospectus, they will not, without the prior written consent of
Cowen & Company, offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock or any securities convertible into, or exercisable or
exchangeable for, Common Stock except, in the case of the Company, in certain
limited circumstances.
At the Company's request, the Representatives have agreed to reserve up to
100,000 shares of Common Stock for sale at the public offering price to Company
employees and other persons having certain business
41
<PAGE>
relationships with the Company. The number of shares available for sale to the
general public will be reduced to the extent these persons purchase such
reserved shares. Any reserved shares not purchased will be offered by the
Underwriters to the general public on the same basis as the other shares offered
hereby.
A senior vice president with Smith Barney Inc. ("Smith Barney"), which has
been invited by the Representatives to participate in this offering as an
Underwriter, purchased 10,000 shares of Series B Preferred Stock in May, 1996
for $5.00 per share for an aggregate purchase price of $50,000. In addition, an
individual whose father and brother are registered representatives with Smith
Barney purchased 5,000 shares of Series B Preferred Stock in May, 1996 for $5.00
per share for an aggregate purchase price of $25,000.
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock has
been determined by negotiations between the Company and the Representatives of
the Underwriters. The factors considered in determining the initial public
offering price were the history of, and the prospects for, the Company's
business and the industry in which it competes, an assessment of the Company's
management, its past and present operations, its past and present earnings and
the trend of such earnings, the prospects for earnings of the Company, the
present state of the Company's development, the general condition of the
securities market at the time of the offering and the market prices and earnings
of similar securities of comparable companies at the time of the offering.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Crummy, Del Deo, Dolan, Griffinger &
Vecchione, Newark, New Jersey. Certain legal matters will be passed upon for the
Underwriters by Dewey Ballantine, New York, New York.
EXPERTS
The financial statements of the Company as of December 31, 1995 and June 30,
1996 and for the period from February 22, 1995 (Inception) to December 31, 1995,
for the six month period ended June 30, 1996 and for the period from February
22, 1995 (Inception) to June 30, 1996 included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein and elsewhere in the registration statement, and have
been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act a Registration Statement with respect to
the Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto.
Statements contained in the 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 being qualified in
all respects by such reference, but such statements are complete in all material
respects for the purposes herein made. The Registration Statement 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,
D.C. 20549; at its Chicago Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and at its New York Regional Office, Seven World
Trade Center, New York, New York 10048. Copies of such material can be obtained
from the public reference section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. For further information pertaining
to the Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other reports as it determines.
42
<PAGE>
PATIENT INFOSYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report.............................................................................. F-2
Balance Sheets as of December 31, 1995, June 30, 1996, September 30, 1996 (unaudited) and September 30,
1996 pro forma (unaudited).............................................................................. F-3
Statements of Operations for the period from February 22, 1995 (Inception) to December 31, 1995, for the
six month period ended June 30, 1996, for the period from February 22, 1995 (Inception) to June 30,
1996, for the period from February 22, 1995 (Inception) to September 30, 1995 (unaudited), for the nine
month period ended September 30, 1996 (unaudited) and for the period from February 22, 1995 (Inception)
to September 30, 1996 (unaudited)....................................................................... F-4
Statements of Stockholders' Equity for the period from February 22, 1995 (Inception) to June 30, 1996 and
the unaudited period from July 1, 1996 to September 30, 1996............................................ F-5
Statements of Cash Flows for the period from February 22, 1995 (Inception) to December 31, 1995, for the
six month period ended June 30, 1996, for the period from February 22, 1995 (Inception) to June 30,
1996, for the period from February 22, 1995 (Inception) to September 30, 1995 (unaudited), for the nine
month period ended September 30, 1996 (unaudited) and for the period from February 22, 1995 (Inception)
to September 30, 1996 (unaudited)....................................................................... F-6
Notes to Financial Statements............................................................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Patient Infosystems, Inc.:
We have audited the accompanying balance sheets of Patient Infosystems, Inc.
(formerly Disease State Management, Inc.) (a development stage enterprise) as of
December 31, 1995 and June 30, 1996 and the related statements of operations,
stockholders' equity, and cash flows for the period from February 22, 1995
(Inception) to December 31, 1995, for the six month period ended June 30, 1996
and for the period from February 22, 1995 (Inception) to June 30, 1996. 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, such financial statements present fairly, in all material
respects, the financial position of Patient Infosystems, Inc. as of December 31,
1995 and June 30, 1996, and the results of its operations and its cash flows for
the period from February 22, 1995 (Inception) to December 31, 1995, for the six
month period ended June 30, 1996 and for the period from February 22, 1995
(Inception) to June 30, 1996, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Rochester, New York
July 16, 1996
(November 22, 1996 as to Note 7)
F-2
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30,
SEPTEMBER 30, 1996
DECEMBER 31, 1995 JUNE 30, 1996 1996 PRO FORMA
----------------- -------------- -------------- --------------
(UNAUDITED)
(UNAUDITED) (NOTE 1)
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents....................... $ 1,182,080 $ 2,904,799 $ 2,022,628 $ 2,022,628
Accounts receivable............................. 4,055 72,262 37,496 37,496
Prepaid expenses and other current assets....... 23,984 105,173 198,101 198,101
----------------- -------------- -------------- --------------
Total current assets........................ 1,210,119 3,082,234 2,258,225 2,258,225
Property and Equipment, net....................... 553,510 710,251 728,427 728,427
----------------- -------------- -------------- --------------
Total Assets...................................... $ 1,763,629 $ 3,792,485 $ 2,986,652 $ 2,986,652
----------------- -------------- -------------- --------------
----------------- -------------- -------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................ $ 362,769 $ 148,668 $ 219,557 $ 219,557
Accrued salaries and wages...................... 48,259 176,157 117,086 117,086
Accrued expenses................................ 19,381 74,170 121,657 121,657
Accrued loss on development contracts........... -- 46,923 47,911 47,911
Deferred revenue................................ 168,055 454,426 281,926 281,926
----------------- -------------- -------------- --------------
Total current liabilities................... 598,464 900,344 788,137 788,137
----------------- -------------- -------------- --------------
Commitments and Contingencies (Note 6)
Stockholders' Equity:
Preferred stock--$.01 par value; authorized
5,000,000 shares:
Series A Convertible Preferred Stock;
1,800,000 shares designated, issued and
outstanding (liquidation preference
$1,800,000).................................. 18,000 18,000 18,000 --
Series B Convertible Preferred Stock; 600,000
shares designated, issued and outstanding
(liquidation preference $3,000,000).......... -- 6,000 6,000 --
Common stock--$.01 par value; authorized
20,000,000 shares; 3,602,880 issued and
outstanding at December 31, 1995 and June 30,
1996 and 3,607,202 shares issued and
outstanding at September 30, 1996 (5,503,202
shares pro forma).............................. 36,029 36,029 36,072 55,032
Additional paid-in capital...................... 2,227,788 5,228,671 5,234,705 5,239,745
Deficit accumulated during the development
stage.......................................... (1,116,652) (2,396,559) (3,096,262) (3,096,262)
----------------- -------------- -------------- --------------
Total stockholders' equity.................. 1,165,165 2,892,141 2,198,515 2,198,515
----------------- -------------- -------------- --------------
Total Liabilities and Stockholders' Equity........ $ 1,763,629 $ 3,792,485 $ 2,986,652 $ 2,986,652
----------------- -------------- -------------- --------------
----------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-3
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 22, 1995 SIX MONTH
(INCEPTION) PERIOD ENDED
TO DECEMBER 31, JUNE 30,
1995 1996
------------------------------ -------------
Revenues................................ $ 113,000 $ 465,416
<S> <C> <C> <C>
----------- -----------
Costs and Expenses:
Cost of sales......................... 111,870 447,312
Sales and marketing................... 375,384 389,756
General and administrative............ 678,498 902,188
Research and development.............. 89,909 26,736
----------- -----------
Total costs and expenses............ 1,255,661 1,765,992
----------- -----------
Operating Loss.......................... (1,142,661) (1,300,576)
Interest Income......................... 26,009 20,669
----------- -----------
Net Loss................................ $(1,116,652) $(1,279,907)
----------- -----------
----------- -----------
Net Loss Per Common and Common Share
Equivalents............................ $ (.18) $ (.21)
----------- -----------
----------- -----------
Weighted Average Common and Common Share
Equivalents............................ 5,963,306 6,087,959
----------- -----------
----------- -----------
<CAPTION>
PERIOD FROM
FEBRUARY 22, 1995
(INCEPTION)
TO JUNE 30,
1996
------------------------------
PERIOD FROM NINE MONTH
FEBRUARY 22, 1995 PERIOD ENDED
(INCEPTION) SEPTEMBER 30,
TO SEPTEMBER 30, 1996
1995 -------------------
------------------------------
(UNAUDITED)
(UNAUDITED)
Revenues................................ $ 578,416 $ 7,500 $ 644,146
<S> <C>
----------- ----------- -------------------
Costs and Expenses:
Cost of sales......................... 559,182 7,621 601,124
Sales and marketing................... 765,140 228,466 616,545
General and administrative............ 1,580,686 298,998 1,298,801
Research and development.............. 116,645 79,910 160,619
----------- ----------- -------------------
Total costs and expenses............ 3,021,653 614,995 2,677,089
----------- ----------- -------------------
Operating Loss.......................... (2,443,237) (607,495) (2,032,943)
Interest Income......................... 46,678 483 53,333
----------- ----------- -------------------
Net Loss................................ $(2,396,559) $ (607,012) ($1,979,610)
----------- ----------- -------------------
----------- ----------- -------------------
Net Loss Per Common and Common Share
Equivalents............................ $ (.39) $ (.10) $ (.32)
----------- ----------- -------------------
----------- ----------- -------------------
Weighted Average Common and Common Share
Equivalents............................ 6,087,959 5,956,248 6,160,715
----------- ----------- -------------------
----------- ----------- -------------------
<CAPTION>
PERIOD FROM
FEBRUARY 22, 1995
(INCEPTION)
TO SEPTEMBER 30,
1996
------------------------------
(UNAUDITED)
Revenues................................ $ 757,146
-----------
Costs and Expenses:
Cost of sales......................... 712,994
Sales and marketing................... 991,929
General and administrative............ 1,977,299
Research and development.............. 250,528
-----------
Total costs and expenses............ 3,932,750
-----------
Operating Loss.......................... (3,175,604)
Interest Income......................... 79,342
-----------
Net Loss................................ $(3,096,262)
-----------
-----------
Net Loss Per Common and Common Share
Equivalents............................ $ (.50)
-----------
-----------
Weighted Average Common and Common Share
Equivalents............................ 6,160,715
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-4
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' EQUITY
PERIOD FROM FEBRUARY 22, 1995 (INCEPTION)
TO JUNE 30, 1996 AND THE UNAUDITED PERIOD FROM JULY 1, 1996 TO
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE
------------------- ------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE
--------- -------- --------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sale of common stock, substantially all of
which was issued on February 22, 1995 at
$0.14 per share............................. -- $ -- 3,602,880 $36,029 $ 464,371 $ --
Sale of Series A convertible preferred stock
at $1.00 per share in August and September
1995 (net of issuance costs of $18,583)..... 1,800,000 18,000 -- -- 1,763,417 --
Net loss for the period from Inception to
December 31, 1995........................... -- -- -- -- -- (1,116,652)
--------- -------- --------- -------- ----------- ------------
Balances, December 31, 1995.................. 1,800,000 18,000 3,602,880 36,029 2,227,788 (1,116,652)
Sale of Series B convertible preferred stock
at $5.00 per share in May and June 1996 (net
of issuance costs of $3,250)................ 600,000 6,000 -- -- 2,990,750 --
Compensation expense related to issuance of
stock warrants.............................. -- -- -- -- 10,133 --
Net loss for the period from January 1, 1996
to June 30, 1996............................ -- -- -- -- -- (1,279,907)
--------- -------- --------- -------- ----------- ------------
Balances, June 30, 1996...................... 2,400,000 24,000 3,602,880 36,029 5,228,671 (2,396,559)
Compensation expense related to issuance of
stock warrants*............................. -- -- -- -- 3,075 --
Exercise of stock warrants*.................. -- -- 4,322 43 2,959 --
Net loss for the period from July 1, 1996 to
September 30, 1996*......................... -- -- -- -- -- (699,703)
--------- -------- --------- -------- ----------- ------------
Balances, September 30, 1996 (unaudited)..... 2,400,000 24,000 3,607,202 36,072 5,234,705 (3,096,262)
Conversion of Series A and B convertible
preferred stock to common stock -- Pro
Forma*...................................... (2,400,000) (24,000) 1,896,000 18,960 5,040 --
--------- -------- --------- -------- ----------- ------------
Balances, September 30, 1996 -- Pro Forma
(unaudited)................................. -- $ -- 5,503,202 $55,032 $5,239,745 $(3,096,262)
--------- -------- --------- -------- ----------- ------------
--------- -------- --------- -------- ----------- ------------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Sale of common stock, substantially all of
which was issued on February 22, 1995 at
$0.14 per share............................. $ 500,400
Sale of Series A convertible preferred stock
at $1.00 per share in August and September
1995 (net of issuance costs of $18,583)..... 1,781,417
Net loss for the period from Inception to
December 31, 1995........................... (1,116,652)
-------------
Balances, December 31, 1995.................. 1,165,165
Sale of Series B convertible preferred stock
at $5.00 per share in May and June 1996 (net
of issuance costs of $3,250)................ 2,996,750
Compensation expense related to issuance of
stock warrants.............................. 10,133
Net loss for the period from January 1, 1996
to June 30, 1996............................ (1,279,907)
-------------
Balances, June 30, 1996...................... 2,892,141
Compensation expense related to issuance of
stock warrants*............................. 3,075
Exercise of stock warrants*.................. 3,002
Net loss for the period from July 1, 1996 to
September 30, 1996*......................... (699,703)
-------------
Balances, September 30, 1996 (unaudited)..... 2,198,515
Conversion of Series A and B convertible
preferred stock to common stock -- Pro
Forma*...................................... --
-------------
Balances, September 30, 1996 -- Pro Forma
(unaudited)................................. $ 2,198,515
-------------
-------------
</TABLE>
* Unaudited
SEE NOTES TO FINANCIAL STATEMENTS.
F-5
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 22, 1995 SIX MONTH
(INCEPTION) PERIOD ENDED
TO DECEMBER 31, JUNE 30,
1995 1996
------------------------------ -------------
Operating Activities:
<S> <C> <C> <C>
Net loss.............................. $(1,116,652) $(1,279,907)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization....... 26,473 82,437
Compensation expense related to
issuance of stock warrants......... -- 10,133
Increase in accounts receivable..... (4,055) (68,207)
Increase in prepaid expenses and
other current assets............... (23,984) (81,189)
Increase (decrease) in accounts
payable............................ 362,769 (214,101)
Increase in accrued salaries and
wages.............................. 48,259 127,898
Increase in accrued expenses........ 19,381 54,789
Increase in deferred revenue........ 168,055 286,371
Increase in accrued loss on
development contracts.............. -- 46,923
----------- -----------
Net cash used in operating
activities....................... (519,754) (1,034,853)
----------- -----------
Investing Activity:
Property and equipment additions...... (579,983) (239,178)
----------- -----------
Financing Activity:
Proceeds from issuance of common and
preferred stock, net................. 2,281,817 2,996,750
----------- -----------
Increase in Cash and Cash Equivalents... 1,182,080 1,722,719
Cash and Cash Equivalents at Beginning
of Period.............................. -- 1,182,080
----------- -----------
Cash and Cash Equivalents at End of
Period................................. $ 1,182,080 $ 2,904,799
----------- -----------
----------- -----------
<CAPTION>
PERIOD FROM
FEBRUARY 22, 1995
(INCEPTION)
TO JUNE 30,
1996
------------------------------
PERIOD FROM NINE MONTH
FEBRUARY 22, 1995 PERIOD ENDED
(INCEPTION) SEPTEMBER 30,
TO SEPTEMBER 30, 1996
1995 -------------------
------------------------------
(UNAUDITED)
(UNAUDITED)
Operating Activities:
<S> <C>
Net loss.............................. $(2,396,559) $ (607,012) $(1,979,610)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization....... 108,910 10,069 129,087
Compensation expense related to
issuance of stock warrants......... 10,133 -- 13,208
Increase in accounts receivable..... (72,262) (55,000) (33,441)
Increase in prepaid expenses and
other current assets............... (105,173) (43,161) (174,117)
Increase (decrease) in accounts
payable............................ 148,668 66,052 (143,212)
Increase in accrued salaries and
wages.............................. 176,157 16,642 68,827
Increase in accrued expenses........ 74,170 30,000 102,276
Increase in deferred revenue........ 454,426 47,500 113,871
Increase in accrued loss on
development contracts.............. 46,923 -- 47,911
----------- ----------- -------------------
Net cash used in operating
activities....................... (1,554,607) (534,910) (1,855,200)
----------- ----------- -------------------
Investing Activity:
Property and equipment additions...... (819,161) (114,737) (304,004)
----------- ----------- -------------------
Financing Activity:
Proceeds from issuance of common and
preferred stock, net................. 5,278,567 2,281,417 2,999,752
----------- ----------- -------------------
Increase in Cash and Cash Equivalents... 2,904,799 1,631,770 840,548
Cash and Cash Equivalents at Beginning
of Period.............................. -- -- 1,182,080
----------- ----------- -------------------
Cash and Cash Equivalents at End of
Period................................. $ 2,904,799 $ 1,631,770 $2,022,628
----------- ----------- -------------------
----------- ----------- -------------------
<CAPTION>
PERIOD FROM
FEBRUARY 22, 1995
(INCEPTION)
TO SEPTEMBER 30,
1996
------------------------------
(UNAUDITED)
Operating Activities:
Net loss.............................. $(3,096,262)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization....... 155,560
Compensation expense related to
issuance of stock warrants......... 13,208
Increase in accounts receivable..... (37,496)
Increase in prepaid expenses and
other current assets............... (198,101)
Increase (decrease) in accounts
payable............................ 219,557
Increase in accrued salaries and
wages.............................. 117,086
Increase in accrued expenses........ 121,657
Increase in deferred revenue........ 281,926
Increase in accrued loss on
development contracts.............. 47,911
-----------
Net cash used in operating
activities....................... (2,374,954)
-----------
Investing Activity:
Property and equipment additions...... (883,987)
-----------
Financing Activity:
Proceeds from issuance of common and
preferred stock, net................. 5,281,569
-----------
Increase in Cash and Cash Equivalents... 2,022,628
Cash and Cash Equivalents at Beginning
of Period.............................. --
-----------
Cash and Cash Equivalents at End of
Period................................. $ 2,022,628
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-6
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
PERIOD ENDED DECEMBER 31, 1995,
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND FOR
THE UNAUDITED NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DEVELOPMENT STAGE ACTIVITIES
The Company was incorporated in Delaware on February 22, 1995 under the name
DSMI Corp., changed its name to Disease State Management, Inc. on October 13,
1995, and on June 28, 1996 changed its name to Patient Infosystems, Inc. The
Company has selected December 31 as the close of its fiscal year.
Through June 30, 1996 the Company's development activities have consisted
primarily of efforts to raise funds, develop the first application of its
information capture and delivery system (which is a system that proactively
collects and analyzes information relevant to patients in specific disease
categories to improve patient compliance with prescribed regimens), and market
its disease management programs for specific diseases. Successful completion of
the Company's program development, and ultimately the attainment of profitable
operations, is dependent upon future events, including obtaining adequate
financing to fund its research and development activities and achieving market
acceptance of its products.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from those estimates.
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to fairly present the Company's
financial position as of September 30, 1996 and results of operations and cash
flows for the nine months ended September 30, 1996, the period from February 22,
1995 (Inception) to September 30, 1995 and the period from February 22, 1995
(Inception) to September 30, 1996. All such adjustments are of a normal
recurring nature. The results of operations for the nine month period ended
September 30, 1996 are not necessarily indicative of the results to be expected
for the entire year of 1996.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of current assets and current
liabilities which are carried at cost, which approximates fair market value.
REVENUE RECOGNITION AND DEFERRED REVENUE
The Company's principal source of revenue to date has been from contracts
with a pharmaceutical company for the development and operation of disease
management programs for chronic diseases. Deferred revenue represents amounts
billed in advance under these contracts. Future revenue sources are expected to
include disease management programs and other health care information system
applications.
Development Contracts
The Company's program development contracts typically require payment from
the customer at the time that the contract is executed, with additional payments
made as certain development milestones are
F-7
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD ENDED DECEMBER 31, 1995,
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND FOR
THE UNAUDITED NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
met. Development contract revenue is recognized on a percentage of completion
basis, in accordance with the ratio of total development cost incurred to the
estimated total development costs for the entire project. Losses, if any, are
recognized in full as identified.
Program Operations
The Company's program operation contracts call for a per enrolled patient
fee to be paid by the customer for a series of program services as defined in
the contract. The timing of customer payments varies by contract, but typically
occurs in advance of the associated services being provided. Revenues from
program operations are recognized ratably as the program services are delivered.
CASH EQUIVALENTS
Cash equivalents include all highly liquid debt instruments with original
maturities of three months or less.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of cash and accounts receivable. The Company
places its cash with high credit-quality institutions. At times such amounts may
be in excess of FDIC insurance limits.
The Company's current contracts are concentrated in a small number of
customers, with five of the Company's eleven contracts being with one customer.
Consequently, the loss of any one of its customers could have a material adverse
effect on the Company and its operations.
During the unaudited nine month period ended September 30, 1996, the six
month period ended June 30, 1996 and the period from February 22, 1995
(Inception) to December 31, 1995, approximately $616,200 (96%), $455,000 (98%)
and $84,000 (74%), respectively, of the Company's revenues arose from contracts
with one customer. At September 30, 1996 (unaudited), June 30, 1996 and December
31, 1995, accounts receivable included balances of $17,496, $52,000 and $-0-,
respectively, from contracts with that customer.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets, which
range from 3 to 10 years.
In 1996, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF. SFAS No. 121 requires that long-lived
assets and certain indentifiable intangibles to be held and used be reported at
the lower of carrying amount or fair value. Assets to be disposed of and assets
not expected to provide any future service potential to the Company are recorded
at the lower of carrying amount or fair value less cost to sell. The adoption of
SFAS No. 121 did not have a material effect on the Company's financial position
or results of operations.
RESEARCH AND DEVELOPMENT
Research and development costs consist principally of compensation and
benefits paid to Company employees. All research and development costs are
expensed as incurred.
F-8
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD ENDED DECEMBER 31, 1995,
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND FOR
THE UNAUDITED NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes in accordance with Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes". Under the asset and liability method, deferred
income tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and net operating
loss and tax credit carryforwards.
NET LOSS PER SHARE
Net loss per share is based on the weighted average number of common and
common share equivalents outstanding during the period using the Treasury Stock
method. Common share equivalents include Series A and B Convertible Preferred
Stock, common stock options and common stock warrants. For purposes of this
calculation, all common shares issued and stock options and warrants granted by
the Company at a price less than the estimated initial public offering price
during at least the twelve months preceding the offering date (using the
treasury stock method until shares are issued and an assumed public offering
price of $10 per share) have been included in the calculation of common and
common share equivalents outstanding. (See Note 7 for a description of
additional issuances of common stock options and common stock warrants
subsequent to June 30, 1996.)
UNAUDITED PRO FORMA INFORMATION
The Company is preparing for an initial public offering of its common stock
which, upon completion, would result in the conversion of the outstanding shares
of the Company's preferred stock into shares of its common stock (see Note 4).
The unaudited pro forma balance sheet information is presented as if such
conversion had occurred as of September 30, 1996. The pro forma unaudited
information assumes that the public offering will occur at a price of $10.00,
which is the mid-point of the filing range. Completion of the offering at this
price will result in the issuance of an additional 168,000 shares of common
stock to the holders of Series B Convertible Preferred Stock (see Note 4).
2. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER
31, JUNE 30,
1995 1996
----------- -----------
<S> <C> <C>
Computer software................................. $137,153 $181,927
Computer equipment................................ 242,393 371,240
Telephone equipment............................... 120,233 124,996
Leasehold improvements............................ 12,200 23,454
Office furniture and equipment.................... 68,004 117,544
----------- -----------
579,983 819,161
Less accumulated depreciation and amortization.... 26,473 108,910
----------- -----------
Property and equipment, net....................... $553,510 $710,251
----------- -----------
----------- -----------
</TABLE>
3. INCOME TAXES
The Company has not recorded any income tax expense during the period from
Inception to June 30, 1996 because of operating losses incurred since Inception.
F-9
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD ENDED DECEMBER 31, 1995,
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND FOR
THE UNAUDITED NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996
3. INCOME TAXES (CONTINUED)
As of June 30, 1996, the Company has net operating loss carryforwards for
Federal income tax purposes of approximately $2,400,000 which are available to
offset future Federal taxable income. These carryforwards expire in 2010. No tax
benefit relating to the net operating loss carryforwards has been reflected in
the financial statements due to the uncertainty regarding the utilization of any
such benefit, and a valuation allowance has been recognized to offset any
deferred tax asset related to this item. Future benefit may occur to the extent
taxable income is earned prior to the expiration of the carryforward period.
Section 382 of the Internal Revenue Code imposes certain limitations on the
use of net operating loss carryforwards in cases of a change in ownership of a
corporation, as defined in the Code. These provisions place an annual limitation
on the amount of pre-change losses that can be used to offset post-change
taxable income, with any unused limitation amounts and losses carrying forward.
The limitation is computed by multiplying the Federal long-term tax exempt rate
(currently approximately 5.8%) by the fair value of the corporation immediately
prior to the change in control. It is not anticipated that a change in control,
as defined, will occur as a result of the current proposed offering.
4. PREFERRED STOCK
The Company has 5,000,000 shares of authorized preferred stock and has the
ability to issue different series with different rights and preferences. A
summary of the rights and preferences related to the Series A and B Convertible
Preferred Stock is as follows:
The holders of Series A and B Convertible Preferred Stock have the right to
convert their shares into shares of Common Stock at the rate of .72 shares
of Common Stock for each share of Series A and B Convertible Preferred
Stock. The conversion ratio for the holders of Series A Convertible
Preferred Stock will be adjusted in the event that the Company, in the
future, sells shares of its Common Stock for less than $1.39 per share. In
addition, the conversion ratio for the holders of Series B Convertible
Preferred Stock will be adjusted in the event that the Company sells shares
of its common stock for less than $13.89 per share in an initial public
offering. At the mid-range ($10.00) of the current proposed offering the
holders of Series B Convertible Preferred Stock would receive an additional
168,000 shares of Common Stock as a result of this provision.
Each share of Series A and B Convertible Preferred Stock will be
automatically converted into shares of Common Stock at the then effective
conversion rate immediately upon the closing of an underwritten public stock
offering which meets certain requirements. It is anticipated that at the
mid-range ($10.00) of the current proposed offering these requirements will
be met and the automatic conversion will occur.
The holders of Series A and B Convertible Preferred Stock and the holders of
Common Stock vote together as a single class, with each share of Series A
and B Convertible Preferred Stock entitled to the number of votes equal to
the number of shares of Common Stock into which it is convertible. They also
have certain liquidation preferences in the event of a liquidation,
dissolution or winding up of the Company, and the right to participate in
dividends to the extent that they are declared on the Company's Common
Stock.
F-10
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD ENDED DECEMBER 31, 1995,
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND FOR
THE UNAUDITED NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996
5. STOCK OPTIONS AND WARRANTS
The Company has an Employee Stock Option Plan (the "Stock Option Plan") for
the benefit of certain employees, non-employee directors, and key advisors. The
Company has adopted the disclosures-only provision of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation cost has been recognized for the stock option plan,
as it relates to employees. Had compensation cost for the Company's stock option
plan been determined based on the fair value at the date of grant for awards
consistent with the provisions of SFAS No. 123, the Company's net loss and net
loss per common and common share equivalent would have been increased to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 22, PERIOD FROM
1995 FEBRUARY 22,
(INCEPTION) SIX MONTH 1995
TO DECEMBER 31, PERIOD ENDED (INCEPTION)
1995 JUNE 30, 1996 TO JUNE 30, 1996
---------------- ------------- ----------------
<S> <C> <C> <C>
Net loss--as reported......................................... $ (1,116,652) $ (1,279,907) $ (2,396,559)
Net loss--pro forma........................................... $ (1,125,428) $ (1,296,878) $ (2,422,306)
Net loss per common and common share equivalent-- as
reported..................................................... $ (.18) $ (.21) $ (.39)
Net loss per common and common share equivalent-- pro forma... $ (.18) $ (.21) $ (.39)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model using an assumed risk-free interest rate
of 7% and expected lives of 7 years. The Stock Option Plan authorizes 1,080,000
shares of common stock to be issued.
Stock options granted under the Stock Option Plan may be of two types: (1)
incentive stock options and (2) nonqualified stock options. The option price of
such grants shall be determined by a Committee of the Board of Directors (the
"Committee"), but shall not be less than the estimated fair market value of the
common stock at the date the option is granted. The terms of the grants shall be
fixed by the Committee, with no term lasting longer than ten years. The ability
to exercise such options shall be determined by the Committee when the options
are granted. All of the outstanding options vest at the rate of 20% per year
with the exception of 36,000 options which were vested as of the date of grant.
F-11
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD ENDED DECEMBER 31, 1995,
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND FOR
THE UNAUDITED NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996
5. STOCK OPTIONS AND WARRANTS (CONTINUED)
A summary of stock option activity follows:
<TABLE>
<CAPTION>
OPTION
OUTSTANDING PRICE PER
OPTIONS SHARE
------------ ---------------
<S> <C> <C>
Options granted during the period from Inception to December 31, 1995
(weighted average fair value of $.13)................................... 658,800 $.14 - 1.04
Options forfeited by holders during the period from Inception to December
31, 1995................................................................ (65,520) $.14 - 1.04
Options exercised during the period from Inception to December 31,
1995.................................................................... (2,880) $.14
------------
Options outstanding at December 31, 1995................................. 590,400 $.14 - 1.04
Options granted during the six month period ended June 30, 1996 (weighted
average fair value of $.75)............................................. 213,120 $1.74 - 2.08
Options forfeited by holders during the six month period ended June 30,
1996.................................................................... (8,640) $1.74 - 2.08
------------
Options outstanding at June 30, 1996..................................... 794,880 $.14 - 2.08
------------
------------
Options exercisable at June 30, 1996..................................... 104,760
Options available for grant at June 30, 1996............................. 285,120
</TABLE>
The following table summarizes information concerning outstanding and
exercisable options at June 30, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTAL EXERCISE NUMBER EXERCISE
EXERCISE PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ---------------- ----------- --------------- ----------- ----------- -----------
$.14 - $.69 543,600 8.84 $ .26 104,760 $ .14
$.70 - $1.39 46,800 9.24 1.04 -- --
$1.40 - $2.08 204,480 9.68 1.99 -- --
----------- -----------
794,880 104,760
----------- -----------
----------- -----------
</TABLE>
The Company also has outstanding stock purchase warrants entitling the
holders to purchase a total of 111,962 shares of common stock at $.14 - 2.08 per
share (weighted average exercise price of $.78). At June 30, 1996, 30,242 of
these warrants are currently vested, with the remaining 81,720 warrants vesting
at 20% per year. The Company has recorded compensation cost of $10,133 for the
six month period ended June 30, 1996 in connection with the issuance of these
warrants.
F-12
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD ENDED DECEMBER 31, 1995,
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND FOR
THE UNAUDITED NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996
6. COMMITMENTS AND CONTINGENCIES
The Company leases office space for its main operating facility under an
operating lease agreement expiring in September 1999, which is cancelable in
September 1998 at the option of the Company. Rental expense from this lease for
the six month period ended June 30, 1996 and the period from Inception to
December 31, 1995 was $30,119 and $40,375, respectively.
At June 30, 1996, future minimum lease payments under this lease, assuming
the cancellation option is exercised, are summarized as follows (See Note 7):
<TABLE>
<S> <C>
1996.............................................................. $ 46,096
1997.............................................................. 95,202
1998.............................................................. 84,460
---------
$ 225,758
---------
---------
</TABLE>
7. SUBSEQUENT EVENTS
On November 22, 1996, the Company effected a .72-for-1 reverse stock split
of all outstanding shares of common stock. Accordingly, all shares and per share
amounts have been adjusted to reflect the reverse stock split as though it had
occurred at the beginning of the initial period presented.
In October 1996 the Company entered into an amended lease agreement for its
main operating facility which increased its monthly rental payments to
approximately $12,000 and which expires in November 1999.
During the three months ended September 30, 1996, 4,322 stock purchase
warrants were exercised. In addition, the Company recorded compensation cost of
$3,075 related to warrants issued prior to June 30, 1996.
In October 1996, the Company issued incentive stock options to purchase
152,280 shares of its common stock at an exercise price of $10.00 per share, and
stock purchase warrants to purchase 1,800 shares of its common stock at an
exercise price of $10.00 per share.
F-13
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN 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 OR BY ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION TO SUCH PERSON. 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 DATE SUBSEQUENT TO THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 5
The Company.................................... 12
Use of Proceeds................................ 12
Dividend Policy................................ 12
Capitalization................................. 13
Dilution....................................... 14
Selected Financial Data........................ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 16
Business....................................... 19
Management..................................... 31
Certain Transactions........................... 35
Principal Stockholders......................... 36
Description of Capital Stock................... 37
Shares Eligible for Future Sale................ 39
Underwriting................................... 41
Legal Matters.................................. 42
Experts........................................ 42
Additional Information......................... 42
Index to Financial Statements.................. F-1
</TABLE>
--------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, 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.
2,000,000 SHARES
[LOGO]
COMMON STOCK
------------
PROSPECTUS
-----------------
COWEN & COMPANY
VECTOR SECURITIES
INTERNATIONAL, INC.
, 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the fees and expenses to be incurred in
connection with the issuance and distribution of the shares of Common Stock, par
value $.01 per share, offered hereby.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee....................... $ 13,087
NASD Filing Fee........................................................... $ 4,295
NASDAQ Listing Fee........................................................ $ 50,000
Blue Sky Fees and Expenses................................................ $ 30,000
Legal Fees and Expenses................................................... $ 150,000
Accounting Fees........................................................... $ 100,000
Printing and Engraving Costs.............................................. $ 100,000
Transfer Agent Fees....................................................... $ 7,500
Miscellaneous Expenses.................................................... $ 145,118
---------
TOTAL................................................................. $ 600,000
---------
---------
</TABLE>
- ------------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation contains a provision
eliminating or limiting director liability to the Registrant and its
stockholders for monetary damages arising from acts or omissions in the
director's capacity as 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 Registrant or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of the 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 Registrant 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
Registrant or a stockholder thereof to successfully prosecute an action against
a director for 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 Securities
and Exchange Commission has taken the position that the provision will have no
effect on claims arising under the Federal securities laws.
In addition, the Registrant's Certificate of Incorporation and Bylaws
provide for mandatory indemnification rights, subject to limited exceptions, to
any director or officer of the Registrant who by reason of the fact that he or
she is a director or officer of the Registrant, 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 deposition of such proceeding in accordance with the applicable provisions
of Delaware General Corporation Law.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following table sets forth all sales of unregistered securities by the
Registrant within the past three years.
<TABLE>
<CAPTION>
AGGREGATE
NATURE OF TRANSACTION OFFERING PRICE PER
AND DATE CLASS OF PURCHASERS SECURITIES SOLD PRICE SHARE
- ------------------------ -------------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C>
Initial capitalization, Three accredited 3,600,000 Common $ 500,000 $0.14
February 1995 investors Stock
Private placement, Nineteen accredited 1,800,000 Series $1,800,000 $1.00
August and September investors A Preferred Stock
1995
Warrant issuances, 1995 Two consultants 77,760 Common (No sale) $0.14 - $0.69
Stock Exercise
price
Option grants, 1995 Sixteen key 658,800 Common (No sale) $0.14 - $1.04
employees Stock Exercise
price
Exercise of stock One key employee 2,880 Common $ 400 $0.14
options December 1995 Stock
Option grants, 1996 Thirty-eight key 365,400 Common (No sale) $1.74-$10.00
employees Stock Exercise
price
Warrant issuances, 1996 Five consultants 37,440 Common (No sale) $2.08-$10.00
Stock Exercise
price
Private placement, May Twenty-five 600,000 Series B $3,000,000 $5.00
and June 1996 accredited investors Preferred Stock
Exercise of stock One consultant 4,322 Common $ 3,002 $0.69
warrants, September Stock
1996
</TABLE>
The Company relied on Section 4(2) of the Securities Act and Rule 701
promulgated thereunder for each issuance. No underwriters were involved nor any
commissions paid in connection with any of the above transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ----------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
3.1+ Certificate of Incorporation, as amended
3.2+ Certificates of Designation
3.3+ By-Laws
4.1 Specimen Common Stock Certificate
5.1+ Opinion of Crummy, Del Deo, Dolan, Griffinger & Vecchione
10.1+ Employment Agreement with Donald A. Carlberg
10.2+ Stock Option Plan
10.3+ Forms of Stock Option Agreement
10.4** Services Agreement dated September 18, 1995 between the Company and Bristol-Myers
Squibb U.S. Pharmaceuticals, a division of Bristol-Myers Squibb Company
10.5** Services Agreement dated February 1, 1996 between the Company and Bristol-Myers
Squibb U.S. Pharmaceuticals, a division of Bristol-Myers Squibb Company
10.6** Services Agreement dated March 30, 1996 between the Company and Bristol-Myers
Squibb Oncology, a division of Bristol-Myers Squibb Company
10.7** Services Agreement dated April 23, 1996 between the Company and Bristol-Myers
Squibb Oncology/Immunology, a division of Bristol-Myers Squibb Company
10.8** Services Agreement dated October 16, 1995 between the Company and Bristol-Myers
Squibb U.S. Pharmaceuticals, a division of Bristol-Myers Squibb Company
</TABLE>
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ----------------------------------------------------------------------------------
<C> <S>
10.9** Services Agreement dated June 24, 1996 between the Company and American
HomePatient, Inc.
10.10** Services Agreement dated June 21, 1996 between the Company and Equifax Healthcare
Administrative Services, a division of Equifax, Inc.
10.11** Services Agreement dated July 28, 1996 between the Company and Equifax Healthcare
Administrative Services, a division of Equifax, Inc.
10.12** Services Agreement dated September 13, 1996 between the Company and Health
Resources, Inc. (Asthma)
10.13** Services Agreement dated September 13, 1996 between the Company and Health
Resources, Inc. (Diabetes)
10.14** Services Agreement dated September 24, 1996 between the Company and Harris
Methodist Health Plan
11.1+ Statement Re: Computation of Per Share Earnings
23.1+ Consent of Crummy, Del Deo, Dolan, Griffinger & Vecchione (See Item 5.1)
23.2+ Consent of Deloitte & Touche LLP
24.1+ Power of Attorney (Page II-5)
</TABLE>
- ------------
** Portions of these Exhibits have been omitted and have been filed separately
with the Secretary of the Commission pursuant to the Registrant's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
+ Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES
None
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to Item 14 hereof, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant 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, Registrant 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 of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant further undertakes that:
(1) For purposes of determining any liability under the Securities Act,
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 Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS (CONTINUED)
(2) For the purpose of determining any liability under the Securities
Act, 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 the time shall be
deemed to be bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Rochester, State of New York, on December 16,
1996.
PATIENT INFOSYSTEMS, INC.
By: /s/ DONALD A. CARLBERG
________________________________________
Donald A. Carlberg,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, this Amendment has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- -------------------------------------------- -------------------------------------------- ----------------------
<C> <S> <C>
/s/ DONALD A. CARLBERG
---------------------------------- President, Chief Executive Officer and December 16, 1996
Donald A. Carlberg Director (Principal Executive Officer)
* Senior Vice President and Chief Financial
---------------------------------- Officer (Principal Financial and Accounting December 16, 1996
Gregory D. Brown Officer)
*
---------------------------------- Chairman of the Board and Director December 16, 1996
Derace L. Schaffer
*
---------------------------------- Director December 16, 1996
John Pappajohn
*
---------------------------------- Director December 16, 1996
Barbara J. McNeil
*
---------------------------------- Director December 16, 1996
Carl F. Kohrt
*/s/ DONALD A. CARLBERG
- ----------------------------------
Donald A. Carlberg
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ----------------------------------------------------------------------------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement
3.1+ Certificate of Incorporation, as amended
3.2+ Certificates of Designation
3.3+ By-Laws
4.1 Specimen Common Stock Certificate
5.1+ Opinion of Crummy, Del Deo, Dolan, Griffinger & Vecchione
10.1+ Employment Agreement with Donald A. Carlberg
10.2+ Stock Option Plan
10.3+ Forms of Stock Option Agreement
10.4** Services Agreement dated September 18, 1995 between the Company and Bristol-
Myers Squibb U.S. Pharmaceuticals, a division of Bristol-Myers Squibb
Company
10.5** Services Agreement dated February 1, 1996 between the Company and
Bristol-Myers Squibb U.S. Pharmaceuticals, a division of Bristol-Myers
Squibb Company
10.6** Services Agreement dated March 30, 1996 between the Company and Bristol-Myers
Squibb Oncology, a division of Bristol-Myers Squibb Company
10.7** Services Agreement dated April 23, 1996 between the Company and Bristol-Myers
Squibb Oncology/Immunology, a division of Bristol-Myers Squibb Company
10.8** Services Agreement dated October 16, 1995 between the Company and
Bristol-Myers Squibb U.S. Pharmaceuticals, a division of Bristol-Myers
Squibb Company
10.9** Services Agreement dated June 24, 1996 between the Company and American
HomePatient, Inc.
10.10** Services Agreement dated June 21, 1996 between the Company and Equifax
Healthcare Administrative Services, a division of Equifax, Inc.
10.11** Services Agreement dated July 28, 1996 between the Company and Equifax
Healthcare Administrative Services, a division of Equifax, Inc.
10.12** Services Agreement dated September 13, 1996 between the Company and Health
Resources, Inc. (Asthma)
10.13** Services Agreement dated September 13, 1996 between the Company and Health
Resources, Inc. (Diabetes)
10.14** Services Agreement dated September 24, 1996 between the Company and Harris
Methodist Health Plan
11.1+ Statement Re: Computation of Per Share Earnings
23.1+ Consent of Crummy, Del Deo, Dolan, Griffinger & Vecchione (See Item 5.1)
23.2+ Consent of Deloitte & Touche LLP
24.1+ Power of Attorney (Page II-5)
</TABLE>
- ------------
* To be filed by amendment.
** Portions of these Exhibits have been omitted and have been filed separately
with the Secretary of the Commission pursuant to the Registrant's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
+ Previously filed.
<PAGE>
Draft of December 16, 1996
2,000,000 SHARES
PATIENT INFOSYSTEMS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
December , 1996
COWEN & COMPANY
VECTOR SECURITIES INTERNATIONAL, INC.
As Representatives of the several Underwriters
c/o Cowen & Company
Financial Square
New York, New York 10005
Dear Sirs:
1. Introductory. Patient Infosystems, Inc., a Delaware corporation (the
"Company"), proposes to sell, pursuant to the terms of this Agreement, to
the several underwriters named in Schedule A hereto (the "Underwriters,"
or, each, an "Underwriter"), an aggregate of 2,000,000 shares of Common
Stock, $.01 par value per share (the "Common Stock") of the Company, a
Delaware corporation (the "Company"). The aggregate of 2,000,000 shares so
proposed to be sold is hereinafter referred to as the "Firm Stock". The
Company also proposes to sell to the Underwriters, upon the terms and
conditions set forth in Section 3 hereof, up to an additional 300,000
shares of Common Stock (the "Optional Stock"). The Firm Stock and the
Optional Stock are hereinafter collectively referred to as the "Stock".
Cowen & Company ("Cowen") and Vector Securities International, Inc.
("Vector") are acting as representatives of the several Underwriters and in
such capacity are hereinafter referred to as the "Representatives".
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to, and agrees with, the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-07643) in the form
in which it became or becomes effective and also in such form as it
may be when any post-effective amendment thereto shall become
effective with respect to the Stock, including any preeffective
prospectuses included as part of the registration statement as
originally filed or as part of any amendment or supplement thereto, or
filed pursuant to Rule 424 under the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission
(the "Commission") thereunder, copies of which have heretofore been
delivered to you, has been carefully prepared by the Company in
conformity with the requirements of the Securities Act and has been
filed with the Commission under the Securities Act; one or more
<PAGE>
amendments to such registration statement, including in each case an
amended preeffective prospectus, copies of which amendments have
heretofore been delivered to you, have been so prepared and filed. If
it is contemplated, at the time this Agreement is executed, that a
post-effective amendment to the registration statement will be filed
and must be declared effective before the offering of the Stock may
commence, the term "Registration Statement" as used in this Agreement
means the registration statement as amended by said post-effective
amendment. The term "Registration Statement" as used in this
Agreement shall also include any registration statement relating to
the Stock that is filed and declared effective pursuant to Rule 462(b)
under the Securities Act. The term "Prospectus" as used in this
Agreement means the prospectus in the form included in the
Registration Statement, or, (A) if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A
under the Securities Act and such information is included in a
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act, the term "Prospectus" as used in this Agreement means
the prospectus in the form included in the Registration Statement as
supplemented by the addition of the Rule 430A information contained in
the prospectus filed with the Commission pursuant to Rule 424(b) and
(B) if prospectuses that meet the requirements of Section 10(a) of the
Securities Act are delivered pursuant to Rule 434 under the Securities
Act, then (i) the term "Prospectus" as used in this Agreement means
the "prospectus subject to completion" (as such term is defined in
Rule 434(g) under the Securities Act) as supplemented by (a) the
addition of Rule 430A information or other information contained in
the form of prospectus delivered pursuant to Rule 434(b)(2) under the
Securities Act or (b) the information contained in the term sheets
described in Rule 434(b)(3) under the Securities Act, and (ii) the
date of such prospectuses shall be deemed to be the date of the term
sheets. The term "Preeffective Prospectus" as used in this Agreement
means the prospectus subject to completion in the form included in the
Registration Statement at the time of the initial filing of the
Registration Statement with the Commission, and as such prospectus
shall have been amended from time to time prior to the date of the
Prospectus.
(b) The Commission has not issued or threatened to issue any order
preventing or suspending the use of any Preeffective Prospectus, and,
at its date of issue, each Preeffective Prospectus conformed in all
material respects with the requirements of the Securities Act and did
not include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading; and, when the Registration Statement
becomes effective and at all times subsequent thereto up to and
including each of the Closing Dates (as hereinafter defined), the
Registration Statement and the Prospectus and any amendments or
supplements thereto contained and will contain all material statements
and information required to be included therein by the Securities Act
and conformed and will conform in all material respects to the
requirements of the Securities Act and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto,
included or will include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances
2
<PAGE>
under which they were made, not misleading; provided, however, that
the foregoing representations, warranties and agreements shall not
apply to information contained in or omitted from any Preeffective
Prospectus or the Registration Statement or the Prospectus or any such
amendment or supplement thereto in reliance upon, and in conformity
with, written information furnished to the Company by or on behalf of
any Underwriter, directly or through you, specifically for use in the
preparation thereof; there is no franchise, lease, contract, agreement
or document required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement
which is not described or filed therein as required; and all
descriptions of any such franchises, leases, contracts, agreements or
documents contained in the Registration Statement are accurate and
complete descriptions of such documents in all material respects.
(c) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus, and except as set forth or
contemplated in the Prospectus, the Company has not incurred any
liabilities or obligations, direct or contingent, nor entered into any
transactions not in the ordinary course of business, and there has not
been any material adverse change in the condition (financial or
otherwise), properties, business, management, prospects, net worth or
results of operations of the Company or any change in the capital
stock or short-term or long-term debt of the Company.
(d) The financial statements, together with the related notes, set forth
in the Prospectus and elsewhere in the Registration Statement fairly
present, on the basis stated in the Registration Statement, the
financial position and the results of operations and changes in
financial position of the Company at the respective dates or for the
respective periods therein specified. Such statements and related
notes have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis except as may be
set forth in the Prospectus. The selected financial and statistical
data set forth in the Prospectus under the caption "Prospectus
Summary--Summary Financial Data" and "Selected Financial Data" fairly
present, on the basis stated in the Registration Statement, the
information set forth therein.
(e) Deloitte & Touche LLP, who have expressed their opinions on the
audited financial statements included in the Registration Statement
and the Prospectus, are independent public accountants as required by
the Securities Act and the Rules and Regulations.
(f) The Company has been duly organized and is validly existing and in
good standing as a corporation under the laws of its jurisdiction of
organization, with power and authority (corporate and other) to own or
lease its properties and to conduct its business as described in the
Prospectus; the Company is in possession of and operating in
compliance with all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates and orders required for the
conduct of its business, the failure to possess which would have a
material adverse effect upon the Company, all of which are valid and
in full force and effect; and the Company is duly qualified to do
business and in good standing as a foreign
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corporation in all other jurisdictions where its ownership or leasing
of properties or the conduct of its business requires such
qualification. The Company has all requisite power and authority, and
all necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses and permits of and from all
public regulatory or governmental agencies and bodies to own, lease
and operate its properties and conduct its business as now being
conducted and as described in the Registration Statement and the
Prospectus, the failure to possess which would have a material adverse
effect upon the Company, and no such consent, approval, authorization,
order, registration, qualification, license or permit contains a
materially burdensome restriction not adequately disclosed in the
Registration Statement and the Prospectus. The Company has no
subsidiaries (as defined in the Securities Act and the Rules and
Regulations).
(g) The Company's authorized and outstanding capital stock is on the date
hereof, and will be on the Closing Dates, as set forth under the
heading "Capitalization" in the Prospectus; the outstanding shares of
common stock (including the outstanding shares of Stock) of the
Company conform to the description thereof in the Prospectus and have
been duly authorized and validly issued and are fully paid and
nonassessable; are duly listed or approved for listing on the Nasdaq
National Market and have been issued in compliance with all federal
and state securities laws (except with respect to the compliance with
state securities laws of the sale of the Common Stock offered hereby
pursuant to this Agreement, as to which the Company makes no
representation) and were not issued in violation of or subject to any
preemptive rights or similar rights to subscribe for or purchase
securities and conform to the description thereof contained in the
Prospectus. Except as disclosed in and or contemplated by the
Prospectus and the financial statements of the Company and related
notes thereto included in the Prospectus, the Company does not have
outstanding any options or warrants to purchase, or any preemptive
rights or other rights to subscribe for or to purchase any securities
or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations, except for options
granted subsequent to the date of information provided in the
Prospectus pursuant to the Company's employee and stock option plans
as disclosed in the Prospectus. The description of the Company's
stock option and other stock plans or arrangements, and the options or
other rights granted or exercised thereunder, as set forth in the
Prospectus, accurately and fairly presents the information required to
be shown with respect to such plans, arrangements, options and rights
in all material respects.
(h) The Stock to be issued and sold by the Company to the Underwriters
hereunder has been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein, will be duly
and validly issued, fully paid and nonassessable and free of any
preemptive or similar rights and will conform to the description
thereof in the Prospectus.
(i) Except as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company is a party or of
which any property of the Company or any affiliate is subject, which,
if determined adversely to the Company, might individually or in the
aggregate (i) prevent or adversely affect
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the transactions contemplated by this Agreement, (ii) suspend the
effectiveness of the Registration Statement, (iii) prevent or suspend
the use of the Preeffective Prospectus in any jurisdiction or
(iv) result in a material adverse change in the condition (financial
or otherwise), properties, business, management, prospects, net worth
or results of operations of the Company and, to the best knowledge of
the Company, there is no valid basis for any such legal or
governmental proceeding; and to the best of the Company's knowledge no
such proceedings are threatened or contemplated against the Company by
governmental authorities or others. The Company is not a party nor
subject to the provisions of any material injunction, judgment, decree
or order of any court, regulatory body or other governmental agency or
body. The description of the Company's litigation under the heading
"Legal Proceedings" in the Prospectus is true and correct in all
material respects and complies with the Rules and Regulations.
(j) The execution, delivery and performance of this Agreement and the
consummation of the transactions herein contemplated (A) will not
result in any violation of the provisions of the certificate of
incorporation, by-laws or other organizational documents of the
Company, or any law, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or
any of its properties or assets, (B) will not conflict with or result
in a breach or violation of any of the terms or provisions of or
constitute a default under any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company
is a party or by which it or any of its properties is or may be bound,
the Certificate of Incorporation, By-laws or other organizational
documents of the Company, or any law, order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company or any of its properties or will result in the creation of a
lien.
(k) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery
and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby, except such as have been or
will be obtained under the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and except such as may be
required by the National Association of Securities Dealers, Inc. (the
"NASD") or under the securities or "Blue Sky" laws of any
jurisdiction.
(l) The Company has the full corporate power and authority to enter into
this Agreement and to perform its obligations hereunder (including to
issue, sell and deliver the Stock), and this Agreement has been duly
and validly authorized, executed and delivered by the Company and is a
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent that rights
to indemnity and contribution hereunder may be limited by federal or
state securities laws or the public policy underlying such laws.
(m) The Company is in all material respects in compliance with, and
conducts its business in conformity with, all applicable federal,
state, local and foreign laws, rules and regulations or any court or
governmental agency or body; to the knowledge of the Company,
otherwise than as set forth in the Registration
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Statement and the Prospectus, no prospective change in any of such
federal or state laws, rules or regulations has been adopted which,
when made effective, would have a material adverse effect on the
operations of the Company.
(n) The Company has filed all necessary federal, state, local and foreign
income, payroll, franchise and other tax returns that are due as of
the date of this Agreement and has paid all taxes shown as due thereon
or with respect to any of its properties, and there is no tax
deficiency that has been, or to the knowledge of the Company is likely
to be, asserted against the Company or any of its properties or assets
that would adversely affect the financial position, business or
operations of the Company.
(o) Except as disclosed in the Registration Statement and the Prospectus,
no person or entity has the right to require registration of shares of
Common Stock or other securities of the Company because of the filing
or effectiveness of the Registration Statement or otherwise, except
for persons and entities who have expressly waived such right or who
have been given proper notice and have failed to exercise such right
within the time or times required under the terms and conditions of
such right.
(p) Neither the Company nor any of its officers, directors or affiliates
has taken or will take, directly or indirectly, any action designed or
intended to stabilize or manipulate the price of any security of the
Company, or which caused or resulted in, or which might in the future
reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company. The Company
has not distributed and, prior to the later to occur of the First
Closing Date and completion of the distribution of the Firm Shares,
will not distribute any offering material in connection with the
offering and sale of the Shares other than the Registration Statement,
the Preeffective Prospectus, the Prospectus or other materials, if
any, permitted by the Securities Act and state securities or Blue Sky
laws.
(q) The Company has provided you with all financial statements since
February 22, 1995 to the date hereof that are available to the
officers of the Company.
(r) The Company owns or possesses the right to use all patents,
trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade
secrets and rights described in the Prospectus as being owned by it or
necessary for the conduct of its respective businesses, and the
Company is not aware of any claim to the contrary or any challenge by
any other person to the rights of the Company with respect to the
foregoing. To the best knowledge of the Company, the Company's
business as now conducted and as proposed to be conducted does not and
will not infringe or conflict with in any material respect patents,
trademarks, service marks, trade names, copyrights, trade secrets,
licenses or other intellectual property or franchise right of any
person. Except as described in the Prospectus, the Company is not
aware of any claim against the Company alleging the infringement by
the Company of any patent, trademark, service mark, trade name,
copyright, trade
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secret, license in or other intellectual property right or franchise
right of any person.
(s) The Company has performed all material obligations required to be
performed by it under all contracts required by Item 601(b)(10) of
Regulation S-K under the Securities Act to be filed as exhibits to the
Registration Statement, and neither the Company nor, to the best of
the Company's knowledge, any other party to such contract is in
default under or in breach of any such obligations. The Company has
not received any notice of such default or breach.
(t) The Company is not involved in any labor dispute nor is any such
dispute threatened. The Company is not aware that (A) any executive,
key employee or significant group of employees of the Company plans to
terminate employment with the Company or (B) any such executive or key
employee is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreement that would be violated by
the present or proposed business activities of the Company. The
Company does not have or expect to have any liability for any
prohibited transaction or funding deficiency or any complete or
partial withdrawal liability with respect to any pension, profit
sharing or other plan which is subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), to which the
Company or any subsidiary makes or ever has made a contribution and in
which any employee of the Company or any subsidiary is or has ever
been a participant. With respect to such plans, the Company is in
compliance in all material respects with all applicable provisions of
ERISA.
(u) The Company has obtained the written agreement described in
Section 8(j) of this Agreement from each of its officers, directors
and certain certain holders of the Company's securities.
(v) The Company has, and the Company as of the Closing Dates will have,
good and marketable title in fee simple to all real property and good
and marketable title to all personal property owned or proposed to be
owned by it which is material to the business of the Company, in each
case free and clear of all liens, encumbrances and defects except such
as are described in the Prospectus or such as would not have a
material adverse effect on the Company; and any real property and
buildings held under lease by the Company or proposed to be held after
giving effect to the transactions described in the Prospectus are, or
will be as of each of the Closing Dates, held by it under valid,
subsisting and enforceable leases with such exceptions as would not
have a material adverse effect on the Company, in each case except as
described in or contemplated by the Prospectus.
(w) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are customary for companies at 5 similar stages of development and in
businesses similar to the businesses in which the Company is engaged
or proposes to engage after giving effect to the transactions
described in the Prospectus; and the Company does not have any reason
to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar
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insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition, financial or
otherwise, or the earnings, business or operations of the Company,
except as described in or contemplated by the Prospectus.
(x) Other than as contemplated by this Agreement, there is no broker,
finder or other party that is entitled to receive from the Company any
brokerage or finder's fee or other fee or commission as a result of
any of the transactions contemplated by this Agreement.
(y) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(z) To the Company's knowledge, neither the Company nor any employee or
agent of the Company has made any payment of funds of the Company or
received or retained any funds in violation of any law, rule or
regulation, which payment, receipt or retention of funds is of a
character required to be disclosed in the Prospectus.
(aa) The Company is not or, after application of the net proceeds of this
offering as described under the caption "Use of Proceeds" in the
Prospectus, will not become an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended.
(bb) Each certificate signed by any officer of the Company and delivered to
the Underwriters or counsel for the Underwriters shall be deemed to be
a representation and warranty by the Company as to the matters covered
thereby.
(cc) The Company has not received nor is it aware of any communication
(written or oral) relating to the termination or modification or
threatened termination or modification of the agreements described or
referred to in the Prospectus under the caption "Risk
Factors--Terminability of Agreements; Exclusivity Provisions" and
"Business--Customer Agreements" nor is it aware of any communication
(written or oral) relating to any determination or threatened
determination not to renew or extend any agreement described or
referred to under such caption at the end of the current term of any
such agreement.
3. PURCHASE BY, AND SALE AND DELIVERY TO, UNDERWRITERS -- CLOSING DATES. The
Company agrees to sell to the Underwriters the Firm Stock; and on the basis
of the representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set forth, the
Underwriters agree, severally and not jointly, to purchase the Firm Stock
from the Company, the number of shares of Firm Stock to be purchased
8
<PAGE>
by each Underwriter being set opposite its name in Schedule A, subject to
adjustment in accordance with Section 12 hereof.
The purchase price per share to be paid by the Underwriters to the Company
will be the price per share set forth in the table on the cover page of the
Prospectus under the heading "Proceeds to Company" (the "Purchase Price").
The Company will deliver the Firm Stock to the Representatives for the
respective accounts of the several Underwriters (in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or
prior to 12:00 Noon, New York Time, on the second full business day
preceding the First Closing Date (as defined below) or, if no such
direction is received, in the names of the respective Underwriters or in
such other names as Cowen may designate (solely for the purpose of
administrative convenience) and in such denominations as Cowen may
determine, against payment of the aggregate Purchase Price therefor by
certified or official bank check or checks in immediately available (same
day) funds, payable to the order of the Company, all at the offices of
Dewey Ballantine, 1301 Avenue of the Americas, New York, New York 10019.
The time and date of the delivery and closing shall be at 10:00 A.M., New
York Time, on December , 1996, in accordance with Rule 15c6-1 of the
Exchange Act. The time and date of such payment and delivery are herein
referred to as the "First Closing Date". The First Closing Date and the
location of delivery of, and the form of payment for, the Firm Stock may be
varied by agreement between the Company and Cowen. The First Closing Date
may be postponed pursuant to the provisions of Section 12.
The Company shall make the certificates for the Stock available to the
Representatives for examination on behalf of the Underwriters not later
than 10:00 A.M., New York Time, on the business day preceding the First
Closing Date at the offices of Cowen & Company, Financial Square, New York,
New York 10005.
It is understood that Cowen or Vector, individually and not as
Representatives of the several Underwriters, may (but shall not be
obligated to) make payment to the Company on behalf of any Underwriter or
Underwriters, for the Stock to be purchased by such Underwriter or
Underwriters. Any such payment by Cowen or Vector shall not relieve such
Underwriter or Underwriters from any of its or their other obligations
hereunder.
The several Underwriters agree to make an initial public offering of the
Firm Stock at the initial public offering price as soon after the
effectiveness of the Registration Statement as in their judgment is
advisable. The Representatives shall promptly advise the Company of the
making of the initial public offering.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus,
the Company hereby grants to the Underwriters an option to purchase,
severally and not jointly, up to an aggregate of 300,000 shares of Optional
Stock. The price per share to be paid for the Optional Stock shall be the
Purchase Price. The option granted hereby may be exercised as to all or
any part of the Optional Stock at any time, and from time to time, not more
than thirty (30) days subsequent to the effective date of this Agreement.
No Optional Stock shall be sold and delivered unless the Firm Stock
previously has been, or simultaneously is, sold and
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<PAGE>
delivered. The right to purchase the Optional Stock or any portion thereof
may be surrendered and terminated at any time upon notice by the
Underwriters to the Company.
The option granted hereby may be exercised by the Underwriters by giving
written notice from Cowen to the Company setting forth the number of shares
of the Optional Stock to be purchased by them and the date and time for
delivery of and payment for the Optional Stock. Each date and time for
delivery of and payment for the Optional Stock (which may be the First
Closing Date, but not earlier) is herein called the "Option Closing Date"
and shall in no event be earlier than two (2) business days nor later than
ten (10) business days after written notice is given. (The Option Closing
Date and the First Closing Date are herein called the "Closing Dates".)
All purchases of Optional Stock from the Company shall be made on a pro
rata basis. Optional Stock shall be purchased for the account of each
Underwriter in the same proportion as the number of shares of Firm Stock
set forth opposite such Underwriter's name in Schedule A hereto bears to
the total number of shares of Firm Stock (subject to adjustment by the
Underwriters to eliminate odd lots). Upon exercise of the option by the
Underwriters, the Company agrees to sell to the Underwriters the number of
shares of Optional Stock set forth in the written notice of exercise and
the Underwriters agree, severally and not jointly and subject to the terms
and conditions herein set forth, to purchase the number of such shares
determined as aforesaid.
The Company will deliver the Optional Stock to the Underwriters (in the
form of definitive certificates, issued in such names and in such
denominations as the Representatives may direct by notice in writing to the
Company given at or prior to 12:00 Noon, New York Time, on the second full
business day preceding the Option Closing Date or, if no such direction is
received, in the names of the respective Underwriters or in such other
names as Cowen may designate (solely for the purpose of administrative
convenience) and in such denominations as Cowen may determine, against
payment of the aggregate Purchase Price therefor by certified or official
bank check or checks in immediately available (same day) funds payable to
the order of the Company, all at the offices of Dewey Ballantine, 1301
Avenue of the Americas, New York, New York 10019. The Option Closing Date
and the location of delivery of, and the form of payment for, the Option
Stock may be varied by agreement between the Company and Cowen. The Option
Closing Date may be postponed pursuant to the provisions of Section 12.
4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and agrees
with the several Underwriters that:
(a) The Company will (i) if the Company and the Representatives have
determined not to proceed pursuant to Rule 430A of the Rules and
Regulations, use its best efforts to cause the Registration Statement
to become effective, (ii) if the Company and the Representatives have
determined to proceed pursuant to Rule 430A of the Rules and
Regulations, use its best efforts to comply with the provisions of and
make all requisite filings with the Commission pursuant to Rule 430A
and Rule 424 of the Rules and Regulations and (iii) if the Company and
the Representatives have determined to deliver Prospectuses pursuant
to Rule 434 of the Rules and Regulations, to use its best efforts to
comply with all the applicable provisions thereof. The Company will
advise the Representatives promptly as to the time at which the
Registration Statement becomes effective, will advise the
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Representatives promptly of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of
the institution of any proceedings for that purpose, and will use its
best efforts to prevent the issuance of any such stop order and to
obtain as soon as possible the lifting thereof, if issued. The
Company will advise the Representatives promptly of the receipt of any
comments of the Commission or any request by the Commission for any
amendment of or supplement to the Registration Statement or the
Prospectus or for additional information and will not at any time file
any amendment to the Registration Statement or supplement to the
Prospectus which shall not previously have been submitted to the
Representatives a reasonable time prior to the proposed filing thereof
or to which the Representatives shall reasonably object in writing or
which is not in compliance with the Securities Act and the Rules and
Regulations.
(b) The Company will prepare and file with the Commission, promptly upon
the request of the Representatives, any amendments or supplements to
the Registration Statement or the Prospectus which in the opinion of
the Representatives may be necessary to enable the several
Underwriters to continue the distribution of the Stock and will use
its best efforts to cause the same to become effective as promptly as
possible.
(c) If at any time after the effective date of the Registration Statement
when a prospectus relating to the Stock is required to be delivered
under the Securities Act any event relating to or affecting the
Company occurs as a result of which the Prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact, or omit to state any material fact necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend
the Prospectus to comply with the Securities Act, the Company will
promptly notify the Representatives thereof and will prepare an
amended or supplemented prospectus which will correct such statement
or omission; and in case any Underwriter is required to deliver a
prospectus relating to the Stock nine (9) months or more after the
effective date of the Registration Statement, the Company upon the
request of the Representatives and at the expense of such Underwriter
will prepare promptly such prospectus or prospectuses as may be
necessary to permit compliance with the requirements of Section
10(a)(3) of the Securities Act.
(d) The Company will deliver to the Representatives, at or before the
Closing Dates, signed copies of the Registration Statement, as
originally filed with the Commission, and all amendments thereto
including all financial statements and exhibits thereto, and will
deliver to the Representatives such number of copies of the
Registration Statement, including such financial statements but
without exhibits, and all amendments thereto, as the Representatives
may reasonably request. The Company will deliver or mail to or upon
the order of the Representatives, from time to time until the
effective date of the Registration Statement, as many copies of the
Preeffective Prospectus as the Representatives may reasonably request.
The Company will deliver or mail to or upon the order of the
Representatives on the date of the initial public offering, and
thereafter from time to time during the period when delivery of a
prospectus relating to the
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Stock is required under the Securities Act, as many copies of the
Prospectus, in final form or as thereafter amended or supplemented as
the Representatives may reasonably request; provided, however, that
the expense of the preparation and delivery of any prospectus required
for use nine (9) months or more after the effective date of the
Registration Statement shall be borne by the Underwriters required to
deliver such prospectus.
(e) The Company will make generally available to its shareholders as soon
as practicable, but not later than fifteen (15) months after the
effective date of the Registration Statement, an earning statement
which will be in reasonable detail (but which need not be audited) and
which will comply with Section 11(a) of the Securities Act, covering a
period of at least twelve (12) months beginning after the "effective
date" (as defined in Rule 158 under the Securities Act) of the
Registration Statement.
(f) The Company will cooperate with the Representatives to enable the
Stock to be registered or qualified for offering and sale by the
Underwriters and by dealers under the securities laws of such
jurisdictions as the Representatives may designate and at the request
of the Representatives will make such applications and furnish such
consents to service of process or other documents as may be required
of it as the issuer of the Stock for that purpose; provided, however,
that the Company shall not be required to qualify to do business or to
file a general consent (other than that arising out of the offering or
sale of the Stock) to service of process in any such jurisdiction
where it is not now so subject. The Company will, from time to time,
prepare and file such statements and reports as are or may be required
of it as the issuer of the Stock to continue such qualifications in
effect for so long a period as the Representatives may reasonably
request for the distribution of the Stock. The Company will advise
the Representatives promptly after the Company becomes aware of the
suspension of the qualifications or registration of (or any such
exception relating to) the Common Stock of the Company for offering,
sale or trading in any jurisdiction or of any initiation or threat of
any proceeding for any such purpose, and in the event of the issuance
of any orders suspending such qualifications, registration or
exception, the Company will, with the cooperation of the
Representatives use its best efforts to obtain the withdrawal thereof.
(g) The Company will furnish to its shareholders annual reports containing
financial statements certified by independent public accountants and
at its option with quarterly summary financial information in
reasonable detail which may be unaudited. During the period of five
(5) years from the date hereof, the Company will deliver to the
Representatives and, upon request, to each of the other Underwriters,
as soon as they are available, copies of each annual report of the
Company and each other report furnished by the Company to its
shareholders and will deliver to the Representatives, (i) as soon as
they are available, copies of any other reports (financial or other)
which the Company shall publish or otherwise make available to any of
its shareholders as such, (ii) as soon as they are available, copies
of any reports and financial statements furnished to or filed with the
Commission or any national securities exchange and (iii) from time to
time such other information concerning the Company as you may request.
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(h) The Company will use its best efforts to list the Stock, subject to
official notice of issuance, on the Nasdaq National Market
concurrently with the effectiveness of the Registration Statement.
(i) The Company will maintain a transfer agent and registrar for its
Common Stock.
(j) Prior to filing its quarterly statements on Form 10-Q, the Company
will have its independent auditors perform a limited quarterly review
of its quarterly financial statements.
(k) The Company will not offer, sell, assign, transfer, encumber, contract
to sell, grant an option to purchase or otherwise dispose of, other
than by operation of law, gifts, pledges or dispositions by estate
representatives, any shares of Common Stock or securities convertible
into or exercisable or exchangeable for Common Stock (including,
without limitation, Common Stock of the Company which may be deemed to
be beneficially owned by the Company in accordance with the Rules and
Regulations) during the 180 days following the date on which the price
of the Common Stock to be purchased by the Underwriters is set (the
"Lock-Up Period"), other than the Company's sale of Common Stock
hereunder and the Company's issuance of Common Stock upon the exercise
of warrants and stock options which are presently outstanding and
described in the Prospectus or the grant of options under the
Company's Stock Option Plan as such is described in the Prospectus,
provided such options are not exercisable during the Lock-Up Period.
(l) Prior to filing with the Commission any reports on Form SR pursuant to
Rule 463 of Rules and Regulations, the Company will furnish a copy
thereof to the counsel for the Underwriters and receive and consider
its comments thereon, and will deliver promptly to the Representatives
a signed copy of each report on Form SR filed by it with the
Commission.
(m) The Company will apply the net proceeds from the sale of the Stock as
set forth in the description under "Use of Proceeds" in the
Prospectus, which description complies in all respects with the
requirements of Item 504 of Regulation S-K.
(n) The Company will supply you with copies of all correspondence to and
from, and all documents issued to and by, the Commission in connection
with the registration of the Stock under the Securities Act.
(o) Prior to each of the Closing Dates the Company will furnish to you, as
soon as they have been prepared, copies of any unaudited interim
consolidated financial statements of the Company for any periods
subsequent to the periods covered by the financial statements
appearing in the Registration Statement and the Prospectus.
(p) Prior to each of the Closing Dates the Company will issue no press
release or other communications directly or indirectly and hold no
press conference with respect to the Company, the financial condition,
results of operations, business, prospects, assets or liabilities of
the Company, or the offering of the Stock,
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without your prior written consent. For a period of twelve (12)
months following the first Closing Date, the Company will use its best
efforts to provide to you copies of each press release or other public
communications with respect to the financial condition, results of
operations, business, prospects, assets or liabilities of the Company
at least simultaneously with the public issuance thereof or such
longer advance period as may reasonably be practicable.
(q) During the period of five (5) years hereafter, the Company will
furnish to the Representatives, and upon request of the
Representatives, to each of the Underwriters: (i) as soon as
practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as
of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the
opinion thereon of the Company's independent public accountants;
(ii) as soon as practicable after the filing thereof, copies of each
proxy statement, Annual Report on Form 10-K, Quarterly Report on Form
10-Q, Report on Form 8-K or other report filed by the Company with the
Commission, or the NASD or any securities exchange; and (iii) as soon
as available, copies of any report or communication of the Company
mailed generally to holders of its Common Stock.
5. Payment of Expenses.
(a) The Company will pay (directly or by reimbursement) all costs, fees
and expenses incurred in connection with expenses incident to the
performance of its obligations under this Agreement and in connection
with the transactions contemplated hereby, including but not limited
to (i) all expenses and taxes incident to the issuance and delivery of
the Stock to the Representatives; (ii) all expenses incident to the
registration of the Stock under the Securities Act; (iii) the costs of
preparing stock certificates (including printing and engraving costs);
(iv) all fees and expenses of the registrar and transfer agent of the
Stock; (v) all necessary issue, transfer and other stamp taxes in
connection with the issuance and sale of the Stock to the
Underwriters; (vi) fees and expenses of the Company's counsel and the
Company's independent accountants; (vii) all costs and expenses
incurred in connection with the preparation, printing filing, shipping
and distribution of the Registration Statement, each Preeffective
Prospectus and the Prospectus (including all exhibits and financial
statements) and all amendments and supplements provided for herein,
the "Agreement Among Underwriters" between the Representatives and the
Underwriters, the Master Selected Dealers' Agreement, the
Underwriters' Questionnaire and the Blue Sky memoranda (including
related fees and expenses of counsel to the Underwriters) and this
Agreement; (viii) all filing fees, attorneys' fees and expenses
incurred by the Company or the Underwriters in connection with
exemptions from the qualifying or registering (or obtaining
qualification or registration of) all or any part of the Stock for
offer and sale and determination of its eligibility for investment
under the Blue Sky or other securities laws of such jurisdictions as
the Representatives may designate; (ix) all fees and expenses paid or
incurred in connection with filings made with the NASD, including the
fees and expenses of counsel to the Underwriters; and (x) all other
costs and expenses incident to the
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performance of its obligations hereunder which are not otherwise
specifically provided for in this Section.
(b) In addition to its other obligations under Section 6(a) hereof, the
Company agrees that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding arising out
of or based upon (i) any statement or omission or any alleged
statement or omission, (ii) any act or failure to act or any alleged
act or failure to act or (iii) any breach or inaccuracy in its
representations and warranties, it will reimburse each Underwriter on
a quarterly basis for all reasonable legal or other expenses incurred
in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse each
Underwriter for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, each Underwriter shall
promptly return it to the Company, together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial
lending rate for borrowers of the highest credit standing) announced
from time to timed by the Chase Manhattan Bank, N.A., New York, New
York (the "Prime Rate"). Any such interim reimbursement payments
which are not made to an Underwriter in a timely manner as provided
below shall bear interest at the Prime Rate from the due date for such
reimbursement. This expense reimbursement agreement will be in
addition to any other liability which the Company may otherwise have.
The request for reimbursement will be sent to the Company.
(c) In addition to its other obligations under Section 6(b) hereof, each
Underwriter severally agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or
any alleged statement or omission, described in Section 6(b) hereof
which relates to information furnished to the Company pursuant to
Section 6(b) hereof, it will reimburse the Company (and, to the extent
applicable, each officer, director and controlling person) on a
quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the
Company (and, to the extent applicable, each officer, director or
controlling person) for such expenses and the possibility that such
payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company
(and, to the extent applicable, each officer, director or controlling
person) shall promptly return it to the Underwriters together with
interest, compounded daily, determined on the basis of the Prime Rate.
Any such interim reimbursement payments which are not made to the
Company within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request. This
indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
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(d) It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in paragraph (b) and/or
(c) of this Section 5, including the amounts of any requested
reimbursement payments and the method of determining such amounts,
shall be settled by arbitration conducted under the provisions of the
Constitution and Rules of the Board of Governors of the New York Stock
Exchange, Inc. or pursuant to the Code of Arbitration Procedure of the
NASD. Any such arbitration must be commenced by service of a written
demand for arbitration or written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said
demand or notice is authorized to do so. Such an arbitration would be
limited to the operation of the interim reimbursement provisions
contained in paragraph (b) and/or (c) of this Section 5 and would not
resolve the ultimate propriety or enforceability of the obligation to
reimburse expenses which is created by the provisions of Section 6.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls such Underwriter within the meaning
of the Securities Act and the respective officers, directors,
partners, employees, representatives and agents of each such
Underwriter (collectively, the "Underwriter Indemnified Parties" and,
each, an "Underwriter Indemnified Party"), against any losses, claims,
damages, liabilities or expenses (including the reasonable cost of
investigating end defending against any claims therefor and counsel
fees incurred in connection therewith), joint or several, which may be
based upon the Securities Act, or any other statute or at common law,
(i) on the ground or alleged ground that any Preeffective Prospectus,
the Registration Statement or the Prospectus (or any Preeffective
Prospectus, the Registration Statement or the Prospectus as from time
to time amended or supplemented) includes or allegedly includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading, unless such statement or omission was made
in reliance upon, and in conformity with, written information
furnished to the Company by any Underwriter, directly or through the
Representatives, specifically for use in the preparation thereof or
(ii) for any act or failure to act or any alleged act or failure to
act by any Underwriter in connection with, or relating in any manner
to, the Stock or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage,
liability or expense arising out of or based upon matters covered by
clause (i) above (provided that the Company shall not be liable under
this clause (ii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim,
damage, or liability or expense resulted directly from any such acts
or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence or willful misconduct). The
Company will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought
to enforce any such liability, but if the Company elects to assume the
defense, such defense shall be conducted by counsel chosen by it and
reasonably
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acceptable to the Underwriters. In the event the Company elects to
assume the defense of any such suit and retain such counsel, any
Underwriter Indemnified Parties, defendant or defendants in the suit,
may retain additional counsel but shall bear the fees and expenses of
such counsel unless (i) the Company shall have specifically authorized
the retaining of such counsel or (ii) the parties to such suit include
any such Underwriter Indemnified Parties, and the Company and such
Underwriter Indemnified Parties at law or in equity have been advised
by counsel to the Underwriters that one or more legal defenses may be
available to it or them which may not be available to the Company, in
which case the Company shall not be entitled to assume the defense of
such suit notwithstanding its obligation to bear the fees and expenses
of such counsel. This indemnity agreement is not exclusive and will
be in addition to any liability which the Company might otherwise have
and shall not limit any rights or remedies which may otherwise be
available at law or in equity to each Underwriter Indemnified Party.
(b) Each Underwriter severally and not jointly agrees to indemnify and
hold harmless the Company, each of its directors, each of its officers
who have signed the Registration Statement and each person, if any,
who controls the Company within the meaning of the Securities Act
(collectively, the "Company Indemnified Parties") against any losses,
claims, damages, liabilities or expenses (including, unless the
Underwriter or Underwriters elect to assume the defense, the
reasonable cost of investigating and defending against any claims
therefor and counsel fees incurred in connection therewith), joint or
several, which arise out of or are based in whole or in part upon the
Securities Act, the Exchange Act or any other federal, state, local or
foreign statute or regulation, or at common law, on the ground or
alleged ground that any Preeffective Prospectus, the Registration
Statement or the Prospectus (or any Preeffective Prospectus, the
Registration Statement or the Prospectus, as from time to time amended
and supplemented) includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, but only
insofar as any such statement or omission was made in reliance upon,
and in conformity with, written information furnished to the Company
by such Underwriter, directly or through the Representatives,
specifically for use in the preparation thereof; provided, however,
that in no case is such Underwriter to be liable with respect to any
claims made against any Company Indemnified Party against whom the
action is brought unless such Company Indemnified Party shall have
notified such Underwriter in writing within a reasonable time after
the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Company
Indemnified Party, but failure to notify such Underwriter of such
claim shall not relieve it from any liability which it may have to any
Company Indemnified Party otherwise than on account of its indemnity
agreement contained in this paragraph. Such Underwriter shall be
entitled to participate at its own expense in the defense, or, if it
so elects, to assume the defense of any suit brought to enforce any
such liability, but, if such Underwriter elects to assume the defense,
such defense shall be conducted by counsel chosen by it. In the event
that any Underwriter elects to assume the defense of any such suit and
retain such counsel, the Company Indemnified
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Parties and any other Underwriter or Underwriters or controlling
person or persons, defendant or defendants in the suit, shall bear the
fees and expenses of any additional counsel retained by them,
respectively. The Underwriter against whom indemnity may be sought
shall not be liable to indemnify any person for any settlement of any
such claim effected without such Underwriter's consent. This
indemnity agreement is not exclusive and will be in addition to any
liability which such Underwriter might otherwise have and shall not
limit any rights or remedies which may otherwise be available at law
or in equity to any Company Indemnified Party.
(c) If the indemnification provided for in this Section 6 is unavailable
or insufficient to hold harmless an indemnified party under subsection
(a) or (b) above in respect of any losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to
herein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Stock. If, however, the
allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one hand
and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities
or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page
of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company
or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it
would not be just and equitable if contribution were determined by pro
rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above. The
amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or expenses (or actions in
respect thereof) referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating, defending, settling or compromising
any such claim. Notwithstanding the provisions of this subsection
(c), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the shares of
the Stock underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by
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<PAGE>
reason of such untrue or alleged untrue statement or omission or
alleged omission. The Underwriters' obligations to contribute are
several in proportion to their respective underwriting obligations and
not joint. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
7. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The respective
indemnities, covenants, agreements, representations, warranties and other
statements of the Company and the several Underwriters, as set forth in
this Agreement or made by them respectively, pursuant to this Agreement,
shall remain in full force and effect, regardless of any investigation made
by or on behalf of any Underwriter, the Company or any of its officers or
directors or any controlling person, and shall survive delivery of and
payment for the Stock.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations of the
several Underwriters hereunder shall be subject to the accuracy, at and
(except as otherwise stated herein) as of the date hereof and at and as of
each of the Closing Dates, of the representations and warranties made
herein by the Company, to compliance at and as of each of the Closing Dates
by the Company with its covenants and agreements herein contained and other
provisions hereof to be satisfied at or prior to each of the Closing Dates,
and to the following additional conditions:
(a) The Registration Statement shall have become effective and no stop
order suspending the effectiveness thereof shall have been issued and
no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or the Representatives, shall be threatened
by the Commission, and any request for additional information on the
part of the Commission (to be included in the Registration Statement
or the Prospectus or otherwise) shall have been complied with to the
reasonable satisfaction of the Representatives. Any filings of the
Prospectus, or any supplement thereto, required pursuant to Rule
424(b) or Rule 434 of the Rules and Regulations, shall have been made
in the manner and within the time period required by Rule 424(b) and
Rule 434 of the Rules and Regulations, as the case may be.
(b) The Representatives shall have been satisfied that there shall not
have occurred any change prior to each of the Closing Dates in the
condition (financial or otherwise), properties, business, management,
prospects, net worth or results of operations of the Company, or any
change in the capital stock, short-term or long-term debt of the
Company, such that (i) the Registration Statement or the Prospectus,
or any amendment or supplement thereto, contains an untrue statement
of fact which, in the opinion of the Representatives, is material, or
omits to state a fact which, in the opinion of the Representatives, is
required to be stated therein or is necessary to make the statements
therein not misleading, or (ii) it is unpracticable in the reasonable
judgment of the Representatives to proceed with the public offering or
purchase the Stock as contemplated hereby.
(c) No legal or governmental action, suit or proceeding affecting the
Company which is material and adverse to the Company or which affects
or may affect the
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<PAGE>
Company's ability to perform their respective obligations under this
Agreement shall have been instituted or threatened and there shall
have occurred no material adverse development in any existing such
action, suit or proceeding.
(d) At the time of execution of this Agreement, the Representatives shall
have received from Deloitte & Touche LLP, independent certified public
accountants, a letter, dated the date hereof, in form and substance
satisfactory to the Underwriters.
(e) The Representatives shall have received from Deloitte & Touche LLP,
independent certified public accountants, letters, dated each of the
Closing Dates, to the effect that such accountants reaffirm, as of
each of the Closing Dates, and as though made on each of the Closing
Dates, the statements made in the letter furnished by such accountants
pursuant to paragraph (d) of this Section 8.
(f) The Representatives shall have received from Crummy, Del Deo, Dolan,
Griffinger & Veccione, counsel for the Company, opinions, dated each
of the Closing Dates, to the effect set forth in Exhibit I hereto.
(g) The Representatives shall have received from Dewey Ballantine, counsel
for the Underwriters, their opinions dated each of the Closing Dates
with respect to the validity of the Common Stock, the Registration
Statement and the Prospectus and such other related matters as it may
reasonably request, and the Company shall have furnished to such
counsel such documents as they may request for the purpose of enabling
them to pass upon such matters.
(h) The Representatives shall have received a certificate, dated each of
the Closing Dates, of the chief executive officer or the President and
the chief financial or accounting officer of the Company to the effect
that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued, and, to the
best of the knowledge of the signers, no proceedings
for that purpose have been instituted or are pending or
contemplated under the Securities Act;
(ii) Neither any Preeffective Prospectus, as of its date,
nor the Registration Statement nor the Prospectus, nor
any amendment or supplement thereto, as of the time
when the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such
certificate, included any untrue statement of a
material fact or omitted to state any material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading;
(iii) Subsequent to the respective dates as of which
information is given in the Registration Statement
and
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the Prospectus, and except as set forth or
contemplated in the Prospectus, the Company has
not incurred any material liabilities or
obligations, direct or contingent, nor entered
into any material transactions not in the ordinary
course of business and there has not been any
material adverse change in the condition
(financial or otherwise), properties, business,
management, prospects, net worth or results of
operations of the Company, or any change in the
capital stock, short-term or long-term debt of the
Company;
(iv) The representations and warranties of the Company
in this Agreement are true and correct at and as
of each of the Closing Dates, and the Company has
complied with all the agreements and performed or
satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing
Dates; and
(v) Since the respective dates as of which information
is given in the Registration Statement and the
Prospectus, and except as disclosed in or
contemplated by the Prospectus, (i) there has not
been any material adverse change or a development
involving a material adverse change in the
condition (financial or otherwise), properties,
business, management, prospects, net worth or
results of operations of the Company; (ii) the
business and operations conducted by the Company
have not sustained a loss by strike, fire, flood,
accident or other calamity (whether or not
insured) of such a character as to interfere
materially with the conduct of the business and
operations of the Company; (iii) no legal or
governmental action, suit or proceeding is pending
or threatened against the Company which is
material to the Company, whether or not arising
from transactions in the ordinary course of
business, or which may materially and adversely
affect the transactions contemplated by this
Agreement; (iv) since such dates and except as so
disclosed, the Company has not incurred any
material liability or obligation, direct,
contingent or indirect, made any change in its
capital stock (except pursuant to its stock
plans), made any material change in its short-term
or funded debt or repurchased or otherwise
acquired any of the Company's capital stock; and
(v) the Company has not declared or paid any
dividend, or made any other distribution, upon its
outstanding capital stock payable to stockholders
of record on a date prior to the Closing Date.
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(i) The Company shall have furnished to the Representatives such
additional certificates as the Representatives may have
reasonably requested as to the accuracy, at and as of each of the
Closing Dates, of the representations and warranties made herein
by it and as to compliance at and as of each of the Closing Dates
by it with its covenants and agreements herein contained and
other provisions hereof to be satisfied at or prior to each of
the Closing Dates, and as to satisfaction of the other conditions
to the obligations of the Underwriters hereunder.
(j) Cowen shall have received the written agreements, substantially
in the form of Exhibit II hereto, of the officers, directors and
holders of Common Stock listed in Schedule B that each will not
offer, sell, assign, transfer, encumber, contract to sell, grant
an option to purchase or otherwise dispose of, other than by
operation of law, gifts, pledges or dispositions by estate
representatives, any shares of Common Stock (including, without
limitation, Common Stock which may be deemed to be beneficially
owned by such officer, director or holder in accordance with the
Rules and Regulations) during the 180 days following the date of
the final Prospectus.
The Nasdaq National Market shall have approved the Stock for listing,
subject only to official notice of issuance.
All opinions, certificates, letters and other documents will be in
compliance with the provisions hereunder only if they are satisfactory in
form and substance to the Representatives. The Company will furnish to the
Representatives conformed copies of such opinions, certificates, letters
and other documents as the Representatives shall reasonably request. If
any of the conditions hereinabove provided for in this Section shall not
have been satisfied when and as required by this Agreement, this Agreement
may be terminated by the Representatives by notifying the Company of such
termination in writing or by telegram at or prior to each of the Closing
Dates, but Cowen, on behalf of the Representatives, shall be entitled to
waive any of such conditions.
9. EFFECTIVE DATE. This Agreement shall become effective immediately as to
Sections 5, 6, 7, 9, 10, 11, 13, 14, 15, 16 and 17 and, as to all other
provisions, shall become effective at 11:00 a.m. New York City time on the
first full business day following the effectiveness of the Registration
Statement or at such earlier time after the Registration Statement becomes
effective as the Representatives may determine on and by notice to the
Company or by release of any of the Stock for sale to the public. For the
purposes of this Section 9, the Stock shall be deemed to have been so
released upon the release for publication of any newspaper advertisement
relating to the Stock or upon the release by you of telegrams (i) advising
Underwriters that the shares of Stock are released for public offering or
(ii) offering the Stock for sale to securities dealers, whichever may occur
first.
10. TERMINATION. This Agreement (except for the provisions of Section 5) may
be terminated by the Company at any time before it becomes effective in
accordance with Section 9 by notice to the Representatives and may be
terminated by the Representatives at any time before it becomes effective
in accordance with Section 9 by notice to the Company. In the event of any
termination of this Agreement under this or any other provision of this
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Agreement, there shall be no liability of any party to this Agreement to
any other party, other than as provided in Sections 5, 6 and 11 and other
than as provided in Section 12 as to the liability of defaulting
Underwriters.
This Agreement may be terminated after it becomes effective by the
Representatives by notice to the Company (i) if at or prior to the First
Closing Date trading in securities on any of the New York Stock Exchange,
American Stock Exchange or Nasdaq National Market System shall have been
suspended or minimum or maximum prices shall have been established on any
such exchange or market, or a banking moratorium shall have been declared
by New York or United States authorities; (ii) trading of any securities of
the Company shall have been suspended on any exchange or in any
over-the-counter market; (iii) if at or prior to the First Closing Date
there shall have been (A) an outbreak or escalation of hostilities between
the United States and any foreign power or of any other insurrection or
armed conflict involving the United States or (B) any change in financial
markets or any calamity or crisis which, in the judgment of the
Representatives, makes it impractical or inadvisable to offer or sell the
Stock on the terms contemplated by the Prospectus; (iv) if there shall have
been any development or prospective development involving particularly the
business or properties or securities of the Company or the transactions
contemplated by this Agreement, which, in the judgment of the
Representatives, makes it impracticable or inadvisable to offer or deliver
the Stock on the terms contemplated by the Prospectus; (v) if there shall
be any litigation or proceeding, pending or threatened, which, in the
judgment of the Representatives, makes it impracticable or inadvisable to
offer or deliver the Stock on the terms contemplated by the Prospectus; or
(vi) if there shall have occurred any of the events specified in the
immediately preceding clauses (i) through (v) together with any other such
event that makes it, in the judgment of the Representatives, impractical or
inadvisable to offer or deliver the Stock on the terms contemplated by the
Prospectus.
11. REIMBURSEMENT OF UNDERWRITERS. Notwithstanding any other provisions
hereof, if this Agreement shall not become effective by reason of any
election of the Company pursuant to the first paragraph of Section 10 or
shall be terminated by the Representatives under Section 8 or Section 10,
the Company will bear and pay the expenses specified in Section 5 hereof
and, in addition to its obligations pursuant to Section 6 hereof, the
Company will reimburse the reasonable out-of-pocket expenses of the several
Underwriters (including reasonable fees and disbursements of counsel for
the Underwriters) incurred in connection with this Agreement and the
proposed purchase of the Stock, and promptly upon demand the Company will
pay such amounts to you as Representatives.
12. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters shall
default in its or their obligations to purchase shares of Stock hereunder
and the aggregate number of shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed ten percent
(10%) of the total number of shares underwritten, the other Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters shall so default and the aggregate number of shares with
respect to which such default or defaults occur is more than ten percent
(10%) of the total number of shares underwritten and arrangements
satisfactory to the Representatives and the Company for the purchase of
such shares by
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<PAGE>
other persons or a reduction in the number of shares to be offered are not
made within forty-eight (48) hours after such default, this Agreement shall
terminate.
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the shares of Stock of a
defaulting Underwriter or Underwriters as provided in this Section 12,
(i) the Company shall have the right to postpone the Closing Dates for a
period of not more than five (5) full business days in order that the
Company may effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees promptly to file any amendments to the
Registration Statement or supplements to the Prospectus which may thereby
be made necessary, and (ii) the respective numbers of shares to be
purchased by the remaining Underwriters or substituted Underwriters shall
be taken as the basis of their underwriting obligation for all purposes of
this Agreement. Nothing herein contained shall relieve any defaulting
Underwriter of its liability to the Company or the other Underwriters for
damages occasioned by its default hereunder. Any termination of this
Agreement pursuant to this Section 12 shall be without liability on the
part of any non-defaulting Underwriter or the Company, except for expenses
to be paid or reimbursed pursuant to Section 5 and except for the
provisions of Section 6.
13. NOTICES. All communications hereunder shall be in writing and, if sent to
the Underwriters shall be mailed, delivered or telegraphed and confirmed to
you, as their Representatives c/o Cowen & Company at Financial Square, New
York, New York 10005 except that notices given to an Underwriter pursuant
to Section 6 hereof shall be sent to such Underwriter at the address
furnished by the Representatives or, if sent to the Company, shall be
mailed, delivered or telegraphed and confirmed c/o Mr. Donald A. Carlberg,
President and Chief Executive Officer, Patient Infosystems, Inc., 46 Prince
Street, Rochester, New York 14607.
14. SUCCESSORS. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters, the Company and their respective successors
and legal representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than
the persons mentioned in the preceding sentence any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person; except that
the representations, warranties, covenants, agreements and indemnities of
the Company contained in this Agreement shall also be for the benefit of
the person or persons, if any, who control any Underwriter or Underwriters
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, and the indemnities of the several Underwriters shall also be
for the benefit of each director of the Company, each of its officers who
has signed the Registration Statement and the person or persons, if any,
who control the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act.
15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
24
<PAGE>
16. AUTHORITY OF THE REPRESENTATIVES. In connection with this Agreement, you
will act for and on behalf of the several Underwriters, and any action
taken under this Agreement by Cowen, as Representative, will be binding on
all the Underwriters.
17. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any
section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other section, paragraph or provision
hereof. If any section, paragraph or provision of this Agreement is for
any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are
necessary to make it valid and enforceable.
18. GENERAL. This Agreement constitutes the entire agreement of the parties to
this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect
the construction or interpretation of this Agreement. This Agreement may
be amended or modified, and the observance of any term of this Agreement
may be waived, only by a writing signed by the Company and the
Representatives.
19. COUNTERPARTS. This Agreement may be signed in two (2) or more
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
25
<PAGE>
If the foregoing correctly sets forth our understanding, please indicate your
acceptance thereof in the space provided below for that purpose, whereupon this
letter and your acceptance shall constitute a binding agreement between us.
Very truly yours,
PATIENT INFOSYSTEMS, INC.
By:
--------------------------------
President
Accepted and delivered in
New York, New York, as of
the date first above written.
COWEN & COMPANY
VECTOR SECURITIES INTERNATIONAL,
INC.
Acting on their own behalf and as
Representatives of the several Underwriters
referred to in the foregoing Agreement.
By: COWEN & COMPANY
By: Cowen Incorporated, its general partner
By:
-----------------------------------
John P. Dunphy
Managing Director - Syndicate
26
<PAGE>
SCHEDULE A
Number of Number of
Firm Shares Optional
to be Shares to be
Purchased Purchased
Name ----------- -------------
Cowen & Company . . . . . . . . . . . . . . .
Vector Securities International, Inc. . . . .
----------- ----------
Total 2,000,000 300,000
----------- ----------
----------- ----------
A-1
<PAGE>
[Form of Opinion of Issuer's Counsel] Exhibit I
[Date]
Cowen & Company
Vector Securities International, Inc.
As representatives of the several
Underwriters named in Schedule A
c/o Cowen & Company
Financial Square
New York, New York 10005
Re: Patient Infosystems, Inc.
2,000,000 Shares of Common Stock
Dear Sirs:
We have acted as counsel for Patient Infosystems, Inc., a Delaware
corporation (the "Company"), in connection with the sale by the Company and
purchase of 2,000,000 shares of Common Stock, par value .01 per share, of the
Company (the "Shares") by the several Underwriters listed in Schedule A to the
Underwriting Agreement, dated among the Company, Cowen & Company and Vector
Securities International, Inc., as representatives of the several Underwriters
named therein (the "Underwriting Agreement"). This opinion is being furnished
pursuant to Section 8(f) of the Underwriting Agreement. All defined terms not
defined herein shall have the meanings ascribed to them in the Underwriting
Agreement.
We are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification, and has all
corporate power and authority necessary to own or hold its properties and
conduct the business in which it is engaged;
2. The Company has an authorized capitalization a set forth in the Prospectus,
and all of the issued shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and nonassessable and all of the
Shares to be issued and sold by the Company to the Underwriters pursuant to the
Underwriting Agreement have been duly and validly authorized and, when issued
and delivered against payment therefor as provided for in the Underwriting
Agreement, shall be duly and validly issued, fully paid and non-assessable.
3. There are no preemptive or other rights to subscribe for or to purchase, nor
any restriction upon the voting or transfer of, any of the Shares pursuant to
the Company's Certificate of
<PAGE>
Incorporation, By-Laws, or any contract or agreement which is made an exhibit to
the Registration Statement, or to our knowledge any other contract, agreement or
other instrument;
4. To our knowledge, there are no legal or governmental proceedings pending to
which the Company is a party or of which any property or assets of the Company
is the subject which, if determined adversely to the Company, could have a
material adverse effect on the Company; and, to the best of our knowledge, no
such proceedings are threatened or contemplated by governmental authorities or
other third parties;
5. To our knowledge, the Company owns or possesses all patents, trademarks,
trademark registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in the
Prospectus as being owned by it or necessary for the conduct of its business,
and we are not aware of any claim to the contrary or any challenge by any other
person to the rights of the Company with respect to the foregoing. To our
knowledge, the Company's business as now conducted and as proposed to be
conducted does not and will not infringe or conflict with any patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses or
other intellectual property or franchise right of any person;
6. Any real property and buildings held under lease by the Company or proposed
to be held after giving effect to the transactions described in the Prospectus
are, or will be as of the Closing Dates, to the best of our knowledge, held by
them under valid, subsisting and enforceable leases with such exceptions as
would not have a material adverse effect on the Company considered as a whole;
7. The Company has full corporate power and authority to enter into the
Underwriting Agreement and to perform its obligations thereunder (including to
issue, sell and deliver the Shares), and the Underwriting Agreement has been
duly and validly authorized, executed and delivered by the Company and is a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that rights to indemnification
and contribution thereunder may be limited by federal or state securities laws
or the public policy underlying such laws;
8. The execution, delivery and performance of the Underwriting Agreement and
the consummation of the transactions therein contemplated will not result in a
breach or violation of any of the terms or provisions of, result in the creation
of a lien under, or constitute a default under, any indenture, mortgage, deed of
trust, note agreement or other agreement or instrument to which the Company is a
party or by which it or any of its properties is or may be bound which is made
an exhibit to the Registration Statement, the Certificate of Incorporation,
By-laws or other organizational documents of the Company or any law, order, rule
or regulation of any court or governmental agency or body having jurisdiction
over the Company or any of its properties or, to our knowledge any other
contract, agreement or other instrument;
9. No consent, approval, authorization or order of any court or governmental
agency or body is required for the consummation by the Company of the
transactions contemplated by the Underwriting Agreement, except such as have
been obtained under the Securities Act and the Exchange Act and except such as
may be required by the NASD or under the Securities Act or the securities or
"Blue Sky" laws of any jurisdiction in connection with the purchase and
distribution of the Shares by the Underwriters;
<PAGE>
10. To the best of our knowledge, the Company is in compliance with, and
conduct their businesses in conformity with, all applicable federal, state,
local and foreign laws, rules and regulations, including, but not limited to,
those of any governmental agency, court or tribunal and to the best of our
knowledge, no prospective change in any of such federal, state, local or foreign
laws, rules or regulations has been adopted which, when made effective, would
have a material adverse effect on the operations of the Company.
11. The Registration Statement was declared effective under the Securities Act
as of December , 1996, the Prospectus was filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations on December , 1996 and we have no
knowledge that any stop order suspending the effectiveness of the Registration
Statement has been issued and we have no knowledge that any proceeding for that
purpose is pending or, to the best of our knowledge, threatened by the
Commission;
12. The Registration Statement and the Prospectus and any amendments or
supplements thereto comply as to form in all respects with the requirements of
the Securities Act and the Rules and Regulations;
13. To the best of our knowledge, there are no contracts or other documents
which are required by the Securities Act or by the Rules and Regulations to be
described in the Prospectus or filed as exhibits to the Registration Statement
which have not been described in the Prospectus or filed as exhibits to the
Registration Statement;
14. To the best of our knowledge, other than as described in the Prospectus,
there are no contracts, agreements or understandings between the Company and any
person granting such person the right (other than rights which have been waived
or satisfied) to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company under the Securities Act;
15. The descriptions in the Registration Statement and Prospectus of statutes,
rules, regulations, legal or governmental proceedings, contracts, agreements and
other documents are accurate and such descriptions fairly present the
information required to be disclosed; and to the best of our knowledge, there
are no legal or governmental proceedings, statutes, ruler or regulations, or any
contracts or documents of a character required to be described in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement which are not described and filed as required;
16. The Company is not, nor will it be immediately after receiving the proceeds
from the sale of the Shares, an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the Investment Company
Act of 1940, as amended.
17. The form of certificate for the Shares conforms to the requirements of the
Delaware General Corporation Law;
<PAGE>
The foregoing opinion is limited to matters governed by the Federal laws of the
United States of America, the general corporate law of the State of Delaware and
the laws of the State of New York.
We have acted as counsel to the Company on a regular basis and have acted as
counsel to the Company in connection with the preparation and filing of the
Registration Statement and the Prospectus, and based on the foregoing, no facts
have come to our attention which lead us to believe that the Registration
Statement or any amendment thereto, as of the Effective Date, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading, or that the Prospectus contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
Very truly yours,
<PAGE>
[Form of Lock-Up Agreement] Exhibit II
[Date]
Cowen & Company
Vector Securities International, Inc.
AS REPRESENTATIVES OF THE SEVERAL
UNDERWRITERS
c/o Cowen & Company
Financial Square
New York, New York 10005
Re: Patient Infosystems, Inc.
2,000,000 Shares of Common Stock
Dear Sirs:
In order to induce Cowen & Company ("Cowen") and Vector Securities
International, Inc. ("Vector" and, together with Cowen, the "Representatives"),
to enter in to a certain underwriting agreement with Patient Infosystems, Inc.,
a Delaware corporation (the "Company"), with respect to the public offering of
shares of the Company's Common Stock, par value $.01 per share ("Common Stock"),
the undersigned hereby agrees that for a period of 180 days following the date
of the final prospectus filed by the Company with the Securities and Exchange
Commission in connection with such public offering, the undersigned will not,
without the prior written consent of Cowen, directly or indirectly, offer, sell,
assign, transfer, encumber, pledge, contract to sell, grant an option to
purchase or otherwise dispose of, other than by operation of law, any shares of
Common Stock (including, without limitation, Common Stock which may be deemed to
be beneficially owned by the undersigned in accordance with the rules and
regulations promulgated under the Securities Act of 1933, as the same may be
amended or supplemented from time to time (such shares, the "Beneficially Owned
Shares")).
Anything contained herein to the contrary notwithstanding, any person to whom
shares of Common Stock or Beneficially Owned Shares are transferred from the
undersigned shall be bound by the terms of this Agreement.
In addition, the undersigned hereby waives, from the date hereof until the
expiration of the one-year period following the date of the Company's final
Prospectus, any and all rights, if any, to request or demand registration
pursuant to the Securities Act of any shares of Common Stock that are registered
in the name of the undersigned or that are Beneficially Owned Shares.
<PAGE>
In order to enable the aforesaid covenants to be enforced, the undersigned
hereby consents to the placing of legends and/or stop-transfer orders with the
transfer agent of the Common Stock with respect to any shares of Common Stock or
Beneficially Owned Shares.
[Signatory]
By:
------------------------------
Name:
Title:
<PAGE>
<TABLE>
<S> <C>
SHARES
PATIENT INFOSYSTEMS, INC.
NUMBER
SEE REVERSE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS CUSIP 702915 10 9
OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01 EACH OF THE COMMON STOCK OF
PATIENT INFOSYSTEMS, INC. transferable on the books of the Corporation by the holder hereof
in person or by duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
WITNESS the seal of the Corporation and the signatures of its duly authorized officers.
Dated:
[PATIENT INFOSYSTEMS, INC. 1995 DELAWARE CORPORATE SEAL]
SECRETARY PRESIDENT
Countersigned and Registered:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(Jersey City, NJ) Transfer Agent
and Registrar
Authorized Officer
</TABLE>
<PAGE>
The Company will furnish to any shareholder upon request and without
charge a full statement of the designation, relative rights, preferences and
limitations of the shares of each class authorized to be issued and the
designation, relative rights, preferences and limitations of each series of
preferred shares which the Company is authorized to issue so far as the same
have been fixed, and the authority of the Board of Directors of the Company
to designate and fix the relative rights, preferences and limitations of
other series.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT-.......Custodian........
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act .............
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above
list.
For value received __________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
[ ]
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF
ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
shares
- -------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ___________________________________ Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated _________________
-----------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
<PAGE>
SERVICES AGREEMENT
This Agreement is effective this 18th day of September, 1995, (the "Effective
Date") between -Disease State Management, Inc., 46 Prince Street, Rochester, New
York 14607 ("Vendor") and Bristol-Myers Squibb U.S. Pharmaceuticals, a division
of Bristol-Myers Squibb Company, P.O. Box 4500, Princeton, New Jersey 08543-4500
(hereinafter called "BMSUSP"). Vendor agrees to provide services to BMSUSP
under the terms set forth below.
A. SERVICES
Vendor will provide the product(s) or service(s) set forth, and to the
specifications set forth in the proposal incorporated herein as
Attachment A.
The product and all elements as set forth on Attachment A are subject
to prior approval by BMSUSP, such approval not to be unreasonably
withheld.
B. COMPENSATION
BMSUSP will pay Vendor according to the terms or payment schedule set
forth in Attachment A hereto.
In the event that BMSUSP shall request any changes in the concept,
specifications or scope of the product(s) or service(s) described on
Attachment A hereto, Vendor will notify BMSUSP of the cost of such
revisions and will not proceed without prior written approval.
If the compensation provision on Attachment A hereto is other than a
flat fee amount per element or for the entire project, Vendor will
provide such documentation in support of all billings as BMSUSP may
reasonably require.
C. CONFIDENTIALITY
Vendor shall treat as confidential and secret any and all BMSUSP
Confidential Information. "BMSUSP Confidential Information" shall
include, but not be limited to, information relating to BMSUSP's past,
present and future marketing and research and development activities
that may be disclosed to Vendor by BMSUSP and/or BMSUSPs parent,
subsidiary or affiliate companies and which are identified in writing
by BMSUSP as confidential. BMSUSP Confidential information shall not
include (i) information known by Vendor prior to disclosure
<PAGE>
from BMSUSP. (ii) information which is or becomes publicly known
through no wrongful act of Vendor, (iii) information that is
independently developed by Vendor, without use of information that
otherwise constitutes BMSUSP Confidential Information, or (iv)
information disclosed pursuant to law, rule, regulation or pursuant to
a court order, provided that BMSUSP is given 10 days prior notice of
such disclosure. Vendor expressly agrees that any information it
discovers or develops under this Agreement for the benefit of BMSUSP
shall not be used by Vendor or disclosed by Vendor to any third
party, nor shall Vendor show this Agreement or disclose the existence,
nature or subject matter of this Agreement to any third. party without
the prior written consent of BMSUSP. Vendors obligations not to
disclose BMSUSP Confidential Information to third parties and not to
otherwise use BMSUSP Confidential Information shall survive the
termination of this Agreement for a period of five years. Vendor
shall not duplicate any material containing BMSUSP Confidential
Information, except in the direct performance of its services under
this Agreement. Vendor shall return all copies of materials
containing BMSUSP Confidential Information upon Vendor's completion of
services under this Agreement or upon any earlier termination of this
Agreement for any reason whatsoever.
BMSUSP shall treat as confidential and secret any and all Vendor
Confidential Information. "Vendor Confidential Information" shall
include, but not be limited to, information relating to Vendor's past,
present and future systems development activities that may be
disclosed to BMSUSP and/or BMSUSP's parent, subsidiary or affiliate
companies and which are identified in writing by Vendor as
confidential, except that in no event shall Vendor Confidential
Information include information relating to Vendor deliverables under
this agreement. Vendor Confidential information shall not include (i)
information known by BMSUSP prior to disclosure from Vendor, (ii)
information which is or becomes publicly known through no wrongful act
of BMSUSP, (iii) information that is independently developed by
BMSUSP, without use of information that otherwise constitutes Vendor
Confidential Information, or (iv) information disclosed pursuant to
law, rule, regulation or pursuant to a court order, provided that
Vendor is given 10 days prior notice of such disclosure. BMSUSP
expressly agrees that any Confidential Information it discovers under
this Agreement shall not be disclosed by BMSUSP to any third party
without the prior written consent of Vendor. BMSUSP's obligations not
to disclose Vendor Confidential Information shall survive the
termination of this Agreement for a period of five years.
D. INDEMNIFICATION
Each party shall indemnify and hold the other party harmless from and
against all liability, damages, penalties, losses, costs or expenses,
including attorneys' fees,
2
<PAGE>
arising from or in any way related to its willful or negligent actions
or omissions in performing the responsibilities as described in this
Agreement, or for any willful or negligent breach of this Agreement.
E. PROFESSIONAL STANDARDS
Vendor represents that it has facilities, personnel, experience and
expertise sufficient in quality and quantity to perform all such
assignments and projects given it by BMSUSP hereunder and agrees that
it will perform all such assignments and projects in a manner
commensurate with professional standards generally applicable to its
industry.
F. OWNERSHIP OF MATERIALS
Any and all reports, information, data or other works created by
Vendor for BMSUSP in connection with this Agreement (with the
exception of customization of the Vendor's basic software and systems
for BMSUSP) shall be the sole and exclusive property of BMSUSP.
BMSUSP may use such work wherever and whenever it chooses. This
Agreement shall be deemed a transfer of copyright and any
copyrightable subject matter created by Vendor in such works. Vendor
shall execute any and all documents necessary to demonstrate or
perfect such transfer. Vendor shall not at any time, in any manner,
during or after this Agreement, under any circumstances, be entitled
to or claim any right, title or interest herein or any commission, fee
or other direct or indirect benefit from BMSUSP or BMSUSP's parent,
subsidiary or affiliate companies, in respect of such reports, data,
information or other works created by Vendor hereunder. Vendor agrees
to execute or cause its agents and/or employees to execute any
documents necessary or desirable to secure or perfect BMSUSP's legal
rights and worldwide ownership in such works, including, but not
limited to, documents relating to patent, trademark and copyright
applications.
Nothing in the preceding paragraph shall preclude Vendor from
referring to the general results of the project performed pursuant to
this Agreement in making marketing presentations to other potential
customers. In addition, BMSUSP agrees to provide Vendor with
reasonable access to data generated by the project performed pursuant
to this Agreement for the sole purpose of supplementing or supporting
marketing presentations to other potential customers, provided,
however, that all such supplemental or supporting presentations,
insofar as they disclose data from the project, must be pre-approved
by BMSUSP.
3
<PAGE>
G. RELEASES
Any materials furnished hereunder which have not been created for
BMSUSP and are subject to the rights of third parties shall be
specifically identified to BMSUSP in writing. Vendor shall obtain
(and deliver upon request to BMSUSP) releases for all names,
photographs, illustrations, testimonials, and any and all other
materials used in works which Vendor prepares or uses. All such
releases shall run to BMSUSP, its agents and employees where
appropriate and customary. Vendor's failure to obtain such releases
or the obtaining of such releases by Vendor shall in no way relieve
Vendor of its obligations in Paragraph F above except where the
releases have been obtained directly by BMSUSP. Except for works that
have been secured by permission, Vendor warrants and covenants that
all works provided by Vendor shall be original and shall not infringe
any copyright or violate any rights of any persons or entities
whatsoever.
H. DURATION OF AGREEMENT
1. Term
This Agreement is effective as of the Effective Date and shall
continue in full force and effect until the earlier of (i) completion
of the project assigned hereunder, (ii) terminated by at least thirty
(30) days written notice by either party to the other, sent by
registered mail to the address for each party first set forth above,
or to such other address which a party may designate for its receipt
of notices hereunder.
2. Payment on Termination
Upon termination of this Agreement BMSUSP is to pay for all authorized
work in process, and BMSUSP shall assume Vendor's liability under and
indemnify Vendor with respect to all outstanding contracts made on
BMSUSP's behalf. Upon written notice of termination Vendor shall
take all steps necessary to wind up the work under this Agreement and
to mitigate BMSUSP's liability therefore.
3. Transfer Upon Termination
Vendor shall transfer, assign and make available to BMSUSP or BMSUSP's
representative all property and materials in Vendor's possession or
control belonging to and paid for by BMSUSP, and all information
regarding BMSUSP's project(s) covered by this Agreement, as set forth
in Paragraph C herein. Vendor also agrees to give all reasonable
cooperation toward transferring with approval of third parties
4
<PAGE>
in interest all contracts and arrangements, if any, properly entered
into by Vendor in the performance of this Agreement, and all rights
and claims thereto and therein, upon being duly released from the
obligation thereof.
I. INDEPENDENT CONTRACTORS
The parties to this Agreement are independent contractors and nothing
contained in this Agreement shall be construed to place the parties in
the relationship of employer and employee, partners, principal and
agent, or joint ventures. Neither party shall have the power to bind
or obligate the other party nor shall either party hold itself out as
having such authority.
J. THIRD PARTY OBLIGATIONS
In connection with this Agreement, Vendor shall make no commitments or
disbursements, incur no obligations nor place any advertising, public
relations or promotional material for BMSUSP's parent, subsidiary or
affiliate companies, nor disseminate any material of any kind using
the name of BMSUSP and/or BMSUSP's parent, subsidiary or affiliate
companies or using their trademarks, without the prior written
approval of BMSUSP.
K. GOVERNING LAW
This Agreement is entered into in the State of New Jersey and shall be
constructed and governed under and in accordance with the laws of that
State.
L. MISCELLANEOUS
(1) The terms of this Agreement shall be binding upon BMSUSP and
Vendor and their respective successors and permitted assigns.
Notwithstanding the foregoing, this Agreement is not assignable in
whole or in part by Vendor without the prior written consent of
BMSUSP. Factoring of accounts receivable is not permitted.
(2) The failure of either party to take action as a result of a
breach of this Agreement by the other party shall constitute neither a
waiver of the particular breach involved nor a waiver of either
party's right to enforce any or all provisions of this Agreement
through any remedy granted by law or this Agreement.
(3) BMSUSP is an Equal Opportunity Employer and does not discriminate
against any person because of race, color, creed, age, sex, or
national
5
<PAGE>
origin. Vendor represents that it has the same policy of Equal
Opportunity Employment.
(4) The policy of BMSUSP is to protect the health, safety and quality
of life of its employees and the public, and to exercise responsible
stewardship of natural resources that may be impacted by its
activities. To realize this, BMSUSP is committed to maintaining
programs and procedures for the environmentally responsible management
of facilities, materials, production processes, products and
packaging, transportation and distribution, waste and ft minimization,
energy, general business operations and contracted goods and services.
Vendor agrees with this policy and further acknowledges that its
performance under this Agreement shall be in strict compliance with
all applicable governmental laws and regulations and in accordance
with and in furtherance of this policy.
(5) This Agreement contains the entire understanding of the parties
with respect to the subject matter contained herein, supersedes any
prior written or oral communications and may be modified in writing
subject to mutual agreement of the parties hereto.
(6) The headings of each paragraph are for reference only and shall
not be construed as part of this Agreement.
6
<PAGE>
(7) Except for the obligation to pay money property due and owing,
either party shall be excused from any delay or failure in performance
hereunder caused by reason of any occurrence or contingency beyond its
reasonable control, including. but not limited to, failure of
performance by the other party, earthquake, labor disputes, riots,
governmental requirements, inability to secure materials on a timely
basis, failure of computer equipment, failures or delays of sources
from which information or data is obtained and transportation
difficulties.
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer, have
entered in to this Agreement this 18th day of September, 1995
Bristol-Myers Squibb DSMI Corp.
U.S. Pharmaceuticals 46 Prince Street
a division of Bristol-Myers Rochester, New York 14607
Squibb Company
/s/ Ray Joske
By: /s/ Rose Crane By: /s/ Donald A. Carlberg
----------------------------- ------------------------
Title: HEALTHCARE MANAGEMENT Title: President & CEO
7
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
DSMI PROPOSAL TO BRISTOL-MYERS SQUIBB COMPANY
CARDIOVASCULAR DISEASE PROGRAM
SEPTEMBER 18, 1995
PROGRAM OBJECTIVES AND BENEFITS
The objective of this patient focused cardiovascular disease program is to
enhance patient knowledge concerning their medical condition and to improve
treatment adherence. The target population is patients who have recently
experienced any of the following health events: moderate to severe angina,
cardiac bypass surgery, myocardial infarction, or PTCA. This personalized,
interactive program links patients, health care providers, and sponsoring
organizations.
The benefits of this programs are multi-level:
FOR PATIENTS:
- Improved access to health care resources beyond existing hospital care
and office and in-home provider visits.
- Improved communication with health care providers.
- Enhanced self-care skills and knowledge in the area of cardiovascular
disease.
- Increased treatment adherence, motivation, and confidence in disease
self-management.
FOR HEALTH CARE PROVIDERS:
- More comprehensive information on patient progress.
- Quicker identification of hard-to-manage patients.
- Enhanced ability to make timely treatment modifications.
- Better targeting of health care resources appropriate to patient
needs.
- Increased patient knowledge, compliance, and satisfaction.
- Minimal or no additional demands on providers' time.
FOR INSURERS AND PROGRAM SPONSORS:
- Cost-effective management of secondary cardiovascular risk via a
program which facilitates appropriate use of health care resources.
- Expanded outcomes assessment capabilities.
- Enhanced patient and provider satisfaction.
- Improved market positioning of health care services.
- Enhanced market understanding.
- Expanded business and services development opportunities (e.g.,
sublicensing of program).
<PAGE>
PROGRAM SCHEDULE*
The program outlined below will be created in English. See the "Program
Intervention Description" section for details about each of the interventions.
This protocol would be delivered to patients during their first year of
involvement in the program.
Month 1 Month 3
------- -------
- Business Reply Card (BRC) + - Follow-up call #3
program description - Personalized patient update #3 +
- Enrollment call to patient - pre-printed education materials
- Personalized patient report + - Personalized physician update #3
- pre-printed education materials
- Personalized physician summary
report Month 5
-------
- Follow-up call #1 - Follow-up call #4
- Personalized patient update #1 + - Personalized patient update #4 +
- pre-printed education materials - pre-printed education materials
- Personalized physician update #1 - Personalized physician update #4
Month 2 Month 8
------- -------
- Follow-up call #2 - Follow-up call #5
- Personalized patient update #2 + - Personalized patient update #5 +
- pre-printed education materials - pre-printed education materials
- Personalized physician update #2 - Personalized physician update #5
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<PAGE>
PROGRAM INTERVENTION DESCRIPTION
See the "Program Schedule" section for an outline of the protocol for
delivering these program components.
BUSINESS REPLY CARD (BRC)*/PROGRAM DESCRIPTION*
- Pre-printed card designed for distribution by providers to patients
and return via postage paid mail response by patient to DSMi.
- Brief assessment of identifying patient data (e.g., name, phone
number, best time to contact) necessary for DSMi to initiate
enrollment call to patient.
- Program description attachment for patient to tear off and keep for
future reference.
ENROLLMENT TELEPHONE CALL*
- Ten minute telephone call to enroll patients in the program as per
receipt of Business Reply Card.
- Call placed by operator according to patient's preferred contact times
as per Business Reply Card.
- Cost-efficient interface: operator-initiated contact to identify
patient and transfer to automated, voice response system.
- Option to reconnect with operator during or after voice response
interaction.
- High appeal voice response system using a recorded human voice versus
computer synthesized speech.
- Patient responds in normal speaking voice versus pushing touch tone
buttons.
- Self-report assessment of relevant medical and behavioral factors:
disease status, prescribed treatment, patient motivation, treatment
barriers, patient knowledge indicators.
- Patient receives personalized questions and clinically appropriate
feedback driven by expert system to promote patients' awareness of
their condition and adherence to their treatment regimen.
- Creates foundation for expanding patient data file which drives the
personalized, interactive program services.
PATIENT REPORT* + PRE-PRINTED EDUCATION MATERIALS*
- One to four page, laser printed, on-demand published report and
program description including text that is personalized based upon
enrollment questionnaire responses and graphics that are personalized
to patient's gender.
- Relevant pre-printed patient education materials (up to a maximum
total mailing weight of 3.0 ounces).
- Mailed to patient within a week after completion of enrollment
telephone call.
- Personalized and pre-printed materials reinforce patient awareness and
knowledge regarding their condition and promote treatment adherence.
- Referral information fosters appropriate use of health care resources
by patient.
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<PAGE>
PHYSICIAN SUMMARY REPORT
- One page, laser printed, on-demand published report summarizing a
patient's enrollment survey data.
- Mailed to patient's physician within a week after enrollment telephone
call.
- "At-a-glance" format provides efficient documentation of critical
patient data, ready for insertion into the medical record.
- Facilitates identification of patient education needs and
hard-to-manage patients, appropriate allocation of health care
resources, and timely modification of treatment regimens.
- Enhances patient-provider communication.
FOLLOW-UP CALLS*
- Five minute telephone calls placed by operator to patients according
to patient's preferred contact times and the program intervention
schedule.
- Cost-efficient interface: operator-initiated contact to identify
patient and transfer to automated, voice response system.
- Option to reconnect with operator during or after voice response
interaction.
- High appeal voice response system using a recorded human voice versus
computer synthesized speech.
- Patient responds in normal speaking voice versus pushing touch tone
buttons.
- Self-report follow-up assessment of relevant medical and behavioral
factors: update on disease status, prescribed treatment, patient
motivation, treatment barriers, patient knowledge indicators.
- Patient receives personalized questions and clinically appropriate
feedback driven by expert system to promote patients' awareness of
their condition and adherence to their treatment regimen.
- Allows identification of patient concerns and appropriate referral.
- Adds vital progress information to the longitudinal patient database.
PATIENT UPDATES* + PRE-PRINTED EDUCATION MATERIALS*
- One to four page, laser printed, on-demand published report including
text that is personalized based upon enrollment questionnaire
responses, and graphics that are personalized to patient's gender.
- Relevant pre-printed patient education materials (up to a maximum
total mailing weight of 3.0 ounces).
- Mailed to patient within a week after each follow-up call.
- Personalized and pre-printed materials reinforce patient awareness and
knowledge regarding their condition and promote treatment adherence.
- Referral information fosters appropriate use of health care resources
by patient.
4
<PAGE>
PHYSICIAN UPDATES
- One page, laser printed, on-demand published report integrating
patient's follow-up and enrollment data.
- Mailed to patient's physician within a week after each patient
follow-up call.
- "At-a-glance" format provides efficient documentation of critical
patient data, ready for insertion into the medical record.
- Facilitates identification of patient education needs and
hard-to-manage patients, appropriate allocation of health care
resources, and timely modification of treatment regimens.
- Enhances patient-provider communication.
ORGANIZATIONAL DATA REPORTS
- Data reports, aggregate information, to payor and participating
organizations, provided quarterly. Configuration of reports to be
determined.
- To insure confidentiality and security of program database, reports to
Bristol-Myers Squibb on program data to include aggregate patient
information only, as per format requested by Bristol-Myers Squibb.
- Reports to payors (e.g., managed care organizations) on program data
to include individual patient information, as per format requested by
the payor.
- Individual data report on each patient provided at end of program.
Configuration of report to be determined.
5
<PAGE>
PROGRAM DEVELOPMENT
Program development will proceed in two stages. During the first stage, within
30 days of finalizing an agreement with Bristol-Myers Squibb, DSMi will deliver
preliminary program components to be used by Bristol-Myers Squibb to market the
program to payors. These components will include twenty four (24) copies of
each of the following prototypes: sample marketing brochure/sales aid, sample
business reply card/program description, voice response call-in telephone
demonstration, sample personalized patient report, and sample personalized
physician report.
The second stage of program development will require an additional 120 days to
deliver a fully operating program, including the following components:
- - Business reply card/program description (design/layout, print
specifications and artwork in a form specified by BMS).
- - Personalized patient report and 5 patient updates.
- - Personalized physician report and 5 physician updates.
- - Enrollment call and 5 follow-up calls.
- - Marketing brochure/sales aid.
The entire program development includes the following tasks:
PHASE I:
- - Consultation with Bristol-Myers Squibb Company to finalize program
specifications.
- - Adaptation of clinical content/malarials to conform to delivery mechanisms
used in the program, including interactive voice response and on demand
publishing.
- - Integration of market research/client/clinical information to finalize
program content.
PHASE II:
- - Design of graphic presentation for pre-print and on-demand published
materials.
- - Coordination of personalized clinical copy with personalized graphics.
- - Design of systems configuration.
- - Systems programming for internal reporting for on-demand publishing,
interactive voice response, and outcomes analyses.
- - Voice recording and training of the voice response system.
PHASE III:
- - Testing of the operable program including debugging of the expert system.
- - Proofreading/editing pre-printed and on-demand published materials.
PHASE IV: PILOT PROGRAM
DSMi shall conduct a pilot test, for a maximum of 100 participants,
recruited by BMS, to demonstrate the efficacy of the fulfillment process.
The test shall include the following interventions:
- - Mail BRCs to pilot program participants.
- - Process all BRCs returned to DSMi.
- - Conduct enrollment telephone call.
- - Mail personalized patient report plus pre-printed patient education
materials.
- - Mail personalized physician summary report.
- - Conduct follow-up telephone call at 3-weeks after enrollment.
- - Mail personalized patient update and pre-printed patient education
materials.
- - Mail personalized physician update.
The test shall be conducted in a period not to exceed 90 days, including
recruitment of participants.
6
<PAGE>
PROGRAM MARKETING AND TRAINING
DSMi will provide 4 full day training sessions to BMS staff or representatives
to assist in the marketing and training efforts for the program. BMS will have
access to additional services that may include any of the following:
- - Development of marketing and/or training strategies and procedures.
- - Coordination and/or presentations for meetings and seminars with
payors/sponsoring organizations.
- - Individual phone and/or in-person consultation with payors/sponsoring
organizations.
- - Written correspondence with payors/sponsoring organizations.
- - Preparation of written materials and/or phone demonstrations for the
payors/sponsoring organizations.
PROGRAM OPERATION
As DSMi's program development team nears completion of the program, a program
operation team will be assembled to participate in testing the system. This
facilitates a smooth transition period for the shift from the development to the
operations staff. DSMi will maintain responsibility for managing its in-house
staff and its subcontractors who are involved in ongoing operations of the
program interventions. Quality assurance measures are included in the
interactive program interventions and DSMi's internal reporting systems.
Algorithms within the expert systems directing the mail and phone interventions
allow for easy modification of program elements without interruption of service
delivery. The systems development staff are available as-needed to make any
necessary modifications. While DSMi's clinical department will remain
responsible for any outcomes analyses evaluating the clinical impact of the
program, DSMi's program operation team will monitor quality assurance indicators
(e.g., enrollment rate, participant satisfaction, follow-up completion rate) on
a continual basis to insure appropriate delivery of program services and
facilitate timely troubleshooting. DSMi will issue periodic reports as agreed
upon by DSMi and Bristol-Myers Squibb.
DATABASE DEVELOPMENT
The program database will be constructed and maintained using a standard
Relational Data Base Management System (RDBMS). The primary record index will
be based upon patient identification. All information collected at enrollment
and during all subsequent interventions will be stored in the database. The
record schema(s) will be developed according to the specific question sets and
data required by the proposed program. Data may be imported or exported
off-line using a variety of industry standard formats, or on-line using DSMi's
SQL Server interface. DSMi will use industry standard procedures for insuring
the confidentiality and security of the program database.
FACULTY
Brief biographies for DSMi's key staff are attached. In addition, DSMi utilizes
the expertise of several consultants from Harvard Medical School, including
Milton Weinstein, Ph.D., M.P.P., Edward Guadagnoli, Ph.D., Steve Samurai, Ph.D.,
and Paul Hauptman, M.D., in the areas of cost-effectiveness analysis, outcomes
analysis, development and implementation of clinical guidelines, medical
interventions, and health care provider education. Also, DSMi retains other
well-published consultants with clinical and research expertise specific to the
therapeutic areas in which a program is being developed. Curriculum vitae for
DSMi's consultants can be provided upon request.
7
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
FEES
PROGRAM DEVELOPMENT
The cost is $[****] to deliver the preliminary program components and the fully
operational program in English. Fee is payable according to the following
schedule:
- 25% upon contract signing.
- 25% upon delivery of preliminary materials.
- 25% upon delivery of fully operational program.
- 25% upon completion of the pilot program.
Printing fees for all pre-printed materials (e.g., patient education
materials, marketing/sales aids, BRC/program description) will be the
responsibility of Bristol-Myers Squibb. However, at Bristol-Myers Squibb's
request, and at no additional cost. DSMI will include a managed care
organization's logo or other identifying graphic element on the material.
DSMI will furnish estimates for printing costs upon determination of volumes
and final specifications.
BMS shall provide all clinical content for the program as described in Phase
I Program Development. BMS shall obtain and deliver to DSMI all pre-printed
patient education materials to be included in patient mailings. BMS shall be
responsible for printing costs of pre-printed materials (BRC/program
description and Marketing/Sales Aid). BMS shall recruit 100 persons to
participate in a pilot test.
PROGRAM OPERATION
The per patient program cost is [*****] for the eight-month protocol outlined
in this proposal.
EXCLUSIVITY
For a period beginning with the date this Agreement is signed and ending 12
months from the date DSMi completes Phase IV of the program (the "Exclusivity
Period"), DSMi agrees not to engage or participate in any other project
involving the development or implementation of an interactive program in the
prevention of cardiac sequelae resulting from acute myocardial infarction, PTCA,
cardiac bypass surgery, or moderate to severe angina. At the conclusion of the
Exclusivity Period, provided at least 3,000 patients have enrolled in the
program, Bristol-Myers Squibb shall have the right, but not the obligation, to
negotiate an exclusive arrangement for an interactive program in the
prevention of cardiac sequelae resulting from acute myocardial infarction, PTCA,
cardiac bypass surgery, or moderate to severe angina. In the event such
negotiations are unsuccessful, Bristol-Myers Squibb shall have the right to
match any bona fide offer made to DSMi for an interactive program in the
prevention of cardiac sequelae resulting from acute myocardial infarction, PTCA,
cardiac bypass surgery, or moderate to severe angina. This right of first
refusal shall endure for a period of nine months from the conclusion of the
Exclusivity Period.
CONSULTING
A per diem fee plus direct expenses is required for consultation services
performed by DSMi or its consultants. Such fees would be required for
activities performed for parties outside Bristol-Myers Squibb on behalf of the
program and/or activities beyond the program development/marketing and training
operations functions outlined in this proposal.
CUSTOMIZATION
Any customization other than incorporation of MCO logo or other identifying
graphic element will constitute a revision to the intervention protocol (i.e.,
additional patient and/or physician reports and/or variations in on-demand or
IVR content). DSMi shall furnish estimates for development and delivery to BMS
prior to undertaking any revisions.
8
<PAGE>
ATTACHMENTS
STAFF BIOGRAPHIES
9
<PAGE>
BIOGRAPHICAL INFORMATION FOR KEY DSMI STAFF MEMBERS
DERACE SCHAFFER, M.D.-CHAIRMAN OF THE BOARD
In addition to his position as Chairman of the Board at DSMi, Dr. Schaffer is
Chairman of NeuralTech, Inc., and Preferred Oncology Networks of America, Inc.
(PONA). He is a Director of OnGard Systems, Inc., and Medifax, Inc. He is also
a director of several not-for-profit healthcare corporations. He has extensive
operating experience as the Chairman and CEO of the Ide Radiology Group, which
provides medical imaging services to six hospitals and ten imaging centers in
New York State. Dr. Schaffer is a Board Certified Radiologist. He received his
postgraduate specialty training at the Massachusetts General Hospital and
Harvard Medical School.
DONALD A. CARLBERG-PRESIDENT AND CEO
Mr. Carlberg has been a senior executive with major companies in the
pharmaceutical, managed care and medical services industries. Those companies
include Ayerst-Wyeth, Blue Cross and Blue Shield and Baxter Healthcare,
International. He was the founder and President and CEO of Patient Management
Technologies, Inc. He received his B.S. from the State University of New York
and attended the William E. Simon Graduate School of Business Administration at
the University of Rochester. As the founder of DSMi, Mr. Carlberg recognized a
need to assist companies involved in providing patients with pharmaceuticals,
medical services and products and healthcare financing with alternative methods
for improving patient compliance with prescribed therapies and treatments. The
desired end result of this improved compliance is improved clinical outcomes.
BARBARA J. MCNEIL, M.D., PH.D.-BOARD MEMBER
Dr. McNeil is currently Ridley Watts Professor and Head of the Department of
Health Care Policy at Harvard Medical School. Dr. McNeil holds degrees from
Emmanuel College, Harvard Medical School and Harvard University. She is a
member of a number of organizations, including the Medical Advisory Panel,
Technology and Evaluation Program for the Blue Cross and Blue Shield
Association. Dr. McNeil is a nationally recognized expert in the field of
improving patient outcomes and has published widely on the subject.
GREGORY D. BROWN-SR. VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Mr. Brown has been Sr. Vice President, Chief Financial Officer, Secretary and
Treasurer of the Company since May 1995. From 1989 to 1995 Mr. Brown was Chief
Financial Officer of Pappajohn Capital Resources. a venture capital firm
specializing in healthcare investments, and Equity Dynamics, Inc.. a financial
consulting firm. From 1984 to 1989 Mr. Brown was a Senior Accountant with
Vroman, McGowen, Hurst, Clark & Smith, P.C., a certified public accounting firm.
GEORGE T. WITTER-VICE PRESIDENT, SALES AND MARKETING
Mr. Witter has 15 years of experience in the sale and marketing of
pharmaceuticals and medical products. Before joining DSMi, Mr. Witter had been
with Genentech, Inc. for 10 years. Prior to this, he was with American Critical
Care. Mr. Witter has an A.B.J. degree from the University of Georgia.
<PAGE>
KENT TAPPER-VICE PRESIDENT, SYSTEMS ENGINEERING
Mr. Tapper has over 15 years of experience in the field of engineering,
engineering management and telecommunications. His specific areas of expertise
include advanced intelligence networks, interactive audio response, speech
recognition, and multimedia applications. Mr. Tapper has significant experience
in the use of advanced speech recognition technology for automation of highly
interactive services and integration with electronic publishing. Prior to
joining DSMi, Mr. Tapper had over 10 years of experience with Northern Telecom.
He has a BSEE from Purdue University.
LEON R. ZAK-DIRECTOR, SYSTEMS DEVELOPMENT
Mr. Zak directs Systems Development for DSMi. An expert in voice-response and
on-demand publishing technology, he has successfully managed a software
development company for over 10 years, developing and marketing numerous
software programs that are currently in use nationally and internationally. Mr.
Zak has extensive research and development experience for FORTUNE 500 companies
such as Tandy Corporation, Eastman Kodak Company and Xerox.
MARION B. LAVIGNE, PH.D.-DIRECTOR, CLINICAL PROGRAMS
Dr. LaVigne is responsible for coordinating clinical research and development
for DSMi's programs. She holds a doctorate in clinical psychology from the
University of Rochester. With over ten years of experience in health
psychology, she has completed research, program development, and clinical work
in smoking cessation, cardiovascular disease, asthma, and health promotion, in
addition to instructing psychology at several universities. She is a member of
the American Psychological Association and the Society of Behavioral Medicine.
RICHARD HOLOWKA-DIRECTOR, PRODUCT DEVELOPMENT
With over fifteen years experience in promotion, marketing and communications,
Mr. Holowka possesses considerable expertise in planning and coordinating
motivational and informational communications programs. As Creative Director of
an advertising/public relations firm, he conducted multi-media campaigns for
numerous clients, from software development to human service and health care.
He is the recipient and co-recipient of 3 Silver Microphone awards for creative
work reaching general, private sector, non-profit, and multi-ethnic audiences.
CINDY DOANE, M.S.P.H.-MANAGER, CLINICAL PROGRAMS
Ms. Doane possesses a unique combination of extensive clinical research
expertise and "hands-on, deadline driven" project management experience. With a
Masters of Science in Public Health from the University of Illinois
Urbana-Champaign, she has participated in and managed projects involving the
Centers for Disease Control, New York State Department of Health, and private
foundations. Her organizational skills and breadth of experience are well
suited for her demanding position which involves coordination, scheduling and
budgeting of diverse product functions. She has published numerous articles and
abstracts on issues of patient compliance and public health.
<PAGE>
SERVICES AGREEMENT
This Agreement is effective this 1 day of February, 1996, (the "Effective
Date") between -Disease State Management, Inc., 46 Prince Street, Rochester, New
York 14607 ("Vendor") and Bristol-Myers Squibb U.S. Pharmaceuticals, a division
of Bristol-Myers Squibb Company, P.O. Box 4500, Princeton, New Jersey 08543-4500
(hereinafter called "BMSUSP"). Vendor agrees to provide services to BMSUSP
under the terms set forth below.
A. SERVICES
Vendor will provide the product(s) or service(s) set forth, and to the
specifications set forth in the proposal incorporated herein as Attachment
A.
The product and all elements as set forth on Attachment A are subject to
prior approval by BMSUSP, such approval not to be unreasonably withheld.
B. COMPENSATION
BMSUSP will pay Vendor according to the terms or payment schedule set forth
in Attachment A hereto.
In the event that BMSUSP shall request any changes in the concept,
specifications or scope of the product(s) or service(s) described on
Attachment A hereto, Vendor will notify BMSUSP of the cost of such
revisions and will not proceed without prior written approval.
If the compensation provision on Attachment A hereto is other than a flat
fee amount per element or for the entire project, Vendor will provide such
documentation in support of all billings as BMSUSP may reasonably require.
C. CONFIDENTIALITY
Vendor shall treat as confidential and secret any and all BMSUSP
Confidential Information. "BMSUSP Confidential Information" shall include,
but not be limited to, information relating to BMSUSP's past, present and
future marketing and research and development activities that may be
disclosed to Vendor by BMSUSP and/or BMSUSPs parent, subsidiary or
affiliate companies and which are identified in writing by BMSUSP as
confidential. BMSUSP Confidential information shall not include (i)
information known by Vendor prior to disclosure from BMSUSP. (ii)
information which is or becomes publicly known through no wrongful act of
Vendor, (iii) information that is independently developed by Vendor,
without use of information that otherwise constitutes BMSUSP Confidential
Information, or (iv) information disclosed pursuant to law, rule,
regulation or pursuant to a court order, provided that BMSUSP is given 10
days prior notice of such disclosure. Vendor expressly agrees that any
information it discovers or develops under this Agreement for the benefit
of BMSUSP shall not be used by Vendor or disclosed by Vendor to any third
party, nor shall Vendor show this Agreement or disclose the existence,
nature or subject matter of this
1
<PAGE>
Agreement to any third. party without the prior written consent of BMSUSP.
Vendors obligations not to disclose BMSUSP Confidential Information to
third parties and not to otherwise use BMSUSP Confidential Information
shall survive the termination of this Agreement for a period of five years.
Vendor shall not duplicate any material containing BMSUSP Confidential
Information, except in the direct performance of its services under this
Agreement. Vendor shall return all copies of materials containing BMSUSP
Confidential Information upon Vendor's completion of services under this
Agreement or upon any earlier termination of this Agreement for any reason
whatsoever.
BMSUSP shall treat as confidential and secret any and all Vendor
Confidential Information. 'Vendor Confidential Information" shall include,
but not be limited to, information relating to Vendor's past, present and
future systems development activities that may be disclosed to BMSUSP
and/or BMSUSP's parent, subsidiary or affiliate companies and which are
identified in writing by Vendor as confidential, except that in no event
shall Vendor Confidential Information include information relating to
Vendor deliverables under this agreement. Vendor Confidential information
shall not include (i) information known by BMSUSP prior to disclosure from
Vendor, (ii) information which is or becomes publicly known through no
wrongful act of BMSUSP, (iii) information that is independently developed
by BMSUSP, without use of information that otherwise constitutes Vendor
Confidential Information, or (iv) information disclosed pursuant to law,
rule, regulation or pursuant to a court order, provided that Vendor is
given 10 days prior notice of such disclosure. BMSUSP expressly agrees
that any Confidential Information it discovers under this Agreement shall
not be disclosed by BMSUSP to any third party without the prior written
consent of Vendor. BMSUSP's obligations not to disclose Vendor
Confidential Information shall survive the termination of this Agreement
for a period of five years.
D. INDEMNIFICATION
Each party shall indemnify and hold the other party harmless from and
against all liability, damages, penalties, losses, costs or expenses,
including attorneys' fees, arising from or in any way related to its
willful or negligent actions or omissions in performing the
responsibilities as described in this Agreement, or for any willful or
negligent breach of this Agreement.
E. PROFESSIONAL STANDARDS
Vendor represents that it has facilities, personnel, experience and
expertise sufficient in quality and quantity to perform all such
assignments and projects given it by BMSUSP hereunder and agrees that it
will perform all such assignments and projects in a manner commensurate
with professional standards generally applicable to its industry.
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<PAGE>
F. OWNERSHIP OF MATERIALS
Any and all reports, information, data or other works created by Vendor for
BMSUSP in connection with this Agreement (with the exception of
customization of the Vendor's basic software and systems for BMSUSP as well
as the Vendor's basic software and systems themselves) shall be the sole
and exclusive property of BMSUSP. BMSUSP may use such work wherever and
whenever it chooses. This Agreement shall be deemed a transfer of
copyright and any copyrightable subject matter created by Vendor in such
works. Vendor shall execute any and all documents necessary to demonstrate
or perfect such transfer. Vendor shall not at any time in any manner
during or after this Agreement, under any circumstances, be entitled to or
claim any right, title or interest herein or any commission, fee or other
direct or indirect benefit from BMSUSP or BMSUSP's parent, subsidiary or
affiliate companies, in respect of such reports, data, information or other
works created by Vendor hereunder. Vendor agrees to execute or cause its
agents and/or employees to execute any documents necessary or desirable to
secure or perfect BMSUSP's legal rights and worldwide ownership in such
works, including, but not limited to documents relating to patent,
trademark and copyright applications.
Nothing in the preceding paragraph shall preclude Vendor from referring to
the general results of the project performed pursuant to this Agreement in
making marketing presentations to other potential customers. In addition,
BMSUSP agrees to provide Vendor with reasonable access to data generated by
the project performed pursuant to this Agreement for the sole purpose of
supplementing or supporting marketing presentations to other potential
customers, provided, however, that all such supplemental or supporting
presentations, insofar as they disclose data from the project, must be pre-
approved by BMSUSP. Such approval shall not be unreasonably withheld.
G. RELEASES
Any materials furnished hereunder which have not been created for BMSUSP
and are subject to the rights of third parties shall be specifically
identified to BMSUSP in writing. Vendor shall obtain (and deliver upon
request to BMSUSP) releases for all names, photographs, illustrations,
testimonials, and any and all other materials used in works which Vendor
prepares or uses. All such releases shall run to BMSUSP, its agents and
employees where appropriate and customary. Vendor's failure to obtain such
releases or the obtaining of such releases by Vendor shall in no way
relieve Vendor of its obligations in Paragraph F above except where the
releases have been obtained directly by BMSUSP. Except for works that have
been secured by permission, Vendor warrants and covenants that all works
provided by Vendor shall be original and shall not infringe any copyright
or violate any rights of any persons or entities whatsoever.
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H. DURATION OF AGREEMENT
1. Term
This Agreement is effective as of the Effective Date and shall continue
in full force and effect until the earlier of (i) completion of the
project assigned hereunder, (ii) terminated by at least thirty (30)
days written notice by either party to the other, sent by registered
mail to the address for each party first set forth above, or to such
other address which a party may designate for its receipt of notices
hereunder.
2. Payment on Termination
Upon termination of this Agreement BMSUSP is to pay for all authorized
work in process, and BMSUSP shall assume Vendor's liability under and
indemnify Vendor with respect to all outstanding contracts made on
BMSUSP's behalf. Upon written notice of termination Vendor shall take
all steps necessary to wind up the work under this Agreement and to
mitigate BMSUSP's liability therefore.
3. Transfer Upon Termination
Vendor shall transfer, assign and make available to BMSUSP or BMSUSP's
representative all property and materials in Vendor's possession or
control belonging to and paid for by BMSUSP, and all information
regarding BMSUSP's project(s) covered by this Agreement, as set forth
in Paragraph C herein. Vendor also agrees to give all reasonable
cooperation toward transferring with approval of third parties in
interest all contracts and arrangements, if any, properly entered into
by Vendor in the performance of this Agreement, and all rights and
claims thereto and therein, upon being duly released from the
obligation thereof.
I. INDEPENDENT CONTRACTORS
The parties to this Agreement are independent contractors and nothing
contained in this Agreement shall be construed to place the parties in the
relationship of employer and employee, partners, principal and agent, or
joint ventures. Neither party shall have the power to bind or obligate the
other party nor shall either party hold itself out as having such authority.
J. THIRD PARTY OBLIGATIONS
In connection with this Agreement, Vendor shall make no commitments or
disbursements, incur no obligations nor place any advertising, public
relations or promotional material for BMSUSP's parent, subsidiary or
affiliate companies, nor disseminate any material of any kind using the
name of BMSUSP and/or BMSUSP's parent, subsidiary or affiliate companies or
using their trademarks, without the prior written approval of BMSUSP.
4
<PAGE>
K. GOVERNING LAW
This Agreement is entered into in the State of New Jersey and shall be
constructed and governed under and in accordance with the laws of that
State.
L. MISCELLANEOUS
1) The terms of this Agreement shall be binding upon BMSUSP and
Vendor and their respective successors and permitted assigns.
Notwithstanding the foregoing, this Agreement is not assignable in whole or
in part by Vendor without the prior written consent of BMSUSP. Factoring
of accounts receivable is not permitted.
2) The failure of either party to take action as a result of a
breach of this Agreement by the other party shall constitute neither a
waiver of the particular breach involved nor a waiver of either party's
right to enforce any or all provisions of this Agreement through any remedy
granted by law or this Agreement.
3) BMSUSP is an Equal Opportunity Employer and does not discriminate
against any person because of race, color, creed, age, sex, or national
origin. Vendor represents that it has the same policy of Equal Opportunity
Employment.
4) The policy of BMSUSP is to protect the health, safety and quality
of life of its employees and the public, and to exercise responsible
stewardship of natural resources that may be impacted by its activities.
To realize this, BMSUSP is committed to maintaining programs and procedures
for the environmentally responsible management of facilities, materials,
production processes, products and packaging, transportation and
distribution, waste and ft minimization, energy, general business
operations and contracted goods and services. Vendor agrees with this
policy and further acknowledges that its performance under this Agreement
shall be in strict compliance with all applicable governmental laws and
regulations and in accordance with and in furtherance of this policy.
5) This Agreement contains the entire understanding of the parties
with respect to the subject matter contained herein, supersedes any prior
written or oral communications and may be modified in writing subject to
mutual agreement of the parties hereto.
6) The headings of each paragraph are for reference only and shall
not be construed as part of this Agreement.
5
<PAGE>
7) Except for the obligation to pay money property due and owing,
either party shall be excused from any delay or failure in performance
hereunder caused by reason of any occurrence or contingency beyond its
reasonable control, including. but not limited to, failure of performance
by the other party, earthquake, labor disputes, riots, governmental
requirements, inability to secure materials on a timely basis, failure of
computer equipment, failures or delays of sources from which information or
data is obtained and transportation difficulties.
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer, have
entered in to this Agreement this 1 day of February, 1996
Bristol-Myers Squibb Disease State Management, Inc..
U.S. Pharmaceuticals 46 Prince Street
a division of Bristol-Myers Rochester, New York 14607
Squibb Company
By: /s/ Sharon Henry By: /s/ Donald A. Carlberg
--------------------------- -----------------------------------
Title: Vice President HealthCare Title: President & CEO
Management --------------------------------
-------------------------
6
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
PROGRAM OVERVIEW
NEEDS ASSESSMENT
DSMI-TM- will perform a comprehensive needs assessment to establish the
fundamental goals, objectives and data sets for the intervention protocol. The
needs assessment portion of the project development shall include:
1. Establishment of an Expert Consultation Panel. The panel will consist of a
board certified cardiologist, critical care/cvd rehabilitation nurse
specialist, a clinical dietitian, DSMI-TM- clinical expert, and a BMS
Disease Management Team member. Recruitment and contracting of the
clinical consultants shall be the responsibility of and at the discretion
of DSMI-TM-'s clinical department. DSMI-TM- will provide for review the
CVS/credentials of the expert consultants. Bristol-Myers Squibb agrees to
review/accept advisory board recommendations. The panel will assist in the
development of the following:
a) Intervention protocol e) Baseline parameters
b) Program goals f) Inclusion/exclusion criteria
c) Data sets g) Appropriate DRG/ICD - 9 codes
d) Outcomes evaluation protocol
During Phase II of clinical development consulting experts will review
program materials, call algorithms and reports to insure that program
development goals are met.
Outcome measures and established data sets shall be reviewed by Barbara
McNeil, MD or other clinical expert at the discretion of DSMi-TM-.
DSMi-TM- will provide for BMS's disease state management team's review the
CVs of all outcome reviewers under consideration.
2. DSMI-TM- will conduct a comprehensive literature search in accordance
with procedures established by Dracup et al. (1994). The search will
involve a review of studies published in English between 1989 and
1995. Search terms will include treatment/pharmacologic compliance,
adherence, patient behavior modification programs and congestive heart
failure risk factors. Program content will reflect nationally
recognized guidelines (e.g., AHCPR) for the treatment of CHF. Where
data or published consensus statements are lacking, expert
consultation will be utilized.
3. DSMI-TM- will perform a review of preprinted published materials provide a
listing of available educational resources pertaining to CHF. DSMI shall
provide sample copies of available materials to BMS and the Expert Panel
for review.
4 DSMI-TM- will assist Bristol-Myers Squibb Company in establishing target
accounts for program implementation. Such assistance will include:
a) Review of MEDLINE database to establish CHF incidence rates by age,
race, and sex. DSMI-TM- will provide a concise reference guide for use
by BMS consultants when meeting target accounts.
b) "Financial impact of CHF" overview sales presentation for BMS
consultants to utilize.
DSMI-TM- shall designate a minimum of one Senior Account Manager and
one Clinical taff Member to this project. Specific staff members will
be assigned to address project concerns as requested by BMS-TM-.
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CONGESTIVE HEART FAILURE INTERVENTION
PROGRAM GOALS
1. Patient Intervention (Behavioral Goals):
a) Improve patient understanding and awareness with respect to:
-- Pharmacological Therapy
-- Self-monitoring of "critical" symptoms
-- Dietary needs and guidelines
-- Exercise regimen
-- Associated CHF risk factors
b) Enhance Patient Motivation and Confidence with respect to:
-- Pharmacological therapy
-- Self-monitoring of "critical" symptoms
-- Adherence to dietary recommendations
-- Exercise regimen
-- Modification of other risk factors contributing to progression of
CHF.
-- Enhance patient/provider communication making visits and
telephone interaction more efficient and effective.
c) Enhance Compliance with respect to:
-- Pharmacological therapy
-- Self-monitoring of "critical" symptoms
-- Dietary guidelines
-- Exercise regimen
-- Modifiable risk factors
d) Facilitate the appropriate use of referral resources with respect to:
-- Medical/treatment concerns
-- Cardiac rehabilitation, including exercise interventions
-- Dietary intervention, education and counseling
-- Modification of other risk factors contributing to the
progression of CHF. (e.g. , smoking cessation, weight loss
programs)
e) Facilitate appropriate and timely communication of critical CHF
symptoms to health care providers.
f) Facilitate early identification and referral for treatment of
depression and emotional distress.
g) Enhance communication of information between patient and health care
providers.
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<PAGE>
CONGESTIVE HEART FAILURE INTERVENTION
PROGRAM GOALS
2. Business Goals
a) MCO Goals
-- Enhance CHF patient management
-- Strengthen patient/provider relationship
-- Encourage adherence to recognized treatment guidelines via pre-printed
provider mailing.
-- Improve competitive position
-- Position MCO as innovative technological leader in competitive market
place
-- Link providers, nursing services, case management and patients
-- Improve pharmacy services awareness of treatment compliance statistics
through reporting services outlined under "Reports" in this document.
-- Reduce risk factors associated with costly:
-- Unscheduled physician visits
-- Emergency room intervention
-- Hospitalizations
-- Provide expanding database for critical pathways development
b) Bristol-Myers Squibb Company
-- Enhance competitive position
-- Encourage drug compliance/secure adherence to ACE inhibition therapy
-- Strengthen customer commitment to BMS partnership
-- Provide powerful customer driven selling tool
-- Develop business alliance with major home health care providers
-- Provide a unique opportunity for Bristol-Myers Squibb
Company to partner with home care market leaders and enhance
MCO relationships
-- Provide widespread introduction into previously inaccessible
markets
15
<PAGE>
PROGRAM SCHEDULE
See the "Program Intervention Description" section for details about each of the
interventions. This protocol would be delivered to patients during their first
year of involvement in the program. Note that the term "provider" is used to
denote a case manager or another health care provider designated to receive
communications regarding the patient.
STANDARD PROTOCOL ( Enrollment Call plus 12 follow up interventions to be
delivered to all enrollees)
-- MONTH 1
Business Reply Card (BRC) + program description
Enrollment call to patient
Personalized patient report
Personalized provider summary report
These are fully demand published reports to highlight
baseline parameters.
-- MONTHS 2-13
One follow-up call/month
One personalized patient report/month
One personalized provider update/month
16
<PAGE>
PROGRAM INTERVENTION DESCRIPTION
See the "Program Schedule" (page 10) section for an outline of the protocol for
delivering these program components. Note that the term "provider" is used to
refer to a case manager or another health care provider designated to receive
communications regarding the patient.
STANDARD PROTOCOL
Business Reply Card (BRC)/Program Description
-- Pre-printed card designed for distribution by providers to patients
and return via postage paid mail response by patient to DSMI-TM-
-- Brief assessment for identifying patient data (e.g., name, phone
number, best time to contact) necessary for DSMI-TM- to initiate
enrollment call to patient
-- Program description attachment for patient to tear off and keep for
future reference
ENROLLMENT TELEPHONE CALL
-- Call to enroll patients in the program as per receipt of Business
Reply Card
-- Call placed by operator according to patient's preferred contact times
as per Business Reply Card
-- Cost-efficient interface: operator-initiated contact to identify
patient and transfer to automated, voice response system
-- Option to reconnect with operator during or after voice response
interaction
-- High appeal voice response system using a recorded human voice versus
computer synthesized speech
-- Patient responds in normal speaking voice versus pushing touch tone
buttons
-- Self-reported assessment of relevant medical and behavioral factors:
disease status, prescribed treatment including diet, exercise,
medications, patient motivation, treatment barriers, patient knowledge
indicators regarding symptom identification and disease self-
management
-- Patient receives personalized questions and clinically appropriate
feedback driven by expert system to promote patients' awareness of
their condition and adherence to their treatment regimen
-- Creates foundation for expanding patient data file which drives the
personalized, interactive program services
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PATIENT REPORT
-- Laser printed, on-demand published report and program description
including text that is personalized based upon enrollment
questionnaire responses and graphics that are personalized to
patient's gender
-- Mailed to patient within a week after completion of enrollment
telephone call
-- Personalized and pre-printed materials reinforce awareness and
knowledge regarding their condition and promote treatment adherence
and proper self-management skills
-- Referral information fosters appropriate use of health care resources
by patient
PROVIDER SUMMARY REPORT
-- Laser printed, on-demand published report summarizing a patient's
enrollment survey data not to exceed one page in length
-- Mailed to patient's provider within a week after enrollment telephone
call
-- "At-a-glance" format provides efficient documentation of critical
patient data, ready for insertion into the medical record not to
exceed one page in length
-- Facilitates identification of patient education needs and hard-to-
manage patients, appropriate allocation of health care resources, and
timely modification of treatment regimens
-- Enhances patient provider communication
FOLLOW-UP CALLS
-- Telephone calls placed by operator to patients according to patient's
preferred contact times and the program intervention schedule
-- Cost-efficient interface: operator-initiated contact to identify
patient and transfer to automated, voice response system
-- Option to reconnect with operator during or after voice response
interaction
-- Option to be connected to provider or other health care resource by
follow-up call operator
-- High appeal voice response system using a recorded human voice versus
computer synthesized speech
-- Patient responds in normal speaking voice versus pushing touch tone
buttons
-- Self-report follow-up assessment of relevant medical and behavioral
factors: update on disease status, prescribed treatment including
diet, exercise, and medications, patient motivation, treatment
barriers, patient knowledge indicators regarding symptom
identification and disease self-management
-- Patient receives personalized questions and clinically appropriate
feedback driven by expert system to promote patients' awareness of
their condition and adherence to their treatment regimen
-- Allows identification of patient concerns and appropriate referral
-- Adds vital progress information to the longitudinal patient database,
over time
PATIENT UPDATES
-- Laser printed, on-demand published report including text that is
personalized based upon enrollment questionnaire responses, and
graphics that are personalized to patient's gender
-- Mailed to patient within three days of telephone intervention to
insure timely receipt by patient
-- Personalized and pre-printed materials reinforce patient awareness and
knowledge regarding their condition and promote treatment adherence
-- Referral information fosters appropriate use of health care resources
by patient
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<PAGE>
PROVIDER UPDATES
-- Laser printed, on-demand published report integrating patient's
follow-up and enrollment data
-- Mailed to patient's provider within a week after each patient follow-
up call
-- "At-a-glance" format provides efficient documentation of critical
patient data, ready for insertion into the medical record
-- Facilitates identification of patient education needs and hard-to-
manage patients, appropriate allocation of health care resources, and
timely modification of treatment regimens
-- Enhances patient-provider communication
ORGANIZATIONAL DATA REPORTS
-- Comprehensive data sets will be determined by expert consultation.
-- Standard data reports, aggregate information, to payor and
participating organizations, provided quarterly. Configuration of
standard reports to be determined upon completion of the Expert Panel
data set development. Nonstandard reports will be developed by DSMI-
TM-'s staff at the request of BMS and its client organizations. DSMI-
TM-/BMS will establish customary and reasonable developmental and
production fees for the aforementioned nonstandard reports.
-- To insure confidentiality and security of program database, reports to
Bristol-Myers Squibb on program data to include aggregate patient
information only, as per format requested by Bristol-Myers Squibb.
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<PAGE>
PROGRAM DEVELOPMENT
Program development will proceed in two stages. During the first stage, to be
completed within 45 days of contract signing, DSMI-TM- will establish and
convene a Congestive Heart Failure advisory panel meeting to determine:
intervention goals, protocol structure, required data sets, educational
requirements, high risk behaviors, available resources and modifiable behaviors.
DSMI-TM- will provide a panel summary report to BMS. Additionally, not later
than signature date plus 45 days, DSMI-TM- will deliver preliminary program
components to be used by Bristol-Myers Squibb to market the program. These
components will include five (5) copies for each of the following prototypes of
the program: sample marketing brochure/sales aid, sample business reply
card/program description, sample personalized patient report (including partial
Greek text), and sample personalized provider report (including partial Greek
text). In addition, a voice response call-in telephone demonstration will be
accessible.
The second stage of program development will require an additional 150 days to
deliver a fully operational program, including the following components:
-- Business reply card/program description (design/layout, print
specifications and artwork in a form specified by BMS)
-- Personalized patient report and 12 patient updates
-- Personalized provider report and 12 standard protocol provider updates
-- Enrollment call and 12 standard protocol follow-up calls
-- Marketing brochure and sales presentation aid
The entire program development includes the following tasks:
PHASE I
-- Consultation with Bristol-Myers Squibb Company to finalize program
specifications. Such consultation will establish: BMS disease
management team's program objectives, requested data sets, outcome
protocol overview to include goals/objectives and tentative design,
marketing and business goals. BMS will provide DSMI-TM- with an
overview in writing no later than contract signing date plus 45 days.
-- Development of and consultation with expert panel as described. Such
consultation will assist in the establishment of: primary CHF
treatment protocols and algorithms, documented intervention methods,
target data for outcomes evaluation, required database for
evaluation/reporting, patient educational requirements, national
resources for preprinted CHF educational materials, standardized
quality of life measures and incidence/economic overview of congestive
heart failure. Consultants will be recruited no later than 15 days
after contract signing.
-- BMS/DSMI-TM- will establish a formal developmental reporting and
review process. DSMI-TM- will provide BMS a comprehensive project
developmental overview annotating clinical development completion
dates for individual modules. Additionally, formal review conference
dates will be established no later than 45 days after contract
signing.
-- Integration of market research/client/clinical information to finalize
program content.
-- DSMI-TM- shall host a patient directed focus group session to solicit
input for program goals, design and print materials.
20
<PAGE>
PHASE II
-- Design of graphic presentation for pre-print and on-demand published
materials
-- Coordination of personalized clinical copy with personalized graphics
-- Design of systems configuration
-- Systems programming for internal reporting for on-demand publishing,
interactive voice response, and outcomes analysis
-- Voice recording and training of the voice response system
-- Identification of appropriate educational brochures and materials
PHASE III
-- Testing of the operable program
-- Proof reading/editing pre-printed and on-demand published materials
PHASE IV: PILOT PROGRAM
DSMI-TM- shall conduct a pilot test, for a maximum of 100 participants,
recruited by BMS, to demonstrate the efficiency of the fulfillment process. The
test shall include the following interventions:
-- Mail BRCs to pilot program participants
-- Process all BRCs returned to DSMI-TM-
-- Conduct enrollment telephone call
-- Mail personalized patient report
-- Mail personalized provider summary report
-- Conduct follow-up telephone call at 2-weeks after enrollment
-- Mail personalized patient update
-- Mail personalized provider update
-- The test shall be conducted in a period not to exceed 90 days,
including recruitment of participants
To insure program validation, DSMI-TM- shall assist in the
development of an Intervention Program Outcomes Assessment as described in
this document. Additionally, at the discretion of DSMI-TM- and in
consultation with BMS-TM-, DSMI-TM- shall insure that program goals, targeted
behaviors, questions and strategies are valid through expert consultation.
Upon completion of the Pilot Program, DSMI-TM- shall begin patient
enrollment. Patients will receive program interventions described under
"Program Intervention Description" on page 14 of this document.
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<PAGE>
CONGESTIVE HEART FAILURE
INTERVENTION PROGRAM QOL ASSESSMENT
Recent research has indicated that the primary method of assessing the
success/failure of a Congestive Heart Failure Management Program is to recognize
its impact on the targeted patient's ability to perform daily tasks, participate
in productive activities, emotional status and ability to self-manage his/her
disease. Studies such as Guyatt et al's "Measurement of Health-Related Quality
of Life in Heart Failure" published in the Journal of the American College of
Cardiology and Wenger et al's "Quality of Life: Can it and should it be
assessed in Patients with Heart Failure?" published in Cardiology 76(5): 391-8,
1989 clearly demonstrate that these measures are a significant tool for
evaluating congestive heart failure patients' well being.
DSMI-TM- will establish a comprehensive quality of life assessment program to
assist in validating the operational intervention protocols. The nature of a
QOL assessment dictates that data be self-reported. As per the behavioral goals
of the program, positive changes in these variables would be utilized as
indicators of the efficacy of the intervention. In addition, the patient
satisfaction measure listed below will be examined as a performance indicator
for the program. Such measures will reflect HEDIS Guidelines and CHF TyPE
functional status codes. The QOL assessment protocol shall reflect the
recommendations of the Expert Advisory Panel.
BIANNUALLY
A report will be prepared biannually displaying summary statistics derived from
aggregate patient data for each of the measures shown below. Each measure will
be collected during the program telephone contacts at program entry, six month
post entry and at the conclusion of the program. Once repeated measures are
available, summary statistics for longitudinal changes in each variable from
baseline and from the preceding semester for each individual will also be
reported.
1. Patient awareness and understanding of:
a) Medication/prescription regimen
b) Critical CHF symptomology
c) Dietary intervention and recommendations
d) Exercise recommendations
e) Other risk factors contributing to progression of CHF
2. Motivation and confidence with respect to:
a) Adherence to medication/prescription regimen
b) Self-monitoring of CHF symptoms
c) Adherence to dietary recommendations
d) Adherence to exercise recommendations
e) Modification of other risk factors contributing to progression of CHF
3. Adherence with respect to:
a) Medication/prescription regimen
b) Ongoing self-monitoring of CHF symptoms
c) Dietary protocol
d) Exercise protocol
e) Modification of other risk factors contributing to progression of CHF
4. Use of health care services:
a) Unscheduled physician office visits
b) Emergency room services
c) Dietary counseling
22
<PAGE>
d) Cardiac rehabilitation services
e) Hospitalizations
5. Quality of care measures
a) Selection of relevant HEDIS items on satisfaction with health care
b) Baseline quality of care assessment results as described under the
"annual" outcomes section below
6. Overall program satisfaction
ANNUAL
A baseline quality of life measure will be obtained through either written or
telephone administration within the first month of a patient's enrollment in the
program. As noted under the "biannual" outcomes section above, the results of
this baseline assessment will be reported in the semester reports as summary
statistics for aggregate patient data collected during the preceding semester.
The quality of life measure will be administered to each patient a second time
during the twelve month phone contact. As the follow-up quality-of-life data
become available, they will also be incorporated into the biannual reports.
23
<PAGE>
CONGESTIVE HEART FAILURE
INTERVENTION PROGRAM OUTCOMES
ASSESSMENT PROGRAM
DSMI-TM- will assist Bristol-Myers Squibb in the development of a study to
evaluate the effectiveness of the aforementioned intervention protocol. After
consultation with BMS/ and in conjunction with the Expert Consultation Panel,
DSMI-TM- will establish a comprehensive database reflecting the outcome measures
listed below. Additionally, DSMI-TM- shall assist BMS in establishing entry
criteria, exclusion criteria, goals, objectives and any additional controls
required to ensure comparative validity. Such information shall include:
-- Number of hospitalizations per patient
-- Number of unscheduled physician office visits/patient
-- Percentage of increase/decrease in reported symptoms
-- Number of emergency room interventions
-- Number of home nursing interventions required
Selection of a comparative data set shall be the responsibility of Bristol-Myers
Squibb and its affiliated clients. The establishment of baseline measures shall
be conducted by BMS/ to insure appropriate comparisons may be drawn.
DSMI-TM- involvement/funding of an outcome evaluation extends only to the
aforementioned items. Further requirements regarding design, implementation,
publication of said study are the sole responsibility of BMS/ and its clients.
24
<PAGE>
PROGRAM MARKETING AND TRAINING
DSMI-TM- will provide 4 full day training sessions to BMS staff or
representatives to assist in the marketing and training efforts for the program.
BMS will have access to additional services that may include any of the
following:
-- Development of marketing and/or training strategies and procedures
-- Coordination and/or presentations for meetings and seminars with
payors/sponsoring organizations
-- Individual phone and/or in-person consultation with payors/sponsoring
organizations
-- Written correspondence with payors/sponsoring organizations
-- Preparation of written materials and/or phone demonstrations for the
payors/sponsoring organizations
PROGRAM OPERATION
As DSMI-TM-'s program development team nears completion of the program, a
program operation team will be assembled to participate in testing the system.
This facilitates a smooth transition period for the shift from the development
to the operations staff. DSMI-TM- will maintain responsibility for managing its
in-house staff and its subcontractors who are involved in ongoing operations of
the program interventions. Quality assurance measures are included in the
interactive program interventions and DSMI-TM-'s internal reporting systems.
DSMI-TM- will update/modify the intervention reports/calls when warranted at the
request of BMS or upon discovering effective program improvements at no charge
for 90 days following program introduction. Change request must be made in
writing. At the expiration of 90 days, DSMI-TM- will continue to update and
revise the system as necessary. Additional changes will be considered. such
changes will be funded in a manner to be approved by both DSMI-TM- and Bristol-
Myers Squibb Company.
Algorithms within the expert systems directing the mail and phone interventions
allow for easy modification of program elements without interruption of service
delivery. The systems development staff are available as-needed to make any
necessary modifications. While DSMI-TM-'s clinical department will remain
responsible for any outcomes analyses evaluating the clinical impact of the
program, DSMI-TM-'s program operation team will monitor quality assurance
indicators (e.g. enrollment rate, participant satisfaction, follow-up completion
rate) on a continual basis to insure appropriate delivery of program services as
agreed upon by DSMI-TM- and Bristol-Myers Squibb Company.
DATABASE DEVELOPMENT
The program database will be constructed and maintained using a standard
Relational Data Base Management System (DBMS). The primary record index will be
based upon patient identification. All information collected at enrollment and
during all subsequent interventions will be stored in the database. The record
schema(s) will be developed according to the specific question sets and data
required by the proposed program. Data may be imported or exported off-line
using a variety of industry standard formats, or on-line using DSMI-TM-'s SQL
Server interface. DSMI-TM- will use industry standard procedures for insuring
the confidentiality and security of the program database.
25
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
PRODUCT DEVELOPMENT FEES
The cost is [*****] to deliver the preliminary program components and the fully
operational program. Fee is payable according to the following schedule:
-- 40% upon contract signing
-- 20% upon delivery of preliminary materials
-- 20% at delivery of operational program
-- 20% upon completion of the pilot program
Developmental fees will cover:
-- Clinical
-- Expert Consultation: DSMi-TM- shall fund all travel, honorarium
and associated fees involved in the convening of the Expert
Advisory Panel Meeting described under "Program Overview" in this
document. DSMI-TM- shall provide all panel members with a
program synopsis, meeting agenda, targeted goals and any
additonal information as necessary to insure expert panel members
are fully prepared for the meeting. Additionally, DSMI-TM- will
provide a follow up mailing for all members to solicit additional
feedback and highlight the panel's recommendations. The panel's
recommendations , as well as, any additional feedback shall be
incorporated into the final intervention at the discretion of
DSMI-TM- and BMS-TM-. Any additional requirements for expert
consultation beyond the services of the "Expert Consultation
Panel" shall be at the sole expense of BMS.
-- Clinical Content
-- Intervention Algorithms
DSMi-TM- shall provide for review and revision all interventional
algorithms. Upon receipt of draft documents, BMS shall review
and return all documents for editing within 5 business days to
DSMi-TM-. DSMi-TM- shall incorporate suggested revisions within
5 business days. Upon receipt of "Second Draft" BMS shall have
the right to an additional edit/revision. BMS shall return
"Second Draft" documents within 5 business days for editing by
DSMi-TM-. Upon completion of final editing by DSMi, BMS shall
make final comments and provide signature approval of all
documents within 5 business days. BMS agrees that all reviews/
revisions shall be concluded in accordance with the formal
developmental reporting/review process under " Program
Development" in this document and in accordance with established
time lines. All documents sent to BMS shall include a cover
sheet indicating due dates for return to DSMI-TM-, a comments
section and a signature authorization.
-- Testing and Debugging
-- Systems
-- Database Development
DSMI-TM- will provide a time and events calendar for database
development to BMS-TM- for review. The program database model
will reflect agreed program parameters.
-- On-Demand Publishing
-- Voice Training (IVR)
-- Call Center Integration
-- Graphics/ Communication
-- Logo Design
-- Layout (preprinted and on-demand materials)
-- Illustration Development
26
<PAGE>
* Voice Recording/Studio
* Primary Marketing Materials
* Print Materials
* Operational Voice Demonstration
* Sales Materials
Printing fees for all pre-printed materials (e.g., marketing/sales aids,
BRC/program description) will be the responsibility of Bristol-Myers Squibb.
At Bristol-Myers Squibb's request, and at no additional cost, DSMI-TM-
will incorporate a managed care organization's logo or other identifying
graphic element on all camera ready art/disk, when provided with camera ready
disk version/disk version or graphic standards manual from the designated
managed care organization.
DSMI-TM- will furnish estimates for printing costs upon determination
of volumes and final specifications.
27
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
PROGRAM OPERATION FEES
The per patient program cost is $[*****] per patient for the 12-month
standard protocol, payable at the time of patient enrollment. In the event of
a patient withdrawal from the intervention program, DSMI-TM- will prorate the
remaining expenses. For operator services and telephone time utilized during
a conversion between a patient and another health care resource which is
initiated by the follow-up call operator, there will be a charge of $ per
minute. This $ per minute fee covers all charges for operator, staff and
telephone time which may occur in the event that DSMI-TM- initiates the
described contact.
The following schedule demonstrates the amortization of the operational fees
based upon the intervention model being proposed. This schedule shall form
the basis for proration of fees due to patients' attrition from the program.
MONTH ACCRUED OPERATIONAL FEES MONTH ACCRUED OPERATIONAL FEES
----- ------------------------ ----- ------------------------
Enrollment [*****] 7 [*****]
1 [*****] 8 [*****]
2 [*****] 9 [*****]
3 [*****] 10 [*****]
4 [*****] 11 [*****]
5 [*****] 12 [*****]
6 [*****]
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<PAGE>
EXCLUSIVITY
Bristol-Myers Squibb agrees to provide enrollment of a minimum of 3000 patients
within 24 months of the delivery of an operational program. For a period
beginning with the date this Agreement is signed and ending 24 months from date
DSMI-TM- completes Phase IV of the program (the "Exclusivity Period"), DSMI-TM-
agrees not to engage or participate in any other project involving the
development or implementation of an interactive program in the treatment of
diagnosed primary congestive heart failure. At the conclusion of the
Exclusivity Period, provided at least 3,000 patients are enrolled in the
program, Bristol-Myers Squibb shall have the right, but not the obligation, to
negotiate an exclusive arrangement for an interactive program in the treatment
of diagnosed congestive heart failure. In the event such negotiations are
unsuccessful, Bristol-Myers Squibb shall have the right to match any bona fide
offer made to DSMI-TM- for an interactive program in the treatment of diagnosed
congestive heart failure. This right of first refusal shall endure for a period
of twelve months from the conclusion of the Exclusivity Period.
CONSULTING
A per diem fee plus direct expenses is required for consultation services
performed by DSMI-TM- or its consultants. Such fees would be required for
activities performed for parties outside Bristol-Myers Squibb on behalf of the
program and/or activities beyond the program development/marketing and training
operations functions outlined in this proposal.
CUSTOMIZATION
Any customization other than incorporation of MCO logo or other identifying
graphic element will constitute a revision to the intervention protocol (i.e.,
additional patient and/or physician reports and/or variations in on-demand or IV
content). DSMI-TM- shall furnish estimates for development and delivery to
Bristol-Myers Squibb prior to undertaking any revision. Additionally, DSMi-TM-
shall provide upon request estimated development and production fees for
additional reporting.
29
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
OPTIONAL INTENSIVE INTERVENTION PROTOCOL
DSMI-TM- will provide Bristol-Myers Squibb with the opportunity to enhance the
Standard Protocol by offering an intensive intervention program which can be
integrated into the program at the request of Bristol-Myers Squibb. Patients
reporting symptoms indicating they are at increased risk of hospitalization,
emergency room evaluation, or requiring additional support can be enrolled in
the intensive protocol. The development and implementation of this module is
independent of the standard protocol and may be initiated by Bristol-Myers
Squibb at any time. Development fees and operational costs are independent of
the standard intervention program. The protocol and fees are outlined below:
INTENSIVE PROTOCOL DEVELOPMENT
PROGRAM DEVELOPMENT FEES
The fee for the development of the intensive intervention protocol shall be
$[*****]. This fee supports the development of three additional telephone
interventions and corresponding reports.
PROGRAM OPERATIONAL FEES
An additional per patient fee of $[*****] will be charged each time a patient
receives the three-week intensive protocol, payable at the time that the patient
receives the first follow-up call included within this protocol. OPERATIONAL
FEES SHALL BE PRORATED AT $[*****] PER CALL FOR PATIENTS WHO DO NOT RECEIVE THE
FULL INTENSIVE INTERVENTION PROTOCOL.
INTENSIVE PROTOCOL
This module may be instituted in addition to the standard protocol after any
standard follow-up call at which critical indicators are found, such as
significant weight gain. If the patient has no critical indicators at the next
scheduled standard follow-up, he or she will continue to receive the standard
protocol unless such indicators arise at subsequent follow-up calls. Any
standard follow-up call which yields these critical indicators will
automatically trigger the intensive protocol regardless of what month it occurs
during the standard protocol. Criteria for the critical indicators are to be
determined.
WEEKLY INTERVENTIONS:
-- One follow-up call/week for three consecutive weeks
-- One personalized patient update/week for three consecutive weeks
-- One personalized provider update/week for three consecutive weeks
DSMI-TM- SHALL PROVIDE FAX CAPABILITY FOR PROVIDER REPORTS DURING THE
INTENSIVE INTERVENTION PHASE.
SAMPLE PATIENT SCENARIO
-- Patient is enrolled on January 1 and receives 1 month interventions.
-- During the month 2 follow-up call in February, patient reports critical
data (e.g., significant weight gain) which triggers the intensive protocol
of three weekly interventions subsequent to patient's month 2 standard
follow-up call.
-- Patient's standard month 3 (March) follow-up call occurs after the
intensive protocol. No critical indicators are reported for this call or
for the standard calls in months 4-7 (April - July).
-- In month 8 (August) patient reports critical data (e.g., difficulty
breathing when lying flat) which triggers the intensive protocol of three
weekly interventions subsequent to their month 8 standard follow-up call.
-- After the intensive protocol of three weekly interventions subsequent to
patient's month 8 standard follow-up call.
30
<PAGE>
-- After the intensive protocol the patient's month 9 standard follow-up call
in September yields no critical indicators. Patient continues to have no
critical indicators during the remainder of the year 1 standard protocol
including (i.e., through months 10 - 12 or October - December).
31
<PAGE>
SERVICES AGREEMENT
This Agreement is effective this 30 day of March 1996, (the "Effective Date")
between Disease State Management, Inc., 46 Prince Street, Rochester, New York
14607 ("DSMi" or "Vendor") and Bristol-Myers Squibb Oncology, a division of
Bristol-Myers Squibb Company, P.O. Box 4500, Princeton, New Jersey 08543-4500
(hereinafter called "BMS"). Vendor agrees to provide services to BMS under the
terms set forth below.
A. SERVICES
Vendor will provide the product(s) or service(s) set forth, and to the
specifications set forth in the proposal incorporated herein as Attachment
A.
The product and all material elements as set forth on Attachment A are
subject to prior approval by BMS, such approval not to be unreasonably
withheld.
B. COMPENSATION
BMS will pay Vendor according to the terms or payment schedule set forth in
Attachment A hereto.
In the event that BMS shall request any changes in the concept,
specifications or scope of the product(s) or service(s) described on
Attachment A hereto, Vendor will notify BMS of the cost of such revisions
and will not proceed without prior approval.
If the compensation provision on Attachment A hereto is other than a flat
fee amount per element or for the entire project, Vendor will provide such
documentation in support of all billings as BMS may reasonably require.
C. CONFIDENTIALITY
Vendor shall treat as confidential and secret any and all BMS Confidential
Information. "BMS Confidential Information" shall include, but not be
limited to, information relating to BMS' past, present and future marketing
and research and development activities that may be disclosed to Vendor by
BMS and/or BMS' parent, subsidiary or affiliate companies and which are
identified in writing by BMS as confidential. BMS Confidential information
shall not include (i) information known by Vendor prior to disclosure from
BMS, (ii) information which is or becomes publicly known through no
wrongful act of Vendor, (iii) information that is independently developed
by Vendor, without use of information that otherwise constitutes BMS
Confidential Information, or (iv) information disclosed pursuant to law,
rule, regulation or pursuant to a court order, provided that BMS is given
10 days prior notice of such disclosure. Vendors obligations not to
disclose BMS Confidential Information to third parties shall survive the
termination of this Agreement for a period of five years. Vendor shall not
duplicate any material containing BMS Confidential Information, except in
the direct performance of its services under this Agreement. Vendor
<PAGE>
shall return all copies of materials containing BMS Confidential
Information upon Vendor's completion of services under this Agreement or
upon any earlier termination of this Agreement for any reason whatsoever.
BMS shall treat as confidential and secret any and all Vendor Confidential
Information. "Vendor Confidential Information" shall include, but not be
limited to, information relating to Vendor's past, present and future
systems development activities that may be disclosed to BMS and/or BMS'
parent, subsidiary or affiliate companies and which are identified in
writing by Vendor as confidential, except that in no event shall Vendor
Confidential Information include information relating to Vendor
deliverables under this agreement. Vendor Confidential lnformation shall
not include (i) information known by BMS prior to disclosure from Vendor,
(ii) information which is or becomes publicly known through no wrongful act
of BMS, (iii) information that is independently developed by BMS, without
use of information that otherwise constitutes Vendor Confidential
Information, or (iv) information disclosed pursuant to law, rule,
regulation or pursuant to a court order, provided that Vendor is given 10
days prior notice of such disclosure. BMS' obligations not to disclose
Vendor Confidential Information shall survive the termination of this
Agreement for a period of five years. BMS shall return all copies of
materials containing Vendor Confidential Information upon Vendor's
completion of services under this Agreement or upon any earlier termination
of this Agreement for any reason whatsoever.
D. INDEMNIFICATION
Each party shall indemnify and hold the other party harmless from and
against all liability, damages, penalties, losses, costs or expenses,
including attorneys' fees, arising from or in any way related to its
willful or negligent actions or omissions in performing the
responsibilities as described in this Agreement, or for any willful or
negligent breach of this Agreement.
E. PROFESSIONAL STANDARDS
Vendor represents that it has facilities, personnel, experience and
expertise sufficient in quality and it will perform all such assignments
and projects given it by BMS hereunder and agrees that it will perform all
such assignments and projects in a manner commensurate with professional
standards generally applicable to its industry.
F. OWNERSHIP OF MATERIALS
Any and all telephone scripts or written materials created by Vendor for
BMS in connection with this Agreement shall be the sole and exclusive
property of BMS. BMS may use such work wherever and whenever it chooses.
This Agreement shall be deemed a transfer of copyright and any
copyrightable subject matter created by Vendor in such
<PAGE>
works. Vendor shall execute any and all documents necessary to demonstrate
or perfect such transfer. Vendor shall not at any time in any manner
during or after this Agreement, under any circumstances, be entitled to or
claim any right, title or interest herein or any commission, fee or other
direct or indirect benefit from BMS or BMS' parent, subsidiary or affiliate
companies, in respect of such works created by Vendor hereunder. Vendor
agrees to execute or cause its agents and/or employees to execute any
documents necessary or desirable to secure or perfect BMS' legal rights and
worldwide ownership in such works, including, but not limited to documents
relating to trademark and copyright applications.
G. RELEASES
Any materials furnished hereunder which have not been created for BMS and
are subject to the rights of third parties shall be specifically identified
to BMS in writing. Vendor shall obtain (and deliver upon request to BMS)
releases for all names, photographs, illustrations, testimonials, and any
and all other materials used in works which Vendor prepares or uses. All
such releases shall run to BMS, its agents and employees where appropriate
and customary. Vendor's failure to obtain such releases or the obtaining
of such releases by Vendor shall in no way relieve Vendor of its
obligations in Paragraph F above except where the releases have been
obtained directly by BMS. Except for works that have been secured by
permission, Vendor warrants and covenants that all works provided by Vendor
shall be original and shall not infringe any copyright or violate any
rights of any persons or entities whatsoever.
H. DURATION OF AGREEMENT
1. Term
This Agreement is effective as of the Effective Date and shall continue in
full force and effect through December 31, 2001 unless terminated by at
least ninety (90) days written notice by either party to the other, sent by
registered mail to the address for each party first set forth above, or to
such other address which a party may designate for its receipt of notices
hereunder. The Agreement will automatically renew for two successive five
year terms unless either party provides the other party with written notice
no less than 90 days prior to the expiration of the Agreement of its intent
not to renew the Agreement.
2. Payment on Termination
Upon termination of this Agreement BMS is to pay for all authorized work in
process, and BMS shall assume Vendor's liability under and indemnify Vendor
with respect to all outstanding contracts made in connection with Vendor
services under this Agreement. Upon written notice of termination Vendor
shall take all steps necessary to wind up the work under this Agreement and
to mitigate BMS' liability therefore. Should Vendor terminate the
agreement, during a period of time during which BMS has the exclusive right
to the program as described in the Exclusivity section of this Agreement,
it shall not engage or participate in any other project involving the
development or implementation
<PAGE>
of an interactive program in pain management for twelve months from the
date of termination. Vendor also agrees to perform services under this
Agreement the shorter of six months or until an alternative source for
those services can be obtained should it terminate this Agreement.
3. Transfer Upon Termination
Vendor shall transfer, assign and make available to BMS or BMS'
representative all property and materials in Vendor's possession or control
belonging to and paid for by BMS, and all information regarding BMS'
project(s) covered by this Agreement, as set forth in Paragraph C herein.
Vendor also agrees to give all reasonable cooperation toward transferring
with approval of third parties in interest all contracts and arrangements,
if any, properly entered into by Vendor in the performance of this
Agreement, and all rights and claims thereto and therein, upon being duly
released from the obligation thereof.
I. INDEPENDENT CONTRACTORS
The parties to this Agreement are independent contractors and nothing
contained in this Agreement shall be construed to place the parties in the
relationship of employer and employee, partners, principal and agent, or
joint venture. Neither party shall have the power to bind or obligate the
other party nor shall either party hold itself out as having such
authority.
J. THIRD PARTY OBLIGATIONS
In connection with this Agreement, Vendor shall make no commitments or
disbursements, incur no obligations nor place any advertising, public
relations or promotional material for BMS' parent, subsidiary or affiliate
companies, nor disseminate any material of any kind using the name of BMS
and/or BMS' parent, subsidiary or affiliate companies or using their
trademarks, without the prior written approval of BMS.
K. GOVERNING LAW
This Agreement is entered into in the State of New Jersey and shall be
construed and governed under and in accordance with the laws of that State.
L. MISCELLANEOUS
1) The terms of this Agreement shall be binding upon BMS and Vendor and
their respective successors and permitted assigns. Notwithstanding the
foregoing, this Agreement is not assignable in whole or in part by Vendor
without the prior written consent of BMS. Factoring of accounts receivable
is not permitted.
<PAGE>
2) The failure of either party to take action as a result of a breach of
this Agreement by the other party shall constitute neither a waiver of the
particular breach involved nor a waiver of either party's right to enforce
any or all provisions of this Agreement through any remedy granted by law
or this Agreement.
3) BMS is an Equal Opportunity Employer and does not discriminate against
any person because of race, color, creed, age, sex, or national origin.
Vendor represents that it has the same policy of Equal Opportunity
Employment.
4) The policy of BMS is to protect the health, safety and quality of life
of its employees and the public, and to exercise responsible stewardship of
natural resources that may be impacted by its activities. To realize this,
BMS is committed to maintaining programs and procedures for the
environmentally responsible management of facilities, materials, production
processes, products and packaging, transportation and distribution, waste
and ft minimization, energy, general business operations and contracted
goods and services. Vendor agrees with this policy and further
acknowledges that its performance under this Agreement shall be in strict
compliance with all applicable governmental laws and regulations and in
accordance with and in furtherance of this policy.
5) This Agreement contains the entire understanding of the parties with
respect to the subject matter contained herein, supersedes any prior
written or oral communications and may be modified in writing subject to
mutual agreement of the parties hereto.
6) The headings of each paragraph are for reference only and shall not be
construed as part of this Agreement.
7) Except for the obligation to pay money property due and owing, either
party shall be excused from any delay or failure in performance hereunder
caused by reason of any occurrence or contingency beyond its reasonable
control, including, but not limited to, failure of performance by the other
party, earthquake, labor disputes, riots, governmental requirements,
judicial requirements, inability to secure materials on a timely basis,
failure of computer equipment, failures or delays of sources from which
information or data is obtained and transportation difficulties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer, have
entered into this Agreement this ____ day of ______________, 1996.
Bristol-Myers Squibb Oncology Disease State Management, Inc.
a division of Bristol-Myers 46 Prince Street
Squibb Company Rochester, New York 14607
By: /s/ Brian Markison By: /s/ George T. Witter
-------------------------------- -----------------------------------
Title: Vice President Title: Vice President Sales
----------------------------- --------------------------------
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
PROGRAM OVERVIEW
It is the intention of DSMi-TM- and BMS that DSMi-TM- will develop and operate
for BMS an interactive pain management program for use by patients. Upon
completion of each phase, BMS and DSMi-TM- will consult to determine the
appropriate next phase. It is understood that subsequent phases may differ from
the Intermediate and Final Phases as described in this contract based upon such
consultation. DSMi-TM- will be working with BMS to identify potential products
as follows:
CLINICAL STUDY PHASE
This phase consists of a thirty day QOL/pharmacoeconomics trial involving one
hundred and fifty patient at the M.D. Anderson Cancer Center in Houston, Texas.
INTERMEDIATE PHASE
This phase is a Phase IV post approval surveillance trial to involve as many as
fifty cancer treatment centers in the United States and as many as 500 patients.
It is expected that this trial will have a twelve week duration.
FINAL PHASE
The final phase of this process will be the implementation of a Pain Management
Distribution System for use with drugs which BMS may market in the future.
PROGRAM GOALS
A. OVERALL GOALS
1. Educate patients on strategies for overcoming breakthrough pain
2. Assess patient's level of pain and degree of symptom relief
3. Identify patients with unrelieved pain
4. Enable the patient to communicate pain and ask for appropriate
analgesics
5. Use the Quality Improvement Guidelines from the American Pain Society
to improve the treatment of cancer pain
6. Assess quality of life issues relating to mood, depression,
constipation, nausea and vomiting
7. Facilitate appropriate and timely communication of critical pain
symptoms to health care providers.
B. BEHAVIORAL GOALS
1. Improve patient understanding and awareness with respect to:
Analgesic therapy for breakthrough pain
Self monitoring of pain intensity
2. Enhance patient motivation and confidence with respect to:
Pharmacological therapy
Self monitoring of pain intensity
Managing associated symptoms (nausea, constipation, depression)
3. Enhance compliance with respect to:
Adjunctive pharmacological agents
1
<PAGE>
C. BUSINESS GOALS
1. Provider goals
- Enhance pain management for patients
- Strengthen patient/provider relationship
- Encourage adherence to established treatment guidelines
- Provide value added service
- Link providers, nurses, pharmacists and patients
- Reduce risk factors associated with costly:
Unscheduled office visits
Emergency room interventions
Hospitalizations
- Provide expanding database for critical pathway development
2. BMS Goals
- Empower patients to take an active role in their pain management
- Gather consistent data enabling publication of results in a peer
review forum
- Establish an automated intervention system as the standard of
care in pain management monitoring
2
<PAGE>
PROGRAM SCHEDULE
See the "Program Intervention Description" section for details about each of the
interventions. This protocol would be delivered to patients during their
involvement in the program.
CLINICAL STUDY PHASE PROTOCOL
- QUALITY OF LIFE ENROLLMENT QUESTIONNAIRE
Patient demographics obtained from Quality of Life Questionnaire
Patient demographics entered into database
- INITIAL PROGRAM CALL (WEEK ONE)
Initial call to patient
Personalized provider update report #1
- FOLLOW-UP CALL #1 (WEEK TWO)
Personalized provider update report #2
- FOLLOW-UP CALL #2 (WEEK THREE)
Personalized provider update report #3
- FOLLOW-UP CALL #3 (WEEK FOUR)
Personalized provider update report #4
- AN ADDITIONAL 22 TELEPHONE INTERVENTIONS EVERY TWO WEEKS TO PATIENTS
WHO WERE PARTICIPANTS IN THE CLINICAL STUDY PHASE. FAXED PHYSICIAN
REPORTING IN CRISIS SITUATION ONLY
AFTER COMPLETION OF THE CLINICAL STUDY PHASE PROTOCOL, THE PATIENT DATABASE WILL
BE FORWARDED TO M.D. ANDERSON CANCER CENTER FOR ANALYSIS.
INTERMEDIATE PHASE PROTOCOL
- Follow-up to Clinical Study Phase
- Telephone interventions every other week to as many as 500 patients at
as many as 50 cancer treatment centers in a Phase IV post approval
study
- Faxed physician reporting in crisis situation only
FINAL PHASE PROTOCOL
- To Be Determined
3
<PAGE>
PROGRAM INTERVENTION DESCRIPTION
See the "Program Schedule" section for an outline of the protocol for delivering
these program components. Note that the term "provider" is used to refer to a
case manager or another health care provider designated to receive
communications regarding the patient.
QUALITY OF LIFE ENROLLMENT QUESTIONNAIRE
- Tool to establish demographic information concerning patients
- Tool for establishing personalized baseline pain statistics
- Summarizes pain medication history
- Tracks pain management
- Establishes treatment, motivation, knowledge and satisfaction issues
TELEPHONE CALLS
- Call to enroll patients in the program as per data provided by BMS
- Call placed by operator to patients according to patient's preferred
contact times and the program intervention schedule
- Cost-efficient interface: operator-initiated contact to identify
patient and transfer to automated, voice response system
- Option to reconnect with operator during or after voice response
interaction
- High appeal voice response system using a recorded human voice versus
computer synthesized speech
- Patient responds in normal speaking voice versus pushing touch tone
buttons
- Self-reported assessment of pain management factors
- Patient receives personalized questions and clinically appropriate
feedback driven by expert system to promote patients' ability to
effectively manage their pain.
- Creates foundation for expanding patient data file which drives the
personalized, interactive program services
- Allows identification of patient concerns and appropriate referral
- Adds vital progress information to the longitudinal patient database
PROVIDER UPDATES
- Laser printed, on-demand published report integrating patient's
follow-up and enrollment data
- Faxed to patient's provider after each patient follow-up call
- "At-a-glance" format provides efficient documentation of critical
patient data, ready for insertion into the medical record
- Facilitates identification of patient education needs and
hard-to-manage patients, appropriate allocation of health care
resources, and timely modification of treatment regimens
- Enhances patient-provider communication
ORGANIZATIONAL DATA REPORTS
- Comprehensive data sets will be determined by expert consultation.
- Standard data reports provided at conclusion of trial period.
Configuration of standard reports to be determined.
4
<PAGE>
PROGRAM DEVELOPMENT
In conjunction with the Pain Management Group, DSMi-TM- will perform a
comprehensive needs assessment to establish the fundamental goals, objectives
and data sets for the intervention protocol. The needs assessment portion of
the project development shall include the establishment of an expert panel. The
panel will consist of Dr. Richard Payne, two oncology nurse specialists, John
La Lota from the Pain Management Group and a DSMi-TM- clinical expert.
Recruitment and contracting of the clinical consultants shall be the
responsibility of and at the discretion of DSMi-TM- and the Pain Management
Group, BMS agrees to review/accept advisory board recommendations. The panel
will assist in the development of the following:
a) Intervention Protocol
b) Program Goals
c) Data sets
d) Outcomes evaluation protocol
e) Baseline parameters
f) Inclusion/exclusion criteria
During clinical development, consulting experts will review program materials,
call algorithms and reports to include that program development goals are met.
Program development for the Clinical Study Phase will be completed within 60
days of contract signing and will result in DSMi-TM- delivering a fully
operational program, including the following components:
- Quality of Life Enrollment Questionnaire
- Four Telephone Interventions
- Four Provider Update Reports
The Clinical Study Phase program development includes the following tasks:
- Design of graphic presentation for on-demand published materials
- Design of systems configuration
- Systems programming for internal reporting, on-demand publishing,
interactive voice response, and outcomes analysis
- Voice recording and training of the voice response system
- Testing of the operable program
- Proof reading/editing pre-printed and on-demand published materials
There will be additional program development activity for the Intermediate and
Final Phases, however these cannot be determined until changes to be made to the
program components developed during the Clinical Study Phase have been
identified.
5
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
PROGRAM DEVELOPMENT FEES
The cost is [*****] to deliver the Clinical Study Phase program. This fee is
payable according to the following schedule:
- 40% upon contract signing
- 20% at signing date plus 30 days
- 40% upon completion of Clinical Study Phase program development
Developmental fees will cover:
- Clinical
- Expert Consultation
- Clinical Content
- Intervention Algorithms
- Testing and Debugging
- Systems
- Database Development
- On-Demand Publishing
- Voice Training (IVR)
- Call Center Integration
- Graphics/ Communication
- Logo Design
- Layout
- Illustration Development
- Voice Recording/Studio
Should the protocols of the intermediate and final phases of this program be
very similar to those of the Clinical Study Phase, the combined development fee
for these two phases will not exceed [*****]. The types of changes that would
cause these additional development fees to exceed [*****] would be items such
as extended call lengths, the use of different calls rather than one call on a
repetitive basis, changes in the length of the provider reports, introduction of
patient reports, and changes to the logic pattern of the calls.
PROGRAM OPERATION FEES
The patient program operation cost is [*****] per call for the Clinical Study
Phase. The patient program operation fees will be billed monthly. Should the
contracted call be modified in such a manner as to shorten/lengthen the call or
reduce/increase the cost of reporting/publication DSMi-TM-/BMS shall negotiate
an appropriate fee for all subsequent interventions.
The per patient program operational cost for the Intermediate and Final Phases
will be determined after analysis of the results of the Clinical Study Phases.
6
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
EXCLUSIVITY
DSMi-TM- agrees not to engage or participate in any other project involving the
development or implementation of an interactive program in pain management
through the earlier of December 31, 1996 or the date upon which development of
the Final Phase program begins. BMS shall have the option to extend this
exclusivity period for the twelve month period commencing on the earlier of the
date upon which development of the Final Phase program begins or December 31,
1996 by agreeing to pay DSMi-TM- an exclusivity fee of [*****] if program
operational fees do not exceed [*****] during the period from January 1, 1997
through December 31, 1997. Further extensions of the period of exclusivity
shall require that BMS agree to pay to DSMi-TM- an annual exclusivity fee of
[*****] multiplied by a fraction, the numerator of which shall be the Consumer
Price Index for the medical sector for the calendar year immediately preceding
that of the commencement of the extension period and the denominator of which
shall be the Consumer Price Index for the medical sector for 1995 if the program
operational fees for the project fail to reach the [*****] during the preceding
twelve month period.
BMS must notify DSMi-TM- 90 days prior to the end of each exclusivity period if
it intends to exercise its option to extend the Exclusivity Period by agreeing
to the above exclusivity fee.
Nothing in this Agreement shall prevent DSMI-TM- from developing an interactive
program for a disease area which includes a pain management component, but which
is not primarily focused on pain management.
7
<PAGE>
SERVICES AGREEMENT
This Agreement is effective this 23rd day of April, 1996, (the "Effective
Date") between Disease State Management, Inc., 46 Prince Street, Rochester, New
York 14607 ("DSMi" or "Vendor") and Bristol-Myers Squibb Oncology/Immunology, a
division of Bristol-Myers Squibb Company, P.O. Box 4500, Princeton, New Jersey
08543-4500 (hereinafter called "BMS"). Vendor agrees to provide services to BMS
under the terms set forth below.
A. SERVICES
Vendor will provide the product(s) or service(s) set forth, and to the
specifications set forth in the proposal incorporated herein as Attachment
A.
The product and all material elements as set forth on Attachment A are
subject to prior approval by BMS, such approval not to be unreasonably
withheld.
B. COMPENSATION
BMS will pay Vendor according to the terms or payment schedule set forth in
Attachment A hereto.
In the event that BMS shall request any changes in the concept,
specifications or scope of the product(s) or service(s) described on
Attachment A hereto, Vendor will notify BMS of the cost of such revisions
and will not proceed without prior approval.
If the compensation provision on Attachment A hereto is other than a flat
fee amount per element or for the entire project, Vendor will provide such
documentation in support of all billings as BMS may reasonably require.
C. CONFIDENTIALITY
Vendor shall treat as confidential and secret any and all BMS Confidential
Information. "BMS Confidential Information" shall include, but not be
limited to, information relating to BMS' past, present and future marketing
and research and development activities that may be disclosed to Vendor by
BMS and/or BMS' parent, subsidiary or affiliate companies and which are
identified in writing by BMS as confidential. BMS Confidential information
shall not include (i) information known by Vendor prior to disclosure from
BMS. (ii) information which is or becomes publicly known through no
wrongful act of Vendor, (iii) information that is independently developed
by Vendor, without use of information that otherwise constitutes BMS
Confidential Information, or (iv) information disclosed pursuant to law,
rule, regulation or pursuant to a court order, provided that BMS is given
10 days prior notice of such disclosure. Vendors obligations not to
disclose BMS Confidential Information to third parties shall survive the
termination of this Agreement for a period of five years. Vendor shall not
duplicate any material containing BMS Confidential
<PAGE>
Information, except in the direct performance of its services under this
Agreement. Vendor shall return all copies of materials containing BMS
Confidential Information upon Vendor's completion of services under this
Agreement or upon any earlier termination of this Agreement for any reason
whatsoever.
BMS shall treat as confidential and secret any and all Vendor Confidential
Information. "Vendor Confidential Information" shall include, but not be
limited to, information relating to Vendor's past, present and future
systems development activities that may be disclosed to BMS and/or BMS'
parent, subsidiary or affiliate companies and which are identified in
writing by Vendor as confidential, except that in no event shall Vendor
Confidential Information include information relating to Vendor
deliverables under this agreement. Vendor Confidential lnformation shall
not include (i) information known by BMS prior to disclosure from Vendor,
(ii) information which is or becomes publicly known through no wrongful act
of BMS, (iii) information that is independently developed by BMS, without
use of information that otherwise constitutes Vendor Confidential
Information, or (iv) information disclosed pursuant to law, rule,
regulation or pursuant to a court order, provided that Vendor is given 10
days prior notice of such disclosure. BMS' obligations not to disclose
Vendor Confidential Information shall survive the termination of this
Agreement for a period of five years. BMS shall return all copies of
materials containing Vendor Confidential Information upon Vendor's
completion of services under this Agreement or upon any earlier termination
of this Agreement for any reason whatsoever.
D. INDEMNIFICATION
Each party shall indemnify and hold the other party harmless from and
against all liability, damages, penalties, losses, costs or expenses,
including attorneys' fees, arising from or in any way related to its
willful or negligent actions or omissions in performing the
responsibilities as described in this Agreement, or for any willful or
negligent breach of this Agreement. BMS shall indemnify and hold Vendor
harmless from and against all liability, damages, penalties, losses, costs
or expenses, including attorney's fees, arising from or in any way related
to any and all medical malpractice claims or litigations involving Vendor
arising from a patient's use of Megace-Registered Trademark-Oral
Suspension.
E. PROFESSIONAL STANDARDS
Vendor represents that it has facilities, personnel, experience and
expertise sufficient in quality and it will perform all such assignments
and projects given it by BMS hereunder and agrees that it will perform all
such assignments and projects in a manner commensurate with professional
standards generally applicable to its industry.
F. OWNERSHIP OF MATERIALS
Any and all telephone scripts or written materials created by Vendor for
BMS in connection with this Agreement shall be the sole and exclusive
property of BMS. BMS
<PAGE>
may use such work wherever and whenever it chooses. This Agreement shall
be deemed a transfer of copyright and any copyrightable subject matter
created by Vendor in such works. Vendor shall execute any and all
documents necessary to demonstrate or perfect such transfer. Vendor shall
not at any time in any manner during or after this Agreement, under any
circumstances, be entitled to or claim any right, title or interest herein
or any commission, fee or other direct or indirect benefit from BMS or BMS'
parent, subsidiary or affiliate companies, in respect of such works created
by Vendor hereunder. Vendor agrees to execute or cause its agents and/or
employees to execute any documents necessary or desirable to secure or
perfect BMS' legal rights and worldwide ownership in such works, including,
but not limited to documents relating to trademark and copyright
applications.
G. RELEASES
Any materials furnished hereunder which have not been created for BMS and
are subject to the rights of third parties shall be specifically identified
to BMS in writing. Vendor shall obtain (and deliver upon request to BMS)
releases for all names, photographs, illustrations, testimonials, and any
and all other materials used in works which Vendor prepares or uses. All
such releases shall run to BMS, its agents and employees where appropriate
and customary. Vendor's failure to obtain such releases or the obtaining
of such releases by Vendor shall in no way relieve Vendor of its
obligations in Paragraph F above except where the releases have been
obtained directly by BMS. Except for works that have been secured by
permission, Vendor warrants and covenants that all works provided by Vendor
shall be original and shall not infringe any copyright or violate any
rights of any persons or entities whatsoever.
H. DURATION OF AGREEMENT
1. Term
This Agreement is effective as of the Effective Date and shall continue in
full force and effect for twelve (12) months unless terminated by at least
ninety (90) days written notice by either party to the other, sent by
registered mail to the address for each party first set forth above, or to
such other address which a party may designate for its receipt of notices
hereunder.
2. Payment on Termination
Upon termination of this Agreement BMS is to pay for all authorized work in
process, and BMS shall assume Vendor's liability under and indemnify Vendor
with respect to all outstanding contracts made in connection with Vendor
services under this Agreement. Upon written notice of termination Vendor
shall take all steps necessary to wind up the work under this Agreement and
to mitigate BMS' liability therefore. Should Vendor terminate the
agreement, during a period of time during which BMS has the exclusive right
to the program as described in the Exclusivity section of this Agreement,
it shall not engage or participate in any other project involving the
development or implementation
<PAGE>
of an interactive program primarily focused on Weight Enhancement for
patients with Cancer or AIDS for twelve months from the date of
termination. Vendor also agrees to perform services under this Agreement
the shorter of six months or until an alternative source for those services
can be obtained should it terminate this Agreement.
3. Transfer Upon Termination
Vendor shall transfer, assign and make available to BMS or BMS'
representative all property and materials in Vendor's possession or control
belonging to and paid for by BMS, and all information regarding BMS'
project(s) covered by this Agreement, as set forth in Paragraph C herein.
Vendor also agrees to give all reasonable cooperation toward transferring
with approval of third parties in interest all contracts and arrangements,
if any, properly entered into by Vendor in the performance of this
Agreement, and all rights and claims thereto and therein, upon being duly
released from the obligation thereof.
I. INDEPENDENT CONTRACTORS
The parties to this Agreement are independent contractors and nothing
contained in this Agreement shall be construed to place the parties in the
relationship of employer and employee, partners, principal and agent, or
joint venture. Neither party shall have the power to bind or obligate the
other party nor shall either party hold itself out as having such
authority.
J. THIRD PARTY OBLIGATIONS
In connection with this Agreement, Vendor shall make no commitments or
disbursements, incur no obligations nor place any advertising, public
relations or promotional material for BMS' parent, subsidiary or affiliate
companies, nor disseminate any material of any kind using the name of BMS
and/or BMS' parent, subsidiary or affiliate companies or using their
trademarks, without the prior written approval of BMS.
K. GOVERNING LAW
This Agreement is entered into in the State of New Jersey and shall be
construed and governed under and in accordance with the laws of that State.
L. MISCELLANEOUS
1) The terms of this Agreement shall be binding upon BMS and Vendor and
their respective successors and permitted assigns. Notwithstanding the
foregoing, this Agreement is not assignable in whole or in part by Vendor
without the prior written consent of BMS. Factoring of accounts receivable
is not permitted.
<PAGE>
2) The failure of either party to take action as a result of a breach of
this Agreement by the other party shall constitute neither a waiver of the
particular breach involved nor a waiver of either party's right to enforce
any or all provisions of this Agreement through any remedy granted by law
or this Agreement.
3) BMS is an Equal Opportunity Employer and does not discriminate against
any person because of race, color, creed, age, sex, or national origin.
Vendor represents that it has the same policy of Equal Opportunity
Employment.
4) The policy of BMS is to protect the health, safety and quality of life
of its employees and the public, and to exercise responsible stewardship of
natural resources that may be impacted by its activities. To realize this,
BMS is committed to maintaining programs and procedures for the
environmentally responsible management of facilities, materials, production
processes, products and packaging, transportation and distribution, waste
and ft minimization, energy, general business operations and contracted
goods and services. Vendor agrees with this policy and further
acknowledges that its performance under this Agreement shall be in strict
compliance with all applicable governmental laws and regulations and in
accordance with and in furtherance of this policy.
5) This Agreement contains the entire understanding of the parties with
respect to the subject matter contained herein, supersedes any prior
written or oral communications and may be modified in writing subject to
mutual agreement of the parties hereto.
6) The headings of each paragraph are for reference only and shall not be
construed as part of this Agreement.
7) Except for the obligation to pay money property due and owing, either
party shall be excused from any delay or failure in performance hereunder
caused by reason of any occurrence or contingency beyond its reasonable
control, including, but not limited to, failure of performance by the other
party, earthquake, labor disputes, riots, governmental requirements,
judicial requirements, inability to secure materials on a timely basis,
failure of computer equipment, failures or delays of sources from which
information or data is obtained and transportation difficulties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer, have
entered in to this Agreement this 23 day of April, 1996.
Bristol-Myers Squibb Disease State Management, Inc.
Oncology/Immunology 46 Prince Street
a division of Bristol-Myers Rochester, New York 14607
Squibb Company
P.O. Box 4500
Princeton, New Jersey 08543
By: /s/ Brian Markison By: /s/ George T. Witter
--------------------------- ---------------------------
Title: Vice President Title: Vice President, Sales
------------------------ ------------------------
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
WEIGHT ENHANCEMENT
PATIENT INTERVENTION PROGRAM
-----------------------------
FOR
BRISTOL-MYERS SQUIBB
ONCOLOGY/IMMUNOLOGY
PRESENTED BY
DISEASE STATE MANAGEMENT,-SM- INC.
46 PRINCE STREET
ROCHESTER, NEW YORK 14607
716-244-1360
<PAGE>
WEIGHT ENHANCEMENT
PROGRAM OVERVIEW
NEEDS ASSESSMENT
DSMI-SM-, under the direction of Bristol-Myers Squibb, Oncology/Immunology, will
perform a comprehensive needs assessment to establish the fundamental goals,
objectives and data sets for the intervention protocol. The needs assessment
portion of the project development shall include:
I. Establishment of an Expert Consultation Panel. The panel will consist of
an Oncologist, an Immunologist, a Dietitian, a Nurse, a Social Worker and a
DSMI-SM- clinical development staff member. Recruitment of the clinical
consultants shall be the responsibility of and at the discretion of BMS.
Contracting of the clinical consultants shall be the responsibility of
DSMI-SM-. BMS agrees to review/accept advisory board recommendations. The
panel will assist in the development of the following:
A. Intervention protocol E. Baseline parameters
B. Program goals F. Inclusion/exclusion criteria
C. Data sets G. Appropriate DRG/ICD - 9 codes
D. Outcomes evaluation protocol
II. DSMI-SM- will perform a review of preprinted published materials to provide
a listing of available educational resources pertaining to Anorexia or
Cachexia secondary to a diagnosis of Cancer or AIDS. BMS will direct
DSMi-SM- towards specific organizations which can provide such materials.
2
<PAGE>
WEIGHT ENHANCEMENT
PROGRAM GOALS
PATIENTS ON MEGACE-REGISTERED TRADEMARK- THERAPY
1. Patient Intervention (Behavioral Goals):
A. Improve patient understanding and awareness with respect to:
1. Pharmacologic Therapy
2. Nutritional Needs & Guidelines
3. Critical Symptoms
4. Associated Risk Factors
5. Exercise Protocols
6. Improved Body Weight
B. Enhance Patient Motivation and Confidence with respect to:
1. Pharmacologic Therapy
2. Nutritional Needs & Guidelines
3. Critical Symptoms
4. Associated Risk Factors
5. Exercise Protocols
6. Improved Body Weight
C. Enhance Compliance with respect to:
1. Pharmacologic Therapy
2. Nutritional Needs & Guidelines
3. Exercise Protocols
4. Critical Symptoms
D. Facilitate the appropriate use of referral resources with respect to:
1. Nutritional Interventions
2. Pharmacologic Therapy
3. Modification of Associated Risk Factors
4. Health Care Team
E. Facilitate appropriate and timely communication of critical symptoms
and patient compliance concerns to health care providers.
F. Enhance communication of information between patient and health care
providers.
3
<PAGE>
WEIGHT ENHANCEMENT
PROGRAM GOALS
AT RISK PATIENTS NAIVE TO MEGACE-REGISTERED TRADEMARK- THERAPY
This intervention program will help patients, who are in advanced stages of
Cancer/AIDS who may have failed on other interventions, with reaching the
following behavioral goals and help the health care provider determine if/when
the patient is a candidate for Megace-Registered Trademark- therapy.
I. Patient Intervention (Behavioral Goals):
A. Improve patient understanding and awareness with respect to:
1. Pharmacologic Therapy
2. Nutritional Needs & Guidelines
3. Critical Symptoms
4. Associated Risk Factors
5. Exercise Protocols
6 Demonstrated Weight Loss
7. Severe Appetite Depression
8. Improved Body Weight
B. Enhance Patient Motivation and Confidence with respect to:
1. Pharmacologic Therapy
2. Nutritional Needs & Guidelines
3. Critical Symptoms
4. Associated Risk Factors
5. Exercise Protocols
6. Improved Body Weight
C. Enhance Compliance with respect to:
1. Nutritional Needs & Guidelines
2. Exercise Protocols
3. Critical Symptoms
4. Improved Body Weight
D. Facilitate the appropriate use of referral resources with respect to:
1. Pharmacologic Therapy
2. Nutritional Interventions
3. Modification of Associated Risk Factors
4. Health Care Team
E. Facilitate appropriate and timely communication of critical symptoms
and patient compliance concerns to health care providers.
F. Enhance communication of information between patient and health care
providers.
4
<PAGE>
WEIGHT ENHANCEMENT
PROGRAM GOALS
II. BUSINESS GOALS WHICH MAY BE ENHANCED:
A. BRISTOL-MYERS SQUIBB, ONCOLOGY/IMMUNOLOGY
1. Enhance competitive position
2. Encourage drug compliance/secure adherence to therapy
3. Strengthen customer commitment to BMS partnership
4. Provide powerful customer driven selling tool
5. Enhance alliance with major home health care providers
6. Enhance economic position
7. Enhance leadership position in Oncology
8. Strengthen leadership position in HIV
9. Identify patients at high risk
B. INDEPENDENT PRACTICE
1. Early identification of high risk patients
2. Encourage drug compliance/secure adherence to therapy
3. Strengthen patient/provider relationships
4. Empower patients to take an active role in self-management
5. Encourage adherence to established treatment guidelines
5
<PAGE>
WEIGHT ENHANCEMENT
PROGRAM SCHEDULE
See the "Program Intervention Description" section for details about each of the
interventions. The selected intervention schedule will be delivered to patients
who are currently on Megace-Registered Trademark- therapy or high risk patients
who are not currently on Megace-Registered Trademark- therapy. Note that the
term "provider" is used to denote a case manager or another health care provider
designated to receive communications regarding the patient.
RATIONALE
The use of physician extenders to provide frequent encouragement, reinforcement
and tracking of targeted symptoms has been shown in models for other disease
entities to improve compliance and the perceived well being of the patient.
Intensive intervention in early stages of a program will facilitate success of
program goals.
I. STANDARD PROTOCOL: (SEE SCHEMATIC, PAGE 7)
MONTH 1:
2 Telephone Interventions
2 Demand Published Patient Reports
2 Demand Published Physician Reports
1 Related Pre-Printed Materials
- - Patient Enrollment via standard BRM
- - Initial telephone intervention within 7 days of the BRM entry into the
database
- - Telephone interventions to patient every other week
- - Demand Published Patient Report to follow each telephone intervention
- - Demand Published Physician Report to follow each telephone intervention
- - Related Pre-Printed Materials to be sent with Patient Report
MONTH 2:
1 Telephone Intervention
1 Demand Published Patient Report
1 Demand Published Physician Report
1 Related Pre-Printed Materials
- - Demand Published Patient Report to follow telephone intervention
- - Demand Published Provider Report to follow telephone intervention
- - Related Pre-Printed Materials to be sent with Patient Report
MONTH 3:
1 Telephone Intervention
1 Demand Published Patient Report
1 Demand Published Physician Report
- - Demand Published Patient Report to follow telephone intervention
- - Demand Published Physician Report to follow telephone intervention
6
<PAGE>
STANDARD PROTOCOL SUMMARY:
- - Interactive Voice Recognition Telephone Interventions = 4
- - Demand Published Patient Reports = 4
- - Demand Published Physician Reports = 4
- - Related Pre-Printed Materials = 2
Week # 1 2 3 4 5 6 7 8 9 10 11 12 total
- --------------------------------------------------------------------------------
Telephone Call * * * * 4
Patient Report * * * * 4
Physician Report * * * * 4
Preprinted * * 2
Materials
7
<PAGE>
II. OPTIONAL MONTHLY PROTOCOL:
The Standard Protocol intervention schedule would be greatly enhanced
by extending the protocol as follows:
MONTHS 4, 5, AND 6:
1 Telephone Intervention
- Telephone Interventions provided monthly
Month # 4 5 6 total
---------------------------------------
Telephone Call * * * 3
MONTHLY INTERVENTION PROTOCOL SUMMARY:
- Interactive Voice Recognition Telephone Interventions = 3
PLEASE FIND ADDENDUM ON PAGE 16 OF THIS PROPOSAL FOR AN ADDITIONAL
FOLD-IN OPTION TO THIS PROTOCOL.
8
<PAGE>
WEIGHT ENHANCEMENT
PROGRAM INTERVENTION DESCRIPTION
See the "Program Schedule" section for an outline of the protocol for delivering
these program components. Note that the term "provider" is used to refer to a
physician, case manager or other health care provider designated to receive
communications regarding the patient.
BUSINESS REPLY MAIL (BRM)/PROGRAM DESCRIPTION
- Up to two (2) page pre-printed mailer designed for distribution by
providers to patients and return via postage paid mail response by
patient to DSMI-SM-
- Brief assessment for identifying patient data (e.g., name, phone
number, best time to contact) necessary for DSMISM to initiate a
telephone call to patient
- Program description includes a brief program overview
TELEPHONE INTERVENTIONS
- Five (5) minute telephone calls placed by operator to patients
according to patient's preferred contact times and the program
intervention schedule
- Cost-efficient interface: operator-initiated contact to identify
patient and transfer to automated, voice response system
- Option to reconnect with a live operator during or after voice
response interaction
- High appeal voice response system using a recorded human voice versus
computer synthesized speech
- Patient responds in normal speaking voice versus pushing touch tone
buttons
- Self-report follow-up assessment of relevant medical and behavioral
factors: update on disease status, prescribed treatment including
diet, exercise, and medications, patient motivation, treatment
barriers, patient knowledge indicators regarding symptom
identification and disease self-management
- Patient receives personalized questions and clinically appropriate
feedback driven by expert system to promote patients' awareness of
their condition and adherence to their treatment regimen
- Allows identification of patient concerns
- Adds vital progress information to the longitudinal patient database
PATIENT REPORTS
- One to four page, single sided, laser printed, on-demand published
report including text that is personalized based upon enrollment
responses, and graphics that are personalized to patient's gender
- Mailed to patient within a week after each telephone intervention
- Personalized and pre-printed materials reinforce patient awareness and
knowledge regarding their condition and promote treatment adherence
9
<PAGE>
PHYSICIAN REPORTS
- One page laser printed, on-demand published report integrating
patient's follow-up and enrollment data
- Mailed to patient's provider within a week after each patient
interactive voice response intervention
- "At-a-glance" format provides efficient documentation of critical
patient data, ready for insertion into the medical record
- Facilitates identification of patient education needs and hard-to-
manage patients, appropriate allocation of health care resources, and
timely modification of treatment regimens
- Enhances patient-provider communication
ORGANIZATIONAL DATA REPORTS
- Standard comprehensive data reports and aggregate information will be
provided to BMS. Configuration of standard reports to be
determined by DSMI-SM-'s Systems and Engineering staff. Nonstandard
reports will be developed by DSMI-SM-'s staff at the request of BMS.
DSMI-SM-/BMS will establish customary and reasonable developmental and
production fees for the aforementioned nonstandard reports
- To insure confidentiality and security of program database, reports to
BMS on program data to include aggregate patient information only
10
<PAGE>
WEIGHT ENHANCEMENT
PROGRAM DEVELOPMENT
Program development will proceed in two stages. During the first stage, to be
completed within 45 days of contract signing, DSMI-SM-/BMS will establish and
convene an expert advisory panel meeting to determine: intervention goals,
protocol structure, required data sets, educational requirements, high risk
behaviors, available resources and modifiable behaviors. DSMI-SM- will provide a
panel summary report to BMS. Additionally, no later than signature date plus 45
days, DSMI-SM- will deliver preliminary program components to be used by BMS to
market the program. These components will include five (5) copies for each of
the following prototypes of the program: sample marketing brochure, sample
business reply mail/program description, sample personalized patient report
(including partial Greek text), and sample personalized physician report
(including partial Greek text). In addition, a voice response call-in telephone
demonstration will be designed specifically for BMS.
The second stage of program development will require a maximum of 150 additional
days to deliver a fully operational program, including the following components:
- Business reply mail/program description (design/layout and print
specifications)
- Design, development and production of personalized patient reports
- Design, development and production of personalized physician reports
- Design, development and production of Interactive Voice Response
interventions
- Marketing brochure and sales presentation aid
The program development schedules shall be based upon the selected protocol and
shall not exceed the aforementioned 150 developmental days.
The entire program development includes the following tasks:
PHASE I
- Consultation with BMS to finalize program specifications. Such
consultation will establish: BMS disease management team's program
objectives and marketing and business goals. BMS will provide
DSMI-SM- with an overview in writing no later than contract signing
date plus 45 days.
- Development of and consultation with expert panel as described.
- BMS/DSMI-SM- will establish a formal developmental reporting and
review process. DSMI-SM- will provide BMS a comprehensive project
developmental overview annotating clinical development completion
dates for individual modules. Additionally, formal review conference
dates will be established no later than 45 days after contract
signing. The finalization of program parameters, graphics design or
these formal review/signoff dates is essential in order to meet the
proposed delivery schedule.
- Integration of market research/client/clinical information to finalize
program content.
11
<PAGE>
PHASE II
- Finalize design of graphic presentation for pre-print and on-demand
published materials
- Coordination of personalized clinical copy with personalized graphics
- Design of systems configuration
- Systems programming for internal reporting for on-demand publishing,
interactive voice response, and outcomes analysis
- Voice recording and training of the voice response system
- Identification of appropriate educational brochures and materials
PHASE III
- Testing of the operable program
- Proof reading/editing pre-printed and on-demand published materials
- Upon completion of operational testing DSMI-SM- shall begin
enrollment of patients at the discretion of BMS.
PHASE IV: PILOT PROGRAM
DSMi-SM- shall conduct a pilot test for a maximum of 100 patients, currently on
Megace-Registered Trademark- therapy, recruited by BMS, to determine the
efficiency of the intervention process. The pilot test shall include the
completion of the Standard Protocol (see pages 6 and 7 of this proposal).
Upon completion of the Pilot Program, DSMi-SM- shall begin patient enrollment.
Patients will receive program interventions described under the "Program
Intervention Description" on pages 9 and 10 of this proposal.
12
<PAGE>
WEIGHT ENHANCEMENT
PROGRAM MARKETING AND TRAINING
DSMI-SM- will provide 2 full day training sessions to BMS staff or
representatives to assist in the marketing and training efforts for the program.
Additional training and marketing support shall be available to BMS. Such
support may include:
- Development of marketing and/or training strategies and procedures
- Coordination and/or presentations for meetings and seminars with
payors/sponsoring organizations
- Individual phone and/or in-person consultation with payors/sponsoring
organizations
- Written correspondence with payors/sponsoring organizations
- Preparation of written materials and/or phone demonstrations for the
payors/sponsoring organizations
Fees for this additional expert consultation shall reflect reasonable and
customary charges.
PROGRAM OPERATION
As DSMI-SM-'s program development team nears completion of the program, a
program operation team will be assembled to participate in testing the system.
This facilitates a smooth transition period for the shift from the development
to the operations staff. DSMI-SM- will maintain responsibility for managing its
in-house staff and its subcontractors who are involved in ongoing operations of
the program interventions. Quality assurance measures are included in the
interactive program interventions and DSMI-SM-'s internal reporting systems.
DATABASE DEVELOPMENT
The program database will be constructed and maintained using a standard
Relational Data Base Management System (DBMS). The primary record index will be
based upon patient identification. All information collected at enrollment and
during all subsequent interventions will be stored in the database. The record
schema(s) will be developed according to the specific question sets and data
required by the proposed program. Data may be imported or exported off-line
using a variety of industry standard formats, or on-line using DSMI-SM-'s SQL
Server interface. DSMI-SM- will use industry standard procedures for insuring
the confidentiality and security of the program database.
13
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
PRODUCT DEVELOPMENT FEES
The product development fees for the intervention protocols are:
Standard Protocol: [*****]
Optional Monthly Protocol: [*****]
PRODUCT DEVELOPMENT FEES ARE PAYABLE ACCORDING TO THE FOLLOWING SCHEDULE:
A pilot phase of 100 patients will be conducted over a 6 month study period.
BMS agrees to pay an initial payment of [*****] to commence this pilot phase.
Successful completion of the pilot phase will be judged by outcomes agreeable to
BMS in its sole judgment. Should BMS decide to move forward with full rollout
of this weight enhancement patient intervention program, the balance of the
development fee, [*****], will be payable to DSMi-TM- within 30 days of the
decision to move forward. At the same time a decision will be made whether or
not to proceed with the optional monthly protocol. Should BMS decide not to
move forward after completion of the pilot phase, the initial payment of
[*****] is not refundable to BMS and BMS relinquishes all ownership rights to
this weight enhancement patient intervention program.
Developmental fees will cover:
- Clinical
- Expert Consultation: DSMi-SM shall fund all travel, honorarium
and associated fees involved in the convening of the Expert
Advisory Panel Meeting described under "Program Overview" in this
proposal. Any additional requirements for expert consultation
beyond the services of the "Expert Consultation Panel" shall be
at the sole expense of BMS.
- Clinical Content
- Intervention Algorithms
- Systems
- Database Development
- On-Demand Publishing
- Voice Training (IVR)
- Call Center Integration
- Testing and Debugging
- Graphics/ Communication
- Logo Design
- Layout (preprinted and on-demand materials)
- Illustration Development
- Voice Recording/Studio
- Primary Marketing Materials
- Print Materials
- Operational Voice Demonstration
- Sales Materials
14
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
Printing fees for all pre-printed materials (e.g., marketing brochure, BRM,
program description) will be the responsibility of BMS. DSMI-SM- will furnish
estimates for printing costs upon determination of volumes and final
specifications.
PROGRAM OPERATION FEES
The per patient program fee is [*****] for the "Standard Protocol"
intervention.
The per patient program fee is [*****] for the "Optional Monthly Protocol"
intervention.
Program operational fees are payable at the time of patient enrollment. In the
event of a patient withdrawal from the intervention program, DSMI-SM- will
prorate the remaining expenses. For telephone time utilized during a
conversation between a patient and another health care resource which is
initiated by the follow-up call operator, there will be a charge of [*****] per
minute.
EXCLUSIVITY
During the Exclusivity Period defined below, BMS will agree to provide DSMI-SM-
with payments representing the selected protocol program operation costs for no
fewer than 3000 patients per year. For a period beginning with the date this
Agreement is signed and ending 12 months from date DSMI-SM- completes Phase III
of the program (the "Exclusivity Period"), DSMI-SM- agrees not to engage or
participate in any other project involving the development or implementation of
an interactive program primarily focused on weight enhancement for patients with
Anorexia or Cachexia secondary to a diagnosis of Cancer or AIDS. At the
conclusion of the Exclusivity Period, provided at least 5000 patients have
enrolled in the program, BMS shall have the right, but not the obligation, to
negotiate an exclusive arrangement for an interactive program primarily focused
on weight enhancement for patients with Anorexia or Cachexia secondary to a
diagnosis of Cancer or AIDS. In the event such negotiations are unsuccessful,
BMS shall have the right to match any bona fide offer made to DSMI-SM- for an
interactive program primarily focused on weight enhancement for patients with
Anorexia or Cachexia secondary to a diagnosis of Cancer or AIDS. This right of
first refusal shall endure for a period of twelve months from the conclusion of
the Exclusivity Period.
CONSULTING
A per diem fee plus direct expenses is required for consultation services
performed by DSMI-SM- or its consultants. Such fees would be required for
activities performed for parties outside BMS on behalf of the program and/or
activities beyond the program development/marketing and training operations
functions outlined in this proposal.
CUSTOMIZATION
Any customization will constitute a revision to the intervention protocol (i.e.,
additional patient and/or physician reports and/or variations in on-demand or IV
content). Any logo design used on the demand published reporting is limited to
black and white/grayscale. DSMI-SM- shall furnish estimates for development and
delivery to BMS prior to undertaking any revision.
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
SERVICES AGREEMENT
This Agreement is effective this 16th day of October, 1995, (the "Effective
Date") between DSMI Corp., 46 Prince Street, Rochester, New York 14607
("Vendor") and Bristol-Myers Squibb U. S. Pharmaceuticals, a division of
Bristol-Myers Squibb Company, P.O. Box 4500, Princeton, New Jersey 08543-4500
(hereinafter called "BMSUSP"). Vendor agrees to provide services to BMSUSP
under the terms set forth below.
A. SERVICES
Vendor will provide the product(s) or service(s) set forth, and to the
specifications set forth in the proposal incorporated herein as
Attachment A.
The product and all elements as set forth on Attachment A are subject to
prior approval by BMSUSP, such approval not to be unreasonably withheld.
B. COMPENSATION
All fees for program development will be payable according to the
following schedule:
50% upon execution of this Services Agreement
50% upon completion of development work, defined as the point in time
when the services contemplated hereunder can be delivered.
All fees for program operation will be payable according to the following
schedule:
Satisfaction survey fees payable at the time of identification of
survey participants by BMSUSP.
Compliance program fees are payable at the time that the initial
service included within a particular phase of the program is
delivered. Phase I fees will be payable upon the identification of
the patient by [*****]. Phase II fees are payable upon
identification of a patient as requiring the additional services
based upon the results of the Phase I intervention. Phase III fees
are payable upon identification of a patient as requiring the
additional services based upon the results of the Phase II
intervention.
In the event that BMSUSP shall request any changes in the concept,
specifications or scope of the product(s) or service(s) described on
Attachment A hereto, Vendor will notify BMSUSP of the cost of such
revisions and will not proceed without prior written approval.
If the compensation provision on Attachment A hereto is other than a flat
fee amount per element or for the entire project, Vendor will provide
such documentation in support of all billings as BMSUSP may reasonably
require.
<PAGE>
C. CONFIDENTIALITY.
Vendor shall treat as confidential and secret any and all BMSUSP
Confidential Information. "BMSUSP Confidential Information" shall include,
but not be limited to, information relating to BMSUSP's past, present and
future marketing and research and development activities that may be
disclosed to Vendor by BMSUSP and/or BMSUSP's parent, subsidiary or
affiliate companies and which are identified in writing by BMSUSP as
confidential. BMSUSP Confidential information shall not include (i)
information known by Vendor prior to disclosure from BMSUSP, (ii)
information which is or becomes publicly known through no wrongful act of
Vendor, (iii) information that is independently developed by Vendor,
without use of information that otherwise constitutes BMSUSP Confidential
Information, or (iv) information disclosed pursuant to law, rule,
regulation or pursuant to a court order, provided that BMSUSP is given 10
days prior notice of such disclosure. Vendor expressly agrees that any
information it discovers or develops under this Agreement for the
benefit of BMSUSP shall not be used by Vendor or disclosed by Vendor to
any third party, nor shall Vendor show this Agreement or disclose the
existence, nature or subject matter of this Agreement to any third party
without the prior written consent of BMSUSP. Vendors obligations not to
disclose BMSUSP Confidential Information to third parties and not to
otherwise use BMSUSP Confidential Information shall survive the
termination of this Agreement for a period of five years. Vendor shall
not duplicate any material containing BMSUSP Confidential Information,
except in the direct performance of its services under this Agreement.
Vendor shall return all copies of materials containing BMSUSP
Confidential Information upon Vendor's completion of services under this
Agreement or upon any earlier termination of this Agreement for any
reason whatsoever.
BMSUSP shall treat as confidential and secret any and all Vendor
Confidential Information. "Vendor Confidential Information" shall
include, but not be limited to, information relating to Vendor's past,
present and future systems development activities that may be disclosed
to BMSUSP and/or BMSUSP's parent, subsidiary or affiliate companies and
which are identified in writing by Vendor as confidential, except that in
no event shall Vendor Confidential Information include information
relation to Vendor deliverables under this agreement. Vendor Confidential
Information shall not include (i) information known by BMSUSP prior to
disclosure from Vendor, (ii) information which is or becomes publicly
known through no wrongful act of BMSUSP, (iii) information that is
independently developed by BMSUSP, without use of information that
otherwise constitutes Vendor Confidential Information, or (iv)
information disclosed pursuant to law, rule, regulation or pursuant to a
court order, provided that Vendor is given 10 days prior notice of such
disclosure. BMSUSP expressly agrees that any Confidential Information it
discovers under this Agreement shall not be disclosed by BMSUSP to any
third party without the prior written consent of Vendor. BMSUSP's
obligations not to disclose Vendor Confidential Information shall survive
the termination of this Agreement for a period of five years.
D. INDEMNIFICATION
<PAGE>
Each party shall indemnify and hold the other party harmless from and
against all liability, damages, penalties, losses, costs or expenses,
including attorneys' fees, arising from or in any way related to its
willful or negligent actions or omissions in performing the
responsibilities as described in this Agreement, or for any willful or
negligent breach of this Agreement.
E. PROFESSIONAL STANDARDS.
Vendor represents that it has facilities, personnel, experience and
expertise sufficient in quality and it will perform all such assignments
and projects given it by BMSUSP hereunder and agrees that it will perform
all such assignments and projects in a manner commensurate with
professional standards generally applicable to its industry.
F. OWNERSHIP OF MATERIALS
Any and all reports, information, data or other works created by Vendor
for BMSUSP in connection with this Agreement (with the exception of
customization of the Vendor's basic software and systems for BMSUSP as
well as the Vendor's basic software and systems themselves) shall be the
sole and exclusive property of BMSUSP. BMSUSP may use such work wherever
and whenever it chooses. Vendor shall not at any time in any manner
during or after this Agreement, under any circumstances, be entitled to
or claim any right, title or interest herein or any commission, fee or
other direct or indirect benefit from BMSUSP or BMSUSP's parent,
subsidiary or affiliate companies, in respect of such reports, data,
information or other works created by Vendor hereunder.
BMSUSP hereby grants Vendor a worldwide perpetual royalty free license to
the data and information created by Vendor in connection with this
agreement for purposes of making marketing presentations to other
potential customers and for the development and sale of additional
products based upon this data and information.
G. RELEASES
Any materials furnished hereunder which have not been created for BMSUSP
and are subject to the rights of third parties shall be specifically
identified to BMSUSP in writing. Vendor shall obtain (and deliver upon
request to BMSUSP) releases for all names, photographs, illustrations,
testimonials, and any and all other materials used in works which Vendor
prepares or uses. All such releases shall run to BMSUSP, its agents and
employees where appropriate and customary. Vendor's failure to obtain
such releases or the obtaining of such releases by Vendor shall in no way
relieve Vendor of its obligations in Paragraph F above except where the
releases have been obtained directly by BMSUSP. Except for works that
have been secured by permission, Vendor warrants and covenants that all
works provided by Vendor shall be original and shall not infringe any
copyright or violate any rights of any persons or entities whatsoever.
H. DURATION OF AGREEMENT
<PAGE>
1. Term
This Agreement is effective as of the Effective Date and shall continue
in full force and effect until the earlier of (i) completion of the
project assigned hereunder, (ii) terminated by at least thirty (30) days
written notice by either party to the other, sent by registered mail to
the address for each party first set forth above, or to such other
address which a party may designate for its receipt of notices hereunder.
2. Payment on Termination
Upon termination of this Agreement BMSUSP is to pay for all authorized
work in process, and BMSUSP shall assume Vendor's liability under and
indemnify Vendor with respect to all outstanding contracts made on
BMSUSP's behalf. Upon written notice of termination Vendor shall take
all steps necessary to wind up the work under this Agreement to mitigate
BMSUSP's liability therefore.
3. Transfer Upon Termination
Vendor shall transfer, assign and make available to BMSUSP or BMSUSP's
representative all property and materials in Vendor's possession or
control belonging to and paid for by BMSUSP, and all information
regarding BMSUSP's project(s) covered by this Agreement, as set forth in
Paragraph C herein. Vendor also agrees to give all reasonable cooperation
toward transferring with approval of third parties in interest all
contracts and arrangements, if any, properly entered into by Vendor in
the performance of this Agreement, and all rights and claims thereto and
therein, upon being duly released from the obligation thereof.
I. INDEPENDENT CONTRACTORS
The parties to this Agreement are independent contractors and nothing
contained in this Agreement shall be construed to place the parties in
the relationship of employer and employee, partners, principal and agent,
or joint ventures. Neither party shall have the power to bind or obligate
the other party nor shall either party hold itself out as having such
authority.
J. THIRD PARTY OBLIGATIONS
In connection with this Agreement, Vendor shall make no commitments or
disbursements, incur no obligations or place any advertising, public
relations or promotional material for BMSUSP's parent, subsidiary or
affiliate companies, nor disseminate any material of any kind using the
name of BMSUSP and/or BMSUSP's parent, subsidiary or affiliate companies
or using their trademarks, without the prior written approval of BMSUSP.
<PAGE>
K. GOVERNING LAW
This Agreement is entered into in the State of New Jersey and shall be
constructed and governed under and in accordance with the laws of that
State.
L. MISCELLANEOUS
1) The terms of this Agreement shall be binding upon BMSUSP and the
Vendor and their respective successors and permitted assigns.
Notwithstanding the foregoing, this Agreement is not assignable in whole
or in part by Vendor without the prior written consent of BMSUSP.
Factoring of accounts receivable is not permitted.
2) The failure of either party to take action as a result of a breach of
this Agreement by the other party shall constitute neither a waiver of
the particular breach involved or a waiver of either party's right to
enforce any or all provisions of this Agreement through any remedy
granted by law or this Agreement.
3) BMSUSP is an Equal Opportunity Employer and does not discriminate
against any person because of race, color, creed, age, sex, or national
origin. Vendor represents that it has the same policy of Equal
Opportunity Employment.
4) The policy of BMSUSP is to protect the health, safety and quality of
life of its employees and the public, and to exercise responsible
stewardship of natural resources that may be impacted by its activities.
To realize this, BMSUSP is committed to maintaining programs and
procedures for the environmentally responsible management of facilities,
materials, production processes, products and packaging, transportation
and distribution, waste and ft minimization, energy, general business
operations and contracted goods and services. Vendor agrees with this
policy and further acknowledges that its performance under this Agreement
shall be in strict compliance with all applicable governmental laws and
regulations and in accordance with and in furtherance of this policy.
5) This Agreement contains the entire understanding of the parties with
respect to the subject matter contained herein, supersedes any prior
written or oral communications and may be modified in writing subject to
mutual agreement of the parties hereto.
6) The headings of each paragraph are for reference only and shall not
be construed as part of this Agreement.
<PAGE>
7) Except for the obligation to pay money property due and owing, either
party shall be excused from any delay or failure in performance hereunder
caused by reason of any occurrence or contingency beyond its reasonable
control, including but not limited to, failure of performance by the other
party, earthquake, labor disputes, riots, governmental requirements,
inability to secure materials on a timely basis, failure of computer
equipment, failures or delays of sources from which information or data
is obtained and transportation difficulties.
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer,
have entered in to this Agreement this 16th day of October, 1995.
Bristol-Myers Squibb DSMI Corp.
U. S. Pharmaceuticals 46 Prince Street
a division of Bristol-Myers Rochester, New York 14607
Squibb Company
By: /s/ ANDREW BEIDLER By: /s/ DONALD A. CARLBERG
--------------------------- -----------------------
Title: Mgr., Customer Projects Title: President & CEO
------------------------ --------------------
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
ATTACHMENT A
TELEPHONE SATISFACTION SURVEY
OBJECTIVE
The objective of this program is to twofold. First, the program is designed to
contact and survey 1000 patients prior to their enrollment in a compliance
program. There will be two contracts: an initial survey and a follow-up
survey at a 12-month period after enrollment.
The second objective is to conduct the telephone contact portion of the
compliance program.
PROCEDURES
1. INITIAL SURVEY
A postcard will be sent to all patients identified for the program providing
them with an 800# to call to conduct a survey via telephone.
If the patient has not called the 800# by a specified date, a call-out will
be conducted. This 5-minute call will be dual live/automated with an operator
establishing contact and transferring the patient to an automated voice
response survey.
2. SECOND SURVEY CONTACT
A postcard will be sent to all patients identified for the program providing
them with an 800# to call to conduct a survey via telephone. Participants
have the option to have an operator administer the survey.
If the patient has not called the 800# by a specified date, a call-out will
be conducted. This 5-minute call will be dual live/automated with an operator
establishing contact and transferring the patient to an automated voice
response survey. Participants have the option to have an operator administer
the survey.
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
COMPLIANCE PROGRAM
OBJECTIVE
The objective of this program is to improve compliance via a personalized
mail and telephone program. The target population consists of 1000 managed
care participants.
PROGRAM PROCEDURES
The program will operate according to the following procedures:
PHASE I:
- - [*****] will provide DSMi with the names and contact information for
approximately 1000 patients
- - DSMi will initiate the first telephone call to each of the 1,000 individuals
approximately 30 days after they are identified by [*****]. These calls
will be made by an operator who will identify the patient and transfer her
to a voice response system. The call will be an average of 4 minutes and
consist of approximately 10-15 questions.
- - Those patients who are identified as "low-risk" (specific criteria to be
determined) will receive no additional telephone or mail interventions from
DSMi.
- - Those patient who are identified as "high-risk" (specific criteria to be
determined) will be contacted according to a call schedule to be
determined by Wellpoint.
PHASE II:
- - An estimated 35% of the original 1000 patients, or 350 patients, will
receive a second telephone call similar in length and format to the call
described in Phase I (i.e., dual live/automated, average length of 4
minutes, 10-15 questions).
- - Those patients who are identified as "low-risk" (specific criteria to be
determined) will receive no additional telephone or mail interventions from
DSMi.
- - Those patients who are identified as "high-risk" (specific criteria to be
determined) will be scheduled to receive a series of postcard mailings as
described in Phase III.
PHASE III:
- - An estimated 75% of the 350 Phase II patients, or approximately 262
patients, will receive 5 medication refill reminder postcards by first
class mail, one at each of the following intervals: 3-months, 4-months,
8-months, 9-months, and 12-months after enrollment in the program.
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
PROGRAM DEVELOPMENT
Using content and algorithms for the telephone scripts provided by BMS, DSMi
will provide a fully operational program 90 days after signing a formal
agreement with BMS.
COSTS
SATISFACTION SURVEY
Program development $[*****]
Initial contact (1000 pts @ [*****]/pt) [*****]
Second contact (1000 pts @ [*****]/pt) [*****]
Total $[*****]
COMPLIANCE PROGRAM
Program development $[*****]
Program operations*
- Phase I only (650 pts @ [*****]/pt) $[*****]
- Phase I & II (87 pts @ [*****]/pt) $[*****]
- Phase I, II, & III (263 pts @ [*****]) $[*****]
Total $[*****]
*Figures for distribution of 1000 patients within the 3 categories of
compliance are based upon estimates furnished by BMS. Any change in
this distribution will result in total program operation costs that
are different from estimates indicated above.
<PAGE>
SERVICES AGREEMENT
This Agreement is effective this __1st___ day of _____July___________, 1996,
(the "Effective Date") between -Disease State Management, Inc., 46 Prince
Street, Rochester, New York 14607 ("Vendor") and American Homepatient. Vendor
agrees to provide services to American Homepatient under the terms set forth
below.
A. SERVICES
Vendor will provide the product(s) or service(s) set forth, and to the
specifications set forth in the proposal incorporated herein as Attachment
A.
The product and all elements as set forth on Attachment A are subject to
prior approval by American Homepatient such approval not to be unreasonably
withheld.
B. COMPENSATION
American Homepatient will pay Vendor according to the terms or payment
schedule set forth in Attachment A hereto.
In the event that American Homepatient shall request any changes in the
concept, specifications or scope of the product(s) or service(s) described
on Attachment A hereto, Vendor will notify American Homepatient of the cost
of such revisions and will not proceed without prior written approval.
If the compensation provision on Attachment A hereto is other than a flat
fee amount per element or for the entire project, Vendor will provide such
documentation in support of all billings as American Homepatient may
reasonably require.
C. CONFIDENTIALITY
Vendor shall treat as confidential and secret any and all American
Homepatient Confidential Information. "American Homepatient Confidential
Information" shall include, but not be limited to, information relating to
American Homepatient past, present and future marketing and research and
development activities that may be disclosed to Vendor by American
Homepatient and/or American Homepatient's parent, subsidiary or affiliate
companies and which are identified in writing by American Homepatient as
confidential. American Homepatient Confidential information shall not
include (i) information known by Vendor prior to disclosure from American
Homepatient. (ii) information which is or becomes publicly known through no
wrongful act of Vendor, (iii) information that is independently developed
by Vendor, without use of information that otherwise constitutes American
Homepatient Confidential Information, or (iv) information disclosed
pursuant to law, rule, regulation or pursuant to a court order, provided
that American Homepatient is given 10 days prior notice of such disclosure.
Vendor expressly agrees that any information it discovers or develops under
this Agreement for the benefit of American Homepatient shall not be used
by Vendor or disclosed by Vendor to any third party, nor shall Vendor show
this Agreement or disclose the existence, nature or subject matter of this
Agreement to any third party without the prior written consent of American
Homepatient. Vendors obligations not to disclose American Homepatient
Confidential Information to third parties and not to otherwise use American
Homepatient Confidential Information shall survive the termination of this
Agreement for a period of five years. Vendor shall not duplicate any
material containing American Homepatient Confidential Information, except
in the direct performance of its services under this Agreement. Vendor
shall return all copies of materials containing American Homepatient
Confidential Information upon Vendor's completion of services under this
Agreement or upon any earlier termination of this Agreement for any reason
whatsoever.
<PAGE>
American Homepatient shall treat as confidential and secret any and all
Vendor Confidential Information. Vendor Confidential Information" shall
include, but not be limited to, information relating to Vendor's past,
present and future systems development activities that may be disclosed to
Homepatient and/or American Homepatient's parent, subsidiary or affiliate
companies and which are identified in writing by Vendor as confidential,
except that in no event shall Vendor Confidential Information include
information related to Vendor deliverables under this agreement. Vendor
Confidential information shall not include (i) information known by
American Homepatient prior to disclosure from Vendor, (ii) information
which is or becomes publicly known through no wrongful act of American
Homepatient, (iii) information that is independently developed by American
Homepatient without use of information that otherwise constitutes Vendor
Confidential Information, or (iv) information disclosed pursuant to law,
rule, regulation or pursuant to a court order, provided that Vendor is
given 10 days prior notice of such disclosure. American Homepatient
expressly agrees that any Confidential Information it discovers under this
Agreement shall not be disclosed by American Homepatient to any third party
without the prior written consent of Vendor. American Homepatient
obligations not to disclose Vendor Confidential Information shall survive
the termination of this Agreement for a period of five years.
D. INDEMNIFICATION
Each party shall indemnify and hold the other party harmless from and
against all liability, damages, penalties, losses, costs or expenses,
including attorneys' fees, arising from or in any way related to its
willful or negligent actions or omissions in performing the
responsibilities as described in this Agreement, or for any willful or
negligent breach of this Agreement.
E. PROFESSIONAL STANDARDS
Vendor represents that it has facilities, personnel, experience and
expertise sufficient in quality and quality to perform all such assignments
and projects given it by American Homepatient hereunder and agrees that it
will perform all such assignments and projects in a manner commensurate
with professional standards generally applicable to its industry.
F. OWNERSHIP OF MATERIALS
Any and all reports, information, data or other works created by Vendor for
American Homepatient in connection with this Agreement (with the exception
of customization of the Vendor's basic software and systems for American
Homepatient as well as the Vendor's basic software and systems themselves)
shall be the sole and exclusive property of American Homepatient. American
Homepatient may use such work wherever and whenever it chooses. This
Agreement shall be deemed a transfer of copyright and any copyrightable
subject matter created by Vendor in such works. Vendor shall execute any
and all documents necessary to demonstrate or perfect such transfer.
Vendor shall not at any time in any manner during or after this Agreement,
under any circumstances, be entitled to or claim any right, title or
interest herein or any commission, fee or other direct or indirect benefit
from American Homepatient or American Homepatient's parent, subsidiary or
affiliate companies, in respect of such reports, data, information or other
works created by Vendor hereunder. Vendor agrees to execute or cause its
agents and/or employees to execute any documents necessary or desirable to
secure or perfect American Homepatient's legal rights and worldwide
ownership in such works, including, but not limited to documents relating
to patent, trademark and copyright applications. American Homepatient
hereby grants Vendor a worldwide perpetual royalty free license to the data
and information created by Vendor in connection with this agreement for
purposes of making marketing presentations to other potential customers and
for the development and sale of additional products based upon this data
and information.
<PAGE>
G. RELEASES
Any materials furnished hereunder which have not been created for American
Homepatient and are subject to the rights of third parties shall be
specifically identified to American Homepatient in writing. Vendor shall
obtain (and deliver upon request to American Homepatient) releases for all
names, photographs, illustrations, testimonials, and any and all other
materials used in works which Vendor prepares or uses. All such releases
shall run to American Homepatient, its agents and employees where
appropriate and customary. Vendor's failure to obtain such releases or the
obtaining of such releases by Vendor shall in no way relieve Vendor of its
obligations in Paragraph F above except where the releases have been
obtained directly by American Homepatient. Except for works that have been
secured by permission, Vendor warrants and covenants that all works
provided by Vendor shall be original and shall not infringe any copyright
or violate any rights of any persons or entities whatsoever.
H. DURATION OF AGREEMENT
1. Term
This Agreement is effective as of the Effective Date and shall continue in
full force and effect until the earlier of (i) completion of the project
assigned hereunder, (ii) terminated by at least thirty (30) days written
notice by either party to the other, sent by registered mail to the address
for each party first set forth above, or to such other address which a
party may designate for its receipt of notices hereunder.
2. Payment on Termination
Upon termination of this Agreement American Homepatient is to pay for all
authorized work in process, and American Homepatient shall assume Vendor's
liability under and indemnify Vendor with respect to all outstanding
contracts made on American Homepatient's behalf. Upon written notice of
termination Vendor shall take all steps necessary to wind up the work under
this Agreement and to mitigate American Homepatient's liability therefore.
3. Transfer Upon Termination
Vendor shall transfer, assign and make available to American Homepatient or
American Homepatient's representative all property and materials in
Vendor's possession or control belonging to and paid for by American
Homepatient and all information regarding American Homepatient project(s)
covered by this Agreement, as set forth in Paragraph C herein. Vendor also
agrees to give all reasonable cooperation toward transferring with approval
of third parties in interest all contracts and arrangements, if any,
properly entered into by Vendor in the performance of this Agreement, and
all rights and claims thereto and therein, upon being duly released from
the obligation thereof.
I. INDEPENDENT CONTRACTORS
The parties to this Agreement are independent contractors and nothing
contained in this Agreement shall be construed to place the parties in the
relationship of employer and employee, partners, principal and agent, or
joint ventures. Neither party shall have the power to bind or obligate the
other party nor shall either party hold itself out as having such
authority.
J. THIRD PARTY OBLIGATIONS
In connection with this Agreement, Vendor shall make no commitments or
disbursements, incur no obligations nor place any advertising, public
relations or promotional material for American
<PAGE>
Homepatient's parent, subsidiary or affiliate companies, nor disseminate
any material of any kind using the name of American Homepatient and/or
American Homepatient's parent, subsidiary or affiliate companies or using
their trademarks, without the prior written approval of American
Homepatient.
K. GOVERNING LAW
This Agreement is entered into in the State of New Jersey and shall be
constructed and governed under and in accordance with the laws of that
State.
L. MISCELLANEOUS
1) The terms of this Agreement shall be binding upon American Homepatient
and Vendor and their respective successors and permitted assigns.
Notwithstanding the foregoing, this Agreement is not assignable in whole or
in part by Vendor without the prior written consent of American
Homepatient. Factoring of accounts receivable is not permitted.
2) The failure of either party to take action as a result of a breach of
this Agreement by the other party shall constitute neither a waiver of the
particular breach involved nor a waiver of either party's right to enforce
any or all provisions of this Agreement through any remedy granted by law
or this Agreement.
3) American Homepatient and DSMI are Equal Opportunity Employers and do
not discriminate against any person because of race, color, creed, age,
sex, or national origin. Vendor represents that it has the same policy of
Equal Opportunity Employment.
4) The policy of American Homepatient and DSMI is to protect the health,
safety and quality of life of its employees and the public, and to exercise
responsible stewardship of natural resources that may be impacted by its
activities. To realize this, American Homepatient and DSMI are committed
to maintaining programs and procedures for the environmentally responsible
management of facilities, materials, production processes, products and
packaging, transportation and distribution, waste and ft minimization,
energy, general business operations and contracted goods and services.
Vendor agrees with this policy and further acknowledges that its
performance under this Agreement shall be in strict compliance with all
applicable governmental laws and regulations and in accordance with and in
furtherance of this policy.
5) This Agreement contains the entire understanding of the parties with
respect to the subject matter contained herein, supersedes any prior
written or oral communications and may be modified in writing subject to
mutual agreement of the parties hereto.
6) The headings of each paragraph are for reference only and shall not be
construed as part of this Agreement.
<PAGE>
7) Except for the obligation to pay money property due and owing, either
party shall be excused from any delay or failure in performance hereunder
caused by reason of any occurrence or contingency beyond its reasonable
control, including. but not limited to, failure of performance by the other
party, earthquake, labor disputes, riots, governmental requirements,
inability to secure materials on a timely basis, failure of computer
equipment, failures or delays of sources from which information or data is
obtained and transportation difficulties.
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer, have
entered in to this Agreement this 24 day of June, 1996
AMERICAN HOMEPATIENT DISEASE STATE MANAGEMENT-SM-, INC.
By: /s/ Sen Serafino By: /s/ Donald A. Carlberg
-------------------------------- -----------------------------------
Title: Vice President Title: President & CEO
----------------------------- --------------------------------
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
ATTACHMENT A
ASTHMA
DISEASE MANAGEMENT
PROPOSAL
------------------------------------------
------------------------------------------
FOR
American Homepatient
PRESENTED BY
Disease State Management,-SM- Inc.
46 Prince Street
Rochester, New York 14607
716-244-1360
Disease State Management and DSMI are registered service marks
of Disease State Management, Inc.
Asthma places a tremendous burden on patients and health care providers and
demands a significant portion of our nations health care dollars. Disease State
Management, Inc.-SM- is committed to improving health outcomes through the
application of state of the art technologies. Our proprietary interactive voice
recognition systems, enhanced database modeling techniques and on-demand
publishing combine to provide the powerful educational intervention necessary to
enhance patient adherence to treatment recommendations, empower patients to
self-manage their disease and provide immediate referrals when specific "high
risk" triggers are met.
DSMI's-SM- staff of systems engineers, clinical experts and physician
consultants perform a comprehensive review of the targeted disease state to
insure that "best practices" and nationally recognized guidelines form the
program's foundation. Recognized leaders in outcomes management provide
guidance throughout the project development process.
Once the baseline parameters have been established, our staff begins the process
of building the intervention protocols. DSMI's-SM- asthma intervention program
consists of six interactive voice response based telephone interventions. Each
contact generates on-demand published educational materials targeting individual
concerns. Additionally, physicians and other health care providers receive an
at-a-glance formatted report for inclusion in the patient's medical records.
These reports highlight specific areas of concern for the patient and
demonstrate areas where an individual's adherence to the prescribed therapy is
lacking.
As an extra feature, DSMI's-SM- clinical staff establishes specific "at risk"
triggers that are continually monitored. patients meeting specific criteria
demonstrating an increased risk of hospitalization, emergency services or other
costly intervention will have their providers notified immediately for follow
up. This critical notification and tracking of key indicators has been
demonstrated to reduce the global cost of managing chronically ill patients.
Each intervention is uniquely structured and targets specific behaviors such as:
diet, exercise, smoking cessation, self-management, key triggers and compliance
with pharmacological therapy. By providing unique, individually tailored
intervention strategies, DSMI-SM- not only highlights areas where noncompliance
and poor self management are impacting the plan's expenditures but also provides
an active intervention to modify "at risk" behavior before an emergency room
visit or hospitalization occurs.
In addition to providing ongoing support for patients, DSMI's-SM- fully
integrated systems approach allows for immediate on-line data collection and
evaluation. Interactive Voice Recognition systems allow administration of
HEDIS, Health Quality, patient satisfaction, and Quality of Life surveys without
operator induced bias. The process streamlines data collection and provides a
cost effective method to query patients.
<PAGE>
TRENDS IN ASTHMA
Chronic lung diseases such as asthma, bronchitis and emphysema pose serious
challenges to both patients and health care providers. Despite an increased
understanding of these disorders, improved pharmacological therapies and a
greater awareness among potential sufferers, the incidence rates continue to
soar. In fact, between 1982 and 1993 the number of people reporting chronic
bronchitis increased seventy-nine percent, while those having emphysema and
asthma increased twenty-five and forty-eight percent respectively.(1)
Currently, over twelve million people suffer from asthma in the United
States, making it not only one of the nation's most common diseases but one
of the most costly as well.
INCREASE IN INCIDENCE RATES: 1982 - 1992
[GRAPH]
DEATH RATE FOR ASTHMA: 1982 - 1992 (PER MILLION)
[GRAPH]
While the reason for the rapid growth in the number of chronic suffers remains
uncertain, one thing is certain: these diseases pose a serious threat to
patients' well being. Despite tremendous advances in both diagnostic and
pharmacological therapies in recent years asthma continues to exact a tremendous
financial toll in terms of both direct and indirect costs.
- -----------------------------------
(1) American Lung Association, Adapted form information published by the
Division of Epidemiology, National Heart, Lung and Blood Institute
<PAGE>
IMPACT OF INCREASED PATIENT EDUCATION EFFORTS
The economic impact of asthma is staggering. In asthma patients diagnosed as
moderate to severe the annual cost of treatment often exceeds $ 100,000. In
fact, John Hancock Mutual Life Insurance Company in Boston has identified 1,300
patients whose care resulted in $28 million dollars in expenditures. Among the
most common reasons for exacerbation of symptoms are: an inability of the
patients to self-manage their disease, poor pharmacological compliance, low
adherence to provider recommendations, a lack of patient knowledge concerning
their disease and failure of the provider to adhere to established treatment
guidelines; all areas that DSMI's-SM- asthma intervention program will impact.
- Study of severe asthmatics found 1,300 patients generated $ 28 million
in claims
- Highest individual level of asthma-specific costs was $ 126,343
- Highest expense for all care were for a 2 year old female - $ 584,211
- 235 members had claims exceeding $ 100,000 annually for treatment
Targeted educational intervention programs for asthma patients have proven
effective. A recent study, conducted at the National Jewish Center for
Immunology and Respiratory Medicine and the John Hancock Managed Care Group,
demonstrated significant improvements in patient outcomes for severe asthmatics
following a comprehensive initiative to educate patients.
PATIENTS ADMITTED WITHIN THE PAST 6 MONTHS
[GRAPH]
ADMISSIONS WITHIN THE PAST 6 MONTHS WERE LOWER IN PATIENTS RECEIVING TARGETED
SUPPORT.
Additionally, personalized asthma self management, which tailors program
materials to the individual, has demonstrated positive results in moderate to
severe asthmatics.(2),(3) In a recent investigation incorporating
targeted support, the extension of face-to-face treatment via follow-up
telephone calls to the patient's home was rated more convenient and more
acceptable to patients than traditional group sessions (J.K. Wigal, personal
communication, July 12, 1994). Finally, in a cost-benefit analysis of a
self-management program for 47 adult asthmatics effectively reduced
hospitalization cost from $18,488 to $1,538 and lost income from $11,593 to
$4,589.(4)
FINANCIAL IMPACT OF ASTHMA
- ----------------------------
(2) Kotses H., Lewis P., Environmental control of asthma self-management.
Journal of Asthma. 1990; 27:373
(3) Kotses H., Stout C., Wigal J.K., Individualized asthma self-management:
A beginning. Journal of Asthma. 1991; 288:287-289.
(4) Taitel M.S., A self-management program for adult asthma. Part II:
Cost-benefit analysis. Journal of Allergy and Clinical Immunology.
1995;95(3):672-6.
<PAGE>
The following analysis reflects admission costs data for patients having severe
asthma. It reflects incident and admission rates for severe asthma as indicated
by the American Lung Association.
<TABLE>
<S> <C> <C> <C>
# of Covered Lives 500,000 500,000 500,000
Asthma Incidence Rate 0.05 0.05 0.05
# Asthma Patients 25,000 25,000 25,000
# Patients with Severe asthma 1250 1250 1250
Cost per Day as Inpatient $1,000.00 $1,000.00 $1,000.00
Average Length of Stay ( days ) 4 4 4
# Hospitalizations/year 3 2 1
Annual Hospitalization Cost/Patient $12,000.00 $8,000.00 $4,000.00
Total Hospitalization Cost to Plan $15,000,000.00 $10,000,000.00 $5,000,000.00
IMPACT OF DISEASE MANAGEMENT PROGRAM
# Patients Enrolled in DM Program 1250 1250 1250
Estimated Operational Costs/Patient $70.00 $70.00 $70.00
Total Operational Costs $87,500.00 $87,500.00 $87,500.00
PROJECTED REDUCTION IN ADMISSIONS
5% Reduction 5.00% 5.00% 5.00%
Annual Savings $750,000.00 $500,000.00 $250,000.00
7.5 % Reduction in Admissions 7.50% 7.50% 7.50%
Annual Savings $1,125,000.00 $750,000.00 $375,000.00
10 % Reduction in Admissions 10.00% 10.00% 10.00%
Annual Savings $1,500,000.00 $1,000,000.00 $500,000.00
% Success Rate Required to Break Even 0.58% 0.88% 1.75%
# Pts. Avoiding Admission to Break Even 7 11 22
</TABLE>
<PAGE>
PROGRAM OVERVIEW
See the "Program Intervention Description" section for details about each of the
interventions. The selected intervention schedule will be delivered to patients
who are enrolled in the program. Note that the term "provider" is used to
denote a case manager or another health care provider designated to receive
communications regarding the patient.
I. COMPONENTS
- - Business reply mailer
- - Patient diary
- - Program description/overview
- - Custom designed educational materials
- - Demand published patient reports
- - Demand published provider reports
- - Crisis flags
- - Voice demonstration line
- - Logo integration
II. INTERVENTION PROTOCOL:
MONTH 1:
- - Patient enrollment via business reply mailer
- - Initial telephone intervention within seven days of business reply mailer
receipt
- - Patients receive demand published report following IVR intervention
- - Appropriate preprinted educational materials sent to patients
MONTHS 2 - 4
- - Patients receive interactive voice response based telephone interventions
monthly
- - Patients receive demand published report following each IVR intervention
- - Appropriate preprinted educational materials sent to patients
- - Physician receives demand published, patient specific report for inclusion
in patient record following IVR intervention at month 2 and 4
- - Additionally physician receives immediate notification via phone/fax for
any patient reporting status indicating a critical "at risk" trigger has
been met
MONTHS 6 AND 8
- - Patients receive interactive voice response based telephone interventions
- - Patients receive demand published report following each IVR intervention
- - Appropriate preprinted educational materials sent to patients
- - Physician receives demand published, patient specific report for inclusion
in patient record following IVR intervention at month 8
- - Additionally physician receives immediate notification via phone/fax for
any patient reporting status indicating a critical "at risk" trigger has
been met
<PAGE>
Month 1 2 3 4 6 8
IVR Intervention * * * * * *
Patient Report * * * * * *
Physician Report * * *
Preprinted Materials * * * * * *
"At risk" Reporting
(as needed) * * * * * *
<PAGE>
PROGRAM INTERVENTION DESCRIPTION
See the "Program Schedule" section for an outline of the protocol for delivering
these program components. Note that the term "provider" is used to refer to a
physician, case manager or other health care provider designated to receive
communications regarding the patient.
BUSINESS REPLY MAIL (BRM)/PROGRAM DESCRIPTION
- Two (2) page pre-printed mailer designed for distribution by providers
to patients and return via postage paid mail
- Provides brief assessment for identifying patient data (e.g., name,
phone number, best time to contact) necessary for DSMI-SM- to initiate
a telephone call to patient
- Program description includes a brief program overview
INTERACTIVE VOICE RECOGNITION BASED TELEPHONE INTERVENTIONS
- Six (5) minute interactive voice recognition base telephone
interventions initiated by live operators to patients at preferred
contact times
- Cost-efficient interface: operator-initiated contact to identify
patient and transfer to automated, voice response system
- High appeal voice response system using a recorded human voice versus
computer synthesized speech
- Patient responds in normal speaking voice versus pushing touch tone
buttons
- Self-report follow-up assessment of relevant medical and behavioral
factors: update on disease status, prescribed treatment including
diet, exercise, and medications, patient motivation, treatment
barriers, patient knowledge indicators regarding symptom
identification and disease self-management
- Patient receives personalized questions and clinically appropriate
feedback driven by expert system to promote patients' awareness of
their condition and adherence to their treatment regimen
- Allows identification of patient concerns
- Adds vital progress information to the longitudinal patient database
PATIENT REPORTS
- Laser printed, on-demand published report including personalized text
and graphics
- Mailed to patient within a week after each telephone intervention
- Personalized and pre-printed materials reinforce patient awareness and
knowledge regarding their condition and promote treatment adherence
PHYSICIAN REPORTS
- One page laser printed, on-demand published report integrating
patient's follow-up and enrollment data
- Mailed to patient's provider within a week after each patient
interactive voice response intervention
- "At-a-glance" format provides efficient documentation of critical
patient data, ready for insertion into the medical record
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
- Facilitates identification of patient education needs and
hard-to-manage patients, appropriate allocation of health care
resources, and timely modification of treatment regimens
- Enhances patient-provider communication
"AT RISK" REPORTING:
- - Physicians/providers will be notified via fax when patients report
symptoms, noncompliance or other critical factors indicating an increased
risk for an acute event, hospitalization or emergency procedure
OPERATIONAL REPORTING:
DSMI-SM- will provide operational and outcome reports quarterly.
PROGRAM FEES:
American Homepatient agrees to pay DSMI-SM- a one time joint marketing fee of
$[*****] payable upon contract signing. Payments exceeding 30 days past due will
accrue a service charge of 1.5% per month of the outstanding balance.
Additionally, American Homepatient agrees to implement the Asthma intervention
described herein in a minimum of three accounts, each account having a minimum
of 100,000 covered lives, within 18 months of the effective date of this
contract. Provided that American Homepatient has successfully implemented the
program in a minimum of three accounts, American Homepatient shall pay DSMI-SM-
an additional marketing fee of $[*****]. This fee shall be payable in
installments as described:
Payment 1: $[*****] due eighteen months from the effective date of this
contract.
Payment 2: $[*****] due twenty-one months from the effective date of this
contract.
Payment 3: $[*****] due twenty-four months from the effective date of this
contract.
Operational Fees for the program shall be scaled as follows:
- - Fees for the first 1000 patients enrolled shall be $[*****] per patient
- - Fees for the next 2000 patients enrolled shall be $[*****] per patient
- - Fees for all patients exceeding 3000 shall be $[*****] per patient
These operational fees include full funding for the Asthma Intervention Program
Protocol which includes 6 interactive voice recognition based telephone
interventions, associated demand published patient reports, associated demand
published physician reports, "at risk" reporting as necessary, data collection
and assessment, and outcomes reporting.
The program may include additional preprinted materials. Such items are a
business reply mailer, patient diary, program description/overview, or custom
designed educational support materials. Since the anticipated number of
enrollees is unknown, printing fees for these pre-printed components will be the
responsibility of American Homepatient. DSMI-SM- will furnish estimates for
printing costs upon determination of volumes and final specifications.
Additionally, DSMI-SM- agrees to provide these additional preprinted materials
at costs.
Program operational fees shall be billed monthly based upon the total number of
patient interventions completed. Payment is due within 30 days of receipt.
Payments exceeding 30 days past due will accrue a service charge of 1.5% per
month of the outstanding balance.
<PAGE>
CUSTOMIZATION
Any customization will constitute a revision to the intervention protocol (i.e.,
additional patient and/or physician reports and/or variations in on-demand or IV
content). Any logo design used on the demand published reporting is limited to
black and white/grayscale. DSMI-SM- shall furnish estimates for development and
delivery to American Homepatient prior to undertaking any revision.
<PAGE>
SERVICES AGREEMENT
This Agreement is effective this 21 day of June, 1996, (the "Effective Date")
between Disease State Management, Inc., 46 Prince Street, Rochester, New York
14607 ("Vendor") and EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES. Vendor agrees
to provide services to EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES under the
terms set forth below.
A. SERVICES
Vendor will provide the product(s) or service(s) set forth, and to the
specifications set forth in the proposal incorporated herein as Attachment
A.
The product and all elements as set forth on Attachment A are subject to
prior approval by EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES, such approval
not to be unreasonably withheld.
B. COMPENSATION
EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES will pay Vendor according to the
terms or payment schedule set forth in Attachment A hereto.
In the event that EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES shall request
any changes in the concept, specifications or scope of the product(s) or
service(s) described on Attachment A hereto, Vendor will notify EQUIFAX
HEALTHCARE ADMINISTRATIVE SERVICES of the cost of such revisions and will
not proceed without prior written approval.
If the compensation provision on Attachment A hereto is other than a flat
fee amount per element or for the entire project, Vendor will provide such
documentation in support of all billings as EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES may reasonably require.
C. CONFIDENTIALITY
1. EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES and Vendor acknowledge that
certain confidential and proprietary information may be disclosed by one of
them to the other in the course of this Agreement. For purposes of this
Agreement, the term "Confidential Information" includes the following: (a)
All information regarding the patient, EQUIFAX'S Customer, any patient
medical data and/or status, or provider information; and (b) any other
information identified as confidential in writing by the disclosing party
prior to disclosure. Notwithstanding the confidentiality requirements of
this Agreement, the foregoing shall not prevent EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES from retaining information, including any and all
information and data pertaining to any patient which comes to EQUIFAX
HEALTHCARE ADMINISTRATIVE SERVICES or to which EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES is given access during this Agreement.
2. Should EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES receive confidential
information of Vendor for use in performing their Services, EQUIFAX
HEALTHCARE ADMINISTRATIVE SERVICES agrees to take all reasonable steps to
safeguard the confidentiality of said information and to prevent
unauthorized disclosure thereof by EQUIFAX HEALTHCARE ADMINISTRATIVE
SERVICE'S employees, agents and representatives. EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES shall maintain strict security procedures to
protect the confidentiality of any information received, stored, or
delivered on
Disease State Management -SM- and DSMI -SM- are servicemarks of
Disease State Management, Inc.
<PAGE>
patients in the EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES or any
affiliated or associated company's database.
3. The data released hereunder to Vendor regarding patients, patient
medical data, EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES Customers, and
provider information, is considered sensitive and confidential information.
Vendor warrants that is shall use any information provided by EQUIFAX
HEALTHCARE ADMINISTRATIVE SERVICES strictly for the performance of this
Agreement. Vendor acknowledges and agrees to take all steps necessary to
safeguard the confidentiality of all information and reports, whether oral
or written, maintain such information as strictly confidential and to
prevent unauthorized disclosure thereof by Vendor's employees, agents,
representatives and other third parties. Vendor warrants that all such
information and reports will not be disclosed to any person, organization
or entity other than EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES.
4. Each party shall hold the other party, its affiliated companies, the
officers, agents, employees, and independent contractors of the other
party, harmless and shall indemnify and defend such party for any claim of
expense or damage, whatsoever, resulting from the publishing or release by
such party, of information contrary to the above conditions.
5. The obligations of the Paragraph shall not apply to any Confidential
Information which the recipient can demonstrate is or becomes available to
the public through no breach of this Agreement.
6. Neither party to this Agreement shall, except as may be required by law
or federal regulation, or except with express written permission of the
other party, disclose the terms and conditions of this Agreement to any
third party or publicly advertise its contents.
7. The parties agree that Vendor's breach of any of its material
obligation under the applicable Confidentiality provisions of this
Agreement, may cause EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES irreparable
injury for which it would have not adequate remedy at law, and that EQUIFAX
HEALTHCARE ADMINISTRATIVE SERVICES shall be entitled to specific
performance or preliminary or other injunctive relief in addition to any
and all remedies it may otherwise be entitled to at law or in equity.
8. This Paragraph shall survive the termination of this Agreement.
Vendor shall not duplicate any material containing EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES Confidential Information, except in the direct
performance of its services under this Agreement. Vendor shall return all
copies of materials containing EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES
Confidential Information upon Vendor's completion of services under this
Agreement or upon any earlier termination of this Agreement for any reason
whatsoever.
D. INDEMNIFICATION
D1. Each party shall indemnify and hold the other party harmless from and
against all liability, damages, penalties, losses, costs or expenses,
including reasonable attorneys' fees, arising from or in any way related to
its willful or negligent actions or omissions in performing the
responsibilities as described in this Agreement.
<PAGE>
D2. "Limitation of Liability"
Neither EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES nor vendor shall in any
way be liable for any special, indirect, exemplary, incidental or
consequential damages, whether based on contract, tort, or any other legal
theory, even if EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES or vendor has
been previously advised of the possibility of such damages. This paragraph
shall survive the termination of this agreement.
E. PROFESSIONAL STANDARDS
Vendor represents that it has facilities, personnel, experience and
expertise sufficient in quality and quality to perform all such assignments
and projects given it by EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES
hereunder and agrees that it will perform all such assignments and projects
in a manner commensurate with professional standards generally applicable
to its industry.
F. OWNERSHIP OF MATERIALS
The parties acknowledge that any modifications to the printed materials
produced by its asthma program for EQUIFAX HEALTHCARE ADMINISTRATIVE
SERVICES are being created at the insistence of EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES and shall be deemed "work made for hire" under the
United States copyright law.
EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES shall have the right to use the
whole work, any part of parts thereof, or none of the work, as it sees fit.
EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES may alter the work, add to it,
or combine it with any other works, at it sole discretion. Notwithstanding
the foregoing, all original material submitted by Vendor as part of the
work or as part of the process creating the work, including but not limited
to listings, printouts, documentation, notes, reports, shall be the
property of EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES whether or not
EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES uses such material. No rights
are reserved by Vendor.
All surveys, reports, data, documentation and all other information
prepared by Vendor in connection with the performance of its services
hereunder will become and remain EQUIFAX'S sole property. Title to all
material and documentation, including data furnished by EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES to Vendor or delivered by EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES into the Vendor's possession shall remain with
EQUIFAX. Vendor shall immediately return all such material or
documentation within seven (7) days of any request by EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES or upon the termination or conclusion of this
Agreement, whichever shall occur first.
EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES hereby grants Vendor a worldwide
perpetual royalty free license to the data and information created by
Vendor in connection with this agreement for purposes of making marketing
presentations to other potential customers and for the development and
sales of additional products based upon this data. Vendor's use of this
data is limited to instances where data will not be identified by patient
or by client of EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES.
Vendor agrees it will not disclose to any third party, without the prior
written consent of EQUIFAX, any proprietary or confidential information
acquired from EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES under this
Agreement, including trade secrets, business plans and confidential or
other information which may be proprietary to EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES.
<PAGE>
Vendor warrants and represents that is has or will have the right, through
written agreements with its employees, to secure for EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES the rights called for in this Section. Further, in
the event Vendor uses any subcontractor, even though subcontracting is not
permitted by this Agreement, or other third party to perform any of the
services contracted for under this Agreement, Vendor agrees to enter into
such written agreements with such third party, and to take such other steps
as are or may be required to secure for EQUIFAX HEALTHCARE ADMINISTRATIVE
SERVICES the rights called for in this Section.
G. DURATION OF AGREEMENT
1. Term
This Agreement is effective as of the Effective Date and shall continue in
full force and effect until the earlier of (i) completion of the project
assigned hereunder, (ii) terminated by at least thirty (30) days written
notice by either party to the other, sent by registered mail to the address
for each party first set forth above, or to such other address which a
party may designate for its receipt of notices hereunder. This Agreement
may be terminated by EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES immediately
in the event EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES is unable to obtain
waivers from its customers regarding Vendor's services.
2. Payment on Termination
Upon termination of this Agreement EQUIFAX HEALTHCARE ADMINISTRATIVE
SERVICES is to pay for all authorized work in process.
3. Transfer Upon Termination
Vendor shall transfer, assign and make available to EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES or EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICE'S
representative all property and materials in Vendor's possession or control
and any copies thereof belonging to and paid for by EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES, and all information regarding EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICE'S project(s) covered by this Agreement, as set forth
in Paragraph C herein.
4. Neither EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES nor Vendor shall be
liable to the other for damages of any kind, including but not limited to
lost profits or Incidental, punitive or consequential damages, relative to
termination of this Agreement in accordance with Section 6.2, even if
advised of the possibility of such damages.
H. INDEPENDENT CONTRACTORS
Vendor shall at all times be an independent contractor and shall so
represent itself to all third parties. Nothing in this Agreement shall be
deemed to constitute either party the agent or legal representative of the
other nor to constitute the parties as partners, agents or joint ventures
of one another.
<PAGE>
I. THIRD PARTY OBLIGATIONS
In connection with this Agreement, Vendor shall make no commitments or
disbursements, incur no obligations nor place any advertising, public
relations or promotional material for itself EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICE'S its parent, subsidiaries or affiliate companies,
nor disseminate any material of any kind using the name of EQUIFAX
HEALTHCARE ADMINISTRATIVE SERVICES and/or EQUIFAX HEALTHCARE ADMINISTRATIVE
SERVICE'S such parent, subsidiary or affiliate companies or using their
trademarks, without the prior written approval of EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES.
J. GOVERNING LAW
This Agreement is entered into in the State of Texas and shall be
constructed and governed under and in accordance with the laws of that
State.
K. MISCELLANEOUS
1) The terms of this Agreement shall be binding upon EQUIFAX HEALTHCARE
ADMINISTRATIVE SERVICES and Vendor and their respective successors and
permitted assigns. Notwithstanding the foregoing, this Agreement is not
assignable in whole or in part by Vendor without the prior written consent
of EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES. Factoring of accounts
receivable is not permitted.
2) The failure of either party to take action as a result of a breach of
this Agreement by the other party shall constitute neither a waiver of the
particular breach involved nor a waiver of either party's right to enforce
any or all provisions of this Agreement through any remedy granted by law
or this Agreement.
3) EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES is an Equal Opportunity
Employer and does not discriminate against any person because of race,
color, creed, age, sex, or national origin. Vendor represents that it has
the same policy of Equal Opportunity Employment.
4) This Agreement contains the entire understanding of the parties with
respect to the subject matter contained herein, supersedes any prior
written or oral communications and may be modified in writing subject to
mutual agreement of the parties hereto.
5) The headings of each paragraph are for reference only and shall not be
construed as part of this Agreement.
6) Except for the obligation to pay money property due and owing, either
party shall be excused from any delay or failure in performance hereunder
caused by reason of any occurrence or contingency beyond its reasonable
control, including. but not limited to, failure of performance by the other
party, earthquake, labor disputes, riots, governmental requirements,
inability to secure materials on a timely basis, failure of computer
equipment, failures or delays of sources from which information or data is
obtained and transportation difficulties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer, have
entered in to this Agreement this 21 day of June, 1996
EQUIFAX HEALTHCARE Disease State Management, Inc.
ADMINISTRATIVE SERVICES, INC. 46 Prince Street
5001 Spring Valley Road Rochester, New York 14607
Suite 1000E
Dallas, TX 75244
By: /s/ M.E. Kenney By: /s/ Donald A. Carlberg
--------------------------- ---------------------------
Title: Vice President & C.O.O. Title: President & C.E.O.
----------------------- ---------------------------
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
- --------------------------------------------------------------------------------
ATTACHMENT A
ASTHMA
DISEASE MANAGEMENT
PROPOSAL
____________________________________________
FOR
EQUIFAX HEALTHCARE ADMINISTRATION
SERVICES
PRESENTED BY
Disease State Management,-SM- Inc.
46 Prince Street
Rochester, New York 14607
716-244-1360
Disease State Management and DSMI are registered service
marks of Disease State Management, Inc.
- --------------------------------------------------------------------------------
Asthma places a tremendous burden on patients and health care providers and
demands a significant portion of our nations health care dollars. Disease State
Management, Inc.-SM- is committed to improving health outcomes through the
application of state of the art technologies. Our proprietary interactive voice
recognition systems, enhanced database modeling techniques and on-demand
publishing combine to provide the powerful educational intervention necessary to
enhance patient adherence to treatment recommendations, empower patients to
self-manage their disease and provide immediate referrals when specific "high
risk" triggers are met.
DSMI's-SM- staff of systems engineers, clinical experts and physician
consultants perform a comprehensive review of the targeted disease state to
insure that "best practices" and nationally recognized guidelines form the
program's foundation. Recognized leaders in outcomes management provide
guidance throughout the project development process.
Once the baseline parameters have been established, our staff begins the process
of building the intervention protocols. DSMI's-SM- asthma intervention program
consists of six interactive voice response based telephone interventions. Each
contact generates on-demand published educational materials targeting individual
concerns. Additionally, physicians and other health care providers receive an
at-a-glance formatted report for inclusion in the patient's medical records.
These reports highlight specific areas of concern for the patient and
demonstrate areas where an individual's adherence to the prescribed therapy is
lacking.
As an extra feature, DSMI's-SM- clinical staff establishes specific "at risk"
triggers that are continually monitored. Patients meeting specific criteria
demonstrating an increased risk of hospitalization, emergency services or other
costly intervention will have their providers notified immediately for follow
up. This critical notification and tracking of key indicators has been
demonstrated to reduce the global cost of managing chronically ill patients.
Each intervention is uniquely structured and targets specific behaviors such as:
diet, exercise, smoking cessation, self-management, key triggers and
compliance with pharmacological therapy. By providing unique, individually
tailored intervention strategies, DSMI-SM- not only highlights areas where
noncompliance and poor self management are impacting the plan's expenditures but
also provides an active intervention to modify "at risk" behavior before an
emergency room visit or hospitalization occurs.
In addition to providing ongoing support for patients, DSMI's-SM- fully
integrated systems approach allows for immediate on-line data collection and
evaluation. Interactive Voice Recognition systems allow administration of
HEDIS, Health Quality, patient satisfaction, and Quality of Life surveys without
operator induced bias. The process streamlines data collection and provides a
cost effective method to query patients.
<PAGE>
TRENDS IN ASTHMA
Chronic lung diseases such as asthma, bronchitis and emphysema pose serious
challenges to both patients and health care providers. Despite an increased
understanding of these disorders, improved pharmacological therapies and a
greater awareness among potential sufferers, the incidence rates continue to
soar. In fact, between 1982 and 1993 the number of people reporting chronic
bronchitis increased seventy-nine percent, while those having emphysema and
asthma increased twenty-five and forty-eight percent respectively.(1)
Currently, over twelve million people suffer from asthma in the United States,
making it not only one of the nation's most common diseases but one of the most
costly as well.
INCREASE IN INCIDENCE RATES: 1982 - 1992
[GRAPH]
DEATH RATE FOR ASTHMA: 1982 - 1992 (PER MILLION)
[GRAPH]
While the reason for the rapid growth in the number of chronic suffers remains
uncertain, one thing is certain: these diseases pose a serious threat to
patients' well being. Despite tremendous advances in both diagnostic and
pharmacological therapies in recent years asthma continues to exact a tremendous
financial toll in terms of both direct and indirect costs.
___________________________
(1) American Lung Association, Adapted form information published by the
Division of Epidemiology, National Heart, Lung and Blood Institute
<PAGE>
IMPACT OF INCREASED PATIENT EDUCATION EFFORTS
The economic impact of asthma is staggering. In asthma patients diagnosed as
moderate to severe the annual cost of treatment often exceeds $ 100,000. In
fact, John Hancock Mutual Life Insurance Company in Boston has identified 1,300
patients whose care resulted in $28 million dollars in expenditures. Among the
most common reasons for exacerbation of symptoms are: an inability of the
patients to self-manage their disease, poor pharmacological compliance, low
adherence to provider recommendations, a lack of patient knowledge concerning
their disease and failure of the provider to adhere to established treatment
guidelines; all areas that DSMI's-SM- asthma intervention program will impact.
* Study of severe asthmatics found 1,300 patients generated $ 28 million
in claims
* Highest individual level of asthma-specific costs was $ 126,343
* Highest expense for all care were for a 2 year old female - $ 584,211
* 235 members had claims exceeding $ 100,000 annually for treatment
Targeted educational intervention programs for asthma patients have proven
effective. A recent study, conducted at the National Jewish Center for
Immunology and Respiratory Medicine and the John Hancock Managed Care Group,
demonstrated significant improvements in patient outcomes for severe asthmatics
following a comprehensive initiative to educate patients.
PATIENTS ADMITTED WITHIN THE PAST 6 MONTHS
[GRAPH]
ADMISSIONS WITHIN THE PAST 6 MONTHS WERE LOWER IN PATIENTS RECEIVING TARGETED
SUPPORT.
Additionally, personalized asthma self management, which tailors program
materials to the individual, has demonstrated positive results in moderate to
severe asthmatics (2)(3). In a recent investigation incorporating targeted
support, the extension of face-to-face treatment via follow-up telephone calls
to the patient's home was rated more convenient and more acceptable to patients
than traditional group sessions (J.K. Wigal, personal communication, July 12,
1994). Finally, in a cost-benefit analysis of a self-management program for 47
adult asthmatics effectively reduced hospitalization cost from $18,488 to $1,538
and lost income from $11,593 to $4,589.(4)
_________________________
(2) Kotses H., Lewis P., Environmental control of asthma self-management.
Journal of Asthma. 1990; 27:373
(3) Kotses H., Stout C., Wigal J.K., Individualized asthma self-management: A
beginning. Journal of Asthma. 1991; 288:287-289.
(4) Taitel M.S., A self-management program for adult asthma. Part II: Cost-
benefit analysis. Journal of Allergy and Clinical Immunology.
1995;95(3):672-6.
<PAGE>
FINANCIAL IMPACT OF ASTHMA
The following analysis reflects admission costs data for patients having severe
asthma. It reflects incident and admission rates for severe asthma as indicated
by the American Lung Association.
<TABLE>
<S> <C> <C> <C>
# of Covered Lives 500,000 500,000 500,000
------------------------------------------------
Asthma Incidence Rate 0.05 0.05 0.05
------------------------------------------------
# Asthma Patients 25,000 25,000 25,000
------------------------------------------------
# Patients with Severe asthma 1250 1250 1250
------------------------------------------------
Cost per Day as Inpatient $1,000.00 $1,000.00 $1,000.00
------------------------------------------------
Average Length of Stay ( days ) 4 4 4
------------------------------------------------
# Hospitalizations/year 3 2 1
------------------------------------------------
Annual Hospitalization Cost/Patient $12,000.00 $8,000.00 $4,000.00
------------------------------------------------
------------------------------------------------
Total Hospitalization Cost to Plan $15,000,000.00 $10,000,000.00 $5,000,000.00
------------------------------------------------
------------------------------------------------
IMPACT OF DISEASE MANAGEMENT PROGRAM
------------------------------------------------
# Patients Enrolled in DM Program 1250 1250 1250
------------------------------------------------
Estimated Operational Costs/Patient $70.00 $70.00 $70.00
------------------------------------------------
Total Operational Costs $87,500.00 $87,500.00 $87,500.00
------------------------------------------------
------------------------------------------------
------------------------------------------------
PROJECTED REDUCTION IN ADMISSIONS
------------------------------------------------
5% Reduction 5.00% 5.00% 5.00%
------------------------------------------------
Annual Savings $750,000.00 $500,000.00 $250,000.00
------------------------------------------------
7.5 % Reduction in Admissions 7.50% 7.50% 7.50%
------------------------------------------------
Annual Savings $1,125,000.00 $750,000.00 $375,000.00
------------------------------------------------
10 % Reduction in Admissions 10.00% 10.00% 10.00%
------------------------------------------------
Annual Savings $1,500,000.00 $1,000,000.00 $500,000.00
------------------------------------------------
------------------------------------------------
------------------------------------------------
% Success Rate Required to Break Even 0.58% 0.88% 1.75%
------------------------------------------------
# Pts. Avoiding Admission to Break Even 7 11 22
------------------------------------------------
</TABLE>
<PAGE>
PROGRAM OVERVIEW
See the "Program Intervention Description" section for details about each of the
interventions. The selected intervention schedule will be delivered to patients
who are enrolled in the program. Note that the term "provider" is used to
denote a case manager or another health care provider designated to receive
communications regarding the patient.
I. COMPONENTS
* Business reply mailer
* Patient diary
* Program description/overview
* Custom designed educational materials
* Demand published patient reports
* Demand published provider reports
* Crisis flags
* Voice demonstration line
* Logo integration
II. INTERVENTION PROTOCOL:
MONTH 1:
* Patient enrollment via business reply mailer
* Initial telephone intervention within seven days of business reply mailer
receipt
* Patients receive demand published report following IVR intervention
* Appropriate preprinted educational materials sent to patients
MONTHS 2 - 4
* Patients receive interactive voice response based telephone interventions
monthly
* Patients receive demand published report following each IVR intervention
* Appropriate preprinted educational materials sent to patients
* Physician receives demand published, patient specific report for inclusion
in patient record following IVR intervention at month 2 and 4
* Additionally physician receives immediate notification via phone/fax for
any patient reporting status indicating a critical "at risk" trigger has
been met
MONTHS 6 AND 8
* Patients receive interactive voice response based telephone interventions
* Patients receive demand published report following each IVR intervention
* Appropriate preprinted educational materials sent to patients
* Physician receives demand published, patient specific report for inclusion
in patient record following IVR intervention at month 8
* Additionally physician receives immediate notification via phone/fax for
any patient reporting status indicating a critical "at risk" trigger has
been met
<PAGE>
Month 1 2 3 4 6 8
--------------------------
IVR Intervention * * * * * *
--------------------------
Patient Report * * * * * *
--------------------------
Physician Report * * *
--------------------------
Preprinted Materials * * * * * *
--------------------------
"At risk" Reporting
(as needed) * * * * * *
--------------------------
<PAGE>
PROGRAM INTERVENTION DESCRIPTION
See the "Program Schedule" section for an outline of the protocol for
delivering these program components. Note that the term "provider" is used
to refer to a physician, case manager or other health care provider
designated to receive communications regarding the patient.
BUSINESS REPLY MAIL (BRM)/PROGRAM DESCRIPTION
* Two (2) page pre-printed mailer designed for distribution by providers to
patients and return via postage paid mail
* Provides brief assessment for identifying patient data (e.g., name,
phone number, best time to contact) necessary for DSMI-SM- to initiate a
telephone call to patient
* Program description includes a brief program overview
INTERACTIVE VOICE RECOGNITION BASED TELEPHONE INTERVENTIONS
* Six (5) minute interactive voice recognition base telephone interventions
initiated by live operators to patients at preferred contact times
* Cost-efficient interface: operator-initiated contact to identify patient
and transfer to automated, voice response system
* High appeal voice response system using a recorded human voice versus
computer synthesized speech
* Patient responds in normal speaking voice versus pushing touch tone
buttons
* Self-report follow-up assessment of relevant medical and behavioral
factors: update on disease status, prescribed treatment including diet,
exercise, and medications, patient motivation, treatment barriers, patient
knowledge indicators regarding symptom identification and disease self-
management
* Patient receives personalized questions and clinically appropriate
feedback driven by expert system to promote patients' awareness of their
condition and adherence to their treatment regimen
* Allows identification of patient concerns
* Adds vital progress information to the longitudinal patient database
PATIENT REPORTS
* Laser printed, on-demand published report including personalized text
and graphics
* Mailed to patient within a week after each telephone intervention
* Personalized and pre-printed materials reinforce patient awareness and
knowledge regarding their condition and promote treatment adherence
PHYSICIAN REPORTS
* One page laser printed, on-demand published report integrating
patient's follow-up and enrollment data
* Mailed to patient's provider within a week after each patient
interactive voice response intervention
* "At-a-glance" format provides efficient documentation of critical
patient data, ready for insertion into the medical record
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
* Facilitates identification of patient education needs and hard-to-
manage patients, appropriate allocation of health care resources,
and timely modification of treatment regimens
* Enhances patient-provider communication
"AT RISK" REPORTING:
* Physicians/providers will be notified via fax when patients report
symptoms, noncompliance or other critical factors indicating an increased
risk for an acute event, hospitalization or emergency procedure
OPERATIONAL REPORTING:
DSMI-SM- will provide operational and outcome reports quarterly.
PROGRAM FEES:
[*****] In lieu of such payment Equifax Healthcare Administration Services
agrees:
Program operational fees shall be are based upon a minimum enrollment of 2000
patients within 36 months of the effective date of this agreement. The
operational fee for the first 2000 enrollees shall be $[*****] per enrollee.
Fees for all subsequent enrollees shall be $[*****] per enrollee. In the event
that Equifax Healthcare Administration services fails to achieve a minimum of
2000 enrollees within 36 months of the effective date of this document, equifax
healthcare administration services agrees to a one time liscensing fee equal to
( 2000 minus the number of enrollees achieved times $[*****]. Such payment is
due 36 months from the effective date of this contract.
Program operational fees shall be billed upon patient enrollment and are payable
within 30 days of receipt. Payments exceeding 30 days past due will accrue a
service charge of 1% per month of the outstanding balance. In the event of a
patient withdrawal from the intervention program, DSMI-SM- will prorate the
remaining expenses.
Printing fees for all pre-printed materials (e.g., marketing brochure, BRM,
program description) will be the responsibility of Equifax Healthcare
Administration services. DSMI-SM- will furnish estimates for printing costs
upon determination of volumes and final specifications.
CUSTOMIZATION
Any customization will constitute a revision to the intervention protocol (i.e.,
additional patient and/or physician reports and/or variations in on-demand or IV
content). Any logo design used on the demand published reporting is limited to
black and white/grayscale. DSMI-SM- shall furnish estimates for development and
delivery to Equifax Healthcare Administration Services prior to undertaking any
revision.
<PAGE>
Portions of this Exhibit have been omitted pursuant
to a request for confidential treatment. The omitted
portions, marked by [****], have been separately filed
the Commission.
EXHIBIT 10.11
SERVICES AGREEMENT
This Agreement is effective this 28 day of July, 1996, (the "Effective Date")
between Disease State Management, Inc., 46 Prince Street, Rochester, New York
14607 ("Vendor") and Equifax. Vendor agrees to provide services to Equifax
under the terms set forth below.
A. SERVICES
Vendor will provide the product(s) or service(s) set forth, and to the
specifications set forth in the proposal incorporated herein as
Attachment A.
The product and all elements as set forth on Attachment A are subject to
prior approval by Equifax, such approval not to be unreasonably withheld.
B. COMPENSATION
1. Equifax shall pay Vendor a program operational fee of [****] in the
program described in Exhibit A. The program operational fee shall be [****]
per enrollee once [****] individuals have been enrolled in the program.
2. "At Risk" reports shall be generated and transmitted via fax directly
to health care providers for patients exhibiting specific high risk
behaviors. Such contacts shall be billed at a flat rate of [****] per
notification.
3. All amounts due under this Agreement shall be invoiced to Equifax by
Vendor and payable to Vendor within thirty days of the date of the
invoice. Payments exceeding thirty days past due shall be subject to a
service charge of [****] per month until paid.
In the event that Equifax shall request any changes in the concept,
specifications or scope of the product(s) or service(s) described on
Attachment A hereto, Vendor will notify Equifax the cost of such revisions
and will not proceed without prior written approval.
If the compensation provision on Attachment A hereto is other than [****]
Vendor will provide such documentation in support of all billings as
Equifax may reasonably require.
C. CONFIDENTIALITY
1. Equifax and Vendor acknowledge that certain confidential and
proprietary information may be disclosed by one of them to the other in the
course of this Agreement. For purposes of this Agreement, the term
"Confidential Information" includes the following: (a) All information
regarding the patient, Equifax's Customer, any patient medical
data and/or status, or provider information; and (b) any other information
identified as confidential in writing by the disclosing party prior to
disclosure. Notwithstanding the confidentiality requirements of this
Agreement, the foregoing shall not prevent Equifax from retaining
information, including any and all information and data pertaining to any
patient which comes to Equifax or to which Equifax is given access during
this Agreement.
Disease State Management-SM- and DSMI-SM- are servicemarks of Disease State
Management, Inc.
<PAGE>
2. Should Equifax receive confidential information of Vendor for use in
performing their Services, Equifax agrees to take all reasonable steps to
safeguard the confidentiality of said information and to prevent
unauthorized disclosure thereof by Equifax employees, agents and
representatives. Equifax shall maintain strict security procedures to
protect the confidentiality of any information received, stored, or
delivered on patients in the Equifax or any affiliated or associated
company's database.
3. The data released hereunder to Vendor regarding patients, patient
medical data, Equifax Customers, and provider information, is considered
sensitive and confidential information. Vendor warrants that is shall use
any information provided by Equifax strictly for the performance of this
Agreement. Vendor acknowledges and agrees to take all steps necessary to
safeguard the confidentiality of all information and reports, whether oral
or written, maintain such information as strictly confidential and to
prevent unauthorized disclosure thereof by Vendor's employees, agents,
representatives and other third parties. Vendor warrants that all such
information and reports will not be disclosed to any person, organization
or entity other than Equifax.
4. Each party shall hold the other party, its affiliated companies, the
officers, agents, employees, and independent contractors of the other party,
harmless and shall indemnify and defend such party for any claim of
expense or damage, whatsoever, resulting from the publishing or release by
such party, of information contrary to the above conditions.
5. The obligations of the Paragraph shall not apply to any Confidential
Information which the recipient can demonstrate is or becomes available to
the public through no breach of this Agreement.
6. Neither party to this Agreement shall, except as may be required by
law or federal regulation, or except with express written permission of
the other party, disclose the terms and conditions of this Agreement to
any third party or publicly advertise its contents.
7. The parties agree that Vendor's breach of any of its material
obligation under the applicable Confidentiality provisions of this
Agreement, may cause Equifax irreparable injury for which it would have
not adequate remedy at law, and that Equifax shall be entitled to specific
performance or preliminary or other injunctive relief in addition to any
and all remedies it may otherwise be entitled to at law in equity.
8. This paragraph shall survive the termination of this Agreement.
Vendor shall not duplicate any material containing Equifax Confidential
Information, except in the direct performance of its services under this
Agreement. Vendor shall return all copies of materials containing Equifax
Confidential Information upon Vendor's completion of services under this
Agreement or upon any earlier termination of this Agreement for any
reason whatsoever.
D. INDEMNIFICATION
Each party shall indemnify and hold the other party harmless from and
against all liability, damages, penalties, losses, costs or expenses,
including reasonable attorneys' fees, arising from or in any way related
to its willful or negligent actions or omissions in performing the
responsibilities as described in this Agreement.
Disease State Management-SM- and DSMI-SM- are servicemarks of Disease State
Management, Inc.
<PAGE>
E. LIMITATION OF LIABILITY
Neither Equifax nor vendor shall in any way be liable for any special,
indirect, exemplary, incidental or consequential damages, whether based on
contract, tort, or any other legal theory, even if Equifax or vendor has
been previously advised of the possibility of such damages. This
paragraph shall survive the termination of this agreement.
F. PROFESSIONAL STANDARDS
Vendor represents that it has facilities, personnel, experience and
expertise sufficient in quality and quality to perform all such assignments
and projects given it by Equifax hereunder and agrees that it will
perform all such assignments and projects in a manner commensurate with
professional standards generally applicable to its industry.
G. OWNERSHIP OF MATERIALS
The parties acknowledge that any modifications to the printed materials
produced by its asthma program for Equifax are being created at the
insistence of Equifax and shall be deemed "work made for hire" under the
United States copyright law.
Equifax shall have the right to use the whole work, any part of the parts
thereof, or none of the work, as it sees fit. Equifax may alter the work,
add to it, or combine it with any other works, at its sole discretion.
Notwithstanding the foregoing, all original material submitted by Vendor
as part of the work or as part of the process creating the work, including
but not limited to listings, printouts, documentation, notes, reports,
shall be the property of Equifax whether or not Equifax uses such material.
No rights are reserved by Vendor.
All surveys, reports, data, documentation and all other information
prepared by Vendor in connection with the performance of its services
hereunder will become and remain Equifax's sole property. Title to all
material and documentation, including data furnished by Equifax to Vendor
or delivered by Equifax into the Vendor's possession shall remain with
Equifax. Vendor shall immediately return all such material or
documentation within seven (7) days of any request by Equifax or upon the
termination or conclusion of this Agreement, whichever shall occur first.
Equifax hereby grants Vendor a worldwide perpetual royalty free license to
the data and information created by Vendor in connection with this
agreement for purposes of making marketing presentations to other potential
customers and for the development and sales of additional products based
upon this data. Vendor's use of this data is limited to instances where
data will not be identified by patient or by client of Equifax.
Vendor agrees it will not disclose to any third party, without the prior
written consent of Equifax, any proprietary or confidential information
acquired from Equifax under this Agreement, including trade secrets,
business plans and confidential or other information which may be
proprietary to Equifax.
Vendor warrants and represents that is has or will have the right, through
written agreements with its employees, to secure for Equifax the rights
called for in this Section. Further, in the event Vendor uses any
subcontractor, even though subcontracting is not permitted by this
Agreement, or other third party to perform any of the services contracted
for under this Agreement, Vendor agrees to enter into such written
agreements with such third party, and to take such other steps as are or
may be required to secure for Equifax the rights called for in this Section.
Disease State Management-SM- and DSMI-SM- are servicemarks of Disease State
Management, Inc.
<PAGE>
H. DURATION OF AGREEMENT
1. Term
This Agreement is effective as of the Effective Date and shall continue
in full force and effect until the earlier of (i) completion of the
project assigned hereunder, (ii) terminated by at least thirty (30) days
written notice by either party to the other, sent by registered mail to
the address for each party first set forth above, or to such other address
which a party may designate for its receipt of notices hereunder. This
Agreement may be terminated by Equifax immediately in the event Equifax is
unable to obtain waivers from its customers regarding Vendor's services.
2. Transfer Upon Termination
Vendor shall transfer, assign and make available to Equifax or Equifax
representative all property and materials in Vendor's possession or control
and any copies thereof belonging to and paid for by Equifax, and all
information regarding Equifax project(s) covered by this Agreement, as set
forth in Paragraph C herein.
3. Neither Equifax nor Vendor shall be liable to the other for damages of
any kind, including but not limited to lost profits or Incidental, punitive
or consequential damages, relative to termination of this Agreement in
accordance with Section 6.2, even if advised of the possibility of such
damages.
I. INDEPENDENT CONTRACTORS
Vendor shall at all times be an independent contractor and shall so
represent itself to all third parties. Nothing in this Agreement shall be
deemed to constitute either party the agent or legal representative of the
other nor to constitute the parties as partners, agents or joint ventures
of one another.
J. THIRD PARTY OBLIGATIONS
In connection with this Agreement, Vendor shall make no commitments or
disbursements, incur no obligations nor place any advertising, public
relations or promotional material for itself Equifax its parent,
subsidiaries or affiliate companies, nor disseminate any material of any
kind using the name of Equifax and/or Equifax such parent, subsidiary or
affiliate companies or using their trademarks, without the prior written
approval of Equifax.
K. GOVERNING LAW
This Agreement is entered into in the State of Texas and shall be
constructed and governed under and in accordance with the laws of that
State.
Disease State Management-SM- and DSMI-SM- are servicemarks of Disease State
Management, Inc.
<PAGE>
L. MISCELLANEOUS
1) The terms of this Agreement shall be binding upon Equifax and
Vendor and their respective successors and permitted assigns.
Notwithstanding the foregoing, this Agreement is not assignable in whole
or in part by Vendor without the prior written consent of Equifax.
Factoring of accounts receivable is not permitted.
2) The failure of either party to take action as a result of a breach
of this Agreement by the other party shall constitute neither a waiver of
the particular breach involved nor a waiver of either party's right to
enforce any or all provisions of this Agreement through any remedy granted
by law or this Agreement.
3) Equifax is an Equal Opportunity Employer and does not discriminate
against any person because of race, color, creed, age, sex, or national
origin. Vendor represents that it has the same policy of Equal Opportunity
Employment.
4) This Agreement contains the entire understanding of the parties
with respect to the subject matter contained herein, supersedes any prior
written or oral communications and may be modified in writing subject to
mutual agreement of the parties hereto.
5) The headings of each paragraph are for reference only and shall
not be construed as part of this Agreement.
6) Except for the obligation to pay money property due and owing,
either party shall be excused from any delay or failure in performance
hereunder caused by reason of any occurrence or contingency beyond its
reasonable control, including, but not limited to, failure of performance
by the other party, earthquake, labor disputes, riots, governmental
requirements, inability to secure materials on a timely basis, failure of
computer equipment, failures or delays of sources from which information
or data is obtained and transportation difficulties.
Disease State Management-SM- and DSMI-SM- are servicemarks of Disease State
Management, Inc.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer,
have entered in to this Agreement this 28 day of July, 1996
Equifax Disease State Management, Inc.
5001 Spring Valley Road 46 Prince Street
Suite 1000E Rochester, NY 14607
Dallas, TX 75244
By: /s/ Charles E. Page By: /s/ Donald A. Carlberg
---------------------------- ----------------------------
Title: President Title: President & CEO
------------------------- -------------------------
<PAGE>
EXHIBIT A
DIABETES
DISEASE MANAGEMENT
PROPOSAL
---------------------------------------
FOR
EQUIFAX HEALTHCARE ADMINISTRATIVE SERVICES
PRESENTED BY
Disease State Management,-SM- Inc.
46 Prince Street
Rochester, New York 14607
716-244-1360
Disease State Management and DSMI are registered service marks of Disease
State Management, Inc.
<PAGE>
Diabetes places a tremendous burden on patients and health care providers and
demands a significant portion of our nation's health care dollars. Disease
State Management, Inc.-SM- is committed to improving health outcomes through
the application of state of the art technologies. Our proprietary interactive
voice recognition systems, enhanced database modeling techniques and
on-demand publishing combine to provide the powerful educational intervention
necessary to enhance patient adherence to treatment recommendations, empower
patients to self-manage their disease and provide immediate referrals when
specific "high risk" triggers are met.
DSMI's-SM- staff of systems engineers, clinical experts and physician
consultants have performed a comprehensive review of diabetes to insure that
"best practices" and nationally recognized guidelines form the program's
foundation. Recognized leaders in outcomes management will provide guidance
throughout the project development process.
DSMI's-SM- standard diabetes intervention program consists of six interactive
voice response based telephone interventions. Each contact generates an
on-demand patient call summary and educational materials targeting individual
concerns. Additionally, physicians and other health care providers receive
an at-a-glance formatted report for inclusion in the patient's medical
records. These reports highlight specific areas of concern for the patient
and demonstrate areas where an individual's adherence to the prescribed
therapy is lacking. In additional to an on-demand published report, the
patient will receive pre-printed educational materials targeting specific
aspects of diabetes.
As an extra feature, DSMI's-SM- clinical staff establishes specific "at risk"
triggers that are monitored at each call. Patients meeting specific criteria
demonstrating an increased risk of hospitalization, emergency services or
other costly intervention will have their providers notified immediately for
follow-up. This critical notification and tracking of key indicators has
been demonstrated to reduce the global cost of managing chronically ill
patients.
Each intervention is uniquely structured and targets specific behaviors such
as: compliance with both diet and medication, diabetes self management and
knowledge base, communications with healthcare providers and quality of life.
By providing unique, individually tailored intervention strategies, DSMI-SM-
not only highlights areas where noncompliance and poor self management are
impacting the plan's expenditures but also provides an active intervention to
modify "at risk" behavior before an emergency room visit or hospitalization
occurs.
<PAGE>
PROGRAM OVERVIEW
See the "Program Intervention Description" section for details about each of
the interventions. The selected intervention schedule will be delivered to
patients who are enrolled in the program. Note that the term "provider" is
used to denote a case manager or another health care provider designated to
receive communications regarding the patient.
I. COMPONENTS
- Business reply mailer
- Program description/overview
- Educational materials
- Demand published patient reports
- Demand published provider reports
- Crisis flags
- Voice demonstration line
- Logo integration
II. INTERVENTION PROTOCOL:
MONTH 1:
- Patient enrollmenet via business reply mailer
- Initial telephone intervention within seven to ten days of business
reply mailer receipt
- Patients receive demand published report following IVR intervention
- Appropriate educational materials sent to patients
- Physician receives demand published, patient specific report for
inclusion in patient record following IVR intervention
- Additionally physician receives immediate notification via phone/fax for
any patient reporting status indicating a critical "at risk" trigger has
been met
MONTHS 2 - 4
- Patients receive interactive voice response based telephone
interventions monthly
- Patients receive demand published report following each IVR intervention
- Appropriate educational materials sent to patients
- Physician receives demand published, patient specific report for
inclusion in patient record following IVR intervention at month 2 and 4
- Additionally physician receives immediate notification via phone/fax for
any patient reporting status indicating a critical "at risk" trigger has
been met
MONTHS 6 AND 8
- Patients receive interactive voice response based telephone interventions
- Patients receive demand published report following each IVR intervention
- Appropriate educational materials sent to patients
- Physician receives demand published, patient specific report for
inclusion in patient record following IVR intervention at month 8
- Additionally physician receives immediate notification via phone/fax for
any patient reporting status indicating a critical "at risk" trigger has
been met
<PAGE>
[TO COME]
4
<PAGE>
PROGRAM INTERVENTION DESCRIPTION
See the "Program Schedule" section for an outline of the protocol for
delivering these program components. Note that the term "provider" is used
to refer to a physician, case manager or other health care provider
designated to receive communications regarding the patient.
BUSINESS REPLY MAIL (BRM)/PROGRAM DESCRIPTION
- Two page, pre-printed mailer designed for distribution by providers to
patients and return postage paid mail
- Provides brief assessment for identifying patient date (e.g., name,
phone number, best time to contact, MD fax number and MCO ID#) necessary
for DSMI-SM- to initiate a telephone call to patient
- Program description includes a brief program overview
INTERACTIVE VOICE RECOGNITION BASED TELEPHONE INTERVENTIONS
- Six interactive voice recognition base telephone interventions
initiated by live operators to patients at preferred contact times
- Cost-efficient interface: operator-initiated contact to identify
patient and transfer to automated, voice response system
- High appeal voice response system using a recorded human voice versus
computer synthesized speech
- Patient responds in normal speaking voice versus pushing touch tone
buttons
- Self-report follow-up assessment of relevant medical and behavioral
factors: update on disease status, prescribed treatment including
diet, exercise, and medications, patient motivation, treatment barriers,
patient knowledge indicators regarding symptom identification and disease
self-management
- Patient receives personalized questions and clinically appropriate
feedback driven by expert system to promote patients' awareness of their
condition and adherence to their treatment regimen
- Allows identification of patient concerns
- Adds vital progress information to the longitudinal patient database
PATIENT REPORTS
- Laser printed, on-demand published report including personalized text
and graphics
- Mailed to patient within a week after each telephone intervention
EDUCATIONAL PIECES
- Educational materials to reinforce patient awareness and knowledge
regarding their condition and promote treatment adherence
5
<PAGE>
PHYSICIAN REPORTS
- One page laser printed, on-demand published report integrating
patient's follow-up and enrollment data
- Mailed to patient's provider within a week after each patient
interactive voice reponse intervention at months 2, 4 and 8
- "At-a-glance" format provides efficient documentation of critical
patient data, ready for insertion into the medical record
- Facilitates identification of patient education needs and
hard-to-manage patients, appropriate allocation of health care resources,
and timely modification of treatment regimens
- Enhances patient-provider communication
"AT RISK" REPORTING:
- Physicians/providers will be notified via fax when patients report
symptoms, noncompliance or other critical factors indicating an incrased
risk for an acute event, hospitalization or emergency procedure
OPERATIONAL REPORTING:
DSMI-SM- will provide standard aggregate reports quarterly.
PRE-PRINTED MATERIAL FEES:
Printing fees for all pre-printed materials (i.e., marketing brochure, BRM,
program description, educational materials) will be the responsibility of the
client. DSMI-SM- will furnish estimates for printing costs upon
determination of volumes and final specifications.
CUSTOMIZATION:
Any customization will constitute a revision to the intervention protocol
(i.e., additional patient and/or physician reports and/or variations in
on-demand or IV content). Any logo design used on the demand published
reporting is limited to black and white/grayscale. DSMI-SM- shall furnish
estimates for development and delivery to the client prior to undertaking any
revision.
6
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
EXHIBIT 10.12
SERVICES AGREEMENT
This Agreement is effective this 13th day of September, 1996, (the
"Effective Date") between Patient Infosystems, 46 Prince Street, Rochester,
New York 14607 ("Vendor") and Health Resources,Inc. under the terms set forth
below.
A. SERVICES
Vendor will provide the product(s) or service(s) set forth in the
proposal incorporated herein as Exhibit A.
The product and all elements as set forth in Exhibit A are subject to
prior approval by Health Resources, Inc., such approval not to be
unreasonably withheld.
B. COMPENSATION
1. Health Resources, Inc. shall pay Vendor an operational fee of [****]
in the program described in Exhibit A.
2. Health Resources, Inc. shall pay Vendor for pre-printed materials
(e.g. marketing brochure, business reply mailer, program description)
required for the program. Vendor will furnish estimates for printing costs
upon determination of volumes and specifications.
3. All amounts due under this agreement shall be invoiced monthly to
Health Resources, Inc. by Vendor and payable within thirty days of the date
of the invoice. Payments exceeding thirty days past due shall be subject to
a service charge of [****] per month until paid.
4. In the event that Health Resources, Inc. shall request any changes in
the specifications or scope of the services described in Exhibit A
hereto, Vendor will notify Health Resources, Inc. of the cost of such
revisions and will not proceed without prior written approval.
C. CONFIDENTIALITY
1. Health Resources, Inc. and Vendor acknowledge that certain
confidential and proprietary information may be disclosed by one of them
to the other in the course of this Agreement. For purposes of this
Agreement, the term "Confidential Information" includes the following: (a)
All information regarding the patient, Health Resources, Inc's. Customer,
any patient medical data and/or status, or provider information; and (b)
any other information identified as confidential in writing by the
disclosing party prior to disclosure. Notwithstanding the confidentiality
requirements of this Agreement, the foregoing shall not prevent Health
Resources, Inc. from retaining information, including any and all
information and data pertaining to any patient which comes to Health
Resources, Inc. or to which Health Resources, Inc. is given access during
this Agreement.
2. Should Health Resources, Inc. receive confidential information of
Vendor for use in performing their Services, Health Resources, Inc.
agrees to take all reasonable steps to safeguard the confidentiality of
said information and to prevent unauthorized disclosure thereof by Health
Resources, Inc.'s employees, agents and representatives. Health
Resources, Inc. shall maintain strict security procedures to protect the
confidentiality of any information received, stored, or delivered on
patients in the Health Resources, Inc. or any affiliated or associated
company's database.
-1-
<PAGE>
3. The data released hereunder to Vendor regarding patients, patient
medical data, Health Resources, Inc. Customers, and provider information,
is considered sensitive and confidential information. Vendor warrants that
it shall use any information provided by Health Resources, Inc. strictly
for the performance of this Agreement. Vendor acknowledges and agrees to
take all necessary steps to safeguard the confidentiality of all
information and reports, whether oral or written, maintain such information
as strictly confidential and to prevent unauthorized disclosure thereof by
Vendor's employees, agents, representatives and other third parties. Vendor
warrants that all such information and reports will not be disclosed to
any person, organization or entity other than Health Resources, Inc.
4. Each party shall hold the other party, its affiliated companies, the
officers, agents, employees, and independent contractors of the other
party, harmless and shall indemnify and defend such party for any claim
of expense or damage, whatsoever, resulting from the publishing or
release by such party, of information contrary to the above conditions.
5. The obligations of the Paragraph shall not apply to any Confidential
Information which the recipient can demonstrate is or becomes available
to the public through no breach of this Agreement.
6. Neither party to this Agreement shall, except as may be required by
law or federal regulation, or except with express written permission of
the other party, disclose the terms and conditions of this Agreement to
any third party or publicly advertise its contents.
7. The parties agree that Vendor's breach of any of its material
obligation under the applicable Confidentiality provisions of this
Agreement, may cause Health Resources, Inc. irreparable injury for which
it would not have adequate remedy at law, and that Health Resources, Inc.
shall be entitled to specific performance or preliminary or other
injunctive relief in addition to any and all remedies it may otherwise be
entitled to at law or in equity.
8. This Paragraph shall survive the termination of this Agreement.
Vendor shall not duplicate any material containing Health Resources, Inc.
Confidential Information, except in the direct performance of its
services under this Agreement. Vendor shall return all copies of
materials containing Health Resources, Inc. Confidential Information upon
Vendor's completion of services under this Agreement or upon any
earlier termination of this Agreement for any reason whatsoever.
D. INDEMNIFICATION
D1. Each party shall indemnify and hold the other party harmless from and
against all liability, damages, penalties, losses, costs or expenses,
including reasonable attorneys' fees, arising from or in any way related to
its willful or negligent actions or omissions in performing the
responsibilities as described in this Agreement.
D2. "Limitation of Liability"
Neither Health Resources, Inc. nor vendor shall in any way be liable for
any special, indirect, exemplary,incidental or consequential damages,
whether based on contract, tort, or any other legal theory, even if Health
Resources, Inc. or vendor has been previously advised of the possibility
of such damages. This paragraph shall survive the termination of this
agreement.
-2-
<PAGE>
E. PROFESSIONAL STANDARDS
Vendor represents that it has facilities, personnel, experience and
expertise sufficient in quality and quality to perform all such
assignments and projects given it by Health Resources, Inc. hereunder and
agrees that it will perform all such assignments and projects in a manner
commensurate with professional standards generally applicable to its
industry.
F. OWNERSHIP OF MATERIALS
The parties acknowledge that any modifications to the printed materials
produced by its asthma program for Health Resources, Inc. are being
created at the insistence of Health Resources, Inc. and shall be deemed
"work made for hire" under the United States copyright law.
Health Resources, Inc. shall have the right to use the whole work, any part
of parts thereof, or none of the work, as it sees fit. Health Resources,
Inc. may alter the work, add to it, or combine it with any other works, at
it sole discretion. Notwithstanding the foregoing, all original material
submitted by Vendor as part of the work or as part of the process creating
the work, including but not limited to listings, printouts, documentation,
notes, reports, shall be the property of Health Resources, Inc. whether or
not Health Resources, Inc. uses such material. No rights are reserved by
Vendor.
All surveys and reports prepared by Vendor in connection with the
performance of its services hereunder will become and remain Health
Resources, Inc.'s sole property.
Vendor agrees it will not disclose to any third party, without the prior
written consent of Health Resources, Inc., any proprietary or confidential
information acquired from Health Resources, Inc. under this Agreement,
including trade secrets, business plans and confidential or other
information which may be proprietary to Health Resources, Inc..
Vendor warrants and represents that it has or will have the right, through
written agreements with its employees, to secure for Health Resources,
Inc. the rights called for in this Section. Further, in the event Vendor
uses any subcontractor, even though subcontracting is not permitted by this
Agreement, or other third party to perform any of the services contracted
for under this Agreement, Vendor agrees to enter into such written
agreements with such third party, and to take such other steps as are or
may be required to secure for Health Resources, Inc. the rights called for
in this Section.
G. DURATION OF AGREEMENT
1. Term
This Agreement is effective as of the Effective Date and shall continue
in full force and effect until the earlier of (i) completion of the project
assigned hereunder, (ii) terminated by at least one hundred eighty (180)
days written notice by either party to the other, sent by registered mail
to the address for each party first set forth above, or to such other
address which a party may designate for its receipt of notices hereunder.
This Agreement may be terminated by Health Resources, Inc. immediately in
the event Health Resources, Inc. is unable to obtain waivers from its
customers regarding Vendor's services.
-3-
<PAGE>
2. Payment on Termination
Upon termination of this Agreement Health Resources, Inc. is to pay for all
authorized work in process.
3. Transfer Upon Termination
Vendor shall transfer, assign and make available to Health Resources, Inc.
or Health Resources, Inc.'s representative all property and materials in
Vendor's possession or control and any copies thereof belonging to and paid
for by Health Resources, Inc., and all information regarding Health
Resources, Inc.'s project(s) covered by this Agreement, as set forth in
Paragraph C herein.
4. Neither Health Resources, Inc. nor Vendor shall be liable to the other for
damages of any kind, including but not limited to lost profits or incidental,
punitive or consequential damages, relative to termination of this Agreement
in accordance with Section 6.2, even if advised of the possibility of such
damages.
H. INDEPENDENT CONTRACTORS
Vendor shall at all times be an independent contractor and shall so represent
itself to all third parties. Nothing in this Agreement shall be deemed to
constitute either party the agent or legal representative of the other nor to
constitute the parties as partners, agents or joint ventures of one another.
I. THIRD PARTY OBLIGATIONS
In connection with this Agreement, Vendor shall make no commitments or
disbursements, incur no obligations nor place any advertising, public
relations or promotional material for itself, Health Resources, Inc.'s,
subsidiaries or affiliate companies, nor disseminate any material of any kind
using the name of Health Resources, Inc. and/or Health Resources, Inc.'s such
parent, subsidiary or affiliate companies or using their trademarks, without
the prior written approval of Health Resources, Inc.
J. GOVERNING LAW
This Agreement is entered into in the State of New York and shall be
constructed and governed under and in accordance with the laws of that State.
K. MISCELLANEOUS
1) The terms of this Agreement shall be binding upon Health Resources, Inc.
and Vendor and their respective successors and permitted assigns.
Notwithstanding the foregoing, this Agreement is not assignable in whole or
in part by Vendor without the prior written consent of Health Resources, Inc.
2) The failure of either party to take action as a result of a breach of this
Agreement by the other party shall constitute neither a waiver of the
particular breach involved nor a waiver of either party's right to enforce
any or all provisions of this Agreement through any remedy granted by law or
this Agreement.
-4-
<PAGE>
3) This Agreement contains the entire understanding of the parties with
respect to the subject matter contained herein, supersedes any prior written
or oral communications and may be modified in writing subject to mutual
agreement of the parties hereto.
4) The headings of each paragraph are for reference only and shall not be
construed as part of this Agreement.
5) Except for the obligation to pay money property due and owing, either
party shall be excused from any delay or failure in performance hereunder
caused by reason of any occurrence or contingency beyond its reasonable
control, including, but not limited to, failure of performance by the other
party, earthquake, labor disputes, riots, governmental requirements,
inability to secure materials on a timely basis, failure of computer
equipment, failures or delays of sources from which information or data is
obtained and transportation difficulties.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer,
have entered in to this Agreement this 13th day of September, 1996.
Health Resources, Inc. Patient Infosystems, Inc.
20 Erford Road 46 Prince Street
Lemoyne, PA 17043 Rochester, New York 14607
By: /s/ David L. Dalton By: /s/ Donald A. Carlberg
-------------------------- -------------------------
Title: President & CEO Title: President & CEO
---------------------- ----------------------
-6-
<PAGE>
TRENDS IN ASTHMA
Chronic lung diseases such as asthma, bronchitis and emphysema pose serious
challenges to both patients and health care providers. Despite an increased
understanding of these disorders, improved pharmacological therapies and a
greater awareness among potential sufferers, the incidence rates continue to
soar. In fact, between 1982 and 1993 the number of people reporting chronic
bronchitis increased seventy-nine percent, while those having emphysema and
asthma increased twenty-five and forty-eight percent respectively.(1)
Currently, over twelve million people suffer from asthma in the United States,
making it not only one of the nation's most common diseases but one of the most
costly as well.
INCREASE IN INCIDENCE RATES: 1982 - 1992
[GRAPH]
DEATH RATE FOR ASTHMA: 1982 - 1992 (PER MILLION)
[GRAPH]
While the reason for the rapid growth in the number of chronic suffers remains
uncertain, one thing is certain: these diseases pose a serious threat to
patients' well being. Despite tremendous advances in both diagnostic and
pharmacological therapies in recent years asthma continues to exact a tremendous
financial toll in terms of both direct and indirect costs.
- ---------------
(1) American Lung Association. Adapted from information published by the
Division of Epidemiology, National Heart, Lung and Blood Institute
<PAGE>
IMPACT OF INCREASED PATIENT EDUCATION EFFORTS
The economic impact of asthma is staggering. In asthma patients diagnosed as
moderate to severe the annual cost of treatment often exceeds $100,000. In
fact, John Hancock Mutual Life Insurance Company in Boston has identified 1,300
patients whose care resulted in $28 million dollars in expenditures. Among the
most common reasons for exacerbation of symptoms are an inability of the
patients to self-manage their disease, poor pharmacological compliance, low
adherence to provider recommendations, a lack of patient knowledge concerning
their disease and failure of the provider to adhere to established treatment
guidelines; all areas that DSMI's-SM- asthma intervention program will impact.
- Study of severe asthmatics found 1,300 patients generated $28 million
in claims
- Highest individual level of asthma-specific costs was $126,343
- Highest expense for all care were for a 2 year old female - $584,211
- 235 members had claims exceeding $100,000 annually for treatment
Targeted educational intervention programs for asthma patients have proven
effective. A recent study, conducted at the National Jewish Center for
Immunology and Respiratory Medicine and the John Hancock Managed Care Group,
demonstrated significant improvements in patient outcomes for severe asthmatics
following a comprehensive initiative to educate patients.
PATIENTS ADMITTED WITHIN THE PAST 6 MONTHS
[GRAPH]
ADMISSIONS WITHIN THE PAST 6 MONTHS WERE LOWER IN PATIENTS RECEIVING TARGETED
SUPPORT.
Additionally, personalized asthma self management, which tailors program
materials to the individual, has demonstrated positive results in moderate to
severe asthmatics(2)(3). In a recent investigation incorporating targeted
support, the extension of face-to-face treatment via follow-up telephone calls
to the patient's home was rated more convenient and more acceptable to patients
than traditional group sessions (J.K. Wigal, personal communication, July 12,
1994). Finally, in a cost-benefit analysis of a self-management program for 47
adult asthmatics effectively reduced hospitalization cost form $18,488 to $1,538
and lost income from $11,593 to $4,589.(4)
- ---------------
(2) Kotses H., Lewis P., Environmental control of asthma self-management.
Journal of Asthma. 1990; 27:373.
(3) Kotses H., Stout C., Wigal J.K., Individualized asthma self-management: A
beginning. Journal of Asthma. 1991; 288:287-289.
(4) Taitel M.S., A self-management program for adult asthma. Part II: Cost-
benefit analysis. Journal of Allergy and Clinical Immunology. 1995;
95(3):672-6.
<PAGE>
FINANCIAL IMPACT OF ASTHMA
The following analysis reflects admission costs data for patients having severe
asthma. It reflects incident and admission rates for severe asthma as indicated
by the American Lung Association.
# of Covered Lives 500,000 500,000 500,000
Asthma Incidence Rate 0.05 0.05 0.05
# Asthma Patients 25,000 25,000 25,000
# Patients with Severe asthma 1250 1250 1250
Cost per Day as Inpatient $1,000.00 $1,000.00 $1,000.00
Average Length of Stay (days) 4 4 4
# Hospitalizations/year 3 2 1
Annual Hospitalization
Cost/Patient $12,000.00 $8,000.00 $4,000.00
Total Hospitalization Cost to
Plan $15,000,000.00 $10,000,000.00 $5,000,000.00
IMPACT OF DISEASE MANAGEMENT
PROGRAM
# of Patients Enrolled in DM
Program 1250 1250 1250
Estimated Operational
Costs/Patient $70.00 $70.00 $70.00
Total Operational Costs $87,500.00 $87,500.00 $87,500.00
PROJECTED REDUCTION IN ADMISSIONS
5% Reduction 5.00% 5.00% 5.00%
Annual Savings $750,000.00 $500,000.00 $250,000.00
7.5% Reduction in Admissions 7.50% 7.50% 7.50%
Annual Savings $1,125,000.00 $750,000.00 $375,000.00
10% Reduction in Admissions 10.00% 10.00% 10.00%
Annual Savings $1,500,000.00 $1,000,000.00 $500,000.00
% Success Rate Required to
Break Even 0.58% 0.88% 1.75%
# Pts. Avoiding Admission to
Break Even 7 11 22
<PAGE>
EXHIBIT A
ASTHMA
DISEASE MANAGEMENT
PROPOSAL
-------------------------------------------------
PRESENTED BY
Patient Infosystems, Inc.
46 Prince Street
Rochester, New York 14607
716-244-1360
<PAGE>
RATIONALE:
Asthma places a tremendous burden on patients and health care providers and
demands a significant portion of our nation's health care dollars. Patient
Infosystems, Inc. is committed to improving health outcomes through the
application of state of the art technologies to the care and treatment of
asthma. Our proprietary interactive voice recognition systems, enhanced
database modeling techniques, and on-demand publishing combine to provide the
powerful educational intervention necessary to enhance patent adherence to
treatment recommendations, empower patients to self-manage their disease and
provide immediate referrals when specific critical triggers are met.
PROGRAM DEVELOPMENT:
Patient Infosystems, Inc.'s staff, clinical experts and physician consultants
performed a comprehensive review of asthma to insure that the National Heart,
Lung, and Blood Institute's guidelines form the program's foundation.
Recognized leaders in outcomes management provided guidance throughout the
project development process.
PROGRAM INTERVENTION STRATEGIES:
Patient Infosystems, Inc.'s core asthma patient intervention program consists of
six interactive voice response based telephone interventions. Each contact
generates an on-demand personalized patient report targeting the patient's
status in relation to the specifics of their asthma condition. The patient will
also receive patient educational materials designed to reinforce their awareness
and knowledge regarding their condition and promote their treatment adherence.
Additionally, the patient's physician/health care provider will receive an
at-a-glance formatted report for review and inclusion in the patient's medical
records. These reports highlight specific areas of concern of the patient and
demonstrate areas of a patient's adherence to the prescribed therapy.
Each intervention is uniquely structured to target specific behaviors such as
recognition of symptoms and triggers, encourage compliance with trigger
avoidance, medications and self-management and provide for Quality of Life
measurements. By providing unique, individually tailored intervention
strategies, Patient Infosystems, Inc. highlights areas where noncompliance and
poor self-management impact the plan's expenditures. The program also provides
an active intervention to modify "at risk" behavior before an emergency room
visit or hospitalization occurs. These intervention strategies also provide the
patient with encouraging feedback and positive reinforcement with respect to
their personal health management.
CRITICAL EVENTS:
As an extra feature, Patient Infosystems, Inc.'s clinical staff establishes
specific critical event triggers that are monitored at each intervention.
Patients meeting specified criteria demonstrating an increased risk of
hospitalization, emergency services or other costly intervention will have their
physician/health care provider notified the day of the intervention by means of
a faxed report. This critical event notification and tracking of key indicators
has demonstrated a reduction in the global cost of managing chronically ill
patients.
DATA MEASUREMENTS:
In addition to providing ongoing support for patients, Patient Infosystems,
Inc.'s fully integrated systems approach allows for immediate on-line data
collection and evaluation. Programs may be customized to include administration
of HEDIS, Health Quality, patient satisfaction, NCQA and Quality of Life surveys
without operator induced bias. The process streamlines data collection and
provides a cost effective method to query patients.
2
<PAGE>
PROGRAM OVERVIEW
The following intervention schedule will be delivered to patients who are
enrolled in the program. See the "Program Intervention Description" section
for details about each of the interventions. See the "Program Schedule Summary"
for the delivery schedule of each intervention. Note that the term
"physician/health care provider" is used to denote a physician, case manager
or other health care provider designated to receive communications regarding
the patient.
I. PROGRAM COMPONENTS
- - Enrollment form
- - Patient diary
- - Program description/overview brochure
- - Six (6) Interactive Voice Response (IVR) telephone contacts
- - Six (6) on-demand published personalized patient reports
- - Patient educational materials - one per call
- - Six (6) on-demand published physician/health care provider reports
- - Critical trigger notification
- - Voice demonstration line
- - Logo integration
II. PROGRAM INTERVENTION SCHEDULE:
CALL #1:
- - Patient enrollment via enrollment form
- - Initial telephone intervention within ten days of enrollment
- - Patient receives on-demand published report following IVR intervention
- - Appropriate patient educational materials and diary sent to patient
- - Physician/health care provider receives on-demand published, patient
specific report for review and inclusion in patient record following IVR
intervention
- - Additionally physician/health care provider receives same day notification
via fax for any patient reporting status indicating a critical trigger has
been met
CALLS #2, 3, 4, 5, 6:
- - Patient receives an IVR based telephone intervention per program schedule
summary
- - Patient receives on-demand published report following each IVR intervention
- - Appropriate patient educational materials sent to patient
- - Physician/health care provider receives on-demand published, patient
specific report for review and inclusion in patient record following each
IVR intervention
- - Additionally physician/health care provider receives same day notification
via fax for any patient reporting status indicating a critical trigger has
been met
<PAGE>
III. INTERVENTION SCHEDULE SUMMARY:
The program consists of a schedule including 6 telephone interventions, 6
patient reports, 6 physician/health care provider reports, 6 patient educational
materials and critical trigger reporting when a patient reports a crisis. The
schedule is carried out over an 8 month period.
- ---------------------------------------------------
CALL # 1 2 3 4 5 6
- ---------------------------------------------------
MONTH # 1 2 3 4 6 8
- ---------------------------------------------------
- ---------------------------------------------------
IVR Intervention - - - - - -
- ---------------------------------------------------
Patient Report - - - - - -
- ---------------------------------------------------
Physician/Health - - - - - -
Care Provider
Report
- ---------------------------------------------------
Patient - - - - - -
Educational
Materials
- ---------------------------------------------------
Critical Trigger - - - - - -
Reporting
(faxed as needed)
- ---------------------------------------------------
<PAGE>
PROGRAM INTERVENTION DESCRIPTION
See the "Program Schedule Summary" section for an outline of the schedule for
delivering these program components. Note that the term "physician/health care
provider" is used to refer to a physician case manager or other health care
provider designated to receive communications regarding the patient.
ENROLLMENT FORM/PROGRAM DESCRIPTION
- One (1) page mailer to be distributed by providers to patients and
returned via postage paid mail
- Provides brief assessment for gathering patient data (e.g., name,
phone number, best time to contact, physician/health care provider fax
number, and identification number). Necessary for Patient
Infosystems, Inc. to initiate a telephone call to patient
- Program description includes a brief program overview for patient
INTERACTIVE VOICE RECOGNITION TELEPHONE INTERVENTIONS
- Six interactive voice recognition based telephone interventions
initiated by live operators to patients at preferred contact times
- Patient receives personalized questions and clinically appropriate
feedback driven by expert system to promote awareness of condition and
adherence to treatment regimen
- Follow-up assessment of relevant medical and behavioral factors:
update on disease status, prescribed treatment including diet,
exercise, and medications, patient motivation, treatment barriers,
patient knowledge indicators regarding symptom identification and
disease self-management
- Allows identification of patient concerns
- Operator-initiated contact to identify patient and transfer to
automated, voice response system
- High appeal voice response system using a recorded human voice versus
computer synthesized speech
- Patient responds in normal speaking voice versus pushing touch tone
buttons
- Adds vital progress information to the longitudinal patient database
PERSONALIZED PATIENT REPORTS
- Laser printed, on-demand published report including personalized
self-reported response data
- Mailed to patient within a week after each telephone intervention
- Black and white/greyscale logo to be used on report as program
identifier
PATIENT EDUCATIONAL MATERIALS
- Educational materials designed to reinforce patient awareness and
knowledge regarding their condition and promote treatment adherence
<PAGE>
PHYSICIAN/HEALTH CARE PROVIDER REPORTS
- One page laser printed, on-demand published report integrating
patient's self-reported response data
- Mailed to patient's physician/health care provider within a week after
each patient intervention
- "At-a-glance" format provides efficient documentation of critical
patient data, ready for review and inclusion into the patient's
medical record
- Highlighted notification that the patient is not following specific
treatment guidelines
- Black and white/grayscale logo to be used on report as program
identifier
- Facilitates identification of patient education needs and
hard-to-manage patients and appropriate allocation of health care
resources
- Enhances patient-physician/health care provider communication
CRITICAL TRIGGER REPORTING
- Physicians/health care providers will be notified via fax when patient
reports symptoms, noncompliance or other critical factors indicating
an increased risk for an acute event, hospitalization or emergency
procedure
- Notification will occur the day of the intervention
- Notification will be a faxed critical physician/health care provider
report
- Black and white/grayscale logo to be used on report as program
identifier
CLIENT REPORTING
- Patient Infosystems, Inc. will provide standard aggregate outcomes and
demographic reports quarterly
CUSTOMIZATION
Customization and modifications to the core program features and schedules are
available. Cost estimates for alterations will be furnished upon identification
of revised program specifications.
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
EXHIBIT 10.13
SERVICES AGREEMENT
This Agreement is effective this 13th day of September, 1996, (the "Effective
Date") between Patient Infosystems, 46 Prince Street, Rochester, New York
14607 ("Vendor") and Health Resources, Inc. Vendor agrees to provide
services to Health Resources, Inc. under the terms set forth below.
A. SERVICES
Vendor will provide the product(s) or service(s) set forth, and to the
specifications set forth in the proposal incorporated herein as Exhibit A.
The product and all elements as set forth in Exhibit A are subject to
prior approval by Health Resources, Inc., such approval not to be
unreasonably withheld.
B. COMPENSATION
1. Health Resources, Inc. shall pay Vendor an operational fee of [****] in
the program described in Exhibit A.
2. Health Resources, Inc. shall pay Vendor for pre-printed materials (e.g.
marketing brochure, business reply mailer, program description) required
for the program. Vendor will furnish estimates for printing costs upon
determination of volumes and specifications.
3. All amounts due under this agreement shall be invoiced monthly to Health
Resources, Inc. by Vendor and payable within thirty days of the date of
the invoice. Payments exceeding thirty days past due shall be subject to a
service charge of [****] per month until paid.
4. In the event that Health Resources, Inc. shall request any changes in
the specifications or scope of the services described in Exhibit A hereto,
Vendor will notify Health Resources, Inc. of the cost of such revisions
and will not proceed without prior written approval.
C. CONFIDENTIALITY
1. Health Resources, Inc. and Vendor acknowledge that certain confidential
and proprietary information may be disclosed by one of them to the other
in the course of this Agreement. For purposes of this Agreement, the term
"Confidential Information" includes the following: (a) All information
regarding the patient, Health Resources, Inc.'s Customer, any patient
medical data and/or status, or provider information; and (b) any other
information identified as confidential in writing by the disclosing party
prior to disclosure. Notwithstanding the confidentiality requirements of
this Agreement, the foregoing shall not prevent Health Resources, Inc. from
retaining information, including any and all information and data
pertaining to any patient which comes to Health Resources, Inc. or to which
Health Resources, Inc. is given access during this Agreement.
2. Should Health Resources, Inc. receive confidential information of
Vendor for use in performing their Services, Health Resources, Inc. agrees
to take all reasonable steps to safeguard the confidentiality of said
information and to prevent unauthorized disclosure thereof by Health
Resources, Inc.'s employees, agents and representatives. Health Resources,
Inc. shall maintain strict security procedures to protect the
confidentiality of any information received, stored, or delivered on
patients in the Health Resources, Inc. or any affiliated or associated
company's database.
-1-
<PAGE>
3. The data released hereunder to Vendor regarding patients, patient
medical data, Health Resources, Inc. Customers, and provider information,
is considered sensitive and confidential information. Vendor warrants that
it shall use any information provided by Health Resources, Inc. strictly
for the performance of this Agreement. Vendor acknowledges and agrees to
take all necessary steps to safeguard the confidentiality of all
information and reports, whether oral or written, maintain such information
as strictly confidential and to prevent unauthorized disclosure thereof by
Vendor's employees, agents, representatives and other third parties.
Vendor warrants that all such information and reports will not be disclosed
to any person, organization or entity other than Health Resources, Inc.
4. Each party shall hold the other party, its affiliated companies, the
officers, agents, employees, and independent contractors of the other
party, harmless and shall indemnify and defend such party for any claim
of expense or damage, whatsoever, resulting from the publishing or
release by such party, of information contrary to the above conditions.
5. The obligations of the Paragraph shall not apply to any Confidential
Information which the recipient can demonstrate is or becomes available
to the public though no breach of this Agreement.
6. Neither party to this Agreement shall, except as may be required by law
or federal regulation, or except with express written permission of the
other party, disclose the terms and conditions of this Agreement to
any third party or publicly advertise its contents.
7. The parties agree that Vendor's breach of any of its material obligation
under the applicable Confidentiality provisions of this Agreement, may
cause Health Resources, Inc. irreparable injury for which it would have not
adequate remedy at law, and that Health Resources, Inc. shall be entitled
to specific performance or preliminary or other injunctive relief in
addition to any and all remedies it may otherwise be entitled to at law
or in equity.
8. This Paragraph shall survive the termination of this Agreement.
Vendor shall not duplicate any material containing Health Resources, Inc.
Confidential Information, except in the direct performance of its
services under this Agreement. Vendor shall return all copies of materials
containing Health Resources, Inc. Confidential Information upon Vendor's
completion of services under this Agreement or upon any earlier termination
of this Agreement for any reason whatsoever.
D. INDEMNIFICATION
D1. Each party shall indemnify and hold the other party harmless from and
against all liability, damages, penalties, losses, costs or expenses,
including reasonable attorneys' fees, arising from or in any way related
to its willful or negligent actions or omissions in performing the
responsibilities as described in this Agreement.
D2. "Limitation of Liability"
Neither Health Resources, Inc. nor vendor shall in any way be liable for
any special, indirect, exemplary, incidental or consequential damages,
whether based on contract, tort, or any other legal theory, even if
Health Resources, Inc. or vendor has been previously advised of
the possibility of such damages. This paragraph shall survive the
termination of this agreement.
-2-
<PAGE>
E. PROFESSIONAL STANDARDS
Vendor represents that it has facilities, personnel, experience and
expertise sufficient in quality and quality to perform all such
assignments and projects given it by Health Resources, Inc. hereunder
and agrees that it will perform all such assignments and projects in
a manner commensurate with professional standards generally applicable
to its industry.
F. OWNERSHIP OF MATERIALS
The parties acknowledge that any modifications to the printed materials
produced by its asthma program for Health Resources, Inc. are being
created at the insistence of Health Resources, Inc. and shall be deemed
"work made for hire" under the United States copyright law.
Health Resources, Inc. shall have the right to use the whole work, any
part of parts thereof, or none of the work, as it sees fit. Health
Resources, Inc. may alter the work, add to it, or combine it with any other
works, at its sole discretion. Notwithstanding the foregoing, all original
material submitted by Vendor as part of the work or as part of the process
creating the work, including but not limited to listings, printouts,
documentation, notes, reports, shall be the property of Health Resources,
Inc. whether or not Health Resources, Inc. uses such material. No rights
are reserved by Vendor.
All surveys and reports prepared by Vendor in connection with the
performance of its services hereunder will become and remain Health
Resources, Inc.'s sole property.
Vendor agrees it will not disclose to any third party, without the prior
written consent of Health Resources, Inc., any proprietary or confidential
information acquired from Health Resources, Inc. under this Agreement,
including trade secrets, business plans and confidential or other
information which may be proprietary to Health Resources, Inc.
Vendor warrants and represents that it has or will have the right, through
written agreements with its employees, to secure for Health Resources, Inc.
the rights called for in this Section. Further, in the event Vendor uses
any subcontractor, even though subcontracting is not permitted by this
Agreement, or other third party to perform any of the services contracted
for under this Agreement, Vendor agrees to enter into such written
agreements with such third party, and to take such other steps as are or
may be required to secure for Health Resources, Inc. the rights called for
in this Section.
G. DURATION OF AGREEMENT
1. Term
This Agreement is effective as of the Effective Date and shall continue in
full force and effect until the earlier of (i) completion of the project
assigned hereunder, (ii) terminated by at least one hundred eighty (180)
days written notice by either party to the other, sent by registered
mail to the address for each party first set forth above, or to such
other address which a party may designate for its receipt of notices
hereunder. This Agreement may be terminated by Health Resources, Inc.
immediately in the event Health Resources, Inc. is unable to obtain
waivers from its customers regarding Vendor's services.
-3-
<PAGE>
2. Payment on Termination
Upon termination of this Agreement Health Resources, Inc. is to pay for all
authorized work in process.
3. Transfer Upon Termination
Vendor shall transfer, assign and make available to Health Resources, Inc.
or Health Resources, Inc.'s representative all property and materials in
Vendor's possession or control and any copies thereof belonging to and paid
for by Health Resources, Inc., and all information regarding Health
Resources, Inc.'s project(s) covered by this Agreement, as set forth in
Paragraph C herein.
4. Neither Health Resources, Inc. nor Vendor shall be liable to the other for
damages of any kind, including but not limited to lost profits or incidental,
punitive or consequential damages, relative to termination of this Agreement
in accordance with Section 6.2, even if advised of the possibility of such
damages.
H. INDEPENDENT CONTRACTORS
Vendor shall at all times be an independent contractor and shall so represent
itself to all third parties. Nothing in this Agreement shall be deemed to
constitute either party the agent or legal representative of the other nor to
constitute the parties as partners, agents or joint ventures of one another.
I. THIRD PARTY OBLIGATIONS
In connection with this Agreement, Vendor shall make no commitments or
disbursements, incur no obligations nor place any advertising, public
relations or promotional material for itself, Health Resources, Inc.'s,
subsidiaries or affiliate companies, nor disseminate any material of any kind
using the name of Health Resources, Inc. and/or Health Resources, Inc.'s such
parent, subsidiary of affiliate companies or using their trademarks, without
the prior written approval of Health Resources, Inc.
J. GOVERNING LAW
This Agreement is entered into the State of New York and shall be constructed
and governed under and in accordance with the laws of that State.
K. MISCELLANEOUS
1) The terms of this Agreement shall be binding upon Health Resources, Inc.
and Vendor and their respective successors and permitted assigns.
Notwithstanding the foregoing, this Agreement is not assignable in whole or
in part by Vendor without the prior consent of Health Resources, Inc.
2) The failure of either party to take action as a result of a breach of this
Agreement by the other party shall constitute neither a waiver of the
particular breach involved nor a waiver of either party's right to enforce
any or all provisions of this Agreement through any remedy granted by law or
this Agreement.
-4-
<PAGE>
3) This Agreement contains the entire understanding of the parties with
respect to the subject matter contained herein, supersedes any prior written
or oral communications and may be modified in writing subject to mutual
agreement of the parties hereto.
4) The headings of each paragraph are for reference only and shall not be
construed as part of this Agreement.
5) Except for the obligation to pay money property due and owing, either
party shall be excused from any delay or failure in performance hereunder
caused by reason of any occurrence or contingency beyond its reasonable
control, including, but not limited to, failure of performance by the other
party, earthquake, labor disputes, riots, governmental requirements,
inability to secure materials on a timely basis, failure of computer
equipment, failures or delays of sources from which information or data is
obtained and transportation difficulties.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer,
have entered in to this Agreement this 13th day of September, 1996.
Health Resources, Inc. Patient Infosystems, Inc.
20 Erford Road 46 Prince Street
Lemoyne, PA 17043 Rochester, New York 14607
By: /s/ David L. Dalton By: /s/ Donald A. Carlberg
-------------------------- -------------------------
Title: President & CEO Title: President & CEO
---------------------- ----------------------
-6-
<PAGE>
EXHIBIT A
DIABETES
DISEASE MANAGEMENT
PROPOSAL
-----------------------------------------------------------
PRESENTED BY
Patient Infosystems, Inc.
46 Prince Street
Rochester, New York 14607
716-244-1360
<PAGE>
RATIONALE:
Diabetes places a tremendous burden on patients and health care providers and
demands a significant portion of our nations health care dollars. Patient
Infosystems, Inc. is committed to improving health outcomes through the
application of state of the art technologies to the care and treatment of
diabetes. Our proprietary interactive voice recognition systems, enhanced
database modeling techniques and on-demand publishing combine to provide the
powerful educational intervention necessary to enhance patient adherence to
treatment recommendations, empower patients to self-manage their disease and
provide immediate referrals when specific critical triggers are met.
PROGRAM DEVELOPMENT:
Patient Infosystems, Inc.'s staff, clinical experts and physician consultants
performed a comprehensive review of diabetes to insure that the American
Diabetes Association's guidelines form the program's foundation. Recognized
leaders in outcomes management provided guidance throughout the project
development process.
PATIENT INTERVENTION STRATEGIES:
Patient Infosystems, Inc.'s core diabetes patient intervention program
consists of six interactive voice response based telephone interventions.
Each contact generates an on-demand personalized patient report targeting the
patient's status in relation to the specifics of their diabetes condition.
The patient will also receive patient educational materials designed to
reinforce their awareness and knowledge regarding their condition and promote
their treatment adherence. Additionally, the patient's physician/health care
provider will receive an at-a-glance formatted report for review and
inclusion in the patient's medical records. These reports highlight specific
areas of concern of the patient and demonstrate areas of a patient's
adherence to the prescribed therapy.
Each intervention is uniquely structured to target specific behaviors such
as: compliance with diet and medication, exercise, diabetes self-management
and knowledge base, awareness of critical symptoms and the self treatment of
such, Quality of Life measurements and improved communication with health
care providers. By providing unique, individually tailored intervention
strategies, Patient Infosystems, Inc. highlights areas where noncompliance
and poor self management are impacting the plan's expenditures and also
provides an active intervention to modify "at risk" behavior before an
emergency room visit or hospitalization occurs. These intervention
strategies also provide the patient with encouraging feedback and positive
reinforcement with respect to their personal health management.
CRITICAL EVENTS:
As an extra feature, Patient Infosystems, Inc.'s clinical staff establishes
specific critical event triggers that are monitored at each intervention.
Patients meeting specified criteria demonstrating an increased risk of
hospitalization, emergency services or other costly intervention will have
their physician/health care provider notified the day of the intervention by
means of a faxed report. This critical event notification and tracking of
key indicators has demonstrated a reduction in the global cost of managing
chronically ill patients.
DATA MEASUREMENTS:
In addition to providing ongoing support for patients, Patient Infosystems,
Inc.'s fully integrated systems approach allows for immediate on-line data
collection and evaluation. Programs may be customized to include
administration of HEDIS, Health Quality, patient satisfaction, NCQA and
Quality of Life surveys without operation induced bias. The process
streamlines data collection and provides a cost effective method to query
patients.
2
<PAGE>
PROGRAM OVERVIEW
The following intervention schedule will be delivered to patients who are
enrolled in the program. See the "Program Intervention Description" section
for details about each of the interventions. See the "Program Schedule
Summary" for the delivery schedule of each intervention. Note that the term
"physician/health care provider" is used to denote a physician, case manager
or other health care provider designated to receive communications regarding
the patient.
I. COMPONENTS
- Enrollment form
- Patient diary
- Program description/overview brochure
- Six (6) Interactive Voice Response (IVR) telephone contacts
- Six (6) on-demand published personalized patient reports
- Patient educational materials - one per call
- Six (6) on-demand published physician/health care provider reports
- Critical trigger notification
- Voice demonstration line
- Logo integration
II. PROGRAM INTERVENTION SCHEDULE:
CALL #1:
- Patient enrollment via enrollment form
- Initial telephone intervention within ten days of enrollment
- Patient receives on-demand published report following IVR intervention
- Appropriate patient educational materials and diary sent to patient
- Physician/health care provider receives on-demand published, patient
specific report for review and inclusion in patient record following IVR
intervention
- Additionally physician/health care provider receives same day
notification via fax for any patient reporting status indicating a critical
trigger has been met
CALL #2, 3, 4, 5, 6:
- Patient receives an IVR based telephone intervention per program schedule
summary
- Patient receives on-demand published report following each IVR
intervention
- Appropriate patient educational materials sent to patient
- Physician/health care provider receives on-demand published, patient
specific report for review and inclusion in patient record following each
IVR intervention
- Additionally physician/health care provider receives same day notification
via fax for any patient reporting status indicating a critical trigger has
been met
3
<PAGE>
III. INTERVENTION SCHEDULE SUMMARY:
The program consists of a schedule including 6 telephone interventions, 6
patient reports, 6 physician/health care provider reports, 6 patient
educational materials and critical trigger reporting when a patient reports a
crisis. The schedule is carried out over an 8 month period.
- -------------------------------------------------------------------------------
CALL # 1 2 3 4 5 6
- -------------------------------------------------------------------------------
MONTH # 1 2 3 4 6 8
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
IVR Intervention * * * * * *
- -------------------------------------------------------------------------------
Patient Report * * * * * *
- -------------------------------------------------------------------------------
Physician/Health * * * * * *
Care Provider
Report
- -------------------------------------------------------------------------------
Patient * * * * * *
Educational
Materials
- -------------------------------------------------------------------------------
Critical Trigger * * * * * *
Reporting
(faxed as needed)
- -------------------------------------------------------------------------------
4
<PAGE>
PROGRAM INTERVENTION DESCRIPTION
See the "Program Schedule Summary" section for an outline of the schedule for
delivering these program components. Note that the term "physician/health
care provider" is used to refer to a physician, case manager or other health
care provider designated to receive communications regarding the patient.
ENROLLMENT FORM/PROGRAM DESCRIPTION
- Two (2) page mailer to be distributed by providers to patients and
return via postage paid mail
- Provides brief assessment for identifying patient data (e.g., name,
phone number, best time to contact, physician/health care provider fax
number, and identification number) necessary for Patient Infosystems, Inc.
to initiate a telephone call to patient
- Program description includes a brief program overview for patient
INTERACTIVE VOICE RECOGNITION BASED TELEPHONE INTERVENTIONS
- Six interactive voice recognition based telephone interventions
initiated by live operators to patients at perferred contact times
- Patient receives personalized questions and clinically appropriate
feedback driven by expert system to promote awareness of condition and
adherence to treatment regimen
- Follow-up assessment of relevant medical and behavioral factors:
update on disease status, prescribed treatment including diet, exercise,
and medications, patient motivation, treatment barriers, patient knowledge
indicators regarding symptom identification and disease self-management
- Allows identification of patient concerns
- Operator-initiated contact to identify patient and transfer to
automated, voice response system
- High appeal voice response system using a recorded human voice versus
computer synthesized speech
- Patient responds in normal speaking voice versus pushing touch tone
buttons
- Adds vital progress information to the longitudinal patient database
PESONALIZED PATIENT REPORTS
- Laser printed, on-demand published report including personalized
self-reported response data
- Mailed to patient within a week after each telephone intervention
- Black and white/grayscale logo to be used on report as program
identifier
PATIENT EDUCATIONAL MATERIALS
- Educational materials designated to reinforce patient awareness and
knowledge regarding their condition and promote treatment adherence
5
<PAGE>
PHYSICIAN/HEALTH CARE PROVIDER REPORTS
- One page laser printed, on-demand published report integrating
patient's self-reported response data
- Mailed to patient's physician/health care provider within a week after
each patient intervention
- "At-a-glance" format provides efficient documentation of critical
patient data, ready for review and inclusion into the patient's medical
record
- Highlight notification that the patient is not following specific
treatment guidelines
- Black and white/grayscale logo to be used on report as program
identifier
- Facilitates identification of patient education needs and
hard-to-manage patients and appropriate allocation of health care
resources
- Enhances patient-physician/health care provider communication
CRITICAL TRIGGER REPORTING
- Physicians/health care providers will be notified via fax when patient
reports symptoms, noncompliance or other critical factors indicating an
increased risk for an acute event, hospitalization or emergency procedure
- Notification will occur the day of the intervention
- Notification will be a faxed critical physician/health care provider
report
- Black and white/grayscale logo to be used on report as program
identifier
CLIENT REPORTING
- Patient Infosystems, Inc. will provide standard aggregate outcomes and
demographic reports quarterly
CUSTOMIZATION
Customization and modifications to the core program features and schedules
are available. Cost estimates for alterations will be furnished upon
identification of revised program specifications.
6
<PAGE>
Portions of this Exhibit have been omitted pursuant
to a request for confidential treatment. The omitted
portions, marked by [****], have been separately filed
the Commission.
SERVICES AGREEMENT
This Agreement is effective this 24th day of September, 1996, (the "Effective
Date") between Patient Infosystems, Inc., 46 Prince Street, Rochester, New York
14607 ("Vendor") and Harris Methodist Health Plan, 611 Ryan Plaza Drive, Suite
900, Arlington, TX 76011-4009 ("Harris"). Vendor agrees to provide services to
Harris under the terms set forth below.
A. SERVICES
Vendor shall enroll up to [****] patients, to be designated by Harris no
later than November 1, 1996, in its asthma disease management program as
described in Exhibit A to this Agreement. Vendor shall provide Harris with
enrollment packages for use in enrolling patients, with each package to
include an introductory letter from Harris, a program enrollment form and
an SF 36 Health Survey form, as well as SF-36 Health Survey forms for use
at the completion of the program. Harris shall provide Vendor with a
completed program enrollment form and a completed SF-36 Health Survey for
each patient at enrollment as well as a completed SF 36 Health Survey at
the conclusion of the program. Vendor shall provide the asthma disease
management program services as described in Exhibit A, and scoring of the
SF 36 Health Surveys completed before and after the delivery of the program
services.
B. COMPENSATION
1. Harris shall pay Vendor program operational fees as follows:
[****] at the time of patient enrollment in the program
2. All amounts due under this Agreement shall be invoiced monthly to
Harris by Vendor and payable to Vendor within thirty days of the date of
the invoice. Payments exceeding thirty days past due shall be subject to a
service charge of [****] per month until paid.
3. In the event that Harris shall request any changes in the
specifications or scope of the services described in Exhibit A hereto,
Vendor will notify Harris of the cost of such revisions and will not
proceed without prior written approval.
C. CONFIDENTIALITY
1. Harris and Vendor acknowledge that certain confidential and proprietary
information may be disclosed by one of them to the other in the course of
this Agreement. For purposes of this Agreement, the term "Confidential
Information" includes the following: (a) All information regarding the
patient, Harris's customers, any patient medical data and/or status, or
provider information; and (b) any other information identified as
confidential in writing by the disclosing party prior to disclosure.
Notwithstanding the confidentiality requirements of this Agreement, the
foregoing shall not prevent Vendor from retaining information, including
any and all information and data pertaining to any patient which comes to
Vendor or to which Vendor is given access during this Agreement.
2. Should Vendor receive confidential information from Harris for use in
performing its services, Vendor agrees to take all reasonable steps to
safeguard the confidentiality of said information and to prevent
unauthorized disclosure thereof by Vendor's employees, agents and
representatives. Vendor shall maintain strict security procedures to
protect the confidentiality of any information received, stored, or
delivered on patients in the Harris or any affiliated or associated
company's database.
<PAGE>
3. The data released hereunder to Vendor regarding patients, patient
medical data, Harris's customers, and provider information is considered
sensitive and confidential information. Vendor acknowledges and agrees to
take all steps necessary to safeguard the confidentiality of all
information provided by Harris , whether oral or written, to maintain such
information as strictly confidential and to prevent unauthorized disclosure
thereof by Vendor's employees, agents, representatives and other third
parties. Vendor warrants that all such information will not be disclosed
to any person, organization or entity other than Harris.
4. The obligations of this Paragraph C shall not apply to any Confidential
Information which the recipient can demonstrate is or becomes available to
the public through no breach of this Agreement.
5. Neither party to this Agreement shall, except as may be required by law
or federal regulation, or except with express written permission of the
other party, disclose the terms and conditions of this Agreement to any
third party or publicly advertise its contents.
6. The parties agree that a breach of any of the material obligations
under the applicable confidentiality provisions of this Agreement may cause
irreparable injury for which the injured party would have not adequate
remedy at law, and that the injured party shall be entitled to specific
performance or preliminary or other injunctive relief in addition to any
and all remedies it may otherwise be entitled to at law or in equity.
7. This Paragraph C shall survive the termination of this Agreement.
D. INDEMNIFICATION
Each party shall indemnify and hold the other party harmless from and
against all liability, damages, penalties, losses, costs or expenses,
including reasonable attorneys' fees, arising from or in any way related to
its willful or negligent actions or omissions in performing the
responsibilities as described in this Agreement.
E. LIMITATION OF LIABILITY
Neither Harris nor Vendor shall in any way be liable for any special,
indirect, exemplary, incidental or consequential damages, whether based on
contract, tort, or any other legal theory, even if Harris or Vendor has
been previously advised of the possibility of such damages. This Paragraph
E shall survive the termination of this Agreement.
F. PROFESSIONAL STANDARDS
Vendor represents that it has facilities, personnel, experience and
expertise sufficient in quantity and quality to perform all such
assignments and projects given it by Harris hereunder and agrees that it
will perform all such assignments and projects in a manner commensurate
with professional standards generally applicable to its industry.
G. OWNERSHIP OF MATERIALS
All surveys, reports and documentation prepared by Vendor in connection
with the performance of its services hereunder will become and remain
Harris's sole property. Title to all material and documentation, including
data furnished by Harris to Vendor or delivered by Harris into the
Vendor's possession, shall remain with Harris. Vendor shall immediately
return all such material or documentation within seven (7) days of any
request by Harris or upon the termination or conclusion of this
Agreement, whichever shall occur first.
<PAGE>
All date collected by Vendor in the course of performing its services under
this Agreement shall remain Vendor's sole property. Vendor's use of the
data is limited to instances where data will not be identified by patient
or by client of Harris.
Vendor agrees it will not disclose to any third party, without the prior
written consent of Harris, any proprietary or confidential information
acquired from Harris under this Agreement, including trade secrets,
business plans and confidential or other information which may be
proprietary to Harris.
Vendor warrants and represents that it has or will have the right, through
written agreements with its employees, to secure for Harris the rights
called for in this Paragraph G. Further, in the event Vendor uses any
subcontractor, or other third party to perform any of the services
contracted for under this Agreement, Vendor agrees to enter into such
written agreements with such third party, and to take such other steps as
are or may be required to secure for Harris the rights called for in this
Paragraph G.
H. DURATION OF AGREEMENT
1. Term
This Agreement is effective as of the Effective Date and shall continue in
full force and effect for a period of twelve months from the effective
date.
2. Termination
If Harris defaults in the payment of any amounts due to Vendor under this
Agreement, Vendor may give Harris notice of such default and if Harris
does not cure any payment default within five (5) days after the giving of
such notice, then Vendor may terminate this Agreement on not less than
thirty (30) days notice to Harris.
I. INDEPENDENT CONTRACTORS
Vendor shall at all times be an independent contractor and shall so
represent itself to all third parties. Nothing in this Agreement shall be
deemed to constitute either party as the agent or legal representative of
the other nor to constitute the parties as partners, or joint ventures of
one another.
J. THIRD PARTY OBLIGATIONS
In connection with this Agreement, Vendor shall make no commitments or
disbursements, incur no obligations nor place any advertising, public
relations or promotional material for itself, Harris, its parent,
subsidiaries or affiliate companies, nor disseminate any material of any
kind using the name of Harris and/or Harris's parent, subsidiary or
affiliate companies or using their trademarks, without the prior written
approval of Harris.
K. GOVERNING LAW
This Agreement is entered into in the State of Texas and shall be
constructed and governed under and in accordance with the laws of that
State.
<PAGE>
L. MISCELLANEOUS
1. The terms of this Agreement shall be binding upon Harris and Vendor
and their respective successors and permitted assigns. Notwithstanding the
foregoing, this Agreement is not assignable in whole or in part by either
party without the prior written consent of the other party.
2. The failure of either party to take action as a result of a breach of
this Agreement by the other party shall constitute neither a waiver of the
particular breach involved nor a waiver of either party's right to enforce
any or all provisions of this Agreement through any remedy granted by law
or this Agreement.
3. This Agreement contains the entire understanding of the parties with
respect to the subject matter contained herein, supersedes any prior
written or oral communications and may be modified in writing subject to
mutual agreement of the parties hereto.
4. The headings of each paragraph are for reference only and shall not be
construed as part of this Agreement.
5. Except for the obligation to pay money properly due and owing, either
party shall be excused from any delay or failure in performance hereunder
caused by reason of any occurrence or contingency beyond its reasonable
control, including, but not limited to, failure of performance by the other
party, earthquake, labor disputes, riots, governmental requirements,
inability to secure materials on a timely basis, failure of computer
equipment, failures or delays of sources from which information or data is
obtained and transportation difficulties.
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer, have
entered in to this Agreement this 24th day of September, 1996
Harris Methodist Health Plan Patient Infosystems, Inc.
611 Ryan Plaza Drive, Suite 900 46 Prince Street
Arlington, TX 66011-4008 Rochester, NY 14607
By: /s/ Edward Harris, M.D. By: /s/ Donald A. Carlberg
-------------------------- ------------------------
Title: Director of Wellness and Prevention Title: President & CEO
----------------------------------- ------------------------
<PAGE>
EXHIBIT A
ASTHMA
DISEASE MANAGEMENT
PROPOSAL
------------------------------
PRESENTED BY
Patient Infosystems, Inc.
46 Prince Street
Rochester, New York 14607
716-244-1380
<PAGE>
RATIONALE:
Asthma places a tremendous burden on patients and health care providers and
demands a significant portion of our nation's health care dollars. Patient
Infosystems, Inc. is committed to improving health outcomes through the
application of state of the art technologies to the care and treatment of
asthma. Our proprietary interactive voice recognition systems, enhanced
database modeling techniques, and on-demand publishing combine to provide the
powerful educational intervention necessary to enhance patient adherence to
treatment recommendations, empower patients to self-manage their disease and
provide immediate referrals when specific critical triggers are met.
PROGRAM DEVELOPMENT:
Patient Infosystems, Inc.'s staff, clinical experts and physician consultants
performed a comprehensive review of asthma to insure that the National Heart,
Lung, and Blood Institute's guidelines form the program's foundation.
Recognized leaders in outcomes management provided guidance throughout the
project development process.
PROGRAM INTERVENTION STRATEGIES:
Patient Infosystems, Inc.'s core asthma patient intervention program consists
of six interactive voice response based telephone interventions. Each
contact generates an on-demand personalized patient report targeting the
patient's status in relation to the specifics of their asthma condition. The
patient will also receive patient educational materials designed to reinforce
their awareness and knowledge regarding their condition and promote their
treatment adherence. Additionally, the patient's physician/health care
provider will receive an at-a-glance formatted report for review and
inclusion in the patient's medical records. These reports highlight specific
areas of concern of the patient and demonstrate areas of a patient's
adherence to the prescribed therapy.
Each intervention is uniquely structured to target specific behaviors such as
recognition of symptoms and triggers, encourage compliance with trigger
avoidance, medications and self-management and provide for Quality of Life
measurements. By providing unique, individually tailored intervention
strategies, Patient Infosystems, Inc. highlights areas where noncompliance
and poor self management impact the plan's expenditures. The program also
provides an active intervention to modify "at risk" behavior before an
emergency room visit or hospitalization occurs. These intervention
strategies also provide the patient with encouraging feedback and positive
reinforcement with respect to their personal health management.
CRITICAL EVENTS:
As an extra feature, Patient Infosystems, Inc.'s clinical staff establishes
specific critical event triggers that are monitored at each intervention.
Patients meeting specified criteria demonstrating an increased risk of
hospitalization, emergency services or other costly intervention will have
their physician/health care provider notified the day of the intervention by
means of a faxed report. This critical event notification and tracking of
key indicators has demonstrated a reduction in the global cost of managing
chronically ill patients.
DATA MEASUREMENTS:
In addition to providing ongoing support for patients, Patient Infosystems,
Inc.'s fully integrated systems approach allows for immediate on-line data
collection and evaluation. Programs may be customized to include
administration of HEDIS, Health Quality, patient satisfaction, NCQA and
Quality of Life surveys without operator induced bias. The process
streamlines data collection and provides a cost effective method to query
patients.
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PROGRAM OVERVIEW
The following intervention schedule will be delivered to patients who are
enrolled in the program. See the "Program Intervention Description" section
for details about each of the interventions. See the "Program Schedule
Summary" for the delivery schedule of each intervention. Note that the term
"physician/health care provider" is used to denote a physician, case manager
or other health care provider designated to receive communications regarding
the patient.
I. PROGRAM COMPONENTS
- Enrollment form
- Patient diary
- Program description/overview brochure
- Six (6) Interactive Voice Response (IVR) telephone contacts
- Six (6) on-demand published personalized patient reports
- Patient educational materials - one per call
- Six (6) on-demand published physician/health care provider reports
- Critical trigger notification
- Voice demonstration line
- Logo integration
II. PROGRAM INTERVENTION SCHEDULE:
CALL #1:
- Patient enrollment via enrollment form
- Initial telephone intervention within ten days of enrollment
- Patient receives on-demand published report following IVR intervention
- Appropriate patient educational materials and diary sent to patient
- Physician/health care provider receives on-demand published, patient
specific report for review and inclusion in patient record following IVR
intervention
- Additionally physician/health care provider receives same day
notification via fax for any patient reporting status indicating a
critical trigger has been met.
CALLS #2, 3, 4, 5, 6:
- Patient receives an IVR based telephone intervention per program
schedule summary
- Patient receives on-demand published report following each IVR
intervention
- Appropriate patient educational materials sent to patient
- Physician/health care provider receives on-demand published, patient
specific report for review and inclusion in patient record following each
IVR intervention
- Additionally physician/health care provider receives same day
notification via fax for any patient reporting status indicating a critical
trigger has been met
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III. INTERVENTION SCHEDULE SUMMARY:
The program consists of a schedule including 6 telephone interventions, 6
patient reports, 6 physician/health care provider reports, 6 patient
educational materials and critical trigger reporting when a patient reports a
crisis. The schedule is carried out over an 8 month period.
- -------------------------------------------------------------------------------
CALL # 1 2 3 4 5 6
- -------------------------------------------------------------------------------
MONTH # 1 2 3 4 6 8
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
IVR Intervention * * * * * *
- -------------------------------------------------------------------------------
Patient Report * * * * * *
- -------------------------------------------------------------------------------
Physician/Health * * * * * *
Care Provider
Report
- -------------------------------------------------------------------------------
Patient * * * * * *
Educational
Materials
- -------------------------------------------------------------------------------
Critical Trigger * * * * * *
Reporting
(faxed as needed)
- -------------------------------------------------------------------------------
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PROGRAM INTERVENTION DESCRIPTION
See the "Program Schedule Summary" section for an outline of the schedule for
delivering these program components. Note that the term "physician/health
care provider" is used to refer to a physician, case manager or other health
care provider designated to receive communications regarding the patient.
ENROLLMENT FORM/PROGRAM DESCRIPTION
- One (1) page mailer to be distributed by providers to patients and
returned via postage paid mail
- Provides brief assessment for gathering patient data (e.g., name, phone
number, best time to contact, physician/health care provider fax number,
and identification number). Necessary for Patient Infosystems, Inc. to
inititate a telephone call to patient
- Program description includes a brief program overview for patient
INTERACTIVE VOICE RECOGNITION TELEPHONE INTERVENTIONS
- Six interactive voice recognition based telephone interventions
initiated by live operators to patients at preferred contact times
- Patient receives personalized questions and clinically appropriate
feedback driven by expert system to promote awareness of condition and
adherence to treatment regimen
- Follow-up assessment of relevant medical and behavioral factors:
update on disease status, prescribed treatment including diet, exercise,
and medications, patient motivation, treatment barriers, patient knowledge
indicators regarding symptom identification and disease self-management
- Allows identification of patient concerns
- Operator-initiated contact to identify patient and transfer to
automated, voice response system
- High appeal voice response system using a recorded human voice versus
computer synthesized speech
- Patient responds in normal speaking voice versus pushing touch tone
buttons
- Adds vital progress information to the longitudinal patient database
PERSONALIZED PATIENT REPORTS
- Laser printed, on-demand published report including personalized
self-reported response data
- Mailed to patient within a week after each telephone intervention
- Black and white/grayscale logo to be used on report as program
identifier
PATIENT EDUCATIONAL MATERIALS
- Educational materials designed to reinforce patient awareness and
knowledge regarding their condition and promote treatment adherence
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PHYSICIAN/HEALTH CARE PROVIDER REPORTS
- One page laser printed, on-demand published report integrating
patient's self-reported response data
- Mailed to patient's physician/health care provider within a week after
each patient intervention
- "At-a-glance" format provides efficient documentation of critical
patient data, ready for review and inclusion into the patient's medical
record
- Highlighted notification that the patient is not following specific
treatment guidelines
- Black and white/grayscale logo to be used on report as program
identifier
- Facilitates identification of patient education needs and
hard-to-manage patients and appropriate allocation of health care
resources
- Enhances patient-physician/health care provider communication
CRITICAL TRIGGER REPORTING
- Physician/health care providers will be notified via fax when patient
reports symptoms, noncompliance or other critical factors indicating an
increased risk for an acute event, hospitalization or emergency procedure
- Notification will occur the day of the intervention
- Notification will be faxed critical physician/health care provider
report
- Black and white/grayscale logo to be used on report as program
identifier
CLIENT REPORTING
- Patient Infosystems, Inc. will provide standard aggregate outcomes and
demographic reports quarterly
CUSTOMIZATION
Customization and modifications to the core program features and schedules
are available. Cost estimates for alterations will be furnished upon
identification of revised program specifications.
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