<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1997
REGISTRATION NO. 333-22999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PHYSICIANS CARE FOR CONNECTICUT, INC.
<TABLE>
<S> <C> <C>
CONNECTICUT 6324 04-1467896
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or Classification Code Number) Identification Number)
organization)
</TABLE>
------------------------
1520 HIGHLAND AVENUE
CHESHIRE, CONNECTICUT 06410
(203) 699-2400
(Address and telephone number of principal executive offices)
------------------------
EDWARD J. BERNS, ESQUIRE
1520 HIGHLAND AVENUE
CHESHIRE, CONNECTICUT 06410
(203) 699-2400
(Name, address and telephone number of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
RICHARD L. TREMBOWICZ, ESQUIRE JOHN A. PICCIONE, ESQUIRE
HUTCHINS, WHEELER & DITTMAR SULLIVAN & WORCESTER LLP
A PROFESSIONAL CORPORATION ONE POST OFFICE SQUARE
101 FEDERAL STREET BOSTON, MASSACHUSETTS 02109
BOSTON, MASSACHUSETTS 02110 (617) 338-2800
(617) 951-6600
</TABLE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
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 the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO 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>
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1997
PROSPECTUS
PHYSICIANS CARE FOR CONNECTICUT, INC.
3,000 SHARES OF CLASS A COMMON STOCK
AND
3,000 SHARES OF CLASS B COMMON STOCK
--------------------------
NOPQRSTU
For definitions of capitalized terms not otherwise defined herein, see
"Glossary" beginning on page 56 of this Prospectus.
Physicians Care for Connecticut, Inc., a Connecticut corporation (the
"Company" or "Physicians Care"), is offering (the "Offering") two classes of
stock, Class A Common Stock, no par value ("Class A Common Stock"), and Class B
Common Stock, no par value ("Class B Common Stock" and together with Class A
Common Stock, "Common Stock"), to Eligible Purchasers (as defined herein, see
"Terms of Offering--Eligibility Requirements to Purchase Stock"), for a period
(the "Offering Period") of one hundred and eighty days from the date of this
Prospectus, with one sixty day extension at the discretion of the Board of
Directors of the Company (the "Board of Directors"). All Common Stock will be
sold to Eligible Purchasers at a price of $4,000 per share, subject to a "prompt
subscription" price of $3,000 per share for Eligible Purchasers who execute and
deliver to the Subscription Agent the completed Subscription Documents in form
sufficient to establish eligibility to purchase Common Stock within ninety days
of the date of this Prospectus. The Offering is subject to receipt of the
payment and completed Subscription Documents prior to the expiration of the
Offering Period committing to purchases of not less than $8 million of Common
Stock. In the event this threshold is not satisfied, the purchase price of each
share of Common Stock, plus interest thereon, shall be refunded, minus $450 per
share, which shall be retained by the Company to offset the costs associated
with the Offering. See "Risk Factors--Retention of Proceeds." Each prospective
subscriber is credited with interest commencing the date the Company determines
that the prospective purchaser has satisfied the requirements for acceptance of
subscriptions (See "Appendix B--How to Subscribe in this Offering") and
(assuming the $8 million threshold is not satisfied) receives a pro rata share
of the interest accrued on all the funds held in the Escrow which funds do not
include the $450 per share of Common Stock to be retained by the Company to
offset the costs associated with offering. Up to 3,000 shares of Class A Common
Stock and 3,000 shares of Class B Common Stock may be sold in this Offering.
Directors and officers of the Company who are Eligible Purchasers of Class A
Common Stock or Class B Common Stock may purchase Common Stock in the Offering
on the same terms and conditions available to all Eligible Purchasers and such
purchases will be counted in determining whether the $8 million threshold has
been satisfied. Directors and officers of the Company who are not physicians and
MedServ are not Eligible Purchasers of Class A Common Stock and, within the
discretion of the Board, may be holders of Class B Common Stock. The Board of
Directors has determined that it will not issue shares of Class B Common Stock
to directors and officers of the Company who are not physicians, hospitals or
MedServ in connection with the Offering.
The Common Stock will be marketed on a best efforts basis by Legg Mason Wood
Walker, Incorporated and Newbury, Piret & Co., Inc., licensed broker-dealers
(collectively referred to as the "Underwriter"), which will receive a sales
commission on all Common Stock sold plus reimbursement for expenses incurred in
connection with the Offering. Additionally, Newbury, Piret & Co., Inc. or its
designee will serve as Subscription Agent. Under certain circumstances, Common
Stock may be marketed by the Company's officers, directors and the members of
the Company's Physician Advocate Council, none of whom will receive compensation
in connection with any offers or sales of Common Stock.
The offering price has been determined by the Board of Directors, based upon
estimates of the capital necessary to begin operations of a Health Maintenance
Organization ("HMO"). The offering price does not necessarily bear any
relationship to the Company's asset value, net worth, or other established
criteria of value and is greater than what its Involuntary Redemption Price is
anticipated to be for at least the first five years after the Offering. The
securities registered hereby are not intended to be a liquid or a quickly
appreciating investment, but do provide an opportunity to develop the Company's
healthcare delivery system and to provide healthcare services to Enrollees
insured by the Company. See "Risk Factors--Restrictions on Transferability of
Common Stock and Absence of a Public or other Trading Market for Common Stock."
Purchasers who meet the eligibility requirements set forth in this Prospectus
may purchase the Common Stock regardless of where they reside, subject to the
Company's compliance with federal and state securities laws and regulations. See
"Terms of Offering--Eligibility Requirements to Purchase Stock."
--------------------------
THESE ARE SPECULATIVE SECURITIES WHICH INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 HEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Transfer of the Common Stock by investors is subject to restrictions and
limitations pursuant to the Company's Certificate of Incorporation and Bylaws.
Consequently, no market for the Common Stock currently exists or is expected to
exist, and Common Stock offered hereby should be purchased only by Eligible
Purchasers who have read and understand this Prospectus and the benefits and
risks of the investment. The terms and conditions under which the Company is
required or permitted to redeem Common Stock are set forth in this Prospectus.
See "Description of Securities--Transfer Restrictions and Redemption
Provisions."
<TABLE>
<CAPTION>
MAXIMUM PRICE TO UNDERWRITING DISCOUNT MAXIMUM PROCEEDS TO
PUBLIC(1)(2)(3) AND COMMISSIONS(4) COMPANY(5)(6)
<S> <C> <C> <C>
Per Class A Common Share........................ $4,000(1) $340 $3,660
Per Class B Common Share........................ $4,000(2) $340 $3,660
Total minimum................................... $8,000,000(3) $680,000 $7,320,000
Total maximum................................... $24,000,000(5) $2,040,000 $21,960,000
</TABLE>
(1) Class A Common Stock will be sold at a cost of $4,000 per share, subject to
a "prompt subscription" price of $3,000 per share to Eligible Purchasers who
execute and deliver to the Subscription Agent completed Subscription
Documents to purchase shares within ninety days of the date of this
Prospectus.
(2) Class B Common Stock will be sold at a cost of $4,000 per share, subject to
a "prompt subscription" price of $3,000 per share to Eligible Purchasers who
execute and deliver to the Subscription Agent completed Subscription
Documents to purchase shares within ninety days of the date of this
Prospectus.
(3) In the event the Company does not receive subscriptions for an aggregate of
$8,000,000 of Common Stock, the Company shall terminate the Offering, and
will retain from the proceeds $450 per share of Common Stock subscribed to
be used to offset expenses associated with the Offering. See "Risk
Factors--Retention of Proceeds."
(4) The Underwriting Discount and Commissions are equal to seven percent (7%) of
the price to the public ("Underwriter's Discount"). In addition, the
Underwriter is entitled to a non-accountable expense allowance of one and
one-half percent (1.5%) of the price to the public plus direct compensation
for certain specified expenses associated with the Offering ("Underwriter's
Accountable Expenses"). See "Underwriting."
(5) In the event all Common Stock offered hereby is sold within ninety days of
the date of this Prospectus, the Maximum Price to Public, Underwriting
Discount and Commission, and Maximum Proceeds to Company will be
$18,000,000, $1,530,000 and $16,470,000, respectively.
(6) Before deducting Offering expenses payable by the Company estimated to be
$1,610,000.
LEGG MASON WOOD WALKER NEWBURY, PIRET & CO., INC.
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the U.S. Securities and Exchange Commission (the
"Commission") Washington, D.C., 20549, a Registration Statement on Form SB-2
under the 1933 Securities Act with respect to the securities offered hereby.
This Prospectus, which is part of the Registration Statement, does not contain
all of the information included in the Registration Statement and the exhibits
and schedules thereto. For further information with respect to the Company and
the securities offered hereby, reference is made to the Registration Statement
and the exhibits and the schedules thereto which may be inspected, without
charge, at the Commission, or copies of which may be obtained from the
Commission in Washington, D.C. upon payment of the requisite fees. Statements
contained in this Prospectus as to the content of any contract or other document
referred to are not necessarily complete, and where such contract or other
document is an exhibit to the Registration Statement, each such statement is
deemed to be qualified in all respects by the provisions of the exhibit.
After this Offering, the Company will be subject to the informational and
reporting requirements of the Securities Exchange Act of 1934, as amended and,
in connection therewith, will file periodic reports, proxy statements, and other
information with the Commission. The Registration Statement, as well as any
periodic reports, proxy statements, and other information filed by the Company
with the Commission can be inspected without charge and copied, upon payment of
prescribed rates, at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and the Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material and
any part thereof will also be available by mail from the Public Reference
Section of the Commission, at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such material may also be accessed electronically by means of
the Commission's home page on the Internet at http:// www.sec.gov.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------------------------------------------------- ---------
<S> <C>
Available Information............................ 2
Prospectus Summary............................... 3
Risk Factors..................................... 8
Use of Proceeds.................................. 19
Dividends........................................ 20
Capitalization................................... 21
Dilution......................................... 21
Plan of Operation................................ 22
The Company...................................... 26
Business......................................... 27
Management....................................... 41
Conflicts of Interest............................ 45
Related Party Transactions....................... 45
<CAPTION>
SECTION PAGE
- ------------------------------------------------- ---------
<S> <C>
Terms of Offering................................ 46
Escrow Arrangements.............................. 48
Subscription Agent............................... 48
Description of Securities........................ 49
Underwriting..................................... 54
Experts.......................................... 54
Glossary......................................... 56
Index to Financial Statements.................... F-1
Appendix A: Questions & Answers.................. A-1
Appendix B: How to Subscribe in this Offering.... B-1
Appendix C: Sample Physician Fee Schedule........ C-1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information
appearing elsewhere. This Prospectus contains, in addition to historical
information, forward-looking statements of the Company's intentions that involve
risk and uncertainties. The Company's actual results could differ materially
from the results contemplated by such forward-looking statements.
PHYSICIANS CARE FOR CONNECTICUT, INC.
Physicians Care for Connecticut, Inc. was incorporated in 1996 as a
Connecticut corporation to develop a statewide physician-owned and -directed
insurance company licensed as an HMO which intends to offer a comprehensive
array of health plans. Presently, the Company is a wholly-owned subsidiary of
MedServ of Connecticut, Inc. ("MedServ"). However, upon completion of the
Offering, the Company will be substantially owned by the Eligible Purchasers of
Common Stock. The principal goal behind the formation of the Company is the
creation of a managed healthcare plan that will become the managed health plan
of choice, preferred by employers and individuals to provide for their health
insurance needs in the State of Connecticut. The Company believes that it can
achieve this goal by developing health insurance products with value that are
clearly identified as the premier products in the State of Connecticut.
The Company believes that physicians will play a critical role in the
overall success of the Company and that the Company will be predominantly owned
by physician shareholders practicing in Connecticut, who are expected to
participate actively in the Company's affairs. The Company currently intends to
support physicians' medical decision-making through timely access to information
and availability of medical management support. By doing so, the Company expects
to foster the commitment of physicians to participate actively in the Company's
marketing efforts and programs, and to manage medical risk while maintaining
patient satisfaction. The Company believes the principal difference between the
Company and its competitors is that the Company is founded on the belief that
physicians will play an important role in both defining and managing the
delivery of its health plan products, and that the Company intends to support
those efforts of physicians accordingly.
Initially, the Company intends to use a modified open access model, pursuant
to which each Enrollee will select a Care Manager who will coordinate medical
care to the extent consulted by the Enrollees or informed by a Participating
Physician or the Company. Although Enrollees may access any Participating
Physician at any time without a Care Manager's referral, the Company believes it
has structured its benefit design to encourage Enrollees to utilize their Care
Managers to coordinate referrals, for example, through a reduced or waived
copayment if a referral is coordinated through a Care Manager.
The Company intends to prepare and file during the fourth quarter of 1997 an
application for a Certificate of Authority ("COA") with the Connecticut
Department of Insurance (the "DOI") to operate as an HMO throughout the State of
Connecticut. The Company will seek such other regulatory approvals as necessary
to offer its health plans, should the COA be approved. The Company intends to
provide coverage for comprehensive healthcare services to Enrollees under its
health plans for a fixed, prepaid enrollment fee paid by or on behalf of the
Enrollees.
As a condition to purchasing Class A Common Stock in the Offering, each
Eligible Purchaser must agree to provide medical services to Enrollees pursuant
to the terms of a Participating Physician Agreement between the investing
physician and IPA. To be an Eligible Purchaser of Class B Common Stock, the
purchaser must be a physician who owns one share of Class A Common Stock, or a
hospital or other investor (including retired physicians) approved by the
Company at its discretion. See "Terms of Offering."
3
<PAGE>
For a more comprehensive description of the Company's contemplated business
operations, see "Business."
THE COMPANY'S MANAGEMENT
The Company intends to enter into a long-term Management Agreement (the
"Management Agreement") with MedServ, pursuant to which MedServ will conduct the
day-to-day operations of the Company, develop the physician and provider network
and oversee clinical service delivery. The Company expects that MedServ IPA,
Inc. ("IPA"), a statewide independent practice association of physicians that is
controlled by physicians, will have responsibility for the development of the
Company's physician network and for the clinical aspects of its operations under
the terms of a service agreement with MedServ. By virtue of its relationship
with MedServ and IPA, it is the Company's intention to maintain the distinctive
physician-led character of the Company in the managed care marketplace.
MEDSERV OF CONNECTICUT, INC.
MedServ was organized in 1995 as a joint venture of the Hartford County
Medical Association and the New Haven County Medical Association. Each of the
Associations holds 50% of the equity interests in MedServ. MedServ is a
for-profit corporation performing administrative functions for both county
medical associations and intends to operate a Central Verification Organization
("CVO") to provide credentialing services which are intended to meet National
Commission for Quality Assurance ("NCQA") credentialing standards.
Through its CVO, MedServ will develop credentialing standards to provide
assurances to Enrollees that each provider of medical services meets the minimum
standards for education, licensing, training and expertise deemed necessary by
the Company to provide the medical services requested. MedServ will collect
information to document compliance with the credentialing standards, verify the
accuracy of such information, and monitor continuing compliance with such
credentialing standards.
Pursuant to the Management Agreement and subject to the oversight of the
Board of Directors, MedServ will be responsible for the day-to-day management of
the Company, including but not limited to the following activities:
- performing all management, administrative and other services necessary to
operate the Company;
- obtaining all licenses, permits or other regulatory approvals necessary to
operate the Company as an HMO in the State of Connecticut;
- conducting or managing the sale of the Company's products, including
negotiating subscriber agreements with employer groups or individuals;
- conducting benefit design of the Company's health plans;
- conducting claims analysis and statistical reporting;
- conducting negotiation of provider contracts and credentialing of
providers;
- developing quality and utilization management standards;
- providing or arranging for the provision of a management information
system;
- ensuring that the Company's operations are consistent with applicable laws
and regulations.
Key members of the MedServ management team will provide management services
to the Company. The Management Agreement will have a minimum term of ten years
and will be automatically renewable for additional three-year terms, unless
terminated on one year's prior notice by either party. MedServ is the sole
holder of the Company's Class C Common Stock. Subject to the consent of the
Board of Directors of the Company ("Board of Directors"), which consent will not
be unreasonably withheld, MedServ will be
4
<PAGE>
permitted to contract with other third party independent contractors to provide
some or all of the services required to be delivered under the terms of the
Management Agreement. As a start-up, MedServ may engage an HMO management
consulting company to provide management or management support and consulting
services to MedServ, in whole or in part during the Company's development and
initial operations stages.
During the Development Stage and the Initial Operations Stage of the
Company, the Company will pay MedServ a Management Fee equal to MedServ's actual
cost of providing the services set forth in the Management Agreement not to
exceed the amounts set forth in the Administrative Services Budget (the
"Budget") approved by the Board of Directors by a two-thirds vote and an
allowance for profit and general administrative expenses equal to five percent
of such actual costs. In the event that actual administrative and capital
expenses in aggregate are expected to exceed the Budget by more than five
percent or if actual expenses related to any line item of the Budget are
expected to exceed the Budget for such line item by more than twenty percent
(whether or not aggregate expenses are expected to exceed Budget), MedServ must
notify the Board of Directors of such expenses and may make no expenditure for
such expenses without the approval of the Board of Directors. After completion
of the Development Stage and Initial Operations Stage, MedServ shall be paid a
negotiated percentage of actual gross premium revenue per Enrollee per month as
mutually agreed to by MedServ and the Company.
MedServ currently employs twenty-one full-time employees and has offices
located at 1520 Highland Avenue, Cheshire, Connecticut 06410. MedServ currently
provides management services to the following entities: New Haven County Medical
Association, Hartford County Medical Association, MedServ IPA and Medical
Delivery Services, Inc.
MEDSERV IPA, INC.
It is anticipated that IPA will enter into a long-term agreement with
MedServ (the "IPA Agreement"), pursuant to which IPA will be the exclusive
provider of a network of Participating Physicians to provide services to
Enrollees, which exclusive status is to remain in effect unless the Board of
Directors determines in its reasonable judgment that the network furnished by
the IPA is not adequate to service the needs of Enrollees, and will cause
Participating Physicians to provide such services. The IPA Agreement provides
that IPA shall, among other things: (a) ensure that Participating Physicians are
properly licensed and credentialed and have privileges at specified hospitals
and other health care facilities; (b) notify MedServ of any professional
disciplinary action or similar action against any Participating Physicians; (c)
with MedServ's assistance, develop peer group monitoring systems for
Participating Physicians; and (d) develop, with MedServ, mutually agreeable
Utilization Management and Quality Management Programs and adopt and implement
such programs. IPA's compensation for its services under the IPA Agreement has
not yet been determined. To the extent that IPA is not able to deliver a network
of physicians in any portion of the State of Connecticut, the Company is free to
establish its own network in that portion of the State of Connecticut and/or to
terminate the IPA Agreement with IPA. In addition, because the IPA may contract
with competitors of the Company, the Company may terminate the IPA Agreement if
the IPA executes a Competitor Contract (as defined in the IPA Agreement) and the
Company determines in its reasonable judgment that the execution of such
contract is contrary to the Company's interests.
IPA is a Connecticut non-profit corporation, organized in October 1985 and
formed specifically for the purpose of developing a network of physicians to
provide services to health plan enrollees. From 1985 to 1996, IPA was known as
ProCare IPA, Inc. IPA is also managed by MedServ.
IPA has previously arranged for the provision of physician services to Cigna
Health Plan of Connecticut and Multiplan.
PHYSICIAN ADVOCATE COUNCIL
The Board of Directors has authorized the establishment of the Physician
Advocate Council as an ad hoc committee appointed by the Board of Directors
which will advise the Board of Directors on matters of
5
<PAGE>
Company policy or operations as they affect physician participation in health
plans offered by the Company, including product design, physician compensation,
physician credentialing criteria, the physicians' role in member services
support, the effectiveness of the Company's medical management model and the
conduct of the Company's capital campaign. The Board of Directors appoints
physician members to the Physician Advocate Council in its discretion.
Participation of physicians in the Physician Advocate Council is voluntary and
no compensation will be paid by the Company to such physicians.
STOCK TRANSFER RESTRICTIONS AND REDEMPTION
The Common Stock is subject to significant restrictions on transfer and on
the redemption thereof by the Company. See "Description of Securities."
THE OFFERING
Common Stock offered by the Company:
<TABLE>
<S> <C>
Class A..................................................... 3,000 shares
Class B..................................................... 3,000 shares
Total....................................................... 6,000 shares
</TABLE>
COMMON STOCK TO BE OUTSTANDING AFTER THE OFFERING:
<TABLE>
<S> <C>
3,000 shares
Class A..................................................... (1)
3,000 shares
Class B..................................................... (1)
Class C..................................................... 3 shares
Total....................................................... 6,003 shares
</TABLE>
- ------------------------
(1) Assumes full subscription of all Common Stock offered hereby.
6
<PAGE>
USE OF PROCEEDS
Proceeds of the Offering will be used for repayment of bank loans, repayment
of Development Stage costs advanced by MedServ and IPA, payment of accounts
payable and accrued expenses related to Development Stage costs, sales and
marketing activities, and for working capital and other general corporate
purposes. See "Use of Proceeds."
RISK FACTORS
An investment in the Common Stock involves a high degree of risk, including,
among others, risks related to lack of operating history, anticipated losses for
several years, retention of proceeds, government approvals and regulation,
restrictions on transfer of stock and absence of a public or other market for
Common Stock, need for agreements with a sufficient number of participating
healthcare providers, and reliance on MedServ and IPA. See "Risk Factors."
SUMMARY FINANCIAL DATA
The following table sets forth certain historical financial data for the
Company as of August 31, 1997, which has been derived from the audited financial
statements of the Company included elsewhere herein, together with unaudited pro
forma data reflecting the application of proceeds of the Offering.
<TABLE>
<CAPTION>
AS ADJUSTED UPON AS ADJUSTED UPON
COMPLETION OF COMPLETION OF
AUGUST 31, THE THE
BALANCE SHEET DATA: 1997 OFFERING(1) OFFERING(2)
- -------------------------------------------------------------- ------------- ---------------- ----------------
<S> <C> <C> <C>
Working Capital (Deficit)..................................... $ (1,258,691) $ 5,560,000 $ 20,200,000
Borrowings under Line of Credit............................... 625,000 -0- -0-
Total Liabilities............................................. 1,292,785 -0- -0-
Total Stockholders' Equity (Deficit).......................... $ (1,258,691) $ 5,560,000 $ 20,200,000
</TABLE>
(1) Assumes the receipt of the minimum net proceeds of the Offering to the
Company $7,170,000 ($8,000,000 less underwriting commissions, discounts and
expense allowances) and the payment of additional offering expenses of
$351,309.
(2) Assumes the receipt of the maximum net proceeds of the Offering to the
Company $21,810,000 ($24,000,000 less underwriting commissions, discounts
and expense allowances) and the payment of additional offering expenses of
$351,309.
7
<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 OF THE COMPANY'S INTENTIONS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS CONTEMPLATED
BY SUCH 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; NO OPERATING HISTORY
The Company was incorporated on November 12, 1996. The Company is in its
development stage, has no operating history, and has generated no operating
revenues. As such, the Company is subject to all of the risks inherent in a new
enterprise, including, but not limited to the items discussed below. The Company
has not completed the design of its benefit plans or its financial, operational,
and administrative plans. Similarly, it has not completed the drafting of
contract documents, utilization management/quality assurance standards and
systems, or the structuring of all payment levels and methodologies. The
application for a COA which will enable the Company to operate as an HMO in the
State of Connecticut will be filed after commencement of this Offering, but will
be subject to completion of the minimum Offering.
Investors should be aware of the difficulties typically encountered by a new
enterprise. There can be no assurance that the Company's development will be
successful, that its services or products will be successfully marketed, or that
a sufficient number of physicians or other healthcare providers (i.e. hospitals,
ancillary providers, etc.) will be willing to provide services to the Enrollees
of the Company to enable it to operate an HMO.
RETENTION OF PROCEEDS
The Company will retain $450 per share from the proceeds of the
subscriptions to purchase Common Stock to offset costs associated with the
Offering, including Underwriter's Accountable Expenses which the Company is
contractually obligated to pay, even if the Offering is not consummated due to
insufficient subscriptions to satisfy the $8,000,000 minimum threshold required
for consummation. Expenses associated with the Offering, exclusive of
underwriting commissions, Underwriter's non-accountable expenses, and
Underwriter's Accountable Expenses, are estimated to be approximately
$1,610,000. There can be no assurance that the Company will receive sufficient
subscriptions to consummate this Offering, and, accordingly, subscribers may
lose a part of their investment without receiving any shares of Common Stock.
RELIANCE ON DEVELOPMENT STUDY
The Company's initiative to develop the HMO is based on a Development Study
conducted by Medical Alliances, Inc. ("Medical Alliances"), which was funded by
MedServ. On the basis of the research conducted by Medical Alliances in support
of the Development Study, a physician-owned statewide HMO was determined to be
feasible. Based on certain assumptions in the Development Study, Medical
Alliances developed certain financial projections and estimated that capital in
the amount of approximately $15,000,000 was required to develop the HMO and to
fund the operations for approximately 30 months, the point at which Medical
Alliances estimated that the Company would attain profitable operations.
The Development Study makes assumptions regarding Company operations,
including acquisition of an information system, number and type of commercial
and Medicare product offerings, scope of marketing effort, method and cost of
conducting the sales effort, and employment of key personnel.
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The Company has undertaken additional review of the Development Study with
the assistance of its consultants and has updated the Development Study based
principally on actual development costs and expenses incurred through August 31,
1997. No assurances can be given as to the accuracy or completeness of the
Development Study or its assumptions, conclusions, recommendations, or financial
projections as of November 26, 1996, or any other date other than actual
expenses incurred through August 31, 1997; or that the Company will be able to
implement, or implement successfully, such recommendations or meet such
financial projections.
MINIMUM OFFERING LESS THAN PROJECTED CAPITAL NEEDS
The minimum gross proceeds of the Offering, less estimated costs of the
Offering, provide less capital than required to operate the Company based on the
assumptions, conclusions, recommendations and financial projections set forth in
the Development Study. See "Use of Proceeds--Minimum and Maximum Offering." In
the event the Company raises not more than the minimum gross proceeds of the
Offering, the Company must either raise more capital or modify its plan of
operations, or both.
In the event the net proceeds of this Offering to the Company are less than
$15,000,000, the Company, in the discretion of the Board of Directors, may
explore the benefits of strategic alliances with companies that provide
expertise and capital. Such companies may include HMOs or insurance companies,
management companies which provide services to HMOs or health care providers or
vendors of information technology services. The Company will also consider sale
of additional shares to health care providers. There is no assurance that such
additional capital will be available, or if available, will be available on
terms acceptable to the Company.
The Company will also consider modification of its plan of operations as
contemplated in the Development Study which may include, among other things, the
lease, instead of purchase, of capital equipment, or out-sourcing of claims
processing and information services to a third party administrator. The Company
will also consider raising additional funds through the issuance of debt or the
sale of additional equity, in which event the Company may nonetheless implement
all or some of the modifications of its plan of operations described above.
There can be no assurance that any additional funds will be available to the
Company, or, if available, will be available to the Company on acceptable terms.
There is no assurance that the Company will be able to raise additional
capital or to modify its plan of operations in a timely manner, or that, through
the raising of additional capital, the modification of the Company's plan of
operations, or any combination thereof, will be able to achieve the results
anticipated in the Development Study.
ACCUMULATED AND ANTICIPATED LOSSES FOR FIRST SEVERAL YEARS
As of August 31, 1997, the Company has cumulative losses of $1,270,691 and a
net stockholder's deficit of $1,258,691. Based on the Development Study and
assuming net proceeds from the Offering received by the Company of $15,000,000,
it is anticipated that the Company will incur additional losses and will have a
substantial operating deficit for approximately thirty months following the
effective date of enrollment of Enrollees, and will have cumulative losses for
approximately five years. A substantial portion of the proceeds of the Offering
is expected to fund negative cash flow. There can be no assurance, however, that
the Company will begin operating with a positive cash flow within the estimated
time described above, or that its actual losses or number of Enrollees will be
as estimated. It may take a significantly longer time than anticipated to
achieve a positive cash flow, if ever, and the Company's losses may be
significantly greater than estimated. The size of the deficit will depend upon,
among other factors, the health status of Enrollees, the ability of management,
the accuracy of actuarial projections, the Company's ability to reinsure against
catastrophic losses, the per capita amount of premiums collected, the ability to
market the Company's products successfully, the effectiveness of its utilization
management programs in controlling unnecessary utilization of health services,
the avoidance of epidemic or unexpected medical catastrophes, the length of time
necessary to obtain regulatory approvals and any conditions attached to such
approvals, and other factors not subject to precise estimation. If the Company
fails to
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achieve positive cash flow within approximately three years of the date on which
it first enrolls Enrollees, or if the proceeds of the Offering are otherwise
inadequate to fund the Company's operations until such time as the Company
ceases to incur deficits, then additional financing may be required to cover
losses incurred, which financing may not be available, or, if available, may not
be available on terms acceptable to the Company, in which event a statutory
liquidation proceeding under the supervision of the DOI might be instituted
against the Company. The rules and regulations of the State of Connecticut will
determine how the assets of the Company would be distributed to creditors and
shareholders under such circumstances. See "--Potential Ineligibility of HMOs
for Federal Bankruptcy Protection."
GOVERNMENT APPROVALS AS A PREREQUISITE TO OPERATIONS
The Company will file an application for a COA as an HMO with the DOI. Such
COA is essential to the operation of an HMO as proposed by the Company, and, as
a result, failure to receive approval from the DOI would have a significant
adverse effect on the Company. Further, the Company intends to file an
application with the HCFA to become a Competitive Medical Plan ("CMP") or
Provider Sponsored Organization ("PSO") to serve Medicare beneficiaries when the
Company meets eligibility requirements for a CMP or PSO, respectively. Under
current regulations, the Company must have at least 5,000 commercial Enrollees
to meet eligibility requirements as a CMP. The eligibility requirements for a
PSO are still being defined by regulations. The Company will continue to assess
whether it will meet the requirements for eligibility as a PSO. If the Company
qualifies as a PSO, the Company may be permitted to apply directly to Health
Care Financing Administration for participation in the Medicare program if the
State of Connecticut fails to act on the Company's licensure application within
90 days. Currently, PSOs also have lower enrollee enrollment requirements than
CMPs (1,500 compared to 5,000 in urban areas and 500 compared to 1,500 in
non-urban areas). There can be no assurance that the Company will be able to
meet such eligibility requirements. The Company intends, under its contract with
MedServ, to expend substantial sums from the proceeds of the Offering to obtain
HCFA's approval and status as a CMP or PSO. If HCFA denies the Company status as
a CMP and PSO, the Company would be unable to offer insurance to the state's
elderly population on a competitive basis, which would have a material adverse
impact on the Company.
GOVERNMENT REGULATION
HMOs are subject to extensive state and federal governmental regulation
which may undergo substantial changes over the next several years. The areas
regulated include, among others, the scope of benefits required to be made
available to Enrollees, minimum net worth and capital reserves requirements, the
manner in which premium rates are structured, procedures for review of quality
assurance programs, enrollment disclosures and requirements, the relationship
between the Company and its healthcare providers and the financial condition of
the Company. Failure of the Company to comply with such regulations could result
in the loss of its COA to operate an HMO in Connecticut, if such authority has
been approved, or federal authority to operate a CMP or PSO, if such federal
authority is obtained. In the future, the Company will assess the advantages and
disadvantages of obtaining federal HMO qualification. In lieu of specified plans
required by state regulation to be offered, federally qualified HMOs are
permitted to offer plans approved in accordance with laws governing a federally
qualified HMO. Until and unless federal HMO qualification is obtained, the
Company will be required to offer the plans required by Connecticut law.
However, there can be no assurance that the Company will seek approval to be a
federally qualified HMO or that if such approval is sought, it will be obtained.
Although the State of Connecticut has begun to deregulate some aspects of
hospital rates such rates are still regulated. As a result, the Company may be
limited in its ability to negotiate favorable rates from hospitals.
In addition, it is impossible to predict whether regulation and/or reforms
which may be considered by the federal government and/or the State of
Connecticut will be adopted, or to forecast the effect that state
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and/or federal legislation, if enacted, may have on the healthcare delivery
system and the Company's business. See "Business--Regulation."
CONTROL BY CURRENT SHAREHOLDER
MedServ, as the sole shareholder of the Company's Class C Common Stock, has
the right to appoint a majority of the Board of Directors. Two-thirds in
interest of the outstanding Class C Common Stock must approve certain
extraordinary actions of the Company, such as: (i) a sale or liquidation of the
Company; (ii) a merger or consolidation involving the Company; (iii) an
amendment to the Company's Certificate of Incorporation; and (iv) any matter
required by law to be submitted to the shareholders for a vote. In addition, the
Company's Bylaws provide that a two-thirds majority of the directors appointed
by MedServ is required in order to appoint management of the Company, to amend
the Company's Bylaws or to authorize the incurring of debt of $1,000,000 or
more. Accordingly, MedServ will be able to determine the outcome of all actions
of the Company requiring approval by the Board of Directors or shareholders and
will substantially control the business affairs of the Company. See "Description
of Securities."
LIMITATIONS ON PHYSICIAN OWNERSHIP OF CERTAIN HEALTHCARE ENTERPRISES
Federal law, under certain defined circumstances, prohibits referrals by a
physician to a healthcare entity in which the physician or his immediate family
has a financial interest, including ownership of an equity interest. There can
be no assurance that the limitations of federal law will not be extended to
physician ownership of an HMO.
Based upon the Company's business plan, and subject to receipt of all
necessary governmental approvals, the Company believes that neither the Company
nor its physician shareholders will be in violation of either federal or
Connecticut law as a result of the operation of, or participation in, the
Company as an HMO. To the extent that physicians refer Enrollees to other
physicians, they will receive no remuneration for such referral. Moreover, the
Company will not require nor encourage physicians to refer Enrollees to entities
in which they have a financial interest. See "Plan of Operation" and "Business--
Regulation--Federal Anti-kickback and Anti-referral Laws."
If the Company becomes a CMP or PSO, federal law requires compliance with
certain requirements and restrictions relating to risk-sharing arrangements with
physicians. These requirements and restrictions may adversely affect the
Company's ability to motivate physicians to manage medical risk effectively.
TERMINATION OF AGREEMENTS WITH PROVIDERS
If revenues are not sufficient to cover payments to providers and other
operating expenses, the Company will operate at a loss which could have a
material adverse impact on the Company's working capital. If the Company is
unable to make payments to Participating Physicians and other healthcare
providers, such providers could terminate their Participation Agreements to
provide services to the Company's Enrollees. The termination of a significant
number of such Participation Agreements could result in any of a series of
occurrences including, but not limited to, inability to service Enrollees,
reduced Enrollee growth, insufficient working capital and the possible loss of a
COA to operate an HMO. See "-- Anticipated Losses for First Several Years" and
"Use of Proceeds."
RESTRICTIONS ON TRANSFERABILITY OF COMMON STOCK AND ABSENCE OF A PUBLIC OR OTHER
TRADING MARKET
FOR COMMON STOCK
Common Stock cannot be transferred by a shareholder to any person or entity
other than to an Eligible Purchaser. As a result, there will be no public market
for the Common Stock of the Company. The Company must redeem Common Stock under
certain circumstances, and may redeem Common Stock otherwise. See "Description
of Securities--Transfer Restrictions and Redemption Provisions." In the event
that the redemption of Common Stock would, in the judgment of the Board of
Directors, render the
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Company insolvent or violate any capital reserve requirement or contract to
which the Company is a party, such redemption shall not be made at that time,
and the parties requesting redemption shall receive no other compensation for
the Common Stock sought to be redeemed. In addition, the Company may adopt
limitations on the amount of funds available each year for the redemption of
Common Stock. The Board of Directors may, in its sole discretion, determine the
amount of funds available each year for the redemption of Common Stock, as well
as the priority of payments to shareholders. As a result of the foregoing
restrictions, a shareholder of the Company should be prepared to hold his or her
Common Stock indefinitely.
NEED FOR PARTICIPATION AGREEMENTS WITH A SUFFICIENT NUMBER OF HEALTHCARE
PROVIDERS
The Company intends to contract with MedServ to arrange for the availability
of a physician network. In turn, the Company understands that MedServ intends to
subcontract its obligations to do so to IPA, which the Company believes will
arrange for the provision of a sufficient number of physicians throughout the
State of Connecticut to provide physician services to Enrollees.
The Company, in conjunction with MedServ, has begun to negotiate provider
agreements with hospitals and other healthcare providers, including, without
limitation, hospitals, pharmacies, laboratories and nursing homes, although it
has not reached a binding agreement with any such provider. There can be no
assurance that IPA will have a sufficient number of physicians or that the
Company through MedServ will contract with enough other healthcare providers to
provide adequate access to medical services for Enrollees. In such case, the
Company may not be able to sell its products or services statewide. The
inability of IPA to maintain a sufficient number of physicians in its network or
the inability of the Company through MedServ to contract with a sufficient
number of other healthcare providers might reduce the Company's ability to
compete with other HMOs in Connecticut and may have an adverse effect upon the
financial condition of the Company. If IPA's Participation Agreements are
terminated by Participating Physicians, or other healthcare providers terminate
their contracts with the Company, the Company's ability to continue to market
its products or services would be materially adversely affected.
NO ASSURANCE OF SUFFICIENT NUMBER OF PARTICIPATING PHYSICIANS
No physician can provide medical services to the Company's Enrollees unless
the physician purchases one share of Class A Common Stock. This requirement may
have the effect of encouraging physicians to provide services to enrollees of an
HMO, other than the Company, which does not condition participation therein upon
the purchase of an ownership interest. There can be no assurance that a
sufficient number of physicians will purchase one share of Class A Common Stock
such that the Company has an adequate number of Participating Physicians to
provide medical care to Enrollees. The failure of the Company through IPA to
attract a sufficient number of Participating Physicians to support an adequate
network may have a material adverse effect on the Company.
OVERABUNDANCE OF PARTICIPATING PHYSICIANS
The Company may have greater than an appropriate number of Participating
Physicians in certain specialties within certain geographic areas. To the extent
that there might be too many Participating Physicians in certain specialties
within a geographic area, the revenue realized by any individual or Group of
Participating Physicians in that specialty for services rendered to the
Company's Enrollees may not be as great as anticipated. In addition, if a large
number of physicians become Participating Physicians, each Participating
Physician may have fewer patients and as a result may derive less income from
the Company than might otherwise be anticipated. There is no assurance that each
shareholder will provide services to Enrollees and receive compensation
therefor. See "--Method of Reimbursement for Physician Services."
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LIMITATION ON CAPITAL; ELIGIBILITY OF PURCHASERS
There are certain eligibility criteria required to be an Eligible Purchaser.
To be an Eligible Purchaser of Common Stock, an individual must: (i) be a
physician licensed in the state in which the physician practices; (ii) be a
member of his or her County and State Medical Societies, if available; (iii)
have in effect a Participation Agreement with IPA and (iv) have in effect a
Physicians Care Primary Care Attachment or a Physicians Care Specialist
Physician Attachment. The Class A Common Stock may also be held by a Group. To
be an Eligible Purchaser of Class B Common Stock, the Eligible Purchaser must be
a physician who owns one share of Class A Common Stock, or a hospital or other
investor (including retired physicians) approved by the Company, in its
discretion. Accordingly, the number of potential Eligible Purchasers is limited
which, in turn, may restrict the potential capital that the Company raises in
this Offering, or thereafter, if the Company needs additional capital.
POTENTIAL FOR UNNECESSARY UTILIZATION OF HEALTHCARE SERVICES
Initially, the Company intends to offer a modified open access product,
pursuant to which each Enrollee will select a Care Manager who will coordinate
the Enrollee's medical care to the extent consulted by the Enrollee or informed
by a Participating Physician or Plan. Although Enrollees may access any
Participating Physician at any time without a Care Manager's referral, the
Company believes it has structured its benefits design to encourage Enrollees to
utilize their Care Managers to coordinate referrals, for example, through the
use of a reduced or waived copayment if a referral is coordinated through a Care
Manager. Female Enrollees, however, may select an Obstetrician/Gynecologist to
provide certain gynecological services or care related to pregnancy without the
prior authorization of the Care Manager, and the Company intends that such
Enrollees will not have to pay higher copayments for such services. Although
this system seeks to limit unnecessary utilization of medical services without
compromising the Company's vision of providing high quality medical care and
providing Enrollees flexibility in their choice of physicians, there is still a
risk that there will be unnecessary utilization of medical services. The
inability of the Company to minimize unnecessary utilization might have a
material adverse effect on the operations of the Company. Furthermore, Enrollees
may find the incentive to obtain a Care Manager's authorization for referral to
be unsatisfactory, which may lead to Enrollee attrition.
The Company intends to employ a Fee-For-Service ("FFS") payment arrangement
with a 20% withhold, which may encourage unnecessary utilization of healthcare
services, causing the Company to incur higher than anticipated costs.
Notwithstanding the use of a Care Manager system, and the use of other efforts
to control unnecessary utilization, the Company may suffer material adverse
financial consequences as a result of unnecessary utilization of healthcare
services. See "Business--Quality Management Program" and "--Utilization
Management Program."
SUBSTANTIAL COMPETITION
The Company will compete with other prepaid health plans and with
traditional indemnity insurers in its geographic area, as well as with
self-insured programs and other managed care companies offering a range of
health insurance products. Moreover, a number of indemnity insurers have begun
to aggressively market HMO or managed care products of their own. Other programs
or entities, including Physicians Health Services, Inc., Blue Cross & Blue
Shield of Connecticut, Inc., ConnectiCare, Inc., M.D. Health Plan, Inc., Oxford
Health Plans, Inc., Medspan, Inc., Cigna Corporation, and U.S. Healthcare/Aetna
Health Plans of Southern New England, Inc., among others, have greater operating
experience and are substantially better capitalized than the Company. Under
proposed changes to federal laws, groups of healthcare providers may contract
directly with employers or other purchasers of health insurance products,
thereby eliminating or reducing the need for HMOs. Furthermore, employer
purchasing coalitions may seek to bypass the Company and its competitors when
purchasing healthcare services for employees and dependents by contracting
directly with healthcare providers. The Company expects substantial competition
for its services. See "Business--Competition."
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NET WORTH AND RESERVES REQUIREMENTS
To operate as an HMO, the Company must satisfy statutory minimum net worth
requirements as required by the DOI and must maintain reserves at least equal to
all of its estimated pending claims. To comply with the those requirements, the
Company must initially have a regulatory minimum net worth of $1,500,000 and
thereafter must maintain capital committed to satisfy ongoing net worth
requirements equal to the greater of (i) $1,000,000, or (ii) two percent of its
annual premium revenues of the first $150,000,000 of premiums plus one percent
of annual premium revenues in excess of $150,000,000. The DOI retains
discretionary authority to increase such amounts to protect the interests of
Enrollees. There is no assurance that the Company will generate sufficient
earnings to meet the DOI reserve and net income requirements after the Company
commences operation as an HMO. Failure to meet those requirements could result
in suspension of operation of the Company and the revocation of the Company's
COA to operate an HMO. Further, there is no assurance that required regulatory
reserves will not be increased in the future, which increases may adversely
affect the Company. See "Business--Regulation."
METHOD OF REIMBURSEMENT FOR PHYSICIAN SERVICES
The Company cannot initially predict the behavior of its Participating
Physicians with respect to their adherence to established practice guidelines
affecting utilization of resources. As a result, the profitability of the
Company in the initial years of operations cannot be assured. If, however,
profits do accrue, the Company intends to use its operating profits to increase
its capital, reduce premiums, re-invest in the Company's operations, support
information systems development by Participating Physicians, and increase
reimbursement to Participating Providers. It is currently intended that
Participating Physicians will be reimbursed the lesser of (a) their usual and
customary fees, (b) the fees set forth on a fee schedule adopted by the Company,
an extract of which is attached as Appendix C hereto, "Sample Physician Fee
Schedule", or (c) a negotiated rate (in each case, less any applicable
copayments, coinsurance, or deductibles) ("Physician Reimbursement"). For most
services, the maximum fee schedule will be based on the Resource Based Relative
Value Scale ("RBRVS") with a conversion factor determined by the Company. The
maximum fee for services which are not included in the RBRVS will be established
by the Company upon the advice of its consultants based on a similar
methodology. The Company currently intends to withhold twenty percent of
Physician Reimbursement to defray medical costs in excess of budgeted amounts.
The sums withheld from Physician Reimbursement may be returned to Participating
Physicians at the discretion of the Board of Directors. As such, Participating
Physicians may be dissatisfied with their level of reimbursement and may
terminate their Participation Agreements and may request a redemption of their
Common Stock. In addition, the Company may not be able to effectively negotiate
payment rates with other providers, leading to increased costs for the Company.
See "--Need For Participation Agreements with a Sufficient Number of Healthcare
Providers" and "Description of Securities--Restrictions on Transfer; Share
Certificate."
There can be no assurance that Physician Reimbursement will be sufficient to
cover the costs of providing such services or to cause the physician to maintain
a Participation Agreement with IPA. Benefits from participation as a
Participating Physician, if any, may not compensate for a potential loss of the
investment made in this Offering.
POTENTIAL LIMITATION ON OUT-OF-STATE SERVICES
The Company, in conjunction with IPA, intends to develop its physician
network and, in conjunction with MedServ, its customer base within the State of
Connecticut. Since many individuals residing in Connecticut commute to employers
located in New York, Massachusetts and Rhode Island, the Company may need to
establish arrangements with out-of-state providers and may, in the future, need
to become licensed as an HMO or insurance company in some or all of those states
to attract regional employer accounts. If the Company seeks to be licensed as an
HMO in other states, there can be no assurance that
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the Company will obtain such licenses. Failure to be licensed to sell products
or services in neighboring states could adversely affect the Company's ability
to market its services to multistate employers and Connecticut employers having
a significant number of employees located or residing outside the State of
Connecticut. Enrollees who commute over state lines may encounter difficulties
in obtaining convenient access to the Company's provider network. Additionally,
to the extent Enrollees require medical services outside of the area covered by
the Company's network, the Company's ability to manage effectively the costs of
those services may be greatly reduced.
CONFLICTS OF INTEREST
The Company intends to market its HMO to large employers, small businesses,
and individuals throughout Connecticut, including physicians and hospitals who
or which may be shareholders and directors of the Company. Accordingly, some of
the Enrollees may be shareholders or employees or relatives of shareholders.
Further, the Company's shareholders may have ownership interests in and/or
participate in competing organizations, such as other HMOs, hospitals, and other
providers. The Company's shareholders may also have interests in free-standing
facilities or other providers with which the Company has contracted. In
addition, there may be a conflict between a shareholder's interest in the
profitability of the Company and the desire to maximize compensation received
for providing medical services to Enrollees. MedServ stands in a similar
position, as it will attempt to maximize the profitability of the Company and
also seek to profit from providing management services. This conflict may be
complicated by MedServ's ownership of all of the Company's Class C Common Stock,
which grants MedServ effective veto power over certain of the Company's actions
and decisions, including approval of the Management Agreement and of amounts
paid to MedServ by the Company pursuant thereto. In addition, those companies,
such as IPA, with which MedServ may subcontract may experience conflicts of
interest. See "Conflicts of Interest" and "Related Party Transactions."
REINSURANCE, INSOLVENCY, AND PROFESSIONAL LIABILITY COVERAGE
To insure against catastrophic losses, the Company, through the Management
Agreement, intends to obtain reinsurance with a qualified reinsurer with a
retention limit of $100,000 per Enrollee per year and to increase this limit
during subsequent years if the Company's financial resources allow and the
number of Enrollees increase. Reinsurance does not legally discharge the Company
from its primary liability to the insured for the full amount of the policy, but
it does make the reinsurer liable to the Company to the extent of the reinsured
portion of any loss that may be incurred.
To the extent required by Connecticut law, the Company will obtain
insolvency coverage to provide for certain payments to Participating Physicians
and other healthcare providers for healthcare services provided to its Enrollees
in the event of an inability by the Company to make such payments. The Company
may become subject to claims for which it may not be fully insured, including
claims for failure to provide medical coverage, for wrongful termination of
coverage, and for malpractice in the provision of services. Although the Company
does not directly provide medical care to Enrollees, care will be rendered to
the Enrollees in accordance with guidelines and protocols established by the
Company, the Board of Directors, its committees and/or its agents and
independent contractors including MedServ and IPA. Therefore, it is possible
that the Company may be held liable for medical malpractice claims against one
or more of its Participating Physicians. The Company intends to obtain insurance
from an A.M. Best A+ (Superior) rated carrier to protect itself from such claims
and losses, with policy limits of $1,000,000 per incident and an aggregate limit
of $10,000,000 in any policy year. Additionally, the Company currently intends
to obtain an umbrella policy with limits consistent with industry practice for a
similar sized operator of an HMO to protect itself from those and other
liability claims against the Company.
Although the Company believes it will be adequately insured against such
claims and losses, a claim or series of claims against the Company could exceed
policy limits and materially adversely affect the
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Company's financial condition. In addition, there can be no assurance that in
the future such coverages will be available to the Company at commercially
reasonable rates.
EXPERIENCE OF BOARD OF DIRECTORS AND MANAGEMENT; RELIANCE ON MEDSERV AND IPA;
UNCERTAINTY AS TO IDENTITY OF MANAGEMENT
As of the date hereof, no member of the Board of Directors has substantial
experience in the creation or management of an HMO.
The Company intends to enter into a Management Agreement with MedServ to
assist the Company in developing and managing its business and operations and in
obtaining a COA to operate an HMO on a statewide basis. In addition, the Company
understands that MedServ intends to subcontract to IPA responsibility to
establish a network of physicians and to oversee the delivery of clinical
services. As a result, the Company has been and will continue to be
substantially dependent upon MedServ and IPA, under the direction of the Board
of Directors, to manage the Company's activities. Although MedServ is staffed
with employees and engages consultants who have substantial experience in the
healthcare and insurance industries, MedServ has not previously been involved in
HMO development or management projects. As a start-up, MedServ may engage an HMO
management consulting company to provide management, or management support and
consulting services to MedServ, in whole or in part, during its Development
Stage and Initial Operations Stage. MedServ's decision relating to
subcontracting some or all of its management responsibilities to the Company
will depend, in part, on the success of the Offering and the options available,
including the ability of the Company or MedServ to secure such services on terms
acceptable to the Company, of which no assurance can be given. Because decisions
relating to the management of the Company during the Development Stage and the
Initial Operations Stage have not been made, the experience and ability of
management cannot be evaluated. The loss of the services of MedServ or the
failure of MedServ and IPA to perform their obligations under the Management
Agreement and the IPA Agreement, respectively, would have a material adverse
effect on the Company.
ANTITRUST CONSIDERATIONS
Federal and state laws may limit the scope of the Company's activities.
Participating Physicians or other healthcare providers will not be required to
provide services exclusively to the Company, and it will not preclude
Participating Physicians from providing services to Enrollees of other HMOs. The
Company may seek preferred or exclusive vendor relations with some providers of
healthcare services whereby the Company will purchase services only from
designated vendors. The Company will address antitrust issues on a case-by-case
basis. Generally, whenever physicians or other healthcare providers join
together to form ventures for the delivery of healthcare services, antitrust
issues may be present. Issues to be considered primarily concern possible
conspiracies, combinations and agreements in restraint of competition, price
fixing, boycotts, exclusive dealing arrangements, and concerted refusals to
deal. The Company has attempted to minimize its antitrust risk. Nevertheless,
the law in this area is unsettled and very fact specific. There can be no
assurance that there will not be a challenge to the Company's operations on the
basis of an antitrust violation in the future. If an antitrust investigation
were to be initiated or a legal action were to be filed against the Company, the
Company would be forced to incur legal expenses which could be substantial.
Moreover, if any antitrust challenge were to be successful, the Company could
suffer additional material adverse consequences, including cease and desist
orders with respect to certain business practices and monetary damages.
POTENTIAL NEGLIGENCE CLAIMS AGAINST HMOS
There is a possibility that the Company could be held liable for medical
malpractice committed by a Participating Physician. There is also a possibility
that the Company could be found liable for damages due to a determination that
certain healthcare services are not medically necessary, the failure to refer a
16
<PAGE>
patient outside of the provider network, the failure to cover certain medical
procedures, or other policies that may affect the level and/or quality of
medical services provided to Enrollees. The law in this area is undergoing
continued development at this time and it is difficult to determine the extent
of the Company's liability, if any, for any such future claims.
Although the Company intends to purchase professional liability coverage,
such policy may not cover the above described potential claims or be sufficient
in amount to satisfy specific claims, which could materially adversely affect
the financial condition of the Company. See "--Reinsurance, Insolvency and
Professional Liability Coverage."
DETERMINATION OF THE OFFERING PRICE
The offering price per share for the Common Stock has been arbitrarily
determined by the Board of Directors, based upon estimates of the capital
necessary to begin operations of an HMO. Accordingly, the offering price does
not bear any relationship to the assets, earnings, book value or net worth or
other established criteria of value of the Company prior to the Offering or to
expected earnings of the Company.
BROAD DISCRETION FOR USE OF PROCEEDS
The proposed use of proceeds is based upon the Company's best estimate given
its knowledge of facts and circumstances existing as of the date of this
Prospectus. The Company will have broad discretion as to the application of such
proceeds. See "Use of Proceeds."
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain provisions
that (a) diminish the likelihood that a potential acquiror would make an offer
for the Common Stock, (b) might impede a transaction favorable in the interests
of the shareholders and (c) increase the difficulty of removing members of the
Board of Directors or management. MedServ, as the sole shareholder of the Class
C Common Stock, has the right to appoint a majority of the Board of Directors.
Furthermore, elections for members of the Board of Directors will be held on a
staggered basis limiting the shareholders' ability to change the composition of
the Board of Directors. In addition, greater than two-thirds in interest of the
Class C Common Stock must approve any of the following actions: (i) a sale or
liquidation of the Company; (ii) a merger or consolidation involving the
Company; (iii) an amendment to the Company's Certificate of Incorporation; and
(iv) any matter required by law to be submitted to the shareholders for a vote.
In addition, the Company's Bylaws provide that two-thirds of the directors
appointed by MedServ is required to appoint management of the Company, to amend
the Company's Bylaws and to authorize the incurring by the Company of $1,000,000
or more of debt. See "--Control by Current Shareholder."
DILUTION
Prospective investors should be aware that the net tangible book value of
the Common Stock immediately following completion of this Offering will be less
than the offering price. This is because various expenses in connection with the
Offering will be paid from such funds, and the Company has already incurred
significant expenses during its development stage and in connection with the
preparation of its COA application. See "Dilution."
POTENTIAL INELIGIBILITY OF HMOS FOR FEDERAL BANKRUPTCY PROTECTION
A domestic insurer is ineligible to pursue a reorganization or liquidation
under the United States Bankruptcy Code as presently enacted. The law is unclear
as to whether an HMO organized and operating in the State of Connecticut would
be classified as a domestic insurer and found ineligible to pursue a liquidation
or reorganization under Federal bankruptcy laws. In light of this uncertainty, a
prospective investor in the Common Stock should assume that a reorganization or
liquidation of the Company would
17
<PAGE>
be conducted under the State of Connecticut's insurance insolvency laws. Under
either the Federal bankruptcy laws or the Connecticut insurance insolvency laws,
shareholders of the Company will be afforded the lowest priority upon
liquidation, and will receive a return on their investments only if all of the
Company's providers and trade creditors have been paid in full. Furthermore, the
Class B Common Stock has a $1,500 per share liquidation preference which must be
paid before Class A Common and Class C Common shareholders receive a return of
their investment in connection with a liquidation or other insolvency
proceeding.
LIMITATION ON LIABILITY OF OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation provides that, except as
prohibited by law, officers and directors of the Company will not be personally
liable to the Company or its shareholders for monetary damages resulting from
breaches of any duty owed to the Company or its shareholders. The Company has
obtained Directors and Officers liability insurance which, under certain
conditions and circumstances, covers the types of liabilities described in this
paragraph.
CERTAIN TAX CONSIDERATIONS
For federal income tax purposes, an HMO may be treated as a tax-exempt
entity under Section 501(c)(3) of the Internal Revenue Code (the "Code"), a
taxable insurance company under Subchapter L of the Code, or a taxable
corporation under Subchapter C of the Code, among other options, depending on
the facts and method of operation. Whether an HMO will be taxed as an insurance
company under Subchapter L of Code remains uncertain at this time because of
certain positions and actions taken by the Internal Revenue Service (the "IRS").
To meet the U.S. Department of the Treasury regulatory definition of an
"insurance company," an HMO's predominant business must consist of the issuance
of insurance contracts. For an HMO contract to be considered an insurance
contract, it must involve genuine shifting and distributing of risk to the HMO.
To be considered an insurance company, the HMO must retain the insurance risk
rather than transferring it to a provider or its contracting subscribers. In a
recent nonbinding ruling, the IRS held that a particular IPA model HMO, which
contracts with outside physicians on a Fee-For-Service basis, is an insurance
company because it acts as an indemnifier and retains the ultimate insurance
risk. The Company through its agreement with MedServ intends to contract
initially with physicians on a Fee-For-Service basis, which may permit the
Company to qualify as an insurance company for income tax purposes. The Company,
however, may enter into risk sharing arrangements with Participating Providers
in the future, which arrangements may shift all or a substantial portion of the
risk of the cost of medical services to such providers. Such arrangements may
disqualify the Company from obtaining insurance company status under IRS
regulations.
The Company is currently consulting with its accounting and tax advisors to
assess the viability of various reporting positions and benefits to be derived
therefrom. There can be no assurance that the IRS will not challenge the
reporting position selected by the Company. To the extent the Company is treated
as an insurance company, it will be eligible to take reporting positions which
provide certain advantages to, and impose certain restrictions on, the Company.
Specifically, estimated reserves for future claim payments will be deductible
(on a discounted basis) in the current taxable year. Conversely, qualification
as an insurance company may limit the Company's flexibility to structure
innovative risk sharing compensation arrangements with Participating Providers,
which arrangements create incentives to manage medical risks more effectively.
At this early stage of the Company's development, it is not feasible to make a
decision regarding tax status.
In addition, prospective investors may be subject to risks regarding the tax
effect of this investment. Such risks are not, nor are they intended to be,
addressed in this Prospectus and prospective investors should consult their own
tax advisors prior to making an investment.
18
<PAGE>
USE OF PROCEEDS
In the event the Company receives the minimum $8 million in subscriptions
necessary to complete the Offering, the net proceeds of the Offering to the
Company after underwriting discounts, commissions and expense allowances will be
$7,170,000. In the event the Company raises the maximum proceeds available in
this Offering, the net proceeds to the Company after underwriting discounts,
commissions and expense allowances will be $21,810,000. A portion of the net
proceeds of this Offering will be used to retire the outstanding balance under a
Credit Facility, dated as of December 3, 1996, with Fleet National Bank, which
outstanding balance of principal and interest was approximately $625,000 as of
August 31, 1997. Unless extended by Fleet National Bank, borrowings under this
Credit Facility must be repaid no later than November 22, 1997, with accrued
interest payable monthly at the lower of (i) Fleet National Bank's prime rate,
or (ii) the London Interbank Offered Rate ("LIBOR") plus 100 basis points. The
interest rates on borrowings under this Credit Facility ranged from 6.72% to
6.81% on August 31, 1997. The remainder of the net proceeds of this Offering
will be used to reimburse MedServ and IPA for advances used to pay development
stage costs equal to $121,791, to repay accounts payable and accrued expenses
and for working capital purposes. See "Use of Proceeds Schedule below." The
Company's outstanding obligations to MedServ and IPA do not have a fixed
maturity date, nor do they accrue interest. Pending use, the Company intends to
invest the net proceeds of this Offering in short- and medium-term,
interest-bearing investment grade securities. In the event that the Offering
fails to raise a minimum of $8,000,000, the purchase price of both Class A
Common Stock and Class B Common Stock, plus interest thereon, will be refunded,
minus $450 per share, which shall be retained to offset the costs of the
Offering. The proceeds of this Offering will be placed in an Escrow Account
until the Company has determined whether the Offering has raised a minimum of
$8,000,000 from the sale of Common Stock to Eligible Purchasers.
The Company intends to contract with an investment manager to invest its
funds. The Company intends to invest only in commercial paper, repurchase
agreements, treasury bonds or bills, U.S. Government and agency securities,
certificates of deposit, and money market funds of investment grade quality. All
assets and related collateral must have the highest credit ratings as assigned
by recognized rating agencies. See "Plan of Operation."
The Company believes that its existing resources, together with proceeds of
this Offering, will be adequate to satisfy its capital needs at least through
the end of the year ending December 31, 1998. However, if the Company's
operational expenses pursuant to its agreement with MedServ exceed expectations,
and the Company does not raise sufficient funds in this Offering to fund them,
it may require additional financing in order to carry out its business plans.
There can be no assurance that such funds will be available to the Company, or,
if available, will be available to the Company on acceptable terms.
The Use of Proceeds Schedule assumes use of proceeds based on the
assumptions, conclusions, recommendations and financial projections of the
Development Study. In the event that the Company is unable to raise more than
the minimum gross proceeds of $8,000,000, the Company must either raise
additional capital or modify its plan of operations or both. The table below
assumes that if the Company receives only the minimum proceeds of the Offering,
it will raise additional capital through the issuance of debt or sale of equity
to finance its operations through the Development Stage and Initial Operations
Stage. Although the Company may modify its plan of operations to require lower
expenditures through these stages, the Company has not identified those costs
which the Company will target for reduction; accordingly, no estimates of such
can be provided below.
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<PAGE>
THE FOLLOWING IS A SOURCE AND USE OF PROCEEDS SCHEDULE
<TABLE>
<CAPTION>
USE OF PROCEEDS SCHEDULE
- ---------------------------------------------------------------------------
<S> <C> <C>
MINIMUM MAXIMUM
---------- ----------
Gross Proceeds................................... $8,000,000 $24,000,000
Commission and non-accountable expense
allowance....................................... 680,000 2,040,000
---------- ----------
Net Proceeds before Accountable Expenses......... 7,320,000 21,960,000
Accountable Expenses............................. 150,000 150,000
---------- ----------
Net Proceeds..................................... $7,170,000 $21,810,000
<CAPTION>
DEVELOPMENT STAGE
- ---------------------------------------------------
<S> <C> <C>
Development Costs (through August 31, 1997)...... $1,271,000 $1,271,000
Additional Legal, Consulting, Accounting and
Actuarial Costs from September 1, 1997 through
September 30, 1998.............................. 489,000 489,000
Capital Expenditures............................. 660,000 660,000
Personnel Costs.................................. 890,000 890,000
Other Operating Costs............................ 380,000 380,000
---------- ----------
Costs through Development Stage.................. $3,690,000 $3,690,000
---------- ----------
<CAPTION>
INITIAL OPERATIONS STAGE
- ---------------------------------------------------
<S> <C> <C>
Capital Expenditures............................. 290,000 290,000
Personnel Costs.................................. 650,000 650,000
Other Operating Costs............................ 340,000 340,000
---------- ----------
Costs of first three months of operations........ 1,280,000 1,280,000
---------- ----------
COA--Mininum Net Worth........................... 1,500,000 1,500,000
---------- ----------
Total Costs through Initial Operations Stage..... $6,470,000 $6,470,000
---------- ----------
<CAPTION>
ADDITIONAL CAPITAL REQUIRED TO BREAK-EVEN (27
MONTHS)
- ---------------------------------------------------
<S> <C> <C>
Capital Expenditures............................. 700,000 700,000
Working Capital (including funding of losses).... 5,991,000 5,991,000
Surplus/Shortfall in Working Capital............. $(5,991,000) $8,649,000
</TABLE>
The Company will continually review the benefits of undertaking strategic
alliances with companies which may contribute expertise and capital to the
Company's operations.
In the event of a shortfall of capital the Company will explore the sale of
additional equity in connection with such strategic alliances, or the sale of
shares to other parties including healthcare providers.
The Company may also explore a modification of the plan of operations as
assumed in the Development Study which could include, among other things, the
lease, instead of purchase, of capital equipment or outsourcing of claims
processing and other information services to a third party administrator. Each
of these modifications would reduce the Company's cash requirements. Because the
Company has not explored the availability of capital through strategic
alliances, it cannot state with certainty the number or type of modifications it
would make to the Company's plan of operations in the event it raised only the
minimum gross proceeds. See "Plan of Operations--Liquidity and Capital
Resources."
DIVIDENDS
The Company has never paid any dividends and does not intend to pay
dividends for the foreseeable future. Earnings, if any, will be retained for use
in the operation and expansion of the Company's business.
20
<PAGE>
CAPITALIZATION
The following chart shows the Company's actual capitalization as of August
31, 1997 and the capitalization as adjusted to give effect to the minimum and
maximum sale of the Common Stock offered by the Company hereby, after estimated
expenses related to the Offering, the repayment of borrowings under the line of
credit and the satisfaction of obligations to MedServ and IPA. This table should
be read in conjunction with the financial statements and notes thereto, included
towards the end of this Prospectus.
<TABLE>
<CAPTION>
AS OF AUGUST 31, 1997
------------------------------------------
<S> <C> <C> <C>
ACTUAL MINIMUM(2) MAXIMUM(3)
------------- ------------ -------------
<CAPTION>
AS ADJUSTED
<S> <C> <C> <C>
Borrowings under line of credit....................................... $ 625,000 $ -- $ --
Shareholders' equity (deficit):
Class A Common Stock, no par value, 10,000 shares authorized........ -- 3,409,345 10,729,345
Class B Common Stock, no par value, 10,000 shares authorized........ -- 3,409,346 10,729,346
Class C Common Stock, no par value, 10,000 shares authorized(1)..... 12,000 12,000 12,000
Accumulated deficit................................................. (1,270,691) (1,270,691) (1,270,691)
------------- ------------ -------------
Total shareholders' equity (deficit)............................ (1,258,691) 5,560,000 20,200,000
------------- ------------ -------------
Total Capitalization............................................ $ (633,691) $ 5,560,000 $ 20,200,000
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
- ------------------------
(1) Reflects 3 shares issued and outstanding.
(2) Reflects the sale of $8,000,000 in Common Stock (2,667 shares) less
underwriting discounts and commissions and estimated expenses of the Company
of $1,181,309
(3) Reflects the sale of $24,000,000 in Common Stock (6,000 shares) less
underwriting discounts and commissions and estimated expenses of the Company
of $2,541,309
DILUTION
Prospective investors should be aware that the net tangible book value of
the Company's stock immediately following completion of this Offering will be
less than the offering price. This is because various expenses in connection
with the Offering will be paid from funds raised in the Offering, and the
Company has already incurred significant expenses in connection with the
preparation of its COA application and the development of its business and
operations. As of August 31, 1997, the Company had a negative net worth of
$1,258,691.
The following table illustrates dilution to prospective investors upon the
completion of the minimum and maximum offering:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
----------- -----------
<S> <C> <C>
Offering price per share............................................... $ 3,000 $ 4,000
Pro forma net tangible book value per share after the offering......... 2,082 3,365
----------- -----------
Dilution to prospective investors...................................... $ 918 $ 635
----------- -----------
----------- -----------
</TABLE>
21
<PAGE>
PLAN OF OPERATION
The Company is making the Offering for the purpose of raising capital
necessary to fund its operations. The Company will offer shares of Common Stock
at a price of $4,000 per share, with Primary Care Physicians required to
purchase one share of Class A Common Stock and Specialist Physicians required to
purchase a minimum of two shares of Common Stock (consisting of one share of
Class A Common Stock and not less than one share of Class B Common Stock). Only
physicians may purchase Class A Common Stock, and no physician may purchase more
than one share of Class A Common Stock. There is no limitation on the number of
shares of Class B Common Stock offered hereby which may be purchased by a
physician or other Eligible Purchaser, except to the extent of the total shares
being offered. During the first ninety days from the date of this Prospectus,
Eligible Purchasers will be offered a "prompt subscription" price of $3,000 per
share of Common Stock.
Since its formation in November 1996, the Company, in conjunction with
MedServ and its shareholders, the Hartford County Medical Association and the
New Haven County Medical Association, has embarked upon a program of developing
a physician-owned and directed HMO. The Company is in the development stage and
has not yet commenced its business activities. During this development stage,
which began prior to its formation and is expected to extend until the
completion of the Offering, the Company has been developing its product
offering, preparing its application to the DOI for a COA, establishing its
provider network in conjunction with MedServ and IPA and undertaking
miscellaneous other activities which will permit Physicians Care to commence its
operations as an HMO. Through this Offering, the Company is attempting to raise
the necessary capital to fund the development, start-up and initial operations
of the Company.
DEVELOPMENT STAGE ACTIVITIES
Beginning March 1996, MedServ retained a healthcare consultant, Medical
Alliances, to begin planning the development of an HMO, and to prepare an
application for a COA with the DOI for such HMO. Medical Alliances prepared a
Development Study dated November 26, 1996 (the "Development Study") which
concluded that a physician owned statewide HMO was feasible. Based on certain
assumptions set forth in the Development Study, Medical Alliances estimated that
approximately $13.5 million of capital would be required to design and develop a
statewide HMO and to fund the operations of the Company for 27 months after
commencement of enrollment, the time at which Medical Alliances estimated that
the HMO would attain profitable operations. The assumptions include acquiring
information systems equipment, offering both commercial and Medicare health
plans, hiring of personnel to operate the HMO including offering of full product
lines and conducting an extensive marketing campaign through the use of
insurance brokers to achieve commercial enrollment. The Company has undertaken
additional review of the Development Study with the assistance of its other
consultants and has updated the Development Study based principally on actual
development cost expenses incurred through August 31, 1997. The Company now
anticipates that approximately $15,000,000 of capital is required. The
application is being prepared and will be submitted by the Company. See "Risk
Factors--Reliance on Development Study." The Company will not be permitted to
solicit business or accept Enrollees until the DOI has approved the Company's
application and issued a COA to the Company to operate an HMO in the State of
Connecticut.
Over the next year, the Company, in conjunction with MedServ and IPA, will
devote substantial efforts to developing and credentialing its healthcare
delivery network. The success of the Company will be dependent upon, among other
things, the ability of the Company to contract with physicians and other
healthcare providers at competitively favorable rates and terms. The Company
intends to contract exclusively with MedServ to arrange for the availability of
a network of physicians throughout the State of Connecticut. The Company
believes MedServ intends to subcontract its obligation to establish the
physician network to IPA under the terms of an IPA Agreement between MedServ and
IPA. IPA currently
22
<PAGE>
has a network of approximately 1,850 physicians. IPA's Participation Agreements
with Participating Physicians are for an initial term of one year and are
automatically renewable for successive one year terms. In the event of
termination of a Participation Agreement by IPA or by the Participating
Physician, a Participating Physician is required to continue to furnish
healthcare services to Enrollees until an orderly transfer of such Enrollees to
other Participating Physicians can be undertaken or until completion of
treatment, whichever occurs first. Initially, the Company intends to reimburse
Participating Physicians pursuant to a pre-established fee schedule, an extract
of which is attached as Appendix C hereto, "Sample Physician Fee Schedule." The
Company currently intends to withhold twenty percent of the Physician
Reimbursement from the payment to Participating Physicians to defray medical
costs in excess of budgeted amounts. The sums withheld from Physician
Reimbursements may be returned to Participating Physicians at the discretion of
the Board of Directors.
Additionally, MedServ and the Company are currently devoting and will
continue to devote substantial efforts to contract with hospitals,
pharmaceutical providers, ancillary service providers and other providers for
the provision of healthcare services. The Company intends to contract with acute
care institutions to provide services at a negotiated rate or at a
Fee-For-Service discount. The Company anticipates that agreements with those
providers shall prohibit them from billing Enrollees for any services covered by
the HMO, except for any applicable copayments, coinsurance, or deductibles.
The Company has undertaken preliminary health plan design and drafted a
model subscriber agreement. The Company, in conjunction with MedServ and IPA, is
currently developing comprehensive utilization management protocols and quality
assurance standards which will be used to monitor the care provided to
Enrollees. Through a combination of effective utilization management and quality
assurance standards, the Company expects to be able to sufficiently contain
medical expenses and achieve targeted medical claims cost levels that will
eventually provide a margin of operating profitability. Initially, the Company
intends to offer a modified open access product, pursuant to which each Enrollee
will select a Care Manager who will coordinate the Enrollee's medical care to
the extent consulted by the Enrollee or informed by a Participating Physician or
Plan. Although Enrollees may access any Participating Physician at any time
without a Care Manager's referral, the Company believes it has structured its
benefits design to encourage Enrollees to utilize their Care Manager to
coordinate referrals, for example, through the use of a reduced or waived
copayment if a referral is coordinated through a Care Manager. Female Enrollees,
however, may select an Obstetrician/Gynecologist to provide certain
gynecological services or care related to pregnancy without the prior
authorization of their Care Manager, and the Company intends that such Enrollees
will not have to pay higher copayments for such services. Also, the Company
plans to insure itself against catastrophic medical losses and expects to obtain
reinsurance through a qualified reinsurer with initial anticipated limits of
$100,000 per Enrollee per year.
In support of Development Stage efforts, from inception through the period
ended August 31, 1997, the Company has incurred organization and planning
expenses related to such development in the amount of $1,272,586. The Company
has financed these Development Stage activities through multiple sources,
including advances from related companies and a revolving credit facility with
Fleet National Bank in the amount of $650,000, of which the Company has borrowed
$625,000 through August 31, 1997. Unless extended by Fleet Bank, the Company's
borrowings under this line of credit are due and payable in full together with
any accrued interest on or before November 22, 1997. The Company has paid for
the balance of its organization and planning costs through advances from MedServ
and IPA, collectively totaling $121,791, and by vendor financing. It is expected
that upon the completion of the Offering, the Company will repay its debt to
Fleet National Bank and satisfy its obligations to MedServ, IPA and vendors from
the net proceeds received by the Company from the Offering. See "Use of
Proceeds."
In addition to the repayment of debt, the proceeds from the Offering and any
interest earned thereon will be utilized for general working capital, repayment
of outstanding indebtedness of the Company, repayment of moneys advanced by
MedServ and IPA for development expenses, payment of outstanding accounts
payables, establishment of the minimum net worth and reserve requirements of the
DOI, and to
23
<PAGE>
fund projected operating deficits. The Company expects to spend a cumulative
total of approximately $3,690,000, excluding Stock Offering Costs, to complete
its development stage which includes the development of its business, the
completion of the application for a COA, the design, acquisition and
installation of management information systems and the continuation of
development of its provider network, through the date ending three months prior
to the anticipated date of enrollment of the first Enrollee (the "Development
Stage"). The Company believes that its resources on hand, combined with the
minimum net proceeds after expenses from the Offering, will be sufficient to
cover Development Stage expenses, costs related to the Management Agreement
during the Development Stage, and the minimum net worth and reserve requirements
of the DOI necessary to obtain a COA to commence marketing of the Company's
health plans.
INITIAL OPERATIONS STAGE
The Company's Initial Operations Stage will begin approximately three months
prior to the date of enrollment of the first Enrollee and conclude approximately
twenty-seven (27) months after the date of enrollment of its first Enrollee (the
"Initial Operations Stage"). During the first three (3) months of the Initial
Operations Stage, the Company expects, based on the Development Study, to expend
an aggregate of up to approximately $1,280,000 before it begins receiving
revenues from monthly premiums for Enrollee health plan coverage, i.e., during
the first three months of the initial operations stage. Its initial operations
activities will involve employing the capital raised in the Offering to build
the necessary business infrastructure and operating systems to operate an HMO
according to its business plan, to conduct marketing of its products, to
complete its provider network and to commence enrollment. See "Risk
Factors--Reliance on Development Study."
The Development Study delineates the Company's operations through various
phases of its development as an HMO. Following the completion of the Offering,
the Company through its Management Agreement with MedServ, will expend
substantial funds to establish its business operations, acquire or lease a
state-of-the-art management information system, and hire and train necessary
professional support personnel. According to the Development Study, the above
described Initial Operations Stage is anticipated to require a minimum net cash
requirements (before investments to support the COA) of approximately $7,971,000
through the first twenty-seven (27) months of operations after enrollment of the
first Enrollee. These expenses will be funded through proceeds from the
Offering. See "Use of Proceeds."
Pursuant to the terms of the Management Agreement, the Company will be
responsible for the payment to MedServ on a reimbursement basis of all costs
incurred by MedServ, consistent with a Budget approved by the Board of Directors
by a two-thirds vote, in establishing the Company's business prior to the
issuance of the COA and until the time when the Company has enrolled its first
Enrollee. Such costs involving the start-up of operations are estimated to
include such items, but not be limited to, the following: compensation and
benefits, professional fees, training, insurance and taxes, advertising,
utilization management guideline development, recruiting and hiring of trained
personnel, design, acquisition and installation of management information
systems, initial marketing of its insurance products and miscellaneous other
activities, the majority of such expenditures will be included in the Management
Agreement. As a start-up company, the Company, through MedServ, may engage an
HMO management consulting company to provide management, management support or
consulting services to MedServ, in whole or in part, during the Development
Stage and the Initial Operations Stage.
In addition, the Company is required by the DOI to have a minimum statutory
net worth at the time of issuance of a COA of not less than $1,500,000, although
the DOI has discretion to increase the amount the Company will be required to
maintain, depending upon the type, design, cost and anticipated premiums for
products offered by the Company. In addition, adequate reserves must be
maintained to satisfy estimated pending insurance claims. On an on-going basis,
the DOI requires that the Company maintain net worth reserves equal to the
greater of (i) $1,000,000, or (ii) two percent of its annual premium revenues on
the first $150,000,000 of premiums plus one percent of annual premium revenues
in excess of
24
<PAGE>
$150,000,000. Currently, the Company does not have sufficient capital to satisfy
these requirements, and the proceeds from the Offering will be used, among other
things, to meet these requirements. See "Use of Proceeds."
Following the completion of the Offering, and the approval and issuance of
the COA by the DOI, the Company intends to begin aggressively marketing its HMO
products to employers and individuals throughout the State of Connecticut with
the objective of insuring Enrollees. Additionally, the Company intends to apply
for approval to operate and market a Medicare CMP or PSO if it believes that it
will meet the required eligibility standards. See "Risk Factors--Government
Regulation" and "--Government Approvals as a Prerequisite to Operations."
Based on a review by management of regulatory filings submitted by a number
of other similar start-up HMOs to the DOI and other regulatory bodies, the
Company believes it is typical for a start-up HMO to experience substantial
operating losses for its first several years of operations. It is anticipated
that the Company will incur such losses and incur a substantial cumulative
operating deficit during its development and initial operations stages. Based
upon the assumptions in the Development Study, such cumulative losses are
expected to occur for approximately twenty-seven months after the effective date
of enrollment of the first Enrollee and are expected to total $10,260,000 prior
to consideration of tax benefits, if any, at which time the Company expects to
achieve a level of positive cash flow from operations. The Company's ability to
reach that level of recurring monthly net premium income and positive net income
from operations will be dependent upon numerous factors, including but not
limited to, the competitiveness of its product offerings, its ability to secure
contracts, the health status of its Enrollees, the management of the Company,
the accuracy of its actuarial projections, the effectiveness of its utilization
management programs in controlling unnecessary services and the resultant costs,
and its ability to avoid catastrophic healthcare coverage losses.
If the Company is unable to raise more than the minimum gross proceeds of
$8,000,000, the Company believes it would have sufficient funds to proceed with
the enrollment of the first Enrollee but would not be able to conduct its
operations for the Initial Operations Stage in accordance with the assumptions,
conclusions, recommendations and financial projections set forth in the
Development Study. The Company would be required to seek other financing means
or undertake a restructuring of operations. See
"--Liquidity and Capital Resources."
LIQUIDITY AND CAPITAL RESOURCES
From the minimum proceeds of the Offering, less the related costs, the
Company expects to have adequate resources to repay its organization costs
advanced by MedServ and the IPA, repay its bank indebtedness, pay its accounts
payable fund its DOI reserve requirement and meet its obligations under its
Management Agreement with MedServ for the first six months of the Initial
Operations Stage. See "Use of Proceeds."
However, to conduct its Initial Operations Stage pursuant to its Development
Study, the Company will need to raise approximately $15,000,000, before
deduction for the related costs of securing such capital. The $15,000,000 amount
would provide the Company with adequate capital to fund its development and
operations through a projected period of approximately three years until such
time as it reaches a level of monthly positive cash flow from operations in
accordance with operating assumptions set forth in the Development Study.
Additionally, such an amount would allow the Company to fund its cumulative
operating deficits for approximately five years at which time it would be
expected that the Company would begin to generate positive retained earnings.
To the extent that the Company is unable to raise more than the minimum
gross proceeds of $8,000,000 from the Offering, it will be necessary to raise
additional capital from such other sources as may be available to the Company or
alternatively to reduce its planned expenditures for development, operations,
and marketing of its products as contemplated within the Company's Development
Study. With
25
<PAGE>
respect to raising additional capital, the Company will continually review the
benefits of undertaking joint ventures or strategic alliances with companies
which may contribute expertise and capital to the Company's operations. The
Company would also explore the sale of additional shares.
The Company would also explore a restructuring of the Company's operations
as described in the Development Study. Such a restructuring could include the
lease, instead of purchase, of capital equipment, and outsourcing of information
services and claims processing to a third party administrator. Subject to
receipt of necessary governmental approvals, the Company believes that it could
operate a Medicare CMP product or PSO as contemplated in the Development Study
if the Company raised only the minimum gross proceeds. The Company believes that
such modifications in its plan of operations, if the Company is able to make
them in a timely manner, could extend significantly the time frame within which
the Company expects to achieve monthly positive cash flow from operations and
net profitability. Additionally, if the Company needs to raise additional
capital, there can be no assurance that such additional capital will be
available or, if available, that such capital will be available on terms
acceptable to the Company.
The Company currently intends to invest cash on hand from the proceeds of
the Offering only in investment grade securities with short and medium-term
maturities. The Company intends to select an investment advisor to manage
investments and, through the advisor, intends only to invest in commercial
paper, repurchase agreements, Treasury notes and bills, U.S. Government and
agency securities, certificates of deposit, and money market funds. All
investments and collateral must have the highest credit ratings as assigned by
recognized rating agencies.
For federal income tax purposes, an HMO can be treated as a tax-exempt
entity, an insurance company or as a taxable non-insurance company, depending on
the certain specific facts and the method of operation of the entity. The tax
status of the Company cannot be ascertained at this time because the Company has
not made a final decision on all matters which could affect its tax status. See
"Risk Factors-- Certain Tax Considerations."
THE COMPANY
Physicians Care was incorporated on November 12, 1996, as a Connecticut
corporation under the sponsorship of MedServ and private practicing physicians
to develop a statewide, physician-owned and directed insurance company licensed
as an HMO and to offer, over time, a comprehensive array of health plans. The
Company will be predominantly owned by physician shareholders practicing in the
State of Connecticut who are expected to participate actively in the Company's
affairs. Each physician purchasing Class A Common Stock, as a condition to such
purchase, must agree to provide medical services to Enrollees pursuant to the
terms of a Participation Agreement. The Company, through MedServ, will prepare
and file an application for a COA with the DOI to operate as an HMO throughout
the State of Connecticut and will seek such other regulatory approvals as
necessary to offer its products. The Company will not be permitted to solicit
business until the DOI has issued a COA to the Company. The Company intends to
provide coverage for comprehensive healthcare services to Enrollees under its
insured products for a fixed, prepaid enrollment fee paid by or on behalf of the
Enrollees.
The Company's principal place of business is 1520 Highland Avenue, Cheshire,
Connecticut and its telephone number is (203) 699-2400.
26
<PAGE>
BUSINESS
THE MANAGED HEALTHCARE INDUSTRY
Medical services traditionally have been provided on a fee-for-service basis
with insurance companies assuming responsibility for paying all or a portion of
such fees. The Company believes the increase in medical costs under traditional
indemnity healthcare plans has been caused by the apparent failure of insurers
to create satisfactory and effective incentives to control costs.
In response to higher premium costs, employers and consumers have sought an
alternative healthcare delivery system, including managed care products. The HMO
originally emerged as a proposed solution to provide a more efficient and
cost-effective array of healthcare services. An HMO is a healthcare delivery
system that provides a broad range of health services to an enrolled population
in return for a premium paid in advance. HMOs actually provide or arrange for
the provision of medical, hospital, emergency and appropriate preventive care.
In particular, HMOs stress preventive healthcare and management of delivery of
medical services when required so that enrollees may minimize hospitalization
and medical procedures.
Managed care requires many different types of healthcare providers to
coordinate activities and to share information so as to operate more
efficiently. Providers generally have not been organized collectively in local
markets and have operated largely as a cottage industry, and, as a result, the
Company believes providers have had limited effect in managing care. Further,
insurers have avoided promoting formation of more efficient provider
organizations because such organizations can also more effectively negotiate
payments with insurers, potentially reducing insurers' profits. In response to
this environment, insurers have developed centralized medical management
programs requiring extensive prior authorization, or pre-certification of
services, referral authorizations, or other limitations on access to care. The
industry has promoted managed access, rather than managed care.
As a result of these limitations, the Company believes that there exists low
enrollee satisfaction and that enrollees of managed care plans now perceive HMOs
as primarily profit-driven versus quality of care driven, with excessive
interference by the HMO in the physician-patient relationship and with cost
control achieved by limiting enrollee access to services. Accordingly, the
Company believes legislative initiatives designed to ensure enrollee access or
to promote member rights reflect enrollee frustration.
The Company was incorporated for the purpose of developing and operating a
statewide HMO and offering other health plans in the State of Connecticut. The
Company will be a physician-directed HMO, providing comprehensive health plans
to its Enrollees. The goals of the Company are to offer high quality medical
care through a broad network of physicians and to ensure access to appropriate
care for Enrollees.
THE COMPANY'S STRATEGY
The Company intends to address concerns raised by patients and their
physicians that managed care plans unreasonably interfere with the
physician-patient relationship and control medical decisions through centrally
administered programs. The Company intends to position itself in the market as a
physician-directed company that believes that the physician-patient relationship
within the context of providing cost-effective and accessible healthcare is
critical. The Company has been founded on the ideal that physicians play an
essential role in defining the Company's health plans because of their direct
impact on costs, quality, and patient satisfaction, and the Company is directly
dependent upon their efforts for its success.
- VISION STATEMENT. The Company accepts the challenge to pass on to future
generations of physicians the legacy that the delivery of healthcare is a
moral enterprise and that the physician-patient relationship is a sacred
trust that shall remain inviolable. In its pursuit of these mandates the
Company will strive to define high standards for medical care in the State
of Connecticut and provide that care to its Enrollees throughout the
state. From these precepts, the Company believes that its Participating
Physicians will demonstrate a strong commitment to practice high quality,
yet cost effective, medicine.
27
<PAGE>
- PHYSICIAN EXPERTISE. The Company has been organized in response to
concerns that insurers centralize management of care and make medical
decisions without appropriate consultation with physicians. The Company
will link physicians to the core administrative activities of the HMO.
Participating Physicians, therefore, will be encouraged to participate
directly in healthcare management, delivery decisions, and the development
of medical protocols.
- PHYSICIAN-ORIENTED SERVICE DELIVERY. By structuring the Company as a
physician-owned and controlled organization, and by engaging the active
participation of physicians in the medical management and health plan
design/development functions, the Company believes that physicians will be
committed to its success, resulting in enhanced physician productivity.
- DATA COLLECTION AND QUALITY IMPROVEMENT. The Company is committed to the
creation and effective utilization of appropriate technology to compile
and disseminate timely, meaningful information to providers that may be
utilized to promote the delivery of high quality, cost effective care. The
Company also intends to utilize collected data to promote the development
of "best practice" protocols, to identify and eliminate waste, and to
promote a high standard of care. Data will also be used to demonstrate the
value of the Company's health plans to encourage employers to contract
with the Company, resulting in greater benefits to the Participating
Physicians.
- ORGANIZATIONAL FLEXIBILITY. The Company is dedicated to easing the
administrative burdens placed on physicians and their staffs which are
associated with managed care plans. The Company is also committed to
organizational flexibility that will eventually permit Participating
Physicians and healthcare providers to assume risk for the delivery of
healthcare services.
- PHYSICIAN NETWORK. The Company's near-term goal is to have 2,000 to 3,000
Participating Physicians to provide services to Enrollees. The IPA
currently has contracts with approximately 1,850 physicians. The IPA
believes that those physicians will meet the Company's criteria to become
Participating Physicians. The Company's long-term goal is to have
substantially all qualified physicians in the State of Connecticut
available to provide services to Enrollees.
- ATTRACTIVENESS TO PARTICIPATING PHYSICIANS. The Company will allow
Participating Physicians to contract with it through IPA on a
non-exclusive basis. The Company believes that this approach will enable
it to attract the broadest possible range of Participating Physicians,
thereby enabling it to compete aggressively throughout the State of
Connecticut.
- ATTRACTIVENESS TO ENROLLEES. The Company believes that its network of
Participating Physicians will be attractive to Enrollees and that
Enrollees will find the Company's health plan designs and its dedication
to administrative ease will facilitate their access to quality healthcare
services from the physician of their choice. The Company also intends to
offer educational programs to assist Enrollees in accessing appropriate
medical care. The Company further believes that the involvement of
physicians as owners, directors and Participating Physicians in marketing
and medical management and quality assurance programs likely will instill
and reinforce Enrollees' confidence in the Company.
- ATTRACTIVENESS TO EMPLOYERS. By offering a competitively priced product,
together with a statewide network of Participating Physicians, the Company
believes it will be attractive to employers with operations and workers in
more than one location.
The Company's medical management model, incorporating as its goals
competitive pricing, high quality care and Enrollee and purchaser satisfaction,
can be successfully implemented only if the Company
28
<PAGE>
and its Participating Physicians work closely as partners. To achieve its goals,
the Company has identified objectives and plans to implement the following joint
physician/Company initiatives:
<TABLE>
<CAPTION>
OBJECTIVES JOINT PHYSICIAN/COMPANY INITIATIVES
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
- - Coordinated medical management in local - Cooperate with physician-directed organizations (e.g., integrated
markets medical groups, PHOs, MSOs) which manage medical care delivery
- - Timely physician access to information - Facilitate development of information system infrastructure to
improve access to, and dissemination of, information
- - Physician-directed medical decisions - Minimize pre-certifications, referral authorizations, or other
centralized medical management techniques of questionable value
- - Accountability and quality improvement - Conduct extensive Company reporting, peer analysis, continuous
quality improvement and education
</TABLE>
The Company recognizes that its Participating Physicians are valuable
partners who will play an essential role in its ultimate success. The Company
intends to achieve its goals through innovative reimbursement arrangements with
its Participating Physicians. The Company is prepared to take an active role to
facilitate the establishment of provider organizations in local markets, to
invest in the development of physician information systems, and to engage in
extensive reporting, peer analysis, and education to achieve those goals.
Initially, the Company intends to use a modified open access model, pursuant
to which each Enrollee will select a Care Manager who will coordinate the
Enrollee's medical care to the extent consulted by the Enrollee or informed by a
Participating Physician or the Company. Although Enrollees may access any
Participating Physician at any time without a Care Manager's referral, the
Company believes it has structured its benefits design to encourage Enrollees to
utilize the Care Manager to coordinate referrals, for example through the use of
a reduced or waived copayment if a referral is coordinated through a Care
Manager. Female Enrollees, however, may select an Obstetrician/Gynecologist to
provide certain gynecological services or care related to pregnancy without the
prior authorization of the Care Manager, and the Company intends that such
Enrollees will not have to pay higher copayments for such services or other
services where the Company determines that prior authorization by the Care
Manager will not improve the quality or lower the cost of care.
The Company intends to enter into the Management Agreement with MedServ.
MedServ was organized in 1995 as a joint venture of the Hartford County Medical
Association and the New Haven County Medical Association. Each of the
Associations holds 50% of the equity interests in MedServ. MedServ is a
for-profit corporation performing administrative functions for both county
medical associations and intends to operate a CVO to provide credentialing
services which are intended to meet NCQA credentialing standards.
MedServ will develop credentialing standards to provide assurances to
Enrollees that each provider of medical services meets the minimum standards for
education, licensing, training and expertise deemed necessary by the Company to
provide the medical services requested. Under the credentialing service, MedServ
will collect information to document compliance with the credentialing
standards, will verify the accuracy of such information, and will monitor
continuing compliance with such credentialing standards.
Key members of the MedServ management team will provide management services
to the Company. The Management Agreement will have a minimum term of ten years
and will be automatically renewable for additional three year terms, unless
terminated on one year's prior notice by either party. MedServ is the sole
holder of the Company's Class C Common Stock. Subject to the consent of the
Board of Directors, which consent will not be unreasonably withheld, MedServ
will be permitted to contract with other third party independent contractors to
provide some or all of the services required to be delivered under the
29
<PAGE>
terms of the Management Agreement. As a start-up, MedServ may hire an HMO
Management consulting company to provide management or management support and
consulting services to MedServ, in whole or in part during the Company's
development and initial operations stages. "See--Experience of Board of
Directors and Management".
Pursuant to the Management Agreement and subject to the oversight of the
Board of Directors, MedServ is responsible for the day-to-day management of the
Company, including but not limited to, the following activities:
- performing all management, administrative and other services necessary to
operate the Company;
- obtaining all licenses, permits or other regulatory approvals necessary to
operate the Company as an HMO in the State of Connecticut;
- providing facilities for the operation of the Company;
- conducting or managing the sale of the Company's products, including
negotiating subscriber agreements with employer groups or individuals;
- providing or securing underwriting on appropriate insurance services;
- conducting benefit design for the Company's health plans;
- preparing materials necessary to inform and educate Enrollees about the
Company's administrative requirements and the terms and conditions of the
Enrollee's benefit plan;
- developing and implementing a grievance and complaint system for
Enrollees;
- developing and implementing marketing initiatives;
- establishing and administering accounting procedures and controls;
- conducting claims analysis and statistical reporting;
- conducting negotiation of provider contracts and credentialing of
providers;
- developing quality and utilization management standards;
- providing or arranging for the provision of a management information
system;
- preparing on-going business plans for the Company;
- maintaining the Company's books and records;
- ensuring that the Company's operations are consistent with applicable laws
and regulations.
During the Development Stage and the Initial Operations Stage, Physicians
Care will pay MedServ a Management Fee equal to MedServ's actual cost of
providing the services set forth in the Management Agreement not to exceed the
amounts set forth in the Budget approved by the Company's Board of Directors by
a two-thirds vote and an allowance for profit and general administrative
expenses equal to five percent of such actual costs. In the event that actual
administrative and capital expenses in the aggregate are expected to exceed the
Budget by more than five percent, or if actual expenses related to any line item
of such Budget are expected to exceed the Budget for such line item by more than
twenty percent (whether or not aggregate expenses are expected to exceed
Budget), MedServ must notify the Board of Directors of such expenses and may
make no expenditure for such expenses without the approval of the Board of
Directors. After completion of Development Stage and Initial Operations Stage,
the Manager shall be paid a negotiated percentage of actual gross premium
revenue per Enrollee per month as mutually agreed to by MedServ and the Company.
IPA intends to enter into an IPA Agreement with MedServ, pursuant to which
IPA will (a) be the exclusive provider of a network of Participating Physicians
to provide or arrange to provide services to
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<PAGE>
Enrollees which exclusive status shall remain in effect until the Board of
Directors determines, in its reasonable judgment, that the network furnished by
IPA is not adequate to service the needs of Enrollees and (b) cause
Participating Physicians to provide such services within each Participating
Physicians expertise and as credentialed. The IPA Agreement will provide that
IPA shall: (a) ensure that Participating Physicians are properly licensed and
credentialed and have privileges at specified hospitals and other health care
facilities; (b) notify MedServ of any professional disciplinary action or
similar action against any Participating Physicians; (c) with MedServ's
assistance, develop peer group monitoring systems for Participating Physicians;
and (d) develop, with MedServ, mutually agreeable Utilization Management and
Quality Management Programs and adopt and implement such Programs. IPA's
compensation for its services has not yet been determined.
MedServ IPA, Inc. is a Connecticut non-profit corporation, which was
organized in October 1985 and formed specifically for the purpose of developing
a network of physicians to provide services to health plan enrollees. From 1985
to 1996, IPA was known as ProCare IPA, Inc. IPA is also managed by MedServ.
IPA may execute contracts with HMOs licensed in Connecticut to make
available its network of physicians to provide healthcare services ("Competition
Contracts"). The IPA Agreement will provide, however, that MedServ may terminate
the IPA Agreement in the event the IPA enters into a Competition Contract, which
contract the Company believes is contrary to the best interests of the Company.
At the present time IPA has a Competitor Contract to provide a network in
Connecticut to Multiplan, a Preferred Provider Organization. The Company
believes that IPA's contract with Multiplan is not contrary to the best
interests of the Company.
Premium rate increases must be submitted to the DOI for acceptance, and
there can be no assurance that premium rate increases, if any, will be accepted
without objection. Renewal dates may vary among groups. The Company will utilize
an actuary-developed system of ratings adjusted by classes (with respect to
groups of fifty or more Enrollees) by age, gender and industry classification,
in the determination of its rates for various employers in the proposed service
area, all in accordance with Connecticut law. Accordingly, premium rates for a
single health plan benefit design may vary among employer groups.
BENEFITS PROVIDED TO ENROLLEES
The Company is committed to offering high quality healthcare benefit plans
at competitive prices in the State of Connecticut. The Company believes that the
range of the fixed, prepaid enrollment fee per commercial Enrollee per month is
estimated to be from $125.00 to $160.00, depending upon the type of product and
the associated benefit design of each Enrollee's chosen plan. The Company
accepts as fundamental the critical relationship between the physician and the
patient in the delivery of healthcare services. The Company expects to reduce
administrative and transactional costs by allowing Participating Physicians,
subject to certain limitations, to exercise their professional judgment in
concert with patients, resulting in higher patient satisfaction and better
management of medical costs.
The Company intends to develop benefit plans for large employers, small
businesses and individuals that meet the requirements of Connecticut law. Based
upon a review of other HMO plans offered in the State of Connecticut, the
Company believes that its benefit plans will be competitive with those other
plans in the marketplace and that they will be customized to the needs of
purchasers, to the extent permitted by law.
The following are examples of the benefits the Company proposes to offer
under its HMO plans:
- physician office visits
- specialist physician visits
- hospital room and board, prescription drugs, and inpatient ancillary
services
- psychiatric inpatient and outpatient services
31
<PAGE>
- diagnostic and therapeutic ambulatory services
- drug and alcohol addiction treatment services
- emergency care
- home healthcare
- skilled nursing services
- therapy services
Coverage of healthcare services listed above will be conditioned on medical
necessity and on the conditions of coverage applicable to the Enrollee's health
plan.
MARKETING
Although competition in the managed care industry is intense, the Company
believes an opportunity exists for a new HMO that is able to manage risk
effectively, while eliminating barriers or impediments to Enrollees' access to
medically necessary care. The Company intends to build a large physician network
that will attract Enrollees and purchasers of the Company's health plans through
the localized efforts of physicians. Subject to the Company's approval by HCFA,
it intends to aggressively pursue the Medicare market. See "Risk
Factors--Government Approvals as a Prerequisite to Operations."
The Company's current marketing strategy is three-tiered. The first tier
involves direct sales of the Company's health plans to large employers and small
businesses. The second tier employs brokerage firms which receive a commission
that is expected to range from three percent to five percent of premiums
collected. The third tier of the Company's marketing campaign will consist of
general advertising through various media that targets all prospective
purchasers. In its marketing efforts, the Company plans to seek the assistance
of its Participating Physicians to effectively market its plans and products.
PHYSICIAN AND OTHER PROVIDER ARRANGEMENTS
PHYSICIANS
The Company is founded on the principle of physician autonomy in the making
of clinical decisions. To facilitate the decision-making process, the Company
intends to provide physicians with physician-defined quality and cost of service
data and performance feedback.
The selection and credentialing of Participating Physicians is the
foundation on which the Company's Quality Management Program ("QMP") will be
built. The Company will delegate authority for credentialing and recredentialing
to the IPA's Credentialing Committee while retaining oversight. All
Participating Physicians will be subject to a review of their qualifications,
including education and training, licensure status, board certification,
hospital privileges, and malpractice history, in accordance with credentialing
requirements which are consistent with NCQA standards. Recredentialing will be
performed on a biannual basis and will include review of data from: (i) Enrollee
complaints, (ii) quality review results, (iii) utilization reviews, and (iv)
Enrollee satisfaction surveys.
Physicians Care plans to develop performance standards with physician input.
The Company intends to require Participating Physicians to use those standards
and to report clinical decisions, utilization management and outcomes to ensure
that the Company acquires high quality data on a timely basis. The Company
anticipates that it will develop state-of-the-art information systems to permit
it to share data with Participating Physicians to improve clinical decisions and
outcomes. The Company intends to focus its efforts on continuous educational
interaction with Participating Physicians to encourage best medical practices.
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<PAGE>
PHYSICIAN PARTICIPATION AGREEMENT
The IPA's Physician Participation Agreement will impose various requirements
and standards (many of which are also mandated by applicable federal and state
law) on Participating Physicians, which may include:
1. Providing, or arranging for the provision of, healthcare services to
Enrollees in accordance with the physician's licensure and training, and
consistent with accepted standards of practice. In particular:
a. Maintaining regular office hours and ensuring after-hours and
emergency coverage for Enrollees on a seven days per week, twenty-four hours
per day basis.
b. Avoiding discrimination in the treatment of patients or in the
quality of services delivered to Enrollees.
c. Maintaining an unrestricted medical license and, if applicable,
maintaining unrestricted, active privileges in good standing at a minimum of
one acute care hospital that has contracted with the Company as a
Participating Provider.
d. Following state and federal laws and the policies and procedures
established and adopted by the Company.
e. Operating office sites in compliance with quality assurance
requirements of the Company.
f. Agreeing that all duties performed shall be consistent with the
proper practice of medicine, and in accordance with the customary rules of
ethics and conduct.
2. Maintaining a medical record for each Enrollee and furnishing access to
such records as may be required by state and federal law, rules, regulations or
by the Company's Utilization Management Program and/or Quality Management
Program. In addition:
a. Agreeing that medical records of Enrollees shall be maintained on a
confidential basis.
b. Providing the Company, or its designees, with reasonable access to
the physician's practice site to examine medical records of Enrollees.
3. Participating in and complying with the Utilization Management and
Quality Management Programs, policies and procedures as have been established by
the Company.
4. Limiting referrals to physicians, hospitals and ancillary healthcare
providers who participate in the Company's healthcare delivery network, except
where the Enrollees have freedom of choice of Participating Provider under the
Company's open access health benefit plans in effect at the time services are
rendered.
OTHER HEALTHCARE PROVIDERS
The Company intends to establish relationships with acute care hospitals
both in the State of Connecticut and in nearby states. It has received
approximately fifteen letters of intent from acute care hospitals located in the
State of Connecticut to participate as providers of services to Enrollees.
Moreover, the Company intends to provide appropriate preventive, diagnostic, and
therapeutic treatment, and rehabilitation healthcare services, to its Enrollees,
in part, by contracting with qualified non-physician providers, and networks of
such providers, who meet the participation criteria established by the Company.
It is expected that those contracts will provide that the participating
hospitals and other providers will accept Enrollees as patients and provide all
medically necessary services that are ordered or supervised by a Participating
Physician in accordance with the Company's requirements. The services provided
by hospitals and other providers will be reviewed by the Quality Management
Committees as may be established by the Company or its designee to ensure that
the services provided meet quality standards and are medically necessary.
33
<PAGE>
QUALITY MANAGEMENT PROGRAM
The Company intends to provide quality healthcare services while avoiding
inappropriate utilization of services. The Company currently is in the process
of developing a Quality Management Program, in conjunction with IPA, for the
continual improvement of the quality of healthcare services delivered.
The Company intends that its Quality Management Program will contain various
components, including, but not limited to, the following:
- adverse event review
- sentinel diagnosis review
- ambulatory medical record review
- quality measurement studies
- complaints and grievance review
- credentialing/recredentialing
- risk management
- enrollee satisfaction surveys
- provider satisfaction surveys
The Company intends to conduct annual evaluations of the Quality Management
Program to assess its overall effectiveness and to generate an annual work plan
designed to outline program goals and objectives and planned projects and
activities for the forthcoming year.
UTILIZATION MANAGEMENT PROGRAM
The Company's profitability will be influenced by its ability to manage
healthcare costs through utilization management and the negotiation of favorable
provider contracts. A Utilization Management Program ("UMP") will be designed to
educate, monitor, and evaluate the provision and cost of medical care and
services accessed through the Company and/or its affiliates. See "Risk
Factors--Potential for Unnecessary Utilization of Healthcare Services."
The Company's objective will be to efficiently utilize available healthcare
resources to ensure and provide for medically appropriate care and to monitor
the quality of medical services accessed through the health plan and/or its
affiliates. The UMP is currently being developed by the Company in conjunction
with IPA. Its essential components are expected to include:
- patient education programs (concurrent and retrospective basis)
- physician education programs (performance standards)
- inpatient review (concurrent and retrospective basis)
- outpatient review (concurrent and retrospective basis)
- case management
- outcomes analysis
MANAGEMENT INFORMATION SYSTEMS ("MIS")
The Company is developing criteria for comprehensive management information
system, and is soliciting information from various vendors. A Request for
Proposal was distributed to selected vendors, and the Company anticipates that
final selection of a system will be made during the last quarter of 1997,
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<PAGE>
with a decision to proceed with acquisition, whether by purchase or lease, made
after the results of the Offering are known. In lieu of acquisition of a system,
the Company may use subcontractors to provide claims processing and Enrollee
eligibility information system support. The Company's management information
system and data system will be essential to the Company's operations.
INSURANCE/RISK MANAGEMENT
Physicians Care intends to implement a risk management program designed to
enhance the quality of care provided to its Enrollees. The Company's risk
management objectives are two-fold: (i) to reduce the incidence and expense of
medical malpractice claims and tort litigation against Participating Providers;
and (ii) to address and prevent conditions that could result in adverse
publicity or legal claims against the Company. A risk manager will be
responsible for the evaluation and coordination of risk management activities.
Any data generated will be presented to the Quality Management Committees for
their review and recommendations. The Quality Management Committees will also
review the data for trends and opportunities for improvement.
MARKET
MANAGED CARE GROWTH IN THE STATE OF CONNECTICUT
The Company's research indicates that the healthcare market in the State of
Connecticut is moving toward increased HMO enrollment. From 1988 to 1994, HMOs
experienced an almost 36% increase in enrollment. (Table 1)
TABLE 1
HMO MEMBERS IN CONNECTICUT
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
# of Members.............................................. 660,331 689,099 726,523 680,610 685,907 805,928
% change.................................................. -- 4.4% 5.4% -6.3% 0.8% 17.5%
<CAPTION>
1994
---------
<S> <C>
# of Members.............................................. 897,013
% change.................................................. 11.3%
</TABLE>
- ------------------------
Source: "GHAA's National Directory of HMOs" database, U.S. Bureau of the Census
The Company believes that the Connecticut managed care market is dominated
by the IPA model HMO. The Company believes that no single plan controls the
managed care market in Connecticut and that physician-driven products continue
to remain popular with Enrollees, as evidenced by the growth of MD Health Plan
and Physicians Health Services, both of which began as physician controlled
HMOs. During 1996, MD Health Plan was sold to Health Systems International, an
HMO management company headquartered in California.
Table 2 illustrates the types of insurance that purchasers of healthcare are
selecting within Metropolitan Statistical Areas (MSA) throughout Connecticut.
TABLE 2
TYPES OF INSURANCE IN CONNECTICUT
<TABLE>
<CAPTION>
% OF
COMMERCIALLY
<S> <C> <C> <C> <C> <C> <C>
% OF RESIDENTS INSURED*
--------------- ---------------
<CAPTION>
HMO PPO FFS HMO PPO FFS
---- --- ---- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
Bridgeport-Stamford-Norwalk........................................... 25.9 2.5 60.4 30.2 3.3 66.5
Hartford-New Britain.................................................. 42.8 6.0 42.7 50.1 8.2 41.7
New Haven............................................................. 32.1 5.2 50.3 39.9 7.1 53.0
Middlesex-Somerset.................................................... 27.1 5.5 59.1 32.6 7.0 60.4
</TABLE>
- ------------------------
Source: "Patterns in HMO enrollment." GHAA June 1995. National Research
Corporation Survey of 132,014 Households, 1994.
* Excludes Medicare Supplemental Insurance
35
<PAGE>
COMPETITION
The managed care industry is highly competitive. The Company will compete
against other companies having substantial financial resources and experience.
The Company has numerous competitors, including for-profit and tax-exempt HMOs,
self-funded plans, preferred provider organizations (PPOs), Blue Cross/ Blue
Shield plans, traditional indemnity insurance carriers and provider networks
engaging in direct contracting with employers (PSOs), all of which have existing
enrollments and greater financial resources than the Company.
As of December 31, 1996, the Connecticut commercial HMO market consisted of
sixteen organizations. The Company's major competitors are Physicians Health
Services, Inc., Blue Cross & Blue Shield of Connecticut, Inc., ConnectiCare,
Inc., M.D. Health Plan, Inc., Oxford Health Plans, Inc., Medspan, Inc., Cigna
Corporation, and Aetna/U.S. Healthcare. Those and other entities, with which the
Company may compete, are or may be substantially better capitalized than the
Company. Additional competitors with financial resources greater than the
Company may enter the Company's markets in the future. Furthermore, existing
major competitors may merge or consolidate, dramatically increasing the
Connecticut market share and capital resources of the surviving organization.
The healthcare industry has been subject to vigorous and intense competition on
price and other bases, which competition may become more severe. Further, the
adoption of any state and/or federal healthcare reform may significantly change
the competitive healthcare environment in the State of Connecticut. See "Risk
Factors--Substantial Competition."
Tables 3 and 4 respectively represent HMO market share by enrollment and by
revenue:
TABLE 3
HMO MARKET SHARE IN CONNECTICUT--1994, 1995 & 1996
LAST QUARTER ENROLLMENT DATA COMPARED
<TABLE>
<CAPTION>
% OF MARKET
PLAN ENROLLMENT 1995 ENROLLMENT 1996 SHARE--1996
- ----------------------------------------------------------------- ----------------- --------------- ---------------
<S> <C> <C> <C>
Blue Cross and Blue Shield of Ct.*............................... 154,920 201,108 18.99%
Physicians Health Services....................................... 155,519 200,339 18.92
ConnectiCare..................................................... 123,176 159,853 15.10
M.D. Health Plan................................................. 124,771 152,310 14.39
Aetna Health Plans............................................... 104,549 118,834 11.22
Kaiser Foundation................................................ 47,380 60,401 5.70
U.S. HealthCare.................................................. 46,863 58,318 5.51
Oxford Health Plan (Ct.)......................................... 17,500 53,900 5.09
CIGNA Health Care................................................ 15,829 17,910 1.69
Yale Preferred Health............................................ 0 14,870 1.40
Suburban......................................................... 3,586 10,057 0.95
MedSpan Health Options........................................... 0 6,788 0.64
Prudential....................................................... 5,035 2,665 0.25
WellCare of Connecticut.......................................... 137 901 0.09
NYLCare Health Plans of Ct....................................... 0 460 0.04
HealthSource of Connecticut...................................... 0 30 0.00
Total Enrollment (grew 32%--1995 to 1996)........................ 799,265 1,058,744 100.0%
</TABLE>
- ------------------------
Source: Department of Insurance, State of Connecticut..
(Due to rounding, the percentages indicated may not add up to equal 100%.)
* Blue Cross Blue Shield of Connecticut data for 1995 includes 41,613 enrollees
of Community Health Care Plan.
36
<PAGE>
TABLE 4
HMO MARKET SHARE BY REVENUE--1996
<TABLE>
<CAPTION>
PLAN REVENUE % OF MARKET SHARE
- ------------------------------------------------------------------------------- ------------- ---------------------
<S> <C> <C>
Blue Cross and Blue Shield of Ct............................................... $ 546,366,693 27.26%
Physicians Health Services..................................................... 362,258,826 18.08
MD Health Plan................................................................. 274,503,731 13.70
ConnectiCare................................................................... 250,559,500 12.50
Aetna Health Plans............................................................. 190,636,312 9.51
U.S. HealthCare................................................................ 110,557,210 5.52
Kaiser Foundation.............................................................. 94,285,591 4.70
Oxford Health Plan (Ct.)....................................................... 74,281,673 3.71
CIGNA Health Care.............................................................. 55,565,182 2.77
Yale Preferred Health.......................................................... 20,708,024 1.03
Suburban....................................................................... 13,715,500 0.68
Prudential..................................................................... 5,972,010 0.30
MedSpan Health Options......................................................... 2,972,412 0.15
WellCare of Connecticut........................................................ 1,284,375 0.06
Healthsource of Connecticut.................................................... 283,507 0.01
NYLCare Health Plans of Ct..................................................... 155,941 0.01
Total Revenue.................................................................. $2,004,106,487 100.0%
</TABLE>
- ------------------------
Source: Department of Insurance, State of Connecticut.
(Due to rounding, the percentages indicated may not sum to equal 100%.)
THE MEDICARE MARKET
The Company's research indicates a growing trend toward an increase in
Medicare enrollment in HMOs/CMPs. Throughout the country, HCFA has licensed
HMOs/CMPs on a county by county basis to accept direct, fixed payment of 95% of
the county's Average Adjusted Per Capita Costs ("AAPCC") for the number of
Medicare lives enrolled in the approved health plan's products. However, the
Balanced Budget Act of 1997 made significant changes to the methodology for
reimbursing HMOs/CMPs (and PSOs) for services provided to Medicare
beneficiaries. HMOs/CMPs/PSOs will receive payments equalling the greatest of:
(i) a blended payment amount comprised of an area-specific and a national rate,
(ii) a minimum monthly of $367 with specified updates, or (iii) 102% of the
previous year's average payment in the particular county.
The Company believes that success in a Medicare HMO product line depends, in
part, on a combination of a relatively high AAPCC for a county and region, broad
physician panels, and cost effective operations. The Company has been advised
that the estimated 1998 payment based on the Balanced Budget Act of 1997 for
Connecticut is approximately $430.00.
As the federal government implements options to control spending with the
Medicare population, the Company believes that an HMO which can save money and
enhance benefits is becoming generally acceptable to the elderly. The Company
intends to focus on the Medicare population for enrollment into the HMO once it
qualifies for HCFA's consideration. Table 5 illustrates the early stage of
development of the Medicare market in the State of Connecticut. As of May 1996,
no county in the State of Connecticut had more than 8% of its eligible elderly
population enrolled in a Medicare HMO plan.
37
<PAGE>
TABLE 5
MEDICARE HMO ENROLLEES IN CONNECTICUT 1996
<TABLE>
<CAPTION>
NUMBER OF MEDICARE NUMBER OF ENROLLEES IN
COUNTY ELIGIBLES MEDICARE HMOS %
- --------------------------------------------------------------- ------------------- ----------------------- ---
<S> <C> <C> <C>
Fairfield...................................................... 125,243 9,529 7.61%
Hartford....................................................... 140,821 4,269 3.03%
Litchfield..................................................... 28,064 354 1.26%
Middlesex...................................................... 21,911 198 0.90%
New Haven...................................................... 133,435 2,475 1.85%
New London..................................................... 37,585 1,049 2.79%
Tolland........................................................ 13,736 391 2.85%
Windham........................................................ 15,819 428 2.71%
Total:....................................................... 516,614 18,693 3.62%
</TABLE>
- ------------------------
Source: HCFA Division of Medicare, Region 1, May, 1996
Based upon this data, the Company believes:
- The Medicare HMO market in the State of Connecticut is in its early stages
of development. If the Company is approved as a CMP or PSO by HCFA, it
expects to have a significant opportunity to expand its business
operations. See "Risk Factors--Government Approvals as a Prerequisite to
Operations."
- Participating Physicians will offer a competitive advantage to the Company
in the marketing of its products to Medicare recipients arising from the
strong ties and loyalties seniors have to their physicians.
REGULATION
DOI REGULATION
The Company will apply for a COA to operate as an HMO in the State of
Connecticut. Among the areas regulated by the Connecticut DOI are the scope of
benefits required to be made available to Enrollees, continuation of benefits in
the event of insolvency or termination of arrangements with providers, reserves
required to be maintained, the manner in which Enrollees' copayments are
structured, procedures for review of quality assurance, enrollment requirements,
the relationships among the HMO, its physicians and other healthcare providers,
and the financial condition of the HMO.
Under Connecticut law, an HMO must maintain a minimum net worth of
$1,500,000 and must initially achieve a reserve at least equal to all of its
estimated pending claims. It is anticipated that the Company will have a need
and thereafter must maintain of capital committed to satisfy ongoing net worth
and reserve requirements equal to the greater of (i) $1,000,000 or (ii) two
percent of its annual premiums revenues of the first $150,000,000 of premiums
plus one percent of annual premium reserves in excess of $150,000,000. If the
Company becomes unable to meet the foregoing net worth and reserve requirements,
the Company's COA may be revoked or its operations restricted. Other
restrictions and requirements may be imposed that affect HMOs generally, the
products offered by the Company, underwriting requirements, and other aspects of
the Company's operations. Rates and proposed covered benefits must be submitted
to the DOI prior to their effectiveness, and there can be no assurance that the
Company's proposed rates will be accepted without objection.
38
<PAGE>
ANTITRUST
Antitrust concerns have become central issues in the managed care segment of
the healthcare industry. Whenever physicians or other healthcare providers join
together to form ventures for the delivery of healthcare services, antitrust
issues may be present. The Company has attempted to take reasonable steps to
minimize antitrust risk. Nevertheless, the law in this area is unsettled and
fact specific. Therefore, there can be no assurance that there will not be a
challenge to the Company's operations on the basis of antitrust violations at
some time in the future. If antitrust lawsuits or other challenges were to be
filed against the Company, it would be forced to incur substantial legal
expenses. Moreover, if any antitrust challenge were to be successful, the
Company could suffer additional material adverse consequences. In addition, it
is impossible to predict whether further federal and/or state antitrust
legislation will be adopted or the impact that the adoption of such legislation
may have on the healthcare delivery system and the Company. See "Risk
Factors--Antitrust Considerations."
FEDERAL ANTI-KICKBACK AND ANTI-REFERRAL LAWS
Federal laws prohibit physicians from paying or receiving any remuneration,
directly or indirectly, for the referral of a patient. In addition, federal law,
under certain defined circumstances, prohibits referral by a physician to a
healthcare entity in which the physician or his or her immediate family member
has a financial interest. The Company believes that neither the Company nor its
physician shareholders will be in violation of federal or Connecticut law as a
result of the operation of or participation in the Company's HMO. To the extent
that physicians refer patients to other physicians, they will receive no
remuneration for such referral. Moreover, the Company will not require nor
encourage physicians to refer patients to entities in which they have a
financial relationship. See "Risk Factors--Limitations on Physician Ownership of
Certain Healthcare Enterprises."
Under the Medicare and Medicaid Fraud and Abuse Law, also known as the
Anti-kickback Statute, a physician is prohibited from: (i) soliciting or
receiving any remuneration in return for referring a patient to another
healthcare provider, and (ii) offering or paying any remuneration to induce the
referral of patients to the physician.
In addition, two related federal laws, Omnibus Budget Reconciliation Act of
1990, Pub. L. No. 101-508, Title IV, Section 4207(e)(1)-(3), (k)(2) and Omnibus
Budget Reconciliation Act of 1993, Pub. L. No. 103-66, Title XIII,
SectionSection13562 and 13624, known respectively as Stark I and Stark II,
prohibit a physician from referring patients to an entity in which the
physician, or an immediate family member, has a financial relationship, for the
provision of certain designated health services. Stark I only applies to
clinical laboratory services. Stark II prohibits self-referrals to certain
additional "designated health services"; physical therapy; occupational therapy;
radiology; radiation therapy; durable medical equipment; parenteral and enteral
nutrients, equipment and supplies; prosthetics, orthotics and prosthetic
devices; home health services; inpatient prescription drugs; and inpatient and
outpatient hospital services. Stark I and II laws apply only to the referral of
patients who are covered under Medicare, Medicaid and/or other federal programs
and grants.
The Company may, in the future, contract with federal programs, including
Medicare, to provide services to eligible patients. However, as indicated above,
the Company will neither require nor encourage physicians to refer patients to
an entity in which the physician (or his or her immediate family) holds a
financial interest. Furthermore, Stark I and II laws contain a specific
statutory exception for HMOs which meet federal requirements. Finally, with
respect to the anti-kickback statute, the federal government has promulgated
so-called "safe harbor" regulations, which insulate from liability individuals
or entities which comply with the regulatory requirements. Included in these
regulations is a safe harbor for HMOs under contract with federal or state
agencies which operate in accordance with applicable laws and regulations.
Should the Company enter into such contracts, thereby bringing it within the
purview of federal law, the Company will be required to comply with this safe
harbor and the statutory exception to Stark I and II
39
<PAGE>
laws. Notwithstanding, the Company's belief is that neither the Company nor its
physicians will be in violation of either federal or Connecticut law as a result
of the operation of or participation in the Company's HMO.
LEGAL MATTERS
There is no pending or threatened legal or administrative proceeding or
arbitration to which the Company is currently a party, other than those
described in this Prospectus relating to the licensing of the Company to do
business as an HMO.
EMPLOYEES
The Company has no paid employees. The day-to-day operation of the Company
will be conducted by MedServ pursuant to the Management Agreement.
FACILITIES
Since the Company intends to be an IPA Model HMO, it is contemplated that
care will be delivered solely by Participating Providers in facilities not owned
by the Company. The Company's management will be conducted at MedServ's facility
located in Cheshire, Connecticut.
40
<PAGE>
MANAGEMENT
Company policies and strategies will be developed by a Board of Directors
with the assistance of MedServ management. Day-to-day management of the Company
will be conducted by MedServ pursuant to the Management Agreement and subject to
the oversight of the Board of Directors. As a start-up in a competitive market,
MedServ may engage an HMO management consulting company to provide management or
management support and consulting services to MedServ, in whole or in part
during development and initial operations stages. In addition to possibly
engaging an HMO management consulting company to support general management
functions, MedServ may also engage such an HMO management consulting company to
recruit and train a permanent Chief Executive Officer, Chief Financial Officer,
Chief Operating Officer, Vice President of Medical Affairs, Vice President of
Management Information Systems, and Vice President of Marketing and Sales with
significant HMO experience to manage the Company's operations. Subject to input
from the Board of Directors, MedServ would pay compensation to such a HMO
management consulting company within the budget and terms of MedServ's
Management Agreement.
The following describes the directors and those individuals employed or
engaged by MedServ who will initially provide management services to the
Company, under the terms of the Management Agreement.
The Company will have a Board of Directors of not less than seventeen nor
more than twenty-one directors. Eleven directors are appointed by the Class C
Common shareholder, MedServ. Within six months after completion of the Offering:
(i) six directors will be elected by the Class A Common shareholders and must be
physicians who are not members of the Hartford County Medical Association or the
New Haven County Medical Association and of whom no more than two may be members
of any one county medical society at any given time and not less than three
shall be primary care physicians and (ii) up to four directors (such number to
be determined in the discretion of the Board of Directors) shall be
representatives of area employers, hospitals, investors in the Company or
individuals representing the interests of the Company's subscribers and shall be
elected by a majority of the Class A shareholders from a list of nominees
provided by the Board of Directors.
At present, the Company has eleven directors appointed by MedServ. The Board
of Directors will be expanded to not less than seventeen directors within six
months after completion of the Offering.
<TABLE>
<CAPTION>
NAME OF DIRECTOR OR OFFICER AGE TITLE
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Craig W. Czarsty, M.D.................. 43 Chairman of the Board of Directors and President
Joseph R. Coffey....................... 53 Chief Executive Officer, Executive Vice President and Director
F.J. Montegut, M.D..................... 58 Secretary and Director
John B. Franklin, M.D.................. 59 Chief Financial Officer, Treasurer and Director
Richard Fiorentino..................... 49 Associate Executive Vice President and Associate Chief Executive
Officer
Margaret Camarco....................... 40 Vice President, Health Services
Edward J. Berns, Esq................... 47 Vice President and General Counsel
John Aversa, M.D....................... 54 Director
Joseph Balsamo, M.D.................... 38 Director
John R. Galvin, Jr., M.D............... 59 Director
Ellen R. Fischbein, M.D................ 51 Director
N. Chandra Narayanan, M.D.............. 55 Director
John W. Rodgers, M.D................... 48 Vice Chairman of the Board of Directors
Earle J. Sittambalam, M.D.............. 53 Director
</TABLE>
41
<PAGE>
KEY MANAGEMENT STAFF
MedServ will provide day-to-day management of the Company pursuant to the
terms of the Management Agreement, subject to the supervision of the Board of
Directors. MedServ management includes the following individuals, who will hold
the specified positions at the Company:
CRAIG W. CZARSTY, M.D., CHAIRMAN, PRESIDENT
Dr. Czarsty incorporated the Connecticut Managed Service Organization in
1992 and has been a member since 1978 of the Connecticut Academy of Family
Physicians for which he has held a number of offices, including President and
Director. He also serves on the Board of Directors and was formerly President of
Health One Connecticut, P.C. Dr. Czarsty has earned diplomate status from the
American Board of Family Practice and the National Board of Examiners. In
addition, in 1986 Dr. Czarsty was appointed Fellow by the American Academy of
Family Physicians. A licensed physician in the State of Connecticut and the
Commonwealth of Virginia, Dr. Czarsty serves on the staff of numerous hospitals
and healthcare providers.
JOSEPH R. COFFEY, CHIEF EXECUTIVE OFFICER, EXECUTIVE VICE PRESIDENT AND DIRECTOR
Mr. Coffey is the Executive Vice President/CEO of the Hartford County
Medical Association and the New Haven County Medical Association and MedServ. He
has been active in association and health agency management since 1968. In 1984,
he joined the Hartford County Medical Association as Executive Vice
President/CEO. In 1985, he was instrumental in establishing Medical Delivery
Systems, Inc. and ProCare IPA, Inc. (now, MedServ IPA, Inc.) to help physicians
interface with commercial managed care entities. In 1994, Mr. Coffey received
the Association Executive of the Year Award from the Connecticut Society of
Association Executives.
RICHARD FIORENTINO, ASSOCIATE EXECUTIVE VICE PRESIDENT AND ASSOCIATE CHIEF
EXECUTIVE OFFICER
Mr. Fiorentino is the Associate Executive Vice President of the Hartford
County Medical Association and the Chief Operating Officer of Medical Delivery
Systems, Inc. and MedServ IPA, Inc. (formerly ProCare IPA, Inc.). He has been
active in association and health agency management since 1974 having served the
Fairfield County Medical Association and the Connecticut State Medical Society
before his employment by Hartford County Medical Association in 1985. Since that
time, Mr. Fiorentino has been at the forefront in the establishment of a
physician network for ProCare IPA, Inc. (now, MedServ IPA, Inc.)
Mr. Fiorentino has more than ten years of experience in the managed care
field representing the interests of physicians in their interactions with
commercial managed care entities. As Chief Operating Officer of MedServ IPA,
Inc., he has been responsible for management oversight in such areas as
physician recruitment and credentialing, Quality Management/Utilization Review
programs, and management information systems.
JOHN B. FRANKLIN, M.D., CHIEF FINANCIAL OFFICER, TREASURER, AND DIRECTOR
Dr. Franklin has practiced medicine for the past 29 years specializing in
Ophthalmology. In addition to his duties as a Director and Treasurer, Dr.
Franklin is the Company's Chief Financial Officer and will hold such office
until the Company, when appropriate and necessary, hires a permanent Chief
Financial Officer. Dr. Franklin received his M.D. from New Jersey College of
Medicine in 1961.
MARGARET A. CAMARCO, L.P.N., VICE PRESIDENT, HEALTH SERVICES
Mrs. Camarco received her L.P.N. degree from the A. I. Prince Technical
School Licensed Practical Nurse Program affiliated with Hartford Hospital in
1982 and served as staff nurse on the Trauma Unit at Hartford Hospital from 1982
to 1985, and as an Occupational Health Nurse for Immediate Medical Care
42
<PAGE>
Centers, Inc. from 1985 to 1987. Mrs. Camarco entered the managed care arena in
1987 serving as Coordinator of Quality Assurance and Utilization Review for an
IPA by providing assistance in the development and administration of its
Quality/Utilization Management Program. In 1989, Mrs. Camarco earned National
Certification and Diplomate status in Quality Assurance and Utilization Review
through the American Board of Directors of Quality Assurance and Utilization
Review Physicians (ABQAURP). In 1995, Mrs. Camarco obtained her certification in
Outcomes Management from the New England HealthCare Assembly (NEHA).
Mrs. Camarco serves in the capacity of Assistant Executive Vice President of
the QM/UM Programs of MedServ and has been instrumental in the establishment,
implementation, and ongoing administration of the Quality Management/Utilization
Management Programs of MedServ IPA, Inc. and Medical Delivery Systems, Inc.,
under their service arrangements with MedServ of Connecticut, Inc. and the
Hartford County Medical Association and the New Haven County Medical
Association. Mrs. Camarco is a member of the American Association of Medical
Executives, the American Board of Quality Assurance and Utilization Review
Physicians, the National Association for HealthCare Quality, the New England
HealthCare Assembly, the Connecticut Medical Group Management Association, and
the Connecticut Society of Association Executives.
EDWARD J. BERNS, ESQUIRE, VICE-PRESIDENT AND GENERAL COUNSEL
Mr. Berns is the General Counsel of the Hartford County Medical Association
and the New Haven County Medical Association and MedServ. He has practiced law
exclusively within the medical environment since 1987 with a concentration in
the field of managed care. Prior to assuming his current positions he was
engaged in the private practice of law from 1975 to 1987 in the New Haven,
Connecticut area.
Mr. Berns is a member of the Bar of the State of Connecticut and the United
States District Court for the District of Connecticut. He has served on the
adjunct faculty of the University of New Haven, Quinnipiac College, and Southern
Connecticut State University. Mr. Berns holds the appointment of Magistrate from
the State of Connecticut Judicial Department.
CURRENT DIRECTORS.
The following describes the directors whose curriculum vitae are not set
forth above:
John Aversa, M.D. has practiced medicine for the past 27 years specializing
in Orthopaedics. Dr. Aversa received his M.D. from SUNY Downstate in 1967.
Joseph Balsamo, M.D. has practiced medicine for the past 8 years
specializing in Internal Medicine. Dr. Balsamo received his M.D. from
Universidad del Noreste in 1985.
John R. Galvin, M.D. has practiced medicine for the past 30 years
specializing in Family Practice. Dr. Galvin received his M.D. from Tufts
University in 1964.
Ellen R. Fischbein, M.D. has practiced Psychiatry for the past 19 years. Dr.
Fischbein received her M.D. from the State University of New York at Buffalo in
1970.
F.J. Montegut, M.D. has practiced medicine for the past 27 years
specializing in Thoracic Surgery. Dr. Montegut received his M.D. from Meharry
Medical College in 1958.
N. Chandra Narayanan, M.D. has practiced medicine for the past 22 years
specializing in Surgical Oncology. Dr. Narayanan received his M.D. from Calcutta
National Medical College and Hospital in 1964.
John W. Rodgers, M.D. has practiced medicine for the past 18 years
specializing in Pulmonary Diseases. Dr. Rodgers received his M.D. from the
University of Connecticut in 1974.
Earle J. Sittambalam, M.D. has practiced medicine for the past 22 years
specializing in Internal Medicine. Dr. Sittambalam received his M.D. from the
University of Ceylon in 1969.
43
<PAGE>
COMPENSATION OF OFFICERS, DIRECTORS AND COMMITTEE MEMBERS
The Company intends to pay its directors a $200 stipend for attending
meetings of the Board of Directors. Officers, who are directors and are not
employed by MedServ, will receive the additional stipends of $10,000 per year
for the President and $5,000 per year for all other officers.
EXECUTIVE COMPENSATION
The following chart provides a summary of the compensation received by the
Company's Chief Executive Officer from the Company's inception through December
31, 1996. No officer or employee of the Company received compensation of greater
than $100,000 during that period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- --------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
Joseph R. Coffey, Chief Executive Officer $20,730 -- --
</TABLE>
- ------------------------------
(1) Paid to Mr. Coffey by MedServ during the period from the Company's inception
through December 31, 1996 for all services rendered by him to MedServ, which
services include serving as the Company's Chief Executive Officer.
The Company has no stock option, stock incentive or long term incentive
plans.
PRINCIPAL SECURITY HOLDERS
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS OF BENEFICIAL
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
- ------------------------------------- ------------------------------------- ------------------- -------------------
<S> <C> <C> <C>
Class A Common....................... N/A N/A N/A
Class B Common....................... N/A N/A N/A
Class C Common....................... MedServ of Connecticut, Inc.(1)(2) 3 Shares 100%
</TABLE>
- ------------------------
(1) The address of this Stockholder is 1520 Highland Avenue, Cheshire,
Connecticut 06410.
(2) MedServ is a for-profit corporation owned by the Hartford County Medical
Association and the New Haven County Medical Association. MedServ's Board of
Directors consists of eleven physicians associated with the Hartford County
Medical Association and the New Haven County Medical Association, of whom
six serve as Directors of Physicians Care.
MedServ owns all of the outstanding Class C Common Stock of the Company.
Prior to this Offering, there is no outstanding Class A Common Stock or Class B
Common Stock of the Company. The Company anticipates that each director who is
an Eligible Purchaser will purchase at least the minimum number of shares of
Common Stock in this Offering and that no director will hold one percent or more
of the outstanding shares.
PHYSICIAN ADVOCATE COUNCIL
The Board of Directors has authorized the establishment of the Physician
Advocate Council as an ad hoc committee appointed by the Board of Directors
which will advise the Board of Directors on matters of Company policy or
operations as they affect physician participation in products offered by the
Company, including product design, physician compensation, physician
credentialing criteria, the physicians' role in member services support, the
effectiveness of the Company's medical management model and the conduct of the
Company's capital campaign. The Board of Directors appoints physician members to
the Advocate Council in its discretion. Participation of physicians in the
Physician Advocate Council is voluntary and no compensation will be paid by the
Company to such physicians.
44
<PAGE>
CONFLICTS OF INTEREST
Some of the shareholders and directors of the Company are or will be and
will continue to be physicians who have entered into Physician Participation
Agreements with IPA. The interests of the physicians, as Participating
Physicians to the Company through IPA, may differ from the interests of the
physicians, as shareholders and/or directors of the Company. As Participating
Physicians, physicians may have an interest in maximizing the amount of
reimbursement from the Company for services provided by them to the Enrollees.
On the other hand, as shareholders and/or directors of the Company, physicians
may benefit from the containment of the costs of providing services through
appreciation in share value, increased compensation or otherwise. The Company's
ability to operate its business effectively will depend in part upon its
resolution of this conflict in a way that enables the Company to offer its
products at competitive rates. See "Business" and "Risk Factors--Method of
Reimbursement for Physician Services."
The Company intends to solicit employers and individuals throughout the
State of Connecticut, including physicians who are shareholders and directors of
the Company, to become Enrollees of the HMO. Physicians, as employers and/or
Enrollees, may be interested in minimizing the Company's premiums (and other
financial aspects of the Company), as well as maximizing the breadth of services
provided by the Company. On the other hand, physicians, as shareholders and/or
directors of the Company, may be interested in maximizing premiums of Enrollees,
and minimizing the breadth of services covered by the Company. Although the
Board of Directors recognizes this potential conflict of interest, its current
intention is to operate the Company in a manner that maintains market
competitive premiums and benefit designs.
Further, the Company's shareholders and/or directors may own stock in and/or
participate in competing organizations. The Company's shareholders and/or
directors may also have an interest in freestanding facilities or institutions
with which the Company may contract.
The Company intends to enter into the Management Agreement with MedServ.
Under this Management Agreement, MedServ will be responsible for all of the
day-to-day management of the Company. The terms and conditions of the Management
Agreement are subject to approval of a majority of the Board of Directors then
in office. The amounts which will be paid to MedServ by the Company pursuant
thereto, are subject to approval by the Board of Directors by a majority vote
and a two-thirds vote of Directors then in office. MedServ, as the sole
shareholder of the Class C Common Stock, has the right to designate a majority
of the Board of Directors. In the negotiations of the Management Agreement,
MedServ was represented by its general counsel, who also serves as general
counsel to the Company.
The Company understands that MedServ will enter into a long-term exclusive
IPA Agreement with IPA. Pursuant to the IPA Agreement, IPA shall be responsible
for the development of the physician network and for the clinical aspects of
operations. MedServ manages the affairs of IPA, and MedServ's general counsel
has provided legal advice to IPA with regard to certain transactions described
herein.
RELATED PARTY TRANSACTIONS
The Company will maintain the Management Agreement with MedServ for the
management of the HMO. MedServ, as the sole shareholder of the Company's Class C
Common Stock, has the right to appoint a majority of the Board of Directors.
Accordingly, MedServ will be able to determine the outcome of all actions of the
Company requiring approval of the Board of Directors and will substantially
control the business affairs of the Company. See "Risk Factors--Control by
Current Shareholder." The Management Agreement and all future arrangements
between the Company and MedServ will be on terms no less favorable to the
Company than those available from unaffiliated parties. In addition, hospitals
and other purchasers which invest in the Company may have service arrangements
with the Company which may make their interests inconsistent with the interests
of the Company as its shareholders.
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Mr. Coffey, Ms. Camarco, Mr. Berns, and Mr. Fiorentino are each employed by
MedServ, which in the year ended December 31, 1996 paid them $154,420, $59,150,
$80,172, and $92,652 respectively, which included compensation for serving as
officers of the Company.
TERMS OF OFFERING
THE OFFERING
The Company is offering two classes of Common Stock, Class A and Class B,
until all the Common Stock offered hereby is sold, for a period of up to one
hundred and eighty days after the date of this Prospectus, with one sixty day
extension at the discretion of the Board of Directors (the "Offering Period").
Class A Common Stock will be sold to both individual physicians and Groups at a
price of $4,000 per share, subject to a "prompt subscription" price of $3,000
per share for Eligible Purchasers who execute and deliver to the Subscription
Agent the completed Subscription Documents in a form sufficient to establish
eligibility to purchase Common Stock within ninety days of the date of this
Prospectus. Every physician who desires to provide medical services to Enrollees
must purchase one share of Class A Common Stock. No physician may hold more than
one share of Class A Common Stock. In addition to purchasing one share of Class
A Common Stock, each Specialist Physician who desires to provide medical
services to Enrollees must purchase not less than one share of Class B Common
Stock.
Class B Common Stock will be sold at a price of $4,000 per share to
physicians and to hospitals that have been approved by the Company, in its
discretion, subject to a prompt subscription price of $3,000 per share for
Eligible Purchasers who execute and deliver to the Subscription Agent completed
Subscription Documents in a form sufficient to establish eligibility to purchase
Common Stock within ninety days of the date of this Prospectus. Although the
Company does not anticipate limiting the number of shares of Class B Common
Stock any purchaser may purchase, a maximum of 3,000 shares of Class B Common
Stock may be sold pursuant to this Offering, and, in response to an
over-subscription, the Company may limit the number of shares of Class B Common
Stock a particular Eligible Purchaser may purchase.
Licensed hospitals that seek to purchase Class B Common Stock are required
to purchase such number of shares which, when multiplied by the price per share,
results in a purchase price of not less than $250,000; provided, however, that a
hospital which is licensed to operate fewer than 100 beds is required to
purchase such number of shares which, when multiplied by the price per share,
results in a purchase price of not less than $100,000.
Professional corporations, corporations, limited liability corporations,
business trusts, trusts, independent practice associations ("IPAs"), physician
hospital organizations ("PHOs"), and partnerships that are majority-owned and
controlled, directly or indirectly, by physicians who provide medical services
on behalf of the entity (each referred to as a "Group") are eligible to purchase
shares of Class A Common Stock and are eligible for the prompt subscription
price for Class A Common Stock and Class B Common Stock if and only if (i)
physicians practicing in the Group ("Group Physicians") meet the qualifications
of individual physician investors; (ii) the number of shares of Class A Common
Stock purchased equals the number of Group Physicians in any particular
purchasing Group, and the number of shares of Class B Common Stock purchased
shall at least equal the number of Specialist Physicians practicing in any
particular purchasing Group; and (iii) each Group Physician in a purchasing
Group executes a Participation Agreement together with the appropriate
Physicians Care Primary Care Physician Attachment and Physicians Care Specialist
Physician Attachment, as more fully described under "Eligibility Requirements to
Purchase Stock." However, with regard to any entity purchasing on behalf of
physicians affiliated therewith who hold full time geographic academic
appointments, the number of shares to be purchased shall be calculated based on
full time equivalent physician time devoted to clinical care based on Medicare
reports completed for the most recent fiscal year of the affiliated hospital,
and if a hospital is a shareholder of such Group, Class B Common Stock must be
purchased in such amount required for a hospital
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purchasing individually. No Group may purchase more than the number of shares of
Class A Common Stock than could be purchased by Group Physicians if purchased
individually.
The Offering is subject to receipt of completed Subscription Documents
during the Offering Period for purchases by Eligible Purchasers of not less than
$8,000,000 of Common Stock. Within five business days after the achievement of
the $8,000,000 threshold, there shall be an Initial Closing. The Company shall
conduct subsequent Closings occurring five days after receipt of incremental
subscriptions of at least $1,500,000, with a final Closing to occur 180 days
following the date of this Prospectus subject to a 60 day extension at the
discretion of the Board of Directors. In the event that the $8,000,000 threshold
is not satisfied, the purchase price of the Common Stock, plus interest thereon,
shall be refunded minus $450 per share which shall be retained by the Company in
order to offset the costs associated with the Offering. See "Risk Factors."
ELIGIBILITY REQUIREMENTS TO PURCHASE STOCK
The Common Stock offered hereby may be purchased only by Eligible
Purchasers, which includes only persons meeting each of the following
requirements:
Class A Common shareholders:
FOR INDIVIDUAL PHYSICIANS:
(i) must be a physician licensed in the state in which the physician
practices.
(ii) unless such requirement is waived by the Corporation's Board of
Directors in its sole discretion, shall have and maintain, or shall have
applied for, membership in the state medical association and (if a county
medical association or equivalent exists in the location in which the
physician practices) the applicable county medical association; provided,
however, that physicians who have applied for and not obtained membership
in the state and/or a county medical association must in order to retain
Class A shares, maintain such membership(s) once approved; and provided,
further, that if such membership(s) is/are denied or not maintained, the
physicians' Class A Common Stock shall automatically be converted to
Class B Common Stock.
(iii) must maintain in effect with IPA a Participation Agreement.
(iv) must have in effect with IPA a Physicians Care Primary Care Physician
Attachment or a Physicians Care Specialist Physician Attachment to the
Participation Agreement.
(v) Specialist Physicians must also purchase not less than one share of
Class B Common Stock.
FOR GROUPS OF PHYSICIANS:
Groups may acquire shares for such number of Group Physicians who
individually satisfy the qualifications of a Class A Common shareholder.
Class B Common shareholders:
QUALIFICATIONS
(i) at the discretion of the Board of Directors, physician groups, hospitals
and/or other investors may purchase Class B Common Stock of the Company.
(ii) all physicians who have purchased a share of Class A Common Stock may
purchase shares of Class B Common Stock.
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(iii) licensed hospitals that seek to purchase Class B Common Stock are
required to purchase such number of shares which, when multiplied by the
price per share, results in a purchase price of not less than $250,000;
provided, however, that if a hospital has less than 100 licensed beds,
then such investor is required to purchase such number of shares which,
when multiplied by the price per share, results in a purchase price of
not less than $100,000.
Because the Company has no present intentions and is not currently
considering a proposal to exercise the Board's discretion to issue Class B
Common Stock to investors other than physicians, physician groups or hospitals,
the Company has not developed any criteria by which it may or will issue such
shares.
OFFERING PERIOD
The Offering will remain open for one hundred and eighty days from the date
of this Prospectus, subject to a sixty day extension at the discretion of the
Board of Directors.
ESCROW ARRANGEMENTS
All amounts received from subscribers whose subscriptions are not rejected
will be promptly forwarded by the Subscription Agent to the Escrow Agent (State
Street Bank & Trust Company, 777 Main Street, Hartford, Connecticut 06115),
shall be cashed by the Escrow Agent, and the Purchase Price less $450 per
subscribed share (the "Subscription Fee") shall be deposited into the Escrow
Account, until the first to occur of (i) a Closing applicable to the applicable
subscription, or (ii) the termination of the Offering. The first closing of the
Offering will occur five days after receipt of accepted subscriptions in the
amount of $8,000,000 of Class A Common Stock and Class B Common Stock with a
subsequent closing occurring five days after the receipt thereafter by the
Company of subscriptions in incremental amounts of $1,500,000. All Subscription
Fees shall be deposited by the Escrow Agent into the account of the Company.
During the period of escrow, subscribers will have no right to demand return
of their subscriptions.
Upon a Closing, investors whose subscriptions have been accepted by the
Company will not be entitled to any interest. No interest will be paid on funds
held in escrow unless the Offering is terminated by the Company without a
Closing. If the Offering is terminated, the Escrow Agent will promptly remit to
each prospective subscriber an amount equal to the Purchase Price per share plus
his or her pro rata amount of the interest accrued on all the funds held in
escrow less the sum of $450 per share. At the written direction of the Company,
the Escrow Agent shall invest the Escrow Account in any of the following: U.S.
Government Obligations, bank certificates of deposit (insured to the amount of
any such deposit), or repurchase obligations secured by U.S. Government
Obligations.
SUBSCRIPTION AGENT
Newbury, Piret & Co., Inc. or its designee has been engaged by the Company
to assist it in effecting the Offering by serving as Subscription Agent. The
Subscription Agent will cause copies of this Prospectus and subscription
materials to be forwarded to prospective subscribers upon request. Following
receipt of completed Subscription Documents from prospective subscribers, the
Subscription Agent will (i) transmit the submitted checks and money orders to
the Escrow Agent, (ii) verify that the Subscription Agreement has been fully and
properly completed and signed, and (iii) forward, if received, the IPA
Participation Agreement, the Physicians Care Primary Care Physician Attachment
or Physicians Care Specialist Physician Attachment and the accompanying separate
check or money orders for IPA membership to MedServ. Any subscription which the
Subscription Agent is not able to verify will be rejected and returned to the
prospective subscriber.
Upon the closing of the Offering, the Subscription Agent will cause stock
certificates to be sent to those subscribers whose subscriptions have been
accepted by the Company. Each of the foregoing will be sent by the Subscription
Agent via first class mail promptly following the closing of the Offering. See
"How to Subscribe in this Offering."
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DESCRIPTION OF SECURITIES
CLASS A COMMON STOCK
The Class A Common Stock shall be issuable only to physicians or entities
who can demonstrate the following qualifications:
FOR INDIVIDUAL PHYSICIANS:
(i) Must be a physician licensed in the state in which the physician
practices,
(ii) unless such requirement is waived by the Corporation's Board of
Directors in its sole discretion, shall have and maintain, or shall have
applied for, membership in the state medical association and (if a county
medical association or equivalent exists in the location in which the
physician practices) the applicable county medical association; provided,
however, that physicians who have applied for and not obtained membership in
the state and/or a county medical association must in order to retain Class
A shares, maintain such membership(s) once approved; and provided, further,
that if such membership(s) is/are denied or not maintained, the physicians'
Class A Common Stock shall automatically be converted to Class B Common
Stock.
(iii) Must have in effect a Participation Agreement with IPA.
(iv) Must have in effect a Physicians Care Primary Care Physician
Attachment or a Physicians Care Specialist Physician Attachment to the
Participation Agreement with IPA.
FOR GROUPS OF PHYSICIANS:
Class A Common Stock may be held by a corporation, professional corporation,
business trust, trust, partnership, limited liability corporation or other legal
entity in which physicians who provide medical services on behalf of the
corporation, professional corporation, business trust, trust, partnership,
limited liability corporation or other legal entity have not less than fifty
percent (50%) ownership interest or control (referred to as a "Group"), provided
that each of the physicians satisfy qualifications (i), (ii), (iii) and (iv)
enumerated above, unless waived by the Board of Directors in its sole
discretion.
RIGHTS AND PREFERENCES
- VOTING RIGHTS. Each share of Class A Common Stock shall entitle the holder
of such share to one vote on all matters which are properly before the
shareholders. Class A shareholders shall be entitled to elect only certain
Directors to the Board of Directors as specified in the Bylaws and the
Certificate of Incorporation.
- DIVIDEND RIGHTS. Class A shareholders shall be entitled to receive
dividend distributions when, as, and if declared by the Board of
Directors, in its sole discretion.
- LIQUIDATION RIGHTS. After the liabilities of the Company have been
discharged, Class B shareholders shall be entitled to a liquidation
preference equal to $1,500 per share of Class B Common Stock. After the
Class B shareholders' liquidation preference is satisfied, all
shareholders will share any remaining liquidating distributions pro rata.
- OWNERSHIP INTEREST. No physician may hold more than one share of Class A
Common Stock.
CLASS B COMMON STOCK
QUALIFICATIONS:
At the discretion of the Board of Directors, physicians, hospitals and/or
other investors may be issued Class B Common Stock. Because the Company has no
present intentions and is not currently considering a
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proposal to exercise the Board's discretion to issue Class B Common Stock to
investors other than physicians, physician groups or hospitals, the Company has
not developed any criteria by which it may or will sell such shares.
RIGHTS AND PREFERENCES
- VOTING RIGHTS. Each share of Class B Common Stock shall entitle the holder
of such share to one vote on all matters which require a vote in
accordance with law, except that Class B shareholders shall not be
entitled to elect representatives to the Board of Directors, to vote on
amendments to the Bylaws or to vote on such other matters reserved to the
holders of Class A Common Stock.
- DIVIDEND RIGHTS. Class B shareholders shall be entitled to receive
dividend distributions, when, as, and if declared by the Board of
Directors, in its sole discretion.
- LIQUIDATION RIGHTS. After the liabilities of the Company have been
discharged, Class B shareholders shall be entitled to a liquidation
preference equal to $1,500 per share of Class B Common Stock. After the
Class B shareholders' liquidation preference is satisfied, all
shareholders will share any remaining liquidating distributions pro rata.
CLASS C COMMON STOCK
QUALIFICATIONS
The Class C Common Stock shall only be issuable to MedServ.
RIGHTS AND PREFERENCES
- VOTING RIGHTS. Each share of Class C Common Stock shall entitle the holder
of such stock to one vote on all matters properly before the shareholders.
The Class C shareholder shall have certain special voting rights as set
forth in "--Governance," below. The Class C shareholder shall be entitled
to elect certain Directors to the Board of Directors as specified in the
Bylaws and in the Certificate of Incorporation.
- DIVIDEND RIGHTS. The Class C shareholder shall be entitled to receive
dividend distributions, when, as, and if declared by the Board of
Directors, in its sole discretion.
- LIQUIDATION RIGHTS. After the liabilities of the Company have been
discharged, Class B shareholders shall be entitled to a liquidation
preference equal to $1,500 per share of Class B Common Stock. After the
Class B shareholders' liquidation preference is satisfied, all
shareholders will share any remaining liquidating distributions pro rata.
GOVERNANCE
BOARD OF DIRECTORS. The number of directors shall be not less than seventeen
nor more than twenty-one; provided, however, that prior to issuance of Class A
Common Stock and Class B Common Stock there shall be eleven directors.
Six of the directors shall be elected by the Class A shareholders with the
first election occurring not more than one hundred and eighty days after the
completion of this Offering. Each of these directors (the "Class A Directors")
must be a physician and a member of a county medical society other than the
Hartford County Medical Association or the New Haven County Medical Association.
No more than two of the Class A Directors may be members of any one county
medical society at any given time; and at all times, not less than three of the
Class A Directors shall be "Primary Care Physicians", as said term is defined by
policy adopted by the Board of Directors from time to time.
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Eleven of the directors shall be appointed and subject to removal by the
Class C shareholder (the "MedServ Directors"). Six of the MedServ Directors
shall be Primary Care Physicians.
Up to four directors (such number to be determined in the discretion of the
Board of Directors) shall be representatives of area employers, hospitals,
investors in the Company or individuals representing the interests of the
Company's subscribers. These directors will be elected by a majority of the
Class A shareholders at the annual meeting of the shareholders from a list of
nominees developed by the Board of Directors.
VOTING REQUIREMENTS. The following actions shall require a vote of the
shareholders:
CLASSES A COMMON STOCK AND B COMMON STOCK:
- These actions which require shareholder action as a matter of law;
provided that nothing contained herein shall have the effect of expanding
the voting rights of the shares of Class B Common Stock described herein.
CLASS C COMMON STOCK:
At least two-thirds in interest of the Class C Common Stock must approve the
following actions:
- the sale or liquidation of the Company;
- the merger or consolidation of the Company;
- the amendment of the Certificate of Incorporation; and
- all other matters required by law to be submitted to the shareholders for
a vote.
RESTRICTIONS ON TRANSFER; SHARE CERTIFICATE
RESTRICTIONS ON TRANSFER. At any time a Class A or Class B shareholder
receives a bona fide offer to transfer shares of the Company's stock to an
individual or entity who/which satisfies the requirements for stock ownership
set forth in the Certificate of Incorporation, the shareholder must offer to the
Company in writing (the "Transfer Notice") a right of first opportunity to
purchase such shares at an amount equal to that contained in the bona fide offer
("Purchase Price"). The Company shall notify the shareholder in writing (the
"Election Notice") of its election to purchase such shares within thirty days of
receipt of the Transfer Notice (the "Election Period"). If the Company elects to
purchase such shares, the Company may, at its election, pay the Purchase Price
in cash or deliver a promissory note to the selling shareholder stating that the
Company will pay the Purchase Price for the shares over a two year period with
interest at the prime rate as reported in the Money Rates section of the Wall
Street Journal on the first day of the month preceding the notice of sale or
transfer. The transfer shall occur within sixty days of the Election Notice at
the offices of the Company on the date and at the time set forth in the Election
Notice. The promissory note shall obligate the Company to pay the selling
shareholder the principal amount due with interest thereon in equal quarterly
installments over the two year repayment term. If the Company does not elect to
purchase such shares, the shareholder may sell such shares to the individual or
entity identified in the Transfer Notice, for the Purchase Price specified in
the Transfer Notice; provided that the closing of such sale occurs within sixty
days following the expiration of the Election Period. If a shareholder otherwise
wishes to sell his or her Common Stock back to the Company, the Company, in its
sole discretion, may redeem such shareholder's Common Stock (optional
redemption) for book value or for such other amount and on such other terms
agreeable to the Company and the shareholder.
MANDATORY REDEMPTION. At any time after the fifth anniversary of the
issuance date of a Class A shareholder's shares of Common Stock, but not before,
the Company shall redeem all shares of Common Stock (including Class A Common or
Class B Common shares) of the Class A shareholder wishing to sell
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or transfer his/her shares upon the occurrence of one of the following events
(termed an "Involuntary Transfer"):
- the death or permanent disability of the Class A shareholder; or
- the Class A shareholder's discontinuation as a provider of medical
services in Connecticut (E.G., retirement or relocation), provided, that
physicians who acquire shares of Common Stock through the initial offering
of the Company's Common Stock and are 55 years of age or older on the date
of receipt of an executed Subscription Agreement shall be eligible to
redeem their Common Stock at any time after the third anniversary of the
issuance date of such Common Stock.
The Company shall redeem such shares of Common Stock at the greater of the
then current net book value of such shares determined pursuant to Generally
Accepted Accounting Principles ("GAAP") as of the most recently completed fiscal
quarter of the Company, or the original issue price of such shares to the
shareholder ("Redemption Price"). At the election of the Company, the Company
may make payment in cash or deliver a promissory note to the selling shareholder
stating that the Company may pay the Redemption Price for the shares over a five
year period with interest at the prime rate as reported in the Money Rates
section of the Wall Street Journal on the first day of the month preceding the
notice of sale or transfer. The promissory note shall obligate the Company to
pay the selling shareholder the principal amount due and accrued interest
thereon in equal quarterly installments over the five year repayment term.
CONVERSION OF SHARES FROM CLASS A COMMON STOCK TO CLASS B COMMON STOCK.
In the event that a Class A shareholder no longer satisfies the
qualifications for Class A shareholder status or transfers the shares to a party
which does not satisfy the qualifications for Class A shareholder status, the
Class A shareholder shall immediately surrender his/her Class A Common Stock,
and the Company will cancel such shares and will issue an equal number of Class
B shares to such shareholder.
LIMITATIONS ON THE COMPANY'S PURCHASE OF SHARES.
Notwithstanding anything to the contrary contained herein, the Company shall
not redeem a shareholder's Common Stock if the Company is insolvent or, by
reason of such redemption, is rendered insolvent, or violates any contract to
which the Company is a party or if the Board of Directors shall determine that
the Company is otherwise not obligated to redeem such Common Stock. The
determination to be made by the Board of Directors from time to time as to
whether the Company is obligated to redeem shares will depend upon a number of
variable factors, including but not limited to (i) the amount of net proceeds
received from this Offering or subsequent financing, if any; (ii) the income
from operations earned and anticipated to be earned in connection with the
Company's business; (iii) the amount of prior redemptions of Common Stock by the
Company; and (iv) the amount needed to meet statutory reserve requirements.
The Board of Directors may adopt annually by resolution a limitation on the
amount of funds available each fiscal year for the redemption of shares, which
resolution shall set forth the priority of payments to shareholders, and/or the
proportionate amount of Common Stock to be redeemed from shareholders, in the
event the aggregate Redemption Price of shares for which redemption is otherwise
required exceeds the limitation duly adopted.
MISCELLANEOUS.
(i) Any or all of the foregoing restrictions may be waived by the Board
of Directors. The certificate of the Treasurer or Secretary of such waiver,
or of the compliance of a shareholder with the above requirements shall be
conclusive evidence thereof.
(ii) No transfer of Common Stock shall be binding on the Company unless
made and recorded on its stock transfer books. The Company shall have the
right to refuse to transfer any shares of Common Stock that are not effected
in compliance with this section.
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(iii) A reference to the restrictions on transfer described herein shall
be printed upon each certificate representing shares of Common Stock issued
by the Company, and those provisions shall be binding upon every person who
becomes a shareholder, all of whom shall take such Common Stock subject to
the provisions hereof. Each certificate representing shares of Common Stock
issued by the Company shall contain the following restrictive legend:
Notice is hereby given that the shares of stock
represented by this certificate is subject to the
provisions and restrictions on transfer and redemption
included in the Certificate of Incorporation of the
Corporation [Company], a copy of which is on file at the
office of the Corporation [Company], and that any transfer
of the shares of stock represented by this Certificate
shall be void unless said transfer is in compliance with
said Certificate.
TRANSFER AGENT
The Company currently intends to engage Boston EquiServe to act as transfer
agent and registrar for shares of its Common Stock.
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UNDERWRITING
Effective the date of the Prospectus, the Company will have entered into an
Underwriting Agreement ("Agreement") with Legg Mason Wood Walker, Incorporated
and Newbury, Piret & Co., Inc. (collectively referred to as the "Underwriter").
Pursuant to the terms of the Agreement, the Underwriter has agreed to sell on a
minimum "best efforts, all or none," basis an aggregate of $8,000,000 of Common
Stock, the Common Stock offered by this Prospectus, within a period of 180 days
after the date hereof (the "Offering Period"), which period may be extended for
an additional sixty days at the discretion of the Board of Directors, to
Eligible Purchasers at the offering prices set forth on the cover page of this
Prospectus. The Underwriting Agreement and Offering may be terminated by the
Underwriter by notice to the Company at any time prior to a Closing if, in the
sole judgment of the Underwriter, the sale, payment for or delivery of the
Common Stock is rendered impractical or inadvisable for any reason. The
Underwriter will not sell any of the Common Stock offered hereby to any account
over which they exercise discretionary control.
If the Underwriter is unable to sell the minimum required Common Stock to
reach $8,000,000 of aggregate subscriptions within the Offering Period, then the
Offering will terminate, and all subscriptions tendered with interest thereon
less $450 per share of Common Stock will be returned to the subscribers, and
without additional deduction for commissions or other expenses relating to the
Offering. All funds received by the Underwriter shall be transmitted promptly to
the Escrow Agent, pursuant to the terms of the Escrow Agreement. During the
period of escrow, subscribers will have no right to demand return of their
subscriptions. See "Escrow Arrangements."
Subject to the sale of $8,000,000 of Common Stock prior to the termination
of this Offering, the Company has agreed to pay the Underwriter a sales
commission of 7% of the offering price. The Company also has agreed to pay to
the Underwriter a non-accountable expense allowance computed on the basis of one
and one-half percent of the gross proceeds from the sale of Common Stock and an
additional expense allowance on an accountable basis for certain of the
Underwriter's expenses. Of such expense allowances, $50,000 has already been
paid. The Underwriter's expenses in excess of the stated expense allowance will
be borne by the Underwriter. To the extent that the actual expenses of the
Underwriter are less than the stated expense allowance, the difference shall be
deemed to be compensation to the Underwriter in addition to the stated sales
commission.
Prior to the Offering, there has been no public market for the Common Stock.
Common Stock cannot be transferred to any person or entity other than an
Eligible Purchaser. As a result, there will be no public market for the Common
Stock. The initial public offering price of the Common Stock has been determined
by consultations between the Company and the Underwriter. The offering price of
the Common Stock is not necessarily related to the Company's asset value, net
worth or any other established criteria of value. Factors considered in
determining the offering price of the Common Stock include estimates of business
potential, historical earnings, future prospects, gross proceeds to be raised,
the type of business in which the Company engages, and an assessment of the
Company's management. See "Risk Factors--Restrictions on Transferability of
Common Stock" and "--Absence of a Public or Other Trading Market for Common
Stock."
The foregoing does not purport to be a complete statement of the terms and
conditions of the Agreement. A copy of the Agreement will be filed with the
Commission as an exhibit to the Registration Statement of which this Prospectus
is a part.
INDEMNIFICATION
The Company and the Underwriter have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended. In addition, the Company's Certificate of Incorporation provides that
directors of the Company will not be personally liable to the Company or its
stockholders for monetary damages resulting from breaches of any duty owed to
the Company or its stockholders if such breach did not (i) involve a knowing
violation of law; (ii) enable the director to receive
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an improper economic gain; (iii) show a lack of good faith and a conscious
disregard for the duty of director; (iv) constitute a sustained and unexcused
pattern of inattention that amounts to an abdication of duty; or (v) create
liability under relevant sections of Connecticut law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
EXPERTS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by the law firm of Fabiani & Kone, P.C., 714 State Street,
New Haven, Connecticut 06511. Certain legal matters relating to the Offering
will be passed upon for the Underwriter by Sullivan & Worcester LLP, Boston,
Massachusetts.
The financial statements included in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
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ADDITIONAL INFORMATION
GLOSSARY
"AAPCC"--average adjusted per capita costs.
"Agreement"--the Underwriting Agreement among the Company, Legg Mason Wood
Walker, Incorporated, and Newbury, Piret & Co., Inc., effective the date of the
Prospectus.
"Board of Directors"--The Board of Directors of Physicians Care of
Connecticut, Inc.
"Budget"--The Administrative Services Budget approved by the Board of
Directors.
"Care Manager"--The Primary Care Physician selected by each Enrollee as
required by the Company who may deliver or coordinate the delivery of medical
services for the Enrollee. Psychiatrists may serve as Care Managers for mental
health benefits.
"Certificate of Authority" (COA)--a certificate of license issued by the DOI
that must be obtained to operate an HMO in the State of Connecticut.
"Class A Common Stock"--Class A Common Stock, without par value, of the
Company.
"Class B Common Stock"--Class B Common Stock, without par value, of the
Company.
"Class C Common Stock"--Class C Common Stock, without par value, of the
Company, the sole shareholder of which is MedServ.
"Closing"--the consummation of the formal purchase and sale of Common Stock
at which money received from Eligible Purchasers relating to subscriptions shall
be transferred from the Escrow Account to the Company and corresponding
certificates representing shares of Common Stock shall be issued to Eligible
Purchasers.
"Code"--Internal Revenue Code.
"Common Stock"--the Class A Common Stock and Class B Common Stock.
"Commission"--the United States Securities and Exchange Commission.
"Company"--Physicians Care for Connecticut, Inc.
"Competitive Medical Plan" (CMP)--A prepayment organization that does not
meet the strict requirements of HMO provisions of the Public Health Service Act
but which is still capable of providing services to Medicare beneficiaries on a
prepayment basis. CMPs must assume full financial risk on a prospective basis
for the provision of the health care services they provide, and they must make
adequate provision against the risk of insolvency.
"CVO"--Central Verification Organization operated by MedServ to provide
credentialing services intended to meet NCQA standards.
"Development Stage"--the period through the date ending three months prior
to the anticipated date of enrollment of the first Enrollee.
"Division of Insurance" (DOI)--the State of Connecticut's Division of
Insurance.
"Election Notice"--notice in writing by the Corporation to the shareholder
of its intent to purchase shares pursuant to its right of first opportunity set
forth in Description of Securities, Section E.
"Election Period"--the 30 day period following receipt of Notice of Transfer
within which the Corporation may decide to purchase shares.
56
<PAGE>
"Eligible Purchasers"--persons or entities that meet the following
requirements:
- Class A Shareholders:
FOR INDIVIDUAL PHYSICIANS: (i) must be a physician licensed in the state
in which the physician practices; (ii) unless such requirement is waived by
the Corporation's Board of Directors in its sole discretion, shall have and
maintain, or shall have applied for, membership in the state medical
association and (if a county medical association or equivalent exists in the
location in which the physician practices) the applicable county medical
association; provided, however, that physicians who have applied for and not
obtained membership in the state and/or a county medical association must in
order to retain Class A shares, maintain such membership(s) once approved;
and provided, further, that if such membership(s) is/are denied or not
maintained, the physicians' Class A Common Stock shall automatically be
converted to Class B Common Stock; (iii) must have in effect a Participation
Agreement with IPA in effect. (iv) must have a Physicians Care Primary Care
Physician Attachment or a Physicians Care Specialist Physician Attachment to
the Participation Agreement with IPA in effect.
FOR MEDICAL GROUPS: Class A Common Stock may be held by a professional
corporation, corporation, limited liability corporation, business trust,
trust, independent practice association, physician hospital organization or
partnership, in which physicians who provide medical services on behalf of
such entity have not less than fifty percent (50%) ownership interest or
control, provided that each of the physicians in the Group meet the
qualifications for physicians as if purchasing individually, unless
otherwise waived by the Company's Board of Directors in its sole discretion.
- Class B Shareholders:
At the discretion of the Board of Directors, physicians, groups,
hospitals and/or other investors may be issued Class B Common Stock of the
Company. Every Specialist Physician seeking to provide medical services to
the Company's Enrollees must agree to purchase not less than one share of
Class B shares. Licensed hospitals that seek to purchase Class B Common
Stock are required to purchase such number of shares which, when multiplied
by the price per share, results in a purchase price of not less than
$250,000; provided, however, that if a hospital has less than 100 licensed
beds, then such an investor is required to purchase such number of shares
which, when multiplied by the price per share, results in a purchase price
of not less than $100,000.
"Enrollee"--any person for whom the Company provides, arranges, and/or
finances managed healthcare or administrative services.
"Escrow Agent"--State Street Bank and Trust Company.
"FFS"--Fee for service payment arrangement.
"GAAP"--Generally Accepted Accounting Principles.
"Group"--professional corporation, partnership, limited liability
corporation, business trust, trust, IPA, PHO or other entity owned and
controlled by a majority of physicians who provide physician services on behalf
of the entity, provided that the physicians meet the Class A Common shareholder
eligibility requirements.
"Group Physicians"--Physicians practicing in a Group as defined herein.
"HCFA"--Health Care Financing Administration.
"Health Maintenance Organization" (HMO)--a healthcare delivery system that
provides a broad range of healthcare services to individuals directly or through
programs sponsored by employers in return for a prepaid premium.
"Initial Closing"--the Closing which will occur as soon as is practicable
after the receipt by the Company of subscriptions totalling at least $8 million.
57
<PAGE>
"Initial Operations Stage"--begins approximately three months prior to the
date of enrollment of the first Enrollee and concludes twenty-seven (27) months
after the date of enrollment of its first Enrollee.
"Involuntary Redemption Price"--the greater of the then current net book
value of Common Stock determined pursuant to GAAP as of the most recently
completed fiscal quarter of the Company, or the original issuance price of the
Common Stock.
"IPA"--MedServ IPA, Inc.
"IPA Agreement"--a long-term agreement to be executed between IPA and
MedServ pursuant to which IPA will develop a network of physicians to provide
services to Enrollees and oversee certain clinical
"LIBOR"--London Interbank Offered Rate.
"Management Agreement"--the long-term contract to be executed between the
Company and MedServ to provide certain management and administrative services
described herein.
"Management Fee"--the fee paid to MedServ under the Management Agreement.
"MedServ"--MedServ of Connecticut, Inc.
"MSO"--Medical Service Organization.
"NCQA"--National Commission for Quality Assurance.
"Offering"--the current offering of the Company's Common Stock, as set forth
in this Prospectus.
"Offering Period"--one hundred and eighty days from the date of this
Prospectus with one sixty day extension at the discretion of the Board of
Directors.
"Participating Physician"--a physician who has executed a Physicians Care
Primary Care Physician Attachment or Physicians Care Specialist Physician
Attachment and who otherwise meets all conditions of participation in Physicians
Care.
"Participating Provider"--a health care provider who or which has executed a
Participation Agreement and otherwise meets all conditions of participation in
Physicians Care.
"Participation Agreement"--The agreement executed by a Participating
Provider which sets forth the terms and conditions under which the Participating
Provider participates as a provider of covered services to Enrollees.
"Physicians Care"--Physicians Care for Connecticut, Inc.
"Physicians Care Primary Care Physician Attachment"--is the document
executed by a Primary Care Physician pursuant to which such Primary Care
Physician agrees to provide services to Enrollees.
"Physicians Care Specialist Physician Attachment"--is the document executed
by a Specialist Physician pursuant to which such Specialist Physician agrees to
provide services to Enrollees.
"Physician Reimbursement"--compensation for Participating Physicians for the
provision of healthcare services to Enrollees in an amount equal to the lesser
of (a) their usual and customary fees, (b) the fees set forth on a fee schedule
adopted by the Company, a sample of which is set forth on Appendix C hereto, or
(c) a negotiated rate (in each case, less any applicable copayments, coinsurance
or deductibles).
"PHO"--Physician Hospital Organization.
"PPO"--Preferred Provider Organization.
"Primary Care Physician"--a person licensed to practice medicine by the
applicable state licensing board who (a) is board eligible or board certified in
Internal Medicine, Family Medicine, General Practice, or Pediatrics, or meets
such other standards as determined by the Board of Directors from time to time,
58
<PAGE>
and (b) devotes significant practice time to providing primary care services or
managing the delivery of other medical services with a capability to make
preliminary diagnoses or to provide treatment of medical and healthcare needs,
without limitation by problem origin, organ system or gender, to arrange for
delivery of all necessary care and to satisfy other requirements as established
in Board of Directors policy recording relating to qualifications of Primary
Care Physicians. For the limited purpose of determining which physicians qualify
to purchase Common Stock as a Primary Care Physician, psychiatrists shall be
considered Primary Care Physicians. Psychiatrists may serve as Care Managers for
mental health benefits.
"Purchase Price"--the price at which the Company may purchase shares when
exercising a right of first opportunity pursuant to the Transfer Notice
provision, equal to the amount contained in the Offer.
"PSO"--Provider Sponsored Organization"--an organization of healthcare
providers engaging in direct contracting with HCFA to provide care to Medicare
beneficiaries.
"QMP"--Quality Management Program. A program to provide physicians with
physician-defined quality and cost of services data and performance feedback and
perform credentialing functions.
"Resource Based Relative Value Scale" (RBRVS)--a fee schedule payment
methodology that determines relative amounts to be paid to physicians according
to overhead costs, skill, intensity of effort and time associated with specific
physician services.
"Specialist Physician"--a licensed physician who (i) executes the Physicians
Care Specialist Physician Attachment to the IPA Participation Agreement and (ii)
is listed as a Specialist Physician in the Company's provider directory, and
(iii) provides medical services to Enrollees upon referral from a Care Manager,
as applicable, and submits a claim for payment therefor, and (iv) is board
eligible or board certified in a medical specialty other than Internal Medicine,
Family Medicine, General Practice, Pediatrics or Psychiatry.
"Subscription Agent"--Newbury, Piret & Co., Inc. or its designee.
"Subscription Documents"--(i) a check or money order made payable to State
Street Bank & Trust Company in the amount of the Purchase Price, (ii) a
Subscription Agreement, properly completed and signed, and (iii) the executed
IPA Participation Agreement, including, a separate check made payable to MedServ
IPA, Inc. to cover the $200 administration fee relating thereto (unless the
subscriber if already a member of IPA), and (iv) the Physicians Care Primary
Care Physician Attachment or Physicians Care Specialist Physician Attachment, as
applicable.
"Transfer Notice"--notice, in writing, to the Company of a bona fide offer
to transfer shares of the Corporation's Common Stock to an individual or entity
who/which satisfies the requirements for stock ownership set forth in the
Certificate of Incorporation, providing a right of first opportunity to purchase
the shares of the Company.
"UMP"--Utilization Management Program.
"Underwriter"--Legg Mason Wood Walker, Incorporated and Newbury, Piret &
Co., Inc.
59
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Balance Sheet as of August 31, 1997........................................................................ F-3
Statement of Operations for the period from inception (November 12, 1996) to August 31, 1997............... F-4
Statement of Stockholder's Equity (Deficit) for the period from inception (November 12, 1996) to August 31,
1997..................................................................................................... F-5
Statement of Cash Flows for the period from inception (November 12, 1996) to August 31, 1997............... F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Physicians Care for Connecticut, Inc.:
We have audited the accompanying balance sheet of Physicians Care for
Connecticut, Inc. (a development stage, Connecticut corporation) (the Company)
as of August 31, 1997 and the related statements of operations, stockholder's
equity (deficit) and cash flows for the period from inception (November 12,
1996) to August 31, 1997. These financial statements are the responsibility of
the Company's and MedServ of Connecticut, Inc.'s (see Note 1) management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The Company is in the development stage as of August 31, 1997. As discussed
in Note 1 to the financial statements, successful completion of the Company's
development program and, ultimately, the attainment of profitable operations is
dependent upon future events, including obtaining adequate capital to fulfill
its development activities, obtaining regulatory approval and achieving a level
of revenues adequate to support the Company's cost structure.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Physicians Care for
Connecticut, Inc. as of August 31, 1997, and the results of its operations and
cash flows for the period from inception (November 12, 1996) to August 31, 1997,
in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Hartford, Connecticut
September 8, 1997
F-2
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents..................................................... $ 34,094
----------
Total assets............................................................ $ 34,094
----------
----------
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
<S> <C>
CURRENT LIABILITIES:
Borrowings under line of credit............................................... $ 625,000
Accounts payable.............................................................. 485,994
Related party payable, net.................................................... 121,791
Accrued expenses.............................................................. 60,000
----------
Total current liabilities............................................... 1,292,785
----------
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock--
Class A, no par value, 10,000 shares authorized, no shares issued and
outstanding............................................................... --
Class B, no par value, 10,000 shares authorized, no shares issued and
outstanding............................................................... --
Class C, no par value, 100 shares authorized, 3 shares issued and
outstanding............................................................... 12,000
Accumulated deficit........................................................... (1,270,691)
----------
Total stockholder's equity (deficit).................................... (1,258,691)
----------
Total liabilities and stockholder's equity (deficit).................... $ 34,094
----------
----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 12, 1996) TO AUGUST 31, 1997
<TABLE>
<S> <C>
INTEREST INCOME................................................................. $ 1,895
----------
EXPENSES:
Consultants................................................................. 472,249
Legal....................................................................... 417,566
Actuarial................................................................... 229,841
Accounting.................................................................. 102,300
Interest.................................................................... 26,344
Other....................................................................... 24,286
----------
Total expenses............................................................ 1,272,586
----------
NET LOSS................................................................ $(1,270,691)
----------
----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (NOVEMBER 12, 1996) TO AUGUST 31, 1997
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------------------------
CLASS A CLASS B CLASS C
-------------------- -------------------- ---------------------- ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT DEFICIT TOTAL
--------- --------- --------- --------- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
November 12, 1996........ -- $-- -- $-- -- $ -- $ -- $ --
Issuance of 3 shares of
Class C common stock..... -- -- -- -- 3 12,000 -- 12,000
Net loss................... -- -- -- -- -- -- (1,270,691) (1,270,691)
--------- --------- --------- --------- --- --------- ------------- -------------
BALANCE,
March 31, 1997........... -- $-- -- $-- 3 $ 12,000 $ (1,270,691) $ (1,258,691)
--------- --------- --------- --------- --- --------- ------------- -------------
--------- --------- --------- --------- --- --------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 12, 1996) TO AUGUST 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................................... $(1,270,691)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in liabilities--
Accounts payable.......................................................... 485,994
Related party payable, net................................................ 121,791
Accrued expenses.......................................................... 60,000
----------
Net cash used in operating activities................................... (602,906)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit............................................... 625,000
Issuance of common stock...................................................... 12,000
----------
Net cash provided by financing activities............................... 637,000
----------
NET INCREASE IN CASH AND CASH EQUIVALENTS....................................... 34,094
CASH AND CASH EQUIVALENTS, November 12, 1996.................................... --
----------
CASH AND CASH EQUIVALENTS, August 31, 1997...................................... $ 34,094
----------
----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest...................................... $ 26,344
----------
----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997
1. ORGANIZATION:
Physicians Care for Connecticut, Inc. (the Company), was formed as a
Connecticut corporation on November 12, 1996 under the sponsorship of private
practicing physicians of Hartford County Medical Association and New Haven
Medical Association to develop a physician-owned and directed insurance company
licensed as a Health Maintenance Organization (HMO) and offer a comprehensive
array of health insurance products throughout the state of Connecticut. The
Company intends to provide coverage for comprehensive healthcare services to
members under its insured products for a fixed, prepaid enrollment fee paid by
or on behalf of the members.
The Company is in the development stage and has not yet commenced its
business activities. The Company has no operating history and has generated no
operating revenues. As such, the Company is subject to all of the risks inherent
in a new enterprise. The Company will prepare and file an application for a
Certificate of Authority with the Connecticut Department of Insurance to operate
an HMO throughout the state of Connecticut and will also seek such other
regulatory approvals as necessary to offer its products. MedServ of Connecticut,
Inc. (MedServ) is committed to support the development stage operations and cash
flow requirements of the Company until the earlier of the completion of the
first closing (after receipt of accepted subscriptions for the amount of not
less than $8,000,000) of the stock offering discussed in the following paragraph
or September 1, 1998.
MedServ owns all of the outstanding shares of common stock as of August 31,
1997. The Company plans to offer Class A Common Stock and Class B Common Stock
to certain eligible purchasers. The net proceeds from the offering, if
successful, will be used to repay borrowings and for other working capital
purposes.
There can be no assurance that the Company's development will be successful
or that its services or products will be successfully marketed, or that the
Company will ever achieve profitable operations.
2. SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS--
The Company considers all short-term investments in highly liquid debt
instruments purchased with original maturities of three months or less to be
cash equivalents. The Company maintains its cash in an overnight sweep account
maintained by MedServ.
INCOME TAXES--
The Company has not as yet determined its tax reporting position for federal
and state income tax purposes. There will be temporary differences in reporting
certain expenses for financial statement and income tax purposes. A principal
difference relates to accounting for organization costs. A deferred income tax
benefit has not been recorded as its realization is not considered more likely
than not. The Company has a tax net operating loss carryforward which
approximates the loss for financial reporting purposes for the period from
inception (November 12, 1996) to August 31, 1997, which may be used to offset
taxable income in future years. Such carryforward expires by 2011.
F-7
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1997
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
USE OF ESTIMATES--
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
disclosures of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS:
The Company intends to enter into a Management Agreement (the Management
Agreement) with MedServ. MedServ was organized in 1995 as a joint venture
between the Hartford and New Haven County Medical Associations. MedServ is a
for-profit entity performing administrative functions for both county medical
associations and operates as a Central Verification Organization to provide
credentialing services which are intended to meet National Commission for
Quality Assurance credentialing standards. MedServ and the Company's management
will conduct the day to day operations of the Company.
Under the Management Agreement, MedServ will exclusively provide management
and administrative services in connection with the development, licensing,
marketing and operations of the Company. MedServ will be permitted to contract
with third-party independent contractors to provide services to health plan
enrollees.
The Company intends to enter into a Provider Network Agreement (Network
Agreement) with MedServ IPA, Inc. (MedServ IPA) under which MedServ IPA will
arrange for the availability of a network of qualified physicians throughout the
state of Connecticut to provide medical services to the Company's members.
MedServ IPA (formerly known as ProCare IPA, Inc.) is a Connecticut corporation
formed specifically for the purpose of developing a network of physicians to
provide services to health plan enrollees.
4. FINANCING ARRANGEMENTS:
The Company has a $650,000 revolving credit facility with a bank. The credit
facility, when used, bears interest at the prime rate or the London interbank
borrowing rate plus 100 basis points at the Company's election (rates ranging
from 6.7% to 6.8% at August 31, 1997), and matures on November 22, 1997.
5. COMMON STOCK:
Holders of Class A and Class B common stock are entitled to one vote on all
matters presented to the stockholders for vote or consent, except that Class B
stockholders will not be entitled to elect representatives to the Board of
Directors. There is no cumulative voting for the election of directors, nor do
any stockholders have preemptive rights. Dividend rights will be available to
stockholders of both classes of stock when, as and if declared by the Company's
Board of Directors, at the Board's discretion, out of funds legally available
therefore. Receipt of dividends by one class of stock does not necessitate
receipt by another. Upon liquidation, after the liabilities of the Company have
been discharged, Class B stockholders will have a liquidation preference of up
to $1,500 per share of Class B common stock. After the Class B stockholders'
liquidation preference is satisfied, all stockholders will share any remaining
liquidating
F-8
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1997
5. COMMON STOCK: (CONTINUED)
distributions pro rata. Outstanding shares are not subject to and do not benefit
from any sinking fund provisions. As of August 31, 1997, there were no shares of
Class A and Class B common stock outstanding.
The Company also has Class C common stock which has been issued to MedServ.
MedServ is the only eligible holder of Class C common stock in the Company. With
its Class C stock investment, MedServ has the right to appoint eleven out of not
more than twenty-one of the Directors to the Company's Board of Directors. In
addition, the Company must have a vote of two-thirds of the MedServ appointed
Directors to approve the sale or liquidation of the Company, the appointment of
management, the merger or consolidation of the Company, the decision to incur
debt over $1,000,000, the amendment of the Articles of Organization or By-laws
of the Company and all other decisions required by law.
F-9
<PAGE>
APPENDIX A
PHYSICIANS CARE FOR CONNECTICUT, INC.
Questions and Answers
The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information
appearing in this Prospectus.
<TABLE>
<C> <S>
1. Question: What is Physicians Care For Connecticut ("Physicians Care")?
ANSWER: PHYSICIANS CARE IS A CONNECTICUT CORPORATION ORGANIZED TO ESTABLISH AND
OPERATE A HEALTH MAINTENANCE ORGANIZATION WHICH IS PREDOMINANTLY
PHYSICIAN-OWNED, CONTROLLED AND DIRECTED. THE PRINCIPAL GOAL OF PHYSICIANS
CARE IS TO BECOME THE INSURER PREFERRED BY EMPLOYERS AND INDIVIDUALS TO
PROVIDE HEALTH INSURANCE PRODUCTS IN THE STATE OF CONNECTICUT. THE COMPANY
ACCEPTS THE CHALLENGE TO PASS ON TO FUTURE GENERATIONS OF PHYSICIANS THE
LEGACY THAT THE DELIVERY OF HEALTHCARE IS A MORAL ENTERPRISE AND THAT THE
PHYSICIAN-PATIENT RELATIONSHIP IS A SACRED TRUST THAT SHALL REMAIN INVIOLABLE.
IN ITS PURSUIT OF THESE MANDATES THE COMPANY WILL STRIVE TO DEFINE HIGH
STANDARDS FOR MEDICAL CARE IN THE STATE OF CONNECTICUT AND PROVIDE THAT CARE
TO ITS ENROLLEES THROUGHOUT THE STATE. FROM THESE PRECEPTS, THE COMPANY
BELIEVES THAT ITS PARTICIPATING PHYSICIANS WILL DEMONSTRATE A STRONG
COMMITMENT TO PRACTICE HIGH QUALITY, YET COST EFFECTIVE MEDICINE.
2. Question: Who will manage Physicians Care?
ANSWER: PHYSICIANS CARE INTENDS TO ENTER INTO A LONG-TERM MANAGEMENT AGREEMENT WITH
MEDSERV OF CONNECTICUT, INC., A JOINT VENTURE BETWEEN THE HARTFORD COUNTY
MEDICAL ASSOCIATION AND THE NEW HAVEN COUNTY MEDICAL ASSOCIATION, TO PROVIDE
COMPREHENSIVE MANAGEMENT SERVICES TO PHYSICIANS CARE. AS A START-UP, MEDSERV
MAY ENGAGE AN HMO MANAGEMENT CONSULTING COMPANY TO PROVIDE MANAGEMENT OR
MANAGEMENT SUPPORT AND CONSULTING SERVICES TO MEDSERV, IN WHOLE OR IN PART,
DURING THE DEVELOPMENT STAGE AND THE INITIAL OPERATIONS STAGE.
3. Question: What products will Physicians Care offer?
ANSWER: INITIALLY, THE COMPANY INTENDS TO OFFER A MODIFIED OPEN ACCESS PRODUCT,
PURSUANT TO WHICH EACH ENROLLEE WILL SELECT A CARE MANAGER WHO WILL COORDINATE
THE ENROLLEE'S MEDICAL CARE TO THE EXTENT CONSULTED BY THE ENROLLEE OR
INFORMED BY A PARTICIPATING PHYSICIAN OR COMPANY. ALTHOUGH ENROLLEES MAY
ACCESS ANY PARTICIPATING PHYSICIAN AT ANY TIME WITHOUT A CARE MANAGER'S
REFERRAL, THE COMPANY BELIEVES IT HAS STRUCTURED ITS BENEFITS DESIGN TO
ENCOURAGE ENROLLEES TO UTILIZE THEIR CARE MANAGERS TO COORDINATE REFERRALS,
FOR EXAMPLE, THROUGH THE USE OF A REDUCED OR WAIVED COPAYMENT IF A REFERRAL IS
COORDINATED THROUGH A CARE MANAGER.
4. Question: What is Physicians Care's philosophy concerning clinical decision-making?
ANSWER: PHYSICIANS CARE INTENDS TO SUPPORT PARTICIPATING PHYSICIANS' CLINICAL
DECISION-MAKING BY PROMOTING INCREASED PHYSICIAN AUTONOMY OVER CLINICAL
DECISIONS, AND BY DEVELOPING STANDARDS FOR BEST CLINICAL PRACTICES AND
CUSTOMER SERVICE, AND PROVIDING EXTENSIVE EDUCATION TO PROMOTE USE OF SUCH
STANDARDS.
5. Question: Who serves on the Board of Directors of Physicians Care?
ANSWER: THE NUMBER OF DIRECTORS SHALL BE NOT LESS THAN SEVENTEEN NOR MORE THAN TWENTY
ONE DIRECTORS.
</TABLE>
A-1
<PAGE>
<TABLE>
<C> <S>
ELEVEN OF THE DIRECTORS MUST BE APPOINTED AND REMOVED BY MEDSERV, SIX OF WHOM
MUST BE PRIMARY CARE PHYSICIANS.
SIX OF THE DIRECTORS WILL BE ELECTED BY THE CLASS A SHAREHOLDERS, EACH OF WHOM
MUST BE A PHYSICIAN AND A MEMBER OF A COUNTY MEDICAL ASSOCIATION OTHER THAN
THE HARTFORD COUNTY MEDICAL ASSOCIATION OR THE NEW HAVEN COUNTY MEDICAL
ASSOCIATION. NO MORE THAN TWO OF THESE CLASS A DIRECTORS MAY BE MEMBERS OF ANY
ONE COUNTY MEDICAL SOCIETY AT ANY GIVEN TIME; AND AT ALL TIMES, THREE OF THE
CLASS A DIRECTORS SHALL BE PRIMARY CARE PHYSICIANS.
UP TO FOUR DIRECTORS (SUCH NUMBER TO BE DETERMINED IN THE DISCRETION OF THE
BOARD OF DIRECTORS) SHALL BE REPRESENTATIVES OF AREA EMPLOYERS, HOSPITALS,
ETC. THESE DIRECTORS WILL BE ELECTED BY A MAJORITY OF THE CLASS A SHAREHOLDERS
AT THE ANNUAL MEETING OF THE BOARD OF DIRECTORS FROM A LIST OF NOMINEES
DEVELOPED BY THE BOARD OF DIRECTORS.
6. Question: Will Physicians Care seek to limit the number of physicians who will provide
medical services to its Enrollees?
ANSWER: UNLIKE OTHER HMOS WHICH MAY SEEK TO SIGNIFICANTLY RESTRICT ACCESS TO
HEALTHCARE PROVIDERS, PHYSICIANS CARE THROUGH ITS MANAGEMENT AGREEMENT WITH
MEDSERV WILL OFFER PARTICIPATION TO ALL QUALIFIED PHYSICIANS WHO ARE ELIGIBLE
PURCHASERS.
7. Question: How will Physicians Care compensate physicians for services rendered?
ANSWER: PHYSICIANS CARE CURRENTLY INTENDS TO REIMBURSE PARTICIPATING PHYSICIANS THE
LESSER OF (A) THEIR USUAL AND CUSTOMARY FEES, (B) THE FEE SET FORTH ON A FEE
SCHEDULE ADOPTED BY THE COMPANY, AN EXTRACT OF WHICH IS SET FORTH ON APPENDIX
C HERETO, OR (C) A NEGOTIATED RATE (IN EACH CASE, LESS ANY APPLICABLE
COPAYMENT; COINSURANCE, OR DEDUCTIBLES). THE COMPANY CURRENTLY INTENDS TO
WITHHOLD TWENTY PERCENT OF THE PHYSICIAN REIMBURSEMENT AMOUNT FROM THE PAYMENT
TO PARTICIPATING PHYSICIANS TO DEFRAY COSTS THAT MAY BE INCURRED. THE TWENTY
PERCENT WITHHELD FROM PHYSICIAN REIMBURSEMENT MAY BE RETURNED TO PARTICIPATING
PHYSICIANS AT THE DISCRETION OF THE BOARD OF DIRECTORS. EVENTUALLY, AS ITS
ENROLLEE MEMBERSHIP GROWS, PHYSICIANS CARE INTENDS TO EXPERIMENT WITH
INNOVATIVE REIMBURSEMENT METHODOLOGIES.
8. Question: If I want to provide medical services to Enrollees of Physicians Care, must I
purchase stock in Physicians Care?
ANSWER: YES, EVERY PHYSICIAN WHO WISHES TO PROVIDE MEDICAL SERVICES TO PHYSICIANS
CARE'S ENROLLEES MUST EXECUTE AN IPA PARTICIPATION AGREEMENT AND, AS
APPLICABLE, A PHYSICIANS CARE PRIMARY CARE PHYSICIAN ATTACHMENT OR PHYSICIANS
CARE SPECIALIST PHYSICIAN ATTACHMENT, AND IF A PRIMARY CARE PHYSICIAN MUST
AGREE TO PURCHASE ONE SHARE OF CLASS A COMMON STOCK, AND IF A SPECIALIST, MUST
AGREE TO PURCHASE ONE SHARE OF CLASS A COMMON STOCK AND ONE SHARE OF CLASS B
COMMON STOCK.
9. Question: What is the purpose of the Offering?
ANSWER: THE PURPOSE OF THE OFFERING IS TO RAISE A MINIMUM OF $8 MILLION OF GROSS
PROCEEDS TO ENABLE PHYSICIANS CARE TO ORGANIZE AND OPERATE ON A STATEWIDE
BASIS AS A HMO.
10. Who may purchase shares of stock in Physicians Care?
Question:
ANSWER: THE FOLLOWING PARTIES MAY PURCHASE STOCK IN PHYSICIANS CARE:
PHYSICIANS SATISFYING THE FOLLOWING REQUIREMENTS MAY PURCHASE STOCK IN
PHYSICIANS CARE:
- BE A PHYSICIAN LICENSED IN THE STATE IN WHICH THE PHYSICIAN PRACTICES
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
- UNLESS SUCH REQUIREMENT IS WAIVED BY THE CORPORATION'S BOARD OF
DIRECTORS IN ITS SOLE DISCRETION, SHALL HAVE AND MAINTAIN, OR SHALL HAVE
APPLIED FOR, MEMBERSHIP IN THE STATE MEDICAL ASSOCIATION AND (IF A
COUNTY MEDICAL ASSOCIATION OR EQUIVALENT EXISTS IN THE LOCATION IN WHICH
THE PHYSICIAN PRACTICES) THE APPLICABLE COUNTY MEDICAL ASSOCIATION;
PROVIDED, HOWEVER, THAT PHYSICIANS WHO HAVE APPLIED FOR AND NOT OBTAINED
MEMBERSHIP IN THE STATE AND/OR A COUNTY MEDICAL ASSOCIATION MUST IN
ORDER TO RETAIN CLASS A SHARES, MAINTAIN SUCH MEMBERSHIP(S) ONCE
APPROVED; AND PROVIDED, FURTHER, THAT IF SUCH MEMBERSHIP(S) IS/ARE
DENIED OR NOT MAINTAINED, THE PHYSICIANS' CLASS A COMMON STOCK SHALL
AUTOMATICALLY BE CONVERTED TO CLASS B COMMON STOCK.
- HAVE IN EFFECT A PARTICIPATION AGREEMENT WITH IPA
- MUST HAVE IN EFFECT A PHYSICIANS CARE PRIMARY CARE PHYSICIAN ATTACHMENT
OR A PHYSICIANS CARE SPECIALIST PHYSICIAN ATTACHMENT TO THE PARTICIPATION
AGREEMENT WITH IPA
HOSPITALS SATISFYING THE FOLLOWING REQUIREMENTS MAY PURCHASE CLASS B STOCK IN
PHYSICIANS CARE:
- BE A LICENSED ACUTE CARE HOSPITAL IN CONNECTICUT
11. If I am a member of a physician group practice, may the group practice
Question: purchase the shares of stock on my behalf?
ANSWER: PROFESSIONAL CORPORATIONS, CORPORATIONS, BUSINESS TRUSTS, TRUSTS, PARTNERSHIPS
OR LIMITED LIABILITY CORPORATIONS, WHICH ARE OWNED AND CONTROLLED, DIRECTLY OR
INDIRECTLY, BY A MAJORITY OF PHYSICIANS WHO PROVIDE MEDICAL SERVICES ON BEHALF
OF THE ENTITY (COLLECTIVELY "GROUP") MAY PURCHASE CLASS A COMMON STOCK OR
CLASS B COMMON STOCK, AS APPLICABLE, ON BEHALF OF THEIR PHYSICIANS, PROVIDED
THAT THE PHYSICIAN AFFILIATED WITH THE GROUP INDIVIDUALLY MEETS THE
QUALIFICATIONS OF STOCK OWNERSHIP. THE GROUP MUST PURCHASE NOT LESS THAN THE
NUMBER OF SHARES REQUIRED TO BE PURCHASED BY PHYSICIANS AS IF EACH PHYSICIAN
IN THE GROUP PARTICIPATED IN PHYSICIANS CARE AND PURCHASED STOCK INDIVIDUALLY.
IF A HOSPITAL IS A SHAREHOLDER IN THE GROUP, THE GROUP MUST ALSO PURCHASE
CLASS B COMMON STOCK IN SUCH AMOUNT AS IF THE HOSPITAL WERE PURCHASING THE
SHARES SEPARATELY.
12. How much does a share of stock cost?
Question:
ANSWER: PHYSICIANS MAY PURCHASE CLASS A COMMON STOCK AND CLASS B COMMON STOCK OF
PHYSICIANS CARE FOR $4,000 PER SHARE. HOWEVER, IF AN ELIGIBLE PURCHASER'S
PAYMENT AND COMPLETED SUBSCRIPTION DOCUMENTS IN FORM SUFFICIENT TO ESTABLISH
ELIGIBILITY ARE RECEIVED BY THE SUBSCRIPTION AGENT WITHIN NINETY DAYS OF THE
DATE OF THIS PROSPECTUS, THE PHYSICIAN WILL PAY A PROMPT SUBSCRIPTION PRICE OF
$3,000 PER SHARE.
HOSPITALS WISHING TO PURCHASE CLASS B COMMON STOCK MUST PURCHASE SUCH NUMBER
OF SHARES WHICH, WHEN MULTIPLIED BY THE PRICE PER SHARE, RESULTS IN A PURCHASE
PRICE OF NOT LESS THAN $250,000; PROVIDED, HOWEVER, THAT IF A LICENSED
HOSPITAL HAS LESS THAN 100 BEDS, THEN THE HOSPITAL IS REQUIRED TO PURCHASE
SUCH NUMBER OF SHARES WHICH, WHEN MULTIPLIED BY THE PRICE PER SHARE, RESULTS
IN A PURCHASE OF NOT LESS THAN $100,000. HOWEVER, IF A HOSPITAL'S PAYMENT AND
COMPLETED SUBSCRIPTION DOCUMENTS IN FORM SUFFICIENT TO ESTABLISH ELIGIBILITY
ARE RECEIVED BY THE SUBSCRIPTION AGENT WITHIN NINETY DAYS OF THE DATE OF THIS
PROSPECTUS, THE HOSPITAL WILL PAY A PROMPT SUBSCRIPTION PRICE OF $3,000 PER
SHARE.
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
13. If I am a Primary Care Physician, how many shares of stock must I purchase?
Question:
ANSWER: PRIMARY CARE PHYSICIANS MUST PURCHASE ONE SHARE OF CLASS A COMMON STOCK.
PRIMARY CARE PHYSICIANS MAY, AT THEIR ELECTION, PURCHASE SHARES OF CLASS B
COMMON STOCK. NO PHYSICIAN MAY HOLD MORE THAN ONE SHARE OF CLASS A COMMON
STOCK.
14. If I am a Specialist, how many shares of stock must I purchase?
Question:
ANSWER: SPECIALISTS MUST PURCHASE ONE SHARE OF CLASS A COMMON STOCK AND AT LEAST ONE
SHARE OF CLASS B COMMON STOCK. SPECIALISTS MAY, AT THEIR ELECTION, PURCHASE
ADDITIONAL SHARES OF CLASS B COMMON STOCK. NO PHYSICIAN MAY HOLD MORE THAN ONE
SHARE OF CLASS A COMMON STOCK.
15. What is the difference between Class A Common Stock and Class B Common Stock?
Question:
ANSWER: CLASS A SHAREHOLDERS ARE ENTITLED TO ELECT SIX OF THE DIRECTORS OF PHYSICIANS
CARE. CLASS B SHAREHOLDERS ARE NOT ENTITLED TO ELECT DIRECTORS TO THE BOARD OF
PHYSICIANS CARE. HOWEVER, CLASS B SHAREHOLDERS HAVE A PREFERENCE UPON
LIQUIDATION OF PHYSICIANS CARE. THIS MEANS THAT IF THERE IS A LIQUIDATION OF
PHYSICIANS CARE, AFTER THE LIABILITIES OF PHYSICIANS CARE HAVE BEEN
DISCHARGED, CLASS B SHAREHOLDERS WILL HAVE A LIQUIDATION PREFERENCE EQUAL TO
$1,500 PER SHARE OF CLASS B COMMON STOCK. AFTER THE CLASS B SHAREHOLDERS'
LIQUIDATION PREFERENCE IS SATISFIED, ALL SHAREHOLDERS WILL SHARE ANY REMAINING
DISTRIBUTIONS FROM PHYSICIANS CARE ON A PRO RATA BASIS.
16. May a hospital purchase shares of stock?
Question:
ANSWER: YES, A HOSPITAL MAY PURCHASE CLASS B COMMON STOCK. HOSPITALS MUST PURCHASE
SUCH NUMBER OF SHARES WHICH, WHEN MULTIPLIED BY THE PRICE PER SHARE, RESULTS
IN A PURCHASE PRICE OF NOT LESS THAN $250,000; PROVIDED, HOWEVER, THAT IF A
LICENSED HOSPITAL HAS LESS THAN 100 BEDS, THEN SUCH HOSPITAL IS REQUIRED TO
PURCHASE SUCH NUMBER OF SHARES WHICH, WHEN MULTIPLIED BY THE PRICE PER SHARE,
RESULTS IN A PURCHASE OF NOT LESS THAN $100,000.
17. Are there any other classes of Common Stock of Physicians Care?
Question:
ANSWER: YES, THERE IS CLASS C COMMON STOCK WHICH MAY BE HELD ONLY BY MEDSERV.
PRESENTLY, MEDSERV OWNS ALL OF THE ISSUED AND OUTSTANDING CLASS C SHARES.
CLASS C COMMON STOCK PROVIDES MEDSERV WITH THE RIGHT TO ELECT ELEVEN DIRECTORS
TO THE BOARD OF DIRECTORS. IN ADDITION, PHYSICIANS CARE MUST HAVE A VOTE OF
TWO-THIRDS IN INTEREST OF THE CLASS C SHARES TO APPROVE ANY OF THE FOLLOWING
ACTIONS OF PHYSICIANS CARE:
- THE SALE OR LIQUIDATION OF THE COMPANY;
- THE MERGER OR CONSOLIDATION OF THE COMPANY;
- THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF THE COMPANY;
- ALL OTHER MATTERS REQUIRED BY LAW TO BE SUBMITTED TO THE SHAREHOLDERS
FOR A VOTE.
18. What if Physicians Care does not raise enough money from the Offering to start
Question: the HMO?
ANSWER: THIS OFFERING IS SUBJECT TO THE REQUIREMENT THAT PHYSICIANS CARE MUST RECEIVE
SUBSCRIPTIONS TO PURCHASE NOT LESS THAN $8 MILLION OF COMMON STOCK. IF
PHYSICIANS CARE DOES NOT RAISE $8 MILLION IN GROSS PROCEEDS FROM THE OFFERING,
THE PURCHASE PRICE OF ALL SHARES WILL BE REFUNDED, PLUS INTEREST THEREON,
MINUS $450 DOLLARS PER SHARE, WHICH WILL BE RETAINED BY PHYSICIANS CARE TO
OFFSET THE COSTS ASSOCIATED WITH THE OFFERING.
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
19. What happens if I no longer meet the qualifications for Class A Common Stock?
Question:
ANSWER: IF YOU NO LONGER MEET THE QUALIFICATIONS NECESSARY FOR CLASS A SHAREHOLDER
STATUS OR IF YOU TRANSFER YOUR STOCK TO AN INDIVIDUAL WHO DOES NOT MEET THE
QUALIFICATIONS FOR CLASS A SHAREHOLDER STATUS, YOU MUST IMMEDIATELY SURRENDER
YOUR CLASS A COMMON STOCK AND PHYSICIANS CARE WILL CANCEL THE SHARES AND ISSUE
AN EQUAL NUMBER OF CLASS B COMMON STOCK.
20. Can I sell my stock to other interested investors?
Question:
ANSWER: IF YOU RECEIVE A BONA FIDE OFFER TO PURCHASE YOUR SHARES, YOU MUST FIRST OFFER
PHYSICIANS CARE A RIGHT OF FIRST OPPORTUNITY TO PURCHASE YOUR SHARES AT AN
AMOUNT EQUAL TO THE BONA FIDE OFFER. IF PHYSICIANS CARE DECLINES AND/OR FAILS
TO PURCHASE THE SHARES WITHIN THIRTY DAYS, YOU MAY SELL THE SHARES TO THE
INTERESTED INVESTOR.
21. If I die, become disabled or retire, what happens to my stock?
Question:
ANSWER: AT ANY TIME AFTER THE FIFTH ANNIVERSARY OF THE ISSUANCE DATE OF A CLASS A
STOCKHOLDER'S SHARES OF STOCK, PHYSICIANS CARE AGREES, SUBJECT TO CERTAIN
CONDITIONS SET FORTH IN THE PROSPECTUS, TO REDEEM ALL SHARES OF STOCK
(INCLUDING CLASS A AND CLASS B SHARES) OF A CLASS A STOCKHOLDER WISHING TO
SELL OR TRANSFER HIS/HER SHARES UPON THE OCCURRENCE OF ONE OF THE FOLLOWING
EVENTS: (I) THE DEATH OR PERMANENT DISABILITY OF THE PHYSICIAN; OR (II) THE
CESSATION OF THE PHYSICIAN'S PROVISION OF MEDICAL SERVICES IN CONNECTICUT
(I.E., RETIREMENT OR RELOCATION); PROVIDED THAT PHYSICIANS WHO ACQUIRE SHARES
OF STOCK THROUGH THE INITIAL OFFERING OF PHYSICIAN CARE'S STOCK AND ARE 55
YEARS OR OLDER ON THE DATE OF RECEIPT OF AN EXECUTED SUBSCRIPTION AGREEMENT
SHALL BE ELIGIBLE TO REDEEM THEIR STOCK AT ANY TIME AFTER THE THIRD
ANNIVERSARY OF THE ISSUANCE OF THE STOCK. SUBJECT TO CERTAIN CONDITIONS SET
FORTH IN THE PROSPECTUS THE COMPANY SHALL PURCHASE SUCH SHARES OF STOCK AT THE
GREATER OF (I) THE THEN CURRENT NET BOOK VALUE OF SUCH SHARES DETERMINED
PURSUANT TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") AS OF THE MOST
RECENTLY COMPLETED FISCAL QUARTER OF PHYSICIANS CARE, OR (II) THE ORIGINAL
ISSUANCE PRICE OF SUCH SHARES.
22. What will Physicians Care do with its profits?
Question:
ANSWER: WHILE PHYSICIANS CARE REQUIRES PROFITS TO MAINTAIN A VIABLE BUSINESS,
PHYSICIANS CARE INTENDS TO REINVEST ITS PROFITS IN THE COMPANY.
23. Will this stock generate dividends?
Question:
ANSWER: PHYSICIANS CARE DOES NOT ANTICIPATE PAYING DIVIDENDS TO SHAREHOLDERS FOR THE
FORESEEABLE FUTURE. IT IS ANTICIPATED THAT PROFITS FROM OPERATIONS WILL BE
REINVESTED IN THE COMPANY TO PROVIDE BETTER BENEFITS FOR PATIENTS, MORE
COMPETITIVE PRICING, IMPROVED REIMBURSEMENT LEVELS FOR PROVIDERS AND FOR OTHER
CORPORATE PURPOSES.
24. How will stock be allocated in the event of an oversubscription?
Question:
ANSWER: PHYSICIANS CARE REGISTERED 3,000 SHARES OF CLASS A COMMON STOCK AND 3,000
SHARES OF CLASS B COMMON STOCK WHICH CAN BE ISSUED IN THIS OFFERING. BECAUSE
APPROXIMATELY 9,000 PHYSICIANS ARE CURRENTLY LICENSED TO PRACTICE MEDICINE IN
THE STATE OF CONNECTICUT, THE POTENTIAL FOR A TOTAL SUBSCRIPTION IN EXCESS OF
THESE AMOUNTS EXISTS. IF ORDERS FOR MORE THAN 3,000 SHARES OF CLASS A COMMON
STOCK ARE RECEIVED, THE ORDERS WILL BE FILLED ON A FIRST-COME, FIRST-SERVED
BASIS. IF ORDERS FOR MORE THAN 3,000 SHARES OF CLASS B COMMON STOCK ARE
RECEIVED, THE COMPANY MAY LIMIT THE NUMBER OF SHARES OF CLASS B COMMON STOCK A
PARTICULAR ELIGIBLE PURCHASER MAY PURCHASE.
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<C> <S>
25. Will interest be paid on my subscription during the time the funds are held in
Question: escrow?
ANSWER: IN THE EVENT THE SUM OF $8 MILLION IN SUBSCRIPTIONS IS NOT GENERATED FROM THE
OFFERING, THE PURCHASE PRICE OF BOTH CLASS A AND CLASS B SHARES, PLUS INTEREST
THEREON, SHALL BE REFUNDED, MINUS $450 DOLLARS PER SHARE, WHICH SHALL BE
RETAINED BY THE COMPANY TO OFFSET THE COSTS ASSOCIATED WITH THE OFFERING. IN
THE EVENT $8 MILLION OR MORE IN SUBSCRIPTIONS ARE GENERATED AND A CLOSING
OCCURS, ANY INTEREST ON ESCROWED FUNDS WILL BE DISTRIBUTED TO THE COMPANY.
26. What do I need to do to purchase shares of Common Stock in Physicians Care?
Question:
ANSWER: IN ORDER TO PURCHASE COMMON STOCK IN PHYSICIANS CARE, YOU MUST RETURN THE
FOLLOWING DOCUMENTS TO THE SUBSCRIPTION AGENT:
- A SIGNED SUBSCRIPTION AGREEMENT
- IF YOU HAVE NOT ALREADY DONE SO, A COMPLETED AND EXECUTED IPA
PARTICIPATION AGREEMENT WITH A SEPARATE CHECK IN THE AMOUNT OF $200 MADE
PAYABLE TO MEDSERV IPA;
- A PHYSICIANS CARE PRIMARY CARE PHYSICIAN ATTACHMENT OR A PHYSICIANS CARE
SPECIALIST PHYSICIAN ATTACHMENT
- A CHECK OR MONEY ORDER MADE PAYABLE TO STATE STREET BANK & TRUST COMPANY
AS ESCROW AGENT EQUALING THE PURCHASE PRICE OF THE SHARES YOU WOULD LIKE
TO PURCHASE.
</TABLE>
<TABLE>
<C> <S>
27. How long do I have to purchase stock in Physicians Care?
Question:
ANSWER: YOU WILL HAVE ONE HUNDRED AND EIGHTY DAYS FROM THE DATE OF THIS PROSPECTUS TO
PURCHASE SHARES OF STOCK IN PHYSICIANS CARE. THE BOARD OF DIRECTORS MAY, IN
ITS DISCRETION, EXTEND THE OFFERING FOR AN ADDITIONAL SIXTY DAYS. HOWEVER, IF
YOU WOULD LIKE TO TAKE ADVANTAGE OF THE PROMPT PAYMENT DISCOUNT DESCRIBED IN
THE PROSPECTUS, YOU MUST RETURN YOUR PAYMENT AND COMPLETED SUBSCRIPTION
DOCUMENTS IN FORM SUFFICIENT TO ESTABLISH ELIGIBILITY TO THE SUBSCRIPTION
AGENT WITHIN NINETY DAYS OF THE DATE OF THIS PROSPECTUS.
28. Can I purchase shares with a check drawn on Individual Retirement Accounts
Question: ("IRAs"), Keough accounts, mutual fund accounts, cash management accounts or
other types of retirement or investment accounts?
ANSWER: NO.
29. How can I pay for my Common Stock?
Question:
ANSWER: ONLY CHECKS AND MONEY ORDERS WILL BE ACCEPTED AS PAYMENT. CASH, CREDIT CARD
NUMBERS AND OTHER FORMS OF PAYMENT SHOULD NOT BE SENT AND WILL NOT BE
ACCEPTED. THE CHECK OR MONEY ORDER MUST BE PAYABLE IN U.S. DOLLARS AND DRAWN
ON A BANK IN THE UNITED STATES. THE CHECK MUST BE HONORED UPON INITIAL
DEPOSIT; NO ATTEMPT WILL BE MADE TO REDEPOSIT ANY DISHONORED CHECK.
</TABLE>
A-6
<PAGE>
APPENDIX B
HOW TO SUBSCRIBE IN THIS OFFERING
GENERAL
Accompanying this Prospectus are the following documents:
(1) A Subscription Agreement;
(2) A IPA Participation Agreement and the Physicians Care Primary Care
Physician Attachment or Physicians Care Specialist Physician Attachment;
(3) An envelope for returning completed subscriptions through the U.S.
Postal Service.
To be eligible to subscribe for a share of Class A Common Stock and Class B
Common Stock in the Offering, the subscriber should return the enclosed postage
paid envelope with (i) a check or money order payable to State Street Bank &
Trust Company, as Escrow Agent in the amount of the Purchase Price, (ii) the
Subscription Agreement, properly completed and signed, (iii) the executed IPA
Participation Agreement, including a check made payable to MedServ IPA, Inc. to
cover the $200 administration fee relating thereto if such amount has not been
paid previously, and (iv) the Physicians Care Primary Care Physician Attachment
or Physicians Care Specialist Physician Attachment, as applicable. The checks or
money orders, the executed Subscription Agreement, the executed IPA
Participation Agreement and Physicians Care Primary Care Physician Attachment or
Physicians Care Specialist Physician Attachment are referred to as the
"Subscription Documents." Subscriptions may be limited and will be accepted on a
first come first served basis. Subscription Documents must be received by the
Subscription Agent no later than the last day of the Offering Period (the
"Expiration Time"). Subscription Documents are considered "received" on the date
they are delivered to the Subscription Agent.
COMPLETION AND MAILING OF SUBSCRIPTION AGREEMENTS
A subscription will be rejected by the Subscription Agent unless the
Subscription Documents are (i) fully and properly completed, signed and received
by the Company's Subscription Agent, and (ii) the Subscription Agent has
received a check or money order for good funds in the amount of the Purchase
Price payable to "State Street Bank & Trust Company, as Escrow Agent" and, if
applicable, a separate check or money order for good funds in the amount of $200
made payable to "MedServ IPA, Inc." prior to the Expiration Time at:
c/o Newbury Piret & Co., Inc.
One Boston Place
26th Floor, Attn: Physicians Care for Connecticut, Inc.
Boston, MA 02108
The Subscription Agent will promptly forward all checks and money orders
made payable to "State Street Bank & Trust Company, as Escrow Agent" for
subscriptions that have not been rejected to the Escrow Agent for deposit into
an escrow account (the "Escrow Account") maintained with the Escrow Agent. See
"Escrow Arrangements."
Subscriptions will be rejected by the Subscription Agent and returned to the
subscriber if (i) the Subscription Agreement is improperly completed or
unsigned, (ii) the Subscription Agreement is sent without accompanying check or
money order in good funds in the amount of the Purchase Price, (iii) the
Subscription Agreement accompanied by a check or money order for the Purchase
Price in good funds is not received by the Subscription Agent by the Expiration
Time, (iv) the proposed subscriber does not complete and execute the IPA
Participation Agreement and the Physicians Care Primary Care Physicians
Attachment or Physicians Care Specialist Physician Attachment and, if
applicable, include a check or money order for good funds in the amount of $200
made payable to "MedServ IPA," (v) the proposed subscriber does not meet the
qualification of an Eligible Purchaser, (vi) all shares of Class A Common
B-1
<PAGE>
Stock offered in the Offering have been fully subscribed, or (vii) the Offering
has been terminated as described below under--"Termination of Offering."
METHOD OF PAYMENT
Only checks and money orders will be accepted as payment. Cash, credit card
numbers and other forms of payment should not be sent and will not be accepted.
The check or money order must be payable in U.S. dollars and drawn on a bank in
the United States. The check must be honored upon initial deposit; no attempt
will be made to redeposit any dishonored check.
ACCEPTED SUBSCRIPTIONS
Unless the Offering is terminated, subscriptions meeting the subscription
requirements discussed above which are received by the Subscription Agent will
be accepted by the Company, subject to qualification of the Subscriber as an
Eligible Purchaser. The Company will cause the Subscription Agent to forward to
each subscriber whose subscription has been accepted promptly following the
closing of the Offering a certificate representing the number of shares of Class
A Common Stock and, if applicable, Class B Common Stock subscribed and for which
payment has been made.
No Subscription Agreement will be formally accepted by the Company until the
Purchase Price of all subscribed Class A Common Stock and Class B Common Stock
totals $8 million. Therefore, subscribers will not be notified that their
Subscription Agreements have been accepted, and should not expect to receive
certificates representing their shares of Class A Common Stock or Class B Common
Stock until some time after the Expiration Time. Pending the Initial Closing of
the Offering, all monies, less $450 per subscribed share, will be held in the
Escrow Account maintained with the Escrow Agent. See "Escrow Arrangements"
below. Thereafter, subscriptions will be accepted by the Company and additional
Closings will occur upon receipt by the Company of subscriptions in increments
of $1,500,000, with a final Closing to occur 180 days after the date of this
Prospectus, subject to a sixty day extension at the discretion of the Board of
Directors.
TERMINATION OF OFFERING
The Offering may be terminated by the Company at any time in its absolute
discretion. If the Offering is terminated, all amounts received from subscribers
whose subscriptions were not rejected by the Subscription Agent and whose funds
were deposited into the Escrow Account will be promptly refunded with interest
less $450 per subscribed share no later than thirty days after the later of the
date of termination of the Offering or the Expiration Time. Interest on such
funds will be paid as described under "Escrow Arrangements."
RETURNED SUBSCRIPTIONS
If a subscription is rejected by the Subscription Agent because (i) the
Subscription Agreement was improperly completed or unsigned, (ii) the
Subscription Agreement was sent without an accompanying check or money order in
good funds in the amount of the Purchase Price, (iii) the Subscription Agreement
accompanied by a separate check or money order in good funds in the amount of
the Purchase Price was not received by the Subscription Agent by the Expiration
Time, (iv) the proposed Subscriber does not complete and execute the IPA
Participation Agreement and the Physicians Care Primary Care Physician
Attachment or Physicians Care Specialist Physician Attachment and, if
applicable, include a check or money order for good funds in the amount of $200
made payable to "MedServ IPA, Inc." (v) the proposed purchaser does not meet the
qualifications of an Eligible Purchaser, or (vi) the Offering has been fully
subscribed, then the Escrow Agent will promptly return to each subscriber the
accompanying check or money order. No interest will be paid on checks or money
orders that have not been deposited into the Escrow Account or that have been
deposited, but are not in good funds.
B-2
<PAGE>
APPENDIX C
SAMPLE PHYSICIAN FEE SCHEDULE
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
ALLERGY & IMMUNOLOGY
70210 RAD EXAM SINUSES PARANASAL LESS
THAN 3 VIEWS $ 54.47
70220 RAD EXAM SINUSES PARANASAL COMPLT
MINI 3 VIEWS $ 72.83
70486 CAT MAXILLOFACIAL AREA; WO
CONTRAST $ 398.41
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
85023 BLD CT; HG/PLATELET CT AUTO &
MANUAL WBC $ 24.48
85031 BLD CT; HG MANUAL COMPLT CBC $ 12.85
88161 CYTOPATH SMEARS OTHR SOURCE;
PREP/SCREEN/INTERPT $ 56.30
89190 NASAL SMEAR EOSINOPHILS $ 10.40
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
92567 TYMPANOMETRY $ 34.27
94010 SPIROMETRY W/RECRD-TOT & TIMED
VC-EXPIR FLO RATE $ 55.08
94060 BRONCHOSPSM EVAL: SPIROM PRE &
POST BRONCHODILAT $ 102.20
95004 PERQ W/ALLERG EXTRACT-IMMED
REACT-SPEC # TEST $ 6.12
95015 INTRACUT SEQUENT/INCREM-IMMED
REACT-SPEC # TESTS $ 16.52
95024 INTRACUT W/ALLERG EXTRCT-IMMED
REACT-SPEC # TEST $ 9.18
95070 INHALA BRONCHIAL CHALLENGE;
W/HISTAMINE-COMPOUND $ 134.03
95115 PROF SERV ALLERG IMMUNOTX NOT INCL
EXTRCT; 1 INJ $ 23.87
95117 PROF SERV ALLERG IMMUNOTX WO
EXTRACT; MX INJ $ 30.60
95125 PROF SERV ALLERG IMMUNOTX INCL
EXTRACT; MX INJ $ 28.76
95145 PRO SERV SUPERVS/PROVIS-IMMUNOTX;
1 VENM-MX VIAL $ 26.32
CARDIOVASCULAR & THORACIC SURGERY
32480 REMOV LUNG OTHER THAN TOT
PNEUMONECTOMY; 1 LOBE $2,657.51
32500 REMOV LUNG NOT TOT PNEUMONECT;
WEDGE RESECT 1/MX $2,079.88
33120 EXC INTRACARDIAC TUMOR RESECT W/CP
BYPASS $4,043.38
33246 IMPLNT/REPLAC CARDIOVERT-DEFIB;
W/INSRT PULS GEN $3,088.76
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
33405 REPLAC AORTIC VALV W/CP BYPASS;
W/PROSTH VALV $4,589.59
33430 REPLAC MITRAL VALV W/
CARDIOPULMONARY BYPASS $5,025.13
33510 CORON ART BYPASS-VEIN ONLY; 1
CORON VENOUS GFT $4,144.06
33511 CORON ART BYPASS-VEIN ONLY; 2
CORON VENOUS GFT $4,549.61
33512 CORON ART BYPASS-VEIN ONLY; 3
CORON VENOUS GFT $4,954.45
33513 CORON ART BYPASS-VEIN ONLY; 4
CORON VENOUS GFT $5,359.28
33514 CORON ART BYPASS-VEIN ONLY; 5
CORON VENOUS GFT $5,762.69
33516 CORON ART BYPASS-VEIN ONLY; 6/MORE
VENOUS GFT $6,166.82
33533 CORONARY ART BYPASS W/ART GFT; 1
ART GFT $4,270.43
33670 REPR COMPLT ATRIOVENT CANAL W/WO
PROSTH VALV $5,521.36
33681 CLO VENTRICULAR SEPTAL DEFECT W/WO
PATCH $4,823.78
33750 SHUNT; SUBCLAVIAN PULM ART $3,322.96
33851 EXC COARCTAT AORTA; REPR W/LT
SUBCLAV/PROSTH MAT $4,059.09
33935 HEART-LUNG TRANSPL W/ RECIPIENT
CARDIECT-PNEUMONE $10,567.20
35301 THROMBOENDARTERECT;
CAROTID/SUBCLAV BY NECK INCS $2,503.28
35646 BYPASS GFT W/OTHER THAN VEIN;
AORTOFEM/BIFEM $3,749.21
35656 BYPASS GFT W/OTHER THAN VEIN;
FEMORAL-POP $2,838.15
35820 EXPLOR POSTOP HEMORR
THROMBOSIS/INFEC; CHEST $1,498.69
36200 INTRO CATH AORTA $ 430.54
36216 SELECT CATH PLCMT ART SYST; INIT
2ND ORDER THORA $ 631.18
CARDIOVASCULAR DISEASES
33208 INSRT/REPLAC PERM PACEMAKER;
ATRIAL & VENTRICULR $1,308.05
36200 INTRO CATH AORTA $ 430.54
36215 SELECT CATH PLCMT ART SYST; EA 1ST
ORDER THORAC $ 549.07
36216 SELECT CATH PLCMT ART SYST; INIT
2ND ORDER THORA $ 631.18
78461 MYOCARDIAL PERFUS IMAG; MX STUDIES
REST/STRESS $ 406.37
78464 MYOCARDIAL PERFUS IMAG;
TOMOGRAPHIC SNGL STUDY $ 539.17
78465 MYOCARDIAL PERFUS IMAG;
TOMOGRAPHIC MX STUDIES $ 865.98
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
78473 CARDIAC BLD POOL IMAG GATED
EQUILIB; MX STUDIES $ 647.50
78483 CARDIAC BLD POOL IMAG 1ST PASS;
MX-REST & STRESS $ 623.63
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
80061 LIPID PANEL $ 26.93
83718 LIPOPROTEIN DIRECT MEASUR; HIGH
DENSITY CHOL $ 20.81
92960 CARDIOVERSION ELECT ELEC
CONVERSION ARRHY EXT $ 262.55
92982 PERQ TRNSLUMNL CORON BALOON
ANGIOPLSTY; 1 VESSEL $1,606.50
92984 PERQ TRNSLUMNL CORON BALOON
ANGIOPLSTY; EA ADD $ 441.25
93000 ECG-ROUTINE W/12 LEADS; W/ INTERPT
& REPORT $ 48.96
93010 ECG-ROUTINE W/12 LEADS; INTERPT &
REPORT ONLY $ 20.81
93015 CV STRESS TEST W/TREADMILL-PHARM;
INTRPT & REPRT $ 201.96
93018 CV STRESS TEST W/TREADMILL;
INTERPT & REPRT ONLY $ 43.45
93224 ECG-24 HR W/SUPERIMPOSIT SCAN;
REPRT-REVW-INTRPT $ 291.31
93227 ECG-24 HR W/SUPERIMPOSIT SCAN; MD
REVIEW & REPRT $ 76.50
93307 ECHO REAL-TIME W/DOCUMEN W/WO
M-MODE; COMPLT $ 364.75
93320 DOPPLER ECHO WAVE W/ SPECTRAL
DISPLY; COMPLT $ 163.40
93325 DOPPLER COLOR FLOW VELOCITY
MAPPING $ 190.94
93350 ECHO DURING REST & CV STRESS
INTERPT & REPORT $ 284.58
93503 INSRT & PLCMT FLO DIREC
CATH-MONITOR PURPOSES $ 345.17
93505 ENDOMYOCARDIAL BX $ 597.31
93545 INJ PROC-CARDIAC CATH; SELECT
CORONARY ANGIO $ 102.20
COLON AND RECTAL SURGERY
44120 ENTERECTOMY RESECT SM INTESTINE;
W/ANASTOMOSIS $1,758.58
44140 COLECTOMY PART; W/ANASTOM $2,194.84
44141 COLECTOMY PART; W/SKIN LEVEL
CECOSTOMY/ COLOSTOMY $2,268.38
44145 COLECTOMY PART; W/ COLOPROCTOSTOMY $2,664.65
44150 COLECTOMY-TOT ABD-WO PROCTECTOMY;
W/ILEOSTOMY $2,645.37
44620 CLO ENTEROSTOMY LG/SM INTEST $1,205.23
45110 PROCTECTOMY; COMPLT W/ COLOSTOMY 1
OR 2 STAGES $2,958.10
45300 PROCTOSIGMOIDOSCOPY RIGID; DX W/WO
COLLEC SPECMN $ 94.25
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
45330 SIGMOIDOSCOPY FLEX; DX W/ WO
COLLEC SPECMN $ 164.93
45378 COLONOSCOPY FLEX-PROX SPLEN FLEX;
DX (SEP PRO) $ 586.91
45380 COLONOSCOPY FLEX-PROX SPLEN FLEX;
W/BX 1/MX $ 656.88
45383 COLONOSCOPY FLEX; W/ABLAT LES NOT
AMENABLE-SNARE $ 877.51
45385 COLONOSCOPY FLEX; W/REMOV
TUMOR/LES BY SNARE $ 895.36
45505 PROCTOPLASTY; PROLAPSE MUCOS
MEMBRN $ 932.48
46060 I&D ISCHIORECTAL/ INTRAMURAL
ABSCESS W/ FISTULECT $ 821.10
46200 FISSURECTOMY W/WO SPHINCTEROTOMY $ 497.66
46221 HEMORRHOIDECTOMY BY SIMPL LIG $ 155.65
46255 HEMORRHOIDECTOMY INT & EXT SIMPL $ 751.13
46260 HEMORRHOIDECTOMY INT & EXT
COMPLX/EXTEN $1,001.03
46261 HEMORRHOIDECTOMY COMPLX/EXTEN; W/
FISSURECTOMY $1,112.41
46262 HEMORRHOIDECTOMY COMPLX/EXTEN; W/
FISTULECTOMY $1,150.97
46600 ANOSCOPY; DX W/WO COLLEC SPECMN
(SEPART PROC) $ 57.83
46700 ANOPLASTY PLASTIC OR STRICT; ADULT $ 983.89
52281 CYSTOURETHROSCOPY W/ CALIBRAT &/OR
DILAT URETHRAL $ 381.28
DERMATOLOGY
10040 ACNE SURG $ 122.40
11100 BX SKIN/SUBQ TISS/MUCOUS MEMB (SEP
PRO); 1 LES $ 110.98
11101 BX SKIN/SUBQ TISS/MUCOUS MEMB (SEP
PRO); EA ADD $ 58.75
11200 REMOV SKIN TAGS ANY AREA; TO &
INCL 15 LES $ 94.66
11400 EXC BEN LES TRUNK/ARMS/ LEGS; 0.5
CM/LESS $ 117.50
11401 EXC BEN LES TRUNK/ARMS/ LEGS; 0.6
TO 1.0 CM $ 163.20
11402 EXC BEN LES TRUNK/ARMS/ LEGS; 1.1
TO 2.0 CM $ 207.26
11420 EXC BEN LES SCALP/HANDS/FT/ GENIT;
0.5 CM/LESS $ 128.93
11421 EXC BEN LES SCALP/HANDS/FT/ GENIT;
0.6 TO 1.0 CM $ 184.42
11440 EXC BEN LES FACE/EARS/NOSE/ LIPS;
0.5 CM/LESS $ 150.96
11441 EXC BEN LES FACE/EARS/NOSE/ LIPS;
0.6 TO 1.0 CM $ 203.18
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
11602 EXC MALIG LES TRUNK/ARMS/ LEGS;
1.1 TO 2.0 CM $ 328.03
11641 EXC MALIG LES FACE/EARS/
NOSE/LIPS; 0.6 TO 1.0 CM $ 380.26
11642 EXC MALIG LES FACE/EARS/
NOSE/LIPS; 1.1 TO 2.0 CM $ 463.49
11900 INJ INTRALES; UP TO & INCL 7 LES $ 64.46
17000 DESTRCT-ANY METHD-BEN FACE LES
W/ANES; 1 LES $ 82.42
17001 DESTRCT-ANY METHD-BEN FACE LES
W/ANES; 2ND & 3RD $ 32.64
17002 DESTRCT-ANY METHD-BEN FACE LES
W/ANES; >3 EA ADD $ 24.48
17100 DESTRCT-ANY METHD- LES NOT FACE
W/ANES; 1 LES $ 75.89
17101 DESTRCT-ANY METHD- LES NOT FACE
W/ANES; 2ND LES $ 25.30
17102 DESTRCT-ANY METHD-LES NOT FACE
W/ANES; > 2 TO 15 $ 16.32
17104 DESTRCT-ANY METHD-LES NOT FACE
W/ANES; 15/MORE $ 170.54
17110 DESTRCT WARTS/MOLLUSCUM
CONTAG/MILIA TO 15 LES $ 79.97
17304 CHEMOSURG (MOH'S TECH); 1ST STAGE
UP TO 5 SPECMN $ 973.49
87101 CULTURE FUNGI ISOLATION; SKIN $ 22.03
87220 TISS EXAM FUNGI $ 12.85
88304 LEVEL III-SURG PATH GROSS/ MICRO
EXAM $ 53.24
88305 LEVEL IV-SURG PATH GROSS/ MICRO
EXAM $ 113.83
88307 LEVEL V-SURG PATH GROSS/ MICRO
EXAM $ 197.68
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
96545 PROVISION CHEMOTX AGENT $ 46.51
96900 ACTINOTHERAPY $ 25.09
96910 PHOTOCHEMOTX; TAR & UV B/
PETROLATUM & UV B $ 36.11
96912 PHOTOCHEMOTHERAPY; PSORALENS &
ULTRAVIOLET A $ 41.62
EMERGENCY MEDICINE
10120 INCS & REMOV F B SUBQ TISS; SIMPL $ 138.72
11750 EXC NAIL/MATRIX PART/ COMPLT PERM
REMOV $ 322.32
12001 SIMPL REPR SCLP/AX/GENIT/
TRUNK/EXTREM; 2.5/LESS $ 185.23
12002 SIMPL REPR SCLP/AX/GENIT/
TRUNK/EXTREM; 2.6-7.5CM $ 217.87
12011 SIMPL REPR FACE/EARS/NOSE/ MUCOUS
MEMB; 2.5/LESS $ 204.82
12013 SIMPL REPR FACE/EARS/NOSE/ MUCOUS
MEMB; 2.6-5.0 $ 248.88
12032 LAYER CLO SCLP/AX/TRUNK/ EXTREM;
2.6 TO 7.5 CM $ 291.31
12051 LAYER CLO FACE/EARS/NOSE/ LIPS;
2.5 CM/LESS $ 288.05
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
12052 LAYER CLO FACE/EARS/NOSE/ LIPS;
2.6 TO 5.0 CM $ 353.33
13300 REPR UNUSUAL COMPLIC OVER 7.5 CM
ANY AREA $ 953.09
25600 CLO TX DIST RAD FX W/WO FX ULNA
STYLOID; WO MANI $ 468.38
31500 INTUBATION ENDOTRACHEAL ER PROC $ 294.58
36000 INTRO NEEDLE/ INTRACATHETER VEIN $ 32.84
62270 SPINAL PUNCT LUMBAR DX $ 155.04
63030 LAMINOT W/DECOMP NERV ROOT; 1
INTERSPACE LUMBAR $2,399.86
64450 INJ ANES AGENT; OTHER PERIPHERAL
NERV/BRANCH $ 150.96
90780 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; TO 1 HR $ 69.77
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
94656 VENTILATION ASSIST & MGMT; 1 ST DA $ 151.16
94760 NONINVASIVE EAR/PULSE OXIMETRY-O2
SAT; 1 DETERM $ 16.52
94770 CO2 EXPIRED GAS DETERM-INFRARED
ANALY $ 40.39
ENDOCRINOLOGY
78006 THYROID IMAGING W/UPTAKE; SNGL
DETERM $ 193.39
78010 THYROID IMAGING; ONLY $ 148.72
78018 THYROID CARCINOMA METASTASES
IMAGING; WHOLE BODY $ 424.73
78990 PROVISION DX RADIONUCLIDE $ 44.68
79000 RADIONUCLIDE THERAP HYPERTHYROID;
INIT W/EVAL PT $ 330.48
82947 GLU; QUAN $ 11.63
83036 HGB; GLYCATED $ 16.52
84436 THYROXINE; TOT $ 15.30
84443 THYROID STIM HORMONE $ 33.66
84479 TRIIODOTHYRONINE; RESIN UPTAKE $ 16.52
91000 ESOPH INTUBATION &
COLLECT-CYTOLOGY W/PREP (SEP) $ 88.74
94010 SPIROMETRY W/RECRD-TOT & TIMED
VC-EXPIR FLO RATE $ 55.08
94664 AEROSOL/VAPOR INHALA; INIT DEMO &/
EVAL $ 33.05
96410 CHEMOTX ADMIN IV; INFUSION TECH
UP-1 HR $ 95.47
96530 REFILLING & MAINTENANCE IMPLNT
PUMP/RESERVOIR $ 66.10
99000 HANDL &/OR CONVEY SPECMN-TRANSF
OFFIC TO LAB $ 20.81
99050 SERV REQUEST AFTR OFFIC HRS ADD TO
BASIC SERV $ 26.93
99054 SERV REQUESTED SUN & HOLIDAYS ADD
BASIC SERV $ 53.24
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
EVALUATION AND MANAGEMENT
99202 OFFIC/OUTPT VISIT E&M NEW LOW-MOD
SEVERITY 20MIN $ 88.68
99203 OFFIC/OUTPT VISIT E&M NEW MODERAT
SEVERITY 3OMIN $ 123.38
99204 OFFIC/OUTPT VISIT E&M NEW MOD-HI
SEVERITY 45 MIN $ 183.78
99212 OFFIC/OUTPT VISIT E&M EST
SELF-LIMIT/MINOR 10MIN $ 48.20
99213 OFFIC/OUTPT VISIT E&M EST LOW-MOD
SEVERITY 15MIN $ 69.40
99214 OFFIC/OUTPT VISIT E&M EST MOD-HI
SEVERITY 25 MIN $ 105.39
99215 OFFIC/OUTPT VISIT E&M ESTAB MOD-HI
SEVRTY 40 MIN $ 167.08
99222 INIT HOSP CARE-DA E&M MODERATE
SEVERITY 50 MIN $ 210.13
99223 INIT HOSP CARE-DA E&M HIGH
SEVERITY 70 MIN $ 269.89
99231 SUBSQT HOSP CARE-DA E&M
STABLE/RECOVER 15 MIN $ 67.47
99232 SUBSQT HOSP CARE-DA E&M MINOR
COMPLIC 25 MIN $ 99.60
99233 SUBSQT HOSP CARE-DA E&M SIGNIFIC
COMPLIC 35 MIN $ 138.80
99242 OFFIC CONS NEW/ESTAB LOW SEVERITY
30 MIN $ 138.16
99243 OFFIC CONS NEW/ESTAB MODERATE
SEVERITY 40 MIN $ 179.29
99244 OFFIC CONS NEW/ESTAB MOD-HIGH
SEVERITY 60 MIN $ 251.90
99245 OFFIC CONS NEW/ESTAB MOD-HIGH
SEVERITY 80 MIN $ 339.29
99281 ER DEPT VISIT E&M SELF
LIMITED/MINOR $ 39.84
99282 ER DEPT VISIT E&M LOW-MODERATE
SEVERITY $ 61.69
99283 ER DEPT VISIT E&M MODERATE
SEVERITY $ 113.74
99284 ER DEPT VISIT E&M HIGH SEVERITY
URGENT EVAL $ 174.14
99285 ER DEPT VISIT E&M HIGH SEVER IMMED
SIGNIF THREAT $ 274.39
FAMILY PRACTICE
10060 I&D ABSCESS; SIMPL/SNGL $ 130.56
11750 EXC NAIL/MATRIX PART/ COMPLT PERM
REMOV $ 322.32
12001 SIMPL REPR SCLP/AX/GENIT/
TRUNK/EXTREM; 2.5/LESS $ 185.23
17100 DESTRCT-ANY METHD- LES NOT FACE
W/ANES; 1 LES $ 75.89
17340 CRYOTHERAPY-ACNE $ 84.05
45330 SIGMOIDOSCOPY FLEX; DX W/ WO
COLLEC SPECMN $ 164.93
59400 ROUTINE OB CARE INCL ANTEPARTUM
CARE-VAG DEL-PP $2,964.53
59410 VAG DELIV ONLY; INCL PP CARE $1,962.07
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
59515 CAESAREAN DELIV ONLY; INCL PP CARE $2,279.09
69210 REMOV IMPACTED CERUMEN (SEP PRO)
1/BOTH EARS $ 70.18
70220 RAD EXAM SINUSES PARANASAL COMPLT
MINI 3 VIEWS $ 72.83
71010 RAD EXAM CHEST; SNGL VIEW FRONTAL $ 45.90
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
73630 RAD EXAM FT; COMPLT MINI 3 VIEWS $ 48.96
76091 MAMMO; BILAT $ 135.86
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
80050 GENERAL HEALTH PANEL $ 63.04
81000 UA DIP STICK/TABLET REAGENT;
W/MICRO $ 7.96
90701 IMMUNIZ ACTIVE; DIPHTHERIA/
TETANUS/PERTUSSIS $ 55.08
90707 IMMUNIZ ACTIVE; MEASLES/
MUMPS/RUBELLA VIRUS LIVE $ 66.10
90712 IMMUNIZ ACTIVE; POLIOVIRUS VACCINE
LIVE ORAL $ 44.06
90724 IMMUNIZ ACTIVE; INFLUENZA VIRUS
VACCINE $ 35.50
90737 IMMUNIZ ACTIVE; HEMOPHILUS
INFLUENZA B $ 42.84
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
93000 ECG-ROUTINE W/12 LEADS; W/ INTERPT
& REPORT $ 48.96
93005 ECG-ROUTINE ECG W/12 LEADS;
TRACING ONLY $ 28.15
93015 CV STRESS TEST W/TREADMILL-PHARM;
INTRPT & REPRT $ 201.96
97035 ULTRASOUND TREATMENT; 15 MINUTES $ 20.20
97260 MANIP (SEPART PROC) PERFORMED BY
PHYS; 1 AREA $ 25.09
GASTROENTEROLOGY
43220 ESOPHAGOSCOPY RIGID/FLEX;
W/BALLOON DILAT $ 360.57
43235 UGI ENDO; DX W/WO COLLEC
SPECMN-BRUSH/WASH (SEP) $ 410.55
43239 UGI ENDO; W/BX 1/MX $ 461.24
43243 UGI ENDO; W/INJ SCLEROSIS-
ESOPH/GASTRIC VARICES $ 756.13
43245 UGI ENDO; W/DILAT OUTLET-OBSTRUC
ANY METHD $ 580.48
43246 UGI ENDO; W/DIRECTED PLCMT PERQ
GASTROSTOMY TUBE $ 741.85
43247 UGI ENDO; W/REMOV F B $ 579.05
43255 UGI ENDO; W/CONTRL BLEEDING ANY
METHD $ 743.27
43260 ERCP; DX W/WO COLLEC
SPECMN-BRUSH/WASH (SEP PRO) $ 880.36
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
43262 ERCP; W/SPHINCTEROTOMY/
PAPILLOTOMY $1,211.66
43264 ERCP; W/ENDO RETRO REMOV
STONE-BILI/PANCREAT DUC $1,315.90
43450 DILAT ESOPH-UNGUIDED
SOUND/BOUGIE-1/MX PASSES $ 150.65
43453 DILAT ESOPH OVER GUIDE WIRE $ 223.48
45330 SIGMOIDOSCOPY FLEX; DX W/ WO
COLLEC SPECMN $ 164.93
45331 SIGMOIDOSCOPY FLEX; W/BX 1/MX $ 215.63
45378 COLONOSCOPY FLEX-PROX SPLEN FLEX;
DX (SEP PRO) $ 586.91
45380 COLONOSCOPY FLEX-PROX SPLEN FLEX;
W/BX 1/MX $ 656.88
45382 COLONOSCOPY FLEX-PROX SPLEN FLEX;
W/CONTRL BLEED $ 857.51
45383 COLONOSCOPY FLEX; W/ABLAT LES NOT
AMENABLE-SNARE $ 877.51
45385 COLONOSCOPY FLEX; W/REMOV
TUMOR/LES BY SNARE $ 895.36
47000 BX LIVER; PERCUT NEEDLE $ 244.90
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
74245 RAD EXAM GI TRACT UPPER; W/SM
BOWEL W/MX SERIAL $ 232.56
74249 RAD EXAM GI TRACT UPPER-AIR
CONTRAST; W/SM BOWEL $ 244.19
74280 RAD EXAM COLON; AIR CONTRAST W/HI
DENSITY BARIUM $ 231.34
76700 ECHO ABD B-SCAN W/IMAGE DOCUMEN;
COMPLT $ 197.68
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
82150 AMYLASE $ 17.75
85024 BLD CT; HG/PLATELET CT AUTO & AUTO
PART WBC $ 23.26
85730 THROMBOPLASTIN TIME PART;
PLASMA/WHOLE BLD $ 11.63
90780 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; TO 1 HR $ 69.77
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
91010 ESOPH MOTILITY STUDY $ 226.44
91033 ESOPH ACID REFLUX TEST; PROLONGED
RECORDING $ 276.62
91055 GASTRIC INTUBAT WASH & PREP SLIDES
(SEPART PROC) $ 110.16
91065 BREATH HYDROGEN TEST $ 66.10
GENERAL PRACTICE
10060 I&D ABSCESS; SIMPL/SNGL $ 130.56
11750 EXC NAIL/MATRIX PART/ COMPLT PERM
REMOV $ 322.32
17000 DESTRCT-ANY METHD-BEN FACE LES
W/ANES; 1 LES $ 82.42
33877 REPR THORACOABD AORTIC ANEURY
W/GFT W/WO BYPASS $6,624.49
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
36216 SELECT CATH PLCMT ART SYST; INIT
2ND ORDER THORA $ 631.18
58150 TOT ABD HYST W/WO REMOV
TUBE(S)--OVARY(S) $2,117.52
59400 ROUTINE OB CARE INCL ANTEPARTUM
CARE-VAG DEL-PP $2,964.53
69210 REMOV IMPACTED CERUMEN (SEP PRO)
1/BOTH EARS $ 70.18
71010 RAD EXAM CHEST; SNGL VIEW FRONTAL $ 45.90
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
72110 RAD EXAM SPINE LUMBOSACRAL; COMPLT
W/ OBLIQ VIEWS $ 85.68
73630 RAD EXAM FT; COMPLT MINI 3 VIEWS $ 48.96
76092 SCREENING MAMMO BILAT $ 109.55
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
81000 UA DIP STICK/TABLET REAGENT;
W/MICRO $ 7.96
83718 LIPOPROTEIN DIRECT MEASUR; HIGH
DENSITY CHOL $ 20.81
85023 BLD CT; HG/PLATELET CT AUTO &
MANUAL WBC $ 24.48
85024 BLD CT; HG/PLATELET CT AUTO & AUTO
PART WBC $ 23.26
90707 IMMUNIZ ACTIVE; MEASLES/
MUMPS/RUBELLA VIRUS LIVE $ 66.10
90724 IMMUNIZ ACTIVE; INFLUENZA VIRUS
VACCINE $ 35.50
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90853 GRP MED PSYCHOTHERAP & DRUG MGMT
WHEN INDICATED $ 53.86
93000 ECG-ROUTINE W/12 LEADS; W/ INTERPT
& REPORT $ 48.96
95115 PROF SERV ALLERG IMMUNOTX NOT INCL
EXTRCT; 1 INJ $ 23.87
95117 PROF SERV ALLERG IMMUNOTX WO
EXTRACT; MX INJ $ 30.60
95125 PROF SERV ALLERG IMMUNOTX INCL
EXTRACT; MX INJ $ 28.76
97010 PHYS MEDS TX-1 AREA; HOT/ COLD
PACKS $ 17.75
97014 PHYS MEDS TX-1 AREA; ELEC STIM $ 24.48
97032 ELECTRICAL STIMULATION; 15 MINUTES $ 24.48
97035 ULTRASOUND TREATMENT; 15 MINUTES $ 20.20
97260 MANIP (SEPART PROC) PERFORMED BY
PHYS; 1 AREA $ 25.09
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
GENERAL SURGERY
19120 EXC CYST/BEN-MALIG TISS/ DUCT/LES
MALE/FE 1/MORE $ 722.16
19162 MASTEC PART; W/AXILRY
LYMPHADENECTOMY $1,970.64
19240 MASTEC MOD RAD W/AX NODES EXCL PEC
MAJOR MUSCL $2,133.02
36533 INSRT IMPLNT VENOUS ACCES PORT
W/WO RESERVOIR $ 724.00
44005 ENTEROLYSIS (SEPART PROC) $1,610.07
44120 ENTERECTOMY RESECT SM INTESTINE;
W/ANASTOMOSIS $1,758.58
44140 COLECTOMY PART; W/ANASTOM $2,194.84
44145 COLECTOMY PART; W/ COLOPROCTOSTOMY $2,664.65
44153 COLECTOMY WO PROCTECT; W/ CREAT
ILEAL RESERVOIR $3,403.64
44950 APPY $1,010.31
44960 APPY; RUPT APPY W/ABSCESS/ GEN
PERITONITIS $1,207.37
45378 COLONOSCOPY FLEX-PROX SPLEN FLEX;
DX (SEP PRO) $ 586.91
46260 HEMORRHOIDECTOMY INT & EXT
COMPLX/EXTEN $1,001.03
47600 CHOLEY $1,413.01
47605 CHOLEY; W/ CHOLANGIOGRAPHY $1,529.39
49500 REPR INIT ING HERNIA 6 MO-/ 5 YR;
REDUCIBLE $ 738.28
49505 REPR INIT ING HERNIA 5 YR/ MORE;
REDUCIBLE $ 829.67
49520 REPR RECURRENT ING HERNIA ANY AGE;
REDUCIBLE $1,013.88
49560 REPR INIT INCS HERNIA; REDUCIBLE
(SEPART PROC) $1,165.25
50360 RENAL HOMOTRANSPL; EXCLD DONOR &
RECIP NEPHRECT $3,979.84
58150 TOT ABD HYST W/WO REMOV
TUBE(S)--OVARY(S) $2,117.52
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
85025 BLD CT; HG/PLATELET CT AUTO & AUTO
COMPLT WBC $ 23.26
88170 FINE NEEDL ASPIRAT W/WO PREP
SMEARS; SUPERF TISS $ 143.82
88304 LEVEL III-SURG PATH GROSS/ MICRO
EXAM $ 53.24
88305 LEVEL IV-SURG PATH GROSS/ MICRO
EXAM $ 113.83
HEMATOLOGY/ONCOLOGY
36000 INTRO NEEDLE/ INTRACATHETER VEIN $ 32.84
36430 TRANSFUSION BLD/BLD COMPONENTS $ 73.54
38230 BONE MARROW HARVESTING TRANSPL $ 514.79
38241 BONE MARROW TRANSPL; AUTOLOGOUS $ 314.87
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
74160 CAT ABD; W/CONTRAST $ 541.62
77336 CONT MED RADIAT PHYSICS CONS W/QA
REPORT WK-THER $ 184.82
77413 RADIATION TX DELIV-3/MORE TX
AREAS; 6-10 MEV $ 145.04
77414 RADIATION TX DELIV-3/MORE TX
AREAS; 11-19 MEV $ 145.04
77430 WK RAD THERAP MGMT; COMPLX $ 332.93
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
85023 BLD CT; HG/PLATELET CT AUTO &
MANUAL WBC $ 24.48
85024 BLD CT; HG/PLATELET CT AUTO & AUTO
PART WBC $ 23.26
85025 BLD CT; HG/PLATELET CT AUTO & AUTO
COMPLT WBC $ 23.26
90780 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; TO 1 HR $ 69.77
90781 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; EA HR TO 8HR $ 34.88
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
96408 CHEMOTX ADMIN IV; PUSH TECH $ 59.98
96410 CHEMOTX ADMIN IV; INFUSION TECH
UP-1 HR $ 95.47
96412 CHEMOTX ADMIN IV; INFUSION TECH
1-8 HR EA ADD HR $ 72.22
96414 CHEMOTX ADMIN IV; INFUSION
TECH-PROLONGED W/PUMP $ 83.23
96520 REFILLING & MAINTENANCE PORTABLE
PUMP $ 55.69
96530 REFILLING & MAINTENANCE IMPLNT
PUMP/RESERVOIR $ 66.10
96545 PROVISION CHEMOTX AGENT $ 46.51
INFECTIOUS DISEASES
96414 CHEMOTX ADMIN IV; INFUSION
TECH-PROLONGED W/PUMP $ 83.23
96520 REFILLING & MAINTENANCE PORTABLE
PUMP $ 55.69
99000 HANDL &/OR CONVEY SPECMN-TRANSF
OFFIC TO LAB $ 20.81
99025 INIT VISIT WHEN (*) SURG PROC =
MAJ SERV @ VISIT $ 26.93
99052 SERV REQUEST BETWEEN 10 PM & 8 AM
ADD TO BASIC $ 53.24
99054 SERV REQUESTED SUN & HOLIDAYS ADD
BASIC SERV $ 53.24
INTERNAL MEDICINE
31622 BRONCHOSCOPY; DX W/WO CELL
WASHING/BRUSHING $ 547.54
43235 UGI ENDO; DX W/WO COLLEC
SPECMN-BRUSH/WASH (SEP) $ 410.55
43239 UGI ENDO; W/BX 1/MX $ 461.24
45330 SIGMOIDOSCOPY FLEX; DX W/ WO
COLLEC SPECMN $ 164.93
45378 COLONOSCOPY FLEX-PROX SPLEN FLEX;
DX (SEP PRO) $ 586.91
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
45380 COLONOSCOPY FLEX-PROX SPLEN FLEX;
W/BX 1/MX $ 656.88
45385 COLONOSCOPY FLEX; W/REMOV
TUMOR/LES BY SNARE $ 895.36
71010 RAD EXAM CHEST; SNGL VIEW FRONTAL $ 45.90
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
76091 MAMMO; BILAT $ 135.86
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
80061 LIPID PANEL $ 26.93
84443 THYROID STIM HORMONE $ 33.66
85025 BLD CT; HG/PLATELET CT AUTO & AUTO
COMPLT WBC $ 23.26
90724 IMMUNIZ ACTIVE; INFLUENZA VIRUS
VACCINE $ 35.50
90780 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; TO 1 HR $ 69.77
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
92982 PERQ TRNSLUMNL CORON BALOON
ANGIOPLSTY; 1 VESSEL $1,606.50
93000 ECG-ROUTINE W/12 LEADS; W/ INTERPT
& REPORT $ 48.96
93005 ECG-ROUTINE ECG W/12 LEADS;
TRACING ONLY $ 28.15
93010 ECG-ROUTINE W/12 LEADS; INTERPT &
REPORT ONLY $ 20.81
93015 CV STRESS TEST W/TREADMILL-PHARM;
INTRPT & REPRT $ 201.96
93018 CV STRESS TEST W/TREADMILL;
INTERPT & REPRT ONLY $ 43.45
93224 ECG-24 HR W/SUPERIMPOSIT SCAN;
REPRT-REVW-INTRPT $ 291.31
93307 ECHO REAL-TIME W/DOCUMEN W/WO
M-MODE; COMPLT $ 364.75
93320 DOPPLER ECHO WAVE W/ SPECTRAL
DISPLY; COMPLT $ 163.40
93325 DOPPLER COLOR FLOW VELOCITY
MAPPING $ 190.94
95115 PROF SERV ALLERG IMMUNOTX NOT INCL
EXTRCT; 1 INJ $ 23.87
96410 CHEMOTX ADMIN IV; INFUSION TECH
UP-1 HR $ 95.47
NEONATOLOGY
31500 INTUBATION ENDOTRACHEAL ER PROC $ 294.58
31520 LARYNGOSCOPY DIRECT W/WO
TRACHEOSCOPY; DX NB $ 357.41
33960 PROLONG EXTRACORPOR CIRCUL CP
INSUFF; INIT 24 HR $1,949.93
36000 INTRO NEEDLE/ INTRACATHETER VEIN $ 32.84
36430 TRANSFUSION BLD/BLD COMPONENTS $ 73.54
36440 PUSH TRANSFUSION BLD 2 YR/ UNDER $ 145.66
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
36450 EXCHG TRANSFUSION BLD; NB $ 306.31
36510 CATH UMBILICAL VEIN DX/ THERAP NB $ 103.53
36600 ART PUNCT WITHDRAWAL BLD DX $ 44.27
36620 ART CATH/CANNULAT-SAMPL MONITOR
(SEP PRO); PERQ $ 139.23
36660 CATH UMBILICAL-ART-NB-DX/ THERAP $ 137.80
61070 PUNCT SHUNT TUBING/
RESERVOIR-ASPIRAT/INJ PROC $ 115.06
62230 REPLAC/REVIS CSF SHUNT/ OBSTRUC
VALV/DISTAL CATH $1,742.98
62270 SPINAL PUNCT LUMBAR DX $ 155.04
94656 VENTILATION ASSIST & MGMT; 1 ST DA $ 151.16
94657 VENTILATION ASSIST & MGMT; SUBSQT
DA $ 91.80
94660 CONT POS AIRWAY PRESS VENTILATION
INIT & MGMT $ 93.64
94761 NONINVASIVE EAR/PULSE OXIMETRY O2
SAT; MX DETERM $ 42.84
NEPHROLOGY
36489 PLCMT CENTRAL VENOUS CATH; PERCUT
OVER AGE 2 $ 179.21
36520 THERAP APHERESIS $ 269.89
36800 INSRT CANNULA HEMODIALYSIS/OTHER;
VEIN-VEIN $ 352.00
50200 RENAL BX; PERCUT BY TROCAR/NEEDLE $ 389.84
50590 LITH EXTRACORPOREAL SHOCK WAVE $1,418.72
76700 ECHO ABD B-SCAN W/IMAGE DOCUMEN;
COMPLT $ 197.68
76775 ECHO RETROPERITON B-SCAN W/IMAGE
DOCUMEN; LTD $ 142.60
76778 ECHO TRANSPL KIDNEY B-SCAN W/IMAGE
DOCUMEN $ 191.56
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
82565 CREATININE; BLD $ 14.08
83970 PARATHORMONE $ 99.14
85025 BLD CT; HG/PLATELET CT AUTO & AUTO
COMPLT WBC $ 23.26
86287 HEPATITIS B SURFACE ANTIG $ 30.60
90784 THERAP/DX INJ; IV $ 29.99
90935 HEMODIALYSIS PROC W/SNGL PHYS EVAL $ 171.97
90937 HEMODIALYSIS PROC W/ REPEAT EVAL
W/WO REVIS DIALY $ 302.33
90945 DIALYSIS PROC OTHER THAN
HEMODIALYSIS W/1 EVAL $ 160.96
90947 DIALYSIS OTHER THAN HEMODIALYSIS
W/REPEAT EVAL $ 268.67
90989 DIALYSIS TRAIN-PT-INCL HELPR WHERE
APPLIC-COMPLT $ 317.02
90997 HEMOPERFUSION $ 266.22
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
95900 NERV CONDUCT VELOCITY/ LATENCY
STDY; MOTR EA NERV $ 66.71
95904 NERV CONDUC VELOCITY/ LATENCY
STDY; SENSRY EA NRV $ 57.53
92002 OPHTH SERV: MED EXAM & EVAL;
INTERMED NEW PT
22554 ARTHRODESIS-ANT INTERBOD; CERV
BELOW C2 W/GFT $3,310.51
22842 POST INSTRUM; SEGMT FIXA $1,677.70
61313 CRANIECTOMY-HEMATOMA-SUPRATENT;
INTRACEREBRAL $4,155.07
61510 CRANIECTOMY; EXC BRAIN
TUMOR-SUPRATENTORIAL $4,790.74
61512 CRANIECTOMY; EXC
MENINGOMA-SUPRATENTORIAL $5,533.30
61518 CRANIECTOMY-EXC TUMOR-POST FOSSA;
EX MENINGIOMA $5,799.31
61520 CRANIECTOMY-POST FOSSA;
CEREBELLOPONTINE ANGLE $7,565.95
61548 HYPOPHYSECTOMY-TRANSNASAL
NONSTEREOTACTIC $3,995.14
61700 SURG ANEURY INTRACRAN APPROACH;
CAROTID CIRCULAT $6,989.86
61751 STEREOTACTIC BX/ASPIRAT/EXC
INTRACRAN LES; W/CAT $3,307.25
62121 CRANIOTOMY REPR ENCEPHALOCELE
SKULL BASE $3,359.47
62223 CREAT SHUNT; VENTRICULO-
PERITONEAL/-PLEURAL $2,560.61
62230 REPLAC/REVIS CSF SHUNT/ OBSTRUC
VALV/DISTAL CATH $1,742.98
63005 LAMINECT W/EXPLOR 1-2 VERTEB;
LUMBAR EX SPONDYLO $2,798.88
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
63020 LAMINOTOMY W/DECOMP NERV ROOT; 1
INTERSPACE CERV $2,708.30
63030 LAMINOT W/DECOMP NERV ROOT; 1
INTERSPACE LUMBAR $2,399.86
63042 LAMINOTOMY W/DECOMP NERV ROOT
RE-EXPLOR; LUMBAR $3,512.06
63045 LAMINECTOMY SNGL VERTEBRAL SEGMT;
CERV $3,205.25
63047 LAMINECTOMY SNGL VERTEBRAL SEGMT;
LUMBAR $2,805.41
63075 DISKECTOMY ANT W/DECOMP; CERV SNGL
INTERSPACE $3,205.25
63081 VERTEBRAL CORPECTOMY-ANT W/DECOMP;
CERV 1 SEGMT $4,311.74
63200 LAMINECTOMY W/RELEASE TETHERED
CORD LUMBAR $2,609.57
64721 NEUROPLASTY &/OR TRANSPO; MEDIAN @
CARPAL TUNNEL $ 793.15
95869 NEEDLE EMG LTD STUDY SPEC MUSCL $ 58.14
95900 NERV CONDUCT VELOCITY/ LATENCY
STDY; MOTR EA NERV $ 66.71
95904 NERV CONDUC VELOCITY/ LATENCY
STDY; SENSRY EA NRV $ 57.53
95920 INTRAOPERATIVE NEUROPHYSIOLOGY
TESTING PER HOUR $ 304.78
95925 SOMATOSENSORY TESTING 1/MORE NERV $ 132.80
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
NEUROLOGY
22554 ARTHRODESIS-ANT INTERBOD; CERV
BELOW C2 W/GFT $3,310.51
36216 SELECT CATH PLCMT ART SYST; INIT
2ND ORDER THORA $ 631.18
62223 CREAT SHUNT; VENTRICULO-
PERITONEAL/-PLEURAL $2,560.61
62270 SPINAL PUNCT LUMBAR DX $ 155.04
70470 CAT HEAD/BRAIN; WO CONTRAST
FOLLOWED BY CONTRAST $ 556.31
70551 MRI BRAIN; WO CONTRAST $ 831.71
70553 MRI BRAIN; WO CONTRAST FOLLOWED BY
CONTRAST $1,762.56
72141 MRI SPINAL CANAL & CONTENTS CERV;
WO CONTRAST $ 843.34
72148 MRI SPINAL CANAL & CONTENTS
LUMBAR; WO CONTRAST $ 908.21
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
84443 THYROID STIM HORMONE $ 33.66
84450 TRANSFERASE; ASPARTATE AMINO $ 11.63
85025 BLD CT; HG/PLATELET CT AUTO & AUTO
COMPLT WBC $ 23.26
90830 PSYCH TEST W/INTERPT & REPRT PER
HR $ 80.78
92280 VISUALLY EVOKED POTENTIAL STUDY
W/MED DX EVAL $ 25.09
92585 BRAINSTEM EVOKED RESPONSE
RECORDING $ 248.47
95819 EEG INCL AWAKE & ASLEEP;
STAND/PORT SAME FACILIT $ 184.82
95860 NEEDLE EMG; 1 EXTREM & RELATED
PARASPINAL AREAS $ 130.97
95861 NEEDLE EMG; 2 EXTREM & RELATED
PARASPINAL AREAS $ 224.60
95900 NERV CONDUCT VELOCITY/ LATENCY
STDY; MOTR EA NERV $ 66.71
95904 NERV CONDUC VELOCITY/ LATENCY
STDY; SENSRY EA NRV $ 57.53
95925 SOMATOSENSORY TESTING 1/MORE NERV $ 132.80
95935 'H/'F' REFLEX STUDY BY ELEC-DX
TESTING $ 13.46
OBSTETRICS & GYNOCOLOGY
56304 LAP SURG; W/LYSIS ADHESIONS $ 911.47
57452 COLPOSCOPY; (SEPART PROC) $ 145.25
57454 COLPOSCOPY; W/BX-CERV &/OR
ENDOCERV CURET $ 223.58
57520 CONIZATION CERV W/WO FULG W/WO D&C
W/WO REPR $ 664.22
58100 ENDOMETRIAL &/OR ENDOCERV SAMPL
(SEPART PROC) $ 123.22
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
58120 DILAT & CURET DX &/OR THERAP (NON
OB) $ 503.47
58150 TOT ABD HYST W/WO REMOV
TUBE(S)--OVARY(S) $2,117.52
58260 VAG HYST $1,864.56
58605 LIG/TRANSECT FALLOPIAN TUBE-SAME
HOSP (SEP PRO) $ 694.42
58720 SALPINGO-OOPHORECTOMY COMPLT/PART
(SEPART PROC) $1,616.50
58740 LYSIS ADHESIONS $1,135.87
59025 FETAL NON-STRESS TEST $ 89.96
59400 ROUTINE OB CARE INCL ANTEPARTUM
CARE-VAG DEL-PP $2,964.53
59410 VAG DELIV ONLY; INCL PP CARE $1,962.07
59510 ROUTINE OB CARE INCL ANTEPARTUM
CARE-C SECT-PP $3,358.66
59515 CAESAREAN DELIV ONLY; INCL PP CARE $2,279.09
59820 TX MISSED AB COMPLT SURGICALLY;
FIRST TRIMESTER $ 589.05
59840 INDUCED AB BY DILAT & CURET $ 486.95
76091 MAMMO; BILAT $ 135.86
76805 ECHO PG UTERUS B-SCAN W/ IMAGE
DOCUMEN; COMPLT $ 222.77
76830 ECHO TRANSVAGINAL $ 159.73
76856 ECHO PELVIC B-SCAN W/IMAGE
DOCUMEN; COMPLT $ 159.73
76946 ULTRASONIC GUIDANCE
AMNIOCENTESIS-RAD S & I $ 130.36
80055 OB PANEL $ 69.77
81000 UA DIP STICK/TABLET REAGENT;
W/MICRO $ 7.96
84703 GONADOTROPIN CHORIONIC; QUAL $ 41.00
88150 CYTPTH SMEARS CERV/VAG 1-3; SCRN
TECH PHYS SUPER $ 10.40
88305 LEVEL IV-SURG PATH GROSS/ MICRO
EXAM $ 113.83
90730 IMMUNIZ ACTIVE; HEPATITIS A
VACCINE $ 80.78
90742 IMMUNIZ PASSIVE; SPEC HYPERIMMUNE
SERUM GLOBULIN $ 58.75
90780 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; TO 1 HR $ 69.77
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
OPHTHALMOLOGY
65855 TRABECULOPLASTY-LASER SURG 1/MORE
SESSIONS $ 871.49
66761 IRIDOTOMY/IRIDECTOMY BY LASER SURG $ 762.14
66821 DISCISSION SECNDRY MEMBRN
CATARACT; LASER SURG $ 516.53
66984 EXTRACAPSULAR CATARACT REMOV
W/INSRT IOL PROSTH $1,916.78
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
67036 VITRECTOMY MECH PARS PLANA
APPROACH $2,324.78
67038 VITRECTOMY MECH; W/ EPIRETINAL
MEMBRN STRIPPING $3,904.56
67107 REPR RETINAL DETACHMENT; SCLERAL
BUCKLING $2,692.80
67108 REPR RETINAL DETACHMENT;
W/VITRECTOMY ANY METHD $3,845.81
67145 PROPHYLAXIS RETINAL DETACH;
PHOTOCOAGULATION $ 984.10
67210 DESTRCT LOCALIZ LES RETINA;
PHOTOCOAGULATION $1,547.95
67228 DESTRCT PROGRESSIVE RETINOPATHY;
PHOTOCOAGULAT $1,816.42
67311 STRABISMUS SURG; 1 HORIZONTAL
MUSCL $1,210.13
67312 STRABISMUS SURG; 2 HORIZONTAL
MUSCL $1,499.81
67420 ORBITOTOMY W/BONE FLAP/ WINDOW;
W/REMOV LES $3,010.22
76511 OPHTH ULTRASOUND ECHO DX; A-SCAN
ONLY $ 153.00
76512 OPHTH ULTRASOUND ECHO DX; CONTACT
B-SCAN $ 156.67
OPHTH SERV: MED EXAM & EVAL;
INTERMED NEW PT $ 85.07
92004 OPHTH SERV: MED EXAM; COMP NEW PT
1/MORE VISITS $ 138.31
92012 OPHTH SERV: MED EXAM & EVAL;
INITERMED ESTAB PT $ 69.16
92014 OPHTH SERV: MED EXAM & EVAL; COMP
ESTAB PT $ 101.59
92015 DETERM REFRACTIVE STATE $ 44.06
92020 GONIOSCOPY W/MED DX EVAL (SEPART
PROC) $ 41.00
92082 VISUAL FIELD EXAM UNILAT/ BILAT
W/EVAL; INTERMED $ 58.14
92083 VISUAL FIELD EXAM UNILAT/ BILAT
W/EVAL; EXTEN $ 83.84
92225 OPHTH EXTEN W/RETINAL DRAW W/MED
DX EVAL; INIT $ 52.02
92235 FLUORESCEIN ANGIOGRAPHY W/MED DX
EVAL $ 151.78
92250 FUNDUS PHOTOGRAPHY W/ MED DX EVAL $ 53.86
OPTOMETRY
92002 OPHTH SERV: MED EXAM & EVAL;
INTERMED NEW PT $ 85.07
92004 OPHTH SERV: MED EXAM; COMP NEW PT
1/MORE VISITS $ 138.31
92012 OPHTH SERV: MED EXAM & EVAL;
INITERMED ESTAB PT $ 69.16
92014 OPHTH SERV: MED EXAM & EVAL; COMP
ESTAB PT $ 101.59
92015 DETERM REFRACTIVE STATE $ 44.06
92020 GONIOSCOPY W/MED DX EVAL (SEPART
PROC) $ 41.00
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
92065 ORTHOPTIC &/OR PLEOPTIC TRAIN
W/MED DIRECT $ 45.29
92081 VISUAL FIELD EXAM UNILAT/ BILAT
W/DX EVAL; LTD $ 42.23
92082 VISUAL FIELD EXAM UNILAT/ BILAT
W/EVAL; INTERMED $ 58.14
92083 VISUAL FIELD EXAM UNILAT/ BILAT
W/EVAL; EXTEN $ 83.84
92100 SERIAL TONOMETRY (SEP PRO) W/DX
EVAL SAME DA $ 72.22
92225 OPHTH EXTEN W/RETINAL DRAW W/MED
DX EVAL; INIT $ 52.02
92226 OPHTH EXTEN W/RETINAL DRAW W/MED
DX EVAL; SUBSQT $ 45.90
92250 FUNDUS PHOTOGRAPHY W/ MED DX EVAL $ 53.86
92285 EXT OCULAR PHOTOGRAPHY
W/EVAL-DOCUMN MED PROGRES $ 30.60
92310 SCRIPT & FIT CONTACT LENS; CORNEAL
EX APHAKIA $ 152.39
92325 MODIFICAT LENS (SEP PRO) W/ MED
SUPERVS ADAPTAT $ 23.87
92326 REPLAC CONTACT LENS $ 99.14
ORTHOPEDIC SURGERY
20680 REMOV IMPLNT; DEEP $ 578.54
22842 POST INSTRUM; SEGMT FIXA $1,677.70
23130 ACROMIOPLASTY/ ACROMIONECTOMY PART $1,247.66
23420 REPR COMPLT SHOULDER CUFF AVULSION
CHRONIC $2,416.99
25605 CLOSED RED FX-DIST RAD OR EPIPH
SEP $ 809.47
27130 ARTHROPLASTY ACETABULAR & PROX FEM
PROSTH REPLAC $3,849.07
27134 REVIS TOT HIP ARTHROPLASTY; BOTH
COMPON W/WO GFT $5,252.59
27425 LAT RETINACULAR RELEASE $1,026.53
27447 ARTHROPLASTY KNEE CONDYLE &
PLATEAU; MED & LAT $4,066.94
27814 OP TX BIMALLEOLAR ANK FX W/WO
INT/EXT FIXA $1,751.95
28285 HAMMERTOE OR; 1 TOE $ 748.27
28296 HALLUX VALGUS CORRECT; W/
METATARSAL OSTEOTOMY $1,507.97
29075 CAST SHORT ARM $ 120.77
29425 CAST SHORT LEG AMBULATORY TYPE $ 172.99
29826 ARTHROSCOPY SHOULDER SURG; DECOMP
SUBACROM SPACE $1,807.44
29870 ARTHROSCOPY KNEE DX W/WO SYNOVIAL
BX (SEP PRO) $ 783.36
29875 ARTHROSCOPY KNEE SURG; SYNOVECTOMY
LTD (SEP PRO) $1,277.04
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
29876 ARTHROSCOPY KNEE SURG; SYNOVECTOMY
MAJOR $1,556.11
29877 ARTHROSCOPY KNEE SURG; DEBRID/SHAV
ARTIC CARTIL $1,459.82
29879 ARTHROSCOPY KNEE SURG; ABRASION
ARTHROPLASTY $1,597.73
29880 ARTHROSCOPY KNEE SURG; W/
MENISECTMY (MED & LAT) $1,685.86
29881 ARTHROSCOPY KNEE SURG; W/
MENISECTMY (MEDIAL/LAT) $1,535.71
29888 ARTHROSCOPICALLY AIDED ACL
REPAIR/AUGMENT/RECON $2,730.34
63030 LAMINOT W/DECOMP NERV ROOT; 1
INTERSPACE LUMBAR $2,399.86
64721 NEUROPLASTY &/OR TRANSPO; MEDIAN @
CARPAL TUNNEL $ 793.15
72100 RAD EXAM SPINE LUMBOSACRAL; AP &
LAT $ 61.81
73100 RAD EXAM WRIST; ANTEROPOSTERIOR &
LAT VIEWS $ 45.29
73560 RAD EXAM KNEE; ANTEROPOSTERIOR &
LAT VIEWS $ 47.74
73620 RAD EXAM FT; ANTEROPOSTERIOR & LAT
VIEWS $ 45.29
73630 RAD EXAM FT; COMPLT MINI 3 VIEWS $ 48.96
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
97010 PHYS MEDS TX-1 AREA; HOT/ COLD
PACKS $ 17.75
97012 PHYS MEDS TX-1 AREA; TRACTION MECH $ 28.15
97110 PHYS MEDS-1 AREA 1ST 30 MIN EA
VISIT; EXERCISE $ 36.72
97530 KINETIC ACTIVITIES 1 AREA; 1ST 30
MIN EA VISIT $ 38.56
97700 OFFIC VISIT W/'CHECK-OUT'
TEST/MEASUR; 1ST 30MIN $ 80.17
97750 PHYSICAL PERFORMANCE TEST; 15 MIN. $ 44.06
OTOLARYNGOLOGY
21147 RECON MIDFACE LEFORT I; 3/MORE
PIECES REQ GFT $3,060.82
21196 RECON MANDIB RAMUS SAGITTAL SPLIT;
W/INT FIXA $2,703.41
21240 ARTHROPLASTY TEMPOROMANDIBULAR JT
W/ WO AUTOGFT $2,607.94
30140 SUBMUCOUS RESECT TURBINATE
PART/COMPLT $ 543.46
30420 RHINOPLASTY PRIMARY; INCL MAJOR
SEPTAL REPR $2,888.64
30520 SEPTOPLASTY/SMR W/WO CARTIL
SCORING/REPLAC W/ GFT $1,110.58
30620 SEPTAL/OTHER INTRANASAL
DERMATOPLASTY $1,122.00
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
31090 SINUSOTOMY COMBO 3/MORE SINUSES $1,802.54
31575 LARYNGOSCOPY FLEXIBLE FIBEROPTIC;
DX $ 230.93
42820 TONSILLECTOMY & ADENOIDECTOMY;
UNDER AGE 12 $ 576.10
42821 TONSILLECTOMY & ADENOIDECTOMY; AGE
12/OVER $ 692.78
42826 TONSILLECTOMY PRIM/ SECNDRY; AGE
12/OVER $ 610.37
42830 ADENOIDECTOMY PRIM; UNDER AGE 12 $ 376.99
69436 TYMPANOSTOMY GEN ANES $ 348.43
69631 TYMPANOPLASTY WO MASTOIDEC; WO
OSSICULAR CHAIN $1,907.81
69641 TYMPANOPLASTY W/ MASTOIDEC; WO
OSSICULAR CHAIN $2,439.02
70210 RAD EXAM SINUSES PARANASAL LESS
THAN 3 VIEWS $ 54.47
70220 RAD EXAM SINUSES PARANASAL COMPLT
MINI 3 VIEWS $ 72.83
70460 CAT HEAD/BRAIN; W/CONTRAST MAT $ 455.94
70480 CAT ORBIT/SELLA/OUTER-MID-INNER
EAR; WO CONTRAST $ 411.88
70486 CAT MAXILLOFACIAL AREA; WO
CONTRAST $ 398.41
82785 GG; IGE $ 34.88
87060 CULTURE BACTERIAL DEFINITIVE;
THROAT/NOSE $ 14.08
87070 CULTURE BACTERIAL DEFINITIVE; ANY
OTHER SOURCE $ 15.30
87184 SENSITIVITY ANTIBIOTIC; DISK METHD
PER PLATE $ 14.08
88170 FINE NEEDL ASPIRAT W/WO PREP
SMEARS; SUPERF TISS $ 143.82
92506 MED EVAL SPEECH/LANGUAGE &/OR
HEARING PROBLEMS $ 87.52
92507 SPEECH/LANG/HEAR THERAP W/MED
SUPERVS; INDIVI $ 53.86
92552 PURE TONE AUDIOMETRY; AIR ONLY $ 28.15
92553 PURE TONE AUDIOMETRY; AIR & BONE $ 42.84
92557 BASIC COMP AUDIOMETRY (92553 &
92556 COMBO) $ 77.11
92567 TYMPANOMETRY $ 34.27
92585 BRAINSTEM EVOKED RESPONSE
RECORDING $ 248.47
PATHOLOGY
80019 19 BLOOD/URINE TESTS $ 19.58
80050 GENERAL HEALTH PANEL $ 63.04
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
80061 LIPID PANEL $ 26.93
80091 THYROID PANEL $ 26.93
81000 URINALYSIS/ NONAUTO/ W/ SCOPE $ 7.96
82270 TEST FECES FOR BLOOD $ 6.12
82785 ASSAY/ GAMMAGLOBULIN IGE $ 34.88
82947 ASSAY QUANTITATIVE/ GLUCOSE $ 11.63
83718 BLOOD LIPOPROTEIN ASSAY $ 20.81
84443 ASSAY THYROID STIM HORMONE $ 33.66
84702 CHORIONIC GONADOTROPIN TEST $ 43.45
84703 CHORIONIC GONADOTROPIN ASSAY $ 41.00
85021 AUTOMATED HEMOGRAM $ 11.63
85022 AUTOMATED HEMOGRAM $ 16.52
85023 AUTOMATED HEMOGRAM $ 24.48
85024 AUTOMATED HEMOGRAM $ 23.26
85025 AUTOMATED HEMOGRAM $ 23.26
85027 AUTOMATED HEMOGRAM $ 20.81
86316 IMMUNOASSAY/ TUMOR ANTIGEN $ 39.78
86317 IMMUNOASSAY/ INFECTIOUS $ 32.44
86403 PARTICLE AGGLUTINATION TEST $ 22.03
86585 TB TINE TEST $ 12.24
87060 NOSE/THROAT CULTURE/ $ 14.08
87086 URINE CULTURE/ COLONY COUNT $ 15.30
88150 CYTOPATHOLOGY/ PAP SMEAR $ 10.40
88304 TISSUE EXAM BY PATHOLOGIST $ 53.24
88305 TISSUE EXAM BY PATHOLOGIST $ 113.83
88307 TISSUE EXAM BY PATHOLOGIST $ 197.68
PEDIATRICS
54150 CIRCUMCISION USING CLAMP/ OTHER
DEVICE; NB $ 169.22
70210 RAD EXAM SINUSES PARANASAL LESS
THAN 3 VIEWS $ 54.47
71010 RAD EXAM CHEST; SNGL VIEW FRONTAL $ 45.90
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
73620 RAD EXAM FT; ANTEROPOSTERIOR & LAT
VIEWS $ 45.29
74241 RAD EXAM GI TRACT UPPER; W/WO
DELAY FILM W/KUB $ 157.28
81000 UA DIP STICK/TABLET REAGENT;
W/MICRO $ 7.96
86317 IMMUNOASSAY INFEC AGENT ANTIB QUAN
NES $ 32.44
86403 PARTICLE AGGLUTINATION ANTIB EA $ 22.03
86585 SKIN TEST; TUBERCULOSIS TINE TEST $ 12.24
87060 CULTURE BACTERIAL DEFINITIVE;
THROAT/NOSE $ 14.08
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
90701 IMMUNIZ ACTIVE; DIPHTHERIA/
TETANUS/PERTUSSIS $ 55.08
90707 IMMUNIZ ACTIVE; MEASLES/
MUMPS/RUBELLA VIRUS LIVE $ 66.10
90712 IMMUNIZ ACTIVE; POLIOVIRUS VACCINE
LIVE ORAL $ 44.06
90731 IMMUNIZ ACTIVE; HEPATITIS B
VACCINE $ 80.78
90737 IMMUNIZ ACTIVE; HEMOPHILUS
INFLUENZA B $ 42.84
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90788 IM INJ ANTIBIOTIC $ 7.34
92012 OPHTH SERV: MED EXAM & EVAL;
INITERMED ESTAB PT $ 69.16
92081 VISUAL FIELD EXAM UNILAT/ BILAT
W/DX EVAL; LTD $ 42.23
92551 SCREENING TEST PURE TONE AIR ONLY $ 25.70
92552 PURE TONE AUDIOMETRY; AIR ONLY $ 28.15
92567 TYMPANOMETRY $ 34.27
95117 PROF SERV ALLERG IMMUNOTX WO
EXTRACT; MX INJ $ 30.60
95125 PROF SERV ALLERG IMMUNOTX INCL
EXTRACT; MX INJ $ 28.76
99050 SERV REQUEST AFTR OFFIC HRS ADD TO
BASIC SERV $ 26.93
99054 SERV REQUESTED SUN & HOLIDAYS ADD
BASIC SERV $ 53.24
99391 PERIODIC RE-E&M HEALTHY INDIVI
ESTAB PT; INFANT $ 138.16
99392 PERIODIC RE-E&M HEALTHY EST PT;
EARLY CHILDHOOD $ 160.65
99431 HX/EXAM NORM NB INIT DX/ TX/PREP
HOSP RECORDS $ 158.08
99433 SUBSQT HOSPITAL CARE NORMAL
NEWBORN $ 83.54
99435 HISTORY AND EXAMINATION $ 202.42
PHYSICAL MEDICINE & REHABILITATION
72040 RAD EXAM SPINE CERV;
ANTEROPOSTERIOR & LAT $ 57.53
72050 RAD EXAM SPINE CERV; MINI 4 VIEWS $ 84.46
72110 RAD EXAM SPINE LUMBOSACRAL; COMPLT
W/ OBLIQ VIEWS $ 85.68
72125 CAT CERV SPINE; WO CONTRAST $ 473.69
92507 SPEECH/LANG/HEAR THERAP W/MED
SUPERVS; INDIVI $ 53.86
95900 NERV CONDUCT VELOCITY/ LATENCY
STDY; MOTR EA NERV $ 66.71
97010 PHYS MEDS TX-1 AREA; HOT/ COLD
PACKS $ 17.75
97012 PHYS MEDS TX-1 AREA; TRACTION MECH $ 28.15
</TABLE>
C-12
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
97014 PHYS MEDS TX-1 AREA; ELEC STIM $ 24.48
97022 PHYS MEDS TX-1 AREA; WHIRLPOOL $ 23.26
97032 ELECTRICAL STIMULATION; 15 MINUTES $ 24.48
97033 IONTOPHORESIS; 15 MINUTES $ 25.70
97035 ULTRASOUND TREATMENT; 15 MINUTES $ 20.20
97036 HUBBARD TANK; 15 MINUTES $ 31.21
97110 PHYS MEDS-1 AREA 1ST 30 MIN EA
VISIT; EXERCISE $ 36.72
97112 PHYS MEDS-1 AREA 1ST 30 MIN;
NEUROMUSCL REEDUCAT $ 36.11
97122 PHYS MEDS-1 AREA 1ST 30 MIN/
VISIT; TRACT MANUAL $ 33.05
97124 PHYS MEDS-1 AREA 1ST 30 MIN EA
VISIT; MASSAGE $ 28.76
97260 MANIP (SEPART PROC) PERFORMED BY
PHYS; 1 AREA $ 25.09
97530 KINETIC ACTIVITIES 1 AREA; 1ST 30
MIN EA VISIT $ 38.56
97700 OFFIC VISIT W/'CHECK-OUT'
TEST/MEASUR; 1ST 30MIN $ 80.17
97750 PHYSICAL PERFORMANCE TEST; 15 MIN. $ 44.06
PLASTIC SURGERY
11440 EXC BEN LES FACE/EARS/NOSE/ LIPS;
0.5 CM/LESS $ 150.96
11441 EXC BEN LES FACE/EARS/NOSE/ LIPS;
0.6 TO 1.0 CM $ 203.18
11442 EXC BEN LES FACE/EARS/NOSE/ LIPS;
1.1 TO 2.0 CM $ 248.88
11641 EXC MALIG LES FACE/EARS/
NOSE/LIPS; 0.6 TO 1.0 CM $ 380.26
11642 EXC MALIG LES FACE/EARS/
NOSE/LIPS; 1.1 TO 2.0 CM $ 463.49
13131 REPR COMPLX FOREHEAD/
CHIN/AX/GENIT/FT; 1.1-2.5 $ 485.52
13132 REPR COMPLX FOREHEAD/
CHIN/AX/GENIT/FT; 2.6-7.5 $ 878.02
13152 REPR COMPLX LIDS/NOSE/EARS/ LIPS;
2.6 TO 7.5 CM $ 986.54
13300 REPR UNUSUAL COMPLIC OVER 7.5 CM
ANY AREA $ 953.09
14040 ADJACENT TRANSF CHIN/NECK/ AX/FT;
10 SQ CM/LESS $1,191.36
14060 ADJACENT TRANSF LIDS/NOSE/ LIPS;
10 SQ CM/LESS $1,374.14
14300 ADJACENT TRANSF MORE THAN 30.0 SQ
CM COMPLIC $1,951.06
15100 SPLIT GFT TRUNK; 100 SQ CM/
LESS-EA 1% BODY CHILD $1,099.97
15734 MUSCL MYOCUT/FASCIOCUT FLAP; TRUNK $3,163.63
15755 FREE FLAP $5,202.00
15831 EXC EXCESSIVE SKIN & SUBQ TISS;
ABD $1,918.42
19318 REDUCTION MAMMAPLASTY $2,644.66
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
19350 NIPPLE/AREOLA RECON $1,385.57
19357 BREAST RECON IMMED/DELAY W/EXPANDR
W/SUBSQT EXPA $2,549.18
19369 BREAST RECON WITH TRANSVERSE FLAP $4,299.50
19371 PERIPROSTHETIC CAPSULECTOMY BREAST $1,492.46
30420 RHINOPLASTY PRIMARY; INCL MAJOR
SEPTAL REPR $2,888.64
30520 SEPTOPLASTY/SMR W/WO CARTIL
SCORING/REPLAC W/ GFT $1,110.58
35207 REPR BLD VESSEL DIRECT;
HAND-FINGER $1,555.81
PSYCHIATRY/PSYCHOLOGY
90801 PSYCH DX INTERVIEW W/HX-
MENTAL-STATUS-DISPOSIT $ 217.87
90825 PSYCH EVAL HOSP RECORDS/ OTHER
DATA MED DX PURPOS $ 80.78
90830 PSYCH TEST W/INTERPT & REPRT PER
HR $ 80.78
90841 INDIVI MED PSYCHOTHERAP-PHYS; TIME
UNSPEC $ 123.01
90843 INDIVI MED PSYCHOTHERAP-PHYS;
APPROX 20-30 MIN $ 114.44
90844 INDIVI MED PSYCHOTHERAP-PHYS;
APPROX 45-50 MIN $ 160.34
90847 FAMILY MED PSYCHOTHERAP & DRUG
MGMT WHEN INDICAT $ 175.64
90849 MX-FAMILY GRP MED PSYCHOTHERAP &
DRUG MGMT $ 53.86
90853 GRP MED PSYCHOTHERAP & DRUG MGMT
WHEN INDICATED $ 53.86
90855 INTERACTIVE INDIVI MED
PSYCHOTHERAP $ 173.20
90862 PHARM MGMT W/SCRIPT USE &
REVIEW-MIN PSYCHOTH $ 83.84
90870 ELEC-CONVULS THERAP; SNGL SEIZURE $ 153.61
90887 INTERPT/EXPLAN RESULTS
EXAM/PROC/DATA TO FAMILY $ 113.22
PULMONARY DISEASES
31622 BRONCHOSCOPY; DX W/WO CELL
WASHING/BRUSHING $ 547.54
31625 BRONCHOSCOPY; W/BX $ 616.08
31628 BRONCHOSCOPY; W/ TRANSBRONCH LUNG
BX W/WO FLUORO $ 740.11
31645 BRONCHOSCPY; W/THERAP ASPIRAT
TRACHEOBRONCH INIT $ 577.73
32000 THORACENTESIS-ASPIRAT-INIT/ SUBSQT $ 179.93
36200 INTRO CATH AORTA $ 430.54
36215 SELECT CATH PLCMT ART SYST; EA 1ST
ORDER THORAC $ 549.07
36489 PLCMT CENTRAL VENOUS CATH; PERCUT
OVER AGE 2 $ 179.21
</TABLE>
C-13
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
36500 VENOUS CATH SELECT ORGAN BLD SAMPL $ 257.75
36620 ART CATH/CANNULAT-SAMPL MONITOR
(SEP PRO); PERQ $ 139.23
70210 RAD EXAM SINUSES PARANASAL LESS
THAN 3 VIEWS $ 54.47
70220 RAD EXAM SINUSES PARANASAL COMPLT
MINI 3 VIEWS $ 72.83
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
71260 CAT THORAX; W/CONTRAST MAT $ 553.25
75774 ANGIO SELECT EA ADD VESSEL-AFTER
BASIC EXAM-S&I $ 813.96
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
82803 GASES BLD ANY COMBO-PH/
PCO2/PO2/CO2/HCO2 $ 56.92
85023 BLD CT; HG/PLATELET CT AUTO &
MANUAL WBC $ 24.48
85027 BLD CT; HG & PLATELET CT AUTOMATED $ 20.81
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
93503 INSRT & PLCMT FLO DIREC
CATH-MONITOR PURPOSES $ 345.17
94010 SPIROMETRY W/RECRD-TOT & TIMED
VC-EXPIR FLO RATE $ 55.08
94060 BRONCHOSPSM EVAL: SPIROM PRE &
POST BRONCHODILAT $ 102.20
94160 VITAL CAPACITY SCREENING TESTS:
TOT CAPACITY $ 34.88
94240 FUNCT RESIDUAL CAPACITY/ RESIDUAL
VOLUM: MX METHD $ 74.05
94375 RESPIRATORY FLOW VOLUM LOOP $ 62.42
94656 VENTILATION ASSIST & MGMT; 1 ST DA $ 151.16
94657 VENTILATION ASSIST & MGMT; SUBSQT
DA $ 91.80
94720 CARBON MONOXIDE DIFFUS CAPACITY
ANY METHD $ 83.84
94760 NONINVASIVE EAR/PULSE OXIMETRY-O2
SAT; 1 DETERM $ 16.52
94761 NONINVASIVE EAR/PULSE OXIMETRY O2
SAT; MX DETERM $ 42.84
RADIOLOGY
70470 CONTRAST CAT SCAN OF HEAD $ 556.31
70551 MAGNETIC IMAGE, BRAIN (MRI) $ 831.71
70553 MAGNETIC IMAGE, BRAIN $1,762.56
71010 CHEST X-RAY $ 45.90
71020 CHEST X-RAY $ 58.75
72100 X-RAY EXAM OF LOWER SPINE $ 61.81
72110 X-RAY EXAM OF LOWER SPINE $ 85.68
72131 CAT SCAN OF LOWER SPINE $ 473.69
72148 MAGNETIC IMAGE, LUMBAR SPINE $ 908.21
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
73610 X-RAY EXAM OF ANKLE $ 48.96
73620 X-RAY EXAM OF FOOT $ 45.29
73630 X-RAY EXAM OF FOOT $ 48.96
73721 MAGNETIC IMAGE, JOINT OF LEG $ 815.18
74160 CONTRAST CAT SCAN OF ABDOMEN $ 541.62
76091 MAMMOGRAM, BOTH BREASTS $ 135.86
76700 ECHO EXAM OF ABDOMEN $ 197.68
76805 ECHO EXAM OF PREGNANT UTERUS $ 222.77
76815 ECHO EXAM OF PREGNANT UTERUS $ 148.72
76830 ECHO EXAM, TRANSVAGINAL $ 159.73
76856 ECHO EXAM OF PELVIS $ 159.73
77413 RADIATION TREATMENT DELIVERY $ 145.04
77430 WEEKLY RADIATION THERAPY $ 332.93
78465 HEART IMAGE (3D) MULTIPLE $ 865.98
RHEUMATOLOGY
20550 INJ TENDON SHEATH/LIG/ TRIGGER
PT/GANGLION CYST $ 104.45
20600 ARTHROCENTESIS/ASPIR/INJ; SM
JT/BURSA/CYST $ 96.29
20605 ARTHROCENTESIS/ASPIR/INJ; INTERMED
JT/BURSA/CYST $ 96.29
20610 ARTHROCENTESIS/ASPIR/INJ; MAJOR
JT/BURSA $ 105.26
21345 CLO TX NASOMAXIL FX W/ INTERDENTAL
FIXA/SPLINT $1,333.34
72050 RAD EXAM SPINE CERV; MINI 4 VIEWS $ 84.46
72110 RAD EXAM SPINE LUMBOSACRAL; COMPLT
W/ OBLIQ VIEWS $ 85.68
73120 RAD EXAM HAND; 2 VIEWS $ 45.29
73560 RAD EXAM KNEE; ANTEROPOSTERIOR &
LAT VIEWS $ 47.74
73620 RAD EXAM FT; ANTEROPOSTERIOR & LAT
VIEWS $ 45.29
85023 BLD CT; HG/PLATELET CT AUTO &
MANUAL WBC $ 24.48
85024 BLD CT; HG/PLATELET CT AUTO & AUTO
PART WBC $ 23.26
85025 BLD CT; HG/PLATELET CT AUTO & AUTO
COMPLT WBC $ 23.26
85027 BLD CT; HG & PLATELET CT AUTOMATED $ 20.81
85651 SED RATE ERYTHROCYTE NON-AUTOMATED $ 9.18
90780 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; TO 1 HR $ 69.77
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
94010 SPIROMETRY W/RECRD-TOT & TIMED
VC-EXPIR FLO RATE $ 55.08
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
95860 NEEDLE EMG; 1 EXTREM & RELATED
PARASPINAL AREAS $ 130.97
95900 NERV CONDUCT VELOCITY/ LATENCY
STDY; MOTR EA NERV $ 66.71
95904 NERV CONDUC VELOCITY/ LATENCY
STDY; SENSRY EA NRV $ 57.53
96545 PROVISION CHEMOTX AGENT $ 46.51
99000 HANDL &/OR CONVEY SPECMN-TRANSF
OFFIC TO LAB $ 20.81
UROLOGICAL SURGERY
50220 NEPHRECTOMY INCL PART URETERECTOMY
W/RIB RESECT $2,193.41
50230 NEPHRECTOMY; RADICAL W/ REGIONAL
LYMPHADENECTOMY $2,913.12
50590 LITH EXTRACORPOREAL SHOCK WAVE $1,418.72
50780 URETERONEOCYSTOSTOMY; ANASTOM SNGL
URETER $2,310.50
51726 COMPLX CYSTOMETROGRAM $ 223.48
51840 ANT VESICOURETHROPEXY/
URETHROPEXY; SIMPL $1,446.56
51845 ABD-VAG VESICAL NECK SUSPEN W/WO
ENDO CONTRL $1,489.40
52000 CYSTOURETHROSCOPY (SEPART PROC) $ 248.47
52005 CYSTOURETHROSCOPY W/ URETERAL CATH
EXCLUS-RAD $ 342.01
52240 CYSTOURETHROSCOPY W/FULG &/OR
RESECT; LG TUMOR $1,528.67
52281 CYSTOURETHROSCOPY W/ CALIBRAT &/OR
DILAT URETHRAL $ 381.28
52310 CYSTOURETHROSCOPY W/ REMOV F B
(SEP PRO); SIMPL $ 435.54
52320 CYSTOURETHROSCOPY; W/ REMOV
URETERAL CALCU $ 716.14
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
52332 CYSTOURETHROSCOPY W/ INSRT
INDWELLING STENT $ 454.10
52335 CYSTOURETHROSCOPY W/ URETEROSCOPY
&/OR PYELOSCOPY $ 785.40
52336 CYSTOURETHROSCOPY W/ URETEROSCOPY;
W/REMOV CALCU $1,190.95
52337 CYSTOURETHROSCOPY W/ URETEROSCOPY;
W/LITH $1,375.16
52601 T U R P INCL CONTRL POSTOP
BLEEDING COMPLT $1,752.16
54161 CIRCUMCISION SURG EXC NOT
CLAMP/SLIT; EX NB $ 401.27
54640 ORCHIOPEXY-ING APPROACH-W/WO
HERNIA REPR $1,090.99
55040 EXC HYDROCELE; UNILAT $ 755.41
55250 VASECTOMY UNILAT/BILAT (SEP PRO)
W/POSTOP SEMEN $ 436.97
55700 BX PROSTATE; NEEDLE/PUNCH SNGL/MX
ANY APPROACH $ 229.91
55845 PROSTATECTOMY RETROPUBIC RAD;
W/BILAT LYMPHADEN $3,874.88
76870 ECHO SCROTUM & CONTENTS $ 154.22
76872 ECHO TRANSRECTAL $ 159.73
81000 UA DIP STICK/TABLET REAGENT;
W/MICRO $ 7.96
84150 PROSTAGLANDIN EA $ 72.22
86316 IMMUNOASSAY TUMOR ANTIG EA $ 39.78
87086 CULTURE BACTERIAL URIN; QUAN
COLONY CT $ 15.30
87088 CULTURE BACTERIAL URIN; IDENT ADD
QUAN/KIT $ 19.58
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
90788 IM INJ ANTIBIOTIC $ 7.34
96400 CHEMOTX ADMIN SUBCUT/IM W/WO LOCAL
ANES $ 8.57
96545 PROVISION CHEMOTX AGENT $ 46.51
</TABLE>
C-15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation and Bylaws of the Company provide that the
Company shall indemnify its officers and directors to the full extent permitted
by law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are as follows:
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 7,500
Printing and Engraving Expenses................................. 40,000
Accounting Fees and Expenses.................................... 160,000
Consultant Fees................................................. 425,000
Legal Fees and Expenses......................................... 400,000
Blue Sky Fees and Expenses...................................... 25,000
Transfer Agent's Fees and Expenses.............................. 12,000
Actuarial Fees and Expenses..................................... 200,000
Liability Insurance............................................. 50,000
Technology Consulting Expenses.................................. 90,000
Miscellaneous Expenses.......................................... 200,500
---------
Total........................................................... $1,610,000
---------
---------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The Company sold three shares of its Class C Common Stock to MedServ in a
private placement on September 1996 and raised $12,000 of gross proceeds
therefrom.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
ITEM #
- ---------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement
3.1 -- Certificate of Incorporation of the Registrant
3.2 -- Bylaws of the Registrant
4.1 -- Form of Class A Common Stock Certificate
4.2 -- Form of Class B Common Stock Certificate
5.1 -- Opinion of Fabiani & Kone, P.C.
10.1 -- Form of Physician Participation Agreement with IPA
10.2 -- Form of Hospital Participation Agreement with MedServ
10.3 -- Form of Physicians Care Primary Care Physician Attachment and Physicians Care Specialist Attachment
to Physician Agreement with IPA
10.4 -- Form of Stock Subscription Agreement
10.5 -- Loan Agreement, dated November 25, 1996, between the Company and Fleet Bank
10.6 -- Line of Credit Note, dated November 25, 1996, issued to Fleet National Bank in principal amount of
$650,000
10.7 -- Management Agreement by and between MedServ of Connecticut, Inc. and Registrant
10.8 -- IPA Agreement between MedServ of Connecticut, Inc. and MedServ IPA, Inc.
10.9 -- Form of Escrow Agreement with State Street Bank & Trust Company
23.1 -- Consent of Fabiani & Kone, P.C. (included in Exhibit 5.1)
23.2 -- Consent of Arthur Andersen LLP
24.1 -- Power of Attorney--Included on Page II-3
</TABLE>
- ------------------------
* To be filed by amendment
** Previously Filed
II-1
<PAGE>
ITEM 28. UNDERTAKINGS
Registrant undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to: (i) Include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) Reflect
in the prospectus any facts or events which, individually or together,
represent a fundamental change in the formation in the registration
statement; and notwithstanding the foregoing, an increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than
a 20% charge in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement. (iii) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act of 1933, treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time be the
initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the 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.
(5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions of its Certificate of Incorporation and
Bylaws, the Connecticut Corporation Act, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the 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, the 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 whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
registration statement on Form SB-2 to be signed on its behalf by the
undersigned, thereunto duly authorized in Cheshire, Connecticut on September 29,
1997.
Physicians Care for Connecticut, Inc.
By: /s/ JOSEPH R. COFFEY
------------------------------------------
Name: Joseph R. Coffey
Title: Chief Executive Officer
We, the undersigned officers and directors of Physicians Care for
Connecticut, Inc. hereby severally constitute and appoint Joseph R. Coffey and
Edward J. Berns, Esq. and each of them singly, our true and lawful attorneys,
with full power to them and each of them singly to sign for us and in our names
in the capacities indicated below, the Registration Statement on Form SB-2 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement, and, in connection with any registration of additional
securities pursuant to Rule 462(b) under the Securities Act of 1933, to sign any
abbreviated registration statement and any and all amendments thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, in each case, with the Securities and Exchange Commission, and
generally to do all such things in our names and on our behalf in our capacities
with the provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ------------------------------ --------------------------- -------------------
Director and Chief
/s/ JOSEPH R. COFFEY Executive Officer
- ------------------------------ (principal executive September 29, 1997
Joseph R. Coffey officer)
* Chairman of the Board of
- ------------------------------ Directors and President September 29, 1997
Craig W. Czarsty, MD
* Director
- ------------------------------ September 29, 1997
John M. Aversa, MD
* Director
- ------------------------------ September 29, 1997
Joseph A. Balsamo, MD
Director
- ------------------------------ September 29, 1997
John R. Galvin, Jr., MD
* Director
- ------------------------------ September 29, 1997
Ellen R. Fischbein, MD
Director, Chief Financial
* Officer and Treasurer
- ------------------------------ (principal financial and September 29, 1997
John B. Franklin, MD accounting officer)
II-3
<PAGE>
SIGNATURES TITLE DATE
- ------------------------------ --------------------------- -------------------
Director and Secretary
- ------------------------------ September 29, 1997
F.J. Montegut, MD
* Director
- ------------------------------ September 29, 1997
N. Chandra Narayanan, MD
Director
- ------------------------------ September 29, 1997
John W. Rodgers, MD
* Director
- ------------------------------ September 29, 1997
Earl J. Sittambalam, MD
* By: Edward J. Berns,
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM # PAGE
- --------- -----
<C> <S> <C> <C>
1.1 -- Form of Underwriting Agreement..............................................................
3.1 -- Certificate of Incorporation of the Registrant..............................................
3.2 -- Bylaws of the Registrant....................................................................
4.1 -- Form of Class A Common Stock Stock Certificate..............................................
4.2 -- Form of Class B Common Stock Stock Certificate..............................................
5.1 -- Opinion of Fabiani & Kone, P.C..............................................................
10.1 -- Form of Physician Participation Agreement with IPA..........................................
10.2 -- Form of Hospital Participation Agreement with MedServ.......................................
10.3 -- Form of Physicians Care Primary Care Physician Attachment and Physicians Care Specialist
Attachment to Physician Agreement with IPA..................................................
10.4 -- Form of Stock Subscription Agreement........................................................
10.5 -- Loan Agreement, dated November 25, 1996, between the Company and Fleet Bank.................
10.6 -- Line of Credit Note, dated November 25, 1996, issued to Fleet National Bank in principal
amount of $650,000..........................................................................
10.7 -- Management Agreement by and between MedServ of Connecticut, Inc. and Registrant.............
10.8 -- IPA Agreement between MedServ of Connecticut, Inc. and MedServ IPA, Inc.....................
10.9 -- Form of Escrow Agreement with State Street Bank & Trust Company.............................
23.1 -- Consent of Fabiani & Kone, P.C. (included in Exhibit 5.1)...................................
23.2 -- Consent of Arthur Andersen LLP..............................................................
24.1 -- Power of Attorney--Included on Page II-3....................................................
</TABLE>
- ------------------------
* To be filed by amendment
** Previously Filed
<PAGE>
EXHIBIT 1.1
PHYSICIANS CARE FOR CONNECTICUT, INC.
1520 Highland Avenue
Cheshire, Connecticut 06410
UNDERWRITING AGREEMENT
________________, 1997
NEWBURY, PIRET & CO., INC.
One Boston Place
Twenty-Sixth Floor
Boston, Massachusetts 02108
and
Legg Mason Wood Walker, Incorporated,
111 South Calvert Street
Baltimore, MD 21202
Dear Sirs:
Physicians Care for Connecticut, Inc., a Connecticut corporation (the
"Company") hereby confirms its agreement with you (the "Underwriter") as
follows. All capitalized terms not defined herein shall have the meanings set
forth in the Prospectus (as hereinafter defined).
SECTION 1
DESCRIPTION OF SECURITIES
The Company proposes to issue and sell to Eligible Purchasers up to
3,000 shares of its Class A Common Stock ("Class A Common Stock") and up to
3,000 shares of its Class B Common Stock ("Class B Common Stock" and together
with the Class A Common Stock, the "Common Stock"). The Common Stock which
the Company proposes to issue and sell (the "Shares") shall be sold at an
offering price of $4,000 per Share, subject to a prompt subscription price of
$3,000 per Share as set forth in the Prospectus and on other terms and
conditions set forth in the Prospectus and as hereinafter set forth. The
Company's authorized and outstanding capitalization, when the offering of the
securities contemplated hereby is permitted to commence and is completed,
will be as set forth in the Registration Statement (as hereinafter defined)
and Prospectus described hereinafter.
<PAGE>
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Underwriter to enter into this Agreement, the
Company hereby represents and warrants to and agrees with the Underwriter as
of the date hereof and as of the Closing Date as follows:
2.01 REGISTRATION STATEMENT AND PROSPECTUS. A Registration Statement
on Form SB-2 (File No. 333-22999) with respect to the Shares, including the
related Prospectus, copies of which have heretofore been delivered by the
Company to the Underwriter, has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Act"),
and the rules and regulations ("Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and said Registration
Statement has been filed with the Commission under the Act; all necessary
amendments to said Registration Statement, a copy of which has heretofore
been delivered to the Underwriter, has been filed; and the Company may file
on or after the effective date of such Registration Statement additional
amendments to said Registration Statement, including the final Prospectus.
As used in this Agreement, the term "Registration Statement" refers
to and means said Registration Statement and all amendments thereto,
including the Prospectus, all exhibits and financial statements, as it
becomes effective; the term "Prospectus" refers to and means the Prospectus
included in the Registration Statement when it becomes effective, and as
amended thereafter; and the term "Preliminary Prospectus" refers to and means
any prospectus included in said Registration Statement before it becomes
effective.
2.02 ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. The Commission
has not issued any order preventing or suspending the use of any Preliminary
Prospectus with respect to the Shares, and each Preliminary Prospectus has
conformed in all material respects with the requirements of the Act and the
applicable Rules and Regulations of the Commission thereunder and has not
included any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein not misleading. When
the Registration Statement becomes effective, until and on the Closing Date
(as hereinafter defined), the Registration Statement and Prospectus and any
further amendments or supplements thereto will contain all statements which
are required to be stated therein in accordance with the Act and the Rules
and Regulations for the purposes of the proposed public offering of the
Shares, and all statements of material fact contained in the Registration
Statement and Prospectus will be true and correct, and neither the
Registration Statement nor the Prospectus 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 not misleading; provided,
however, the Company does not make any representations or warranties as to
information contained in or omitted from the Registration Statement or the
Preliminary Prospectus or the Prospectus in reliance upon written information
furnished on behalf of the Underwriter specifically for use therein.
-2-
<PAGE>
2.03 FINANCIAL STATEMENTS. The financial statements of the Company,
together with related schedules and notes as set forth in the Registration
Statement and Prospectus, will present fairly the financial position and the
results of operations of the Company at the represented dates and for the
represented periods to which they apply; such financial statements have been
prepared in accordance with generally accepted accounting principles which
have been consistently applied throughout the periods concerned except as
otherwise stated therein.
2.04 INDEPENDENT PUBLIC ACCOUNTANT. Arthur Anderson LLP, which has
audited the financial statements as of and for the period ended March 31,
1997, filed with the Commission as part of the Registration Statement, and
which has reviewed certain other information of a financial or accounting
nature contained in the Registration Statement and the Prospectus, are
independent certified public accountants with respect to the Company as
required by the Rules and Regulations.
2.05 NO MATERIAL ADVERSE CHANGE. Except as may be reflected in or
contemplated by the Registration Statement and the Prospectus, subsequent to
the dates as of which information is given in the Registration Statement and
Prospectus, and through the Closing Date, (i) there has not been any material
adverse change in the condition, financial or otherwise, or management of the
Company, or in the Company's business taken as a whole, (ii) there has not
been any material transaction entered into by the Company other than
transactions in the ordinary course of business; (iii) the Company has not
incurred any material obligations, contingent or otherwise, which are not
disclosed in the Prospectus; (iv) there has not been any change in the
capital stock or long-term debt (except current payments) of the Company; and
(v) the Company has not paid or declared any dividends or other distributions.
2.06 NO DEFAULTS. The Company is not in default in the performance of
any obligation, agreement or condition contained in any debenture, note or
other evidence of indebtedness or any indenture or loan agreement of the
Company, other than as set forth in the Prospectus. The execution and
delivery of this Agreement and the consummation of the transaction herein
contemplated, and compliance with the terms of this Agreement will not
conflict with or result in a breach of any of the terms, articles of
incorporation of the Company or its bylaws, any note, indenture, mortgage,
deed of trust, or other agreement or instrument to which the Company is a
party or by which it or any of its property is bound, or any existing law,
order, rule, regulation, writ, injunction, or decree of any government,
governmental instrumentality, agency or body, arbitrator, tribunal or court,
domestic or foreign, having jurisdiction over the Company or its property.
The consent, approval, authorization, or order of any court or governmental
instrumentality, agency or body is not required for the consummation of the
transactions herein contemplated except such as may be required under the Act
or under the securities laws of any state or jurisdiction.
2.07 INCORPORATION AND STANDING. The Company has no interest in any
other corporation, partnership, joint venture or other entity. The Company
is, and at the Closing Date will be duly incorporated and validly existing in
good standing as a corporation under the laws of the State of Connecticut,
with an authorized and outstanding capital stock as set forth in the
-3-
<PAGE>
Registration Statement and the Prospectus, and with full corporate power and
authority to own its property and conduct its business as described in the
Registration Statement and Prospectus; the Company has full power and
authority to enter into this Agreement and to issue the Shares; and the
Company is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which it owns or leases real property or transacts
business requiring such qualification. The Company has paid all fees
required by the jurisdiction of incorporation and any jurisdiction in which
it is qualified as a foreign corporation.
2.08 LEGALITY OF OUTSTANDING STOCK. The outstanding common stock of
the Company has been duly and validly authorized and issued, and is fully
paid and nonassessable and will conform to all statements with regard thereto
contained in the Registration Statement and Prospectus. No offers to sell,
offers to buy, sales or purchases of securities have been made by the Company
in violation of the Act or in violation of any state law, regulation, rule or
order.
2.09 LEGALITY OF SHARES. The Shares have been duly and validly
authorized and, when issued or sold and delivered against payment therefore
as provided in this Agreement, will be validly issued, fully paid and
nonassessable. The Shares, upon issuance, will not be subject to preemptive
rights or contractual rights to purchase and the certificates for the Shares
will be valid and in proper legal form. The Shares will conform to all
statements with regard thereto in the Registration Statement and Prospectus.
2.10 PRIOR SALES. No securities of the Company have been sold by the
Company or by, or on behalf of, or for the benefit of, any person or persons
controlling, controlled by, or under common control with the Company at any
time prior to the date hereof, except as set forth in the Registration
Statement and Prospectus.
2.11 LITIGATION. Except as set forth in the Registration Statement and
Prospectus, there is, and at the Closing Date there will be, no action, suit
or proceeding before any court or governmental agency, authority or body
pending or to the knowledge of the Company, or its officers, directors,
employees or agents which the Company is obligated to indemnify, not
adequately covered by insurance and which collectively might result in any
material adverse change in the condition (financial or otherwise), the
business or the prospects of the Company, or would materially affect the
properties or assets of the Company.
2.12 FINDER. No person has acted as a finder in connection with the
transactions contemplated herein and the Company will indemnify the
Underwriter with respect to any claim for finder's fees in connection
herewith. The Company further represents that it has no management or
financial consulting or advisory agreement with anyone except as set forth in
the Registration Statement and Prospectus. The Company additionally
represents that, to the best of the knowledge of its officers, no promoter,
officer, director or shareholder of the Company is, directly or indirectly,
associated with a National Association of Securities Dealers, Inc. member
broker-dealer, other than such persons as the Company has advised the
Underwriter in writing are so associated.
-4-
<PAGE>
2.13 EXHIBITS. There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the Act or
by the Rules and Regulations which have not been so filed and each contract
to which the Company is a party and to which reference is made in the
Registration Statement or Prospectus has been duly and validly executed, is
in full force and effect in all material respects in accordance with their
respective terms, and none of such contracts has been assigned by the
Company; and the Company knows of no present situation or condition or fact
which would prevent compliance with the terms of such contracts, as amended
to date. Except for amendments or modifications of such contracts in the
ordinary course of business, the Company has no intention of exercising any
right which it may have to cancel any of its obligations under any of such
contracts, and has no knowledge that any other party to any of such contract
has any intention not to render full performance under such contracts.
2.14 TAX RETURNS. The Company has filed all federal, state and
municipal tax returns which are required to be filed, and has paid all taxes
shown on such returns and on all assessments received by it to the extent
such taxes have become due. All other taxes with respect to which the
Company is obligated have been paid or adequate accruals have been set up to
cover any such unpaid taxes.
2.15 PROPERTY. Except as otherwise set forth in the Registration
Statement and Prospectus, the Company has good title, free and clear of all
liens, encumbrances and defects, except liens for current taxes not due and
payable, to all property and assets which are described in the Registration
Statement and the Prospectus as being owned by the Company, subject only to
such exceptions as are described in the Registration Statement or Prospectus
and as are not material and do not materially adversely affect the present or
prospective business of the Company. All of the claims, leases and subleases
material to the real or personal property, including those described or
referred to in the Registration Statement and Prospectus, are in full force
and effect, and the provisions of any such claims, leases or subleases, and
no claim of any sort has been asserted by anyone adverse to the Company's
rights under any such claims, leases or subleases or affecting or questioning
the Company's rights to the continued possession of the claimed, leased or
subleased property covered by such claim, lease or sublease.
2.16 PATENTS, LICENSES AND TRADEMARKS. Except as set forth in the
Registration Statement and Prospectus, the Company owns or possesses or can
acquire on reasonable terms, adequate patent rights or licenses or other
rights to use patent rights, inventions, trademarks, service marks, trade
names, government permits and copyrights necessary to conduct the business
now or expected to be operated by it and the Company has not received any
notice of infringement of or conflict with asserted rights of others with
respect to any patent, names or copyrights which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
materially adversely affect the conduct of the business, operations,
financial condition or income of the Company.
2.17 OFFICER'S CERTIFICATES. Any certificate signed by any officer of
the Company in his capacity as such and delivered to the Underwriter or to
counsel for the Underwriter shall be
-5-
<PAGE>
deemed a representation and warranty by the Company to the Underwriter as to
the matters covered thereby.
2.18 AUTHORITY. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and this
Agreement is the valid, binding and legally enforceable obligation of the
Company.
SECTION 3
ISSUE, SALE AND DELIVERY OF THE SHARES
3.01 UNDERWRITER APPOINTMENT. The Company hereby appoints the
Underwriter as its exclusive agent for a period of 180 days, which period may
be extended for an additional 60 days at the sole discretion of the Board of
Directors, from the effective date of the Registration Statement (the
"Effective Date") to sell 3,000 Shares of Class A Common Stock and 3,000
Shares of Class B Common Stock on a $8,000,000 gross proceeds minimum "best
efforts, all-or-none," $24,000,000 gross proceeds maximum "best efforts"
basis (the "Offering"). On the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein set forth,
the Underwriter accepts such appointment and agrees to use its best efforts
to find purchasers for the Shares. The Underwriter shall receive as a
commission seven percent (7%) of the total proceeds resulting from the sale
of Shares. Such commissions shall be paid directly from the escrow
established by the Escrow Agreement referred to hereinafter. Once
subscriptions for Shares with an aggregate gross sales price of $8,000,000
are received, the agency between the Company and the Underwriter shall
continue until all the Shares are sold, or until the above described offering
period expires, including any extension thereof, or the Underwriter
unilaterally terminates the offering, whichever event first occurs. The
period of time during which the Shares are being offered by the Underwriter
as agent hereinafter shall be referred to as the "Offering Period." If the
Offering is abandoned by the Company prior to the date 240 days after the
Effective Date because of an inability to sell sufficient Shares to result in
an aggregate gross proceeds of $8,000,000, than the Company shall pay to the
Underwriter the sum plus all actual expenses pursuant to Section 3.05 hereof,
provided, however, that the amount of such legal fees and expenses shall be
capped at $50,000. If the Offering is abandoned by the Company for any other
reason prior to the date 240 days after the Effective Date, then the Company
shall pay to the Underwriter the sum of $420,000 plus all actual expenses
pursuant to Section 3.05 plus the amount of Underwriter's legal fees and
expenses incurred in connection with the Offering.
The Company agrees that the obligations of the Underwriter under this
Agreement shall not preclude the Underwriter from contemporaneously
participating in or underwriting the offering of securities of other issuers.
3.02 CERTIFICATES. Certificates evidencing the Shares, in such form
that they can be negotiated by the purchasers thereof, subject to such
restrictions on transfer as are set forth in the Prospectus, (issued in such
denominations and in such names as the Underwriter may direct the transfer
agent to issue), shall be made available by the Company to the Underwriter
for
-6-
<PAGE>
checking and packaging at the offices of the Company's counsel at least three
full business days prior to any Closing Date. The Company shall make
available for delivery such certificates on the subject Closing Date, with
any transfer taxes thereon duly paid by the Company, against payment of the
purchase price therefor by certified or bank cashier's check or other Boston
clearing house funds payable to the order of the Company.
3.03 ESCROW. It hereby is agreed between the Company and the
Underwriter that unless Shares with an aggregate sales price of $8,000,000
are sold during the Offering Period, this Agreement shall automatically be
terminated and the entire proceeds received from the sale of securities shall
be returned to subscribers of the Company's Shares, plus accrued interest
and less $450 per Share subscribed. During the Offering Period, the proceeds
from the sale of the Shares shall be forwarded promptly to the escrow agent
(the "Escrow Agent") in accordance with Rule 15c2-4 of the Rules and
Regulations and the escrow agreement (the "Escrow Agreement"), which will be
substantially in the form filed as an exhibit to the Registration Statement,
or if not so filed, as mutually agreed upon by the Underwriter and the
Company.
3.04 CLOSING. The sale of any of the Company's securities pursuant
hereto and payment to the Company therefore is called herein a "Closing."
The time and date of delivery of securities sold and payment to the Company
hereunder is called herein a "Closing Date." Notwithstanding any provision
hereof to the contrary, "Closing" and "Closing Date" shall refer to and mean
each sale of securities and payment to the Company pursuant to this Agreement
if the sale of all 6,000 Shares does not occur at a single Closing on one
Closing Date. Subject to subscriptions to purchase Shares with an aggregate
sales price of $8,000,000, the first Closing shall take place at the office
of the Underwriter at the address set forth at the beginning of this
Agreement on such date and after such time as will be fixed by notice in
writing to be given by the Underwriter to the Company, such date to be not
less than two (2) full business days after the date on which the conditions
allowing the release of proceeds from the escrow account (the "Escrow
Account") to the Company and Underwriter as provided in the Escrow Agreement
shall have occurred. The Closing Date and place may be changed by the
agreement of the Underwriter and the Company. To the extent that any of the
remaining Shares to be offered by the Underwriter are not closed upon with
the Shares subscribed to satisfy the minimum $8,000,000 aggregate sales
price, the Underwriter shall establish additional Closings at such times as
the conditions allowing the release of additional proceeds from the escrow
account shall have occurred.
3.05 EXPENSE ALLOWANCE. The Company shall reimburse the Underwriter
its expenses on a nonaccountable basis in an amount equal to the sum of 1.5%
of the gross dollar amount of the Shares sold, less $50,000 which the
Underwriter acknowledges has been paid, such amount to be due and payable
only after the Closing. Additionally, the Company shall reimburse the
Underwriter all actual expenses of Newbury, Piret & Co., Inc. on an
accountable basis including, without limitation, advertising, postage,
travel, printing, research, courier, telephone and facsimile costs but
excluding the fees and expenses of the Underwriter's legal counsel (except
such fees and expenses related solely to blue sky qualification of the
Shares.) The accountable expenses shall exclude the fees of the Company's
counsel, but shall include fees of
-7-
<PAGE>
legal counsel retained to perform state filings, Commission and state filing
fees, National Association of Securities Dealers, Inc. filing fees, and any
and all other expenses customarily paid by the Company. The Company shall
pay the Underwriter the balance of the nonaccountable expense allowance and
all actual expenses on an accountable basis as described above on the release
to the Company by the Escrow Agent of the proceeds from the sale of the
Shares, such amounts to be paid directly from the Escrow Account.
3.06 REPRESENTATIONS AND WARRANTIES. The parties hereto each represent
that as of the Closing Date the representations and warranties herein
contained and the statements contained in all the certificates heretofore or
simultaneously delivered by any party to another, pursuant to this Agreement,
shall in all material respects be true and correct.
SECTION 4
OFFERING OF THE SHARES ON BEHALF OF THE COMPANY
4.01 AGENCY. In offering the Shares for sale, the Underwriter shall
offer the Shares solely as an agent for the Company and such offer shall be
made upon the terms and subject to the conditions set forth in the
Registration Statement and Prospectus. The Underwriter shall commence making
such offer as an agent for the Company as soon after the Effective Date of
the Registration Statement as the Underwriter in its sole discretion deems
advisable; provided, however, that if the Underwriter does not commence such
offering within three business days after the Effective Date, it shall so
advise the Company. With respect to the sale of the Shares, customer checks
will be made payable to the Escrow Agent in accordance with Rule 15c2-4 of
the Securities Exchange Act of 1934 and customer funds will be transmitted to
the Escrow Agent by participating dealers by noon of the next business day
following their receipt in accordance with rule 15c2-4 of the Securities
Exchange Act. The Company agrees to appoint no other agents in offering the
Shares for sale, except as herein provided.
SECTION 5
REGISTRATION STATEMENT AND PROSPECTUS
5.01 UNDERWRITER'S COPIES. The Company shall deliver to the
Underwriter, without charge, three manually signed copies of the Registration
Statement, including all financial statements and exhibits filed therewith
and any amendments or supplements thereto, and shall deliver without charge
to the Underwriter a minimum of seven conformed copies of the Registration
Statement and any amendment or supplement thereto, including such financial
statements and exhibits. The signed copies of the Registration Statement so
furnished to the Underwriter will include signed copies of any and all
consents and certificates of the independent public accountant certifying to
the financial statements included in the Registration Statement and
Prospectus and signed copies of any and all consents and certificates of any
other persons whose profession gives authority to statements made by them and
who are named in the Registration Statement and Prospectus as having
prepared, certified, or reviewed any part thereof.
-8-
<PAGE>
5.02 COPIES OF PRELIMINARY PROSPECTUS. The Company will deliver to the
Underwriter, without charge, as many copies of each Preliminary Prospectus
filed with the Commission bearing in red ink the statement required by the
Commission's Regulation S-B, Item 501(a)(5), as may be required by the
Underwriter. The Company consents to the use of the Preliminary Prospectus
by the Underwriter and by Co-Managers prior to the Effective Date. The
Company will procure, at its expense, as many printed copies of the
Prospectus as the Underwriter may require for the purposes contemplated by
this Agreement and shall deliver said printed copies of the Prospectus within
two business days after the Effective Date. The Company, at its expense,
will deliver as many printed copies of the Preliminary Prospectus and final
(definitive) Prospectus to the Underwriter at addresses, and in the quantity
at each address, as specified by the Underwriter, and each Preliminary
Prospectus and Prospectus shall be suitable for mailing and other
distribution.
5.03 POST-EFFECTIVE AMENDMENTS. If during such period of time as in
the opinion of the Underwriter or its counsel a prospectus related to this
Offering is required to be delivered under the Act, any event occurs or any
event known to the Company relating to or affecting the Company shall occur
as a result of which the Prospectus as then amended or supplemented 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
after the Effective Date to amend or supplement the Prospectus to comply with
the Act, the Company will immediately notify the Underwriter thereof and the
Company will immediately prepare and file with the Commission such further
amendment to the Registration Statement or supplemental or amended Prospectus
as may be required and furnish and deliver to the Underwriter and to others
whose names and addresses are designated by the Underwriter, all at the cost
of the Company, a reasonable number of copies of the amended or supplemented
Prospectus which as so amended or supplemented will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the Prospectus not misleading in the light of the circumstances
when it is delivered to a purchaser or prospective purchaser, and which will
comply in all respects with the Act; and in the event the Underwriter is
required to deliver a prospectus 90 days or more after the date of
commencement of the Offering, upon request the Company will prepare promptly
such Prospectus or Prospectuses as may be necessary to permit compliance with
the requirements of Section 10 of the Act.
5.04 USE OF PROSPECTUS. The Company authorizes the Underwriter, in
connection with the distribution of the Shares and all dealers to whom any of
the Shares may be sold by the Underwriter, to use the Prospectus as from time
to time amended or supplemented in connection with applicable provisions of
the Act and the applicable rules and Regulations thereunder and applicable
state securities laws.
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SECTION 6
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Underwriter that:
6.01 FILING OF AMENDMENTS. After the date hereof, the Company will not
at any time, whether before or after the Effective Date, file any amendment
or supplement to the Registration Statement or Prospectus unless the
Underwriter shall have previously been advised of the filing of such
amendment or supplement and a copy of such amendment or supplement shall have
previously been furnished to the Underwriter a reasonable time period prior
to the proposed filing thereof, and the Underwriter or counsel for the
Underwriter shall not have reasonably objected to the filing of such
amendment or supplement on the grounds that such amendment or supplement is
not in compliance with the Act or the Rules and Regulations.
6.02 EFFECTIVENESS OF REGISTRATION STATEMENT. The Company will use its
best efforts to cause the Registration Statement, and any post-effective
amendment subsequently filed, to become effective as promptly as reasonably
practicable and will promptly advise the Underwriter, and will confirm such
advise in writing, (i) when the Registration Statement shall have become
effective, when any amendment thereto shall have become effective, and when
any amendment of or supplement to the Prospectus shall be filed with the
Commission, (ii) when the Commission shall make a request or suggestion for
any additional information, and the nature and substance thereof, (iii) when
the Commission shall issue an order temporarily suspending the effectiveness
of the Registration Statement pursuant to Section 8 of the Act or of the
initiation of any proceedings for that purpose, (iv) upon the happening of
any event which, in the judgment of the Company, makes any material statement
in the Registration Statement and Prospectus untrue or which requires the
making of any changes in the Registration Statement and Prospectus in order
to make the statements therein not misleading, and (v) upon the refusal of
any state securities administrators to qualify, or the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of
the institution of any proceedings for any of such purposes. The Company
will use every reasonable effort to prevent the issuance of any such order
suspending the effectiveness of the Registration Statement, to prevent any
such refusal to qualify or any such suspension and to obtain as soon as
possible the lifting of any such order, the reversal of any such refusal, and
the termination of any such suspension.
6.03 AMENDMENTS TO REGISTRATION STATEMENT. The Company will prepare
and file promptly with the Commission, upon request of the Underwriter, such
amendments or supplements to the Registration Statement and Prospectus, in
form reasonably satisfactory to counsel to the Company, as in the opinion of
the Underwriter may be necessary or advisable in connection with the offering
or distribution of the Shares.
6.04 BLUE SKY FILINGS. As a condition of closing, the Company, at its
own expense, will qualify the Shares or such part thereof for sale under the
applicable laws of Connecticut, Rhode Island, New York and Massachusetts and
such other states as are mutually agreed to by
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the Company and the Underwriter, and continue such qualifications in effect
so long as required for the purpose of distribution of the Shares.
6.05 ADDITIONAL INFORMATION. The Company, at its own expense, will
prepare and give and will continue to give such financial statements and
other information to and as may be required by the Commission or the
governmental authorities of states in which the Shares may be qualified.
6.06 REPORTS TO UNDERWRITER. During the Offering Period, the Company
will deliver to the Underwriter: (i) within 90 days after the close of each
fiscal year of the Company, a financial report of the Company and its
subsidiaries, if any, on a consolidated basis, and a similar financial report
of all unconsolidated subsidiaries, if any, all such reports to include a
balance sheet as of the end of the preceding fiscal year, an income
statement, a statement of changes in financial condition and a statement of
stockholders' equity covering such fiscal year, and all to be in reasonable
detail and audited by independent public accountants who may, however, be the
regularly employed independent public accountants, of the Company; (ii)
within 45 days after the end of each quarterly fiscal period of the Company
other than the last quarterly fiscal period in any fiscal year, copies of the
income statement and statement of changes in financial condition for that
period, and the balance sheet as of the end of that period statement,
statement of changes in financial condition and the balance sheet of each
unconsolidated subsidiary, if any, of the Company for that period, all
subject to year-end adjustment, signed by the principal executive or
principal financial or accounting officer of the Company; (iii) copies of all
other statements, documents, or other information which the Company shall
mail or otherwise make available to any class of its security holders, to the
press or to the public or shall file with the Commission, including, but not
limited to periodic reports required to be filed under Sections 13 and 15 of
the Securities Exchange Act of 1934, as amended, in particular Forms 10-KSB,
10-QSB and 8-K (which shall be provided within the same period such reports
are required to be filed with the Commission); and (iv) upon request in
writing from the Underwriter, furnish to the Underwriter such other
information as may reasonably be requested with reference to the property,
business and affairs to the Company and its subsidiaries, if any.
If the Company shall fail to furnish the Underwriter with financial
statements as herein provided, within the times specified herein, the
Underwriter, at the Company's expense, shall have the right to have such
financial statements prepared by independent public accountants of its own
choosing, subject to the Company's approval, which will not be unreasonably
withheld, and the Company agrees to furnish to such independent public
accountants such data and assistance and access to such records as they may
reasonably require to enable them to prepare such statements.
6.07 EXPENSES OF THE OFFERING. The Company will pay, whether or not
the transactions contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs and expenses
incident to the performance of its obligations under this Agreement,
including all expenses incident to the authorization of the Shares and its
issue and delivery to the Underwriter, any original issue taxes in connection
therewith, all
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transfer taxes, if any, incident to the initial sale of the Shares to the
public, the fees and expenses of the Company's counsel and accountants, the
costs and expenses incident to the preparation, printing and filing under the
Act and with the National Association of Securities Dealers, Inc. of the
Registration Statement, any Preliminary Prospectus and the Prospectus and any
amendments or supplements thereto, the cost of preparing for filing and
filing all exhibits to the Registration Statement, this Agreement, the
Participating Dealers Agreement and any Blue Sky Memorandum and any
underwriter's questionnaire, the cost of printing and furnishing to the
Underwriter copies of the Registration Statement and copies of the Prospectus
as herein provided, and the cost of qualifying the Shares under the state
securities laws as provided in Section 6.04 herein including filing fees.
6.08 SHAREHOLDER REPORTS. During the Offering Period, the Company, as
promptly as possible after each annual fiscal period, will prepare and
distribute reports to its shareholders which will include audited statements
of its operation and changes of financial position during such period and its
balance sheet as of the end of such period.
6.09 EARNINGS STATEMENT. Not later than the 45th day following the end
of the first fiscal quarter first occurring after the first anniversary of
the Effective Date, the Company will make generally available to its security
holders in accordance with Section 11(a) of the Act, and will deliver to the
Underwriter, an earnings statement, which need not be audited, covering a
twelve-month period beginning after the Effective Date.
6.10 COMPLIANCE WITH THE ACT. Within the time during which the
Prospectus is required to be delivered under the Act, the Company will
comply, at its own expense, with all requirements imposed on it by the Act,
as now or hereafter amended, by the Rules and Regulations promulgated
thereunder, and applicable state laws as from time to time may be in force,
and by any order of the Commission and state authorities so far as necessary
to permit the continuance of sales or dealings in the Shares.
6.11 USE OF PROCEEDS. The Company will apply the proceeds from the
sale of Shares to the purposes set forth in the Registration Statement and
Prospectus. To the extent the Registration Statement and Prospectus contain
a provision that the Board of Directors may change the priority or purpose
for which the proceeds are applied, the Company, through its Board of
Directors, will establish procedures reasonably designed to ensure compliance
with such provision.
6.12 DELIVERY OF DOCUMENTS. Prior to the Closing Date, the Company
will deliver to the Underwriter true and correct copies of the Articles of
Incorporation of the Company and all amendments thereto, all such copies to
be certified by the Secretary of State or other appropriate officers of the
state or other jurisdiction of incorporation; true and current copies of the
By-Laws of the Company and of the minutes of all meetings of the directors
and shareholders of the Company held since inception of the Company through
the Closing Date and all minutes which in any way relate to the subject
matter of this Agreement, all certified by the Chief Executive Officer of the
Company as to accuracy and completeness; and true and correct copies of all
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material contracts to which the Company is a party, other than contracts for
the sale of products or services in the normal course of business.
6.13 UNDERWRITER'S DUE DILIGENCE. Up to and through the last Closing
Date, the Company and its officers and directors will cooperate with the
Underwriter in such investigation as the Underwriter may make or cause to be
made of the properties, business, management and operations of the Company in
connection with the public offering of the Shares, and the Company will make
available to the Underwriter in connection therewith such information in its
possession as the Underwriter may reasonably request.
6.14 NEWS RELEASES. Up to and through the last Closing Date, no
discussions will be held by officers and directors of the Company with any
member of the news media and no news release or other publicity about the
Company will be permitted without the approval of the Company's and the
Underwriter's respective legal counsel.
6.15 SALES OF SECURITIES. No offering, sale or other disposition of
any equity securities will be made during the Offering Period, directly or
indirectly by the Company, otherwise than hereunder or with the Underwriter's
consent, which shall not be unreasonably withheld.
6.16 TRANSFER AGENT. The Company has appointed Boston EquiService,
Inc. as Transfer Agent for the Shares. The Company will not change or
terminate such appointment during the Offering Period without first obtaining
the written consent of the Underwriter, which consent shall not be
unreasonably withheld.
6.17 COMPLIANCE. The Company will use all reasonable efforts to comply
or cause to be complied with the conditions precedent to the several
obligations of the Underwriter specified in this Agreement.
6.18 FORM 8-A. The Company shall register the classes of equity
securities of which the Stock is a part by filing with the Securities and
Exchange Commission a registration statement (and such copies thereof as the
Commission may require) with respect to such security containing such
information and documents as the Commission may specify, pursuant to Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and will
use its best efforts to have such registration statement declared effective
by the Commission concurrently with the Registration Statement being declared
effective. Copies of such filing shall be provided to the Underwriter and
its counsel.
6.19 MANUAL FILINGS. Immediately after the first Closing Date, the
Company shall apply for listing in Moody's OTC Guide or Standard and Poor's
Standard Corporation Reports and use its best efforts to have the Company
listed in such report provided, however, that the Company shall apply for
both such listings if requested in writing by the Underwriter.
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6.20 CLOSING BINDERS. The Company, at its expense, shall provide two
sets of hard back, book bound copies of all SEC, NASD and blue sky filings
and all related corporate documents to each of the Underwriter and its legal
counsel.
SECTION 7
INDEMNIFICATION
7.01 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify,
defend and hold harmless the Underwriter and each person who controls the
Underwriter within the meaning of either Section 15 of the Act or Section 20
of the Securities Exchange Act from and against any and all losses, claims,
damages, liabilities or expenses, joint or several, (including reasonable
legal or other expenses incurred by each such person in connection with
investigating, preparing or defending against any such litigation, commenced
or threatened, or claims or liabilities, whether or not resulting in any
liability to such person) which they or any of them may incur under the Act,
or any state securities law and the Rules and Regulations or the rules and
regulations under any state securities laws or any other statute or at common
law or otherwise and to reimburse persons indemnified as above for any legal
or other expense (including the cost of any investigation and preparation)
incurred by any of them in connection with any litigation, whether or not
resulting in any liability, but only insofar as such losses, claims, damages,
liabilities and litigation arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereto or any application or other
document filed in any state or other jurisdiction in order to qualify the
Shares under the securities laws thereof, or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, all as of the date when the
Registration Statement or such amendment, as the case may be, becomes
effective, or any untrue statement or alleged untrue statement of a material
fact contained in the Prospectus (as amended or supplemented if the Company
shall have filed with the Commission any amendments thereof or supplements
thereto), or the omission or alleged omission to state therein a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the indemnity agreement contained in this Section 7.01 shall not apply
to amounts paid in settlement of any such litigation if such settlements are
effected without the consent of the Company, nor shall it apply to the
Underwriter or any person controlling the Underwriter in respect of any such
losses, claims, damages, liabilities or actions arising out of or based upon
any such untrue statements or alleged untrue statement, or any such omission
or alleged omission, if such statement or omission was made in reliance upon
information furnished in writing to the Company by such Underwriter
specifically for use in connection with the preparation of the Registration
Statement and Prospectus or any such amendment or supplement thereto. This
indemnity agreement is in addition to any other liability which the Company
may otherwise have to the Underwriter.
7.02 NOTIFICATION TO THE COMPANY OF PROCEEDINGS. The Underwriter
agrees to notify the Company promptly of the commencement of any litigation
or proceeding against it or against
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any such controlling person, of which it may be advised, in connection with
the offer and sale of any of the Shares of the Company, and to furnish to the
Company at its request copies of all pleadings therein and permit the Company
to be an observer therein and apprise it of all the developments therein. In
case of commencement of any action in which indemnity may be sought from the
Company on account of the indemnity agreement contained in Section 7.01, the
Underwriter agrees within a reasonable time after the receipt by it of
written notice of the commencement of any action against the Underwriter or
against any person controlling it as aforesaid, to notify the Company in
writing of the commencement thereof. The omission of the Underwriter so to
notify the Company of any such action shall relieve the Company from any
liability which it may have to the Underwriter or any person controlling it.
In case any such action shall be brought against the Underwriter or any such
controlling person of which the Underwriter shall have notified the Company
of the commencement thereof, the Company shall be entitled to participate in
the defense thereof at its own expense, but such defense shall be conducted
by counsel of recognized standing and reasonably satisfactory to the
Underwriter or such controlling person or persons, defendant or defendants in
such litigation.
7.03 INDEMNIFICATION BY THE UNDERWRITER. The Underwriter agrees in the
same manner and to the same extent as set forth in Section 7.01 above, to
indemnify and hold harmless the Company, the directors of the Company, each
officer who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of either Section 15 of the Act or
Section 20 of the Securities Exchange Act with respect to any statement in or
omission from the Registration Statement or any amendment thereto, and the
Prospectus, or any amendment thereto, or any application or other document
filed in any state or other jurisdiction in order to qualify the Shares under
the securities laws thereof, or any information furnished pursuant to Section
3.04 hereof, if such statements or omissions were made in reliance upon
information furnished in writing to the Company by the Underwriter on its
behalf specifically for use in connection with the preparation thereof or
amendment thereto, or with respect to any failure of the Underwriter to
deliver a Prospectus in accordance with the requirements of Section 5 of the
Act, or with respect to any untrue statement or alleged untrue statement of a
material fact made by the Underwriter or its agents not based on statements
in the Prospectus or authorized in writing by the Company, or with respect to
any misleading statement or alleged misleading statement made by the
Underwriter or its agents resulting from the omission of material facts which
misleading statement is not based upon the Prospectus, or information
furnished in writing by the Company. This indemnity agreement is in addition
to any other liability which the Underwriter may otherwise have to the
Company.
7.04 NOTIFICATION TO THE UNDERWRITER OF PROCEEDINGS. The Company
agrees to notify the Underwriter promptly of commencement of any litigation
or proceedings against it or any of its officers or directors, of which it
may be advised, in connection with the offer and sale of any of its Shares
and to furnish to the Underwriter, at its request, copies of all pleadings
therein and permit the Underwriter to be an observer therein and apprise the
Underwriter of all developments therein, all at the Company's expense. In
case of commencement of any action in which indemnity may be sought from the
Underwriter on account of the indemnity agreement contained in Section 7.03,
each person agreed to be indemnified by the Underwriter shall notify
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the Underwriter of the commencement thereof in writing within 10 days. The
omission of the Company to so notify the Underwriter of any such action shall
relieve the Underwriter from any liability which it may have to the Company
or any person controlling it on account of the indemnity agreement contained
in Section 7.03 or otherwise. In case any such action shall be brought
against the Company or any such controlling person of which the Company shall
have notified the Underwriter of the commencement thereof, the Underwriter
shall be entitled to participate in (and to the extent that it shall wish, to
direct) the defense thereto at its own expense. The Underwriter shall not be
liable for amounts paid in settlement of any litigation if such settlement
was effected without its consent.
7.05 CONTRIBUTION. If the indemnification provided for in paragraphs
7.01 and 7.03 is unavailable to an indemnified party in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under either such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and by the Underwriter on
the other from the offering of the Shares or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand
and of the Underwriter on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriter 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 bears to the
total underwriting discounts and commissions received by the Underwriter, as
in each case set forth in the table on the cover page of the Prospectus. The
relative fault of the Company and of the Underwriter shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the Company or by the Underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission.
The Company and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 7, the
Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public exceeds the amount of any damages which such
Underwriter otherwise has been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
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of fraudulent misrepresentation (within the meaning of Section ll(f) of the
Act) shall be entitled to contribution hereunder from any person who was not
guilty of such fraudulent misrepresentation.
SECTION 8
EFFECTIVENESS OF AGREEMENT
This Agreement shall be effective as of 9:00 A.M., Boston local time, on
the Effective Date.
SECTION 9
CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS
The Underwriter's obligations to act as agent of the Company hereunder
and to solicit purchasers for the Shares and to make payment to the Company
hereunder shall be subject to the accuracy of the representations and
warranties on the part of the Company herein contained, to the performance by
the Company of all their respective agreements herein contained, to the
fulfillment of or compliance by the Company with all covenants and conditions
hereof, and to the following additional conditions:
9.01 EFFECTIVE REGISTRATION STATEMENT; NO STOP ORDER. The Registration
Statement shall have become effective and you shall have received notice
thereof not later than 5:00 p.m., Boston local time, on the date of this
Agreement, or at such later time or on such later date as to which you may
agree in writing. In addition, on each Closing Date, (i) no stop order
denying or suspending the effectiveness of the Registration Statement shall
be in effect and no proceedings for that or any similar purpose shall have
been instituted or shall be pending or, to your knowledge or to the knowledge
of the Company, shall be contemplated by the Commission, and (ii) all
requests on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Sullivan & Worcester,
LLP, counsel to the Underwriter.
9.02 OPINION OF COMPANY COUNSEL. On each Closing Date, you shall have
received the opinion, dated as of each Closing Date, of Hutchins, Wheeler &
Dittmar, counsel for the Company, in form and substance satisfactory to
counsel for the Underwriters, to the effect that:
(i) the Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Connecticut with full corporate power and authority to own its properties
and conduct its business as described in the Prospectus and is current in
the payment of all corporate fees due and owing to its state of
incorporation. Hutchins, Wheeler & Dittmar may rely on the opinion of
Fabriani & Kane, P.C. with respect to the matters set forth in this
paragraph 9.02(i).
(ii) the Company is duly authorized to transact business in which it
is engaged and is in good standing in each jurisdiction in which its
ownership of property
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or its conduct of business requires such authorization, specifying each
such jurisdiction, and is current in the payment of all corporate fees
due and owning in each such jurisdiction.
(iii) to the best knowledge of such counsel: (A) the Company has
obtained, or is in the process of obtaining, all necessary licenses,
permits and other governmental authorizations currently required for the
conduct of its business or the ownership of its property; (B) such
obtained licenses, permits and other governmental authorizations are in
full force and effect; and (C) the Company is in all material respects
complying therewith;
(iv) (A) the authorized capitalization of the Company as of the date
of the Prospectus was as set forth under the "CAPITALIZATION" Section of
the Prospectus; (B) all of the shares of the Company's Common Stock now
outstanding have been duly authorized and validly issued, are fully paid
and non-assessable and conform to the description thereof contained in
the Prospectus, have not been issued in violations of the pre-emptive
rights of any stockholder and, except as described in the Prospectus, to
the best knowledge of such counsel, are not subject to any restrictions
upon the voting or transfer thereof; (C) the Shares to be issued as
contemplated in the Registration Statement have been duly authorized and,
when issued and delivered against payment therefor as provided herein,
will be validly issued, fully paid and nonassessable, will not have been
issued in violation of the pre-emptive rights of any stockholder, and no
personal liability will attach to the ownership thereof; (D) except as
described in the Prospectus, the security holders of the Company do not
have any pre-emptive rights or other rights to subscribe for or purchase,
and there are no restrictions imposed by the Company upon the voting or
transfer of, any shares of Common Stock owned by them, except for transfer
restrictions imposed by federal or state securities laws; (E) the Shares
conform in all material respects to the respective descriptions thereof
contained in the Prospectus; (F) all prior sales of the Company's
securities have been made in compliance with, or under an exemption form,
the Act and applicable state securities laws; and to the best of such
counsel's knowledge, except as described in the Prospectus, neither the
filing of the Registration Statement nor the offering or sale of the
Shares as contemplated by this Agreement gives rise to any registration
rights or other rights, other than those which have been waived or
satisfied or described in the Prospectus, for or relating to the
registration of any securities of the Company;
(v) this Agreement has been duly and validly authorized, executed
and delivered by the Company, and assuming due execution and delivery by
you, all of such agreements are, or when duly executed will be, the valid
and legally binding obligations of the Company; provided, however, that no
opinion need be expressed as to the enforceability of the indemnity
provisions contained in Section 7 of this Agreement;
(vi) the certificates evidencing the Shares are in valid and proper
legal form;
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(vii) to the best knowledge of such counsel, except as required to be
described in the Prospectus: (A) there is no pending or threatened legal
or governmental proceeding affecting the Company which could materially
and adversely affect the business, property, operations, condition
(financial or otherwise) or results of operations of the Company, or which
questions the validity of the Shares or this Agreement or any action taken
or to be taken by the Company pursuant thereto; and (B) there is no legal
or governmental proceeding or regulation required to be described or
referred to in the Registration Statement which is not so described or
referred to;
(viii) to the best knowledge of such counsel: (A) the Company is not
in violation of or default under this Agreement; and (B) and the execution
and delivery hereof and thereof and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions
herein or therein contemplated will not result in a violation of, or
constitute a default under, the Certificate of Incorporation or By-laws of
the Company, or any material obligation, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of indebtedness
or in any material contract, indenture, mortgage, loan agreement, lease,
joint venture, other agreement or instrument filed as an Exhibit to the
Registration Statement and to which the Company is a party or by which its
assets are bound or any material order, rule, regulation, writ, injunction
or decree of any government, governmental instrumentality or court,
domestic or foreign;
(ix) the Registration Statement has become effective under the Act,
and to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement is in effect, and to the best
knowledge of such counsel no proceeding for that or any similar purpose
have been instituted or are pending before, or threatened by, the
Commission;
(x) the Registration Statement and the prospectus (except for the
financial statements and other financial data contained therein, or
omitted therefrom, as to which such counsel need express no opinion)
comply as to form in all material respects with the applicable
requirements of the Act and the Rules and Regulations;
(xi) all descriptions contained in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts and other
documents are accurate and fairly present the information required to be
described, and such counsel is familiar with all contracts and other
documents referred to in the Registration Statement and the Prospectus and
any such amendment or supplement, or filed as exhibits to the Registration
Statement, and such counsel does not know of any contracts, documents,
licenses or permits of a character required to be summarized or described
therein or to be filed as exhibits thereto which are not so summarized,
described or filed;
(xii) no authorization, approval, consent or license of any
governmental or regulatory authority or agency is necessary in connection
with the authorization, issuance, transfer, sale or delivery of the Shares
by the Company, in connection with the
19
<PAGE>
execution, delivery and performance by the Company of this Agreement or
in connection with the taking by the Company of any action contemplated
herein, other than registration or qualification of the Shares under
applicable state or foreign securities or blue sky laws and registration
under the Act; and
(xiii) the statements in the Registration Statement under the captions
"BUSINESS," "USE OF PROCEEDS," "MANAGEMENT," "DESCRIPTION OF SECURITIES"
and "CONFLICTS OF INTEREST" have been reviewed by such counsel and insofar
as they refer to descriptions of agreements, statements of laws,
descriptions of statutes, licenses, rules or regulations or legal
conclusions, are correct in all material respects.
Such opinion shall also state that Company counsel's examination of the
Registration Statement and its discussions with the Company and its
independent auditors did not disclose any information which gives Company
counsel reason to believe that the Registration Statement (other than the
Underwriting Information, the financial statements and other financial and
statistical information as to which counsel need not express an opinion) at
the time it became effective contained 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 not misleading or that the
Prospectus (other than the Underwriting Information, the schedules, financial
statements and other financial and statistical information as to which no
view is expressed) at the time it became effective contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein not misleading, or that the Prospectus (other than the
Underwriting Information, the financial statements and other financial and
statistical information as to which counsel need not express an opinion)
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In addition, such opinion shall also cover such matters incident to the
transactions contemplated hereby as you or your counsel shall reasonably
request. In rendering such opinion, such counsel may rely upon certificates
of any officer of the Company or public officials as to matters of fact; and
may rely as to all matters of law other than the law of the United States, or
the Commonwealth of Massachusetts upon opinions of counsel satisfactory to
you, in which case the opinion shall state that they have no reason to
believe that you and they are not entitled to so rely.
9.03 CORPORATE PROCEEDINGS. All corporate proceedings and other legal
matters relating to this Agreement, the Registration Statement, the
Prospectus, and other related matters shall be satisfactory to or approved by
Sullivan & Worcester, LLP, counsel to the Underwriters, and you shall have
received from such counsel a signed opinion, dated as of the date of the
first Closing Date, with respect to the validity the issuance of the Shares,
the form of the Registration Statement and Prospectus (other than the
financial statements and other financial data contained therein), the
execution of this Agreement and other related matters. With respect to
matters of Connecticut law, Sullivan & Worcester, LLP may rely on the opinion
of Connecticut counsel.
20
<PAGE>
The Company shall have furnished to counsel for the Underwriters such
documents as they may reasonably request for the purpose of enabling them to
render such opinion.
9.04 COMFORT LETTER. You shall have received a letter on and as of the
Effective Date and again on and as of the each Closing Date, from Arthur
Andersen LLP, certified public accountants for the Company, in each instance
describing the procedures carried out to a date within five (5) days of the
date of the letter and substantially in the form approved by you.
9.05 BRING DOWN. At each of the Closing Dates, (i) the representations
and warranties of the Company contained in this Agreement shall be true and
correct with the same effect as if made on and as of such Closing Date, and
the Company shall have performed all of its obligations hereunder and
satisfied all the conditions on its part to be satisfied at or prior to such
Closing Date; (ii) the Registration Statement and the Prospectus shall
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and shall in all material
respects conform to the requirements thereof, and neither the Registration
Statement nor the Prospectus shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make he statements therein not misleading; (iii) there shall
have been, since the respective dates of which information is given, no
material adverse change in the business, properties, condition (financial or
otherwise), results of operations, capital stock, long-term or short-term
debt or general affairs or operations of the Company from that set forth in
the Registration Statement and the Prospectus, except changes which the
Registration Statement and Prospectus indicate might occur after the
Effective Date, and the Company shall not have incurred any material
liabilities nor entered into any agreement not in the ordinary course of
business other than as referred to in the Registration Statement and
Prospectus; and (iv) except as set forth in the Prospectus, no action, suit
or proceeding at law or at equity shall be pending or threatened against the
Company which would be required to be disclosed in the Registration
Statement, and no proceedings shall be pending or threatened against the
Company before or by any commission, board or administrative agency in the
United States or elsewhere, wherein an unfavorable decision, ruling or
finding would materially and adversely affect the business, property,
condition (financial or otherwise), results of operations or general affairs
of the Company. In addition, you shall have received at each Closing, a
certificate signed by the principal executive officer and the principal
financial or accounting officer of the Company, dated as of such Closing
Date, evidencing compliance with the provisions of this Section 9.05.
9.06 TRANSFER AGENT. The Company shall have appointed Boston EquiServe
(or other agent mutually acceptable to the Company and you), as its transfer
agent to transfer all of the Shares issued in the Offering, as well as to
transfer other shares of the Common Stock outstanding from time to time.
9.07 CERTAIN FURTHER MATTERS. On each Closing Date, Underwriter's
counsel shall have been furnished with all such other documents and
certificates as they may reasonably request for the purpose of enabling them
to render their legal opinion to the Underwriter and in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements,
21
<PAGE>
the performance of any of the covenants, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company on or
prior to each of the Closing Dates in connection with the authorization,
issuance and sale of the Shares as herein contemplated shall be reasonably
satisfactory in form and substance to you and to Underwriter's counsel.
9.08 NO UNTRUE MATERIAL FACTS. The Underwriter shall not have advised
the Company that the Registration Statement and the Prospectus or any
amendment thereof or supplement thereto contains an untrue statement of a
fact which, in the opinion of counsel to the Underwriter, is material, or
omits to state a fact which, in the opinion of such counsel, is or may be
material and is or may be required to be stated therein, or is necessary to
make the statements therein not misleading.
9.09 NO LITIGATION. Between the date hereof and the Closing Date,
there shall be no litigation instituted or threatened against the Company
which shall have a materially adverse affect upon the Company in the opinion
of the Underwriter and there shall be no proceeding instituted or threatened
against the Company before or by any federal or state commission, regulatory
body or administrative agency or other governmental body, domestic or
foreign, wherein an unfavorable ruling, decision or finding would materially
adversely affect the business, franchises, licenses, operations or financial
condition or income of the Company considered as an entirety.
9.10 CUSIP NUMBERS. The Company shall have obtained and furnished to
the Underwriter CUSIP numbers for each class of Shares.
9.11 DELIVERY OF CERTIFICATES. All of the certificates for the Shares
being offered by the Company shall be tendered for delivery in accordance
with the terms and provisions of this Agreement.
9.12 BLUE SKY. The Shares shall be qualified in Connecticut,
Massachusetts, New York and Rhode Island and such other states as the
Underwriter reasonably may request, and each qualification shall be in effect
and not subject to any stop order or other proceeding on the Closing Date.
9.13 COUNSEL'S APPROVAL. All opinions, letters, certificates and
evidence mentioned above or elsewhere in this Agreement shall be deemed to be
in compliance with the provisions hereof only if they are in form and
substance satisfactory to counsel to the Underwriter, whose approval shall
not be unreasonably withheld.
SECTION 10
TERMINATION
10.01 TERMINATION BY THE UNDERWRITER. This Agreement may be terminated
by the Underwriter by notice to the Company in the event that the Company
shall have failed or been
22
<PAGE>
unable to comply substantially with any of the terms, conditions or
provisions of this Agreement on the part of the Company to be performed,
complied with or fulfilled (including but not limited to those specified in
Sections 2, 3, 5, 6 and 9 hereof) within the respective times herein provided
for, unless compliance therewith or performance or satisfaction thereof shall
have been expressly waived by the Underwriter in writing.
10.02 TERMINATION DUE TO CERTAIN CONDITIONS. This Agreement may be
terminated by the Underwriter by notice to the Company at any time if, in the
sole judgment of the Underwriter, the sale, payment for or delivery of the
Shares is rendered impractical or inadvisable for any reason, including
without limitation because (i) of the occurrence of the enactment,
publication, regulation, rule or order of any court or other governmental
authority which in the sole judgment of the Underwriter adversely affects or
will adversely affect the business or operations of the Company, or (ii) the
declaration of a banking moratorium by federal, Connecticut or Massachusetts
authorities, or (iii) an outbreak of hostilities or other national or
international calamity or crisis shall have occurred, or (iv) the condition
of the market (either generally or with reference to the sale of the Shares
to be offered hereby), investor acceptability, or the condition of any matter
affecting the Company or any other circumstances is such that it would be
undesirable, impracticable or inadvisable to proceed with this Agreement or
with the public offering in the sole determination of the Underwriter, which
determination shall be conclusive, or (v) the present or future business or
reputation of the Underwriter would be adversely affected, or (vi) there is
an adverse change or development including a prospective adverse change in or
affecting the condition financial or otherwise, or obligations of the Company
or the earnings, affairs or business prospects of the Company whether or not
arising in the ordinary course of business.
10.03 SURVIVAL OF OBLIGATIONS AFTER TERMINATION. Any termination of
this Agreement pursuant to this Section 10 shall be without liability of any
character (including, but not limited to, loss of anticipated profits or
consequential damages) on the part of any party hereto, except that the
Company shall remain obligated to pay the fees, costs and expenses provided
to be paid by it so specified in Section 3.05 for the Underwriter's expenses
on an accountable basis only. The Company and the Underwriter shall remain
obligated to pay, respectively, all losses, claims, damages or liabilities,
joint or several, under Section 7.
SECTION 11
UNDERWRITER'S REPRESENTATIONS AND WARRANTIES
The Underwriter represents and warrants to and agrees with the Company
that:
11.01 REGISTERED BROKER-DEALER. It is registered as a broker-dealer
with the Commission and as a broker-dealer in the states in which the Shares
are to be offered, and it is a member in good standing of the National
Association of Securities Dealers, Inc.
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<PAGE>
11.02 PROCEEDINGS INVOLVING THE UNDERWRITER. There is not now pending
or, to the knowledge of the Underwriter, threatened against the Underwriter
any action or proceeding of which the Underwriter has been advised, either in
any court of competent jurisdiction, before the Commission or any state
securities commission concerning the Underwriter's activities as a broker or
dealer, nor has the Underwriter been named in any action or proceeding which
may be expected to have a material adverse effect upon the Underwriter's
ability to act as agent to the Company as contemplated herein (except as set
forth in the Registration Statement or by letter to the Company from the
Underwriter).
11.03 NO IMPAIRMENT OF UNDERWRITER. In the event any action or
proceeding of the type referred to in subparagraph 11.02 above (except for
actions referred to in the Registration Statement) shall be instituted or, to
the knowledge of the Underwriter, threatened against the Underwriter at any
time prior to the Effective Date, or in the event there shall be filed by or
against the Underwriter in any court pursuant to any federal, state, local or
municipal statute, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of its assets
or if the Underwriter makes an assignment for the benefit of creditors, the
Company shall have the right on three (3) days' written notice to the
Underwriter to terminate this Agreement without any liability to the
Underwriter of any kind except for the payment of expenses as provided herein.
SECTION 12
NOTICES
Except as otherwise expressly provided in this Agreement, notices,
demands and all other communications provided for in this Agreement shall be
in writing and shall be deemed to have been duly given when delivered or two
days after the date when mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the address listed for each
party below or to such other address as any party may have furnished to all
the others in writing in accordance herewith whichever is earlier, except the
notices of change of address shall be effective only upon receipt:
To the Company as follows:
Physicians Care for Connecticut, Inc.
Attention: Chief Executive Officer
1520 Highland Avenue
Cheshire, Connecticut 06410
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<PAGE>
With Copy to:
Hutchins, Wheeler & Dittmar
Attention: Richard Trembowicz, Esq.
101 Federal Street
Boston, Massachusetts 02110
To the Underwriters as follows:
Legg Mason Wood Walker, Incorporated
Attention: Scott R. Cousino
111 South Calvert Street
Baltimore, Maryland 21202
Newbury, Piret & Co., Inc.
Attention: Marguerite A. Piret
One Boston Place
Boston, Massachusetts 02108
With Copy to:
Sullivan & Worcester LLP
Attention: John A. Piccione, Esq.
One Post Office Square
Boston, Massachusetts 02109
SECTION 13
MISCELLANEOUS
13.01 BENEFITS. This Agreement is made solely for the benefit of the
Underwriter, the Company, their respective officers and directors and any
controlling person referred to in Section 15 of the Act or Section 20 of the
Securities Exchange Act, and their respective successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successor" or the term "successors and assigns" as used
in this Agreement shall not include any purchaser, as such, of any of the
Shares.
13.02 SURVIVAL. The respective indemnities, agreements,
representations, warranties, covenants and other statements of the Company or
its officers as set forth in or made pursuant to this Agreement and the
indemnity agreements of the Company and the Underwriter contained in Section
7 hereof shall survive and remain in full force and effect, regardless of (i)
any investigation made by or on behalf of the Company or the Underwriter or
any such officer or director thereof or any controlling person of the Company
or of the Underwriter, (ii) delivery of or payment for the Shares, or (iii)
the Closing Date, and any successor of the Company, the
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<PAGE>
Underwriter and Co-Managers, or any controlling person, officer or director
thereof, as the case may be, shall be entitled to the benefits hereof.
13.03 GOVERNING LAW. The validity, interpretation and construction of
this Agreement and of each part hereof will be governed by the laws of the
Commonwealth of Massachusetts.
13.04 UNDERWRITER'S INFORMATION. The statements in the last paragraph
under the caption "Underwriting" in the Prospectus, and in the risk factor
entitled "Underwriter's Experience." therein constitute the written
information furnished by or on behalf of the Underwriter referred to in
Sections 2.02 and 7 hereof.
13.05 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will constitute an original.
13.06 All obligations of Legg Mason Wood Walker, Incorporated and
Newbury, Piret & Co., Inc. hereunder shall be several and not joint.
Please confirm that the foregoing correctly sets forth the Agreement
between you and the Company.
Very truly yours,
PHYSICIAN'S CARE FOR CONNECTICUT,
INC.
By_______________________________
Joseph R. Coffey, Chief Executive
Officer
26
<PAGE>
WE HEREBY CONFIRM AS OF THE DATE HEREOF THAT THE ABOVE LETTER SETS FORTH
THE AGREEMENT BETWEEN THE COMPANY AND US:
LEGG MASON WOOD WALKER, INCORPORATED
By_________________________________
Scott R. Cousino, Managing Partner
NEWBURY, PIRET & CO., INC.
By________________________________
Marguerite A. Piret, President
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<PAGE>
EXHIBIT 3.1
Articles of Incorporation
Secretary of the State
30 Trinity Street
Hartford, CT 06106
<TABLE>
<CAPTION>
Complete All Blanks
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Enter Name of Corporation here:
Physicians Care for Connecticut, Inc.
- ------------------------------------------------------------------------------------------------------------------------
The above corporation appoints as its statutory agent for service, one of the following:
- ------------------------------------------------------------------------------------------------------------------------
Name of Natural Person Who is Resident of Connecticut Business Address Zip Code
1520 Highland Avenue
Edward J. Berns Cheshire, CT 06410
Residence Address
16 Vineyard Road Zip Code
North Haven, CT 06473
- ------------------------------------------------------------------------------------------------------------------------
Name of Connecticut Corporation Address of Principal Office in Conn. (If none, enter
address of appointee's statutory agent for service)
- ------------------------------------------------------------------------------------------------------------------------
Name of Corporation Address of Principal Office in Conn.
Not organized under the Laws of Conn.*) (If none, enter "Secretary of the State of Conn.")
- ------------------------------------------------------------------------------------------------------------------------
*Which has procured a Certificate of Authority to transact business or conduct affairs in this state.
- ------------------------------------------------------------------------------------------------------------------------
AUTHORIZATION
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Name of Incorporator (Print or Type) Signee (Incorporator) Date
Original Appointee
(Must be Signed Joseph R. Coffey /s/ Joseph R. Coffey 11-1-96
by a majority of -----------------------------------------------------------------------
Incorporators) Name of Incorporator (Print or Type) Signed (Incorporator)
-----------------------------------------------------------------------
Name of Incorporator (Print or Type) Signed (Incorporator)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Name of President, Vice President, Secretary or Assistant Secretary Date
Subsequent Appointment
-----------------------------------------------------------------------
Signed (President or Vice President, Secretary/Assistant Secretary)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Acceptance: Name of Statutory Agent for Service (Print or Type) Signed (Statutory Agent for Service)
Edward J. Berns /s/ Edward J. Berns
- ------------------------------------------------------------------------------------------------------------------------
For Official Use Only Rec: CC:
Fabiani & Kone, P.C.
------------------------------------------------------------------------------------
714 State Street
------------------------------------------------------------------------------------
New Haven, CT 06511
------------------------------------------------------------------------------------
Please provide filer's name and complete address for mailing receipt
</TABLE>
<PAGE>
Certificate of Incorporation
of
Physicians Care for Connecticut, Inc.
FIRST. The name of the corporation is Physicians Care for Connecticut, Inc.
SECOND. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be formed under the Stock Corporation Act
of the State of Connecticut.
THIRD. The designation of each class of shares, the authorized number of
shares of each such class and the par value of each share thereof, are as
follows:
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 20,100 shares,
consisting of the following classes of stock:
(a) 10,000 shares of Class A Common Stock,
(b) 10,000 shares of Class B Common Stock, and
(c) 100 shares of Class C Common Stock. Each share of
common stock shall be without par value.
FOURTH. The terms, limitations and relative rights and preferences of each
class of shares and series thereof, are as follows:
A. CLASS A COMMON STOCK
1. The Class A Common Stock of the Corporation shall be issuable only to
physicians or entities who can demonstrate the following qualifications:
For individual physicians:
(i) Must be a physician licensed in the state in which the
physician practices.
(ii) Unless such requirement is waived by the Corporation's
Board of Directors in its sole discretion, shall have and
maintain, or shall have applied for, membership in the
State Medical Association and (if a county medical
association or equivalent exists in the location in which
the physician practices) the applicable county medical
association; provided, however, that physicians who have
applied for and not obtained membership in the state and/or
a county medical association, must in order to retain
Class A shares of the Corporation's Common Stock, maintain
such membership(s) once approved; and, provided further,
that if such membership(s) is/are denied or not maintained,
the physician's Class A Common Stock shall automatically
be converted to Class B Common Stock.
<PAGE>
(iii) Must have a Participation Agreement with MedServ IPA, Inc.
in effect.
(iv) Must have a Physicians Care Primary Care Physician
Attachment or a Physicians Care Specialist Physician
Attachment to the Participation Agreement with MedServ IPA,
Inc. in effect.
For Groups of physicians: Class A stock may be held by a
corporation, professional corporation, business trust, trust,
partnership, limited liability corporation or other legal entity in
which physicians who provide medical services on behalf of the
corporation, professional corporation, business trust, trust,
partnership, limited liability corporation or other legal entity
have not less than fifty percent (50%) ownership interest or
control (referred to as a "Group"), provided that each of the
physicians satisfy qualifications (i), (ii), (iii) and (iv)
enumerated above, unless waived by the Corporation's Board of
Directors in its sole discretion.
2. Rights and Preferences
o Voting Rights. Each share of Class A stock shall entitle the
holder of such share to one vote on all matters which are
properly before the stockholders. Class A shareholders shall
be entitled to elect only certain Directors to the
Corporation's Board of Directors as specified in the
Corporation's Bylaws and this Certificate of Incorporation.
o Dividend Rights. Class A Stockholders shall be entitled to
receive dividend distributions when, as and if declared by
the Corporation's Board of Directors, in its sole discretion.
Liquidation Rights. After the liabilities of the Corporation
have been discharged, Class B Stockholders shall be entitled
to a liquidation preference equal to $1,500 per share of
Class B Common Stock. After the Class B Stockholders'
liquidation preference is satisfied, all stockholders will
share any remaining liquidating distributions pro rata.
o Ownership Interest. No physician may hold more than one
share of Class A Common Stock.
B. CLASS B COMMON STOCK
1. Qualifications:
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<PAGE>
At the discretion of the Corporation's Board of Directors,
physicians, hospitals and/or other investors may be issued Class B Common Stock
of the Corporation.
2. Rights and Preferences
o Voting Rights. Each share of Class B stock shall entitle the
holder of such share to one vote on all matters which require
a vote in accordance with law, except that Class B
Stockholders shall not be entitled to elect representatives to
the Corporation's Board of Directors, to vote on amendments to
the Corporation's Bylaws or to vote on such other matters
reserved to the holders of Class A stock.
o Dividend Rights. Class B stockholders shall be entitled to
receive dividend distributions, when, as and if declared by
the Corporation's Board of Directors, in its sole discretion.
o Liquidation Rights. After the liabilities of the Corporation
have been discharged, Class B Stockholders shall be entitled
to a liquidation preference equal to $1,500 per share of Class
B Common Stock. After the Class B Stockholders' liquidation
preference is satisfied, all stockholders with share any
remaining liquidating distributions pro rata.
C. CLASS C COMMON STOCK
1. Qualifications
The Class C Common Stock of the Corporation shall only be issuable
to MedServ of Connecticut, Inc.
2. Rights and Preferences
o Voting Rights. Each share of Class C stock shall entitle the
holder of such stock to one vote on all matters properly
before the stockholders. The Class C Stockholders shall have
certain special voting rights as set forth in Section D,
below. The Class C shareholder shall be entitled to elect
certain Directors to the Corporation' s Board of Directors
as specified in the Corporation's Bylaws and in this
Certificate of Incorporation.
o Dividend Rights. Class C Stockholders shall be entitled to
receive dividend distributions, when, as and if declared by
the Corporation's Board of Directors, in its sole discretion.
3
<PAGE>
o Liquidation Rights. After the liabilities of the Corporation
have been discharged, Class B Stockholders shall be entitled
to a liquidation preference equal to $1,500 per share of Class
B Common Stock. After the Class B Stockholders' liquidation
preference is satisfied, all stockholders will share any
remaining liquidating distributions pro rata.
D. GOVERNANCE
1. Board of Directors. The number of directors shall be not less than
seventeen (17) nor more than twenty-one (21); provided, however, that prior to
issuance of Class A and Class B Common Stock there shall be eleven (11)
directors.
Six (6) of the directors shall be elected by the Class A Stockholders with
the first election occurring not more than one hundred and eighty (180) days
after the last Closing of any issuance of Class A Common Stock. Each of these
directors (the "Class A Directors") must be a physician and a member of a county
medical society other than the Hartford or New Haven Medical Association. No
more than two (2) of the Class A Directors may be members of any one county
medical society at any given time; and at all times, not less than three of the
Class A Directors shall be "Primary Care Physicians", as said term is defined by
policy adopted by the Board of Directors from time to time.
Eleven (11) of the directors shall be appointed and removed by the Class C
Stockholder (the "MedServ Directors"). Six (6) of the MedServ Directors shall be
Primary Care Physicians.
Up to four (4) directors (such number to be determined in the discretion
of the Board) shall be representatives of area employers, hospitals, investors
in the corporation or individuals representing the interests of the
corporation's subscribers. These directors will be elected by a majority of the
Class A Stockholders at the annual meeting of the Stockholders from a list of
nominees developed by the Board of Directors.
2. Voting Requirements. The following actions shall require a vote
of the stockholders:
Classes A and B:
o Those actions which require stockholder action as a
matter of law; provided that nothing contained in this
Section D shall have the effect of expanding the voting
rights of the shares of Class B Common Stock set forth
in Section B.2 above.
Class C:
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<PAGE>
A 2/3 majority of the Class C shares must approve the
following actions:
o the sale or liquidation of the Corporation;
o the merger or consolidation of the Corporation;
o the amendment of the Certificate of Incorporation; and
o all other matters required by law to be submitted to
the shareholders for a vote.
E. RESTRICTIONS ON TRANSFER; SHARE CERTIFICATE
(1) Restrictions on Transfer. At any time a Class A or Class B Stockholder
receives a bona fide offer to transfer shares of the Corporation's stock to an
individual or entity who/which satisfies the requirements for stock ownership
set forth in the certificate of incorporation, the Stockholder must offer to the
Corporation in writing (the "Transfer Notice") a right of first opportunity to
purchase such shares at an amount equal to that contained in the bona fide offer
("Purchase Price"). The Corporation shall notify the Stockholder in writing (the
"Election Notice") of its election to purchase such shares within thirty (30)
days of receipt of the Transfer Notice (the "Election Period"). If the
Corporation elects to purchase such shares, the Corporation may, at its
election, pay the Purchase Price in cash or deliver a promissory note to the
selling stockholder stating that the Corporation will pay the Purchase Price for
the shares over a two year period with interest at the prime rate as reported in
the Money Rates section of the Wall Street Journal on the first day of the month
preceding the notice of sale or transfer. The transfer shall occur within sixty
(60) days of the Election Notice at the offices of the Corporation on the date
and at the times set forth in the Election Notice. The promissory note shall
obligate the Corporation to pay the selling stockholder the principal amount due
with interest thereon in equal quarterly installments over the two year
repayment term. If the Corporation does not elect to purchase such shares, the
Stockholder may sell such shares to the individual or entity identified in the
Transfer Notice, for the Purchase Price specified in the Transfer Notice;
provided that the closing of such sale occurs within sixty (60) days following
the expiration of the Election Period. If a Stockholder otherwise wishes to sell
his or her Stock back to the Corporation, the Corporation, in its sole
discretion, may redeem such Stockholder's Stock (optional redemption) for book
value, or for such other amount and on such other terms agreeable to the
Corporation and the Stockholder.
(2) Mandatory Redemption. At any time after the fifth anniversary of the
issuance date of a Class A Stockholder's shares of stock, but not before, the
Corporation shall redeem all shares of stock (including Class A or Class B
shares) of the Class A Stockholder wishing to sell or transfer his/her shares
upon the occurrence of one of the following events (termed an "Involuntary
Transfer"):
o the death or permanent disability of the Class A
Stockholder; or
5
<PAGE>
o the Class A Stockholder's discontinuation as a provider of
medical services in Connecticut (i.e., retirement or
relocation), provided, that Physicians who acquire shares of
stock through the initial offering of the Corporation's
stock and are 55 years of age or older on the date of
receipt of an executed Subscription Agreement shall be
eligible to redeem their stock at any time after the third
anniversary of the issuance date of such stock.
The Corporation shall redeem such shares of stock at the greater of the
then current net book value of such shares determined pursuant to Generally
Accepted Accounting Principles ("GAAP") as of the most recently completed fiscal
quarter of the Company, or the original issue price of such shares to the
stockholder ("Purchase Price"). At the election of the Corporation, the
Corporation may make payment in cash or deliver a promissory note to the selling
stockholder stating that the Corporation may pay the Purchase Price for the
shares over a five year period with interest at the prime rate as reported in
the Money Rates section of the Wall Street Journal on the first day of the month
preceding the notice of sale or transfer. The promissory note shall obligate the
Corporation to pay the selling stockholder the principal amount due and accrued
interest thereon in equal quarterly installments over the five year repayment
term.
(3) Conversion of Shares From Class A to Class B.
In the event that a Class A Stockholder no longer satisfies the qualifications
for Class A Stockholder status or transfers the shares to a party which does not
satisfy the qualifications for Class A Stockholder status, the Class A
Stockholder shall immediately surrender his/her Class A shares of stock and the
Corporation will cancel such shares and will issue an equal number of Class B
shares to such Stockholder.
(4) Limitations on the Corporation's Purchase of Shares.
Notwithstanding any provision to the contrary in these Articles, the
Corporation shall not redeem a Stockholder's Stock if the Corporation is
insolvent or, by reason of such redemption, is rendered insolvent, or violates
any contract to which the Corporation is a party or if the Board of Directors
shall determine that the Corporation is otherwise not obligated to redeem such
stock. The determination to be made by the Board of Directors from time to time
as to whether the Corporation is obligated to redeem shares will depend upon a
number of variable factors, including but not limited to (i) the amount of net
proceeds received from this Offering or subsequent financings; if any; (ii) the
income from operations earned and anticipated to be earned in connection with
the Corporation's business; (iii) the amount of prior redemptions of Stock by
the Corporation; and (iv) the amount needed to meet statutory reserve
requirements.
The Board of Directors of the Corporation may adopt annually by resolution
a limitation on the amount of funds available each fiscal year for the
redemption of shares,
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which resolution shall set forth the priority of payments to Stockholders,
and/or the proportionate amount of stock to be redeemed from stockholders, in
the event the aggregate Purchase Price of shares for which redemption is
otherwise required exceeds the limitation duly adopted.
(5) Miscellaneous.
(i) Any or all of the foregoing restrictions may be waived by the
Board of Directors of the Corporation. The certificate of the
Treasurer or Secretary of such waiver, or of the compliance of
a shareholder with the above requirements shall be conclusive
evidence thereof.
(ii) No transfer of stock shall be binding on the Corporation
unless made and recorded on its stock transfer books. The
Corporation shall have the right to refuse to transfer any
shares of stock that are not effected in compliance with this
Article.
(iii) A reference to this Article shall be printed upon each share
of capital stock issued by the Corporation, and the provisions
of this Article shall be binding upon every person now or
hereafter becoming a shareholder, all of whom shall take such
stock subject to the provisions hereof. Each share of capital
stock issued by the Corporation shall contained the following
restrictive legend:
Notice is hereby given that the shares of stock
represented by this certificate is subject to the
provisions and restrictions on transfer and redemption
included in the Certificate of Incorporation of the
Corporation, a copy of which is on file at the office
of the Corporation, and that any transfer of the shares
of stock represented by this Certificate shall be void
unless said transfer is in compliance with said
Certificate.
FIFTH. The minimum amount of stated capital with which the Corporation
shall commence business is Twelve Thousand Dollars ($12,000).
SIXTH. The duration of this Corporation is unlimited.
SEVENTH. The personal liability of a director to the Corporation or its
shareholders for monetary damages for breach of duty as a director shall be
limited to an amount equal to the amount of compensation received by the
director for serving the Corporation during the calendar year in which the
violation occurred (and if the director received no such compensation from the
Corporation during the calendar year of the violation, such director
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shall have no liability to the Corporation of its shareholders for breach of
duty) if such breach did not:
(A) involve a knowing and culpable violation of law by the director;
(B) enable the director or an Associate, as defined in subdivision (3)
of Section 33-374d of the Connecticut Stock Corporation Act as in
effect at the time of the violation, to receive an improper personal
economic gain;
(C) show a lack of good faith and a conscious disregard for the duty of
the director to the Corporation under circumstances in which the
director was aware that his conduct or omission created an
unjustifiable risk of serious injury to the Corporation;
(D) constitute a sustained and unexcused pattern of inattention that
amount to an abdication of the director's duty to the Corporation;
or
(E) create liability under Section 33-321 of the Connecticut Stock
Corporation Act as in effect at the time of the violation.
Any repeal or modification of this Article Seventh shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification.
EIGHTH. As permitted by Section 33-343(f) of the Connecticut Stock
Corporation Act, all preemptive rights of shareholders are hereby denied, and no
holder of any shares of stock of the Corporation shall be entitled as a matter
of right to subscribe for, purchase or receive any shares of stock of the
Corporation (or any obligation convertible into, or warrant or other instrument
entitling the holder to purchase, any stock of the Corporation) which the
Corporation may issue or sell, whether out of the number of shares of the stock
now authorized, or whenever authorized, or out of shares of stock or the
Corporation acquired by it after issuance.
Under penalties of false statement, I declare that the statements
contained in this Certificate of Incorporation are true.
Dated at Cheshire, Connecticut, this 12th day of November, 1996.
/s/ Joseph R. Coffey
------------------------------
Joseph R. Coffey, Incorporator
8
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EXHIBIT 3.2
PHYSICIANS CARE FOR CONNECTICUT, INC.
* * * * *
Bylaws
* * * * *
ARTICLE I
OFFICES
Section 1. The principal office shall be located in Cheshire, Connecticut.
Section 2. The corporation may also have offices at such other places both
within and without the State of Connecticut as the board of directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
ANNUAL MEETINGS OF STOCKHOLDERS
Section 1 All meetings of Stockholders for the election of directors shall
be held in the state of Connecticut, at such place as may be fixed from time to
time by the Board of Directors.
Section 2. Annual meetings of Stockholders, commencing with the 1997
annual meeting, shall be held on the second Tuesday in April, if not a legal
holiday, and if a legal holiday, then on
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DRAFT #2, October 3, 1996
the next secular day following, at 6:00 P.M., at which the Stockholders shall
elect a Board of Directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Written or printed notice of the annual meeting stating the
place, day and hour of the meeting shall be delivered not less than seven nor
more than fifty days before the date of the meeting, either personally or by
mail, by or at the direction of the President, or the Secretary, or the officer
or persons calling the meeting, to each Stockholder of record entitled to vote
at such meeting.
ARTICLE III
SPECIAL MEETINGS OF STOCKHOLDERS
Section 1. Special meetings of Stockholders for any purpose other than the
election of directors may be held at such time and place within or without the
State of Connecticut as shall be stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
Section 2. Special meetings of Stockholders may be called at any time, for
any purpose or purposes, by the Board of Directors or by such other persons as
may be authorized by law.
Section 3. Written or printed notice of a special meeting stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered not less than seven nor more than fifty
days before the date of the meeting, either personally or by mail, by or at the
direction of the President, or the Secretary, or the officer or persons calling
the meeting, to each Stockholder of record entitled to vote at such meeting.
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Section 4. The business transacted at any special meeting of Stockholders
shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of each class of stock
issued and outstanding and entitled to vote on the matter, represented in person
or by proxy, shall constitute a quorum at all meetings of the Stockholders for
the transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If; however, such quorum shall not be present or
represented at any meeting of the Stockholders, the Stockholders present in
person or represented by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a majority of
the shares of stock represented at the meeting and entitled to vote on the
matter shall be the act of the Stockholders unless the vote of a greater or
different number of shares of stock is required by law or the certificate of
incorporation.
Section 3. Except as provided in the certificate of incorporation, each
outstanding share of stock, having voting power, shall be entitled to one vote
on each matter submitted to a vote at a
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meeting of Stockholders. A Stockholder may vote either in person or by proxy
executed in writing by the Stockholder or by his duly authorized
attorney-in-fact.
Section 4. Any action required to be taken at a meeting of the
Stockholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the Stockholders entitled
to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1 . The number of directors shall be not less that seventeen (17)
nor more than twenty-one (21) with the number of directorships over seventeen
(17) (the "Additional Directors") to be determined from time to time by the
Board of Directors; provided, however, that prior to issuance of Class A and
Class B Common Stock there shall be eleven (11) directors.
Six (6) of the directors shall be elected by the Class A Stockholders with
the first election occurring not more than one hundred and eighty (180) days
after the last Closing of any issuance of Class A Common Stock. Each of these
directors (the "Class A Directors") must be a physician and a member of a county
medical society other than the Hartford or New Haven Medical Association. No
more than two (2) of the Class A Directors may be members of any one county
medical society at any given time; and at all times, not less than three of the
Class A Directors shall be "Primary Care Physicians", as said term is defined by
policy adopted by the Board of Directors from time to time.
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Eleven (11) of the directors shall be appointed and removed by the Class C
Stockholder (the "MedServ Directors"). Six (6) of these eleven (11) directors
shall be Primary Care Physicians.
The Additional Directors (the number of which shall be determined in the
discretion of the Board) shall be representatives of area employers, hospitals,
investors in the corporation or individuals representing the interests of the
corporation's subscribers. The Additional Directors shall be elected by a
majority of the Class A Stockholders at the annual meeting of the stockholders
from a list of nominees developed by the Board of Directors.
Directors need not be residents of the State of Connecticut nor
Stockholders of the corporation. The directors shall be elected or appointed at
the annual meeting of the Stockholders. The initial Board of Directors shall be
structured so that one-half of the elected directors serve one-year terms and
one-half serve two-year terms. Thereafter, one-half of the elected directors
shall be elected each year for two (2) year terms and until their successors
shall have been elected and qualified.
Section 2. A vacancy occurring in the Board of Directors may be filled as
follows: (a) if the vacant position to be filled is that of a Class A Director,
the vacancy shall be filled by the affirmative vote of a majority of the
remaining Class A Directors; (b) if the vacant position to be filled was held by
an individual who was appointed by the Class C Stockholder, the vacancy shall be
filled by the Class C Stockholder; and (c) if the vacant position to be filled
is that of an Additional Director, the vacancy shall be filled by the
affirmative vote of a majority of the remaining Class A Directors, though less
than a quorum of the Board of Directors. A director elected to fill a vacancy
shall be elected for the unexpired portion of the term of his predecessor in
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office. The Board of Directors, following the filling of vacancies, shall
reflect the same primary care physician requirements as are set forth in Article
V, Section 1.
Any vacancy created by an increase in the number of directorships shall be
filled for the unexpired term by action of the Stockholders in accordance with
the provisions in these bylaws for the election of Directors.
Section 3. The business affairs of the Corporation shall be managed by its
Board of Directors which may exercise all such powers of the Corporation and do
all such lawful acts and things as are not by statute or by the certificate of
incorporation or by these bylaws directed or required to be exercised or done by
the Stockholders.
Section 4. The directors shall ensure that the books of the Corporation be
maintained in a manner and at such place or places as may be required by the
State of Connecticut.
Section 5. The Board of Directors, by the affirmative vote of a majority of
the directors then in office, and irrespective of any personal interest of any
of its members, shall have authority to establish reasonable compensation of all
directors for services to the Corporation as directors, officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the Board of Directors, regular or special, may be
held either within or without the State of Connecticut.
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Section 2. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
Stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the Board of Directors may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the board.
Section 4. Special meetings of the Board of Directors may be called by the
President on ten (10) days' notice to each director, either personally or by
mail, telegram, facsimile, or similar means of communication; special meetings
shall be called by the President or Secretary in like manner and on like notice
on the written request of two directors.
Section 5. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. A majority of the directors, including a majority of the
MedServ Directors, shall constitute a quorum for the transaction of business
unless a greater number is required by law or by the certificate of
incorporation. The act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of Directors, unless the
act of a greater
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number is required by statute or by the certificate of incorporation. The
following actions must be approved by at least a two-thirds affirmative vote of
the MedServ Directors: the appointment of management of the Corporation,
including the Chief Executive Officer and Chief Financial Officer; the incurring
of debt in excess of one million dollars ($1,000,000); and the amendment of the
Corporation's bylaws. If a quorum shall not be present at any meeting of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 7. Any action required or permitted to be taken at a meeting of
the directors may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the directors entitled to
vote with respect to the subject matter thereof.
Section 8. A director or a member of a committee of the Board of Directors
may participate in a meeting of the Board of Directors or of such committee by
means of conference telephone or similar communications equipment enabling all
directors participating in the meeting to hear one another, and participation in
a meeting pursuant to this section shall constitute presence in person at such
meeting.
ARTICLE VII
COMMITTEES
Section 1. The Board of Directors, by resolution adopted by a majority of
the number of directors fixed by the bylaws or otherwise, may designate two or
more directors to constitute an
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executive committee and/or other committees, which committees shall, to the
extent provided in such resolution, have and be empowered to exercise all of the
authority of the Board of Directors in the management of the Corporation, except
as otherwise required bylaw, the certificate of incorporation or these bylaws.
Vacancies in the membership of such committees shall be filled by the Board of
Directors at a regular or special meeting of the Board of Directors. Such
committees shall keep regular minutes of their proceedings and report the same
to the Board when required.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or Stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or Stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram, facsimile, or similar means
of communication.
Section 2. Whenever any notice whatever is required to be given under the
provisions of the statutes or under the provisions of the certificate of
incorporation or these bylaws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
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ARTICLE IX
OFFICERS
Section 1. The officers of the Corporation shall be elected by the Board
of Directors and shall be a President and Chairperson of the Board, a Chief
Executive Officer, a Vice-President, a Secretary and a Treasurer. The Board of
Directors may also appoint additional Vice-Presidents, and one or more Assistant
Secretaries and Assistant Treasurers and establish such other offices as it
deems in its discretion.
Section 2. The Board of Directors at its first meeting after each annual
meeting of Stockholders shall elect a President and Chairperson of the Board, a
Chief Executive Officer, one or more Vice-Presidents, a Secretary and a
Treasurer, none of whom need be a member of the Board.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
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The President
Section 6. The President and Chairperson of the Board of the corporation,
shall preside at all meetings of the Stockholders and the Board of Directors and
shall have such other powers and duties as may be determined by the Board.
The Chief Executive Officer
Section 7. The Chief Executive Officer shall be responsible for the
general and active management of the business of the corporation and shall see
that all orders and resolutions of the Board of Directors are carried into
effect. The Chief Executive Officer will have ultimate responsibility for the
operations of the Corporation's business and be accountable to the Board. The
Chief Executive Officer shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to another officer or agent of the Corporation. The Chief Executive
Officer shall, in the absence or disability of the President, perform the duties
and exercise the powers of the President and shall perform such other duties and
have such other powers as the Board of Directors may from time to time prescribe
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The Vice-President
Section 8. The Vice-President, or if there shall be more than one, the
Vice-Presidents in the order determined by the Board of Directors, shall, in the
absence or disability of the Chief Executive Officer, perform the duties and
exercise the powers of the Chief Executive Officer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
The Secretary and Assistant Secretaries
Section 9. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the Stockholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the Stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the Corporation and he, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
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Section 10. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors, shall,
in the absence or disability of the Secretary, perform the duties and exercise
the powers of the Secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
The Treasurer and Assistant Treasurers
Section 11. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all monies
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
Section 12. He shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
Corporation.
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Section 13. If required by the Board of Directors, he shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 14. The Assistant Treasurer, or, if there shall be more than one,
the Assistant Treasurers in the order determined by the Board of Directors,
shall, in the absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the Corporation shall be represented by
certificates signed by the President or a Vice-President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer of the
Corporation, and may be sealed with the seal of the Corporation or a facsimile
thereof. When the Corporation is authorized to issue shares of more than one
class there shall be set forth upon the face or back of the certificate, or the
certificate shall have a statement that the Corporation will furnish to any
Stockholder upon request and without charge, a full or summary statement of the
designations, preferences, limitations, and relative rights of the shares of
each class
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authorized to be issued and, if the Corporation is authorized to issue any
preferred or special class in series, the variations in the relative rights and
preferences between the shares of each such series so far as the same have been
fixed and determined and the authority of the Board of Directors to fix and
determine the relative rights and preferences of subsequent series.
Section 2. The signatures of the officers of the Corporation upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent, or registered by a registrar, other than the Corporation itself or an
employee of the Corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be adopted by the
Corporation and issued by the Corporation with the same effect as if he were
such officer at the date of its issue.
Lost Certificates
Section 3. The Board of Directors may direct a new certificate to be
issued in place of any certificate theretofore issued by the Corporation alleged
to have been lost or destroyed. When authorizing such issue of a new
certificate, the Board of Directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the Corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
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Transfers of Shares
Section 4. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto, and the old
certificate canceled and the transaction recorded upon the books of the
Corporation.
Closing of Transfer Books
Section 5. For the purpose of determining Stockholders entitled to notice
of or to vote at any meeting of Stockholders, or Stockholders entitled to
receive payment of any dividend, or in order to make a determination of
Stockholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, seventy days. If the stock transfer books shall be closed
for the purpose of determining Stockholders entitled to notice of or to vote at
a meeting of Stockholders, such books shall be closed for at least ten days,
immediately preceding such meeting. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the record date for any such
determination of Stockholders, such date in any case to be not more than seventy
days and, in case of a meeting of Stockholders, not less than ten days prior to
the date on which the particular action
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requiring such determination of Stockholders is to be taken. If the stock
transfer books are not closed and no record date is fixed, the determination of
Stockholders entitled to notice of or to vote at a meeting, or to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the Board of Directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of Stockholders. When a determination of Stockholders entitled to vote at any
meeting of Stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
Registered Stockholders
Section 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Connecticut.
List of Stockholders
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Section 7. The officer or agent having charge of the transfer books for
shares shall make, at least five days before each meeting of Stockholders, a
complete list of the Stockholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list, for a period of five days prior to such meeting, shall be kept
on file at the principal office of the Corporation and shall be subject to
inspection by any Stockholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any Stockholder during the whole time of
the meeting. The original share ledger or transfer book, or a duplicate thereof,
shall be prima facie evidence as to who are the Stockholders entitled to examine
such list or share ledger or transfer book or to vote at any meeting of the
Stockholders.
ARTICLE XI
GENERAL PROVISIONS
Dividends
Section 1. Subject to the provisions of the certificate of incorporation
relating thereto, if any, dividends may be declared by the Board of Directors at
any regular or special meeting, pursuant to law. Dividends may be paid in cash,
in property or in shares of the capital stock, subject to any provisions of the
certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their
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absolute discretion, think proper as a reserve fund to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the directors shall think conducive to
the interest of the Corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
Checks
Section 3. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
Fiscal year
Section 4. The fiscal year of the Corporation shall be fixed by resolution
of the Board of Directors.
................................................................................
Seal
Section 5. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Connecticut". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
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EXHIBIT 4.1
<TABLE>
<S> <C>
NUMBER SHARES
PHYSICIANS CARE FOR CONNECTICUT, INC.
Class A Common Stock, No Par Value Per Share
3,000 Authorized Shares
THIS CERTIFIES THAT IS THE
-----------------------------------------------------------
REGISTERED HOLDER OF SHARES
-----------------------------------------------------------
of the fully paid and non-assessable common stock of Physicians Care for
Connecticut, Inc.
TRANSFERABLE ONLY ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN
PERSON OR BY ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE SIGNED
BY ITS DULY AUTHORIZED OFFICERS AND ITS CORPORATE SEAL TO BE HEREUNTO AFFIXED
THIS day of A.D.,
-------------- -------------- ----
---------------------------------- ------------------------------
President Secretary
</TABLE>
<PAGE>
CERTIFICATE
FOR
SHARES
OF THE
ISSUED TO
---------------------------------
DATED ---------------------------
- -------------------------------------------------------------------------------
FOR VALUE RECEIVED _________ HEREBY SELL, ASSIGN, AND TRANSFER
UNTO _________________________________________________________
_______________________________________________________ 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 CORPORA-
TION, WITH FULL POWER OF SUBSTITUTION ON THE PREMISES.
DATED __________________ 19__.
IN PRESENCE OF
________________________________
Notice is hereby given that the shares of stock represented by this
certificate is subject to the provisions and restrictions on transfer and
redemption included in the Certificate of Incorporation of the
Corporation, a copy of which is on file at the office of the Corporation,
and that any transfer of the shares of stock represented by this
Certificate shall be void unless said transfer is in compliance with
said Certificate.
<PAGE>
EXHIBIT 4.2
<TABLE>
<S> <C>
NUMBER SHARES
PHYSICIANS CARE FOR CONNECTICUT, INC.
Class B Common Stock, Par Value $.01 Per Share
3,000 Authorized Shares
THIS CERTIFIES THAT IS THE
-----------------------------------------------------------
REGISTERED HOLDER OF SHARES
-----------------------------------------------------------
of the fully paid and non-assessable common stock of Physicians Care for
Connecticut, Inc.
TRANSFERABLE ONLY ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN
PERSON OR BY ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE SIGNED
BY ITS DULY AUTHORIZED OFFICERS AND ITS CORPORATE SEAL TO BE HEREUNTO AFFIXED
THIS day of A.D.,
-------------- -------------- ----
---------------------------------- ------------------------------
President Secretary
</TABLE>
<PAGE>
CERTIFICATE
FOR
SHARES
OF THE
ISSUED TO
---------------------------------
DATED ---------------------------
- -------------------------------------------------------------------------------
FOR VALUE RECEIVED _________ HEREBY SELL, ASSIGN, AND TRANSFER
UNTO _________________________________________________________
_______________________________________________________ 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 CORPORA-
TION, WITH FULL POWER OF SUBSTITUTION ON THE PREMISES.
DATED __________________ 19__.
IN PRESENCE OF
________________________________
Notice is hereby given that the shares of stock represented by this
certificate is subject to the provisions and restrictions on transfer and
redemption included in the Certificate of Incorporation of the
Corporation, a copy of which is on file at the office of the Corporation,
and that any transfer of the shares of stock represented by this
Certificate shall be void unless said transfer is in compliance with
said Certificate.
<PAGE>
September ___, 1997
Physicians Care for Connecticut, Inc.
1520 Highland Avenue
Cheshire, CT 06410
Gentlemen:
This firm has been retained by Physicians Care for Connecticut, Inc. (the
"Corporation") to act as special counsel for the purposes of rendering
certain opinions in connection with the filing by the Corporation of a Form
SB-2 with the United States Securities and Exchange Commission, a copy of
which is attached hereto as Schedule A (the "Form SB-2"). In such capacity,
we have examined executed copies or counterparts of (i) the Certificate of
Incorporation of the Corporation filed in the Office of the Secretary of
State of the State of Connecticut on November 12, 1996, a copy of which is
attached hereto as Schedule B (the "Certificate of Incorporation"), (ii) the
By-Laws of the Corporation, and (iii) such other corporate documents and
records and other certificates and instruments as we hereinafter set forth.
We have also made such examinations of the general corporate laws of the
State of Connecticut as we have deemed appropriate or necessary in order to
form the basis for the opinions hereinafter set forth.
With respect to all such agreements, instruments and documents examined
by us, we have assumed the genuineness of all signatures thereon, the
authenticity of such of the same as are purported to be originals, and
conformity to originals of such of the same as are purported to be copies.
We have also assumed that the transaction described in the Form SB-2 and
the Form SB-2 itself comply with all federal and state laws, rules and
regulations applicable thereto, and we neither express nor intend any opinion
as to such matters or as to any matter arising under any federal and/or state
securities laws, rules or regulation.
Based upon the foregoing, as well as such other considerations as are
hereinafter expressly set forth, we are of the opinion that:
<PAGE>
Physicians Care for Connecticut, Inc.
September __, 1997
Page 2
1. The Corporation is a corporation duly organized and validly existing
under the laws of the State of Connecticut.
2. Based solely upon a review of the Certificate of Incorporation, the
authorized capital stock of the Corporation is as follows:
(a) 10,000 shares of Class A Common Stock, no par value;
(b) 10,000 shares of Class B Common Stock no par value; and
(c) 100 shares of Class C Common Stock, no par value.
3. If and when issued and sold in the manner described in the Form SB-2,
the shares of Common Stock offered by the Corporation pursuant to the Form
SB-2 will be duly authorized, validly issued, fully paid and nonassessable. *
* * * * *
No opinion is hereby expressed or intended as to the laws, or as to any
other legal matters arising under the laws, of any jurisdiction other than
the general corporate laws of the State of Connecticut.
This opinion has been issued for your benefit and may not be relied upon
by nor copies delivered to any other party without our prior written consent.
Very truly yours,
FABIANI & KONE, P.C.
By: __________________________
Its President
<PAGE>
MEDSERV IPA, INC.
PARTICIPATION AGREEMENT FOR PHYSICIANS
This AGREEMENT (the "Agreement") is made and entered into this ____ day
of ______________, 1997, by and between MEDSERV IPA, INC. ("IPA"), and ______
____________________________________________ M.D. having a principal place of
business at ________________________________________________________________
("Physician").
WHEREAS, IPA intends to enter into agreements with third party payors
including insurers, self-insured employers, health maintenance organizations,
and other managed care organizations (collectively, "Plan(s)") for the
provision of primary care and specialty medical and surgical services to
Members; and
WHEREAS, IPA and Physician desire to enter into an agreement whereby
Physician agrees to provide Covered Services to Members of such Plans.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties agree as follows:
1. DEFINED TERMS.
Terms used herein which are not otherwise defined in context and the
initial letters of which are capitalized shall have the following
definitions:
a. "Admitting Physician" means a physician who, in the normal
course and scope of his medical practice, admits patients for hospital care
on either an inpatient or treats patients within a hospital on an outpatient
basis.
b. "Co-payment" means those charges for professional services
which shall be collected directly by Physician from Member as payment in
addition to payments by a Plan, in accordance with the Member's Subscriber
Agreement.
c. "Covered Services" means those Medically Necessary health care
services and supplies which a Member is entitled to receive under a Plan's
benefit program and which are described and defined in the Member's
Subscriber Agreement and in the Plan's provider manual.
d. "Dependent" shall have the meaning assigned to it in the
Member's Subscriber Agreement.
<PAGE>
e. "Emergency Services" means those health care services provided
to a Member in the event of the sudden onset of a symptom, illness or injury
requiring immediate medical or surgical care to prevent serious impairment of
health, or where taking the time to call his or her Primary Care Physician
might place the Member's life in danger. Heart attacks, strokes, poisoning,
loss of consciousness, and convulsions are examples of emergencies.
f. "Medical Director" means a Participating Physician who is
authorized by IPA to be responsible for administering IPA medical affairs.
The Medical Director shall also serve as IPA's liaison to Plans.
g. "Medically Necessary" means medical treatment required by a
Member as determined in accordance with accepted medical and surgical
practices and standards prevailing at the time of treatment and in conformity
with the professional and technical standards adopted by the Quality Care
Committee.
h. "Member" means a person who is enrolled in a Plan, including
enrolled Dependents, has selected a IPA Physician as their Primary Care
Physician, and is entitled to receive Covered Services. At such time as a
Member receives Covered Services from a Participating Physician, such Member
shall be deemed a patient of IPA.
i. "Participating Physician" means a physician duly licensed to
practice medicine by the applicable state authority and who has entered into
an agreement with IPA to provide Covered Services to Members.
j. "Participating Provider" means a participating hospital, a
physician, or any other health care practitioner or entity that has a direct
or indirect contractual arrangement with IPA and/or a Plan to provide Covered
Services to Members.
k. "Plan" means a benefit program of a third party payor which is
an insurer, self-insured employer, health maintenance organization or other
managed care organization and which has entered into an agreement pursuant to
which IPA is to provide Covered Services.
l. "Plan Schedule" means a document attached to this Agreement
relating to a particular Plan which is entitled "Plan Schedule" and which
provides an executive summary of the services to be rendered, compensation to
be paid, requirements to be met and additional terms and conditions of this
Agreement applicable to the particular Plan. In any instance where this
Agreement and a Plan Schedule are inconsistent in a particular circumstance,
the Plan Schedule shall govern. This Agreement may have more than one Plan
Schedule and additional Plan Schedules may be added from time to time in
accordance with the terms of this Agreement.
m. "Primary Care" means the field of general medicine, internal
medicine, family practice or pediatrics.
-2-
<PAGE>
n. "Primary Care Physician" means a physician licensed to practice
medicine who has executed the attached Primary Care Physician Participation
Schedule to provide Primary Care Covered Services and who has agreed to
provide Primary Care physician services to Members.
o. "Quality Management" means the process, plans and procedures by
which IPA or a Plan assures that the quality of care provided to Members
meets accepted medical standards. It may involve the establishment of a
Quality Care Committee to, among other things, monitor medical services
provided to Members and take action in any instance in which the competence
or professional conduct of a Participating Provider may be detrimental to
patient safety or to the delivery of patient care.
p. "Referral" means the process by which a Participating Physician
directs a Member to seek and obtain Covered Services from a health
professional, a hospital or any other provider of Covered Services.
q. "Specialist Care" means Covered Services rendered by a
Participating Physician who is not a Primary Care Physician.
r. "Specialist Care Physician" means a physician licensed to
practice medicine who has executed the attached Participating Specialist Care
Attachment to provide Specialist Care Covered Services and who has agreed to
provide Specialist Care physician services to Members.
s. "Subscriber" means the person who signs the application for
membership in the Plan and in whose name the subscription premium is paid. A
Subscriber signs for himself or herself and any Dependents.
t. "Subscriber Agreement" means the individual or family contract
with a Plan or any of its affiliates, including all amendments thereto, under
which a Subscriber and his or her Dependents are entitled to receive Covered
Services.
u. "Utilization Management" means the process, plans and
procedures by which IPA or Plan assures that Participating Providers are
efficient and follow economically sound practices in providing Covered
Services. It may involve the establishment of a Quality Care Committee to
set economic standards and procedures and to monitor and make appropriate
corrections which relate to the business, efficiency and economic aspects of
providing Covered Services.
2. SERVICES TO BE PERFORMED BY THE PHYSICIAN.
a. Services. Physician, within Physician's licensure and
expertise, agrees to provide or arrange to provide Covered Services, as
described in relevant Plan Schedule(s)
-3-
<PAGE>
incorporated herein by reference, to Members. Physician shall provide
Covered Services with the same standard of care, skill and diligence used by
similar physicians in the community in which such services are rendered.
b. Covering Physicians. Physicians agrees to provide or arrange
to provide coverage for all Members under the Physician's care twenty-four
(24) hours per day, each day of the year. If Physician is, for any reason,
from time to time unable to provide Covered Services when and as needed,
Physician may secure the services of a qualified physician (the "Covering
Physician") who shall render such Covered Services otherwise required of
Physician. Covering Physician must be approved by IPA to provide Covered
Services to Members and Physician shall notify IPA in advance of Covering
Physician providing any services hereunder by giving his or her name,
qualifications, address and telephone number and such other pertinent
information as shall be required by IPA. Physician shall be solely
responsible for securing services of such Covering Physician. It will be
Physician's responsibility to ensure that the Covering Physician (i) will not
seek reimbursement from the Plan for Covered Services under the terms of this
Agreement unless the payment arrangement with the Plan permits the Covering
Physician to be paid directly by the Plan for such services, (ii) will abide
by IPA's and Plan's policies and procedures including Utilization Management
and Quality Management, and (iii) agrees to be bound by all other provisions
of this Agreement relating to the delivery of Covered Services. Physician
agrees to accept responsibility for costs associated with any deviations of
Covering Physician from above requirements.
c. Ancillary Services. Physician agrees to refer all ancillary
services to Participating Providers, to the extent available, in accordance
with IPA Utilization Management procedures.
d. Hospital Admission Authorization. Physician shall admit
Members to a Participating Hospital in accordance with Utilization Management
procedures described in the Plan Schedules and/or in accordance with the
policies adopted by the IPA from time to time. Physician may not admit any
Member to any hospital on a non-emergency basis without pre-certification for
admission as prescribed in the Plan Schedules or in the IPA's policies.
e. Physician Referral. Primary Care Physicians shall not refer
Members except in accordance with Utilization Management procedures of the
Plan and/or policies adopted by the IPA from time to time, and shall (i)
refer a Member to another Participating Physician or Provider for
non-emergency Covered Services, or (ii) self refer for other than primary
care services, only upon compliance with the Referral Management Program as
prescribed by the Plan or IPA. Specialist Physicians shall provide non
emergency Covered Services (including diagnostic services) to a Member upon
referral, by the Member's Primary Care Physician unless such referral
authorization is not required and, if applicable, upon receipt of
authorization from IPA, except in case of emergency. Specialist Physicians
shall only refer a Member to another Participating Physician or other
Participating Provider for non-emergency Covered Services upon compliance
with the Referral Management Program. Failure of
-4-
<PAGE>
Physician to obtain such prior authorizations when applicable shall
constitute a material breach of this Agreement which shall entitle IPA, at
its option, to terminate this Agreement under Paragraph 8(a) below.
f. Data Requirements. Physician agrees to provide Plan with any
reasonably requested billing, claims or medical record information which is
necessary for the Plan to conduct utilization review and quality management
activities. The IPA shall inform Physician of the type and format of the
required data and the time-frames for submission of such data. The IPA
represents that it has been appointed as the Plan's agent for purposes of
conducting utilization management and related activities. Physician agrees
to comply with any such request for information from the IPA in a timely
manner.
3. COMPENSATION.
a. Compensation. Physician shall be paid compensation for Covered
Services provided to Members pursuant to (i) the rates, fees or capitation
payments set forth in the Plan Schedules or (ii) the rates and/or capitation
payments adopted by the IPA, as may be modified or adjusted from time to time
by the IPA, and applicable to the service and class of provider. The IPA
shall from time to time distribute information setting forth services, rates
of payment, co-payments, billing information and other arrangements pertinent
to Physician's compensation with respect to services to Members.
b. Charges to Members. Physician will look only to Plan for
compensation for Covered Services, except that Physician may seek
compensation from or make surcharges to a Member for i) services other than
Covered Services, or ii) co-payments or deductibles identified in the
applicable Plan Schedules.
c. Physician Responsibility. Physician shall be responsible to
collect for Physician's own account all co-payments and deductibles
applicable to Covered Services rendered to Members. Services rendered to
Members which are not Covered Services shall be solely the responsibility of
the Member.
d. Plan Schedules. Plan Schedules in respect of Plans for which
contractual arrangements with IPA exist as of the date of the Agreement are
attached to and are a part of this Agreement. Plan Schedules respecting
Plans with which contractual arrangements are made in the future shall become
a part of this Agreement in accordance with the provisions of Paragraph 8.e.
below. If any Plan Schedule which is a part of this Agreement is in conflict
with any provision of this Agreement, such Plan Schedule shall govern the
rights of the parties with respect to the matter in conflict.
e. Claims. Physician shall submit claims to the Plan, for all
Covered Services on the appropriate claim forms as soon as possible but in no
event later than sixty (60) days from date of service; provided, however,
that Plan may waive this requirement. Physician agrees to
-5-
<PAGE>
complete such claims information, including appropriate coding and completion
of HCFA-1500 or similar claims forms, in connection with services rendered
pursuant to this Agreement. All claim payments will be considered final
unless adjustments are requested in writing by Physician within the time
specified by the applicable Plan.
f. COB Obligations of Physician. Physician agrees to cooperate
with IPA and the applicable Plan for proper identification of claims subject
to Coordination of Benefits ("COB") or subrogation, and to bill and collect
from other payors such charges for which the other payor is responsible.
When Plan is determined to be secondary to any other payor including
Medicare, shall pay Physician no greater amount than the difference between
the amount received by Physician from the primary payor and the amount owing
under the applicable Plan Schedule.
g. Member Non-Recourse. In accordance with Section 38a-193 (c) of
the Connecticut General Statutes, Physician agrees that in no event,
including but not limited to, non-payment by Plan, Plan's insolvency or
breach of this Agreement, will Physician bill, charge, collect a deposit
from, seek compensation, remuneration or reimbursement from or have any
recourse against a Member or persons (other than the Plan) acting on the
Member's behalf for services provided under this Agreement. Physician
agrees that in the event of the Plan's insolvency or other cessation of
operations, to continue to provide services to Members through the period for
which premiums have been paid and until care has been appropriately
transferred to another physician. The Physician agrees that the provisions
of this Section shall survive the termination of this Agreement regardless of
the reason for termination, including the Plan's insolvency, and shall be
construed to be for the benefit of Members.
4. REPRESENTATIONS
a. Representations by IPA. IPA represents and warrants that it is
a Connecticut corporation. IPA makes no representation concerning the number
of Members it can or will refer to Physician under this Agreement.
b. Representations by Physician. Physician represents and
warrants:
(i) that Physician is a physician, duly licensed to practice
medicine in the State of Connecticut without restriction or sanction;
(ii) that if Physician is an Admitting Physician, Physician
will remain a member in good standing of the medical staff of a
Participating Hospital, with privileges that are appropriate to allow
admission of patients by Physician;
(iii) that Physician maintains, and agrees to continue to
maintain, in effect, at Physician's sole cost and expense, throughout the
entire term of this Agreement, a policy of professional malpractice
liability insurance with a licensed insurance company
-6-
<PAGE>
permitted to do business in the State of Connecticut to cover any loss,
liability or damage alleged to have been committed by Physician, or
Physician's professional agents, servants or employees. Where
malpractice coverage is maintained on a claims-made basis, appropriate
tail coverage insuring Physician against any claims relating to the
period that the Physician provides services hereunder. The limits of
liability provided by such insurance policy shall be at least as great as
established by the Board of the IPA from time to time and as required by
the applicable Plan; and
(iv) that Physician provides and agrees to continue to provide,
at Physician's sole cost and expense, throughout the entire term of this
Agreement, a policy or policies of insurance covering Physician's
principal place of business insuring Physician against any claim of loss,
liability or damage committed or arising out of the alleged condition of
said premises, or the furniture, fixtures, appliances or equipment
located therein, with limits at least as great as established by the
Board of the IPA from time to time and as required by the applicable Plan.
5. OBLIGATIONS OF PHYSICIAN
a. Hours. Physician agrees to be available to provide Covered
Services or to provide coverage for said services twenty-four (24) hours per
day, seven (7) days per week, three hundred sixty-five (365) days per year.
b. Proof of Insurance and Notice of Adverse Claims. Physician
shall provide IPA with a minimum of thirty (30) days prior written notice in
the event any of the insurance policies set forth in Paragraph 4 are
canceled, amended or not renewed. Upon request, Physician shall furnish to
IPA written evidence that the policies of insurance required under Paragraph
4 are in full force and effect. Physician agrees to provide written
notification to IPA in the event of any legal action arising out of services
provided to Members covered by IPA contracts with Plans within ten (10)
working days of any notice of such legal action.
c. Medical Records. Physician agrees to maintain records and to
provide information regarding services rendered to patients subject to this
Agreement to IPA, to applicable Plans, and to applicable state and federal
regulatory agencies, as may be reasonably required. Such obligations shall
not be terminated upon termination of this Agreement. Physician agrees to
permit Plan's or IPA's authorized representatives at all reasonable times to
have access upon reasonable request to books, records and other papers
relating to Covered Services rendered by Physician, and access to the cost
thereof and to the amounts of any payments received from Members or from
others on such Member's behalf. Physician agrees to retain such books and
records for a term of at least seven (7) years from and after the termination
of this Agreement. Physician further agrees to permit access to and
inspection, to the extent required by law, by IPA, Plans, the Connecticut
Secretary of State, the Connecticut Commissioner of Public Health, The United
States Department of Health and Human Services, and the Comptroller General
of the United States, at all reasonable times and upon demand, of all
-7-
<PAGE>
of those facilities, books and records maintained or utilized by Physician in
the performance of Covered Services pursuant to this Agreement.
d. Hospital Privileges. If Physician is an Admitting Physician,
during the entire term of this Agreement, Physician shall remain a member in
good standing of the medical staff of a [Participating Hospital], with
privileges that are appropriate to allow admission to a Participating
Hospital of patients by Physician.
e. Continuing Education. Physician shall attend and participate
in approved continuing education courses and shall attend, at the reasonable
request of the IPA, specialized training sessions and managed care programs
presented by Plan and/or IPA.
f. Compliance with IPA Rules. Physician agrees to be bound by the
rules, regulations and policies of IPA, as developed and adopted from time to
time by the IPA, and Physician recognizes that such provisions may be amended
from time to time. Physician agrees to cooperate with any administrative
procedures which may be adopted by IPA regarding the performance of Covered
Services pursuant to this Agreement.
g. Compliance with IPA Dispute Resolution Procedures. Physician
agrees to be bound by the IPA's Dispute Resolutions Policies and Procedures,
as in effect from time to time.
h. Physician Roster. Physician agrees that IPA and each Plan
which contracts with IPA may use Physician's name, address, telephone number
and specialty in the IPA or Plan directory of Participating Providers.
i. Cooperation with Plan Medical Directors. Physician understands
that Plans will place certain obligations upon IPA regarding the quality of
care received by Members and that in certain instances will have the right to
review the quality of care administered to Members. Physician agrees to
cooperate with Plan or IPA Medical Directors, as applicable, in the Medical
Directors' review of the quality of care administered to Members, to
participate in IPA's Quality Care Committee and Utilization Management
subcommittees and to comply with the policies adopted by the IPA and such
committees from time to time.
j. Binding Agreement. Physician agrees to be bound by all of the
terms and conditions, applicable to Physician, of each and every agreement
between IPA and any Plan with respect to which Physician has agreed to
participate under this Agreement; provided, however, that in any instance in
which there is a conflict between any Plan agreement and either this
Agreement or the applicable schedule to this Agreement, the Plan agreement
shall prevail.
k. Closure of Practice. Physician may close his/her practice to
new patients upon thirty (30) days prior notice to IPA, provided that the
practice shall be closed to all new patients except family members of
existing patients.
-8-
<PAGE>
l. Compliance with Law and Ethical Standards. Physician shall at
all times, during the term of this Agreement comply with all applicable
federal, state or municipal statues or ordinances, all applicable rules and
regulations of the Board of Registration in Medicine and the ethical
standards of the American Medical Association.
m. Nondiscrimination. Physician agrees not to differentiate or
discriminate in its provision of Covered Services to Members because of race,
color, national origin, ancestry, religion, sex, marital status, sexual
orientation or age.
6. MEDICAL RECORDS.
With respect to each Member receiving Covered Services hereunder,
Physician shall maintain medical records in such form, containing such
information, and preserved for such time period(s), and shall keep such
records confidential, all as are required by state and federal law. To the
extent permitted by law, in accordance with procedures required by law and
upon receipt of reasonable notice from IPA or Plan, Physician shall permit
IPA or Plan to inspect and make copies of said records.
7. TERM OF AGREEMENT.
This Agreement will become effective ________________, 199__ and remain
in effect through _____________________, 199__, unless sooner terminated
pursuant to the terms of this Agreement. This Agreement will automatically
renew for successive periods of twelve (12) months each on the same terms and
conditions contained herein, unless sooner terminated pursuant to the terms
of this Agreement.
8. TERMINATION OF THE AGREEMENT.
a. Termination With Cause. This Agreement may be terminated with
cause by either party upon sixty (60) days prior written notice to the other
party if the other party violates or fails to comply with any of the material
requirements of this Agreement, or if any of the representations made in
Paragraph 4 by the other party are not or cease to be true; provided,
however, that the breaching party shall be given an opportunity to cure such
breach during the sixty (60) day notice period. If the breach is cured
during such notice period, then this Agreement shall remain in effect.
b. Immediate Termination. Notwithstanding any other provision of
this Agreement to the contrary, the IPA shall have the right to terminate
this Agreement immediately in the event that the Physician:
(i) shall have his or her license to practice medicine revoked
or subject to sanction;
-9-
<PAGE>
(ii) is subject to the loss, suspension or reduction of (i)
medical staff privileges at any hospital or (ii) federal or state
controlled substance registrations;
(iii) undertakes any activity which results in jeopardy to the
life, health or safety of patients; or
(iv) fails to comply with a Plan's or IPA's policies and
procedures, as adopted from time to time.
c. Termination Without Cause. This Agreement may be terminated
by either party at any time without cause upon at least ninety (90) days
prior written notice to the other party.
d. Suspension. Pending the final adjudication of any action to
revoke, sanction or reduce a license to practice medicine or privileges at a
hospital, or upon failure of the Physician to satisfy the participation
criteria of any Plan, the President of IPA may suspend the Physician's
provision of Covered Services pursuant to this Agreement or to the Members of
a Plan, as the case may be. Any Physician subject to such action may seek
reinstatement by filing a petition with the Board of Directors pursuant to
procedures approved by the Board; provided, however, that no Physician shall
be eligible for reinstatement unless the proceeding leading to suspension has
been finally adjudicated in favor of the Physician or the Board of Directors
finds by clear and convincing evidence that such proceeding, if conducted,
would be finally adjudicated in favor of the Physician.
e. Failure to Accept Plan Participation. For each Plan with which
the IPA contracts, the IPA shall provide to Physician a description of the
Plan contract. Physician understands and agrees that the IPA shall review,
evaluate and, in some instances, negotiate contracting options with the
various Plans. The IPA may act as a messenger to facilitate discussions
concerning non-risk contracts with Plans ("Non-Risk Contracts") and may
negotiate contracts with Plans which require the IPA and Physician to bear
economic risk as part of the contract's terms ("Risk Contracts").
Physician agrees to participate in, and to accept the terms and
compensation negotiated by IPA with respect to each Plan except where the
Physician is required to give IPA notice of election for participation, or
may elect that to participate under applicable law.
Within fifteen (15) days of receipt of IPA's notice of a Non-Risk
contract, Physician may notify the IPA of his/her intent to participate in
the Contract (the "Opt-in Notice"). If the IPA does not receive an Opt-in
Notice from Physician then the time period prescribed above, Physician shall
be designated as not participating in Contracts where the Physician must
provide a notice of election to participate and shall be designated
participating where the Physician must elect not to participate.
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<PAGE>
IPA may request that Physician execute documents indicating participation
in a particular Risk or Non-Risk Contract.
f. Responsibility for Members Upon Suspension or at Termination.
Physician shall continue to provide Covered Services to a Member who is
receiving Covered Services from Physician on the effective date of suspension
of participation under, or termination of, this Agreement until the then
existing spell of illness is completed, unless IPA or Plan makes reasonable
and medically appropriate provision for the assumption of such Covered
Services by another Participating Provider. Physician agrees to cooperate
with the IPA and the Plan in the proper transition of care to another
Participating Physician. For the period after termination, specified in the
applicable Plan Schedule, IPA or Plan, as applicable, shall pay Physician for
those Covered Services provided to a Member in accordance with the
compensation methodology described in the Plan Schedule or, if applicable,
developed by the IPA.
g. Liability Upon Termination. The contractual obligations
(including but not limited to payment of deficits or a loss of withholds) of
Physician under this Agreement and a Plan Schedule which arise or accrue
prior to the effective date of termination will survive termination of this
Agreement.
9. UTILIZATION/QUALITY MANAGEMENT
a. IPA shall establish a Quality Care Committee which shall be
responsible for the continuing review of the care provided to Members by
Participating Providers. The Quality Care Committee shall also establish a
Utilization Management program to review the cost effectiveness of Covered
Services furnished by Physician to Members on an inpatient and outpatient
basis. Such program will include pre-admission, concurrent and retrospective
review. Physician shall comply with the Utilization Management program and
with any additional Utilization Management requirements imposed by IPA or a
Plan.
b. Physician agrees to be bound by and comply with policies and
procedures established by the Quality Care Committee. Physician agrees that
the Quality Care Committee may deny Physician payment hereunder for those
Covered Services provided to a Member which are determined not to be
Medically Necessary or in respect of which Physician failed to receive a
required prior consent/authorization or follow policies or procedures which
are developed and adopted by a Plan and/or IPA. IPA may also impose
financial penalties and/or terminate this Agreement immediately if Physician
fails to comply with the IPA's Utilization Management policies or
recommendations.
c. Failure to comply with the requirements of this paragraph 9
shall be deemed by IPA to be a material breach of this Agreement and shall,
at IPA's option, be grounds for immediate termination of this Agreement.
10. RIGHT OF FIRST OPPORTUNITY.
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The Physician hereby grants IPA the first opportunity to negotiate Risk
Contracts and enter into Risk Contracts with a Plan on behalf of the
Physician in accordance with the following terms:
a. If the Physician is contacted by a Plan for the purpose of
participating in the Plan, or if the Physician desires to participate in a
Plan or to renew a contract where the IPA also has a contract with such Plan
in effect, in any case after the effective date of this Agreement, the
Physician agrees to promptly notify IPA in writing of such offer. IPA will
have sixty (60) days from the date of notice to execute a letter of intent to
enter into a definitive agreement with the Plan and an additional one hundred
twenty (120) days after execution of the letter of intent to negotiate and
execute a definitive agreement between IPA and the Plan. The Physician
agrees to suspend all negotiations with such Plan during the period in which
IPA is conducting negotiations with the Plan. IPA agrees to promptly notify
the Physician if IPA decides not to contract with the Plan or is otherwise
unable to reach an acceptable agreement with such Plan, and in either such
case the Physician may after such notice negotiate and execute a separate
agreement with the Plan. IPA will use its best efforts to exercise its right
of first refusal in an expeditious manner.
b. If IPA is contacted by a Plan for the purpose of entering into
an agreement with the Plan, or if IPA contacts a Plan for the purpose of
entering into a contract with the Plan, IPA will promptly notify the
Physician in writing of such contact. The Physician agrees to suspend or
forego separate negotiation of a contract with the Plan during a one hundred
twenty (120) day period from the date of such notice, during which time IPA
may negotiate a definitive agreement between IPA and the Plan. IPA agrees to
promptly notify the Physician if it decides not to contract with the Plan or
is otherwise unable to reach an acceptable agreement with such Plan, and in
either such case, the Physician may after such notice negotiate and execute a
separate agreement with the Plan.
c. If the Physician has in effect a contract with a Plan as of the
date that IPA first executes a contract with a Plan, then the Physician
agrees not to renew such contract as of its expiration date and instead to
participate in such Plan through IPA as of such expiration date.
11. GENERAL PROVISIONS.
a. Notices. Any notices required or permitted to be given
hereunder by either party to the other may be given by personal delivery in
writing or by registered or certified mail, postage prepaid, with return
receipt requested. Notices shall be addressed to Physician at the address
appearing in the introductory paragraph on the first page of this Agreement,
and to IPA as follows:
MedServ IPA, Inc.
1520 Highland Avenue
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Cheshire, Connecticut 06410
Attn: Associate Chief Executive Officer
Each party may change such party's address by written notice given in
accordance with this paragraph. Notices delivered personally will be deemed
communicated as of actual receipt; mailed notices will be deemed communicated
as of three days after mailing.
b. Entire Agreement of the Parties. This Agreement supersedes any
and all agreements, either written or oral, between the parties hereto with
respect to the subject matter contained herein and contains all of the
covenants and agreements between the parties with respect to the rendering of
Covered Services to Members. Each party to this Agreement acknowledges that
no representations, inducements, promises, or agreements, oral or otherwise,
have been made by either party, or anyone acting on behalf of either party,
which are not embodied herein, and that no other agreement, statement, or
promise not contained in this Agreement shall be valid or binding.
c. Severability. If any provision of this Agreement is held by a
court of competent jurisdiction or applicable state or federal law and their
implementing regulations to be invalid, void or unenforceable, the remaining
provisions will nevertheless continue in full force and effect.
d. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut.
e. Assignment. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties to it, and their respective heirs, legal
representatives, successors and assigns. Notwithstanding the foregoing,
neither Physician or IPA may assign any of their respective rights or
delegate any of their respective duties hereunder without receiving the prior
written consent of the other party which consent shall not be unreasonably
withheld.
f. Independent Contractor. At all times relevant and pursuant to
the terms and conditions of this Agreement, Physician is and shall be
construed to be an independent contractor practicing Physician's profession
and shall not be deemed to be or construed to be an agent, servant or
employee of IPA.
g. Confidentiality. The terms of this Agreement and in particular
the provisions regarding compensation, are confidential and shall not be
disclosed except as necessary to enforce the performance of this Agreement or
as required by law.
h. Waiver. The waiver of any provision, or of the breach of any
provision, of this Agreement must be set forth specifically in writing and
signed by the waiving party. Any such waiver shall not operate or be deemed
to be a waiver of any prior or future breach of such provision or of any
other provision.
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i. Amendment. This Agreement may be automatically amended by IPA
to comply with any amendments to Plan Schedules or any subsequent agreements
entered into between IPA and a Plan or to comply with any applicable state or
federal law or regulation or other governmental requirement. Any other
amendments must be mutually agreed to in writing by IPA and Physician.
Executed on the date and year first above written.
PHYSICIAN
By:___________________________________(signature)
___________________________________, M.D. (print name)
Date:________________
MEDSERV IPA, INC.
By:___________________________________(signature)
___________________________________(print name)
Date:________________
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PHYSICIANS CARE FOR CONNECTICUT, INC.
ACUTE HOSPITAL AGREEMENT
This Agreement is between PHYSICIANS CARE FOR CONNECTICUT, INC.
("Physicians Care"), a Connecticut corporation, licensed as a health
maintenance organization (HMO) under the laws of the State of
Connecticut, and _________________________________ ("the Hospital"), a
facility duly licensed under the laws of the State of Connecticut.
WHEREAS, Physicians Care desires to purchase, on behalf of Physicians
Care Members, certain inpatient and outpatient hospital services
[and hospital-based professional services]; and
WHEREAS, the HOSPITAL desires to contract with Physicians Care to provide
such services to Members.
NOW THEREFORE, Physicians Care and the HOSPITAL agree as follows:
1.0 DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 Covered Services: The medical services and benefits for which a
Member is eligible under the applicable Subscriber Agreement. Except as
specifically stated in the applicable Subscriber Agreement, only (i)
services that are Medically Necessary and provided or authorized by a
Member's Primary Care Physician or (ii) Emergency Services, are Covered
Services. The terms used herein shall have the same meaning in
this Agreement as those specified in the applicable Subscriber Agreement
unless there is a conflict, in which case the Subscriber Agreement shall
control.
<PAGE>
1.2 Emergency Services: Health care services required in the event of
the sudden onset of a condition that requires immediate medical or
surgical care to prevent death or permanent impairment of the Member's
health, or where taking the time to call his or her Primary Care
Physician might place the Member's life in danger. Heart attack, stroke,
poisoning, loss of consciousness or convulsions are examples.
1.3 Inpatient Hospital Services: All hospital services, including
ancillary services (but not including separately billed professional
services) associated with inpatient care.
1.4 Medicaid: A program under which Physicians Care membership is
provided to persons eligible for Medicaid benefits in return for periodic
payments to Physicians Care by the Connecticut Medicaid agency.
1.5 Medically Necessary: Those medical services that are essential for
the treatment of a Member's medical condition and are in accordance with
generally accepted medical practice.
1.6 Medicare Risk Program: A program under which Physicians Care
membership is provided to Medicare-eligible beneficiaries in return for
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prospective payments to Physicians Care by the Health Care Financing
Administration and/or the enrolled member.
1.7 Medicare Supplement Program: A program under which Physicians Care
membership is provided to Medicare-eligible beneficiaries. Medicare is
the primary payor, and Physicians Care is financially responsible for
supplemental coverage in accordance with the Medicare Supplement Program
Agreement.
1.8 Member: A Member means a person entitled to receive medical and
hospital services and/or financing of such services through Physicians
Care pursuant to the terms of an effective and applicable Subscriber
Agreement. For purposes of this Agreement, a Member includes any person
for whom Physicians Care is legally obligated to provide, arrange to
provide and/or underwrite health care or administrative services.
1.9 Outpatient Hospital Services: All hospital services provided on an
ambulatory basis, including, but not limited to emergency room services,
surgical day care and outpatient ambulatory procedures, but not including
separately billed professional services.
1.10 Physicians Care Administrative Manual ("Manual"): This Agreement
incorporates by reference, as fully set forth herein, the Manual in
effect on the date hereof
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and as modified by Physicians Care in its sole discretion. The Manual
includes, but is not limited to, claims submission procedures, discharge
planning procedures, and Hospital recredentialing criteria. Hospital
acknowledges receipt of the Manual. In the event of conflict between the
Manual and this Agreement, this Agreement shall control.
1.11 Physicians Care Physician: A physician who maintains a contractual
relationship with Physicians Care to provide or arrange to provide
comprehensive health care services to Members.
1.12 Primary Care Physician: A specialist in internal medicine, family
practice, or pediatrics who is under contract with Physicians Care to
provide and authorize a Member's care.
1.13 Self-Funded Employer (Self-Insured Employer): An Employer that
contracts with Physicians Care for the provision or arrangement of
managed care medical services and other related administrative services
for its eligible employees, dependents and/or retirees whereby the
Employer assumes financial risk for claims incurred by those participants.
1.14 Subscriber Agreement(s): The contract(s) under which Physicians Care
is legally required to provide Covered Services to a Member. Physicians
Care shall provide the Hospital with copies of Subscriber Agreements upon
written request.
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2.0 HOSPITAL SERVICES AND AUTHORIZATION REQUIREMENTS
2.1 The Hospital will provide Members with Covered Services to the
extent customarily provided by the Hospital. If the Hospital plans to
modify or delete services that are usually and customarily provided, or
add services for its patients not in effect as of the effective date of
this contract, the Hospital will provide prior written notice to
Physicians Care of such changes.
Priority and access to services for Members will be determined on the
same basis as for other patients, according to the severity of medical
need and availability of accommodations. The Hospital agrees to provide
Covered Services to Members in accordance with generally accepted
standards of patient care. The Hospital will provide the same quality of
care to Members as it provides to its other patients.
2.2 In the event that a Member requires Emergency Services, the Hospital
will provide or arrange for such services and will notify Physicians Care
as soon as practical (but no longer than the later of twelve (12) hours
or the next business day) following the provision of Emergency Services
to permit Physicians Care to notify the applicable Primary Care Physician
to coordinate further delivery of care. Whenever Emergency Services are
provided or arranged, the Hospital shall furnish Physicians Care with
information on care provided and patient status. The Hospital shall also
notify and provide Physicians Care with the status and likely disposition
of any patients being cared for by the Hospital's Emergency Room.
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2.3 In the event that admission is deemed necessary following the
provision of Emergency Services, Physicians Care authorization must be
obtained for the admission. This authorization is separate from the
notification for Emergency Services and must be obtained prior to
admitting the patient, unless the delay would endanger the patient. If
patient condition does not permit prior authorization of admission, the
Hospital must contact Physicians Care within twelve (12) hours of the
admission or the next business day to obtain authorization. The
notification to Physicians Care in and of itself does not constitute
authorization.
2.4 In the event that follow-up services, but not an admission, are
believed to be necessary by the Hospital or its physicians following the
provision of Emergency Services, Physicians Care authorization must be
obtained. This authorization is separate from the notification for
Emergency Services and must be obtained prior to treating the patient for
follow-up care.
3.0 HOSPITAL FINANCIAL RESPONSIBILITIES
3.1 In the event that the Hospital provides or arranges for Services to
a Member, (except a Point of Service Plan Member receiving Out-of-Network
Services), without Physicians Care authorization and not otherwise
constituting Emergency Services as defined in this Agreement, the
Hospital must seek payment from such Member or other responsible party,
and Physicians Care shall not be responsible for payment for such
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services. In the event of admission following Emergency Services,
Physicians Care will not be responsible for payment of unauthorized days
if the notification procedures outlined in Section 2.2 were not followed.
Under these circumstances, the Hospital cannot bill the Member for
payment of these services.
3.2 The Hospital shall submit claims to Physicians Care within ninety
(90) days from the date of service; however, claims may be submitted
later than ninety (90) days but not more than one (1) year from the date
of service, if accompanied by documentation indicating good cause for
late filing. Physicians Care shall determine good cause in its sole
discretion and shall not be obligated to pay claims submitted more than
ninety (90) days from date of service without good cause for delay or
claims submitted more than one (1) year from the date of service. The
Member may not be billed for such services. Claims shall be submitted in
accordance with the procedures and requirements set forth in the Manual.
This includes the requirement that all claims shall be submitted on an
UB-82 or UB-92 form, with all appropriate ICD-9 and CPT codes.
3.3 Except as specifically set forth herein, the Hospital will look
solely to Physicians Care for payment for Covered Services provided to
Members. The Hospital will not assert any claim or demand on Members or
employers of Members (except for Self-Funded Employers in accordance with
Section 4.10 of this Agreement), for
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compensation for Covered Services, whether or not payment has actually been
received from Physicians Care.
3.4 When rendering Covered Services, the Hospital may collect and retain
from Members, at the same time services are provided, any applicable
copayment or deductible as set forth in the applicable Subscriber
Agreement. Payments to the Hospital shall be net of any applicable
copayments or deductibles payable by Members for Covered Services,
whether or not the Hospital collects such payment.
3.5 Physicians Care will be responsible for payment for Covered Services
if the patient is an active Member and eligible for such service on the
date of treatment. Physicians Care reserves the right to deny or recover
payment if after receipt of a claim it is determined that the patient was
not a Member on the date of service. The Hospital may bill the patient
or his or her insurance carrier directly for those non-reimbursed
services furnished to the patient. [Retroactive termination policy]
3.6 The Hospital may bill a Member for services furnished to a Member if
(1) the services were not authorized by a Physicians Care Physician
(except Emergency Services), (2) the services were not Covered Services
and the Member was advised that the services were not Covered Services
prior to their provision, or (3) the Member did not identify himself or
herself as a Member.
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3.7 Physicians Care assesses the appropriateness of inpatient care using
clinically recognized criteria, such as the Managed Care Appropriateness
Protocol (MCAP). If through its utilization management program,
Physicians Care determines that any portion of a hospital stay is not
Medically Necessary, Physicians Care, at its discretion, will not be
financially responsible for said portion of the hospital stay.
3.8 The Hospital agrees that, in the event of the insolvency or
bankruptcy of Physicians Care, the Hospital shall not seek payment from
Members who have received Covered Services pursuant to this Agreement
whether or not payment has actually been received for such services, and
whether or not this Agreement remains in effect. The Hospital's sole
redress shall be against the assets of Physicians Care as applicable
under this Agreement. In the event of insolvency on the part of
Physicians Care, the Hospital agrees to continue to provide services to a
Member who is an inpatient until the Member is discharged based on
medical appropriateness.
4.0 RATES AND PAYORS' FINANCIAL RESPONSIBILITIES
4.1 Physicians Care will pay the Hospital for authorized Inpatient
Services and Outpatient Services, and the Hospital shall accept from
Physicians Care in full and final satisfaction for all Hospital Inpatient
Services and Outpatient Services rendered hereunder, fees and charges as
specified in Exhibit A, which is by reference expressly incorporated
herein.
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4.2 Pre-Admission Testing: The cost of any diagnostic, consultative or
other services related to an inpatient admission performed by the
Hospital, or by a wholly-owned or controlled subsidiary or affiliate of
the Hospital, within seven (7) days immediately preceding the admission
shall be included in the Inpatient Services rates of payment.
4.3 If Physicians Care and the Hospital have not reached agreement on
rates for Medicare Risk Program Members, Physicians Care may pay the
Hospital for Inpatient Services at the then applicable Medicare DRG rates
of payment in accordance with Section 4012 of the Omnibus Budget
Reconciliation Act of 1987 in full satisfaction of its obligations
hereunder.
4.4 For Covered Services provided to Medicare Supplement Program Members
who are covered by Medicare or Physicians Care, as applicable, Physicians
Care shall reimburse the Hospital solely for the Medicare copayment and
deductible that would be payable by the Medicare enrollee for such care
(or the full contract rate, if lower). For any Covered Services that
Medicare does not cover, the Hospital shall be reimbursed at the contract
rates, as set in Exhibit A.
4.5 Physicians Care may pay the Hospital for Covered Services for
Connecticut Medicaid Members at the rates that the Hospital has
contracted with the Connecticut Medicaid agency for such services.
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4.6 All rates of payment, as listed in Exhibit A, are applicable to all
Member, except as otherwise indicated.
4.7 For hospitals licensed in Connecticut, all rates of payment, as
listed in Exhibit A, are inclusive of any free care surcharge as may be
required to be itemized on Hospital bills to payors in accordance with
any state law regarding uncompensated or free care pool. If the
Connecticut Medicaid agency regulations or other legal mandates prohibit
the inclusion of any uncompensated or free care surcharge in the rates of
payment listed above, then those rates will be reduced by the amount of
the uncompensated or free care surcharge.
For hospitals licensed out of state, all rates of payment, as listed in
Exhibit A, are inclusive of any surcharges, taxes, or similar fees
required to be itemized or otherwise incorporated into or added onto
Hospital bills to payers in accordance with laws that may be enacted in
the provider hospital's state.
4.8 Hospital agrees to accept payments for Inpatient and Outpatient
Services according to the guidelines as specified in the Manual.
Physicians Care will pay the lower of billed charges or the rate set
forth in Exhibit A. Physicians Care may revise the outpatient Physicians
Care Fee Schedule(s) from time to time in accordance with industry
practice, including but not limited to such revisions as the addition or
deletion of procedural codes.
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4.9 Notwithstanding any other provisions of Section 3 or 4 of this
Agreement, Physicians Care shall not be liable under this Agreement for
payment of Covered Services that are the financial responsibility of a
Self-Funded Employer. The Hospital shall look to the responsible
Self-Funded Employer for payment for any non-reimbursed Covered Services.
4.10 Physicians Care's may engage a third-party auditing firm to verify
the accuracy of Hospital claims. The Hospital shall cooperate with
Physicians Care and its auditor under the procedures as set forth in the
Manual. For DRG-based reimbursement, Physicians Care reserves the right
to validate inpatient claim information (including diagnosis procedure
code) used to determine DRG assignment by Physicians Care, and to adjust
payments to the Hospital based on corrections to claim information.
5.0 PAYMENT FOR MEMBERS ELIGIBLE FOR OTHER INSURANCE
5.1 Hospital agrees to comply with generally accepted practices and
procedures for coordination of benefits, and third party liability
recovery and to assist Physicians Care with such programs. Hospital will
collect information concerning duplicate coverage, workers compensation
and personal injury liability at the time of admission, and provide such
information to Physicians Care in a timely manner.
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5.2 Hospital shall bill the primary payor directly, and provide
Physicians Care with copies of all primary payor payments and outstanding
claims. Physicians Care will pay the remaining balance for Covered
Services provided to Members whose primary insurer is not Physicians Care
after the primary payor's full liability has been determined (full
liability equals the primary payor's payment plus the primary payor's
contractual allowance). In no event will Physicians Care pay more than
if it were the primary payor, and Physicians Care's secondary liability
as payor shall be determined based on the rates set forth in Exhibit A.
If Physicians Care makes payment to the Hospital and it is subsequently
determined that Physicians Care is not the primary payor, the Hospital
shall reimburse Physicians Care for such payments.
5.3 Notwithstanding the above and in accordance with state regulation,
Physicians Care shall not have liability, either as the primary or
secondary payor, under this Agreement, unless the services are Covered
Services under this Agreement and unless the Hospital has complied with
all other terms of the Agreement.
6.0 PROFESSIONAL STAFF; PHYSICIAN CREDENTIALING AND RECREDENTIALING
6.1 The Physicians Care Medical Director shall be responsible for
representing Physicians Care Physicians in their relationship with the
Hospital and will assume general oversight of Physicians Care's
responsibility with respect to the provision of services pursuant to this
Agreement. The Hospital agrees to consider applications from
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qualified Physicians Care Physicians for appointment to the Hospital Staff
and for delineation of privileges in accordance with the Bylaws, rules,
regulations and policies of both the Hospital and its Medical Staff.
6.2 A Physicians Care Physician who has been appointed to the Hospital
medical staff under Section 6.1 shall have the opportunity to provide
medical care to Members at the Hospital within the scope of any
applicable privilege. Any professional services required with respect to
any service or admission (such as consultation services) that cannot
appropriately be delivered by a Physicians Care Physician who has been
appointed to the Hospital staff may be provided by an appropriate
physician on the Hospital staff according to the usual Hospital protocols
and rules for referral and in accordance with any separate agreements
which may exist between the Hospital physicians and Physicians Care for
physician services.
6.3 Each physician who is a member of the medical staff of the Hospital
providing services under this Agreement shall maintain his or her status
as a duly licensed physician under the laws of Connecticut and shall
continue to be Board Certified or Board Eligible in their respective
practicing specialty. Hospital agrees to provide Physicians Care, on
written request, with a current list of staff physicians and their
medical staff classifications.
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6.4 Physicians Care may request credentialing and recredentialing
information from the Hospital regarding Physicians Care Physicians
(either current Physicians Care Physicians or physicians who have applied
to become Physicians Care Physicians) who are on the medical staff of the
Hospital. Pursuant to each physician's release and waiver, in accordance
with the regulations of the Connecticut Board of Medicine and as supplied
by Physicians Care, the Hospital shall provide written confirmation that
the physicians in question have been credentialed by Hospital, and are
members of the Hospital staff in good standing; and the Hospital shall
provide a copy of each physician's application for medical licensure or
renewal of medical licensure, whichever is most recent. The Hospital
shall provide whatever additional information may be required in
accordance with Board of Medicine regulations.
To the extent the Hospital has knowledge, it shall immediately notify
Physicians Care in the event that a Physicians Care Physician is censured
or reprimanded by any health care facility (and such discipline is
reportable to the Board of Medicine) or has his or her privileges at any
health care facility suspended, revoked, restricted, made probationary,
or otherwise diminished in any way, including resignation or nonrenewal,
or is subject to any disciplinary action by the Board of Registration.
Physicians Care shall be notified of any medical malpractice claim or
potential medical malpractice claim against the Hospital or its
physicians by any Physicians Care Member.
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7.0 REPORTING REQUIREMENTS; MEDICAL RECORDS
7.1 The Hospital shall make available to Physicians Care the information
specified in the Reporting Requirements section of the Manual, and shall
comply with such procedures specified therein.
7.2 Upon request, the Hospital agrees to provide Physicians Care with
copies of Members' medical records, except where specific member consent
is required by law. Physicians Care represents that patient consent for
release of patient records has been obtained by Physicians Care as part
of its enrollment process and the Member's acceptance of the Subscriber
Agreement.
7.3 During the term of this Agreement, and for a period of seven years
thereafter, Hospital will allow Physicians Care to have access to their
Members' medical records relating to services provided under this
Agreement.
7.4 In addition, upon reasonable request and at reasonable times,
Physicians Care and the Hospital shall make available to the other for
review and copying any additional records, patient charts, and other
medical or billing documents or information as may be deemed relevant to
any determination required by this Agreement, or as may be requested by
Physicians Care for medical purposes, quality assurance or utilization
review purposes, pursuant to any legal or regulatory
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requirements. All parties shall treat such information confidentially
pursuant to Section 1 9.0 of this Agreement and in accordance with law.
7.5 The Hospital will be reimbursed for copies of any documents
requested pursuant to Section 7 of this Agreement at the rate of $
per page.
8.0 UTILIZATION MANAGEMENT/ CASE MANAGEMENT/ QUALITY ASSURANCE
8.1 The Hospital shall cooperate with and assist Physicians Care in its
case management/quality assurance and utilization management functions.
The Hospital shall provide on-site privileges for Physicians Care's
liaison nurses, continuing care nurses, patient care coordinators, and/or
social workers upon Physicians Care's request, including unrestricted
access to medical records, unrestricted access to Members and hospital
staff, and authority to input into the Hospital medical record, when in
accordance with the Bylaws of the Hospital. The Hospital shall allow
Physicians Care's liaison nurses, continuing care nurses, patient care
coordinators, and/or social workers work spare access including desk
space, telephone access, spare for a computer terminal, and secure space
for personal belongings.
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8.2 The Hospital shall cooperate with Physicians Care in level-of-care
decision-making and discharge planning in accordance with the discharge
planning procedures outlined in the Manual. The final decision of
level-of-care for purposes of determining reimbursement by Physicians
Care shall be made by Physicians Care.
8.3 The Hospital shall treat Physicians Care Members the same as any
other Hospital patients in making available to such patients social
services (e.g., assistance with Medicaid applications, family counseling,
and advice and assistance in obtaining other non-medical post-discharge
services and continuing care services.)
8.4 The Hospital shall not exclude Members from its utilization
management, quality assurance and discharge planning programs and will
notify Physicians Care of Members referred to its Quality Assurance
Review Committee.
9.0 HOSPITAL RECREDENTIALING PROGRAM
9.1 The Hospital agrees to cooperate with and participate in any
Physicians Care Recredentialing Requirements as set forth in the Manual.
The Hospital agrees to provide the required information and documentation
in a timely manner as specified in the Manual.
10.0 TERM AND TERMINATION
10.1 This Agreement shall be effective as of ___________________________
and shall continue
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in effect through ______________________________ (the "Term") and shall
be automatically renewed under the same terms and conditions for
successive one-year terms (each referred to as a "Renewal Term"), unless
terminated upon written notice given at least ninety (90) days prior to
the end of the Term.
10.2 The Hospital fees for services to Physicians Care Members specified
in Exhibit A shall be effective for the Term of this Agreement. Should
the parties be unable to agree upon the schedule of fees and charges
within ninety (90) days after the start of any Renewal Term, the Hospital
will be reimbursed in accordance with the reimbursement schedule in
effect on the last day of the Term, until a new reimbursement schedule is
finalized or unless the Agreement is terminated as provided in Section
10.1.
10.3 Physicians Care shall continue to pay for Covered Services provided
to Members hospitalized at the time of termination of this Agreement in
accordance with the terms and rates in effect on the date of termination
and until there can be a medically appropriate discharge.
10.4 This Agreement shall be terminated immediately upon receipt of
notice of any of the following: 1) material breach, where the material
breach is not resolved or cured within thirty (30) days of receipt of
written notice of the alleged breach; 2) fraud and misrepresentation; 3)
loss, limitation or suspension of the Hospital's license, JCAHO
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accreditation, or qualification under Medicare or Medicaid; 4) where
either party (i) makes a general assignment for the benefit of creditors,
(ii) suffers or permits the appointment of a receiver for its business or
assets, (iii) avails itself of, or becomes subject to, any proceeding
under the Federal Bankruptcy Act or any other statute of any state
relating to insolvency or the protection of the rights of creditors.
11.0 NOTICES
All legal notices or other communications provided for or required by
this Agreement shall be given by each party to the other parties in
writing addressed to the parties as set forth below, or to such other
addresses as each party may designate by written notice:
To Hospital:
To Physicians Care:
12.0 SEVERABILITY
If any term, provision, covenant or condition of this Agreement is
invalid, void or unenforceable, the rest of the Agreement shall remain in
full force and effect. The validity or enforceability of any term or
provision hereof shall in no way affect the validity or enforceability of
any other term or provisions.
-20-
<PAGE>
13.0 INTEGRATION AND AMENDMENTS
13.1 This Agreement (and its Exhibits and Appendices) contains the
complete understanding and agreement between the parties and supersedes
all representations, understandings or agreements prior to the execution
hereof.
13.2 No waiver, alteration, amendment or modification of this Agreement,
(except to the Manual and except as otherwise noted), shall be valid
unless in each instance a written memorandum specifically expressing such
waiver, alteration, amendment or modification is made and subscribed by a
duly authorized officer of the Hospital and a duly authorized officer of
Physicians Care.
14.0 LIABILITY INSURANCE
The Hospital shall procure and maintain professional liability insurance
(medical malpractice) in the amount of at least $1,000,000/$3,000,000,
and ensure that its physicians maintain such insurance for the duration
of this Agreement. Physicians Care shall procure and maintain
professional liability insurance (medical malpractice) in the amount of
at least $1,000,000/$3,000,000, and the Hospital agrees to procure and
maintain comprehensive general liability in an amount commensurate with
industry standards. The parties shall immediately report to the other
any lapse or modification in such coverage.
-21-
<PAGE>
15.0 USE OF NAME
The Hospital agrees to designation as a participating Hospital in
Physicians Care Member or marketing materials and the parties agree to
the listing of each other's name, address, telephone number and
description of facilities and services in each other's brochures and
literature.
16.0 MEMBER COMPLAINTS
16.1 Physicians Care and the Hospital agree, to the extent permitted by
law, fully to advise each other of any Member complaint, grievance or
claim known to that party relating to services provided under this
Agreement.
16.2 Physicians Care maintains a grievance process for Members in
accordance with applicable state and federal law, and the applicable
Subscriber Agreement. Hospital agrees to cooperate with Physicians Care
in its resolution of Member complaints and grievances.
17.0 INDEMNIFICATION
17.1 The Hospital shall indemnify and hold harmless Physicians Care from
and against any claims, demands, costs, or expenses (including reasonable
attorney's fees) arising from or based on acts or omissions of the
Hospital or its agents or employees
-22-
<PAGE>
under this Agreement, provided that the Hospital shall have no liability to
Physicians Care under this subsection unless the Hospital is promptly
notified in writing of all claims asserted and actions instituted against
Physicians Care and is given the opportunity to defend the same at its own
cost and expense.
17.2 Physicians Care shall indemnify and hold the Hospital harmless from
and against any claims, demands, costs or expenses (including reasonable
attorney's fees) arising from or based on acts or omissions of Physicians
Care or its agents or employees under this Agreement, provided that
Physicians Care shall have no liability to the Hospital under this
subsection unless Physicians Care is promptly notified in writing of all
claims asserted and actions instituted against the Hospital and is given
the opportunity to defend the same at its own cost and expense.
18.0 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which will be deemed to be an original, but all of which together shall
constitute the same instrument.
19.0 PROPRIETARY INFORMATION
Each party to this Agreement shall protect the confidentiality of
proprietary business information, Member medical record information, and
any other confidential information disclosed to it by any other party
under this Agreement, and labeled as such, including but not limited to
financial information, fees, and rates contained in this
-23-
<PAGE>
Agreement and Exhibit A, and shall take all reasonable measures to
prevent any of its agents, employees, independent contractors, or any
other person involved in doing business with or controlled by the party
involved from disclosing or transmitting to any person or entity any of
such information; provided, however, that nothing herein shall prohibit a
party from disclosing or transmitting information to the extent necessary
under the terms of this Agreement or as required by law. This provision
shall not apply to any information which is now in, or subsequently
enters the public domain, provided that a party has not, in violation of
this provision, disclosed or caused to be disclosed such information so
as to make it public or to enter the public domain.
IN WITNESS WHEREOF, Physicians Care and the HOSPITAL have executed this
Agreement by their respective duly authorized officers.
PHYSICIANS CARE FOR CONNECTICUT, INC. HOSPITAL
BY:______________________________ BY:______________________________
DATE:___________________________ DATE:___________________________
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<PAGE>
EXHIBIT 10.3
MEDSERV IPA, INC.
PHYSICIANS CARE FOR CONNECTICUT, INC.
PRIMARY CARE PHYSICIAN ATTACHMENT
I, ____________________, with a principal business address at
_____________ __________________________, acknowledge that I am a
participating provider in MedServ IPA, Inc. ("MedServ IPA"), and I agree as
follows:
1. I agree to be a participating provider in all Physicians Care for
Connecticut, Inc. ("Physicians Care") products for which MedServ IPA and its
participating physicians and Physicians Care share financial risk under the
terms of the [NETWORK/INSURER AGREEMENT] dated as of [DATE]. I agree to be
bound by all terms and conditions of such Agreement.
2. Recognizing that I must elect to participate in any Physicians Care
product for which I will be paid on a fee-for-service basis without
financial risk (the "Non-Risk Products"), the following constitutes my
election:
_____ I will participate in Non-Risk Products.
_____ I will not participate in Non-Risk Products.
3. I agree:
(i) to assume responsibility for the total management of the health
care of any Enrollee who has designated me as their Primary Care
Physician under any Physicians Care product requiring selection
of a Care Manager
(ii) to provide Enrollees regular preventative health examinations and
services (E.G., immunizations, hypertension screening) as
recommended by MedServ IPA and Physicians Care; and
(iii) to offer Enrollees such health education as deemed appropriate
pursuant to MedServ IPA and Physicians Care guidelines.
4. I shall maintain an open panel of patients; provided, however, that
my practice may be closed provided that it is closed to enrollees of all
managed care payors with whom I contact and for all products offered by such
payors. In the event that I do close my panel, I may accept immediate family
members of existing patients or patients with whom I have had a pre-existing
relationship in the immediately preceding thirty-six (36) months.
IN WITNESS WHEREOF, the undersigned have set their hands and seals this
___day of _________, 1997.
PHYSICIANS CARE FOR
CONNECTICUT, INC.
<TABLE>
<S> <C>
- --------------------------------------------- ---------------------------------------------
By: Physician
</TABLE>
<PAGE>
MEDSERV IPA, INC.
PHYSICIANS CARE FOR CONNECTICUT, INC.
SPECIALTY PHYSICIAN ATTACHMENT
I, ______________, with a principal business address at ____________________
__________________________, acknowledge that I am a participating provider
in MedServ IPA, Inc. ("MedServ IPA"), and I agree as follows:
1. I agree to be a participating provider in all Physicians Care for
Connecticut, Inc. ("Physicians Care") products for which MedServ IPA and
its participating physicians share financial risk pursuant to the terms of
the [NETWORK/INSURER AGREEMENT] dated as of [DATE]. I agree to be bound by
all terms and conditions of such Agreement.
2. Recognizing that I must elect to participate in any Physicians Care
product for which I will be paid on a fee-for-service basis without
financial risk (the "Non-Risk Products"), the following constitutes my
election:
_____ I will participate in Non-Risk Products.
_____ I will not participate in Non-Risk Products.
3. I shall maintain an open panel of patients; provided, however, that
my practice may be closed provided that it is closed to enrollees of all
managed care payors with whom I contact and for all products offered by such
payors. Notwithstanding the foregoing, in the event that I do close my
panel, I may accept immediate family members of existing patients or
patients with whom I have had a pre-existing relationship in the immediately
preceding thirty-six (36) months.
IN WITNESS WHEREOF, the undersigned have set their hands and seals this
___day of _________, 1997.
PHYSICIANS CARE FOR
CONNECTICUT, INC.
<TABLE>
<S> <C>
- --------------------------------------------- ---------------------------------------------
By: Physician
</TABLE>
<PAGE>
EXHIBIT 10.4
[LOGO]
[Redraft #8--September 11, 1997]
PHYSICIANS CARE FOR CONNECTICUT, INC.
SUBSCRIPTION AGREEMENT (INDIVIDUAL)
<TABLE>
<CAPTION>
EXPLANATORY NOTES
REQUIRED INFORMATION (PLEASE REFER TO THE PROSPECTUS FOR COMPLETE
(PLEASE COMPLETE ALL UNSHADED AREAS) INFORMATION)
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
NAME AND ADDRESS Print or type the Subscriber's name, Social Security
Number, date of birth, and address where the Subscriber
would like the stock certificate(s) sent.
__________________________________________________________________________________________________________________
(Name) The Subscriber's name.
__________________________________________________________________________________________________________________
(Social Security Number) ___--__--____ The Subscriber's Social Security Number.
(Date of Birth) _______________, 19__ The Subscriber's Date of Birth.
__________________________________________________________________________________________________________________
(Address) The street address to which the stock certificate(s)
will be sent. Post Offices boxes may not be used as the
stock certificate(s) will be sent by Registered Mail.
__________________________________________________________________________________________________________________
(City) The city to which the stock certificate(s) will be sent.
__________________________________________________________________________________________________________________
(State) The state to which the stock certificate(s) will be
sent.
__________________________________________________________________________________________________________________
(Zip Code) The zip code to which the stock certificate(s) will be
sent.
__________________________________________________________________________________________________________________
STOCK REGISTRATION Common Stock must be registered with Physicians Care for
Connecticut, Inc. by the name of the individual
stockholder.
__________________________________________________________________________________________________________________
(Name) - Please print or type the Subscriber's name as the
Subscriber would like it to read on the stock
certificate(s). Include first name, middle initial,
and last name. Please avoid the use of two initials,
if possible, and omit words that do not affect
ownership rights, such as Dr., Mr., Mrs., special
account, etc.
- If Common Stock is to be listed in a corporate or
practice name, please use "Subscription
Agreement -- Group."
__________________________________________________________________________________________________________________
TELEPHONE AND FAX NUMBERS
__________________________________________________________________________________________________________________
/ / Telephone (home) (___)___-____ - All telephone and fax numbers provided will be kept
________________________________________________________ confidential and will not be used for purposes of
/ / Fax (home) (___)___-____ solicitation, but may be used by the Subscription
Agent to make contact with the Subscriber regarding
________________________________________________________ this Subscription.
/ / Telephone (office) (___)___-____
________________________________________________________ - Please check the preferred number(s) for contact by
/ / Fax (office) (___)___-____ the Subscription Agent.
__________________________________________________________________________________________________________________
<PAGE>
MEDICAL ASSOCIATION MEMBERSHIP
AND
MEMBERSHIP IN MEDSERV IPA, INC.
__________________________________________________________________________________________________________________
I certify:
/ / I am currently a member of my state medical - A Subscriber to the Common Stock of Physicians Care for
association and county medical association, Connecticut, Inc. who desires to participate with
if a county medical association exists. Physicians Care for Connecticut, Inc. must be a member
/ / I am not currently a member of both my State of his or her county medical association (if one
and County Medical Associations but have exists in the county in which the subscriber maintains
applied for membership in the following his or her practice) and the state medical association
(if applicable): (if one exists in the state in which the Subscriber
maintains his or her practice).
County Medical Association - In the alternative, a Subscriber may represent that he
__________________________________________________ or she has applied for and, once a member, will
maintain such membership(s) as are referred to above.
State Medical Association
___________________________________________________ - By executing this Subscription Agreement, the Subscriber
confirms the accuracy of the statements of memberships
recognizing that they will be relied on by Physicians
Care for Connecticut, Inc. for the issuance of the
shares of Common Stock subscribed to herein.
__________________________________________________________________________________________________________________
I certify:
/ / I am currently a member of MedServ - A Subscriber to the Common Stock of Physicians Care
IPA, Inc., or for Connecticut, Inc. who desires to participate with
Physicians Care for Connecticut, Inc. must be a member
of MedServ IPA, Inc.
/ / I am not currently a member of MedServ IPA, Inc.
but have enclosed with this Subscription Agreement a - If the Subscriber is not currently a member of
completed application for membership along with a MedServ IPA, Inc. and requires information
separate check in the sum of $200 for payment of its or assistance, please call (203) 699-2401, or
administration fee. (800) 541-5083.
__________________________________________________________________________________________________________________
PURCHASE OF COMMON STOCK AND - The price for each share of Class A or Class B
COMPUTATION OF PURCHASE PRICE Common Stock is $3,000 when fully completed
Subscription Documents are received by the
Subscription Agent on or before the Prompt
Subscription date.
THE PROMPT SUBSCRIPTION DATE
IS ___________________, 199_. - The price for each share of Class A or Class B
Common Stock is $4,000 when fully completed
Subscription Documents are received by the
Subscription Agent after the Prompt Subscription date.
- Subscription Documents are considered "received" on the
date they are delivered to the Subscription Agent.
__________________________________________________________________________________________________________________
Primary Care Physicians and Specialty Care Physicians - All physicians who desire to participate with
Desiring to Purchase Class A Common Stock: Physicians Care for Connecticut, Inc. are required to
purchase one share of Class A Common Stock.
/ / I wish to purchase one share of Class A - No physician may purchase more than one share of Class A
Common Stock at: Common Stock.
/ / $3,000 per share if purchased on or - Primary Care Physicians are required to purchase
before the Prompt Subscription date, or only Class A Common Stock. (See the definition
of Primary Care Physician in the Glossary section
/ / $4,000 per share if purchased of the Prospectus.)
after the Prompt Subscription date.
__________________________________________________________________________________________________________________
Specialty Care Physicians and Others Desiring to - A Specialty Care Physician who desires to
Purchase Class B Common Stock: participate with Physicians Care for Connecticut,
Inc. is required to purchase at least one
share of Class B Common Stock in addition to
/ / I wish to purchase the following number of the required purchase of one share of
shares of Class B Common Stock (specify): Class A Common Stock. (See the
______ share(s), at: definition of Specialty Care Physician
in the Glossary section of the Prospectus.)
/ / $3,000 per share if purchased on or
before the Prompt Subscription date, or
- Primary Care Physicians are not required to
/ / $4,000 per share if purchased after the purchase Class B Common Stock.
Prompt Subscription date.
- Any physician, including Primary Care
Physicians and retired physicians, and those who
do not wish to participate with Physicians Care
for Connecticut, Inc., may purchase as many shares
of Class B Common Stock as desired, subject to
availability.
__________________________________________________________________________________________________________________
<PAGE>
__________________________________________________________________________________________________________________
PAYMENT FOR SUBSCRIBED STOCK
__________________________________________________________________________________________________________________
Make check payable to: The Subscriber's check for the total purchase price
(number of shares subscribed to multiplied by the price
State Street Bank & Trust Company -- Escrow Agent per share) must be enclosed with this completed
Subscription Agreement.
__________________________________________________________________________________________________________________
CERTIFICATION OF RESIDENCE
AND LICENSURE
__________________________________________________________________________________________________________________
I certify that I am a resident of one of the A Subscriber to the Common Stock of Physicians Care
following states (please check one state): for Connecticut, Inc. who desires to participate with
Physicians Care for Connecticut, Inc. must:
/ / Connecticut - reside in one of the listed states
- be a physician licensed in the state in which he
/ / New York or she practices.
/ / Rhode Island The Subscriber recognizes that this certification
will be relied on by Physicians Care for
/ / Massachusetts Connecticut, Inc. for the issuance of the shares
of Common Stock subscribed to herein.
and that I am licensed to practice medicine in
the State of _________________________________.
__________________________________________________________________________________________________________________
RETENTION OF PROCEEDS, STOCK TRANSFER AND
REDEMPTION RESTRICTIONS
__________________________________________________________________________________________________________________
I certify my understanding: By signing in the box opposite, the Subscriber certifies
that he or she has read and understands the provisions
set forth in the Prospectus pertaining to the retention
of proceeds, restrictions on transfer and redemption of
the Physicians Care for Connecticut, Inc. Common Stock.
(Signature) ___________________________________
__________________________________________________________________________________________________________________
REQUIRED DOCUMENTS AND ENCLOSURE(S)
__________________________________________________________________________________________________________________
For all purchases of Class A and/or Class B Documents and enclosures that are required to be
Common Stock: provided with this executed Subscription Agreement to
complete the subscription process and enable
/ / A check in the amount of the total purchase processing by the Subscription Agent.
price made payable to: State Street Bank &
Trust Company -- Escrow Agent.
__________________________________________________________
For all purchases of Class A Common Stock (whether alone
or with Class B Common Stock):
/ / An executed Physicians Care Primary Care Physician
Attachment or Physicians Care Specialist Physician
Attachment.
/ / A MedServ IPA, Inc. Participation Agreement (if not
currently a member), along with a separate check
made payable to MedServ IPA, Inc. in the sum of $200.
__________________________________________________________________________________________________________________
The undersigned agrees that after receipt by the Subscription Agent,
this Subscription Agreement may not be modified, withdrawn or canceled
without the express written consent of Physicians Care for Connecticut, Inc.
Under penalty of perjury, I certify that the Social Security Number and
the information provided in this Subscription Agreement are true, correct,
and complete, that I am not subject to back-up withholding and that I am
subscribing for the purchase of the Common Stock of Physicians Care for
Connecticut, Inc. for my own account and that I am not a party to any
agreement or understanding regarding the transfer of this stock.
I acknowledge and agree that the purchase of the shares of Common Stock
of Physicians Care for Connecticut, Inc. indicated by this Subscription
Agreement is subject to the terms, conditions, restrictions, limitations and
obligations set forth in the Prospectus.
_____________________________________ _____________________ , 199_
(Subscriber's signature) (Date)
</TABLE>
<PAGE>
LOAN AGREEMENT
This Agreement made this 25th day of November, 1996, by and between FLEET
NATIONAL BANK, a national banking association with an address at 777 Main
Street, Hartford, CT 06115 (the "Lender") and PHYSICIANS CARE FOR
CONNECTICUT, INC., a Connecticut corporation located at 1520 Highland Avenue,
Cheshire, Connecticut 06410 (the "Borrower").
SECTION 1. The Loan Transaction.
1.1 The Line of Credit
a. Amount. Lender will loan to Borrower and Borrower may borrow,
repay and reborrow from Lender up to Six Hundred Fifty Thousand
Dollars ($650,000) (the "Loan").
b. Note. The obligation of Borrower to repay the Loan made pursuant
to this Section 1.1 with interest (the "Loan Obligations") will
be evidenced by a line of credit note (the "Note") in the form
annexed hereto as EXHIBIT 1.1b.
c. Repayment. The Loan Obligations shall be payable as stated in
the Note and if not sooner paid in full will be immediately due
and payable on November 22, 1997.
1.2 Obligations. The Loan Obligations, together with all other
obligations of Borrower to Lender under this Agreement and any
document referred to herein or related to this transaction whether
now existing or hereafter arising, including, without limitation,
principal, interest, reasonable attorneys' fees and costs of
collection, shall be referred to as the "Obligations".
1.3 Guaranty. The payment and performance of the Obligations shall be
unconditionally guaranteed by Hartford County Medical Association,
Incorporated (the "Guarantor") pursuant to a Guaranty Agreement
(the "Guaranty") dated the date of this Agreement.
1.4 Pledge Agreement. The Guaranty shall be fully secured by a pledge
of securities pursuant to a Pledge Agreement dated the date of this
Agreement (the "Pledge Agreement") executed by the Guarantor. The
Lender will release the pledge of the securities pursuant to the
Pledge Agreement upon a pledge by the Borrower of similar securities
pursuant to a new pledge agreement executed by the Borrower
containing the same basic provisions as in the Pledge Agreement and
which is otherwise satisfactory to Lender in its reasonable
discretion.
<PAGE>
SECTION 2. Representations, Warranties and General Covenants. On the date
hereof and in order to induce Lender to enter into this Agreement, Borrower
represents, warrants and covenants the following:
2.1 Organization and Qualification. Borrower is and will continue to
be a corporation duly organized, validly existing and in good
standing under the laws of the State of Connecticut, and is and
will continue to be duly qualified and licensed to do business in
each state where failure to be so qualified would have a material
adverse effect on the Borrower.
2.2 Corporate Records. The Certificate of Incorporation and all
amendments thereto of Borrower have been duly filed and are in
proper order. All books and records of Borrower, including but
not limited to its minute books, bylaws, and books of account, are
accurate and up to date and will be so maintained.
2.3 Power and Authority. Borrower has the power to execute, deliver and
carry out this Agreement and to incur the Obligations and has taken
all necessary action to authorize the execution, delivery and
performance by Borrower of this Agreement and the other documents
executed in connection with this Agreement and the incurring of the
Obligations.
2.4 No Legal Bar. The execution and delivery of this
Agreement and compliance by Borrower with the terms and
provisions hereof or of any of the other agreements or
instruments referred to herein (i) will not, on the date hereof,
violate any provision of any existing law or regulation or any
writ or decree of any court or governmental instrumentality, or
any agreement or instrument to which Borrower is a party or which
is binding upon it or its assets, and (ii) will not result in
the creation or imposition of any hen, security interest, charge
or encumbrance of any nature whatsoever upon or in any of its
assets, except as contemplated by this Agreement. No consent of
any other party, and no consent, license, approval or
authorization of or registration or declaration with any
governmental bureau or agency, is required in connection with the
execution, delivery, performance, validity and enforceability of
this Agreement except for those which have been obtained or
completed prior to the closing of the transactions contemplated
herein; and this Agreement and the Note are valid, binding and
enforceable against Borrower in accordance with their terms.
2.5 Title. Borrower has good and marketable title to all of its
property and assets (the "Property").
2.6 No Material Litigation. Borrower represents that no material
litigation or administrative proceeding of or before any
governmental body is presently pending or, to the knowledge of
Borrower, threatened against Borrower or any of its property.
-2-
<PAGE>
2.7 No Default. Borrower is not in default with respect to the payment
or performance of any of its obligations or in the performance of
any covenants or conditions to be performed by it pursuant to the
terms and provisions of any indenture, agreement or instrument to
which it is a party or by which it may be bound, including, without
limitation, leases of or mortgages on the premises, if any, on
which the Property is or may be located, except in any such case
where such default would not have a material adverse effect on the
financial condition of the Borrower, and Borrower has received no
notice of default thereunder.
2.8 Compliance with Laws. Borrower has complied with and will continue
to comply, except where non-compliance would not have a material
adverse effect on the Borrower, with all applicable statutes and
regulations of the United States of America, and all states,
counties, municipalities and agencies of any governmental authority
thereof, including those with respect to:
a. Any restrictions, specifications or other requirements pertaining
to the services it performs;
b. The conduct of its business operations;
c. The use, maintenance and operation of the real and personal
properties owned or leased by it in the operation of its
business; and
d. The management storage and disposal of hazardous materials,
substances and wastes.
2.9 No Secondary Liabilities. There are no outstanding contracts or
agreements of guaranty or suretyship made by Borrower, or to which
it is a party, or to which. any of its assets are subject, except as
set forth on the financial statements previously provided to Lender.
2.10 Taxes. Borrower has filed or caused to be filed or obtained
extensions for the filing of, and will continue to file and cause to
be filed, all federal, state and local tax returns required by law
to be filed, and has paid and will continue to pay all taxes shown
to be due and payable on such returns or on any assessment made
against it, except if being contested in good faith, and adequate
provision has been made therefor on its books of account. No claims
are being asserted with respect to such taxes which are not
reflected in the financial statements previously provided to Lender.
2.11 Financial Condition. Borrower has submitted to Lender various
financial statements and information, and represents that all of
such financial information is true and correct to the best of the
knowledge and belief of Borrower; that such financial information
fairly presents the financial condition and results of the
operations of Borrower as of the date thereof and for the period
indicated therein; that such financial statements have been prepared
in accordance with generally accepted accounting principles and
practices
-3-
<PAGE>
consistently maintained throughout the period involved; that, as of
the date of such financial information, there were no material
unrealized or anticipated losses from any unfavorable commitments
of Borrower; and that there has been no material adverse change in
the business or assets or in the condition, financial or otherwise,
of Borrower from that set forth in such financial statements.
2.12 Accuracy of Representations. No representation or warranty by
Borrower contained in any certificate or other document furnished
or to be furnished by Borrower pursuant hereto or in connection with
the transactions contemplated hereunder, contains, or at the time
of delivery will contain, any untrue statement of material fact or
omits or will omit to state a material fact necessary to make it not
misleading.
2.13 Trade Names. Borrower operates its business under the name
"Physicians Care for Connecticut" and has no other trade names.
2.14 Director and Officer Debt. Borrower does not owe any money to or
have any outstanding liabilities to any director, trustee or officer
of Borrower other than liabilities to officers for services rendered
in the ordinary course of the Borrower's business.
2.15 Pension Plans. To the extent that any present or future pension
plan of Borrower is subject to state or federal statutes or
regulations, Borrower represents and warrants that it shall at
all times be in compliance in all material respects with such
statutes and regulations and will furnish Lender with copies of such
reports as it may be required to furnish under such statutes or
regulations.
2.16 Environmental Contamination. To the best of Borrower's knowledge,
there does not now exist on, under or within any property owned or
operated by the Borrower any known discharge, spillage, uncontrolled
loss, seepage or filtration of oil, petroleum or hazardous or toxic
substances or wastes which could have a material adverse effect on
the property, financial condition or operations of Borrower.
SECTION 3. Affirmative Covenants. Borrower covenants and agrees that, so long
as any of the Obligations shall remain outstanding, Borrower will perform and
observe each and all of the covenants and agreements herein set forth.
3.1 Payments Under this Agreement and Other Agreements. Borrower
will make punctual payment of all monies and will faithfully and
fully keep and perform all of the terms, conditions, covenants and
agreements contained on Borrower's part to be paid, kept or
performed hereunder, and will be bound in all respects as debtor
under this Agreement; and will make punctual payment of all monies
and will faithfully and fully keep and perform all of the material
terms, conditions, covenants and agreements on its part to be paid,
kept or performed under the terms of any lease or mortgage of the
premises where the Property is located or is to be located wherein
Borrower is lessee or mortgagor, and
-4-
<PAGE>
will promptly notify Lender in the event of any default on the part
of Borrower or receipt by Borrower of any notice of alleged default
under any such lease or mortgage.
3.2 Information, Access to Books, and Inspection. Borrower will furnish
to Lender such information regarding the business affairs and
financial condition of Borrower as Lender may reasonably request,
and upon at least 24 hours prior notice, give any representative or
agent of Lender access during normal business hours to, and permit
him or her to examine and copy, and make extracts from, any and all
books, records and documents in the possession of Borrower relating
to its affairs and to inspect any of the properties of Borrower.
3.3 Payment of Liabilities. Borrower will pay and discharge at or before
their due date all taxes, assessments, rents, claims, debts and
charges, except where the same may be contested in good faith and
Borrower maintains, in accordance with generally accepted accounting
principles and practice, appropriate reserves satisfactory to Lender
for the accrual of any of the same.
3.4 Payment of Taxes. Borrower will pay promptly when due
all taxes and assessments upon the Property or for its use or
operation or upon this Agreement or upon any note or notes
evidencing the Obligations. If not paid by Borrower, at Lender's
option, in its sole and absolute discretion, Lender may discharge
taxes, liens or security interests or other encumbrances at any
time levied or placed on the Property, including but not limited
to payments on premises leased by Borrower. Borrower agrees to
reimburse Lender on demand for any payment made with interest at
the prime rate contained in the Note, or any expense incurred by
Lender pursuant to the foregoing authorization. Nothing herein
contained shall obligate Lender to make such payment nor shall
the making of one or more such payments constitute: (i) an
agreement on Lender's part to take any farther or similar action;
or (ii) a waiver of any default by Borrower under the terms
thereof or of this Agreement. Borrower may in good faith contest
any of such taxes in the manner provided by law as long as
Borrower establishes a reserve on its financial statements, as
Lender may reasonably require, equal to the amount of the
contested charges, interest and penalties.
3.5 Corporate Existence, Properties, Insurance. (a)
Borrower will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate
existence, rights and franchises, and comply in all material
respects with all laws applicable thereto; at all times maintain,
preserve and protect all franchises, patents, and trade names and
preserve all the remainder of its property used or useful in the
conduct of its business and keep the same in good condition and
repair (normal wear and tear and obsolescence excepted), and from
time to time make, or cause to be made, all needful and proper
repairs, renewals, replacements, betterments and improvements
thereto, and will pay or cause to be paid, except when the same
may be contested in good faith, all rent due on premises where
any property is held or may be held, so that the business carried
on in connection therewith may be continuously conducted.
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(b) Borrower will have and maintain, or shall cause
to be in place and maintained, insurance at all times with
respect to all Property against risks of fire (including
so-called extended coverage), theft and such other risks as is
customary for entities engaged in the same business as the
Borrower in companies licensed to do business in Connecticut.
Borrower will furnish Lender with certificates or other evidence
satisfactory to Lender of compliance with the foregoing insurance
provisions. Borrower will also at all times maintain necessary
workers' compensation insurance and such other insurance as may
be required by law or as may be reasonably required in
writing by Lender.
3.6 Notices. Borrower will promptly give notice in
writing to Lender of the occurrence of any event which
constitutes or which with notice or lapse of time, or both, would
constitute an Event of Default hereunder. Borrower will give
Lender written notice of any court or governmental orders,
notices, claims, investigations, litigation and proceedings
affecting Borrower in which the amounts involved exceed $ 10,000
in any one instance or $50,000 in the aggregate and are not
covered by insurance or malpractice trust funds, and of any
dispute which may exist between Borrower and any governmental
regulatory body or any other party.
3.7 Financial Statements and Reports.
a. Borrower will furnish to Lender, within one hundred
twenty (120) days after the close of each fiscal year of
Borrower, a balance sheet of Borrower as at the close of each
such fiscal year and statements of income and retained earnings
and source and application of funds for the year then ended,
prepared in conformity with generally accepted accounting
principles, applied on a basis consistent with that of the
preceding year or containing disclosure of the effect on
financial position or results of operations of any change in the
application of accounting principles during the year and audited
by a firm of independent certified public accountants selected by
Borrower and reasonably acceptable to Lender. Each annual
statement will be accompanied by: (i) a certificate from the
chief financial officer or the ???? executive officer of Borrower
certifying to the accuracy of such statement and further
certifying that Borrower is not in default under any of the
terms, covenants or provisions of this Agreement and that no
events have occurred which, after notice by Lender or lapse of
time or both, would constitute such a default; or (ii) a
statement specifying the nature and period of existence of any
such default or event.
b. Borrower will furnish to Lender, within forty-five
(45) days after the close of each fiscal quarter of Borrower, a
balance sheet of Borrower as at the close of each such fiscal
quarter and statements of income and retained earnings and source
and application of funds for the year to date, prepared in
conformity with generally accepted accounting principles, applied
on a basis consistent with that of the
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preceding year or containing disclosure of the effect on
financial position or results of operations of any change in the
application of accounting principles during the year. Each
quarterly statement will be accompanied by: (i) a certificate
from the chief financial officer or the chief executive officer
of Borrower certifying to the accuracy of such statement and
further certifying that Borrower is not in default under any of
the terms, covenants or provisions of this Agreement and that no
events have occurred which, after notice by Lender or lapse of
time or both, would constitute such a default; or (ii) a
statement specifying the nature and period of existence of any
such default or event.
c. Borrower shall furnish to Lender at least 30 days prior to the
end of each fiscal year an annual budget for the upcoming fiscal
year of the Borrower in form satisfactory to Lender.
d. Borrower will cause to be furnished to Lender, within one hundred
twenty (120) days . after the close of each fiscal year of
Guarantor, the financial statements required to be delivered
pursuant to the Guaranty.
e. Borrower shall promptly furnish to Lender such other information
as Lender shall reasonably request.
3.8 Minimum Collateral Pledged. The Collateral Value (as defined in
the Pledge Agreement) shall at all times equal or exceed the maximum
permitted principal amount under the Note (including both
outstanding and available amounts).
3.9 Direct Debit of Principal and Interest. Borrower agrees that Lender
may directly debit Borrower's accounts held by Lender for any
principal or interest payment on any Obligation when such Obligation
becomes due and payable.
3.10 Good Standing Certificate of Guarantor. Borrower will furnish to
Lender within 60 days of the date of this Agreement a good standing
certificate for the Guarantor issued by the Connecticut Secretary
of State.
SECTION 4. Negative Covenants. So long as any Obligations remain outstanding
and unpaid, Borrower covenants and agrees that it will not, without the express
written consent of Lender:
4.1. Limitation on Fundamental Changes. Merge or consolidate with or
into any other firm or corporation; dissolve or liquidate; change
substantially its fine of business; change its name; or convey,
sell, lease or otherwise dispose of all or substantially all of
its property, assets or business; provided, however, that Lender
will not unreasonably withhold consent to a name change of Borrower.
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4.2. Limitation on Liens. Incur or permit to exist any
hen, mortgage, security interest, pledge, charge or other
encumbrance against its Property whether now owned or hereafter
acquired (including, without limitation, any lien or encumbrance
relating to any response, removal or clean-up of any toxic
substances or hazardous wastes), except: (a) hens, mortgages,
security interests, charges or other encumbrances in favor of the
Lender or specifically permitted in writing by the Lender; (b)
pledges or deposits in connection with or to secure worker's
compensation or unemployment insurance; and (c) tax hens which
are being contested in good faith with the prior written consent
of the Lender and against which, if requested by the Lender, the
Borrower shall maintain reserves in amounts and in form (book,
cash, bond or otherwise) satisfactory to Lender.
4.3. Limitation on Advances and Investments. Make or
suffer to exist any advances or loans in excess of $10,000 to, or
any material investments in (by transfers of property,
contributions to capital, purchase of stock or securities or
evidence of indebtedness, acquisition of assets or business or
otherwise but excluding accounts receivable arising in the
ordinary course of Borrower's business) any person, firm or
corporation, including officers or employees of the Borrower.
4.4. Limitation on Other Borrowing. Incur, create, assume
or permit to exist any indebtedness or liability on account of
deposits or advances or any indebtedness or liability for
borrowed money or any other indebtedness or liability evidenced
by notes, bonds, debentures or similar obligations or
incorporated in any lease or license agreement.
4.5. Limitation on Contingent Liabilities. Become liable
as guarantor, surety, endorser or otherwise for, or agree to
purchase, repurchase or assume, any obligation of any person,
firm or corporation, except for endorsement of commercial paper
for deposit, collection, or discount in the ordinary course of
business.
SECTION 5. Events of Default.
5.1 The occurrence of any of the following events with respect to
Borrower will constitute an Event of Default by Borrower under
this Agreement:
a. Failure to make any payment of principal or interest on the
Obligations within 10 days of the date when due.
b. Any warranty or representation or other statement made or
furnished to Lender by or on behalf of Borrower or Guarantor
herein or in any document or instrument furnished in connection
herewith proves to have been false or misleading in any material
respect when made or furnished.
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<PAGE>
c. Dissolution, termination of existence, insolvency,
appointment of a receiver, trustee, custodian or similar
fiduciary, assignment for the benefit of creditors of or the
commencement of any proceedings under any bankruptcy or
insolvency laws by or against Borrower or Guarantor and if
against the Borrower or Guarantor the continuation of such
proceeding for more than sixty (60) days, or the making by
Borrower or Guarantor of any offer of settlement, extension or
composition to its creditors generally.
d. Breach of or failure in the due observance or
performance in any material respect of any covenant condition or
agreement (not otherwise specified in this section 5. 1) on the
part of Borrower to be observed or performed pursuant to this
Agreement or any other agreement or instrument between Lender and
Borrower.
e. The issuance, filing or levy against Borrower of an
attachment, injunction, execution, tax lien or judgment for the
payment of money in excess of $ 1 0,000 which is not discharged
in full or stayed within thirty (30) days after issuance, filing
or levy.
f. Default in the payment of any sum due under any
indebtedness for borrowed money .owed by Borrower to any person
or entity or any other default under such indebtedness which
results in such indebtedness being due prior to its stated
maturity.
g. Any material loss, theft, substantial damage,
destruction, sale (other than in the ordinary course of
business), exchange, or other disposition not in the ordinary
course of business, or any encumbrance on all or substantially
all of the Property, the making of any levy, seizure or
attachment thereof or thereon, or the placing of any lien or
liens thereon by the United States of America or any federal,
state or local government agency or authority.
h. The occurrence of a default beyond any applicable
grace period under or demand for the payment of any other note-
or obligation of Borrower or Guarantor to Lender.
i. The occurrence of a default beyond any applicable
grace period pursuant to the Guaranty or the Pledge Agreement or
any claim by Guarantor that the Guaranty or Pledge Agreement is
no longer in full force and effect.
5.2 Upon the happening of any event of default specified above, the
entire unpaid balance owed under the Note and this Agreement, or any
note or other documents relating to the same, plus any other sums
owed hereunder or under any such note, shall, at Lender's option,
automatically become and shall thereafter be immediately due and
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payable without presentment, demand, protest, notice of protest, or
other notice of dishonor of any kind, all of which are hereby
expressly waived by Borrower.
SECTION 6. Miscellaneous.
6.1 Setoff. All sums at any time standing to Borrower's
credit on Lender's books and all of Borrower's property at any
time in Lender's possession or upon or in which Lender has a hen
or security interest shall be security for all Obligations. In
addition to and not in limitation of the above, with respect to
any deposits or property of Borrower in Lender's possession or
control, now or in the future, Lender shall have the right after
a default hereunder to setoff all or any portion thereof, at any
time, against any Obligations hereunder, even though unmatured,
without prior notice or demand to Borrower.
6.2 No Waiver. No course of dealing between Borrower and
Lender and no failure to exercise or delay in exercising on the
part of Lender any right, power or privilege under the terms of
this Agreement or under the terms of any other agreements,
instruments or other documents between Lender and Borrower shall
operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder
preclude any other or further privilege. The rights and remedies
provided herein or in any other agreement are cumulative and not
exclusive or in derogation of any rights or remedies provided
herein and therein and by law or otherwise.
6.3 Survival of Agreements. All agreements,
representations and warranties made herein, in any agreement and
in any statements, notices, invoices, certificates, schedules,
documents or other instruments delivered to Lender in connection
with this Agreement or any other agreement shall survive the
making of the loans and advances hereunder.
6.4 Further Documents. Borrower agrees that, at any time
or from time to time upon written request of Lender, Borrower
will execute and deliver such further documents and do such other
acts and things as Lender may reasonably request in order to
fully effect the purposes of this Agreement and the documents
referred to herein.
6.5 Entire Agreement. This Agreement and the documents of
even date executed in connection ,with this transaction
constitute the entire agreement of the parties relating to this
transaction, and may not be amended orally but only by a writing
signed by the parties.
6.6 Successors. All rights of Lender hereunder shall inure to the
benefit of its successors and assigns, and all Obligations of
Borrower shall bind its successors and assigns.
6.7 Payments. The acceptance of any check, draft, money order or
preauthorized electronic transfer tendered in full or partial
payment of any Obligation hereunder is conditioned upon and subject
to the receipt of final payment in cash.
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6.8 Exhibits. All exhibits referred to herein and annexed hereto are
hereby incorporated into this Agreement and made a part hereof.
6.9 Counsel Fees and Expenses. Borrower agrees to pay all fees and
expenses, including reasonable attorneys' fees and recording and
filing fees, which Lender may hereafter incur in reasonably
protecting, enforcing, increasing or releasing any security held
by Lender.
6.10 Descriptive Headings. The descriptive headings of the
several sections of this Agreement are inserted for convenience
only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
6.11 Notices. Any written notice required or permitted by
this Agreement may be delivered by hand delivery, by overnight
courier service or by United States certified or registered mail,
postage prepaid, return receipt requested. The date of receipt
of any notice shall be deemed to be, and shall be effective from,
the time of actual receipt, if hand delivered or sent by over
night courier and three days after the same is deposited in the
United States mail as provided above if sent by United States
mail. Notices should be sent as follows:
If to the Lender:
Fleet National Bank
777 Main Street - CT MO H04A
Hartford, Connecticut 06115
Attn: Celeste Echlin, Vice President
If to the Borrower:
Physicians Care for Connecticut, Inc.
1520 Highland Avenue
Cheshire, Connecticut 06410
Attn: Joseph R. Coffey, Chief Executive Officer
Any address for notice herein may be changed by a notice in writing
to the other party in accordance with the terms hereof.
6.12 Severability. If any provision of this Agreement or
application thereof to any person or circumstance shall to any
extent be invalid, the remainder of this Agreement or the
application of such provision to persons, entities or
circumstances other than those as to which it is held invalid,
shall not be affected thereby and each provision of this
Agreement shall be valid and enforceable to the fullest extent
permitted by law.
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<PAGE>
6.13 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Connecticut.
6.14 WAIVER OF RIGHT TO PREJUDGMENT REMEDY NOTICE AND
HEARING BORROWER ACKNOWLEDGES THAT LENDER MAY HAVE RIGHTS AGAINST
BORROWER, NOW OR IN THE FUTURE, IN ITS CAPACITY AS CREDITOR OR IN
ANY OTHER CAPACITIES. SUCH RIGHTS MAY INCLUDE THE RIGHT TO
DEPRIVE BORROWER OF OR AFFECT THE USE OF OR POSSESSION OR
ENJOYMENT OF BORROWER'S PROPERTY, AND IN THE EVENT LENDER DEEMS
IT NECESSARY TO EXERCISE ANY OF SUCH RIGHTS PRIOR TO THE
RENDITION OF A FINAL JUDGMENT AGAINST BORROWER, OR OTHERWISE,
BORROWER MAY BE ENTITLED TO NOTICE AND/OR BEARING UNDER THE
CONSTITUTION OF THE UNITED STATES AND/OR STATE OF CONNECTICUT,
CONNECTICUT STATUTES (TO DETERMINE WHETHER OR NOT LENDER HAS
PROBABLE CAUSE TO SUSTAIN THE VALIDITY OF LENDER'S CLAM, OR THE
RIGHT TO NOTICE AND/OR BEARING UNDER OTHER APPLICABLE STATE OR
FEDERAL LAWS PERTAINING TO PREJUDGMENT REMEDIES, PRIOR TO THE
EXERCISE BY LENDER OF ANY SUCH RIGHTS. BORROWER EXPRESSLY WAIVES
ANY SUCH RIGHT TO PREJUDGMENT REMEDY NOTICE OR BEARING TO WHICH
BORROWER MAY BE ENTITLED. TIES SHALL BE A CONTINUING WAIVER AND
REMAIN IN FULL FORCE AND EFFECT SO LONG AS BORROWER IS OBLIGATED
TO LENDER.
6.15 WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER AND LENDER
KNOWINGLY AND VOLUNTARILY HEREBY WAIVE, AFTER CONSULTATION WITH
LEGAL COUNSEL, TRIAL BY JURY AND THE RIGHT TO TRIAL BY JURY,
WHETHER UNDER THE CONSTITUTION OF THE UNITED STATES AND/OR THE
STATE OF CONNECTICUT, STATUTES OR OTHER APPLICABLE LAW, IN ALL
ACTIONS OR PROCEEDINGS BETWEEN THEM IN ANY COURT ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ITS VALIDITY OR INTERPRETATION.
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In Witness Whereof, the parties have caused this Agreement to be duly
executed and delivered by the proper and duly authorized officers as of the
date and year first above written.
WITNESS: PHYSICIANS CARE FOR CONNECTICUT, INC.
_______________________________ By____________________________________
Joseph R. Coffey
Its Chief Executive Officer
FLEET NATIONAL BANK
_______________________________
_______________________________ By____________________________________
Celeste Echlin
Its Vice President
STATE OF CONNECTICUT )
) ss. Hartford
COUNTY OF HARTFORD )
On this the 25th day of november, 1996, before me, the undersigned
officer, personally appeared Joseph R. Coffey, who acknowledged himself to be
the Chief Executive Officer of PHYSICIANS CARE FOR CONNECTICUT, INC., and
that he, as such officer, being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by himself as such officer.
In witness whereof, I hereunto set my hand.
_______________________________________
Name:__________________________________
Commissioner of the Superior Court
STATE OF CONNECTICUT )
) ss. Hartford
COUNTY OF HARTFORD )
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On this the 25th day of November, 1996, before me, the undersigned
officer, personally appeared Celeste Echlin, who acknowledged herself to be a
Vice President of FLEET NATIONAL BANK, a corporation, and that she, as such
officer, being authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation by herself
as such officer.
In witness whereof, I hereunto set my hand.
________________________________________
Name: __________________________________
Commissioner of the Superior Court
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<PAGE>
Exhibit 1.1b
LINE OF CREDIT NOTE
$650,000.00 Hartford, Connecticut
November 25, 1996
FOR VALUE RECEIVED, the undersigned, PHYSICIANS CARE FOR CONNECTICUT, INC., a
Connecticut corporation located at 1520 Highland Avenue, Cheshire,
Connecticut 06410 (the "Borrower"), hereby promises to pay to the order of
FLEET NATIONAL BANK, a national banking association, (the "Lender"), at its
office at 777 Main Street Hartford, Connecticut 06115 or at such other place
as the holder hereof may designate, the principal amount advanced hereunder
and remaining unpaid, up to a maximum amount of SIX HUNDRED FlFTY THOUSAND
AND NO/100 DOLLARS ($650,000.00) (the "Principal Amount") in lawful money of
the United States, together with interest on the Principal Amount, beginning
on the date hereof, before and after maturity or judgment, at a per annum
rate determined as provided below.
1. Interest Rate: Each advance under this Note (each a "Loan Advance")
shall bear interest at a per annum rate equal to either (a) a floating rate
equal to Lender's Prime Rate (as hereinafter defined) or (b) a fixed rate
equal to one hundred (100) basis points above the LIBOR Rate (as determined
for each Interest Period applicable thereto) for available Interest Periods
of thirty (3 0), sixty (60) or ninety (90) days. The Borrower shall elect
either option (a) or (b) as provided below.
2. Requests for Advances: Whenever Borrower desires an advance,
Borrower shall notify Lender (which notice shall be irrevocable) by
telephone, facsimile or in writing, of the desired borrowing. Such notice
(the "Notice of Borrowing") shall specify the date of the proposed borrowing,
the amount requested, whether the advance shall be a Prime Rate Loan or a
LIBOR Rate Loan, and, if a LIBOR Rate Loan, the duration of the initial
available Interest Period. Each Notice of Borrowing for advances which are
Prime Rate Loans must be received by Lender no later than 1 1:00 a.m.,
Hartford, Connecticut time on the day such borrowing is requested, and each
Notice of Borrowing for advances which are LIBOR Rate Loans must be received
by Lender no later than 10:00 a.m., Hartford, Connecticut time at least three
(3) Business Days' prior to the day such borrowing is requested. Any Notice
of Borrowing that is not in writing shall be followed by a written
confirmation by the Borrower, provided that if such written confirmation
differs in any respect from the action taken by Lender, the records of Lender
shall control, absent manifest error. Lender shall enter each Loan Advance
as a debit on a loan account maintained by Borrower with Lender (the "Loan
Account"). Lender may also record in the Loan Account, in accordance with
customary banking procedures, all fees, accrued and unpaid interest, late
fees, usual and customary bank charges for the maintenance and administration
of accounts maintained by Borrower and other fees and charges which are
properly chargeable to Borrower in connection
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with the Loan Advances and all payments, subject to collection, made by
Borrower on account of or to Lender. Borrower may repay and reborrow advances
that are made under this Note, subject, however, to the prepayment terms
contained below. Borrower's right to request advances under this Note shall
terminate on the Termination Date.
3. Election and Continuation of Interest Periods. Any Prime Rate Loan
shall continue as a Prime Rate Loan until the Borrower elects to convert it
to a LIBOR Rate Loan as provided below. Any LIBOR Rate Loan may be continued
as such upon the expiration of the then current Interest Period by the
Borrower giving irrevocable written notice to Lender of the duration of the
next available Interest Period to be applicable to any such LIBOR Rate Loan
not less than three (3) Business Days prior to the last Business Day of the
then current Interest Period with respect to such LIBOR Rate Loan, provided
that no LIBOR Rate Loan may be continued as such: (i) at a time when any
Event of Default (or event or condition which would constitute an Event of
Default but for the giving of notice or passage of time or both) has occurred
and is continuing and (H) after the date that is thirty (30) days prior to
the Termination Date. Unless Borrower elects to convert to a different
interest rate as provided below, if a LIBOR Rate Loan is not continued as a
LIBOR Rate Loan, all as provided above, then any such loan shall
automatically be converted to a Prime Rate Loan on the last day of the then
expiring Interest Period.
4. Conversion of Loans to a Different Interest Rate. The Borrower may
elect from time to time to convert (a) a LIBOR Rate Loan to a Prime Rate Loan
or (b) a Prime Rate Loan to a LIBOR Rate Loan as provided in this section.
Borrower shall exercise such election by giving the Lender not less than
three (3) Business Days prior irrevocable written notice of such election;
provided that any such conversion of a LIBOR Rate Loan to a Prime Rate Loan
shall only be made on the last Business Day of the then current Interest
Period with respect thereto. Any such notice of conversion to a LIBOR Rate
Loan shall specify the length of the available Interest Period applicable
thereto.
5. Payments of Interest. Interest on this Note shall be calculated on
the basis of a 3 60 day year and the actual number of days elapsed. Monthly
payments of interest shall be due and payable in arrears on the first day of
each month, commencing December 1, 1996, until this Note is paid in full.
6. Payments of Principal. If not sooner paid, the aggregate
outstanding Principal Amount of this Note, together with all accrued and
unpaid interest thereon and any other fees or charges then due, shall be due
and payable on the Termination Date.
7. Definitions. As used in this Note and not defined elsewhere in this
Note, the following terms shall have the following meanings:
a. "Business Day" means any day other than a day on which commercial
banks in Hartford, Connecticut are required or permitted by law to close.
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b. "Interest Period" means with respect to advances bearing interest
at the LIBOR Rate, an available period of thirty (30), sixty (60) or ninety
(90) days, provided that:
(1) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall end on the immediately preceding
Business Day;
(2) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the
last Business Day of a calendar month; and
(3) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date.
c. "LIBOR Rate" means, with respect to any LIBOR Rate Loan for each
applicable Interest Period, the rate per annum determined by the Lender to be
equal to the quotient of (a) the London Interbank Offered Rate for such LIBOR
Rate Loan for such Interest Period, divided by (b) one (1) minus -the Reserve
Percentage for such Interest Period, expressed as follows:
LIBOR Rate = London Interbank Offered Rate
------------------------------
1 - Reserve Percentage
d. "LIBOR Rate Loan" means an advance that bears interest at a rate
equal to the LIBOR Rate plus one hundred (I 00) basis points.
e. "London Interbank Offered Rate" means, with respect to any
applicable Interest Period for a LIBOR Rate Loan, the rate per annum at which
the Eurodollar office of the Lender is offered, in the London interbank
Dollar deposits market, at or about I 1:00 a.m. London time, two (2) business
days prior to the first day of such Interest Period, Dollar deposits, for a
period, and in an amount comparable to such Interest Period and principal
amount of the LIBOR Rate Loan which shall be made by the Lender and
outstanding during such Interest Period.
f. "Prime Rate" means the rate of interest announced from time to
time by Lender at its office in Hartford, Connecticut as its prime rate.
Such Prime Rate may not be the lowest or best rate that is made available by
Lender to its commercial borrowers.
g. "Prime Rate Loan" means an advance that bears interest at a
rate equal to Lender's Prime Rate.. The interest rate on each Prime Rate Loan
shall change, without notice to Borrower, each time that Lender's Prime Rate
changes so that the rate of interest on a Prime Rate Loan is at all times
equal to Lender's Prime Rate.
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h. "Reserve Percentage" means the maximum marginal percentage as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirement for Lender in respect of
eurodollar deposits having a maturity equal to the Interest Period as the
Borrower may elect pursuant to the terms of this Note. With respect to the
LIBOR Rate, any change in the interest rate because of a change in the
Reserve Percentage shall become effective, without notice or demand, on the
date on which such change in the Reserve Percentage becomes effective.
"Termination Date" means November 22, 1997.
8. Illegality. Notwithstanding any other provisions hereof, if any
applicable law or governmental regulation, guideline, order or directive, or
any change therein or in the interpretation or application thereof by any
governmental authority charged with the interpretation or the administration
thereof (whether or not having the force of law) shall make it unlawful for
the Lender to make or maintain LIBOR Rate Loans as contemplated by this Note:
(i) the obligation of the Lender to continue LIBOR Rate Loans shall forthwith
be cancelled, and (ii) such amounts then outstanding shall be automatically
converted, without notice, to Prime Rate Loans on the last day of the then
current Interest Period or within such earlier time as required by law. If
any such conversion of LIBOR Rate Loans is made on a day that is not the last
Business Day of the then current Interest Period applicable thereto, Borrower
shall pay the Lender such amount or amounts required pursuant to Section 13
below.
9. Basis for Determining LIBOR Inadequate or Unfair. In the event that
the Lender shall have determined (which determination, absent manifest error,
shall be conclusive and binding upon Borrower) that (i) by reason of
circumstances affecting the Interbank LIBOR market, adequate and reasonable
means do not exist for determining the LIBOR Rate, or (H) Dollar deposits in
the relevant amount and for the relevant maturity are no longer available to
the Lender in the Interbank LIBOR market, or (iii) the 'continuation of LIBOR
Rate Loans has been made impractical or unlawful by the occurrence of a
contingency that materially and adversely affects the Interbank LIBOR market,
or (iv) the LIBOR Rate will not adequately and fairly reflect the cost to the
Lender of maintaining LIBOR Rate Loans, or (v) the LIBOR Rate shall no longer
represent the effective cost to the Lender of U.S. Dollar deposits in the
relevant market for deposits in which it regularly participates, the Lender
shall give the Borrower notice of such determination as soon as practicable.
If such notice is given all LIBOR Rate Loans shall be automatically
converted, without notice, to Prime Rate Loans effective on the last Business
Day of the then current Interest Period applicable thereto. Until such
notice has been withdrawn, the LIBOR Rate shall not be continued.
10. Costs and Expenses. The Borrower shall pay a taxes levied or
assessed on this Note or the debt evidenced hereby against the Lender,
together with all costs, expenses and attorneys' and other professional fees
incurred in any action to collect and/or enforce this Note or to enforce the
Loan Agreement between Borrower and Lender dated the same date as this Note
(the "Loan Agreement") or any other agreement relating to this Note or the
Loan Agreement or
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any other agreement or in any litigation or controversy arising from or
connected with the Loan Agreement or any other agreement, or this Note.
11. Increased Costs. In the event that applicable law, treaty or
regulation or directive from any government governmental agency or regulatory
authority, or any change therein or in the interpretation or application
thereof, or compliance by the Lender with any request or directive (whether
or not having the force of law) from any central bank or government,
governmental agency or regulatory authority, shall:
a. subject the Lender to any tax of any kind whatsoever (except
taxes on the overall net income of the Lender) with respect to the Loan
Agreement, this Note or any of the loans made by it, or change the basis of
taxation of payments to the Lender in respect thereof (except for changes in
the rate of tax on the overall net income of the Lender);
b. impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirements against assets held by, deposits or
other liabilities in or for the account ot advances, loans or other
extensions of credit by, or any other acquisition of funds by, any office of
the Lender, including (without limitation) pursuant to Regulations of the
Board of Governors of the Federal Reserve System; or
c. in the opinion of the Lender, cause this Note, any loan made
under this Note or under the Loan Agreement to be included in any
calculations used in the computation of regulatory capital standards; or
d. impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the Lender,
by an amount that the Lender deems to be material, of making, converting
into, continuing and/or maintaining the loans made pursuant to this Note (the
"Loans") or to reduce the amount of any payment (whether of principal,
interest or otherwise) in respect of any of such Loans, then, in any case,
the Borrower shall promptly pay the Lender, upon its demand, such additional
amounts necessary to compensate the Lender for such additional costs or such
reduction in payment, as the case may be (collectively the "Additional
Costs"). The Lender shall certify the amount of such Additional Costs to the
Borrower, and such certification, absent manifest error, shall be deemed
conclusive.
12. Capital Adequacy Protection. If, after the date hereof, the Lender
shall have determined that the adoption of any applicable law, governmental
rule, regulation or order regarding capital adequacy of banks or bank holding
companies, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by the Lender with any request or, directive regarding capital
adequacy (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful, so long as the Lender believes in good
faith that such has the force of law or that the failure to so comply would
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be unlawful) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on any of the Lenders
capital as a consequence of the Lender's obligations hereunder to a level
below that which the Lender could have achieved but for such adoption, change
or compliance (taking into consideration the Lender's policies with respect
to capital adequacy immediately before such adoption, change or compliance
and assuming that the Lender's capital was fully utilized prior to such
adoption, change or compliance) by an amount deemed by the Lender in its
judgment to be material, then, promptly upon demand, the Borrower shall
immediately pay to the Lender, from time to time as specified by the Lender,
such additional amounts as shall be sufficient to compensate the Lender for
such reduced return, together with interest on each such amount from the date
of such specification by the Lender until payment in full thereof at the
highest rate of interest (other than the default rate of interest) due on the
Loans. A certificate of the Lender setting forth the amount to be paid to the
Lender shall, in the absence of manifest error, be deemed conclusive. In
determining such amount, the Lender shall use any reasonable averaging and
attribution methods. The Borrower may, however, avoid paying such amounts
for future rate of return reductions if, within the maximum borrowings
permitted herein, the Borrower borrows such amounts as will cause the Lender
to avoid any such future rate of return reductions which would otherwise be
caused by such changed capital adequacy requirements or the Borrower agrees
to a reduction in the Loans to achieve the same result.
13. Indemnity. The Borrower agrees to indemnify the Lender and to hold
the Lender harmless from any loss (including any of the additional costs
referred to above and any lost profits) or expense that it may sustain or
incur as a consequence of (i) a default by the Borrower in the payment of the
principal of or interest due on this Note, or (ii) the making of a prepayment
of the Principal Amount bearing interest at the LIBOR Rate on a day which is
not the last day of the then cur-rent Interest Period applicable thereto,
including, but not limited to, in each case any such loss or expense arising
from the reemployment of funds obtained by it or from fees, interest or other
amounts payable to terminate the deposits from which such funds were
obtained. The Lender shall prepare a certificate as to any additional
amounts payable to it pursuant to this Section 13, which certificate shall be
submitted by the Lender to the Borrower and shall, absent manifest error, be
deemed conclusive.
14. Lawful Interest. Notwithstanding any provisions of this Note, it is
the understanding and agreement of the Borrower and Lender that the maximum
rate of interest to be paid by the Borrower to the Lender shall not exceed
the highest or the maximum rate of interest permissible to be charged by a
commercial lender such as the Lender to a commercial borrower such as the
Borrower under the laws of the State of Connecticut. Any amount paid in
excess of such rate shall be considered to have been payments in reduction of
principal.
15. Late Charge. Without limiting the Lender's rights and remedies with
respect to the Event of Default that will have occurred, the Borrower hereby
agrees to pay a "late charge" equal to five percent (5%) of any installment
of interest or other amount due to the Lender which is not paid within ten
(10) days of the due date thereof to defray the extra expense involved in
handling such delinquent payment.
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16. Prepayments.
a. The Borrower may, at its option and upon two (2) Business Days'
prior written notice (which notice shall be irrevocable), prepay the
Principal Amount of a LIBOR Rate Loan or a Prime Rate Loan on the following
conditions: (a) the Borrower shall pay all accrued interest on the Principal
Amount being paid to the date of the prepayment and, in the case of
prepayments in fun, all fees, charges, costs, expenses and other amounts then
due hereunder; and (b) such Principal Amount of a LIBOR Rate Loan shall only
be prepaid on the last Business Day of the then current Interest Period with
respect thereto. In its notice, the Borrower shall specify the date and
amount of the prepayment. In the event that any prepayment of the Principal
Amount of a LIBOR Rate Loan is required or permitted on a date other than the
last Business Day of the then current Interest Period with respect thereto,
the Borrower shall indemnify the Lender therefore as provided in this Note.
b. In the event that Borrower makes a prepayment and does not
specify in its notice of prepayment whether the prepayment is to be applied
to a LIBOR Rate Loan or a Prime Rate Loan, then Lender shall apply such
prepayment in such order as Lender in its sole discretion shall determine.
17. Events of Default. The Borrower agrees that the occurrence of an
Event of Default under the Loan Agreement shall constitute an Event of
Default under this Note. Reference is hereby made to the Loan Agreement for
the other terms and conditions relating to the loan evidenced by this Note
which are incorporated in this Note by reference. Upon the occurrence of any
Event of Default, the availability of advances hereunder shall, at the option
of the Lender, be automatically terminated and the Lender, at its option, may
declare all advances outstanding hereunder, together with accrued interest
thereon and all applicable late charges, other amounts due under this Note
and all other liabilities and obligations of the Borrower to the Lender to be
immediately due and payable, whereupon the same shall become immediately due
and payable; all of the foregoing without demand, presentment protest or
notice or any kind, all of which are hereby expressly waived by the Borrower.
Failure to exercise such option shall not constitute a waiver of the right
to exercise the same in the event of any subsequent default. Upon the
occurrence of any Event of Default, without in any way affecting the Lender's
other rights and remedies, or after maturity or judgment, the interest rate
applicable to the outstanding principal balance of this Note shall
automatically change without notice to a floating per annum rate equal to
five percentage points (5.0%) above the otherwise applicable rate.
18. Lien and Right of Setoff. The Borrower hereby gives the Lender a
lien and right of setoff for all liabilities arising hereunder upon and
against all the deposits, credits and property of Borrower now or hereafter
in the possession, custody, safekeeping or control of the Lender or in
transit to it. Lender may, upon the occurrence of an Event of Default@
without notice and without first resorting to any collateral which may now or
hereafter secure
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this Note, apply or set off the same, or any part thereof, to any liability
of the Borrower, even though unmatured.
19. No Waiver. Failure by the Lender to insist upon the strict
performance by Borrower of any terms and provisions herein shall not be
deemed to be a waiver of any terms and provisions herein, and the Lender
shall retain the right thereafter to insist upon strict performance by the
Borrower of any and all terms and provisions of this Note or any agreement
securing the repayment of this Note.
20. Governing Law. This Note shall be governed by the laws of the State
of Connecticut.
21. Prejudgment Remedy and Other Waivers. THE BORROWER ACKNOWLEDGES
THAT THE LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVES
ITS RIGHT TO NOTICE AND BEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL
STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO
ANY PREJUDGMENT REMEDY WHICH LENDER MAY DESIRE TO USE, AND FURTHER, WAIVES
DILIGENCE, DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND
NOTICE OF PROTEST, AND NOTICE OF ANY RENEWALS OR EXTENSIONS OF THIS NOTE, AND
ALL RIGHTS UNDER ANY STATUTE OF ??????????. THE BORROWER ACKNOWLEDGES THAT IT
MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
22. Jury Waiver. THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT
AND IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION
WITH OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS NOTE
IS A PART AND/OR THE ENFORCEMENT OF ANY OF THE LENDER'S RIGHTS AND REMEDIES,
INCLUDING WITHOUT LIMITATION, TORT CLAIMS. THE BORROWER ACKNOWLEDGES THAT IT
MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
this 25th day of November, 1996.
PHYSICIANS CARE FOR CONNECTICUT, INC.
By /s/ Joseph R. Coffey
--------------------------------------
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Joseph R. Coffey
Title: Chief Executive Officer
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<PAGE>
LINE OF CREDIT NOTE
-------------------
$650,000.00 Hartford, Connecticut
November 25, 1996
FOR VALUE RECEIVED, the undersigned, PHYSICIANS CARE FOR CONNECTICUT, INC., a
Connecticut corporation located at 1520 Highland Avenue, Cheshire,
Connecticut 06410 (the "Borrower"), hereby promises to pay to the order of
FLEET NATIONAL BANK, a national banking association, (the "Lender"), at its
office at 777 Main Street Hartford, Connecticut 06115 or at such other place
as the holder hereof may designate, the principal amount advanced hereunder
and remaining unpaid, up to a maximum amount of SIX HUNDRED FIFTY THOUSAND
AND NO/100 DOLLARS ($650,000.00) (the "Principal Amount") in lawful money of
the United States, together with interest on the Principal Amount, beginning
on the date hereof, before and after maturity or judgment, at a per annum
rate determined as provided below.
1. INTEREST RATE: Each advance under this Note (each a "Loan Advance")
shall bear interest at a per annum rate equal to either (a) a floating rate
equal to Lender's Prime Rate (as hereinafter defined) or (b) a fixed rate
equal to one hundred (100) basis points above the LIBOR Rate (as determined
for each Interest Period applicable thereto) for available Interest Periods
of thirty (30), sixty (60) or ninety (90) days. The Borrower shall elect
either option (a) or (b) as provided below.
2. REQUESTS FOR ADVANCES: Whenever Borrower desires an advance,
Borrower shall notify Lender (which notice shall be irrevocable) by
telephone, facsimile or in writing, of the desired borrowing. Such notice
(the "Notice of Borrowing") shall specify the date of the proposed borrowing,
the amount requested, whether the advance shall be a Prime Rate Loan or a
LIBOR Rate Loan, and, if a LIBOR Rate Loan, the duration of the initial
available Interest Period. Each Notice of Borrowing for advances which are
Prime Rate Loans must be received by Lender no later than 1 1:00 a.m.,
Hartford, Connecticut time on the day such borrowing is requested, and each
Notice of Borrowing for advances which are LIBOR Rate Loans must be received
by Lender no later than 10:00 a.m., Hartford, Connecticut time at least three
(3) Business Days' prior to the day such borrowing is requested. Any Notice
of Borrowing that is not in writing shall be followed by a written
confirmation by the Borrower, provided that if such written confirmation
differs in any respect from the action taken by Lender, the records of Lender
shall control, absent manifest error. Lender shall enter each Loan Advance
as a debit on a loan account maintained by Borrower with Lender (the "Loan
Account"). Lender may also record in the Loan Account, in accordance with
customary banking procedures, all fees, accrued and unpaid interest, late
fees, usual and customary bank charges for the maintenance and administration
of accounts maintained by Borrower and other fees and charges which are
properly chargeable to Borrower in connection with the Loan Advances and all
payments, subject to collection, made by Borrower on account of or to Lender.
Borrower may repay and reborrow advances that are made under this Note,
subject, however, to the prepayment terms
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<PAGE>
contained below. Borrower's right to request advances under this Note shall
terminate on the Termination Date.
3. ELECTION AND CONTINUATION OF INTEREST PERIODS. Any Prime-Rate Loan
shall continue as a Prime Rate Loan until the Borrower elects to convert it
to a LIBOR Rate Loan as provided below. Any LIBOR Rate Loan may be continued
as such upon the expiration of the then current Interest Period by the
Borrower giving irrevocable written notice to Lender of the duration of the
next available Interest Period to be applicable to any such LIBOR Rate Loan
not less than three (3) Business Days prior to the last Business Day of the
then current Interest Period with respect to such LIBOR Rate Loan, provided
that no LIBOR Rate Loan may be continued as such: (i) at a time when any
Event of Default (or event or condition which would constitute an Event of
Default but for the giving of notice or passage of time or both) has occurred
and is continuing and (ii) after the date that is thirty (30) days prior to
the Termination Date. Unless Borrower elects to convert to a different
interest rate as provided below, if a LIBOR Rate Loan is not continued as a
LIBOR Rate Loan, all as provided above, then any such loan shall
automatically be converted to a Prime Rate Loan on the last day of the then
expiring Interest Period.
4. CONVERSION OF LOANS TO A DIFFERENT INTEREST RATE. The Borrower may
elect from time to time to convert (a) a LIBOR Rate Loan to a Prime Rate Loan
or (b) a Prime Rate Loan to a LIBOR Rate Loan as provided in this section.
Borrower shall exercise such election by giving the Lender not less than
three (3) Business Days prior irrevocable written notice of such election;
provided that any such conversion of a LIBOR Rate Loan to a Prime Rate Loan
shall only be made on the last Business Day of the then current Interest
Period with respect thereto. Any such notice of conversion to a LIBOR Rate
Loan shall specify the length of the available Interest Period applicable
thereto.
5. PAYMENTS OF INTEREST. Interest on this Note shall be calculated on
the basis of a 360 day year and the actual number of days elapsed. Monthly
payments of interest shall be due and payable in arrears on the first day of
each month, commencing December 1, 1996, until this Note is paid in full.
6. PAYMENTS OF PRINCIPAL. If not sooner paid, the aggregate
outstanding Principal Amount of this Note, together with all accrued and
unpaid interest thereon and any other fees or charges then due, shall be due
and payable on the Termination Date.
7. DEFINITIONS. As used in this Note and not defined elsewhere in
this Note, the following terms shall have the following meanings:
a. "Business Day" means any day other than a day on which
commercial banks in Hartford, Connecticut are required or permitted by law to
close.
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<PAGE>
b. "Interest Period" means with respect to advances bearing
interest at the LIBOR Rate, an available period of thirty (30), sixty (60) or
ninety (90) days, provided that:
(1) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall end on the immediately
preceding Business Day;
(2) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month; and
(3) any Interest Period that would otherwise extend
beyond the Termination Date shall end on the Termination Date.
c. "LIBOR Rate" means, with respect to any LIBOR Rate Loan for
each applicable Interest Period, the rate per annum determined by the Lender
to be equal to the quotient of (a) the London Interbank Offered Rate for such
LIBOR Rate Loan for such Interest Period, divided by (b) one (1) minus the
Reserve Percentage for such Interest Period, expressed as follows:
LIBOR Rate = London Interbank Offered Rate
-----------------------------
1 - Reserve Percentage
d. "LIBOR Rate Loan" means an advance that bears interest at a
rate equal to the LIBOR Rate plus one hundred (I 00) basis points.
e. "London Interbank Offered Rate" means, with respect to any
applicable Interest Period for a LIBOR Rate Loan, the rate per annum at which
the Eurodollar office of the Lender is offered, in the London interbank
Dollar deposits market, at or about 1 1:00 a.m. London time, two (2) business
days prior to the first day of such Interest Period, Dollar deposits, for a
period, and in an amount comparable to such Interest Period and principal
amount of the LIBOR Rate Loan which shall be made by the Lender and
outstanding during such Interest Period.
f. "Prime Rate" means the rate of interest announced from time
to time by Lender at its office in Hartford, Connecticut as its prime rate.
Such Prime Rate may not be the lowest or best rate that is made available by
Lender to its commercial borrowers.
g. "Prime Rate Loan" means an advance that bears interest at a
rate equal to Lender's Prime Rate. The interest rate on each Prime Rate Loan
shall change, without notice to Borrower, each time that Lender's Prime Rate
changes so that the rate of interest on a Prime Rate Loan is at all times
equal to Lender's Prime Rate.
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<PAGE>
h. "Reserve Percentage" means the maximum marginal percentage
as prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirement for Lender in respect of
eurodollar deposits having a maturity equal to the Interest Period as the
Borrower may elect pursuant to the terms of this Note. With respect to the
LIBOR Rate, any change in the interest rate because of a change in the
Reserve Percentage shall become effective, without notice or demand, on the
date on which such change in the Reserve Percentage becomes effective.
i. "Termination Date" means November 22, 1997.
8. ILLEGALITY. Notwithstanding any other provisions hereof, if any
applicable law or governmental regulation, guideline, order or directive, or
any change therein or in the interpretation or application thereof by any
governmental authority charged with the interpretation or the administration
thereof (whether or not having the force of law) shall make it unlawful for
the Lender to make or maintain LIBOR Rate Loans as contemplated by this Note:
(i) the obligation of the Lender to continue LIBOR Rate Loans shall forthwith
be cancelled, and (ii) such amounts then outstanding shall be automatically
converted, without notice, to Prime Rate Loans on the last day of the then
current Interest Period or within such earlier time as required by law. If
any such conversion of LIBOR Rate Loans is made on a day that is not the last
Business Day of the then current Interest Period applicable thereto, Borrower
shall pay the Lender such amount or amounts required pursuant to Section 13
below.
9. BASIS FOR DETERMINING LIBOR INADEQUATE OR UNFAIR. In the event that
the Lender shall have determined (which determination, absent manifest error,
shall be conclusive and binding upon Borrower) that (J) by reason of
circumstances affecting the Interbank LIBOR market, adequate and reasonable
means do not exist for determining the LIBOR Rate, or (H) Dollar deposits in
the relevant amount and for the relevant maturity are no longer available to
the Lender in the Interbank LIBOR market, or (iii) the continuation of LIBOR
Rate Loans has been made impractical or unlawful by the occurrence of a
contingency that materially and adversely affects the Interbank LIBOR market,
or (iv) the LIBOR Rate will not adequately and fairly reflect the cost to the
Lender of maintaining LIBOR Rate Loans, or (v) the LIBOR Rate shall no longer
represent the effective cost to the Lender of U.S. Dollar deposits in the
relevant market for deposits in which it regularly participates, the Lender
shall give the Borrower notice of such determination as soon as practicable.
If such notice is given a LIBOR Rate Loans shall be automatically converted,
without notice, to Prime Rate Loans effective on the last Business Day of the
then current Interest Period applicable thereto. Until such notice has been
withdrawn, the LIBOR Rate shall not be continued.
10. COSTS AND EXPENSES. The Borrower shall pay all taxes levied or
assessed on this Note or the debt evidenced hereby against the Lender,
together with all costs, expenses and attorneys' and other professional fees
incurred in any action to collect and/or enforce this Note or to enforce the
Loan Agreement between Borrower and Lender dated the same date as this Note
(the "Loan Agreement") or any other agreement relating to this Note or the
Loan Agreement or
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<PAGE>
any other agreement or in any litigation or controversy arising from or
connected with the Loan Agreement or any other agreement, or this Note.
11. INCREASED COSTS. In the event that applicable law, treaty or
regulation or directive from any government, governmental agency or
regulatory authority, or any change therein or in the interpretation or
application thereof, or compliance by the Lender with any request or
directive (whether or not having the force of law) from any central bank or
government, governmental agency or regulatory authority, shall:
a. subject the Lender to any tax of any kind whatsoever (except
taxes on the overall net income of the Lender) with respect to the Loan
Agreement, this Note or any of the loans made by it or change the basis of
taxation of payments to the Lender in respect thereof (except for changes in
the rate of tax on the overall net income of the Lender);
b. impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirements against assets held by, deposits or
other liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any office of
the Lender, including (without limitation) pursuant to Regulations of the
Board of Governors of the Federal Reserve System; or
c. in the opinion of the Lender, cause this Note, any loan made
under this Note or under the Loan Agreement to be included in any
calculations used in the computation of regulatory capital standards; or
d. impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the Lender,
by an amount that the Lender deems to be material, of making, converting
into, continuing and/or maintaining the loans made pursuant to this Note (the
"Loans") or to reduce the amount of any payment (whether of principal,
interest or otherwise) in respect of any of such Loans, then, in any case,
the Borrower shall promptly pay the Lender, upon its demand, such additional
amounts necessary to compensate the Lender for such additional costs or such
reduction in payment, as the case may be (collectively the "Additional
Costs"). The Lender shall certify the amount of such Additional Costs to the
Borrower, and such certification, absent manifest error, shall be deemed
conclusive.
12. CAPITAL ADEQUACY PROTECTION. If, after the date hereof, the Lender
shall have determined that the adoption of any applicable law, governmental
rule, regulation or order regarding capital adequacy of banks or bank holding
companies, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by the Lender with any request or directive regarding capital
adequacy (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful, so long as the Lender believes in good
faith that such has the force of law or that the failure to so comply would
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<PAGE>
be unlawful) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on any of the Lender's
capital as a consequence of the Lender's obligations hereunder to a level
below that which the Lender could have achieved but for such adoption, change
or compliance (taking into consideration the Lender's policies with respect
to capital adequacy immediately before such adoption, change or compliance
and assuming that the Lender's capital was fully utilized prior to such
adoption, change or compliance) by an amount deemed by the Lender in its
judgment to be material, then, promptly upon demand, the Borrower shall
immediately pay to the Lender, from time to time as specified by the Lender,
such additional amounts as shall be sufficient to compensate the Lender for
such reduced return, together with interest on each such amount from the date
of such specification by the Lender until payment in full thereof at the
highest rate of interest (other than the default rate of interest) due on the
Loans. A certificate of the Lender setting forth the amount to be paid to
the Lender shall, in the absence of manifest error, be deemed conclusive. In
determining such amount, the Lender shall use any reasonable averaging and
attribution methods. The Borrower may, however, avoid paying such amounts
for future rate of return reductions if, within the maximum borrowings
permitted herein, the Borrower borrows such amounts as will cause the Lender
to avoid any such future rate of return reductions which would otherwise be
caused by such changed capital adequacy requirements or the Borrower agrees
to a reduction in the Loans to achieve the same result.
13. INDEMNITY. The Borrower agrees to indemnify the Lender and to hold
the Lender harmless from any loss (including any of the additional costs
referred to above and any lost profits) or expense that it may sustain or
incur as a consequence of (i) a default by the Borrower in the payment of the
principal of or interest due on this Note, or (H) the making of a prepayment
of the Principal Amount bearing interest at the LIBOR Rate on a day which is
not the last day of the then cur-rent Interest Period applicable thereto,
including, but not limited to, in each case any such loss or expense arising
from the reemployment of funds obtained by it or from fees, interest or other
amounts payable to terminate the deposits from which such funds were
obtained. The Lender shall prepare a certificate as to any additional
amounts payable to it pursuant to this Section 13, which certificate shall be
submitted by the Lender to the Borrower and shall, absent manifest error, be
deemed conclusive.
14. LAWFUL INTEREST. Notwithstanding any provisions of this Note, it is
the understanding and agreement of the Borrower and Lender that the maximum
rate of interest to be paid by the Borrower to the Lender shall not exceed
the highest or the maximum rate of interest permissible to be charged by a
commercial lender such as the Lender to a commercial borrower such as the
Borrower under the laws of the State of Connecticut. Any amount paid in
excess of such rate shall be considered to have been payments in reduction of
principal.
15. LATE CHARGE. Without limiting the Lender's rights and remedies with
respect to the Event of Default that will have occurred, the Borrower hereby
agrees to pay a "late charge" equal to five percent (50/6) of any installment
of interest or other amount due to the Lender which
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is not paid within ten (10) days of the due date thereof to defray the extra
expense involved in handling such delinquent payment.
16. PREPAYMENTS.
a. The Borrower may, at its option and upon two (2) Business Days'
prior written notice (which notice shall be irrevocable), prepay the
Principal Amount of a LIBOR Rate Loan or a Prime Rate Loan on the following
conditions: (a) the Borrower shall pay all accrued interest on the Principal
Amount being paid to the date of the prepayment and, in the case of
prepayments in full, all fees, charges, costs, expenses and other amounts
then due hereunder; and (b) such Principal Amount of a LIBOR Rate Loan shall
only be prepaid on the last Business Day of the then current Interest Period
with respect thereto. In its notice, the Borrower shall specify the date and
amount of the prepayment. In the event that any prepayment of the Principal
Amount of a LIBOR Rate Loan is required or permitted on a date other than the
last Business Day of the then current Interest Period with respect thereto,
the Borrower shall indemnify the Lender therefore as provided in this Note.
b. In the event that Borrower makes a prepayment and does not
specify in its notice of prepayment whether the prepayment is to be applied
to a LIBOR Rate Loan or a Prime Rate Loan, then Lender shall apply such
prepayment in such order as Lender in its sole discretion shall determine.
17. EVENTS OF DEFAULT. The Borrower agrees that the occurrence of an
Event of Default under the Loan Agreement shall constitute an Event of
Default under this Note. Reference is hereby made to the Loan Agreement for
the other terms and conditions relating to the loan evidenced by this Note
which are incorporated in this Note by reference. Upon the occurrence of any
Event of Default the availability of advances hereunder shall, at the option
of the Lender, be automatically terminated and the Lender, at its option, may
declare all advances outstanding hereunder, together with accrued interest
thereon and all applicable late charges, other amounts due under this Note
and all other liabilities and obligations of the Borrower to the Lender to be
immediately due and payable, whereupon the same shall become immediately due
and payable; ALL of the foregoing without demand, presentment protest or
notice or any kind, all of which are hereby expressly waived by the Borrower.
Failure to exercise such option shall not constitute a waiver of the right
to exercise the same in the event of any subsequent default. Upon the
occurrence of any Event of Default, without in any way affecting the Lender's
other rights and remedies, or after maturity or judgment, the interest rate
applicable to the outstanding principal balance of this Note shall
automatically change without notice to a floating per annum rate equal to
five percentage points (5.0%) above the otherwise applicable rate.
18. LIEN AND RIGHT OF SETOFF. The Borrower hereby gives the Lender a
lien and right of setoff for all liabilities arising hereunder upon and
against all the deposits, credits and property of Borrower now or hereafter
in the possession, custody, safekeeping or control of the Lender or in
transit to it. Lender may, upon the occurrence of an Event of Default@
without notice and
-8-
<PAGE>
without first resorting to any collateral which may now or hereafter secure
this Note, apply or set off the same, or any part thereof, to any liability
of the Borrower, even though unmatured.
19. NO WAIVER. Failure by the Lender to insist upon the strict
performance by Borrower of any terms and provisions herein shall not be
deemed to be a waiver of any terms and provisions herein, and the Lender
shall retain the right thereafter to insist upon strict performance by the
Borrower of any and all terms and provisions of this Note or any agreement
securing the repayment of this Note.
20. GOVERNING LAW. This Note shall be governed by the laws of the State
of Connecticut.
21. PREJUDGMENT REMEDY AND OTHER WAIVERS. THE BORROWER ACKNOWLEDGES THAT
THE LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND RESERVES ITS
RIGHT TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL
STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO
ANY PREJUDGMENT REMEDY WHICH LENDER MAY DESIRE TO USE, AND FURTHER, WAIVES
DILIGENCE, DEMAND, PRESENTMENT OF PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND
NOTICE OF PROTEST, AND NOTICE OF ANY RENEWALS OR EXTENSIONS OF THIS NOTE, AND
ALL RIGHTS UNDER ANY STATUTE OF LIMITATION. THE BORROWER ACKNOWLEDGES THAT
IT ????? THIS WAIVER KNOWLINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY UNDER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
22. JURY WAIVER. THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND
IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR
IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART
AND/OR THE ENFORCEMENT OF ANY OF THE LENDER'S RIGHTS AND REMEDIES, INCLUDING
WITHOUT LIMITATION, TORT ?????. THE BORROWER ACKNOWLEDGES THAT IT MAKES THIS
WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER CONSIDERATION OF
THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
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<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
this 25th day of November, 1996.
PHYSICIANS CARE FOR CONNECTICUT, INC.
By
-----------------------------------
Joseph R. Coffey
Title: Chief Executive Officer
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MANAGEMENT AGREEMENT
AGREEMENT made this 1st day of June 1997, by and between MedServ of
Connecticut, Inc., a Connecticut corporation with offices at 1520 Highland
Avenue, Cheshire, Connecticut 06410 (the "Manager") and Physicians Care for
Connecticut, Inc., a Connecticut corporation with offices at 1520 Highland
Avenue, Cheshire, Connecticut 06410 ("Physicians Care").
WHEREAS, Physicians Care is organized under the laws of the State of
Connecticut and expects to obtain a license to do business as a health
maintenance organization ("HMO") in Connecticut, and may apply for a similar
license in other states, or may seek to be licensed to offer additional products
in the State of Connecticut;
WHEREAS, Physicians Care desires to purchase management and administrative
services to support its insurance business (the "Services");
WHEREAS, Manager has the resources and expertise to provide the Services and
Manager desires to provide such Services to Physicians Care; and
WHEREAS, the parties mutually desire to provide or arrange for the
provision of quality and cost effective care to enrollees in Physicians
Care's health plans (the "Plans") and to develop and operate Physicians Care
in a businesslike manner.
NOW, THEREFORE, in consideration of the mutual promises herein stated and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
I. AUTHORITY OF THE PARTIES
1.1 ENGAGEMENT OF MANAGER. Physicians Care hereby engages Manager as its
manager to operate Physicians Care in an efficient and businesslike manner and
in a manner that promotes quality healthcare in accordance with the terms
hereof. Manager hereby accepts the engagement.
1.2 DUTIES OF MANAGER. Physicians Care, acting through its Board of
Directors (the "Board of Directors") and in accordance with its Certificate of
Incorporation and Bylaws, shall at all times exercise ultimate authority over
the policies, assets and operations of Physicians Care and shall retain the
ultimate authority and responsibility regarding the powers, duties and
responsibilities vested in Physicians Care by law and regulation. Subject to the
foregoing and all other terms of this Agreement, Physicians Care hereby grants
and delegates to Manager the general authority to supervise and manage
Physicians Care on a day-to-day basis, subject to the direction of the
Physicians Care Board of Directors. Manager's specific responsibilities include,
but are not necessarily limited to, those set forth in Section II herein.
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1.3 PHYSICIANS CARE APPROVALS. If Physicians Care is required or
permitted hereunder to take any action or give any approval, Manager shall be
entitled to rely upon the statements of one or more representative(s)
designated by resolutions adopted by Physicians Care's Board of Directors, to
act on its behalf. If no representative(s) are so designated, all necessary
actions shall be taken and approvals shall be given by the Board of Directors
of Physicians Care on a timely basis.
1.4 MAINTENANCE OF SOUND OPERATIONS. Physicians Care shall conduct its
affairs in accordance with the provisions of any state and federal laws and
regulations to which it is subject. Physicians Care shall honor all legitimate
debts and obligations to its creditors.
II. MANAGEMENT SERVICES
2.1 GENERAL RESPONSIBILITIES AND SERVICES. Manager shall perform all
management, administrative and other services that are reasonably necessary
for Physicians Care's financial stability, Physicians Care's competent and
efficient operations, and implementation of Physicians Care's policies as
established by Physicians Care's Board of Directors, including but not
limited to those services set forth in the remainder of this Section II. In
addition, Manager shall provide Physicians Care with all clerical services
reasonably required for the operation of an HMO. Manager shall use its best
efforts to act in a prompt, competent and businesslike manner to perform its
duties hereunder in good faith. Manager shall retain, in Physicians Care's
name and on Physicians Care's behalf and at Physicians Care's expense, such
accounting, actuarial, legal, and other purchased services as in Manager's
determination pursuant hereto that Physicians Care shall reasonably require
from time to time. Manager shall not be excused from its obligations to
provide management services hereunder on behalf of Physicians Care except to
the extent that Physicians Care refuses or is unable to expend funds as required
hereunder, execute agreements, or otherwise to act in a manner that
unreasonably prevents or constrains Manager from performing its
responsibilities under the Agreement.
2.2 APPLICATION FOR LICENSE AND PERMITS/REGULATORY REQUIREMENTS. Manager
shall apply for and use its best efforts to obtain and maintain, on behalf of
Physicians Care, all licenses, certificates, registrations and permits
required in connection with the management and operation of an HMO or any
other activity in which Physicians Care will engage as determined by the
Board of Directors. Physicians Care shall cooperate with Manager in applying
for, obtaining, and maintaining such licenses, certificates, registrations
and permits. Manager shall notify Physicians Care of changes in regulatory
requirements applicable to Physicians Care's business as soon as reasonably
possible, which notice shall state the actions which must be undertaken by
Physicians Care and/or Manager on its behalf to comply
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therewith. Manager shall propose a specific plan by which Physicians Care
will obtain National Committee for Quality Assurance Accreditation. Manager
shall periodically review the sufficiency of such agreements and shall
recommend to the Board of Directors modifications thereof which Manager
reasonably determines are necessary to comply with law or industry standards
or which will promote enrollment in Physicians Care's Plans.
2.3 SUBSCRIBER AGREEMENTS. Manager shall, in the name of and on behalf of
Physicians Care, negotiate and enter into agreements with employer groups or
individuals as necessary and/or appropriate to sell Physicians Care's Plans as
services.
2.4 UNDERWRITING. Manager shall be responsible for providing or securing
underwriting services necessary to establish the annual per capita revenue
requirement for each product offered by Physicians Care including all relevant
adjustments thereto for age/sex, health status, employer group size, rating
region, experience or plan types (e.g. family, spousal or individual) to develop
the budget of medical costs including line items for each category of medical
costs, and to complete any regulatory filing or to obtain regulatory approval
for the marketing and establishment of premium for each product, including the
rating and underwriting of accounts.
2.5 ENROLLEE MATERIALS. Manager shall be responsible for preparing and
revising, as appropriate, materials intended to inform or educate individuals
enrolled in Physicians Care's Plans (the "Enrollees") regarding terms and
conditions of the Plans, administrative procedures and Enrollee
responsibilities.
2.6 GRIEVANCE PROCEDURE. Manager shall be responsible for developing and
implementing a written grievance and complaint procedure for Physicians Care's
members.
2.7 ENROLLEE MANAGEMENT. Manager shall be responsible for obtaining or
providing Physicians Care with necessary services related to Enrollee
services and records, including receiving all documents necessary to confirm
enrollment, maintenance of accurate eligibility information, processing of
all Enrollee additions and deletions, and obtaining from Enrollees a general
consent for the release of medical and financial information to Physicians
Care and its Providers (whether directly or indirectly through MedServ IPA,
Inc. or any other party) as reasonably necessary to administer the Plans.
2.8 MARKETING AND ADVERTISING. Manager shall be responsible for developing
and implementing a marketing plan for Physicians Care, including a comprehensive
public relations and advertising program, designed to promote public awareness
of Physicians Care and enrollment in its Plans.
2.9 SALES. Manager shall be responsible for selling Physicians Care's
products whether directly or through a network of brokers and to document such
sales through execution of Subscriber Agreements.
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2.10 ACCOUNTING AND FINANCIAL SUPPORT. Manager shall be responsible for
establishing and administering accounting procedures and controls, and systems
for the preparation of appropriate financial, utilization, membership and
medical management reports for the efficient management and planning of
Physicians Care's business operations, systems for the billing of accounts and
the collection of accounts receivable, and systems to improve or expedite
providers access to relevant enrollment, claims and clinical information. The
foregoing shall include, but shall not be limited to:
a. Manager shall be responsible for preparing and presenting to
Physicians Care an annual operating and capital budget with appropriate
membership, revenue, and detailed line item cost estimates for each Plan
(the "Plan Budget"). Upon its adoption, the Plan Budgets shall serve as a
basis for the operation of Physicians Care during the year to which it is
related. All Plan Budgets shall be subject to the approval of Physicians Care.
b. Manager shall submit as soon as practicable but not less than
sixty (60) days prior to (i) the expiration of the initial Offering Period
for the Start-up and "Initial Operations" stages, and (ii) the first day of
each fiscal year of Physicians Care an administrative services budget with
detailed line item cost estimates for all Services contemplated to be
provided hereunder (the "Administrative Services Budget"). The start-up stage
shall commence as of the completion of the offering of Common Stock
contemplated by Physicians Care through the effective date of enrollment of
the first Enrollee in a Plan. The Initial Operations phase shall commence the
effective date of enrollment of the first Enrollee in a Plan and terminate on
the last day of the month in which Physicians Care attains a positive net
income from operations but not later than thirty-six (36) months after
commencement of the Initial Operations stage. The Administrative Services
Budget shall be the basis for compensation of the Manager pursuant to Section
VII.
c. Manager shall cause to be delivered to Physicians Care certain
financial statements and reports, including the following:
(i) Within forty-five (45) days after the close of each month, financial
statements for the preceding month and the fiscal year to date (unaudited
but consistent with generally accepted accounting principles ("GAAP")
consistently applied, except as directed by the Board of Directors)
containing a statement of income and expenses in reasonable detail,
variances from budget by Plan and in aggregate and such other financial
reports as Physicians Care may reasonably request from time to time;
(ii) Within sixty (60) days after the close of a fiscal year, financial
statements for the preceding fiscal year, prepared in accordance with GAAP
consistently applied, which shall be audited by an independent certified
public accounting firm approved by Physicians Care at Physicians Care's
expense, plus such other financial reports as Physicians Care may reasonably
request from time to time;
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(iii) Within time frames prescribed by regulatory authorities, financial
statements and other such reports prepared in accordance with standards
prescribed or permitted by such regulatory authorities;
(iv) Monthly and year-to-date summary reports regarding the utilization
and cost of health services and supplies;
(v) Marketing and enrollment reports for each Plan and as requested by
Physicians Care, indicating Enrollee demographics and employer profiles; and
(vi) If specifically requested by the Physicians Care's Board of
Directors, report(s) evaluating and making recommendations regarding the
performance by Manager or any of its designees of its obligations under this
Agreement, which report(s) shall be prepared at Physicians Care's expense by
a certified public accounting firm chosen by Manager with the approval of
Physicians Care which approval shall not be unreasonably withheld.
d. Manager shall be responsible for developing and implementing
accounting procedures appropriate to Physicians Care's operation.
e. Manager shall be responsible for preparing medical management
reports to assist providers in the evaluation of practice patterns for the
following categories: (i) by physician, (ii) by Member, (iii) by CPT-4 Code,
(iv) by diagnosis code, or (v) in such other format as may be reasonably
requested by Physicians Care.
f. Manager shall be responsible for preparing such other reports as
Physicians Care shall reasonably request.
2.11 CLAIMS ANALYSIS AND STATISTICAL REPORTING. As reasonably required and
requested by Physicians Care, Manager shall prepare and deliver to Physicians
Care reports setting forth various information and statistics regarding
utilization of services by Enrollees or performance of various operating
departments or divisions of Physicians Care.
2.12 PARTICIPATING PROVIDERS AND CREDENTIALING. 2.12.1 Manager shall, on
behalf of Physicians Care, be responsible for preparation and implementation of
contracts with providers of healthcare services or organizations thereof (I.E.,
physicians, IPAs, hospitals, etc.) with which or with whom Manager contracts,
to provide (or to arrange to provide) healthcare services to
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Enrollees (such contracting Providers are sometimes collectively referred
to herein as "Providers"). Manager is expressly authorized to contract with
MedServ IPA to make available a physician network in fulfillment of a
portion of its responsibilities under this subsection 2.12.2, provided that
under such contract MedServ shall have a right to terminate the contract in
the event that MedServ IPA contracts with an HMO licensed in Connecticut (the
"Competitor Contract") to make available the Physician Network to provide
healthcare services. MedServ agrees to issue notice of termination of such
contract upon receipt from Physicians Care of a certificate of an officer of
Physicians Care setting forth a resolution of Physicians Care's Board
determining in its reasonable judgment that the Competitor Contract is
contrary to the best interests of Physicians Care. The Manager shall cause
MedServ IPA to give notice to the Manager within five (5) days of execution
of a Competitor Contract.
Manager shall cause all contracts between Providers and MedServ IPA
or Physicians Care to contain terms required by law and consistent with the
Subscriber Agreements and as reasonably designed to promote enrollment in
Physicians Care's Plans. Such contracts shall specify that Providers shall
not, under any circumstances, seek payment from Enrollees for Covered
Services (as defined in the applicable Subscriber Agreement) provided to
Enrollees, except for copayments, deductibles or coinsurance amounts
specified in the applicable Subscriber Agreement with Physicians Care.
2.12.2 Manager shall periodically report to the Board of Directors
the status of Physicians Care's Provider networks and make recommendations
regarding additions/deletions from the Provider network.
2.12.3 Manager, on behalf of Physicians Care, shall conduct
credentialing activities for Physicians Care pursuant to credentialing
standards approved by the Board of Directors. Manager shall periodically
provide to the Board of Directors a comparison of Physicians Care's
credentialing standards to national standards and those of competitors.
2.13 QUALITY STANDARDS. Manager shall manage Physicians Care and shall
cause other agents or designees of Physicians Care, to perform their
responsibilities in a manner that enables Physicians Care to meet NCQA
accreditation standards and such other accreditation standards as reasonably
requested by Physicians Care's Board of Directors.
2.14 QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT. Manager shall be
responsible for development, recommendation and implementation of quality
management, utilization review, and similar programs.
2.15 MANAGEMENT INFORMATION SYSTEM. Subject to the approval of the Board
of Directors, Manager shall be responsible for providing or arranging for the
provision of a management information services ("MIS") appropriate for the
management of Physicians Care's operations.
2.16 PLANNING AND PRODUCT DEVELOPMENT. Manager shall prepare business
plans for the Board of Directors as requested by the Board. Manager shall
periodically survey the plan design and benefits of competitors and shall make
recommendations regarding modification of Plan design and introduction of new
Plans.
2.17 DEPOSIT AND DISBURSEMENT OF FUNDS. 2.17.1 Manager shall open and
maintain an Operating Account and such other bank accounts in Physicians Care's
name in accordance with requirements of state and federal laws and as authorized
by the Board of Directors, shall deposit in such Operating Account all monies
received arising from the operation of Physicians Care and shall make
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disbursements from such Operating Account and other bank accounts on behalf
of Physicians Care in such amounts and at such times as the same are required
and as directed by the Board of Directors. Signatories and approvals as to
amounts on all checks shall be in accordance with the duly adopted policies
of the Board of Directors, which policies shall not adversely affect the
Manager's ability to perform its duties hereunder.
2.17.2 Physicians Care agrees to establish an Administrative Services
Account and to deposit monthly in advance into such account the amounts
estimated pursuant to the Administrative Services Budget to be due for such
month to the Manager for Services hereunder.
2.17.3 Manager shall recommend to the Board of Directors reasonable
and prudent investment guidelines that comply with applicable state and
federal laws and shall have authority to invest any surplus funds on behalf
of Physicians Care subject to guidelines approved by its Board of Directors.
2.18 LEGAL ACTIONS AND COUNSEL. Manager shall notify Physicians Care
immediately of any and all legal actions brought against Physicians Care. In
addition, Manager shall provide the services of a General Counsel for Physicians
Care as outlined in Section IV below.
2.19 REPORTS. Manager shall be responsible for the preparation and
provision of such reports as may be required by any regulatory agency having
jurisdiction over the operations of Physicians Care including, but not limited
to, those required by state governmental agencies, the Health Care Financing
Administration, and the Internal Revenue Service.
2.20 GOVERNMENT REGULATIONS. Manager shall use all reasonable efforts,
within the scope of its authority and responsibilities hereunder, to ensure that
Physicians Care complies with the requirements of any applicable state or
federal statute, ordinance, law, rule, regulation, or order of any governmental
or regulatory body having jurisdiction over Physicians Care, including any
applicable requirements relating to federal qualification. Manager shall notify
the Board of Directors if the Manager reasonably determines that Physicians Care
is not compliant with any governmental regulation.
2.21 ANCILLARY AND OTHER AGREEMENTS. In Physicians Care's name and at
Physicians Care's expense, Manager shall negotiate and cause Physicians Care to
enter into such agreements as Manager may deem necessary or advisable in
accordance with Physicians Care Board policy, for the furnishing of those goods
and services necessary and appropriate for the maintenance and operation of
Physicians Care which are Physicians Care's responsibility under this Agreement.
Any such agreement which may involve a conflict of interest shall be disclosed
to and be subject to the prior approval of Physicians Care's Board of Directors,
which approval shall not be unreasonably withheld. Provided that such agreements
are negotiated, entered into and administered at arm's length, Manager shall be
permitted to enter into and perform such contracts with Physicians Care.
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2.22 CAPITAL EXPENDITURES. Manager shall review and make recommendations
to Physicians Care concerning proposed capital expenditures.
2.23 COOPERATION. Manager agrees to cooperate with Physicians Care or as
directed by the Board of Directors, with any auditor, consultant, legal counsel,
or other party engaged by Physicians Care relating to Physicians Care's products
subject to this Agreement. The Manager agrees to provide such parties at
reasonable times and upon reasonable notice with full and complete access to all
books, records, documents and other information relating to management
activities performed on behalf of Physicians Care.
2.24 POLICIES AND PROCEDURES. Whenever the Manager reasonably determines
that policies and procedures of Physicians Care should be instituted, modified
or deleted to facilitate effective operation of Physicians Care, the Manager
shall make a recommendation to the Board of Directors accordingly.
III. SUPPORT SERVICES
3.1 GENERAL RESPONSIBILITIES AND SERVICES. Manager shall provide all
clerical services reasonably required, including, but not limited to, claims
processing, member enrollment, and premium billing for Physicians Care's Plans.
Manager shall use its best efforts to act in a prompt, competent and
businesslike manner to perform its duties hereunder in good faith such that
Physicians Care offers a scope of services in support of administration of the
Plans which permits such Plans to be competitive in the marketplace.
3.2 ENROLLEE REGISTRATION. Manager shall be responsible for implementation
and maintenance of such systems and procedures as reasonably directed by
Physicians Care to enroll and disenroll new employer groups and individuals in a
prompt manner, and to maintain a continuous and accurate record of enrollment.
Such systems and procedures shall be installed and be operational no later than
the earliest effective date of any Physicians Care Subscriber Agreement. Such
system must permit Physician Care providers to confirm Enrollee eligibility
status electronically.
3.3 CLAIMS PROCESSING AND ADMINISTRATION. Manager shall be responsible for
the development, implementation, and maintenance of such systems and procedures
as may be reasonably directed by Physicians Care and as may be reasonably
necessary for the appropriate review and timely payment or disapproval of all
claims, with timing of such payments as directed by Physicians Care. Such system
shall use claim forms as approved by Physicians Care and shall capture all
information on such forms in the Manager's data base. Such systems and
procedures shall be installed and operational no later than the earliest
effective date of any Physicians Care Subscriber Agreement. Such system must
provide electronic submission and payment of claims.
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3.4 REFERRAL AUTHORIZATION. Manager shall be responsible for
implementation and maintenance of such systems and procedures as reasonably
directed by Physicians Care to monitor and record any prior authorization or
precertification required from a Physicians Care Manager or Physicians Care as a
condition of payment for Covered Services delivered to Enrollees. Such
authorization and precertification information shall be used as a Condition of
Payment to process and approve claims. Such system must permit Physicians Care
providers to submit such referral information to Physicians Care electronically.
3.5 DATABASE MANAGEMENT. Manager shall be responsible for maintenance and
management of a database of Physicians Care's claims, enrollment, customer
service and quality management information. Manager shall provide Physicians
Care with access to such database including reproduction on disks or electronic
transmissions to Physicians Care of data as reasonably requested by Physicians
Care. All data relating to Enrollees shall be the sole and exclusive property of
Physicians Care; provided, however, that during the term of this agreement,
Manager shall have a non-exclusive license to use such data solely for the
purpose of complying with its obligations hereunder to ensure effective
administration of the Plans.
3.6 PREMIUM BILLING AND COLLECTION OF ACCOUNTS. Manager shall be
responsible for the development, implementation, and maintenance of billing and
collection procedures reasonably appropriate to Physicians Care's operation.
IV. PERSONNEL
4.1 APPOINTMENT. Manager shall hire, appoint, and supervise the personnel
specified below, and all other personnel reasonably necessary or appropriate to
carry out its obligations under this Agreement and in accordance with the
Administrative Services Budget, all of whom shall be employees or independent
contractors of Manager. Such Manager personnel shall have the authority to act
on behalf of Physicians Care within the scope of authority common to their
positions in the industry, and the authority granted to Manager under this
Agreement, provided that they shall at all times perform their duties in
accordance with the Certificate of Incorporation and Bylaws of Physicians Care
and subject to the overall policy direction established by Physicians Care's
Board of Directors. The hiring, assignment and termination of such personnel
shall be within the discretion of Manager, but shall be subject to the approval
of the Board of Directors.
4.2 SPECIFIC PERSONNEL. Manager shall provide individuals to oversee the
operations of Physicians Care and arrange for the performance of services
reasonably required to be performed by Manager under this Agreement.
Specifically, the parties agree that Manager shall provide qualified individuals
to fill the following positions; among others:
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- CHIEF EXECUTIVE OFFICER("CEO"). The CEO shall be responsible to Physicians
Care's Board of Directors for the overall administration, operation and
performance of the Company.
- ASSOCIATE CHIEF EXECUTIVE OFFICER. The Associate Chief Executive Officer
shall assist the CEO in the discharge of his duties by consulting on
policies, performance goals, facilities planning and general operations of
the Company.
- VICE-PRESIDENT OF QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT. The
Vice-President of Quality Management and Utilization Management will be
responsible for monitoring quantitative inpatient hospitalization and
outpatient ambulatory care experience and assuring that proper utilization
management techniques are used. The Vice-President of Quality Management
and Utilization Management shall also be responsible for the management of
quantative and qualitative information concerning patient outcomes and
physician/hospital practice patterns in accordance with the Physicians Care's
utilization standards.
- GENERAL COUNSEL. The General Counsel shall concentrate on legal matters
concerning procedures, entities, regulations, and laws relating to the
business of Physicians Care. The General Counsel shall also provide general
legal services required of corporate counsel on such matters as review,
negotiation, and drafting of contractual obligations, addressing members'
communications and questions, and coordinating services provided by outside
legal counsel as necessary and/or appropriate.
- CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be responsible for
the Company's overall financial plans, policies, and accounting practices.
- VICE PRESIDENT OF MEDICAL AFFAIRS. The Vice President of Medical Affairs
shall be responsible for overseeing the medical practices, medical service
delivery and quality of care for Physicians Care's Enrollees.
- DIRECTOR OF MIS. The Director of MIS shall be responsible for the operation
and maintenance of the computer system and information services provided for
Physicians Care, including all data storage, maintenance and reporting
responsibilities.
- VICE PRESIDENT OF MARKETING AND SALES. The Vice President of Marketing and
Sales shall be responsible for the overall administration of marketing and
sales activities.
4.3 OBLIGATIONS RELATING TO MANAGEMENT PERSONNEL. Physicians Care shall
cooperate in good faith with the management personnel provided by Manager
pursuant to this Agreement as may be reasonably necessary for such personnel to
perform their duties.
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4.4 COORDINATION OF PERSONNEL. Provided that the requirements of
Manager to operate Physicians Care can be adequately met, the personnel
appointed pursuant to this Section may also serve other entities which are
affiliates through common majority ownership or control of the Hartford
Medical Association County or New Haven County Medical Association or MedServ
IPA, Inc., or at the discretion of Physicians Care, such other entities as
approved by the Physicians Care Board of Directors.
4.5 CONSULTATIVE STAFF. Manager may, at its reasonable discretion,
utilize the consultative services and support of the professional staff at
its corporate offices and may engage the services of consultants or
independent contractors and other non-Manager personnel as may be necessary
in carrying out Manager's obligations hereunder. Compensation and expenses of
Manager's professional staff and all independent contractors providing
services shall be the responsibility of Manager and Physicians Care's sole
obligation shall be to pay the Management Fee to Manager and/or the costs as
specified under Section VII herein.
4.6 APPOINTMENT/REMOVAL OF PERSONNEL. The Board of Directors shall have
authority to approve appointment of any personnel for the positions
designated above and for any employment agreement with a term in excess of
one year. The Board of Directors may request the removal of any management
personnel selected by Manager and the Manager agrees to remove such personnel.
V. PROPERTY AND EQUIPMENT
5.1 ACQUISITION. Consistent with the Administrative Services Budget,
Manager shall be responsible for purchasing, leasing, renting, or otherwise
acquiring such property, equipment and supplies as Manager determines to be
reasonably necessary to provide the services set forth in this Agreement and
as may be reasonably required to carry out Physicians Care's contractual
obligations with Providers or Enrollees, subject to any limitations or
restrictions imposed by the Board of Directors. Title to all such property
shall be held by Physicians Care.
5.2 REPAIR AND MAINTENANCE. Manager shall be responsible for negotiating,
contracting for and supervising such repair and maintenance of any property and
equipment owned by Physicians Care as shall be necessary to maintain such
property and equipment in good working order.
5.3 UTILITIES AND SERVICES. Manager shall be responsible for negotiating
and entering into such administrative arrangements and agreements as it
determines to be reasonably necessary or advisable for the furnishing of
utilities, services, concessions and supplies for the maintenance and operation
of Physicians Care, and as may be necessary for Manager to provide the services
set forth in this Agreement.
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VI. INSURANCE
6.1 TYPES OF INSURANCE AND COSTS. Manager shall be responsible for
purchasing and maintaining on behalf of Physicians Care, at Physicians Care's
expense, various insurance policies as set forth in Exhibit 6.1 in such
amounts, with such companies, and on such terms and conditions upon which
Manager and Physicians Care shall mutually agree.
6.2 MANAGER'S INSURANCE. Manager shall obtain and maintain throughout the
term of this Agreement, at its sole expense, workers' compensation insurance and
other appropriate insurance covering employees of Manager who are utilized in
carrying out Manager's obligations under this Agreement and the other insurance
policies set forth in Exhibit 6.2.
6.3 NOTIFICATION OF CHANGES IN INSURANCE COVERAGE. Both parties agree
to provide the other with at least ten (10) days prior notice of the
cancellation, non-renewal or modification of any of the insurance policies
referenced in either Sections 6.1 or 6.2.
VII. COMPENSATION OF MANAGER
7.1 MANAGEMENT FEE. During the start-up and Initial Operation stages,
Manager shall be entitled to a Management Fee which shall be equal to the
Manager's actual cost of providing such services not to exceed amounts
approved in the Administrative Services Budget as described below plus an
allowance for Manager's profit and general administrative expense equal to 5
percent (5%) of such amounts. After completion of the start-up and Initial
Operations stages, the Manager shall be paid a negotiated percentage of
actual gross premium revenue per Enrollee per month as mutually agreed
between the Manager and Physicians Care as evidenced by an amendment to this
Agreement.
7.2 LIMITATION ON PAYMENTS. Physicians Care shall be responsible for
reimbursement of Manager for costs incurred to start up operations in any
service area, and for certain services directly attributable to Physicians
Care's business and operations up to the amount as set forth in the
Administrative Services Budget approved by the Board of Directors. The
Manager will make no expenditure in excess of the Administrative Services
Budget without the consent of the Board of Directors. If expenses for
services provided hereunder in aggregate are expected to exceed the
Administrative Services Budget by more than five percent (5%), or if expenses
related to any line item of such Budget are expected to exceed the amount
approved for such line item in such Budget by more than twenty percent (20%)
(whether or not aggregate expenses are expected to exceed the Budget), in
each case on a cumulative year to date basis, then the Manager agrees to
notify the Board of Directors of an anticipated increase to the Budget not
less than twenty (20) business days prior to any such excess being incurred,
such notice to include the reason for such variance and why it was not
anticipated at the time the Administrative Services Budget was approved the
requested modification to the Budget and alternatives available to Physicians
Care other than modification of the Budget. The Board shall act on such
request not more than twenty (20) business days after receipt of such
request.
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7.3 PROCESS FOR PAYMENT. For personnel costs associated with Services
provided hereunder, the Manager agrees to submit to Physicians Care not less
frequently than biweekly and not less than three (3) business days prior to
the due date for payment thereof, a detailed statement of actual personnel
expenses to be incurred for such period by the Manager. Unless objected to by
Physicians Care prior to such due date, the Manager may deduct from the
Administrative Services Account an amount equal to the personnel costs as set
forth in the detailed statement.
With respect to all other expenses of the Manager, the Manager agrees to
submit to Physicians Care an invoice and a detailed statement of actual
expenses on the fifth day of each month for the immediately preceding month.
Such detailed statement shall also include a certification of the Chief
Financial Officer of the Manager indicating the status of all accounts
payable of Physicians Care and the Manager related to Services hereunder, as
of the first day of the immediately preceding month, all additions to such
accounts payable for such month, and a detailed listing of the accounts
actually paid for such month. If not contested by Physicians Care within five
(5) business days of receipt hereof, the Manager may deduct from the
Administrative Services Account an amount equal to the undisputed amount of
such invoice. The Manager shall submit within thirty (30) days of the close
of each fiscal year a detailed reconciliation of all costs for Services
hereunder, payments made and amounts due. Physicians Care's failure to
contest any invoice shall not be deemed a waiver of any rights of Physicians
Care to dispute an amount due on annual reconciliation or within the
applicable statute of limitations.
VIII. RECORDS
8.1 OWNERSHIP OF RECORDS. All information relating to the operation of
Physicians Care, including but not limited to, all books of account, enrollment
records, general administrative records, account and Provider files, patient
records, and information generated under and/or contained in the MIS shall be
and remain the sole property of Physicians Care. Manager shall not possess any
interest, title, lien or right to any such data or records, except as expressly
set forth herein.
8.2 CONFIDENTIALITY OF RECORDS. 8.2.1 Manager shall use reasonable
efforts to protect the confidentiality of the records of Physicians Care and
shall to the extent of its authority and responsibility hereunder comply in
all material respects with all applicable laws and regulations relating to
the records of Physicians Care. In this connection, medical records and other
privileged Enrollee information, and information subject to confidentiality
agreements, will not be disclosed by Manager except (i) with the consent of
the subscriber or the parties to the applicable confidentiality agreement,
(ii) pursuant to a court order, (iii) as reasonably necessary for quality
assurance and utilization review programs of Physicians Care, or (iv) when
required by applicable law.
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8.3 COMPUTER PROGRAMS. Physicians Care covenants and agrees that any and
all computer programs and computer software developed or utilized by Manager in
order to fulfill Manager's responsibilities specified herein shall remain the
property of Manager, or shall be used by Manager pursuant to appropriate
authorization, and that Physicians Care shall not use such programs and software
for any purpose other than the activities of Physicians Care without the express
written consent of Manager; provided, however, that if Physicians Care funds the
development cost of any such program, whether in whole or in part, then such
program shall be the property of Physicians Care and Manager shall have a
license to use such program, which license shall automatically terminate upon
termination of this Agreement for any reason.
8.4 PROPRIETARY MATERIAL.
8.4.1 Physicians Care acknowledges that Manager, in providing
services under this Agreement, will by necessity divulge and provide to
Physicians Care confidential proprietary plans, programs, formula, methods
and other products and information (collectively, the "Proprietary Material")
relating to the business, services and activities of Manager in managing the
business and operations of Physicians Care including Proprietary Material
developed in the course of providing services hereunder. Physicians Care
agrees that, during the term of this Agreement and thereafter, Physicians
Care shall take reasonable steps to maintain the confidentiality of such
Proprietary Material and agrees not to disclose such Proprietary Material to
anyone other than Manager or other than is reasonably necessary in the
furtherance of Physicians Care's business and operations. This provision
shall not apply to any information which is now in, or subsequently enters
the public domain, provided that Physicians Care has not, in violation of
this provision, disclosed or caused to be disclosed such information so as to
make it enter the public domain. Proprietary Material shall be and remain the
property of Manager.
Upon termination of this Agreement all proprietary information shall be
destroyed by Physicians Care or returned to Manager whenever Manager so
requests in writing.
8.5 AUDIT OF RECORDS. Manager shall allow auditors designated by
Physicians Care at Physicians Care's expense to audit all of Manager's books
and records relating to Manager's expenses under this Agreement and to the
fees paid to Manager under this Agreement to verify the accuracy of the
aggregate amount of fees paid to Manager pursuant to Article VII.
IX. TERM OF AGREEMENT, TERMINATION
9.1 TERM. The initial term of this Agreement shall commence on the first
closing of the Offering of Shares of Physicians Care's Common Stock pursuant to
a certain SB-2 registration ("Effective Date") and shall continue for a period
of ten (10) years (the "Initial Term") unless sooner terminated as provided
herein. The Agreement shall thereafter be
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extended upon the same terms and conditions for successive three (3) year
terms ("Renewal Term"), unless terminated as provided herein. The word "term"
used in this Agreement without any modifier shall mean the Initial Term and
any Renewal Terms. Notwithstanding the foregoing, the Management Fee shall be
reevaluated for each calendar year in each Renewal Term pursuant to Section
7.1.
9.2 TERMINATION.
9.2.1 TERMINATION DURING RENEWAL TERM. This Agreement may be
terminated by either party by delivering one (1) year's prior written notice
of such termination to the other party.
9.2.2 TERMINATION UPON MUTUAL CONSENT. This Agreement may be
terminated at any time upon mutual consent of the parties.
9.2.3 BANKRUPTCY TERMINATION. Either party may terminate this
agreement immediately upon the bankruptcy of the other party. As used in this
Section 9.2.3, bankruptcy of a party hereto shall mean the filing of a
petition commencing a voluntary case against it under the Bankruptcy Code; a
general assignment by it for the benefit of creditors; its insolvency, its
inability to pay its debts as they become due; the filing by it of any
petition or answer in any proceeding seeking for itself or consenting to, any
insolvency, receivership, or similar relief under any law or regulation.
9.2.4 TERMINATION FOR BREACH OR DEFAULT. If either party fails
substantially to perform any of its material obligations hereunder (the
"Defaulting Party"), the other party (the "Non-defaulting Party") shall have
the right to give the Defaulting Party a notice of default ("Notice of
Default"). The Notice of Default shall set forth the nature of the obligation
that the Defaulting Party has not performed. If, within the ninety (90) day
period following the giving of the Notice of Default, the Defaulting Party in
good faith commences to perform such obligation and cure such default and,
thereafter, prosecutes to completion with diligence and continuity the curing
thereof without material adverse affect on the financial performance or
operations of Physicians Care, it shall be deemed that the default shall not
have occurred and the Agreement shall remain in effect. If within such ninety
(90) day period the Defaulting Party does not commence in good faith the
curing of such default or does not thereafter prosecute to completion with
diligence and continuity the curing hereof, the Non-defaulting Party shall
have the right to terminate this Agreement at the end of that ninety (90) day
period. The right to terminate this Agreement shall be in addition to any
other remedy available to the
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Non-defaulting Party, on account of any such breach or default. The waiver by
either party of a breach or violation of any provision of this Agreement
shall not operate as or be construed to be a waiver of any subsequent breach
thereof.
9.2.5 TERMINATION FOR SUSPENSION OR REVOCATION OF LICENSED PARTY.
Manager shall have the right to terminate this Agreement upon written notice
to Physicians Care if any of Physicians Care's Certificates of Authority to
operate Physicians Care are suspended or revoked or not renewed, except that
in the event that the loss of a Certificate is due to the actions of Manager,
Manager with the full cooperation of Physicians Care shall assume
responsibility for remedying the event which gave rise to the suspension,
revocation, or nonrenewal to ensure that Physicians Care maintains the
Certificates of Authority contemplated hereunder.
9.2.6 TERMINATION UPON FAILURE TO AGREE ON PERCENTAGE OF PREMIUM
PAYMENT OR BUDGET. This Agreement may be terminated by either party upon
failure to agree on the percentage of premium payment pursuant to Section 7.1
by delivering one year's prior written notice of such termination. The
payment rate to Manager shall be the rate then in effect upon failure to
agree on the percentage of premium payment.
9.5 COOPERATION FOLLOWING TERMINATION. Beginning on the date of receipt
of notice of termination for any reason by either party to this Agreement,
Manager shall upon written request of Physicians Care, continue to provide
services, equipment and supplies to Physicians Care in accordance with this
Agreement for a reasonable period of time, sufficient to enable Physicians
Care to engage another manager. During such period Manager shall be entitled
to payment in accordance with this Agreement.
X. INDEMNIFICATION
10.1 INDEMNIFICATION OF MANAGER. Physicians Care shall indemnify and hold
harmless Manager from and against any and all damages, liabilities, actions,
suits, proceedings, claims, demands, losses, costs and expenses (including
reasonable attorneys' fees) that shall or may arise out of or in connection with
certain acts or omissions by Physicians Care to the extent not covered by
insurance.
10.2 INDEMNIFICATION OF PHYSICIANS CARE. Manager shall indemnify and hold
harmless Physicians Care from and against any and all damages, liabilities,
actions, suits, proceedings, claims, demands, losses, costs and expenses
(including reasonable attorneys' fees) that shall or may arise out of or in
connection with certain acts or omissions by Manager except where Manager
carries out in good faith the directives or policies of Physicians Care's Board
of Directors without negligence or willful misconduct, to the extent not covered
by insurance.
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XI. GENERAL PROVISIONS
11.1 ASSIGNMENT AND SUBCONTRACTING. This Agreement shall be binding upon
and inure to the benefit of each of the parties' respective successors and
assigns, provided that such successor and/or assign is capable of fulfilling and
assumes the duties set forth in this Agreement, and the parties hereto remain
primarily liable for performance hereunder. Manager shall be permitted, in its
sole discretion, to fulfill or perform any of its obligations under this
Agreement by or through contracts or subcontracts with third parties therefore;
provided, however, that Manager shall remain fully liable and responsible for
the performance of its duties and obligations under this Agreement. Except as
set forth in this Section 10.1 neither party shall in any manner inconsistent
with this Agreement, assign, subcontract or otherwise delegate its rights and
responsibilities under this Agreement unless the other party shall so consent by
prior written consent, which consent shall not be unreasonably withheld.
11.2 NONASSUMPTION OF LIABILITIES. Manager shall not by entering into and
performing this Agreement, be or become liable for any of the existing or future
obligations, liabilities or debts of Physicians Care, and Physicians Care shall
not assume or become liable for any of the existing or future obligations,
liabilities or debts of Manager.
11.3 IMPOSSIBILITY OF PERFORMANCE. Neither Manager nor Physicians Care
shall be deemed to be in default of this Agreement if prevented from performing
any obligation hereunder for any reasons beyond its control, including without
limitation governmental laws and regulations, acts of God or the public, flood
or storm or strikes. In such case, the parties shall negotiate in good faith
with the goal or intent of preserving this Agreement and the respective rights
and obligations of the parties.
11.4 INTERPRETATION. The validity, enforceability and interpretation of
any provision of this Agreement determined and governed by the laws of the State
of Connecticut. The invalidity or enforceability of any terms or provisions
hereof shall not unless, otherwise specified herein, affect the validity or
enforceability of any other term or provision of this Agreement unless the term
or provision is material and its invalidity or unenforceability results in a
substantial economic detriment to Physicians Care or Manager.
11.5 INDEPENDENT CONTRACTORS. Nothing in this Agreement shall affect the
separate identity of Physicians Care and Manager. Other than as provided in this
Agreement or other written agreement, it is not the intention of the parties
hereto to create a partnership or agency relationship. Nothing contained in this
Agreement is intended to cause either party to be the partner or agent of the
other or as limiting in any manner the parties in the conduct of their
respective businesses, ventures or activities, except as may be permitted
under this Agreement.
11.6 ENTIRE AGREEMENT, AMENDMENT. This Agreement, including its
Attachments and riders, contains all the terms and conditions agreed upon by
the parties hereto, and constitutes the entire understanding of the parties.
It supersedes all other agreements of the parties, oral or otherwise,
regarding the subject matter. This Agreement may not be amended or modified
in any material respect except by written instruction duly executed by the
parties hereto.
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11.7 NOTICES. Any notice request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by registered or
certified mail, postage prepaid, return receipt requested as follows:
If to Manager:
MedServ of Connecticut, Inc.
1520 Highland Avenue
Cheshire, Connecticut 06410
Attn: President
If to Physicians Care:
Physicians Care For Connecticut, Inc.
1520 Highland Avenue
Cheshire, Connecticut 06410
Attn: Chairperson of the Board
or to such other address as addressee may have specified in a notice duly
given to the sender in the manner provided herein, Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to
have been given as of the date so delivered or mailed.
11.8 HEADING. The headings contained herein are for convenience of
reference only and are not intended to define, limit, or describe the scope or
intent of any provision of this Agreement.
11.9 WAIVER. The waiver by either party of any of the terms or provisions
of this Agreement shall not be deemed to constitute a waiver of any of its other
terms or provisions. No waiver of the provisions of this Agreement shall be
deemed to constitute a continuing waiver thereof unless otherwise expressly
provided herein.
11.10 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, all of which together shall constitute one and the same
instrument.
11.11 AUTHORITY TO EXECUTE AGREEMENT. The individual executing this
Agreement on behalf of each party is duly empowered to execute the Agreement and
bind said party to the terms hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
MEDSERV OF CONNECTICUT, INC.
By:________________________________
Its:_______________________________
Date:
PHYSICIANS CARE FOR CONNECTICUT, INC.
By:________________________________
Its:_______________________________
Date:
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IPA AGREEMENT
THIS AGREEMENT, effective as of , is by and between MedServ
of Connecticut, Inc., a Connecticut corporation having a principal place of
business at 1520 Highland Avenue, Cheshire, Connecticut ("MedServ") and
MedServ IPA, Inc., a Connecticut corporation, having its principal place of
business at 1520 Highland Avenue, Cheshire, Connecticut (the "IPA").
WITNESSETH THAT
WHEREAS, MedServ is obligated, on behalf of Physicians Care for Connecticut,
Inc. ("Physicians Care") to provide a network of qualified physicians who will
provide or arrange provide medical and surgical services to Physicians Care's
Enrollees, as hereinafter defined; and
WHEREAS, the IPA operates a network of physicians in the State of
Connecticut and desires to make such network available to MedServ to provide
medical and surgical services to Physicians Care Enrollees; and
WHEREAS, IPA and MedServ desire and intend to secure a mutually productive
relationship from the operation of such network;
NOW, THEREFORE, MedServ and the IPA agree as follows:
1. DEFINITIONS. For the purposes of this Agreement, in the event that any of
the definitions contained or referenced in this Section 1 shall conflict with
the definitions of the same terms set forth in Physicians Care's Subscriber
Agreement, as amended from time to time, the definitions provided in the
Subscriber Agreement shall prevail.
1.1. "Authorized Care" means those Covered Services which have been
authorized for an Enrollee by the Enrollee's Primary Care Physician, or as
required under the applicable Subscriber Agreement.
1.2. "Care Manager" means a person licensed to practice medicine by the
applicable state licensing board who (a) (i) is board eligible or board
certified in internal medicine, family medicine, general practitioner, or
pediatrics, or (ii) meets such other standards as determined by MedServ or
Physicians Care from time to time, and (b) devotes significant practice time to
providing primary care services or managing the delivery of other medical
services with a capability to make preliminary diagnoses or to provide treatment
of medical and healthcare needs, without limitation by problem origin, organ
system or gender, to arrange for delivery of all necessary care and to satisfy
other requirements as established in policy recording relating to qualifications
of Care Managers. Psychiatrists may serve as a Care Manager for mental health
benefits.
1.3. "Covered Services" means those Medically Necessary healthcare services
and supplies which an Enrollee is entitled to receive under a Physicians Care
health benefit plan and which are described and defined in the Enrollee's
Subscriber Agreement.
1.4. "Dependent" shall have the meaning assigned to it in the Enrollee's
Subscriber Agreement.
1.5. "Emergency Services" means those healthcare services provided to an
Enrollee in the event of the sudden onset of an illness or injury requiring
immediate medical or surgical care to prevent serious impairment of health, or
where taking the time to call his or her Care Manager might place the Enrollee's
life in danger. Heart attacks, strokes, poisoning, loss of consciousness, and
convulsions are examples of emergencies.
1.6. "Enrollee" means a person entitled to receive Covered Services under
the terms of an applicable Subscriber Agreement. For purposes of this Agreement,
an Enrollee includes any person for whom Physicians Care or its designee
provides, arranges, and/or finances managed healthcare or administrative
services. 1.7. "Enrollee Co-payment" means the amount that may be charged by
Physicians to an Enrollee
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at the time of providing Covered Services to the Enrollee as provided in the
Enrollee's Subscriber Agreement.
1.8. "Fiscal Year" means the fiscal year of Physicians Care, commencing on
each January 1st and ending on each December 31st.
1.9. "IPA Physician" means a physician who is a member in good standing of
the IPA.
1.10. "Medically Necessary" means medical treatment required by an Enrollee
as determined in accordance with accepted medical and surgical practices and
standards prevailing at the time of treatment and in conformity with the
professional and technical standards adopted by the Quality Care Committee.
1.11. "Non-Covered Services" means healthcare services which are not Covered
Services.
1.12. "Physician" means any person duly licensed under applicable laws and
regulations to practice medicine.
1.13. "Physicians Care Administrative Manual" or "Manual" means the
documents setting forth procedures for administration of Physicians Care health
benefit plans and which are incorporated by reference herein. The Manual
contains claims submission, medical management and discharge planning
procedures, recredentialing criteria, Enrollee grievance and appeal procedures,
and other information. MedServ reserves the right, at its sole discretion, to
modify the Manual from time to time. If any provision of the Manual is
inconsistent with the terms of the Subscriber Agreement, the terms of the
Subscriber Agreement shall prevail. The IPA hereby acknowledges receiving a copy
of the Manual.
1.14. "Service Area" means the State of Connecticut, or such other areas or
locales in which Physicians Care may be licensed to do business as a Health
Maintenance Organization.
1.15. "Subscriber" means the person who signs the application for Membership
with Physicians Care and in whose name the subscription premium or service fee
is paid. A Subscriber signs for himself or herself and any Dependents.
1.16. "Subscriber Agreement" means the applicable contract between an
individual, a family or an employer, trust or other entity on behalf of
employees, retirees, affiliated persons, and Dependents, with Physicians Care or
any of its affiliates, including all amendments thereto, under which the
Subscriber, designated persons and their Dependents are entitled to receive
Covered Services.
2. NETWORK DEVELOPMENT. IPA agrees, on an exclusive basis on behalf of
Physicians Care and subject to Section 18.2(b), to develop a network of
qualified Physicians in each county of the Service Area as provided in Exhibit A
covering such medical specialties and having such geographic distribution as
required to serve the needs of Enrollees. Each Physician in the Network shall be
permitted to participate in Physicians Care only after satisfaction of all
credentialing requirements as established by Physicians Care. IPA agrees to
provide to MedServ on a monthly basis a schedule of all IPA Physicians,
specifically identifying any additions or deletions.
3. PROVISION OF COVERED SERVICES. Subject to the provisions of this
Agreement, the IPA agrees to establish a network of qualified Physicians in the
Service Area covering all medical specialties and shall cause IPA Physicians to
provide Covered Services to Physician Care Enrollees as follows:
(a) subject to reasonable policies, procedures, and payment standards
developed by MedServ, (i) to provide Covered Services within the scope of an
IPA Physician's expertise and to the extent credentialed to provide such
services and (ii) to arrange to provide and to authorize, where appropriate,
the provision of Covered Services to Enrollees by other providers;
(b) where medically appropriate and practicable, to authorize, manage,
and review services provided outside the Service Area which are provided to
Enrollees;
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(c) to participate in the medical management and quality assurance
programs developed by MedServ to administer and deliver Covered Services to
Enrollees; and
(d) to provide or arrange for the provision of Covered Services without
discriminating among Enrollees, or between Enrollees and other patients on
the basis of race, color, age, religion, gender, national origin, sexual
preference, or HMO Membership, and to provide services to its patients with
the highest regard for personal dignity.
4. UTILIZATION MANAGEMENT AND QUALITY MANAGEMENT PROGRAMS. The parties agree
to develop mutually agreeable Utilization Management and Quality Management
Programs which the IPA shall adopt and implement in connection with services
rendered by IPA Physicians. The IPA shall periodically make recommendations to
MedServ concerning the types of Utilization Management and Quality Management
Programs which the IPA believes are desirable.
5. COMPENSATION TO IPA PHYSICIANS FOR MEDICAL SERVICES. Except for Enrollee
Co-payments or any other charges specifically permitted by this Agreement or the
applicable Subscriber Agreement including, without limitation, missed
appointment charges and charges to Enrollees for Non-Covered Services, the IPA
agrees that it will cause IPA Physicians to accept the compensation paid by
Physicians Care as payment in full and to look solely to Physicians Care for
compensation for Covered Services provided to Enrollees whenever Physicians Care
is legally obligated to pay for Covered Services. Except as provided herein, the
IPA shall not assert, and shall cause IPA Physicians not to assert, any claim or
demand on Enrollees or Subscribers, for compensation for Covered Services
provided to Enrollees hereunder whenever Physicians Care is legally obligated to
pay for Covered Services. MedServ will use its best efforts to give the IPA
notice of material defaults in payment of claims or administrative fees by
health benefit plan sponsors other than Physicians Care (e.g., self-funded
employers) that may have adverse consequences on the IPA. This provision shall
survive the termination or expiration of this Agreement with respect to services
provided prior to the effective date of such termination or expiration.
The amount due to IPA Physicians for services rendered shall be the fee
schedule, case rate or capitation payment amounts customarily paid by Physicians
Care and in effect from time to time net of any co-payment, coinsurance or
deductibles; provided, however, that if Physicians Care has a risk contract (the
"Risk Contract") which is applicable to such IPA Participating Physicians, then
the financial terms of such Risk Contract shall control.
6. IPA PHYSICIAN CREDENTIALING AND QUALIFICATIONS. The IPA shall be
responsible for assuring that its IPA Physicians meet the following
qualifications:
(a) LICENSURE. All Covered Services (other than Emergency Services)
provided to Enrollees under this Agreement will be provided by IPA
Physicians acting within the scope of their licenses, certifications or
expertise and as credentialed. The IPA will ensure that all IPA Physicians
meet continuing education and other similar requirements established by the
professional organizations overseeing licensure or certification in their
respective fields. The IPA will cooperate with MedServ to establish and
maintain an auditable system to ensure that the requirements of licensure
are met in a timely manner by all IPA Physicians.
(b) CREDENTIALING. The IPA shall credential all IPA Physicians pursuant
to Physicians Care policies and in accordance with all NCQA standards and
guidelines. IPA shall maintain a full and complete credentialing file for
each IPA Physician and shall provide MedServ and Physicians Care with access
to or copies of such file on its reasonable request.
(c) PRIVILEGES. The IPA shall ensure that each IPA Physician providing
inpatient services under this Agreement has taken or will take all steps
necessary to obtain and maintain hospital privileges at a hospital and or
such other healthcare facilities which have an effective participation
agreement with Physicians Care.
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(d) CENSURE OR SUSPENSION. The IPA shall immediately notify MedServ in
the event that any IPA Physician is disciplined by the applicable state
licensing agency charged with licensing physicians or any healthcare
facility, is censured by or expelled from any county medical society, or has
his or her privileges at any healthcare facility suspended, revoked,
restricted, made probationary, or otherwise diminished in any way, including
resignation or non-renewal. The IPA shall also immediately notify MedServ in
the event that any IPA Physician's participation with the IPA is terminated
in any way.
(e) PEER GROUP MONITORING. In addition to ensuring that all IPA
Physicians comply with the above requirements evidencing licensure, the IPA
shall, with the assistance of MedServ, develop peer group monitoring systems
to ensure that all IPA Physicians function in a competent and professional
manner when providing Covered Services and comply with professionally
recognized quality of care standards.
The IPA shall also maintain all licenses, permits and registrations which
may be required by law in order for the IPA to provide services under this
Agreement.
7. IPA COMPENSATION FOR SERVICES. The IPA shall be compensated pursuant to
Exhibit B for administrative services provided pursuant to this Agreement.
8. ENROLLEE SELECTION OF CARE MANAGER. If required pursuant to Physicians
Care's Subscriber Agreements, Physicians Care may require each Enrollee to
select a Care Manager to be primarily responsible for the coordination of the
Enrollee's overall healthcare as his or her "Care Manager," and to allow
reasonable changes to such selection. Subject to the right of an IPA Physician
to close his/her panel to new patients upon reasonable notice, each Enrollee may
select the Care Manager of said Enrollee's choice.
9. NOTIFICATION OF CHANGES. The IPA agrees to provide MedServ with
reasonable notice of any material change to be made in the structure or
operation of the IPA.
10. INSURANCE. The IPA shall have and maintain policies of professional
liability insurance in amounts and on terms reasonably satisfactory to MedServ,
and the IPA shall have and maintainadequate casualty insurance on its real and
personal property. Currently, the IPA maintains the following insurance
coverages:
<TABLE>
<CAPTION>
COVERAGE PER OCCURRENCE LIMIT AGGREGATE LIMIT
- ------------------------------------------------------- -------------------- ---------------
<S> <C> <C>
Directors' and Officers' Liability..................... $ 1,000,000 N/A
General Liability
Professional Liability................................. $ 1,000,000 $ 1,000,000
Excess Professional Liability.......................... $ 1,000,000 $ 1,000,000
</TABLE>
To the extent available at commercially reasonable rates, IPA shall cause
MedServ to be a named insured under any such policy. The IPA shall notify
MedServ of any material changes in this coverage and shall provide MedServ, upon
request, with evidence of such coverage. In the event any policy is a "claims
made" policy, IPA agrees to purchase an appropriate "tail" policy upon
termination of this Agreement or any such policy.
11. FINANCIAL REPORTING. The IPA shall have annual financial statements
which accurately reflect the financial condition of the IPA prepared and
delivered to MedServ within 120 days after the end of each of the IPA's fiscal
years. Upon request, MedServ shall permit a reasonable extension of the
deadline. The annual financial statements shall be prepared in accordance with
generally accepted accounting principles and shall be audited or reviewed by a
firm of certified public accountants reasonably acceptable to MedServ. The IPA's
annual financial statements shall include at least the following elements:
(i) Balance Sheet;
(ii) Income Statement;
(iii) Statement of Changes in Cash.
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12. INSOLVENCY.
(a) PAYMENTS OR DISTRIBUTIONS WHILE INSOLVENT. With the consent of MedServ,
which consent shall not be unreasonably withheld, the IPA will not make any form
of payment or distribution to IPA Physicians if the IPA is at that time not
generally meeting its debts as they come due, or if making such payment or
distribution would render the IPA unable generally to meet its debts as they
come due or render it unable to meet its obligations under this Agreement, or
would cause the IPA to have a negative net worth.
(b) PHYSICIANS CARE INSOLVENCY. Notwithstanding anything to the contrary
contained herein, in the event that Physicians Care becomes unable generally to
meet its debts as they come due or is insolvent as determined by the Insurance
Commissioner, the IPA agrees that it shall cause IPA Physicians to continue to
provide or to arrange for the provision of Covered Services to Enrollees in
accordance with the terms of this Agreement for the period for which premiums
have been paid to Physicians Care by or on behalf of Enrollees.
13. OTHER PAYMENTS.
13.1 ENROLLEE PAYMENTS. IPA Physicians may charge to Enrollees any
Enrollee Co-payments permitted by the applicable Subscriber Agreement. The IPA
Physicians may also bill Enrollees a reasonable charge for missed appointments
in accordance with the applicable Subscriber Agreement and may bill for
Non-Covered Services in accordance with the Manual.
13.2 COORDINATION OF BENEFITS AND SUBROGATION. The IPA shall cause IPA
Physicians to cooperate with coordination of benefits and subrogation policies
and procedures established by MedServ or Physicians Care. Physicians Care shall
not make any payment in excess of the amount Physicians Care would be obligated
to make as if the primary payor. If Physicians Care pays as the primary payor
and subsequently determines that another party is liable to make payments as
primary payor, the IPA Physician agrees to remit to Physicians Care any excess
payment. Physicians Care may set off against payments otherwise due the IPA
Physician the amount of such excess payment.
14. MEDSERV OBLIGATIONS AND RIGHTS.
(a) ADMINISTER PLAN. MedServ agrees that the maintenance of appropriate
administrative, marketing, and actuarial systems and the employment of qualified
personnel are essential parts of its obligations under this Agreement.
(b) ENROLLEE ORIENTATION AND EDUCATION. MedServ or Physicians Care, as
applicable, shall be responsible for advising Enrollees of their rights and
obligations under the applicable Subscriber Agreement as promptly as practicable
after they become Enrollees. IPA shall cause IPA Physicians to cooperate in
responding to Enrollee inquiries regarding their rights and obligations under
applicable Subscriber Agreements.
(c) LICENSES AND PERMITS. MedServ, on behalf of Physicians Care, shall
obtain and keep in full force and effect throughout the term hereof all
necessary licenses and permits with respect to the operation of MedServ and/or
Physicians Care and, if requested by IPA, provide copies thereof to the IPA at
MedServ's expense.
(d) MANAGEMENT INFORMATION DATA. MedServ agrees to provide the IPA with
computer hardware adequate to access directly the IPA-specific database
maintained by MedServ relating to Covered Services provided to Enrollees and to
provide direct access to said database, including enrollment data and data on
referral authorizations and referral accounts payable. MedServ also agrees to
provide the IPA with the management information reports listed in Exhibit C.
(e) ENROLLEE SATISFACTION SURVEYS. MedServ and the IPA agree to jointly
develop and the IPA shall administer and utilize a regular program of Enrollee
satisfaction surveys to analyze Enrollee perception of
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the quality of services provided by Participating Providers and to take such
reasonable steps as may be necessary to correct any deficiencies revealed by
such surveys.
15. INDEMNIFICATIONS.
15.1 INDEMNIFICATION BY MEDSERV. MedServ agrees to indemnify, defend, and
save harmless the IPA, its officers, directors and employees, from and against
any and all claims, costs, liabilities, losses and damages made against or
suffered by them, or any or all of them, arising out of or in any way connected
with the operation or administration of MedServ, except those arising out of the
conduct, acts, or omissions of the IPA, its officers, directors, employees, or
agents, or of IPA Physicians.
15.2 INDEMNIFICATION BY THE IPA. The IPA agrees to indemnify, defend, and
save harmless MedServ, its affiliates and their officers, directors and
employees, from and against any and all claims, costs, liabilities, losses, and
damages made against or suffered by them, or any or all of them, arising out of
or in any way connected with by the conduct, acts, or omissions of the IPA, its
officers, partners, directors, employees, agents, independent contractors, or
IPA Physicians.
16. CONFIDENTIALITY.
16.1 BY MEDSERV. MedServ agrees to comply with all applicable state and
federal laws respecting the confidentiality of proprietary information, data,
and other confidential or personal information concerning the medical, personal,
or business affairs of Enrollees acquired in the course of providing or
arranging for Physicians Care benefits. MedServ agrees to maintain the
confidentiality of this Agreement and all financial, operating, proprietary or
business information relating to the IPA which is not otherwise public
information and shall respect the confidentiality of any information, not
described above, specified in writing by the IPA as confidential information.
MedServ shall exercise its best efforts to prevent any of its agents, employees,
legal counsel, independent contractors or any other person involved in doing
business with or controlled by MedServ from disclosing, using or transmitting to
any other person or entity any of the above described information. Nothing
herein shall prohibit MedServ from making any use, disclosure, or transmission
of information to the extent that such use, disclosure, or transmission is
necessary and appropriate to enable MedServ to perform its obligations under
this Agreement, or is required by law or if such use, disclosure, or
transmission is made to or by Physicians Care. MedServ shall include the
substantive provisions of this paragraph in all written contracts for amounts in
excess of ten thousand dollars ($10,000) between MedServ and its subcontractors,
independent contractors, and agents. MedServ shall cause Physicians Care to
obtain from Enrollees any general consent required for the release of medical
information to IPA or IPA Physicians reasonably necessary for the administration
of each Subscriber Agreement or this Agreement.
16.2 BY THE IPA. The IPA agrees to comply with all applicable state and
federal laws respecting the confidentiality of proprietary information, data,
and other confidential or personal information concerning the medical, personal,
or business affairs of Enrollees acquired in the course of providing or
arranging for the provision of services hereunder and agrees to maintain the
confidentiality of this Agreement and all financial, operating, proprietary or
business information relating to MedServ or Physicians Care which is not
otherwise public information. The IPA shall respect the confidentiality of any
information, not described above, specified in writing by MedServ or Physicians
Care as confidential information, and shall exercise its best efforts to prevent
any of its agents, employees, legal counsel, independent contractors or any
other person involved in doing business with or controlled by the IPA from
disclosing, using or transmitting to any other person or entity any of the above
described information. Nothing herein shall prohibit the IPA from making any
use, disclosure, or transmission of information to the extent that such use,
disclosure, or transmission is necessary and appropriate to enable the IPA to
perform its obligations under this Agreement, or is required by law. The IPA
shall include the substantive provisions of this paragraph in all written
contracts for amounts in excess of ten thousand dollars ($10,000) between the
IPA and its subcontractors, independent contractors, and agents.
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IPA represents and warrants that it has obtained from each IPA Physician any
consents necessary for the release to IPA of any information relating to such
Physician's provision of healthcare services to Enrollees. IPA agrees to cause
IPA Physicians to obtain from Enrollees any special consents required by law for
the release to IPA, MedServ or Physicians Care of any medical information
reasonably necessary for the administration of each Subscriber Agreement or this
Agreement.
17. TERM AND TERMINATION.
17.1 TERM. The term of this Agreement shall begin not later than thirty
(30) days after the first closing of the offering of Common Stock of Physicians
Care and shall remain in effect for a period of ten (10) years (the "Initial
Term"), unless terminated as provided herein. Thereafter, this Agreement shall
be automatically renewed for a term of five (5) years (the "Renewal Term"),
unless terminated as provided herein. The word "Term" as used in this Agreement
without any modifier shall mean the Initial Term and the Renewal Term.
17.2 TERMINATION.
(a) FOR CAUSE TERMINATION. This Agreement may be terminated at any time (i)
upon one hundred and eighty (180) days prior written notice, for breach hereof,
provided that no breach shall be deemed to have occurred if the breaching party
has cured said breach prior to the expiration of the notice period; or (ii) by
MedServ if the IPA executes a Competitor Contract and Physicians Care determines
in its reasonable judgment that the execution of such contracts is contrary to
the best interests of Physicians Care.
(b) TERMINATION OF EXCLUSIVE STATUS. The exclusive status granted to IPA
pursuant to Section 2 hereof may be terminated at any time with respect to all
or any portion of the Service Area in the event MedServ or the Board of
Directors of Physicians Care determine in their reasonable judgment that the
number of IPA Physicians is not sufficient to service the needs of Enrollees, in
which case Physicians Care or MedServ may contract directly with Physicians.
(c) TERMINATION OF PARTICIPATION OF IPA PHYSICIANS.
The IPA shall ensure that no IPA Physician provides services to Enrollees
upon the occurrence of the following:
i. WITH CAUSE TERMINATION OF PARTICIPATION. If an IPA Physician
violates or fails to comply with any of the material requirements of this
Agreement, the IPA agrees to terminate the participation of the IPA
Physician in Physicians Care upon thirty (30) days prior written notice as
requested by MedServ or Physicians Care. If the breach is cured during such
thirty (30) day period, then no breach shall be deemed to have occurred and
this Agreement shall remain in effect. If the breach is not cured during
such thirty (30) day period, then such IPA Physician shall no longer provide
services to Physicians Care Enrollees hereunder.
ii. IMMEDIATE TERMINATION OF PARTICIPATION. Notwithstanding any other
provision of this Agreement to the contrary, the IPA shall, upon its own
initiative or MedServ's request, immediately terminate an IPA Physician's
provision of services to Enrollees hereunder in the event that the IPA
Physician:
- shall have his or her license to practice medicine revoked or subject to
sanction;
- is subject to the loss, suspension, or reduction of medical staff
privileges at a hospital or federal or state controlled substance
registrations; or
- undertakes any activity which results or may be reasonably considered to
place in jeopardy the life, health, or safety of patients, whether acting
pursuant to this Agreement or otherwise.
18.3 EFFECTS OF NOTICE OF TERMINATION.
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(a) MedServ and the IPA will work together in good faith to plan
cooperatively the manner in which the IPA will be phased out as Physicians
Care's provider network, including, but not limited to, the procedure and timing
of notice to IPA Physicians that this Agreement has been terminated including a
process to enable IPA Physicians to execute a participation agreement directly
with Physicians Care.
(b) Upon termination, the IPA shall turn over to MedServ all tangible
personal property, if any, belonging to MedServ and shall further make available
to MedServ, at MedServ's expense, such information and copies of records as
MedServ may reasonably request concerning Enrollees. Original medical records of
Enrollees shall remain the property of IPA Physicians. MedServ shall turn over
to the IPA all tangible personal property, if any, belonging to the IPA.
19. DISPUTE RESOLUTION. MedServ and the IPA agree that the creation of a
system for resolving disputes arising from performance under or interpretation
of this Agreement is essential to the continuation of their relationship. Both
parties agree to use good faith efforts to resolve such disagreements in the
context of the following system:
(a) INFORMAL DISPUTE RESOLUTION. The parties agree that a
representative of the IPA will meet with a representative of MedServ to seek
to resolve the issue or dispute. If an issue or dispute is not resolved
within 30 days after the commencement of such a meeting, any party to the
dispute may request the appointment of a mediator to assist the parties to
resolve the issue.
(b) MEDIATION. The parties agree to complete the selection of a
mediator within 10 days following the receipt of the request for mediation
by a party. The parties agree to cooperate in good faith in the mediator's
efforts to assist the parties to resolve the issue. The parties agree to
split the costs of mediation services equally between the two sides of the
dispute. If the issue is not resolved within 45 days of the commencement of
mediation, any party to the dispute may request arbitration.
(c) ARBITRATION. A party requesting arbitration will do so in writing
addressed to the other party. The parties agree to complete the selection of
the arbitrator(s) within 10 days following receipt of the request by a
party. If the parties fail to complete selection of the arbitrator(s) within
the above time limits, the party requesting arbitration may request the
American Arbitration Association to appoint an arbitrator. Immediately
following the selection of an arbitrator, the parties will meet with the
mediator to frame the issues to be placed before the arbitrator. The parties
agree to be guided by the mediator in the process of framing the issues. The
parties agree that arbitration proceedings will be commenced within 45 days
of selection of the arbitrator(s) and concluded within 90 days of selection
of the arbitrator(s). Unless otherwise agreed by the parties in writing, the
arbitration hearings shall not last more than one day, with each party
receiving equal time to present its case before the arbitrator. The
arbitrator shall render a decision within 10 days after conclusion of the
hearings. The decision of the arbitrator(s) shall be final and conclusive of
the issue in dispute. The cost of the arbitrator's services will be
allocated between the two sides of the dispute by the arbitrator(s). An
arbitrator shall not be authorized to award punitive damages to any of the
parties. All arbitration proceedings shall be conducted in the State of
Connecticut.
MISCELLANEOUS
20. IPA'S COMPLIANCE WITH LAW. The IPA agrees to comply with all federal,
state, and municipal laws, statutes, ordinances, orders, and regulations
applicable to the conduct of its business and with professionally recognized
quality of care standards.
21. MEDSERV'S COMPLIANCE WITH LAW. MedServ shall operate itself and shall
manager and operate Physicians Care in accordance with all laws, rules and
regulations applicable thereto.
22. RELATIONSHIP OF PARTIES. Each party is and shall continue to be an
independent entity hereunder. Neither party is the agent or representative of
the other, nor shall either party have any express or implied
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right or authority to assume or create any obligation on behalf of or in the
name of the other, unless specifically authorized for the purpose.
23. FORCE MAJEURE. Each party will make a good faith effort to meet its
obligations under this Agreement in the case of an event beyond its control.
These events include, but are not limited to, war, riot, civil insurrection,
epidemic, public emergency, and natural disaster. Other causes include the
partial or complete destruction of MedServ or IPA facilities. For the purposes
of this Section 23, an event is not within the control of either MedServ or the
IPA if neither one can exercise influence or control over its occurrence.
24. GOVERNMENTAL ACTION. Both parties recognize the existence or potential
existence of legislation or administrative rules and regulations or actions
which may affect or impair the delivery of the services described herein by the
IPA and/or IPA Physicians. The obligations of the IPA, the IPA Physicians and
MedServ pursuant to the Agreement shall be subject to such legislation, rules,
regulations and actions.
25. RIGHTS OF ENROLLEES. The rights and benefits of Enrollees shall arise
solely from the Subscriber Agreement. No rights or causes of action shall accrue
to any Enrollee from the terms of this Agreement. The parties agree that no
Enrollee is a third-party beneficiary hereof.
26. ASSIGNMENT. This Agreement and the respective rights and obligations of
the parties hereto may not be assigned or transferred in any manner without the
prior express written consent of both parties, and, in the absence of such
consent, any purported assignment shall be wholly void; provided, however, that
either party may fulfill or perform any of obligations under this Agreement by
or through contracts or subcontracts with third parties as long as the party to
this Agreement remains primarily liable for performance hereunder.
27. NOTICES. Any notice required under the terms of this Agreement shall be
in writing and shall be sent by overnight mail addressed to each party at the
address set forth below the signature of its officer affixed to the Agreement,
or transmitted by facsimile to the officer who signed this Agreement on behalf
of the respective parties. Any such notice shall be effective upon receipt.
28. INTEGRATION CLAUSE. This Agreement constitutes the entire contract
between the parties hereto and supersedes any prior agreements between the IPA
and MedServ with respect to the arrangement of the provision of Covered Services
to Enrollees after the date of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on this day of , 1997 in two or more copies for themselves and their
successors by their duly authorized officers.
MEDSERV FOR CONNECTICUT, INC.
BY: _________________________________
MEDSERV IPA, INC.
BY: _________________________________
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ESCROW AGREEMENT
This ESCROW AGREEMENT is made as of this ___ day of ______________, 1997
by and among Physicians Care for Connecticut, Inc., a Connecticut corporation
with a principal place of business at 1520 Highland Avenue, Cheshire, CT
06410 (the "Company"), State Street Bank and Trust Company, a national bank
organized under the laws of the United States of America acting by and
through its Corporate Trust Department with a principal place of business at
777 Main Street, Hartford, Connecticut 06115, in its capacity as escrow agent
only (the "Escrow Agent") and those persons executing counterpart signature
pages hereto ("Subscribers").
W I T N E S S E T H:
WHEREAS, the Company and the Subscribers desire to create an escrow
account for the reasons set forth on Exhibit A attached hereto; and
WHEREAS, the Company and the Subscribers agree to appoint the
Escrow Agent as the escrow agent for such account, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the mutual promises and obligations
set forth below, and for other valuable consideration the sufficiency and
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. APPOINTMENT OF ESCROW AGENT AND CREATION OF ACCOUNT.
Contemporaneously, with the execution of this Agreement, the Company has
deposited with the Escrow Agent those assets listed on Exhibit B attached
hereto. The Company and the Subscribers hereby appoint the Escrow Agent as
escrow agent hereunder and direct it to hold those assets listed on Exhibit B
attached hereto. The Company and the Subscribers hereby appoint the Escrow
Agent as escrow agent hereunder and direct it to hold those assets described
in said Exhibit B, together with any additional assets which may be deposited
with the Escrow Agent from time to time to be held pursuant to this Agreement
and all income earned from investment of the assets described in Exhibit B
and any additions thereto (collectively the "Escrow Assets"), in a separate
account in the name of "Physicians Care" (the "Escrow Account"). The Escrow
Account shall be invested, administered and distributed in accordance with
the terms set forth below.
2. INVESTMENT OF ESCROW ASSETS. The Escrow Assets shall be invested in
accordance with the instructions set forth in Exhibit C attached hereto. Such
instructions may be modified only by a written certificate executed by an
authorized officer of the Company and delivered to the Escrow Agent. The
Escrow Agent shall make monthly accountings of such investments, the income
received therefrom, and the then existing balance of the Escrow Account to
the Company.
3. DISTRIBUTIONS FROM ESCROW ACCOUNT. The Escrow Agent shall make
distributions from the Escrow Account in accordance with the instructions set
forth in Exhibit D attached hereto. Such instructions may be modified only by
a written certificate executed by an authorized officer of the Company and
delivered
<PAGE>
to the Escrow Agent. Notice of each disbursement from the Escrow Account
shall be provided to the Company within five (5) days of each such
disbursement. Upon the final distribution of all of the Escrow Assets, this
Agreement shall terminate and the Escrow Agent shall have no further
obligations or liabilities hereunder.
4. COMPENSATION OF ESCROW AGENT. In consideration of the services
provided by the Escrow Agent in the performance of its duties hereunder,
the Company agrees to reimburse the Escrow Agent for all costs and
expense incurred by it with respect to this Agreement, including reasonable
fees of legal counsel and other consultants, and to further compensate the
Escrow Agent in accordance with the fee arrangement described in Exhibit E
attached hereto.
5. LIMITATION OF ESCROW AGENT'S DUTIES.
(a) All parties hereto acknowledge that the duties of the Escrow Agent
hereunder are solely ministerial in nature, and have been requested for their
convenience. The Escrow Agent shall not be deemed to be the agent of
either/any party hereto, or to have any legal or beneficial interest in any
of the Escrow Assets. The parties agree that the Escrow Agent is a party to
the Escrow Agreement only and has no duties or responsibilities in connection
with any agreements related hereto. The parties agree that the Escrow Agent
shall not be liable for any act or omission taken or suffered in good faith
with respect to this Agreement unless such act or omission is the result of
the gross negligence or willful misconduct of the Escrow Agent.
(b) The Escrow Agent may consult with legal counsel and shall be fully
protected and incur no liability to any action or inaction taken in good
faith in accordance with the advice of such counsel. The Escrow Agent shall
have no responsibility for determining the genuineness or validity of any
certificate, document, notice or other instrument or item presented to or
deposited with it, and shall be fully protected in acting in accordance with
any written instruction given to it by any of the parties hereto and
reasonably believed by the Escrow Agent to have been signed by the proper
representatives of such parties.
(c) The Escrow Agent shall not be responsible for any losses relative to
the investment or liquidation of the Escrow Assets, provided such Escrow
Assets are invested and held in accordance with Section 2 above. The Escrow
Agent further shall not be responsible for assuring that the Escrow Assets
are sufficient for the disbursements contemplated under Section 3 above.
(d) The Escrow Agent shall not be required to institute legal proceedings
of any kind. The Escrow Agent shall not be required to defend any legal
proceedings which may be instituted against it with respect to this Agreement
unless requested to do so in writing by any of the parties hereto, and unless
and until it is indemnified by the requesting party to the satisfaction of
the Escrow Agent, in its sole discretion, against the cost and expense of
such defense,
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including without limitation the reasonable fees and expenses of its legal
counsel. If any conflicting demand shall be made upon the Escrow Agent, it
shall not be required to determine the same or take any action thereon and
may await settlement of the controversy by appropriate and nonappealable
legal proceedings. Upon the commencement of any action against or otherwise
involving the Escrow Agent with respect to this Agreement, or upon advice of
counsel under subsection (b) hereunder, the Escrow Agent shall be entitled to
interplead the matter of this escrow into a court of competent jurisdiction
in the State of Connecticut and, in such event, the Escrow Agent shall be
relieved of and discharged from any and all obligations and liabilities under
this Agreement. In any such action, the Escrow Agent shall be entitled to the
indemnities provided in Section 6 below.
6. INDEMNIFICATION OF ESCROW AGENT. The parties hereto jointly and
severally hold harmless and indemnify the Escrow Agent, its directors,
officers, employees and agent from and against all obligations, liabilities,
claims, suits, judgments, losses, damages, costs or expenses of any kind or
nature, including without limitation reasonable attorneys' fees, which may be
imposed on, incurred by, or asserted against the Escrow Agreement or the
Escrow Agent's duties hereunder. The foregoing indemnities shall survive the
resignation of the Escrow Agent or the termination of this Agreement. To the
extent the Escrow Agent is entitled to indemnification hereunder and such
indemnification is not timely paid, the parties agree the Escrow Agent shall
have - and hereby grant the Escrow Agent - a first lien for the payment of
such expenses upon the Escrow Assets in the Escrow Account.
7. RESIGNATION OF ESCROW AGENT. The Escrow Agent in its sole discretion
may resign at any time and be discharged of its duties by giving thirty (30)
days prior written notice to the parties hereto, and which notice shall
specify the date of such resignation. In the event the parties fail to
appoint a successor escrow agent and notify the Escrow Agent in writing of
such appointment within such thirty-day period, the Escrow Agent shall be
deemed to be solely a custodian of the Escrow Account without further duties
hereunder, and shall be entitled to petition a court of competent
jurisdiction to appoint a successor escrow agent. Upon the appointment of a
successor escrow agent by the parties hereunder or by such court, the Escrow
Agent's duties and liabilities under this Agreement shall terminate.
8. NOTICES. All demands, notices and communications hereunder shall be in
writing and shall be given prepaid, by hand-delivery, courier service or
certified or registered United States mail, return receipt requested, and
addressed to the party for whom intended, at the following addresses:
(a) If to the Company:
1520 Highland Avenue
Cheshire, CT 06410
Attn: President
Phone: (203) 699-2400
Fax: (203)
(b) If to any Subscriber: to the address set forth on said
Subscriber's counterpart signature page hereto.
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(c) If to the Escrow Agent:
State Street Bank and Trust Company
Corporate Trust Administration
777 Main Street - CT/MO/0238
Hartford, Connecticut 06115
Attn:___________________
Tel:
Fax:
9. GOVERNING LAW AND SEVERABILITY. This agreement shall be construed, and
the obligations, rights and remedies of the parties hereunder shall be
determined, in accordance with the laws of the State of Connecticut. The
invalidity or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and the Agreement shall be
construed in all respects as if such invalid or unenforceable provision was
omitted.
10. GENERAL PROVISIONS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
shall constitute one and the same instrument. This Agreement shall bind and
inure to the benefit of the parties hereto, and their respective successors
and assigns, and shall not be modified or amended except by a written
instrument executed by all parties hereto.
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PHYSICIANS CARE FOR CONNECTICUT, INC.
ESCROW AGREEMENT
COUNTERPART SIGNATURE PAGE
Reference is hereby made to that certain Escrow Agreement made as of _____
__, 1997 (the "Escrow Agreement") by and among Physicians Care for
Connecticut, Inc. ("the Company"), State Street Bank and Trust Company and
those subscribers executing this counterpart signature page to the Escrow
Agreement. Capitalized terms used as defined terms herein and not otherwise
defined shall have the meanings ascribed to such terms in the Purchase
Agreement.
The undersigned is purchasing Common Stock of the Company pursuant to a
Registration Statement on Form SB-2 of the Company (Reg. No. _______). By
execution of this Counterpart Signature Page to the Escrow Agreement, the
undersigned hereby agrees to be bound by and obtain the benefit of the rights
and restrictions of the Escrow Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Counterpart
Signature Page as of the ____ day of ___________, 1997.
SUBSCRIBER
______________________________________
Name:
AMOUNT PLACED INTO ESCROW: ____________
Notice Address:
______________________________________
Street Address
______________________________________
City State Zip Code
PHYSICIANS CARE FOR CONNECTICUT, INC.
By: ___________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, AS ESCROW AGENT ONLY
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
REASONS FOR ESCROW
The Subscribers have agreed to purchase from the Company shares of the
Company's Common Stock. A condition to the purchase and sale of said shares
is that the Company receive from Subscribers subscriptions to purchase an
aggregate of $8 million. Accordingly, monies received prior to achievement of
the $8 million threshold are to be placed into escrow to be realeased upon
and subject to actual achievement of the $8 million threshold.
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EXHIBIT B TO ESCROW AGREEMENT
ESCROW ASSETS
Monies provided from time to time by Newbury, Piret & Co., Inc. as
Subscription Agent for the Company, said monies to be in the form of checks
in varying amounts which shall be provided under cover expressly referencing
this Agreement.
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EXHIBIT C TO ESCROW AGREEMENT
INVESTMENT INSTRUCTIONS
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EXHIBIT D TO ESCROW AGREEMENT
DISBURSEMENT INSTRUCTIONS
Upon a certificate from a duly authorized officer of the Company, the
Escrow Agent will release Escrow Assets in accordance with the instructions
contained in said certificate.
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EXHIBIT E TO ESCROW AGREEMENT
FEE ARRANGEMENT
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EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Hartford, Connecticut
September 8, 1997
