<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1998
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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OPTIMUM HEALTH SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 8099 52-2042636
(STATE OR OTHER (PRIMARY INDUSTRIAL (IRS EMPLOYER
JURISDICTION OF CLASSIFICATIONCODE IDENTIFICATION NUMBER)
INCORPORATION OR NUMBER)
ORGANIZATION)
17757 U.S. NORTH
SUITE 470
CLEARWATER, FLORIDA 33764
(727) 536-9956
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MR. JASON PATCHEN
CHIEF EXECUTIVE OFFICER
17757 U.S. NORTH
SUITE 470
CLEARWATER, FLORIDA 33764
(727) 536-9956
(NAME, ADDRESS, INCLUDING ZIP CODE, TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
PLEASE SEND COPIES OF COMMUNICATIONS TO:
DAVID E. FLEMING, ESQ.
EPSTEIN BECKER & GREEN, P.C.
250 PARK AVENUE
NEW YORK, NEW YORK 10177
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Approximate date of commencement of proposed sale to the public: AS SOON AS
PRACTICABLE AFTER THE EFFECT DATE OF THIS REGISTRATION STATEMENT.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
<PAGE> 2
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 OFFER. [_]
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. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED OFFERING AGGREGATE REGISTRATION
PRICE OFFERING FEE
PER SHARE PRICE
<S> <C> <C> <C> <C>
Transferable
Subscription Rights 1,000,000 $0 $0 $0
Common Stock,
$.01 par value 1,000,000* $1.00 $1,000,000 $303.03
</TABLE>
* Estimated solely for the purpose of calculating the Registration Fee.
----------------
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.
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OPTIMUM HEALTH SERVICES, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501 OF REGULATION S-K
SB-2 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
- --------------------------- --- -------------------
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page; Cross Reference
Sheet; Outside Front Cover
Page
2
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2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front Cover Page; Table
of Contents
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Risk
Factors
4. Use of Proceeds............................. Use of Proceeds
5. Determination of Offering Price............. Outside Front Cover Page;
Plan of Distribution
6. Dilution.................................... Not Applicable
7. Selling Security Holders................... Not Applicable
8. Plan of Distribution........................ Outside Front Cover Page;
Plan of Distribution
9. Description of Securities to be
Registered.................................. The Distribution--Description
of Capital Stock; The
Offering
10. Interests of Named Experts and Counsel...... Legal Matters; Experts
11. Information with Respect to Registrant...... Selected Historical Financial
Data;--Pro Forma Financial
Data;--Management's
Discussion and Analysis of
Financial Condition and
Results of Operations;--
Business and Properties;--
Management; Certain
Relationships and Related
Transactions; Security
Ownership
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 16, 1998
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[OPTIMUM HEALTH SERVICES LOGO]
1,000,000 SHARES OF COMMON STOCK
(AND RIGHTS TO ACQUIRE UP TO 1,000,000 OF SUCH SHARES)
---------------------------
Optimum Health Services, Inc., a Delaware corporation ("Optimum" or the
"Company"), is distributing to holders of record of shares of its common stock,
$.01 par value per share (the "Common Stock"), as of the close of business on
May 13, 1998 (the "Record Date"), transferable subscription rights (the
"Rights") to purchase additional shares of Common Stock (the "Basic Subscription
Privilege") at a price of $1.00 per share (the "Subscription Price") as part of
a rights offering referred to below (the "Rights Offering"). See "The Rights
Offering." The Company shall be spun off in a taxable transaction (the
"Spin-Off") by Complete Wellness Centers, Inc., a Delaware corporation, ("CWC")
owning 75.14% of the Company, as further described below, in a distribution of
all of the shares of Common Stock owned by CWC to the shareholders of CWC (the
"Distribution") on the date of this Prospectus (the "Spin-Off Date"). Pursuant
to a Distribution Agreement dated June 25, 1998 (the "Distribution Agreement"),
CWC intends to distribute, on a one share-for-twelve shares basis to its
stockholders of record as of the Record Date, all of the outstanding Common
Stock of the Company owned by CWC. A valuation of the Company, as of April 30,
1998, was performed by American Express Tax and Business Services, Inc. The
valuation of the Company as of April 30, 1998 was determined to be
approximately $361,500 or $1.44 per share based upon the issued and outstanding
shares on the Spin-Off Date. The purchase price for the Common Stock issuable
upon exercise of Rights was determined by the Company based upon a 31% discount
from that valuation. On or before the Spin-Off Date, CWC will advance $200,000
to Optimum in return for a $200,000 senior secured note bearing interest at 12%
per annum due at the earlier of December 31, 1999 or the date Optimum is
successful in closing a financing arrangement (exclusive of the Rights
Offering). See "Notes to Consolidated Financial Statements". In return for
previous capital contributions to the Company approximating $730,000 as of May
31, 1998, CWC shall receive warrants (the "Warrants") to purchase 100,000
shares of Optimum's Common Stock at an exercise price of $1.00 per share for a
period of five years exchangeable pro rata at various prices up to a maximum of
$860,000 in the aggregate. CWC will also provide certain lease guarantees (up
to a maximum of $250,000) to Optimum and enter into a 10-year intercompany
operating agreement with Optimum the ("Intercompany Agreement"). See "The
Rights Offering". Stockholders will be entitled to four Rights for each share
of Common Stock held on the Record Date after the Spin-Off. Each Right will
entitle its holder (a "Holder") to purchase one share of Common Stock
(collectively the "Underlying Shares"). No fractional shares of Common Stock
will be sold, and fractional interests will be rounded up.
(cover continued on page 2)
---------------------------
AN INVESTMENT IN THE COMPANY'S COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE SECURITIES OFFERED HEREBY.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 16, 1998.
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(cover continued from front cover page)
Upon exercise of the Basic Subscription Privilege, a Holder will also be
entitled to purchase at the Subscription Price a pro rata portion of any
Underlying Shares that are not otherwise subscribed for pursuant to the exercise
of Basic Subscription Privileges (the "Oversubscription Privilege"). In the
event there are any unexercised Rights after the Basic Subscription Privileges
and Oversubscription Privileges have been fulfilled, then any such remaining
unexercised Rights (the "Unexercised Allotment" and, collectively, with the
Basic Subscription Privilege, Oversubscription Privilege, and the sale of shares
of Common Stock in connection therewith, the "Rights Offering") shall be offered
to members of management, directors of the Company and CWC. If available,
management and directors of both companies intend to exercise a minimum of
250,000 Rights in the Basic Subscription, Oversubscription, and Unexercised
Allotment and purchase the respective shares underlying such Rights at the
Subscription Price
The Company's Common Stock is not currently traded on any exchange. The
Company has applied to list the Rights and Underlying Shares issuable upon
exercise of the Rights on the over-the-counter OTC Bulletin Board market ("OTC")
and after the Spin-Off, the Underlying Shares shall be subject to
transferability restrictions until the expiration of the Rights Offering. Until
it is accepted for trading on the OTC, bid quotations for the Rights and Common
Stock shall be available only from the "print sheets" published by the National
Quotation Bureau. Such bid quotations reflect inter-dealer prices, without
retail mark-up, mark-down, or commission and may not necessarily represent
actual transactions. However, a market for the Rights may not develop or if it
does develop, such market may not be available throughout the Rights Offering.
In addition, there can be no assurance that after the Expiration date any
trading market will develop for the Common Stock.
THE RIGHTS WILL EXPIRE AT 5:30 p.m., Eastern Standard Time, on September
25, 1998, unless extended by the Company (such date, as it may be extended on
one or more occasions, is referred to herein as the "Expiration Date"). Funds
provided in payment of the Subscription Price will be held by American Stock
Transfer & Trust Company, as the Subscription Agent, until the Closing, which
will occur promptly following the Expiration Date. The exercise of Rights is
irrevocable once made, and no interest will be paid to Holders exercising their
Rights.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (together with any
amendments thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Rights and the
Underlying Shares. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein or therein are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, or
incorporated by reference therein, for a more complete description of the matter
involved and each such statement shall be deemed qualified in all respects by
such reference. Such additional information may be obtained from the
Commission's principal office in Washington, D.C.
Following the Spin-Off, the Company will be subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files periodic reports, proxy and information
statements and other information with the Commission. The Registration Statement
and the exhibits thereto, as well as such reports, proxy and information
statements and other information, filed by the Company can be inspected and
copied 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, New York, NY 10048
and Citicorp Center, 500 Madison Street, Suite 1400, Chicago, IL 60661. Copies
of such material can be obtained upon written request addressed to the Public
Reference Section of the Commission at 450 Fifth Street, N.W. Washington, D.C.
20549, at prescribed rates. The Commission also
5
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maintains a World Wide Web site on the Internet at www.sec.gov that contains
reports, proxy and information statements and other information filed
electronically with the Commission by registrants like the Company.
The Company will provide without charge to each person, including each
beneficial owner, to whom a copy of this Prospectus is delivered, on the written
or oral request of such person, a copy of any or all documents incorporated by
reference into this Prospectus that are not delivered herewith, except the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Requests for such copies should be directed to
the Company's principal office: Optimum Health Services, Inc. 17757 U.S. 19
North, Suite 470, Clearwater, FL 33764, Attn: David Sherwin, Tel. (727)
536-9956.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the consolidated financial
statements and related notes thereto appearing elsewhere in or incorporated by
reference into this prospectus. All references to the Company contained herein
include the operations of its subsidiaries unless the context requires
otherwise.
THE COMPANY
The Company is a development stage enterprise organized to develop,
market and administer a comprehensive healthcare benefits program which is
designed to provide members with expanded access to alternative care
practitioners and wellness programs, including SMOKENDERS(TM) and
Nutri/Systems(TM), under discounted or insured methods of payment. The Company
develops provider networks comprised of traditional medical and ancillary
providers and alternative (or complementary) care providers under independent
provider agreements. The Company combines the benefits of a traditional
physician network, an alternative therapy network, and brand name wellness
products into an integrated healthcare service product for integrated health
care insurance purchasers, government agencies, HMOs, or individuals. The
Company's objective is to become the nationally recognized leader of developing
and managing the health care benefits associated with such combined plans. As of
May 31, 1998, the Company has individual or group Provider Agreements comprising
2,991 provider locations including primary care, specialty and ancillary care,
and alternative care.
Effective March 1, 1998, the Company signed two HMO agreements. The
Company currently provides management services to the HMOs and their enrollees
including provisions of the traditional medical network, provider credentialing
and claims payment. The agreements call for the provision of expanded services
to include utilization management, quality assurance and peer review. Letters of
Intent have also been signed by these HMOs to incorporate the alternative care
product for delivery to their enrollees.
During July 1998, the Company signed its third HMO contract. Under this
agreement, the Company provides and manages its provider network for HMO members
and administers claims as a TPA (Third Party Administrator) on behalf of the HMO
for the Company's providers. This contract services the HMOs approximately
13,000 members in Central and South Florida.
These three HMO agreements are currently managed by the Company under
fee-for-service arrangements such that the Company is not at financial risk for
the medical claim portion of services provided.
The Company has developed a discounted PPO product of complementary
alternative care providers, products and services, including the Wellness
Passport card, which the Company recently introduced in the local Florida
market. In July, 1998, the Company signed its first employer group with
approximately 200 employees. The employees and their dependents have the
opportunity to purchase discounted network access to the Company's complementary
alternative care network. The Company continues to conduct presentation and
enrollment meetings with employer groups to market and sell these products.
A Florida subsidiary of the Company currently holds a Third Party
Administrator's ("TPA") license and is licensed as a Private Review Agent to
conduct utilization review. As such, the Company provides a full range of
integrated management services including network development, provider
credentialing, payor contracting, utilization review, quality management, claims
processing, product and member services and information services.
The Company's products provide the consumer the ability to obtain these
benefits in an integrated package or as a stand-alone benefit. Employers may
offer these benefits to their employees as an insured benefit or an
out-of-pocket, discounted, preferred provider product. In addition, the Company
develops disease management programs utilizing these modalities in conjunction
with conventional treatments and programs.
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The Company believes creating a system of alternative care under a
setting that is familiar to the consumer creates confidence in the services and
increases demand. The creation of these medically oriented alternative care
networks provides for convenient provider access for consumers to qualified
alternative care providers. Management feels partnering with alternative care
providers, rather then acquiring them, creates incentive for the providers to
deliver high quality, cost effective care. The Company provides the member and
provider administrative support services typically found in HMOs to ensure the
delivery of a quality product for this new health system.
The Company itself is not authorized or qualified to engage in any
activity which may be construed or be deemed to constitute the practice of
medicine but is an independent supplier of non-medical services only. The
contracted physicians and other health care practitioners are responsible for
all aspects of the practice of medicine and alternative care (subject to certain
benefit guidelines determined in conjunction with the Company and third party
payors).
Management believes that the growing popularity and acceptance of
alternative medicine, also referred to as complementary medicine, will
contribute to the Company's growth. In 1993, the New England Journal of Medicine
reported that the use of alternative medicine in 1990 amounted to approximately
$13.7 billion. In October 1996, The Wall Street Journal reported that the
alternative medical therapy market is approximately $50 billion. By integrating
alternative medicine with traditional medicine, the Company is providing an
opportunity for the consumer to choose complementary treatments under the review
of their primary care physician, which the Company believes alleviates some of
the concerns of patients and third party payors.
The Company's operating strategy is to (i) provide consumers the
opportunity to obtain as a stand- alone service or under the supervision of
their primary care physician, complementary and alternative medical treatments
in convenient locations, (ii) furnish high quality patient care efficiently
through the use of credentialing standards and standardized utilization
protocols, (iii) establish geographically complete networks, including
integrated medical centers comprised of medical physicians, chiropractors and
alternative care practitioners, in local and regional clusters for purposes of
obtaining managed care contracts, (iv) achieve operating efficiencies and
economies of scale through the implementation of management information systems,
increased purchasing power with suppliers, standardized protocols,
administrative systems and procedures, (v) negotiate contracts with HMOs and
other third party payors for the integration of an alternative care rider or PPO
product within their benefit plans to enrollees and (vi) effect a change in
Florida statutes to allow the delivery of a comprehensive, stand-alone insured
alternative care product to individual employer groups.
The Company's expansion strategy is to continue to develop the delivery
network of integrated and non-integrated groups of traditional and alternative
care practitioners in regional groups or clusters in order to facilitate the
development of a national network of (both traditional and alternative). The
Company has been, and will continue to, develop strategic alliances with weight
management and smoking cessation programs, health clubs, natural supplement
companies, corporations, government offices or other organizations to include as
added value products to the alternative care benefit programs. The Company
regularly explores new opportunities related to alternative care programs and
services and may in the future negotiate arrangements with or acquire businesses
directly related to or ancillary to the provision of alternative care services.
As of the date of this Prospectus, the Company has no understandings,
commitments or agreements with respect to any acquisitions.
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THE DISTRIBUTION
The Company.......... Optimum Health Services, Inc. will be spun-off in a
taxable transaction (the Spin- Off") by Complete Wellness Centers, Inc., a
Delaware corporation ("CWC") pursuant to the Distribution Agreement to the CWC
shareholders on the Record Date to become an independent management services
organization ("MSO"). CWC intends to transfer or cause to be transferred certain
assets and liabilities related principally to the Optimum business not currently
held by Optimum or an Optimum subsidiary, if applicable. Optimum will transfer
to CWC any assets and liabilities relating to the CWC business or the CWC
subsidiaries not currently held by CWC or a CWC subsidiary, if applicable. On
the Distribution Date, the Company will own all of the business and assets of,
and be responsible for all of the liabilities associated with, the business of
Optimum (the "Optimum Business").
The Spin-Off.......... CWC intends to distribute on a one share-for-twelve share
basis to its stockholders of record as of the Record Date, all of the
outstanding common stock, par value $.01 per share of Optimum owned by CWC (the
"Common Stock"). On or before the Spin-Off Date, CWC will advance $200,000 to
Optimum in return for a $200,000 senior secured note bearing interest at 12% per
annum due at the earlier of December 31, 1999 or the date Optimum is successful
in closing a financing (exclusive of this Rights Offering) in which the
principal and interest of the senior note shall be repayable as follows: 20% up
to and equal to $1,000,000 in financing. In return for previous capital
contributions to the Company approximating $730,000 as of May 31, 1998, CWC
shall receive Warrants to purchase 100,000 shares of Optimum's Common Stock at
an exercise price of $1.00 per share for a period of five years. Optimum shall
be granted a five year call option and CWC shall be granted a five year put
option to purchase and/or sell the 100,000 Warrants pro rata at an exercise
price equal to 25% of any equity financing in excess of $1,000,000 and 10% of
Optimum's annual earnings before interest and taxes ("EBIT") as determined by
generally accepted accounting principles ("GAAP"), up to and equal to $1,000,000
and 20% Optimum's EBIT over $1,000,000, to an aggregate exercise price for the
100,000 Warrants of $860,000. Both options are exercisable upon 30 days notice.
In addition, in the event Optimum closes a minimum of $200,000 for the Rights
Offering, CWC shall make available lease guarantees to Optimum in an amount
equal to the dollar amount raised in the Offering up to a maximum of $250,000.
For such guarantees, CWC shall receive lease guarantee fees payable annually in
the amount equal to 6% the first year, 8% the second year, and 10% the third
year of the face amount of CWC's outstanding lease guarantees on behalf of
Optimum. In the event the guarantees are ever called, CWC shall be entitled to a
confession of judgment in the face amount of the outstanding guarantees.
Additionally, CWC shall be entitled to perfect their interest as second
mortgagee in any assets which are leased using CWC's guarantees. As part of the
Spin-Off and Rights Offering, management of the Company has been granted an
immediate acceleration of their previously granted stock options which represent
approximately 15% of the issued and outstanding shares of the Company as of the
Spin-Off date, irrespective of management's exercise of their Rights. The
Spin-Off will provide the stockholders of CWC as of the Record Date with the
opportunity to participate in the benefits of both ownership of the clinical
business through CWC, and the MSO business through Optimum, but will separate
the risks of Optimum's managed care contracts under capitated payment
arrangements from CWC's businesses. See "Spin-Off."
Relationship between CWC and Optimum after the Distribution.......For purposes
of governing the ongoing relationships between CWC and Optimum after the
Distribution Date and in order to provide for an orderly transfer of the Optimum
Business to Optimum and facilitate the transition to a publicly traded company,
CWC and Optimum will enter into a Distribution Agreement, an Intercompany
Agreement, and various other agreements with respect to, among other things,
intercompany debt, tax matters, risk management and corporate and administrative
services. See "Relationship Between CWC and Optimum After the Distribution." CWC
and Optimum may be subject to certain potential conflicts of interest. See "Risk
Factors--Potential Conflicts."
The Intercompany Agreement.......... Pursuant to the "Intercompany Agreement"
between Optimum and CWC, each company agrees to 1) cooperate and coordinate with
each other with regards to certain matters; 2) CWC agrees to provide certain
corporate services to Optimum, including financing assistance, legal support,
strategic merger and acquisition assistance, as well as various wellness
products and services; and 3) Optimum agrees to provide certain corporate
services to CWC, including credentialing, management information services,
corporate compliance, managed care expertise and contracting. The compensation
to each company shall be based on
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services rendered and shall include a grant by each company on the Spin-Off Date
and each anniversary during the term of the Intercompany Agreement thereafter of
5,000 warrants ("Operating Warrants") at an exercise price equal to the market
price of each company's Common Stock at the time of the grant. However, the
first grant of 5,000 Operating Warrants of Optimum to CWC shall be equal to
$1.44 per share. The term of the Intercompany Agreement shall be ten (10) years.
Securities to Be Distributed..... 188,116 shares of Optimum Common Stock based
on 2,203,452 shares of CWC Common outstanding as of May 13, 1998 (the "Record
Date").
Distribution Ratio............ One share of Optimum Common Stock for each 12
shares of CWC Common Stock owned.
Listing and Trading Market.... There is currently no public market for Optimum
Common Stock. The Optimum Common Stock will be traded Over the Counter and, upon
compliance with certain conditions, CWC expects the Optimum Common stock to be
quoted in the OTC Bulletin Board established by the NASD. CWC expects that no
"when issued" trading market will exist prior to the time that Optimum's
Registration Statement is declared effective by the Commission. See "Risk
Factors--No Current Market for Optimum Common Stock; and --The
Distribution--Listing and Trading of Optimum Common Stock."
Record Date........... The CWC Board of Directors set the record date for the
Distribution referred to herein as May 13, 1998 (the "Distribution Record Date")
provided, however, that the Distribution remains subject to satisfaction of
certain conditions prior to the Distribution Record Date.
Distribution Date............. The date determined by the CWC Board of
Directors, to coincide with the Securities and Exchange Commission's effective
date, estimated to be August 27, 1998. On the Distribution Date, CWC will
deliver all outstanding shares of Optimum Common Stock owned by CWC to the
Distribution Agent. As soon as practicable thereafter, the Distribution Agent
will mail account statements reflecting ownership of the appropriate number of
shares of Optimum Common Stock to CWC's stockholders entitled thereto. See "The
Distribution--Manner of Effecting the Distribution."
Distribution Agent............ American Stock Transfer & Trust Company, the
transfer agent for the Company.
Certain Restated Certificate of Incorporation and Bylaw
Provisions................... The Restated Certificate of Incorporation (the
"Optimum Certificate") and the Bylaws (the "Optimum Bylaws") of Optimum are
substantially identical to, and contain no material differences from, the CWC
Restated Certificate of Incorporation and Bylaws. Certain provisions of the
Optimum Certificate and the Optimum Bylaws have the effect of delaying or making
more difficult an acquisition of control of Optimum in a transaction not
approved by its Board of Directors. These provisions have been designed to
enable Optimum, especially in its initial years, to develop its businesses and
foster its long-term growth without disruptions caused by the threat of a
takeover not deemed by its Board of Directors to be in the best interests of
Optimum. Such provisions could, however, deter an offer for Optimum Common Stock
at a substantial premium to the then current market price or hinder a potential
transaction that may be attractive to stockholders. See "Certain Information
Concerning Optimum--Purposes and Effects of Certain Provisions of the Optimum
Certificate and Bylaws." The Optimum Certificate would eliminate certain
liabilities of directors in connection with the performance of their duties. See
"Certain Information Concerning Optimum--Liability and Indemnification of
Officers and Directors--Elimination of Liability in Certain Circumstances."
Accounting Treatment........ The historical consolidated financial statements of
Optimum present its financial position, results of operations and cash flows as
if it were a separate entity for all periods presented. CWC's historical basis
in the assets and liabilities of Optimum has been carried over. See "Accounting
Treatment," and consolidated financial statements contained elsewhere herein
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THE RIGHTS OFFERING
Rights.......... Each Holder of Common Stock shall, after the Spin-Off, receive
four transferable Rights for each share of Common Stock held of record on the
Record Date. An aggregate of 1,000,000 Rights shall be distributed pursuant to
the Rights Offering. An aggregate of 1,000,000 shares of Common Stock will be
sold if all Rights are exercised. The exercise of Rights is irrevocable once
made, and no Underlying Shares will be issued until the closing following the
Expiration Date.
Basic Subscription Privilege.......... Holders are entitled to purchase at the
Subscription Price one share of Common Stock for each Right held. See "The
Rights Offering--The Rights" and "Subscription Privileges--Basic Subscription
Privilege."
Oversubscription Privilege.......... Each Holder who elects to exercise his or
her Basic Subscription Privilege may also subscribe at the Subscription Price
for Underlying Shares, if any, remaining unissued after satisfaction of all
subscriptions pursuant to the Basic Subscription Privilege. If an insufficient
number of Underlying Shares is available to satisfy fully all elections to
exercise the Oversubscription Privilege, the available Underlying Shares will be
allocated on a pro rata basis among Holders who exercise their Oversubscription
Privilege based on the respective numbers of Underlying Shares subscribed for by
such Holders pursuant to the Basic Subscription Privilege. In the event any
Rights remain unexercised following satisfaction of the Basic Subscription and
Oversubscription Privileges, the Company intends to offer the remaining
Underlying Shares for purchase at the Subscription Price to members of
management, including Directors. See "The Rights Offering--The Rights" and
"Subscription Privileges--Oversubscription Privilege."
Subscription Price.......... $1.00 in cash per share of Common Stock. The
Subscription Price of $1.00 was determined by the Board of Directors based on a
31% discount from the independent valuation of the Company as of April 30, 1998,
conducted by American Express Business and Tax Services, Inc., which generated a
valuation of approximately $1.44 per share, post Spin-Off.
Shares of Common Stock Outstanding after Rights Offering.......... Assuming that
all Rights are fully exercised, 1,250,339 shares will be outstanding after the
Rights Offering, based on 250,339 shares outstanding on the Spin-Off Date. The
final number of shares of Common Stock that will be outstanding after the Rights
Offering is dependent upon the extent to which Rights are exercised. The Company
intends to use the net proceeds of the Rights Offering for general corporate
purposes. See "Use of Proceeds."
Transferability of Rights.......... The Rights are transferable, and it is
anticipated that they will trade on the OTC market until the close of business
on the last trading day prior to the Expiration Date. In addition, the Company
has applied to list the Rights and the Underlying Shares on the OTC Bulletin
Board. The Basic Subscription Privilege and the Oversubscription Privilege are
only transferable together, and any transfer of a Right will be deemed a
transfer of both the Basic Subscription Privilege and the Oversubscription
Privilege. There can be no assumption that any market for Rights will develop.
See "The Rights Offering -- Method of Transferring Rights."
Record Date......................... May 13, 1998.
Expiration Date..................... 5:30 p.m. Eastern Standard Time, September
25, 1998. The Company reserves the right, in its sole discretion, to extend the
Expiration Date to deal with any unanticipated contingencies relating to the
conduct of the Rights Offering, but does not otherwise expect to extend the
Expiration Date.
Procedure for Exercising Rights.......... Rights may be exercised by properly
completing the certificate evidencing such Rights (the "Subscription
Certificate") and forwarding such Subscription Certificate (or following the
Guaranteed Delivery Procedures, as defined below) to the Subscription Agent on
or prior to the Expiration Date, together with payment in full of the
Subscription Price for each Underlying Share subscribed for pursuant to the
Subscription Privileges. If the mail is used to forward Subscription
Certificates, it is recommended that insured, registered mail be used. The
exercise of a Right may not be revoked or amended. If time does not
11
<PAGE> 12
permit a Holder or transferee of a Right to deliver its Subscription Certificate
to the Subscription Agent on or before the Expiration Date, such Holder or
transferee should make use of the Guaranteed Delivery Procedures described under
"The Rights Offering--Exercise of Rights." If paying by uncertified personal
check, please note that the funds paid thereby may take at least five business
days to clear. Accordingly, Holders who wish to pay the Subscription Price by
means of uncertified personal check are urged to make payment sufficiently in
advance of the Expiration Date to ensure that such payment is received and
clears by such date and are urged to consider payment by means of certified or
cashier's check, money order or wire transfer of funds. Consideration payable
by management and director's of CWC and the Company shall be either in full or,
for up to 400,000 and 135,000 shares respectively, consideration may be
one-third payable prior to the Expiration Date and two-third's represented by a
note payable to the Company bearing interest at 6.1% payable on or before
January 30, 1999. The Company shall hold in trust any shares whose
consideration is represented by a note payable.
The Lockup Period.......... All holders of the Common Stock shall not directly
or indirectly offer, sell, transfer, pledge, assign, hypothecate or dispose any
of the Company securities for a period from the Spin-Off Date to the Expiration
Date of this Offering (the "Lockup Period"). An appropriate legend will be
transfixed on the back of the stock certificate representing all such
requirements.
Persons Holding Shares, or Wishing to Exercise Rights Through Others..........
Persons holding shares of Common Stock, and receiving the Rights distributable
with respect thereto, through a broker, dealer, commercial bank, trust company
or other nominee, as well as persons holding certificates of Common Stock
personally who would prefer to have such institutions effect transactions
relating to the Rights on their behalf, should contact the appropriate
institution or nominee and request it to effect the transactions for them. See
"The Rights Offering--Exercise of Rights."
Closing and Issuance of Common Stock.......... The closing will occur and
certificates representing Underlying Shares will be delivered to subscribers as
soon as practicable after the Expiration Date and after all prorations have been
effected. See "The Rights Offering--Subscription Privileges." No Underlying
Shares will be issued until the closing. Funds delivered to the Subscription
Agent for the exercise of Subscription Privileges will be held in escrow by the
Subscription Agent until the closing. No interest will be paid to Holders on
funds held by the Subscription Agent. In the case of Holders exercising
Oversubscription Privileges, any excess funds will be returned to the Holders as
soon as practicable following the closing.
Use of Proceeds.......... It is anticipated that the net proceeds to the Company
will be approximately $950,000 if all of the Underlying Shares are purchased in
the Rights Offering. If less than all of the Underlying Shares are purchased,
the proceeds will be correspondingly reduced. The funds from the proceeds will
be used for general corporate purposes. See "Use of Proceeds."
Subscription Agent.......... American Stock Transfer & Trust Company.
Proposed Over-the-Counter Symbol.......... OHS, OHSR
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<PAGE> 13
SUMMARY FINANCIAL DATA
The following summary financial data should be read in conjunction with
the consolidated statements of the Company and related notes thereto appearing
elsewhere in the Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM JUNE 1,
1997 (DATE OF
INCEPTION) TO FIVE MONTH
DECEMBER 31, PERIOD ENDED
1997 MAY 31, 1998
------------------- -------------------
<S> <C> <C>
Statement of Operations Data:
Operating Revenue:
Managed Care $ - $ 1,739
Other 1,140 1,408
------------------- -------------------
Total Revenue 1,140 3,147
------------------- -------------------
Operating Expenses:
Medical services expense - 1,428
Personnel costs 261,402 245,011
Professional fees 1,916 22,928
Rent 7,789 19,832
Marketing and network development 20,582 34,181
General and administrative 36,974 39,816
Depreciation and amortization 2,276 2,671
------------------- -------------------
Total operating expenses 330,939 365,867
------------------- -------------------
Loss before income taxes (329,799) (362,720)
Income taxes - -
------------------- -------------------
Net loss $ (329,799) $ (362,720)
=================== ===================
Pro forma basic & diluted loss per common share (1) $ (0.26) $ (0.29)
=================== ===================
Pro forma weighted average number of
common shares outstanding (1)
1,254,680 1,254,219
=================== ===================
</TABLE>
<TABLE>
<CAPTION>
MAY 31, 1998
-----------------------------------------
ACTUAL AS ADJUSTED (1)
------------------- -------------------
BALANCE SHEET DATA:
<S> <C> <C>
Working capital $ 105,166 $ 1,255,166
Total assets 187,830 1,337,830
Total liabilities 49,749 249,749
Stockholders' equity 138,081 1,088,081
</TABLE>
- ----------------
(1) Adjusted to give effect to the sale of the Securities offered hereby (at
an assumed offering price of $1.00 per Share and 1,000,000 Shares sold)
of the net proceeds therefrom, the $200,000 proceeds from issuance of
a senior secured note to CWC (See "Use of Proceeds") and the exercise
of 37,623 options by management which were granted on June 1, 1997.
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<PAGE> 14
RISK FACTORS
An investment in the Securities offered hereby involves a high degree of risk
and should be made only by investors who can afford the loss of their entire
investment. Prospective investors should carefully review and consider the
following risks as well as the other information set forth in this Prospectus.
Limited Operating History; History of Losses; No Assurance of Profitability. The
Company commenced operations in June 1997 and implemented its first HMO contract
in March 1998. The Company has been developing its infrastructure of, among
others, medical policies and procedures, credentialing criteria and the provider
network. The Company has a limited operating history upon which prospective
investors can judge the Company's performance. At May 31, 1998, the Company had
an accumulated deficit of $692,519 and working capital of $105,166. For the
period from June 1, 1997 (date of inception) to December 31, 1997 the Company
incurred a loss of $329,799. There can be no assurance that the Company will
ever be profitable. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation."
Risks Related to Expansion Strategy. The Company's growth will depend upon a
number of factors, including: (i) the Company's ability to identify and
affiliate with suitable providers and the Company's ability to obtain good
locations within geographic markets; (ii) whether new payor agreements will be
negotiated in accordance with the Company's plans; (iii) regulatory constraints;
(iv) the ability of the Company to manage enrollee populations effectively; (v)
whether anticipated performance levels within payor agreements will be achieved;
(vi) the ability to secure alternative care contracts and the ability to enroll
retail consumers. There can be no assurance that the Company's expansion
strategy will be successful or that modification to the Company's expansion
strategy will not be required. Any significant delay in the negotiation of new
payor agreements or the failure of network providers to continue to be recruited
at a significant pace, and at pre-determined reimbursement rates could adversely
affect the Company. In pursuing its expansion strategy, the Company intends to
expand its presence into new geographic markets. In entering a new geographic
market, the Company will be required to comply with laws and regulations of
jurisdictions that differ from those applicable to the Company's current
operations, deal with different payors as well as face competitors with greater
knowledge of such markets than the Company. There can be no assurance that the
Company will be able to effectively establish a presence in any new market. The
Company's strategy also involves growth through acquisitions of complementary
businesses in order to enhance the services offered. The Company will be subject
to various risks associated with an acquisition growth strategy, including the
risk that the Company will be unable to identify and recruit suitable
acquisition candidates in the future or to absorb and manage the acquisitions.
See "Business -- Expansion Strategy" and "Business -- Government Regulation."
Possible Need for Additional Financing. The Company is dependent upon the net
proceeds of this Rights Offering for the continued implementation of its
development and expansion strategy. Although the Company believes that the net
proceeds of this Rights Offering (assuming the Rights are fully exercised)
together with the $200,000 advance from CWC and anticipated net cash from
operations will be sufficient to satisfy its cash requirements for at least 12
months following the date of this Prospectus (exclusive of applying any such
funds to the acquisition of other businesses), there is no assurance that
additional funds will not be needed. Factors that may require the Company to
seek additional financing include potential increased reserve requirements of a
payor, higher than expected medical claims, lack of additional payor contracts,
the acquisition of other businesses all or part of the payment for which is in
cash and costs for additional licensing requirements. If the Company requires
additional financing, it may raise capital through the issuance of equity
securities and/or the incurrence of debt. If additional capital is raised
through the issuance of equity securities, dilution to the Company's
stockholders may result, and if additional capital were raised through the
incurrence of debt, the Company would likely become subject to restrictions on
its operations and finances. There can be no assurance that the Company will be
able to raise additional capital when needed on satisfactory terms or at all.
None of the stockholders receiving or exercising Rights in the Rights Offering
will be obligated to provide any additional capital to the Company beyond
amounts paid pursuant to the Basic Subscription Privilege or the
Oversubscription Privilege. If the Company is unable to secure additional
sources of financing on terms and conditions acceptable to the Company or at
all, the Company's expansion strategy could be materially adversely affected.
See "Management's Discussion and
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<PAGE> 15
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and Note 1 to the Consolidated Financial Statements.
Possibility of Regulatory Challenge to the HMO Relationships. Many of the
management service organizations ("MSOs"), Third Party Administrators ("TPAs"),
Utilization Review ("UR") Agents, Physician Practice Management ("PPMs")
companies and Single Specialty Alternative Care organizations of which the
Company is aware provide, on behalf of their payor, various integrated or stand
alone products including collection of prospective per member per month ("pmpm")
fees, utilization review, credentialing, network development and claims payment.
The Company likewise undertakes to perform these services. To date, the Company
is unaware of any scrutiny by state or federal health care enforcement officials
of the structure of such relationships. Although the Company believes its
Provider Agreements and Payor Agreement relationships do not violate applicable
federal or state health care and insurance regulatory requirements, there can be
no assurance that health care enforcement officials will not take a contrary
view. Investigations or prosecutions by such enforcement officials could have a
material adverse effect on the Company, even if the Company's Provider
Agreements and Payor Agreement relationships were subsequently determined
lawful.
Reliance on Providers and Payors. A significant portion of the Company's revenue
is dependent on revenue generated by the assignment of enrollees, or the
selection by the enrollee, of the Company's primary care physicians ("PCPs"),
where such PCP's provide services through an Agreement with the Company. There
can be no assurance that any such enrollees are assigned to, or select, such
PCPs or that PCPs continue to remain affiliated with the Company through its
Agreements. The initial terms of such Provider Agreements are generally one year
and automatically renew for successive one-year terms. The Provider may
terminate his/her Agreement if the Company materially breaches it and fails to
cure the breach within ten days after notification. Enrollees may however be
re-assigned to the Company's other PCPs. The Company's continued growth depends,
in part, on its ability to retain existing and attract additional PCPs to the
network. There can be no assurance that physicians presently in the Company's
network will not leave, that the Company will be able to attract additional PCPs
or that the amount of capitation payments to PCPs will not have to be increased.
To the extent that PCPs leave the network, new PCPs are not recruited in a
timely manner or capitation payments to PCPs are increased, the Company's
results of operations may be materially adversely affected. The loss of a
substantial number of Provider Agreements would have a material adverse effect
on the Company. See "Business-Agreements with Licensed Practitioners." The
Company's revenue is also dependent on revenue generated as a result of the
payor agreements. Such agreement's are generally for one or more years and
automatically renew for successive terms. The payor may terminate its Agreement
under a number of circumstances but the Company, in most cases, generally has 60
days to cure a breach. The agreements may be terminated immediately under order
of the Department of Insurance. Additional revenues derived from the developing
retail and Prepaid Limited Health Service Organization ("PLHSO") business do not
depend on the reliance of providers and payors because of the direct involvement
with consumers.
Risks Associated with Managed Care Contracts. An increasing percentage of
patients are coming under the control of managed care entities. The Company
believes that its success will, in part, depend upon the Company's ability to
negotiate favorable managed care contracts with health maintenance organizations
("HMOs") and other private third party payors. Such contracts often shift much
of the financial risk of providing care from the payor to the Provider by
requiring the Provider to furnish all or a portion of its services in exchange
for a fixed or "capitated" fee per member patient, per month, regardless of the
level of such patients' utilization rates. The Company's current agreements with
managed care organizations are on a fee-for-service basis with provisions to
convert to capitated agreements at the Company's option. Some managed care
agreements also offer "shared risk" provisions under which providers and MSOs
can earn additional compensation based on the utilization of services by
members, but may be required to bear a portion of any loss in connection with
such "shared-risk" provisions. Any such losses could have a material adverse
effect on the Company. Accordingly, in order for such "shared-risk" contracts to
be profitable for the Company, the Company must effectively monitor the
utilization of its services delivered to members of the managed care
organization who are patients of the Company's PCPs and, to the extent the
Company is responsible for overall patient care, monitor the utilization of
specialist physicians or hospitals, negotiate favorable rates with such
providers, and obtain, on favorable terms, stoploss protection
15
<PAGE> 16
limiting its per enrollee exposure above specified thresholds. Third party
payors are not, however, generally familiar with traditional and alternative
health services being provided within the same medical practice or having
alternative health services being provided independently of PCP oversight and
may have concerns about contracting with such practices or implementation. For
this and other reasons, there can be no assurance that the Company will be able
to negotiate satisfactory managed care contracts at satisfactory rates. Nor can
there be any assurance that any managed care contracts it enters into will not
adversely affect the Company.
Difficulty in Controlling Healthcare Costs; Capitated Nature of Revenue.
Agreements with Payors typically provide for the Company to receive monthly fees
per enrollee known as "capitation" payments. The Company is not currently
receiving capitation payments for the provision of specialty and hospital
services to enrollees although it intends to do so in the future. The Company's
capitated risk profitability in this area primarily will depend upon its ability
to control costs and incur less in medical, hospital and administrative costs
than the capitation revenue received from Payors. Such profitability is achieved
through effective management of the provision of medical services by providers
in the Company's network, including controlling utilization of specialty care
physicians and other ancillary providers, purchasing services from physicians
outside the Company's network at competitive prices and negotiating favorable
rates with hospitals. Agreements with payors may also contain "risk pool"
provisions under which additional compensation can be earned based on lower
utilization of hospitalization and certain ancillary services by enrollees but
which may require that a portion of any loss in connection with such "risk pool"
provisions be assumed by the Company , which would reduce the Company's net
income. The amount of non-capitated medical and hospital costs in any period
could be affected by factors beyond the control of the Company such as changes
in treatment protocols, epidemics, disasters, new technologies and inflation. To
the extent that specialty care physicians' fees or hospital costs have not been
capitated and enrollees (i) require more specialty care than anticipated or (ii)
have higher than anticipated hospital utilization rates, revenue paid to the
Company by payors may not be sufficient to cover the costs the Company is
obligated to pay to its providers. The Company intends to purchase stoploss
protection which provides thresholds or "attachment points", generally $75,000
for inpatient services and $10,000 for outpatient services per year, at which
the risk of financial exposure for an enrollee beyond such thresholds is
contractually shifted to the insurer. The Company believes it has negotiated
favorable attachment points on its behalf. There can be no assurance that the
Company will be able to negotiate favorable attachment points in the future.
Full Risk Capitation. Under capitation contracts, entities generally accept
capitation payments and, as a result, accept the financial risk for health
services (primary care, specialty care and ancillary care). Although the current
payor contracts of the Company involve capitation or fee for service payments
for the provision of certain health care services for which the Company has
negotiated for such services through its network at a lower capitation or fee
for service amount, the Company intends to expand these payor contracts such
that the Company would be responsible for the provision of substantially all
medical services and the related medical management ("fully delegated"
contracts). In the event that (i) the Company is unable to negotiate favorable
prices or rates in contracts with providers of these services on behalf of the
Company, (ii) a significant number of enrollees require services up to the
stoploss insurance "attachment points" or (iii) the Company is unable to
effectively manage the medical utilization of these services, the Company could
experience material adverse effects on its results of operations.
Capitated Fee Revenue. One hundred percent (100%) of the Company's operating
revenue for the five month period ended May 31, 1998, came from contracts on
which the Company received a fixed, prepaid monthly fee, or capitated fee, for
each covered life in exchange for assuming the responsibility for the cost and
provision of primary care services. The Company has the future option of
receiving additional capitation in exchange for assuming the responsibility for
the cost and provision of substantially all medical services to its enrollees.
The Company's success under these contracts is dependent upon effective
utilization controls, competitive pricing for purchased services and favorable
agreements with payors which increasingly negotiate prices charged for medical
services with the goal of lowering reimbursement and utilization rates. To the
extent that the patients or enrollees covered under a capitated fee contract
require more frequent or extensive care than was anticipated by the Company, the
revenue to the Company under the contract may be insufficient to cover the costs
of the care that was provided. All of the Company's capitated fee contracts
contain aggregate expense limitations on each covered life. Given the increasing
pressures from health care payors to restrain costs, changes in health care
practices,
16
<PAGE> 17
inflation, new technologies, major epidemics, natural disasters and numerous
other factors affecting the delivery and cost of health care, most of which are
beyond the Company's control, there can be no assurance that capitated fee
contracts will be profitable for the Company in the future.
Health Care Reform. Although Congress failed to pass comprehensive health care
reform legislation in 1996, the Company anticipates that Congress and state
legislatures will continue to review and assess alternative health care delivery
and payment systems and may in the future propose and adopt legislation
effecting fundamental changes in the health care delivery system. Also, Congress
is expected to consider major reductions in the rate of increase of Medicare and
Medicaid spending as part of efforts to balance the budget of the United States.
The Company cannot predict the ultimate timing, scope or effect of any
legislation concerning health care reform, including legislation affecting the
Medicare and Medicaid programs. Any proposed federal legislation, if adopted,
could result in significant changes in the availability, delivery, pricing and
payment for health care services and products. Various state agencies also have
undertaken or are considering significant health care reform initiatives.
Although it is not possible to predict whether any health care reform
legislation will be adopted or, if adopted, the exact manner and the extent to
which the Company will be affected, it is likely that the Company will be
affected in some fashion, and there can be no assurance that any health care
reform legislation, if and when adopted, will not have a material adverse effect
on the Company.
Dependence Upon Key Personnel. The Company is dependent upon the active
participation of its executive officers, particularly the Company's founders:
President and Chief Executive Officer, Jason M. Patchen; Vice President of
Operations, Christian E. Miller; Vice President of Finance, David A. Sherwin,
C.P.A.; Vice President of Information Systems, Christopher Grady. The loss to
the Company of the services of the executive officers could have a material
adverse effect upon the Company. The Company has an employment contract with
each of these executive officers extending through June 1, 2001. See "Management
- -- Employment Agreements." Subsequent to the consummation of the Offering, the
Company plans to apply for "key-man" life insurance policies on the lives of the
Managers providing benefits to the Company of $500,000 upon the death of Mr.
Patchen and $150,000 each upon the death of Mr. Miller, Mr. Sherwin or Mr.
Grady. Nevertheless, the loss of, or the inability to attract other qualified
employees could have a material adverse effect on the Company.
Limitation of Directors' Liability. The Company's Certificate of Incorporation
and By-laws provide that a director of the Company will not be personally liable
to the Company or its stockholders for monetary damages for breach of the
fiduciary duty of care as a director, subject to certain limitations imposed by
the Delaware General Corporation Law. Thus, under certain circumstances, neither
the Company nor its stockholders will be able to recover damages even if the
directors take actions which harm the Company. See "Management -- Limitation of
Directors' and Officers' Liability and Indemnification."
Professional Liability. The Company contracts with health care practitioners for
the delivery of health care services to the public. They are thus exposed to the
risk of professional liability claims. The Company does not itself provide such
services or control the provision of health care services by the Providers or
their compliance with regulatory and other requirements in that regard. The
Company might nevertheless be held liable for medical negligence on their part.
The Company's Provider Agreements with PCP's typically require, with very
limited exceptions, the PCP to maintain, at their expense, professional
liability insurance for themselves and the licensed health care practitioners
employed by or otherwise associated with them in the minimum amount of $250,000
for each occurrence and $750,000 in the aggregate, or such lesser or greater
amounts as may be required by applicable state law within their specialty. The
Company's Provider Agreements with all other specialties, ancillary Providers
and alternative care Providers require them to maintain, at their expense,
professional liability insurance for themselves and the licensed health care
practitioners employed by or otherwise associated with them in amounts as may be
required by applicable state law within their specialty. In addition, the
Company maintains general liability, workers' compensation, association
professional liability insurance and third party administrators professional
liability insurance. The Company's association professional liability insurance
is limited to $1,000,000 per wrongful act and $1,000,000 in the aggregate. The
third party administrators professional liability insurance is limited to
$1,000,000 per wrongful act and $3,000,000 in the aggregate. The professional
liability insurance is provided under a "claims-made" policy. The policy
provides coverage for covered claims made
17
<PAGE> 18
during the policy's term and does not provide coverage for losses occurring
during the policy's term for which a claim is made subsequent to the policy's
termination. Finally, the licensed health care practitioners, by Agreement, hold
the Company harmless against liability and expenses for or related to
professional liability claims arising out of any negligent act or wrongful
conduct of the health care practitioner or any of their personnel. There can be
no assurance, however, that the Company, its employees, or the licensed health
care practitioners contracted with the Company will not be subject to claims in
amounts that exceed the coverage limits or that such coverage will be available
when needed. Further, there can be no assurance that professional liability
insurance will continue to be available to the Company in the future at adequate
levels or at an acceptable cost to the Company. A successful claim against the
Company in excess of the Company's insurance coverage could have a material
adverse effect upon the Company's business. Claims against the Company,
regardless of their merits or eventual outcome, also may have an adverse effect
upon the Company. See "Business -- Professional Liability."
Government Regulation. Federal and state laws extensively regulate the
relationships among providers of health care services, physicians and other
clinicians. These laws include federal fraud and abuse provisions that prohibit
the solicitation, receipt, payment, or offering of any direct or indirect
remuneration for the referral of patients for which reimbursement is made under
any federal or state funded health care program or for the recommending,
leasing, arranging, ordering or providing of services covered by such programs.
States have similar laws that apply to patients covered by private and
government programs. Federal fraud and abuse laws also impose restrictions on
physicians' referrals for designated health services covered under a federal or
state funded health care program to entities with which they have financial
relationships. Various states, such as Illinois, Maryland and Florida, among
others, have adopted similar laws that cover patients in private programs as
well as government programs. There can be no assurance that the federal and
state governments will not consider additional prohibitions on physician
ownership, directly or indirectly, of facilities to which they refer patients,
which could adversely affect the Company. Violations of these laws may result in
substantial civil or criminal penalties for individuals or entities, including
large civil money penalties and exclusion from participation in the Medicare and
Medicaid programs. Such exclusion, if applied to the Company or any of its
payors, could result in significant loss of reimbursement and could have a
material adverse effect on the Company. See "Business -- Government Regulation."
In addition, federal law also prohibits conduct that may result in price-fixing
or other anti-competitive conduct. Moreover, the Company contracts with licensed
insurance companies and/or HMO's. Certain of such contracts may require the
Company to assume risk in connection with providing health care services under
capitation arrangements. To the extent that the Company may be in the business
of insurance as a result of entering into such arrangements, they may be subject
to a variety of regulatory and licensing requirements applicable to insurance
companies, prepaid limited health service organizations or HMOs. There can be no
assurance that the Company will not be adversely affected by such regulations.
Moreover, the laws of many states prohibit physicians from sharing professional
fees, or "splitting fees," with anyone other than a member of the same
profession. These laws and their interpretations vary from state to state and
are enforced by the courts and by regulatory authorities with broad discretion.
Expansion of the operations of the Company to certain jurisdictions may require
structural and organizational modifications of the Company's form of
relationship with Providers, which could have an adverse effect on the Company.
Although the Company believes its operations as currently conducted are in
material compliance with existing applicable laws, there can be no assurance
that review of the Company's business by courts or regulatory authorities will
not result in a determination that could adversely affect the operations of the
Company or that the health care regulatory environment will not change so as to
restrict the Company's existing operations or its expansion. See
"Business-Government Regulation."
State Laws Regarding Prohibition of Corporate Practice of Medicine. The Company
has been formed as a general business corporation. Corporations such as the
Company are not permitted under certain state laws to practice medicine or
exercise control over the medical judgments or decisions of practitioners.
Corporate practice of medicine laws and their interpretations vary from state to
state and are enforced by the courts and by regulatory authorities with broad
discretion. The Company believes that it performs only non-medical
administrative services, does not represent to the public or its clients that it
offers medical services and does not exercise influence or control over the
practice of medicine by the practitioners with whom it contracts. Expansion of
the operations of the Company to certain jurisdictions may require structural
and organizational modifications of the Company's form of relationship with
Providers in order to comply with corporate practice of medicine laws,
18
<PAGE> 19
which could have an adverse effect on the Company. Although the Company believes
its operations as currently conducted are in material compliance with existing
applicable laws, there can be no assurance that the Company's structure will not
be challenged as constituting the unlicensed practice of medicine or that the
enforceability of the agreements underlying this structure will not be limited.
If such a challenge were made successfully in any state, the Company could be
subject to civil and criminal penalties under such state's law and could be
required to restructure its contractual arrangements in that state. Such results
or the inability to successfully restructure its contractual arrangements could
have a material adverse effect upon the Company.
Discretion in Use of Proceeds. Approximately 100% of the estimated net proceeds
of the Rights Offering have been allocated to working capital and general
corporate purposes. Accordingly, management will have broad discretion as to the
application of such net proceeds. See "Use of Proceeds."
Competition. There are no national companies, to the Company's knowledge, in the
Company's market for alternative care. The managed health care industry,
including the management services, PPM and TPA industry, is highly competitive.
The Company competes with other companies for physicians and other practitioners
of health care services as well as for managed care contracts and patients. The
Company competes not only with national and regional physician practice
management companies and other MSOs, but also with local providers, many of
which are trying to combine their own services with those of other providers
into delivery networks. Certain of the companies are significantly larger,
provide a wider variety of services, have greater financial and other resources.
In addition, companies with greater resources than the Company that are not
presently engaged in the provision of management services and alternative care
delivery systems could decide to enter the business and engage in activities
similar to those in which the Company engages. There can be no assurance that
the Company will be able to compete effectively. See "Business -- Competition."
Control by Existing Stockholders. Following the closing of the Rights Offering,
the Company's executive officers and directors will control or own approximately
5% of the outstanding shares of Common Stock irrespective of their exercise of
the Rights granted to them and certain options granted from the 1998 stock
option plan. As a result, such persons may be able to determine the election of
all of the Company's directors and the outcome of all issues submitted to the
Company's stockholders. Furthermore, such concentration of ownership could limit
the price that certain investors might be willing to pay in the future for
shares of Common Stock, and could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire, control of the Company. See "Principal Stockholders."
Shares Eligible for Future Sale. Of the 1,250,339 shares of Common Stock to be
outstanding upon completion of this Rights Offering 659,624 shares will be
immediately freely tradable, assuming all Rights are fully exercised, without
restriction after the Expiration Date of the Rights Offering under the
Securities Act of 1933 as amended (the "Securities Act") except for any
securities purchased by an "Affiliate" of the Company, as that term is defined
by the Securities Act, which securities will be subject to the resale limitation
of Rule 144 under the Securities Act. The sale or availability for sale of
substantial amounts of Common Stock in the public market subsequent to this
Rights Offering pursuant to Rule 144 or otherwise could materially adversely
affect the market price of the common stock and could impair the Company's
ability to raise additional capital through the sale of its equity securities or
debt financing. Notwithstanding the foregoing, each officer, director, manager
and employee of the Company and each officer, director, manager and employee of
CWC has agreed not to, directly or indirectly, offer, sell, transfer, pledge,
assign, hypothecate or otherwise encumber or dispose of any of the Company's
securities, whether or not presently owned, for a period of 13 months (the
"Management Lockup Period") after the date of this Prospectus. After such 13-
month period, 590,715 of such shares of Common Stock (if the Rights are fully
exercised) may be sold in accordance with Rule 144. The foregoing restriction
does not apply to the Warrants and Operating Warrants and the shares of Common
Stock underlying such Warrants and Operating Warrants registered pursuant
hereto. Such holder, CWC, has agreed with the Company not to effect any sales of
the Common Stock issuable upon exercise of the Warrants and Operating Warrants
until six months after the date of this Prospectus. See "Shares Eligible for
Future Use."
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Absence of Dividends. The Company has paid no cash dividends on its Common Stock
since its inception and does not plan to pay cash dividends on the Common Stock
in the foreseeable future. The Company anticipates that future earnings will be
retained to finance future operations and expansion. See "Dividend Policy."
Immediate and Substantial Dilution. The purchasers of the shares of Common Stock
offered by the Company hereby will experience immediate and substantial dilution
in the net tangible book value of the shares of Common Stock from the Rights
Offering price in the amount of $.13 per share, or approximately 13% per share.
See "Dilution."
Anti-Takeover Provisions; Preferred Stock. Certain provisions of Delaware law,
the Certificate of Incorporation and the Company's By-laws, as amended (the
"By-laws") could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, control
of the Company. These provisions and the prohibition against certain business
combinations could have the effect of delaying, deferring or preventing a change
in control or the removal of existing management of the Company. The Company's
Board of Directors has the authority to issue up to 1,000,000 shares of
preferred stock in one or more series and to determine the number of shares in
each series, as well as the designations, preferences, rights and qualifications
or restrictions of those shares without any further vote or action by the
stockholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any preferred stock
that may be issued in the future. The issuance of preferred stock could have the
effect of making it more difficult for a third party to acquire a majority of
the outstanding voting stock of the Company. The Company has no present plans to
issue shares of preferred stock. In addition, the Company is subject to the
anti-takeover provisions of Section 203 of the Delaware General Corporation Law.
In general, this statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became interested stockholder, unless the business combination is approved in a
prescribed manner. See "Description of Securities."
Securities Not Listed on the NASDAQ System; Penny Stock Rules. Upon completion
of this Offering, neither the Company's Common Stock nor the Rights will be
approved for listing on the NASDAQ SmallCap or National Market System
("NASDAQ"). Consequently, trading, if any, in the securities will be conducted
on the over-the-counter market in what are commonly referred to as the "pink
sheets," or in the "OTC Bulletin Board." If such result occurs, an investor may
find it more difficult to dispose of, or to obtain accurate quotations as to the
price of, the Common Stock. In addition, because the Company's securities are
not listed on NASDAQ they will be subject to a rule that imposes additional
sales practice requirements on broker-dealers which sell such securities to
persons other than established customers and accredited investors (generally
persons with assets in excess of $1,000,000 or annual income exceeding $200,000,
or $300,000 together with their spouse. Additionally, the Common stock and
Rights will fall within the definition of "penny stock" under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and transactions in the
Common Stock and Rights will be subject to the penny stock regulations which
impose significant sales practice requirements on broker dealers, including (a)
delivering to customers the Commission's standardized disclosure statement about
"penny stocks", (b) providing to customers current bid and ask prices for the
stock, (c) disclosing to customers the broker-dealer's and sales
representative's compensation with respect to trades in the stock, and (d)
providing to customers monthly account statements reflecting the stock's then
current price. For transactions covered by this rule, the broker-dealer must
make a special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to purchase. Consequently,
the rule may restrict the ability of broker-dealers to sell the Company's
securities and may affect the ability of stockholders to sell their securities
in the secondary market. The lack of a NASDAQ listing may also cause a decline
in share price, loss of news coverage of the Company and difficulty in obtaining
subsequent financing.
Issuance of Additional Shares. The Company is currently authorized to issue up
to a total of 10,000,000 shares of Common Stock and 1,000,000 shares of
preferred stock. There are currently 250,339 shares of Common Stock outstanding.
The Company's Board of Directors is authorized to issue preferred stock in one
or more series and to fix the voting powers and the designations, preferences
and relative, participating, optional or other rights and restrictions thereof.
Accordingly, the Company may further issue a series of preferred stock in the
future that will
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<PAGE> 21
have preference over the Common Stock with respect to the payment of dividends
and proceeds from the Company's liquidation, dissolution or winding up or have
voting or conversion rights which could adversely effect the voting power and
percentage ownership of the holders of the Common Stock. The Company has no
plans, arrangements, understandings or commitments to issue any preferred stock.
However, rights granted to future holders of preferred stock could be used to
restrict the Company's ability to merge with, or sell its assets to, a third
party, and the ability of the Board of Directors to issue preferred stock could
discourage, delay or prevent a takeover of the Company, thereby preserving
control of the Company by the current shareholders. See "Description of
Securities-Preferred Stock."
Risks Associated with the Year 2000. The Year 2000 issue is the result of
computer programs being written using two digits rather than four to define the
applicable year. In other words, date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations causing disruptions of operations, including,
among others, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Company does not believe that it has material exposure to the Year
2000 issue with respect to its own information systems since its existing
systems correctly define the year 2000. The Company intends to conduct an
analysis in 1998 to determine the extent to which its major supplier's systems
(insofar as they relate to the Company's business) are subject to the Year 2000
issue. The Company is currently unable to predict the extent to which the Year
2000 issue will affect its suppliers, or the extent to which it would be
vulnerable to the supplier's failure to remediate any Year 2000 issue on a
timely basis. The failure of a major supplier subject to the Year 2000 to
convert its systems on a timely basis or a conversion that is incompatible with
the Company's systems could have a material adverse effect on the Company. In
addition, future purchases of certain products from the Company may be made with
credit cards, and the Company's operations may be materially adversely affected
to the extent its customers are unable to use their credit cards due to the Year
2000 issues that are not rectified by their credit card vendors.
Risks Associated with Forward-Looking Statements Included in this Prospectus.
This Prospectus contains certain forward-looking statements regarding the plans
and objectives of management for future operations, including plans and
objectives relating to the further development of Provider networks and payor
contracting. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. Certain statements
contained in this Prospectus under the captions "Prospectus Summary; Risks
Factors; Certain Information Concerning Optimum--Management's Discussion and
Analysis of Financial Condition and Results of Operations; Business and
Properties" and elsewhere constitute estimates of future performance or other
forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of CWC or Optimum for industry
results to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
risks, uncertainties and other important factors include, among other things:
the risk factors referenced in this Prospectus. These forward-looking statements
speak only as of the date of this Prospectus. CWC and Optimum expressly disclaim
any obligation or undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change in CWC's or
Optimum's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based. The Company's plans and
objectives are based on a successful execution of the Company's expansion
strategy and assumptions that the Company's negotiated payor agreements will be
profitable, that the health care industry will not change materially or
adversely, and that there will be no unanticipated material adverse change in
the Company's operations or business. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
the control of the Company. Although the Company believes that its assumptions
underlying the forward-looking statements are reasonable, any of the assumptions
could prove inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this Prospectus will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, particularly in view of the
Company's early stage operations, the inclusion of such information should not
be
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regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
Risks Associated With Certain Financial And Operating Conditions. While CWC has
an operating history, Optimum does not have an operating history as a separate
stand-alone company. Prior to the Distribution, Optimum had access to the
capital of CWC and CWC's credit, which was based on the combined assets of CWC
and Optimum. Subsequent to the Distribution, except as provided in the
Distribution Agreement, Optimum will not have the benefit of either the capital
or the assets of CWC.
Certain Tax Considerations. The Distribution will not qualify as a "tax-free"
distribution under Section 355 of the Code, and in general a corporate tax would
be payable by the consolidated group of which CWC is the common parent based
upon the difference between (x) the fair market value of the Optimum Common
Stock and (y) the adjusted basis of the Optimum Common Stock immediately prior
to the Distribution. Any corporate level tax will be payable by CWC. Under the
consolidated return rules, each member of the consolidated group (including
Optimum) is severally liable for such tax liability.
Furthermore, each holder of CWC Common Stock who receives shares of Optimum
Common Stock in the Distribution will be treated as if such stockholder received
a taxable distribution in an amount equal to the fair market value of the
Optimum Common Stock received, which will result in (x) a dividend to the extent
of such stockholder's pro rata share of CWC's current and accumulated earnings
and profits, (y) a reduction in such stockholder's basis in CWC Common Stock to
the extent the amount received exceeds such stockholder's share of earnings and
profits and (z) gain from the exchange of CWC Common Stock to the extent the
amount received exceeds both such stockholder's share of earnings and profits
and such stockholder's basis in CWC Common Stock.
Potential Conflicts Of Interest. Subsequent to the Distribution, the ongoing
relationship between CWC and Optimum may potentially give rise to conflicts of
interests. In connection with the Distribution, (i) CWC and Optimum will enter
into an Intercompany Agreement pursuant to which each of the parties will
continue to cooperate with respect to matters of mutual interest. See
"Relationship Between Optimum and CWC After the Distribution." With respect to
these matters, the potential exists for disagreements as to the quality of the
services provided by the parties and as to contract compliance. Nevertheless,
CWC believes that there will be sufficient mutuality of interest between the two
companies to result in a mutually productive relationship. In addition, C.
Thomas McMillen will serve as a director of Optimum. Mr. McMillen, as well as
certain other officers and directors of CWC and Optimum, will also own shares
(and/or options or other rights to acquire shares) in both companies following
the Distribution. Appropriate policies and procedures will be followed by the
boards of directors of each company to limit the involvement of the overlapping
director (and if appropriate, relevant officers of such companies) in conflict
situations, including requiring them to abstain from voting as directors of
either CWC or Optimum on certain matters which present a conflict between the
two companies.
Fraudulent Transfer Considerations; Legal Dividend Requirements. CWC's Board of
Directors does not intend to consummate the Distribution unless it is satisfied
regarding the solvency of CWC, Optimum and the permissibility of the
Distribution under Section 170 of the DGCL. There is no certainty, however, that
a court would reach the same conclusion. If a court (for example, in a lawsuit
by an unpaid creditor or representatives of creditors) were to find that, at the
time the Company effected the Distribution of Optimum, CWC or Optimum, as the
case may be, (i) was insolvent, (ii) was rendered insolvent by reason of the
Distribution, (iii) was engaged in a business or transaction for which CWC's or
Optimum's remaining assets, as the case may be, constituted unreasonably small
capital, or (iv) intended to incur, or believed it would incur, debts beyond its
ability to pay as such debts matured, such court may be asked to void the
Distribution (in whole or in part) as a fraudulent conveyance and require that
the stockholders return the special dividend (in whole or in part) to CWC, or
require CWC or Optimum, as the case may be, to fund certain liabilities of the
other company for the benefit of creditors. The measure of insolvency for
purposes of the foregoing will vary depending upon the jurisdiction whose law is
being applied. Generally, however, CWC or Optimum, as the case may be, would be
considered insolvent if the
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<PAGE> 23
fair value of their respective assets were less than the amount of their
respective liabilities or if they incurred debt beyond their ability to repay
such debt as it matures. In addition, under Section 170 of the DGCL (which is
applicable to CWC in the Distribution) a corporation generally may make
distributions to its stockholders only out of its surplus (net assets minus
capital) and not out of capital.
In November 1997, various facilities of CWC's operations were searched by
an interdepartmental team of federal investigative officers, under the
supervision of the Office of the United States Attorney for the Eastern District
of Virginia, pursuant to search warrants. The warrants and related subpoenas
primarily sought CWC's patient billing records and other computer equipment
records and documents related to various insurers "to include but not be limited
to CHAMPUS, Medicare, Federal Employees Health Benefits Program ("FEHBP"),
Medicaid and Blue Cross/Blue Shield of Virginia." During the first half of 1998,
various employees of CWC and certain subsidiaries were served with subpoenas
requesting records and documents related to billing records, clinical
relationships and corporate records. No charges have been filed against CWC or
any of its employees and no search warrants or subpoenas have been issued to
Optimum or any of its employees or in connection with any activities of Optimum.
While it is too early to predict the outcome of any of the ongoing
investigations of CWC, were CWC to be found in violation of federal or state
laws, CWC could be subject to substantial monetary fines, and such sanctions
could have a material adverse effect on CWC's financial position and results
of operations. Further, because a federal claim is a senior lien above other
creditors, if a federal monetary fine were imposed against CWC, which could not
be satisfied from the assets of CWC, the federal government might seek to impose
the claim against Optimum, as a prior subsidiary of CWC, and its assets, to the
extent of CWC's value therein.
CERTAIN RIGHTS OFFERING CONSIDERATIONS
No Commitments to Purchase and No Minimum Size of Rights Offering. The
Company does not have a written commitment from any person to purchase any
shares of Common Stock pursuant to the Rights Offering. In addition, no minimum
amount of proceeds is required for the Company to consummate the Rights
Offering. Accordingly, no assurances can be given as to the amount of gross
proceeds that the Company will realize from the Rights Offering. See "Purpose of
the Rights Offering and Use of Proceeds," "The Rights Offering," and "Plan of
Distribution."
Dilution: Discount from Market Price. Holders who do not exercise their
Subscription Privileges in full will realize a dilution in their percentage
voting interest and ownership interest in future earnings, if any, of the
Company to the extent that Rights are exercised by other Holders. In addition,
the Subscription Price represents a 31% discount from an independent valuation
of the Company, as of April 30, 1998, which generated a valuation of
approximately $1.44 per share, as determined by American Express Tax and
Business Services, Inc. and could result in a reduction in the market price for
the Company's Common Stock.
Absence of Public Market for Common Stock. There is currently no public market
for the Common Stock. The Company has applied to list the Rights and the
Underlying Shares of Common Stock issuable upon exercise of the Rights on the
OTC under the symbols "OHSI R" and "OHSI," respectively. The Company believes
that the Rights will commence trading on or about August 27, 1998. There can be
no assurance that an efficient market for the Rights will develop or, if
developed, be maintained. In addition, there can be no assurance as to the
prices at which trading in Common Stock will occur after the Spin-Off or that an
active trading market in the Common Stock will develop or be sustained in the
future. In the event no active trading market develops for the Common Stock,
holders of Common Stock may not be able to sell their shares promptly at a
reasonable price. Accordingly, Rights holders and holders of Common Stock should
consider the Common Stock a long-term investment.
Possible Extension of Expiration Date. The Company has reserved the right to
extend the Expiration Date at its sole discretion. Funds deposited in payment of
the Subscription Price may not be withdrawn and no interest will be paid thereon
to Holders. See "The Rights Offering - Expiration Date."
FOR ALL OF THE FOREGOING REASONS AND OTHERS SET FORTH IN THIS
PROSPECTUS, THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. ANY
PERSON CONSIDERING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY SHOULD BE
AWARE OF THESE AND OTHER FACTORS SET FORTH IN THIS PROSPECTUS. THESE SECURITIES
SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD A TOTAL LOSS OF THEIR
INVESTMENT IN THE COMPANY.
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THE COMPANY
The Company is a development stage enterprise organized to develop,
market and administer a healthcare benefits program which is designed to provide
members with expanded access to alternative care practitioners and premium
wellness programs under discounted or insured methods of payment. The Company
develops physician networks comprised of traditional medical and ancillary
providers and alternative (or complementary) care providers under Independent
Provider Agreements. The Company combines the benefits of a traditional
physician network, an alternative therapy network, and brand name wellness
products, including SMOKENDERS(TM) and Nutri/Systems(TM), into an integrated
healthcare service product for health care insurance purchasers, government
agencies, HMOs, or individuals. The Company's objective is to become a
nationally recognized developer and manager of traditional and alternative care
provider networks and the management of the health care benefits associated with
those individuals enrolled under such benefit plans. As of May 31, 1998, the
Company has individual or group Provider comprising 2,991 provider locations
including primary care, specialty and ancillary, and alternative care.
Effective March 1, 1998, the Company signed two HMO agreements. The
Company currently provides management services to the HMOs and their enrollees
including provisions of the traditional medical network, provider credentialing
and claims payment. The agreements call for the provision of expanded services
to include utilization management, quality assurance and peer review. Letters of
Intent have also been signed by these HMOs to incorporate the alternative care
product for delivery to their enrollees.
During July 1998, the Company signed its third HMO contract. Under this
agreement, the Company provides and manages its provider network for HMO members
and administers claims as a TPA (Third Party Administrator) on behalf of the HMO
for the Company's providers. This contract services the HMOs approximately
13,000 members in Central and South Florida.
These three HMO agreements are currently managed by the Company under
fee-for-service arrangements such that the Company is not at financial risk for
the medical claim portion of services provided.
Also in July, 1998, the Company signed its first employer group with
approximately 200 employees. The employees and their dependents have the
opportunity to purchase discounted network access to the Company's complementary
alternative care network. The Company continues to conduct presentation and
enrollment meetings with employer groups to market and sell these products.
The Company believes that their development of a discounted fee network
access card (the "Wellness Passport") and the integration of alternative and
traditional providers address three significant healthcare concerns: limited
provider access under insurance plans, cost containment, and underinsured
populations. Employers and insurers continue to struggle over healthcare cost
containment and improving health. The demand for products that improve health
and lower costs continues to escalate. The ability to bring in wellness-focused
programs and practitioners under an affordable price is in demand. The
additional ability to lower overall healthcare expenditures based on improved
outcomes increase the potential viability of the Company's product sales. The
Employee Benefit Research Institute estimates that in 1995 approximately 40
million (17%) Americans under the age of 65 had no health insurance. Employers
continue to reduce health care benefits based on lack of affordability. The
Company's products provides them with value added benefits at little or no
costs. It also provides individuals who cannot pay some of these out-of-pocket
treatments an affordable option utilizing our discounted programs. The products
will be marketed through in-house representatives, independent brokers, agents
and marketing organizations to individuals, employer groups, government
programs, traditional insurers, and HMOs who may either purchase or offer the
program for their employees and members.
The Company was incorporated in the State of Delaware in May 1997. The
Company's principal offices are located at 17757 U.S. Highway 19 North, Suite
470, Clearwater, Florida 33764 and its telephone number is (727) 536-9956. The
Company's web site is http://www.optimum-health.net.
INDUSTRY BACKGROUND
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Until recently healthcare in the United States has been comprised of a
fragmented system of health providers including individuals and small groups of
physicians. The advent of managed care has created new large-scale provider
systems such as IPAs, PHOs, PSOs and PPMs. The entities typically operate as a
Management Services Organization. The Management Services Organization (MSO)
industry has developed throughout the 1990's where it is a multi-billion dollar
industry with several publicly traded organizations. These companies perform
administrative and medical management services for managed care organizations
and self-insured populations. They operate as single specialty carve-out
networks such as dental, vision and mental health and multi-specialty networks
for managing all lines of healthcare services. The advent of Provider Sponsored
Organizations (PSO) legislation for servicing the Medicare population will
create more public awareness of these companies, which currently operate, with a
low level of recognition. The application of this model as it relates to
alternative healthcare and alternative medicine is relatively new. These
strategies have not been applied to this fragmented model of non-traditional
healthcare. Until recently, the demand for these services and for companies
providing these services on a large scale, with the exception of chiropractic
services had not been known. The 1993 Eisenberg study, which showed 1 in 3
Americans access alternative care and that it was an estimated $15 billion
dollar industry, spurred new growth in the industry. Two major events led to
greater awareness and demand. First, two best selling books by Author Dr. Andrew
Weil on alternative healthcare treatments and his being named one of Time
Magazine's most influential people in the United States in 1997. Second, Oxford
Health Plan's integration of an alternative healthcare product into managed
care.
While public demand and awareness is high, cohesive, quality delivery
systems for these services have not been available. The healthcare industry is
looking for alternative healthcare models which parallel the utilization
management, credentialing, quality and payment systems typically associated with
traditional health care. These have not been available. Payors are seeking to
outsource this product in a manner similar to dental, mental health and vision
benefits to companies focused on delivering the service. The ability to create
these delivery systems and have them meet the rigorous quality standards of a
traditional delivery systems is the challenge and the goal of this industry, and
specifically, the Company.
On May 20th, 1998 the Journal of the American Medical Association
published the results of their alternative care study which estimated that 40%
of those surveyed use alternative care. The Company believes that the discounted
alternative care program and the integration of alternative and traditional
providers address three significant healthcare concerns: limited provider access
under insurance plans, cost containment, and underinsured populations. Employers
and insurers continue to struggle over healthcare cost containment and improving
health. The demand for products that improve health and lower costs continues to
escalate. The ability to bring in wellness-focused programs and practitioners
under an affordable price is increasingly in demand. The additional ability to
lower overall healthcare expenditures based on improved outcomes increased the
viability of Company sales. The Employee Benefit Research Institute estimates
that in 1995 approximately 40 million (17%) Americans under the age of 65 had no
health insurance. Employers continue to reduce health care benefits based on
lack of affordability. The Company's products provides them with value added
benefits at little or no cost. It also provides individuals who cannot pay some
of these out-of- pocket treatments an affordable option utilizing our discounted
programs. The products will be marketed through in-house representatives,
independent brokers, agents and marketing organizations to individuals, employer
groups, government programs, traditional insurers, and HMOs who may either
purchase or offer the program for their employees and members.
COMPETITION
The alternative care and management services industry is competitive. At
this time there are no major national provider of alternative health care
services. The Company competes with regional and local providers for alternative
care and wellness services. Furthermore, the Company competes with traditional
managers of health care services such as hospital and HMOs for the recruitment
of providers. While competition is generally based on cost and quality of
services, it is not possible to predict the extent of competition that present
or future activities of the Company will encounter because of changing
competitive conditions, changes in laws and regulations, government budgeting,
technological, and economic developments and other factors. There are
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certain companies, including hospitals and insurers, which are expanding their
presence in the alternative care and wellness program areas and have access to
greater financial resources than the Company.
OPERATING STRATEGY
The Company incorporates a strategy that applies the knowledge and
methods used for traditional health services to alternative health care. The
Company develops both traditional and alternative healthcare networks for
incorporation under a traditional setting of care. Through the application of
traditional standards and provider criteria to alternative health care providers
and services it is easier to integrate alternative care into current health care
delivery system structures. Providing management services for both traditional
and alternative care products allows payors to be more willing to contract with
the Company over competitors. Management believes it has demonstrated knowledge
of the current systems that allow for more acceptance of its alternative care
product because it understands and addresses the issues commonly raised by
payors in the integration of alternative care in a traditional health care
setting. Through the incorporation of alternative health care and wellness
programs the Company intends to improve health outcomes and lower overall health
care costs. These savings will result in increased profitability of traditional
lines of business and demand for alternative care products.
The Company has developed a discounted PPO product of complementary
alternative care providers, products and services, including the Wellness
Passport card, which the Company recently introduced in the local Florida
market. In July, 1998, the Company signed its first employer group with
approximately 200 employees.
The Company intends to develop a more comprehensive stand-alone insured
product (versus a discounted network product) of complementary alternative care
products and services. As such, the Company intends to submit to the State of
Florida for licensure as a Pre-Paid Limited Health Services Organization
("PLHSO") in order to deliver this insured product. Under current Florida law,
the Company may apply for its PLHSO license to provide chiropractic and mental
health benefits on an insured basis and the Company hopes to augment this with a
discounted alternative care network.
OPTIMUM HEALTH SERVICES BENEFITS
Members: Provision of access to credentialed alternative health care and
wellness products and services on a discounted fee-for-service basis at the
point of purchase, the Company believes the Wellness Passport will be attractive
to Members because of its flexibility and ease of use. Membership in the
Wellness Passport program will be unrestricted, thereby providing potential
benefits to individuals who, because of their medical history, age or
occupation, or lack of healthcare coverage of these services are otherwise
unable to obtain such benefits. The Wellness Passport can be used as often as
each participant wishes. In addition, in the non-insured care programs Members
have little or no paperwork or claims to prepare, no waiting periods, and no
prior authorizations. Moreover, in certain cases, membership in the Company's
programs will entitle Members to benefits that would otherwise be unavailable or
difficult to obtain such as our mail order natural supplements program which is
currently being developed. In addition, where a Member may already have a
Wellness Passport, it will entitle Members to various discounted products and
services that would typically be excluded from traditional health care
insurance. Our in-house medical and health economics expertise allow us to
integrate this program to meet the needs of insurers and managed care payors. In
addition, it provides members with low cost care to large numbers of healthcare
practitioners. This is a commodity in today's restrictive managed care provider
networks
Providers and Networks. The Company believes that health care providers
will be attracted to the Company's program because it will enable them to obtain
additional patients who are Members while allowing Providers to retain their
existing patient base. In addition, it will open new insurance markets for
providers not previously accessible. Although Members generally pay fees and
charges less than those of non- Members, the incremental business from Members
is an important revenue source for Providers, with little or no increase in
their overhead costs. However, there can be no assurance that Providers will
continue to participate in the Networks even if their participation results in
such an increase in revenues since the Member portion of their business may be
relatively less profitable. In addition, the Company believes that its program
will be attractive to
26
<PAGE> 27
provider networks because it may increase the likelihood that Providers will
affiliate with provider networks in order to have access to Members, and
accordingly, provider networks may realize increased revenues from such
affiliations and it may provide a new patient base.
Sponsors. The Company believes that the Wellness Passport will assist
Sponsors in their efforts to attract and retain employees by enabling them to
offer a more complete health care benefits package. Similarly, as competition
between HMOs for participants continues to intensify, the Company believes that
The Wellness Passport will enable HMOs to offer a more complete, and therefore
more attractive, array of potential health care benefits. In addition, due to
the low cost of the Wellness Passport, Sponsors may even choose to offer it to
part-time employees, who often are not eligible, for health care benefits
offered to full- time employees. Moreover, because the Wellness Passport may be
offered as a discount card and not an insurance product, Sponsors can offer
discounts to their employees or members without bearing any economic risk over
the annual cost of the Wellness Passport. It also may increase productivity and
decrease absenteeism. As an insured benefit it may reduce the utilization of
high cost medical services ultimately lowering insurance premiums while
increasing employee satisfaction. In addition, this satisfaction will increase
HMO/ insurance enrollment.
27
<PAGE> 28
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities offered hereby
(assuming an offering price of $1.00 per Share and 1,000,000 shares sold), after
deduction of underwriting discounts and other estimated offering expenses, are
estimated to be approximately $950,000. The Company intends to utilize such net
proceeds as follows:
<TABLE>
<CAPTION>
Approximate
Dollar Approximate
Amount Percentage
------ ----------
<S> <C> <C>
Working capital and general corporate purposes (1)................... $950,000 100.0%
-------- -----
</TABLE>
- ----------
(1) The net proceeds allocated to working capital will be used by the Company to
fund operations as required including amounts required to pay professional
fees, office-related expenses, management information system enhancements,
marketing expenses and other corporate expenses. The Company reserves the
right to change the amount of such net proceeds that will be used for any
purpose to the extent that management determines that such change is
advisable. Consequently, management of the Company will have broad
discretion in determining the manner in which the net proceeds of the Rights
Offering are applied.
The Company anticipates, based on current plans and assumptions relating to its
operations, that the net proceeds of the Rights Offering (assuming the Rights
are fully exercised), together with the $200,000 advance from CWC and
anticipated net cash from operations should be sufficient to satisfy the
Company's cash requirements for at least the 12 months after the date of this
Prospectus. Proceeds not immediately required for the purposes described above
will be invested in short-term, investment grade, interest-bearing government
obligations.
It is anticipated that the net proceeds to Company will be approximately
$950,000 if all Underlying Shares are purchased in the Rights Offering. If less
than all of the Underlying Shares are purchased, the proceeds will be
correspondingly reduced.
28
<PAGE> 29
CAPITALIZATION
The following table sets forth as of May 31, 1998 the capitalization of the
Company (i) on an actual basis and (ii) as adjusted to give effect to (a) the
sale by the Company of the Securities offered hereby (at an assumed offering
price of $1.00 per Share and 1,000,000 Shares sold) and the initial application
of the estimated net proceeds therefrom, (b) the $200,000 advance by CWC in
exchange for a $200,000 senior secured note and (c) exercise of 37,623 options
by management which were granted on June 1, 1997. See "Use of Proceeds,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of Securities."
This table should be read in conjunction with the Consolidated Financial
Statements and the notes thereto which are included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
May 31, 1998
------------------------------
Actual As Adjusted
------------------------------
<S> <C>
Long Term Debt:
Note Payable to CWC $ -- $200,000
------------------------------
Stockholders' equity
Common stock, $.01 par value per share; 10,000,000 shares authorized;
212,716 shares issued and outstanding, actual; 1,250,339 shares issued
and outstanding, as adjusted 2,127 12,503
Additional paid-in capital 828,473 1,769,397
Notes receivable from stockholders -- (1,300)
Deficit accumulated during the development stage (692,519) (692,519)
------------------------------
Total stockholders' equity $138,081 $1,088,081
------------------------------
Total capitalization $138,081 $1,288,081
==============================
</TABLE>
DIVIDEND POLICY
The Company has never declared or paid dividends, and does not intend to
pay any dividends in the foreseeable future on shares of Common Stock. Earnings
of the Company, if any, are expected to be retained for use in expanding the
Company's business. The payment of dividends is within the discretion of the
Board of Directors of the Company and will depend upon the Company's earnings,
if any, capital requirements, financial condition and such other factors as are
considered to be relevant by the Board of Directors from time to time.
29
<PAGE> 30
DILUTION
At May 31, 1998, the Company had a net tangible book value of $138,081
or $0.65 per share of Common Stock. Net tangible book value per share is equal
to the Company's total tangible assets less its total liabilities, divided by
the total number of shares of its Common Stock outstanding. After giving effect
to the sale of the shares of Common Stock offered hereby at an assumed offering
price of $1.00 per share and the initial application of the net proceeds
therefrom (after deducting estimated expenses of the Rights Offering), and
exercise of 37,623 options by management which were granted on June 1, 1997,
the pro forma net tangible book value of the Company at May 31, 1998 would have
been $1,088,081 or $0.87 per share of Common Stock, representing an immediate
dilution of $0.13 per share (or approximately 13%) to the new investors, as
illustrated by the following table:
<TABLE>
<S> <C> <C>
Initial public offering price per share $1.00
Net tangible book value per share prior to this offering $0.65
Increase per share attributable to new investors $0.22
----------------
Pro forma net tangible book value per share after this offering $0.87
------------------
Dilution per share to new investors $0.13
==================
</TABLE>
The following table sets forth, as of the date of this Prospectus, the number of
shares of Common Stock purchased from the Company, the total consideration paid,
and the average price per share paid by existing stockholders and by new
investors purchasing shares sold by the Company in the Rights Offering.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
--------------------------------------------------------------------- Price
Number Percent Amount Percent Per Share
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders 250,339 20.0% $100,000 9.1% $0.40
New Investors 1,000,000 80.0% $1,000,000 90.9% $1.00
------------------------------------------------------------------
Total 1,250,339 100.0% $1,100,000 100.0%
------------------------------------------------------------------
</TABLE>
(1) Does not include 65,000 shares issuable upon exercise of outstanding
options under the Company's 1998 Stock Option Plan and 310,000 shares
reserved for issuance upon exercise of options available for grant under
such plan. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources,"
"Management -- Stock Option Plans" and "Description of Securities."
(2) Does not include 100,000 shares issuable upon exercise of outstanding
Warrants issued in connection with the reclassification of certain
operating funds previously advanced to the Company by Complete Wellness
Centers, Inc.. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources,"
"Management -- Stock Option Plans" and "Description of Securities."
(3) Does not include 5,000 shares issuable upon exercise of outstanding
Operating Warrants granted on the Spin- Off date pursuant to the
Intercompany Agreement. See "Rights Offering" and "The Intercompany
Agreement".
30
<PAGE> 31
SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company
for each of the periods indicated. The selected financial data of the Company
for the period from June 1, 1997 (date of inception) to December 31, 1997 are
derived from the Consolidated Financial Statements of the Company which have
been audited by Ernst & Young LLP, independent certified public accountants. The
selected financial data for the five-month period ended May 31, 1998 are
unaudited and were prepared by management of the Company on the same basis as
the audited Consolidated Financial Statements appearing elsewhere in this
Prospectus. The unaudited consolidated financial statements include all
adjustments, consisting of normal recurring accruals, which the Company
considers necessary for a fair presentation of the consolidated financial
position at May 31, 1998 and the consolidated results of operations for the five
month period then ended. The results for the five-month period ended May 31,
1998 are not necessarily indicative of the results to be expected for the year
ending December 31, 1998 or future periods. All of the information set forth
below should be read in conjunction with the Consolidated Financial Statements
of the Company and related notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM JUNE 1,
1997 (DATE OF
INCEPTION) TO FIVE MONTH
DECEMBER 31, PERIOD ENDED
1997 MAY 31, 1998
------------------- -------------------
<S> <C> <C>
Statement of Operations Data:
Operating Revenue:
Managed Care $ - $ 1,739
Other 1,140 1,408
------------------- -------------------
Total Revenue 1,140 3,147
------------------- -------------------
Operating Expenses:
Medical services expense - 1,428
Personnel costs 261,402 245,011
Professional fees 1,916 22,928
Rent 7,789 19,832
Marketing and network development 20,582 34,181
General and administrative 36,974 39,816
Depreciation and amortization 2,276 2,671
------------------- -------------------
Total operating expenses 330,939 365,867
------------------- -------------------
Loss before income taxes (329,799) (362,720)
Income taxes - -
------------------- -------------------
Net loss $ (329,799) $ (362,720)
=================== ===================
Basic and diluted loss per common share $ (1.52) $ (1.67)
=================== ===================
Weighted average number of common
shares outstanding 217,057 216,596
=================== ===================
Pro forma basic & diluted loss per
common share (1) $ (0.26) $ (0.29)
=================== ===================
Pro forma weighted average number of
common shares outstanding(1) 1,254,680 1,254,219
=================== ===================
</TABLE>
<TABLE>
<CAPTION>
MAY 31, 1998
---------------------------------------
ACTUAL AS ADJUSTED (1)
BALANCE SHEET DATA: -------------- ---------------------
<S> <C> <C>
Working capital $ 105,166 $ 1,255,166
Total assets 187,830 1,337,830
Total liabilities 49,749 249,749
Stockholders' equity 138,081 1,088,081
</TABLE>
- ------------
(1) Adjusted to give effect to the sale of the Securities offered hereby (at
an assumed offering price of $1.00 per Share and 1,000,000 Shares sold)
of the net proceeds therefrom and the $200,000 proceeds from issuance of
a senior secured note to CWC (See "Use of Proceeds") and the exercise
of 37,623 options by management which were granted on June 1, 1997.
31
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was established on May 23, 1997 as a joint venture between
Complete Wellness Centers, Inc. and five senior managers from the health care
industry. The Company was incorporated in the State of Delaware on May 23, 1997
and filed as a foreign corporation to conduct business in the State of Florida
on July 31, 1997. Additionally, the Company organized and incorporated Optimum
Health Services of Florida, Inc. ("OHSOF") (formerly known as Complete Wellness
Independent Physician Association of Florida, Inc), in the State of Florida, on
June 5, 1997 as a wholly owned subsidiary. The business activities conducted
since inception have generally been through OHSOF and are presented herein on a
consolidated basis as the Company.
The Company combines the benefits of a traditional physician network, an
alternative therapy network, and brand name wellness products into an integrated
healthcare service product for health care insurance purchasers, government
agencies, HMOs, or individuals. The Company's products provide the consumer the
ability to obtain these services in an integrated package or as a stand-alone
benefit. Employers may offer these benefits to their employees as an insured
benefit or an out-of-pocket, discounted, preferred provider product. In
addition, the Company develops disease management programs utilizing these
modalities in conjunction with conventional treatments and programs. The Company
incorporates wellness products and services into its product packages. OHS has
the exclusive right of first refusal to market SMOKENDERS(TM) and
Nutri/Systems(TM) products where applicable. The Company has begun marketing its
alternative care programs and products directly to individual consumers.
Creating a system of alternative care under a setting that is familiar
to the consumer creates confidence in the services and increases demand. The
creation of these medically oriented alternative care networks provides for
convenient provider access for consumers to quality alternative care providers.
Partnering with alternative care providers, rather then acquiring them, creates
incentive for the providers to deliver high quality, cost effective care. The
Company provides the member and provider administrative support services
typically found in HMOs to ensure the delivery of a quality product for this new
health system. The Company's development of broad networks mirroring traditional
provider panel standards is one of the only large-scale initiatives in the U.S.
As of May 31, 1998, the Company has approximately 1900 physicians under
contract. There are approximately 276 alternative care therapists under contract
and an additional 225 expected by third quarter 1998. The Company holds
management service contracts with 3 HMOs, a Letter of Intent to contract with an
additional HMO for MSO services, and in negotiations with several other HMOs,
companies, and/or government agencies with target implementation dates of 1998
should such negotiations be successful.
Statements included in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" Section, and in other sections of
this Report and in future filings by the Company with the Securities and
Exchange Commission, in the Company's prior and future press releases and in
oral statements made with the approval of an authorized executive which are not
historical or current facts are "forward-looking statements" made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and are subject to certain risks and uncertainties that could cause actual
results to differ materially from those presently anticipated or projected. The
Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. There are
important risk factors that in some cases have affected and in the future could
affect the Company's actual results and could cause the Company's actual
financial and operating performance to differ materially from that expressed in
any forward-looking statement. The following discussion and analysis should be
read in conjunction with the Consolidated Financial Statements and notes
appearing elsewhere in this report.
32
<PAGE> 33
RESULTS OF OPERATIONS
Managed Care Revenue. During the seven month period from inception to
December 31,1997 and the five month period ended May 31, 1998 the Company had
revenues of $0 and $1,739 respectively. During this period the Company has been
a development stage enterprise and has centered its activity on developing a
provider network. The $1,739 in revenue for the period ended May 31, 1998 was
comprised of contracted fees for primary care services.
Medical Service Expenses. During the seven month period from inception
to December 31, 1997 and the five month period ended May 31,1998 the Company
incurred costs of $0 and $1,428 respectively. These costs are associated with
the capitated payments for primary care services.
Personnel Costs. During the seven month period from inception to
December 31, 1997 and the five month period ended May 31, 1998, the Company
incurred personnel costs of $261,402 and $245,011 respectively. These cost
include employee compensation, employee benefits, payroll taxes and temporary
help. The increase in 1998, on an annualized basis, is due to the hiring of
additional employees in connection with developing the provider network and
credentialing the provider network.
Professional Fees. During the seven month period from inception to
December 31, 1997 and the five month period ended May 31, 1998, the Company
incurred professional fees of $1,916 and $22,928 respectively. Professional fees
primarily consist of contracted Medical Doctors and credentialing professionals.
The increase in 1998, on an annualized basis, is due to retaining a part-time
Medical Director on an independent contractor basis and increased activity of
the credentialing committee, for which members are paid a per meeting hourly
fee.
Rent. During the seven month period from inception to December 31, 1997
and the five month period ended May 31, 1998, the Company incurred rent expenses
of $7,789 and $19,832 respectively. Rent consists of amounts paid for office
space and certain furniture and equipment used by the Company. The increase in
1998, on an annualized basis, is due to increased office space rented and
additional furniture rented, both due to overall Company growth.
Marketing and Network Development. During the seven month period from
inception to December 31, 1997 and the five month period ended May 31, 1998, the
Company incurred marketing and network development expenses of $20,582 and
$34,181 respectively. These costs include automobile expenses, travel and
entertainment, printing costs, marketing expenses, and certain fees and expenses
associated with credentialing the provider network. The increase in 1998, on an
annualized basis, is primarily due to expanded network recruiting efforts,
increase in number of providers being credentialed and the development of
additional marketing materials.
General and Administrative. During the seven month period from inception
to December 31, 1997 and the five month period ended May 31, 1998, the Company
incurred general and administrative expenses of $36,974 and $39,816
respectively. These costs include, among others, dues and subscriptions, office
supplies, postage, repairs and maintenance, telephone and communications. The
overall expenses, as well as the increase in 1998, are related to infrastructure
development, overall growth in the network development and credentialing
functions, and increased personnel.
Depreciation and Amortization. During the seven month period from
inception to December 31, 1997 and the five month period ended May 31, 1998, the
Company incurred depreciation and amortization expenses of $2,276 and $2,671
respectively. The annualized increase in depreciation resulted from the addition
of computer equipment, which tend to have depreciable lives of five years.
Amortization is related to the purchase of credentialing software in 1997.
33
<PAGE> 34
SEASONALITY
The Company believes that its network development activities and payor
negotiating are not significantly affected by seasonality.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced net losses, negative cash flow and an accumulated
deficit each month since its inception. For the period from June 1, 1997 (date
of inception) to December 31, 1997 and for the five month period ended May 31,
1998 the Company had incurred a net loss of $329,799 and of $362,720,
respectively. At May 31, 1998, the Company had working capital of $105,166 and
an accumulated deficit of $692,519. Net cash used in operations for the period
from June 1, 1997 (date of inception) to December 31, 1997 and for the five
month period ended May 31, 1998 was $280,881 and $360,971, respectively.
Negative cash flow for each period was attributable to net losses in each of the
periods during company development. For the period from June 1, 1997 (date of
inception) to December 31, 1997 and for the five month period ended May 31,
1998, the Company used $29,723 and $8,139, respectively, for purchases of
equipment, software and other assets. From June 1, 1997 to May 31, 1998
development costs, capital expenditures and working capital needs of the Company
have been financed through cash contributions of the Managers and significant
cash contributions by Complete Wellness Centers, Inc.
The Company intends to finance its continued development and expansion
strategy with the net proceeds of this Offering. Management believes that the
net proceeds of this Rights Offering (assuming the Rights are fully exercised)
together with the $200,000 advance from CWC and anticipated net cash from
operations will be sufficient to finance the Company's activities for at least
12 months following the date of this Prospectus; however, there can be no
assurance that such net proceeds and cash from operations will be sufficient to
finance the Company's activities for such period. See "Risk Factors -- Possible
Need for Additional Financing," "Use of Proceeds," and "-- General."
In August, 1998, the Company will expand to approximately 4,000 square
feet of space for its operations and executive offices in Pinellas County,
Florida. See "Business -- Property."
NET OPERATING LOSSES
The Company generated a net operating loss carryforward for federal
income tax purposes of approximately $329,000 during the period from June 1,
1997 (date of inception) to December 31, 1997 which expires in 2012. During the
five-month period ended May 31, 1998, the Company generated a net operating loss
carryforward of $361,000 that expires in 2018. A full valuation allowance has
been established to offset any benefit from the net operating loss
carryforwards, since based on the weight of the evidence, it is more likely than
not that some portion or all of the net operating loss carryforwards will not be
realized. These carryforwards may be significantly limited under the Internal
Revenue Code of 1986, as amended, as a result of ownership changes resulting
from this Rights Offering and other equity offerings of the Company.
34
<PAGE> 35
BUSINESS
GENERAL
The Company develops physician networks comprised of traditional medical
and ancillary providers and alternative (or complementary) care providers under
independent Provider Agreements. The Company combines the benefits of a
traditional physician network, an alternative therapy network, and brand name
wellness products into an integrated healthcare service product for health care
insurance purchasers, government agencies, HMOs, or individuals. The Company's
objective is to become a nationally recognized developer and manager of
traditional and alternative care provider networks and the management of the
health care benefits associated with those individuals enrolled under such
benefit plans. As of May 31, 1998, the Company has individual or group Provider
Agreements (or letters of intent) comprising 2,991 provider locations including
primary care, specialty and ancillary, and alternative care.
The Company was incorporated in the State of Delaware in May 1997. The Company's
principal offices are located at 1757 U.S. Highway 19 North, Suite 470,
Clearwater, Florida 33764 and its telephone number is (727) 536-9956. The
Company's web site is: http://www.optimum-health.net.
INDUSTRY BACKGROUND
Until recently healthcare in the United States has been comprised of a
fragmented system of health providers including individuals and small groups of
physicians. The advent of managed care has created new large-scale provider
systems such as IPAs, PHOs, PSOs and PPMs. The entities typically operate as a
Management Services Organization. The Management Services Organization (MSO)
industry has developed throughout the 1990's where it is a multi-billion dollar
industry with several publicly traded organizations. These companies perform
administrative and medical management services for managed care organizations
and self-insured populations. They operate as single specialty carve-out
networks such as dental, vision and mental health and multi-specialty networks
for managing all lines of healthcare services. The advent of Provider Sponsored
Organizations (PSO) legislation for servicing the Medicare population will
create more public awareness of these companies which currently operate with a
low level of recognition. The application of this model as it relates to
alternative healthcare and alternative medicine is relatively new. These
strategies have not been applied to this fragmented model of non-traditional
healthcare. Until recently, the demand for these services and for companies
providing these services on a large scale, with the exception of chiropractic
services, had not been known. The 1993 Eisenberg study, which showed 1 in 3
Americans access alternative care and that it was an estimated $15 billion
dollar industry, spurred new growth in the industry. Two major events led to
greater awareness and demand. First, two best selling books by Author Dr. Andrew
Weil on alternative healthcare treatments and his being named one of Time
Magazine's most influential people in the United States in 1997. Second, Oxford
Health Plan's integration of an alternative healthcare product into managed
care.
While public demand and awareness is high, cohesive, quality delivery
systems for these services have not been available. The healthcare industry is
looking for alternative healthcare models which parallel the utilization
management, credentialing, quality and payment systems typically associated with
traditional health care. These have not been available. Payors are seeking to
outsource this product in a manner similar to dental, mental health and vision
benefits to companies focused on delivering the service. The ability to create
these delivery systems and have them meet the rigorous quality standards of a
traditional delivery systems is the challenge and the goal of this industry, and
specifically, the Company.
OPERATING STRATEGY
The Company incorporates a strategy that applies the knowledge and
methods used for traditional health services in alternative health care. The
Company develops both traditional and alternative healthcare networks for
incorporation under a traditional setting of care. Through the application of
traditional standards and provider criteria to alternative health care providers
and services it is easier to integrate alternative care into current health
35
<PAGE> 36
care delivery system structures. Providing management services for both
traditional and alternative care products allows payors to be more willing to
contract with the Company over competitors. Management believes it has
demonstrated knowledge of the current systems that allow for more acceptance of
its alternative care product because it understands and addresses the issues
commonly raised by payors in the integration of alternative care in a
traditional health care setting. Through the incorporation of alternative health
care and wellness programs the Company intends to improve health outcomes and
lower overall health care costs. These savings will result in increased
profitability of traditional lines of business and demand for alternative care
products.
The Company has developed a discounted PPO product of complementary
alternative care providers, products and services, including the Wellness
Passport card, which the Company recently introduced in the local Florida
market. In July, 1998, the Company signed its first employer group with
approximately 200 employees.
The Company intends to develop a more comprehensive stand-alone insured
product (versus a discounted network product) of complementary alternative care
products and services. As such, the Company intends to submit to the State of
Florida for licensure as a Pre-Paid Limited Health Services Organization
("PLHSO") in order to deliver this insured product. Under current Florida law,
the Company may apply for its PLHSO license to provide chiropractic and mental
health benefits on an insured basis and the Company hopes to augment this with a
discounted alternative care network.
OPTIMUM HEALTH SERVICES BENEFITS
Members: Provision of access to credentialed alternative health care and
wellness products and services on a discounted fee-for-service basis at the
point of purchase, the Company believes the Wellness Passport will be attractive
to Members because of its flexibility and ease of use. Membership in the
Wellness Passport program will be unrestricted, thereby providing potential
benefits to individuals who, because of their medical history, age or
occupation, or lack of healthcare coverage of these services are otherwise
unable to obtain such benefits. The Wellness Passport can be used as often as
each participant wishes. In addition, in the non-insured care programs Members
have little or no paperwork or claims to prepare, no waiting periods, and no
prior authorizations. Moreover, in certain cases, membership in the Company's
programs will entitle Members to benefits that would otherwise be unavailable or
difficult to obtain such as our mail order natural supplements program which is
currently being developed. Where a Member may already have the Wellness
Passport, it will entitle Members to various discounted products and services
that would typically be excluded from traditional health care insurance. Our
in-house medical and health economics expertise allow us to integrate this
program to meet the needs of insurers and managed care payors. In addition, it
provides members with low cost care to large numbers of healthcare
practitioners. This is a commodity in today's restrictive managed care provider
networks
Providers and Networks. The Company believes that health care providers
will be attracted to the Company's program because it will enable them to obtain
additional patients who are Members while allowing Providers to retain their
existing patient base. In addition, it will open new insurance markets for
providers not previously accessible. Although Members generally pay fees and
charges less than those of non-Members, the incremental business from Members
is an important revenue source for Providers, with little or no increase in
their overhead costs. However, there can be no assurance that Providers will
continue to participate in the Networks even if their participation results in
such an increase in revenues since the Member portion of their business may be
relatively less profitable. In addition, the Company believes that its program
will be attractive to provider networks because it may increase the likelihood
that Providers will affiliate with provider networks in order to have access to
Members, and accordingly, provider networks may realize increased revenues from
such affiliations and it may provide a new patient base.
Payors. The Company believes that the Wellness Passport will assist
payors in their efforts to attract and retain employees by enabling them to
offer a more complete health care benefits package. In addition, due to the low
cost of the Wellness Passport , payors may even choose to offer it to part-time
employees who often are not eligible for health care benefits offered to
full-time employees. Moreover, because the Wellness Passport may be offered as a
discount card and not an insurance product, payors can offer discounts to their
employees or members
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without bearing any economic risk over the annual cost of the Wellness Passport.
It may also increase productivity and decrease absenteeism. Similarly, as
competition between HMOs for participants continues to intensify, the Company
believes that the Wellness Passport will enable HMOs to offer a more complete
and therefore more attractive array of potential health care benefits. As an
insured benefit it may reduce the utilization of high cost medical services
ultimately lowering insurance premiums while increasing employee satisfaction.
In addition, this satisfaction could lead to increased HMO or other payor
enrollments.
EXPANSION STRATEGY
The Company intends to expand its contracting efforts from Florida to
states that have pro-alternative care legislation and consumer demand. As demand
is increased market expansion efforts will grow. At this time, The Company is
currently operating in Central and South Florida.
SERVICES AND OPERATIONS
Provider Services Department
The Company has a division of network recruiters and provider services
representatives who recruit and service contracted providers in areas which are
underserved by most managed care plans. The most important issues that face
providers today are fair compensation and servicing their day to day operational
issues. The Company's Department of Provider Services are able to meet these
challenges where most managed care plans historically have been unsuccessful.
Network Recruitment
The Company's network management division includes the network
development and strategic planning for the recruitment of affiliated providers.
The Company structures and negotiates risk-bearing contracts on behalf of the
affiliated providers. The main goal of this division is provider recruitment.
The Company typically establishes an MSO relationship with an independent
practitioner, providing administrative support services for the providers. The
Company has built an integrated provider network consisting of traditional
practitioners and complementary alternative care therapist. The traditional
network consists of primary care physicians (internal medicine, family practice,
general medicine and pediatricians), specialty and ancillary providers. The
complementary alternative care network consists of providers, such as;
acupuncture, licensed massage therapist, dietitians/nutritionist, yoga/tai chi
and chiropractic. It is our intention to continue expanding these modalities,
especially in Alternative care. The affiliated provider is responsible for
completing a credentialing application and provider agreement in the process.
The contractual arrangement is non- exclusive and no risk to the provider. There
are numerous advantages for providers to join our network, such as: the Company
eliminated the administrative burden of individually credentialing, and
negotiating agreements directly with each new payor. There is no fee to join our
network. The reimbursement to the affiliated providers is flexible and
competitive.
Provider Services
The goal of the Provider Service Representatives is to build a strong
relationship by servicing each affiliated provider. A typical payor focuses on
sales, where the Company's focus is on servicing the affiliated providers.
Therefore, as a servicing arm, we enhance the relationship between the provider
and payor. All network providers have had face to face meetings with the
Company's representative. During these meetings, the providers are educated on
the Company 's philosophy and intent to build a truly integrated medical
delivery system. The credentialing process is in accordance with NCQA
guidelines. After the provider's credentials are approved, an in-service is
conducted to educate our affiliated providers on the operational procedure of
the Company. The provider services representatives are available for a monthly
meeting, follow-up training and day to day telephone support as needed.
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Sales and Marketing
The Company intends to rely primarily upon the services of in-house
staff, independent sales representatives, including brokers, agents, consumer
marketing organizations and associations, to market the Wellness Passport card.
The Company anticipates that such arrangements will generally provide for a
commission based upon a percentage of sales of the Wellness Passport, which
commission is expected to range from 10% to 50% of the aggregate sales price.
The Company believes that there are a large number, of independent brokers and
other agents nationwide with whom the Company may establish relationships. The
Company intends to continue to contract with additional independent brokers in
the future and believes that certain of its Network's may provide the Company
with access to additional independent brokers. In addition, the Company
maintains an in-house sales force that currently consists of three salespersons,
and the Company intends to hire additional salespersons as needed in the near
term.
The Company intends to market the Wellness Passport card to
corporations, insurance carriers, third party administrators, corporations,
HMOs, preferred provider organizations, reinsurers, government agencies and
unions, which have, or have access to, a large number of potential Members. The
Company believes that its use of independent brokers and third party
administrators will not only provide immediate access to specific organizations
with potential Members.
The Company anticipates that payors will either fund the Wellness Passport on
behalf of their members or employees so that every eligible individual in the
organization becomes a Member or they will offer the Wellness Passport to their
members or employees as an option where each individual will be responsible for
purchasing the Wellness Passport and pay an annual fee (either directly or
through a payroll deduction plan). The Company also expects to market the
Wellness Passport directly to potential Members, particularly in cases where a
payor offers the Wellness Passport as an unpaid option to its members or
employees.
The Company also intends to market the Wellness Passport as an
"affinity" or private label card to selected large payors, including
corporations and consumer marketing organizations. Pursuant to such affinity
card arrangements the payor would be able to custom design, and place its own
name on, the Wellness Passport card. In certain cases, the Company's name may
not appear on the Wellness Passport, although the Company would provide access
to its Networks, as well as all other requested services. The Company believes
that Wellness Passport cards will be attractive to certain payors because they
will enable the payor to more closely identify itself with the benefit provided
to the Member. Moreover, the Company believes that the pre-existing
relationship, or affinity, between the payor and its employees or members may
enhance the likelihood that a potential Member will purchase the Wellness
Passport.
The Company's ability to provide quality customer service is a key
element in the Company's marketing efforts. The Company believes that the
Management Information System will enable the Company to quickly and efficiently
respond to requests of Members and payors and will be critical to the Company's
sales and marketing efforts.
The Company anticipates that its marketing efforts, and the expenses
associated therewith, will be heavily concentrated in the first few years of its
operation. The Company's marketing efforts will emphasize the substantial
potential discounts to Members through their use of the Wellness Passport, as
well as the wellness products and services which are included in the Company's
Networks.
Credentialing of Providers
The Company enters into agreements with licensed, independent providers
for both medical and alternative care services and facilities to provide
healthcare services in an efficient and cost effective manner. The Company is
committed to continuously improving the quality of patient care and serving the
communities in which it provides these services. Credentialing policies and
procedures have been developed to ensure that a systematic approach to the
evaluation and monitoring of the Company's credentialing process of
participating
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providers. The screening and credentialing process will allow the Company to (i)
screen providers to determine if all Company application requirements are met;
(ii) obtain and maintain provider professional information; (iii) enable due
process of those providers who do not meet the Company's credentialing criteria;
and (iv) to assess the ability of the providers to meet qualifications and
standards demonstrating their ability to deliver high quality healthcare and
medical services. These requirements are designed to meet or exceed the
standards for credentialing established by the National Committee on Quality
Assurance (NCQA).
The Company utilizes a provider application that includes a mechanism by
which essential information as to current licensure, relevant training and/or
experience, current competence, and health status is verified for each specific
contracted provider. This information is attested to via the applicant's
signature and is used by the Company's credentialing committee to assess the
applicant's ability to deliver quality healthcare and service. The Company
primary source verifies, e.g., verifies via a written notice from its' initial
source, a substantial portion of each provider's credentials including, but not
limited to, medical education, residency, hospital staff affiliations, license
to practice, and insurance coverage.
Every Provider will have a credentialing file that contains information
obtained for verification for initial credentialing and recredentialing. All
files will remain in a confidential and secure manner, which is defined as,
locked file cabinets after business hours. Any release of information can be
done if written authorization is obtained from the Provider. See policies
regarding confidentiality.
The Company will perform primary source verification of credentials, and
other such procedures as may be applicable, for each prospective licensed,
independent provider and facility which falls under its scope of authority prior
to the provider or facility being authorized to provide healthcare. Such
verification, or recredentialing, shall be performed at least once every two (2)
years thereafter.
Claim Management
The Company is a licensed third party administrator in the State of
Florida and possesses claim processing and claim review processes as they relate
to the payment of medical services. These capabilities include the determination
of member eligibility, member healthplan benefits, contract management, the
payment of professional physician services and hospital and outpatient facility
charges. The Company has developed claim management policies and procedures to
ensure that a systematic approach to the collection, evaluation, and payment of
claims incurred by members affiliated with the Company administered by
participating providers.
As a prerequisite to many payor relationships, the Company has the
ability to provide encounter data in a variety of formats including those
required by NCQA for the submission of its' Healthplan Employer Data and
Information Set (HEDIS). HEDIS is a set of standardized performance measures
designed to ensure that purchasers and consumers of healthplan services have the
information they need to reliably compare the performance of managed healthcare
plans. In addition, the Company has the ability to provide analytical data
gathering assistance to contracted payors for any state or federal filings
required for their books of business as it applies to relationships with the
Company.
Utilization Management
The Company has established a utilization management program designed to
ensure that healthplan members affiliated with the Company are provided with
highest quality, cost effective healthcare. This program includes guidelines
established and approved by the Company's utilization management committee that
encourage and require participating providers to emphasize preventative
healthcare and proper treatment plans while reducing and eliminating the
utilization of unnecessary procedures, testing, hospital stays, and surgeries.
All specialist referrals and hospital stays, with the exception of emergency
care, requires prior review and authorization, concurrent review, and/or
retrospective review by the Company's trained staff of medical professionals
directed by the Company's Medical Director and staff of utilization review and
case management nurses.
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To perform the services involved with the utilization management
program, the Company holds a license as a Private Review Agent in the State of
Florida. The State of Florida requires this to ensure that all programs of
utilization review comply with the promotion and delivery of quality healthcare
in a cost-effective manner. In order to comply with this licensing requirement,
the Company developed its' utilization management program in a manner to (i)
foster greater coordination between participating providers and the Company's
staff of utilization review nurses; and (ii) protect patients and insurance
providers by ensuring that utilization review nurses are qualified to perform
utilization review activities and to make informed decisions on the
appropriateness of medical care. The utilization management committee reviews
department policies and procedures on a monthly basis to ensure that these
characteristics are satisfied.
Management Information Systems
The Company currently utilizes several state of the art technologies to
host a Medical Management Information System ("MMIS") and member tracking
system. These systems include a direct Internet connection, high-speed servers
and wide area network. The Company expects to implement a network communication
system that will enable direct provider access to the MMIS system through the
Internet. The Company has completed a 1-year due diligence process to select a
software partner to develop its Medical Management Information System ("MMIS")
and Network Administration System. The Company believes that these systems will
(i) facilitate its ability to process member applications and access member and
provider data and (ii) enhance the Company's customer service capabilities. The
MMIS and Network Administration System will contain information relating to
members, such as eligibility in the respective plan, services and products
available to members, and discounts available to the member for services and
products, locations of providers and utilization data provided to the Company by
each of the providers in the Network. The Company believes that the two systems
will enable it to administer members electronically, quickly respond to
information requests from members, payors, and providers, assist members and
providers in locating the nearest providers and facilities and facilitate
billing and data processing. The Company currently provides the MIS division for
Complete Wellness Centers, Inc. which include the clinical data repository, web
site housing and development, interoffice communications, and corporate wide
area network.
AGREEMENTS WITH PROVIDERS AND OTHER LICENSED PRACTITIONERS
The Company has entered or intends to enter into agreements with a
variety of healthcare providers including primary care physicians, specialist
physicians, ancillary providers, hospitals, and complementary and alternative
medicine (CAM) practitioners. The terms of these agreements extend through
December 31st of the year that the agreement was entered into and is
automatically renewable, unless either party to the agreement delivers notice
of termination to the other at least ninety (90) days prior to the effective
date of the termination. All provider agreements are not executed until such
time that all required credentials have been satisfactorily reviewed and the
Company's Credentialing Committee has elected to approve the provider for
network participation.
The Company enters into agreements with CAM practitioners that are
licensed, wherever possible, by the State of Florida. This includes, but is not
limited to, acupuncturist physicians, chiropractic physicians, nutritionists,
and massage therapists. The Company requires all participating CAM practitioners
to adhere to the same quality and administrative standards that the traditional
provider network observes including the filing of encounter data, member
satisfaction, and member availability standards. In addition, the Company
provides assistance, through its' provider relations functions, to the CAM
practitioners through education and guidance with respect to the managed care
marketplace. This includes understanding utilization protocols, the filing of
HCFA approved claim forms, and maintaining the Company's credentialing standards
for network participation.
The Company enters into agreements with primary care physicians in
several different manners depending on group size, primary area of primary
specialty, and geographic location. The Company continues to recruit primary
care physicians that are open-minded to the CAM healthcare services provided by
the contracted CAM practitioners. This is the foundation of the Company's
objective to open new access points for healthplan
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members to the CAM therapies, thereby creating a fully integrated delivery
system of traditional and alternative healthcare providers functioning together
as a single unit in the managed care marketplace. This contributes to the
Company's mission to achieve the goal of optimal patient wellness through high
quality, cost-effective healthcare provider alternatives.
The primary care physician, in general, receives a capitation payment
based on the number of members assigned by contracted payors and/or the Company.
Contracted primary care physicians may choose to enhance their capitation
payment by electing to render certain non-capitated office based tests,
emergency department, or hospital based care to their assigned members, on a
capitated basis. In addition to the capitation payment, primary care physicians
are entitled to additional compensation based on the successful medical
management of referrals for professional services to their assigned members.
Primary care physicians may also be awarded a bonus to their capitation payment
for achieving certain membership levels as they pertain to the agreement entered
into with the Company.
In order to accommodate the introduction of managed healthcare into
geographic regions with low managed care penetration or experience, the Company
has restructured its' standard primary care physician agreements in a manner
acceptable to these region's primary care providers. To reduce risk factors that
capitation payments typically present, the Company has structured these
agreements with cost containing methodologies to prevent substantial material
risk to the Company and the primary care physicians for these services.
Specialist physicians and ancillary providers contract with the Company
to provide medical services to members and are compensated on a discounted
fee-for-service basis. Hospitals and affiliated medical facilities contract with
the Company and/or contracted payors to provide both inpatient and outpatient
services to members on a fee-for-service or per diem basis representing a
significant discount to customary charges.
The Company develops competitive primary care and specialist physician
compensatory patterns within the geographic areas that those physicians are
located. These patterns are applied to both capitated and fee-for-service
reimbursement provisions frequently utilized by the Company in its' contracting
strategies. Differences in these patterns between geographic areas have been
created in response to regional variances in the consumer pricing indices (CPI)
as well as overall marketplace competitiveness.
GOVERNMENT REGULATION
Various state and federal laws regulate the relationship between
providers of health care services and physicians, and, as a business in the
health care industry, the Company is subject to these laws and regulations. The
Company is also subject to laws and regulations relating to business
corporations in general. Although many aspects of the Company's business
operations have not been the subject of state or federal regulatory
interpretation, the Company believes its operations are in material compliance
with applicable laws. There can be no assurance, however, that a review of the
business practices of the Company or payor or Provider relationships by courts
or regulatory authorities would not result in a determination that could
adversely affect the operations of the Company, or that the health care
regulatory environment will not change so as to restrict the Company's
operations or its ability to expand them. See "Risk Factors."
Licensure. Every state imposes licensing requirements on individual
physicians and on certain other types of health care providers, service
organizations and facilities. Many states require regulatory approval and/or
licensing, including licenses to services which entail the payment of claims or
the performance of utilization review services. While the performance of
management services on behalf of a medical practice does not currently require
any regulatory approval, there can be no assurance that such activities will not
be subject to licensure in the future. Although the Company currently maintains
licensure for providing services which entail the payment of claims and the
performance of utilization review services, the Company's day-to-day business
operations have not been the subject of state or federal regulatory review. The
Company believes its operations are in material compliance with applicable laws.
There can be no assurance, however, that a review of the business practices of
the Company or payor or Provider relationships by courts or regulatory
authorities would not
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result in a determination that could adversely affect the operations of the
Company, or that the health care regulatory environment will not change so as to
restrict the Company's operations or its ability to expand them. See "Risk
Factors."
Corporate Practice of Medicine. The laws of many states prohibit
business corporations from engaging in the practice of medicine, such as through
employment arrangements with physicians. These laws vary from state to state and
are enforced by the state courts and regulatory authorities with broad
discretion. The Company will not employ physicians to practice medicine, will
not represent to the public that it offers medical services, and will not
control or interfere with the practice of medicine by physicians rendering
services to the Company's enrollee's. Accordingly, the Company believes that its
current and intended operations do not and will not violate applicable state
laws regulating the unlicensed practice of medicine by a business corporation.
However, because the laws governing the corporate practice of medicine vary from
state to state, any expansion of the operations of the Company to a state with
strict corporate practice of medicine laws may require the Company to modify its
operations with respect to one or more of such practices, which may result in
increased financial risk to the Company. Further, there can be no assurance that
the Company's arrangements will not be successfully challenged as constituting
the unauthorized practice of medicine or that certain provisions of the
management services agreements or Provider Agreements will be enforceable. See
"Risk Factors -- State Laws Regarding Prohibition of Corporate Practice of
Medicine."
Fee-Splitting Prohibitions. The laws of some states prohibit physicians
from splitting professional fees. These statutes are sometimes quite broad and
as a result prohibit otherwise legitimate business arrangements. Penalties for
violating these fee-splitting statutes or regulations may include revocation,
suspension, or probation of a physician's license, or other disciplinary action,
as well as monetary penalties. Alleged violations of the fee-splitting laws have
also been used successfully by physicians to declare a contract to be void as
against public policy. While the Company believes that its Provider compensation
arrangements comply with state fee-splitting laws, there can be no assurance
that these compensation arrangements will not be construed by state or judicial
authorities as being proscribed by the fee-splitting laws.
State Anti-kickback and Self-Referral Laws. A number of states in which
the Company conducts business or plans to conduct business (including Florida,
Illinois and Maryland) have enacted laws that prohibit the payment for referrals
and other types of kickback arrangements. Such state laws typically apply to all
patients regardless of their insurance coverage. In addition, a number of states
(including Florida, Illinois and Maryland) have enacted laws which to varying
degrees prohibit physician self-referrals. Illinois, for example, has a broad
self-referral law which regulates all health care workers (including
physicians), regardless of the patient's source of payment. Subject to certain
limited exceptions, the Illinois law prohibits referrals for health services
provided by or through licensed health care workers to an entity outside the
health care worker's office or group practice in which the health care worker is
an investor, unless the health care worker directly provides health services
within the entity and will be personally involved with the provision of care to
the referred patient. In April 1992, the State of Florida enacted a Patient
Self-Referral Act that severely restricts patient referrals for certain
services, prohibits markups of certain procedures and requires health care
providers to disclose ownership in businesses to which patients are referred.
The Company believes it is likely that more states will adopt similar
legislation. The Company believes that its operations comply with current
statutory provisions, although there can be no assurance that state
anti-kickback and self-referral laws will not be interpreted more broadly or
amended in the future to be more expansive. In addition, expansion of the
operations of the Company to certain jurisdictions may require it to comply with
such jurisdictions' regulations, which could lead to structural and
organizational modifications of the Company's form of relationships with managed
practices. Such changes, if any, could have an adverse effect on the Company.
State Regulation of Insurance Business and HMOs. Laws in all states
regulate the business of insurance and the operation of health maintenance
organizations, or HMOs. Many states also regulate the establishment and
operation of networks of health care providers. Many state insurance
commissioners have interpreted their state's insurance statutes to prohibit
entities from entering into risk-based managed care contracts unless there is an
entity licensed to engage in the business of insurance, such as an HMO, in the
chain of contracts. An entity not
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licensed to engage in the business of insurance that contracts directly with a
self-insured employer in such a state may be deemed to be engaged in the
unlicensed business of insurance. While these laws do not generally apply to the
hiring and contracting of physicians by other health care providers, there can
be no assurance that regulatory authorities of the states in which the Company
operates would not apply these laws to require licensure of the Company's
operations as an insurer, as an HMO, or as a provider network. The Company
believes that it is in compliance with these laws in the states in which it does
business, but there can be no assurance that future interpretations of insurance
and health care network laws by regulatory authorities in these states or in the
states into which the Company may expand will not require additional licensure
or a restructuring of some or all of the Company's operations.
Federal Medicare and Medicaid Related Regulation. There are a number of
federal laws prohibiting certain activities and arrangements relating to
services or items which are reimbursable by federal or state funded health care
programs. Certain provisions of the Social Security Act, commonly referred to as
the "Anti-kickback Amendments," prohibit the offer, payment, solicitation or
receipt of any form of remuneration either in return for the referral of federal
or state health care reimbursement program patients or patient care
opportunities, or in return for the recommendation, arrangement, purchase, lease
or order of items or services that are covered by such federal or state health
care funded programs. The Anti-kickback Amendments are broad in scope and have
been broadly interpreted by courts in many jurisdictions. Read literally, the
statute places at risk many otherwise legitimate business arrangements,
potentially subjecting such arrangements to lengthy, expensive investigations
and prosecutions initiated by federal and state governmental officials.
Violation of the Anti-kickback Amendments is a felony, punishable by substantial
civil fines and imprisonment for up to five years. In addition, the Department
of Health and Human Services may impose civil penalties excluding violators from
participation in federal or state funded health care reimbursement programs.
Although the Company believes that its current operations are not in violation
of the Anti-kickback Amendments, there can be no assurance that regulatory
authorities will not determine that the Company's operations are in violation of
the Anti-kickback Amendments. Significant prohibitions against physician self-
referrals for services covered by Medicare and Medicaid programs were enacted,
subject to certain exceptions, by Congress in the Omnibus Budget Reconciliation
Act of 1993. These prohibitions, commonly known as "Stark II," amended prior
physician self-referral legislation known as "Stark I" (which applied only to
clinical laboratory referrals) by significantly enlarging the list of services
and investment interests to which the referral prohibitions apply. Effective
January 1, 1995 and subject to certain exceptions, Stark II prohibits a
physician or a member of his immediate family from referring Medicare or
Medicaid patients to any entity providing "designated health services" in which
the physician has an ownership or investment interest, or with which the
physician has entered into a compensation arrangement. The designated health
services include the provision of clinical laboratory services, radiology
services, including magnetic resonance imaging, computerized axial tarrography
scans and ultrasound services, radiation therapy services, physical and
occupational therapy services, durable medical equipment, parenteral and enteral
nutrients, equipment and supplies, orthotics and prosthetic devices and
supplies, outpatient prescription drugs, home health services and inpatient and
outpatient hospital services. The Company does not provide any of these services
as of the date of this Prospectus, although it may do so in the future. The
penalties for violating Stark II include a prohibition on Medicaid and Medicare
participation and reimbursement, and civil penalties of as much as $15,000 for
each violative referral and $100,000 for participation in a "circumvention
scheme." A physician's ownership of publicly traded securities of a corporation
with equity exceeding $75 million as of the end of its most recent fiscal year
is not deemed to constitute an ownership or investment interest in that
corporation under Stark II. The Company believes that its operations currently
are not in violation of Stark I or Stark II; however, the Stark legislation is
broad and ambiguous. While the Company believes it is in compliance with the
Stark legislation, future regulations could require the Company to modify the
form of its relationships with payors or Providers. Moreover, the violation of
Stark I or II by the Company, any of its payors or Providers could result in
significant fines and loss of reimbursement which would adversely affect the
Company.
COMPETITION
The alternative care and management services business is competitive. At
this time there are no major national provider of alternative health care
services. The Company competes with regional and local providers
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for alternative care and wellness services. Furthermore, the Company competes
with traditional managers of health care services such as hospital and HMOs for
the recruitment of providers. While competition is generally based on cost and
quality of services, it is not possible to predict the extent of competition
that present or future activities of the Company will encounter because of
changing competitive conditions, changes in laws and regulations, government
budgeting, technological, and economic developments and other factors. There are
certain companies, including hospitals and insurers, which are expanding their
presence in the alternative care and wellness program areas and have access to
greater financial resources than the Company.
EMPLOYEES
As of May 31, 1998, the Company had 13 full time employees and one
part-time physician (Medical Director) under an independent contractor
agreement. The Company's 13 employees consist of 6 in network recruiting, sales
and marketing, 2 in provider credentialing, 2 in finance and administration, 2
in information systems and 1 in operations. None of the Company's employees are
represented by any labor union. The Company believes that relations with its
employees are satisfactory.
PROPERTIES
The Company does not own any property. The Company's offices are located
in approximately 2,400 square feet of office space in Clearwater, Florida. The
Company pays $3,609 per month rent, for the first 12 months, under a 5-year
lease agreement beginning on February 4, 1998. The lease gave the Company
certain expansion options, which the Company has exercised, to be effective on
or about August 1, 1998 under a new 5-year lease term. Under the new lease and
in the existing office complex, the Company has agreed to establish new offices
in 6,265 square feet. During months 1 through 5 of a 60-month lease term, the
space will consist of 4,000 square feet at a monthly rental amount of $6,000.
The monthly rent shall increase to $9,397.50 only if the entire 6,265 square
feet becomes occupied during months 1 through 5 otherwise the rent shall
increase to $9,397.50 effective January 1, 1999 for 7 months. Monthly rent
increases approximately 3% per year for the remainder of the lease term. The
original monthly lease payments on the 2,400 square feet become null and void.
See footnote to financial statements.
PROFESSIONAL LIABILITY
The Company contracts with health care practitioners for the delivery of
health care services to the public. They are exposed to the risk of professional
liability claims. The Company does not itself provide such services or control
the provision of health care services by the health care practitioners or their
compliance with regulatory and other requirements in that regard. The Company
might nevertheless be held liable for medical negligence on their part. The
Company's Provider Agreements with the health care practitioners and ancillary
providers require them to maintain, at their expense, professional liability
insurance for themselves and the licensed health care practitioners employed by
or otherwise associated with them. Amounts vary according to their specialty but
in no case should their coverage limits be less than those amounts, if any, as
may be required by applicable state law. Primary Care Physician's for example,
are generally required by the Company to carry $250,000 per occurrence and
$750,000 in the aggregate. In addition, the Company maintains general liability,
workers' compensation, association professional liability insurance and third
party administrators professional liability insurance. The Company's association
professional liability insurance is limited to $1,000,000 per wrongful act and
$1,000,000 in the aggregate. The third party administrators professional
liability insurance is limited to $1,000,000 per wrongful act and $3,000,000 in
the aggregate. The professional liability insurance is provided under a
"claims-made" policy. The policy provides coverage for covered claims made
during the policy's term and does not provide coverage for losses occurring
during the policy's term for which a claim is made subsequent to the policy's
termination. Finally, the licensed health care practitioners, by Agreement, hold
the Company harmless against liability and expenses for or related to
professional liability claims arising out of any negligent act or wrongful
conduct of the health care practitioner or any of their personnel. There can be
no assurance, however, that the Company, its employees, or the licensed health
care practitioners contracted with the Company will not be subject to claims in
amounts that exceed the coverage limits or that such coverage will be available
when
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needed. Further, there can be no assurance that professional liability insurance
will continue to be available to the Company in the future at adequate levels or
at an acceptable cost to the Company. A successful claim against the Company in
excess of the Company's insurance coverage could have a material adverse effect
upon the Company's business. Claims against the Company, regardless of their
merits or eventual outcome, also may have an adverse effect upon the Company.
LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is subject.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS, AND KEY EMPLOYEES
The names and ages of the directors, executive officers, and key
employees of the Company, and their positions with the Company, are as follows:
<TABLE>
Name Age Position
- ---- --- --------
<S> <C> <C>
Jason M. Patchen........................ 29 Chairman of the Board, President, Chief Executive
Officer and Director
David A. Sherwin........................ 41 Treasurer, Vice President of Finance and Administration
Christopher M. Grady ................... 30 Secretary, Vice President of Information Services
Christian E. Miller .................... 28 Vice President of Operations
Theresa M. May.......................... 38 Vice President of Corporate Development
Trevor Rose, M.D........................ 39 Medical Director (1)
C. Thomas McMillen...................... 46 Director
To be announced ....................... Director
</TABLE>
- ------------------------------------------
(1) Currently serves on an independent contractor basis.
Jason M. Patchen, M.B.A., A.C.H.E., a Company co-founder, has been
President and a Director since its inception. He also became Chief Executive
Officer in November 1997. Mr. Patchen began his career in healthcare in the
mid-1980's developing hospital information systems. In the early 1990's, Mr.
Patchen served as a legislative aide in the New York State Legislature and as a
market researcher. While completing his master's in business administration, he
worked as a New York State Health Department regulator with compliance oversight
responsibility of national managed care companies. In 1994 he left the State to
assume the acting Chief Financial Officer position of a start-up HMO in Western
New York State. Upon implementation, Mr. Patchen assumed the role of Executive
Director. In a little over one year, he grew the membership from early
implementation to over 24,000 members. Upon the sale of the company to Coastal
Physician Group, Inc., he assumed the role of Vice President of Corporate
Development for Heritage Medical Systems. While at Heritage Medical Systems Mr.
Patchen's primary responsibility was the development of the Southeast United
States, a market that Heritage had not penetrated. In a period of nine months,
Mr. Patchen developed a provider network contracting more than 1,100 physicians
and had secured HMO full risk contracts for more than 65,000 covered lives. His
work in alternative care has been the subject of several articles, and he was
recently named one of the 25 most influential people in healthcare by the
Florida Medical Business Journal.
David A. Sherwin, C.P.A., a Company co-founder, has been the Vice
President of Finance since its inception. Mr. Sherwin is responsible for the
Company's business planning and infrastructure development, accounting, finance,
credentialing (through February 1998), and human resources functions. Mr.
Sherwin was appointed the Chief Compliance Officer of Complete Wellness Centers,
Inc. in February 1998. He recently served as Vice President of Finance &
Administration of a start-up Integrated Delivery System serving 40,000 covered
lives. His additional experience includes: the international accounting firm of
Deloitte, Haskins & Sells; Financial Compliance section of a Medicare risk
bearing HMO; Chief Operating Officer and Vice President of Finance &
Administration of a single-specialty MSO with members nationally; health care
consulting experience;
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<PAGE> 47
court appointed receiver in, among others, the health care arena. Mr. Sherwin
has over twelve years managed care experience. He holds a B.S. from the
University of Florida and was awarded his Certified Public Accountant
certification from the State of Florida.
Christopher M. Grady, C.N.A., a Company co-founder, has been Vice
President of Information Systems since its inception. Mr. Grady is responsible
for the design and development of the medical management information system as
well as the Company wide office and financial management systems. His duties
include developing, analyzing, and directing the Company's information
technology structure. Mr. Grady recently became Director of Information Services
for Complete Wellness Centers, Inc. Mr. Grady has over five years of information
technology experience with health and insurance companies. Mr. Grady recently
served as the Director of Information Systems for Heritage Southeast Medical
Group, a national medical management services organization managing over 70,000
HMO enrollees. Prior to Heritage, Mr. Grady served as a senior consultant to
several hospitals and healthcare organizations in New York State. During these
appointments, Mr. Grady designed and implemented information systems in several
startup companies, created and upgraded proprietary information systems for HMOs
and MSOs nationally, and re-engineered hospital information systems to improve
workflow. Mr. Grady is a Certified Novell Administrator and is pursuing his
MCSE. He holds a B.S. from Clarkson University.
Christian E. Miller, M.A., a Company co-founder, has been Vice President
of Operations since its inception. Mr. Miller is responsible for determining and
monitoring all medically related premium and expense accruals and reserves, the
development of the complementary alternative medicine provider network (through
January 1998), the operational success of all non-clinical utilization review
and management, the claim management functions, credentialing and the
operational integration of the medical management information system. He is a
recent Vice President of Finance and Medical Economics for Heritage Medical
Systems. His responsibilities included the maintenance of all regional medical
accruals and reserves, administrative expense reporting, and the development and
negotiation of financial proposals to several HMO's. Mr. Miller also served as
regional Director of Finance for Heritage New York Medical Group, serving over
25,000 covered lives. He has held past positions as a chief actuarial and
financial manager in both health maintenance organizations (HMOs) and management
service organizations (MSOs). Mr. Miller holds a Master of Arts in Mathematics
from the State University of New York at Potsdam, and has completed a
substantial portion of his doctorate in mathematics at the State University of
New York at Buffalo.
Theresa M. May is the Vice President of Corporate Development. Ms. May
is responsible for negotiating managed care contracts. She is also responsible
for the strategic planning and implementation of the network development and
provider relations departments. Ms. May has over 18 years experience in
healthcare/insurance/managed care companies such as Metropolitan Life, Crown
Life, Humana Health Care Plans and Heritage Southeast Medical Group. Ms. May was
the Contract Manager for the Florida Spine Institute where she represented an
eighteen-member multi-specialty group of physicians. Ms. May has managed the
network development and provider relations departments for a management service
organization with membership exceeding 50,000 lives. Her background representing
the insurance companies, providers offices and management services organization
has proven the key to contracting an integrated delivery medical system. This
key emphasizes the utmost importance of building a partnering relationship with
all parties involved. Ms. May is licensed as a Health Insurance Agent since
1990.
Trevor A. Rose MD, MS is the Medical Director. Responsible for medical
management, utilization management and all quality improvement initiatives.
Practicing community physician for 24 years. Past Regional Medical Director for
Humana Medical Plans of Pasco, Hernando, and Citrus counties of Florida,
responsible for overseeing all aspects of quality of care, services, utilization
and network development for 7,500 commercial and 14,000 Medicare risk members.
In the same period, as acting Associate Executive Director of Medical Affairs,
provided the clinical leadership at the NCQA site visit of 1996, that secured a
full three year accreditation for Humana. Board certified in Internal Medicine,
Geriatric Medicine, Quality Assurance and Utilization Review.
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<PAGE> 48
C. Thomas McMillen has been a member of the Board of Directors since its
formation in May 1997. He was also the Chairman and Chief Executive Officer of
the Company until November 1997. Mr. McMillen was the founder of Complete
Wellness Centers, Inc., has been Chairman of the Board of Directors and Chief
Executive Officer since its formation in November 1994. He was also President of
Complete Wellness Centers, Inc. until April 1996. From 1987 to 1993, Mr.
McMillen served three consecutive terms in the U.S. House of Representatives
from the 4th Congressional District of Maryland. He was named by President
Clinton to Co-Chair the President's Council on Physical Fitness and Sports in
1993 and served until December 1997. Mr. McMillen is currently a member of the
Board of Directors of North Atlantic Acquisition Corporation, (of which he is
also the secretary and treasurer) and a member of the Board of Directors of the
College Television Network, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors intends to establish a Compensation Committee and
an Audit Committee. The Compensation Committee is expected to make
recommendations to the Board concerning salaries and incentive compensation for
officers and employees of the Company and shall administer the Company's 1998
Stock Option Plan. The Audit Committee is expected to review, with the Company's
independent accountants, the scope, timing and results of audit services and any
other services that the accountants are asked to perform, their report on the
Company's financial statements following completion of their audit and the
Company's policies and procedures with respect to internal accounting and
financial controls. In addition, the Audit Committee is expected to make annual
recommendations to the Board of Directors for the appointment of independent
public accountants for the ensuing year.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual
compensation of the Company's Chief Executive Officer for services in all
capacities to the Company during the Company's last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual
Fiscal Compensation
Year Salary
---- ------
<S> <C> <C>
Jason M. Patchen......................................................... 1997 $90,000
Chief Executive Officer
</TABLE>
- -------------
Note: No other executive officer received annual compensation in excess of
$70,000 during 1997.
DIRECTOR COMPENSATION
At the completion of the Rights Offering, non-employee directors shall
be granted options to purchase 5,000 shares of the Company's Common Stock at an
exercise price of $1.44 per share. The Options will vest in three equal
installments on each anniversary of service as a director. Directors are not
precluded from serving the Company in any other capacity and receiving
compensation therefor. In addition, directors may also receive stock option
grants under the Company's 1998 Stock Option Plan. See "--Stock Options."
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<PAGE> 49
EMPLOYMENT AGREEMENTS
In June 1998, the Company amended its employment agreement with Mr.
Patchen providing for his employment as President and Chief Executive Officer
for a term expiring in May, 2001. The employment agreement provides for an
annual base salary for Mr. Patchen of $90,000 until such time the Company
becomes "operational", as defined in the agreement, at which time the annual
base salary is increased to $150,000. The Company shall be deemed operational at
such time as it has generated accrued revenues for a fiscal quarter in an amount
equal to or greater than $375,000. The agreement also provides for participation
in all executive benefit plans, as well as an automobile allowance of $500 per
month upon becoming operational. In addition, Mr. Patchen was granted time
options to purchase 17,632 shares of the Company's Common Stock at an exercise
price of $1.44 per share. The options will vest in equal installments on June 1,
1999, June 1, 2000, and May 31, 2001. The agreement also provides, among other
things, that, if his employment is terminated without cause (as defined in the
agreement) the Company will pay to him an amount equal to 50% of his annual base
salary, payable over a six month period.
In June 1998 the Company amended its employment agreement with Mr.
Sherwin providing for his employment as Vice President for Finance and
Administration for a term expiring in May, 2001. The employment agreement
provides for an annual base salary for Mr. Sherwin of $68,000 until such time
the Company becomes "operational", as defined in the agreement, at which time
the annual base salary is increased to $90,000. The Company shall be deemed
operational at such time as it has generated accrued revenues for a fiscal
quarter in an amount equal to or greater than $375,000. The agreement also
provides for participation in all executive benefit plans. In addition, Mr.
Sherwin was granted time options to purchase 12,134 shares of the Company's
Common Stock at an exercise price of $1.44 per share. The options will vest in
equal installments on June 1, 1999, June 1, 2000, and May 31, 2001. The
agreement also provides, among other things, that, if his employment is
terminated without cause (as defined in the agreement) the Company will pay to
him an amount equal to 50% of his annual base salary, payable over a six month
period.
In June 1998 the Company amended its employment agreement with Mr. Grady
providing for his employment as Vice President of Information Services for a
term expiring in May, 2001. The subsequently amended employment agreement
provides for an annual base salary for Mr. Grady of $49,200 until such time the
Company becomes "operational", as defined in the agreement, at which time the
annual base salary is increased to $80,000. The Company shall be deemed
operational at such time as it has generated accrued revenues for a fiscal
quarter in an amount equal to or greater than $375,000. The agreement also
provides for participation in all executive benefit plans. In addition, Mr.
Grady was granted time options to purchase 13,407 shares of the Company's Common
Stock at an exercise price of $1.44 per share. The options will vest in equal
installments on June 1, 1999, June 1, 2000, and May 31, 2001. The agreement also
provides, among other things, that, if his employment is terminated without
cause (as defined in the agreement) the Company will pay to him an amount equal
to 50% of his annual base salary, payable over a six month period.
In June 1998 the Company amended its employment agreement with Mr.
Miller providing for his employment as Vice President of Operations for a term
expiring in May, 2001. The employment agreement provides for an annual base
salary for Mr. Miller of $65,000 until such time the Company becomes
"operational", as defined in the agreement, at which time the annual base salary
is increased to $90,000. The Company shall be deemed operational at such time as
it has generated accrued revenues for a fiscal quarter in an amount equal to or
greater than $375,000. The agreement also provides for participation in all
executive benefit plans. In addition, Mr. Miller was granted time options to
purchase 12,568 shares of the Company's Common Stock at an exercise price of
$1.44 per share. The options will vest in equal installments on June 1, 1999,
June 1, 2000, and May 31, 2001. The agreement also provides, among other things,
that, if his employment is terminated without cause (as defined in the
agreement) the Company will pay to him an amount equal to 50% of his annual base
salary, payable over a six month period.
In May 1998 the Company entered into an employment agreement with Ms.
May providing for her employment as Vice President of Corporate Development for
a term expiring in May, 2001. The employment
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<PAGE> 50
agreement provides for an annual base salary for Ms. May of $39,000 until such
time the Company becomes "operational", as defined in the agreement, at which
time the annual base salary is increased to $60,000. The Company shall be deemed
operational at such time as it has generated accrued revenues for a quarter in
an amount equal to or greater than $375,000. The agreement also provides for
participation in all executive benefit plans. In addition, Ms. May was granted
time options to purchase 4,259 shares of the Company's Common Stock at an
exercise price of $1.44 per share. The options will vest in equal installments
on June 1, 1999, June 1, 2000, and May 31, 2001. The agreement also provides,
among other things, that, if her employment is terminated without cause (as
defined in the agreement) the Company will pay to her an amount equal to 50% of
her annual base salary, payable over a six month period.
Each of the employment agreements with Messrs. Patchen, Sherwin, Grady,
and Miller and Ms. May requires their time and best efforts on a substantially
full time basis to the business and affairs of the Company. The agreements also
contain covenants restricting the employee from engaging in any activities
competitive with the business of the Company during the term of such agreement
and for a period of six months thereafter, and prohibiting the employee from
disclosing confidential information regarding the Company.
STOCK OPTION PLAN
1998 Stock Option Plan. In June 1998, the Board of Directors of the
Company, with shareholder approval, adopted its 1998 Stock Option Plan (the
"1998 Plan") covering up to 375,000 shares of the Common Stock, pursuant to
which officers, directors, employees, advisors and consultants to the Company
are eligible to receive incentive and/or nonqualified stock options. The 1998
Plan, which expires in June 2008, will be administered by the Compensation
Committee of the Board of Directors. The selection of participants, allotment of
shares, determination of price, and other conditions relating to the grant of
options will be determined by the Compensation Committee in its sole discretion.
Incentive stock options granted under the 1998 Plan are exercisable for period
of up to 10 years from the date of grant at an exercise price which is not less
than the fair market value of the Common Stock on the date of the grant, except
that the term of an incentive stock option granted under the 1998 Plan to a
shareholder owning more than 10% of the outstanding Common Stock may not exceed
five years and its exercise price may not be less than 110% of the fair market
value of the Common Stock on the date of the grant. Options granted under the
1998 Plan are non-transferable and generally expire 90 days after termination
of an optionee's service to the Company. As of the date of this Prospectus,
options to purchase 65,000 shares of Common Stock at an exercise price of $1.44
were outstanding. In the event the beneficial ownership of the Company by
Messrs. Patchen, Sherwin, Grady and Miller, exclusive of any Rights they may
have exercised in this Offering and other Options granted to them under the 1998
Stock Option Plan prior to the closing of this Offering, is less than seventeen
percent (17%) after the Offering is closed, additional Options to purchase
shares of Common Stock at an exercise price equal to the fair market value shall
be granted subsequent to the closing of this Offering to Messrs. Patchen,
Sherwin, Grady and Miller such that, as a combined group, their beneficial
ownership of the Company shall equal seventeen percent (17%). Such additional
Options shall vest within twelve (12) months of the closing of this Offering.
EXECUTIVE BONUS PLAN
Effective June 25, 1998, the Company established an Executive Bonus Plan
for Key Executives (the "Bonus Plan") to reward executive officers and other key
employees based upon the performance of the Company and such individuals. Under
the Bonus Plan, the Company has discretion to award bonuses in an aggregate
amount equal to 10% of the Company's pre-tax income for a particular fiscal year
(the "Bonus Fund"). The maximum amount of the Bonus Fund for any year is $5
million. Under the terms of existing employment agreements, which expire in May
2001, the Bonus Fund has been allocated as follows: 25% to Mr. Patchen, 25% to
Mr. Sherwin, 25% to Mr. Grady, and 25% to Mr. Miller. Awards under the Bonus
Fund are not exclusive of other bonuses that may be awarded by the Board of
Directors or the Compensation Committee from time to time.
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<PAGE> 51
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY AND INDEMNIFICATION
The Company has included in its Certificate of Incorporation and
By-laws provisions to (i) eliminate the personal liability of its directors and
officers for monetary damages resulting from breaches of their fiduciary duty
(provided that such provisions do not eliminate liability for breaches of the
duty of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, violations under Section
174 of the Delaware General Corporation Law, or for any transaction from which
the director and/or officer derived an improper personal benefit), and (ii)
indemnify its directors and officers to the fullest extent permitted by the
Delaware General Corporation Law, including circumstances in which
indemnification is otherwise discretionary. The Company believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers. The Company has not entered into indemnification agreements with
any of its directors and officers. The Company may in the future enter into
separate indemnification agreements with its directors and officers containing
provisions which may in some respects be broader than the specific
indemnification provisions contained in the Company's Certificate of
Incorporation and By-laws.
51
<PAGE> 52
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's voting securities as of May 31, 1998,
prior to the Rights Offering, and after the Rights Offering (assuming the Rights
are fully exercised), for Common Stock on the effective date of the Rights
Offering and as adjusted to reflect the sale of the Shares offered hereby by (i)
each shareholder known by the Company to be the beneficial owner of more than 5%
of any class of the Company's voting securities, (ii) each director of the
Company and (iii) all officers and directors of the Company as a group. Except
as otherwise indicated, the Company believes that the beneficial owners of the
securities listed below have sole investment and voting power with respect to
such securities, subject to community property laws where applicable.
<TABLE>
<CAPTION>
Number of Shares Percentage of Class
of Class Beneficially Beneficially Owned
Owned After -------------------
Name of Beneficial Owner Offering Before Offering After Offering
- ------------------------ -------- --------------- --------------
COMMON STOCK
<S> <C> <C> <C>
Jason M. Patchen ......................... 173,645 13.9 % 13.9 %
17757 U.S. 19 N., Suite 350
Clearwater, FL 33764
David A. Sherwin.......................... 50,771 4.1 % 4.1 %
17757 U.S. 19 N., Suite 350
Clearwater, FL 33764
Christopher M. Grady................... 50,786 4.1 % 4.1 %
17757 U.S. 19 N., Suite 350
Clearwater, FL 33764
Christian E. Miller.......................... 36,178 2.9 % 2.9 %
17757 U.S. 19 N., Suite 350
Clearwater, FL 33764
C. Thomas McMillen .................. 153,672 12.3 % 12.3 %
666 - 11th Street, N.W., Suite 200
Washington, D.C. 20001
All officers and directors as a group
( 5 persons).......................... 465,052 37.3 % 37.3 %
</TABLE>
(1) Does not include 65,000 shares issuable upon exercise of outstanding options
under the Company's 1998 Stock Option Plan and 310,000 shares reserved for
issuance upon exercise of options available for grant under such plan. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Management -- Stock Option
Plans" and "Description of Securities."
(2) Doesnot include 100,000 shares issuable upon exercise of outstanding
Warrants issued in connection with the reclassification of certain operating
funds previously advanced to the Company by Complete Wellness Centers, Inc.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources," "Management -- Stock
Option Plans" and "Description of Securities."
(3) Doesnot include 5,000 shares issuable upon exercise of outstanding Operating
Warrants granted on the Spin- Off date pursuant to the Intercompany
Agreement. See "Rights Offering" and "The Intercompany Agreement".
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<PAGE> 53
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The authorized capital stock of the Company includes 10,000,000 shares
of Common Stock, par value $.01 per share. Holders of Common Stock have no
preemptive rights. The outstanding shares of Common Stock are fully paid and
non-assessable. Holders of Common Stock are entitled to dividends when, as, and
if declared by the Board of Directors of the Company out of any funds legally
available to the Company for that purpose.
Holders of Common Stock are entitled to one vote per share held of
record with respect to all matters submitted to a vote of the stockholders.
There is no cumulative voting for the election of directors, who are elected
annually to one-year terms. Directors are elected by a plurality; all other
matters require the affirmative vote of a majority of the votes cast the
meeting.
PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of Preferred Stock,
par value $.01 per share, and to establish and issue shares of Preferred Stock
in series and to fix, determine and vary the voting rights, designations,
preference qualifications, privileges, options, conversion rights and other
special rights of each series of Preferred Stock.
CERTAIN PROVISIONS OF DELAWARE LAW
The Company is subject to Section 203 of Delaware General Corporation
Law, which prohibits a Delaware corporation from engaging in a wide range of
specified transactions with any "interested stockholder," as such term is
defined to include, among others, any person or entity who in the previous three
years obtained 15% or more of any class or series of stock entitled to vote in
the election of directors, unless, among other exceptions, the transaction is
approved by (i) the Board of Directors prior to the date the interested
stockholder obtained such status or (ii) the holders of two-thirds of the
outstanding shares of each class or series owned by the interested stockholder.
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock and it does not
presently anticipate making any such payments in the near future.
HOLDERS OF RECORD
As of May 13, 1998, the approximate number of holders of record of the
Common Stock of CWC was 560.
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<PAGE> 54
THE SPIN-OFF
Optimum Health Services, Inc. ("Optimum" or the "Company") will be
spun-off in a taxable transaction, as further described below by Complete
Wellness Centers, Inc. ("CWC") to become an independent management services
organization ("MSO"). CWC intends to transfer or cause to be transferred certain
assets and liabilities related principally to the Optimum business not currently
held by Optimum or an Optimum subsidiary. Optimum will transfer to CWC any
assets and liabilities relating to the CWC business or the CWC subsidiaries not
currently held by CWC or a CWC subsidiary, if applicable.
CWC intends to distribute on a one share-for-12 shares basis to its
stockholders of record as of the Record date, all of the outstanding Common
Stock, par value $.01 per share of Optimum owned by CWC (the "Common Stock"). On
or before the Spin-Off Date, CWC will advance $200,000 to Optimum in return for
a $200,000 senior secured note bearing interest at 12% per annum due at the
earlier of December 31, 1999 or the date that Optimum is successful in closing a
financing (exclusive of the Rights Offering) in which the principal and interest
of the senior note shall be repayable as follows: 20% up to and equal to
$1,000,000 in financing. In return for previous capital contributions
approximating $730,000, CWC shall receive Warrants to purchase 100,000 shares of
Optimum's Common Stock at an exercise price of $1.00 per share for a period of
five years. Optimum shall be granted a five year call option and CWC shall be
granted a five year put option to purchase and/or sell the 100,000 Warrants pro
rata at an exercise price equal to 25% of any equity financing in excess of
$1,000,000 and 10% of Optimum's annual earnings before interest and taxes
("EBIT") as determined by generally accepted accounting principles ("GAAP"), up
to and equal to $1,000,000 and 20% Optimum's EBIT over $1,000,000, to an
aggregate exercise price for the 100,000 warrants of $860,000. Both options are
exercisable upon 30 days notice. In addition, in the event Optimum closes a
minimum of $200,000 for the Rights Offering, CWC shall make available lease
guarantees to Optimum in an amount equal to the dollar amount raised in the
Offering up to a maximum of $250,000. For such guarantees, CWC shall receive
credit guarantee fees payable annually in the amount equal to 6% the first year,
8% the second year, and 10% the third year of the face amount of CWC's
outstanding lease guarantees to Optimum. In the event the guarantees are ever
called, CWC shall be entitled to a confession of judgement in the face amount of
the outstanding guarantees. Additionally, CWC shall be entitled to perfect their
interest as second mortgagee in any assets which are leased using CWC's
guarantees.
MANNER OF EFFECTING THE DISTRIBUTION
The general terms and conditions of the Distribution will be set forth
in a Distribution Agreement (the "Distribution Agreement") to be entered into by
CWC and Optimum prior to the Distribution.
If all conditions to the Distribution are satisfied (or waived by the
Board of Directors), the Distribution will be made on the Distribution Date to
stockholders of record of CWC as of the Record Date. On the Distribution Date,
the Optimum Common Stock will be delivered by CWC to American Stock Transfer &
Trust Company, as the distribution agent (the "Distribution Agent"). As soon
thereafter as practicable, account statements reflecting ownership of shares of
CWC Common Stock and Optimum Common Stock will be mailed by the Distribution
Agent to holders of CWC Common Stock as of the Distribution Record Date to
reflect the distribution of one share of Optimum Common Stock for every share of
CWC Common Stock held on such date. All shares will be fully paid and
non-assessable and the holders thereof will not be entitled to preemptive
rights.
No holder of CWC Common Stock will be required to pay any cash or other
consideration for the shares of Optimum Common Stock received in the
Distribution or to surrender or exchange shares of CWC Common Stock in order to
receive Optimum Common Stock.
FEDERAL INCOME TAX ASPECTS OF THE DISTRIBUTION
The Distribution will not qualify as a "tax-free" distribution under
Section 355 of the Code, and in general a corporate tax would be payable by the
consolidated group of which CWC is the common parent based upon the difference
between (x) the fair market value of the Optimum Common Stock and (y) the
adjusted basis of the
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<PAGE> 55
Optimum Common Stock immediately prior to the Distribution. Any corporate level
tax will be payable by CWC. Under the consolidated return rules, each member of
the consolidated group (including Optimum) is severally liable for such tax
liability.
Furthermore, each holder of CWC Common Stock who receives shares of
Optimum Common Stock in the Distribution will be treated as if such stockholder
received a taxable distribution in an amount equal to the fair market value of
the Optimum Common Stock received, which will result in (x) a dividend to the
extent of such stockholder's pro rata share of CWC's current and accumulated
earnings and profits, (y) a reduction in such stockholder's basis in CWC Common
Stock to the extent the amount received exceeds such stockholder's share of
earnings and profits and (z) gain from the exchange of CWC Common Stock to the
extent the amount received exceeds both such stockholder's share of earnings and
profits and such stockholder's basis in CWC Common Stock.
The foregoing summary of material federal income tax consequences of the
Distribution does not purport to cover all federal income tax consequences that
may apply to all categories of stockholders. Each stockholder should consult its
own tax advisor as to the particular consequences of the Distribution to such
stockholder, including the application of state, local and foreign tax laws, and
the effect of possible changes in tax laws that may affect the tax consequences
described above.
LISTING AND TRADING OF OPTIMUM COMMON STOCK
Currently, there is no public market for Optimum Common Stock. It is
CWC's intention that no "when-issued" trading market for Optimum Common Stock
will exist prior to the time Optimum's Registration Statement with respect to
the Optimum Common Stock. Prices at which Optimum Common Stock may trade prior
to the Distribution (on a "when-issued" basis) or after the Distribution cannot
be predicted. Until the Optimum Common Stock is fully distributed and an orderly
market develops, the prices at which trading in such stock occurs may fluctuate
significantly. The prices at which Optimum Common Stock trades will be
determined by the marketplace and may be influenced by many factors, including,
among others, the depth and liquidity of the market for Optimum Common Stock,
investor perception of Optimum and the industry in which Optimum participates,
Optimum's dividend policy and general economic and market conditions. Such
prices may also be affected by certain provisions of the Optimum Certificate and
Optimum Bylaws, as each will be in effect following the Distribution, which may
have an antitakeover effect. See "Risk Factors--Dividend Policies; and--Certain
Information Concerning Optimum--Purposes and Antitakeover Effects of Certain
Provisions of the Optimum Certificate and Bylaws."
Optimum initially will have approximately 560 stockholders of record
based upon the number of stockholders of record of CWC as of May 13, 1998. For
certain information regarding options to purchase Optimum Common Stock that will
be outstanding after the Distribution, see "Relationship Between the Company and
Optimum After the Distribution ."
INTERESTS OF CERTAIN PERSONS IN THE DISTRIBUTION
It is anticipated that upon the Distribution, one member of the CWC
Board of Directors, C. Thomas McMillen, will be a member of the Board of
Directors of Optimum. Mr. McMillen will receive from Optimum compensation for
serving as a director of Optimum that is substantially the same as the
compensation currently received by such persons as directors of CWC.
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RELATIONSHIP BETWEEN OPTIMUM AND CWC AFTER THE SPINOFF
For purposes of governing the ongoing relationships between CWC and
Optimum after the Distribution Date, and in order to facilitate the transition
to two separate publicly-traded companies, CWC and Optimum will enter into
agreements setting forth CWC's and Optimum's on-going responsibilities regarding
the matters outlined below. The material terms of such agreements are described
below and the agreements summarized in this section are included as exhibits to
the Registration Statement of which this Prospectus is a part.
THE DISTRIBUTION AGREEMENT
On or prior to the Distribution Date, CWC and Optimum will enter into a
Distribution Agreement which provides for, among other things, the principal
corporate transactions required to effect the Distribution, the assumption by
Optimum of all liabilities relating to the Optimum Business and the allocation
between the Company and Optimum of certain other liabilities, certain
indemnification obligations of CWC and Optimum and certain other agreements
governing the relationship between CWC and Optimum with respect to or in
consequence of the Distribution. The Distribution Agreement provides that the
Distribution is subject to the prior satisfaction of certain conditions
including, among other things, the execution of all ancillary agreements to the
Distribution Agreement, certain of which are described below, and the
declaration of the Distribution by the CWC Board of Directors.
Subject to certain exceptions, Optimum has agreed to indemnify CWC and
its subsidiaries against any loss, liability or expense incurred or suffered by
CWC or its subsidiaries arising out of or related to the failure by Optimum to
perform or otherwise discharge liabilities allocated to and assumed by Optimum
under the Distribution Agreement, and CWC has agreed to indemnify Optimum
against any loss, liability or expense incurred or suffered by Optimum arising
out of or related to the failure by CWC to perform or otherwise discharge the
liabilities retained by CWC under the Distribution Agreement. The foregoing
cross-indemnities do not apply to indemnification for tax claims and
liabilities, which are addressed in the Tax Sharing Agreement described below.
The Distribution Agreement also includes procedures for notice and payment of
indemnification claims and provides that the indemnifying party may assume the
defense of a claim or suit brought by a third party.
The Distribution Agreement also provides that by the Distribution Date,
Optimum's Amended and Restated Certificate of Incorporation and Bylaws shall be
in the forms attached hereto as Annexes A and B, respectively, and that Optimum
and CWC will take all actions which may be required to elect or otherwise
appoint, as directors of Optimum, the five persons indicated herein. See
"Certain Information Concerning Optimum--Description of Optimum Capital Stock;
Purposes and Antitakeover Effects of Certain Provisions of the Optimum
Certificate and Bylaws; and Management."
The Distribution Agreement also provides that each of CWC and Optimum
will be granted access to certain records and information in the possession of
the other, and requires the retention of such information in its possession for
specified periods and thereafter requires that each party give the other prior
notice of its intention to dispose of such information. In addition, the
Distribution Agreement provides for the allocation of shared privileges with
respect to certain information and requires each of CWC and Optimum to obtain
the consent of the other prior to waiving any shared privilege.
The Distribution Agreement provides that except as otherwise
specifically provided, all costs and expenses incurred in connection with the
preparation, execution, delivery and implementation of the Distribution
Agreement and with the consummation of the transactions contemplated by the
Distribution Agreement (including transfer taxes and the fees and expenses of
all counsel, accountants and other advisors) shall be paid by the party
incurring such cost or expense. Notwithstanding the foregoing, CWC shall be
obligated to pay the legal,
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filing, accounting, printing and other out-of- pocket expenditures in connection
with the preparation, printing and filing of the Registration Statement.
INTERCOMPANY AGREEMENT
Pursuant to the "Intercompany Agreement" between Optimum and CWC, each
company agrees to 1) cooperate and coordinate with each other with regards to
certain matters; 2) CWC agrees to provide certain corporate services to Optimum,
including financing assistance, legal support, strategic merger, and acquisition
assistance, as well as various wellness products and services; and 3) Optimum
agrees to provide certain corporate services to CWC, including credentialing,
management information services, corporate compliance, managed care expertise
and contracting, etc. The compensation to each company shall be based on
services rendered and shall include a grant by each company, to the other
company, on the Spin-Off date and each anniversary thereafter during the term of
the Intercompany Agreement of 5,000 warrants ("Operating Warrants") at an
exercise price equal to the market price of each company's common stock at the
time of the grant. However, the first grant of 5,000 Operating Warrants of
Optimum to CWC shall be equal to $1.44 per share. The term of the Intercompany
Agreement shall be ten (10) years.
TAX SHARING AGREEMENT
CWC and Optimum will enter into the Tax Sharing Agreement for purposes of
allocating pre-Distribution tax liabilities among CWC and Optimum and their
respective subsidiaries. In general, CWC will be responsible for (i) filing
consolidated federal income tax returns for the CWC affiliated group and
combined or consolidated state tax returns for any group that includes a member
of the CWC affiliated group, including in each case Optimum and its subsidiaries
for the periods of time that such companies were members of the applicable group
and (ii) paying the taxes relating to such tax returns to the applicable taxing
authorities (including any subsequent adjustments resulting from the
redetermination of such tax liabilities by the applicable taxing authorities).
Optimum will reimburse CWC for the portion of such taxes that relates to Optimum
and its subsidiaries, as determined based on their hypothetical separate company
income tax liabilities. CWC and Optimum have agreed to cooperate with each
other, and to share information, in preparing such tax returns and in dealing
with other tax matters.
BACKGROUND AND REASON FOR THE SPIN-OFF
The Spin-Off will provide the stockholders of CWC as of the Record Date
with the opportunity to participate in the benefits of both ownership of the
clinical business through CWC, and the MSO business through Optimum, but will
separate the risks of Optimum's managed care contracts under capitated payment
arrangements from CWC's businesses.
The Spin-Off will allow Optimum to pursue its business plan and the
right to execute capitated managed care contracts without the risk limitations
imposed on its operations by CWC. See "Spin-Off."
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THE RIGHTS OFFERING
THE RIGHTS
The Company is distributing, at no cost, to the record holders of its
outstanding Common Stock as of May 13, 1998 (the "Record Date"), transferable
Rights to purchase additional shares of Common Stock (the "Basic Subscription
Privilege") at a price of $1.00 per share (the "Subscription Price"). The
Company will distribute four Rights for each share of Common Stock held on the
Record Date. Each Right will entitle its Holder to purchase one share of Common
Stock. The Rights will be evidenced by transferable subscription certificates
(the "Subscription Certificates"). An aggregate of 1,000,000 shares of Common
Stock (the "Underlying Shares") will be sold if all Rights are exercised.
No fractional Underlying Shares, or cash in lieu thereof, will be issued
or paid. The number of Underlying Shares distributed to each Holder will be
rounded up to the nearest whole share in connection with the exercise of
Subscription Privileges.
DETERMINATION OF SUBSCRIPTION PRICE
The Subscription Price was based on a valuation of the Company as of
April 30, 1998 undertaken by American Express Business and Tax Services, Inc.
The valuation of the Company as of April 30, 1998 was determined to be
approximately $361,500 or $1.44 per share based upon the issued an outstanding
shares of Common Stock on the Spin-Off Date.
SUBSCRIPTION PRIVILEGES
BASIC SUBSCRIPTION PRIVILEGE. Each Right will entitle the Holder thereof
to receive, upon payment of the Subscription Price, one share of Common Stock.
Certificates representing shares of Common Stock purchased pursuant to the Basic
Subscription Privilege will be delivered to subscribers as soon as practicable
after the Expiration Date, irrespective of whether the Subscription Privilege is
exercised immediately prior to the Expiration Date or earlier. Holders
exercising their Subscription Privilege will not be stockholders of record with
respect to the shares issuable pursuant to such Subscription Privilege until the
closing, which it is anticipated will occur five business days after the
Expiration Date.
OVERSUBSCRIPTION PRIVILEGE. Subject to the allocation described below,
each Right also carries the right to subscribe at the Subscription Price for any
Underlying Shares not subscribed for through the exercise of Basic Subscription
Privileges by other Holders (the "Excess Shares"). If the Excess Shares are not
sufficient to satisfy all subscriptions pursuant to the Oversubscription
Privilege, such Excess Shares will be allocated pro rata (subject to the
elimination of fractional shares) among those Holders exercising the
Oversubscription Privilege, in proportion, not to the number of shares requested
pursuant to the Oversubscription Privilege, but to the number of shares each
Holder exercising the Oversubscription Privilege subscribed for pursuant to the
Basic Subscription Privilege; provided, however, that if such pro rata
allocation results in any Holder being allocated a greater number of Excess
Shares than such Holder subscribed for pursuant to the exercise of such holder's
Oversubscription Privilege, then such Holder will be allocated only such number
of Excess Shares as such Holder subscribed for and the remaining Excess Shares
will be allocated among all other Holders exercising the Oversubscription
Privilege. Only beneficial holders who exercise the Basic Subscription privilege
in full will be entitled to exercise the Oversubscription Privilege.
Certificates representing Excess Shares purchased pursuant to the
Oversubscription Privilege will be delivered to subscribers as soon as
practicable after the Expiration Date and after all prorations have been
effected. In the event Rights remain unexercised after satisfaction of the Basic
Subscription and Oversubscription Privileges, the Company intends to offer the
remaining unexercised Rights (the "Unexercised Allotment") to members of
management and Directors of the Company and CWC. If available, management and
Directors of both companies intend to exercise a minimum of 250,000 Rights in
the Basic Subscription, Oversubscription, and Unexercised Allotment and purchase
the respective shares underlying such Rights at the Subscription Price.
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EXPIRATION DATE
The Rights will expire at 5:30 p.m., Eastern Standard Time on September
25, 1998, unless extended by the Company in its sole discretion.
EXERCISE OF RIGHTS
Rights may be exercised by delivering to the Subscription Agent, on or
prior to 5:30 p.m., Eastern Standard Time, on the Expiration Date, the properly
completed and executed Subscription Certificate evidencing such Rights with any
required signatures guaranteed, together with payment in full of the
Subscription Price for the Underlying Shares subscribed for pursuant to the
Subscription Privileges (except as permitted pursuant to clause (iii) of the
next sentence). Such payment in full must be by: (i) check or bank draft drawn
upon a U.S. bank or postal telegraphic or express money order payable to
American Stock Transfer & Trust Company, as Subscription Agent; or (ii) wire
transfer of funds to the account maintained by the Subscription Agent for such
purpose; or (iii) in such other manner as Company may approve in writing and as
is deemed to be valid consideration under Delaware law, provided in each case
that the full amount of such Subscription Price is received by the Subscription
Agent on or prior to 5:30 p.m. Eastern Standard Time on the Expiration Date (the
payment method under (iii) being an "Approved Payment Method"). Payment of the
Subscription Price will be deemed to have been received by the Subscription
Agent only upon (a) clearance of any uncertified check, (b) receipt by the
Subscription Agent of any certified check or bank draft drawn upon a United
States bank or of any postal, telegraphic or express money order, (c) receipt
of good funds or other valid consideration by the Subscription Agent through an
Approved Payment Method, (including consideration payable by the management and
director's of CWC and the Company which may be either in full or, for up to
400,000 shares and 135,000 shares respectively, consideration may be one-third
payable prior to the Expiration Date and two-third's represented by a note
payable to the Company bearing interest at 6.1% payable on or before January
30, 1999. The Company shall hold in trust any shares whose consideration is
represented by a note payable), or (d) receipt of good funds in the
Subscription Agent's account designated above.
If paying by uncertified personal check, please note that the funds paid
thereby may take at least five business days to clear. Accordingly, Holders who
wish to pay the Subscription Price by means of uncertified personal check are
urged to make payment sufficiently in advance of the Expiration Date to ensure
that such payment is received and clears by such date and are urged to consider
payment by means of certified or cashier's check, money order or wire transfer
of funds.
The address to which the Subscription Certificates and payment of the
Subscription Price should be delivered is:
American Stock Transfer & Trust Company
40 Wall Street, 49th Floor
New York, NY 10005
Attn: Shareholder Relations
If a Holder wishes to exercise Rights, but time will not permit such
Holder to cause the Subscription Certificate or Subscription Certificates
evidencing such Rights to reach the Subscription Agent on or prior to the
Expiration Date, such Rights may nevertheless be exercised if all of the
following conditions (the "Guaranteed Delivery Procedures") are met:
(i) such Holder has caused payment in full of the Subscription Price for
each Underlying Share being subscribed for pursuant to the Subscription Agent on
or prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration
Date, a guaranteed notice (a "Notice of Guaranteed Delivery"), substantially in
the form provided with the Instructions as to Use of Optimum Health Services,
Inc. Subscription Certificates (the "Instructions") distributed with the
Subscription Certificates, from an "Eligible Guarantor Institution" (as defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934), stating
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the name of the exercising Holder, the number of Rights represented by the
Subscription Certificate(s) held by such exercising Holder, the number of
Underlying Shares being subscribed for pursuant to the Subscription Privileges
and guaranteeing the delivery to the Subscription Agent of any Subscription
certificate(s) evidencing such Rights within three American Stock Exchange
trading days following the date of the Notice of Guaranteed Delivery; and
(iii) the properly completed Subscription Certificate(s), with any
required signatures guaranteed, is received by the Subscription Agent within
three trading days following the date of the Notice of Guaranteed Delivery
relating thereto. The Notice of Guaranteed Delivery may be delivered to the
Subscription Agent in the same manner as Subscription Certificates at the
addresses set forth above, or may be transmitted to the Subscription Agent by
facsimile transmission (telecopy number (303) 234-5340). Additional copies of
the form of Notice of Guaranteed Delivery are available upon request from the
Subscription Agent, whose address and telephone number are set forth under
"Subscription Agent" below.
Funds received in payment of the Subscription Price for Excess Shares
subscribed for pursuant to the Oversubscription Privilege will be held in a
segregated account pending issuance of such Excess Shares. If a Holder
exercising the Oversubscription Privilege is allocated less than all of the
Excess Shares that such Holder wished to subscribe for pursuant to the
Oversubscription Privilege, the excess funds paid by such Holder in respect of
the Subscription Price for shares not issued shall be returned by mail without
interest or deduction as soon as practicable after the Expiration Date.
A holder who holds shares of Common Stock for the account of others,
such as a broker, a trustee or a depository for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owner's intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record Holder of such
Rights should complete the Subscription Certificate and submit it to the
Subscription Agent with the proper payment. In addition, the beneficial owner of
Common Stock or Rights held through such a holder of record should contact the
Holder and request the Holder to effect transactions in accordance with the
beneficial owner's instructions.
Unless a Subscription Certificate (i) provides that the shares of Common
Stock to be issued pursuant to the exercise of Right represented thereby are to
be delivered to the Holder or (ii) is submitted for the account of an Eligible
Guarantor Institution, signatures on such Subscription Certificate must be
guaranteed by an Eligible Guarantor Institution.
If either the number of Underlying Shares being subscribed for payment
to the Basic Subscription Privilege is not specified on the Subscription
Certificate, or the amount delivered is not enough to pay the Subscription Price
for all Underlying Shares stated to be subscribed for, the number of Underlying
Shares subscribed for will be assumed to be the maximum amount that could be
subscribed for upon payment of such amount, after allowance for the Subscription
Price of any specified Underlying Shares. If the number of Underlying Shares
being subscribed for is not specified, or payment of the Subscription Price for
the indicated number of Rights that are being exercised exceeds the required
Subscription Price, the payment will be applied, until depleted, to subscribe
for Underlying Shares in the following order: (i) to subscribe for the number of
Underlying Shares indicated, if any, pursuant to the Basic Subscription
Privilege; (ii) to subscribe for Underlying Shares until the Basic Subscription
Privilege has been fully exercised with respect to all of the Rights represented
by the Subscription Certificate; and (iii) to subscribe for additional
Underlying Shares pursuant to the Oversubscription Privilege (subject to any
applicable proration).
The Instructions accompanying the Subscription Certificates should be
read carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO
THE COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF
THE RIGHTS HOLDER, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES
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AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO
THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:30 P.M., EASTERN
STANDARD TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY
TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, THE RIGHTS HOLDER IS STRONGLY URGED
TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIERS CHECK, MONEY
ORDER OR WIRE TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility
of any exercise of Rights will be determined by the Company, whose
determinations will be final and binding. The Company, in its sole discretion,
may waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported exercise
of any Right. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
Company determines in its sole discretion.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus or the
Instructions or the Notice of Guaranteed Delivery should be directed to the
Subscription Agent, telephone number (800) 537-9449
NO REVOCATION
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE
OR THE OVERSUBSCRIPTION PRIVILEGE SUCH EXERCISE MAY NOT BE REVOKED.
THE LOCKUP PERIOD
All holders of the Common Stock shall not directly or indirectly offer,
sell, transfer, pledge, assign, hypothecate or dispose any of the Company
securities for a period from the Spin-Off Date to the Expiration Date of this
Offering (the "Lockup Period"). An appropriate legend will be transfixed on the
back of the stock certificate representing all such requirements.
METHOD OF TRANSFERRING RIGHTS
The Rights evidenced by a single Subscription Certificate may be
transferred in whole by endorsing the Subscription Certificate for transfer in
accordance with the accompanying instructions. A portion of the Rights evidenced
by a single Subscription Certificate may be transferred by delivering to the
Subscription Agent a Subscription Certificate properly endorsed for transfer,
with instructions to register such portion of the Rights evidenced thereby in
the name of the transferee (and to issue a new Subscription Certificate to the
transferee evidencing such transferred Rights). In such event, a new
Subscription Certificate evidencing the balance of the Rights will be issued to
the Holder or, if the Holder so instructs, to an additional transferee.
Holders wishing to transfer all or a portion of their Rights should
allow a sufficient amount of time prior to the Expiration Date for (i) the
transfer instructions to be received and processed by the Subscription Agent,
(ii) a new Subscription Certificate to be issued and transmitted to the
transferee or transferees with respect to the transferred Rights, and to the
transferor with respect to retained Rights, if any, and (iii) the Rights
evidenced by such new Subscription Certificates to be exercised or sold by the
recipients thereof. If time does not permit a transferee of a Right who wishes
to exercise its Right to deliver its Subscription Certificate to the
Subscription Agent on or before the Expiration Date, such transferee should make
use of the Guaranteed Delivery Procedure described under "The Rights
Offering--Exercise of Rights." Neither the Company nor the Subscription Agent
shall have any liability to a transferee or transferor or Rights if Subscription
Certificates or new Subscription Certificates are not received in time for
exercise or sale prior to the Expiration Date.
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All commissions, fees and other expenses (including brokerage
commissions and transfer taxes) incurred in connection with the purchase, sale
or exercise of Rights will be for the account of the transferor or subscriber of
the Rights, and none of such commissions, fees or expenses will be paid by the
Company or the Subscription Agent.
DISTRIBUTION OF THE RIGHTS
Holders of Common Stock will not recognize taxable income for federal
income tax purposes in connection with the receipt of the Rights.
STOCKHOLDER BASIS AND HOLDING PERIOD OF THE RIGHTS
Except as provided in the following sentence, the basis of the Rights
received by a stockholder as a distribution with respect to such stockholder's
Common Stock will be zero. If, however, either (i) the fair market value of the
Rights on the date of Distribution is 15% or more of the fair market value (on
the date of Distribution) of the Common Stock with respect to which they are
received or (ii) the stockholder properly elects, in his or her federal income
tax return for the taxable year in which the Rights are received, to allocate
basis, part of his or her basis in Common Stock will be allocated between the
Common Stock and the Rights in proportion to the fair market value of each on
the date of Distribution.
The holding period of a stockholder with respect to the Rights received
as a distribution on such stockholder's Common Stock will include the
stockholder's holding period for the Common Stock with respect to which the
Rights were issued.
In the case of a stockholder who purchased Rights, the tax basis of such
Rights will be equal to the purchase price paid therefor, and the holding period
for such Rights will commence on the day following the date of the purchase.
SALE OF THE RIGHTS
A stockholder who sells the Rights received in the Distribution prior to
exercise will recognize gain or loss equal to the difference between the amount
realized on the sale and such stockholder's adjusted basis (if any) in the
Rights sold. Such gain or loss will be capital gain or loss if gain or loss from
a sale of Common Stock held by such stockholder would be characterized as
capital gain or loss at the time of such sale.
Any gain or loss recognized on a sale acquired by purchase will be
capital gain or loss if Common Stock would be a capital asset in the hands of
the stockholder.
Generally, such capital gain or loss would be classified as short-term
if the stockholder's holding period in the Rights is eighteen months or less and
long-term if the stockholder's holding period in the Rights is more than
eighteen months. Under current law, generally long-term capital gains are
subject to a maximum marginal tax rate of 28% for individuals, estates and
trusts if the capital asset is held for more than one year but not more than 18
months, and a maximum marginal tax rate of 20% if the capital asset is held for
more than 18 months.
LAPSE OF THE RIGHTS
Stockholders who allow the Rights received by them in the Distribution
to lapse will not recognize any gain or loss, and no adjustment will be made to
the basis of the Common Stock, if any, owned by such stockholders.
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EXERCISE OF THE RIGHTS, BASIS AND HOLDING PERIOD OF COMMON STOCK
Stockholders will not recognize any gain or loss upon the exercise of
Rights. The basis of the Common Stock acquired through exercise of the Rights
will be equal to the sum of the Subscription Price therefor and the
stockholder's basis in such Rights (if any).
A stockholder's holding period for the Common Stock acquired through
exercise of the Rights will begin on the date the Rights are exercised.
SALE OF COMMON STOCK.
The sale of Common Stock acquired through exercise of the Rights will
result in the recognition of gain or loss to the stockholder in an amount equal
to the difference between the amount realized on the sale and the stockholder's
adjusted basis in the Common Stock. Gain or loss on the sale of such Common
Stock will be classified as short-term capital gain or loss, if the
stockholder's holding period in such Common Stock is eighteen months or less and
long-term capital gain or loss if the stockholder's holding period in such
Common Stock is more than eighteen months. Under current law, generally
long-term capital gains are subject to a maximum marginal tax rate of 28% for
individuals, estates and trusts if the capital asset is held for more than one
year but not more than 18 months, and a maximum marginal tax rate of 20% if the
capital asset is held for more than 18 months.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH HOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING APPLICABLE TO HIS OR
HER OWN PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF STATE
AND LOCAL INCOME AND OTHER TAX LAWS.
SUBSCRIPTION AGENT
The Company has appointed American Stock Transfer & Trust Company as
Subscription Agent for the Rights Offering. The Subscription Agent's address,
which is the address to which the Subscription Certificates and payment of the
Subscription Price should be delivered, as well as the address to which Notice
of Guaranteed Delivery must be delivered, and the Subscription Agent's telephone
number and facsimile number, are:
American Stock Transfer & Trust Company
Attn:Shareholder Relations
40 Wall Street, 46th Floor
New York, NY 10005
Tel. No.: (800) 537-9449
Facsimile No.: (718) 234-5001
The Company will pay the fees and expenses of the Subscription Agent,
and will also agree to indemnify it from any liability which it may incur in
connection with the Rights Offering.
PLAN OF DISTRIBUTION
The Common Stock offered hereby is being offered by Company pursuant to
the issuance of Rights directly to holders of shares of Common Stock on the
Record Date. Certain employees, officers or directors of the Company may solicit
responses from Holders to the Rights Offering, but such individuals will not
receive any commissions or compensation for such services other than their
normal employment compensation.
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The Company intends to distribute Rights and copies of this Prospectus
to stockholders of record on the Record Date promptly following the effective
date of the Registration Statement of which this Prospectus forms a part.
Holders who desire to subscribe for the purchase of shares of Common
Stock in the Rights Offering are urged to complete, date and sign the
Subscription Certificate and return it to the Subscription Agent on or before
the Expiration Date, together with payment in full of shares should be directed
to the Subscription Agent.
INFORMATION AGENT
The Company has appointed American Stock Transfer & Trust Company as
Information Agent for the Rights Offering. Any questions or requests for
additional copies of this Prospectus, the Instructions or the Notice of
Guaranteed Delivery may be directed to the Information Agent at the telephone
number and address below.
American Stock Transfer & Trust Company
Attn: Shareholder Relations
40 Wall Street, 49th Floor
New York, NY 10005
Tel. No.: (800) 537-9449
Facsimile No.: (718) 234-5001
The Company will pay the fees and expenses of the Information Agent and
will also agree to indemnify the Information Agent from certain liabilities in
connection with the Rights Offering.
LEGAL MATTERS
The validity of the authorization and issuance of the securities offered
hereby and the tax matters discussed under "Certain Federal Income Tax
Consequences" are being passed upon for Company by Epstein Becker and Green,
P.C., New York, New York.
EXPERTS
The consolidated financial statements of Optimum Health Services, Inc.
as of December 31, 1997 appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young, LLP, independent certified public
accountants, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Rights Offering (if all Rights are exercised),
1,250,339 shares of common stock will be outstanding based upon 250,339 shares
outstanding on the Spin-Off Date. 659,624 shares of Common Stock will be freely
tradable, subject to a restriction that all holders of such Common Stock shall
not directly or indirectly offer, sell, transfer, pledge, assign, hypothecate,
or otherwise encumber or dispose of such securities for a period from the date
of this Prospectus to the Expiration Date of this Offering (the "Lock-Up
Period") and without further registration under the Securities Act unless
acquired by an affiliate of the Company (as that term is defined in the
Securities Act ("Rule 144").
In addition, the Company has agreed that the Warrants and the Operating
Warrants and the shares of Common Stock issuable upon exercise of the Warrants
and the Operating Warrants would be included in the registration statement of
which this Prospectus forms a part. A total of 105,000 shares of Common Stock
will be issuable upon exercise of the Warrants and the Operating Warrants.
Holder has agreed not to, directly or indirectly, offer, sell transfer, pledge,
assign, hypothecate, or otherwise encumber or dispose of any such shares for a
period of 180 days after the date of this Prospectus.
Notwithstanding the foregoing, each officer and director of the Company
and CWC have agreed not to directly or indirectly, offer, sell transfer, pledge,
assign, hypothecate, or otherwise encumber or dispose of any of the Company's
securities, whether presently owned, for a period of 13 months (the "Management
Lockup Period") after the date of this Prospectus. An appropriate legend shall
be marked on the back of the stock certificates representing all such
securities. Market sales of a substantial number of shares of Common Stock, or
the availability of such shares for sale in the public market, could adversely
affect prevailing market prices of the Common Stock.
A total of 375,000 shares of Common Stock are reserved for issuance
under the Company's stock option plan. Upon completion of the Rights Offering,
options to purchase an aggregate 65,000 shares of Common Stock will be
outstanding. Each holder of options has agreed not to sell the shares issuable
upon exercise of such options until the expiration of the Management Lockup
Period. The Company intends to file a registration statement on Form S-8
registering shares issuable upon exercise of options granted under the plan, as
and to the extent permitted by the eligibility requirements of Form S-8. Upon
such registration, such shares will be eligible for resale in the public market.
65
<PAGE> 66
OPTIMUM HEALTH SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants............................... F-2
Consolidated Financial Statements:
Consolidated Balance Sheets
as of December 31, 1997 and May 31, 1998 (unaudited)..................... F-3
Consolidated Statements of Operations
for the period from June 1, 1997 (date of inception) to December 31,
1997, the five-month period ended May 31, 1998 (unaudited) and the
period from June 1, 1997 (date of inception) to May 31, 1998 (unaudited). F-4
Consolidated Statements of Changes in Stockholders' Equity
for the period from June 1, 1997 (date of inception) to December 31, 1997
and the five-month period ended may 31, 1998 (unaudited)................. F-5
Consolidated Statements of Cash Flows
for the period from June 1, 1997 (date of inception) to December 31,
1997, the five-month period ended May 31, 1998 (unaudited) and the
period from June 1, 1997 (date of inception) to May 31, 1998 (unaudited). F-6
Notes to Consolidated Financial Statements....................................... F-7
</TABLE>
F-1
<PAGE> 67
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Optimum Health Services, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Optimum Health
Services, Inc. and Subsidiaries (a development stage company) as of December 31,
1997, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the period from June 1, 1997 (date of
inception) to December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Optimum Health
Services, Inc. and Subsidiaries (a development stage company) as of December 31,
1997, and the consolidated results of their operations and their cash flows for
the period from June 1, 1997 (date of inception) to December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Tampa, Florida
June 15, 1998
F-2
<PAGE> 68
OPTIMUM HEALTH SERVICES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, May 31,
1997 1998
---------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash ............................................................. $ 69,996 $ 150,886
Other current assets ............................................. 2,957 4,029
-----------------------------
Total current assets ................................................ 72,953 154,915
Computer equipment, net ............................................. 26,790 27,855
Other assets ........................................................ 657 5,060
-----------------------------
Total assets ........................................................ $ 100,400 $ 187,830
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................. $ 7,821 $ 10,333
Accrued compensation ............................................. 41,778 39,416
-----------------------------
Total current liabilities ........................................... 49,599 49,749
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized; none
issued and outstanding at December 31, 1997 and May 31,
1998, respectively ............................................ - -
Common stock, $.01 par value, 10,000,000 shares authorized;
217,057 and 212,716 shares issued and outstanding at
December 31,1997 and May 31, 1998 , respectively ............. 2,170 2,127
Additional paid-in capital ....................................... 378,430 828,473
Deficit accumulated during the development stage ................. (329,799) (692,519)
-----------------------------
Total stockholders' equity .......................................... 50,801 138,081
-----------------------------
Total liabilities and stockholders' equity........................... $ 100,400 $ 187,830
=============================
</TABLE>
See accompanying notes.
F-3
<PAGE> 69
OPTIMUM HEALTH SERVICES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
June 1, 1997 Period from June
(date of Five-Month 1, 1997 (date of
inception) to Period Ended inception) to
December 31, May 31, May 31,
1997 1998 1998
------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenue:
Managed care ..................... $ - $ 1,739 $ 1,739
Other ............................ 1,140 1,408 2,548
-------------------------------------------
Total revenue ................ 1,140 3,147 4,287
Expenses:
Medical service expense .......... - 1,428 1,428
Personnel costs .................. 261,402 245,011 506,413
Professional fees ................ 1,916 22,928 24,844
Rent ............................. 7,789 19,832 27,621
Marketing and network development 20,582 34,181 54,763
General and administrative ....... 36,974 39,816 76,790
Depreciation and amortization .... 2,276 2,671 4,947
-------------------------------------------
Total expenses ............... 330,939 365,867 696,806
Loss before income taxes ............ (329,799) (362,720) (692,519)
Income taxes ........................ - - -
-------------------------------------------
Net loss ............................ $(329,799) $(362,720) $(692,519)
===========================================
Basic and diluted loss per common share... $ (1.52) $ (1.67)
==========================
</TABLE>
See accompanying notes.
F-4
<PAGE> 70
OPTIMUM HEALTH SERVICES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock During the Total
Additional Development Stockholders'
Shares Amount Paid-in Capital Stage Equity
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JUNE 1, 1997 (DATE OF
INCEPTION) - $ - $ - $ - $ -
Sale of common stock............. 217,057 2,170 5,330 - 7,500
Additional capitalcontributions - - 373,100 - 373,100
Net loss......................... - - - (329,799) (329,799)
------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997....... 217,057 2,170 378,430 (329,799) 50,801
Unaudited:
Repurchase and retirement of -
shares of common stock ......... (4,341) (43) 43 -
Additional capital contribution - - 450,000 - 450,000
Net loss........................ - - - (362,720) (362,720)
------------------------------------------------------------------------------
BALANCE AT MAY 31, 1998
(UNAUDITED)...................... 212,716 $ 2,127 $ 828,473 $ (692,519) $ 138,081
==============================================================================
</TABLE>]
See accompanying notes.
F-5
<PAGE> 71
OPTIMUM HEALTH SERVICES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from Period from
June 1, 1997 June 1, 1997
(date of Five-Month (date of
inception) to Period Ended inception) to
December 31, May 31, May 31,
1997 1998 1998
-------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss......................................... $ (329,799) $ (362,720) $ (692,519)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.............. 2,276 2,671 4,947
Changes in operating assets and liabilities
Other current assets..................... (2,957) (1,072) (4,029)
Accounts payable......................... 7,821 2,512 10,333
Accrued compensation..................... 41,778 (2,362) 39,416
----------------------------------------------------
Net cash used in operating activities......... (280,881) (360,971) (641,852)
INVESTING ACTIVITIES
Payments for computer equipment................. (29,066) (3,736) (32,802)
Payments for other assets........................ (657) (4,403) (5,060)
----------------------------------------------------
Net cash used in investing activities......... (29,723) (8,139) (37,862)
FINANCING ACTIVITIES
Additional capital contributions................. 373,100 450,000 823,100
Proceeds from the sale of common stock........... 7,500 - 7,500
----------------------------------------------------
Net cash provided by financing activities..... 380,600 450,000 830,600
Net increase in cash............................. 69,996 80,890 150,886
Cash at beginning of period...................... - 69,996 -
----------------------------------------------------
Cash at end of period............................ $ 69,996 $ 150,886 $ 150,886
====================================================
</TABLE>
See accompanying notes.
F-6
<PAGE> 72
OPTIMUM HEALTH SERVICES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Optimum Health Services, Inc. and Subsidiaries (Optimum or the Company), a
Delaware corporation, was organized in June 1997 as a management services
organization to develop, market and administer a comprehensive healthcare
benefits program which is designed to provide members with expanded access to
alternative care practitioners and premium wellness programs under discounted or
insured methods of payment. Optimum develops provider networks comprised of
traditional medical and ancillary providers and alternative (or complementary)
care providers under independent provider agreements. The Company is a
subsidiary of Complete Wellness Centers, Inc. (a stockholder) which owns
approximately 87% of the outstanding shares of common stock as of December 31,
1997.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions have been
eliminated.
DEVELOPMENT STAGE ENTERPRISE
Optimum is a development stage enterprise as defined by generally accepted
accounting principles. Optimum is devoting most of its efforts to activities
such as developing markets, raising capital and recruiting and training
personnel. The Company's planned principal operations have commenced, but there
has been no significant revenue therefrom. Complete Wellness Centers, Inc. will
continue to fund operations through the closing of the anticipated Rights
Offering (Note 7).
UNAUDITED INTERIM FINANCIAL INFORMATION
The interim consolidated financial statements as of May 31, 1998 and for the
five-month period ended May 31, 1998 do not provide all disclosures included in
the audited consolidated financial statements. These interim consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and the footnotes thereto. Results for the 1998 interim
period are not necessarily indicative of the results for the year ending
December 31, 1998. However, the accompanying interim consolidated financial
statements reflect all adjustments which are, in the opinion of management, of a
normal and recurring nature necessary for a fair presentation of the
consolidated financial position and results of operations of the Company.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
F-7
<PAGE> 73
OPTIMUM HEALTH SERVICES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPUTER EQUIPMENT
Computer equipment is stated at cost. Depreciation and amortization are computed
using the straight-line method, with the assets' useful lives estimated at five
years. Routine maintenance and repairs are charged to expense as incurred, while
betterments and renewals are capitalized.
MANAGED CARE REVENUE
Managed care revenues are derived from monthly capitation payments from managed
health benefits payors which contract with the Company for the delivery of
health and wellness services. The Company records this revenue on the accrual
basis at contractually agreed-upon rates.
INCOME TAXES
The Company has applied the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS 109), which requires an
asset and liability approach for financial accounting and reporting. Deferred
income tax assets and liabilities are determined based upon differences between
the financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.
NET LOSS PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings Per Share (SFAS 128). SFAS 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All loss per share amounts for all periods have been
presented to conform to the SFAS 128 requirements.
CONCENTRATION OF CREDIT RISK
The Company places cash with high-quality financial institutions. At times, the
Company maintains cash balances in excess of amounts insured by the Federal
Deposit Insurance Corporation (FDIC).
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation arrangements under the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25). In 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123), which is effective for fiscal years
beginning after December 15, 1995. Under
F-8
<PAGE> 74
OPTIMUM HEALTH SERVICES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SFAS 123, the Company may elect to recognize stock-based compensation expense
based on the fair value of the awards or continue to account for stock-based
compensation under APB 25, and disclose in the financial statements the effects
of SFAS 123 as if the recognition provisions were adopted.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash approximates its fair value.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information (SFAS 131), which supersedes Statement of
Financial Accounting Standards No. 14. SFAS 131 uses a management approach to
report financial and descriptive information about a company's operating
segments. Operating segments are revenue-producing components of the enterprise
for which separate financial information is produced internally for the
Company's management. SFAS 131 is effective for fiscal years beginning after
December 15, 1997. Management is currently assessing the impact of this
Standard.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS
130). SFAS 130 requires that total comprehensive income and comprehensive income
per share be disclosed and be given equal prominence with net income and
earnings per share. Comprehensive income is defined as changes in stockholders'
equity exclusive of transactions with owners such as capital contributions and
dividends. SFAS 130 is effective for fiscal years beginning after December 15,
1997. Management is currently assessing the impact of this Standard.
2. COMPUTER EQUIPMENT
Computer equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
1997
---------------------
<S> <C>
Computer equipment and software.......................................... $ 29,066
LESS accumulated depreciation and amortization........................... 2,276
---------------------
$ 26,790
=====================
</TABLE>
F-9
<PAGE> 75
OPTIMUM HEALTH SERVICES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INCOME TAXES
The Company is a member of a controlled group that files a consolidated tax
return. The Company computes current and deferred income taxes on a separate
return basis.
The Company did not have a current or deferred tax provision or benefit for the
period June 1, 1997 (date of inception) to December 31, 1997 due to its net
losses.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, May 31,
1997 1998
--------------------------------------
(Unaudited)
<S> <C> <C>
Deferred tax asset:
Net operating losses........................................ $124,000 $260,000
Less valuation allowance.................................... (124,000) (260,000)
--------------------------------------
Net deferred tax asset....................................... $ - $ -
======================================
</TABLE>
SFAS 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that a $124,000 valuation allowance at December 31, 1997 and a
$260,000 valuation allowance at May 31, 1998 (unaudited) are necessary to reduce
the deferred tax asset to the amount that will more likely than not be realized.
The change in the valuation allowance for the five-month period ended May 31,
1998 was $136,000 (unaudited).
Income taxes are different from the amount computed by applying the United
States statutory rate to loss before income taxes for the following reasons:
<TABLE>
<CAPTION>
Period from
June 1, 1997
(date of
inception) to Five-Month
December 31, Period Ended
1997 May 31, 1998
--------------------------------------
(Unaudited)
<S> <C> <C>
Income tax benefit at the statutory rate .............. $(112,000) $ (123,000)
State income taxes, net of federal benefit............. (12,000) (13,000)
Change in valuation allowance.......................... 124,000 136,000
--------------------------------------
Income taxes........................................... $ - $ -
======================================
</TABLE>
F-10
<PAGE> 76
OPTIMUM HEALTH SERVICES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company generated a net operating loss carryforward of $329,000 at December
31, 1997 which expires in 2012. During the five-month period ended May 31, 1998,
the Company generated a net operating loss carryforward of $361,000 (unaudited)
that expires in 2018.
4. STOCK OPTION PLANS
In June 1997, the Company adopted an employee stock option plan. The aggregate
number of shares of common stock reserved for issuance is 101,293. The Company
granted options to purchase 43,412 shares of the Company's common stock at an
exercise price of $0.03 per share on June 1, 1997. These options vest over a
three year period and are exercisable over a five year period (Note 7). The
Company also granted options to purchase 28,940 shares of the Company's common
stock at an exercise price of $0.03 per share on June 1, 1997. These options
vest at the rate of 10% for every $1 million of net income generated by the
Company for the year ending December 31, 1997 and are exercisable over a five
year period.
5. LOSS PER SHARE
The following table sets forth the computation of basic and diluted loss per
share from continuing operations:
<TABLE>
<CAPTION>
Period from June
1, 1997 (date of Five-Month
inception) to Period
December 31, Ended May 31,
1997 1998
(Unaudited)
--------------------------------------------
<S> <C> <C>
Numerator for basic and diluted loss per share - loss
available to common stockholders...................... $ (329,799) $ (362,720)
Denominator for basic and diluted loss per share -
weighted-average shares......................... 217,057 216,596
--------------------------------------------
Basic and diluted loss per share.......... $ (1.52) $ (1.67)
============================================
</TABLE>
Options to purchase approximately 72,000 shares of common stock were outstanding
at December 31, 1997, but were not included in the computation of diluted loss
per share because the effect would be antidilutive.
F-11
<PAGE> 77
OPTIMUM HEALTH SERVICES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
LEASE
The Company leases its facilities and certain office equipment under
noncancelable operating lease arrangements which expire at various dates, most
with options for renewal. Future minimum lease payments under noncancelable
operating leases with original terms of more than one year are as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1998.............................................................................. $59,426
1999.............................................................................. $127,160
2000.............................................................................. $130,835
2001.............................................................................. $134,618
2002.............................................................................. $138,494
Thereafter........................................................................ $80,056
---------------
Total ............................................................................ $670,589
===============
</TABLE>
LITIGATION
In November 1997, the Office of the United States Attorney for the Eastern
District of Virginia began investigating the billing procedures and clinical
relationships of Complete Wellness Centers, Inc. (CWC) and certain subsidiaries
related to CHAMPUS, Medicare, Federal Employees Health Benefits Program
(FEHBP), Medicaid and Blue Cross/Blue Shield of Virginia. As of June 15, 1998,
no charges have been filed against CWC or any of its employees and no search
warrants or subpoenas have been issued to Optimum or any of its employees or in
connection with any activities of Optimum.
If CWC or any of its subsidiaries were to be found in violation of federal or
state laws relating to these programs, CWC could be subject to substantial
monetary fines, civil and criminal penalties and exclusion from participation
in the Medicare, Medicaid or CHAMPUS programs and similar other reimbursement
programs. If any monetary fines were to be imposed and CWC could not satisfy
the assessed obligation, a claim may be sanctioned against the subsidiaries of
CWC, including Optimum, for satisfaction of any remaining obligation.
Since the investigation of CWC and certain subsidiaries is still ongoing,
management of Optimum can not determine the possible outcome of the
investigation.
7. OTHER TRANSACTIONS (UNAUDITED)
On May 13, 1998, the Board of Directors of Complete Wellness Centers, Inc.
adopted a plan to divest its approximately 87% ownership of Optimum. Under the
plan, Complete Wellness Centers, Inc. will issue a dividend to its shareholders
in the form of common stock of Optimum.
Effective May 15, 1998, the Company's Board of Directors approved the
acceleration of the vesting of certain options granted on June 1, 1997.
Effective May 31, 1998, the Company's Board of Director's approved a twenty
nine-for-one stock split of Optimum's common stock. All share and per share
amounts in the accompanying consolidated financial statements have been restated
to retroactively reflect the stock split.
On June 1, 1998, the Company adopted its 1998 Stock Option Plan. The aggregate
number of shares of common stock reserved for issuance is 375,000. As of June 1,
1998, options to purchase 65,000 shares of common stock have been granted to
management and director's. These options vest over a three year period.
Upon an effective date of the Company's anticipated Form SB-2 Registration
Statement, the Company will issue Rights to acquire 1,000,000 shares of Common
Stock at an exercise price of $1.00 per share. It is anticipated that the net
proceeds to the Company will be approximately $950,000 if all of the Underlying
Shares are purchased in
F-12
<PAGE> 78
OPTIMUM HEALTH SERVICES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the Rights Offering. If less than all of the Underlying Shares are purchased,
the proceeds will be correspondingly reduced.
On or before an effective date, CWC will advance $200,000 to Optimum in return
for a $200,000 senior secured note bearing interest at 12% per annum due at the
earlier of December 31, 1999 or the date Optimum is successful in closing a
financing arrangement (exclusive of the Rights Offering).
The Company will also issue warrants to Complete Wellness Centers, Inc. to
purchase 100,000 shares of the Company's common stock at an exercise price of
$1.00 per share in exchange for approximately $730,000 that was received by the
Company as of May 31, 1998. The warrants are exercisable for a period of five
years. Optimum shall be granted a five year call option to purchase and Complete
Wellness Centers, Inc. shall be granted a five year put option to sell the
100,000 warrants pro rata at an exercise price equal to: (1) 25% of any equity
financing in excess of $1,000,000 and (2) 10% of Optimum's annual earnings
before interest and taxes ("EBIT") up to $1,000,000 of Optimum's EBIT and (3)
20% of Optimum's EBIT in excess of $1,000,000, subject to a maximum exercise
price of $860,000 in total.
Complete Wellness Centers, Inc. will also provide certain lease guarantees to
Optimum and enter into a ten year intercompany operating agreement with
Optimum.
F-13
<PAGE> 79
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATIONS THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH THE INFORMATION
IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
--------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary.......................... 7
Risk Factors................................ 14
The Company................................. 24
Use of Proceeds............................. 28
Capitalization.............................. 29
Dividend Policy............................. 29
Dilution.................................... 30
Selected Financial Data..................... 31
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 32
Business.................................... 35
Management.................................. 46
Principal Stockholders...................... 52
Description of Capital Stock................ 53
The Spin-Off................................ 54
The Rights Offering......................... 58
Legal Matters............................... 64
Experts..................................... 64
Shares Eligible for Future Sale............. 65
Index to Financial Statements............... F-1
--------------
[OPTIMUM HEALTH SERVICES LOGO]
1,000,000 SHARES OF COMMON STOCK
AND
RIGHTS TO ACQUIRE UP TO
1,000,000 OF SUCH SHARES
------------
PROSPECTUS
------------
<PAGE> 80
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an itemized statement of all
estimated expenses in connection with the issuance and distribution of the
securities being registered:
SEC Registration fee ................................ $189.00
Legal expenses ...................................... 25,000.00
Accounting fees and expenses ........................ 19,000.00
Printing and other................................... 5,811.00
Total ....................................... $50,000.00
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes
a court to award or a corporation's Board of Directors to grant indemnification
to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act"). Article VII of the Registrant's Bylaws provides for
mandatory indemnification of its directors and permissible indemnification of
its officers, employees and other agents to the maximum extent permitted by
the Delaware General Corporation Law. The Registrant has entered into
Indemnification Agreements with its officers and directors which are intended
to provide the Registrant's officers and directors with further
indemnification to the maximum extent permitted by the Delaware General
Corporation Law.
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Number Description
- ------- -------------
<S> <C>
2.1 Distribution Agreement dated July 25, 1998 between Complete Wellness
Centers, Inc. and the Company.
3.1 Restated Certificate of Incorporation of the Company, as amended.
3.2 Amended and Restated By-laws of the Company.
4.1* Form of Common Stock Certificate.
4.2* Form of Rights Certificate.
4.3* Form of Warrants.
</TABLE>
<PAGE> 81
<TABLE>
<S> <C>
5.1* Opinion of Epstein Becker & Green, P.C.
10.1 Agreement Between Beacon Health Plans, Inc. and the Company
dated March 1, 1998.
10.2 Management Services Organization Fee for services Agreement
between SunStar Healthcare, Inc. and the Company dated June
1998.
10.3 HMO Agreement between the Company and One Health Plan of Florida,
Inc.
10.4 PPO Agreement between the Company and One Health Plan of Florida,
Inc.
10.5 POS Agreement between the Company and One Health Plan of Florida,
Inc.
10.6 Form of Ancillary Provider Agreement.
10.7 Form of Hospital services Agreement.
10.8 Form of Primary Care Group Provider Agreement.
10.9 From of Specialist Provider Agreement.
10.10 Employment Agreement between the Company and Christopher M. Grady
Dated May 12, 1997.
10.11 Employment Agreement Amendment between the Company and Christopher M. Grady
dated June 25, 1998.
10.12 Employment Agreement between the Company and Christian E. Miller
Dated May 12, 1997.
10.13 Employment Agreement Amendment between the Company and Christian
E. Miller dated June 25, 1998.
10.14 Employment Agreement between the Company and Jason M. Patchen
Dated May 12, 1997.
10.15 Employment Agreement Amendment between the Company and Jason M.
Patchen dated June 25, 1998.
</TABLE>
<PAGE> 82
<TABLE>
<S> <C>
10.16 Employment Agreement between the Company and David A. Sherwin
Dated May 12, 1997.
10.17 Employment Agreement Amendment between the Company and David A.
Sherwin dated June 25, 1998.
10.18 Employment Agreement between the Company and Theresa May dated
June 30, 1998.
10.19 1997 Bonus Plan for Key Employees.
10.20 1998 Bonus Plan for Key Employees.
10.21 Form of Management Lock-Up and Escrow Agreement for Outstanding
Common Stock.
10.22 1997 Stock Option Plan
10.23 1998 Stock Option Plan
10.24 Valuation of the Company Made by American Express Tax and Business
Services Dated June 5, 1998.
10.25 Certificate of Authority Issued by the State of Florida Dated December 4,
1997 for the Company to Act as a Third Party Administrator.
10.26 Certificate of Authority Issued by the State of Florida Dated August 26,
1997 for the Company to be a Private Review Agent.
10.27 Form of Promissory Note of the Company to Complete Wellness Centers,
Inc.
10.28 Form of Promissory Note to Optimum Health Services, Inc.
10.29 PPO Agreement between the Company and Managed Care of America
PPO, Inc.
10.30 Intercompany Agreement between the Company and Complete Wellness
Centers, Inc.
20.1 Declarations - Association Professional Liability Insurance.
20.2 Declarations - Third Party Administrators Professional
Liability Insurance.
21 Subsidiaries of Optimum Heath Services, Inc.
23.1 Consent of Ernst & Young LLP, Independent Accountants.
23.2* Consent of Epstein Becker & Green, P.C., (included in
Exhibit 5.1).
</TABLE>
<PAGE> 83
24 Power of Attorney (see page II-3).
27 Financial Data Schedule
- - ---------------------
* To be filed by amendment.
Item 17. Undertaking
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation or the Bylaws of the Registrant, indemnification Agreements
entered into between the Registrant and its officers and directors, 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
hereunder, 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.
The Registrant hereby undertakes:
1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the
registration statement.
Notwithstanding the foregoing, any increase or decrease in the
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 and
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 20 percent
change in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement.
<PAGE> 84
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at
the termination of the offering.
4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d)of
the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Clearwater, State of Florida on this 15 day of
July, 1998.
OPTIMUM HEALTH SERVICES, INC.
By: /s/
----------------------------
(Jason Patchen)
Chairman of the Board and
Chief Executive Officer
<PAGE> 85
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jason Patchen and David Sherwin, and
each of them singly, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities to sign the Registration Statement
filed herewith and any or all amendments to said Registration Statement
(including post-effective amendments and registration statements filed pursuant
to Rule 462 and otherwise), and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission granting unto said attorneys-in-fact and agents the
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as full to all
intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or his substitute, may lawfully do or cause to be done by virtue hereof.
Witness our hands on the date set forth below.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
- -----------------
Jason M. Patchen President, July 15, 1998
Chief Executive Officer
and Director
- ------------------
David A. Sherwin Treasurer & Vice President July 15, 1998
of Finance and Administration
- -------------------
Christopher M. Grady Secretary & Vice President July 15, 1998
of Information Services
- -------------------
Christian E. Miller Vice President of Operations July 15, 1998
</TABLE>
<PAGE> 86
<TABLE>
<S> <C> <C>
- -------------------
Theresa M. May Vice President of Corporate Development July 15, 1998
- -------------------
C. Thomas McMillen Chairman of the Board, Director July 15, 1998
</TABLE>
<PAGE> 1
Exhibit 2.1
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "Agreement") is made as of this 25th day
of June, 1998 between Complete Wellness Centers, Inc., a Delaware corporation
("CWC") and Optimum Health Services, Inc., a Delaware corporation and 86.67%
owned subsidiary of CWC ("Optimum").
WITNESSETH
WHEREAS, CWC controls, either through 100% or majority ownership, seven
separate operating subsidiaries and is the managing member of a limited
liability corporation;
WHEREAS, all of CWC's subsidiaries are focused in the healthcare industry
and each delivers a unique product or service sold to consumers directly or
through their sister companies.
WHEREAS, CWC provides administrative support services to such operating
subsidiaries including: (1) management services; (2) legal services; (3)
accounting services; (4) purchasing services, and (5) support services (the "CWC
Business");
WHEREAS, Optimum is a healthcare Management Service Organization ("MSO")
which provides services to health maintenance organizations including developing
provider networks, accepting delegated claims, credentialing, utilization
management, quality assurance, marketing and provider relations (the "Optimum
Business");
WHEREAS, the Optimum Business is conducted solely through Optimum and
its Subsidiaries;
WHEREAS, the Board of Directors of CWC has determined that it is in the
best interest of CWC and the stockholders of CWC to separate the Optimum
Business from the CWC Business through the distribution (the "Distribution") to
the holders of CWC Common Stock (as defined herein) all of the outstanding
shares of Optimum Common Stock (as defined herein) owned by CWC on May 13, 1998.
WHEREAS, in order to effect such separation, CWC will transfer to Optimum
prior to the Distribution certain assets and liabilities relating principally to
the Optimum Business not currently held by Optimum or an Optimum Subsidiary and
Optimum will transfer to CWC any assets and liabilities relating principally to
the CWC Business or the CWC Subsidiaries not currently held by CWC or a CWC
Subsidiary, if any, (the "Preliminary Transfers").
WHEREAS, in connection with the Distribution, CWC and Optimum have
determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Distribution, and to set forth the
agreements that will govern certain matters following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
<PAGE> 2
I. DEFINITIONS
Section 1.01. General.
As used in this Agreement, the following terms shall have the
following meanings:
Action: Any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
Affiliate: With respect to any specified Person, any other Person directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, such specified Person. For purposes of this definition, "control,"
when used with respect to any Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
Notwithstanding the foregoing, (i) the Affiliates of CWC shall not include
Optimum, the Optimum Subsidiaries or any other Person which otherwise would be
an Affiliate of CWC by reason of CWC's ownership of the capital stock of Optimum
prior to the Distribution or the fact that any officer or director of Optimum or
any of the Optimum Subsidiaries shall also serve as an officer or director of
CWC or any of the CWC Subsidiaries, and (ii) the Affiliates of Optimum shall not
include CWC, the CWC Subsidiaries, or any other Person which otherwise would be
an Affiliate of Optimum by reason of CWC's ownership of the capital stock of
Optimum prior to the Distribution or the fact that any officer or director of
Optimum or any of the Optimum Subsidiaries shall also serve as an officer or
director of CWC or any of the CWC Subsidiaries.
Agent: American Stock Transfer & Trust Company, as distribution agent
appointed by Optimum Health Services, Inc. to distribute the Optimum Common
Stock pursuant to the Distribution.
Assumed Financing Obligations: All Financing Obligations of CWC and
its Subsidiaries set forth on the Optimum Pro Forma Balance Sheet.
CWC Assets: The assets of CWC and the CWC Subsidiaries including, without
limitation, (i) the capital stock of the CWC Subsidiaries; (ii) the CWC Books
and Records; (iii) all of the assets expressly to be retained by, or assigned or
allocated to, CWC or any of the CWC Subsidiaries under this Agreement or the
Related Agreements; and (iv) any other assets of CWC and its Subsidiaries not
composing Optimum Assets.
CWC Board: The Board of Directors of CWC as it is constituted prior to the
Distribution Date.
CWC Books and Records: The books and records (including computerized
records) of CWC and the CWC Subsidiaries and any other books and records of
CWC's Subsidiaries which relate principally to the CWC Group, are necessary to
conduct the CWC Business or are required by law to be retained by CWC or a CWC
Subsidiary, including, without limitation, (i) all such
2
<PAGE> 3
books and records relating to CWC Employees, (ii) all files relating to any
Action being retained or assumed by CWC as part of the CWC Liabilities, and
(iii) original corporate minute books, stock ledgers and certificates and
corporate seals, and all licenses, leases, agreements and filings, relating to
CWC, the CWC Subsidiaries or the CWC Business (but not including the Optimum
Books and Records, provided that CWC shall have access to, and shall have the
right to obtain duplicate copies of, the Optimum Books and Records in accordance
with the provisions of Article VII).
CWC Business: The business conducted by Complete Wellness Centers, Inc.,
as referenced in the recitals to this Agreement.
CWC Common Stock: The common stock, par value $.0001665 per share, of
CWC.
CWC Group: CWC and the CWC Subsidiaries, collectively.
CWC Liabilities: (i) All of the Liabilities of CWC and the CWC
Subsidiaries under, or to be retained or assumed by CWC or any of the CWC
Subsidiaries pursuant to, this Agreement or any of the Related Agreements; (ii)
any Financing Obligations of CWC and its Subsidiaries not constituting Optimum
Liabilities; (iii) all Liabilities transferred to CWC or the CWC Subsidiaries in
connection with the Distribution; (iv) all claims, losses, damages, demands,
costs, expenses or Liabilities for Tax (which shall be governed by Sections
5.06, 6.05 and 9.02 hereof and by the Tax Sharing Agreement; (v) all other
Liabilities arising out of, or in connection with, any of the CWC Assets or the
CWC Business; and (vi) to the extent not otherwise provided for, all other
Liabilities of CWC and its Subsidiaries not constituting Optimum Liabilities.
CWC Policies: The Directors and Officers and General Liability policy
effective February, 2 1998 and any other policies current or past, which are
owned or maintained by or on behalf of CWC or any of its Affiliates or
predecessors, which, by mutual agreement of CWC and Optimum are to be assigned
to CWC or to any CWC Subsidiary.
CWC Subsidiaries: All Subsidiaries of CWC, except Optimum and the Optimum
Subsidiaries.
Commission: The Securities and Exchange Commission.
Conveyancing and Assumption Instruments: Collectively, the various
agreements, instruments and other documents to be entered into to effect the
Preliminary Transfers and the assignment of assets and the assumption of
Liabilities contemplated by this Agreement and the Related Agreements in the
manner contemplated herein and therein.
Distribution Date: The date determined by the CWC Board as the date on
which the Distribution shall be effected, which Distribution Date is
contemplated by the CWC Board to occur on or about August 27, 1998.
Distribution Record Date: The date established by the CWC Board as the
date for taking a record of the Holders of record of CWC Common Stock entitled
to participate in the
3
<PAGE> 4
Distribution, which Distribution Record Date has been established as May 13,
1998, subject to the fulfillment on or before August 27, 1998 of certain
conditions to the Distribution as provided in Section 4.02.
Exchange Act: The Securities Exchange Act of 1934, as
amended.
Financing Obligations: All (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, notes, debentures or similar instruments, (iii)
obligations under capitalized leases and deferred purchase arrangements, (iv)
reimbursement or other obligations relating to letters of credit or similar
arrangements, and (v) obligations to guarantee, directly or indirectly, any of
the foregoing types of obligations on behalf of others.
Holders: The holders of record of CWC Common Stock as of the
Distribution Record Date.
Insurance Administration: With respect to each Policy (including Self
Insurance Programs), the accounting for premiums, retrospectively rated
premiums, defense cost, adjuster's fees, indemnity payments, deductibles and
retentions as appropriate under the terms and conditions of each of the
Policies; and the reporting to excess insurance carriers of any losses or claims
in accordance with Policy provisions, and the distribution of Insurance Proceeds
as contemplated by this Agreement.
Insurance Proceeds: Those moneys (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of the insured,
in either case net of any applicable premium adjustment, retrospectively rated
premium, deductible, retention, cost or reserve paid or held by or for the
benefit of such insured.
Insured Claims: Those Liabilities that, individually or in the aggregate,
are covered within the terms and conditions of any of the Policies (including
Self Insurance Programs), whether or not subject to deductibles, co-insurance,
uncollectability or retrospectively rated premium adjustments, but only to the
extent that such Liabilities are within applicable Policy limits, including
aggregates.
IRS: The Internal Revenue Service.
Liabilities: Any and all debts, liabilities and obligations, absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, including all costs and expenses
relating thereto, and including, without limitation, those debts, liabilities
and obligations arising under any law, rule, regulation, Action, threatened
Action, order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
Optimum Board: The Board of Directors of Optimum.
Optimum Books and Records: The books and records (including computerized
records) of Optimum and the Optimum Subsidiaries and any other books and records
of CWC's
4
<PAGE> 5
Subsidiaries which relate principally to Optimum, are necessary to
conduct the Optimum Business, or are required by law to be retained by Optimum
or a Optimum Subsidiary, including, without limitation, (i) all such books and
records relating to Optimum Employees, (ii) all files relating to any Action
being assumed by Optimum as part of the Optimum Liabilities, and (iii) original
corporate minute books, stock ledgers and certificates and corporate seals, and
all licenses, leases, agreements and filings, relating to Optimum, the Optimum
Subsidiaries or the Optimum Business (but not including the CWC Books and
Records, provided that Optimum shall have access to, and have the right to
obtain duplicate copies of, the CWC Books and Records which pertain to the
Optimum Business in accordance with the provisions of Article VII).
Optimum Amended Certificate: The Amendment to the Restated Certificate of
Incorporation of Optimum for the purpose of, among other things, increasing the
number of authorized shares of Optimum capital stock to 10,000,000 shares of
Common Stock and 1,000,000 shares of Preferred Stock.
Optimum Bylaws: The Restated Bylaws of Optimum, substantially in the
form of Exhibit A, to be in effect at the Distribution Date.
Optimum Certificate: The Restated Certificate of Incorporation of
Optimum, substantially in the form of Exhibit B, to be in effect at the
Distribution Date.
Optimum Common Stock: The common stock, $.01 par value per share, of
Optimum.
Optimum: Optimum and the Optimum Subsidiaries, collectively.
Optimum Assets: (i) All outstanding capital stock of the Optimum
Subsidiaries; (ii) the Optimum Books and Records; (iii) all of the assets
expressly to be retained by, or assigned or allotted to, Optimum or any of the
Optimum Subsidiaries under this Agreement or the Related Agreements; and (iv)
any other assets of CWC and its Subsidiaries used principally in the Optimum
Business.
Optimum Liabilities: (i) All of the Liabilities of the Optimum under, or
to be retained or assumed by Optimum or any of the Optimum Subsidiaries pursuant
to, this Agreement or any of the Related Agreements, including, without
limitation, liabilities arising under the securities or blue sky laws of the
United States or of states or other political subdivisions of the United States
in connection with or related to, information contained in or omitted from the
SB-2 or the Proxy Statement; (ii) all Liabilities for payment of outstanding
drafts of Optimum and its Subsidiaries existing as of the Distribution Date;
(iii) the Assumed Financing Obligations; (iv) all Liabilities of Optimum and the
Optimum Subsidiaries, other than Liabilities transferred to CWC or to any CWC
Subsidiary in connection with the Distribution; and (v) all other Liabilities
arising out of, or in connection with, any of the Optimum Assets or the Optimum
Business; provided, however, that the Optimum Liabilities shall not include (i)
any Financing Obligations of CWC or the Optimum Subsidiaries other than the
Assumed Financing Obligations; and (ii) all claims, losses, damages, demands,
costs, expenses or Liabilities for any Tax (which shall be governed by Sections
5.06, 6.05 and 9.02 hereof and by the Tax Sharing Agreement).
5
<PAGE> 6
Optimum Subsidiaries: All Subsidiaries of Optimum.
New Agreements: Tax Sharing Agreement; and Tax Administration Agreement.
Person: Any individual, corporation, partnership, association, trust,
estate or other entity or organization, including any governmental entity or
authority.
Policies: Insurance policies and insurance contracts of any kind relating
to the Optimum Business or the CWC Business as conducted prior to the
Distribution Date, including without limitation primary and excess policies,
comprehensive general liability policies, automobile, aircraft and workers'
compensation insurance policies, and self-insurance and captive insurance
company arrangements, including any "fronted policies" with respect to Self
Insurance Programs, together with the rights and benefits thereunder.
Privileged Information: All information as to which CWC, Optimum or
any of their Subsidiaries are entitled to assert the protection of a
Privilege.
Privileges: All privileges that may be asserted under applicable law
including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluative processes.
Related Agreements: All of the agreements, instruments,
understandings, assignments or other arrangements set forth in writing, which
are entered into in connection with the transactions contemplated hereby,
including, without limitation: [ ].
SB-2: The Registration Statement on SB-2 under the Exchange Act with
respect to the Optimum Common Stock.
Subsidiary: With respect to any Person, (a) any corporation of which at
least a majority in interest of the outstanding voting stock (having by the
terms thereof voting power under ordinary circumstances to elect a majority of
the directors of such corporation, irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned or controlled by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries, or (b) any corporate or non-corporate entity in which such Person,
one or more Subsidiaries of such Person, or such Person and one or more
Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has an ownership interest and which is included in the
consolidated financial reports of such Person consistent with generally accepted
accounting principles.
Tax: The meaning set forth in the Tax Sharing Agreement.
Tax Administration Agreement: The Tax Administration Agreement between CWC
and Optimum pursuant to which such parties will provide to the other certain tax
administration
6
<PAGE> 7
services after the consummation of the Distribution, which agreement shall be
entered into on or prior to the Distribution Date in substantially the form
attached hereto as Exhibit N.
Tax Sharing Agreement: The Tax Sharing Agreement between CWC and Optimum
pursuant to which such parties will provide for the allocation of certain tax
liabilities after the consummation of the Distribution, which agreement shall be
entered into on or prior to the Distribution Date in substantially in the form
attached hereto as Exhibit O.
Section 1.02. Terms Defined Elsewhere in Agreement. Each of the
following terms is defined in the Section set forth opposite such term:
II. TRANSFER OF ASSETS
Section 2.01. Transfer of Assets to Optimum.
Prior to the Distribution Date, CWC shall take or cause to be taken all
actions necessary to cause the transfer, assignment, delivery and conveyance to
Optimum or the Optimum Subsidiary designated by Optimum, of all of CWC's and its
Subsidiaries' right, title and interest in any Optimum Assets held, on or prior
to the Distribution Date, by CWC or any CWC Subsidiary.
Section 2.02. Transfers of Assets from Optimum Subsidiaries to CWC or CWC
Subsidiaries.
Prior to the Distribution Date, Optimum shall take or cause to be taken
all action necessary to cause the transfer, assignment, delivery and conveyance
to CWC or the CWC Subsidiary designated by CWC, of all of Optimum's and the
Optimum Subsidiaries' right, title and interest in CWC Assets held, on or prior
to the Distribution Date by Optimum or one of the Optimum Subsidiaries, if any.
Section 2.03. Transfers Not Effected Prior to the Distribution.
To the extent that any transfers contemplated by this Article II shall not
have been fully effected on the Distribution Date, the parties shall cooperate
to effect such transfers as promptly as shall be practicable following the
Distribution Date. Nothing herein shall be deemed to require the transfer of any
assets or the assumption of any Liabilities which by their terms or operation of
law cannot be transferred or assumed; provided, however, that CWC and Optimum
and their respective Subsidiaries and Affiliates shall cooperate in seeking to
obtain any necessary consents or approvals for the transfer of all assets and
Liabilities contemplated to be transferred pursuant to this Article II. In the
event that any such transfer of assets or Liabilities has not been consummated
effective as of the Distribution Date, the party retaining such asset or
Liability shall thereafter hold such asset in trust for the use and benefit of
the party entitled thereto (at the expense of the party entitled thereto) and
retain such Liability for the account of the party by whom such Liability is to
be assumed pursuant hereto, and take such other actions as may be reasonably
required in order to place the parties, insofar as reasonably possible, in the
same position as would have existed had such asset been transferred or such
Liability been assumed as
7
<PAGE> 8
contemplated hereby. As and when any such asset or Liability becomes
transferable, such transfer and assumption shall be effected forthwith. The
parties agree that, except as set forth in this Section 2.03, as of the
Distribution Date, each party hereto shall be deemed to have acquired complete
and sole beneficial ownership over all of the assets, together with all rights,
powers and privileges incidental thereto, and shall be deemed to have assumed in
accordance with the terms of this Agreement all of the Liabilities, and all
duties, obligations and responsibilities incidental thereto, which such party is
entitled to acquire or required to assume pursuant to the terms of this
Agreement.
Section 2.04. Cooperation Re: Assets.
In the case that at any time after the Distribution Date, Optimum
reasonably determines that any of the CWC Assets are essential for the conduct
of the Optimum Business, or CWC reasonably determines that any of the Optimum
Assets are essential for the conduct of the CWC Business, and the nature of such
assets makes it impracticable for Optimum or CWC, as the case may be, to obtain
substitute assets or to make alternative arrangements on commercially reasonable
terms to conduct their respective businesses, and reasonable provisions for the
use thereof are not already included in the Related Agreements, then Optimum
(with respect to the Optimum Assets) and CWC (with respect to the CWC Assets)
shall cooperate to make such assets available to the other party on commercially
reasonable terms, as may be reasonably required for such party to maintain
normal business operations. However, (i) the usage of such assets by the other
party shall not materially interfere with the use of such assets by the party
holding such assets, and (ii) such assets shall be required to be made available
only until such time as the other party may reasonably obtain substitute assets
or make alternative arrangements on commercially reasonable terms to permit it
to maintain normal business operations.
Section 2.05. No Representations or Warranties; Consents.
Each of the parties hereto understands and agrees that no party hereto is,
in this Agreement, in any Related Agreement, or otherwise, representing or
warranting in any way (i) as to the value or freedom from encumbrance of, or any
other matter concerning, any assets of such party or (ii) as to the legal
sufficiency to convey title to any asset transferred pursuant to this Agreement
or any Related Agreement. It is also agreed and understood that there are no
warranties, express or implied, as to the merchantability or fitness of any of
the assets either transferred to or retained by the parties, as the case may be,
and all such assets shall be "as is, where is" and "with all faults" provided,
however, that the absence of warranties shall have no effect upon the allocation
of Liabilities under this Agreement and provided further that Optimum represents
and warrants that, prior to the Distribution Date, Optimum and the Optimum have
maintained their accounts payable and accounts receivable in a manner consistent
with the customary practices of the Optimum Business. Each party hereto
understands and agrees that no party hereto is, in this Agreement, in any
Related Agreement or otherwise, representing or warranting in any way that the
obtaining of any consents or approvals, the execution and delivery of any
amendatory agreements and the making of any filings or applications contemplated
by this Agreement, any Related Agreement or otherwise will satisfy the
provisions of any or all applicable laws or judgments or other instruments or
agreements relating to such assets. Notwithstanding the foregoing, the parties
shall use their good faith efforts to obtain all consents
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and approvals, to enter into all reasonable amendatory agreements and to make
all filings and applications which may be reasonably required for the
consummation of the transactions contemplated by this Agreement and the Related
Agreements, and shall take all such further reasonable actions as shall be
reasonably necessary to preserve for each of the Optimum and the CWC Group, to
the greatest extent feasible, the economic and operational benefits of the
allocation of assets and liabilities provided for in this Agreement. In case at
any time after the Distribution Date any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary or
desirable action.
Section 2.06. Conveyancing and Assumption Instruments.
In connection with the Preliminary Transfers described in Article II and
Article III hereof, and the assignment of assets and the assumption of
Liabilities contemplated by any Related Agreements, the parties shall execute,
or cause to be executed by the appropriate entities, the Conveyancing and
Assumption Instruments in such forms as the parties shall reasonably agree. The
transfer of capital stock shall be effected by means of delivery of stock
certificates and executed stock powers and notation on the stock record books of
the corporation or other legal entities involved and, to the extent required by
applicable law, by notation on public registries.
Section 2.07. Cash Allocation; Cash Management.
(a) Cash Allocation on the Distribution Date.
The allocation between CWC and Optimum of all domestic and international
cash bank balances, short-term investments and outstanding checks and drafts of
CWC and its Subsidiaries recorded per the books of CWC and its Subsidiaries
shall be in accordance with all cash received in, and deposits of cash, checks,
drafts or short-term investments made to, depository accounts, as of the close
of [business on] the Distribution Date shall be remitted to Optimum.
All Liabilities for payment of outstanding checks or drafts drawn on or
prior to the Distribution Date on accounts allocated to Optimum shall be paid by
Optimum.
(b) Cash Management After the Distribution Date. All petty cash,
depository and disbursement accounts of CWC on the Distribution Date shall be
transferred to Optimum after the allocations are made pursuant to this Section
2.07.
(c) For purposes of this Section 2.07, the parties contemplate that the
Optimum Business and the CWC Business, including, but not limited to, the
administration of accounts payable and accounts receivable, will be conducted in
the ordinary course of business and consistent with the past policies and
practices of Optimum prior the Distribution Date.
(d) For purposes of this Section 2.07, any disagreement or dispute shall
be resolved by the Chief Financial Officer of Optimum, which resolution shall be
binding and final upon each of the parties hereto and not subject to further
review.
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Section 2.08. Agreements Between CWC and Optimum.
On or prior to the Distribution Date, CWC and Optimum shall enter into
the New Agreements.
III. ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. Assumption and Satisfaction of Liabilities.
Except as set forth in one or more of the Related Agreements, effective as
of and after the Distribution Date, (a) Optimum shall, and/or shall cause the
Optimum Subsidiaries to, assume, pay, perform and discharge in due course all of
the Optimum Liabilities, and (b) CWC shall, and/or shall cause the CWC
Subsidiaries to, assume, pay, perform and discharge in due course all of the CWC
Liabilities.
IV. THE DISTRIBUTION
Section 4.01. Cooperation Prior to the Distribution.
(a) Optimum and CWC shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the transactions
contemplated by this Agreement and the Related Agreements.
(b) Optimum and CWC shall use all reasonable efforts to obtain any
third-party consents or approvals necessary or desirable in connection with the
transactions contemplated hereby ("Consents").
(c) Optimum and CWC will use all reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary or
desirable under applicable law, to consummate the transactions contemplated
under this Agreement and the Related Agreements.
Section 4.02. CWC Board Action; Conditions Precedent to the
Distribution.
The CWC Board, in its sole discretion, has established the Record Date as
May 13, 1998, and the Distribution Date and any appropriate procedures in
connection with the Distribution to coincide with the SEC effective date. In no
event shall the Distribution occur unless the following conditions shall have
been satisfied:
(a) the transactions contemplated in Article II and Article III shall have
been consummated in all material respects;
(b) the Optimum Board members, comprised as contemplated by Section 6.01,
shall have been elected by Optimum, and the Optimum Certificate and
Optimum Bylaws shall have been adopted and shall be in effect;
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(c) the Ruling Request shall have been granted in form and substance
satisfactory to the CWC Board, in its sole discretion and the
representations made to the IRS therein shall be true in all
material respects;
(d) the SB-2 shall have been declared effective by the Commission;
(e) Optimum and CWC shall have entered into the Related Agreements to
which they are a party and each of the transactions contemplated by
the Related Agreements to be consummated on or prior to the
Distribution Date shall have been consummated;
(f) all necessary regulatory approvals and consents of third parties shall
have been received;
(g) Optimum shall have obtained, or CWC shall have obtained for Optimum,
insurance (or binders therefor) providing coverage to Optimum
similar to the coverage provided by insurance in place prior to the
Distribution Date; and,
(h) all financing arrangements with respect to CWC and Optimum
satisfactory to the CWC and Optimum Boards shall be in place.
provided, however, that (x) any such condition may be waived by the CWC Board in
its sole discretion, and (y) the satisfaction of such conditions shall not
create any obligation on the part of CWC or any other party hereto to effect the
Distribution or in any way limit CWC's power of termination set forth in Section
9.08 or alter the consequences of any such termination from those specified in
such Section.
Section 4.03. The Distribution.
On the Distribution Date, or as soon thereafter as practicable, subject to
the conditions and rights of termination set forth in this Agreement, CWC shall
deliver to the Agent a share certificate representing all of the then
outstanding shares of Optimum Common Stock owned by CWC, endorsed in blank, and
shall instruct the Agent to distribute to each Holder, on or as soon as
practicable following the Distribution Date, a certification, or if requested by
such Holder, a certificate, representing one share of Optimum Common Stock for
each twelve shares of CWC Common Stock so held. Optimum agrees to provide all
share certificates that the Agent shall require in order to effect the
Distribution.
V. INDEMNIFICATION
Section 5.01. Indemnification by CWC.
Except as otherwise expressly set forth in a Related Agreement, CWC shall
indemnify, defend and hold harmless Optimum and each of the Optimum
Subsidiaries, and each of their respective directors, officers, employees,
agents and Affiliates and each of the heirs, executors, successors and assigns
of any of the foregoing (the "Optimum Indemnities") from and against any and all
Indemnifiable Losses incurred or suffered by any of the Optimum Indemnities and
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arising out of or due to the failure or alleged failure of CWC, any CWC
Subsidiaries, or any of their Affiliates to pay, perform or otherwise discharge
in due course any of the CWC Liabilities or comply with the provisions of
Section 6.04. To the extent that counsel is provided to Optimum under this
Indemnification, such counsel shall be selected by CWC and such counsel may
include its in-house corporate counsel.
Section 5.02. Indemnification by Optimum.
Except as otherwise expressly set forth in a Related Agreement, Optimum
shall indemnify, defend and hold harmless CWC and each of the CWC Subsidiaries,
and each of their respective directors, officers, employees, agents and
Affiliates and each of the heirs, executors, successors and assigns of any of
the foregoing (the "CWC Indemnities") from and against any and all Indemnifiable
Losses incurred or suffered by any of the CWC Indemnities and arising out of or
due to the failure or alleged failure of Optimum, any Optimum Subsidiaries, or
any of their Affiliates to pay, perform or otherwise discharge in due course any
of the Optimum Liabilities or comply with the provisions of Section 6.04. To the
extent that counsel is provided to CWC under this Indemnification, such counsel
shall be selected by Optimum and such counsel may include its in-house corporate
counsel.
Section 5.03. Insurance Proceeds.
The amount which any party (an "Indemnifying Party") is or may be required
to pay to any other Person (an "Indemnified Person") pursuant to Section 5.01 or
Section 5.02 shall be reduced (including, without limitation, retroactively) by
any Insurance Proceeds or other amounts actually recovered by or on behalf of
such Indemnified Party in reduction of the related Indemnifiable Loss. If an
Indemnified Party shall have received the payment required by this Agreement
from an Indemnifying Party in respect of an Indemnifiable Loss and shall
subsequently actually receive Insurance Proceeds, or other amounts in respect of
such Indemnifiable Loss as specified above, then such Indemnified Party shall
pay to such Indemnifying Party a sum equal to the amount of such Insurance
Proceeds or other amounts actually received.
Section 5.04. Procedure for Indemnification.
(a) Except as may be set forth in a Related Agreement, if an Indemnified
Party shall receive notice or otherwise learn of the assertion by a Person
(including, without limitation, any governmental entity) who is not a party to
this Agreement or to any of the Related Agreements of any claim or of the
commencement by any such Person or its Affiliate of any Action with respect to
which an Indemnifying Party may be obligated to provide indemnification pursuant
to this Agreement (a "Third-Party Claim"), such Indemnified Party shall give
such Indemnifying Party written notice thereof promptly after becoming aware of
such Third-Party Claim; provided, that the failure of any Indemnified Party to
give notice as required by this Section 5.04 shall not relieve the Indemnifying
Party of its obligations under this Article V, except to the extent that such
Indemnifying Party is prejudiced by such failure to give notice. Such notice
shall describe the Third-Party Claim in reasonable detail, and shall indicate
the amount (estimated if necessary) of the Indemnifiable Loss that has been or
may be sustained by such Indemnified Party.
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(b) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third-Party Claim, provided that the Indemnifying Party
must confirm in writing that it agrees that the Indemnified Party is entitled to
indemnification hereunder in respect of such Third-Party Claim. Within 30 days
of the receipt of notice from an Indemnified Party in accordance with Section
5.04(a) (or sooner, if the nature of such Third-Party Claim so requires), the
Indemnifying Party shall notify the Indemnified Party of its election whether to
assume responsibility for such Third-Party Claim (provided that if the
Indemnifying Party does not so notify the Indemnified Party of its election
within 30 days after receipt of such notice from the Indemnified Party, the
Indemnifying Party shall be deemed to have elected not to assume responsibility
for such Third-Party Claim), and such Indemnified Party shall cooperate in the
defense or settlement or compromise of such Third-Party Claim. After notice from
an Indemnifying Party to an Indemnified Party of its election to assume
responsibility for a Third-Party Claim, such Indemnifying Party shall not be
liable to such Indemnified Party under this Article V for any legal or other
expenses (except expenses approved in advance by the Indemnifying Party)
subsequently incurred by such Indemnified Party in connection with the defense
thereof; provided, that if the defendants in any such claim include both the
Indemnifying Party and one or more Indemnified Parties and in such Indemnified
Parties' reasonable judgment a conflict of interest between such Indemnified
Parties and such Indemnifying Party exists in respect of such claim, such
Indemnified Parties shall have the right to employ separate counsel and in that
event the reasonable fees and expenses of such separate counsel (but not more
than one separate counsel reasonably satisfactory to the Indemnifying Party)
shall be paid by such Indemnifying Party. If an Indemnifying Party elects not to
assume responsibility for a Third-Party Claim (which election may be made only
in the event of a good faith dispute that a claim was inappropriately tendered
under Section 5.01 or 5.02, as the case may be) such Indemnified Party may
defend or (subject to the following sentence) seek to compromise or settle such
Third-Party Claim. Notwithstanding the foregoing, an Indemnified Party may not
settle or compromise any claim without prior written notice to the Indemnifying
Party, which shall have the option within ten days following the receipt of such
notice (i) to disapprove the settlement and assume all past and future
responsibility for the claim, including reimbursing the Indemnified Party for
prior expenditures in connection with the claim, or (ii) to disapprove the
settlement and continue to refrain from participation in the defense of the
claim, in which event the Indemnifying Party shall have no further right to
contest the amount or reasonableness of the settlement if the Indemnified Party
elects to proceed therewith, or (iii) to approve the amount of the settlement,
reserving the Indemnifying Party's right to contest the Indemnified Party's
right to indemnity, or (iv) to approve and agree to pay the settlement. In the
event the Indemnifying Party makes no response to such written notice from the
Indemnity, the Indemnifying Party shall be deemed to have elected option (ii).
(c) If an Indemnifying Party chooses to defend or to seek to compromise
any Third-Party Claim, the Indemnified Party shall make available to such
Indemnifying Party any personnel and any books, records or other documents
within its control or which it otherwise has the ability to make available that
are necessary or appropriate for such defense.
(d) Any claim on account of an Indemnifiable Loss which does not result
from a Third-Party Claim shall be asserted by written notice given by the
Indemnified Party to the applicable
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Indemnifying Party. Such Indemnifying Party shall have a period of 15 days after
the receipt of such notice within which to respond thereto. If such Indemnifying
Party does not respond within such 15-day period, such Indemnifying Party shall
be deemed to have refused to accept responsibility to make payment. If such
Indemnifying Party does not respond within such 15-day period or rejects such
claim in whole or in part, such Indemnified Party shall be free to pursue such
remedies as may be available to such party under applicable law or under this
Agreement.
(e) In addition to any adjustments required pursuant to Section 5.03, if
the amount of any Indemnifiable Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnified Party to the
Indemnifying Party.
(f) In the event of payment by an Indemnifying Party to any Indemnified
Party in connection with any Third-Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place of such Indemnified Party as to any
events or circumstances in respect of which such Indemnified Party may have any
right or claim relating to such Third-Party Claim against any claimant or
plaintiff asserting such Third-Party Claim. Such Indemnified Party shall
cooperate with such Indemnifying Party in a reasonable manner, and at the cost
and expense of such Indemnifying Party, in prosecuting any subrogated right or
claim.
Section 5.05. Remedies Cumulative.
The remedies provided in this Article V shall be cumulative and shall not
preclude assertion by any Indemnified Party of any other rights or the seeking
of any and all other remedies against any Indemnifying Party.
Section 5.06. After-Tax Indemnification Payments.
Except as otherwise expressly provided herein or in a Related Agreement,
any indemnification payment made by any Indemnifying Party under this Article V
shall be computed by taking into account the value of any and all applicable
deductions, losses, credits, offsets or other items for Federal, State or other
Tax purposes attributable to the payment of the Indemnified Losses by the
Indemnified Party attributable to receipt of the indemnification payment.
Section 5.07. Survival of Indemnities.
The obligations of each of Optimum and CWC under this Article V shall
survive the sale or other transfer by it of any assets or businesses or the
assignment by it of any Liabilities, with respect to any Indemnifiable Loss of
the other related to such assets, businesses or Liabilities.
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VI. CERTAIN ADDITIONAL MATTERS.
Section 6.01. Optimum Board.
Optimum and CWC shall take all actions which may be required to appoint as
officers and directors of Optimum those persons named in the SB-2 (as may be
altered or supplemented prior to the date hereof by the CWC Board and the
Optimum Board) to constitute, effective as of the Distribution Date, the
officers and the directors of Optimum.
Section 6.02. CWC and Optimum Board.
C. Thomas McMillen shall serve as a director of both Optimum and CWC.
Section 6.03. Certificate and Bylaws.
(a) On or prior to the Distribution Date, Optimum shall adopt the Optimum
Certificate and the Optimum Bylaws, and shall file the Optimum Certificate with
the Secretary of State of the State of Delaware. CWC shall provide all necessary
shareholder approvals for the Optimum Certificate prior to the filing of the
Optimum Certificate with the Secretary of State of the State of Delaware.
(b) On or prior to the Distribution Date, CWC shall obtain all necessary
corporate approvals (including the approval by the holders of CWC Common Stock)
to the CWC Amended Certificate, and shall file the CWC Amended Certificate with
the Secretary of State of the State of Delaware.
Section 6.04. Certain Post-Distribution Transactions.
Each of CWC and Optimum shall, and shall cause each of their respective
Subsidiaries to, comply in all material respects with each representation and
statement made, or to be made, to any taxing authority in connection with the
IRS Ruling or any other ruling obtained, or to be obtained, by CWC and Optimum
acting together, from any such taxing authority with respect to any transaction
contemplated by this Agreement.
Section 6.05. Sales and Transfer Taxes.
CWC and Optimum agree to cooperate to determine the amount of sales,
transfer or other taxes or fees, including, without limitation, all real estate,
patent, trademark and transfer taxes and recording fees payable in connection
with the transactions contemplated by the Agreement (the "Transaction Taxes").
CWC agrees to file promptly and timely the returns for such Transaction Taxes
and Optimum will join in the execution of any such tax returns or other
documentation. Payment of all such Transaction Taxes shall be the responsibility
of CWC and Optimum on a 50%-50% basis.
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VII. ACCESS TO INFORMATION AND SERVICES
Section 7.01. Provision of Corporate Records.
(a) Except as may otherwise be provided in a Related Agreement, CWC shall
arrange as soon as practicable following the Distribution Date, to the extent
not previously delivered in connection with the transactions contemplated in
Article II, for the transportation (at Optimum's cost) to Optimum of the Optimum
Books and Records in its possession, except to the extent such items are already
in the possession of Optimum or a Optimum Subsidiary. The Optimum Books and
Records shall be the property of Optimum, but the Optimum Book and Records that
reasonably relate to the CWC business shall be available to CWC for review and
duplication until CWC shall notify Optimum in writing that such records are no
longer of use to CWC.
(b) Except as otherwise provided in a Related Agreement, Optimum shall
arrange as soon as practicable following the Distribution Date, to the extent
not previously delivered in connection with the transactions contemplated in
Article II, for the transportation (at CWC's cost) to CWC of the CWC Books and
Records in its possession, except to the extent such items are already in the
possession of CWC. The CWC Books and Records shall be the property of CWC, but
the CWC Books and Records that reasonably relate to the Optimum Business shall
be available to Optimum for review and duplication until Optimum shall notify
CWC in writing that such records are no longer of use to Optimum.
Section 7.02. Access to Information.
Except as otherwise provided in a Related Agreement, from and after the
Distribution Date, CWC shall afford to Optimum and its authorized accountants,
counsel and other designated representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing information)
and duplicating rights during normal business hours to all records, books,
contracts, instruments, computer data and other data and information relating to
pre-Distribution operations (collectively, "Information") within CWC's
possession insofar as such access is reasonably required by Optimum for the
conduct of its business, subject to appropriate restrictions for classified or
Privileged Information. Similarly, except as otherwise provided in a Related
Agreement, Optimum shall afford to CWC and its authorized accountants, counsel
and other designated representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing information)
and duplicating rights during normal business hours to Information within
Optimum's possession, insofar as such access is reasonably required by CWC for
the conduct of its business, subject to appropriate restrictions for classified
or Privileged Information. Information may be requested under this Article VII
for the legitimate business purposes of either party, including without
limitation, audit, accounting, claims (including claims for indemnification
hereunder), litigation and tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations and for performing this Agreement and the
transactions contemplated hereby. The parties hereby agree that Optimum shall
also grant to CWC reasonable access to the computer systems maintained by
Optimum after the Distribution that contain data and other information
reasonably related to the CWC Assets or the CWC Business, for purposes of review
and retrieval of such data (including the generation of reports containing such
data).
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Section 7.03. Production of Witnesses.
At all times from and after the Distribution Date, each of Optimum and CWC
shall use reasonable efforts to make available to the other, upon written
request, its and its Subsidiaries' officers, directors, employees and agents as
witnesses to the extent that such persons may reasonably be required in
connection with any Action.
Section 7.04. Reimbursement.
Except to the extent otherwise contemplated in any Related Agreement, a
party providing Information or witnesses to the other party under this Article
VII shall be entitled to receive from the recipient, upon the presentation of
invoices therefor, payments of such amounts, relating to supplies, disbursements
and other out-of-pocket expenses (at cost) and direct and indirect expenses of
employees who are witnesses or otherwise furnish assistance (at cost), as may be
reasonably incurred in providing such Information or witnesses.
Section 7.05. Retention of Records.
Except as otherwise required by law or agreed to in a Related Agreement or
otherwise in writing, each of Optimum and CWC may destroy or otherwise dispose
of any of the Information, which is material Information and is not contained in
other Information retained by CWC or Optimum, as the case may be, at any time
after the tenth anniversary of this Agreement, provided that, prior to such
destruction or disposal, (a) it shall provide no less than 90 or more than 120
days prior written notice to the other, specifying in reasonable detail the
Information proposed to be destroyed or disposed of and (b) if a recipient of
such notice shall request in writing prior to the scheduled date for such
destruction or disposal that any of the Information proposed to be destroyed or
disposed of be delivered to such requesting party, the party proposing the
destruction or disposal shall promptly arrange for the delivery of such of the
Information as was requested at the expense of the party requesting such
Information.
Section 7.06. Confidentiality.
Each of CWC and its Subsidiaries on the one hand, and Optimum and its
Subsidiaries on the other hand, shall hold, and shall cause its consultants and
advisors to hold, in strict confidence, all Information concerning the other in
its possession or furnished by the other or the other's representatives pursuant
to this Agreement (except to the extent that such Information has been (i) in
the public domain through no fault of such party or (ii) later lawfully acquired
from other sources by such party), and each party shall not release or disclose
such Information to any other person, except its auditors, attorneys, financial
advisors, rating agencies, bankers and other consultants and advisors, unless
compelled to disclose by judicial or administrative process or, as reasonably
advised by its counsel, by other requirements of law, or unless such Information
is reasonably required to be disclosed in connection with (x) any litigation
with any third-parties or litigation between the CWC Group and the Optimum , (y)
any contractual agreement to which the CWC Group or the Optimum are currently
parties, or (z) in exercise of either party's rights hereunder.
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Section 7.07. Privileged Matters.
Optimum and CWC recognize that legal and other professional services that
have been and will be provided prior to the Distribution Date have been and will
be rendered for the benefit of both the CWC Group and the Optimum and that both
the CWC Group and the Optimum should be deemed to be the client for the purposes
of asserting all Privileges.
To allocate the interests of each party in the Privileged Information, the
parties agree as follows:
(a) CWC shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the CWC Group, whether or not the Privileged Information is in the
possession of or under the control of CWC or Optimum. CWC shall also be
entitled, in perpetuity, to control the assertion or waiver of all Privileges in
connection with Privileged Information that relates solely to the subject matter
of any claims constituting CWC Liabilities, now pending or which may be asserted
in the future, in any lawsuits or other proceedings initiated against or by CWC,
whether or not the Privileged Information is in the possession of or under the
control of CWC or Optimum.
(b) Optimum shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the Optimum , whether or not the Privileged Information is in the
possession of or under the control of CWC or Optimum. Optimum shall also be
entitled, in perpetuity, to control the assertion or waiver of all Privileges in
connection with Privileged Information which relates solely to the subject
matter of any claims constituting Optimum Liabilities, now pending or which may
be asserted in the future, in any lawsuits or other proceedings initiated
against or by Optimum, whether or not the Privileged Information is in the
possession of or under the control of CWC or Optimum.
(c) Optimum and CWC agree that they shall have a shared Privilege, with
equal right to assert or waive, subject to the restrictions in this Section
7.07, with respect to all Privileges not allocated pursuant to the terms of
Sections 7.07(a) and (b). All Privileges relating to any claims, proceedings,
litigation, disputes, or other matters which involve both Optimum and CWC or in
respect of which both Optimum and CWC retain any responsibility or liability
under this Agreement, shall be subject to a shared Privilege.
(d) No party may waive any Privilege which could be asserted under any
applicable law, and in which the other party has a shared Privilege, without the
consent of the other party, except to the extent reasonably required in
connection with any litigation with third-parties or as provided in subsection
(e) below. Consent shall be in writing, or shall be deemed to be granted unless
written objection is made within twenty (20) days after written notice upon the
other party requesting such consent.
(e) In the event of any litigation or dispute between a member of the CWC
Group and a member of the Optimum, either party may waive a Privilege in which
the other party has a shared Privilege, without obtaining the consent of the
other party, provided that such waiver of a shared Privilege shall be effective
only as to the use of Information with respect to the litigation
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or dispute between the CWC Group and the Optimum, and shall not operate as a
waiver of the shared Privilege with respect to third-parties.
(f) If a dispute arises between the parties regarding whether a Privilege
should be waived to protect or advance the interest of either party, each party
agrees that it shall negotiate in good faith, shall endeavor to minimize any
prejudice to the rights of the other party, and shall not unreasonably withhold
consent to any request for waiver by the other party. Each party specifically
agrees that it will not withhold consent to waiver for any purpose except to
protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or other request
which arguably calls for the production or disclosure of Information subject to
a shared Privilege or as to which the other party has the sole right hereunder
to assert a Privilege, or if any party obtains knowledge that any of its current
or former directors, officers, agents or employees have received any subpoena,
discovery or other requests which arguably calls for the production or
disclosure of such Privileged Information, such party shall promptly notify the
other party of the existence of the request and shall provide the other party a
reasonable opportunity to review the Information and to assert any rights it may
have under this Section 7.07 or otherwise to prevent the production or
disclosure of such Privileged Information.
(h) The transfer of the Optimum Books and Records and the CWC Books and
Records and other Information between CWC and its Subsidiaries and Optimum and
its Subsidiaries is made in reliance on the agreement of Optimum and CWC, as set
forth in Sections 7.06 and 7.07, to maintain the confidentiality of Privileged
Information and to assert and maintain all applicable Privileges. The access to
information being granted pursuant to Sections 7.01 and 7.02 hereof, the
agreement to provide witnesses and individuals pursuant to Section 7.03 hereof
and the transfer of Privileged Information between CWC and its Subsidiaries and
Optimum and its Subsidiaries pursuant to this Agreement shall not be deemed a
waiver of any Privilege that has been or may be asserted under this Agreement or
otherwise.
VIII. INSURANCE.
Section 8.01. Policies and Rights Included Within the Optimum Assets.
Without limiting the generality of the definition of the Optimum Assets or
the effect of Section 2.01, the Optimum Assets shall include (a) any and all
rights of an insured party under each of the Shared Policies, specifically
including rights of indemnity and the right to be defended by or at the expense
of the insurer, with respect to all injuries, losses, liabilities, damages and
expenses incurred or claimed to have been incurred on or prior to the
Distribution Date by any party in or in connection with the conduct of the
Optimum or, to the extent any claim is made against Optimum, any of its
Subsidiaries or the Optimum, and which injuries, losses, liabilities, damages
and expenses may arise out of insured or insurable occurrences or events under
one or more of the Shared Policies; provided, however, that nothing in this
clause shall be deemed to constitute (or to reflect) the assignment of the
Shared Policies, or any of them, to Optimum and (b) the Optimum Policies.
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<PAGE> 20
Section 8.02. Post-Distribution Date Claims.
(a) If, subsequent to the Distribution Date, any person, corporation, firm
or entity shall assert a claim against Optimum or any of its Subsidiaries with
respect to any injury, loss, liability, damage or expense incurred or claimed to
have been incurred prior to the Distribution Date in, or in connection with, the
conduct of the Optimum Business or, to the extent any claim is made against
Optimum or any of its Subsidiaries, the Optimum Business, and which injury,
loss, liability, damage or expense may arise out of insured or insurable
occurrences or events under one or more of the Shared Policies, CWC shall at the
time such claim is asserted be deemed to assign, without need of further
documentation, to Optimum any and all rights of an insured party under the
applicable Shared Policy with respect to such asserted claim, specifically
including rights of indemnity and the right to be defended by or at the expense
of the insurer; provided, however, that nothing in this sentence shall be deemed
to constitute (or to reflect) the assignment of the Shared Policies, or any of
them, to Optimum.
(b) If, subsequent to the Distribution Date, any person, corporation, firm
or entity shall assert a claim against CWC or any of its Subsidiaries with
respect to any injury, loss, liability, damage or expense incurred or claimed to
have been incurred prior to the Distribution Date and which injury, loss,
liability, damage or expense may arise out of insured or insurable occurrences
or events under one or more of the Shared Policies, Optimum shall at the time
such claim is asserted be deemed to assign, without need of further
documentation, to CWC any and all rights of an insured party under the
applicable Shared Policy with respect to such asserted claim, specifically
including rights of indemnity and the right to be defended by or at the expense
of the insurer; provided, however, that nothing in this sentence shall be deemed
to constitute (or to reflect) the assignment of the Shared Policies, or any of
them, to CWC.
Section 8.03. Administration and Reserves.
(a) Notwithstanding the provisions of Article III, but subject to any
contrary provisions of any Related Agreement, from and after the Distribution
Date:
(i) Optimum shall be entitled to any reserves established by CWC or
any of its Subsidiaries, or the benefit of reserves held by any insurance
carrier, with respect to the Optimum Liabilities; and
(ii) CWC shall be entitled to any reserves established by Optimum or
any of its Subsidiaries, or the benefit of reserves held by any insurance
carrier, with respect to the CWC Liabilities.
(b) Insurance Premiums. Optimum shall have the right but not the
obligation to pay the premiums, to the extent that CWC does not pay premiums
with respect to CWC Liabilities (retrospectively rated or otherwise), with
respect to Shared Policies and the CWC Policies, as required under the terms and
conditions of the respective Policies, whereupon CWC shall forthwith reimburse
Optimum for that portion of such premiums paid by Optimum as are attributable to
the CWC Liabilities. CWC shall provide continued coverage under its director and
officer liability insurance policy for a period of not less than one year for
acts which took place
20
<PAGE> 21
or were alleged to have taken place prior to the Distribution Date covering
persons who were directors and officers of CWC prior to the Distribution Date.
Fifty percent of the additional premiums, if any, for such coverage shall be
reimbursed by Optimum. Such coverage for director and officer liability
insurance shall not be discontinued by CWC without the consent of Optimum, which
consent shall not be unreasonably withheld.
(c) Allocation of Insurance Proceeds. Insurance Proceeds received with
respect to claims, costs and expenses under the Policies shall be paid to
Optimum with respect to the Optimum Liabilities and to CWC with respect to the
CWC Liabilities. Payment of the allocable portions of indemnity costs of
Insurance Proceeds resulting from the liability policies will be made to the
appropriate party upon receipt from the insurance carrier. In the event that the
aggregate limits on any Policies are exceeded, the parties agree to provide an
equitable allocation of Insurance Proceeds received after the Distribution Date
based upon their respective bona fide claims. The parties agree to use their
best efforts to cooperate with respect to insurance matters.
Section 8.04. Agreement for Waiver of Conflict and Shared Defense.
In the event that Insured Claims of both Optimum and CWC exist relating to
the same occurrence, Optimum and CWC agree to jointly defend and to waive any
conflict of interest necessary to the conduct of that joint defense. Nothing in
this paragraph shall be construed to limit or otherwise alter in any way the
indemnity obligations of the parties to this Agreement, including those created
by this Agreement, by operation of law or otherwise.
IX. MISCELLANEOUS.
Section 9.01. Complete Agreement; Construction.
This Agreement, including the Schedules and Exhibits and the Related
Agreements and other agreements and documents referred to herein, shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and thereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter. Notwithstanding
any other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the provisions of the Related Agreements, then the Related Agreements shall
control.
Section 9.02. Tax Sharing Agreement; After-Tax Payments.
(a) Other than as provided in this Section 9.02 and Sections 5.06 and
6.05, this Agreement shall not govern any Tax, and any and all claims, losses,
damages, demands, costs, expenses, liabilities, refunds, deductions, write-offs,
or benefits relating to Taxes shall be exclusively governed by the Tax Sharing
Agreement or the Tax Administration Agreement.
(b) If, at the time Optimum is required to make any payment to CWC under
this Agreement, CWC owes Optimum any amount under the Tax Sharing Agreement,
then such amounts shall be offset and the excess shall be paid by the party
liable for such excess. Similarly,
21
<PAGE> 22
if, at the time CWC is required to make any payment to Optimum under this
Agreement, Optimum owes CWC any amount under the Tax Sharing Agreement, then
such amounts shall be offset and the excess shall be paid by the party liable
for such excess.
Section 9.03. Expenses.
Except as specifically provided in this Agreement or in a Related
Agreement, all costs and expenses incurred in connection with the preparation,
execution, delivery and implementation of this Agreement and with the
consummation of the transactions contemplated by this Agreement shall be paid by
the party incurring the expense. The determination of who has incurred an
expense shall be made by the Chief Financial Officer of Optimum, which
determination shall be binding and final upon each of the parties hereto and not
subject to further review. In addition, it is understood and agreed that [ ]
shall pay the legal, filing, accounting, printing and other accountable and
out-of-pocket expenditures in connection with the preparation, printing and
filing of the SB-2 and the Proxy Statement.
Section 9.04. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to the principles of conflicts of
laws thereof.
Section 9.05. Notices.
All notices and other communications hereunder shall be in writing and
shall be delivered by hand or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
addresses for a party as shall be specified by like notice) and shall be deemed
given on the date on which such notice is received:
To Optimum:
Optimum Health Services, Inc.
17757 U.S. 19 North, Suite #470
Clearwater, FL 33764
Attention: General Counsel
To CWC:
Complete Wellness Centers, Inc.
666 11th Street, N.W., Suite 200
Washington, D.C. 20003
Attention: General Counsel
Section 9.06. Amendments.
This Agreement may not be modified or amended except by an agreement in
writing signed by the parties.
22
<PAGE> 23
Section 9.07. Successors and Assigns.
This Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.
Section 9.08. Termination.
This Agreement may be terminated and the Distribution abandoned at any
time prior to the Distribution Date by and in the sole discretion of the CWC
Board without the approval of Optimum's or of CWC's stockholders. In the event
of such termination, CWC will pay for all costs incurred in contemplation of the
terminated distribution including, but not limited to, legal and accounting
fees.
Section 9.09. Subsidiaries.
Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
herein to be performed by any Subsidiary of such party which is contemplated to
be a Subsidiary of such party on and after the Distribution Date.
Section 9.10. No Third-Party Beneficiaries.
Except for the provisions of Article VI relating to Indemnities, this
Agreement is solely for the benefit of the parties hereto and their respective
Subsidiaries and Affiliates and should not be deemed to confer upon
third-parties any remedy, claim, claim of action or other right in excess of
those existing without reference to this Agreement.
Section 9.11. Titles and Headings.
Titles and headings to sections herein are inserted for the convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
Section 9.12. Exhibits and Schedules.
The Exhibits and Schedules shall be construed with and as an integral part
of this Agreement to the same extent as if the same had been set forth verbatim
herein.
Section 9.13 Legal Enforceability.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies otherwise available to
any party hereto, each party hereto acknowledges that damages would be an
inadequate remedy for any breach of
23
<PAGE> 24
the provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
Section 9.14. Arbitration of Disputes.
(a) Any dispute, controversy or disagreement ("Dispute") between the
Parties related to the obligations of the parties under this Agreement in
respect to which an amicable resolution cannot be reached shall be submitted for
mediation to a committee made up of an equal number of non-common members of
each company's Board of Directors ("Committee"). Any award issued as a result of
such arbitration shall be final and binding between the parties thereto and
shall be enforceable by any court having jurisdiction over the party against
whom enforcement was sought and application may be made to such court for
judicial acceptance of the award and order of enforcement. The fees and expenses
of arbitration (including reasonable attorneys' fees) shall be paid by the party
that does not prevail in such arbitration.
(b) Attorneys' Fees. If any party to this Agreement brings an action to
enforce its rights under this Agreement, the prevailing party shall be entitled
to recover its costs and expenses, including without limitation reasonable
attorneys' fees, incurred in connection with such action, including any appeal
of such action.
(c) Nothing contained in this Section 9.14 shall limit or restrict in any
way the right or power of a party at any time to seek injunctive relief in any
court and to litigate the issues relevant to such request for injunctive relief
before such court (i) to restrain the other party from breaching this Agreement
or (ii) for specific enforcement of this Section 9.14. The parties agree that
any legal remedy available to a party with respect to a breach of this Section
9.14 will not be adequate and that, in addition to all other legal remedies,
each party is entitled to an order specifically enforcing this Section 9.14.
(d) The Parties hereby consent to the jurisdiction of the federal courts
located in the State of Delaware for all purposes under this Agreement.
(e) Neither party nor the arbitrators may disclose the existence or
results of any arbitration under this Agreement or any evidence presented during
the course of the arbitration without the prior written consent of both parties,
except as required to fulfill applicable disclosure and reporting obligations,
or as otherwise required by law.
Section 9.15. Prompt Payment.
Where the terms of this Agreement require payment of an amount "as
promptly as possible," "as soon as practicable," or "as soon as possible",
following a specified event, occurrences or date, such payment shall be made
within five (5) business days of such event, occurrence or date.
24
<PAGE> 25
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
Complete Wellness Centers, Inc.
By: /s/ C. THOMAS MCMILLEN
----------------------
C. Thomas McMillen
Optimum Health Services, Inc.
By: /s/ JASON M. PATCHEN
----------------------
Jason M. Patchen
<PAGE> 26
INDEX OF EXHIBITS
Exhibit A Optimum Bylaws
Exhibit B Optimum Certificate
Exhibit C
Exhibit D
Exhibit E
Exhibit F
Exhibit G
Exhibit H
Exhibit I
Exhibit J
Exhibit K
Exhibit L
Exhibit M
Exhibit N Tax Administration Agreement
Exhibit O Tax Sharing Agreement
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE
OF
INCORPORATION
OF
OPTIMUM HEALTH SERVICES, INC.
The undersigned, being the president of Optimum Health Services, Inc.
(the "Corporation") hereby certifies as follows:
1. The Certificate of Incorporation of the Corporation as
originally filed with the Secretary of State on the 23rd day of May, 1997
and as amended on the 17th day of February, 1998, is amended and restated
pursuant to Sections 242 and 245 of the Delaware General Corporation Law to
read as follows:
FIRST: The name of the Corporation is Optimum Health
Services, Inc.
SECOND: The Certificate of Incorporation was originally filed
with the Secretary of State on the 23rd day of May, 1997, and was amended
on the 17th day of February, 1998. The address of the Corporation's
registered office in the State of Delaware is 1209 Orange Street,
Wilmington, New Castle County, DE 19801. The registered agent in charge
thereof is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH: The Corporation shall have the authority to issue
11,000,000 shares, consisting of 10,000,000 shares of Common Stock, $.01
par value per share and 1,000,000 shares of Preferred Stock, $.01 par value
per share. The Board of Directors may authorize the issuance from time to
time of the preferred stock in one or more series and with such
designations and such powers, preferences and rights, and the
qualifications, limitations or restrictions thereof (which may differ with
respect to each series) and such powers as the Board may fix by resolution.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: Whenever a compromise or arrangement is proposed
between this
<PAGE> 2
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization
of the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.
SEVENTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
EIGHTH: A director of this Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit. Any
repeal or modification of this Article by the stockholders of this Corporation
shall not adversely affect any right or protection of a director of this
Corporation existing at the time of such repeal or modification with respect to
acts or omissions occurring prior to such repeal or modification.
NINTH: The Corporation shall, to the fullest extent
permitted by law, as the same is now or may hereafter be in effect, indemnify
each person (including heirs, executors, adminstrators and other personal
representatives of such person) against expenses including attorney's fees,
judgments, fines and amounts paid in settlement, actually and reasonably
incurred y such person in connection with any threatened, pending or completed
suit, action or proceeding (whether civil, criminal, administrative or
investigative in nature or otherwise) in which such person may be involved by
reason of the fact that he or she is or was a director or officer of the
Corporation or is or was serving any other incorporated or unincorporated
enterprise in such capacity at the request of the Corporation.
TENTH: Unless, and except to the extent that the bylaws
of the Corporation
<PAGE> 3
shall so require, the election of directors of the Corporation need not be by
written ballot.
2. The foregoing Amended and Restated Certificate of
Incorporation of the Corporation have been duly approved and adopted by the
board of directors and the shareholders of the Corporation in accordance with
Section 242 of the General Corporation Law.
IN WITNESS WHEREOF, I hereunto set my hand this ____ day of July,
1998, and I affirm that the foregoing certificate is my act and deed and that
the facts stated therein as true.
-------------------------
Jason Patchen, President
<PAGE> 1
Exhibit 3.2
BY-LAWS
OF
COMPLETE WELLNESS INDEPENDENT PHYSICIAN ASSOCIATION, INC.
1. MEETINGS OF STOCKHOLDERS.
1.1 Annual Meeting. The annual meeting of stockholders
shall be held in the first week of May in each year, or as soon thereafter as
practicable, and shall be held at a place and time determined by the board of
directors (the "Board").
1.2 Special Meetings. Special meetings of the
stockholders may be called by resolution of the Board or the president and
shall be called by the president or secretary upon the written request (stating
the purpose or purposes of the meeting) of a majority of the directors then in
office or of the holders of a majority of the outstanding shares entitled to
vote. Only business related to the purposes set forth in the notice of the
meeting may be transacted at a special meeting.
1.3 Place and Time of Meetings. Meetings of the
stockholders may be held in or outside Delaware at the place and time specified
by the Board or the officers or stockholders requesting the meeting.
1.4 Notice of Meetings; Waiver of Notice. Written notice
of each meeting of stockholders shall be given to each stockholder entitled to
vote at the meeting, except that (a) it shall not be necessary to give notice
to any stockholder who submits a signed waiver of notice before or after the
meeting, and (b) no notice of an adjourned meeting need be given, except when
required under section 1.5 below or by law. Each notice of a meeting shall be
given, personally or by mail, not fewer than 10 nor more that 60 days before
the meeting and shall state the time and place of the meeting, and, unless it
is the annual meeting, shall state at whose direction or request the meeting is
called and the purposes for which it is called. If mailed, notice shall be
considered given when mailed to a stockholder at his address on the
corporation's records. The attendance of any stockholder at a meeting, without
protesting at the beginning of the meeting that the meeting is not lawfully
called or convened, shall constitute a waiver of notice by him.
1.5 Quorum. At any meeting of stockholders, the presence
in person or by proxy of the holders of a majority of the shares entitled to
vote shall constitute a quorum for the transaction of any business. In the
absence of a quorum, a majority in voting interest of those present or, if no
secretary of the meeting, may adjourn the meeting until a quorum is present.
At any adjourned meeting at which a quorum is present, any action may be taken
that might have been taken at the meeting as originally called. No notice of
an adjourned meeting need be given, if the time and place are announced at the
meeting at which the adjournment is taken, except that, if adjournment is for
more than 30 days or if, after the adjournment, a new record date is fixed for
the meeting, notice of the adjourned meeting shall be given pursuant to section
1.4.
<PAGE> 2
1.6 Voting; Proxies. Each stockholder of record shall be
entitled to one vote for each share registered in his name. Corporate action
to be taken by stockholder vote, other than the election of directors, shall be
authorized by a majority of the votes cast at a meeting of stockholders, except
its manner provided in section 2.1. Voting need not be by ballot, unless
requested by a majority of the stockholders entitled to vote at the meeting or
ordered by the chairman of the meeting. Each stockholder is entitled to vote
at any meeting of stockholders or to express consent to or dissent from
corporate by proxy. No proxy shall be valid after three years from its date,
unless it provides otherwise.
1.7 List of Stockholders. Not fewer than 10 days prior
to the date of any meeting of stockholders, the secretary of the corporation
shall prepare a complete list of stockholders entitled to vote at the meeting,
arranged in alphabetical order and showing the address of each stockholder and
the number of shares registered in his name. For a period of not fewer than 10
days prior to the meeting, the list shall be available during ordinary business
hours for inspection by any stockholder for any purpose germane to the meeting.
During this period, the list shall be kept either (a) at a place within the
city where the meeting is to be held, if that place shall have been specified
in the notice of the meeting, or (b) if not so specified, at the place where
the meeting is to be held. The list shall also be available for inspection by
stockholders at the time and place of the meeting.
1.8 Action by Consent Without a Meeting. Any action
required or permitted to be taken at any meeting of stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not fewer than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voting. Prompt notice of the taking
of any such action shall be given to those stockholders who did not consent in
writing.
2. BOARD OF DIRECTORS.
2.1 Number, Qualification, Election and Term of
Directors. The business of the corporation shall be managed by the entire
Board, which initially shall consist of two (2) director. The number of
directors may be changed by resolution of a majority of the Board or by the
stockholders, but no decrease may shorten the term of any incumbent director.
Directors shall be elected at each annual meeting of stockholders by a
plurality of the votes cast and shall hold office until the next annual meeting
of stockholders and until the election and qualification of their respective
successors, subject to the provisions of section 2.9. As used in these
by-laws, the term "entire Board" means the total number of directors the
corporation would have, if there were no vacancies on the Board.
2.2 Quorum and Manner of Acting. A majority of the
entire Board shall constitute a quorum for the transaction of business at any
meeting, except as provided in section 2.10. Action of the Board shall be
authorized by the vote of the majority of the directors present at the time of
the vote, if there is a quorum, unless otherwise provided by law or these
by-laws. In the absence of a quorum, a majority of the directors present may
adjourn any meeting from time to time until a quorum is present.
2.3 Place of Meetings. Meetings of the Board may be held
in or outside Delaware.
2.4 Annual and Regular Meetings. Annual meetings of the
Board, for the election of officers and consideration of other matters, shall
be held either (a) without notice immediately after
<PAGE> 3
the annual meeting of the stockholders and at the same place, or (b) as soon as
practicable after the annual meeting of stockholders, on notice as provided in
section 2.6. Regular meetings of the Board may be held without notice at such
times and places as the Board determines. If the day fixed for a regular
meeting is a legal holiday, the meeting shall be held on the next business day.
2.5 Special Meetings. Special meetings of the Board
maybe called by the chairman of the board, the president or by a majority of
the directors.
2.6 Notice of Meeting; Waiver of Notice. Notice of the
time and place of each special meeting of the Board, and of each annual meeting
not held immediately after the annual meeting of stockholders and at the same
place, shall be given to each director by mailing it to him at his residence or
usual place of business at least three days before the meeting, or by
delivering or telephoning or telegraphing it to him at least two days before
the meeting. Notice of a special meeting also shall state the purpose or
purposes for which the meeting is called. Notice need not be given to any
director who submits a signed waiver of notice before or after the meeting or
who attends the meeting without protesting at the beginning of the meeting or
who attends the meeting without protesting at the beginning of the meeting the
transaction of any business because the meeting was not lawfully called or
convened. Notice of any adjourned meeting need not be given, other than by
announcement at the meeting at which the adjournment is taken.
2.7 Board or Committee Action Without a Meeting. Any
action required or permitted to be taken by the Board or by any committee of
the Board may be taken without a meeting, if all the members of the Board or
the committee consent in writing to the adoption of a resolution authorizing
the action. The resolution and the written consents by the members of the
Board or the committee shall be filed with the minutes of the proceedings of
the Board or the committee.
2.8 Participation in Board or Committee Meetings by
Conference Telephone. Any or all members of the Board or any committee of the
board may participate in a meeting of the Board or the committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at the meeting.
2.9 Resignation and Removal of Directors. Any director
may resign at any time by delivering his resignation in writing to the
president or secretary of the corporation, to take effect at the time specified
in the resignation; the acceptance of a resignation, unless required by its
terms, shall not be necessary to make it effective. Any or all of the
directors may be removed at any time, either with or without cause, by vote of
a plurality of the stockholders.
2.10 Vacancies. Any vacancy in the Board, including one
created by an increase in the number of directors, may be filled for the
expired term by a majority vote of the remaining directors, though less than a
quorum.
2.11 Compensation. Directors shall receive such
compensation as the Board determines, together with reimbursement of their
reasonable expenses in connection with the performance of their duties. A
director also may be paid for serving the corporation or its affiliates or
subsidiaries in other capacities.
<PAGE> 4
3. COMMITTEES.
3.1 Executive Committee. The Board, by resolution
adopted by a majority of the entire Board, may designate an executive committee
of one or more directors, which shall have all the powers and authority of the
Board, except as otherwise provided in the resolution, section 141(c) of the
General Corporation Law of Delaware or any other applicable law. The members
of the executive committee shall serve at the pleasure of the Board. All
action of the executive committee shall be reported to the Board at its next
meeting.
3.2 Other Committees. The Board, by resolution adopted
by a majority of the entire Board, may designate other committees of one or
more directors, which shall serve at the Board's pleasure and have such powers
and duties as the Board determines.
3.3 Rules Applicable to Committees. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
case of the absence or disqualification of any member of the committee, the
member or members present at a meeting of the committee and not disqualified,
whether or not a quorum, may unanimously appoint another director to act at the
meeting in place of the absent or disqualified member. All action of a
committee shall be reported to the Board at its next meeting. Each committee
shall adopt rules of procedure and shall meet as provided by those rules or by
resolutions of the Board.
4. OFFICERS.
4.1 Number; Security. The executive officers of the
corporation shall be the chairman of the board, the president, one or more vice
presidents (including an executive vice president, if the Board so determines),
a secretary and a treasurer. Any two or more offices may be held by the same
person. The board may require any officer, agent or employee to give security
in the faithful performance of his duties.
4.2 Election; Term of Office. The executive officers of
the corporation shall be elected annually by the Board, and each such officer
shall hold office until the next annual meeting of the Board and until the
election of his successor, subject to the provisions of section 4.4.
4.3 Subordinate Officers. The Board may appoint
subordinate officers (including assistant secretaries and assistant
treasurers), agents or employees, each of whom shall hold office for such
period and have such powers and duties as the Board determines. The Board may
delegate to any executive officer or committee the power to appoint and define
the powers and duties of any subordinate officers, agents or employees.
4.4 Resignation and Removal of Officers. Any officer may
resign at any time by delivering his resignation to the president or secretary
of the corporation, to take effect at the time specified in the resignation;
the acceptance of a resignation, unless required by its terms, shall not be
necessary to make it effective. Any officer elected or appointed by the Board
or appointed by an executive officer or by a committee may be a removed by the
Board either with or without cause, and
<PAGE> 5
in the case of an officer appointed by an executive officer by a committee, by
the officer or committee that appointed him or by the president.
4.5 Vacancies. A vacancy in any office may be filled for
the unexpired term in the manner prescribed in sections 4.2 and 4.3 for
election or appointment to the office.
4.6 The Chairman of the Board. The chairman of the
board, who shall be a director of the corporation, shall be the chief executive
officer of the corporation. He shall preside at all meetings of the Board and
of the stockholders at which he shall be present. He shall have and may
exercise such powers as are, from time to time, assigned to him by the Board
and as may be provided by law.
4.7 The President. The president shall be the chief
operating officer of the corporation. In the absence of the chairman of the
board, he shall preside at all meetings of the Board and of the stockholders.
Subject to the direction and control of the Board, he shall have control of
general active management of the business of the corporation and shall see that
all orders and resolutions of the Board are carried into effect. He may
execute contracts, deeds, and other instruments on behalf of the corporation as
are authorized by the Board. He shall perform such additional functions and
duties as the Board may from time to time prescribe.
4.8 Vice President. Each vice president shall have such
powers and duties as the Board or the president assigns to him.
4.9 The Treasurer. The treasurer shall be the chief
financial officer of the corporation and shall be in charge of the
corporation's books and accounts. Subject to the control of the Board, he
shall have such other powers and duties as the Board or the president assigns
to him.
4.10 The Secretary. The secretary shall be the secretary
of, and keep the minutes of, all meetings of the Board and the stockholders,
shall be responsible for giving notice of all meetings of stockholder and the
Board, and shall keep the seal and, when authorized by the Board, apply it to
any instrument requiring it. Subject to the control of the Board, he shall
have such powers and duties as the Board or the president assigns to him. In
the absence of the secretary from any meeting, the minutes shall be kept by the
person appointed for that purpose by the presiding officer.
4.11 Salaries. The Board may fix the officers' salaries,
if any, or it may authorize the president to fix the salary of any other
officer.
5. SHARES.
5.1 Certificates. The corporation's shares shall be
represented by certificates in the form approved by the Board. Each
certificate shall be signed by the president or a vice president, and by the
secretary or an assistant secretary or the treasurer or an assistant treasurer,
and shall be sealed with the corporation's seal or a facsimile of the seal.
Any or all of the signatures on the certificate may be a facsimile.
<PAGE> 6
5.2 Transfers. Shares shall be transferable only on the
corporation's books, upon surrender of the certificate for the shares, properly
endorsed. The Board may require satisfactory surety before issuing a new
certificate to replace a certificate claimed to have been lost or destroyed.
5.3 Determination of Stockholders of Record. The Board
may fix, in advance, a date as the record date for the determination of
stockholders entitled to notice of or to vote at any meeting of the
shareholders, or to express consent to or dissent from any proposal without a
meeting, or to receive payment of any dividend or the allotment of any rights,
or for the purpose of any other action. The record date may not be more than
60 or fewer than 10 days before the date of the meeting or more than 60 days
before any other action.
6. INDEMNIFICATION.
6.1 Right to Indemnification. Each person who was or is
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
proceeding"), by reason of the fact that he, or a person of whom he is the
legal representative, is or was a director or officer of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action or inaction in an
official capacity while serving as director, officer, employee or agent, shall
be indemnified and held harmless by the corporation to the fullest extent
permitted by the General Corporation Law of Delaware, as amended from time to
time, against all costs, charges, expenses, liabilities and losses (including
attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such
person in connection therewith, and that indemnification shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of his heirs, executors and administrators; provided,
however, that, except as provided in section 6.2, the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by that person, only if that proceeding
(or part thereof) was authorized by the Board. The right to indemnification
conferred in these by-laws shall be a contract right and shall include the
right to be paid by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if the
General Corporation Law of Delaware, as amended from time to time, requires the
payment of such expenses incurred by a director or officer in his capacity as a
director or officer (and not in any other capacity) in which service was or is
rendered by that person while a director or officer, including, without
disposition of the proceeding shall be made only upon delivery to the
corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced, if it shall ultimately be determined that such
director or the officer is not entitled to be indemnified under these by-laws
or otherwise. The corporation may, by action of its Board, provide
indemnification to employees and agents of the corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
6.2 Right of Claimant to Bring Suit. If a claim under
section 6.1 is not paid in full
<PAGE> 7
by the corporation within 30 days after a written claim has been received by
the corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant also shall be entitled to be paid the expense of
prosecuting that claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred by defending any
proceeding in advance of its final disposition, where the required undertaking,
if any, is required and has been tendered to the corporation) that the claimant
has failed to meet a standard of conduct that makes it permissible under
Delaware law for the corporation to indemnify the claimant for the amount
claimed. Neither the failure of the corporation (including its Board, its
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is permissible in the circumstances because he has met that standard of
conduct, nor an actual determination by the corporation (including its Board,
its independent counsel or its stockholders) that the claimant has not met that
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has failed to meet the standard of conduct.
6.3 Non-Exclusivity of Rights. The right to
indemnification and the payment of expenses incurred in defending a proceeding
in advance of its final disposition conferred in this section 6 shall not be
exclusive of any provision of the certificate of incorporation, by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
6.4 Insurance. The corporation may maintain insurance,
at its expense, to protect itself and any director, officer, employee or agent
of the corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or not
the corporation would have the power to indemnify such person against that
expense, liability or loss under Delaware law.
6.5 Expenses as a Witness. To the extent any director,
officer, employee or agent of the corporation is by reason of such position, or
a position with another entity at the request of the corporation, a witness in
any action, suit or proceeding, he shall be indemnified against all costs and
expenses actually and reasonably incurred by him or on his behalf in connection
therewith.
6.6 Indemnity Agreements. The corporation may enter into
agreement with any director, officer, employee or agent of the corporation
providing for indemnification to the fullest extent permitted by Delaware law.
7. MISCELLANEOUS.
7.1 Seal. The Board shall adopt a corporate seal, which
shall be in the form of a circle and shall bear the corporation's name and the
year and state in which it was incorporated.
7.2 Fiscal Year. The Board may determine the
corporation's fiscal year. Until changed by the Board, the last day of the
corporation's fiscal year shall be December 31.
7.3 Voting of Shares in Other Corporations. Shares in
other corporations held by
<PAGE> 8
the corporation may be represented and voted by an officer of this corporation
or by a proxy or proxies appointed by one of them. The Board may, however,
appoint some other person to vote the shares.
7.4 Amendments. By-laws may be amended, repealed or
adopted by the directors and, to the extent provided by statute, by the
stockholders.
<PAGE> 1
Exhibit 10.1
AGREEMENT
BY AND BETWEEN
BEACON HEALTH PLANS, INC.
AND
COMPLETE WELLNESS INDEPENDENT PHYSICIAN ASSOCIATION OF
FLORIDA, INC.
1.1 This AGREEMENT effective as of the 1st day of March, 1998 ("Effective
Date") by and between Beacon Health Plans, Inc. (HMO), and Complete
Wellness Independent Physician Association of Florida, Inc.
(IPA).
RECITALS
WHEREAS, HMO is a health maintenance organization duly licensed by the State of
Florida to offer commercial health insurance products, and may contract with
the Agency for Healthcare Administration (AHCA) and/or HCFA, as those terms are
defined below, to provide certain health care services and benefits under Title
XVIII and XIX of the Social Security Act, as amended, hereinafter commonly
referred to as Medicare or Medicaid.
WHEREAS, HMO desires to utilize IPA to obtain Covered Services for Members
covered under its Medicare, Medicaid, and/or Commercial Health Plan Products,
as defined below, in accordance with the terms and conditions of this
Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants and promises
herein contained and other good and valuable consideration, the receipt and
adequacy of which are forever acknowledged and confessed, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
The following terms, as used in this Agreement, shall have the meanings
specified below unless defined otherwise elsewhere in this Agreement.
1.2 AGENCY means the State of Florida Agency for Health Care
Administration.
1.3 COPAYMENT means any amount, excluding the deductible, required to be
paid by a Member for Covered Services. There are no copayments for
Medicaid and Medicare Members.
<PAGE> 2
1.4 COVERED SERVICES means those Medically Necessary health care services
that members are entitled to receive under Medicare, Medicaid, and/or
applicable HMO plan products; as more specifically set forth in this
Agreement. IPA shall use its best efforts to notify the member in
writing prior to rendering non-covered services and the cost of such
service(s).
1.5 DEDUCTIBLE means the amount of expenses, if any, a Member must incur
during a defined period of time before the HMO Plan Product provides
payment for Covered Services rendered to a Member.
1.6 DEPARTMENT means the State of Florida Department of Insurance.
1.7 HCFA shall mean the Federal Department of Health and Human Services,
Healthcare Financing Administration.
1.8 EMERGENCY MEDICAL CONDITION means a medical condition manifesting
itself by acute symptoms of sufficient severity, which may include severe pain
or other acute symptoms, such that the absence of immediate medical attention
could reasonably be expected to result in any of the following: (1) serious
jeopardy to the health of a Member, including a pregnant woman or a fetus (2)
serious impairment to bodily functions (3) serious dysfunction of any bodily
organ or part (4) with respect to a pregnant woman: (a) that there is
inadequate time to effect safe transfer to another hospital prior to delivery
(b) that a transfer may pose a threat to the health and safety of the Member or
fetus c) that there is evidence of the onset and persistence of uterine
contractions or rupture of the membranes.
Emergency Services and Care: means medical screening, examination and
evaluation by a physician, or to the extent permitted by applicable laws, by
other appropriate personnel under the supervision of a physician, to determine
whether an emergency medical condition exists and, if it does, the care,
treatment or surgery for a covered service by a physician which is necessary to
relieve or eliminate the emergency medical condition, within the service
capability of a hospital.
Emergency medical care, as required by this agreement, shall be available on a
24 hour a day, 7 day a week basis.
1.9 URGENT CARE means those problems which, though not life threatening,
could result in serious injury or disability unless medical attention
is received (e.g. high fever, animal bites, fractures, severe pain) or
substantially restrict a member's activity (e.g. infectious illness,
flu, respiratory ailments, etc.). The Provider shall make available
and accessible a facility, service location and personnel sufficient
to provide the covered services.
<PAGE> 3
1.10 ACCESSIBILITY Emergency medical care, as required by this Agreement
shall be available on a twenty four (24) hour, seven (7) day a week basis.
1.11 HRS means the State of Florida Department of Health and
Rehabilitative Services.
1.12 HMO PLAN PRODUCT(s) means the commercial health benefit plans offered
by HMO that utilize IPA providers with agreements with HMO, to render covered
services to Members under the terms and conditions of this Agreement.
1.13 IPA means Complete Wellness Independent Physician Association of
Florida Inc.
1.14 MEDICAID AGENCY CONTRACT means the contract, if any, between HMO and
the Agency, pursuant to 409.912, Florida Statutes and RFP MHC96-001, as
amended, under which HMO may be obligated to provide certain health care
benefits to eligible Medicaid recipients.
1.15 MEDICAID HEALTH PLAN PRODUCT means the health benefit plan offered
by HMO, if any, which utilizes IPA to render covered services to Members
eligible for participation and enrolled in the Medicaid program, under the
terms and conditions of this Agreement.
1.16 MEDICALLY NECESSARY means that the medical condition or allied care,
goods or services furnished or ordered (a) must meet the following conditions
1: Be necessary to protect life, to prevent significant illness or significant
disability, or to alleviate severe pain, 2: Be individualized, specific and
consistent with symptoms or confirmed diagnosis of the illness or injury under
treatment, and not in excess of the patient's needs, 3: Be consistent generally
accepted professional medical standards as determined by the Medicaid program,
not experimental or investigational, 4: Be reflective of the level of service
that can be safely furnished, and for which no equally effective and more
conservative or less costly treatment is available statewide, and 5: Be
furnished in a manner not primarily intended for the convenience of the
recipient, the recipient's caretaker or the provider. (b) Medically necessary
or medical necessity for inpatient hospital services requires that those
services furnished in a hospital on an inpatient basis could not, consistent
with the provisions of appropriate medical care, be effectively furnished more
economically on an outpatient basis or in an inpatient facility of a different
scope. (c) The fact that a provider has prescribed, recommended, or approved
medical or allied care, goods or services does not, in itself, make such care,
goods or services medically necessary or a covered service.
1.17 MEMBER means a person eligible and enrolled with HMO to receive
covered services and who has selected or been assigned to a Primary Care
<PAGE> 4
Physician. Members may include person eligible and enrolled for Medicare and
Medicaid benefits.
1.18 IPA MEMBER means a person eligible and enrolled with HMO to receive
Covered Services, and who has selected or been assigned to an IPA Primary
Care Physician.
1.19 IPA means (Legal entity) Complete Wellness Independent Physician
Association of Florida, Inc.
1.20 IPA ANCILLARY PROVIDER means a provider of ancillary health care
services who or which have contracted with IPA, directly or indirectly, as an
independent contractor and listed in Schedule 1.14, as the same may be
amended or updated from time to time. Any facility or provider owned,
operated or managed by IPA and duly licensed under Florida law, if
applicable, that is eligible for participation under the programs
established by Titles XVIII and XIX of the Social Security Act shall
automatically be deemed added to Schedule 1.14 upon notice and acceptance
by HMO; provided the additional facilities or providers meet the applicable
credentialing criteria, pursuant to Section 3.3.
1.21 IPA HOSPITAL means hospitals and any other facilities licensed under
Florida law as a general acute care or specialty hospital and eligible for
participation under the programs established by Titles XVIII and XIX of the
Social Security Act, and which has contracted to provide Covered Services and
is listed in Schedule 1.12, as the same may be amended or updated from time
to time. Any facility owned, operated or managed by IPA and licensed under
Florida law as a general acute care or specialty hospital and eligible for
participation under the programs established by Titles XVIII and XIX of the
Social Security Act shall be deemed added to schedule 1.12 upon notice and
acceptance by HMO; provided the additional facilities meet the applicable
credentialing criteria in accordance with Article 3.3.
1.22 IPA PHYSICIAN means a doctor of medicine, doctor of osteopathy,
doctor of podiatry, doctor of chiropractic or doctor of dentistry who is
affiliated with an IPA, as defined herein, or a doctor of medicine, doctor of
osteopathy, doctor of podiatry, doctor of chiropractic or doctor of dentistry
who is employed by IPA or any of its affiliates, and who is not performing
medical services through an IPA, and listed on Schedule 1.13, as the same may
be amended or updated from time to time, and who has not exercised any
election, in accordance with his or her respective IPA, not to participate
under this Agreement.
1.23 MEDICARE HEALTH PLAN PRODUCT means the health benefit plan offered
by HMO, if any, which utilizes IPA to render covered services eligible for
<PAGE> 5
participation and enrolled in the Medicare program, under the terms and
conditions of this Agreement.
1.24 MEDICARE CONTRACT means the contract between the HMO and the United
States Government, Department of Health and Human Services, Health Care
Financing Administration pursuant to Section 1876 of the Social Security Act,
as amended, under which HMO is obligated to provide certain health care
benefits and services to eligible Medicare recipients.
1.25 IPA PRIMARY CARE PHYSICIANS means an IPA Physician who is practicing
as a Primary Care Physician, as that term is defined herein, and who
furnishes such services to a Member.
1.26 IPA PROVIDER(s) means the IPA Hospitals, IPA Physicians and IPA
Ancillary Providers either individually or collectively as the context so
requires.
1.27 PARTICIPATING PROVIDER means any provider of health care goods and
services licensed and authorized under Florida Law to render such health care
goods and services that have contracted with HMO to provide to Members the
health care goods and services for which they are licensed.
1.28 PAYOR means the United States Government, Department of Health and
Human Services, Health Care Financing Administration and/or the State of
Florida, or HMO, as the context so requires.
1.29 PRIMARY CARE OR PRIMARY CARE SERVICES means comprehensive,
coordinated and readily accessible medical care, including health promotion
and maintenance, treatment of illness and injury, early detection of
disease and referral to Specialist Physicians when appropriate.
1.30 PRIMARY CARE PHYSICIAN means the physician who the Member has chosen
to provide primary medial services, and who is responsible for coordinating
the total medical care of the Member. The Primary Care Physician will
refer Members only to Participating Specialists and hospitals, when
medically necessary. The Primary Care Physician shall make referrals to
non-participating specialists and hospitals, subject to HMO referral
procedures pursuant to F.S. 409.9128, when a particular type of specialty
care needed is not available through an HMO participating provider. The
Primary Care Physician shall be available twenty-four hours a day seven
days a week in case of an emergency.
1.31 PROVIDER HANDBOOK means the rules, policies, and procedures of HMO
regarding, among other matters, utilization review, quality assurance,
<PAGE> 6
grievance procedures, pre-authorization and referral requirements and
credentialing and recredentialing standards and policies. HMO shall give IPA
30-calendar day's prior written notice of any revisions or modifications to
the Provider Handbook, which materially change the obligations of the
parties or an IPA Provider. If IPA does not provide notice objecting
within the 30 days, the modifications shall be deemed approved, unless such
revisions or modifications are required for compliance with law in which
case they shall become effective immediately.
1.32 SERVICE AREA: SERVICE Area will include the entire State of Florida
where Health Plan is licensed to operate.
1.33 SPECIALIST PHYSICIAN means an IPA Physician who is not a Primary
Care Physician.
1.32 Net PREMIUM is equal to the gross premium less any benefit withhold and
commissions.
ARTICLE 2
RELATIONSHIP OF THE PARTIES
2.1 INDEPENDENT PARTIES HMO, IPA Physicians, IPA Hospitals, and IPA
Ancillary Providers are independent contractors. Expressly as set
forth in this Agreement, nothing herein shall be construed or deemed
to create between them any relationship of employer and employee,
principal and agent, partnership, joint venture or any relationship
other than that of independent parties. No parties hereto, nor the
respective agents or employees of either party, shall be required to
assume or bear any responsibility for the acts or omissions, or any
consequences thereof of any other party, or its agents or employees
under this Agreement.
ARTICLE 3
IPA ORGANIZTION AND OPERATIONS
3.1 AUTHORITY TO ENTER AGREEMENT IPA is duly authorized and empowered to
enter into and execute this Agreement, in accordance with certain IPA
agreements with IPA Providers, for the purpose of binding the IPA
Providers with respect to their participation in Medicare, Medicaid
and/or HMO Health Plan Products as set forth in this Agreement.
3.2 ADEQUACY OF AND ACCESSIBILITY TO IPA IPA shall consist of a
sufficient number of IPA Physicians, IPA Hospitals, and IPA Ancillary
Providers to ensure the availability and accessibility of a capable
provider network of
<PAGE> 7
sufficient size and composition to adequately serve the Member
enrolled in Medicare, Medicaid and/or HMO Health Plan Products and
assigned to IPA pursuant to this Agreement.
3.3 CONDITIONS OF PARTICIPATION: CREDENTIALING OF IPA PHYSICIANS, IPA
HOSPITALS, AND IPA ANCILLARY PROVIDERS. Each IPA Physician, IPA
Hospital, and IPA Ancillary Provider shall be credentialed by and meet
all HMO credentialing criteria prior to rendering Covered Services to
Members. HMO, at its sole cost and expense, shall be solely
responsible for credentialing IPA Providers for participation under
this Agreement, except as otherwise set forth in Section 3.3.1 below.
3.3.1 DELEGATION OF CREDENTIALS FUNCTION HMO may delegate credentialing
responsibilities to IPA (Delegatee) pursuant to a written agreement, provided
that Delegatee can demonstrate to the satisfaction of HMO that Delegatee's
credentialing criteria, policies and procedures are in full compliance with
HMO's credentialing standards and the credentialing standards and guidelines
recommended by the National Committee for Quality Assurance ("NCQA"), or such
other accreditation organization which has accredited HMO in accordance with
Rule 59A-12.0072, Fla. Admin. Code or any successor regulation, and the
requirements imposed by Florida and Federal laws and regulations governing HMOs
as amended from time to time, and such delegation is not otherwise prohibited
or inconsistent with state or federal laws and regulations. If HMO delegates
credentialing responsibilities to Delegatee, Delegatee shall provide to HMO a
copy of any proposed revision to or amendment of its credentialing criteria or
procedures 60 days prior to the effective date of any such revision or
amendment. Any such revision shall be subject to the HMO's approval as it
relates to IPA Members under this Agreement. Furthermore, Delegatee shall
permit HMO to conduct periodic audits of Delegatee's credentialing activities
to ensure that the Delegatee reasonably and consistently apply its
credentialing criteria in the manner reasonably required by Delegatee's
credentialing procedures. Any delegation of services made hereunder shall be
subject to oversight and control by HMO in accordance with applicable state and
federal laws and regulations and the accreditation requirements of NCQA, or
such other accreditation organization that has accredited HMO in accordance
with Rule 59A-12.0072, Fla. Admin. Code or any successor regulation. HMO may
elect to terminate such delegation upon sixty (60) days written notice to
Delegatee if HMO determines that the Delegatee is not performing the delegated
services in accordance with applicable law, regulations, accreditation
standards or HMO's standards.
3.4 PROVISION OF MEDICAL SERVICES Each IPA Physician shall provide all
Medically Necessary Covered services within the scope of such
physician's practice. Continuous health care coverage is available to
Members by IPA Physicians on a twenty-four (24) hour seven (7) days a
week basis. Each IPA
<PAGE> 8
Physician shall only be obligated to provide those services that such
IPA Physician has been licensed and credentialed to provide. IPA
Physicians shall provide Covered Services to all Members in a
nondiscriminatory manner (i.e., without regard for the Member's race,
ethnic or national origin, color, sex, age, sexual preference or
religion) and consistent with the treatment the IPA Physician usually
and customarily provides to his or her patients. During an IPA
Physician's temporary absence or unavailability, such IPA Physician
shall make arrangements with one or more IPA Physicians to provide
coverage for Members for whose care the absent or unavailable IPA
Physician is responsible.
3.4.1 LICENSURE OF IPA PHYSICIANS Each IPA Physician: (a) is licensed by
the State of Florida to provide applicable Covered Services, as appropriate and
within the scope of such IPA Physician's license and practice, and possesses a
valid DEA certificate; (b) is eligible to participate in Medicare under Title
XVIII of the Social Security Act and in Medicaid under Title XIX of the Social
Security Act; (c) holds active staff privileges on the medical staff of at
least one IPA Hospital; (d) shall maintain such licensure, compliance,
certification and registration throughout the term of his or her participation
under this Agreement; and (e) shall maintain all required professional
credentials and meet all continuous education requirements necessary to retain
Board certification or eligibility in the provider's area (s) of practice.
3.5 BALANCE BILLING IPA and IPA Providers agree not to bill, charge,
collect a deposit from, surcharge or have any recourse against a
Member or any person acting on behalf of a Member (other that HMO),
except to the extent that Copayments are specified in the Medicare,
Medicaid and/or HMO Health Plan Products or as permitted via
coordination of benefits with other health care plans. IPA and IPA
Providers agree not to maintain any action at law or in equity against
a Member to collect sums that are owed by HMO to IPA or IPA Provider
under the terms of this Agreement, even if HMO fails to pay, becomes
insolvent or otherwise breaches the terms and conditions of this
Agreement, regardless of the cause of termination. This provision
shall be construed to be for the benefit of the Members. This
provision supercedes any provision either oral or written now existing
or hereafter entered into between IPA and/or any of the IPA providers
3.6 PROVISION OF HOSPITAL SERVICES Each IPA Hospital shall provide to
Members all Medically Necessary inpatient and outpatient hospital
services that are Covered Services and that the IPA Hospitals are
licensed and capable of providing. IPA Hospitals shall provide such
services to all Members in a non-discriminatory manner (i.e., without
regard for the Member's race, ethnic or national origin, color, sex,
age, sexual preference or religion) and consistent with the standards
and timeliness of treatment as usually and customarily provided to all
IPA Hospital patients.
<PAGE> 9
3.6.1 LICENSURE OF IPA HOSPITALS Each IPA Hospital shall be meet all
appropriate state and federal regulations for a licensed hospital in the
State of Florida, be accredited by the Joint Commission on Accreditation
of Health Care Organizations ("JCAHO") and be duly licensed, pursuant to
applicable state law and regulation, to render the applicable Covered
Services contemplated under this Agreement. Each IPA Hospital is currently
certified to participate as a provider under Title XVIII of the Social
Security Act (Medicare) and is certified to provide services to Title XIX
(Medicaid) beneficiaries under the Medicaid program administered by the
Agency and shall endeavor to maintain said certification and qualification
during the term of this Agreement. Evidence of such licenses and
certifications shall be provided to HMO upon written request. If any action
is taken against an IPA Hospital to revoke or suspend its certification, the
IPA Hospital shall, immediately upon learning of such action, provide notice
to HMO.
3.7 PROVISION OF ANCILLARY PROVIDER SERVICES Each IPA Ancillary Provider
shall provide to Members all Medically Necessary ancillary provider
services that are Covered Services and that the IPA Ancillary
Providers are licensed to provide and are capable of providing. IPA
Ancillary Providers shall provide such services to all Members in a
non-discriminatory manner (i.e., without regard for the Member's race,
ethnic or national origin, color, sex, age, sexual preference or
religion) consistent with the standards and timeliness of treatment as
usually and customarily provided by IPA Ancillary Providers.
3.8 LICENSURE AND CERTIFICATION REQUIREMENTS; INSURANCE Each IPA
Hospital, IPA Physician, and IPA Ancillary Provider shall remain in
compliance with all state and federal laws applicable to licensure and
malpractice insurance coverage requirements.
3.9 COMPLIANCE WITH HMO POLICIES AND PROCEDURES Each IPA Provider shall
comply with and participate in HMO's policies and procedures regarding
referrals, utilization review, quality assurance, risk management,
claims processing and administration, and any other matters to ensure
efficient operation of Medicare, Medicaid, and/or HMO Health Plan
Products in accordance with the terms of this Agreement and as set
forth in the Provider Handbook. HMO shall be solely responsible for
the enforcement and interpretation of its own policies and procedures
and any liability resulting from, relating to, or arising out of such
enforcement or interpretation, provided, however, the forgoing shall
not be interpreted or construed as any obligation of HMO to indemnify
an IPA Provider for any liability that such provider may have
resulting from, relating to or arising out of any act or omission by
such provider.
<PAGE> 10
3.10 MEMBER GRIEVANCES Each IPA Provider shall participate in and abide by
the HMO's grievance procedure to resolve Member's complaints relating to
the respective IPA Physicians, IPA Hospitals, and/or IPA Ancillary
Providers.
3.11 USE OF IPA PROVIDER ROSTER Each IPA Provider consents to HMO
publishing IPA Physician's name, office, address, and area of practice
and IPA Hospital's and IPA Ancillary Provider's name, address, and
description of facilities and services, as applicable, in HMO's roster of
participating providers
3.11.1 ACCEPTANCE OF NEW PATIENTS Each IPA Provider, unless otherwise
prohibited by law, shall retain the right to notify HMO that the IPA
Provider is no longer accepting additional Members as patients
("Practice Closing"), provided (a) a Practice Closing shall not apply
to any Members to whom services had been rendered by the IPA Provider
prior to the effective date of the Practice Closing and (b) the IPA
Provider simultaneously stops accepting as new patients (i) any person
eligible for Medicare benefits under a prepaid or capitated contract
with HCFA to provide services to such persons, (ii) any person
eligible for Medicaid benefits and who is enrolled in any health plan
under a prepaid or capitated contract with the Agency to provide
services to such persons, or (iii) any person eligible for benefits
under the commercial products offered by any other health maintenance
organization with which the IPA Provider contracts to provide health
care services to its Members.
3.11.2 PRIMARY CARE PHYSICIAN PATIENT RELATIONSHIP As the physician-patient
relationship is a personal one and may become unacceptable to either
an IPA Primary Care Physician or Member, an IPA Primary Care Physician
may request in writing to HMO that an IPA Member be transferred to
another Participating Provider who is a Primary Care Physician. An
IPA Primary Care Physician shall not seek to have an IPA Member
transferred because of the amount of Covered Services required by such
Member or because of the physical condition of the IPA Member. All
decisions regarding such transfers shall be made as soon as
administratively feasible, but no later than thirty (30) days from the
date of the written request. Any such removal shall be effective as
of the first day of the month for which capitation or payments are
made to an IPA Primary Care Physician.
3.12 NOTICE OF ADVERSE ACTION IPA shall promptly notify HMO in writing
after receiving any written notice of any malpractice suit or
arbitration action, or other suit or arbitration action with respect
to Members naming or otherwise involving IPA Physician, IPA Hospital
or IPA Ancillary Provider.
<PAGE> 11
3.13 RECORD KEEPING Each IPA Provider shall maintain such records as are
necessary for the evaluation of the quality, appropriateness, and
timeliness of services performed under this Agreement. Said records
will be made available for fiscal audit, medical audit, medical
review, utilization review and other periodic monitoring upon request
of authorized representatives of HMO. Said records shall be retained
for a period of at least five (5) years after the expiration of this
Agreement or until the resolution of any ongoing audit occurs,
whichever is longer. Such records shall be provided for inspection to
the Agency and HCFA or other appropriate state or federal agency. All
records shall be maintained and safeguarded in compliance with 42 CFR
Part 431, Subpart F. Any release of medical or other patient records
in accordance with this Section 3.13 shall be subject to all
applicable state and federal laws pertaining to and governing the
confidentiality of such records including, without limitation, any
applicable requirements regarding the consent of the patient or such
patient's legal representative to the release of such records.
3.14 SPECIAL PROVISIONS RELATING TO THE RENDERING OF SERVICES TO MEDICAID
MEMBERS Each IPA Provider shall comply with the following with regard
to Covered Services rendered to Medicaid Members.
3.14.1 RECORDS AND REPORTING Each IPA Provider shall maintain such records
as are necessary for the evaluation of the quality, appropriateness
and timeliness of services performed under this Agreement. Said
records will be made available for fiscal audit, medical audit,
medical review, utilization review and other periodic monitoring upon
request of authorized representatives of HMO. Said records shall be
retained for a period of at least five (5) years after the expiration
of this Agreement or until the resolution of any ongoing audit occurs,
whichever is longer. Such records shall be provided for inspection to
the Agency and HCFA or other appropriate state or federal agency. All
records shall be maintained and safeguarded in compliance with 42 CFR
Part 431, Subpart F. Any release of medical or other patient records
in accordance with this Section 3.13 shall be subject to all
applicable state and federal laws pertaining to and governing the
confidentiality of such records including, without limitation, any
applicable requirements regarding the consent of the patient or such
patient's legal representative to the release of such records.
(a) Maintain such records as necessary for the evaluation
of the quality, appropriateness and timeliness of
services performed under this Agreement. Said
records will be made available for fiscal audit,
medical audit, medical review, utilization review and
other periodic monitoring upon request of authorized
representatives of HMO. Said records shall be
retained for a period of at least five (5) years
after the expiration of this Agreement or until
<PAGE> 12
the resolution of any ongoing audit occurs, whichever
is longer. Such records shall be provided for
inspection by the Agency and the Federal Department
of Health and Human Services upon notice. All
records shall be maintained and safeguarded in
compliance with 42 CFR Part 431, Subpart F.
(b) Submit all reports and clinical information required
by the HMO including EPSDT reporting, if applicable.
(c) Any releases of medical or other patient records in
accordance with subsections (a) or (b) above shall be
subject to all applicable state and federal laws
pertaining to and governing the confidentiality of
such records including, without limitation, any
applicable requirements regarding the consent of the
patient or such patient's legal representative to the
release of such records.
(d) Prior to disposition of any records, IPA & IPA
provider will obtain the prior written authorization
of the HMO.
3.15 INDEMNIFICATION If and only to the extent required by law, each IPA
Provider shall indemnify, defend and hold the Agency, HCFA and Members
harmless from and against all claims, damages, causes of action, cost
or expense, including court costs and reasonable attorneys fees, to
the extent primarily caused by any negligent act or other wrongful
conduct arising from said act or conduct. This obligation shall
survive the termination of this Agreement, including breach due to
insolvency of HMO.
3.15.1 INSPECTION OF SERVICES Allow for the evaluation by the Agency and the
Federal Department of Health and Human Services of the quality,
appropriateness, and timeliness of services.
3.15.2 WORKERS COMPENSATION INSURANCE Secure and maintain workers
compensation insurance, in compliance with the Florida Workers
Compensation Law, for all employees connected with the services
provided under this Agreement.
3.15.3 EXCULPATION OF DEBT LIABILITY Neither the Agency, HCFA nor any Member
shall be held liable for any debts of an IPA Provider. This provision
shall survive the termination of this Agreement for any reason,
including breach of contract because of insolvency.
3.15.4 NOTIFICATION OF BIRTHS BY IPA HOSPITALS Each IPA Hospital shall
notify HMO of births by mothers who are Members. IPA Hospitals shall
be responsible for completing the HRS-ES 2039 form for submission of
the form to the local Department of Children and Family Services.
<PAGE> 13
3.15.5 STANDARDS FOR PATIENT ACCESS Each IPA Physician shall ensure timely
access to physician appointments in accordance with the following
schedule: urgent care - within one (1) day; routine sick care - within
one (1) week; and well care - within one (1) month.
3.15.6 INDEPENDENT PROFESSIONAL JUDGEMENT Nothing in this Agreement is
intended to create, nor shall it be construed to create, any right of
HMO to intervene in any manner in the methods or means by which any
IPA Provider renders Covered Services to Members.
3.15.7 REQUIRED NOTIFICATIONS IPA shall notify HMO in writing, within the
time frame set forth below, following IPA first obtaining actual
knowledge of the occurrence of any of the following events:
(a) An IPA Hospital's license to operate, or any IPA Physician's
license to practice in the State or DEA Certificate is
suspended (excluding any suspension for medical records
deficiencies unless the period of such suspension is thirty
(30) days or greater), revoked or otherwise terminated, or any
risk management issues, notification immediately.
(b) An IPA Hospital or IPA Physician is required to pay damages in
excess of Five Thousand Dollars ($5,000) in any malpractice
action by way of judgement or settlement, notification within
ten (10) business days;
(c) An IPA Hospital is sanctioned by the Health Care Financing
Administration or the applicable State licensing agency or an
IPA Physician is disciplined by the physician licensing
agency, notification within ten (10) business days;
(d) An IPA Physician, IPA Hospital or any of its principal
officers are indicted or convicted of a felony, notification
within seventy-two (72) hours;
(e) There is a change in an IPA Hospital's or IPA Physician's
business address, notification within seventy-two (72) hours;
(f) Any change in the nature or extent of services rendered by an
IPA Hospital or IPA Physician, notification within ten (10)
days;
(g) Any other act, event, occurrence or the like that materially
affect an IPA Hospital's or an IPA Physician's ability to
carry out duties and obligations under this Agreement,
notification within ten (10) days.
3.16 NOTIFICATIONS THAT APPLY ONLY TO IPA PHYSICIANS WHICH NEED TO BE
REPORTED TO THE HMO
(a) The permanent loss of an IPA Physician's admitting privileges
or the equivalent with an IPA Hospital, unless such disclosure
is prohibited by law, notification within seventy-two (72)
hours;
(b) Any material changes or additions to the information and
disclosures submitted by an IPA Physician as part of the
application for participation with IPA, notification within
ten (10) days.
<PAGE> 14
3.17 DUTY OF IPA TO ENSURE COMPLIANCE OF IPA PROVIDERS If IPA obtains
knowledge that an IPA Provider is in breach or default of any of such
provider's obligations or duties under this Agreement or in the event
HMO provides notice that an IPA Provider is in breach or default of
any such provider's duties or obligations under this Agreement, IPA
shall cooperate with HMO to cure the breach or default and take such
other reasonable actions as HMO may request consistent with the terms
and conditions of this Agreement. Should HMO and IPA not agree,
either party may terminate this Agreement with 60 days prior written
notice.
3.18 INSPECTION OF SERVICES Each IPA Provider will allow for the
evaluation by the HMO, Agency and HCFA or other appropriate state or
federal agency the quality, appropriateness, and timeliness of
services. IPA Provider shall comply with requirements issued as a
result of any such inspection of audit.
3.19 WORKER'S COMPENSATION INSURANCE Each IPA Provider shall secure and
maintain worker's compensation insurance, in compliance with the
Florida's Worker's Compensation Law, for all employees connected with
the services provided under this Agreement
3.20 POST INSOLVENCY CONTINUATION OF CARE Each IPA Provider shall continue
the provision of Covered Services to Members through the period for
which premium has been paid to HMO and continue the provision of
Covered Services to Members confined on the date of insolvency in an
inpatient facility until their discharge, but in either instance no
event longer than the first to occur of: (a) sixty (60) days or (b)
the effective date of the Medicaid or Medicare Member's enrollment in
another health maintenance organization or competitive medical plan
which has entered into a contract with AHCA or HCFA pursuant to
Section 1876 of the Social Security Act, as amended.
3.21 IPA Physician and/or IPA Ancillary Provider certifies that he/she/it
has met the State of Florida requirements for malpractice liability.
IPA Physician and/or IPA Ancillary Provider and each physician and
licensed medical professional acting on behalf of IPA Physician and/or
IPA Ancillary provider, at his/her/its sole cost and expense, shall
procure and maintain such policies of general liability, workers
compensation, professional liability and other insurance as shall be
necessary to insure IPA Physician and/or IPA Ancillary Provider, every
physician, and licensed medical professional acting on behalf of IPA
Physician and/or IPA Ancillary Provider and IPA Physician's and/o IPA
Ancillary Provider's employees against any claim or claims for damages
arising by reason of personal injuries or death occasioned directly or
indirectly in connection with the performance of any services by IPA
Physician and/or IPA Ancillary Provider or physicians or
<PAGE> 15
licensed medical professionals acting on behalf of IPA Physician
and/or IPA Ancillary Provider. IPA Physician and/or IPA Ancillary
Provider shall provide the HMO with evidence of such coverage, upon
request, and shall require the carriers to provide the HMO with notice
of any policy cancellations or modifications. IPA Physician and/or IPA
Ancillary Provider shall notify HMO in writing within ten (10) days of
any changes in carriers, termination of, renewal of or any material
changes in IPA Physician and/or IPA Ancillary Provider's general
liability and professional liability insurance, including reduction of
limits, erosion of aggregate, changes in retention or non-payment of
premium. IPA Physician and/or IPA Ancillary Provider shall require
that all health care professionals employed by or under contract with
IPA Physician and/or IPA Ancillary Provider to render health services
to Members to procure and maintain professional liability and where
applicable general liability insurance, unless they are covered under
Physician's and/or IPA Ancillary Provider's insurance policies.
ARTICLE 4
PERFORMANCE OBLIGATIONS OF HMO
4.1 LICENSURE; AUTHORITY HMO represents and warrants that it is duly
licensed and authorized to enter into and perform its obligations
under this Agreement. In accordance with applicable laws and
regulations, HMO has or will obtain all necessary governmental
approvals relating to this Agreement and assumes sole and full
responsibility to file with the Department, the Agency, and/or any
state or federal agency any and all notices, documents and/or other
information to obtain such approvals.
4.2 HMO RESPONSIBILITIES; ADMINISTRATIVE SERVICES Nothing in this
Agreement is intended, nor shall it be construed, to in any way
relieve HMO of any duties or obligations it has under the Medicare or
Medicaid Contract and/or Medicaid Agency Agreement. Unless otherwise
provided for in a separate and duly executed delegation agreement
entered into by and between HMO and IPA, HMO shall be responsible for
performing all necessary administrative services in connection with
this Agreement and Medicare, Medicaid, and/or HMO Health Plan Products
including, without limitation, benefit plan design, enrollment,
premium billing and collection, utilization management, member
services, regulatory compliance, coverage benefits, premium pricing,
preparation and issuance of certificates, claims adjudication and
claims payment, and all other services necessary to administer
Medicare, Medicaid, and/or HMO Health Plan Products in accordance with
the terms and conditions of this Agreement and all applicable laws and
regulations, without limiting the foregoing, HMO shall perform the
following administrative services:
<PAGE> 16
(A) ADVERTISING AND PROMOTION HMO shall develop advertising and
promotion programs reasonably necessary to effectively market
Medicare, Medicaid, and/or HMO Health Plan Products.
(B) CLAIMS/CAPITATION/ENCOUNTER PROCESSING HMO shall have full
responsibility for claims/capitation/encounter processing.
HMO and IPA shall mutually agree on reports to be generated
for IPA Provider claims/encounters.
(C) RECIPROCITY IPA shall cooperate and develop arrangements with
or work through HMO's other contracted Participating Providers
and other HMO affiliated entities to assure reciprocity of
health care for Members, including Members not assigned to IPA
Providers. IPA Providers shall accept referrals from such
other Participating Providers and such other Participating
Providers will accept referrals from IPA Providers. Payments
to Participating Providers for referrals made by IPA Providers
shall be paid by HMO at the HMO's contracted rates and such
payment shall be deducted from the next month's capitation
payment. Payment to an IPA Provider shall be made by HMO at
IPA's contracted rate.
(D) EOB (EXPLANATION OF BENEFITS) HMO has full responsibility for
the preparation and dissemination of EOBs and Remittance
Advices generated to IPA Providers to explain payments made
with appropriate adjustment codes to reflect payment reasons.
(E) IRS FORM 1099 HMO HMO shall have the full and sole
responsibility for making payments to IPA Providers, at the
rates and in accordance with the provisions of this Agreement,
and for generating all IRS For, 1099s to all IPA Providers
participating under this Agreement.
(F) ELIGIBILITY PROCESSING HMO shall be fully responsible for the
process of loading enrollments with appropriate effective
dates that automatically generate eligibility or
non-eligibility upon the processing of claims. HMO shall
provide IPA with monthly eligibility of IPA Members no later
than the fifteenth calendar day of the month for which the
eligibility report pertains.
(G) STATUTORY REPORTING HMO shall maintain the full
responsibility for al statutory reporting to all governmental
agencies as may be required.
(H) RISK POOL REPORTING HMO shall maintain reports on the status
of the Risk Pools created pursuant to Schedule 6.1 and provide
copies of the same, on a quarterly basis, to IPA.
<PAGE> 17
(I) PLAN ADMINISTRATION HMO shall be responsible for the
credentialing, utilization and quality management, eligibility
verification and authorization, cash management procedures and
policies and such other policies and procedures necessary to
implement this Agreement, the Medicaid Agency Agreement,
and/or the Medicare Contract.
(J) PROVIDER HANDBOOK HMO shall provide IPA with a copy of HMO's
Provider Handbook. To the extent of any conflicts between the
terms of this Agreement and any Ancillary obligation created
by the Provider Handbook, the terms of this Agreement shall
govern.
ARTICLE 5
TERM AND TERMINATION
5.1 TERM Unless terminated earlier as provided for in this Agreement, the
term of this Agreement shall be for a period of 3 years, commencing as of the
Effective Date (the "term") and continue annually thereafter.
5.1.2 ANCILLARY PROVIDERS Ancillary providers shall not terminate its
participation with IPA or under this agreement for any reason, including
non-payment by HMO without (60) calendar days prior written notice to the
Department of Insurance and The Agency for Healthcare Administration.
5.2 TERMINATION Either HMO or IPA may terminate this Agreement without
cause upon 60 days prior written notice to the other party.
5.3 IPA ASSIGNABILITY; CONTINUATION OF CARE If this Agreement is
terminated prior to the expiration of the Term and the termination results in
HMO no longer being in compliance with its obligations to provide a
geographically accessible network of providers, HMO shall become the limited
assignee under this Agreement, for a period (the Assignment Period) to ensure
the continued provision of Covered Services to Members and HMO's continued
compliance with Section 641.21(1) (I), Florida Statutes, and its regulations.
In such case the contractual relationship between HMO and IPA shall
automatically convert during the Assignment Period to a direct contractual
agreement between HMO and IPA Providers, and HMO shall become the limited
assignee under this Agreement to ensure the continued provision of Covered
Services to Members enrolled in HMO's Plans and HMO's compliance with
applicable laws and regulations governing health maintenance organizations
during this Assignment Period. During this Assignment Period, each IPA
Provider shall continue to render Covered Services to Members, in accordance
with the terms and conditions of this Agreement until HMO is capable of
complying with Section 641.21(1)(I),
<PAGE> 18
Florida Statutes. All IPA Providers rendering Covered Services to Members
shall be compensated as provided in Schedule 5.4. If Member has a
life-threatening condition, or a disability or degenerative condition or if a
Member is in the third trimester of pregnancy, the care must be continued; (1)
until after post partum care for pregnancy (2) for 60 days for disabling and
degenerative and life-threatening conditions. HMO may use IPA providers for no
more than 180 days from Agreement termination date in order to ensure HMO's
compliance with Section 641.21(1)(I), Florida Statutes.
5.4 HMO TERMINATION OF IPA PROVIDER HMO shall provide IPA written notice
of any IPA Provider not complying with HMO rules and regulations and HMO may
notify IPA to terminate Provider immediately, as it pertains to HMO's Member.
5.5 CANCELLATION UPON ORDER OF THE DEPARTMENT As required under Section
641.234 (3), Florida Statutes, as amended, this Agreement shall be terminated
if HMO is ordered by the Department of Insurance to cancel the Agreement based
on the Department's determination that HMO has entered into a contract which
requires it to pay a fee which is unreasonably high in relation to services
provided.
5.6 TERMINATION OF IPA PHYSICIAN PARTICIPATION UNDER THIS AGREEMENT
(a) TERMINATION FROM IPA If an IPA Physician's participation with IPA is
terminated for any reason, such IPA Physician's participation with HMO shall
automatically terminate.
(b) LICENSURE AND PRIVILEGE An IPA Provider's participation under
Medicare, Medicaid and/or HMO Health Plan Products shall automatically and
immediately terminate upon the expiration, surrender, revocation, restriction
or suspension (whether voluntary or involuntary) of such physician's license to
practice in the State of Florida, the failure of such physician to maintain
current and active medical staff privileges at any one or more IPA Hospitals or
the failure to be eligible to participate in the programs under Titles XVIII
and XIX of the Social Security Act, as amended.
5.7 DEPARTMENT AND AGENCY NOTIFICATION IPA shall not terminate this
Agreement for any reason, including non-payment by HMO, without sixty (6)
calendar days prior written notice to the Department, the Agency and the HMO.
5.8 INSOLVENCY. Upon any insolvency of IPA, HMO will automatically
assume all rights and obligations to IPA Providers. Upon HMO's request, IPA
shall provide evidence, the sufficiency of which shall be mutually agreed upon
between the parties, that the prepayment or capitation amounts are being
distributed in a timely manner to IPA Providers. HMO, may audit financials on
a
<PAGE> 19
quarterly basis or as otherwise mutually agreed upon and may request a copy of
the audited annual financial statement, may request evidence of solvency from
IPA provided that the request of such IPA Providers arises from an alleged
non-payment of capitation or other contractual obligations.
5.9 CONTINUATION OF BENEFITS. If IPA Members are receiving Covered
Services upon the date of termination of this Agreement, IPA Providers shall
continue to render Covered Services to such IPA Members, until the services are
no longer necessary for the health and safety of those IPA Members. The IPA
Providers shall agree to provide such continuing services for a period of sixty
(60) calendar days. If continuing services are required so as not to
jeopardize the health of the member for a period of more than sixty (60)
calendar days, the IPA Providers may charge their post term rates for the
services provided after the expiration of the sixty (60) calendar days, if
allowed by law. The Physician agrees to provide continued care for sixty (60)
days if the Physician terminates this Agreement or is terminated by the Health
Plan and the Member has a life-threatening condition, or a disabling and
degenerative condition. IF a Member is in the third trimester of pregnancy the
care must be continued until after postpartum care. The services must be
provided and paid in accordance with the terms of this Agreement. This does
not apply if Physician is terminated for cause.
5.10 IPA Provider shall not terminate it's participation with IPA, nor
under this Agreement, for any reason, including non-payment by HMO, without
sixty (60) calendar days prior written notice to the Department and the Agency
5.11 IPA Physician shall not terminate it's participation with IPA, nor
under this Agreement, for any reason, including non-payment by HMO, without
sixty (60) calendar days prior written notice to the Department and the agency.
5.12 IPA Ancillary Provider shall not terminate its participation with IPA,
nor under this Agreement for any reason, including non-payment by HMO without
sixty (60) calendar days prior written notice to the Department and the Agency.
ARTICLE 6
COMPENSATION AND CLAIMS PROCESSING
6.1 GENERAL PRINCIPLES OF REIMBURSEMENT. With respect to Covered
Services rendered to Member, the IPA Provider rendering those Covered
Services shall be paid as provided for in Schedule 6.1.A. With
respect to Covered Services rendered by an IPA Provider to any person
enrolled in the Medicare, Medicaid and/or HMO Health Plan Products but
not a Member, such provider shall be compensated as provided for in
Schedule 5.4.
<PAGE> 20
6.2 CLAIMS DATA; UTILIZATION REPORTS AND ENCOUNTERS REPORTING; MONTHLY
ACCOUNTING STATEMENTS. Each party shall provide each other, on a
monthly basis, aggregate claims, patient encounter reports,
utilization reports and such other reports as applicable, either party
may request pertaining to the Covered Services furnished to Member
under Medicare, and HMO Health Plan Products pursuant to this
Agreement. Additionally, each party shall provide a monthly
accounting statement of all premiums collected, all paid claims, IBNRs
and any other information as applicable reasonably requested for
Medicare, and HMO Health Plan Products. Such reports shall be
provided within forty-five (45) days of the end of the then current
reporting period. Failure to timely provide the reports required by
this Section 6.2 shall be deemed a material breach of this Agreement
for purposes of Section 5.2. Nothing contained herein shall require
either party to make any disclosure, which is prohibited by law.
6.3 ULTIMATE RESPONSIBILITY FOR PAYMENT OF CLAIMS. IPA shall not be
liable for the payment of any claims relating to Covered Services or
any other services received by a Member. IPA is neither implicitly
nor explicitly the insurer, reinsurer, guarantor, indemnifier or
underwriter of HMO or Medicare, and HMO Health Plan Products. IPA
shall not have any liability to IPA Providers with respect to the
failure of HMO to compensate any such IPA Provider for services
rendered pursuant to this Agreement.
6.3.1 COORDINATION OF BENEFITS IPA Provider further agrees that,
notwithstanding the payment provisions above, the HMO retains any and
all rights whatsoever for Third Party Liability, involving but not
limited to Auto Insurance Carriers and Subrogation (litigation) cases
and Worker's Compensation and any and all rights whatsoever for
Coordination of Benefits with another group health insurance, up to
the full amount paid to the IPA Provider by the HMO. IPA Provider also
agrees to inform the HMO, at the time the IPA Provider obtains such
information (before, during, or after services are rendered) of the
existence of any of the above underlined conditions as it relates to
the services the IPA Provider is providing to the HMO's Members. In
addition, the IPA Provider agrees to inform the HMO upon receipt of
any payment received from other than the HMO for services provided to
the HMO's Members, refunding all such monies to the HMO where Third
Party Liability and Workers' Compensation are involved and to the
extent paid by the HMO to the IPA Provider where Coordination of
Benefits with another group health insurance is involved up to the
full amount paid to the IPA Provider by the HMO, and shall_not
interfere with the attempts by the HMO to recover monies for which
another party may be liable under one of the above underlined
conditions.
<PAGE> 21
6.4 DISPROPORTIONATE SHARE QUALIFICATION. HMO shall assist IPA and
provide in a timely manner such data and information as IPA may
reasonably request which IPA may, from time to time, need in order to
establish its eligibility to participate in or qualify for funds under
any state or federal disproportionate share programs regarding
payments to providers rendering services to persons eligible for
benefits
6.5 REINSURANCE Reinsurance may be obtained by HMO. If HMO provides the
reinsurance, IPA will have the cost of the reinsurance deducted from
the capitation amount paid to IPA. IPA may retain own reinsurance and
IPA will furnish proof of said insurance to HMO.
6.6 IPA Provider shall seek no reimbursement from the HMO Medicaid or
Medicare Member for services rendered under or in the course of this
Agreement. Should the contracts with HCFA or the Agency be terminated
or expire, payment for all services performed for eligible Medicaid or
Medicare HMO Members prior to termination/expiration will be
guaranteed by HMO.
ARTICLE 7
ASSIGNMENT AND CHANGE OF CONTROL
7.1 ASSIGNMENT. Neither party may sell, assign, or otherwise transfer
this Agreement without the prior written consent of the other party,
which shall not be unreasonably withheld.
7.2 CHANGE OF CONTROL. IF the ownership or control of any party is
materially changed at any time during the Term or any renewal term of
this Agreement, any other party may terminate this Agreement upon
sixty (60) calendar days prior written notice to the party that has
undergone the material change in ownership or control.
ARTICLE 8
MISCELLANEOUS PROVISIONS
8.1 WAIVER OF BREACH. The waiver by either party of a breach or violation
of any provision of this Agreement shall not be deemed a waiver of any
other breach of the same or different provision.
8.2 SEVERABILITY. If any provision of this Agreement is rendered
invalid or unenforceable by any act of Congress or of the Florida
Legislature or by any regulation promulgated by officials of the
United States or the applicable Florida state agency, or declared null
and void by any court of
<PAGE> 22
competent jurisdiction, the remainder of the provisions of this
Agreement shall remain in full force and effect.
8.3 EFFECT OF SEVERABLE PROVISION. If a provision of this Agreement is
rendered invalid or unenforceable or declared null and void as
provided in Section 8.2 of this Agreement and its removal has the
effect of materially altering the obligations of any party in such
manner as, in the judgment of the party affected: (1) will cause
serious financial hardship to such party, (b) will substantially
disrupt and hamper the mutual efforts of the parties to maintain a
cost efficient means of delivery of health care services, or (c) will
cause such party to act in violation of its Articles of Incorporation
or Bylaws or equivalent organization documentation, the party so
affected shall have the right to terminate this Agreement for cause
upon sixty (60) calendar days prior written notice to the other
parties. During the notice period, each party shall make a good faith
effort to negotiate with the other party to resolve the basis of the
termination.
8.4 ARBITRATION. Any dispute arising out of or related to this Agreement
shall be resolved by arbitration. All arbitration shall be conducted
pursuant to the rules and procedures of the National Health Lawyers
Association Alternative Dispute Resolution Service Rules of Procedure
for Arbitration ("NHLA Arbitration Service"). Within thirty (30)
calendar days from receipt of a written request to arbitrate from
either party, the matter shall be submitted to a single arbitrator in
Miami, Florida, mutually selected by the parties from a list of names
to be provided by the NHLA Arbitration Service. The decision of the
arbitrator shall be final and binding on the parties, including a
decision to terminate the Agreement, and enforceable in any court of
competent jurisdiction. The arbitrator shall apply the laws of the
State of Florida in resolving all disputes arising out of or relating
to this Agreement. All arbitration costs shall be paid equally by
each party, except each party shall pay its own attorneys' and
experts' fees. The parties shall be obligated to continue their
respective obligations in accordance with the terms and conditions of
this Agreement until the dispute under this Article is resolved,
unless otherwise ordered by the arbitrator.
8.5 AMENDMENTS. Except as otherwise provided for herein, all amendments
to this Agreement must be agreed to in writing by the parties in advance of the
effective date thereof. Notwithstanding the foregoing, amendments required
because of legislative, regulatory or legal requirements shall not require the
consent of IPA or HMO. Any amendment to this Agreement requiring prior
approval of or notice to any federal or state regulatory agency shall not
become effective until all necessary approvals have been granted or all
required notice periods have expired.
<PAGE> 23
8.6 CONFIDENTIALITY. This Agreement, including all attachment,
schedules, appendices, appendices, with any and all information disclosed by
either party to the other in relation to this Agreement, whether communicated
orally or in any physical form, related to party's business and shall be deemed
the "Confidential Information" of the party disclosing the Confidential
Information. In accordance with the following provision, IPA and HMO shall
hold each other's Confidential Information with respect to which it may gain
knowledge or possession in trust and confidence and such information shall be
used only for the purposes contemplated herein, and not for other purpose.
(a) IPA shall use the Confidential Information received from HMO
solely in relation to those agreements. No other rights are implied or granted
under this Agreement.
(b) HMO shall use the Confidential Information received from IPA
solely in relation to this Agreement. No other rights are implied or granted
under this Agreement.
(c) Confidential Information supplied by one party to another
shall not be reproduced in any form except for internal use or with the prior
written authorization of the prior written authorization of the party
furnishing the Confidential Information. Each such reproduction shall include
any ownership and confidentiality legends of the party disclosing the
Confidential Information, which may be included in the originals.
(d) The parties shall use all reasonable efforts to protect the
confidentiality of the Confidential Information received from each other with
the same degree of care used to protect its own Confidential Information ad
that its affiliates from unauthorized use or disclosure by its agents and
employees and shall not release, publish, reveal or disclose, directly or
indirectly, to any other person or entity, without the prior written consent of
the other, except that such Confidential Information may be used by or
disclosed to the parties' directors, officers, lawyers, accountants and other
professional consultants as may be reasonably require in relation to this
Agreement, provided that all such persons shall be directed and required to
maintain the disclosed Confidential Information in confidence at all times
thereafter. Such disclosure shall not relieve the parties of their obligations
under this Agreement.
(e) All Confidential Information, unless otherwise specified in
writing, shall remain the exclusive property of the party providing the
Confidential Information, shall be used by the party receiving the Confidential
Information only for the purposes permitted under this Agreement, and shall be
returned to the party furnishing the Confidential Information (including all
whole or partial copies therefore) promptly upon termination of this Agreement.
<PAGE> 24
(f) The term "Confidential Information" does not include
information that:
(g) The provisions of this section 9.6 are necessary for the
protection of the business and goodwill of the respective parties and are
considered by the parties to be reasonable for such purpose.
(h) Without limiting other possible remedies of the parties for
breaches of their respective obligations under this Agreement, the parties
agree that the breach or threatened breach of this Agreement may cause
irreparable harm to the non-breaching party and a non-breaching party may not
have an adequate remedy at law, and therefore a non-breaching party shall be
entitled to injunctive or other equitable relief to enforce the Agreement
without obligation to post a bond.
(i) This document is confidential and not a public hospital record
and it is exempt from the provisions of Section 119.07 (1), Florida Statutes,
and Section 24(a), Art. I of the Constitution of the State of Florida
pursuant to Section 395.3035 (2) (a), Florida Statues.
8.7 NOTICE. Any notice required or desired to be given under this
Agreement shall be sent by certified mail, return receipt requested, postage
prepaid, or overnight courier, or hand delivery to the addresses set forth in
Schedule 8.7. Notices given hereunder shall be deemed given upon documented
receipt. The address to which notices are to be sent may be changed by written
notice given to the other party.
8.8 HEADINGS. The headings of the Articles contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.9 GENDER. Whenever the masculine gender is used in this Agreement, it
shall also mean and refer to the feminine gender whenever appropriate.
8.10 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida.
8.11 ENTIRE AGREEMENT. All schedules to this Agreement and all attachments
thereto are by reference incorporated into and made part of this Agreement.
This Agreement and any amendments, exhibits, attachments, and schedules hereto
as are now incorporated, or as added from time-to-time pursuant to the terms of
this Agreement, constitute the entire understanding and agreement of the
parties hereto and supersede any prior written oral agreement pertaining to the
subject matter hereof.
<PAGE> 25
8.12 ERISA. For purposes of the Employee Retirement Income Security Act of
1974 ("ERISA") and any other applicable state or federal laws, IPA shall not
be deemed an "Administrator" or "Name Fiduciary".
8.13 THIRD - PARTY BENEFICIARIES. The provisions of this Agreement
shall be construed for the benefit of Members.
8.14 GRIEVANCES. IPA Providers agrees to participate in the
grievance procedure adopted by the Health Plan pursuant to state or federal
requirements.
8.15 INDEPENDENT CONTRACTOR RELATIONSHIP. None of the provisions of this
Agreement are intended to create nor shall be deemed or construed to
create any relationship between the parties hereto other than that
independent entities contracting with each other hereunder solely for
the purposes of effecting the provisions of this Agreement. Neither
the parties hereto, nor any of their respective of he other. The
parties do however, understand and agree that the HMO, the Agency, and
the HCFA will pursuant to this Agreement and the Medicaid Prepaid Plan
Contract, between the Agency and the HMO, and the Medicare Contract,
between HCFA and the HMO, shall exert certain requirements on the
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers or agents as of the date first
written above.
BEACON HEALTH PLANS, INC. Complete Wellness IPA, of
Florida Inc.
[sig] [sig]
- ----------------------------- -----------------------------------
Name Name
COO President and CEO
- ----------------------------- -----------------------------------
Title Title
3/28/98 3/1/98
- ----------------------------- -----------------------------------
Date Date
<PAGE> 26
SCHEDULE 1.12
LIST OF XYZ HOSPITALS AND FACILITIES
<PAGE> 27
SCHEDULE 1.13
LIST OF XYZ PHYSICIANS AND AVAILABILITY
<PAGE> 28
SCHEDULE 1.3
COVERED SERVICES*
Primary Care Physician
Specialist Physician
Institutional Physician Services
Outpatient Surgery
Chiropractic Services
Podiatric Services
Anesthesia
Radiology
Laboratory
Diagnostic Services
Immunizations
PT/ST/OT
Family Planning
Ambulance in Service Area
Home Health Care
Hospice - Facility
Hospitalization Inpatient Service
Plastic Surgery
Laboratory Services Inpatient
Dental Services
Outpatient Surgery Facility
Facility Pharmacy
Durable Medical Equipment
Physical Therapy Inpatient
Emergency Room Facility
Radiation Therapy
Skilled Nursing Facility
ALL ADDITIONAL HMO CURRENTLY COVERED SERVICES NOT LISTED, AND NOT EXCLUDED
BELOW UNDER BULLET **.
*Includes both technical a professional components of items listed above.
** Out of Area covered services remain the financial responsibility of HMO;
Organ transplant/experimental related services are excluded as the IPA covered
services.
<PAGE> 29
SCHEDULE 3.3.1
DELEGATION OF CREDENTIALING SERVICES
Complete Wellness Independent Physician Association of Florida, Inc. (IPA), on
behalf of the individual Providers, represents and warrants that each IPA
Provider has been the subject of the IPA's credentialing process. IPA has
submitted its credentialing criteria to Beacon Health Plans, Inc. (HMO), for
consideration and HMO has reviewed same and determined that said criteria is
sufficient and satisfactory to meet HMO's needs. Therefore, the IPA
credentialing criteria will be utilized to credential the Providers. HMO will
have the right to audit IPA's credentialing to determine compliance.
IPA agrees to notify HMO if it has knowledge of any change in any credentialing
information, specifically including, but not limited to, the occurrence of any
of the following:
(1) The revocation, restriction, termination or voluntary relinquishment
of any of the licenses, certifications or accreditations required to
practice medicine; or
(2) Any final adverse disposition or settlement of any legal action
against Provider for Professional negligence; or
(3) Any conviction or felony or any felony criminal charge against a
Provider; or
(4) Any lapse, termination or material change in the liability insurance
coverage required by this Agreement; or
(5) Any restriction, suspension, revocation or voluntary relinquishment of
medical staff membership or clinical privileges at any health care
facility.
(6) BHP reserves the right to review the records of IPA at least annually
upon reasonable advance notice, not less than five (5) days notice.
Such review shall not unreasonably interfere with IPA's business and
shall be conducted during normal business hours. Each party shall
bear their own costs of such review. Such review shall be an internal
document and shall not be revealed to any outside source, except as
required by law.
HMO retains the right to approve new Providers and locations, and to terminate
or suspend individual Providers specific to HMO's membership. IPA will follow
the credentialing standards created by NCQA and will also be in compliance for
any State and Federal standards. If IPA is not in compliance with the
standards set forth by NCQA, State and Federal Standards, and HMO, HMO will
have the
<PAGE> 30
right to cancel the Delegating Agreement within thirty (30) days. IPA will
submit to HMO quarterly reports on credentialing activities.
<PAGE> 31
SCHEDULE 4.2
ELECTRONIC DATA EXCHANGE FORMAT AND TECHNICAL SPECIFICATIONS
<PAGE> 32
SCHEDULE 5.4
POST TERMINATION AND NON - ASSIGNED MEMBERS
PROVIDER REIMBURSEMENT RATES
(1) Primary Care Physicians:
(a) ### of Medicare Allowable for Commercial HMO Members
(excluding Sarasota and Manatee Counties)*.
(b) ### of Medicare Allowable for Medicare Members (excluding
Sarasota and Manatee Counties)*.
(2) Specialist Physicians:
(a) ### of Medicare Allowable for Commercial HMO Members
(excluding Sarasota and Manatee Counties)*.
(b) ### of Medicare Allowable for Medicare Members (excluding
Sarasota and Manatee Counties)*.
(3) Hospital: See attached compensation.
* In the event that HMO has a lower contracted reimbursement with a shared
Primary Care or Specialist Physician, HMO shall reimburse the Primary Care or
Specialist Physician directly, not IPA.
<PAGE> 33
SCHEDULE 5.5
ASSIGNED MEMBERS - PRE-DELEGATION OF ASO SERVICES
PROVIDER REIMBURSEMENT RATES
(1) Primary Care Physicians:
(a) ### PMPM for Commercial HMO Members 0.00-1.99 Age Range for
Primary Care Covered Services (excluding Sarasota and Manatee
Counties)*.
(b) ### PMPM for Commercial HMO Members 2.00-64.99 Age Range
for Primary Care Covered Services (excluding Sarasota and
Manatee Counties)*.
(c) ### PMPM for Medicare Members for Primary Care Covered
Services (excluding Sarasota and Manatee Counties)*.
(d) ### of Medicare Allowable for Commercial HMO Members for
Non-Primary Care Covered Services (excluding Sarasota and
Manatee Counties).
(e) ### of Medicare Allowable for Medicare Members for
Non-Primary Care Covered Services (excluding Sarasota and
Manatee Counties).
(f) ### of Medicare Allowable for Commercial HMO Members
(Sarasota and Manatee Counties).
(g) ### of Medicare Allowable for Medicare Members (Sarasota
and Manatee Counties).
- Each calendar month on or before the tenth (10th) day of that
month, HMO shall mail the gross Primary Care Physician capitation
payment to IPA due for that month.
(2) Specialist Physicians:
(a) ### of Medicare Allowable for Commercial HMO Members (excluding
Sarasota and Manatee Counties).
(b) ### of Medicare Allowable for Medicare Members (excluding
Sarasota and Manatee Counties).
<PAGE> 34
(c) ### of Medicare Allowable for Commercial HMO Members (Sarasota
and Manatee Counties).
(d) ### of Medicare Allowable for Medicare Members (Sarasota and
Manatee Counties).
(3) Hospital: See attached compensation.
<PAGE> 35
SCHEDULE 6.1
RISK SHARING ARRANGEMENT
(1) DEFINITIONS: As used in this Schedule 6.1 shall mean:
(a) PERIOD 1 shall be the period during which either (i) IPA has less
than 1,500 Members assigned to IPA Primary Care Physicians; or
(ii) No longer than thirty (30) days after IPA has requested
delegation of credentialing, claim management, and utilization
management from HMO. Upon this maximum thirty (30) day request
for delegation of services, HMO may delegate all requested
services unless deficiencies can be substantiated for such
delegation of requested services.
(b) PERIOD 2 shall be the period subsequent to Period 1.
(2) During Period 1, HMO shall change the reimbursement methodology as
specified in Schedule 5.4 or 5.5 to a shared risk methodology as
follows:
(a) HMO will pool all funds in the Covered Services Pool (CSP) as
specified in Schedule 6.1 - Exhibit A no later than on a
quarterly basis. HMO will be responsible for reconciling the CSP
and providing IPA with any payment (if applicable) and a detailed
reconciliatory report of the CSP including all claim deductions
and all IBNR calculations, which must be jointly agreed upon by
HMO and IPA. Payments shall be made by HMO to IPA no later than
30 business days of a reconciliation. IPA and HMO will share the
pool surplus or deficit funding 50% each. Any pool deficit owed
by IPA shall be applied to the following months pool
reconciliation.
(b) HMO will continue to reimburse IPA for Primary Care Physician
capitation as specified in Schedule 5.5, (1)(a)-(c). All
payments made to IPA shall be deducted from the CSP for the
applicable period.
(c) HMO may adjust the CSP balance for the applicable monthly period
at ninety (90) days and one hundred eighty (180) days after the
close of that applicable monthly period, after the HMO and IPA
complete a quarterly review of the IBNR and mutually agreed upon
adjustments to the calculation.
<PAGE> 36
(d) A pooling charge for catastrophic claims in excess of $25,000 for
any member in a calendar year will be subtracted from the fund.
The initial pooling charge will be ### PMPM. IPA may elect to
secure its own coverage if it meets or exceeds the coverage funded
through HMO.
(e) An initial reserve factor shall be deducted from the pool in the
amount of :
### Per member per year commercial, and ### per member
per year for Medicare.
(3) During Period 2, HMO will reimburse IPA the full amount as specified
in Schedule 6.1 - Exhibit A. Each calendar month on or before the
tenth (10th) day of that month, HMO shall mail the net payment to IPA
due for that month.
(4) During Period 2, IPA may secure its own catastrophic insurance and
eliminate the catastrophic claim pool charge under schedule 6.1 2d.
<PAGE> 37
SCHEDULE 6.1 - EXHIBIT A
GENERAL PRINCIPALS OF REIMBURSEMENT
COMMERCIAL, MEDICAID AND MEDICARE MEMBERS
The following represents the rate of funding to the CSP or IPA by line of
business as specified in Schedule 6.1 for those Covered Services specified in
Schedule 1.3*:
(1) Commercial HMO Members: ### of the net premium collected by HMO.
(2) Medicare Members: ### of the net premium collected by HMO.
<PAGE> 38
SCHEDULE 6.1 - EXHIBIT B
RISK SHARING ARRANGEMENT
DIVISION OF FINANCIAL RESPONSIBILITY
<TABLE>
<CAPTION>
====================================================================================================
FINANCIAL RESPONSIBILITY
BENEFIT IPA HMO
====================================================================================================
<S> <C> <C>
Primary Care Physician X
- ----------------------------------------------------------------------------------------------------
Specialist Physician X
- ----------------------------------------------------------------------------------------------------
Institutional Physician Services X
- ----------------------------------------------------------------------------------------------------
Outpatient Surgery X
- ----------------------------------------------------------------------------------------------------
Chiropractic Services X
- ----------------------------------------------------------------------------------------------------
Podiatric Services X
- ----------------------------------------------------------------------------------------------------
Anesthesia X
- ----------------------------------------------------------------------------------------------------
Radiology X
- ----------------------------------------------------------------------------------------------------
Laboratory X
- ----------------------------------------------------------------------------------------------------
Diagnostic Services X
- ----------------------------------------------------------------------------------------------------
Immunizations X
- ----------------------------------------------------------------------------------------------------
PT/ST/OT - Professional/Outpatient X
- ----------------------------------------------------------------------------------------------------
Family Planning X
- ----------------------------------------------------------------------------------------------------
Ambulance in Service Area X
- ----------------------------------------------------------------------------------------------------
Home Health Care X
- ----------------------------------------------------------------------------------------------------
Hospice X
- ----------------------------------------------------------------------------------------------------
Hospitalization Inpatient Service X
- ----------------------------------------------------------------------------------------------------
Plastic Surgery X
- ----------------------------------------------------------------------------------------------------
Laboratory Services X
- ----------------------------------------------------------------------------------------------------
Dental Services X
- ----------------------------------------------------------------------------------------------------
Outpatient Surgery X
- ----------------------------------------------------------------------------------------------------
Pharmacy X
- ----------------------------------------------------------------------------------------------------
Durable Medical Equipment X
- ----------------------------------------------------------------------------------------------------
Physical Therapy Inpatient X
- ----------------------------------------------------------------------------------------------------
Emergency Room X
- ----------------------------------------------------------------------------------------------------
Radiation Therapy X
- ----------------------------------------------------------------------------------------------------
Skilled Nursing Facility X
- ----------------------------------------------------------------------------------------------------
Organ Transplants X
- ----------------------------------------------------------------------------------------------------
Experimental Procedures X
- ----------------------------------------------------------------------------------------------------
Out of Service Area Procedures X
====================================================================================================
</TABLE>
* ALL MEDICAL SERVICES, EXCLUDING ORGAN TRANSPLANTS, EXPERIMENTAL PROCEDURES,
OUT-OF-AREA, SHALL BE DEDUCTED FROM THE CSP IN ORDER TO CALCULATE SURLPUS OR
DEFICIT
<PAGE> 39
SCHEDULE 8.7
NOTICE
<PAGE> 40
ADMINISTRATIVE SERVICES AMENDMENT TO
AGREEMENT
BY AND BETWEEN
COMPLETE WELLNESS INDEPENDENT PHYSICIAN ASSOCIATION OF FLORIDA, INC.
AND
BEACON HEALTH PLANS, INC.
THIS AMENDMENT is made effective as of the 1st day of March, 1998
("Effective Date"), by and between COMPLETE WELLNESS INDEPENDENT PHYSICIAN
ASSOCIATION OF FLORIDA, INC., a Florida corporation ("CWIPA"), and BEACON
HEALTH PLANS, INC., a Florida corporation ("HMO").
R E C I T A L S
WHEREAS, CWIPA and HMO have entered into that certain Commercial
Member Agreement by and between COMPLETE WELLNESS INDEPENDENT PHYSICIAN
ASSOCIATION OF FLORIDA, INC. and BEACON HEALTH PLANS, INC. and dated February
1, 1998 (the "Beacon Contract");
WHEREAS, pursuant to its terms, the Beacon Contract requires the
provision of certain administrative services by HMO to CWIPA, namely the
credentialing of CWIPA Physicians, utilization management functions, and claims
processing; and
WHEREAS, HMO and CWIPA desire to amend the Beacon Contract to require
that upon the request of CWIPA, HMO may delegate certain of these
administrative services to CWIPA, and CWIPA many accept such delegation.
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises herein contained and for other good and valuable consideration, the
receipt and adequacy of which are forever acknowledged and confessed, the
parties hereto agree to amend the Beacon Contract as follows:
ARTICLE I
DEFINITIONS
All defined terms as used in this Agreement, shall have the meanings
specified in the Beacon Contract, unless otherwise defined herein.
<PAGE> 41
ARTICLE II
DELEGATION OF CREDENTIALING FUNCITONS
Upon the request of CWIPA, HMO may delegate credentialing
responsibilities to CWIPA pursuant to a separate written agreement and
provisions of Article IV hereof, provided that CWIPA can demonstrate to the
satisfaction of HMO that CWIPA's credentialing criteria, policies, and
procedures are in full compliance with HMO's credentialing standards and
guidelines recommended by the National Committee for Quality Assurance ("NCQA")
or such other accreditation organization which has accredited HMO in accordance
with Rule 59A-12. 0072, Fla. Admin. Code or any successor regulation and the
requirements imposed by Florida and federal laws and regulations governing
HMOs, as amended, from time to time, and such delegation is not otherwise
prohibited or inconsistent with state or federal laws and regulations. If HMO
delegates credentialing responsibilities to CWIPA, CWIPA shall provide to HMO a
copy of any proposed revision to or amendment of its credentialing criteria or
procedures prior to the effective date of any such revision or amendment. any
such revision shall be subject to HMO's approval as it relates to CWIPA Members
under this Agreement. Furthermore, CWIPA shall permit HMO to conduct periodic
audits of CWIPA's credentialing activities to ensure that CWIPA reasonably and
consistently applies its credentialing criteria in the manner reasonably
required by CWIPA's credentialing procedures. Upon the execution of a
delegation agreement with respect to credentialing, and adjustment (reduction)
shall be made to HMO's administrative retention percentage pursuant to Article
IV hereof, to reflect the reduction in HMO's administrative duties under this
Agreement, upon such terms as may be mutually agreeable to the parties. If the
parties cannot reach agreement on these terms or on the amount of such
reduction, CWIPA may decline to accept the delegation of credentialing
functions, which shall then continue as HMO's responsibility. Any delegation
of services made hereunder shall be subject to reasonable oversight and control
by HMO in accordance with applicable state and federal laws and regulations and
the accreditation requirements of NCQA or such other accreditation organization
that has accredited HMO in accordance with Rule 59A-12.0072, Fla. Admin. Code
or any successor regulation. HMO may elect to terminate such delegation upon
sixty (60) days prior written notice to CWIPA if HMO reasonably determines that
CWIPA is not performing the delegated services in accordance with applicable
law, regulations, accreditation standards or HMO's standards.
HMO shall retain oversight of delegated credentialing activities. Any
delegation shall be memorialized in a written document that, among other items,
will state HMO's ultimate accountability for these activities. Notwithstanding
the formal delegation of credentialing, HMO shall retain the right to approve
new providers and sites and to terminate or suspend individual providers and to
monitor the effectiveness of CWIPA's credentialing and reappointment or
recertification processes annually.
<PAGE> 42
Upon the execution of a delegation agreement with respect to credentialing,
an adjustment (reduction), based on fair market value and as set forth in the
delegation agreement, shall be made to HMO's administrative retention
percentage to reflect the reduction in HMO's administrative duties under this
Agreement only, provided, that the following services and obligations are
within the scope of obligations delegated to CWIPA or MPO as CWIPA's designee:
1.0 CWIPA has written policies and procedures for the
credentialing process that include the original credentialing,
recredentialing, recertification, and/or reappointment of
physicians and other licensed independent practitioners who fall
under its scope of authority and action.
2.0 CWIPA's governing body, or the group or individual to whom the
governing body has formally delegated the credentialing function,
reviews and approves credentialing policies and procedures.
3.0 CWIPA designates a credentialing committee or other peer
review body that makes recommendations regarding credentialing
decisions.
4.0 CWIPA identifies those practitioners who fall under its scope
of authority and action, including, at a minimum, all physicians
and other licensed independent practitioners listed in CWIPA's
literature for CWIPA Members.
5.0 The initial credentialing process is ongoing and up-to-date.
At a minimum, CWIPA obtains and reviews verification of the
following from primary sources:
5.1 A current valid license to practice;
5.2 Clinical privileges at primary hospital;
5.3 A valid DEA or CDS certificate, as applicable;
5.4 Work history; reviewed and verified (where applicable) in
accordance with policies and procedures;
5.5 Current, adequate malpractice insurance, in accordance
with state law requirements; and
5.6 Professional liability claims history.
<PAGE> 43
6.0 The Applicant completes an application for membership
6.1 The application includes a statement by the applicant
regarding:
6.1.1 reasons for any inability to perform the
essential functions of the position, with or
without accommodation subject to applicable
legal requirements such as the Americans With
Disabilities Act (ADA);
6.1.2 lack of present illegal drug use, subject to
applicable legal requirements such as the
Americans With Disabilities Act (ADA;
6.1.3 history of loss of license and/or felony
convictions; and
6.1.4 history of loss or limitation of privileges
or disciplinary activity.
6.2 There is an attestation to the correctness/completeness
of the application.
7.0 There is evidence that CWIPA request information on the
practitioner from recognized monitoring organizations.
7.1 CWIPA has requested information from the National
Practitioner Data Bank.
7.2 CWIPA has requested information from the State Board of
Medical Examiners or Department of Professional
Regulation (if available).
7.3 CWIPA has reviewed previous sanction activity by
Medicare and Medicaid.
8.0 There is an initial visit to each potential primary care
practitioner's office and to the offices of
obstetricians/gynecologists and other high-volume specialists (as
mutually agreed), and the visit results in documentation of a
structured review of the site and of medical record keeping
practices (upon implementation), to ensure conformance with CWIPA
standards.
<PAGE> 44
9.0 CWIPA has written policies and procedures for the initial quality
assessment of health delivery organizations with which it intends
to contract. At a minimum CWIPA must either (a) confirm that the
health delivery organization has been reviewed and approved by a
recognized accrediting body and is in good standing with state
and federal regulatory bodies or (b) if the health delivery
organization has not been approved by a recognized accrediting
body, CWIPA must develop and implement standards of
participation. Health delivery organizations include, but are
not limited to, hospitals, home health agencies, nursing homes,
and free-standing surgical centers.
10.0 There is a process for the periodic verification of credentials
(recredentialing, reappointment, or recertification) that is
ongoing and up-to-date.
10.1 There is evidence that the process is implemented at
least every two (2) years.
10.2 At a minimum, the recredentialing, recertification, or
reappointment process includes verification form primary
sources of
10.2.1 a valid state license to practice;
10.2.2 clinical privileges in good standing at
primary hospital;
10.2.3 a valid DEA or CDS certificate, as
applicable;
10.2.4 Board certification, as applicable;
10.2.5 current, adequate malpractice insurance,
according to CWIPA's policy, and
10.2.6 professional liability claims history.
10.3 The recredentialing process includes a current
statement by the application regarding
10.3.1 physical and mental health status; and
10.3.2 lack of impairment due to chemical
dependency/substance abuse.
<PAGE> 45
11.0 There is evidence that CWIPA requested information from
recognized monitoring organization.
11.1 CWIPA has requested information from the
National Practitioner Data Bank.
11.2 CWIPA has requested information from the
State Board of Medical Examiners or Department of
Professional Regulations (if available).
11.3 CWIPA has reviewed previous sanction activity
by Medicare and Medicaid.
12.0 The recredentialing, recertification or performance
appraisal process also includes review of data from member
complaints; results of quality reviews; utilization
management; and member satisfaction surveys.
13.0 The recredentialing process includes an on-site visit
to provider offices.
13.1 The visit results in documentation of a
structured review of the site and of medical
record keeping practices to ensure conformance with
CWIPA standards.
13.2 Offices to be visited included all primary
care providers, all obstetricians/gynecologists,
and high-volume specialists.
14.0 CWIPA has policies and procedures for reducing,
suspending, or terminating practitioner privileges.
14.1 There is a mechanism for, and evidence of
implementation of procedures for, reporting to
appropriate authorities serious quality deficiencies
resulting in suspension or termination.
14.2 There is an appeal process for instances in
which CWIPA chooses to reduce, suspend, or
terminate a practitioner's privileges with CWIPA.
CWIPA affirmatively makes known to the practitioner
the procedure by which to appeal an adverse
determination.
<PAGE> 46
ARTICLE III
DELEGATION OF UTILIZATION MANAGEMENT FUNCTIONS
Upon the request of CWIPA, HMO may delegate utilization
management duties and responsibilities ("UM") to CWIPA, pursuant to
the provisions of Article IV hereof, provided CWIPA can demonstrate to
the reasonable satisfaction of HMO that CWIPA's UM criteria and
procedures comply with the UM standards and guidelines recommended by
the NCQA or such other accreditation organization which has accredited
HMO in accordance with Rule 59A-12.0072, Fla. Admin. Code or any
successor regulation and the requirements imposed by Florida and
federal laws and regulations and the requirements imposed by Florida
and federal laws and regulations governing health maintenance
organizations, as amended from time to time and in accordance with the
performance standards and criteria of HMO, and such delegation is not
otherwise prohibited or inconsistent with state or federal laws and
regulations. HMO shall have the right to audit CWIPA's performance of
UM from time to time, upon reasonable notice and request. Upon the
execution of a delegation agreement with respect to utilization
management functions, and adjustment (reduction) shall be made to
HMO's administrative retention premium pursuant to Article IV hereof,
to reflect the reduction in HMO's administrative duties under this
Agreement, upon such terms as may be mutually agreeable to the
parties. If the parties cannot reach agreement on these terms or on
the amount of such reduction, CWIPA may decline to accept the
delegation of utilization management functions, which shall then
continue as HMO's responsibility. Any delegation of services made
hereunder shall be subject to HMO's reasonable oversight and control
in accordance with applicable state and federal laws and regulations
and the accreditation requirements of the NCQA, or such other
accreditation organization which has accredited HMO in accordance with
Rule 59A-12.0072, Fla. Admin. Code or any successor regulation. HMO
may elect to terminate such delegation upon sixty (60) days prior
written notice to CWIPA if HMO reasonably determines that CWIPA is not
performing the delegated services in accordance with applicable law,
regulations, accreditation standards or HMO's standards.
With respect to any delegation of UM, HMO shall retain oversight
of the delegated activities. The delegation shall be memorialized in
this written document that among other items which state the
delegate's accountability for these activities, the frequency of
reporting to HMO, and the process by which the delegation will the
evaluated.
<PAGE> 47
Upon the execution of a delegation agreement with respect to
utilization management, the adjustment (reduction), based on fair
market value and as set forth in the delegation agreement, shall be
made to HMO's administrative duties under this Agreement only,
provided, that (i) the UM program description includes, at a minimum,
policies and procedures to evaluate medical necessity, criteria used,
information sources, and the process used to review and approve the
provision of medical services, and (ii) there is a mechanism for
updating the UM program description on a periodic basis. The
adjustment (reduction) in HMO's administrative retention percentage
shall be upon such terms as may be mutually agreeable to the parties.
If the parties cannot reach agreement on these terms, CWIPA may
decline to accept the delegation of utilization management services.
If the delegated UM program includes pre-authorization and
concurrent review program, then the following shall apply:
2.0 Where procedures are used for pre-authorization and
concurrent review, qualified medical professionals
supervise review decisions.
2.1 A physician conducts a review for medical
appropriateness on any denial; and
2.2 CWIPA utilizes, as needed, physician
consultants from appropriate specialty areas
of medicine and surgery, who are certified by
one of the American Board of Medical
Specialties.
3.0 There is a set of written utilization review decision
protocols that is based on reasonable medical evidence.
3.1 Criteria for appropriateness of medical
services are clearly documented and
available, upon request, to participating
physicians.
3.2 There is a mechanism for checking the
consistency of application of criteria across
reviewers.
3.3 There is a mechanism for updating review
criteria periodically.
4.0 Efforts are made to obtain all necessary information,
including pertinent clinical information, and
consultation with the treating physician, as
appropriate.
5.0 Decisions are made in a timely manner, depending on the
emergency of the situation.
<PAGE> 48
6.0 Reasons for denial are clearly documented and available
to the Member. Notification of a denial includes
appeal process information.
7.0 CWIPA has policies and procedures in place to evaluate
the appropriate use of new medical technologies or new
applications of established technologies, including
medical procedures, drugs, and devices.
7.1 Appropriate professionals participate in the
development of technology evaluation criteria.
7.2 Criteria include review of information from
appropriate government regulatory bodies and
unpublished scientific evidence.
7.3 Criteria are used effectively to assess new
technologies and new applications of existing
technologies.
8.0 There are mechanisms to evaluate the effects of the
program using member satisfaction data, provider
satisfaction data, and/or other appropriate means.
<PAGE> 49
ARTICLE IV
DELEGATION OF CLAIMS PROCESSING
Upon the request of CWIPA, HMO may delegate claims processing to CWIPA
provided that CWIPA can demonstrate to the reasonable satisfaction of HMO that
CWIPA's claims processing procedures comply with applicable requirements and
accreditation standards imposed by Florida and federal laws and regulations
governing health maintenance organizations, as amended from time to time, and
in accordance with the performance standards and criteria of HMO, and such
delegation is not otherwise prohibited or inconsistent with state or federal
laws and regulations governing HMO and its operations. HMO shall have the
right to audit CWIPA's performance of claims processing from time to time. HMO
may elect to terminate such delegation upon sixty (60) calendar days prior
written notice to CWIPA in the event HMO reasonably determines that CWIPA is
not performing the delegated services in accordance with applicable law,
regulations, accreditation standards or HMO's standards. Upon notice, CWIPA
shall have sixty (60) days to cure any deficiencies. HMO may elect to
terminate such delegation immediately, if allowed by applicable law, upon HMO's
reasonable determination that CWIPA has routinely failed to pay provider claims
within the regular course of business.
<TABLE>
<S> <C>
BEACON HEALTH PLANS, INC.; COMPLETE WELLNESS INDEPENDENT
PHYSICIAN ASSOCIATION OF FLORIDA, INC.
a Florida corporation a Florida corporation
By: By:
---------------------------- -----------------------------
As its: As its:
------------------------ -------------------------
</TABLE>
<PAGE> 1
Exhibit 10.2
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MANAGEMENT SERVICES ORGANIZATION
FEE FOR SERVICE AGREEMENT
This is an Agreement between Optimum Health Services of Florida, Inc., "Group",
and SunStar Healthcare, Inc., "Company", entered into as of the 1 day of July
1998, the "Effective Date".
WHEREAS, Company will operate as a health maintenance organization under
the Florida Insurance Code and the rules and regulations thereunder ("Act") to
provide or arrange for health care services and perform administrative services
for individuals and for group health benefit plans; and
WHEREAS, Group means the above-referenced Group, which is a partnership,
association, corporation or other legally constituted entity existing under the
laws of the State of Florida organized to arrange for the provision of
professional medical services (1) whose Group Physicians share equipment,
facilities, records, administrative services and/or personnel in such a manner
as is deemed acceptable to Company and (2) which can bind its Group Physicians
to the terms of this Agreement; and
WHEREAS, Company desires to contract with Group on behalf of Company and
Group desires to contract with Company to arrange for the provision of licensed
health care professionals to render medical and health care services to Members;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and undertakings hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Affiliates" means any entity controlled by or which controls
Company or Group. Control will mean the right or authority,
granted by a board of directors, to direct the management of the
affairs of the other entity.
(b) "Company Medical Director" means a licensed physician engaged by
Company to supervise and direct the conduct of the Utilization
Management program in the geographic area that includes Group's
Service Area.
(c) "Contracting Provider" means any medical group or medical
organization, physician (also referred to herein as "Contracting
Physician"), hospital (also referred to herein as "Contracting
Hospital") and other health care providers, who have entered
into a written agreement with Company or Group to provide
Covered Services to Members.
(d) "Contract Year" means a period of twelve (12) months commencing
on either the Effective Date of this Agreement or any subsequent
anniversary of the Effective Date of this Agreement.
(e) "Covered Services" means only such medical care, treatment and
supplies that (1) are provided by licensed health care providers
to Members, (2) are benefits under the terms
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
6/12/98
PAGE 1 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 2
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of such Member's Group Subscriber Contract and (3) are services
mandated by the Act now or in the future.
(f) "Emergency" means the sudden, unexpected onset of a medical
condition manifesting itself by acute symptoms of sufficient
severity, including severe pain, such that the absence of
immediate medical attention could reasonably be expected to
jeopardize the life or health of a patient, including a pregnant
woman or fetus, cause serious injury to or impairment of bodily
functions or cause serious dysfunction to any bodily organ or
part. With respect to a pregnant woman, an emergency medical
condition exists when there is inadequate time to effect safe
transfer to another hospital prior to delivery, when a transfer
may pose a threat to the health and safety of the patient or
fetus, or when there is evidence of the onset and persistence of
uterine contractions or rupture of the membranes. All
determinations of whether or not an Emergency exists will be
subject to retrospective review and approval or disapproval by
Company Medical Director pursuant to the Utilization Management
program pursuant to Section 6 of this Agreement.
(g) "Group Medical Director" means a licensed physician appointed by
Group to be responsible for managing and directing the Group
Physicians rendering Covered Services to Members.
(h) "Group Physician" means a physician who is a member of, or is
employed by, or has contracted with Group and has agreed to
provide Covered Services pursuant to this Agreement. Group
Physician includes any physicians not contracting with or
employed by Group who have agreed to temporarily cover Group
Physician's practice.
(i) "Group Subscriber Contract" means a contract issued by Company
to a group health benefit plan sponsored or maintained by an
employer, labor union, association or trust under which payment
for health care services is provided.
(j) "Member" means any individual covered under a Group Subscriber
Contract or other contract issued by Company.
(k) "Pre-Certification" means a determination in accordance with
Company's Utilization Management program.
(l) "Primary Care Physician" means a Group Physician, as designated
by Group and approved by Company, who practices as an Internist,
Pediatrician, Family Practitioner or General Practitioner and
with whom a Member has established a physician-patient
relationship pursuant to which that physician has responsibility
for ongoing care of that Member in both health maintenance and
therapy for illness or injury, for maintaining overall
coordination and continuity of patient care and for initiating
referrals for specialist care for that Member.
(m) "Service Area" means the State of Florida. In no event, however,
will Service Area include any areas outside Company's approved
service area.
(n) "Utilization Management" means the program administered by
Company, or Group if delegated, with the specific goal of
determining whether or not care or treatment meets the
requirements of Section 5(n) hereof. The Utilization Management
program is described in Section 6, and may include also without
limitation (i) additional prospective review, (ii) concurrent
review, (iii) retrospective review and/or (iv) case management.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
6/12/98
PAGE 2 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 3
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2. TERM AND TERMINATION. The initial term of this Agreement begins on the
Effective Date of this Agreement and will continue in effect for a
period of thirty-six (36) months. Thereafter, this Agreement will
automatically be renewed for successive one (1) year terms unless
terminated as herein provided. This Agreement will terminate as
specified within the initial term or thereafter upon the occurrence of
any of the following events:
(a) Automatically and without notice upon the cancellation of
Group's general or professional liability insurance maintained
in accordance with Sections 11(a) and 11(b); or upon Group's
suspension by a State or the Federal Government from
participation in the Medicare or Medicaid programs due to fraud
or abuse.
(b) Upon sixty (60) days prior written notice from Company to Group
if any action is initiated against Group or any Group Physician
of a kind specified in Sections 5(p) or 5(q) hereof and if no
bona fide attempt by Group is made to rectify the action
initiated against Group or any Group Physician, and the
conditions giving rise to the action, during such sixty (60) day
period.
(c) Upon sixty (60) days prior written notice from Company to Group
if Group or any Group Physician changes affiliations, admitting
privileges or specialty status in such a way as to substantially
limit Group's range of services or access to Contracting
Hospitals. Group will have a thirty (30) day cure period in
which to cure any network deficiency that has been deemed to
substantially limit Group's scope of Covered Services or access
to Contracted Hospitals.
(d) By either party, by written notice thereof to the other party
and to the Department of Insurance, if the other party commits a
material breach of any warranties, covenants or obligations,
provided that the breaching party fails to cure that breach
within sixty (60) days after the written notice of default is
given by the terminating party.
(e) Automatically and with sixty (60) days written notice to the
Department of Insurance on such date as either party becomes
insolvent, or is adjudicated as bankrupt, or its business comes
into possession or control, even temporarily, of any trustee in
bankruptcy, or a receiver is appointed for it or it makes a
general assignment for the benefit of creditors. No interest in
this Agreement will be deemed an asset or liability of either
party, nor will any interest in this Agreement pass by operation
of law without the consent of the other party.
(f) Immediately upon written notice from Company if Group makes or
has made any untrue statements of material fact or any
intentional misrepresentation of any fact, whether or not
material, in any claim for payment, in any application form or
Quality Assessment Questionnaire or in any statement made by
Group to Company.
(g) Upon sixty (60) days prior written notice, given with cause by
either party to the other and to the Department of Insurance.
Company does not have to provide sixty (60) days prior written
notice in cases where a Member's health is subject to imminent
danger or the Group's ability to practice medicine is
effectively impaired by an action by the Board of Medicine or by
any other governmental agency, except in the case of failure to
pay by Company to Group, in which case Group may terminate this
Agreement by giving thirty (30) days written notice.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
6/12/98
PAGE 3 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 4
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(h) If any action of a kind specified in Section 5(s) is initiated
against a Group Physician, Company may, in lieu of or in
addition to terminating Group as provided in Sections 2(a) and
2(b) above, terminate such Group Physician's authority to
provide Covered Services under this Agreement effective
immediately upon notice thereof.
(i) Immediately upon written notice from Company if Group fails to
make refunds as specified under Section 5(j)(ii) or if Group
fails to make payments as specified in Section 5(o).
(j) Nonpayment for goods or services rendered by Group to Company
shall not be a valid reason for Group to avoid advance written
notice of cancellation as set forth in this Section.
(k) Following the effective date of termination of this Agreement,
this Agreement will be of no further force or effect except that
each party will remain liable for any obligations or liabilities
arising from activities undertaken prior to the effective date
of termination. Upon any such termination or withdrawal of a
Group Physician, whether by termination of this Agreement or
otherwise, the Company shall continue to be liable to pay in
accordance with Section 3 hereof and the Fee Schedule in effect
immediately prior to such termination for Covered Services
rendered by that Group Physician under the terms and conditions
of this Agreement to any Member who is under the care of that
Group Physician at the time of such termination or withdrawal,
and that Group Physician shall be obligated to provide Covered
Services for a period of up to thirty (30) days, or until
reasonable and medically appropriate arrangements for the
assumption of such care by another provider are made. During
this period, Company will reimburse Group 100.0% of the relative
value reimbursement (RBRVS) for any continued episodic Covered
Services, unless reasonably and medically appropriate
arrangements for the assumption of such care by another provider
are made. The Group shall be responsible for cooperating with
the Company in order to make reasonable and medically
appropriate arrangements for the assumption by other Group
Physicians for the care of Members who are under the care of any
terminated or withdrawn Group Physician.
(l) Immediately upon the issuance of an order by the Department of
Insurance.
3. GROUP COMPENSATION. Company will compensate Group as described in
Exhibit II. Where Company has contracted on behalf of a group benefit
plan, that group benefit plan will be solely responsible for
compensation payment under this paragraph.
4. RESPONSIBILITIES OF THE COMPANY.
(a) Regulatory Compliance. Company will comply with all requirements
of the law and regulations of governmental agencies relating to
the business of health maintenance organizations and any other
business in which Company is engaged relating to this Agreement,
and will obtain and maintain in effect all permits, licenses and
governmental approvals necessary for that purpose.
(b) Promotion. Company, its parent or its Affiliate will make
available and promote Company's Group Subscriber Contracts,
subject to the standards of lawfulness, reasonableness and
protection of the health and interests of Members.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
6/12/98
PAGE 4 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 5
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(c) Enrollment Requirements. Company will provide in its Group
Subscriber Contracts that (1) Members will be required to enroll
to receive all Covered Services from or through one medical
organization that is a Contracting Provider such as Group and
(2) Members will be permitted to change their enrollment from
one such medical organization to another, or from one Primary
Care Physician to another, upon formal notice or contact with
Company, and subject to the standards of lawfulness,
reasonableness and protection of the health and interests of
Members.
(d) Claim Payment. Company, or Group if delegated, will pay or
arrange to pay for all Covered Services as described in Exhibit
II.
(e) Utilization Management. Company, or Group if delegated, will
conduct a Utilization Management program in accordance with the
provisions of Section 6 hereof.
(f) Member Access. Company will use its best efforts to contract
with sufficient physicians and other health care providers to
allow Members access to medical services to the extent required
by applicable law and regulations of governmental agencies
relating to the business of health maintenance organizations and
any other business in which Company is engaged relating to this
Agreement.
(g) Enrollment Reports. Company will arrange to prepare and furnish
to Group monthly enrollment reports of Members assigned to Group
no later than the fifteenth (15th) day of each month. Company
will exercise best efforts to provide quarterly utilization
management reports.
(h) Member Identification. Company will supply Members with a means
of identifying themselves to Group and/or a Group Physician
(e.g., an identification card) which indicates the Member's
participation in a Group Subscriber Contract. Group and each
Group Physician will make a good faith effort in using the
Eligibility/Benefits Verification telephone number on the
identification card to confirm that the individual presenting a
Company identification card is in fact the Member whose name
appears on Company identification card and is eligible for
coverage.
5. RESPONSIBILITIES OF THE GROUP.
(a) Enrollment. Group will accept enrollment of any and all Members
who select Group. Group may request authorization from Company
to decline to render care to any Member for reasons including,
but not limited to, the Member's fraud, threatened violence,
failure to follow medical instructions, disruption of provision
of medical services to that Member or any other patient of Group
or a Group Physician. No such authorization will be granted
unless and until Group will have given the Member a reasonable
opportunity, given all of the circumstances, to correct the
situation that is the subject of such a request. Group will not
request, demand or require the removal of any Member based on
such Member's needs or utilization of services. Upon the receipt
of authorization, Group must notify Member that he or she must
select another physician not affiliated with the Group within
thirty-one (31) days. Group is responsible for continuing to
provide urgent or Emergency care until the earlier of thirty-one
(31) days or the selection of another Group or Group Physician
by the Member.
(b) Member Access. Unless otherwise approved by Company Medical
Director, Group will by staffing, contracting or referral
provide medically appropriate access in accordance
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
6/12/98
PAGE 5 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 6
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with applicable laws and regulation in all parts of Group's
Service Area to the services of Group Physicians who are board
certified or eligible and practicing in the full range of
medical specialties. As part of Company's, or Group's if
delegated, credentialing process, the names, addresses, medical
specialties and medical license numbers of all Group Physicians
in addition to all tax identification numbers under which each
such physician bills for medical services, and updates thereof,
must be supplied to Company in written documentation or
material. If a Member requires Covered Services that cannot be
provided directly by Group Physicians, the Member's Primary Care
Physician will refer the Member to a physician able to provide
such services. These provisions will not be construed to
obligate Group to indemnify or otherwise hold harmless any
Member from the charges of any provider who is not a Group
Physician if the Member obtains services from such provider
without being first referred or otherwise directed thereto by
Group or a Group Physician. In the event that Group plans to
close enrollment to new Members, Group will provide Company with
at least sixty (60) days prior written notice of such plans.
(c) Quality of Care. Group will ensure that medical and health care
services are rendered by Group Physicians in a manner which
assures availability, adequacy and continuity of care to
Members, both during the term and as required after termination
hereof, and that all decisions pertaining to health care
services to be rendered by Group Physicians to Members are based
on such Members' medical needs and are made by or under the
supervision of licensed physicians with physician extender.
Group will remain solely responsible for the quality of medical
and health care services provided by Group Physicians and will
ensure such services are rendered in accordance with
professionally recognized standards. In the event that Group
denies services to any Member or any Member experiences an
adverse outcome, Group will notify Company within two (2) days
of such an event.
(d) Hours of Coverage. Group will ensure that Covered Services are
available within the Service Area from Group Physicians or by
referral to other physicians by keeping office hours of at least
forty (40) hours per week. Group also will ensure that Members
have access by phone to Group Physicians twenty-four (24) hours
per day and seven (7) days per week. When a Group Physician is
unavailable to a Member, Group will arrange for coverage from
other Group Physicians.
(e) Appointments. Group will ensure that Members are able to receive
an elective appointment with a Primary Care Group Physician
within seven (7) days of a Member Request and an elective
appointment with a Specialty Care Group Physician within ten
(10) days of referral. Group will arrange for immediate
attention to Emergency care needs and same day attention to
urgent care needs.
(f) Member Referral and Transfer. When referrals are appropriate,
Group and each Group Physician will follow the procedures in the
Physician Group Handbook and will exercise best efforts to refer
Members to other Contracting Providers and to admit Members to
Contracting Hospitals. In the event a Member requires transfer
to a Contracting Hospital, Group will cooperate with such
transfer provided that such activity is consistent with good
medical judgment and applicable law.
(g) Referrals Among Groups. Group will accept non-Emergency or
specialty referrals from other medical groups participating with
Company and such other medical groups will be required to accept
non-Emergency and specialty referrals from Group. Payment to
Group will be at rates not to exceed those in the Fee Schedule
shown in Exhibit III.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
6/12/98
PAGE 6 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 7
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(h) Hospital Privileges. Group will ensure that Group Physicians
have admitting privileges at contracted hospitals that meet the
requirements for the hospital services to which Members are
entitled. Alternatively, Group will arrange for the provision of
such services.
(i) Group Medical Director. Group will appoint a licensed physician
to serve as Group's Medical Director and to be responsible in
such capacity for managing and directing Group Physicians'
rendering of Covered Services to Members.
(j) Collection from Members.
(i) Except as described in Section 9 herein, neither Group
nor any Group Physician nor any representative of Group
will seek or require any Member to tender a deposit or
similar payment during the Member's course of treatment
with respect to Covered Services rendered pursuant to
this Agreement, other than any applicable deductibles,
coinsurance or copayments specified in the applicable
Group Subscriber Contract. Except for copayments and
non-covered services, Group will not bill Member prior
to receipt of Company's Explanation of Benefits. Group
and/or Group Physician will fully advise Members of
their financial responsibility prior to rendering any
services that are not covered.
(ii) Notwithstanding anything in this Agreement to the
contrary, in no event, including, but not limited to,
nonpayment by Company, the insolvency of Company or
breach of this Agreement, will any Member be liable for
any amount owing to Group or any Group Physician by
Company, and Group and any Group Physician or any
representative of Group will not bill, charge, collect a
deposit or other sum, or seek compensation, remuneration
or reimbursement from, or maintain any action or have
any recourse against or make any surcharge upon a Member
or any person acting on a Member's behalf, other than
any applicable deductibles, coinsurance, or copayments
specified in the applicable Company Subscriber Contract.
Whenever any such charge has occurred, Group will refund
such charge to the Member within fifteen (15) days of
discovering or receiving notification of the charge. If
Company receives notice of any such charge, Company may
take appropriate action to remedy the situation,
including, without limitation, offsetting any such
charge against amounts due to Group or Group Physician.
The obligations set forth in this paragraph will survive
the termination of this Agreement regardless of the
cause giving rise to the termination and will be
construed for the benefit of the Members.
(k) Sub-Contracting. In the event that Group makes arrangements with
other health professionals to fulfill Group's obligations under
this Agreement.
(l) Equitable Treatment. Neither Group nor any Group Physician will
differentiate or discriminate against Members, and each will
render health services to all such patients in the same manner,
in accordance with the same standards and with the same time
availability as offered Group's and each Group Physician's other
patients. In the event that access to Group's Primary Care
Physician panel becomes limited or specific Primary Care
Physicians close their practices, such limitations and practice
closures will be applicable to Members covered under Group
Subscriber Contracts represented under this Agreement only to
the extent applicable to individuals covered under plans
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
6/12/98
PAGE 7 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 8
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sponsored by other payors. In such circumstance, Company must be
promptly notified of primary care practice limitations and
closures.
(m) Utilization Management Systems. Group will demonstrate promptly
and to the reasonable satisfaction of Company that it has
established effective, documented systems to direct and monitor
Group's and its Group Physician's compliance with the Primary
Care Physician Authorization requirements and with all other
aspects of the Utilization Management program. Group will also
demonstrate that it has established and documented effective
peer review and quality assurance protocols to assure compliance
with utilization and quality of care standards consistent with
professionally recognized standards of care, local practice
patterns and Company's Quality Assurance Plan. Group will
continue to conduct such systems through the initial term and
any renewal term of this Agreement.
(n) Compliance. Group will cooperate and comply fully with the
Utilization Management program and Quality Assurance Plan
pursuant to Section 6, and policies and procedures in the
Physician Group Handbook, including updates thereof. Any failure
to do so will be deemed a material breach of this Agreement.
Group must comply with Company's pre-authorization and
Pre-Certification procedures pursuant to Section 6. For services
which require pre-authorization by a Member's Primary Care
Physician, by Company or Group if delegated, shall cause Group
Providers to obtain authorization prior to rendering services.
For services requiring Pre-Certification, Group must obtain
Pre-Certification from the Company. Company, or Group if
delegated, will determine whether to certify the services based
on whether the services meet all the following criteria:
(i) They are appropriate given the symptoms and patient
history, and are consistent with the diagnosis, if any,
of the Member. "Appropriate" means that the type, level
and duration of services, and setting are necessary to
provide safe and adequate care and treatment;
(ii) They are rendered in accordance with generally accepted
medical practice and professionally recognized
standards;
(iii) They are not generally regarded as experimental or
unproven by recognized medical professionals or
appropriate governmental agencies, such as, but not
limited to, the United States Department of Health and
Human Services, Office of Pre-Paid Health Planning, the
Food and Drug Administration and the Public Health
Service Office of Health Technology Assessment; and
(iv) They are permitted by the licensing statutes that apply
to the provider who renders that service.
(o) Physician Payments. Group will make timely payments to its Group
Physicians and its contracted physicians pursuant to agreements
between Group and its Group Physicians and its contracted
physicians on such payments for clean claims. In the event Group
does not make timely payments for clean claims, Company may make
payments and either deduct such amount from other amounts due
Group from Company or demand immediate payment from Group.
Company will notify Group ten (10) business days prior to making
any such payments, and Group shall have the right to make such
payments prior to payment by the Company.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
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<PAGE> 9
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(o) Notice of Impairment of Group. Within ten (10) business days of
the receipt of notice thereof, Group will send written notice to
Company of any action undertaken with respect to Group or any
Group Physician, which action could materially impair the
ability of Group to carry out the duties and obligations of this
Agreement, including, but not limited to, actions related to:
(i) cancellation of Group's general and professional liability
insurance maintained in accordance with Section 11; (ii) Group's
suspension from participation in any Medicare or Medicaid
program due to fraud or abuse; or (iii) upon the indictment,
arrest or conviction of any Group Physician for (a) any felony
or (b) any criminal charge relating to the practice of medicine.
(p) Notice of Impairment of Group Physician. Within ten (10)
business day of the receipt of notice thereof, Group will send
written notice to the Company of any action undertaken with
respect to any Group Physician related to any such physician's
ability to provide care to Members, including, but not limited
to: (i) the termination, probation or suspension of any license
of a Group Physician relating to the practice of medicine; (ii)
any termination or limitation in staff privileges; (iii) any
disciplinary action taken by a hospital; (iv) the suspension of
a Group Physician's indictment, arrest or conviction for (a) any
felony or (b) any criminal charge relating to the practice of
medicine.
(q) Grievances. Group agrees to cooperate in resolving all
grievances relating to the provision of medical services to
Members in accordance with the grievance procedures established
by Company. Group agrees to participate in and provide
assistance and information as may be necessary or helpful to
Company. In the event Group receives any complaint regarding
Company or a Group Physician, Group agrees to notify Company
within five (5) days concerning all details of such complaint.
However, Group must notify Company of an urgent grievance
immediately and in no case later than twenty-four (24) hours
after receipt of complaint. Conversely, if Company directly
receives a complaint regarding Group, Company will promptly
notify Group of such complaint.
(r) Regulatory Compliance. Group and each Group Physician will
comply with all requirements of the law relating to the
furnishing of medical and health care services to the public,
and now has and will obtain and maintain in effect all permits,
licenses, registrations and governmental or board approvals
which may from time to time be necessary for that purpose.
(s) Orientation. On request by Company, Group will provide
orientation time to Company and assist in coordination of
in-service training for Group's staff and Group Physicians.
(t) Company Display. If requested by Company, Group shall cause
Group Providers to display the emblem, logo or similar
representation of Company at each of its facilities.
(u) Transfer of Member. Upon the effective date of termination of
this Agreement or upon the transfer of a Member to another
Group, at the request of Company, Group will, at its own
expense, copy all medical files of Member and forward such files
to the succeeding provider of Covered Services.
(v) Application and Credentialing Forms. Group shall cause each
Group Physician to complete Company, or Group if delegated,
application and credentialing forms in a timely fashion. Group
and each Group Physician will notify Company at least two (2)
times per month of any changes.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
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<PAGE> 10
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(w) Continuation of Care. Group shall cause Group Physicians to
agree to provide continued care for sixty (60) days after the
termination date of the Agreement if the Member has a life
threatening, disabling or degenerative condition or if the
Member is in the third trimester of pregnancy. If the Member is
in the third trimester of pregnancy, the care must be continued
until after postpartum care. The Covered Services must be
provided and paid for in accordance with the terms and
conditions of the terminated Agreement.
6. UTILIZATION MANAGEMENT. All Covered Services furnished to Members will
be subject to Utilization Management in accordance with the procedures
and guidelines attached as Exhibit IV. Such procedures and guidelines,
including Exhibit IV, may be modified by Company from time to time upon
forty-five (45) days written notice.
7. SELECTION AND TERMINATION OF PARTICIPATING PHYSICIANS.
(a) Initial Physician Designation. After consultation with Company,
Group will designate those physicians who are members of Group
and are authorized to act as Group Physicians and Primary Care
Physicians hereunder. Such designation, if not already made,
will be made in writing and attached to this Agreement as
Exhibit I.
(b) Notification. Group will notify Company at least sixty (60) days
in advance of the effective date of any withdrawal or
termination of a Group Physician. Group will notify Company of
the addition of a new Group Physician within ten (10) days after
such addition.
(c) Transfer of Care. Upon the termination or withdrawal of a Group
Physician, Group agrees to arrange for the transfer of all care
and treatment of any affected Members including, but not limited
to, identifying Members undergoing acute care and/or treatment
and assuming responsibility for the transfer of care to another
appropriate Group Physician.
8. COORDINATION OF BENEFITS AND SUBROGATION/RIGHT OF RECOVERY.
(a) Cooperation. Group will cooperate with Company to identify any
and all parties, other than Company, which may be responsible
for payment of or reimbursement for Covered Services, and for
the purpose of coordinating benefits with other payors.
(b) Coordination of Benefits. When a party other than Company is
identified as having primary responsibility for payment of or
reimbursement for Covered Services under the Coordination of
Benefits provision of a Member's Evidence of Coverage, Group
will bill and make all reasonable efforts to collect from such
party for the value of Covered Services.
(c) Subrogation/Right of Recovery. When a party other than Company
is identified as a party with respect to whom the
Subrogation/Right of Recovery provision of a Member's Evidence
of Coverage applies, Company will be responsible for using its
best efforts to obtain any and all recoveries allowable under
such provision. Company will pay the amount to Group to
compensate Group for the value of services rendered by Group
with respect to the injury or illness giving rise to the
recovery.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
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PAGE 10 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 11
- --------------------------------------------------------------------------------
9. RIGHT TO AUDIT AND ACCESS INFORMATION.
(a) Member Records. Group shall cause each Group Physician to
prepare and maintain appropriate financial and medical records
on Members. Such records will be maintained in accordance with
generally accepted medical, accounting and bookkeeping practices
and will be maintained as may be necessary for compliance with
the provisions of the Act.
(b) Inspection. Subject to any applicable legal restrictions, Group
and each Group Physician agrees to allow inspection and
duplication by Company, by the Florida Department of Insurance
and by any other properly identified governmental regulatory
authority of all billing and other financial records and all
medical records maintained on Members under this Agreement.
Company will have access at all reasonable times upon demand to
the books, records and papers of Group and each Group Physician
relating to the health care services provided to Members, to the
cost thereof, to payments received by Group and each Group
Physician from Members (or from others on their behalf). Company
will protect the confidentiality of such records in accordance
with applicable legal standards. Such inspection and duplication
will occur during regular working hours upon receipt of
seventy-two (72) hours prior written notice from Company.
Company will reimburse Group and Group Physicians for all
reasonable copying costs incurred by Group as a result of said
record inspection and duplication if requested by Plan for
Plan's own purposes. Group will notify Company of any adverse
report that results from an inspection by a governmental
regulatory authority.
(c) Record Retention. All records required to be maintained by Group
and each Group Physician under this Agreement will be retained
by Group and each Group Physician for at least three (3) years.
The obligation under Sections 9(b) and 9(d) will not terminate
upon the termination of this Agreement, whether by rescission or
otherwise.
10. INDEPENDENT CONTRACTOR. It is understood that each Group Physician will
maintain a physician-patient relationship with Members and will be
responsible to the Members for medical care and treatment. Group is an
independent contractor relative to Company. Nothing in this Agreement
will be construed as, or be deemed to create, a relationship of employer
and employee, or principal and agent or any relationship other than that
of independent parties contracting with each other solely for the
purpose of carrying out the provisions of this Agreement.
11. LIABILITY INSURANCE.
(a) General Liability Coverage. In order to protect the other party,
each party, at its sole cost and expense, will procure and
maintain a policy of general liability insurance or maintain
adequate resources to insure itself and its respective officers,
agents and employees against any liability, claims or damages
arising by reason of personal injuries or death occasioned
directly or indirectly by such party or its officers, agents or
employees in connection with the performance or nonperformance
of such party's responsibilities under this Agreement.
(b) Professional Liability Coverage. Group shall cause Group
Physicians individually to maintain professional liability
insurance, with limits of at least two hundred and fifty
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
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PAGE 11 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 12
- --------------------------------------------------------------------------------
thousand dollars ($250,000) per occurrence and at least seven
hundred and fifty thousand ($750,000) in the aggregate covering
Group and each of the Group Physicians. If Group Physician is
classified as Class 1 by the insurance company providing said
professional liability insurance, the limits for Group Physician
are at least one hundred thousand dollars ($100,000) per person
per occurrence with at least three hundred thousand dollars
($300,000) in the aggregate. Class 1 is hereby defined as those
non-surgical specialties which said insurance company has
determined to be in the lowest liability risk category.
(c) Third Party Liability. Nothing in this Agreement will be
construed to make Company, Group, Group Physicians, or their
respective agents or representatives, liable to persons not
parties hereto. Nor will anything herein be construed as, or be
deemed to create, any rights or remedies in any third party,
including, but not limited to, any Members or hospital.
(d) Company Professional Liability Coverage. Company maintains
professional liability insurance covering the utilization
management function with current limits of ten million dollars
($10,000,000) per occurrence and ten million dollars
($10,000,000) in the aggregate.
12. INDEMNIFICATION. Each party will indemnify the other and hold the other
harmless from and against any and all losses and liabilities (including
reasonable attorneys' fees and related legal expenses) arising from any
third party claim, action, cause of action, contest or dispute to the
extent the losses or liabilities are the result of the indemnifying
party's negligent or intentional act or omission. Group and Group
Physicians agree to indemnify and hold harmless Company against any and
all judgments, cross judgments, fines, and penalties levied against the
Company due to Group or Group Physician's failure to comply with all
applicable legal, regulatory, licensure and registration requirements.
13. NON-EXCLUSIVITY. Nothing herein will be construed to restrict the rights
of Group and Group Physicians or Company to participate in other
comparable provider plans, such as, but not limited to, preferred
provider plans, health maintenance organizations or other managed care
systems. Nothing herein will be construed to restrict the rights of
Company to enter into contracts or arrangements for services with any
other health care provider serving any geographic area.
14. PROPRIETARY INFORMATION, TRADEMARKS.
(a) Company's Proprietary Information. All information and materials
provided by Company to Group remain proprietary to Company,
including, but not limited to, subscriber lists, contracts, fee
schedules, the "Physician Group Handbook" and any other
operations manuals. Neither Group nor the Group Physicians will
disclose any of such information or materials or use them except
as may be required to carry out their respective obligations
hereunder.
(b) Trademarks. Neither Group nor Company will use each other's
trademarks, name or symbols without express written permission;
provided however, that Group agrees that Company may use the
Group Physician's name, office address, telephone number,
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
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PAGE 12 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 13
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specialty and factual description of practice in directories and
other promotional materials.
(c) Group's Proprietary Information. All information and materials
provided by Group to Company will remain proprietary to Group,
including, but not limited to, contracts, fee schedules,
utilization management procedures and administrative procedures.
Company will not disclose any such information or materials or
use them except as may be required to carry out its respective
obligations hereunder.
(d) Non-Solicitation. Group will not directly or indirectly solicit
Company's Group Subscribers or Members during the term of this
Agreement and for a period of twelve (12) months after the
termination of this Agreement. Solicitation will mean any act or
practice designed to encourage Company's Group Subscribers or
Members to terminate their coverage with Company.
(e) Survival. The obligations of this Section 15 shall survive the
termination of this Agreement.
15. GENERAL PROVISIONS.
(a) Scope of Agreement, Governing Law; Severability, Amendment;
Waiver. This Agreement, together with all Exhibits attached
hereto, constitutes the entire Agreement between Company and
Group. It will be construed and governed in accordance with the
Act. Any provision required to be in this Agreement by the Act
will bind Company and Group whether or not provided in this
Agreement. Any provision herein inconsistent therewith will be
of no effect and will be severable without affecting the
validity or enforceability of the remaining provisions of this
Agreement. Except as otherwise specified herein, this Agreement
may not be modified or amended except by mutual consent in
writing by the duly authorized representatives of Company and
Group. Waiver of breach of any provision of this Agreement will
not be deemed a waiver of any other breach of the same or a
different provision.
(b) Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, will be settled by
arbitration in accordance with the Rules of the American
Arbitration Association (Commercial Rules), and judgment upon
the award rendered by the Arbitrator(s) shall be handled
whenever practical in the City of Saint Petersburg, Pinellas
County, Florida. Notwithstanding anything to the contrary in
this Agreement, the initiation of any and all arbitration
proceedings initiated pursuant to this Agreement will be
approved by Group's risk carrier(s) prior to the initiation of
said proceedings. If not so approved, within thirty (30) days of
the demand or request for arbitration, this provision will be of
no force and effect and either party may file an action in a
court of competent jurisdiction to resolve the dispute.
(c) Amendments. No amendment or modification will be effective
unless made in writing and signed by both parties. All
amendments required by the Florida Department of Insurance will
be deemed effective upon receipt by the Group from the Company
and incorporated into and made part of this Agreement without
either party's execution.
(d) Conditions Precedent to the Implementation of this Agreement.
This Agreement is contingent upon Company receiving licensure
from the Florida Department of Insurance and the Florida Agency
for Health Care Administration to operate as a health
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
6/12/98
PAGE 13 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 14
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maintenance organization and conditioned upon provider's
availability in the approved service area.
(e) Notices. Any notice required to be given pursuant to the terms
and provisions of this Agreement will be in writing, postage
prepaid, and will be sent by certified mail, return receipt
requested, to Group at the following address:
Optimum Health Services of Florida, Inc.
17757 US 19 North, Suite 350
Clearwater, Florida 33764
Attn: Manager of Provider Services
and directly to Company at the following address:
SunStar Healthcare, Inc.
300 International Parkway, Suite 230
Heathrow, Florida 32746
Attn: Manager of Provider Services
or at such other address as the parties may designate by written
notice. Any such notice will be effective upon receipt at such
address.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
6/12/98
PAGE 14 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 15
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IN WITNESS WHEREOF, Company and Group have executed this Agreement through their
duly authorized representative as of the date last entered below.
COMPANY
Company Name: SunStar Healthcare, Inc.
------------------------
Name: Warren D. Stowell
--------------------------------------------------
Title: PRESIDENT/CEO
--------------------------------------------------
Date: 6-24-98
-----------------------
Signature: /s/ WARREN D. STOWELL
--------------------------------------------------
GROUP
Group Name: Optimum Health Services of Florida, Inc.
----------------------------------------
Name: Jason M. Patchen
----------------
Title: President and CEO
-----------------
Date: 6-26-98
-----------------------
Signature: /s/ JASON M. PATCHEN
--------------------------------------------------
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
6/12/98
PAGE 15 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 16
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EXHIBIT I
DESIGNATION OF PARTICIPATING PHYSICIANS AND LOCATIONS
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
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<PAGE> 17
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EXHIBIT II
GROUP COMPENSATION
Company will pay Group within thirty (30) days of receipt of a properly
submitted clean claim as full compensation for any Covered Services provided to
Members the fee for the Covered Service as shown in Exhibit III, minus any
applicable deductibles, copayment or coinsurance specified in the Member's Group
Subscriber Contract. Group may bill Member for such deductibles, copayments or
coinsurance but may not bill Member for any additional charges unless provided
for in the Member's Group Subscriber Contract. Any claim submitted after
seventy-five (75) days from the date of service shall be denied, and Group shall
not bill Members for such services.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
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<PAGE> 18
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EXHIBIT III
FEE SCHEDULE
1. For Group Providers in the Service Area, excluding Sarasota and Manatee
Counties, Company shall reimburse Group ### of the relative value
reimbursement (RBRVS) for all Covered Services rendered by Group
Physicians to Members. (Commercial and/or Medicare)
2. For Group Providers in Sarasota and Manatee Counties, Company shall
reimburse Group ### of the relative value reimbursement (RBRVS) for
all Covered Services rendered by Group Physicians to Members.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
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<PAGE> 19
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EXHIBIT VI
GROUP UTILIZATION MANAGEMENT EXHIBIT
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
6/12/98
PAGE 19 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 20
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EXHIBIT V
DELEGATION OF CREDENTIALING
Credentialing and recredentialing responsibilities have been delegated to Group.
Group will perform delegated credentialing and recredentialing on an ongoing
basis. Delegated credentialing and recredentialing policies and procedures are
as follows:
1. Information required by Company for the delegating credentialing process
and the physician files is as follows:
(a) Signed Application: each physician will be required to complete
a physician application form. This form will include information
required by Company and state regulatory bodies.
(b) Signed Release, allowing access to Group Physician's medical
records.
(c) Copy of Group Provider contract with Group. Contract must state
that the Group Provider agrees to participate in the Group's
QA/UM activities.
(d) Copy of current DEA Certificate.
(e) Copy of current state license. A letter will be sent to the
state medical board requesting verification and status of the
license.
(f) Verification of current malpractice insurance.
(g) Review of malpractice claims and medical board sanction reports.
(h) Board certification status can be verified by looking up each
Group Provider in the appropriate board directory.
(i) Verification from physician's affiliated participating hospitals
indicating physician has privileges and the privileges granted.
(j) All new providers will be screened by Company by utilizing
information obtained from the Federation of State Medical Boards
or the National Practitioners Data Bank.
(k) Review and approval of Group's credentialing committee.
2. All information in the application, including physician status, board
certification and malpractice insurance will be verified by Group.
3. All applications with deficiencies found during the verification process
will be transmitted to and reviewed by Company Medical Director, Company
President and the Company credentialing committee for final
determination before the physician will become a member of Company's
provider network.
4. If a Group Physician is found to be sanctioned by the medical board or
other state medical board or has committed a serious crime, Company
Medical Director has the authority to
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
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PAGE 20 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 21
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terminate the individual physician's contract. Company Medical Director
will discuss the reason for termination with the physician and Group
Medical Director when appropriate.
5. The physician and Group have the right to appeal the termination to the
Company's Physician Advisory Committee or Company Grievance Committee.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. MANAGEMENT SERVICES AGREEMENT
6/12/98
PAGE 21 OF 21 SUNSTAR HEALTHCARE, INC.
<PAGE> 1
Exhibit 10.3
==============================================================================
ONE HEALTH PLAN OF FLORIDA, INC.
COMPLETE WELLNESS INDEPENDENT PHYSICIAN ASSOCIATION OF
FLORIDA,INC
HMO MEDICAL GROUP FEE FOR SERVICE AGREEMENT
- ------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. DEFINITIONS...............................................................1
2. TERM AND TERMINATION......................................................3
3. GROUP COMPENSATION........................................................4
4. MODIFICATION OF RATES AND FACTORS.........................................4
5. RESPONSIBILITIES OF THE COMPANY...........................................4
6. RESPONSIBILITIES OF THE GROUP.............................................6
7. UTILIZATION MANAGEMENT...................................................10
8. SELECTION AND TERMINATION OF PARTICIPATING PHYSICIANS....................11
9. COORDINATION OF BENEFITS AND SUBROGATION/RIGHT OF RECOVERY...............11
10. RIGHT TO AUDIT AND ACCESS INFORMATION....................................12
11. INDEPENDENT CONTRACTOR...................................................12
12. LIABILITY INSURANCE......................................................12
13. INDEMNIFICATION..........................................................13
14. NON-EXCLUSIVITY..........................................................13
15. PROPRIETARY INFORMATION; TRADEMARKS......................................13
16. GENERAL PROVISIONS.......................................................14
</TABLE>
i
<PAGE> 3
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT I: DESIGNATION OF PARTICIPATING PHYSICIANS....................17
EXHIBIT II: GROUP COMPENSATION.........................................18
EXHIBIT III: FEE SCHEDULE...............................................19
EXHIBIT IV: UTILIZATION MANAGEMENT.....................................20
EXHIBIT V: AMENDMENTS.................................................22
</TABLE>
ii
<PAGE> 4
ONE HEALTH PLAN OF FLORIDA, INC.
MEDICAL GROUP FEE FOR SERVICE AGREEMENT
This is an Agreement between Complete Wellness Independent Physician
Association,Inc., ("Group"), [507 South Paula Drive, Dunedin, Florida 34698],
and One Health Plan of Florida, Inc. ("Company"), with its executive
offices at 7650 Courtney Campbell Causeway, Suite 850, Tampa, FL 33607,
entered into as of the _____ day of ________________, 19 _____ (the
"Effective Date").
WHEREAS, Company will operate as a health maintenance organization
under the Florida Insurance Code and the rules and regulations thereunder
("Act") to provide or arrange for health care services and perform
administrative services for individuals and for group health benefit plans;
and
WHEREAS, Group means the above-referenced Group, which is a
partnership, association, corporation or other legally constituted entity
existing under the laws of the State of Florida organized to provide
professional medical services (1) whose Group Physicians share equipment,
facilities, records, administrative services and/or personnel in such a
manner as is deemed acceptable to Company and (2) which can bind its Group
Physicians to the terms of this Agreement; and
WHEREAS, Company desires to contract with Group on behalf of Company
and Group desires to contract with Company to provide licensed health care
professionals to render medical and health care services to Members;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and undertakings hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Affiliates" means any entity controlled by or which
controls Company or Group. Control will mean the right to direct the
management of the affairs of the other entity.
(b) "Company Medical Director" means a licensed physician
engaged by Company to supervise and direct the conduct of the Utilization
Management program in the geographic area that includes Group's Service Area.
(c) "Contracting Provider" means any medical group or medical
organization, physician (also referred to herein as "Contracting Physician"),
hospital (also referred to herein as "Contracting Hospital") and other health
care providers, who have entered into a written agreement with Company to
provide Covered Services to Members.
(d) "Contract Year" means a period of twelve (12) months
commencing on either the Effective Date of this Agreement or any subsequent
anniversary of the Effective Date of this Agreement.
(e) "Covered Services" means only such medical care, treatment
and supplies that (1) are provided by licensed health care providers to
Members, (2) are benefits under the
1
<PAGE> 5
terms of such Member's Group Subscriber Contract and (3) are services mandated
by the Act now or in the future.
(f) "Emergency" means the sudden, unexpected onset of a medical
condition manifesting itself by acute symptoms of sufficient severity,
including severe pain, such that the absence of immediate medical attention
could reasonably be expected to jeopardize the life or health of a patient,
including a pregnant woman or fetus, cause serious injury to or impairment of
bodily functions or cause serious dysfunction to any bodily organ or part.
With respect to a pregnant woman, an emergency medical condition exists when
there is inadequate time to effect safe transfer to another hospital prior to
delivery, when a transfer may pose a threat to the health and safety of the
patient or fetus, or when there is evidence of the onset and persistence of
uterine contractions or rupture of the membranes. All determinations of
whether or not an Emergency exists will be subject to retrospective review
and approval or disapproval by Company Medical Director pursuant to the
Utilization Management program.
(g) "Group Medical Director" means a licensed physician
appointed by Group to be responsible for managing and directing the Group
Physicians rendering Covered Services to Members.
(h) "Group Physician" means a physician who is a member of, or
is employed by, or has contracted with Group and has agreed to provide
Covered Services pursuant to this Agreement. Group Physician includes any
physicians not contracting with or employed by Group who have agreed to
temporarily cover Group Physician's practice.
(i) "Group Subscriber Contract" means a contract issued by
Company to a group health benefit plan sponsored or maintained by an
employer, labor union, association or trust under which payment for health
care services is provided.
(j) "Member" means any individual covered under a Group
Subscriber Contract or other contract issued by Company.
(k) "Pre-Certification" means a determination in accordance
with Company's Utilization Management program.
(l) "Primary Care Physician" means a Group Physician, as
designated by Group and approved by Company, who practices as an Internist,
Pediatrician, Family Practitioner or General Practitioner and with whom a
Member has established a physician-patient relationship pursuant to which
that physician has responsibility for ongoing care of that Member in both
health maintenance and therapy for illness or injury, for maintaining overall
coordination and continuity of patient care and for initiating referrals for
specialist care for that Member.
(m) "Service Area" means the geographic area within a thirty
(30) air mile radius of Group's primary admitting hospital located at
______________. In no event, however, will Service Area include any areas
outside Company's approved service area.
(n) "Utilization Management" means the program administered by
Company with the specific goal of determining whether or not care or
treatment meets the requirements of Section 6(p) hereof. The Utilization
Management program is described in Section 7, and may
2
<PAGE> 6
include also without limitation (1) additional prospective review, (2)
concurrent review, (3) retrospective review and/or (4) case management.
2. TERM AND TERMINATION. The initial term of this Agreement begins
on the Effective Date of this Agreement and will continue in effect for a
period of twelve (12) months. Thereafter, this Agreement will automatically
be renewed for successive one (1) year terms until terminated as herein
provided. This Agreement will terminate as specified within the initial
term or thereafter upon the occurrence of any of the following events:
(a) Automatically and without notice upon the cancellation of
Group's general or professional liability insurance maintained in accordance
with Sections 12(a) and 12(b); or upon Group's suspension by a State or the
Federal Government from participation in the Medicare or Medicaid programs
due to fraud or abuse.
(b) Upon sixty (60) days prior written notice from Company to
Group if any action is initiated against Group or any Group Physician of a
kind specified in Sections 6(r) or 6(s) hereof and if no bona fide attempt by
Group is made to rectify the action initiated against Group or any Group
Physician, and the conditions giving rise to the action, during such sixty
(60) day period.
(c) Upon sixty (60) days prior written notice from Company to
Group if Group or any Group Physician changes affiliations, admitting
privileges or specialty status in such a way as to substantially limit
Group's range of services or access to Contracting Hospitals.
(d) By either party, by written notice thereof to the other
party and to the Department of Insurance, if the other party commits a
material breach of any warranties, covenants or obligations, provided that
the breaching party fails to cure that breach within sixty (60) days after
the written notice of default is given by the terminating party.
(e) Automatically and with sixty (60) days written notice to
the Department of Insurance on such date as either party becomes insolvent,
or is adjudicated as bankrupt, or its business comes into possession or
control, even temporarily, of any trustee in bankruptcy, or a receiver is
appointed for it or it makes a general assignment for the benefit of
creditors. No interest in this Agreement will be deemed an asset or
liability of either party, nor will any interest in this Agreement pass by
operation of law without the consent of the other party.
(f) By either party if at least sixty (60) days prior written
notice is given that it rejects any modification of Section 3 Group
Compensation and elects to terminate this Agreement, such termination to be
effective at the end of the last day before such modified rates or factors
would become effective.
(g) Immediately upon written notice from Company if Group makes
or has made any untrue statements of material fact or any intentional
misrepresentation of any fact, whether or not material, in any claim for
payment, in any application form or Quality Assessment Questionnaire or in
any statement made by Group to Company.
(h) Upon ninety (90) days prior written notice, given with or
without cause by either party to the other and to the Department of
Insurance. Company does not have to provide ninety (90) days prior written
notice in cases where a Member's health is subject to imminent
3
<PAGE> 7
danger or the Group's ability to practice medicine is effectively impaired by an
action by the Board of Medicine or by any other governmental agency.
(i) If any action of a kind specified in Section 6(s) is
initiated against a Group Physician, Company may, in lieu of or in addition
to terminating Group as provided in Sections 2(a) and 2(b) above, terminate
such Group Physician's authority to provide Covered Services under this
Agreement effective immediately upon notice thereof.
(j) Immediately upon written notice from Company if Group fails
to make refunds as specified under Section 6(l)(ii) or if Group fails to make
payments as specified in Section 6(q).
(k) Nonpayment for goods or services rendered by Group to
Company shall not be a valid reason for Group to avoid advance written notice
of cancellation as set forth in this Section.
(l) Following the effective date of termination of this
Agreement, this Agreement will be of no further force or effect except that
each party will remain liable for any obligations or liabilities arising from
activities undertaken prior to the effective date of termination. Upon any
such termination or withdrawal of a Group Physician, whether by termination
of this Agreement or otherwise, the Company shall continue to be liable to
pay in accordance with Section 3 hereof and the Fee Schedule in effect
immediately prior to such termination for Covered Services rendered by that
Group Physician under the terms and conditions of this Agreement to any
Member who is under the care of that Group Physician at the time of such
termination or withdrawal, and that Group Physician shall continue to provide
such Covered Services until the current episode of care is completed, unless
reasonably and medically appropriate arrangements for the assumption of such
care by another provider are made. The Group shall be responsible for
cooperating with the Company in order to make reasonable and medically
appropriate arrangements for the assumption by other Group Physicians for the
care of Members who are under the care of any terminated or withdrawn Group
Physician.
(m) Immediately upon the issuance of an order by the Department
of Insurance.
3. GROUP COMPENSATION. Company will compensate Group as described
in Exhibit II. Where Company has contracted on behalf of a group benefit
plan, that group benefit plan will be solely responsible for compensation
payment under this paragraph.
4. MODIFICATION OF RATES AND FACTORS. Company may propose changes
to the rates or factors in Section 3 Group Compensation by giving written
notice at least ninety (90) days prior to the end of any term of this
Agreement. If the proposed rates are unsatisfactory to Group, the parties
agree to meet and discuss in good faith the proposed changes. If no
agreement can be reached, either party may elect to terminate this Agreement
pursuant to Section 2(f). Otherwise, the proposed rates will become
effective on the first (1st) day of the next term of this Agreement.
5. RESPONSIBILITIES OF THE COMPANY.
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<PAGE> 8
(a) Regulatory Compliance. Company will comply with all
requirements of the law and regulations of governmental agencies relating to
the business of health maintenance organizations and any other business in
which Company is engaged relating to this Agreement, and will obtain and
maintain in effect all permits, licenses and governmental approvals necessary
for that purpose.
(b) Promotion. Company, its parent or its Affiliate will make
available and promote Company's Group Subscriber Contracts, subject to the
standards of lawfulness, reasonableness and protection of the health and
interests of Members.
(c) Enrollment Requirements. Company will provide in its Group
Subscriber Contracts that (1) Members will be required to enroll to receive
all Covered Services from or through one medical organization that is a
Contracting Provider such as Group and (2) Members will be permitted to
change their enrollment from one such medical organization to another, or
from one Primary Care Physician to another, upon formal notice or contact
with Company, and subject to the standards of lawfulness, reasonableness and
protection of the health and interests of Members.
(d) Claim Payment. Company will pay or arrange to pay for all
Covered Services as described in Exhibit II.
(e) Utilization Management. Company will conduct a Utilization
Management program in accordance with the provisions of Section 7 hereof.
(f) Member Access. Company will use its best efforts to
contract with sufficient physicians and other health care providers to allow
Members access to medical services to the extent required by applicable law
and regulations of governmental agencies relating to the business of health
maintenance organizations and any other business in which Company is engaged
relating to this Agreement.
(g) Enrollment Reports. Company will arrange to prepare and
furnish to Group monthly enrollment reports of Members assigned to Group on
or about the fifteenth (15th) day of each month. Company will exercise best
efforts to provide quarterly utilization management reports.
(h) Member Identification. Company will supply Members with a
means of identifying themselves to Group and/or a Group Physician (e.g., an
identification card) which indicates the Member's participation in a Group
Subscriber Contract. Group and each Group Physician will make a good faith
effort in using the Eligibility/Benefits Verification telephone number on the
identification card to confirm that the individual presenting a Company
identification card is in fact the Member whose name appears on Company
identification card and is eligible for coverage.
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<PAGE> 9
6. RESPONSIBILITIES OF THE GROUP.
(a) Enrollment. Group will accept enrollment of any and all
Members who select Group. Group may request authorization from Company to
decline to render care to any Member for reasons including, but not limited
to, the Member's fraud, threatened violence, failure to follow medical
instructions, disruption of provision of medical services to that Member or
any other patient of Group or a Group Physician. No such authorization will
be granted unless and until Group will have given the Member a reasonable
opportunity, given all of the circumstances, to correct the situation that is
the subject of such a request. Group will not request, demand or require the
removal of any Member based on such Member's needs or utilization of
services. Upon the receipt of authorization, Group must notify Member that
he or she must select another physician not affiliated with the Group within
thirty-one (31) days. Group is responsible for continuing to provide urgent
or Emergency care until the earlier of thirty-one (31) days or the selection
of another Group or Group Physician by the Member.
(b) Member Access. Unless otherwise approved by Company
Medical Director, Group will by staffing, contracting or referral provide
medically appropriate access in accordance with applicable laws and
regulation in all parts of Group's Service Area to the services of Group
Physicians who are board certified or eligible and practicing in the full
range of medical specialties. As part of Company's credentialing process,
the names, addresses, medical specialties and medical license numbers of all
Group Physicians in addition to all tax identification numbers under which
each such physician bills for medical services, and updates thereof, must be
supplied to Company in written documentation or material. If a Member
requires Covered Services that cannot be provided directly by Group
Physicians, the Member's Primary Care Physician will refer the Member to a
physician able to provide such services. These provisions will not be
construed to obligate Group to indemnify or otherwise hold harmless any
Member from the charges of any provider who is not a Group Physician if the
Member obtains services from such provider without being first referred or
otherwise directed thereto by Group or a Group Physician. In the event that
Group plans to close enrollment to new Members, Group will provide Company
with at least sixty (60) days prior written notice of such plans.
(c) Quality of Care. Group will ensure that medical and health
care services are rendered by Group Physicians in a manner which assures
availability, adequacy and continuity of care to Members, both during the
term and as required after termination hereof, and that all decisions
pertaining to health care services to be rendered by Group Physicians to
Members are based on such Members' medical needs and are made by or under the
supervision of licensed physicians. Group will remain solely responsible for
the quality of medical and health care services provided by Group Physicians
and will ensure such services are rendered in accordance with professionally
recognized standards. In the event that Group denies services to any Member
or any Member experiences an adverse outcome, Group will notify Company
within two (2) days of such an event.
(d) Hours of Coverage. Group will ensure that Covered Services
are available within the Service Area from Group Physicians or by referral to
other physicians by keeping office hours of at least forty (40) hours per
week. Group also will ensure that Members have access by phone to Group
Physicians twenty-four (24) hours per day and seven (7) days per
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<PAGE> 10
week. When a Group Physician is unavailable to a Member, Group will arrange for
coverage from other Group Physicians.
(e) Appointments. Group will ensure that Members are able to
receive an elective appointment with a Primary Care Group Physician within
seven (7) days of a Member Request and an elective appointment with a
Specialty Care Group Physician within ten (10) days of referral. Group will
provide or arrange for immediate attention to Emergency care needs and same
day attention to urgent care needs.
(f) Member Referral and Transfer. When referrals are
appropriate, Group and each Group Physician will follow the procedures in the
Physician Group Handbook and will exercise best efforts to refer Members to
other Contracting Providers and to admit Members to Contracting Hospitals.
In the event a Member requires transfer to a Contracting Hospital, Group will
cooperate with such transfer provided that such activity is consistent with
good medical judgment and applicable law.
(g) Referrals Among Groups. Group will accept non-Emergency or
specialty referrals from other medical groups participating with Company and
such other medical groups will be required to accept non-Emergency and
specialty referrals from Group. Payment to Group will be at rates not to
exceed those in the Fee Schedule shown in Exhibit III.
(h) Hospital Privileges. Group will ensure that Group
Physicians have admitting privileges at contracted hospitals which meet the
requirements for the hospital services to which Members are entitled.
Alternatively, Group will arrange for the provision of such services.
(i) Group Medical Director. Group will appoint a licensed
physician to serve as Group's Medical Director and to be responsible in such
capacity for managing and directing Group Physicians' rendering of Covered
Services to Members.
(j) Prescription Drugs. Group Physicians will exercise best
efforts to prescribe generic drugs and pharmaceutical products and to comply
with Company's formulary.
(k) Primary Care Physician Authorization. If any aspect of
Covered Services requires any Primary Care Physician Authorization,
documentation of that authorization will be promptly made available to
Company.
(l) Collection from Members.
(i) Except as described in Section 9 herein, neither
Group nor any Group Physician nor any representative of Group will seek or
require any Member to tender a deposit or similar payment during the Member's
course of treatment with respect to Covered Services rendered pursuant to
this Agreement, other than any applicable deductibles, coinsurance or
copayments specified in the applicable Group Subscriber Contract. Except for
copayments and non-covered services, Group will not bill Member prior to
receipt of Company's Explanation of Benefits. Group and/or Group Physician
will fully advise Members of their financial responsibility prior to
rendering any services that are not covered.
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<PAGE> 11
(ii) Notwithstanding anything in this Agreement to the
contrary, in no event, including, but not limited to, nonpayment by Company,
the insolvency of Company or breach of this Agreement, will any Member be
liable for any amount owing to Group or any Group Physician by Company, and
Group and any Group Physician or any representative of Group will not bill,
charge, collect a deposit or other sum, or seek compensation, remuneration or
reimbursement from, or maintain any action or have any recourse against or
make any surcharge upon a Member or any person acting on a Member's behalf.
Whenever any such charge has occurred, Group will refund such charge to the
Member within fifteen (15) days of discovering or receiving notification of
the charge. If Company receives notice of any such charge, Company may take
appropriate action to remedy the situation, including, without limitation,
offsetting any such charge against amounts due to Group or Group Physician
and/or immediate termination pursuant to this Agreement. The obligations set
forth in this paragraph will survive the termination of this Agreement
regardless of the cause giving rise to the termination and will be construed
for the benefit of the Members.
(m) Sub-Contracting. In the event that Group makes
arrangements with other health professionals to fulfill Group's obligations
under this Agreement, Group will obtain written contracts with such health
professionals, which will include a provision substantially similar to that
contained in Section 6(l) herein, and in which they agree to abide by all the
obligations of Group under this Agreement. If Group capitates any providers
or uses any method of reimbursement which may act as an incentive to withhold
services, Company will be notified by Group. Group's contracts, including
the method of compensation, with other providers will be subject to Company's
review and approval. Group shall promptly provide a copy of each such
contract, or a copy of Group's standard form contract and amendments thereto,
if any, used for such purpose.
(n) Equitable Treatment. Neither Group nor any Group Physician
will differentiate or discriminate against Members, and each will render
health services to all such patients in the same manner, in accordance with
the same standards and with the same time availability as offered Group's and
each Group Physician's other patients. In the event that access to Group's
Primary Care Physician panel becomes limited or specific Primary Care
Physicians close their practices, such limitations and practice closures will
be applicable to Members covered under Group Subscriber Contracts represented
under this Agreement only to the extent applicable to individuals covered
under plans sponsored by other payers. In such circumstance, Company must be
promptly notified of primary care practice limitations and closures.
(o) Utilization Management Systems. Group will demonstrate
promptly and to the reasonable satisfaction of Company that it has
established and implemented effective, documented systems to direct and
monitor Group's and its Group Physician's compliance with the Primary Care
Physician Authorization requirements and with all other aspects of the
Utilization Management program. Group will also demonstrate that it has
established, implemented and documented effective peer review and quality
assurance protocols to assure compliance with utilization and quality of care
standards consistent with professionally recognized standards of care, local
practice patterns and Company's Quality Assurance Plan. Group will continue
to conduct such systems through the initial term and any renewal term of this
Agreement.
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<PAGE> 12
(p) Compliance. Group will cooperate and comply fully with the
Utilization Management program, Quality Assurance Plan and policies and
procedures in the Physician Group Handbook, including updates thereof. Any
failure to do so will be deemed a material breach of this Agreement. Group
must comply with Company's pre-authorization and Pre-Certification
procedures. For services which require pre-authorization by a Member's
Primary Care Physician or by Company, Group must ensure that such
authorization is obtained prior to rendering services. For services
requiring Pre-Certification, Group must obtain such Pre-Certification from
the Company. Company will determine whether to certify the services based on
whether the services meet all the following criteria:
(i) They are appropriate given the symptoms and patient
history, and are consistent with the diagnosis, if any, of the Member.
"Appropriate" means that the type, level and duration of services, and
setting are necessary to provide safe and adequate care and treatment;
(ii) They are rendered in accordance with generally
accepted medical practice and professionally recognized standards;
(iii) They are not generally regarded as experimental or
unproven by recognized medical professionals or appropriate governmental
agencies, such as, but not limited to, the United States Department of Health
and Human Services, Office of Pre-Paid Health Planning, the Food and Drug
Administration and the Public Health Service Office of Health Technology
Assessment; and
(iv) They are permitted by the licensing statutes which
apply to the provider who renders that service.
(q) Physician Payments. Group will make timely payments to its
Group Physicians and its contracted physicians pursuant to agreements between
Group and its Group Physicians and its contracted physicians on such
payments. In the event Group does not make timely payments, Company may make
payments and, at its sole option, either deduct such amount from other
amounts due Group from Company or demand immediate payment. Company will
notify Group ten (10) business days prior to making any such payments, and
Group shall have the right to make such payments prior to payment by the
Company.
(r) Notice of Impairment of Group. As soon as it receives
notice thereof, Group will send written notice to Company of any action
undertaken with respect to Group or any Group Physician, which action could
materially impair the ability of Group to carry out the duties and
obligations of this Agreement, including, but not limited to, actions related
to: (1) cancellation of Group's general and professional liability insurance
maintained in accordance with Section 12; (2) Group's suspension from
participation in any Medicare or Medicaid program due to fraud or abuse; or
(3) upon the indictment, arrest or conviction of any Group Physician for (i)
any felony or (ii) any criminal charge relating to the practice of medicine.
(s) Notice of Impairment of Group Physician. As soon as it
receives notice thereof, Group will send written notice to the Company of any
action undertaken with respect to any Group Physician related to any such
physician's ability to provide care to Members, including, but not limited
to: (1) the termination, probation or suspension of any license of a
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<PAGE> 13
Group Physician relating to the practice of medicine; (2) any termination or
limitation in staff privileges; (3) any disciplinary action taken by a hospital;
(4) the suspension of a Group Physician's indictment, arrest or conviction for
(i) any felony or (ii) any criminal charge relating to the practice of medicine.
(t) Grievances. Group agrees to cooperate in resolving all
grievances relating to the provision of medical services to Members in
accordance with the grievance procedures established by Company. Group
agrees to participate in and provide assistance and information as may be
necessary or helpful to Company. In the event Group receives any complaint
regarding Company or a Group Physician, Group agrees to notify Company within
five (5) days concerning all details of such complaint. However, Group must
notify Company of an urgent grievance immediately and in no case later than
twenty-four (24) hours after receipt of complaint. Conversely, if Company
directly receives a complaint regarding Group, Company will promptly notify
Group of such complaint.
(u) Regulatory Compliance. Group and each Group Physician will
comply with all requirements of the law relating to the furnishing of medical
and health care services to the public, and now has and will obtain and
maintain in effect all permits, licenses, registrations and governmental or
board approvals which may from time to time be necessary for that purpose.
(v) Orientation. On request, Group will provide orientation
time to Company and assist in coordination of in-service training for Group's
staff and Group Physicians.
(w) Company Display. If requested by Company, Group will
display the emblem, logo or similar representation of Company at each of its
facilities.
(x) Transfer of Member. Upon the effective date of termination
of this Agreement or upon the transfer of a Member to another Group, at the
request of Company, Group will, at its own expense, copy all medical files of
Member and forward such files to the succeeding provider of Covered Services.
(y) Application and Credentialing Forms. Group and each Group
Physician will complete Company Application and Credentialing Forms within
ten (10) days of Agreement's execution by Group. Group and each Group
Physician will notify Company within ten (10) days of any changes.
(z) Continuation of Care. Group and Group Physicians agree to
provide continued care for sixty (60) days after the termination date of the
Agreement if the Member has a life threatening, disabling or degenerative
condition or if the Member is in the third trimester of pregnancy. If the
Member is in the third trimester of pregnancy, the care must be continued
until after postpartum care. The Covered Services must be provided and paid
for in accordance with the terms and conditions of the terminated Agreement.
7. UTILIZATION MANAGEMENT. All Covered Services furnished to Members
will be subject to Utilization Management in accordance with the procedures
and guidelines attached as Exhibit IV. Such procedures and guidelines,
including Exhibit IV, may be modified by Company from time to time upon
thirty (30) days written notice.
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8. SELECTION AND TERMINATION OF PARTICIPATING PHYSICIANS.
(a) Initial Physician Designation. After consultation with
Company, Group will designate those physicians who are members of or are
employed by Group and are authorized to act as Group Physicians and Primary
Care Physicians hereunder. Such designation, if not already made, will be
made in writing and attached to this Agreement as Exhibit I.
(b) Physician Selection and Termination. After consultation
with Group, the Company may make additional selections or terminate any Group
Physician from participation in Company's provider network within the initial
term or thereafter, upon ninety (90) days written notice or, in the case of
termination of this Agreement, at such earlier time as may be permitted under
Section 2 hereof.
(c) Notification. Group will notify Company at least sixty
(60) days in advance of the effective date of any withdrawal or termination
of a Group Physician. Group will notify Company of the addition of a new
Group Physician within ten (10) days after such addition.
(d) Transfer of Care. Upon the termination or withdrawal of a
Group Physician, Group agrees to arrange for the transfer of all care and
treatment of any affected Members including, but not limited to, identifying
Members undergoing acute care and/or treatment and assuming responsibility
for the transfer of care to another appropriate Group Physician.
9. COORDINATION OF BENEFITS AND SUBROGATION/RIGHT OF RECOVERY.
(a) Cooperation. Group will cooperate with Company to identify
any and all parties, other than Company, which may be responsible for payment
of or reimbursement for Covered Services, and for the purpose of coordinating
benefits with other payors.
(b) Coordination of Benefits. When a party other than Company
is identified as having primary responsibility for payment of or
reimbursement for Covered Services under the Coordination of Benefits
provision of a Member's Evidence of Coverage, Group will bill and make all
reasonable efforts to collect from such party for the value of Covered
Services.
(c) Subrogation/Right of Recovery. When a party other than
Company is identified as a party with respect to whom the Subrogation/Right
of Recovery provision of a Member's Evidence of Coverage applies, Company
will be responsible for using its best efforts to obtain any and all
recoveries allowable under such provision. After application of such
recoveries to reimburse Company for any and all amounts paid or payable by
Company with respect to the injury or illness giving rise to the recovery,
Company will pay the remaining amount, if any, to Group to compensate Group
for the value of services rendered by Group with respect to the injury or
illness giving rise to the recovery. Such payment to Group will be valued in
accordance with Exhibit III.
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10. RIGHT TO AUDIT AND ACCESS INFORMATION.
(a) Member Records. Group and each Group Physician will
prepare and maintain appropriate financial and medical records on Members.
Such records will be maintained in accordance with generally accepted
medical, accounting and bookkeeping practices and will be maintained as may
be necessary for compliance with the provisions of the Act.
(b) Inspection. Subject to any applicable legal restrictions,
Group and each Group Physician agrees to allow inspection and duplication by
Company, by the Florida Department of Insurance and by any other properly
identified governmental regulatory authority of all billing and other
financial records and all medical records maintained on Members under this
Agreement. Company will have access at all reasonable times upon demand to
the books, records and papers of Group and each Group Physician relating to
the health care services provided to Members, to the cost thereof, to
payments received by Group and each Group Physician from Members (or from
others on their behalf). Company will protect the confidentiality of such
records in accordance with applicable legal standards. Such inspection and
duplication will occur during regular working hours upon receipt of
seventy-two (72) hours prior written notice from Company. Company will
reimburse Group and Group Physicians for all reasonable copying costs
incurred by Group as a result of said record inspection and duplication.
Group will notify Company of any adverse report that results from an
inspection by a governmental regulatory authority.
(c) Financial Statements. Group will provide Company copies of
its quarterly financial statements inclusive of Group's balance sheet and
statements of income and cash flows within forty-five (45) days of the end of
each fiscal quarter. In addition, Group will provide Company copies of its
audited annual financial statements within ninety (90) days of the end of
Group's fiscal year. All financial statements will be prepared in accordance
with generally accepted accounting principles and will be certified by
Group's chief financial officer as accurately reflecting the financial
condition of Group for the period.
(d) Record Retention. All records required to be maintained by
Group and each Group Physician under this Agreement will be retained by Group
and each Group Physician for at least three (3) years. The obligation under
Sections 10(b) and 10(d) will not terminate upon the termination of this
Agreement, whether by rescission or otherwise.
11. INDEPENDENT CONTRACTOR. It is understood that each Group
Physician will maintain a physician-patient relationship with Members and
will be responsible to the Members for medical care and treatment. Group is
an independent contractor relative to Company. Nothing in this Agreement
will be construed as, or be deemed to create, a relationship of employer and
employee, or principal and agent or any relationship other than that of
independent parties contracting with each other solely for the purpose of
carrying out the provisions of this Agreement.
12. LIABILITY INSURANCE.
(a) General Liability Coverage. In order to protect the other
party, each party, at its sole cost and expense, will procure and maintain a
policy of general liability insurance or
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maintain adequate resources to insure itself and its respective officers, agents
and employees against any liability, claims or damages arising by reason of
personal injuries or death occasioned directly or indirectly by such party or
its officers, agents or employees in connection with the performance or
nonperformance of such party's responsibilities under this Agreement.
(b) Professional Liability Coverage. Group or each of the
Group Physicians individually will maintain professional liability insurance,
with limits of at least one million dollars ($1,000,000) per occurrence and
at least three million dollars ($3,000,000) in the aggregate covering Group
and each of the Group Physicians. If Group or Group Physician is classified
as Class 1 by the insurance company providing said professional liability
insurance, the limits for Group or such Group Physician are at least five
hundred thousand dollars ($500,000) per person per occurrence with at least
one million dollars ($1,000,000) in the aggregate. Class 1 is hereby defined
as those nonsurgical specialties which said insurance company has determined
to be in the lowest liability risk category.
(c) Third Party Liability. Nothing in this Agreement will be
construed to make Company, Group, Group Physicians, or their respective
agents or representatives, liable to persons not parties hereto. Nor will
anything herein be construed as, or be deemed to create, any rights or
remedies in any third party, including, but not limited to, any Members or
hospital.
(d) Company Professional Liability Coverage. Company maintains
professional liability insurance covering the utilization management function
with current limits of ten million dollars ($10,000,000) per occurrence and
ten million dollars ($10,000,000) in the aggregate.
13. INDEMNIFICATION. Each party will indemnify the other and hold
the other harmless from and against any and all losses and liabilities
(including reasonable attorneys' fees and related legal expenses) arising
from any third party claim, action, cause of action, contest or dispute to
the extent the losses or liabilities are the result of the indemnifying
party's negligent or intentional act or omission. Group and Group Physicians
agree to indemnify and hold harmless Company against any and all judgments,
cross judgments, fines, and penalties levied against the Company due to Group
or Group Physician's failure to comply with all applicable legal, regulatory,
licensure and registration requirements.
14. NON-EXCLUSIVITY. Nothing herein will be construed to restrict
the rights of Group and Group Physicians or Company to participate in other
comparable provider plans, such as, but not limited to, preferred provider
plans, health maintenance organizations or other managed care systems.
Nothing herein will be construed to restrict the rights of Company to enter
into contracts or arrangements for services with any other health care
provider serving any geographic area.
15. PROPRIETARY INFORMATION; TRADEMARKS.
(a) Company's Proprietary Information. All information and
materials provided by Company to Group remain proprietary to Company,
including, but not limited to, subscriber lists, contracts, fee schedules,
the "Physician Group Handbook" and any other operations manuals. Neither
Group nor the Group Physicians will disclose any of such
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information or materials or use them except as may be required to carry out
their respective obligations hereunder.
(b) Trademarks. Neither Group nor Company will use each
other's trademarks, name or symbols without express written permission;
provided however, that Group agrees that Company may use the Group
Physician's name, office address, telephone number, specialty and factual
description of practice in directories and other promotional materials.
(c) Group's Proprietary Information. All information and
materials provided by Group to Company will remain proprietary to Group,
including, but not limited to, contracts, fee schedules, utilization
management procedures and administrative procedures. Company will not
disclose any such information or materials or use them except as may be
required to carry out its respective obligations hereunder.
(d) Non-Solicitation. Group will not directly or indirectly
solicit Company's Group Subscribers or Members during the term of this
Agreement and for a period of twelve (12) months after the termination of
this Agreement. Solicitation will mean any act or practice designed to
encourage Company's Group Subscribers or Members to terminate their coverage
with Company.
(e) Survival. The obligations of this Section 15 shall survive
the termination of this Agreement.
16. GENERAL PROVISIONS.
(a) Scope of Agreement; Governing Law; Severability; Amendment;
Waiver. This Agreement, together with all Exhibits attached hereto,
constitutes the entire Agreement between Company and Group. It will be
construed and governed in accordance with the Act. Any provision required to
be in this Agreement by the Act will bind Company and Group whether or not
provided in this Agreement. Any provision herein inconsistent therewith will
be of no effect and will be severable without affecting the validity or
enforceability of the remaining provisions of this Agreement. Except as
otherwise specified herein, this Agreement may not be modified or amended
except by mutual consent in writing by the duly authorized representatives of
Company and Group. Waiver of breach of any provision of this Agreement will
not be deemed a waiver of any other breach of the same or a different
provision.
(b) Assignment and Subcontracting. No assignment,
subcontracting or delegation of the rights, duties or obligations of this
Agreement will be made by either party (except for Group's delegation to
Group Physicians of responsibility for providing Covered Services and except
as otherwise specifically provided herein) without the express written
approval of a duly authorized representative of the other party; provided,
however, that Company may assign any or all of its rights and obligations
hereunder to an Affiliate.
(c) Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, will be settled by
arbitration in accordance with the Rules of the American Arbitration
Association (Commercial Rules), and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
Notwithstanding anything to the contrary in this Agreement, the initiation of
any and all
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arbitration proceedings initiated pursuant to this Agreement will be approved by
Group's risk carrier(s) prior to the initiation of said proceedings. If not so
approved, within thirty (30) days of the demand or request for arbitration, this
provision will be of no force and effect and either party may file an action in
a court of competent jurisdiction to resolve the dispute.
(d) Amendments. This Agreement is subject to the amendments as
found in Exhibit V. The parties agree to comply with any and all provisions
in Exhibit V, and further agree that, in the event of any conflict between
the provisions in Exhibit V and any provisions elsewhere in this Agreement,
the provisions in Exhibit V will take precedence. No amendment or
modification will be effective unless made in writing and signed by both
parties. All amendments required by the Florida Department of Insurance will
be deemed effective upon receipt by the Group from the Company and
incorporated into and made part of this Agreement without either party's
execution.
(e) Conditions Precedent to the Implementation of this
Agreement. This Agreement is contingent upon Company receiving licensure
from the Florida Department of Insurance and the Florida Agency for Health
Care Administration to operate as a health maintenance organization and
conditioned upon provider's availability in the approved service area.
(f) Notices. Any notice required to be given pursuant to the
terms and provisions of this Agreement will be in writing, postage prepaid,
and will be sent by certified mail, return receipt requested, to Group at the
following address:
and directly to Company at the following address:
ONE HEALTH PLAN OF FLORIDA, INC.
7650 Courtney Campbell Causeway
Suite 850
Tampa, FL 33607
Attn.: Manager, Provider Relations
or at such other address as the parties may designate by written notice. Any
such notice will be effective upon receipt at such address.
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IN WITNESS WHEREOF, Company and Group have executed this Agreement
through their duly authorized representative as of the date last entered
below.
COMPANY: ONE HEALTH PLAN OF FLORIDA, INC.
By: /s/ SUSAN GRIFFIN
----------------------------
Print Name: Susan Griffin
-----------------------
Title: Vice President
----------------------------
Date: 1/22/98
----------------------------
GROUP:
By: /s/ JASON M POTCHER
----------------------------
Print Name: Jason M Potcher
-----------------------
Title: President & CEO
----------------------------
Date: 1/22/98
----------------------------
SIGNATURE PAGE FOR ONE HEALTH PLAN OF FLORIDA, INC. HMO MEDICAL GROUP FEE FOR
SERVICE AGREEMENT
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EXHIBIT I
DESIGNATION OF PARTICIPATING PHYSICIANS AND LOCATIONS
17
<PAGE> 21
EXHIBIT II
GROUP COMPENSATION
Company will pay Group within thirty (30) days of receipt of a properly
submitted clean claim as full compensation for any Covered Services provided
to Members, the lesser of Group's usual charge for the Covered Service and
the fee for the Covered Service as shown in Exhibit III, minus any applicable
deductibles, copayment or coinsurance specified in the Member's Group
Subscriber Contract. Group may bill Member for such deductibles, copayments
or coinsurance but may not bill Member for any additional charges unless
provided for in the Member's Group Subscriber Contract. Any claim submitted
after sixty (60) days from the date of service shall be denied, and Group
shall not bill Members for such services.
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EXHIBIT III
FEE SCHEDULE
A sample reimbursement schedule is attached and subject to amendment.
In no event will Company pay more than the lesser of the Fee Schedule
established by One Health Plan of Florida, Inc. or Contracting Provider's
usual billed charges.
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EXHIBIT IV
GROUP UTILIZATION MANAGEMENT EXHIBIT
A. Purpose
The Utilization Management program is administered by Company to insure the
efficient and effective use of health care resources, avoid inappropriate
care, and promote cost effective approaches to delivery of health care
services. The program includes the following:
1. monitoring of the appropriateness and efficiency of services
performed.
2. monitoring of patterns and trends of utilization of providers,
facilities and other elements of care.
3. identification of patterns and trends of under and over utilization
of care.
B. Program Content
1. Primary Care Physician Authorization
(a) Authorization. Except in the event of an Emergency, each
Group Physician will obtain the authorization from a Member's
Primary Care Physician prior to rendering, or referring any
Member for, any Covered Services. All continuing Covered
Services provided after the acute phase of an Emergency has ended
will require Primary Care Physician authorization in advance as
described above.
(b) Non-Contracting Providers. Except in the event of an
Emergency, a Primary Care Physician will not without the express
prior authorization of the Company, grant any such authorization
for any Covered Services to be rendered by providers who are not
Contracting Providers.
2. Pre-Certification
The Pre-Certification program consists of a review of proposed
treatment involving inpatient or day admissions for surgical,
medical, obstetric, pediatric, psychiatric and substance abuse
cases, outside of a physician's office and as described in the
Physician Group Handbook. Pre-Certification is required in
advance as described in the Physician Group Handbook for all
elective hospital admissions, surgical or invasive procedures,
and high cost non-invasive services such as MRI, CT and other
diagnostic services (excluding Emergencies). All elective
admissions require Pre-Certification. For urgent or Emergency
admissions, notification of Company is required as described in
the Physician Group Handbook or as soon as is practicable.
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3. Prescription of Drugs
The following medications require Pre-Certification before being filled
by a pharmacist:
Betaseron
Ceredase
Epogen/Procrit (Erythropoietin)
Humatrope/Protropin (Growth Hormone)
Leukine/Prokine (Sargramostion)
Metrodin/Profasi/Pergonal (Injectable Infertility)
Roferon/Intron (Interferon)
C. The Process
1. The Pre-Certification Process is initiated by the admitting or
Primary Care Physician or a representative of his/her office who calls
the toll-free number listed on the Member's identification card.
2. Company Utilization Management Nurse Reviewers perform the
Pre-Certification review, aided by a series of clinical protocols.
The Nurses are supported by the Company Medical Director.
3. If the attending or Primary Care Physician agrees on the
necessity, location and duration decisions, the case is certified, and
entered into the system for Concurrent Review.
4. On, or before the Pre-Certified discharge date, the attending or
Primary Care Physician will contact the Company Utilization Nurse
Reviewer by phone to arrange for a length of stay extension if it is
needed.
D. Appeals Process:
1. If the proposed treatment is not deemed to meet the requirements of
Section 6(p) hereof and the attending or Primary Care Physician does not
agree with the determination, the attending or Primary Care Physician may
appeal to the Group Medical Director.
2. If the Group Medical Director and attending or Primary Care
Physician still cannot reach an agreement with the Company determination,
the case is referred for final review to the Company Medical Director. If
the final review agrees with the proposed treatment, such treatment will
be certified.
3. If the treatment provided by the Group is not certified but is of
such a nature as to require Pre-Certification; and if the Primary Care
Physician or attending physician fails to comply with the Utilization
Management Process by (1) failing to contact the Company
Pre-Certification Service for pre-treatment review or length of stay
extension, or (2) failing to exhaust the entire physician appeals
process, then compensation payable by Company to Group shall be reduced
by 50%, up to a maximum of one thousand dollars ($1,000.00) for each
episode of non-compliance. For the purpose of this paragraph,
"compensation payable" shall mean the amount as shown in Exhibit III, as
applicable, payable to Group for the month in which the non-compliance is
identified to Group by Company.
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EXHIBIT V
AMENDMENTS
The terms and conditions specified in the One Health Plan of Florida,
Inc. Medical Group Fee for Service Agreement with Group are further subject
to the amendments put forth herein as Exhibit V.
The terms and conditions specified in the One Health Plan of Florida, Inc.
Medical Group Fee for Service Agreement with Group are further subject to
the amendments put forth herein as Exhibit V.
PREAMBLE, change second Whereas to: replace "provide" with "arrange for the
provision of"
PREAMBLE, change third Whereas to: replace "provide" with "arrange for the
provision of"
SECTION 1(a), "Affiliates" add "right or authority, granted by a Board of
Directors,"
SECTION 1(c), "Contracting Provider" add " Company or Group" to provide Covered
Services to members.
SECTION 1(f), " Emergency" add to last sentence "pursuant to Section 7 of this
Agreement."
SECTION 1(k), "Pre-Certification" add to end of statement: "pursuant to Section
7 of this Agreement.
SECTION 1(m), "Service Area" replace first sentence with "means the following
geographic area : Pineallas, Hillsborough, Polk, Osceola, Orange, Seminole, and
West Pasco Counties."
SECTION 1(n), "Utilization Management" add to first sentence "Company, or Group
if delegated,"
SECTION 2, "Terms and Termination" replace "until" to "unless"
SECTION 2 (c), add to end of statement: "Group will have thirty (30) day period
in which to cure any network deficiency that has been deemed to substantially
limit Group's scope of Covered Services or access to Contracted Hospitals."
SECTION 2 (h), add to end of last sentence "except in the case of failure to pay
by Company to Group, in which case Group may terminate the Agreement given
thirty (30) day cure period."
SECTION 2 (l), replace "continue to provide such Covered Services until the
current episode of care is completed" to "be obligated to provide Covered
Services for a period of up to thirty (30) days, or until reasonable and
medically appropriate arrangements for the assumption of such care by another
provider are made. During this period, Company will reimburse Group 100.0% of
the relative value reimbursement for any continued episodic Covered Services."
SECTION 5 (d), "Claim Payment" add to first sentence "Company, or Group if
delegated,"
SECTION 5 (e), " Utilization Management" add to first sentence "Company, or
Group if delegated,"
SECTION 5 (g), "Enrollment Reports" replace "on or about" to "by the 15th " also
add; "if applicable" to the end of second sentence.
SECTION 6 (b), "Member Access" add to second sentence "As part of Company's
credentialing process, or Group's credentialing process if delegated, the names,
addressed, medical specialties, and medical license numbers of all Group
Physicians in addition to all tax identification numbers under which each such
22
<PAGE> 26
physician bills for medical services, and updates thereof, must by supplied to
Company in written or electronic documentation or material."
SECTION 6 (c), "Quality of Care" add to second sentence " Group Physicians" also
add to third sentence "the Payment of Covered Services"
SECTION 6 (d), "Hours of coverage" add to end of first sentence "with physician
extender."
SECTION 6 (e), "Appointments" last sentence delete "provide or"
SECTION 6 (l) (II), "Collection from Members" add to the end of first sentence
"other than any applicable deductibles, coinsurance or copayments specified in
the applicable Group Subscriber Contract." also delete the end of third sentence
"and/or immediate termination pursuant to this Agreement."
SECTION 6 (p), "Compliance" The paragraph will be replaced with: "Group will
cooperate and comply fully with the Utilization Management and Quality Assurance
plan pursuant to section 7, and policies and procedures in the Physician Group
handbook including updates thereof. Any failure to do so will be deemed a
material breech of this Agreement. Group must comply with Company's
pre-authorization and Pre-Certification procedures pursuant to section 7. For
services which require pre-authorization by a Members Primary Care Physician,
Company or Group if delegated, shall cause Group providers to obtain
authorization prior to rendering services. For services requiring
Pre-Certification, Group must obtain Pre-Certification from the Company.
Company, or Group if delegated, will determine whether to certify the services
based on weather the services meet all the following criteria:"
SECTION 6 (q), "Physician Payments" add to end of first sentence "for clean
claims" add to second sentence "timely payments for clean claims" delete in
second sentence " at its sole option" add to end of second sentence "from
Group."
SECTION 6 (r), "Notice of Impairment of Group" delete "as soon as it receives"
add "Within one (1) business day of the receipt of"
SECTION 6 (s), "Notice of Impairment of Group Physician" delete " As soon as it
receives" add "Within one (1) business day of the receipt of"
SECTION 6 (v), "Orientation" add "on request by Company "
SECTION 6 (w), "Company Display" add "Group shall cause Group Providers to"
delete "will"
SECTION 6 (y), "Application and Credentialing Forms" replace paragraph with
"Group shall cause each Group Physician to complete Company, or Group if
delegated, application and credentialing forms in a timely fashion by Group.
Group and each Group Physician will notify Company at least two (2) times per
month of any changes."
SECTION 6 (z), "Continuation of Care" first sentence delete "and" add "shall
cause Group Physicians to agree"
SECTION 8 (a), "Initial Physician Designation" delete "or are employed by"
SECTION 10 (a), "Member Records" change to "Group shall cause each group
Physician to prepare and maintain appropriate financial and medical records on
Members."
SECTION 10 (c), "Financial Statements" change to "Group will provide Company
with proof of solvency within forty-five (45) days of the end of each fiscal
quarter. In addition, Group will provide Company copies of its audited annual
financial statements within thirty days from such date that said statements have
been prepared, not to exceed May 15th of the calendar year in question. All
financial statements will be prepared,
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<PAGE> 27
in accordance with generally accepted accounting principles and will be
certified by Group's chief financial officer as accurately reflecting the
financial condition of group for the period."
SECTION 12 (b), "Professional Liability Coverage " change to "with limits of at
least two hundred and fifty thousand dollars (250,000) per occurrence and at
least seven hundred and fifty thousand (750,000) in aggregate covering Group and
each of the Group Physician. If Group or Group Physician is classified as Class
1 by the insurance company providing said professional liability insurance, the
limits for Group or such Group Physician are at least one hundred thousand
dollars (100,000) per person per occurrence with at least three hundred thousand
dollars (300,000) in the aggregate. Class 1 is hereby defined as those
non-surgical specialties which said insurance company has determined to be in
the lowest liability risk category.
SECTION 16 (b), "Assignment and Subcontracting" add to last sentence "that
Company or Group"
SECTION 16 (c), "Arbitration" delete "may be entered in any court having
jurisdiction thereof" add "shall be handled whenever practical in the City of
Tampa, Hillsborough County, Florida."
GROUP COMPENSATION (a), last sentence change "sixty (60) days" to "seventy five
(75) days"
GROUP COMPENSATION (c), At such time that Group meets the network adequacy
requirements Company and Group will open discussions to convert the Group
compensation as specified in Exhibit II(a) from a fee-for-service arrangement to
a capitated arrangement for those Covered Services not covered in the Shared
Risk Pool and Pharmacy Pool, "Capitated Services". Capitated Services may
included, but not limited to, the following Covered Services:
1. Primary care Physician Office Visits;
2. Specialist Physician Office Visits;
3. Institutional Physician Services - Professional Only;
4. Outpatient Surgery - Professional Only;
5. Chiropractic Services;
6. Podiatric Services;
7. Anesthesia;
8. Radiology - Professional/Outpatient;
9. Laboratory - Outpatient;
10. Immunizations;
11. Diagnostic services;
12. PT/ST/OT - Professional/Outpatient; and
13. Family Planning - Professional Only.
Company and Group agree to convert the Group compensatory arrangements as
specified above within thirty (30) days from such date that Group meets the
network adequacy requirements.
ONE HEALTH PLAN OF COMPLETE WELLNESS INDEPENDENT
FLORIDA, INC. PHYSICIAN ASSOCIATION OF FLORIDA, INC.
BY: /s/ Susan Griffin BY: /s/ Jason M. Potcher
------------------------ ------------------------
NAME: SUSAN GRIFFIN NAME: JASON M. POTCHER
---------------------- ----------------------
TITLE: VICE PRESIDENT TITLE: PRESIDENT & CEO
--------------------- ---------------------
DATE: 1/22/98 DATE: 1/22/98
---------------------- ----------------------
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Exhibit 10.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ONE HEALTH PLAN OF FLORIDA, INC.
COMPLETE WELLNESS INDEPANDANT PHYSICIAN ASSOCIATION,INC.
PPO MEDICAL GROUP AGREEMENT
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS........................................................................1
2. TERM AND TERMINATION...............................................................3
3. GROUP COMPENSATION.................................................................4
4. MODIFICATION OF RATES AND FACTORS..................................................4
5. RESPONSIBILITIES OF THE COMPANY....................................................5
6. RESPONSIBILITIES OF THE GROUP......................................................5
7. UTILIZATION MANAGEMENT.............................................................9
8. SELECTION AND TERMINATION OF PARTICIPATING PHYSICIANS..............................9
9. COORDINATION OF BENEFITS AND SUBROGATION/RIGHT OF RECOVERY........................10
10. RIGHT TO AUDIT AND ACCESS INFORMATION............................................10
11. INDEPENDENT CONTRACTOR...........................................................11
12. LIABILITY INSURANCE..............................................................11
13. INDEMNIFICATION..................................................................12
14. NON-EXCLUSIVITY..................................................................12
15. PROPRIETARY INFORMATION; TRADEMARKS..............................................12
16. GENERAL PROVISIONS...............................................................13
</TABLE>
ii
<PAGE> 3
EXHIBITS
<TABLE>
<S> <C> <C>
EXHIBIT I: DESIGNATION OF PARTICIPATING PHYSICIANS........................16
EXHIBIT II: GROUP COMPENSATION..............................................17
EXHIBIT III: FEE SCHEDULE....................................................18
EXHIBIT IV: UTILIZATION MANAGEMENT..........................................19
EXHIBIT V: AMENDMENTS......................................................22
</TABLE>
iii
<PAGE> 4
ONE HEALTH PLAN OF FLORIDA, INC.
PPO MEDICAL GROUP AGREEMENT
This is an Agreement between Complete Wellness Independent Physician
Association of Florida, Inc.,17757 U.S. 19 North, Suite 350 Clearwater, Fl.
33764, and ONE HEALTH PLAN OF FLORIDA, INC. ("Company"), 7650 Courtney Campbell
Causeway, Suite 850, Tampa, FL 33607, entered into as of the 1st day of March,
1998 (the "Effective Date"), and is made for the purpose of setting forth the
terms and conditions under which Group will participate in one or more networks
of providers developed by Company to render health care services to Members, as
defined in this Agreement. On the Effective Date, this Agreement supersedes and
replaces any existing agreements between the parties relating to the provision
of health care services to Members.
WHEREAS, Company operates as a managed care company in the State of
Florida and provides or arranges for health care services and performs
administrative services; and
WHEREAS, Company maintains contracts with health care facilities,
physicians and other health care providers each of whom has agreed to provide
health care services to Members, has agreed to certain rates of payment or
reimbursement for their services, and has agreed to abide by certain procedures
in order to manage the quality and cost of the health care services provided;
and
WHEREAS, insurance companies, health plans, employers and other
entities (all hereinafter referred to as "Payors") maintain insurance policies,
plans or other arrangements whereby persons covered by such policies, plans or
arrangements are entitled to receive, or are entitled to indemnification or
reimbursement of the cost of health care services rendered by health care
providers; and are entitled to a higher level of service, payment or
reimbursement if they use certain designated health care providers, thereby
encouraging the covered person to use the designated providers; and
WHEREAS, Group means the above-referenced Group, which is an IPA,
partnership, association, corporation or other legally constituted entity
existing under the laws of the State of Florida organized to provide
professional medical services (1) whose Group Physicians share facilities,
records, administrative services and/or personnel and (2) which can bind its
Group Physicians to the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and undertakings hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Affiliates" means any entity controlled by or which
controls Company or Group. Control will mean the right to direct the
management of the affairs of the other entity.
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(b) "Benefit Contract" means a contract issued by or an
arrangement maintained by Company or Payor that is in effect with any employer,
labor union, association or trust under which payment for health care services
is provided, and which provides financial incentives for the use of designated
health care providers.
(c) "Company Medical Director" means a licensed physician
engaged by Company to supervise and direct the conduct of the Utilization
Management program.
(d) "Contracting Provider" means any medical group or
medical organization, physician (also referred to herein as "Contracting
Physician"), hospital (also referred to herein as "Contracting Hospital") and
other health care providers, who have entered into a written agreement with
Company to provide Covered Services to Members.
(e) "Contract Year" means a period of twelve (12) months
commencing on either the Effective Date of this Agreement or any subsequent
anniversary of the Effective Date of this Agreement.
(f) "Covered Services" means only such medical care,
treatment and supplies that (1) are provided by licensed health care providers
to Members and (2) are benefits under the terms of such Members' Benefit
Contracts.
(g) "Emergency" means the sudden, unexpected onset of a
medical condition manifesting itself by acute symptoms of sufficient severity,
including severe pain, such that the absence of immediate medical attention
could reasonably be expected to jeopardize life, cause serious injury or
impairment of bodily functions or cause serious injury to or permanent
dysfunction of any bodily organ or part. All determinations of whether or not
an emergency exists will be subject to retrospective review and approval or
disapproval by the Company Medical Director pursuant to the Utilization
Management program.
(h) "Group Medical Director" means a licensed physician
appointed by Group to be responsible for managing and directing the Group
Physicians rendering Covered Services to Members.
(i) "Group Physician" means a physician who is a member
of or is employed by or has contracted with Group and has agreed to provide
Covered Services pursuant to this Agreement. Group Physician includes any
physicians not contracting with or employed by Group who have agreed to
temporarily cover Group Physician's practice.
(j) "Member" means any individual covered under a Benefit
Contract or other contract issued by Company or Payor.
(k) "Payor" means an entity or person authorized by
Company to designate one or more of Company's Contracting Providers and who has
financial responsibility for payment of Covered Services.
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<PAGE> 6
(l) "Pre-Certification" means a determination in
accordance with Company's Utilization Management program.
(m) "Utilization Management" means the program
administered by Company with the specific goal of determining whether or not
care or treatment meets the requirements of Section 6(l) hereof. The
Utilization Management program is described in Section 7, and may include also
without limitation (1) pre-admission review, (2) concurrent review, (3)
retrospective review and/or (4) case management.
2. TERM AND TERMINATION. The initial term of this Agreement
begins on the Effective Date of this Agreement and will continue in effect for
a period of twelve (12) months. Thereafter, this Agreement will automatically
be renewed for successive one (1) year terms until terminated as herein
provided. This Agreement will terminate as specified within the initial term
or thereafter upon the occurrence of any of the following events:
(a) Automatically and without notice upon the
cancellation of Group's general or professional liability insurance maintained
in accordance with Sections 12(a) and 12(b); or upon Group's suspension by a
State or the Federal Government from participation in the Medicare or Medicaid
programs due to fraud or abuse.
(b) Upon thirty (30) days prior written notice from
Company to Group if any action is initiated against Group or any Group
Physician of a kind specified in Sections 6(n) or 6(o) hereof and if no bona
fide attempt by Group is made to rectify the action initiated against Group or
any Group Physician, and the conditions giving rise to the action, during such
thirty (30) day period.
(c) Upon sixty (60) days prior written notice from
Company to Group if Group or any Group Physician changes affiliations,
admitting privileges or specialty status in such a way as to substantially
limit Group's range of services or access to Contracting Hospitals.
(d) By either party, by written notice thereof, if the
other party commits a material breach of any warranties, covenants or
obligations, provided that the breaching party fails to cure that breach within
thirty (30) days after written notice of default is given by the terminating
party.
(e) Automatically and without notice on such date as
either party becomes insolvent, or is adjudicated as bankrupt, or its business
comes into possession or control, even temporarily, of any trustee in
bankruptcy, or a receiver is appointed for it or it makes a general assignment
for the benefit of creditors. No interest in this Agreement will be deemed an
asset or liability of either party, nor will any interest in this Agreement
pass by the operation of law without the consent of the other party.
(f) By either party if at least forty-five (45) days
prior written notice is given that it rejects any modification of Section 3
Group Compensation and elects to terminate this
3
<PAGE> 7
Agreement, such termination to be effective at the end of the last day before
such modified rates or factors would become effective.
(g) Immediately upon written notice from Company if Group
makes or has made any untrue statements of material fact or any intentional
misrepresentation of any fact, whether or not material, in any claim for
payment, in any application form or questionnaire or in any statement made by
Group to Company.
(h) Upon ninety (90) days prior written notice, given
with or without cause by either party to the other.
(i) If any action of a kind specified in Section 6(o) is
initiated against a Group Physician, the Company may, in lieu of or in addition
to terminating Group as provided in Sections 2(a) and 2(b) above, terminate
such Group Physician's authority to provide Covered Services under this
Agreement effective immediately upon notice thereof.
(j) Immediately upon written notice from Company if Group
fails to make refunds as specified under Section 6(i)(ii) or if Group fails to
make payments as specified in Section 6(m).
(k) Following the effective date of termination of this
Agreement, this Agreement will be of no further force or effect except that
each party will remain liable for any obligations or liabilities arising from
activities undertaken prior to the effective date of termination. Upon any
such termination or withdrawal of a Group Physician, whether by termination of
this Agreement or otherwise, the Company shall continue to be liable to pay in
accordance with Section 3 hereof and the Fee Schedule in effect immediately
prior to such termination for Covered Services rendered by that Group Physician
under the terms and conditions of this Agreement to any Member who under the
care of that Group Physician at the time of such termination or withdrawal, and
that Group Physician shall continue to provide such Covered Services until the
current episode of care is completed, unless reasonable and medically
appropriate arrangements for the assumption of such care by another provider
are made. The Group shall be responsible for cooperating with the Company in
order to make reasonable and medically appropriate arrangements for the
assumption by other Group Physicians for the care of Members who are under the
care of any terminated or withdrawn Group Physician.
3. GROUP COMPENSATION. Company or Payor will compensate Group as
described in Exhibits II and III.
4. MODIFICATION OF RATES AND FACTORS. Company may propose
changes to the rates or factors in Section 3 Group Compensation by giving
written notice at least ninety (90) days prior to the end of any term of this
Agreement. If the proposed rates are unsatisfactory to Group, the parties
agree to meet and discuss in good faith the proposed changes. If no agreement
can be reached, either party may elect to terminate this Agreement pursuant to
Section 2(f). Otherwise, the proposed rates will become effective on the first
(1st) day of the next term of this Agreement.
4
<PAGE> 8
5. RESPONSIBILITIES OF THE COMPANY.
(a) Regulatory Compliance. Company will comply with all
requirements of the law and regulations of governmental agencies relating to
the business of health care and any other business in which Company is engaged
relating to this Agreement, and will obtain and maintain in effect all permits,
licenses and governmental approvals necessary for that purpose.
(b) Promotion. Company and Payor will make available and
promote the Benefit Contracts, subject to the standards of lawfulness,
reasonableness and protection of the health and interests of Members.
(c) Claim Payment. Company or Payor will pay or arrange
to pay for all Covered Services as set forth herein.
(d) Utilization Management. Company will conduct a
Utilization Management program in accordance with the provisions of Section 7
hereof.
(e) Member Access. Company will use its best efforts to
contract with sufficient physicians and other health care providers to allow
Members access to medical services to the extent required by applicable law and
regulations of governmental agencies relating to the business of health care
and any other business in which Company is engaged relating to this Agreement.
(f) Member Identification. Company or Payor will supply
Members with a means of identifying themselves to Group and/or a Group
Physician (e.g., an identification card) which indicates the Member's
participation in a Benefit Contract. Group and each Group Physician will make
a good faith effort in using the Eligibility/Benefits Verification telephone
number on the identification card to confirm that the individual presenting a
Company identification card is in fact the Member whose name appears on Company
identification card and is eligible for coverage.
(g) Designation. Company will provide written notice to
Physician of all Payors which have designated Physician.
6. RESPONSIBILITIES OF THE GROUP.
(a) Member Access. Unless otherwise approved by Company
Medical Director, Group will by staffing, contracting or referral provide
medically appropriate access in accordance with applicable laws and regulations
to the services of Group Physicians who are board certified or eligible and
practicing in the full range of medical specialties. As part of Company's
credentialing process, the names, addresses, medical specialties and medical
license numbers of all Group Physicians in addition to all tax identification
numbers under which each such Group Physician bills for medical services, and
updates thereof, must be supplied to Company in written documentation or
material. In the event that the Group or Group Physician
5
<PAGE> 9
plans to close or reopen its practice to new Members, Group or Group Physician
will provide Company with at least sixty (60) days prior written notice of such
plans.
(b) Quality of Care. Group will ensure that medical and
health care services are rendered by Group Physicians in a manner which assures
availability, adequacy and continuity of care to Members, both during the term
and as required after termination hereof, and that all decisions pertaining to
health care services to be rendered by Group Physicians to Members are based on
such Members' medical needs and are made by or under the supervision of
licensed physicians. Group and Group Physician's primary consideration shall
be the quality of health care services rendered to Members. Group will remain
solely responsible for the quality of medical and health care services provided
by Group Physicians and will ensure such services are rendered in accordance
with professionally recognized standards. In the event that Group denies
services to any Member or any Member experiences an adverse outcome, Group will
notify Company within two (2) days of such an event.
(c) Hours of Coverage. Group shall ensure that Covered
Services are available from Group Physicians or by referral to other physicians
by keeping office hours of at least forty (40) hours per week, except for weeks
including holidays, and that Covered Services are available until at least nine
o'clock p.m. at least one (1) day per week and for at least four (4) hours each
Saturday, except for Saturdays falling on holidays.
(d) Member Referral and Transfer. When referrals are
appropriate, Group and each Group Physician will follow the procedures in the
Provider Handbook and refer Members to Contracting Providers and admit Members
to Contracting Hospitals. In the event a Member requires transfer to a
Contracting Hospital, Group will cooperate with such transfer provided that
such activity is consistent with good medical judgment and applicable law.
(e) Referrals Among Groups. Group will accept
non-Emergency or specialty referrals from other medical groups participating
with Company and such other medical groups will be required to accept
non-Emergency and specialty referrals from Group. Payment to Group will be at
rates not to exceed those in the Fee Schedule as shown in Exhibit III.
(f) Hospital Privileges. Group will ensure that Group
Physicians have admitting privileges at contracted hospitals which meet the
requirements for the hospital services to which Members are entitled.
Alternatively, Group will arrange for the provision of such services.
(g) Group Medical Director. Group will appoint a
licensed physician to serve as Group's Medical Director and to be responsible
in such capacity for managing and directing Group Physicians' rendering of
Covered Services to Members.
(h) Prescription Drugs. Group Physicians will exercise
best efforts to prescribe generic drugs and pharmaceutical products and to
comply with Company's formulary.
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<PAGE> 10
(i) Collections from Members.
(i) Except as described in Section 9 herein,
neither Group nor any Group Physician will seek or require any Member to tender
a deposit or similar payment during the Member's course of treatment with
respect to Covered Services rendered pursuant to this Agreement, other than any
applicable deductibles, coinsurance or copayments specified in the applicable
Benefit Contract. Except for copayments, deductibles, coinsurance and
non-covered services, Group will not bill Member prior to receipt of Company's
Explanation of Benefits. Group and/or Group Physician will fully advise Members
of their financial responsibility prior to rendering any services that are not
covered.
(ii) Notwithstanding anything in this Agreement to
the contrary, in no event, including but not limited to nonpayment by Company
or Payor, the insolvency of Company or Payor or breach of this Agreement, will
any Member be liable for any amount owing to Group or any Group Physician by
Company or Payor, and Group and any Group Physician will not bill, charge,
collect a deposit or other sum, or seek compensation, remuneration or
reimbursement from, or maintain any action or have any recourse against, or
make any surcharge upon a Member or any person acting on a Member's behalf.
Whenever any such charge has occurred, Group will refund such charge to the
Member within fifteen (15) days of discovering, or receiving notification of,
the charge. If Company or Payor receives notice of any such charge, Company or
Payor may take appropriate action to remedy the situation, including, without
limitation, offsetting any such charge against amounts due to Group or Group
Physician and/or immediate termination pursuant to this Agreement. The
obligations set forth in this paragraph will survive the termination of this
Agreement regardless of the cause giving rise to the termination and will be
construed for the benefit of the Members.
(j) Equitable Treatment. Neither Group nor any Group
Physician will differentiate or discriminate against Members and will render
health services to all such patients in the same manner, in accordance with the
same standards and with the same time availability as offered Group's and each
Group Physician's other patients.
(k) Quality of Care Systems. Group will demonstrate
promptly and to the reasonable satisfaction of Company that it has established
and implemented effective, documented systems to direct and monitor Group's and
its Group Physicians' compliance with all aspects of the Utilization Management
program. Group will also demonstrate that it has established, implemented and
documented effective peer review and quality assurance protocols to assure
compliance with utilization and quality of care standards consistent with
professionally recognized standards of care, local practice patterns and
Company's Quality Assurance Plan. Group will continue to conduct such systems
throughout the initial term and any renewal term of this Agreement.
(l) Compliance. Group will cooperate and comply fully
with the Utilization Management program, Quality Assurance Plan and any other
applicable quality assurance program of Company, as well as policies and
procedures in the Provider Handbook, including updates thereof. Any failure to
do so will be deemed a material breach of this Agreement. Group
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<PAGE> 11
must comply with Company's Pre-Certification procedures. For services
requiring Pre-Certification, Group must obtain such Pre-Certification from
Company. Company will determine whether to certify the services based on
whether the services meet all of the following criteria:
(i) They are appropriate given the symptoms and
patient history, and are consistent with the diagnosis, if any, of the Member.
"Appropriate" means that the type, level and duration of services, and setting
are necessary to provide safe and adequate care and treatment;
(ii) They are rendered in accordance with
generally accepted medical practice and professionally recognized standards;
(iii) They are not generally regarded as
experimental or unproven by recognized medical professionals or appropriate
governmental agencies, such as, but not limited to, the United States
Department of Health and Human Services, Office of Pre-Paid Health Planning,
the Food and Drug Administration and the Public Health Service Office of Health
Technology Assessment; and
(iv) They are permitted by the licensing statutes
which apply to the provider who renders that service.
(m) Physician Payments. Where Group is responsible for
payment to Group Physicians, Group will make timely payments to its Group
Physicians and its contracted physicians pursuant to agreements between Group
and its Group Physicians and its contracted physicians on such payments. In
the event Group does not make timely payments, Company may make payments and,
at its sole option, either deduct such amount from other amounts due Group from
Company or demand immediate payment. Company will notify Group ten (10)
business days prior to making any such payments and Group shall have the right
to make such payments prior to payment by the Company.
(n) Notice of Impairment of Group. As soon as it
receives notice thereof, Group will send written notice to Company of any
action undertaken with respect to Group or any Group Physician, which action
could materially impair the ability of Group to carry out the duties and
obligations of this Agreement, including but not limited to actions related to:
(1) cancellation of Group's general and professional liability insurance
maintained in accordance with Section 12; (2) Group's suspension from
participation in any Medicare or Medicaid program due to fraud or abuse; or (3)
upon the indictment, arrest or conviction of any Group Physician for (i) any
felony or (ii) any criminal charge relating to the practice of medicine.
(o) Notice of Impairment of Group Physician. As soon as
it receives notice thereof, Group will send written notice to the Company of
any action undertaken with respect to any Group Physician related to any such
physician's ability to provide care to Members, including but not limited to:
(1) the termination, probation or suspension of any license of a Group
Physician relating to the practice of medicine; (2) any termination or
limitation in staff
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<PAGE> 12
privileges; (3) any disciplinary action taken by a hospital; (4) the suspension
of a Group Physician's participation in any Medicare or Medicaid program due to
fraud or abuse; or (5) a Group Physician's indictment, arrest or conviction for
(i) any felony or (ii) any criminal charge relating to the practice of
medicine.
(p) Grievances. Group agrees to cooperate in resolving
all grievances relating to the provision of medical services to Members in
accordance with the grievance procedures established by Company. Group agrees
to participate in and provide assistance and information as may be necessary or
helpful to Company. In the event Group receives any complaint regarding Company
or a Group Physician, Group agrees to notify Company within five (5) days
concerning all details of such complaint. Conversely, if Company directly
receives a complaint regarding Group or Group Physician, Company will promptly
notify Group or Group Physician of such complaint.
(q) Regulatory Compliance. Group and each Group
Physician will comply with all requirements of the law relating to the
furnishing of medical and health care services to the public, and now has and
will obtain and maintain in effect all permits, licenses and governmental or
board approvals which may from time to time be necessary for that purpose.
(r) Orientation. On request, Group will provide
orientation time to Company and assist in coordination of in-service training
for Group's staff and Group Physicians.
(s) Company Display. If requested by Company, Group will
display the emblem, logo or similar representation of Company at each of its
facilities.
(t) Application and Credentialing Forms. Group and each
Group Physician will submit Company Application and Credentialing Forms with
Group's submission of the executed Agreement. Group and each Group Physician
will notify Company within ten (10) days of any changes to information on the
forms.
7. UTILIZATION MANAGEMENT. All Covered Services furnished to
Members will be subject to Utilization Management in accordance with the
procedures and guidelines attached as Exhibit IV. Such procedures and
guidelines, including Exhibit IV, may be modified by Company from time to time
upon thirty (30) days written notice.
8. SELECTION AND TERMINATION OF PARTICIPATING PHYSICIANS.
(a) Initial Physician Designation. After consultation
with Company, Group will designate those physicians who are members of or are
employed by Group and are authorized to act as Group Physicians hereunder. Such
designation, if not already made, will be made in writing and attached to this
Agreement as Exhibit I.
(b) Physician Selection and Termination. After
consultation with Group, the Company may make additional selections or
terminate any Group Physician from participation in Company's provider network
within the initial term or thereafter, upon ninety (90) days written
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<PAGE> 13
notice or, in the case of termination of this Agreement, at such earlier time
as may be permitted under Section 2 hereof.
(c) Notification. Group will notify Company within at
least sixty (60) days in advance of the effective date of any withdrawal or
termination of a Group Physician. Group will notify Company of the addition of
a new Group Physician within ten (10) days after such addition.
(d) Transfer of Care. Upon the termination or withdrawal
of a Group Physician, Group agrees to arrange for the transfer of all care and
treatment of any affected Members including but not limited to identifying
Members undergoing acute care and/or treatment and assuming responsibility for
the transfer of care to another appropriate Group Physician.
9. COORDINATION OF BENEFITS AND SUBROGATION/RIGHT OF RECOVERY.
(a) Cooperation. Group will cooperate with Company or
Payor to identify any and all parties, other than Company or Payor, which may
be responsible for payment of, or reimbursement for, Covered Services and for
the purpose of coordinating benefits with other payors.
(b) Coordination of Benefits. When a party, other than
Company or Payor, is identified as having primary responsibility for payment
of, or reimbursement for, Covered Services, under the Coordination of Benefits
provision of a Member's Benefit Contract, Group will bill, and make all
reasonable efforts to collect from such party for the value of Covered
Services.
(c) Subrogation/Right of Recovery. When a party, other
than Company or Payor, is identified as a party with respect to whom the
Subrogation/Right of Recovery provision of a Member's Benefit Contract applies,
Company or Payor will be responsible for using its best efforts to obtain any
and all recoveries allowable under such provision. After application of such
recoveries to reimburse Company or Payor for any and all amounts paid or
payable by Company or Payor with respect to the injury or illness giving rise
to the recovery, Company or Payor will pay the remaining amount, if any, to
Group to compensate Group for the value of services rendered by Group with
respect to the injury or illness giving rise to the recovery. Such payment to
Group will be valued in accordance with the Fee Schedule as shown in Exhibit
III.
10. RIGHT TO AUDIT AND ACCESS INFORMATION.
(a) Member Records. Group and each Group Physician will
prepare and maintain appropriate financial and medical records on Members.
Such records will be maintained in accordance with generally accepted medical,
accounting and bookkeeping practices and will be maintained as may be necessary
for compliance with the provisions of the laws of Florida.
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<PAGE> 14
(b) Inspection. Subject to any applicable legal
restrictions, Group and each Group Physician agrees to allow inspection and
duplication by Company, by the Department of Insurance and by any properly
identified governmental regulatory authority of all billings and other
financial records and all medical records maintained on Members under this
Agreement. Company will have access at all reasonable times upon demand to the
books, records and papers of Group and each Group Physician relating to the
health care services provided to Members, to the cost thereof, and to payments
received by Group and each Group Physician from Members (or from others on
their behalf). Company will protect the confidentiality of such records in
accordance with applicable legal standards. Such inspection and duplication
will occur during regular working hours upon receipt of seventy-two (72) hours
prior written notice from Company. Company will reimburse Group and Group
Physicians for all reasonable copying costs incurred by Group as a result of
said record inspection and duplication. Group will notify Company of any
adverse report that results from an inspection by a governmental regulatory
authority.
(c) Record Retention. All records required to be
maintained by Group and each Group Physician under this Agreement will be
retained by Group and each Group Physician for at least three (3) years. The
obligation under Sections 10(b) and 10(c) will not terminate upon the
termination of this Agreement, whether by rescission or otherwise.
11. INDEPENDENT CONTRACTOR. It is understood that each Group
Physician will maintain a physician-patient relationship with Members and will
be responsible to the Members for medical care and treatment. Group is an
independent contractor relative to Company. Nothing in this Agreement will be
construed as, or be deemed to create, a relationship of employer and employee,
or principal and agent or any relationship other than that of independent
parties contracting with each other solely for the purpose of carrying out the
provisions of this Agreement.
12. LIABILITY INSURANCE.
(a) General Liability Coverage. In order to protect the
other party, each party, at its sole cost and expense, will procure and
maintain a policy of general liability insurance or maintain adequate resources
to insure itself and its respective officers, agents and employees against any
liability or claims or damages arising by reason of personal injuries or death
occasioned directly or indirectly by such party or its officers, agents or
employees in connection with the performance or nonperformance of such party's
responsibilities under this Agreement.
(b) Professional Liability Coverage. Group or each of
the Group Physicians individually will maintain professional liability
insurance, with limits of at least one million dollars ($1,000,000) per
occurrence and at least three million dollars ($3,000,000) in the aggregate
covering Group and each of the Group Physicians. If Group or Group Physician
is classified as Class 1 by the insurance company providing said professional
liability insurance, the limits for Group or such Group Physician are at least
five hundred thousand dollars ($500,000) per person per occurrence with at
least one million dollars ($1,000,000) in the aggregate. Class
11
<PAGE> 15
1 is hereby defined as those nonsurgical specialties which said insurance
company has determined to be in the lowest liability risk category.
(c) Third Party Liability. Nothing in this Agreement
will be construed to make Company, Group, Group Physicians, or their respective
agents or representatives liable to persons not parties hereto. Nor will
anything herein be construed as, or be deemed to create, any rights or remedies
in any third party, including but not limited to any Members or hospital.
(d) Company Professional Liability Coverage. Company
maintains professional liability insurance covering the Utilization Management
function with current limits of ten million dollars ($10,000,000) per
occurrence and ten million dollars ($10,000,000) in the aggregate.
13. INDEMNIFICATION. Each party will indemnify the other and
hold the other harmless from and against any and all losses and liabilities
(including reasonable attorneys' fees and related legal expenses) arising from
any third party claim, action, cause of action, contest or dispute to the
extent the losses or liabilities are the result of the indemnifying party's
negligent or intentional act or omission.
14. NON-EXCLUSIVITY. Nothing herein will be construed to restrict
the rights of Group and Group Physicians or Company to participate in other
comparable provider plans, such as but not limited to preferred provider plans,
health maintenance organizations or other managed care systems. Nothing herein
will be construed to restrict the rights of Company to enter into contracts or
arrangements for services with any other health care provider serving any
geographic area.
15. PROPRIETARY INFORMATION; TRADEMARKS.
(a) Company's Proprietary Information. All information
and materials provided by Company to Group remain proprietary to Company, as
the case may be, including but not limited to subscriber lists, contracts, fee
schedules, provider handbooks and any other operations manuals. Neither Group
nor the Group Physicians will disclose any of such information or materials or
use them except as may be required to carry out their respective obligations
hereunder.
(b) Trademarks. Neither Group nor Company will use each
other's trademarks, name or symbols without express written permission;
provided however, that Group agrees that Company may use the Group Physician's
name, office address, telephone number, specialty and factual description of
practice in directories and other promotional materials.
(c) Group's Proprietary Information. All information and
materials provided by Group to Company will remain proprietary to Group,
including but not limited to contracts, fee schedules, Utilization Management
procedures and administrative procedures. Company will not disclose any such
information or materials or use them except as may be required to carry out its
respective obligations hereunder.
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<PAGE> 16
(d) Non-Solicitation. Group will not directly or
indirectly solicit Company or Payor's Members during the term of this Agreement
and for a period of twelve (12) months after the termination of this Agreement.
Solicitation will mean any act or practice designed to encourage Company's
Group Subscribers or Members to terminate their coverage with Company.
(e) Survival. The obligations of this paragraph shall
survive the termination of this Agreement.
16. GENERAL PROVISIONS.
(a) Scope of Agreement; Governing Law; Severability;
Amendment; Waiver. This Agreement, together with all Exhibits attached hereto,
constitutes the entire Agreement between the Company and Group. It will be
construed and governed in accordance with the laws of Florida. Any provision
required to be in this Agreement by the laws of Florida will bind Company and
Group whether or not provided in this Agreement. Any provision herein
inconsistent therewith will be of no effect and will be severable without
affecting the validity or enforceability of the remaining provisions of this
Agreement. Except as otherwise specified herein, this Agreement may not be
modified or amended except by mutual consent in writing by the duly authorized
representatives of Company and Group. Waiver of breach of any provision of this
Agreement will not be deemed a waiver of any other breach of the same or a
different provision.
(b) Assignment and Subcontracting. No assignment,
subcontracting or delegation of the rights, duties or obligations of this
Agreement will be made by either party (except for Group's delegation to Group
Physicians of responsibility for providing Covered Services and except as
otherwise specifically provided herein) without the express written approval of
a duly authorized representative of the other party; provided, however, Company
may assign any or all of its rights and obligations hereunder to an Affiliate.
(c) Arbitration. Any controversy or claim arising out of
or relating to this Agreement, or the breach thereof, will be settled by
arbitration in accordance with the Rules of the American Arbitration
Association (Commercial Rules), and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
Notwithstanding anything to the contrary in this Agreement, the initiation of
any and all arbitration proceedings initiated pursuant to this Agreement will
be approved by Group's risk carrier(s) prior to the initiation of said
proceedings. If not so approved, within thirty (30) days of the demand or
request for arbitration, this provision will be of no force and effect and
either party may file an action in a court of competent jurisdiction to resolve
the dispute.
(d) Amendments. This Agreement is subject to the
amendments as found in Exhibit V. The parties agree to comply with any and all
provisions in Exhibit V, and further agree that, in the event of any conflict
between the provisions in Exhibit V and any provisions elsewhere in this
Agreement, the provisions in Exhibit V will take precedence. No amendment or
modification will be effective unless made in writing and signed by both
parties. All
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<PAGE> 17
amendments required by an appropriate regulatory authority will be deemed
effective upon receipt by the Group from the Company and incorporated into and
made part of this Agreement without either party's execution.
(e) Notices. Any notice required to be given pursuant to
the terms and provisions of this Agreement will be in writing, postage prepaid,
and will be sent by certified mail, return receipt requested, to Group at the
following address:
and directly to Company at the following address:
ONE HEALTH PLAN OF FLORIDA, INC.
7650 Courtney Campbell Causeway
Suite 850
Tampa, FL 33607
Attn.: Vice President
or at such other address as the parties may designate by written notice. Any
such notice will be effective upon receipt at such address.
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<PAGE> 18
IN WITNESS WHEREOF, Company and Group have executed this Agreement
through their duly authorized representative as of the date last entered below.
COMPANY: ONE HEALTH PLAN OF FLORIDA, INC.
By: /s/ SUSAN GRIFFIN
------------------------------
Print Name: Susan Griffin
----------------------
Title: Vice President
---------------------------
Date: 2/2/98
----------------------------
GROUP: COMPLETE WELLNESS INDEPENDENT PHYSICIAN
ASSOCIATION OF FLORIDA, INC.
By: /s/ JASON PATCHEN
------------------------------
Print Name: Jason Patchen
----------------------
Title: President & CEO
---------------------------
Date: 1/30/98
----------------------------
SIGNATURE PAGE FOR ONE HEALTH PLAN OF FLORIDA, INC. POS MEDICAL GROUP AGREEMENT
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EXHIBIT I
DESIGNATION OF PARTICIPATING PHYSICIANS AND LOCATIONS
16
<PAGE> 20
EXHIBIT II
GROUP COMPENSATION
Company or Payor will pay Group as full compensation for any Covered
Services provided to Members and for which Group has submitted a properly
submitted claim, the lesser of Group's usual billed charges or the Fee Schedule
as shown in Exhibit III, minus any applicable deductibles, copayments or
coinsurance specified in the Member's Benefit Contract. Group may bill Member
for such deductibles, copayments or coinsurance but may not bill Member for any
additional charges unless provided for in the Member's Benefit Contract.
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EXHIBIT III
FEE SCHEDULE
A representative sample reimbursement schedule is attached and subject
to amendment. In no event will Company pay more than the lesser of the Fee
Schedule established by One Health Plan of Florida, Inc. or Contracting
Provider's usual billed charges. The fee schedule will be 90% percent of RBRVS
fee schedule in place with One Health Plan of Florida,Inc.
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<PAGE> 22
EXHIBIT IV
GROUP UTILIZATION MANAGEMENT EXHIBIT
A. Purpose
The Utilization Management program is administered by Company to insure the
efficient and effective use of health care resources, avoid inappropriate care,
and promote cost effective approaches to delivery of health care services. The
program includes the following:
1. monitoring of the appropriateness and efficiency of services
performed.
2. monitoring of patterns and trends of utilization of providers,
facilities and other elements of care.
3. identification of patterns and trends of under and over
utilization of care.
B. Program Content
1. Primary Care Physician Authorization
(a) Authorization. Except in the event of an Emergency,
each Group Physician will obtain the authorization from a
Member's Primary Care Physician prior to rendering, or
referring any Member for, any Covered Services. All
continuing Covered Services provided after the acute phase of
an Emergency has ended will require Primary Care Physician
authorization in advance as described above.
(b) Non-Contracting Providers. Except in the event of an
Emergency, a Primary Care Physician will not without the
express prior authorization of the Company, grant any such
authorization for any Covered Services to be rendered by
providers who are not Contracting Providers.
2. Pre-Certification
The Pre-Certification program consists of a review of proposed
treatment involving inpatient or day admissions for surgical,
medical, obstetric, pediatric, psychiatric and substance abuse
cases, outside of a physician's office and as described in the
Physician Group Handbook. Pre-Certification is required in
advance as described in the Physician Group Handbook for all
elective hospital admissions, surgical or invasive procedures,
and high cost non-invasive services such as MRI, CT and other
diagnostic services (excluding Emergencies). All elective
admissions require Pre-Certification. For urgent or Emergency
admissions, notification of Company is required as described
in the Physician Group Handbook or as soon as is practicable.
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3. Prescription of Drugs
The following medications require Pre-Certification before being
filled by a pharmacist:
Betaseron
Ceredase
Epogen/Procrit (Erythropoietin)
Humatrope/Protropin (Growth Hormone)
Leukine/Prokine (Sargramostion)
Metrodin/Profasi/Pergonal (Injectable Infertility)
Roferon/Intron (Interferon)
C. The Process
1. The Pre-Certification Process is initiated by the admitting or
Primary Care Physician or a representative of his/her office who calls
the toll-free number listed on the Member's identification card.
2. Company Utilization Management Nurse Reviewers perform the
Pre-Certification review, aided by a series of clinical protocols.
The Nurses are supported by the Company Medical Director.
3. If the attending or Primary Care Physician agrees on the
necessity, location and duration decisions, the case is certified, and
entered into the system for Concurrent Review.
4. On, or before the Pre-Certified discharge date, the attending
or Primary Care Physician will contact the Company Utilization Nurse
Reviewer by phone to arrange for a length of stay extension if it is
needed.
D. Appeals Process:
1. If the proposed treatment is not deemed to meet the
requirements of Section 6(l) hereof and the attending or Primary Care
Physician does not agree with the determination, the attending or
Primary Care Physician may appeal to the Group Medical Director.
2. If the Group Medical Director and attending or Primary Care
Physician still cannot reach an agreement with the Company
determination, the case is referred for final review to the Company
Medical Director. If the final review agrees with the proposed
treatment, such treatment will be certified.
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<PAGE> 24
3. If the treatment provided by the Group is not certified but is
of such a nature as to require Pre-Certification; and if the Primary
Care Physician or attending physician fails to comply with the
Utilization Management Process by (1) failing to contact the Company
Pre-Certification Service for pre-treatment review or length of stay
extension, or (2) failing to exhaust the entire physician appeals
process, then compensation payable by Company to Group shall be
reduced by 50%, up to a maximum of one thousand dollars ($1,000.00)
for each episode of non-compliance. For the purpose of this paragraph,
"compensation payable" shall mean the amount as shown in Exhibit III,
as applicable, payable to Group for the month in which the
non-compliance is identified to Group by Company.
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<PAGE> 25
EXHIBIT V
AMENDMENTS
The terms and conditions specified in the One Health Plan of Florida, Inc. PPO
Medical Group Agreement with Group are further subject to the amendments put
forth herein.
PREAMBLE, change second Whereas to: replace "provide" with "arrange for the
provision of"
PREAMBLE, change fourth Whereas to: replace "provide" with "arrange for
the provision of"
SECTION 1(A), "Affiliates" add "right or authority, granted by a Broad of
Directors,"
SECTION 1(J), "Member" add: means any individual "except for East
Pasco,Martin, St. Lucie, Okechobee, Dade, Broward, Palm beach, and Monroe
Counties."
SECTION 1(D), "Contracting Provider" add "Company or Group" to provide
Covered Services to members.
SECTION 1(G), "Emergency" add to last sentence "pursuant to Section 7 of
this Agreement."
SECTION 1(L), "Pre-Certification: add to end of statement: "pursuant to
Section 7 of this Agreement."
SECTION 1(M), "Utilization Management" add to first sentence "Company, or
Group if delegated,"
SECTION 2, "Terms and Termination" replace "until to "unless"
SECTION 2(C), add to end of statement: "Group will have thirty (30) day
period in which to cure any network deficiency that has been deemed to
substantially limit Group's scope of Covered Services or access to Contracted
Hospitals."
SECTION 2(H), add to end of last sentence: "except in the case of failure to
pay by Company to Group, in which case Group may terminate the Agreement given
thirty (30) day cure period."
SECTION 2(K), replace "continue to provide such Covered Services until the
current episode of care is completed" to "be obligated to provide Covered
Services for a period of up to thirty (30) days, or until reasonable and
medically appropriate arrangements for
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<PAGE> 26
the assumption of such care by another provider are made. During this period,
Company will reimburse Group 100.0% of the relative value reimbursement for any
continued episodic Covered Services."
SECTION 6(A), "Member Access" add to second sentence "As part of Company's
credentialing process, or Group's credentialing process if delegated, the
names, addresses, medical specialties, and medical license numbers of all Group
Physicians in addition to all tax identification numbers under which each such
physician bills for medical services, and updates thereof, must be supplied to
Company in written or electronic documentation or material."
SECTION 6(B), "Quality of Care" add to third sentence "group Physicians"
also add to fourth sentence "the Payment of Covered Services"
SECTION 6(C), "Hours of Coverage" or by referral to other physician "or with
physician extender"
SECTION 6(I) (II), "Collection from Members" add to the end of last sentence:
"other than applicable deductibles, coinsurance or copayments specified in the
applicable Group Subscriber Contract." Also delete the end of third sentence
"and/or immediate termination pursuant to this Agreement."
SECTION 6(L), "Compliance" the paragraph will be replaced with: "Group will
cooperate and comply fully with the Utilization Management and Quality
Assurance plan pursuant to section 7, and policies and procedures in the
Physician Group handbook including updates thereof. Any failure to do so will
be deemed a material breech of this Agreement. Group must comply with Company's
Pre-authorization and Pre-Certification procedures pursuant to section 7. For
services which require pre-authorization by a Members Primary Care Physician,
shall cause Group providers to obtain authorization prior to rendering
services. For services requiring Pre-Certifications, Group must obtain
Pre-Certification from the Company. Company, will determine whether to certify
the services based on weather the services meet all the following criteria:"
SECTION 6(M), "Physician Payments" add to end of first sentence "for clean
claims" add to second sentence "timely payments for clean claims" delete in
second sentence "at its sole option" add to end of second sentence "from
Group.'
SECTION 6(N), "Notice of Impairment of Group" delete "as soon as it
receives" add "Within one (1) business day of the receipt of"
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<PAGE> 27
SECTION 6(O), "Notice of Impairment of Group Physician" delete "As soon as
it receives" add "Within one (1) business day of the receipt of"
SECTION 6(R), "orientation" add "on request by Company"
SECTION 6(S), "Company Display" add "Group shall cause Group Providers to"
delete "will"
SECTION 6(T), "Application and Credentialing Forms" replace paragraph with
"Group shall cause each Group Physician to complete. Company, or Group if
delegated, application and credentialing forms in a timely fashion by Group.
Group and each Group Physician will notify company at least two (2) times per
month of any changes."
SECTION 8(A), "Initial Physician Designation" delete "or are employed by"
SECTION 10(A), "Member Records" change to "Group shall cause each group
Physician to prepare and maintain appropriate financial and medical records on
Members."
SECTION 12(B), "Professional Liability Coverage" change to "with the limits
of a least two hundred and fifty thousand dollars (250,000) per occurrence and
at least seven hundred and fifty thousand (750,000) in aggregate covering Group
and each group Physician. If Group or group Physician is classified as Class 1
by the insurance company providing said professional liability insurance, the
limits for Group or Group Physician are at least one hundred thousand dollars
(100,000) per person per occurrence with at least three hundred thousand
dollars (300,000) in the aggregate. Class 1 is hereby defined as those
non-surgical specialties which said insurance company has determined to be in
the lowest liability risk category."
SECTION 16(B), "Assignment and Subcontracting" add to last sentence "that
Company or Group"
SECTION 16(C), "Arbitration" delete "may by entered in any court having
jurisdiction thereof" add "shall be handled whenever practical in the City of
Tampa, Hillsborough County, Florida."
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<PAGE> 28
EXHIBIT VI
AMENDMENTS
The terms and condition specified in the One Health plan of Florida, Inc. PPO
Medical Group Agreement are further subject to the amendments put forth herein
as Exhibit VI.
Effective February 16,1998 Complete Wellness Independent Physician Association
of Florida, Inc. will legally change its name to Optimum Health Services of
Florida, Inc. The change in name to any other name does not constitute a change
in contract which currently exists between Complete Wellness Independent
Physician Association of Florida, Inc. and One Health Plan of Florida, Inc.
ONE HEALTH PLAN OF FLORIDA, INC. OPTIMUM HEALTH SERVICES OF
FLORIDA, INC.
By: /s/ SUSAN GRIFFIN By: /s/ JASON PATCHEN
---------------------------- --------------------------------
Print Name: Susan Griffin Print Name: JASON PATCHEN
-------------------- ------------------------
Title: Vice President Title: President & CEO
------------------------ ----------------------------
Date: 2/2/98 Date: 1/30/98
-------------------------- ----------------------------
25
<PAGE> 1
Exhibit 10.5
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ONE HEALTH PLAN OF FLORIDA, INC.
COMPLETE WELLNESS INDEPENDENT PHYSICIAN ASSOCIATION OF
FLORIDA, INC.
POS MEDICAL GROUP AGREEMENT
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. GROUP COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. MODIFICATION OF RATES AND FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. RESPONSIBILITIES OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6. RESPONSIBILITIES OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7. UTILIZATION MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8. SELECTION AND TERMINATION OF PARTICIPATING PHYSICIANS. . . . . . . . . . . . . . . . . . . . . . . . 10
9. COORDINATION OF BENEFITS AND SUBROGATION/RIGHT OF RECOVERY . . . . . . . . . . . . . . . . . . . . . 10
10. RIGHT TO AUDIT AND ACCESS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11. INDEPENDENT CONTRACTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
12. LIABILITY INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
13. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
14. NON-EXCLUSIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
15. PROPRIETARY INFORMATION; TRADEMARKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
16. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
i
<PAGE> 3
EXHIBITS
<TABLE>
<S> <C> <C>
EXHIBIT I: DESIGNATION OF PARTICIPATING PHYSICIANS . . . . . . . . . . . . . . . . . . . . . . . . . . 16
EXHIBIT II: GROUP COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
EXHIBIT III: FEE SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
EXHIBIT IV: UTILIZATION MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
EXHIBIT V: AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
ii
<PAGE> 4
ONE HEALTH PLAN OF FLORIDA, INC.
POS MEDICAL GROUP AGREEMENT
This is an Agreement between Complete Wellness Independent Physican
Association of Florida, Inc.,17757 U.S.19 North, Suite 350 Clearwater,Fl.33764,
and One Health Plan of Florida, Inc. ("Company"), 7650 Courtney Campbell
Causeway, Suite 850, Tampa, FL 33607, entered into as of the 1st day of March,
1998 (the "Effective Date") and made for the purpose of setting forth the terms
and conditions under which Group will participate in one or more networks of
providers developed by Company to render health care services to Members, as
defined in this Agreement. On the Effective Date, this Agreement supersedes and
replaces any existing agreements between the parties relating to the provision
of health care services to Members.
WHEREAS, Company operates as a managed care company in the State of
Florida and provides or arranges for health care services and performs
administrative services; and
WHEREAS, Company maintains contracts with health care facilities,
physicians and other health care providers each of whom has agreed to provide
health care services to Members, has agreed to certain rates of payment or
reimbursement for their services, and has agreed to abide by certain procedures
in order to manage the quality and cost of the health care services provided;
and
WHEREAS, insurance companies, health plans, employers and other
entities (all hereinafter referred to as "Payors") maintain insurance policies,
plans or other arrangements whereby persons covered by such policies, plans or
arrangements are entitled to receive, or are entitled to indemnification or
reimbursement of the cost of health care services rendered by health care
providers, and are entitled to a higher level of service, payment or
reimbursement if they use certain designated health care providers, thereby
encouraging members person to use the designated providers; and
WHEREAS, Group means the above-referenced Group, which is an IPA,
partnership, association, corporation or other legally constituted entity
existing under the laws of the State of Florida organized to provide
professional medical services (1) whose Group Physicians share facilities,
records, administrative services and/or personnel and (2) which can bind its
Group Physicians to the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and undertakings hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Affiliates" means any entity controlled by or which
controls Company or Group. Control will mean the right to direct the
management of the affairs of the other entity.
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<PAGE> 5
(b) "Benefit Contract" means a contract issued by or an
arrangement maintained by Company or Payor that is in effect with any employer,
labor union, association or trust under which payment for health care services
is provided, and which provides financial incentives for the use of designated
health care providers.
(c) "Company Medical Director" means a licensed physician
engaged by Company to supervise and direct the conduct of the Utilization
Management program.
(d) "Contracting Provider" means any medical group or
medical organization, physician (also referred to herein as "Contracting
Physician"), hospital (also referred to herein as "Contracting Hospital") and
other health care providers, who have entered into a written agreement with
Company to provide Covered Services to Members.
(e) "Contract Year" means a period of twelve (12) months
commencing on either the Effective Date of this Agreement or any subsequent
anniversary of the Effective Date of this Agreement.
(f) "Covered Services" means only such medical care,
treatment and supplies that (1) are provided by licensed health care providers
to Members and (2) are benefits under the terms of such Members' Benefit
Contracts.
(g) "Emergency" means the sudden, unexpected onset of a
medical condition manifesting itself by acute symptoms of sufficient severity,
including severe pain, such that the absence of immediate medical attention
could reasonably be expected to jeopardize life, cause serious injury to or
impairment of bodily functions or cause serious injury to or permanent
dysfunction of any bodily organ or part. All determinations of whether or not
an Emergency exists will be subject to retrospective review and approval or
disapproval by the Company Medical Director pursuant to the Utilization
Management program.
(h) "Group Medical Director" means a licensed physician
appointed by Group to be responsible for managing and directing the Group
Physicians rendering Covered Services to Members.
(i) "Group Physician" means a physician who is a member
of or is employed by or has contracted with Group and has agreed to provide
Covered Services pursuant to this Agreement. Group Physician includes any
physicians not contracting with or employed by Group who have agreed to
temporarily cover Group Physician's practice.
(j) "Member" means any individual covered under a Benefit
Contract or other contract issued by Company or Payor.
(k) "Payor" means an entity or person authorized by
Company to designate one or more of Company's Contracting Providers and who has
financial responsibility for payment of Covered Services.
2
<PAGE> 6
(l) "Pre-Certification" means a determination in
accordance with Company's Utilization Management program.
(m) "Primary Care Physician" means a Group Physician, as
designated by Group and approved by Company, who practices as an Internist,
Pediatrician, Family Practitioner or General Practitioner and with whom a
Member has established a physician-patient relationship pursuant to which that
physician has responsibility for ongoing care of that Member in both health
maintenance and therapy for illness or injury, for maintaining overall
coordination and continuity of patient care, and for initiating referrals for
specialist care for that Member.
(n) "Utilization Management" means the program
administered by Company with the specific goal of determining whether or not
care or treatment meets the requirements of Section 6(l) hereof. The
Utilization Management program is described in Section 7, and may include also
without limitation (1) pre-admission review, (2) concurrent review, (3)
retrospective review and/or (4) case management.
2. TERM AND TERMINATION. The initial term of this Agreement
begins on the Effective Date of this Agreement and will continue in effect for
a period of twelve (12) months. Thereafter, this Agreement will automatically
be renewed for successive one (1) year terms until terminated as herein
provided. This Agreement will terminate as specified within the initial term
or thereafter upon the occurrence of any of the following events:
(a) Automatically and without notice upon the
cancellation of Group's general or professional liability insurance maintained
in accordance with Sections 12(a) and 12(b); or upon Group's suspension by a
State or the Federal Government from participation in the Medicare or Medicaid
programs due to fraud or abuse.
(b) Upon thirty (30) days prior written notice from
Company to Group if any action is initiated against Group or any Group
Physician of a kind specified in Sections 6(n) or 6(o) hereof and if no bona
fide attempt by Group is made to rectify the action initiated against Group or
any Group Physician, and the conditions giving rise to the action, during such
thirty (30) day period.
(c) Upon sixty (60) days prior written notice from
Company to Group if Group or any Group Physician changes affiliations,
admitting privileges or specialty status in such a way as to substantially
limit Group's range of services or access to Contracting Hospitals.
(d) By either party, by written notice thereof, if the
other party commits a material breach of any warranties, covenants or
obligations, provided that the breaching party fails to cure that breach within
thirty (30) days after written notice of default is given by the terminating
party.
(e) Automatically and without notice on such date as
either party becomes insolvent, or is adjudicated as bankrupt, or its business
comes into possession or control, even temporarily, of any trustee in
bankruptcy, or a receiver is appointed for it, or it makes a general
3
<PAGE> 7
assignment for the benefit of creditors. No interest in this Agreement will be
deemed an asset or liability of either party, nor will any interest in this
Agreement pass by the operation of law without the consent of the other party.
(f) By either party if at least forty-five (45) days
prior written notice is given that it rejects any modification of Section 3
Group Compensation and elects to terminate this Agreement, such termination to
be effective at the end of the last day before such modified rates or factors
would become effective.
(g) Immediately upon written notice from Company if Group
makes or has made any untrue statements of material fact or any intentional
misrepresentation of any fact, whether or not material, in any claim for
payment, in any application form or questionnaire or in any statement made by
Group to Company.
(h) Upon ninety (90) days prior written notice, given
with or without cause by either party to the other.
(i) If any action of a kind specified in Section 6(o) is
initiated against a Group Physician, the Company may, in lieu of or in addition
to terminating Group as provided in Sections 2(a) and 2(b) above, terminate
such Group Physician's authority to provide Covered Services under this
Agreement effective immediately upon notice thereof.
(j) Immediately upon written notice from Company if Group
fails to make refunds as specified under Section 6(i)(ii) or if Group fails to
make payments as specified in Section 6(m).
(k) Following the effective date of termination of this
Agreement, this Agreement will be of no further force or effect except that
each party will remain liable for any obligations or liabilities arising from
activities undertaken prior to the effective date of termination. Upon any
such termination or withdrawal of a Group Physician, whether by termination of
this Agreement or otherwise, the Company shall continue to be liable to pay in
accordance with Section 3 hereof and the Fee Schedule in effect immediately
prior to such termination for Covered Services rendered by that Group Physician
under the terms and conditions of this Agreement to any Member who under the
care of that Group Physician at the time of such termination or withdrawal, and
that Group Physician shall continue to provide such Covered Services until the
current episode of care is completed, unless reasonable and medically
appropriate arrangements for the assumption of such care by another provider
are made. The Group shall be responsible for cooperating with the Company in
order to make reasonable and medically appropriate arrangements for the
assumption by other Group Physicians for the care of Members who are under the
care of any terminated or withdrawn Group Physician.
3. GROUP COMPENSATION. Company or Payor will compensate Group as
described in Exhibits II and III.
4
<PAGE> 8
4. MODIFICATION OF RATES AND FACTORS. Company may propose
changes to the rates or factors in Section 3 Group Compensation by giving
written notice at least ninety (90) days prior to the end of any term of this
Agreement. If the proposed rates are unsatisfactory to Group, the parties
agree to meet and discuss in good faith the proposed changes. If no agreement
can be reached, either party may elect to terminate this Agreement pursuant to
Section 2(f). Otherwise, the proposed rates will become effective on the first
(1st) day of the next term of this Agreement.
5. RESPONSIBILITIES OF THE COMPANY.
(a) Regulatory Compliance. Company will comply with all
requirements of the law and regulations of governmental agencies relating to
the business of health care and any other business in which Company is engaged
relating to this Agreement, and will obtain and maintain in effect all permits,
licenses and governmental approvals necessary for that purpose.
(b) Promotion. Company and Payor will make available and
promote the Benefit Contracts, subject to the standards of lawfulness,
reasonableness and protection of the health and interests of Members.
(c) Claim Payment. Company or Payor will pay or arrange
to pay for all Covered Services as set forth herein.
(d) Utilization Management. Company will conduct a
Utilization Management program in accordance with the provisions of Section 7
hereof.
(e) Member Access. Company will use its best efforts to
contract with sufficient physicians and other health care providers to allow
Members access to medical services to the extent required by applicable law and
regulations of governmental agencies relating to the business of health care
and any other business in which Company is engaged relating to this Agreement.
(f) Member Identification. Company or Payor will supply
Members with a means of identifying themselves to Group and/or a Group
Physician (e.g., an identification card) which indicates the Member's
participation in a Benefit Contract. Group and each Group Physician will make
a good faith effort in using the Eligibility/Benefits Verification telephone
number on the identification card to confirm that the individual presenting a
Company identification card is in fact the Member whose name appears on Company
identification card and is eligible for coverage.
(g) Designation. Company will provide written notice to
Physician of all Payors which have designated Physician.
5
<PAGE> 9
6. RESPONSIBILITIES OF THE GROUP.
(a) Member Access. Unless otherwise approved by Company
Medical Director, Group will by staffing, contracting or referral provide
medically appropriate access in accordance with applicable laws and regulations
to the services of Group Physicians who are board certified or eligible and
practicing in the full range of medical specialties. As part of Company's
credentialing process, the names, addresses, medical specialties and medical
license numbers of all Group Physicians in addition to all tax identification
numbers under which each such Group Physician bills for medical services, and
updates thereof, must be supplied to Company in written documentation or
material. In the event that the Group or Group Physician plans to close or
reopen its practice to new Members, Group or Group Physician will provide
Company with at least sixty (60) days prior written notice of such plans.
(b) Quality of Care. Group will ensure that medical and
health care services are rendered by Group Physicians in a manner which assures
availability, adequacy and continuity of care to Members, both during the term
and as required after termination hereof, and that all decisions pertaining to
health care services to be rendered by Group Physicians to Members are based on
such Members' medical needs and are made by or under the supervision of
licensed physicians. Group and Group Physician's primary consideration shall
be the quality of health care services rendered to Members. Group will remain
solely responsible for the quality of medical and health care services provided
by Group Physicians and will ensure such services are rendered in accordance
with professionally recognized standards. In the event that Group denies
services to any Member or any Member experiences an adverse outcome, Group will
notify Company within two (2) days of such an event.
(c) Hours of Coverage. Group shall ensure that Covered
Services are available from Group Physicians or by referral to other physicians
by keeping office hours of at least forty (40) hours per week, except for weeks
including holidays, and that Covered Services are available until at least nine
o'clock p.m. at least one (1) day per week and for at least four (4) hours each
Saturday, except for Saturdays falling on holidays.
(d) Member Referral and Transfer. When referrals are
appropriate, Group and each Group Physician will follow the procedures in the
Provider Handbook and refer Members to Contracting Providers and admit Members
to Contracting Hospitals. In the event a Member requires transfer to a
Contracting Hospital, Group will cooperate with such transfer provided that
such activity is consistent with good medical judgment and applicable law.
(e) Referrals Among Groups. Group will accept
non-Emergency or specialty referrals from other medical groups participating
with Company and such other medical groups will be required to accept
non-Emergency and specialty referrals from Group. Payment to Group will be at
rates not to exceed those in the Fee Schedule as shown in Exhibit III.
(f) Hospital Privileges. Group will ensure that Group
Physicians have admitting privileges at contracted hospitals which meet the
requirements for the hospital services
6
<PAGE> 10
to which Members are entitled. Alternatively, Group will arrange for the
provision of such services.
(g) Group Medical Director. Group will appoint a
licensed physician to serve as Group's Medical Director and to be responsible
in such capacity for managing and directing Group Physicians' rendering of
Covered Services to Members.
(h) Prescription Drugs. Group Physicians will exercise
best efforts to prescribe generic drugs and pharmaceutical products and to
comply with Company's formulary.
(i) Collections from Members.
(i) Except as described in Section 9 herein,
neither Group nor any Group Physician will seek or require any Member to tender
a deposit or similar payment during the Member's course of treatment with
respect to Covered Services rendered pursuant to this Agreement, other than any
applicable deductibles, coinsurance or copayments specified in the applicable
Benefit Contract. Except for copayments and non-covered services, Group will
not bill Member prior to receipt of Company's Explanation of Benefits. Group
and/or Group Physician will fully advise Members of their financial
responsibility prior to rendering any services that are not covered.
(ii) Notwithstanding anything in this Agreement to
the contrary, in no event, including but not limited to nonpayment by Company
or Payor, the insolvency of Company or Payor or breach of this Agreement, will
any Member be liable for any amount owing to Group or any Group Physician by
Company or Payor, and Group and any Group Physician will not bill, charge,
collect a deposit or other sum, or seek compensation, remuneration or
reimbursement from, or maintain any action or have any recourse against, or
make any surcharge upon a Member or any person acting on a Member's behalf.
Whenever any such charge has occurred, Group will refund such charge to the
Member within fifteen (15) days of discovering, or receiving notification of,
the charge. If Company or Payor receives notice of any such charge, Company or
Payor may take appropriate action to remedy the situation, including, without
limitation, offsetting any such charge against amounts due to Group or Group
Physician and/or immediate termination pursuant to this Agreement. The
obligations set forth in this paragraph will survive the termination of this
Agreement regardless of the cause giving rise to the termination and will be
construed for the benefit of the Members.
(j) Equitable Treatment. Neither Group nor any Group
Physician will differentiate or discriminate against Members and will render
health services to all such patients in the same manner, in accordance with the
same standards and with the same time availability as offered Group's and each
Group Physician's other patients.
(k) Quality of Care Systems. Group will demonstrate
promptly and to the reasonable satisfaction of Company that it has established
and implemented effective, documented systems to direct and monitor Group's and
its Group Physicians' compliance with all aspects of the Utilization Management
program. Group will also demonstrate that it has established,
7
<PAGE> 11
implemented and documented effective peer review and quality assurance
protocols to assure compliance with utilization and quality of care standards
consistent with professionally recognized standards of care, local practice
patterns and Company's Quality Assurance Plan. Group will continue to conduct
such systems throughout the initial term and any renewal term of this
Agreement.
(l) Compliance. Group will cooperate and comply fully
with the Utilization Management program, Quality Assurance Plan and any other
quality assurance program of Company, as well as and policies and procedures in
the Provider Handbook, including updates thereof. Any failure to do so will be
deemed a material breach of this Agreement. Group must comply with Company's
Pre-Certification procedures. For services requiring Pre-Certification, Group
must obtain such Pre-Certification from Company. Company will determine
whether to certify the services based on whether the services meet all of the
following criteria:
(i) They are appropriate given the symptoms and
patient history, and are consistent with the diagnosis, if any, of the Member.
"Appropriate" means that the type, level and duration of services, and setting
are necessary to provide safe and adequate care and treatment;
(ii) They are rendered in accordance with
generally accepted medical practice and professionally recognized standards;
(iii) They are not generally regarded as
experimental or unproven by recognized medical professionals or appropriate
governmental agencies, such as, but not limited to, the United States
Department of Health and Human Services, Office of Pre-Paid Health Planning,
the Food and Drug Administration and the Public Health Service Office of Health
Technology Assessment; and
(iv) They are permitted by the licensing statutes
which apply to the provider who renders that service.
(m) Physician Payments. Where Group is responsible for
payment to Group Physicians, Group will make timely payments to its Group
Physicians and its contracted physicians pursuant to agreements between Group
and its Group Physicians and its contracted physicians on such payments. In
the event Group does not make timely payments, Company may make payments and,
at its sole option, either deduct such amount from other amounts due Group from
Company or demand immediate payment. Company will notify Group ten (10)
business days prior to making any such payments and Group shall have the right
to make such payments prior to payment by the Company.
(n) Notice of Impairment of Group. As soon as it
receives notice thereof, Group will send written notice to Company of any
action undertaken with respect to Group or any Group Physician, which action
could materially impair the ability of Group to carry out the duties and
obligations of this Agreement, including but not limited to actions related to:
(1) cancellation of Group's general and professional liability insurance
maintained in accordance with
8
<PAGE> 12
Section 12; (2) Group's suspension from participation in any Medicare or
Medicaid program due to fraud or abuse; or (3) upon the indictment, arrest or
conviction of any Group Physician for (i) any felony or (ii) any criminal
charge relating to the practice of medicine.
(o) Notice of Impairment of Group Physician. As soon as
it receives notice thereof, Group will send written notice to the Company of
any action undertaken with respect to any Group Physician related to any such
physician's ability to provide care to Members, including but not limited to:
(1) the termination, probation or suspension of any license of a Group
Physician relating to the practice of medicine; (2) any termination or
limitation in staff privileges; (3) any disciplinary action taken by a
hospital; (4) the suspension of a Group Physician's participation in any
Medicare or Medicaid program due to fraud or abuse; or (5) a Group Physician's
indictment, arrest, or conviction for (i) any felony or (ii) any criminal
charge relating to the practice of medicine.
(p) Grievances. Group agrees to cooperate in resolving
all grievances relating to the provision of medical services to Members in
accordance with the grievance procedures established by Company. Group agrees
to participate in and provide assistance and information as may be necessary or
helpful to Company. In the event Group receives any complaint regarding Company
or a Group Physician, Group agrees to notify Company within five (5) days
concerning all details of such complaint. Conversely, if Company directly
receives a complaint regarding Group or Group Physician, Company will promptly
notify Group or Group Physician of such complaint.
(q) Regulatory Compliance. Group and each Group
Physician will comply with all requirements of the law relating to the
furnishing of medical and health care services to the public, and now has and
will obtain and maintain in effect all permits, licenses and governmental or
board approvals which may from time to time be necessary for that purpose.
(r) Orientation. On request, Group will provide
orientation time to Company and assist in coordination of in-service training
for Group's staff and Group Physicians.
(s) Company Display. If requested by Company, Group will
display the emblem, logo or similar representation of Company at each of its
facilities.
(t) Application and Credentialing Forms. Group and each
Group Physician will submit Company Application and Credentialing forms with
the executed Agreement. Group and each Group Physician will notify Company
within ten (10) days of any changes to information on the forms.
7. UTILIZATION MANAGEMENT. All Covered Services furnished to
Members will be subject to Utilization Management in accordance with the
procedures and guidelines attached as Exhibit V. Such procedures and
guidelines, including Exhibit V, may be modified by Company from time to time
upon thirty (30) days written notice.
9
<PAGE> 13
8. SELECTION AND TERMINATION OF PARTICIPATING PHYSICIANS.
(a) Initial Physician Designation. After consultation
with Company, Group will designate those physicians who are members of or are
employed by Group and are authorized to act as Group Physicians hereunder. Such
designation, if not already made, will be made in writing and attached to this
Agreement as Exhibit I.
(b) Physician Selection and Termination. After
consultation with Group, the Company may make additional selections or
terminate any Group Physician from participation in Company's provider network
within the initial term or thereafter, upon ninety (90) days written notice or,
in the case of termination of this Agreement, at such earlier time as may be
permitted under Section 2 hereof.
(c) Notification. Group will notify Company within at
least sixty (60) days in advance of the effective date of any withdrawal or
termination of a Group Physician. Group will notify Company of the addition of
a new Group Physician within ten (10) days after such addition.
(d) Transfer of Care. Upon the termination or withdrawal
of a Group Physician, Group agrees to arrange for the transfer of all care and
treatment of any affected Members including but not limited to identifying
Members undergoing acute care and/or treatment and assuming responsibility for
the transfer of care to another appropriate Group Physician.
9. COORDINATION OF BENEFITS AND SUBROGATION/RIGHT OF
RECOVERY.
(a) Cooperation. Group will cooperate with Company or
Payor to identify any and all parties, other than Company or Payor, which may
be responsible for payment of, or reimbursement for, Covered Services, and for
the purpose of coordinating benefits with other payors.
(b) Coordination of Benefits. When a party, other than
Company or Payor, is identified as having primary responsibility for payment
of, or reimbursement for, Covered Services, under the Coordination of Benefits
provision of a Member's Benefit Contract, Group will bill, and make all
reasonable efforts to collect from such party for the value of Covered
Services.
(c) Subrogation/Right of Recovery. When a party, other
than Company or Payor, is identified as a party with respect to whom the
Subrogation/Right of Recovery provision of a Member's Benefit Contract applies,
Company or Payor will be responsible for using its best efforts to obtain any
and all recoveries allowable under such provision. After application of such
recoveries to reimburse Company or Payor for any and all amounts paid or
payable by Company or Payor with respect to the injury or illness giving rise
to the recovery, Company or Payor will pay the remaining amount, if any, to
Group to compensate Group for the value of services
10
<PAGE> 14
rendered by Group with respect to the injury or illness giving rise to the
recovery. Such payment to Group will be valued in accordance with the Fee
Schedule as shown in Exhibit III.
10. RIGHT TO AUDIT AND ACCESS INFORMATION.
(a) Member Records. Group and each Group Physician will
prepare and maintain appropriate financial and medical records on Members.
Such records will be maintained in accordance with generally accepted medical,
accounting and bookkeeping practices and will be maintained as may be necessary
for compliance with the provisions of the laws of Florida.
(b) Inspection. Subject to any applicable legal
restrictions, Group and each Group Physician agrees to allow inspection and
duplication by Company, by the Department of Insurance and by any other
properly identified governmental regulatory authority of all billings and other
financial records and all medical records maintained on Members under this
Agreement. Company will have access at all reasonable times upon demand to the
books, records and papers of Group and each Group Physician relating to the
health care services provided to Members, to the cost thereof, and to payments
received by Group and each Group Physician from Members (or from others on
their behalf). Company will protect the confidentiality of such records in
accordance with applicable legal standards. Such inspection and duplication
will occur during regular working hours upon receipt of seventy-two (72) hours
prior written notice from Company. Company will reimburse Group and Group
Physicians for all reasonable copying costs incurred by Group as a result of
said record inspection and duplication. Group will notify Company of any
adverse report that results from an inspection by a governmental regulatory
authority.
(c) Record Retention. All records required to be
maintained by Group and each Group Physician under this Agreement will be
retained by Group and each Group Physician for at least three (3) years. The
obligation under Sections 10(b) and 10(c) will not terminate upon the
termination of this Agreement, whether by rescission or otherwise.
11. INDEPENDENT CONTRACTOR. It is understood that each Group
Physician will maintain a physician-patient relationship with Members and will
be responsible to the Members for medical care and treatment. Group is an
independent contractor relative to Company. Nothing in this Agreement will be
construed as, or be deemed to create, a relationship of employer and employee,
or principal and agent, or any relationship other than that of independent
parties contracting with each other solely for the purpose of carrying out the
provisions of this Agreement.
12. LIABILITY INSURANCE.
(a) General Liability Coverage. In order to protect the
other party, each party, at its sole cost and expense, will procure and
maintain a policy of general liability insurance or maintain adequate resources
to insure itself and its respective officers, agents and employees against any
liability or claims or damages arising by reason of personal injuries or
11
<PAGE> 15
death occasioned directly or indirectly by such party or its officers, agents
or employees in connection with the performance or nonperformance of such
party's responsibilities under this Agreement.
(b) Professional Liability Coverage. Group or each of
the Group Physicians individually will maintain professional liability
insurance, with limits of at least one million dollars ($1,000,000) per
occurrence and at least three million dollars ($3,000,000) in the aggregate
covering Group and each of the Group Physicians. If Group or Group Physician
is classified as Class 1 by the insurance company providing said professional
liability insurance, the limits for Group or such Group Physician are at least
five hundred thousand dollars ($500,000) per person per occurrence with at
least one million dollars ($1,000,000) in the aggregate. Class 1 is hereby
defined as those nonsurgical specialties which said insurance company has
determined to be in the lowest liability risk category.
(c) Third Party Liability. Nothing in this Agreement
will be construed to make Company, Group, Group Physicians or their respective
agents or representatives, liable to persons not parties hereto. Nor will
anything herein be construed as, or be deemed to create, any rights or remedies
in any third party, including but not limited to any Members or hospital.
(d) Company Professional Liability Coverage. Company
maintains professional liability insurance covering the Utilization Management
function with current limits of ten million dollars ($10,000,000) per
occurrence and ten million dollars ($10,000,000) in the aggregate.
13. INDEMNIFICATION. Each party will indemnify the other and hold
the other harmless from and against any and all losses and liabilities
(including reasonable attorneys' fees and related legal expenses) arising from
any third party claim, action, cause of action, contest or dispute to the
extent the losses or liabilities are the result of the indemnifying party's
negligent or intentional act or omission.
14. NON-EXCLUSIVITY. Nothing herein will be construed to restrict
the rights of Group and Group Physicians or Company to participate in other
comparable provider plans, such as, but not limited to, preferred provider
plans, health maintenance organizations or other managed care systems. Nothing
herein will be construed to restrict the rights of Company to enter into
contracts or arrangements for services with any other health care provider
serving any geographic area.
15. PROPRIETARY INFORMATION; TRADEMARKS.
(a) Company's Proprietary Information. All information
and materials provided by Company to Group remain proprietary to Company, as
the case may be, including but not limited to subscriber lists, contracts, fee
schedules, provider handbooks and any other operations manuals. Neither Group
nor the Group Physicians will disclose any of such information or materials or
use them except as may be required to carry out their respective obligations
hereunder.
12
<PAGE> 16
(b) Trademarks. Neither Group nor Company will use each
other's trademarks, name or symbols without express written permission;
provided however, that Group agrees that Company may use the Group Physician's
name, office address, telephone number, specialty and factual description of
practice in directories and other promotional materials.
(c) Group's Proprietary Information. All information and
materials provided by Group to Company will remain proprietary to Group,
including but not limited to contracts, fee schedules, Utilization Management
procedures and administrative procedures. Company will not disclose any such
information or materials or use them except as may be required to carry out its
respective obligations hereunder.
(d) Non-Solicitation. Group will not directly or
indirectly solicit Company or Payor's Members during the term of this Agreement
and for a period of twelve (12) months after the termination of this Agreement.
Solicitation will mean any act or practice designed to encourage Company's
Group Subscribers or Members to terminate their coverage with Company.
(e) Survival. The obligations of this paragraph shall
survive the termination of this Agreement.
16. GENERAL PROVISIONS.
(a) Scope of Agreement; Governing Law; Severability;
Amendment; Waiver. This Agreement, together with all Exhibits attached hereto,
constitutes the entire Agreement between the Company and Group. It will be
construed and governed in accordance with the laws of Florida. Any provision
required to be in this Agreement by the laws of Florida will bind Company and
Group whether or not provided in this Agreement. Any provision herein
inconsistent therewith will be of no effect and will be severable without
affecting the validity or enforceability of the remaining provisions of this
Agreement. Except as otherwise specified herein, this Agreement may not be
modified or amended except by mutual consent in writing by the duly authorized
representatives of Company and Group. Waiver of breach of any provision of
this Agreement will not be deemed a waiver of any other breach of the same or a
different provision.
(b) Assignment and Subcontracting. No assignment,
subcontracting or delegation of the rights, duties or obligations of this
Agreement will be made by either party (except for Group's delegation to Group
Physicians of responsibility for providing Covered Services and except as
otherwise specifically provided herein) without the express written approval of
a duly authorized representative of the other party; provided, however, Company
may assign any or all of its rights and obligations hereunder to an Affiliate.
(c) Arbitration. Any controversy or claim arising out of
or relating to this Agreement, or the breach thereof, will be settled by
arbitration in accordance with the Rules of the American Arbitration
Association (Commercial Rules), and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof.
13
<PAGE> 17
Notwithstanding anything to the contrary in this Agreement, the initiation of
any and all arbitration proceedings initiated pursuant to this Agreement will
be approved by Group's risk carrier(s) prior to the initiation of said
proceedings. If not so approved, within thirty (30) days of the demand or
request for arbitration, this provision will be of no force and effect and
either party may file an action in a court of competent jurisdiction to resolve
the dispute.
(d) Amendments. This Agreement is subject to the
amendments as found in Exhibit VI. The parties agree to comply with any and
all provisions in Exhibit VI, and further agree that, in the event of any
conflict between the provisions in Exhibit VI and any provisions elsewhere in
this Agreement, the provisions in Exhibit VI will take precedence. No
amendment or modification will be effective unless made in writing and signed
by both parties. All amendments required by an appropriate regulatory
authority will be deemed effective upon receipt by the Group from the Company
and incorporated into and made part of this Agreement without either party's
execution.
(e) Notices. Any notice required to be given pursuant to
the terms and provisions of this Agreement will be in writing, postage prepaid,
and will be sent by certified mail, return receipt requested, to Group at the
following address:
and directly to Company at the following address:
ONE HEALTH PLAN OF FLORIDA, INC.
7650 Courtney Campbell Causeway
Suite 850
Tampa, FL 33607
Attn.: Manager, Provider Relations
or at such other address as the parties may designate by written notice. Any
such notice will be effective upon receipt at such address.
14
<PAGE> 18
IN WITNESS WHEREOF, Company and Group have executed this Agreement
through their duly authorized representative as of the date last entered below.
COMPANY: ONE HEALTH PLAN OF FLORIDA, INC.
By: /s/ SUSAN GRIFFIN
-----------------------------
Print Name: Susan Griffin
---------------------
Title: Vice President
--------------------------
Date: 2/2/98
--------------------------
GROUP: COMPLETE WELLNESS INDEPENDENT PHYSICIAN
ASSOCIATION OF FLORIDA,INC.
By: /s/ JASON PATCHEN
-----------------------------
Print Name: Jason Patchen
---------------------
Title: President and C.E.O.
-------------------------
Date: 1/30/98
-------------------------
SIGNATURE PAGE FOR ONE HEALTH PLAN OF FLORIDA, INC. POS MEDICAL GROUP AGREEMENT
15
<PAGE> 19
EXHIBIT I
DESIGNATION OF PARTICIPATING PHYSICIANS AND LOCATIONS
16
<PAGE> 20
EXHIBIT II
GROUP COMPENSATION
Company or Payor will pay Group as full compensation for any Covered
Services provided to Members and for which Group has submitted a properly
submitted claim, the lesser of Group's usual billed charges or the Fee Schedule
as shown in Exhibit III, minus any applicable deductibles, copayments or
coinsurance specified in the Member's Benefit Contract. Group may bill Member
for such deductibles, copayments or coinsurance but may not bill Member for any
additional charges unless provided for in the Member's Benefit Contract.
17
<PAGE> 21
EXHIBIT III
FEE SCHEDULE
A representative sample reimbursement schedule is attached and subject
to amendment. In no event will Company pay more than the lesser of the Fee
Schedule established by One Health Plan of Florida, Inc. or Contracting
Provider's usual billed charges. The fee schedule will be 90% percent of RBRVS
fee schedule in place with One Health Plan of Florida, Inc.
18
<PAGE> 22
EXHIBIT IV
GROUP UTILIZATION MANAGEMENT EXHIBIT
A. Purpose
The Utilization Management program is administered by Company to insure the
efficient and effective use of health care resources, avoid inappropriate care,
and promote cost effective approaches to delivery of health care services. The
program includes the following:
1. monitoring of the appropriateness and efficiency of services
performed.
2. monitoring of patterns and trends of utilization of providers,
facilities and other elements of care.
3. identification of patterns and trends of under and over
utilization of care.
B. Program Content
1. Primary Care Physician Authorization
(a) Authorization. Except in the event of an Emergency,
each Group Physician will obtain the authorization from a
Member's Primary Care Physician prior to rendering, or
referring any Member for, any Covered Services. All
continuing Covered Services provided after the acute phase of
an Emergency has ended will require Primary Care Physician
authorization in advance as described above.
(b) Non-Contracting Providers. Except in the event of an
Emergency, a Primary Care Physician will not without the
express prior authorization of the Company, grant any such
authorization for any Covered Services to be rendered by
providers who are not Contracting Providers.
2. Pre-Certification
The Pre-Certification program consists of a review of proposed
treatment involving inpatient or day admissions for surgical,
medical, obstetric, pediatric, psychiatric and substance abuse
cases, outside of a physician's office and as described in the
Physician Group Handbook. Pre-Certification is required in
advance as described in the Physician Group Handbook for all
elective hospital admissions, surgical or invasive procedures,
and high cost non-invasive services such as MRI, CT and other
diagnostic services (excluding Emergencies). All elective
admissions require Pre-Certification. For urgent or Emergency
admissions, notification of Company is required as described
in the Physician Group Handbook or as soon as is practicable.
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<PAGE> 23
3. Prescription of Drugs
The following medications require Pre-Certification before being
filled by a pharmacist:
Betaseron
Ceredase
Epogen/Procrit (Erythropoietin)
Humatrope/Protropin (Growth Hormone)
Leukine/Prokine (Sargramostion)
Metrodin/Profasi/Pergonal (Injectable Infertility)
Roferon/Intron (Interferon)
C. The Process
1. The Pre-Certification Process is initiated by the admitting or
Primary Care Physician or a representative of his/her office who calls
the toll-free number listed on the Member's identification card.
2. Company Utilization Management Nurse Reviewers perform the
Pre-Certification review, aided by a series of clinical protocols.
The Nurses are supported by the Company Medical Director.
3. If the attending or Primary Care Physician agrees on the
necessity, location and duration decisions, the case is certified, and
entered into the system for Concurrent Review.
4. On, or before the Pre-Certified discharge date, the attending
or Primary Care Physician will contact the Company Utilization Nurse
Reviewer by phone to arrange for a length of stay extension if it is
needed.
D. Appeals Process:
1. If the proposed treatment is not deemed to meet the
requirements of Section 6(l) hereof and the attending or Primary Care
Physician does not agree with the determination, the attending or
Primary Care Physician may appeal to the Group Medical Director.
2. If the Group Medical Director and attending or Primary Care
Physician still cannot reach an agreement with the Company
determination, the case is referred for final review to the Company
Medical Director. If the final review agrees with the proposed
treatment, such treatment will be certified.
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<PAGE> 24
3. If the treatment provided by the Group is not certified but is
of such a nature as to require Pre-Certification; and if the Primary
Care Physician or attending physician fails to comply with the
Utilization Management Process by (1) failing to contact the Company
Pre-Certification Service for pre-treatment review or length of stay
extension, or (2) failing to exhaust the entire physician appeals
process, then compensation payable by Company to Group shall be
reduced by 50%, up to a maximum of one thousand dollars ($1,000.00)
for each episode of non-compliance. For the purpose of this paragraph,
"compensation payable" shall mean the amount as shown in Exhibit III,
as applicable, payable to Group for the month in which the
non-compliance is identified to Group by Company.
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<PAGE> 25
EXHIBIT V
AMENDMENTS
The terms and conditions specified in the One Health Plan of Florida,
Inc. POS Medical Group Agreement with Group are further subject to the
amendments put forth herein.
PREAMBLE, change second Whereas to: replace "provide" with "arrange for the
provision of"
PREAMBLE, change fourth Whereas to: replace "provide" with "arrange for
the provision of"
SECTION 1(a), "Affiliates" add "right or authority, granted by a Broad of
Directors,"
SECTION 1(j), "Member" add: means any individual "except for East
Pasco,Martin, St. Lucie, Okechobee, Dade, Broward, Palm beach, and Monroe
Counties."
SECTION 1(d), "Contracting Provider" add "Company or Group" to provide
Covered Services to members.
SECTION 1(g), "Emergency" add to last sentence "pursuant to Section 7 of
this Agreement."
SECTION 1(l), "Pre-Certification: add to end of statement: "pursuant to
Section 7 of this Agreement."
SECTION 1(n), "Utilization Management" add to first sentence "Company, or
Group if delegated,"
SECTION 2, "Terms and Termination" replace "until to "unless"
SECTION 2(c), add to end of statement: "Group will have thirty (30) day
period in which to cure any network deficiency that has been deemed to
substantially limit Group's scope of Covered Services or access to Contracted
Hospitals."
SECTION 2(h), add to end of last sentence: "except in the case of failure to
pay by Company to Group, in which case Group may terminate the Agreement given
thirty (30) day cure period."
22
<PAGE> 26
SECTION 2(k), replace "continue to provide such Covered Services until the
current episode of care is completed" to "be obligated to provide Covered
Services for a period of up to thirty (30) days, or until reasonable and
medically appropriate arrangements for the assumption of such care by another
provider are made. During this period, Company will reimburse Group 100.0% of
the relative value reimbursement for any continued episodic Covered Services."
SECTION 6(a), "Member Access" add to second sentence "As part of Company's
credentialing process, or Group's credentialing process if delegated, the
names, addresses, medical specialties, and medical license numbers of all Group
Physicians in addition to all tax identification numbers under which each such
physician bills for medical services, and updates thereof, must be supplied to
Company in written or electronic documentation or material."
SECTION 6(b), "Quality of Care" add to third sentence "group Physicians"
also add to fourth sentence "the Payment of Covered Services"
SECTION 6(c), "Hours of Coverage" or by referral to other physician "or
with physician extender"
SECTION 6(i) (ii), "Collection from Members" add to the end of last sentence:
"other than applicable deductibles, coinsurance or copayments specified in the
applicable Group Subscriber Contract." Also delete the end of third sentence
"and/or immediate termination pursuant to this Agreement."
SECTION 6(l), "Compliance" the paragraph will be replaced with: "Group will
cooperate and comply fully with the Utilization Management and Quality
Assurance plan pursuant to section 7, and policies and procedures in the
Physician Group handbook including updates thereof. Any failure to do so will
be deemed a material breech of this Agreement. Group must comply with Company's
Pre-authorization and Pre-Certification procedures pursuant to section 7. For
services which require pre-authorization by a Members Primary Care Physician,
shall cause Group providers to obtain authorization prior to rendering
services. For services requiring Pre-Certifications, Group must obtain
Pre-Certification from the Company. Company, will determine whether to certify
the services based on weather the services meet all the following criteria:"
SECTION 6(m), "Physician Payments" add to end of first sentence "for clean
claims" add to second sentence "timely payments for clean claims" delete in
second sentence "at its sole option" add to end of second sentence "from
Group.'
23
<PAGE> 27
SECTION 6(n), "Notice of Impairment of Group" delete "as soon as it
receives" add "Within one (1) business day of the receipt of"
SECTION 6(o), "Notice of Impairment of Group Physician" delete "As soon as
it receives" add "Within one (1) business day of the receipt of"
SECTION 6(r), "orientation" add "on request by Company"
SECTION 6(s), "Company Display" add "Group shall cause Group Providers to"
delete "will"
SECTION 6(t), "Application and Credentialing Forms" replace paragraph with
"Group shall cause each Group Physician to complete. Company, or Group if
delegated, application and credentialing forms in a timely fashion by Group.
Group and each Group Physician will notify company at least two (2) times per
month of any changes."
SECTION 8(a), "Initial Physician Designation" delete "or are employed by"
SECTION 10(a), "Member Records" change to "Group shall cause each group
Physician to prepare and maintain appropriate financial and medical records on
Members."
SECTION 12(b), "Professional Liability Coverage" change to "with the limits
of a least two hundred and fifty thousand dollars (250,000) per occurrence and
at least seven hundred and fifty thousand (750,000) in aggregate covering Group
and each group Physician. If Group or group Physician is classified as Class 1
by the insurance company providing said professional liability insurance, the
limits for Group or Group Physician are at least one hundred thousand dollars
(100,000) per person per occurrence with at least three hundred thousand
dollars (300,000) in the aggregate. Class 1 is hereby defined as those
non-surgical specialties which said insurance company has determined to be in
the lowest liability risk category."
SECTION 16(b), "Assignment and Subcontracting" add to last sentence "that
Company or Group"
SECTION 16(c), "Arbitration" delete "may by entered in any court having
jurisdiction thereof" add "shall be handled whenever practical in the City of
Tampa, Hillsborough County, Florida."
24
<PAGE> 28
EXHIBIT VI
AMENDMENTS
The terms and condition specified in the One Health Plan of Florida, Inc. POS
Medical Group Agreement are further subject to the amendments put forth herein
as Exhibit VI.
Effective February 16,1998 Complete Wellness Independent Physician Association
of Florida, Inc. will legally change its name to Optimum Health Services of
Florida, Inc. The change in name to any other name does not constitute a change
in contract which currently exists between Complete Wellness Independent
Physician Association of Florida, Inc. and One Health Plan of Florida, Inc.
ONE HEALTH PLAN OF FLORIDA, INC. OPTIMUM HEALTH SERVICES OF
FLORIDA, INC.
By: /s/ SUSAN GRIFFIN By: /s/ JASON PATCHEN
--------------------------- ---------------------------
Print Name: Susan Griffin Print Name: Jason Patchen
-------------------- --------------------
Title: Vice President Title: President & C.E.O.
------------------------- -------------------------
Date: 2/2/98 Date: 1/30/98
------------------------- -------------------------
25
<PAGE> 1
Exhibit 10.6
================================================================================
OPTIMUM HEALTH SERVICES OF FLORIDA, INC.
================================================================================
ANCILLARY PROVIDER AGREEMENT
<PAGE> 2
- --------------------------------------------------------------------------------
This ANCILLARY PROVIDER Agreement, "Agreement", is made and entered into this
______ day of ________________, 199__ by and between Optimum Health Services of
Florida, Inc. (hereinafter referred to as "COMPANY") and
________________________________, "ANCILLARY PROVIDER".
DEFINITIONS
Defined terms shall have the meanings assigned to them in Attachment A to this
Agreement.
RECITALS
0.1 WHEREAS, COMPANY plans to seek and enter into service agreements with
health maintenance organizations and other healthcare insurers and
managed healthcare organizations, "PLAN's", licensed to operate in the
State of Florida for the provision of PLAN medical services, "Covered
Services", to "Enrollees" on a prepaid basis.
0.2 WHEREAS, COMPANY hereby engages ANCILLARY PROVIDER to provide "Covered
Services" to Enrollees on behalf of COMPANY in a manner which is in
accordance with the generally accepted standards of care of the
community within which the practice is located and, in accordance with
the same standards and with the same time availability as offered his
other patients.
0.3 NOW, THEREFORE, in consideration of the mutual promises hereinafter
contained and other valuable consideration, the parties hereto agree as
follows:
PART 1
PROVIDER CREDENTIALS
1.1 ANCILLARY PROVIDER assures that all persons employed, retained, or used
by ANCILLARY PROVIDER are licensed or are otherwise authorized by the
State of Florida to practice under their healthcare profession, and that
said licenses and/or authorizations have not been limited, restricted,
or revoked.
1.2 ANCILLARY PROVIDER agrees that no Covered Services may be rendered to
any Enrollees until COMPANY has verified the credentials of each
Physician and Healthcare Professional acting on behalf of ANCILLARY
PROVIDER. Such individuals must be fully licensed and in good standing
to practice their profession in the State of Florida.
1.3 ANCILLARY PROVIDER certifies that all information submitted to COMPANY
for credentialing by COMPANY is true and correct.
PART 2
PROFESSIONAL SERVICES AND OBLIGATIONS
2.1 ANCILLARY PROVIDER shall facilitate any approved transfers of the
responsibility for care of Enrollees in a timely fashion that ensures
confidentiality and the continuance of appropriate care in a manner
consistent with generally accepted standards of medical practice in the
community.
2.2 ANCILLARY PROVIDER shall not differentiate or discriminate in its
provision of Covered Services because of race, color, national origin,
ancestry, religion, sex, marital status, sexual orientation, or age; and
ANCILLARY PROVIDER shall render Covered Services to Enrollees in the
same manner, in accordance with the same standards, and within the same
time availability as offered to non-Enrollee patients.
2.3 In providing and claiming payment for Covered Services to Enrollees,
ANCILLARY PROVIDER shall comply with COMPANY's administrative policies
and procedures. This shall include, but not be limited to, timely
submission of Encounter Data and adherence to COMPANY's QM/UM Programs.
ANCILLARY PROVIDER shall also comply with all applicable State and
Federal laws and regulations relating to the delivery of Covered
Services.
2.4 Except when an Emergency renders it unsafe or impractical, ANCILLARY
PROVIDER shall utilize only Referral Providers, and will not utilize
other Providers to provide services to Enrollees unless specifically
Authorized in advance by Medical Director or his/her designee. ANCILLARY
PROVIDER also agrees to obtain Referral Authorization or pre-admission
certification for Referral services.
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. ANCILLARY PROVIDER AGREEMENT
2/15/98 - REVISED ALL
PAGE 2 of 13
<PAGE> 3
- --------------------------------------------------------------------------------
If, in the case of an emergency, Referral Authorization or pre-admission
certification cannot be obtained, ANCILLARY PROVIDER shall perform in
the best interests of Enrollee. ANCILLARY PROVIDER agrees to notify
COMPANY within one business day of the provision of said Referral
Covered Services to Enrollee.
2.5 Except when an Emergency renders it unsafe or impractical, ANCILLARY
PROVIDER agrees to arrange for admission of Enrollees only to hospitals
that are Participating Providers with COMPANY, and shall only admit
Enrollees after receipt of an Authorization from the Medical Director or
his/her designee.
2.6 Whenever an Enrollee requires the services of a Referral Provider,
ANCILLARY PROVIDER shall seek to obtain the services of a Participating
Referral Provider according to the guidelines adopted by the Utilization
Management Program. This shall include ANCILLARY PROVIDER'S full
cooperation with the Medical Director and his/her staff in the
administration of COMPANY's QM/UM Programs.
2.7 ANCILLARY PROVIDER shall maintain adequate personnel and facilities
within the PLAN service area to meet their responsibilities under this
Agreement. ANCILLARY PROVIDER shall supervise all personnel employed by
him/her, including, but not limited to, allied Healthcare Professionals.
ANCILLARY PROVIDER'S personnel, equipment, and facilities shall be
licensed or certified to the extent required by law.
2.8 ANCILLARY PROVIDER agrees to provide the Covered Services outlined in
Attachment B. These services shall be available to Enrollees during
ANCILLARY PROVIDER'S regular working hours, and urgent care twenty-four
(24) hours per day, seven (7) days per week, including holidays, and
without regard to the degree or frequency of utilization of such Covered
Services by Enrollees.
2.9 ANCILLARY PROVIDER agrees to obtain and maintain such policies of
liability and malpractice insurance as are necessary to adequately cover
the ANCILLARY PROVIDER and their agents and/or employees against any
claim for damages arising from personal injuries or death occasioned
directly or indirectly in connection with performance of an act or
omission by ANCILLARY PROVIDER or their agents and/or employees. At a
minimum, said policy shall provide one million dollars ($1,000,000) per
claim. ANCILLARY PROVIDER agrees to provide proof of said insurance to
COMPANY upon demand. In addition, ANCILLARY PROVIDER shall have a "tail"
policy for a period not less than two (2) years following the effective
termination date of the foregoing policy in the event said policy is a
"claims made" policy. Said "tail" policy shall have the same policy
limits as the primary professional liability policy.
2.10 ANCILLARY PROVIDER shall maintain all required licensing necessary to
conduct all business as defined in this Agreement. Such licensing shall
include, but not be limited to, ANCILLARY PROVIDER'S license to practice
medicine in the State of Florida, DEA licensing where applicable, and
all licensing required of ANCILLARY PROVIDER'S employees. Pursuant to
Section 4.3, if at any time such licensing becomes suspended or revoked,
this Agreement shall immediately terminate.
2.11 ANCILLARY PROVIDER agrees to notify COMPANY immediately in the event of
any of the following:
2.11.1 If the policies referred to in Section 2.9 are canceled or
denied for any reason.
2.11.2 Of any malpractice claims related to Covered Services provided
to Enrollees.
2.11.3 Suspension or relinquishment of ANCILLARY PROVIDER'S license to
practice medicine in the State of Florida.
2.11.4 Suspension or relinquishment of any of ANCILLARY PROVIDER'S
employee's and/or allied professional's licensing to provide
healthcare services to Enrollees.
2.12 ANCILLARY PROVIDER agrees to allow COMPANY and any PLAN(s) contracted
with COMPANY the right to use the name, specialties, and other pertinent
information concerning ANCILLARY PROVIDER for purposes of providing
Enrollment and marketing information in the course of COMPANY's
business. ANCILLARY PROVIDER may post a notice or sign in ANCILLARY
PROVIDER'S place of business stating that ANCILLARY PROVIDER is a
Participating Provider with COMPANY and such contacted PLAN(s).
2.13 ANCILLARY PROVIDER agrees to comply with any pharmaceutical formularies
instituted and/or adopted by COMPANY and PLAN(s).
PART 3
COMPENSATION
3.1 ANCILLARY PROVIDER shall be reimbursed by COMPANY as set forth in the
Attachments to this Agreement.
3.2 The reimbursement set forth in the Attachments of this Agreement plus
any applicable Copayment shall constitute ANCILLARY PROVIDER'S sole
compensation for Covered Services rendered to Enrollees.
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3.3 ANCILLARY PROVIDER agrees to accept reimbursement from COMPANY as
payment in full for Covered Services rendered to Enrollees. ANCILLARY
PROVIDER agrees not to bill or to assess any surcharge to COMPANY, or
Enrollees for Covered Services regardless of whether or not payment is
received from COMPANY. ANCILLARY PROVIDER acknowledges that attempting
to charge any surcharge other than Copayments set forth by PLAN may
result in termination of this Agreement or other appropriate action by
COMPANY.
3.4 ANCILLARY PROVIDER hereby agrees that in no event, including but not
limited to, non-payment by COMPANY, COMPANY insolvency, or breach of
this Agreement, shall ANCILLARY PROVIDER bill, charge, collect a deposit
from, seek compensation remuneration, or reimbursement from, or have any
recourse against Enrollees or persons other than COMPANY acting on their
behalf, for Covered Services provided pursuant to this Agreement. This
provision shall not prohibit collection of copayments on the COMPANY's
behalf made in accordance with the terms of the applicable agreement
between the Enrollee and PLAN. ANCILLARY PROVIDER further agrees that:
3.4.1 This provision shall survive the termination of this Agreement
regardless of the cause giving rise to termination and shall be
construed to be for benefit of the Enrollee, and
3.4.2 This provision supersedes any oral or written contrary agreement
now existing or hereafter entered into between ANCILLARY
PROVIDER and Enrollee or persons on their behalf.
3.5 COMPANY has or intends to enter into a medical services agreement with
PLAN, "the TPA Agreement". PLAN is a health maintenance organization,
healthcare insurer, or managed healthcare organization licensed by the
State of Florida pursuant to Chapter 641, Part I and Part III of the
Florida Statutes. Under the PLAN Agreement, COMPANY has contracted to
arrange for the provision of medical services, supplies, and
administration to Enrollees. COMPANY entered this Agreement with
ANCILLARY PROVIDER to provide medical services to Enrollees as set forth
in the TPA Agreement. COMPANY and ANCILLARY PROVIDER acknowledge that as
the entity accredited by the Florida Department of Insurance, PLAN has
the financial responsibility to ensure that Enrollees receive the
healthcare services for which they have contracted and nothing in this
Agreement relieves PLAN of the ultimate financial responsibility for the
delivery of healthcare services to Enrollees.
3.6 Covered Services provided to Enrollees by ANCILLARY PROVIDER shall be
submitted to COMPANY on a HCFA 1500 (or UB 92 when applicable) claim
form within sixty (60) days from the date of service. Any claims
submitted to COMPANY after sixty (60) days from the date of service will
not be reimbursed to ANCILLARY PROVIDER.
3.7 Hold Harmless Clause:
3.7.1 COMPANY agrees that at all times during the term of this
Agreement COMPANY shall indemnify, defend, and hold ANCILLARY
PROVIDER and its employees harmless from and against all claims,
damages, causes of action, cost, or expense, including court
costs and reasonable attorney fees, to the extent proximately
caused by any negligent act or wrongful conduct arising as a
result of any action or inaction caused by COMPANY or any of
their personnel in the performance or omission of any act or
responsibility assumed or deemed to have been assumed by COMPANY
pursuant to this Agreement.
3.7.2 ANCILLARY PROVIDER agrees that at all times during the term of
this Agreement, ANCILLARY PROVIDER shall hold COMPANY and its
employees, officers, directors, agents, and ACHA harmless from
and against all claims, damages, causes of action, cost, or
expense, including court costs and reasonable attorney fees, to
the extent proximately caused by any negligent act or wrongful
conduct arising as a result of any action or inaction caused by
ANCILLARY PROVIDER or any of their personnel in the performance
or omission of any act or responsibility assumed or deemed to
have been assumed by ANCILLARY PROVIDER pursuant to this
Agreement.
3.8 COMPANY may amend any financial arrangements offered to ANCILLARY
PROVIDER in the Attachments to this Agreement upon thirty (30) days
written notice to ANCILLARY PROVIDER. COMPANY may exercise amendment to
the financial arrangements of this contract in the event that at least
one of the following circumstances occur:
3.8.1 Significant changes made to the financial arrangements between
COMPANY and PLAN.
3.8.2 Significant changes made to Covered Services as defined in this
Agreement.
3.8.3 Regulatory changes made by any State or Federal agency that
would cause either Section 3.8.1 or 3.8.2 to occur.
If none of the above circumstances are met, any amendment to the
financial arrangements of this Agreement will be handled pursuant to
Section 9.1 of this Agreement.
3.9 COMPANY shall retain all rights whatsoever for all third party liability
including, but not limited to, auto insurance, worker's compensation,
and any coordination of benefits with other group health insurance up to
the full amount reimbursed to ANCILLARY PROVIDER by COMPANY. ANCILLARY
PROVIDER agrees to notify COMPANY immediately upon notification of the
existence of such third party liability in the provision of Covered
Services to Enrollee. In addition, ANCILLARY PROVIDER agrees to inform
COMPANY of any payment received from such third party, including the
refund of any compensation from such third party beyond any receivable
due ANCILLARY PROVIDER from COMPANY for the provision of Covered
Services as defined in the Attachments of this Agreement.
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PART 4
TERM AND TERMINATION
4.1 This Agreement shall start from the date signed by COMPANY through
December 31st of the year signed by COMPANY. This Agreement shall be
automatically renewed and extended for one year periods from and after
the expiration date, unless either party delivers notice of termination
to the other at least ninety (90) days before the effective date of the
termination, except when termination is made by COMPANY for cause.
4.2 This Agreement may be terminated by COMPANY as of the end of a calendar
month, without cause, by giving ninety (90) days prior written notice to
ANCILLARY PHYSICIAN. This Agreement may be terminated by ANCILLARY
PHYSICIAN as of the end of a calendar month, without cause, by giving
ninety (90) days prior written notice to COMPANY.
4.3 Termination of this Agreement by COMPANY for cause is effective
immediately. Cause for termination includes, but may not be limited to:
4.3.1 Revocation, suspension, or restrictions of ANCILLARY PROVIDER'S
license, certification, or medical staff membership or clinical
privileges at an COMPANY Participating hospital.
4.3.2 Failure to provide services of acceptable quality.
4.3.3 Failure to attend and adhere to this Agreement or the bylaws or
reasonable rules, regulations, or requirements adopted by
COMPANY relating to the provision of Covered Services.
4.3.4 Acts or omissions constituting unprofessional or unethical
conduct.
4.3.5 Cause pursuant to Section 6.1.
4.4 In the event this Agreement is terminated, the right of compensation
shall extend to the effective date of termination.
4.5 COMPANY shall promptly make reasonable and medically appropriate
arrangements for the continued care of Enrollees upon termination of
this Agreement. Until such arrangements have been made, ANCILLARY
PROVIDER shall continue to provide care or treatment to Enrollees then
under their care or treatment.
4.6 ANCILLARY PROVIDER shall look solely to COMPANY or PLAN for compensation
according to this Agreement for Covered Services provided to Enrollees
pursuant to Section 4.4.
4.7 In the event that any agreement between COMPANY and any PLAN is
terminated, COMPANY shall have the right to terminate this Agreement by
giving thirty (30) days written notice to ANCILLARY PROVIDER.
4.8 In the event that any State or Federal Agency or Court of Law determines
that this Agreement violates any law or regulation, COMPANY or ANCILLARY
PROVIDER may terminate this Agreement upon thirty (30) days written
notice to the other party. This notice period may be shortened if such
determination made by the ruling State or Federal Agency or Court of Law
requires a shorter period.
4.9 ANCILLARY PROVIDER shall provide ninety (90) days advance written notice
to COMPANY and the Department of Insurance before canceling this
Agreement for any reason.
4.10 Nonpayment for goods or services rendered by ANCILLARY PROVIDER to
COMPANY Enrollees shall not be a valid reason for avoiding the ninety
(90) day advance notice of cancellation, pursuant to Section 4.9.
4.11 Upon receipt by COMPANY of a ninety (90) day cancellation notice,
COMPANY may, if requested by ANCILLARY PROVIDER, terminate this
Agreement in less than ninety (90) days if COMPANY and PLAN are not
financially impaired or insolvent.
PART 5
RECORD MAINTENANCE AND ACCESSABILITY
5.1 ANCILLARY PROVIDER agrees to maintain complete and accurate fiscal
records, as well as medical and social records, applying solely to
Enrollees for whom the ANCILLARY PROVIDER has claimed and received
payment. ANCILLARY PROVIDER shall maintain such records as are necessary
for evaluation of the quality, appropriateness and timeliness of
services performed under this Agreement. Said records will be made
available for fiscal audit, medical audit, medical review, utilization
review, any State or Federal agency audits, and any other periodic
monitoring upon request of authorized representatives of COMPANY.
ANCILLARY PROVIDER further agrees to reimburse COMPANY within thirty
(30) days after COMPANY's request for such payment any and all
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amounts determined to be payable to COMPANY by ANCILLARY PROVIDER as a
result of such audit and any State and/or Federal disallowances lawfully
imposed on COMPANY or PLAN. Said records shall be retained for a period
of at least seven (7) years after the start date of the applicable
retention period (in case of a minor, records shall be retained for at
least seven (7) years after age of majority), or until resolution of any
ongoing audit occurs, whichever is later.
5.2 Medical records of Enrollees shall be treated as confidential and shall
be maintained in compliance with all State and/or Federal laws and
regulations regarding the ownership and confidentiality of patient
records.
PART 6
QUALITY OF CARE
6.1 At all times while this Agreement is in effect, ANCILLARY PROVIDER shall
be licensed without restriction as a Physician in the State of Florida;
shall hold DEA certification without restriction; and shall be approved
by the credentialing committee of COMPANY. This Agreement shall be
terminated immediately if ANCILLARY PROVIDER ceases to be so qualified
at any time.
6.2 ANCILLARY PROVIDER shall participate in the Quality Management and
Utilization Review Programs and procedures, and shall participate in a
program of continuing education consistent with such requirements as
COMPANY may adopt. ANCILLARY PROVIDER will be obligated to cooperate
fully within such programs and procedures, including, but not limited
to, pre-admission certification of all elective Hospital admissions,
pre-Authorization certification of Referrals, and Referrals of certain
identified ancillary services.
PART 7
CONFIDENTIALITY
7.1 ANCILLARY PROVIDER shall not release information regarding the terms set
forth in this Agreement to any person or entity without the written
consent of COMPANY, except such information as may be necessary to
disclose to agents, affiliates, attorneys, or patients in order to carry
out the terms of this Agreement. ANCILLARY PROVIDER recognizes that all
material provided by COMPANY, except for material prepared and/or
provided by any State or Federal regulatory bodies, is the proprietary
property of COMPANY and ANCILLARY PROVIDER shall not disclose or release
such material to any third party, with the exception of above mentioned
regulatory bodies and then, only to the extent appropriate, or as
otherwise provided herein, without the prior written consent of COMPANY.
Upon termination of this Agreement, ANCILLARY PROVIDER agrees to return
all such materials, including copies thereof, whether authorized or not,
to COMPANY. In addition, ANCILLARY PROVIDER shall not use any of the
above referenced materials including, but not limited to, Enrollee
listings, directly or indirectly, to further the business purposes of
any other entity, including, but not limited to, COMPANY's, health
maintenance organizations, and preferred provider organizations. The
above shall not apply if disclosure is made pursuant to a court order,
provided COMPANY is immediately informed of such order and has had the
opportunity to seek relief. This Part shall survive the termination of
this Agreement. The parties agree that any violation of this Part by
ANCILLARY PROVIDER shall result in irreparable injury to COMPANY.
Therefore, in addition to any remedies otherwise available to the
COMPANY, COMPANY is hereby entitled to have a court issue an injunction
enjoining and restraining ANCILLARY PROVIDER and any related parties or
individuals from violating this Part.
PART 8
COMPANY OBLIGATIONS
8.1 COMPANY shall seek and enter into contracts with PLANS and monitor the
healthcare performance of ANCILLARY PROVIDERS and their Referred
Enrollees under such contracts.
8.2 COMPANY shall institute a Quality Management and Utilization Management
Program as defined in Attachment A, along with committees comprised of
Primary Care and Referral Providers to oversee the implementation and
administration of these Programs. COMPANY will provide ANCILLARY
PROVIDER with a Provider manual defining policies and procedures for the
administration of these Programs.
8.3 COMPANY will develop a dispute resolution process, including a formal
grievance procedure, for handling complaints and/or concerns of
ANCILLARY PROVIDER. Such procedure will be defined in the Provider
manual provided to ANCILLARY PROVIDER.
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PART 9
MISCELLANEOUS
9.1 In the case of amendment of any Section or Part of this Agreement by
COMPANY, except in the case outlined in Section 3.8, COMPANY must give
written notice of such amendment to ANCILLARY PROVIDER with a time frame
of no more than thirty (30) days from which said amendment will take
effect unless objected to by at least fifty-one percent (51.0%) of all
ANCILLARY PROVIDERS to which said amendment is added.
9.2 All notices and demands of any kind shall be in writing and personally
delivered or sent by first class mail to either party at the address
that either party designates in this Agreement. Any such notice to
ANCILLARY PROVIDER shall be effective immediately upon personal delivery
or five (5) days after deposit with the United States Postal Service.
Any such notice to COMPANY shall be effective immediately upon receipt.
9.3 If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, or unenforceable by reason of any
rule of law or public policy, all other provisions of this Agreement
shall nevertheless remain in effect. No provision of this Agreement
shall be deemed dependent on any other provision unless so expressed
herein.
9.4 This Agreement shall be interpreted, construed, and governed according
to the laws of the State of Florida.
9.5 ANCILLARY PROVIDER shall not, without the written consent of COMPANY,
transfer or assign this Agreement or any rights or obligations under
this Agreement. This Agreement shall be binding upon and inure to the
benefit of the parties to it, and their respective heirs, legal
representatives, successors, and assigns. COMPANY may assign this
Agreement without approval of ANCILLARY PROVIDER.
9.6 This Agreement constitutes the entire Agreement between the parties and
shall bind and inure to the benefit of COMPANY and ANCILLARY PROVIDER
and their respective successors, assigns, heirs, and personal
representatives subject to the restrictions on assignment contained
herein.
9.7 The Part headings used in this Agreement are for reference and
convenience only and shall not in any way limit or amplify the terms and
provisions hereof nor affect the interpretation of this Agreement.
9.8 In the event the parties are unable to resolve disputes, pursuant to
Section 8.3, the parties agree to submit the matter to binding
arbitration in accordance with the rules of the American Arbitration
Association, which arbitration shall be handled whenever practical in
the City of Tampa, Hillsborough County, Florida. The parties expressly
covenant and agree to be bound by the decisions of the arbitrator(s) and
accept any decision by a majority of the arbitrators as a final
determination of the matter in dispute. The arbitrator(s) may in any
such proceedings award all court costs and attorney's fees to the
prevailing party.
9.9 None of the provisions of this Agreement are intended to create nor
shall be deemed or construed to create any relationship between the
parties hereto other than that of independent contractors. Neither of
the parties hereto, nor any of their respective officers, directors, or
employees shall act as nor be construed to be the agent, employee, or
representative of the other.
9.10 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.
9.11 For the term of this Agreement, and for a period of twelve (12) months
after the termination of this Agreement, ANCILLARY PROVIDER shall not
engage in the persuasion of an Enrollee to disenroll from PLAN, to
discontinue their relationship with COMPANY.
9.12 In the event the provision of services provided for herein conflicts
with those of a Participating PLAN, services provided may be amended in
accordance with Section 9.1.
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If the foregoing correctly sets forth the understanding between COMPANY and
ANCILLARY PROVIDER, please indicate in the space provided for that purpose
below, whereupon this shall constitute a binding Agreement.
OPTIMUM HEALTH SERVICES OF FLORIDA, INC.
BY: Christian E. Miller
-------------------
DATE:
-----------------------------
TITLE: Vice President of Operations
----------------------------
SIGNATURE:
-----------------------------
ADDRESS: 17757 US 19 North, Suite 350
----------------------------
Clearwater, Florida 33764
-------------------------
ANCILLARY PROVIDER
BY:
-----------------------------
DATE:
-----------------------------
TITLE:
-----------------------------
SIGNATURE:
-----------------------------
ADDRESS:
-----------------------------
-----------------------------
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ATTACHMENT A
DEFINITIONS
1.1 "ATTACHMENTS" means Attachments A through D, which are incorporated
herein.
1.2 "AUTHORIZATION" means a QM/UM Program determination made by or on behalf
of COMPANY for a specific non-Emergent COMPANY Covered Service to be
provided or arranged for an Enrollee, to be directed by a primary care
provider to a Referral Provider, or Emergent COMPANY Covered Service
provided, including without limitation, the extent and duration of such
Medically Necessary Covered Service for an Enrollee.
1.3 "COPAYMENT" means any and all charges collectable directly by ANCILLARY
PROVIDER from Enrollee as payment in addition to Capitation or Fee-for
Service Payments for Covered Services as defined by the Enrollee's Group
Benefits Agreement.
1.4 "COVERED SERVICES" shall mean those healthcare benefits that an Enrollee
is entitled to receive from a Participating Provider pursuant to the
applicable Enrollee Group Benefits Agreement.
1.5 "ENCOUNTER FORM" means a HCFA 1500 or a form supplied to ANCILLARY
PROVIDER by COMPANY upon which the ANCILLARY PROVIDER enters all
information relative to Enrollee's use of Covered Services.
1.6 "EMERGENCY" means the sudden and unexpected onset of a symptom, illness,
or injury, which in the judgment of a Physician requires immediate
diagnosis and/or treatment to alleviate or attempt to prevent loss of
life, irreparable physical damage, or serious impairment of bodily
function.
1.7 "EMERGENCY SERVICES" means medical screening examination and evaluation
by a Physician, or, to the extent permitted by applicable laws, by other
appropriate personnel under the supervision of a Physician, to determine
whether an Emergency medical condition exists, and if it does, the
inpatient or outpatient Covered Services, provided by an appropriate
source which is necessary to relieve or eliminate the Emergency medical
condition, within or outside the Service Area, which may not be delayed
until Participating Physicians can be used without possible serious
effects on the health of the Enrollee. Such services must be or appear
to be needed immediately to prevent the death of the Enrollee or serious
impairment of the Enrollee's health, and are considered Emergency
Services as long as the transfer of the Enrollee to an appropriate
Participating Physician is precluded because of the risk to the Enrollee
's health, or the distance and nature of illness involved would make
such transfer unreasonable.
1.8 "ENROLLEE" means an individual enrolled with PLAN, including, but not
limited to eligible newborn children and dependents, entitled to receive
Covered Services.
1.9 "GROUP BENEFITS AGREEMENT" means the document distributed by PLAN to its
Enrollees describing all Covered Services in the PLAN.
1.10 "HEALTHCARE PROFESSIONAL" means any nurse, physician extender (e.g.,
nurse practitioner, physician assistant) and other allied health
professional, including but not limited to health educator, laboratory
technologist, audiologist, speech pathologist, psychologist, podiatrist,
dentist, physical therapist, occupational therapist, clinical social
worker, marriage, family and child counselor, optometrist or dispensing
optician, who is licensed by the State of Florida if required and who
provides certain Covered Services to COMPANY Enrollees through an
Agreement with COMPANY.
1.11 "INSTITUTION" means any facility licensed by the State of Florida as an
acute care hospital, ambulatory surgery center, skilled nursing
facility, hospice, or other urgent care center.
1.12 "MEDICAL DIRECTOR" means a Physician appointed by COMPANY to oversee all
COMPANY medical affairs including QM and UM.
1.13 "MEDICALLY NECESSARY" shall be defined by COMPANY in the exercise of the
Utilization Management Program. This shall include due consideration of
whether Covered Services are:
1.13.1 Appropriate for the symptoms, diagnosis or treatment of a
condition, illness or injury; and
1.13.2 Provided for the diagnosis or the direct care and treatment of a
condition, illness, or injury; and
1.13.3 In accordance with the standards of good medical practice within
the surrounding community; and
1.13.4 Not solely for the convenience of the Enrollee or Provider.
The Medical Director or his designee, subject to the applicable dispute
resolution and member grievance procedures of the Utilization Management
Program, shall make the final decision of whether a treatment is
Medically Necessary.
1.14 "NON-COVERED SERVICE" means those services which COMPANY enrollees are
not entitled to receive pursuant to the applicable Enrollee benefit
package and/or those services considered not Medically Necessary.
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1.15 "PARTICIPATING PROVIDER" means a Provider that has entered into an
Agreement with COMPANY to provide Covered Services to Enrollees.
1.16 "PHYSICIAN" means any doctor of medicine, osteopathy, chiropractor, or
dental surgery licensed by the State of Florida.
1.17 "PLAN" means the entity described in Section 0.1 of this Agreement.
1.18 "PRIMARY CARE PROVIDER" shall mean the Participating Provider, usually a
family or general practitioner, internist, or pediatrician, selected by
Enrollee, who has the responsibility of providing initial care and
referring, obtaining Authorization for, supervising, and coordinating
the provision of all other Covered Services to Enrollee in accordance
with COMPANY's QM/UM Programs.
1.19 "PROVIDER" means the Physicians, Institution, Healthcare Professionals,
pharmacies, ambulance companies, ancillary entities, and other licensed
healthcare entities who provide Covered Services.
1.20 "QUALITY MANAGEMENT PROGRAM" (QM) means a program approved by COMPANY,
directed by Participating Physicians and designed to assure the
provision of quality Covered Services to Enrollees.
1.21 "ANCILLARY, OR REFERRAL COVERED SERVICES" means those Covered Services
for which ANCILLARY PROVIDER is trained, qualified, credentialed, and
licensed to perform and provide to Enrollees pursuant to Attachment B to
this Agreement.
1.22 "ANCILLARY PROVIDER, OR REFERRAL PROVIDER" shall mean a Participating
Provider who performs Covered Services that are not Primary Care Covered
Services, within their designated specialty(s) as defined in their
Provider Agreement with COMPANY.
1.23 "UTILIZATION MANAGEMENT PROGRAM" (UM) means a program approved by
COMPANY and designed to review the appropriate utilization of Covered
Services provided to Enrollees.
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ATTACHMENT B
ANCILLARY PROVIDER COVERED SERVICES
ANCILLARY Covered Services shall include the following:
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ATTACHMENT C
FINANCIAL ARRANGEMENTS
COMPANY shall reimburse ANCILLARY PROVIDER those fees as set forth attached as
payment for those ANCILLARY Covered Services made available or provided by
ANCILLARY PROVIDER to Enrollee:
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ATTACHMENT D
FEE FOR SERVICE REIMBURSEMENT
STANDARD PPO HEALTHPLAN AGREEMENTS / DIRECT PAYMENT PPO AGREEMENTS
1.1 Definitions: The following definitions apply only to this Attachment D
of this Agreement:
1.1.1 "ADDENDUM" means this Attachment D, which shall be incorporated
herein.
1.1.2 "DIRECT PAYMENT PPO ENROLLEE" shall refer to those Enrollees
that have entered into a Group Subscriber Agreement with PLAN
for access to COMPANY's Participating Provider network. Under
such a Group Subscriber Agreement, Direct Payment PPO Enrollee
shall reimburse ANCILLARY PROVIDER the Direct Payment PPO
Enrollee Reimbursement (DPPER) at such time that Ancillary
Provider Covered Services are rendered or thereafter.
1.1.3 "STANDARD PPO ENROLLEE" shall refer to those Enrollees that have
entered into a Group Subscriber Agreement with PLAN for access
to COMPANY's Participating Provider network. Under such a Group
Subscriber Agreement, ANCILLARY PROVIDER will bill COMPANY the
Standard PPO Enrollee Reimbursement (SPER) less any copayment or
coinsurance collected from Standard PPO Enrollee at such time
that Ancillary Provider Covered Services are rendered or
thereafter.
1.1.4 "DIRECT PAYMENT PPO ENROLLEE REIMBURSEMENT OR DPPER" shall refer
to the rate of compensation as specified in Section 1.3 of this
Attachment that ANCILLARY PROVIDER will receive for rendering
Ancillary Provider Covered Services to Direct Payment PPO
Enrollees.
1.1.5 "STANDARD PPO ENROLLEE REIMBURSEMENT OR SPER" shall refer to the
rate of compensation as specified in Section 1.3 of this
Attachment that ANCILLARY PROVIDER will receive for rendering
Ancillary Provider Covered Services to Standard PPO Enrollees.
1.1.6 "PPO UTILIZATION MANAGEMENT PROGRAM (UM-PPO)" shall mean a
program approved by COMPANY and designed to review the
appropriate utilization of Ancillary Provider Covered Services
provided to Standard and Direct Payment PPO Enrollees.
1.2 COMPANY shall institute a PPO Utilization Management Program as defined
in Section 1.1.6 of this Attachment, along with committees comprised of
Primary Care and Referral Providers to oversee the implementation and
administration of this Program. COMPANY will provide ANCILLARY PROVIDER
with a Provider manual defining policies and procedures for the
administration of this Program.
1.3 Compensation:
1.3.1 DIRECT PAYMENT PPO ENROLLEE REIMBURSEMENT: Direct Payment PPO
Enrollee shall reimburse ANCILLARY PROVIDER "DPPER" at such time
that Referral Covered Services are rendered or thereafter, as
set forth below as payment for those Ancillary Provider Covered
Services made available or provided by ANCILLARY PROVIDER to a
Direct Payment PPO Enrollee:
All Ancillary Provider Covered Services:
1.3.2 STANDARD PPO ENROLLEE REIMBURSEMENT: COMPANY shall reimburse
ANCILLARY PROVIDER "SPER", less any copayment or coinsurance
collected from Standard PPO Enrollee at such time that Referral
Covered Services are rendered or thereafter, as set forth below
as payment for those Referral Covered Services made available or
provided by ANCILLARY PROVIDER to a Standard PPO Enrollee:
All Ancillary Provider Covered Services:
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Exhibit 10.7
================================================================================
OPTIMUM HEALTH SERVICES OF FLORIDA, INC.
================================================================================
HOSPITAL SERVICES AGREEMENT
<PAGE> 2
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This Hospital Services Agreement, "Agreement", is made and entered into this
______ day of ________________, 199__ by and between Optimum Health Services of
Florida, Inc. (hereinafter referred to as "COMPANY") and
________________________________, "HOSPITAL".
DEFINITIONS
Defined terms shall have the meanings assigned to them in Attachment A of this
Agreement.
RECITALS
0.1 WHEREAS, COMPANY plans to seek and enter into service agreements with
health maintenance organizations and other healthcare insurers and
managed healthcare organizations, "PLANs", licensed to operate in the
State of Florida for the provision of PLAN medical services, "Covered
Services", to "Enrollees" on a prepaid basis.
0.2 WHEREAS, COMPANY hereby engages HOSPITAL to provide "Covered Services"
to assigned Enrollees of HOSPITAL in a manner which is in accordance
with the generally accepted standards of care of the community within
which the practice is located and, in accordance with the same standards
and with the same time availability as offered his other patients.
0.3 NOW, THEREFORE, in consideration of the mutual promises hereinafter
contained and other valuable consideration, the parties hereto agree as
follows:
PART 1
HOSPITAL CREDENTIALS
1.1 HOSPITAL attests to the fact that it is duly licensed to operate a
general acute care hospital in the State of Florida and is currently
accredited by either the Joint Commission on the Accreditation of
Healthcare Organizations (JCAHO) or the American Osteopathic HOSPITAL
Association (AOHA). HOSPITAL shall maintain in good standing such
license and accreditation, and shall notify COMPANY immediately of any
and all changes in said license and/or accreditation.
1.2 HOSPITAL assures that all persons employed, retained, or used by
HOSPITAL are licensed or are otherwise authorized by the State of
Florida to practice under their healthcare profession, and that said
licenses and/or authorizations have not been limited, restricted, or
revoked.
1.3 HOSPITAL agrees that no Covered Services may be rendered to any
Enrollees assigned to HOSPITAL until COMPANY has verified the
credentials of each Physician and Healthcare Professional acting on
behalf of HOSPITAL. Such individuals must be fully licensed and in good
standing to practice their profession in the State of Florida.
1.4 HOSPITAL certifies that all information submitted to COMPANY for
credentialing by COMPANY is true and correct.
PART 2
HOSPITAL SERVICES AND OBLIGATIONS
2.1 HOSPITAL agrees to provide Covered Services to Enrollees, except in the
case of an Emergency, with prior authorization by COMPANY.
2.2 All Physicians treating Enrollees on behalf of HOSPITAL shall have
appropriate appointment and clinical privileges according to HOSPITAL
medical staff bylaws.
2.3 All Healthcare Professionals treating Enrollees on behalf of HOSPITAL
shall have appropriate appointment and clinical privileges according to
HOSPITAL's medical staff bylaws.
2.4 Subject to Medical Necessity and availability of facilities, HOSPITAL
shall not differentiate or discriminate in its provision of Covered
Services because of race, color, national origin, ancestry, religion,
sex, marital status, sexual orientation, or age; and HOSPITAL shall
render Covered Services to Enrollees in the same manner, in accordance
with the same standards, and within the
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same time availability as offered to non-Enrollee patients.
2.5 Identification/Notification Process:
2.5.1 Elective: HOSPITAL shall make a reasonable effort to confirm
that the individual presenting PLAN identification is the
individual whose name appears on the identification card or
form. HOSPITAL agrees to verify the eligibility of Enrollee's
COMPANY coverage pursuant to the UM Program or via telephone
and/or other means prior to commencement of treatment. HOSPITAL
must secure pre-certification for all elective admissions as
failure to do so will result in non-payment by COMPANY for
services rendered.
2.5.2 Emergency Services: HOSPITAL shall exercise every reasonable
effort to identify the individual presenting PLAN identification
card for Emergency Services and confirm that, in fact, the
individual is the same as named on the identification card.
HOSPITAL agrees to notify COMPANY of all Emergency treatment and
admissions of enrollees within a twenty-four (24) hour period.
Failure to notify COMPANY within this time frame will result in
COMPANY not being responsible for payment.
2.6 HOSPITAL shall facilitate meetings between COMPANY and hospital based
subcontracted services and hospital based physicians operated by an
entity other than HOSPITAL, and with Physicians practicing at HOSPITAL
in order that COMPANY may have an opportunity to establish acceptable
contractual relations with those parties.
2.7 HOSPITAL shall notify COMPANY immediately of any adverse action taken by
HOSPITAL involving any Participating Provider which affects such
Participating Provider's staff status or privileges on HOSPITAL's
medical staff, except as prohibited by applicable laws and regulations
concerning confidentiality.
2.8 HOSPITAL shall assure that a fully credentialed member of HOSPITAL's
medical staff is within HOSPITAL twenty four (24) hours per day and is
available and competent to perform such lifesaving measures as patients
may require, from time to time.
2.9 HOSPITAL shall participate in the Quality Management and Utilization
Management Programs, and shall participate in a program of continuing
education consistent with such requirements as COMPANY may adopt.
HOSPITAL will be obligated to cooperate fully within such programs and
procedures, including, but not limited to, pre-admission certification
of all elective HOSPITAL admissions, pre-Authorization certification of
Referrals, and Referrals of certain identified ancillary services.
PART 3
COMPANY OBLIGATIONS
3.1 COMPANY shall seek and enter into contracts with PLAN(s) and monitor the
healthcare performance of Participating Providers and their Enrollees,
if applicable, under such contracts.
3.2 COMPANY shall institute a Quality Management and Utilization Management
Program as defined in Attachment A, along with committees comprised of
Primary Care and Referral Providers to oversee the implementation and
administration of these Programs. COMPANY will provide HOSPITAL with a
Provider manual defining policies and procedures for the administration
of these Programs.
3.3 COMPANY will develop a dispute resolution process, including a formal
grievance procedure, for handling complaints and/or concerns of
HOSPITAL. Such procedure will be defined in the Provider manual provided
to HOSPITAL.
PART 4
COMPENSATION
4.1 HOSPITAL will bill COMPANY for Covered Services rendered to Enrollees in
accordance with Attachment B of this Agreement. HOSPITAL agrees to
submit claims to COMPANY on HCFA form UB92 or HCFA1500 for Covered
Services provided to Enrollees. Claims submitted after sixty (60) days
shall not be reimbursed to HOSPITAL. In the instance where coordination
of benefits is in effect, HOSPITAL shall notify COMPANY in writing and
COMPANY shall extend claims submittal period to one hundred twenty (120)
days. All billings by HOSPITAL shall be considered final unless
adjustment is made by HOSPITAL or if COMPANY questions said charges
within sixty (60) days of receipt of billing.
4.2 HOSPITAL may submit claims for payment to COMPANY every thirty (30) days
for Enrollees who are continuously hospitalized.
4.3 HOSPITAL will look solely to COMPANY for reimbursement of Covered
Services rendered to Enrollees, except for applicable
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Copayment, co-insurance, or deductibles. HOSPITAL further agrees to look
solely to Enrollees for compensation for all required Copayment,
coinsurance, deductibles, supplemental charges, or non-Covered Services,
if any, only after receipt of denial for payment of such services from
COMPANY. COMPANY shall reimburse HOSPITAL in accordance with Attachment
C.
The rates set forth in the Attachment C represent compensation for all
Covered Services provided by HOSPITAL employees. In addition, the rates
set forth in Attachment C include compensation for non-invasive
Physician services rendered in connection with hospital based services,
including but not limited, by the following specialists:
4.3.1 Radiologists;
4.3.2 Pathologists;
4.3.3 Cardiologists (diagnostic services only); and
4.3.4 Emergency services physicians, whether or not the physician is
employed by HOSPITAL and whether rendered on an inpatient basis
or on an outpatient basis in connection with HOSPITAL's
emergency room, clinic, hemodialysis or ambulatory surgical
services.
Referred ambulatory services rendered by such specialists shall not be
included in the rates stated in Attachment C unless expressly stated
that the professional services of such specialists are included.
Non-Invasive Physician services that are included in the rates set forth
in Attachment C are the CPT-4 codes stated in Attachment C, which shall
be agreed to by the parties on or before execution of this Agreement.
Attachment C will be revised annually, consistent with updates by the
American Medical Association to its Current Procedural Terminology, to
remove obsolete codes and to add codes which replace codes on Attachment
C.
4.4 Required pre-admission diagnostic and laboratory services provided by
HOSPITAL within seventy-two (72) hours of an inpatient admission shall
be included in the per diem rate for that inpatient stay, and shall not
be compensated separately.
4.5 Emergency room and/or other outpatient services, including observation,
provided by HOSPITAL to Enrollees on the day of admission shall be
included in the inpatient per diem for that day.
4.6 It is understood by the parties to this Agreement that all payments for
Covered Services rendered under this Agreement shall automatically be
assigned to HOSPITAL without obtaining the Enrollee's signature.
4.7 HOSPITAL and COMPANY agree to maintain in strict confidentiality the
contents of Attachment C to any third party, except pursuant to a valid
court order or subpoena, or when disclosure of the contents of any
Attachment(s) is required by a government agency.
4.8 HOSPITAL agrees to cooperate with and assist COMPANY in the coordination
of benefits. Where COMPANY is not the primary payor of rendered Covered
Services by HOSPITAL, HOSPITAL shall collect from primary payor and
COMPANY shall be obligated to pay the difference between the amount due
from the primary payor and the appropriate amount as specified in
Attachment C.
4.9 If an Enrollee is entitled to receive benefits provided by any Workers'
Compensation law, HOSPITAL will the follow coordination of benefit
provisions as outlined by the applicable law. If Enrollee is
concurrently treated for a condition not covered by Workers'
Compensation, HOSPITAL shall independently obtain prior authorization
for such Covered Services and shall bill COMPANY independently for such
Covered Services and payment shall be according to Attachment C.
4.10 HOSPITAL shall refrain from assessing any surcharges to Enrollees for
Covered Services. Should COMPANY become aware of any such surcharge,
HOSPITAL shall refund such amount immediately. Should HOSPITAL fail to
reimburse Enrollee within fifteen (15) calendar days of notice to do so
by COMPANY, COMPANY shall deduct such amount from monies owed HOSPITAL
and shall also have the right to terminate this Agreement effective upon
receipt by HOSPITAL of notice of such termination.
4.11 HOSPITAL hereby agrees that in no event, including but not limited to,
non-payment by COMPANY, COMPANY insolvency, or breach of this Agreement,
shall HOSPITAL bill, charge, collect a deposit from, seek compensation
remuneration, or reimbursement from, or have any recourse against
Enrollees or persons other than COMPANY acting on their behalf, for
Covered Services provided pursuant to this Agreement. This provision
shall not prohibit collection of copayments on the COMPANY's behalf made
in accordance with the terms of the applicable agreement between the
Enrollee and PLAN. HOSPITAL further agrees that:
4.11.1 This provision shall survive the termination of this Agreement
regardless of the cause giving rise to termination and shall be
construed to be for benefit of the Enrollee, and
4.11.2 This provision supersedes any oral or written contrary agreement
now existing or hereafter entered into between HOSPITAL and
Enrollee or persons on their behalf.
Payment for non-Covered Services may be collected from Enrollee only
after receiving a denial of payment from COMPANY.
4.12 COMPANY has or intends to enter into a medical services agreement with
PLAN, "the TPA Agreement". PLAN is a health
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maintenance organization, healthcare insurer, or managed healthcare
organization licensed by the State of Florida pursuant to Chapter 641,
Part I and Part III of the Florida Statutes. Under the PLAN Agreement,
COMPANY has contracted to arrange for the provision of medical services,
supplies, and administration to Enrollees. COMPANY entered this
Agreement with HOSPITAL to provide medical services to Enrollees as set
forth in the TPA Agreement. COMPANY and HOSPITAL acknowledge that as the
entity accredited by the Florida Department of Insurance, PLAN has the
financial responsibility to ensure that Enrollees receive the healthcare
services for which they have contracted and nothing in this Agreement
relieves PLAN of the ultimate financial responsibility for the delivery
of healthcare services to Enrollees.
PART 5
UTILIZATION MANAGEMENT AND DISCHARGE PLANNING
5.1 COMPANY shall be responsible for utilization review activities
pertaining to Enrollees including the UM Program. COMPANY shall
coordinate its' activities with HOSPITAL's utilization management
department or other entity designated by HOSPITAL.
5.2 HOSPITAL shall cooperate with COMPANY's UM Program/case management
efforts within twenty-four (24) hours, or next business day, of request.
Such cooperation shall include, but not be limited to, allowing COMPANY
access to Enrollees within HOSPITAL, making available all Enrollee
medical records to COMPANY, cooperation from HOSPITAL's discharge
planning staff, and use of HOSPITAL facilities, including but not
limited to, telephones, photocopying, etc.
PART 6
RECORDS
6.1 When requested by COMPANY, HOSPITAL will provide within forty-eight (48)
hours, copies of Enrollee discharge summaries any and all components of
Enrollee's medical record, and other pertinent medical information. Such
copies shall be at no charge to COMPANY and shall be made without the
release of the specific patient who received care within HOSPITAL.
6.2 HOSPITAL agrees to maintain complete and accurate fiscal records, as
well as medical and social records, applying solely to Enrollees for
whom HOSPITAL has claimed and received payment. HOSPITAL shall maintain
such records as are necessary for evaluation of the quality,
appropriateness and timeliness of services performed under this
Agreement. Said records will be made available for fiscal audit, medical
audit, medical review, utilization review, any state or federal agency
audits, and any other periodic monitoring upon no longer than
seventy-two (72) hours prior notice of such request by authorized
representatives of COMPANY. Termination of this Agreement, for any
reason, shall not preclude HOSPITAL from such obligation of record
availability.
HOSPITAL further agrees to reimburse COMPANY within thirty (30) days
after COMPANY's request for such payment any and all amounts determined
to be payable to COMPANY by HOSPITAL as a result of such audit and any
State and/or Federal disallowances lawfully imposed on COMPANY or PLAN.
Said records shall be retained for a period of at least seven (7) years
after the start date of the applicable retention period (in case of a
minor, records shall be retained for at least seven (7) years after age
of majority), or until resolution of any ongoing audit occurs, whichever
is later.
6.3 Medical records of Enrollees shall be treated as confidential and shall
be maintained in compliance with all State and/or Federal laws and
regulations regarding the ownership and confidentiality of patient
records.
6.4 It is understood that the medical records of HOSPITAL shall be and
remain the property of HOSPITAL and shall not be removed, released or
transferred from HOSPITAL, except in accordance with applicable laws and
HOSPITAL policies, rules and regulations thereto, and the terms of this
Agreement.
PART 7
INSURANCE AND INDEMNITY
7.1 COMPANY, at its sole expense, shall procure and maintain for the term of
this Agreement, appropriate insurance to protect COMPANY against any
claim(s) for damage arising out of personal injury or death occasioned
directly or indirectly in connection with the provision of services
under this Agreement. Such insurance shall provide protection of at
least one million dollars ($1,000,000) per occurrence and at least three
million dollars ($3,000,000) in the aggregate.
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7.2 COMPANY agrees that at all times during the term of this Agreement
COMPANY shall indemnify, defend, and hold HOSPITAL and its employees
harmless from and against all claims, damages, causes of action, cost,
or expense, including court costs and reasonable attorney fees, to the
extent proximately caused by any negligent act or wrongful conduct
arising as a result of any action or inaction caused by COMPANY or any
of their personnel in the performance or omission of any act or
responsibility assumed or deemed to have been assumed by COMPANY
pursuant to this Agreement.
7.3 HOSPITAL, at its' sole expense, shall procure and maintain for the term
of this Agreement such policies or program of self-insurance as may be
necessary to protect HOSPITAL against any claim(s) for damages arising
out of personal injury or death occasioned directly or indirectly in
connection with the provision of services under this Agreement. Such
insurance shall provide protection of at least one million dollars
($1,000,000) per occurrence and at least three million dollars
($3,000,000) in the aggregate. Appropriate certificates of such
insurance shall be provided to COMPANY upon request. HOSPITAL shall
notify COMPANY of any lapse, modification, or cancellation of this
insurance immediately.
7.4 HOSPITAL agrees that at all times during the term of this Agreement,
HOSPITAL shall hold COMPANY and its employees, officers, directors,
agents, and ACHA harmless from and against all claims, damages, causes
of action, cost, or expense, including court costs and reasonable
attorney fees, to the extent proximately caused by any negligent act or
wrongful conduct arising as a result of any action or inaction caused by
HOSPITAL or any of their personnel in the performance or omission of any
act or responsibility assumed or deemed to have been assumed by HOSPITAL
pursuant to this Agreement.
PART 8
MARKETING
8.1 COMPANY may list HOSPITAL's name, address, telephone number, and a
factual description of hospital services in its directory or roster of
providers which is intended for use by Enrollees. Any other use of
HOSPITAL's name, logo or trademark may be used only with prior written
consent of HOSPITAL. HOSPITAL may list COMPANY's name, address and
telephone number as a payor on a list of payors or in reference to
HOSPITAL's network participation in informational literature and
materials only. Any other use of COMPANY's name, logo or trademark may
be used only with prior written consent of COMPANY.
PART 9
TERM AND TERMINATION, RENEGOTIATION OF RATES, CONTINUITY OF CARE
9.1 The initial term of this Agreement shall begin on the effective date as
defined above and continue thereafter for a period of three (3) years,
at which time it shall be eligible for renewal for one (1) year periods
thereafter, unless notice of intent not to renew is given in writing not
less than one hundred twenty (120) days prior to the termination date.
9.2 This Agreement may not be terminated without cause. All other claims,
disputes, controversies, or breaches shall not be grounds for cause for
termination of this Agreement, but rather shall be resolved through the
dispute resolution process as set forth pursuant to Section 3.3. Cause
shall include, but not be limited to, the following:
9.2.1 Failure to maintain necessary licenses or certifications to
operate in conformity with this Agreement after exhaustion of
all appeals rights;
9.2.2 Initiation of bankruptcy proceedings or any other insolvency,
conservation or liquidation proceeding under state or federal
law;
9.2.3 Acts or omissions constituting unprofessional or unethical
conduct;
9.2.4 Cause pursuant to Section 4.11 and its' subsections;
9.2.5 Failure of either party to carry the required levels of
liability insurance pursuant to Part 7 of this Agreement; or
9.2.6 Defaulting in the performance of any duty or obligation under
the Agreement and failure to cure such default or breach within
sixty (60) days of notice from the other party, including but
not limited to failure of COMPANY to pay clean, nondisputed
claims within the time frames described within this Agreement
after giving COMPANY sixty (60) days notice to cure.
9.3 HOSPITAL agrees that upon termination of this Agreement, HOSPITAL will
continue to provide Covered Services to Enrollees who retain eligibility
under their Group Benefits Agreement or by operation of law, and who are
receiving Covered Services from HOSPITAL at the time of termination,
until such Covered Services are completed. COMPANY shall continue to
remit payment at
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the agreed upon rate(s) of payment on behalf of members receiving active
treatment at the time of termination until these services are completed,
or until COMPANY makes reasonable and medically appropriate arrangements
to have another healthcare provider furnish those services.
9.4 The delivery of notice of intent to terminate this Agreement shall not
excuse the parties from their obligations under this Agreement. COMPANY
and HOSPITAL agree to cooperate with one another in the orderly and
prompt transfer of Enrollee's medical records before and after the
termination of this Agreement.
9.5 In the event that COMPANY should become insolvent or files for
protection under State of Florida bankruptcy laws, either voluntarily or
involuntarily, HOSPITAL agrees to continue to provide Covered Services
in accordance with the terms and provisions of this Agreement to
Enrollees who are then currently hospitalized on the date of such
insolvency or bankruptcy until such Enrollee is discharged or
transferred, or this Agreement expires by its own terms.
PART 10
NOTICES
Any notice required under this Agreement shall be given in writing and sent to
the other party by hand delivery or by certified or registered mail, return
receipt requested, at the following address:
COMPANY
Name: Optimum Health Services of Florida, Inc.
----------------------------------------
Attention: Director of Provider Services
-----------------------------
Address: 17757 US 19 North
-----------------
Suite 350
---------
City/State/Zip Code: Clearwater, Florida 33764
-------------------------
HOSPITAL
Name:
----------------------------------
Attention:
----------------------------------
Address:
----------------------------------
----------------------------------
City/State/Zip Code:
----------------------------------
Notice of change of addressee or address shall be effective only after fifteen
(15) days from receipt by the person giving such notice.
PART 11
GENERAL PROVISIONS
11.1 Except as expressly stated herein, each party shall retain in strict
confidence all information and data, including patient information,
relating to the other parties' business, development plans, programs,
documentation, trade secrets, systems, and know how, and shall not,
unless otherwise required by law, disclose such information to any third
party without the other parties' prior written consent. Any data or
information pertaining to the diagnosis, treatment or health of an
Enrollee shall be held confidential to the maximum extent permitted by
law. Both parties agree to maintain the confidentiality of information
contained in the Enrollee's medical records except for the dissemination
of such records as required and permitted by law.
11.2 None of the provisions of this Agreement are intended to create nor
shall be deemed or construed to create any relationship
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between the parties hereto other than that of independent contractors.
Neither of the parties hereto, nor any of their respective officers,
directors, or employees shall act as nor be construed to be the agent,
employee, or representative of the other.
11.3 This Agreement shall be interpreted, construed, and governed according
to the laws of the State of Florida.
11.4 Changes to this Agreement shall be made by mutual consent, in writing,
and signed by authorized representatives of both parties.
11.5 During the period of this Agreement and for twelve (12) months after the
effective date of termination of this Agreement, HOSPITAL as an
independent entity or in an association with its staff physicians, shall
not engage in the practice of solicitation of COMPANY Enrollees or any
employer or PLAN(s) of said Enrollees, without COMPANY's prior written
consent. For purposes of the Agreement, solicitation shall mean any
action by HOSPITAL or by HOSPITAL in association with its staff
physicians which COMPANY may reasonably interpret to be designed to
persuade an Enrollee to discontinue his/her relationship with COMPANY,
to disenroll from a PLAN(s) contracting with COMPANY, or to encourage an
Enrollee to receive health care from HOSPITAL or by HOSPITAL in an
association with its staff physicians on a fee for services basis.
11.6 HOSPITAL shall not, without the written consent of COMPANY, transfer or
assign this Agreement or any rights or obligations under this Agreement.
This Agreement shall be binding upon and inure to the benefit of the
parties to it, and their respective heirs, legal representatives,
successors, and assigns. COMPANY may assign this Agreement without
approval of HOSPITAL.
11.7 If any provision of this Agreement is in conflict with state or federal
law or regulations, the provision shall be deemed null and void with the
remainder of this Agreement remaining in full force and effect.
11.8 The provisions of this Agreement are independent of and separate from
one another. If any provision shall be affected or rendered invalid or
unenforceable, the remainder of the contract remains in full force and
effect.
11.9 The Part headings used in this Agreement are for reference and
convenience only and shall not in any way limit or amplify the terms and
provisions hereof nor affect the interpretation of this Agreement.
11.10 In the event the parties are unable to resolve disputes, pursuant to
Section 3.3, the parties agree to submit the matter to binding
arbitration in accordance with the rules of the American Arbitration
Association, which arbitration shall be handled whenever practical in
the City of Tampa, Hillsborough County, Florida. The parties expressly
covenant and agree to be bound by the decisions of the arbitrator(s) and
accept any decision by a majority of the arbitrators as a final
determination of the matter in dispute. The arbitrator(s) may in any
such proceedings award all court costs and attorney's fees to the
prevailing party.
11.11 Both parties shall be relieved of obligations to perform because of acts
of God, nature, fire, riots, interruption in supply, or other reasons
beyond the control of HOSPITAL and/or COMPANY to perform by any reason
of any of these forces.
11.12 A waiver of a breach of any provision of this Hospital Services
Agreement shall not be deemed a waiver of any other breach of the same
or different provisions.
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If the foregoing correctly sets forth the understanding between COMPANY and
HOSPITAL, please indicate in the space provided for that purpose below,
whereupon this shall constitute a binding Agreement.
OPTIMUM HEALTH SERVICES OF FLORIDA, INC.
BY: Christian E. Miller
-------------------
DATE:
-----------------------------
TITLE: Vice President of Operations
----------------------------
SIGNATURE:
-----------------------------
ADDRESS: 17757 US 19 North, Suite 350
----------------------------
Clearwater, Florida 33764
-------------------------
HOSPITAL
HOSPITAL:
-----------------------------
BY:
-----------------------------
DATE:
-----------------------------
TITLE:
-----------------------------
SIGNATURE:
-----------------------------
ADDRESS:
-----------------------------
-----------------------------
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ATTACHMENT A
DEFINITIONS
1.1 "ATTACHMENTS" means Attachments A through C, which are incorporated
herein.
1.2 "AUTHORIZATION" means a QM/UM Program determination made by or on behalf
of COMPANY for a specific non-Emergent COMPANY Covered Service to be
provided or arranged for an Enrollee, to be directed by Participating
Provider, or Emergent COMPANY Covered Service provided, including
without limitation, the extent and duration of such Medically Necessary
Covered Service for an Enrollee.
1.3 "COPAYMENT" means any and all charges collectable directly by HOSPITAL
from Enrollee as payment in addition to payments for Covered Services by
COMPANY as defined by the Enrollee's Group Benefits Agreement.
1.4 "COVERED SERVICES" shall mean those healthcare benefits that an Enrollee
is entitled to receive from a Participating Provider pursuant to the
applicable Enrollee Group Benefits Agreement.
1.5 "DAY(S) OF SERVICE" shall refer to the time measure utilized for
determining length of stay for inpatient Hospital Covered Services. This
measure, as it pertains to this Agreement, shall be calculated as
follows:
1.5.1 Admitting time (AT) shall be the time and date that an Enrollee
is admitted as an inpatient to HOSPITAL.
1.5.2 Discharge time (DT) shall be the time and date that an Enrollee
is discharged from inpatient status at HOSPITAL.
1.5.3 Day(s) of Service shall be equivalent to [DT-AT] divided by
twenty-four (24).
This measure shall be rounded down to the nearest whole number when
greater than one (1).
1.6 "EMERGENCY" means the sudden and unexpected onset of a symptom, illness,
or injury, which in the judgment of a Physician requires immediate
diagnosis and/or treatment to alleviate or attempt to prevent loss of
life, irreparable physical damage, or serious impairment of bodily
function.
1.7 "EMERGENCY SERVICES" means medical screening examination and evaluation
by a Physician, or, to the extent permitted by applicable laws, by other
appropriate personnel under the supervision of a Physician, to determine
whether an Emergency medical condition exists, and if it does, the
inpatient or outpatient Covered Services, provided by an appropriate
source which is necessary to relieve or eliminate the Emergency medical
condition, within or outside the Service Area, which may not be delayed
until Participating Physicians can be used without possible serious
effects on the health of the Enrollee. Such services must be or appear
to be needed immediately to prevent the death of the Enrollee or serious
impairment of the Enrollee's health, and are considered Emergency
Services as long as the transfer of the Enrollee to an appropriate
Participating Physician is precluded because of the risk to the
Enrollee's health, or the distance and nature of illness involved would
make such transfer unreasonable.
1.8 "ENROLLEE" means an individual enrolled with PLAN, including, but not
limited to eligible newborn children and dependents, entitled to receive
Covered Services.
1.9 "GROUP BENEFITS AGREEMENT" means the document distributed by PLAN to its
Enrollees describing all Covered Services in the PLAN.
1.10 "HEALTHCARE PROFESSIONAL" means any nurse, physician extender (e.g.,
nurse practitioner, physician assistant) and other allied health
professional, including but not limited to health educator, laboratory
technologist, audiologist, speech pathologist, psychologist, podiatrist,
dentist, physical therapist, occupational therapist, clinical social
worker, marriage, family and child counselor, optometrist or dispensing
optician, who is licensed by the State of Florida if required and who
provides certain Covered Services to COMPANY Enrollees through an
Agreement with COMPANY.
1.11 "HOSPITAL COVERED SERVICES" mean those Covered Services defined in
Attachment B of this Hospital Services Agreement.
1.12 "INSTITUTION" means any facility licensed by the State of Florida as an
acute care hospital, ambulatory surgery center, skilled nursing
facility, hospice, or other urgent care center.
1.13 "MEDICAL DIRECTOR" means a Physician appointed by COMPANY to oversee all
COMPANY medical affairs including QM and UM.
1.14 "MEDICALLY NECESSARY" shall be defined by COMPANY in the exercise of the
Utilization Management Program. This shall include due consideration of
whether Covered Services are:
1.14.1 Appropriate for the symptoms, diagnosis or treatment of a
condition, illness or injury; and
1.14.2 Provided for the diagnosis or the direct care and treatment of a
condition, illness, or injury; and
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. HOSPITAL SERVICES AGREEMENT
4/7/98 - REVISED
PAGE 10 OF 14
<PAGE> 11
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1.14.3 In accordance with the standards of good medical practice within
the surrounding community; and
1.14.4 Not solely for the convenience of the Enrollee or Provider.
The Medical Director or his designee, subject to the applicable dispute
resolution and member grievance procedures of the Utilization Management
Program, shall make the final decision of whether a treatment is
Medically Necessary.
1.15 "NON-COVERED SERVICE" means those services which COMPANY enrollees are
not entitled to receive pursuant to the applicable Enrollee benefit
package and/or those services considered not Medically Necessary.
1.16 "NON-INVASIVE" shall mean any procedure or other service which is not an
incision or puncture of the skin or tissue requiring the use of surgical
instruments other than preparing a portal for the introduction of a
catheter.
1.17 "PARTICIPATING PROVIDER" means a Provider that has entered into an
Agreement with COMPANY to provide Covered Services to Enrollees.
1.18 "PHYSICIAN" means any doctor of medicine, osteopathy, chiropractor, or
dental surgery licensed by the State of Florida.
1.19 "PLAN" means the entity described in Recitals, Section 0.1 of this
Agreement.
1.20 "PRIMARY CARE PROVIDER" means a Participating Physician who has been
selected by and/or assigned Enrollees to provide Primary Care Covered
Services and coordinating all referral Covered Services.
1.21 "PROVIDER" means the Physicians, Institution, Healthcare Professionals,
pharmacies, ambulance companies, ancillary entities, and other licensed
healthcare entities who provide Covered Services.
1.22 "REFERRAL PROVIDER" shall mean a Participating Provider who performs
Covered Services that are not Primary Care Covered Services, within
their designated specialty(s) as defined in their Provider Agreement
with COMPANY.
1.23 "QUALITY MANAGEMENT PROGRAM" (QM) means a program approved by COMPANY,
directed by Participating Providers and designed to assure the provision
of quality Covered Services to Enrollees.
1.24 "UTILIZATION MANAGEMENT PROGRAM" (UM) means a program approved by
COMPANY and designed to review the appropriate utilization of Covered
Services provided to Enrollees.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. HOSPITAL SERVICES AGREEMENT
4/7/98 - REVISED
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ATTACHMENT B
HOSPITAL COVERED SERVICES
HOSPITAL shall provide or arrange for the provision of the following Hospital
Covered Services, subject to the terms of the applicable PLAN Group Benefits
Agreement:
1.1 Inpatient Hospital Services: All inpatient hospital services, excluding
those services set forth in Section 1.4 of this Attachment, provided for
the medical or surgical prevention, diagnosis, and treatment of illness
and injury. This includes:
1.1.1 General medical/surgical/pediatric accommodations in
semi-private rooms, two patients or less, or private rooms if
medically necessary.
1.1.2 Intensive/Coronary care unit services if medically necessary.
1.1.3 Newborn nursery services including all levels of neonatal
intensive care unit services if medically necessary.
1.1.4 Obstetric and delivery room services.
1.1.5 All operating room services.
1.2 Ancillary Services and Supplies: The following inpatient services,
supplies, and facilities, when provided to hospitalized Enrollees,
excluding those services set forth in Section 1.4 of this Attachment.
This includes:
1.2.1 Routine and intensive nursing services including special duty
nursing when medically necessary as determined by the attending
Physician.
1.2.2 Respiratory therapy services including, but not limited to,
oxygen and pulmonary function testing.
1.2.3 Physical therapy, occupational therapy, and speech therapy for
short term rehabilitation.
1.2.4 Social service and discharge planning services.
1.2.5 Dietary counseling and education.
1.2.6 Surgical and anesthesia supplies.
1.2.7 All medications and pharmaceuticals.
1.2.8 Surgically implanted devices.
1.2.9 Administration of blood and blood derivatives.
1.2.10 Clinical laboratory studies and services, excluding professional
services.
1.2.11 Cytology and pathology services.
1.2.12 Radiology services including, but not limited to, x-rays,
fluoroscopy, and tomography.
1.2.13 Computerized tomography (CT).
1.2.14 Magnetic resonance imaging (MRI/NMR).
1.2.15 Ultrasound.
1.2.16 Nuclear medicine scans.
1.2.17 Echocardiograms.
1.2.18 Nuclear cardiology studies.
1.2.19 Cardiac stress testing.
1.2.20 Angiography.
1.2.21 EKG/ECG including holter monitor.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. HOSPITAL SERVICES AGREEMENT
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<PAGE> 13
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1.2.22 Electroencephalography (EEG).
1.2.23 Electromyography (EMG).
1.2.24 Hemodialysis.
1.2.25 Radiation therapy and radioactive implants, excluding
professional services.
1.2.26 Cast, splints, and dressings.
1.2.27 All other hospital services considered to be customarily a
hospital inpatient service in accordance with the applicable
PLAN Group Benefits Agreement.
1.3 Outpatient Services:
1.3.1 The facility cost, equipment, and supplies for outpatient
ambulatory surgery, excluding those services set forth in
Section 1.4 of this Attachment. HOSPITAL may provide outpatient
surgical services in its' own facilities or through arrangements
with another facility pursuant to agreements approved by
COMPANY.
1.3.2 The facility costs for emergency room services, excluding those
services set forth in Section 1.4 of this Attachment.
1.4 Exclusions: The following services are not Hospital Covered Services:
1.4.1 Physician services.
1.4.2 Mental health and chemical dependency services.
1.4.3 All services provided to Enrollees who require a transplant,
with the exception of corneal transplants, until treatment is
completed in the opinion of the Medical Director.
1.4.4 All services provided to Enrollees who have been diagnosed at
the time of diagnosis.
1.4.5 All services provided to any Enrollee who receives burn
treatment where such treatment requires admission to a regional
burn center, until such treatment is completed in the opinion of
the Medical Director.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. HOSPITAL SERVICES AGREEMENT
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ATTACHMENT C
COMPENSATION
COMPANY shall reimburse HOSPITAL those fees as set forth below as payment for
those Hospital Covered Services made available or provided by HOSPITAL to an
Enrollee:
<TABLE>
<CAPTION>
====================================================================================================================================
BILLING
REVENUE UP TO % OF % OF GROSS
CODES / PER DIEM # OF UP TO PER DIEM CHARGES CHARGES/
COVERED SERVICE PROCEDURES RATE FLAT RATE DAYS $ MAX THEREAFTER THEREAFTER % OF ASG
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Inpatient - Medical 111/121
- ------------------------------------------------------------------------------------------------------------------------------------
Inpatient - Surgical 111/121
- ------------------------------------------------------------------------------------------------------------------------------------
Inpatient - Pediatric 113/123
- ------------------------------------------------------------------------------------------------------------------------------------
Inpatient - Telemetry 732
- ------------------------------------------------------------------------------------------------------------------------------------
Inpatient - ICU/CCU 200/210
- ------------------------------------------------------------------------------------------------------------------------------------
Inpatient - NICU 174
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Inpatient - Cardiac Surgery:
- ------------------------------------------------------------------------------------------------------------------------------------
DRG 104 - Cardiac Valve with CC DRG 104
- ------------------------------------------------------------------------------------------------------------------------------------
DRG 105 - Cardiac Valve without CC DRG 105
- ------------------------------------------------------------------------------------------------------------------------------------
DRG 106 - Coronary Bypass with CC DRG 106
- ------------------------------------------------------------------------------------------------------------------------------------
DRG 107 - Coronary Bypass without CC DRG 107
- ------------------------------------------------------------------------------------------------------------------------------------
DRG 110 - Major Procedures with CC DRG 110
- ------------------------------------------------------------------------------------------------------------------------------------
DRG 111 - Major Procedures without CC DRG 111
- ------------------------------------------------------------------------------------------------------------------------------------
DRG 113 - Amp. for Circ. Sys. Disorders DRG 113
- ------------------------------------------------------------------------------------------------------------------------------------
DRG 115 - Permanent PM with MI, HF, shock DRG 115
- ------------------------------------------------------------------------------------------------------------------------------------
Inpatient - Maternity Related:
- ------------------------------------------------------------------------------------------------------------------------------------
Standard Vaginal Delivery 112/122
- ------------------------------------------------------------------------------------------------------------------------------------
Cesarean Section 112/122
- ------------------------------------------------------------------------------------------------------------------------------------
Inpatient - Newborn Nursery 170/171/172
- ------------------------------------------------------------------------------------------------------------------------------------
Emergency Room 450
- ------------------------------------------------------------------------------------------------------------------------------------
Ambulatory/Outpatient Surgery ASG (1-8)
- ------------------------------------------------------------------------------------------------------------------------------------
Lithotripsy 790
- ------------------------------------------------------------------------------------------------------------------------------------
Laparoscopy 490
- ------------------------------------------------------------------------------------------------------------------------------------
Triage 459
- ------------------------------------------------------------------------------------------------------------------------------------
310/311/312
Pathology 314/319
- ------------------------------------------------------------------------------------------------------------------------------------
Outpatient Procedures and Other Services
====================================================================================================================================
</TABLE>
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. HOSPITAL SERVICES AGREEMENT
4/7/98 - REVISED
PAGE 14 OF 14
<PAGE> 1
Exhibit 10.8
================================================================================
OPTIMUM HEALTH SERVICES OF FLORIDA, INC.
================================================================================
PRIMARY CARE GROUP PROVIDER AGREEMENT
<PAGE> 2
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This PRIMARY CARE GROUP PROVIDER Agreement, "Agreement", is made and entered
into this ______ day of ________________, 199__ by and between Optimum Health
Services of Florida, Inc. (hereinafter referred to as "COMPANY") and
________________________________, "GROUP PROVIDER".
DEFINITIONS
Defined terms shall have the meanings assigned to them in Attachment A to this
Agreement.
RECITALS
0.1 WHEREAS, COMPANY plans to seek and enter into service agreements with
health maintenance organizations and other healthcare insurers and
managed healthcare organizations, "PLAN's", licensed to operate in the
State of Florida for the provision of PLAN medical services, "Covered
Services", to "Enrollees" on a prepaid basis.
0.2 WHEREAS, COMPANY hereby engages the GROUP PROVIDER to provide "Covered
Services" to assigned Enrollees of GROUP PROVIDER in a manner which is
in accordance with the generally accepted standards of care of the
community within which the practice is located and, in accordance with
the same standards and with the same time availability as offered his
other patients.
0.3 NOW, THEREFORE, in consideration of the mutual promises hereinafter
contained and other valuable consideration, the parties hereto agree as
follows:
PART 1
PROVIDER CREDENTIALS
1.1 GROUP PROVIDER assures that all persons employed, retained, or used by
GROUP PROVIDER are licensed or are otherwise authorized by the State of
Florida to practice under their healthcare profession, and that said
licenses and/or authorizations have not been limited, restricted, or
revoked.
1.2 GROUP PROVIDER agrees that no Covered Services may be rendered to any
Enrollees assigned to GROUP PROVIDER until COMPANY has verified the
credentials of each Physician and Healthcare Professional acting on
behalf of GROUP PROVIDER. Such individuals must be fully licensed and in
good standing to practice their profession in the State of Florida.
1.3 GROUP PROVIDER certifies that all information submitted to COMPANY for
credentialing by COMPANY is true and correct.
PART 2
PROFESSIONAL SERVICES
2.1 Upon selection and/or assignment of Enrollees to GROUP PROVIDER,
Affiliated Provider shall manage the overall health care of those
Enrollees by providing Covered Services within the Physician's specialty
area of practice, and coordinating the delivery of other Covered
Services required by the Enrollees. Affiliated Providers agree not to
refer out those Covered Services to Enrollees that GROUP PROVIDER is
medically qualified to provide and does provide to their non-Enrollee
patients.
2.2 If an Enrollee unreasonably refuses to follow the course of medical
treatment prescribed by Affiliated Provider, COMPANY shall reassign or,
if necessary, recommend disenrollment of Enrollee from PLAN. GROUP
PROVIDER may not terminate their relationship with an Enrollee due to
Enrollee's medical condition nor the amount, variety, or cost of Covered
Services required by Enrollee.
2.3 GROUP PROVIDER agrees Enrollee may, without cause, request transfer to
another GROUP PROVIDER. GROUP PROVIDER shall provide patient records,
reports, and other documentation regarding such Enrollee to COMPANY or
to any Participating Provider assuming responsibility for care of member
within ten (10) days of receipt of a proper written request for such
documents, or sooner, as dictated by the medical needs of the Enrollee.
Transfers by Enrollees shall be according to COMPANY's disenrollment and
GROUP PROVIDER change procedures, as outlined in the COMPANY Provider
Manual.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
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<PAGE> 3
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2.4 GROUP PROVIDER shall facilitate any approved transfers of the
responsibility for care of Enrollees in a timely fashion that ensures
confidentiality and the continuance of appropriate care in a manner
consistent with generally accepted standards of medical practice in the
community.
2.5 In providing and claiming payment for Covered Services to Enrollees,
GROUP PROVIDER shall comply with COMPANY's administrative policies and
procedures. This shall include, but not be limited to, timely submission
of Encounter Data. GROUP PROVIDER shall also comply with all applicable
State and Federal laws and regulations relating to the delivery of
Covered Services.
2.6 Affiliated Provider shall maintain affiliation on the medical staff of
at least one of the COMPANY Participating Hospitals, or shall arrange
for attending coverage at a Participating Hospital, and shall
appropriate privileges within their specialty area of practice as
indicated in a completed COMPANY Provider application submitted to
COMPANY. GROUP PROVIDER shall immediately notify COMPANY in the event
such affiliation and/or clinical privileges are modified, suspended, or
revoked. If GROUP PROVIDER chooses to arrange for attending coverage,
2.6.1 COMPANY must verify the credentials of said covering physician
pursuant to Part 1 of this Agreement.
2.6.2 GROUP PROVIDER will maintain financial responsibility for the
provision of all attending Covered Services provided to
Enrollees assigned to GROUP PROVIDER.
2.7 Except when an Emergency renders it unsafe or impractical, Affiliated
Provider shall utilize only Referral Providers, and will not utilize
other Providers to provide services to Enrollees unless specifically
Authorized in advance by Medical Director or his/her designee.
Affiliated Provider also agrees to obtain Referral Authorization or pre
admission certification for certain Referral services, as identified
from time to time by COMPANY.
2.8 Except when an Emergency renders it unsafe or impractical, Affiliated
Providers agree to arrange for admission of Enrollees only to hospitals
that are Participating Providers with COMPANY, and shall only admit
Enrollees after receipt of an Authorization from the Medical Director or
his/her designee.
2.9 Whenever an Enrollee requires the services of a Referral Provider,
Affiliated Providers shall seek to obtain the services of a
Participating Referral Provider according to the guidelines adopted by
the Utilization Management Program.
2.10 GROUP PROVIDER shall maintain adequate personnel and facilities within
the PLAN service area to meet their responsibilities under this
Agreement. GROUP PROVIDER shall supervise all personnel employed by
him/her, including, but not limited to, allied Healthcare Professionals.
GROUP PROVIDER's personnel, equipment, and facilities shall be licensed
or certified to the extent required by law.
PART 3
PROVIDER OBLIGATIONS
3.1 Affiliated Provider agrees to provide the Covered Services outlined in
Attachment B. These services shall be available to GROUP PROVIDER's
Enrollees during Affiliated Provider's regular working hours, and urgent
care twenty-four (24) hours per day, seven (7) days per week, including
holidays, and without regard to the degree or frequency of utilization
of such Covered Services by Enrollees. GROUP PROVIDER is responsible for
notifying COMPANY, in writing seven (7) days in advance, of the names
and telephone number of additional Physicians who will be providing
coverage for GROUP PROVIDER's Enrollee's in the absence of Affiliated
Provider(s). COMPANY will request verification of appropriate
credentials on each such Physician. COMPANY reserves the right to accept
or reject those Physicians and any decision by COMPANY is final and
binding upon the GROUP PROVIDER.
3.2 GROUP PROVIDER agrees to obtain and maintain such policies of liability
and malpractice insurance as are necessary to adequately cover all
Affiliated Providers and their agents and/or employees against any claim
for damages arising from personal injuries or death occasioned directly
or indirectly in connection with performance of an act or omission by
GROUP PROVIDER or their agents and/or employees. At a minimum, said
policy shall provide two hundred and fifty thousand dollars ($250,000)
per claim and seven hundred and fifty thousand dollars ($750,000) in the
aggregate, unless otherwise specified in the State of Florida Statutes
or AHCA Florida Administrative Code Rules. GROUP PROVIDER agrees to
provide proof of said insurance to COMPANY upon demand. In addition,
GROUP PROVIDER shall have a "tail" policy for a period not less than two
(2) years following the effective termination date of the foregoing
policy in the event said policy is a "claims made" policy. Said "tail"
policy shall have the same policy limits as the primary professional
liability policy.
3.3 GROUP PROVIDER shall maintain all required licensing necessary to
conduct all business as defined in this Agreement. Such licensing shall
include, but not be limited to, Affiliated Provider's license to
practice medicine in the State of Florida, DEA licensing where
applicable, and all licensing required of Affiliated Provider's
employees. Pursuant to Section 5.2, if at any time such licensing
becomes suspended or revoked, this Agreement shall immediately terminate
as it pertains to that Affiliated Provider.
3.4 GROUP PROVIDER agrees to notify COMPANY immediately in the event of any
of the following:
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 3 of 26
<PAGE> 4
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3.4.1 If the policies referred to in Section 3.2 are canceled or
denied for any reason.
3.4.2 Of any malpractice claims related to Covered Services provided
to Enrollees.
3.4.3 Suspension or relinquishment of any Affiliated Provider's
license to practice medicine in the State of Florida.
3.4.4 Suspension or relinquishment of any of Affiliated Provider's
employee's and/or allied professional's licensing to provide
healthcare services to Enrollees.
3.5 GROUP PROVIDER agrees to allow COMPANY and any PLAN(s) contracted with
COMPANY the right to use the name, specialties, and other pertinent
information concerning GROUP PROVIDER for purposes of providing
Enrollment and marketing information in the course of COMPANY's
business. GROUP PROVIDER may post a notice or sign in GROUP PROVIDER's
and any Affiliated Provider 's place of business stating that GROUP
PROVIDER is a Participating Provider with COMPANY and such contacted
PLAN(s).
3.6 GROUP PROVIDER agrees to comply with any pharmaceutical formularies
instituted and/or adopted by COMPANY and PLAN(s).
3.7 GROUP PROVIDER shall not differentiate or discriminate in its provision
of Covered Services because of race, color, national origin, ancestry,
religion, sex, marital status, sexual orientation, or age; and GROUP
PROVIDER shall render Covered Services to Enrollees in the same manner,
in accordance with the same standards, and within the same time
availability as offered to non-Enrollee patients.
PART 4
COMPENSATION
4.1 GROUP PROVIDER shall be reimbursed by COMPANY as set forth in the
Attachments to this Agreement.
4.2 The reimbursement set forth in the Attachments of this Agreement less
any applicable copayment shall constitute GROUP PROVIDER's sole
compensation for Covered Services rendered to Enrollees.
4.3 GROUP PROVIDER agrees to accept reimbursement from COMPANY as payment in
full for Covered Services rendered to Enrollees. GROUP PROVIDER agrees
not to bill or to assess any surcharge to COMPANY, or Enrollees for
Covered Services regardless of whether or not payment is received from
COMPANY. GROUP PROVIDER acknowledges that attempting to charge any
surcharge, other than the Fee-for-Service Billaboves or Copayments set
forth by PLAN, may result in termination of this Agreement or other
appropriate action by COMPANY.
4.4 GROUP PROVIDER hereby agrees that in no event, including but not limited
to, non-payment by COMPANY, COMPANY insolvency, or breach of this
Agreement, shall GROUP PROVIDER bill, charge, collect a deposit from,
seek compensation remuneration, or reimbursement from, or have any
recourse against Enrollees or persons other than COMPANY acting on their
behalf, for Covered Services provided pursuant to this Agreement. This
provision shall not prohibit collection of copayments on the COMPANY's
behalf made in accordance with the terms of the applicable agreement
between the Enrollee and PLAN. GROUP PROVIDER further agrees that:
4.4.1 This provision shall survive the termination of this Agreement
regardless of the cause giving rise to termination and shall be
construed to be for benefit of the Enrollee, and
4.4.2 This provision supersedes any oral or written contrary agreement
now existing or hereafter entered into between GROUP PROVIDER
and Enrollee or persons on their behalf.
4.5 COMPANY has or intends to enter into a medical services agreement with
PLAN, "the TPA Agreement". PLAN is a health maintenance organization,
healthcare insurer, or managed healthcare organization licensed by the
State of Florida pursuant to Chapter 641, Part I and Part III of the
Florida Statutes. Under the PLAN Agreement, COMPANY has contracted to
arrange for the provision of medical services, supplies, and
administration to Enrollees. COMPANY entered this Agreement with GROUP
PROVIDER to provide medical services to Enrollees as set forth in the
TPA Agreement. COMPANY and GROUP PROVIDER acknowledge that as the entity
accredited by the Florida Department of Insurance, PLAN has the
financial responsibility to ensure that Enrollees receive the healthcare
services for which they have contracted and nothing in this Agreement
relieves PLAN of the ultimate financial responsibility for the delivery
of healthcare services to Enrollees.
4.6 Primary Care Covered Services provided to Enrollees by GROUP PROVIDER
shall be submitted to COMPANY on a HCFA 1500 claim form within sixty
(60) days from the date of service. Unless otherwise specified,
compensation to GROUP PROVIDER for these Primary Care Covered Services
shall not exceed the amounts as shown in the Attachments to this
Agreement. Any claims submitted to COMPANY after sixty (60) days from
the date of service will not be reimbursed to GROUP PROVIDER.
4.7 Hold Harmless Clause:
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 4 of 26
<PAGE> 5
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4.7.1 COMPANY agrees that at all times during the term of this
Agreement COMPANY shall indemnify, defend, and hold GROUP
PROVIDER and its employees harmless from and against all claims,
damages, causes of action, cost, or expense, including court
costs and reasonable attorney fees, to the extent proximately
caused by any negligent act or wrongful conduct arising as a
result of any action or inaction caused by COMPANY or any of
their personnel in the performance or omission of any act or
responsibility assumed or deemed to have been assumed by COMPANY
pursuant to this Agreement.
4.7.2 GROUP PROVIDER agrees that at all times during the term of this
Agreement, GROUP PROVIDER shall hold COMPANY and its employees,
officers, directors, agents, and ACHA harmless from and against
all claims, damages, causes of action, cost, or expense,
including court costs and reasonable attorney fees, to the
extent proximately caused by any negligent act or wrongful
conduct arising as a result of any action or inaction caused by
GROUP PROVIDER or any of their personnel in the performance or
omission of any act or responsibility assumed or deemed to have
been assumed by GROUP PROVIDER pursuant to this Agreement.
4.8 COMPANY may amend any financial arrangements offered to GROUP PROVIDER
in the Attachments to this Agreement upon thirty (30) days written
notice to GROUP PROVIDER. COMPANY may exercise amendment to the
financial arrangements of this contract in the event that at least one
of the following circumstances occur:
4.8.1 Significant changes made to the financial arrangements between
COMPANY and PLAN.
4.8.2 Significant changes made to Covered Services as defined in this
Agreement.
4.8.3 Regulatory changes made by any State or Federal agency that
would cause either Section 4.8.1 or 4.8.2 to occur.
If none of the above circumstances are met, any amendment to the
financial arrangements of this Agreement will be handled pursuant to
Section 10.1 of this Agreement.
PART 5
TERM AND TERMINATION
5.1 This Agreement shall start from the date signed by COMPANY through
December 31st of the year signed by COMPANY. This Agreement shall be
automatically renewed and extended for one year periods from and after
the expiration date, unless either party delivers notice of termination
to the other at least ninety (90) days before the effective date of the
termination, except when termination is made by COMPANY for cause.
5.2 This Agreement may be terminated by COMPANY as of the end of a calendar
month, without cause, by giving ninety (90) days prior written notice to
GROUP PROVIDER. This Agreement may be terminated by GROUP PROVIDER as of
the end of a calendar month, without cause, by giving ninety (90) days
prior written notice to COMPANY.
5.3 Termination of this Agreement by COMPANY for cause is effective
immediately. Cause for termination includes, but may not be limited to:
5.3.1 Revocation, suspension, or restrictions of Affiliated Provider's
license, certification, or medical staff membership or clinical
privileges at an COMPANY Participating hospital.
5.3.2 Failure to provide services of acceptable quality.
5.3.3 Failure to attend and adhere to this Agreement or the bylaws or
reasonable rules, regulations, or requirements adopted by
COMPANY relating to the provision of Covered Services.
5.3.4 Acts or omissions constituting unprofessional or unethical
conduct.
5.3.5 Cause pursuant to Section 7.1.
5.4 Termination, pursuant to Section 5.3.1, may be exercised upon individual
Affiliated Provider(s) only, provided that such cause is not materially
damaging to the successful execution of this Agreement.
5.5 In the event this Agreement is terminated, the right of compensation
shall extend to the effective date of termination.
5.6 COMPANY shall promptly make reasonable and medically appropriate
arrangements for the continued care of Enrollees upon termination of
this Agreement, whether in whole or as it applies to individual
Affiliated Providers pursuant to Section 5.4. Until such arrangements
have been made, Affiliated Provider shall continue to provide care or
treatment to Enrollees then under their care or treatment for a period
of up to thirty (30) days from the date of termination.
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 5 of 26
<PAGE> 6
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5.7 GROUP PROVIDER shall look solely to COMPANY or PLAN for compensation
according to this Agreement for Covered Services provided to Enrollees
pursuant to Section 5.4.
5.8 In the event that any agreement between COMPANY and any PLAN is
terminated, COMPANY shall have the right to terminate this Agreement by
giving thirty (30) days written notice to GROUP PROVIDER.
5.9 In the event that any State or Federal Agency or Court of Law determines
that this Agreement violates any law or regulation, COMPANY or GROUP
PROVIDER may terminate this Agreement upon thirty (30) days written
notice to the other party. This notice period may be shortened if such
determination made by the ruling State or Federal Agency or Court of Law
requires a shorter period.
5.10 GROUP PROVIDER shall provide ninety (90) days advance written notice to
COMPANY and the Department of Insurance before canceling this Agreement
for any reason.
5.11 Nonpayment for goods or services rendered by GROUP PROVIDER to COMPANY
Enrollees shall not be a valid reason for avoiding the ninety (90) day
advance notice of cancellation, pursuant to Section 5.9.
5.12 Upon receipt by COMPANY of a ninety (90) day cancellation notice,
COMPANY may, if requested by GROUP PROVIDER, terminate this Agreement in
less than ninety (90) days if COMPANY and PLAN are not financially
impaired or insolvent.
PART 6
RECORD MAINTENANCE AND ACCESSABILITY
6.1 GROUP PROVIDER agrees to maintain complete and accurate fiscal records,
as well as medical and social records, applying solely to Enrollees for
whom the GROUP PROVIDER has claimed and received payment. GROUP PROVIDER
and its' Affiliated Providers shall maintain such records as are
necessary for evaluation of the quality, appropriateness and timeliness
of services performed under this Agreement. Said records will be made
available for fiscal audit, medical audit, medical review, utilization
review, any State or Federal agency audits, and any other periodic
monitoring upon request of authorized representatives of COMPANY. GROUP
PROVIDER further agrees to reimburse COMPANY within thirty (30) days
after COMPANY's request for such payment any and all amounts determined
to be payable to COMPANY by GROUP PROVIDER as a result of such audit and
any State and/or Federal disallowances lawfully imposed on COMPANY or
PLAN. Said records shall be retained for a period of at least seven (7)
years after the start date of the applicable retention period (in case
of a minor, records shall be retained for at least seven (7) years after
age of majority), or until resolution of any ongoing audit occurs,
whichever is later.
6.2 Medical records of Enrollees shall be treated as confidential and shall
be maintained in compliance with all State and/or Federal laws and
regulations regarding the ownership and confidentiality of patient
records.
PART 7
QUALITY OF CARE
7.1 At all times while this Agreement is in effect, Affiliated Providers
shall be licensed without restriction as a Physician in the State of
Florida, shall hold DEA certification without restriction, and shall be
approved by the credentialing committee of COMPANY. This Agreement shall
be terminated immediately if Affiliated Provider ceases to be so
qualified at any time, as it pertains to that Affiliated Provider.
7.2 GROUP PROVIDER shall participate in the Quality Management and
Utilization Management Programs, and shall participate in a program of
continuing education consistent with such requirements as COMPANY may
adopt. GROUP PROVIDER will be obligated to cooperate fully within such
programs and procedures, including, but not limited to, pre-admission
certification of all elective Hospital admissions, pre-Authorization
certification of Referrals, and Referrals of certain identified
ancillary services.
PART 8
CONFIDENTIALITY
8.1 GROUP PROVIDER shall not release information regarding the terms set
forth in this Agreement to any person or entity without the written
consent of COMPANY, except such information as may be necessary to
disclose to agents, affiliates, attorneys, or patients in order to carry
out the terms of this Agreement. GROUP PROVIDER recognizes that all
material provided by COMPANY, except for material prepared and/or
provided by any State or Federal regulatory bodies, is the proprietary
property of COMPANY and GROUP
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 6 of 26
<PAGE> 7
- --------------------------------------------------------------------------------
PROVIDER shall not disclose or release such material to any third party,
with the exception of above mentioned regulatory bodies and then, only
to the extent appropriate, or as otherwise provided herein, without the
prior written consent of COMPANY. Upon termination of this Agreement,
GROUP PROVIDER agrees to return all such materials, including copies
thereof, whether authorized or not, to COMPANY. In addition, GROUP
PROVIDER shall not use any of the above referenced materials including,
but not limited to, Enrollee listings, directly or indirectly, to
further the business purposes of any other entity, including, but not
limited to, COMPANY's, health maintenance organizations, and preferred
provider organizations. The above shall not apply if disclosure is made
pursuant to a court order, provided COMPANY is immediately informed of
such order and has had the opportunity to seek relief. This Part shall
survive the termination of this Agreement. The parties agree that any
violation of this Part by GROUP PROVIDER shall result in irreparable
injury to COMPANY. Therefore, in addition to any remedies otherwise
available to the COMPANY, COMPANY is hereby entitled to have a court
issue an injunction enjoining and restraining GROUP PROVIDER and any
related parties or individuals from violating this Part.
PART 9
COMPANY OBLIGATIONS
9.1 COMPANY shall seek and enter into contracts with PLANS and monitor the
healthcare performance of Affiliated Providers and their Enrollees under
such contracts.
9.2 COMPANY shall institute a Quality Management and Utilization Management
Program as defined in Attachment A, along with committees comprised of
Primary Care and Referral Providers to oversee the implementation and
administration of these Programs. COMPANY will provide GROUP PROVIDER
with a Provider manual defining policies and procedures for the
administration of these Programs.
9.3 COMPANY will develop a dispute resolution process, including a formal
grievance procedure, for handling complaints and/or concerns of GROUP
PROVIDER. Such procedure will be defined in the Provider manual provided
to GROUP PROVIDER.
PART 10
MISCELLANEOUS
10.1 In the case of amendment of any Part of this Agreement by COMPANY,
except in the case outlined Section 4.8, COMPANY must give written
notice of such amendment to GROUP PROVIDER with a time frame of no more
than thirty (30) days from which said amendment will take effect unless
objected to by at least fifty-one percent (51.0%) of all GROUP PROVIDERS
to which said amendment is added.
10.2 All notices and demands of any kind shall be in writing and personally
delivered or sent by first class mail to either party at the address
that either party designates in this Agreement. Any such notice to GROUP
PROVIDER shall be effective immediately upon personal delivery or five
(5) days after deposit with the United States Postal Service. Any such
notice to COMPANY shall be effective immediately upon receipt.
10.3 If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, or unenforceable by reason of any
rule of law or public policy, all other provisions of this Agreement
shall nevertheless remain in effect. No provision of this Agreement
shall be deemed dependent on any other provision unless so expressed
herein.
10.4 This Agreement shall be interpreted, construed, and governed according
to the laws of the State of Florida.
10.5 GROUP PROVIDER shall not, without the written consent of COMPANY,
transfer or assign this Agreement or any rights or obligations under
this Agreement. This Agreement shall be binding upon and inure to the
benefit of the parties to it, and their respective heirs, legal
representatives, successors, and assigns. COMPANY may assign this
Agreement without approval of GROUP PROVIDER.
10.6 This Agreement constitutes the entire Agreement between the parties and
shall bind and inure to the benefit of both COMPANY and GROUP PROVIDER
and their respective successors, assigns, heirs, and personal
representatives subject to the restrictions on assignment contained
herein.
10.7 The Part headings used in this Agreement are for reference and
convenience only and shall not in any way limit or amplify the terms and
provisions hereof nor affect the interpretation of this Agreement.
10.8 In the event the parties are unable to resolve disputes, pursuant to
Section 9.3, the parties agree to submit the matter to binding
arbitration in accordance with the rules of the American Arbitration
Association, which arbitration shall be handled whenever practical
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 7 of 26
<PAGE> 8
- --------------------------------------------------------------------------------
in the City of Tampa, Hillsborough County, Florida. The parties
expressly covenant and agree to be bound by the decisions of the
arbitrator(s) and accept any decision by a majority of the arbitrators
as a final determination of the matter in dispute. The arbitrator(s) may
in any such proceedings award all court costs and attorney's fees to the
prevailing party.
10.9 None of the provisions of this Agreement are intended to create nor
shall be deemed or construed to create any relationship between the
parties hereto other than that of independent contractors. Neither of
the parties hereto, nor any of their respective officers, directors, or
employees shall act as nor be construed to be the agent, employee, or
representative of the other.
10.10 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.
10.11 For the term of this Agreement, and for a period of twelve (12) months
after the termination of this Agreement, GROUP PROVIDER shall not engage
in the persuasion of an Enrollee to disenroll from PLAN, to discontinue
their relationship with COMPANY.
10.12 In the event the provision of services provided for herein conflicts
with those of a Participating PLAN, services provided may be amended in
accordance with Section 10.1.
If the foregoing correctly sets forth the understanding between COMPANY and
GROUP PROVIDER, please indicate in the space provided for that purpose below,
whereupon this shall constitute a binding Agreement.
OPTIMUM HEALTH SERVICES OF FLORIDA, INC.
BY: Christian E. Miller
-------------------
DATE:
-----------------------------
TITLE: Vice President of Operations
----------------------------
SIGNATURE:
-----------------------------
ADDRESS: 17757 US 19 North, Suite 350
----------------------------
Clearwater, Florida 33764
-------------------------
GROUP PROVIDER
BY:
-----------------------------
DATE:
-----------------------------
TITLE:
-----------------------------
SIGNATURE:
-----------------------------
ADDRESS:
-----------------------------
-----------------------------
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 8 of 26
<PAGE> 9
- --------------------------------------------------------------------------------
ATTACHMENT A
DEFINITIONS
1.1 "AFFILIATED PROVIDER" means a Provider contracted with GROUP PROVIDER
(as listed in Attachment G).
1.2 "ATTACHMENTS" means Attachments A through H, which are incorporated
herein.
1.3 "AUTHORIZATION" means a QM/UM Program determination made by or on behalf
of COMPANY for a specific non-Emergent COMPANY Covered Service to be
provided or arranged for an Enrollee, to be directed by Affiliated
Provider to a Referral Provider, or Emergent COMPANY Covered Service
provided, including without limitation, the extent and duration of such
Medically Necessary Covered Service for an Enrollee.
1.4 "COPAYMENT" means any and all charges collectable directly by GROUP
PROVIDER and/or Affiliated Provider from Enrollee as payment in addition
to Capitation or Fee-for Service Payments for Covered Services as
defined by the Enrollee's Group Benefits Agreement.
1.5 "COVERED SERVICES" shall mean those healthcare benefits that an Enrollee
is entitled to receive from a Participating Provider pursuant to the
applicable Enrollee Group Benefits Agreement.
1.6 "ENCOUNTER FORM" means a HCFA 1500 or a form supplied to GROUP PROVIDER
by COMPANY upon which the GROUP PROVIDER enters all information relative
to Enrollee's use of capitated Billaboves and Primary Care Covered
Services.
1.7 "EMERGENCY" means the sudden and unexpected onset of a symptom, illness,
or injury, which in the judgment of a Physician requires immediate
diagnosis and/or treatment to alleviate or attempt to prevent loss of
life, irreparable physical damage, or serious impairment of bodily
function.
1.8 "EMERGENCY SERVICES" means medical screening examination and evaluation
by a Physician, or, to the extent permitted by applicable laws, by other
appropriate personnel under the supervision of a Physician, to determine
whether an Emergency medical condition exists, and if it does, the
inpatient or outpatient Covered Services, provided by an appropriate
source which is necessary to relieve or eliminate the Emergency medical
condition, within or outside the Service Area, which may not be delayed
until Participating Physicians can be used without possible serious
effects on the health of the Enrollee. Such services must be or appear
to be needed immediately to prevent the death of the Enrollee or serious
impairment of the Enrollee's health, and are considered Emergency
Services as long as the transfer of the Enrollee to an appropriate
Participating Physician is precluded because of the risk to the Enrollee
's health, or the distance and nature of illness involved would make
such transfer unreasonable.
1.9 "ENROLLEE" means an individual enrolled with PLAN, including, but not
limited to eligible newborn children and dependents, entitled to receive
Covered Services.
1.10 "GROUP BENEFITS AGREEMENT" means the document distributed by PLAN to its
Enrollees describing all Covered Services in the PLAN.
1.11 "HEALTHCARE PROFESSIONAL" means any nurse, physician extender (e.g.,
nurse practitioner, physician assistant) and other allied health
professional, including but not limited to health educator, laboratory
technologist, audiologist, speech pathologist, psychologist, podiatrist,
dentist, physical therapist, occupational therapist, clinical social
worker, marriage, family and child counselor, optometrist or dispensing
optician, who is licensed by the State of Florida if required and who
provides certain Covered Services to COMPANY Enrollees through an
Agreement with COMPANY.
1.12 "INSTITUTION" means any facility licensed by the State of Florida as an
acute care hospital, ambulatory surgery center, skilled nursing
facility, hospice, or other urgent care center.
1.13 "MEDICAL DIRECTOR" means a Physician appointed by COMPANY to oversee all
COMPANY medical affairs including QM and UM.
1.14 "MEDICALLY NECESSARY" shall be defined by COMPANY in the exercise of the
Utilization Management Program. This shall include due consideration of
whether Covered Services are:
1.14.1 Appropriate for the symptoms, diagnosis or treatment of a
condition, illness or injury; and
1.14.2 Provided for the diagnosis or the direct care and treatment of a
condition, illness, or injury; and
1.14.3 In accordance with the standards of good medical practice within
the surrounding community; and
1.14.4 Not solely for the convenience of the Enrollee or Provider.
The Medical Director or his designee, subject to the applicable dispute
resolution and member grievance procedures of the Utilization Management
Program, shall make the final decision of whether a treatment is
Medically Necessary.
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 9 of 26
<PAGE> 10
- --------------------------------------------------------------------------------
1.15 "NON-COVERED SERVICE" means those services which COMPANY enrollees are
not entitled to receive pursuant to the applicable Enrollee benefit
package and/or those services considered not Medically Necessary.
1.16 "PARTICIPATING PROVIDER" means a Provider that has entered into an
Agreement with COMPANY to provide Covered Services to Enrollees.
1.17 "PHYSICIAN" means any doctor of medicine, osteopathy, chiropractor, or
dental surgery licensed by the State of Florida.
1.18 "PLAN" means the entity described in Recitals, Paragraph 1 of this
Agreement.
1.19 "PRIMARY CARE COVERED SERVICES" mean those Covered Services defined in
Attachment B of this GROUP PROVIDER Agreement.
1.20 "GROUP PROVIDER" means a Participating Physician who has been selected
by and/or assigned Enrollees to provide Primary Care Covered Services,
Billaboves, and coordinating all referral Covered Services.
1.21 "PROVIDER" means the Physicians, Institution, Healthcare Professionals,
pharmacies, ambulance companies, ancillary entities, and other licensed
healthcare entities who provide Covered Services.
1.22 "REFERRAL PROVIDER" shall mean a Participating Provider who performs
Covered Services that are not Primary Care Covered Services, within
their designated specialty(s) as defined in their Provider Agreement
with COMPANY.
1.23 "QUALITY MANAGEMENT PROGRAM" (QM) means a program approved by COMPANY,
directed by Participating Providers and designed to assure the provision
of quality Covered Services to Enrollees.
1.24 "UTILIZATION MANAGEMENT PROGRAM" (UM) means a program approved by
COMPANY and designed to review the appropriate utilization of Covered
Services provided to Enrollees.
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 10 of 26
<PAGE> 11
- --------------------------------------------------------------------------------
ATTACHMENT B
PRIMARY CARE COVERED SERVICES
Primary Care Covered Services shall include the following:
1.1 Covered Services rendered by an Affiliated Provider at the Affiliated
Provider's office, Enrollees home, by telephone, or elsewhere when
dictated by the need for preventive, diagnostic, or therapeutic care for
the treatment of a particular injury, illness, or disease which do not
require the knowledge, skill, or expertise of a Referral Provider.
1.2 Covered Services rendered by an Affiliated Provider for the purpose of
enabling Enrollees to make comprehensive, informed decisions about
family size, spacing of births, or to receive assistance to determine
the causes of infertility.
1.3 Covered Services aimed at identifying medical conditions of Enrollees
under twenty-one years of age, including:
1.3.1 Health screenings;
1.3.2 Scheduling Assistance;
1.3.3 Immunization administration; and
1.3.4 Maintenance of a coordinated tracking system to monitor Enrollee
through the entire range of screening and treatment.
1.4 Covered Services provided to Enrollees in the following categories:
1.4.1 Periodic physical exams
1.4.2 Preventive care check-ups
1.4.3 Chronic disease follow-up
1.5 All resources required planning, directing, and coordinating the
delivery of Covered Services to GROUP PROVIDER's Enrollees. Affiliated
Provider shall arrange for all non-emergency Covered Services for which
GROUP PROVIDER's Enrollees are eligible under the applicable Group
Benefits Agreement.
1.6 The referral of Enrollee to a Participating Referral Provider or other
Provider for Medically Necessary Covered Services according to the
guidelines adopted by the Utilization Management Program.
1.7 GROUP PROVIDER shall bill COMPANY as necessary to reimburse any other
Provider, e.g., covering Physicians, that provides any portion of the
Primary Care Covered Services that are provided in agreements between
COMPANY and Participating Providers. COMPANY will reimburse GROUP
PROVIDER the rates as shown in the Attachments to this Agreement for
those Covered Services.
1.8 Subject to Attachment B, Section 1.7, the rate of payment for Primary
Care Covered Services provided shall be the usual and customary
fee-for-service reimbursement for those services, and shall remain the
responsibility of the GROUP PROVIDER.
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 11 of 26
<PAGE> 12
- --------------------------------------------------------------------------------
ATTACHMENT C
FINANCIAL ARRANGEMENTS - COMMERCIAL HMO ENROLLEES (NON-PEDIATRICIANS ONLY)
1.1 GROUP PROVIDER shall be reimbursed at the base rate of ##### of the
Medicare Allowable Rate (Medicare RBRVS) for all Covered Primary Care
Physician Services, as defined in Attachment B, provided to Enrollees
during Period 1 of the Agreement (see below).
1.2 GROUP PROVIDER shall be reimbursed at the base rate of ##### of the
Medicare Allowable Rate (Medicare RBRVS) for all Covered Primary Care
Services, as defined in Attachment B, provided to Enrollees during
Period 2 of the Agreement (see below).
1.3 GROUP PROVIDER shall be reimbursed the following rates for the following
Covered Primary Care Services exclusive of the financial arrangements
defined in Sections 1.1 and 1.2:
1.3.1 Immunization Injections and Administration - (CPT 90700 - 90749,
W9875, W9877)
1.3.2 Preventive Visit, new, infant (CPT 99381)
1.3.3 Preventive Visit, new, age 1-4 (CPT 99382)
1.3.4 Preventive Visit, new, age 5-11 (CPT 99383)
1.3.5 Preventive Visit, new, age 12-17 (CPT 99384)
1.3.6 Preventive Visit, new, age 18-39 (CPT 99385)
1.3.7 Preventive Visit, new, age 40-64 (CPT 99386)
1.3.8 Preventive Visit, new, age 65 & over (CPT 99387)
1.3.9 Preventive Visit, established, infant (CPT 99391)
1.3.10 Preventive Visit, established, age 1-4 (CPT 99392)
1.3.11 Preventive Visit, established, age 5-11 (CPT 99393)
1.3.12 Preventive Visit, established, age 12-17 (CPT 99394)
1.3.13 Preventive Visit, established, age 18-39 (CPT 99395)
1.3.14 Preventive Visit, established, age 40-64 (CPT 99396)
1.3.15 Preventive Visit, established, age 65 & over (CPT 99397)
1.3.16 EPSDT
1.4 The base rate of ### of Medicare Allowable will be incrementally
increased/decreased according to the following table and algorithm
reflecting the GROUP PROVIDER'S performance to effectively cause
improved patient outcomes due to successful Enrollee preventive
management:
Algorithm: Inpatient and other institutionally related bed days per
thousand will be calculated semi-annually for all Enrollees assigned to
GROUP PROVIDER. The calculation is as follows:
<TABLE>
<CAPTION>
Type of Bed Day* Number of Adjusted Days per Incurred Bed Day
--------------- --------------------------------------------
<S> <C>
SNF/Hospice/Medical Rehab. 0.60
Medical/Surgical/Pediatric 1.00
ICU/CCU/NICU 1.25
</TABLE>
*OB room and board, C-Section room and board, and newborn nursery
inpatient bed days are not to be used in this calculation.
Example:
<TABLE>
<CAPTION>
Enrollees: 5,000 per month @ 6 months (30,000 member months)
<S> <C> <C> <C>
Bed Days:
SNF/Hospice/Medical Rehab. 24 x 0.60 = 14.4
Medical/Surgical/Pediatric 560 x 1.00 = 560
ICU/CCU/NICU 40 x 1.25 = 50
Total Bed Days: = 624.4
DAYS PER THOUSAND: (624.4 / 30,000) x 12,000 = 249.76
</TABLE>
The base rate of #### of Medicare Allowable will be incrementally
increased/decreased as follows:
<TABLE>
<S> <C>
Days per Thousand** % of Medicare Allowable
------------------- -----------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
GREATER THAN OR EQUAL TO 220.0 MINIMUM RETURN
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
219.9 to 210.0
209.9 to 200.0
199.9 to 190.0
</TABLE>
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 12 of 26
<PAGE> 13
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
189.9 to 180.0
179.9 to 170.0
169.9 to 160.0
- ---------------------------------------------------------------------------------------------------------------
159.9 TO 150.0 BASE RATE
- ---------------------------------------------------------------------------------------------------------------
149.9 to 140.0
139.9 to 130.0
129.9 to 120.0
119.9 to 110.0
109.9 to 105.0
104.9 to 100.0
- ---------------------------------------------------------------------------------------------------------------
LESS THAN 100.0 MAXIMUM RETURN
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
** Calculated using the algorithm shown above.
The semi-annual days per thousand calculation and its increase of the
base rate will be effective for all claims incurred during the new six
month period. Claims incurred from prior periods will be adjudicated
under its adjusted rate schedule from that period.
1.5 The periods mentioned above shall refer to the following:
1.5.1 Period 1: Beginning on the first day of the first month of the
operational start of this Agreement, e.g., the first day that
services are provided to Enrollees under the terms of this
Agreement, through the last day of the sixth month or June
30th/December 31st on or after the last day of the sixth month,
whichever is later.
1.5.2 Period 2: Beginning on the first day after the close of Period
1, and after.
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 13 of 26
<PAGE> 14
- --------------------------------------------------------------------------------
ATTACHMENT C-1
FINANCIAL ARRANGEMENTS - COMMERCIAL HMO ENROLLEES (PEDIATRICIANS ONLY)
1.1 GROUP PROVIDER shall be reimbursed at the base rate of #### of the
Medicare Allowable Rate (Medicare RBRVS) for all Covered Primary Care
Physician Services, as defined in Attachment B, provided to Enrollees
during Period 1 of the Agreement (see below).
1.2 GROUP PROVIDER shall be reimbursed at the base rate of #### of the
Medicare Allowable Rate (Medicare RBRVS) for all Covered Primary Care
Services, as defined in Attachment B, provided to Enrollees during
Period 2 of the Agreement (see below).
1.3 GROUP PROVIDER shall be reimbursed the following rates for the following
Covered Primary Care Services exclusive of the financial arrangements
defined in Sections 1.1 and 1.2:
1.3.1 Immunization Injections and Administration - (CPT 90700 - 90749,
W9875, W9877)
1.3.2 Preventive Visit, new, infant (CPT 99381)
1.3.3 Preventive Visit, new, age 1-4 (CPT 99382)
1.3.4 Preventive Visit, new, age 5-11 (CPT 99383)
1.3.5 Preventive Visit, new, age 12-17 (CPT 99384)
1.3.6 Preventive Visit, new, age 18-39 (CPT 99385)
1.3.7 Preventive Visit, new, age 40-64 (CPT 99386)
1.3.8 Preventive Visit, new, age 65 & over (CPT 99387)
1.3.9 Preventive Visit, established, infant (CPT 99391)
1.3.10 Preventive Visit, established, age 1-4 (CPT 99392)
1.3.11 Preventive Visit, established, age 5-11 (CPT 99393)
1.3.12 Preventive Visit, established, age 12-17 (CPT 99394)
1.3.13 Preventive Visit, established, age 18-39 (CPT 99395)
1.3.14 Preventive Visit, established, age 40-64 (CPT 99396)
1.3.15 Preventive Visit, established, age 65 & over (CPT 99397)
1.3.16 EPSDT
1.4 Allowable will be incrementally increased/decreased according to the
following table and algorithm reflecting the GROUP PROVIDER'S
performance to effectively cause improved patient outcomes due to
successful Enrollee preventive management:
Algorithm: Inpatient and other institutionally related bed days per
thousand will be calculated semi-annually for all Enrollees assigned to
GROUP PROVIDER. The calculation is as follows:
<TABLE>
<CAPTION>
Type of Bed Day* Number of Adjusted Days per Incurred Bed Day
--------------- --------------------------------------------
<S> <C>
SNF/Hospice/Medical Rehab. 0.60
Medical/Surgical/Pediatric 1.00
ICU/CCU/NICU 1.25
</TABLE>
*OB room and board, C-Section room and board, and newborn nursery
inpatient bed days are not to be used in this calculation.
Example:
<TABLE>
<CAPTION>
Enrollees: 5,000 per month @ 6 months (30,000 member months)
<S> <C> <C> <C>
Bed Days:
SNF/Hospice/Medical Rehab. 24 x 0.60 = 14.4
Medical/Surgical/Pediatric 560 x 1.00 = 560
ICU/CCU/NICU 40 x 1.25 = 50
Total Bed Days: = 624.4
DAYS PER THOUSAND: (624.4 / 30,000) x 12,000 = 249.76
</TABLE>
The base rate of #### of Medicare Allowable will be incrementally
increased/decreased as follows:
<TABLE>
<S> <C>
Days per Thousand** % of Medicare Allowable
------------------- -----------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
GREATER THAN OR EQUAL TO 160.0 MINIMUM RETURN
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
159.9 to 152.0
151.9 to 144.0
143.9 to 146.0
145.9 to 138.0
137.9 to 130.0
</TABLE>
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 14 of 26
<PAGE> 15
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
129.9 to 122.0
- ---------------------------------------------------------------------------------------------------------------
121.9 TO 114.0 BASE RATE
- ---------------------------------------------------------------------------------------------------------------
113.9 to 106.0
105.9 to 98.0
97.9 to 90.0
89.9 to 82.0
80.9 to 74.0
73.9 to 69.0
- ---------------------------------------------------------------------------------------------------------------
LESS THAN 69.0 MAXIMUM RETURN
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
** Calculated using the algorithm shown above.
The semi-annual days per thousand calculation and its increase of the
base rate will be effective for all claims incurred during the new six
month period. Claims incurred from prior periods will be adjudicated
under its adjusted rate schedule from that period.
1.5 The periods mentioned above shall refer to the following:
1.5.1 Period 1: Beginning on the first day of the first month of the
operational start of this Agreement, e.g., the first day that
services are provided to Enrollees under the terms of this
Agreement, through the last day of the sixth month or June
30th/December 31st on or after the last day of the sixth month,
whichever is later.
1.5.2 Period 2: Beginning on the first day after the close of Period
1, and after.
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 15 of 26
<PAGE> 16
- --------------------------------------------------------------------------------
ATTACHMENT D
FINANCIAL ARRANGEMENTS - MEDICARE ENROLLEES
1.1 GROUP PROVIDER shall be reimbursed at the base rate of ##### of the
Medicare Allowable Rate (Medicare RBRVS) for all Covered Primary Care
Physician Services, as defined in Attachment B, provided to Enrollees
during Period 1 of the Agreement (see below).
1.2 GROUP PROVIDER shall be reimbursed at the base rate of ##### of the
Medicare Allowable Rate (Medicare RBRVS) for all Covered Primary Care
Services, as defined in Attachment B, provided to Enrollees during
Period 2 of the Agreement (see below).
1.3 GROUP PROVIDER shall be reimbursed the following rates for the following
Covered Primary Care Services exclusive of the financial arrangements
defined in Sections 1.1 and 1.2:
1.3.1 Preventive Visit, new, age 65 & over (CPT 99387)
1.3.2 Preventive Visit, established, age 65 & over (CPT 99397)
1.4 The base rate of #### of Medicare Allowable will be incrementally
increased/decreased according to the following table and algorithm
reflecting the GROUP PROVIDER'S performance to effectively cause
improved patient outcomes due to successful Enrollee preventive
management:
Algorithm: Inpatient and other institutionally related bed days per
thousand will be calculated semi-annually for all Enrollees assigned to
GROUP PROVIDER. The calculation is as follows:
<TABLE>
<CAPTION>
Type of Bed Day* Number of Adjusted Days per Incurred Bed Day
--------------- --------------------------------------------
<S> <C>
SNF/Hospice/Medical Rehab. 0.60
Medical/Surgical/Pediatric 1.00
ICU/CCU/NICU 1.25
</TABLE>
*OB room and board, C-Section room and board, and newborn nursery
inpatient bed days are not to be used in this calculation.
Example:
<TABLE>
<CAPTION>
Enrollees: 5,000 per month @ 6 months (30,000 member months)
<S> <C> <C> <C>
Bed Days:
SNF/Hospice/Medical Rehab. 24 x 0.60 = 14.4
Medical/Surgical/Pediatric 560 x 1.00 = 560
ICU/CCU/NICU 40 x 1.25 = 50
Total Bed Days: = 624.4
DAYS PER THOUSAND: (624.4 / 30,000) x 12,000 = 249.76
</TABLE>
The base rate of #### of Medicare Allowable will be incrementally
increased/decreased as follows:
<TABLE>
<S> <C>
Days per Thousand** % of Medicare Allowable
------------------- -----------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
GREATER THAN OR EQUAL TO 1,485.0 MINIMUM RETURN
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1,484.9 to 1,430.0
1,429.9 to 1,375.0
1,374.9 to 1,320.0
1,319.9 to 1,265.0
1,264.9 to 1,210.0
1,209.9 to 1,155.0
- ---------------------------------------------------------------------------------------------------------------
1,154.9 TO 1,100.0 BASE RATE
- ---------------------------------------------------------------------------------------------------------------
1,099.9 to 1,045.0
1,044.9 to 990.0
989.9 to 935.0
934.9 to 880.0
879.9 to 825.0
824.9 to 770.0
- ---------------------------------------------------------------------------------------------------------------
LESS THAN 769.0 MAXIMUM RETURN
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 16 of 26
<PAGE> 17
- --------------------------------------------------------------------------------
** Calculated using the algorithm shown above.
The semi-annual days per thousand calculation and its increase of the
base rate will be effective for all claims incurred during the new six
month period. Claims incurred from prior periods will be adjudicated
under its adjusted rate schedule from that period.
1.5 The periods mentioned above shall refer to the following:
1.5.1 Period 1: Beginning on the first day of the first month of the
operational start of this Agreement, e.g., the first day that
services are provided to Enrollees under the terms of this
Agreement, through the last day of the sixth month or June
30th/December 31st on or after the last day of the sixth month,
whichever is later.
1.5.2 Period 2: Beginning on the first day after the close of Period
1, and after.
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 17 of 26
<PAGE> 18
- --------------------------------------------------------------------------------
ATTACHMENT E
FINANCIAL ARRANGEMENTS - MEDICAID ENROLLEES (NON-PEDIATRICIANS ONLY)
1.1 GROUP PROVIDER shall be reimbursed at the base rate of #### of the
Medicare Allowable Rate (Medicare RBRVS) for all Covered Primary Care
Physician Services, as defined in Attachment B, provided to Enrollees
during Period 1 of the Agreement (see below).
1.2 GROUP PROVIDER shall be reimbursed at the base rate of #### of the
Medicare Allowable Rate (Medicare RBRVS) for all Covered Primary Care
Services, as defined in Attachment B, provided to Enrollees during
Period 2 of the Agreement (see below).
1.3 GROUP PROVIDER shall be reimbursed the following rates for the following
Covered Primary Care Services exclusive of the financial arrangements
defined in Sections 1.1 and 1.2:
1.3.1 Immunization Injections and Administration - (CPT 90700 - 90749,
W9875, W9877)
1.3.2 Preventive Visit, new, infant (CPT 99381)
1.3.3 Preventive Visit, new, age 1-4 (CPT 99382)
1.3.4 Preventive Visit, new, age 5-11 (CPT 99383)
1.3.5 Preventive Visit, new, age 12-17 (CPT 99384)
1.3.6 Preventive Visit, new, age 18-39 (CPT 99385)
1.3.7 Preventive Visit, new, age 40-64 (CPT 99386)
1.3.8 Preventive Visit, new, age 65 & over (CPT 99387)
1.3.9 Preventive Visit, established, infant (CPT 99391)
1.3.10 Preventive Visit, established, age 1-4 (CPT 99392)
1.3.11 Preventive Visit, established, age 5-11 (CPT 99393)
1.3.12 Preventive Visit, established, age 12-17 (CPT 99394)
1.3.13 Preventive Visit, established, age 18-39 (CPT 99395)
1.3.14 Preventive Visit, established, age 40-64 (CPT 99396)
1.3.15 Preventive Visit, established, age 65 & over (CPT 99397)
1.3.16 EPSDT
1.4 The base rate of #### of Medicare Allowable will be incrementally
increased/decreased according to the following table and algorithm
reflecting the GROUP PROVIDER'S performance to effectively cause
improved patient outcomes due to successful Enrollee preventive
management:
Algorithm: Inpatient and other institutionally related bed days per
thousand will be calculated semi-annually for all Enrollees assigned to
GROUP PROVIDER. The calculation is as follows:
<TABLE>
<CAPTION>
Type of Bed Day* Number of Adjusted Days per Incurred Bed Day
--------------- --------------------------------------------
<S> <C>
SNF/Hospice/Medical Rehab. 0.60
Medical/Surgical/Pediatric 1.00
ICU/CCU/NICU 1.25
</TABLE>
*OB room and board, C-Section room and board, and newborn nursery
inpatient bed days are not to be used in this calculation.
Example:
<TABLE>
<CAPTION>
Enrollees: 5,000 per month @ 6 months (30,000 member months)
<S> <C> <C> <C>
Bed Days:
SNF/Hospice/Medical Rehab. 24 x 0.60 = 14.4
Medical/Surgical/Pediatric 560 x 1.00 = 560
ICU/CCU/NICU 40 x 1.25 = 50
Total Bed Days: = 624.4
DAYS PER THOUSAND: (624.4 / 30,000) x 12,000 = 249.76
</TABLE>
The base rate of 120.0% of Medicare Allowable will be incrementally
increased/decreased as follows:
<TABLE>
<S> <C>
Days per Thousand** % of Medicare Allowable
------------------- -----------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
GREATER THAN OR EQUAL TO 281.0 MINIMUM RETURN
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
280.9 to 271.0
269.9 to 260.0
259.9 to 249.0
248.9 to 237.0
</TABLE>
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 18 of 26
<PAGE> 19
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
236.9 to 225.0
224.9 to 212.0
- ---------------------------------------------------------------------------------------------------------------
211.9 TO 199.0 BASE RATE
- ---------------------------------------------------------------------------------------------------------------
198.9 to 188.0
187.9 to 178.0
177.9 to 168.0
167.9 to 158.0
157.9 to 148.0
147.9 to 137.0
- ---------------------------------------------------------------------------------------------------------------
LESS THAN 137.0 MAXIMUM RETURN
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
** Calculated using the algorithm shown above.
The semi-annual days per thousand calculation and its increase of the
base rate will be effective for all claims incurred during the new six
month period. Claims incurred from prior periods will be adjudicated
under its adjusted rate schedule from that period.
1.5 The periods mentioned above shall refer to the following:
1.5.1 Period 1: Beginning on the first day of the first month of the
operational start of this Agreement, e.g., the first day that
services are provided to Enrollees under the terms of this
Agreement, through the last day of the sixth month or June
30th/December 31st on or after the last day of the sixth month,
whichever is later.
1.5.2 Period 2: Beginning on the first day after the close of Period
1, and after.
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 19 of 26
<PAGE> 20
- --------------------------------------------------------------------------------
ATTACHMENT E-1
FINANCIAL ARRANGEMENTS - MEDICAID ENROLLEES (PEDIATRICIANS ONLY)
1.1 GROUP PROVIDER shall be reimbursed at the base rate of #### of the
Medicare Allowable Rate (Medicare RBRVS) for all Covered Primary Care
Physician Services, as defined in Attachment B, provided to Enrollees
during Period 1 of the Agreement (see below).
1.2 GROUP PROVIDER shall be reimbursed at the base rate of #### of the
Medicare Allowable Rate (Medicare RBRVS) for all Covered Primary Care
Services, as defined in Attachment B, provided to Enrollees during
Period 2 of the Agreement (see below).
1.3 GROUP PROVIDER shall be reimbursed the following rates for the following
Covered Primary Care Services exclusive of the financial arrangements
defined in Sections 1.1 and 1.2:
1.3.1 Immunization Injections and Administration - (CPT 90700 - 90749,
W9875, W9877)
1.3.2 Preventive Visit, new, infant (CPT 99381)
1.3.3 Preventive Visit, new, age 1-4 (CPT 99382)
1.3.4 Preventive Visit, new, age 5-11 (CPT 99383)
1.3.5 Preventive Visit, new, age 12-17 (CPT 99384)
1.3.6 Preventive Visit, new, age 18-39 (CPT 99385)
1.3.7 Preventive Visit, new, age 40-64 (CPT 99386)
1.3.8 Preventive Visit, new, age 65 & over (CPT 99387)
1.3.9 Preventive Visit, established, infant (CPT 99391)
1.3.10 Preventive Visit, established, age 1-4 (CPT 99392)
1.3.11 Preventive Visit, established, age 5-11 (CPT 99393)
1.3.12 Preventive Visit, established, age 12-17 (CPT 99394)
1.3.13 Preventive Visit, established, age 18-39 (CPT 99395)
1.3.14 Preventive Visit, established, age 40-64 (CPT 99396)
1.3.15 Preventive Visit, established, age 65 & over (CPT 99397)
1.3.16 EPSDT
1.4 The base rate of ### of Medicare Allowable will be incrementally
increased/decreased according to the following table and algorithm
reflecting the GROUP PROVIDER'S performance to effectively cause
improved patient outcomes due to successful Enrollee preventive
management:
Algorithm: Inpatient and other institutionally related bed days per
thousand will be calculated semi-annually for all Enrollees assigned to
GROUP PROVIDER. The calculation is as follows:
<TABLE>
<CAPTION>
Type of Bed Day* Number of Adjusted Days per Incurred Bed Day
--------------- --------------------------------------------
<S> <C>
SNF/Hospice/Medical Rehab. 0.60
Medical/Surgical/Pediatric 1.00
ICU/CCU/NICU 1.25
</TABLE>
*OB room and board, C-Section room and board, and newborn nursery
inpatient bed days are not to be used in this calculation.
Example:
<TABLE>
<CAPTION>
Enrollees: 5,000 per month @ 6 months (30,000 member months)
<S> <C> <C> <C>
Bed Days:
SNF/Hospice/Medical Rehab. 24 x 0.60 = 14.4
Medical/Surgical/Pediatric 560 x 1.00 = 560
ICU/CCU/NICU 40 x 1.25 = 50
Total Bed Days: = 624.4
DAYS PER THOUSAND: (624.4 / 30,000) x 12,000 = 249.76
</TABLE>
The base rate of 120.0% of Medicare Allowable will be incrementally
increased/decreased as follows:
<TABLE>
<S> <C>
Days per Thousand** % of Medicare Allowable
------------------- -----------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
GREATER THAN OR EQUAL TO 205.0 MINIMUM RETURN
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
204.9 to 197.0
196.9 to 190.0
189.9 to 182.0
181.9 to 174.0
</TABLE>
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 20 of 26
<PAGE> 21
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
173.9 to 167.0
166.9 to 159.0
- ---------------------------------------------------------------------------------------------------------------
158.9 TO 152.0 BASE RATE
- ---------------------------------------------------------------------------------------------------------------
151.9 to 143.0
142.9 to 136.0
135.9 to 127.0
126.9 to 118.0
117.9 to 108.0
107.9 to 98.0
- ---------------------------------------------------------------------------------------------------------------
LESS THAN 98.0 MAXIMUM RETURN
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
** Calculated using the algorithm shown above.
The semi-annual days per thousand calculation and its increase of the
base rate will be effective for all claims incurred during the new six
month period. Claims incurred from prior periods will be adjudicated
under its adjusted rate schedule from that period.
1.5 The periods mentioned above shall refer to the following:
1.5.1 Period 1: Beginning on the first day of the first month of the
operational start of this Agreement, e.g., the first day that
services are provided to Enrollees under the terms of this
Agreement, through the last day of the sixth month or June
30th/December 31st on or after the last day of the sixth month,
whichever is later.
1.5.2 Period 2: Beginning on the first day after the close of Period
1, and after.
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 21 of 26
<PAGE> 22
- --------------------------------------------------------------------------------
ATTACHMENT F
ENROLLEE BONUS LEVELS
GROUP PROVIDER will be paid the following bonus amounts per Enrollee during
every month that the corresponding enrollment levels are met:
1.1 Commercial HMO Enrollees
1.1.1 At least 250 Enrollees and less than 500 Enrollees PMPM
1.1.2 500 Enrollees or more PMPM
1.2 Medicare Enrollees
1.2.1 At least 250 Enrollees and less than 500 Enrollees PMPM
1.2.2 500 Enrollees or more PMPM
1.3 Medicaid Enrollees
1.3.1 At least 250 Enrollees and less than 500 Enrollees PMPM
1.3.2 500 Enrollees or more PMPM
The Enrollee Bonuses to GROUP PROVIDER will be calculated on a semi-annual
calendar year basis, e.g., January- June, July-December, and settled three (3)
months after the close of the applicable semi-annual calendar year period.
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 22 of 26
<PAGE> 23
- --------------------------------------------------------------------------------
ATTACHMENT G
GROUP PROVIDER AFFILIATED PRIMARY CARE PHYSICIANS
List the names of the Primary Care Physicians that will be providing those
Covered Primary Care Physician Services as defined in Attachment B under the
terms of this Agreement:
<TABLE>
<CAPTION>
Name Specialty Address SSN
- ---- --------- ------- ---
<S> <C> <C> <C>
1.
----------------------------------- --------------- -------------------------------------- -------------
2.
----------------------------------- --------------- -------------------------------------- -------------
3.
----------------------------------- --------------- -------------------------------------- -------------
4.
----------------------------------- --------------- -------------------------------------- -------------
5.
----------------------------------- --------------- -------------------------------------- -------------
6.
----------------------------------- --------------- -------------------------------------- -------------
7.
----------------------------------- --------------- -------------------------------------- -------------
8.
----------------------------------- --------------- -------------------------------------- -------------
9.
----------------------------------- --------------- -------------------------------------- -------------
10.
----------------------------------- --------------- -------------------------------------- -------------
11.
----------------------------------- --------------- -------------------------------------- -------------
12.
----------------------------------- --------------- -------------------------------------- -------------
13.
----------------------------------- --------------- -------------------------------------- -------------
14.
----------------------------------- --------------- -------------------------------------- -------------
15.
----------------------------------- --------------- -------------------------------------- -------------
16.
----------------------------------- --------------- -------------------------------------- -------------
17.
----------------------------------- --------------- -------------------------------------- -------------
18.
----------------------------------- --------------- -------------------------------------- -------------
19.
----------------------------------- --------------- -------------------------------------- -------------
20.
----------------------------------- --------------- -------------------------------------- -------------
21.
----------------------------------- --------------- -------------------------------------- -------------
22.
----------------------------------- --------------- -------------------------------------- -------------
23.
----------------------------------- --------------- -------------------------------------- -------------
24.
----------------------------------- --------------- -------------------------------------- -------------
25.
----------------------------------- --------------- -------------------------------------- -------------
26.
----------------------------------- --------------- -------------------------------------- -------------
27.
----------------------------------- --------------- -------------------------------------- -------------
28.
----------------------------------- --------------- -------------------------------------- -------------
29.
----------------------------------- --------------- -------------------------------------- -------------
30.
----------------------------------- --------------- -------------------------------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 23 of 26
<PAGE> 24
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
31.
----------------------------------- --------------- -------------------------------------- -------------
</TABLE>
ATTACHMENT G
GROUP PROVIDER AFFILIATED PRIMARY CARE PHYSICIANS
List the names of the Primary Care Physicians that will be providing those
Covered Primary Care Physician Services as defined in Attachment B under the
terms of this Agreement:
<TABLE>
<CAPTION>
Name Specialty Address SSN
- ---- --------- ------- ---
<S> <C> <C> <C>
32.
----------------------------------- --------------- -------------------------------------- -------------
33.
----------------------------------- --------------- -------------------------------------- -------------
34.
----------------------------------- --------------- -------------------------------------- -------------
35.
----------------------------------- --------------- -------------------------------------- -------------
36.
----------------------------------- --------------- -------------------------------------- -------------
37.
----------------------------------- --------------- -------------------------------------- -------------
38.
----------------------------------- --------------- -------------------------------------- -------------
39.
----------------------------------- --------------- -------------------------------------- -------------
40.
----------------------------------- --------------- -------------------------------------- -------------
41.
----------------------------------- --------------- -------------------------------------- -------------
42.
----------------------------------- --------------- -------------------------------------- -------------
43.
----------------------------------- --------------- -------------------------------------- -------------
44.
----------------------------------- --------------- -------------------------------------- -------------
45.
----------------------------------- --------------- -------------------------------------- -------------
46.
----------------------------------- --------------- -------------------------------------- -------------
47.
----------------------------------- --------------- -------------------------------------- -------------
48.
----------------------------------- --------------- -------------------------------------- -------------
49.
----------------------------------- --------------- -------------------------------------- -------------
50.
----------------------------------- --------------- -------------------------------------- -------------
51.
----------------------------------- --------------- -------------------------------------- -------------
52.
----------------------------------- --------------- -------------------------------------- -------------
53.
----------------------------------- --------------- -------------------------------------- -------------
54.
----------------------------------- --------------- -------------------------------------- -------------
55.
----------------------------------- --------------- -------------------------------------- -------------
56.
----------------------------------- --------------- -------------------------------------- -------------
57.
----------------------------------- --------------- -------------------------------------- -------------
58.
----------------------------------- --------------- -------------------------------------- -------------
59.
----------------------------------- --------------- -------------------------------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 24 of 26
<PAGE> 25
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
60.
----------------------------------- --------------- -------------------------------------- -------------
61.
----------------------------------- --------------- -------------------------------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 25 of 26
<PAGE> 26
- --------------------------------------------------------------------------------
ATTACHMENT H
FEE FOR SERVICE REIMBURSEMENT
DIRECT PAYMENT PPO AGREEMENTS
1.1 Definitions: The following definitions apply only to this Attachment H
of this Agreement:
1.1.1 "ATTACHMENT" means this Attachment H, which shall be
incorporated herein.
1.1.2 "HMO OPEN ACCESS ENROLLEE" shall refer to those Commercial HMO
Enrollees that have entered into a Group Subscriber Agreement
with PLAN for Open Access to COMPANY's Participating Provider
network.
1.1.3 "POS OPEN ACCESS ENROLLEE" shall refer to those POS Enrollees
that have entered into a Group Subscriber Agreement with PLAN
for Open Access to COMPANY's Participating Provider network.
1.1.4 "OPEN ACCESS" shall refer to COMPANY's UM/QM Program under which
Enrollees are not assigned to GROUP PROVIDER. Under this
application, Enrollees are not required to obtain Authorization
from COMPANY prior to seeking Primary Care Covered Services from
GROUP PROVIDER.
1.1.5 "DIRECT PAYMENT PPO ENROLLEE" shall refer to those Enrollees
that have entered into a Group Subscriber Agreement with PLAN
for access to COMPANY's Participating Provider network. Under
such a Group Subscriber Agreement, Direct Payment PPO Enrollee
shall reimburse GROUP PROVIDER the Direct Payment PPO Enrollee
Reimbursement (DPPER) at such time that Primary Care Covered
Services are rendered or thereafter.
1.1.6 "DIRECT PAYMENT PPO ENROLLEE REIMBURSEMENT OR DPPER" shall refer
to the rate of compensation as specified in Section 1.3 of this
Attachment that GROUP PROVIDER will receive for rendering
Primary Care Covered Services to Direct Payment PPO Enrollees.
1.1.7 "PPO UTILIZATION MANAGEMENT PROGRAM (UM-PPO)" shall mean a
program approved by COMPANY and designed to review the
appropriate utilization of Covered Services provided to Direct
Payment PPO Enrollees.
1.2 COMPANY shall institute a PPO Utilization Management Program as defined
in Section 1.1.7 of this Attachment, along with committees comprised of
Primary Care and Referral Providers to oversee the implementation and
administration of this Program. COMPANY will provide GROUP PROVIDER with
a Provider manual defining policies and procedures for the
administration of this Program.
1.3 Compensation:
1.3.1 DIRECT PAYMENT PPO ENROLLEE REIMBURSEMENT: Direct Payment PPO
Enrollee shall reimburse GROUP PROVIDER "DPPER" at such time
that Primary Care Covered Services are rendered or thereafter,
as set forth below as payment for those Primary Care Covered
Services made available or provided by GROUP PROVIDER to a
Direct Payment PPO Enrollee:
All Primary Care Covered Services:
1.3.2 HMO OPEN ACCESS ENROLLEES:
All Primary Care Covered Services:
1.3.3 POS OPEN ACCESS ENROLLEES:
All Primary Care Covered Services:
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. PRIMARY CARE GROUP PROVIDER AGREEMENT
6/8/98 - REVISED SARASOTA/MANATEE COUNTY MSA
PAGE 26 of 26
<PAGE> 1
Exhibit 10.9
================================================================================
OPTIMUM HEALTH SERVICES OF FLORIDA, INC.
================================================================================
SPECIALIST PROVIDER AGREEMENT
<PAGE> 2
- --------------------------------------------------------------------------------
This SPECIALIST PROVIDER Agreement, "Agreement", is made and entered into this
______ day of ________________, 199__ by and between Optimum Health Services of
Florida, Inc. (hereinafter referred to as "COMPANY") and
________________________________, "SPECIALIST PROVIDER".
DEFINITIONS
Defined terms shall have the meanings assigned to them in Attachment A to this
Agreement.
RECITALS
0.1 WHEREAS, COMPANY plans to seek and enter into service agreements with
health maintenance organizations and other healthcare insurers and
managed healthcare organizations, "PLAN's", licensed to operate in the
State of Florida for the provision of PLAN medical services, "Covered
Services", to "Enrollees" on a prepaid basis.
0.2 WHEREAS, COMPANY hereby engages SPECIALIST PROVIDER to provide "Covered
Services" to Enrollees on behalf of COMPANY in a manner which is in
accordance with the generally accepted standards of care of the
community within which the practice is located and, in accordance with
the same standards and with the same time availability as offered his
other patients.
0.3 NOW, THEREFORE, in consideration of the mutual promises hereinafter
contained and other valuable consideration, the parties hereto agree as
follows:
PART 1
PROVIDER CREDENTIALS
1.1 SPECIALIST PROVIDER assures that all persons employed, retained, or used
by SPECIALIST PROVIDER are licensed or are otherwise authorized by the
State of Florida to practice under their healthcare profession, and that
said licenses and/or authorizations have not been limited, restricted,
or revoked.
1.2 SPECIALIST PROVIDER agrees that no Covered Services may be rendered to
any Enrollees until COMPANY has verified the credentials of each
Physician and/or Healthcare Professional acting on behalf of SPECIALIST
PROVIDER. Such individuals must be fully licensed and in good standing
to practice their profession in the State of Florida.
1.3 SPECIALIST PROVIDER certifies that all information submitted to COMPANY
for credentialing by COMPANY is true and correct.
PART 2
PROFESSIONAL SERVICES AND OBLIGATIONS
2.1 SPECIALIST PROVIDER shall facilitate any approved transfers of the
responsibility for care of Enrollees in a timely fashion that ensures
confidentiality and the continuance of appropriate care in a manner
consistent with generally accepted standards of medical practice in the
community.
2.2 SPECIALIST PROVIDER shall not differentiate or discriminate in its
provision of Covered Services because of race, color, national origin,
ancestry, religion, sex, marital status, sexual orientation, or age; and
SPECIALIST PROVIDER shall render Covered Services to Enrollees in the
same manner, in accordance with the same standards, and within the same
time availability as offered to non-Enrollee patients.
2.3 In providing and claiming payment for Covered Services to Enrollees,
SPECIALIST PROVIDER shall comply with COMPANY's administrative policies
and procedures. This shall include, but not be limited to, timely
submission of Encounter Data and adherence to COMPANY's QM/UM Programs.
SPECIALIST PROVIDER shall also comply with all applicable State and
Federal laws and regulations relating to the delivery of Covered
Services.
2.4 SPECIALIST PROVIDER, if applicable, shall maintain affiliation on the
medical staff of at least one of the COMPANY Participating Hospitals, or
shall arrange for attending coverage at a Participating Hospital, and
shall appropriate privileges within their specialty area of practice as
indicated in a completed COMPANY Provider application submitted to
COMPANY. SPECIALIST PROVIDER
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. SPECIALIST PROVIDER AGREEMENT
REVISED - 2/15/98 ALL
PAGE 2 of 13
<PAGE> 3
- --------------------------------------------------------------------------------
shall immediately notify COMPANY in the event such affiliation and/or
clinical privileges are modified, suspended, or revoked. If SPECIALIST
PROVIDER chooses to arrange for attending coverage,
2.4.1 COMPANY must verify the credentials of said covering physician
pursuant to Part 1 of this Agreement.
2.4.2 SPECIALIST PROVIDER will maintain financial responsibility for
the provision of all attending Covered Services provided to
Enrollees referred to SPECIALIST PROVIDER.
2.5 Except when an Emergency renders it unsafe or impractical, SPECIALIST
PROVIDER shall utilize only Referral Providers, and will not utilize
other Providers to provide services to Enrollees unless specifically
Authorized in advance by Medical Director or his/her designee.
SPECIALIST PROVIDER also agrees to obtain Referral Authorization or
pre-admission certification for Referral services. If, in the case of an
emergency, Referral Authorization or pre-admission certification cannot
be obtained, SPECIALIST PROVIDER shall perform in the best interests of
Enrollee. SPECIALIST PROVIDER agrees to notify COMPANY within one
business day of the provision of said Referral Covered Services to
Enrollee.
2.6 Except when an Emergency renders it unsafe or impractical, SPECIALIST
PROVIDER agrees to arrange for admission of Enrollees only to hospitals
that are Participating Providers with COMPANY, and shall only admit
Enrollees after receipt of an Authorization from the Medical Director or
his/her designee.
2.7 Whenever an Enrollee requires the services of a Referral Provider,
SPECIALIST PROVIDER shall seek to obtain the services of a Participating
Referral Provider according to the guidelines adopted by the Utilization
Management Program. This shall include SPECIALIST PROVIDER's full
cooperation with the Medical Director and his/her staff in the
administration of COMPANY's QM/UM Programs.
2.8 SPECIALIST PROVIDER shall maintain adequate personnel and facilities
within the PLAN service area to meet their responsibilities under this
Agreement. SPECIALIST PROVIDER shall supervise all personnel employed by
him/her, including, but not limited to, allied Healthcare Professionals.
SPECIALIST PROVIDER's personnel, equipment, and facilities shall be
licensed or certified to the extent required by law.
2.9 SPECIALIST PROVIDER agrees to provide the Covered Services outlined in
Attachment B. These services shall be available to Enrollees during
SPECIALIST PROVIDER's regular working hours, and urgent care twenty-four
(24) hours per day, seven (7) days per week, including holidays, and
without regard to the degree or frequency of utilization of such Covered
Services by Enrollees.
2.10 SPECIALIST PROVIDER agrees to obtain and maintain such policies of
liability and malpractice insurance as are necessary to adequately cover
the SPECIALIST PROVIDER and their agents and/or employees against any
claim for damages arising from personal injuries or death occasioned
directly or indirectly in connection with performance of an act or
omission by SPECIALIST PROVIDER or their agents and/or employees. At a
minimum, said policy shall provide two hundred and fifty thousand
dollars ($250,000) per claim and seven hundred and fifty thousand
dollars ($750,000) in the aggregate, unless otherwise specified in the
State of Florida Statutes or the AHCA Florida Administrative Code Rules.
SPECIALIST PROVIDER agrees to provide proof of said insurance to COMPANY
upon demand. In addition, SPECIALIST PROVIDER shall have a "tail" policy
for a period not less than two (2) years following the effective
termination date of the foregoing policy in the event said policy is a
"claims made" policy. Said "tail" policy shall have the same policy
limits as the primary professional liability policy.
2.11 SPECIALIST PROVIDER shall maintain all required licensing necessary to
conduct all business as defined in this Agreement. Such licensing shall
include, but not be limited to, SPECIALIST PROVIDER's license to
practice medicine in the State of Florida, DEA licensing where
applicable, and all licensing required of SPECIALIST PROVIDER's
employees. Pursuant to Section 4.3, if at any time such licensing
becomes suspended or revoked, this Agreement shall immediately
terminate.
2.12 SPECIALIST PROVIDER agrees to notify COMPANY immediately in the event of
any of the following:
2.12.1 If the policies referred to in Section 2.10 are canceled or
denied for any reason.
2.12.2 Of any malpractice claims related to Covered Services provided
to Enrollees.
2.12.3 Suspension or relinquishment of SPECIALIST PROVIDER's license to
practice medicine in the State of Florida.
2.12.4 Suspension or relinquishment of any of SPECIALIST PROVIDER's
employee's and/or allied professional's licensing to provide
healthcare services to Enrollees.
2.13 SPECIALIST PROVIDER agrees to allow COMPANY and any PLAN(s) contracted
with COMPANY the right to use the name, specialties, and other pertinent
information concerning SPECIALIST PROVIDER for purposes of providing
Enrollment and marketing information in the course of COMPANY's
business. SPECIALIST PROVIDER may post a notice or sign in SPECIALIST
PROVIDER's place of business stating that SPECIALIST PROVIDER is a
Participating Provider with COMPANY and such contacted PLAN(s).
2.14 SPECIALIST PROVIDER agrees to comply with any pharmaceutical formularies
instituted and/or adopted by COMPANY and PLAN(s).
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PART 3
COMPENSATION
3.1 SPECIALIST PROVIDER shall be reimbursed by COMPANY as set forth in the
Attachments to this Agreement.
3.2 The reimbursement set forth in the Attachments of this Agreement less
any applicable Copayment shall constitute SPECIALIST PROVIDER's sole
compensation for Covered Services rendered to Enrollees.
3.3 SPECIALIST PROVIDER agrees to accept reimbursement from COMPANY as
payment in full for Covered Services rendered to Enrollees. SPECIALIST
PROVIDER agrees not to bill or to assess any surcharge to COMPANY, or
Enrollees for Covered Services regardless of whether or not payment is
received from COMPANY. SPECIALIST PROVIDER acknowledges that attempting
to charge any surcharge other than Copayments set forth by PLAN may
result in termination of this Agreement or other appropriate action by
COMPANY.
3.4 SPECIALIST PROVIDER hereby agrees that in no event, including but not
limited to, non-payment by COMPANY, COMPANY insolvency, or breach of
this Agreement, shall SPECIALIST PROVIDER bill, charge, collect a
deposit from, seek compensation remuneration, or reimbursement from, or
have any recourse against Enrollees or persons other than COMPANY acting
on their behalf, for Covered Services provided pursuant to this
Agreement. This provision shall not prohibit collection of copayments on
the COMPANY's behalf made in accordance with the terms of the applicable
agreement between the Enrollee and PLAN. SPECIALIST PROVIDER further
agrees that:
3.4.1 This provision shall survive the termination of this Agreement
regardless of the cause giving rise to termination and shall be
construed to be for benefit of the Enrollee, and
3.4.2 This provision supersedes any oral or written contrary agreement
now existing or hereafter entered into between SPECIALIST
PROVIDER and Enrollee or persons on their behalf.
3.5 COMPANY has or intends to enter into a medical services agreement with
PLAN, "the TPA Agreement". PLAN is a health maintenance organization,
healthcare insurer, or managed healthcare organization licensed by the
State of Florida pursuant to Chapter 641, Part I and Part III of the
Florida Statutes. Under the PLAN Agreement, COMPANY has contracted to
arrange for the provision of medical services, supplies, and
administration to Enrollees. COMPANY entered this Agreement with
SPECIALIST PROVIDER to provide medical services to Enrollees as set
forth in the TPA Agreement. COMPANY and SPECIALIST PROVIDER acknowledge
that as the entity accredited by the Florida Department of Insurance,
PLAN has the financial responsibility to ensure that Enrollees receive
the healthcare services for which they have contracted and nothing in
this Agreement relieves PLAN of the ultimate financial responsibility
for the delivery of healthcare services to Enrollees.
3.6 Covered Services provided to Enrollees by SPECIALIST PROVIDER shall be
submitted to COMPANY on a HCFA 1500 claim form within sixty (60) days
from the date of service. Any claims submitted to COMPANY after sixty
(60) days from the date of service will not be reimbursed to SPECIALIST
PROVIDER.
3.7 Hold Harmless Clause:
3.7.1 COMPANY agrees that at all times during the term of this
Agreement COMPANY shall indemnify, defend, and hold SPECIALIST
PROVIDER and its employees harmless from and against all claims,
damages, causes of action, cost, or expense, including court
costs and reasonable attorney fees, to the extent proximately
caused by any negligent act or wrongful conduct arising as a
result of any action or inaction caused by COMPANY or any of
their personnel in the performance or omission of any act or
responsibility assumed or deemed to have been assumed by COMPANY
pursuant to this Agreement.
3.7.2 SPECIALIST PROVIDER agrees that at all times during the term of
this Agreement, SPECIALIST PROVIDER shall hold COMPANY and its
employees, officers, directors, agents, and ACHA harmless from
and against all claims, damages, causes of action, cost, or
expense, including court costs and reasonable attorney fees, to
the extent proximately caused by any negligent act or wrongful
conduct arising as a result of any action or inaction caused by
SPECIALIST PROVIDER or any of their personnel in the performance
or omission of any act or responsibility assumed or deemed to
have been assumed by SPECIALIST PROVIDER pursuant to this
Agreement.
3.8 COMPANY may amend any financial arrangements offered to SPECIALIST
PROVIDER in the Attachments to this Agreement upon thirty (30) days
written notice to SPECIALIST PROVIDER. COMPANY may exercise amendment to
the financial arrangements of this contract in the event that at least
one of the following circumstances occur:
3.8.1 Significant changes made to the financial arrangements between
COMPANY and PLAN.
3.8.2 Significant changes made to Covered Services as defined in this
Agreement.
3.8.3 Regulatory changes made by any State or Federal agency that
would cause either Section 3.8.1 or 3.8.2 to occur.
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If none of the above circumstances are met, any amendment to the
financial arrangements of this Agreement will be handled pursuant to
Section 9.1 of this Agreement.
3.9 COMPANY shall retain all rights whatsoever for all third party liability
including, but not limited to, auto insurance, worker's compensation,
and any coordination of benefits with other group health insurance up to
the full amount reimbursed to SPECIALIST PROVIDER by COMPANY. SPECIALIST
PROVIDER agrees to notify COMPANY immediately upon notification of the
existence of such third party liability in the provision of Covered
Services to Enrollee. In addition, SPECIALIST PROVIDER agrees to inform
COMPANY of any payment received from such third party, including the
refund of any compensation from such third party beyond any receivable
due SPECIALIST PROVIDER from COMPANY for the provision of Covered
Services as defined in the Attachments of this Agreement.
PART 4
TERM AND TERMINATION
4.1 This Agreement shall start from the date signed by COMPANY through
December 31st of the year signed by COMPANY. This Agreement shall be
automatically renewed and extended for one year periods from and after
the expiration date, unless either party delivers notice of termination
to the other at least ninety (90) days before the effective date of the
termination, except when termination is made by COMPANY for cause.
4.2 This Agreement may be terminated by COMPANY as of the end of a calendar
month, without cause, by giving ninety (90) days prior written notice to
SPECIALIST PROVIDER. This Agreement may be terminated by SPECIALIST
PROVIDER as of the end of a calendar month, without cause, by giving
ninety (90) days prior written notice to COMPANY.
4.3 Termination of this Agreement by COMPANY for cause is effective
immediately. Cause for termination includes, but may not be limited to:
4.3.1 Revocation, suspension, or restrictions of SPECIALIST PROVIDER's
license, certification, or medical staff membership or clinical
privileges at an COMPANY Participating hospital.
4.3.2 Failure to provide services of acceptable quality.
4.3.3 Failure to attend and adhere to this Agreement or the bylaws or
reasonable rules, regulations, or requirements adopted by
COMPANY relating to the provision of Covered Services.
4.3.4 Acts or omissions constituting unprofessional or unethical
conduct.
4.3.5 Cause pursuant to Section 6.1.
4.4 In the event this Agreement is terminated, the right of compensation
shall extend to the effective date of termination.
4.5 COMPANY shall promptly make reasonable and medically appropriate
arrangements for the continued care of Enrollees upon termination of
this Agreement. Until such arrangements have been made, SPECIALIST
PROVIDER shall continue to provide care or treatment to Enrollees then
under their care or treatment.
4.6 SPECIALIST PROVIDER shall look solely to COMPANY or PLAN for
compensation according to this Agreement for Covered Services provided
to Enrollees pursuant to Section 4.4.
4.7 In the event that any agreement between COMPANY and any PLAN is
terminated, COMPANY shall have the right to terminate this Agreement by
giving thirty (30) days written notice to SPECIALIST PROVIDER.
4.8 In the event that any State or Federal Agency or Court of Law determines
that this Agreement violates any law or regulation, COMPANY or
SPECIALIST PROVIDER may terminate this Agreement upon thirty (30) days
written notice to the other party. This notice period may be shortened
if such determination made by the ruling State or Federal Agency or
Court of Law requires a shorter period.
4.9 SPECIALIST PROVIDER shall provide ninety (90) days advance written
notice to COMPANY and the Department of Insurance before canceling this
Agreement for any reason.
4.10 Nonpayment for goods or services rendered by SPECIALIST PROVIDER to
COMPANY Enrollees shall not be a valid reason for avoiding the ninety
(90) day advance notice of cancellation, pursuant to Section 4.9.
4.11 Upon receipt by COMPANY of a ninety (90) day cancellation notice,
COMPANY may, if requested by SPECIALIST PROVIDER, terminate this
Agreement in less than ninety (90) days if COMPANY and PLAN are not
financially impaired or insolvent.
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PART 5
RECORD MAINTENANCE AND ACCESSABILITY
5.1 SPECIALIST PROVIDER agrees to maintain complete and accurate fiscal
records, as well as medical and social records, applying solely to
Enrollees for whom the SPECIALIST PROVIDER has claimed and received
payment. SPECIALIST PROVIDER shall maintain such records as are
necessary for evaluation of the quality, appropriateness and timeliness
of services performed under this Agreement. Said records will be made
available for fiscal audit, medical audit, medical review, utilization
review, any State or Federal agency audits, and any other periodic
monitoring upon request of authorized representatives of COMPANY.
SPECIALIST PROVIDER further agrees to reimburse COMPANY within thirty
(30) days after COMPANY's request for such payment any and all amounts
determined to be payable to COMPANY by SPECIALIST PROVIDER as a result
of such audit and any State and/or Federal disallowances lawfully
imposed on COMPANY or PLAN. Said records shall be retained for a period
of at least seven (7) years after the start date of the applicable
retention period (in case of a minor, records shall be retained for at
least seven (7) years after age of majority), or until resolution of any
ongoing audit occurs, whichever is later.
5.2 Medical records of Enrollees shall be treated as confidential and shall
be maintained in compliance with all State and/or Federal laws and
regulations regarding the ownership and confidentiality of patient
records.
PART 6
QUALITY OF CARE
6.1 At all times while this Agreement is in effect, SPECIALIST PROVIDER
shall be licensed without restriction as a Physician or Healthcare
Professional in the State of Florida; shall hold DEA certification
without restriction; and shall be approved by the credentialing
committee of COMPANY. This Agreement shall be terminated immediately if
SPECIALIST PROVIDER ceases to be so qualified at any time.
6.2 SPECIALIST PROVIDER shall participate in the Quality Management and
Utilization Review Programs, and shall participate in a program of
continuing education consistent with such requirements as COMPANY may
adopt. SPECIALIST PROVIDER will be obligated to cooperate fully within
such programs and procedures, including, but not limited to,
pre-admission certification of all elective Hospital admissions,
pre-Authorization certification of Referrals, and Referrals of certain
identified ancillary services.
PART 7
CONFIDENTIALITY
7.1 SPECIALIST PROVIDER shall not release information regarding the terms
set forth in this Agreement to any person or entity without the written
consent of COMPANY, except such information as may be necessary to
disclose to agents, affiliates, attorneys, or patients in order to carry
out the terms of this Agreement. SPECIALIST PROVIDER recognizes that all
material provided by COMPANY, except for material prepared and/or
provided by any State or Federal regulatory bodies, is the proprietary
property of COMPANY and SPECIALIST PROVIDER shall not disclose or
release such material to any third party, with the exception of above
mentioned regulatory bodies and then, only to the extent appropriate, or
as otherwise provided herein, without the prior written consent of
COMPANY. Upon termination of this Agreement, SPECIALIST PROVIDER agrees
to return all such materials, including copies thereof, whether
authorized or not, to COMPANY. In addition, SPECIALIST PROVIDER shall
not use any of the above referenced materials including, but not limited
to, Enrollee listings, directly or indirectly, to further the business
purposes of any other entity, including, but not limited to, COMPANY's,
health maintenance organizations, and preferred provider organizations.
The above shall not apply if disclosure is made pursuant to a court
order, provided COMPANY is immediately informed of such order and has
had the opportunity to seek relief. This Part shall survive the
termination of this Agreement. The parties agree that any violation of
this Part by SPECIALIST PROVIDER shall result in irreparable injury to
COMPANY. Therefore, in addition to any remedies otherwise available to
the COMPANY, COMPANY is hereby entitled to have a court issue an
injunction enjoining and restraining SPECIALIST PROVIDER and any related
parties or individuals from violating this Part.
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PART 8
COMPANY OBLIGATIONS
8.1 COMPANY shall seek and enter into contracts with PLANS and monitor the
healthcare performance of SPECIALIST PROVIDERS and their Referred
Enrollees under such contracts.
8.2 COMPANY shall institute a Quality Management and Utilization Management
Program as defined in Attachment A, along with committees comprised of
Primary Care and Referral Providers to oversee the implementation and
administration of these Programs. COMPANY will provide SPECIALIST
PROVIDER with a Provider manual defining policies and procedures for the
administration of these Programs.
8.3 COMPANY will develop a dispute resolution process, including a formal
grievance procedure, for handling complaints and/or concerns of
SPECIALIST PROVIDER. Such procedure will be defined in the Provider
manual provided to SPECIALIST PROVIDER.
PART 9
MISCELLANEOUS
9.1 In the case of amendment of any Section or Part of this Agreement by
COMPANY, except in the case outlined in Section 3.8, COMPANY must give
written notice of such amendment to SPECIALIST PROVIDER with a time
frame of no more than thirty (30) days from which said amendment will
take effect unless objected to by at least fifty-one percent (51.0%) of
all SPECIALIST PROVIDERS to which said amendment is added.
9.2 All notices and demands of any kind shall be in writing and personally
delivered or sent by first class mail to either party at the address
that either party designates in this Agreement. Any such notice to
SPECIALIST PROVIDER shall be effective immediately upon personal
delivery or five (5) days after deposit with the United States Postal
Service. Any such notice to COMPANY shall be effective immediately upon
receipt.
9.3 If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, or unenforceable by reason of any
rule of law or public policy, all other provisions of this Agreement
shall nevertheless remain in effect. No provision of this Agreement
shall be deemed dependent on any other provision unless so expressed
herein.
9.4 This Agreement shall be interpreted, construed, and governed according
to the laws of the State of Florida.
9.5 SPECIALIST PROVIDER shall not, without the written consent of COMPANY,
transfer or assign this Agreement or any rights or obligations under
this Agreement. This Agreement shall be binding upon and inure to the
benefit of the parties to it, and their respective heirs, legal
representatives, successors, and assigns. COMPANY may assign this
Agreement without approval of SPECIALIST PROVIDER.
9.6 This Agreement constitutes the entire Agreement between the parties and
shall bind and inure to the benefit of both COMPANY and SPECIALIST
PROVIDER and their respective successors, assigns, heirs, and personal
representatives subject to the restrictions on assignment contained
herein.
9.7 The Part headings used in this Agreement are for reference and
convenience only and shall not in any way limit or amplify the terms and
provisions hereof nor affect the interpretation of this Agreement.
9.8 In the event the parties are unable to resolve disputes, pursuant to
Section 8.3, the parties agree to submit the matter to binding
arbitration in accordance with the rules of the American Arbitration
Association, which arbitration shall be handled whenever practical in
the City of Tampa, Hillsborough County, Florida. The parties expressly
covenant and agree to be bound by the decisions of the arbitrator(s) and
accept any decision by a majority of the arbitrators as a final
determination of the matter in dispute. The arbitrator(s) may in any
such proceedings award all court costs and attorney's fees to the
prevailing party.
9.9 None of the provisions of this Agreement are intended to create nor
shall be deemed or construed to create any relationship between the
parties hereto other than that of independent contractors. Neither of
the parties hereto, nor any of their respective officers, directors, or
employees shall act as nor be construed to be the agent, employee, or
representative of the other.
9.10 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.
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9.11 For the term of this Agreement, and for a period of twelve (12) months
after the termination of this Agreement, SPECIALIST PROVIDER shall not
engage in the persuasion of an Enrollee to disenroll from PLAN, to
discontinue their relationship with COMPANY.
9.12 In the event the provision of services provided for herein conflicts
with those of a Participating PLAN, services provided may be amended in
accordance with Section 9.1.
If the foregoing correctly sets forth the understanding between COMPANY and
SPECIALIST PROVIDER, please indicate in the space provided for that purpose
below, whereupon this shall constitute a binding Agreement.
OPTIMUM HEALTH SERVICES OF FLORIDA, INC.
BY: Christian E. Miller
-------------------
DATE:
-----------------------------
TITLE: Vice President of Operations
----------------------------
SIGNATURE:
-----------------------------
ADDRESS: 17757 US 19 North, Suite 350
----------------------------
Clearwater, Florida 33764
-------------------------
SPECIALIST PROVIDER
BY:
-----------------------------
DATE:
-----------------------------
TITLE:
-----------------------------
SIGNATURE:
-----------------------------
ADDRESS:
-----------------------------
-----------------------------
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OPTIMUM HEALTH SERVICES OF FLORIDA, INC. SPECIALIST PROVIDER AGREEMENT
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ATTACHMENT A
DEFINITIONS
1.1 "ATTACHMENTS" means Attachments A through D, which are incorporated
herein.
1.2 "AUTHORIZATION" means a QM/UM Program determination made by or on behalf
of COMPANY for a specific non-Emergent COMPANY Covered Service to be
provided or arranged for an Enrollee, to be directed by a primary care
provider to a Referral Provider, or Emergent COMPANY Covered Service
provided, including without limitation, the extent and duration of such
Medically Necessary Covered Service for an Enrollee.
1.3 "COPAYMENT" means any and all charges collectable directly by SPECIALIST
PROVIDER from Enrollee as payment in addition to Capitation or Fee-for
Service Payments for Covered Services as defined by the Enrollee's Group
Benefits Agreement.
1.4 "COVERED SERVICES" shall mean those healthcare benefits that an Enrollee
is entitled to receive from a Participating Provider pursuant to the
applicable Enrollee Group Benefits Agreement.
1.5 "ENCOUNTER FORM" means a HCFA 1500 or a form supplied to SPECIALIST
PROVIDER by COMPANY upon which the SPECIALIST PROVIDER enters all
information relative to Enrollee's use of Covered Services.
1.6 "EMERGENCY" means the sudden and unexpected onset of a symptom, illness,
or injury, which in the judgment of a Physician requires immediate
diagnosis and/or treatment to alleviate or attempt to prevent loss of
life, irreparable physical damage, or serious impairment of bodily
function.
1.7 "EMERGENCY SERVICES" means medical screening examination and evaluation
by a Physician, or, to the extent permitted by applicable laws, by other
appropriate personnel under the supervision of a Physician, to determine
whether an Emergency medical condition exists, and if it does, the
inpatient or outpatient Covered Services, provided by an appropriate
source which is necessary to relieve or eliminate the Emergency medical
condition, within or outside the Service Area, which may not be delayed
until Participating Physicians can be used without possible serious
effects on the health of the Enrollee. Such services must be or appear
to be needed immediately to prevent the death of the Enrollee or serious
impairment of the Enrollee's health, and are considered Emergency
Services as long as the transfer of the Enrollee to an appropriate
Participating Physician is precluded because of the risk to the Enrollee
's health, or the distance and nature of illness involved would make
such transfer unreasonable.
1.8 "ENROLLEE" means an individual enrolled with PLAN, including, but not
limited to eligible newborn children and dependents, entitled to receive
Covered Services.
1.9 "GROUP BENEFITS AGREEMENT" means the document distributed by PLAN to its
Enrollees describing all Covered Services in the PLAN.
1.10 "HEALTHCARE PROFESSIONAL" means any nurse, physician extender (e.g.,
nurse practitioner, physician assistant) and other allied health
professional, including but not limited to health educator, laboratory
technologist, audiologist, speech pathologist, psychologist, podiatrist,
dentist, physical therapist, occupational therapist, clinical social
worker, marriage, family and child counselor, optometrist or dispensing
optician, who is licensed by the State of Florida if required and who
provides certain Covered Services to COMPANY Enrollees through an
Agreement with COMPANY.
1.11 "INSTITUTION" means any facility licensed by the State of Florida as an
acute care hospital, ambulatory surgery center, skilled nursing
facility, hospice, or other urgent care center.
1.12 "MEDICAL DIRECTOR" means a Physician appointed by COMPANY to oversee all
COMPANY medical affairs including QM and UM.
1.13 "MEDICALLY NECESSARY" shall be defined by COMPANY in the exercise of the
Utilization Management Program. This shall include due consideration of
whether Covered Services are:
1.13.1 Appropriate for the symptoms, diagnosis or treatment of a
condition, illness or injury; and
1.13.2 Provided for the diagnosis or the direct care and treatment of a
condition, illness, or injury; and
1.13.3 In accordance with the standards of good medical practice within
the surrounding community; and
1.13.4 Not solely for the convenience of the Enrollee or Provider.
The Medical Director or his designee, subject to the applicable dispute
resolution and member grievance procedures of the Utilization Management
Program, shall make the final decision of whether a treatment is
Medically Necessary.
1.14 "NON-COVERED SERVICE" means those services which COMPANY enrollees are
not entitled to receive pursuant to the applicable Enrollee benefit
package and/or those services considered not Medically Necessary.
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1.15 "PARTICIPATING PROVIDER" means a Provider that has entered into an
Agreement with COMPANY to provide Covered Services to Enrollees.
1.16 "PHYSICIAN" means any doctor of medicine, osteopathy, chiropractor, or
dental surgery licensed by the State of Florida.
1.17 "PLAN" means the entity described in Section 0.1 of this Agreement.
1.18 "PRIMARY CARE PROVIDER" shall mean the Participating Provider, usually a
family or general practitioner, internist, or pediatrician, selected by
Enrollee, who has the responsibility of providing initial care and
referring, obtaining Authorization for, supervising, and coordinating
the provision of all other Covered Services to Enrollee in accordance
with COMPANY's QM/UM Programs.
1.19 "PROVIDER" means the Physicians, Institution, Healthcare Professionals,
pharmacies, ambulance companies, ancillary entities, and other licensed
healthcare entities who provide Covered Services.
1.20 "QUALITY MANAGEMENT PROGRAM" (QM) means a program approved by COMPANY,
directed by Participating Providers and designed to assure the provision
of quality Covered Services to Enrollees.
1.21 "SPECIALIST, OR REFERRAL COVERED SERVICES" means those Covered Services
for which SPECIALIST PROVIDER is trained, qualified, credentialed, and
licensed to perform and provide to Enrollees pursuant to Attachment B to
this Agreement.
1.22 "SPECIALIST PROVIDER, OR REFERRAL PROVIDER" shall mean a Participating
Provider who performs Covered Services that are not Primary Care Covered
Services, within their designated specialty(s) as defined in their
Provider Agreement with COMPANY.
1.23 "UTILIZATION MANAGEMENT PROGRAM" (UM) means a program approved by
COMPANY and designed to review the appropriate utilization of Covered
Services provided to Enrollees.
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ATTACHMENT B
SPECIALIST PROVIDER COVERED SERVICES
Specialist Covered Services shall include the following:
1.1 Covered Services rendered by SPECIALIST PROVIDER within his/her
specialty upon Referral at the SPECIALIST PROVIDER's office or elsewhere
when dictated by the need for preventive, diagnostic, or therapeutic
care for the treatment of a particular injury, illness, disease,
specimen collection, and routine outpatient surgical conditions.
1.2 Consultations with Enrollees. This includes any time spent with Enrollee
for the evaluation and treatment of Enrollee's diagnoses. This includes
any time spent on the telephone with Enrollee regarding the evaluation
and treatment of their diagnoses.
1.3 All pre-Authorized X-ray, laboratory, and ancillary services. If no
pre-Authorization is given by COMPANY, SPECIALIST PROVIDER must refer
those Covered Services to a Participated Provider in accordance with
COMPANY's policies and procedures as defined in COMPANY's Provider
manual.
1.4 SPECIALIST PROVIDER Covered Services to Enrollees admitted to
Institutions within said specialist's primary area of specialty.
1.5 Consultations with Medical Director and his/her staff, Enrollee's
Primary Care Provider, PLAN's UM staff, and other Referring Providers as
defined in the COMPANY Provider manual policies and procedures.
1.6 Supplies used in the provision of Covered Services by SPECIALIST
PROVIDER. This shall not include the cost for any injectables given by
SPECIALIST PROVIDER. The administration of injectables will be included
in the COMPANY fee schedule for injectables to SPECIALIST PROVIDER.
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ATTACHMENT D
FEE FOR SERVICE REIMBURSEMENT
STANDARD PPO HEALTHPLAN AGREEMENTS / DIRECT PAYMENT PPO AGREEMENTS
1.1 Definitions: The following definitions apply only to this Attachment D
of this Agreement:
1.1.1 "ADDENDUM" means this Attachment D, which shall be incorporated
herein.
1.1.2 "DIRECT PAYMENT PPO ENROLLEE" shall refer to those Enrollees
that have entered into a Group Subscriber Agreement with PLAN
for access to COMPANY's Participating Provider network. Under
such a Group Subscriber Agreement, Direct Payment PPO Enrollee
shall reimburse SPECIALIST PROVIDER the Direct Payment PPO
Enrollee Reimbursement (DPPER) at such time that Referral
Covered Services are rendered or thereafter.
1.1.3 "STANDARD PPO ENROLLEE" shall refer to those Enrollees that have
entered into a Group Subscriber Agreement with PLAN for access
to COMPANY's Participating Provider network. Under such a Group
Subscriber Agreement, SPECIALIST PROVIDER will bill COMPANY the
Standard PPO Enrollee Reimbursement (SPER) less any copayment or
coinsurance collected from Standard PPO Enrollee at such time
that Referral Covered Services are rendered or thereafter.
1.1.4 "DIRECT PAYMENT PPO ENROLLEE REIMBURSEMENT OR DPPER" shall refer
to the rate of compensation as specified in Section 1.3 of this
Attachment that SPECIALIST PROVIDER will receive for rendering
Referral Covered Services to Direct Payment PPO Enrollees.
1.1.5 "STANDARD PPO ENROLLEE REIMBURSEMENT OR SPER" shall refer to the
rate of compensation as specified in Section 1.3 of this
Attachment that SPECIALIST PROVIDER will receive for rendering
Referral Covered Services to Standard PPO Enrollees.
1.1.6 "PPO UTILIZATION MANAGEMENT PROGRAM (UM-PPO)" shall mean a
program approved by COMPANY and designed to review the
appropriate utilization of Covered Services provided to Standard
and Direct Payment PPO Enrollees.
1.2 COMPANY shall institute a PPO Utilization Management Program as defined
in Section 1.1.6 of this Attachment, along with committees comprised of
Primary Care and Referral Providers to oversee the implementation and
administration of this Program. COMPANY will provide SPECIALIST PROVIDER
with a Provider manual defining policies and procedures for the
administration of this Program.
1.3 Compensation:
1.3.1 DIRECT PAYMENT PPO ENROLLEE REIMBURSEMENT: Direct Payment PPO
Enrollee shall reimburse SPECIALIST PROVIDER "DPPER" at such
time that Referral Covered Services are rendered or thereafter,
as set forth below as payment for those Referral Covered
Services made available or provided by SPECIALIST PROVIDER to a
Direct Payment PPO Enrollee:
All Referral Covered Services:
1.3.2 STANDARD PPO ENROLLEE REIMBURSEMENT: COMPANY shall reimburse
SPECIALIST PROVIDER "SPER", less any copayment or coinsurance
collected from Standard PPO Enrollee at such time that Referral
Covered Services are rendered or thereafter, as set forth below
as payment for those Referral Covered Services made available or
provided by SPECIALIST PROVIDER to a Standard PPO Enrollee:
All Referral Covered Services:
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ATTACHMENT C
FINANCIAL ARRANGEMENTS
COMPANY shall reimburse SPECIALIST PROVIDER those fees as set forth below as
payment for those Referral Covered Services made available or provided by
SPECIALIST PROVIDER to an Enrollee.
All Referral Covered Services rendered to:
- - To Commercial HMO Enrollees:
--------------------
(Initial if Elected)
- - To Medicare Enrollees:
--------------------
(Initial if Elected)
- - To Medicaid Enrollees:
--------------------
(Initial if Elected)
*** NO WITHHOLD SHALL APPLY***
- --------------------------------------------------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. SPECIALIST PROVIDER AGREEMENT
REVISED - 2/15/98 ALL
PAGE 13 of 13
<PAGE> 1
Exhibit 10.10
May 12, 1997
Mr. Christopher M. Grady, CNE
509 35th Avenue North
St. Petersburg, FL 33704
Dear Mr. Grady,
This letter, when accepted by you in a manner hereinafter provided, will
evidence the agreement among Mr. Christopher M. Grady, CNE (the "Employee") and
Complete Wellness Independent Physician Association, Inc. (the "Company"), a
subsidiary of Complete Wellness Centers, Inc., a Delaware corporation ("CWC")
for the provision of certain services to be rendered by Employee to the Company
(the "Agreement"), all under the following terms and conditions to wit:
1. EMPLOYMENT DUTIES
The Company shall employ Employee as Director of Management Information Systems.
Employee shall report to the President and Chief Operating Officer, subject in
all events to the control and supervision of the Board of Directors.
Employee shall devote his time and best efforts on a substantially full time
basis to the business and affairs of the Company.
2. EMPLOYMENT TERM
This Agreement shall commence on June 1, 1997, and shall end on May 31, 2000
(the "Employment Term") unless extended by the Company and Employee in writing
or unless sooner terminated in accordance with the provisions of this Agreement.
3. COMPENSATION, EXPENSES, ETC.
In consideration of performance of the services and activities hereby, the
Company shall pay Employee compensation as follows:
A. An initial base salary of forty-five thousand dollars ($45,000)
per annum until such time as the Company is operational. At such
time as the Company is operational, Employee's base salary shall
increase to eighty thousand dollars ($80,000.00) per annum,
payable semi-monthly in arrears. For the purposes of this
Agreement, the Company shall be deemed to be "operational" at
such a time as the Company executes a binding agreement(s) with
a managed care organization(s) covering at least two thousand
five hundred (2,500) lives.
<PAGE> 2
B. Employee shall receive an additional performance bonus (the
"Bonus") equal to twenty percent (20%) of the Company's
management bonus pool ("Management Bonus Pool"). The management
Bonus Pool shall be equal to ten percent (10%) of the Company's
annual pre-tax income, determined in accordance with generally
accepted accounting principles ("GAAP"). However, in no case
shall the Management Bonus Pool exceed five million dollars
($5,000,000.00) annually. In the event Employee terminates his
employment agreement with the Company, his Bonus will be
reallocated by the Board.
In the event the Company is obligated in fiscal year 1998 to
fund shortfall in its capital reserves to meet managed care
contracting requirements, the Company shall defer payment of the
Bonus due employee in fiscal year 1998 until fiscal year 1999
and such deferred Bonus shall not be included as part of the
five million dollar ($5,000,000.00) cap on the Management Bonus
Pool for that year.
In the event this Agreement is terminated by the Company in
accordance with section 5 herein, unless such termination is for
Cause, Employee shall receive a pro rata portion of the Bonus.
C. Three (3) weeks of compensated vacation which shall vest ratably
throughout the year. Vacation accrued but unused at the end of
the calendar year may be carried over into the following year
and used in accordance with Company policy.
D. The Company shall make available such health benefits and any
other benefits as it makes available to its executive employees.
E. Upon termination of this Agreement by mutual written agreement,
death, or disability of the Employee, or change of control
(where change of control shall mean (i) any transaction that has
the result that stockholders of the Company immediately before
such transaction cease to own at least fifty-one percent (51%)
of the voting stock of the Company or of any entity that results
from the participation of the Company in a reorganization,
liquidation or any other form of corporate transaction; (ii) a
merger, consolidation, reorganization, liquidation or
dissolution in which the Company does not survive; or (iii) a
sale, lease exchange or other disposition of all or
substantially all the property and assets of the Company), the
Employee shall receive a severance package equal to fifty
percent (50%) of Employee's annual base salary at the time of
termination, payable in six (6) equal monthly installments,
beginning in the second calendar month following the month in
which termination occurs.
Employee shall be entitled to all holidays that are prescribed
by the Company's policies and practices. The Employee shall be
entitled to five (5) days paid sick leave per year. Unused sick
leave days may not be carried over to the following calendar
year or years.
2
<PAGE> 3
F. The Company shall provide Employee with an office and
secretarial services comparable to those of its other executive
employees.
G. The Company shall deduct the usual withholding taxes from
Employee's compensation consistent with standard practices and
applicable federal and state laws.
H. The Company shall reimburse Employee for any documented out of
pocket expenses incurred in connection with the duties and
responsibilities described herein, subject to the Company's
policies. Upon termination of this Agreement, all accrued but
unpaid compensation to Employee shall be payable in full.
4. STOCK OPTIONS
A. Time Options - Employee shall be granted on June 1, 1997 under the Company's
stock option plan non-qualified options ("Time Options') to purchase two hundred
(200) shares of the Company's Common Stock at an exercise price of one dollar
($1.00) per share which shall be evidenced by a stock option agreement (such
Time Options shall be subject to adjustment in the event of a re-capitalization,
stock split, rights offering, stock dividend). Sale of the shares of Common
Stock issued to Employee upon the exercise of the Time Options may be subject to
limitations pursuant to Rule 144 under the Securities Act of 1933. The Time
Options shall vest with respect to thirty-three and one-third percent (33 1/3%)
on June 1, 1998; thirty-three and one-third percent (33 1/3%) on June 1, 1999;
and thirty-three and one-third percent (33 1/3%) on May 31, 2000. The Time
Options shall be exercisable for a period of five (5) years from June 1, 1997.
However, in the event this Agreement is terminated for cause or in the event
Employee resigns from the employment of the Company, the vested Time Options
shall be exercisable for a period of three (3) months from the date of such
termination or resignation.
B. Performance Options - Employee shall be granted on June 1, 1997 under the
Company's stock option plan, non-qualified performance options ("Performance
Options') to purchase two hundred (200) shares of the Company's Common Stock at
an exercise price of one dollar ($1.00) per share which shall be evidenced by a
stock option agreement (such Performance Options shall be subject to adjustment
in the event of a re-capitalization, stock split, rights offering, stock
dividend). Sale of the shares of Common Stock issued to Employee upon the
exercise of the Performance Options may be subject to limitations pursuant to
Rule 144 under the Securities Act of 1933. The Performance Options shall vest at
the rate of twenty (20) Performance Options for every one million dollars
($1,000,000.00) of after tax net income determined in accordance with GAAP,
generated by the Company in fiscal year 1999, which ends December 31, 1999.
However, in the event this Agreement is terminated for cause or in the event
Employee resigns from the employment of the Company, the vested Performance
Options shall be exercisable for a period of three (3) months from the date of
such termination or resignation.
C. Additional Options - In the event of an initial public offering ("IPO') by
the Company, the Company shall, in addition to the Time Options and the
Performance Options, create a management stock option plan ("Management Option
Plan") representing not less than five percent (5%) of the fully issued and
outstanding shares of the Company at that time, before the
3
<PAGE> 4
issuance of the shares in the IPO, and employee shall be granted twenty percent
(20%) of the Management Option Plan.
5. TERMINATION
This Agreement may be terminated prior to the end of the Employment Term,
(i) by the written agreement between Company and Employee;
(ii) by the death of Employee or her disability for a period of one
hundred and twenty (120) consecutive days or the adjudicated
mental incompetency of Employee; or
(iii) by the Company for cause, where "cause" shall mean for purpose
of this Agreement:
(a) a violation by Employee of any material provision of this
Agreement, a breach of fiduciary duty or conduct involving
moral turpitude, where such violation, activity, or
conduct is not remedied by Employee within thirty, (30)
days of written notice from the Company
(b) employee's conviction of a felony
6. COVENANT NOT TO COMPETE; NOT TO SOLICIT
A. During the Employment Term and for a period of six (6) months
thereafter, the Employee will not without the prior written
permission of the Company in each instance directly or indirectly
carry on or participate in a business the same as or similar to or in
competition with that conducted or engaged in by the Company or any
of its subsidiaries or affiliates. In the event this Agreement is
terminated in accordance with Section 5 herein, the terms of this
Section 6(a) shall be applicable for a period of six (6) months
beyond such termination.
B. The term "carry on or participate in a business the same as or
similar to that conducted or engaged in by the Company or any of its
subsidiaries or affiliates" shall include the Employee, directly or
indirectly, doing any of the following listed acts, other than
carrying on or engaging in activities expressly permitted under this
Agreement:
(i) carrying on or engaging in any such business as a principal,
or solely or jointly with others as a director, officer,
agent, employee, consultant or partner, or stockholder or
limited partner owning more than five percent (5%) of the
stock or equity interests in or securities convertible into
more than five percent (5%) of the stock of or equity
interests in any corporation, association or limited
partnership; or
(ii) as agent or principal carrying on or engaging in any
activities or negotiations with respect to the acquisition
or disposition of any such business; or
(iii) lending credit or money for the purpose of establishing or
operating any such business; or
(iv) giving advice to any other person, firm, association,
corporation or other entity engaging in any such business,
provided such other person, firm, association, corporation
or other entity is not a member of Employee's immediate
family; or
(v) lending or allowing his name or reputation to be used in
any such business; or
C. In the event of a breach or threatened breach by the Employee of the
provisions of this Section 6, the Company shall be entitled to
injunctive relief against the Employee.
4
<PAGE> 5
Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies available to the Employer for such breach
or threatened breach, including without limitation the recovery of
damages from the Employee.
D. During the Employment Term and for six (6) months thereafter, the
Employee will not without the prior written permission of the Company
in each instance will not solicit, or attempt to solicit and employ
any employee of the Company or any of its subsidiaries or affiliates,
or commit an act the primary purpose of which is to induce employee
of the Company or any of its subsidiaries or affiliates to leave such
employment or significantly interfere with, disrupt or attempt to
disrupt any past, present or prospective relationship, contractual or
otherwise, relating to the business activities between the Company or
any of its subsidiaries or affiliates and their respective prospects.
E. The parties hereto consider the restrictions contained in this
Section 6 to be reasonable. If, however, such restrictions are found
by any court having jurisdiction to be unreasonable because they are
(or any of them is) too broad, then such restrictions shall
nevertheless remain effective, but shall be considered amended as to
protection of business, time or geographic area in whatever manner is
considered reasonable by that court and, as so amended, shall be
enforced.
F. The provisions of this Section 6 shall survive the expiration or
termination, for any reason, or this Agreement and shall be
separately enforceable.
7. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. The Employee agrees that she will not, during the Employment Term or
thereafter, make use of, divulge or otherwise disclose, directly or
indirectly, any trade or business secret (including, without
limitation, any customer list, data, records or financial information
constituting a trade or business secret) concerning the business or
policies of the Company or any of its subsidiaries or affiliates
which she may have learned as a result of her employment during the
Employment Term or prior thereto as shareholder, employee, officer
and/or director or the Company except to the extent such use or
disclosure is necessary to the performance of this Agreement and in
furtherance of the Company's best interest. The provisions of this
Section 7 shall survive the expiration or termination, for any
reason, of this Agreement.
B. The Employee shall not during the Employment Term or for six (6)
months thereafter make use of, divulge or otherwise disclose,
directly or indirectly, any confidential information concerning the
business or policies of the Company or any of its subsidiaries or
affiliates which she may have learned while a shareholder, employee,
officer and/or director of the Company.
C. In the event of a breach or reasonably threatened breach by the
Employee of the provisions of this Section 7, the Company shall be
entitled to an injunction restraining the Employee from disclosing,
in whole or in part, any such trade or business secret and/or any
such confidential information, or from rendering any services to any
person,
5
<PAGE> 6
firm, corporation, association, or other entity to whom any such
trade or business secret and/or any such confidential information, in
whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company for
such breach or threatened breach, including without limitation the
recovery of damages from the Employee.
D. The provisions of this Section 7 shall survive the expiration or
termination, for any reason, of this Agreement and shall be
separately enforceable.
8. AMENDMENT
This Agreement may be amended only by the written agreement of the Company and
Employee.
9. SUCCESSORS AND ASSIGNS
The Company's rights and obligations under this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Company; and
the Company may delegate all or any part of its rights and obligations hereunder
to any affiliate or subsidiary of the Company.
The Employee acknowledges and agrees that this Agreement is personal to her and
her rights and interests hereunder may not be assigned, nor may her obligations
and duties hereunder be delegated with exception of the voting rights assigned
to Employee's spouse by Employee.
10. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of Florida.
11. ENTIRE AGREEMENT
This Agreement supersedes any and all other agreements, either oral or written
heretofore made with respect to the subject matter hereof.
12. SEVERABILITY
Any provision of this Agreement which is found to be unenforceable in any
jurisdiction, shall, as to such jurisdiction only, be ineffective to the extent
of such unenforceability, without invalidating or otherwise affecting the
remaining provisions hereof. If any of the covenants against competition
contained in Section 6 are found by a court having jurisdiction to be
unreasonable in duration, geographical scope, or character of restriction, the
covenant shall not be rendered unenforceable thereby, but rather the duration,
geographical scope, or character of restriction of said covenant shall
respectively be reduced or modified to render the covenant reasonable and the
covenant shall be enforced as modified.
6
<PAGE> 7
13. COUNTERPARTS
This Agreement may be executed simultaneously in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. This Agreement shall be binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of the parties reflected hereon as signatories.
14. NOTICES
All notices required or permitted under this Agreement shall be in writing and
shall be deemed effective upon personal delivery or upon deposit in the United
States Post Office, by registered or certified mail, postage prepaid, addressed
to:
(i) Employee at the address shown above, or at such other address or
addresses as Employee shall designate to the Company in accordance
with this Section, or
(ii) Company at the address set forth on the above letterhead, or at
such other address as the Company shall designate to Employee in
accordance with this section.
15. PRONOUNS
Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms and the singular
form of nouns and pronouns shall include the plural and vice versa.
16. MISCELLANEOUS
A. No delay or omission by the Company or Employee in exercising any
right under this Agreement shall operate as a waiver of that or any
other right. A waiver or consent given by the Company or Employee on
any one occasion shall be effective only in that instance and shall
not be construed as a bar or waiver of any right on any other
occasion.
B. The captions of the sections of this Agreement are for convenience of
reference only and in no way define, limit or affect the scope or
substance of any of this Agreement.
17. EMPLOYEE REPRESENTATIONS
Employee represents and warrants that he has the full power and authority to
enter into this Agreement and perform the duties as contemplated hereunder.
Employee further represents and warrants that he is free to enter into this
Agreement and that there are no other employment contracts, agreements or
understandings, written or oral, restrictive covenants, agreements not to
compete, confidentiality agreements or other restrictions whether written or
oral, preventing the performance of his duties hereunder. To the extent of any
breach of these representations and warranties by Employee, Employee agrees to
indemnify Employer and hold Employer harmless from any claim, action, liability,
damage or loss threatened or incurred by Employer on account of such breach.
7
<PAGE> 8
* * *
If the foregoing accurately sets out our agreement with regard to the above,
please indicate your acceptance by executing and returning two copies of this
letter to the undersigned.
Very truly yours,
COMPLETE WELLNESS INDEPENDENT PHYSICIAN ASSOCIATION, INC.
By:
-------------------------------
C. Thomas McMillen
Chairman and CEO
Accepted and agreed to this ___ day of _________________, 1997.
- ----------------------------------
Christopher M. Grady
"Employee"
8
<PAGE> 1
Exhibit 10.11
[OPTIMUM HEALTH SERVICES LETTERHEAD]
AMENDMENT TO EMPLOYMENT
AGREEMENT DATED MAY 12, 1997
CHRISTOPHER M. GRADY
JUNE 25, 1998
The following changes to the Agreement are made and effective as of May 31,
1998:
Section 1. Employment Duties
The title of Employee is hereby changed from Director of Information System to
Vice President of Information Services.
Section 2. Employment Term
The term of the Agreement is extended one year and shall end on May 31, 2001.
Section 3.A. Compensation, Expenses, Etc.
a) The initial base salary is hereby changed from forty-five thousand dollars
($45,000.00) to forty-nine thousand two hundred dollars ($49,200.00) per
annum.
b) The following shall be added to the end of the second sentence: ",
effective the first day of the fiscal quarter in which the Company is
deemed to be operational."
c) The third sentence is deleted and the following is substituted in its
place. "For purposes of this Agreement, the Company shall be deemed
"operational" at such time as the Company's accrued revenues for a fiscal
quarter are equal to or greater than $375,000."
Section 3.B. Compensation, Expenses, Etc.
The performance bonus percentage is hereby changed from 20% to 25%.
Section 4. Stock Options
<PAGE> 2
a) Time Options - The vesting of the stock options granted under the Company's
1997 stock option plan is hereby accelerated by the action of the Board of
Directors to May 15, 1998. In addition, the entire Time Options section is
hereby changed to:
"Employee shall be granted, under the Company's 1998 stock option plan,
incentive stock options ("Time Options") to purchase 13,407 shares of the
Company's Common Stock at an exercise price of $1.44 per share. The Time
Options will vest in equal installments on June 1, 1999, June 1, 2000, and
May 31, 2001 which shall be evidenced by a stock option agreement (such
Time Options shall be subject to adjustment in the event of a
re-capitalization, stock split, rights offering, stock dividend). Sale of
the shares of Common Stock issued to Employee upon the exercise of the
Time Options may be subject to limitations pursuant to Rule 144 under the
Securities Act of 1933. The Time Options shall be exercisable for a period
of five (5) years from June 1, 1998. However, in the event this Agreement
is terminated for cause or in the event Employee resigns from the
employment of the Company, the vested Time Options shall be exercisable
for a period of three (3) months from the date of such termination or
resignation."
b) Performance Options - Deleted in its entirety.
c) Additional Options - Deleted in its entirety.
/s/ CHRISTOPHER M. GRADY /s/ JASON M. PATCHEN
--------------------------- -----------------------------
Christopher M. Grady Jason M. Patchen
<PAGE> 1
Exhibit 10.12
May 12, 1997
Mr. Christian E. Miller
4700 Pembrook Place
Orlando, FL 32811
Dear Mr. Miller,
This letter, when accepted by you in a manner hereinafter provided, will
evidence the agreement among Mr. Christian E. Miller (the "Employee") and
Complete Wellness Independent Physician Association, Inc. (the "Company"), a
subsidiary of Complete Wellness Centers, Inc., a Delaware corporation ("CWC")
for the provision of certain services to be rendered by Employee to the Company
(the "Agreement"), all under the following terms and conditions to wit:
1. EMPLOYMENT DUTIES
The Company shall employ Employee as Vice President for Operations. Employee
shall report to the President and Chief Operating Officer, subject in all events
to the control and supervision of the Board of Directors.
Employee shall devote his time and best efforts on a substantially full time
basis to the business and affairs of the Company.
2. EMPLOYMENT TERM
This Agreement shall commence on June 1, 1997, and shall end on May 31, 2000
(the "Employment Term") unless extended by the Company and Employee in writing
or unless sooner terminated in accordance with the provisions of this Agreement.
3. COMPENSATION, EXPENSES, ETC.
In consideration of performance of the services and activities hereby, the
Company shall pay Employee compensation as follows:
A. An initial base salary of forty-five thousand dollars ($65,000)
per annum until such time as the Company is operational. At such
time as the Company is operational, Employee's base salary shall
increase to eighty thousand dollars ($90,000.00) per annum,
payable semi-monthly in arrears. For the purposes of this
Agreement, the Company shall be deemed to be "operational" at
such a time as the Company executes a binding agreement(s) with
a managed care organization(s) covering at least two thousand
five hundred (2,500) lives.
<PAGE> 2
B. Employee shall receive an additional performance bonus (the
"Bonus") equal to twenty percent (20%) of the Company's
management bonus pool ("Management Bonus Pool"). The management
Bonus Pool shall be equal to ten percent (10%) of the Company's
annual pre-tax income, determined in accordance with generally
accepted accounting principles ("GAAP"). However, in no case
shall the Management Bonus Pool exceed five million dollars
($5,000,000.00) annually. In the event Employee terminates his
employment agreement with the Company, his Bonus will be
reallocated by the Board.
In the event the Company is obligated in fiscal year 1998 to
fund shortfall in its capital reserves to meet managed care
contracting requirements, the Company shall defer payment of the
Bonus due employee in fiscal year 1998 until fiscal year 1999
and such deferred Bonus shall not be included as part of the
five million dollar ($5,000,000.00) cap on the Management Bonus
Pool for that year.
In the event this Agreement is terminated by the Company in
accordance with section 5 herein, unless such termination is for
Cause, Employee shall receive a pro rata portion of the Bonus.
C. Three (3) weeks of compensated vacation which shall vest ratably
throughout the year. Vacation accrued but unused at the end of
the calendar year may be carried over into the following year
and used in accordance with Company policy.
D. The Company shall make available such health benefits and any
other benefits as it makes available to its executive employees.
E. Upon termination of this Agreement by mutual written agreement,
death, or disability of the Employee, or change of control
(where change of control shall mean (i) any transaction that has
the result that stockholders of the Company immediately before
such transaction cease to own at least fifty-one percent (51%)
of the voting stock of the Company or of any entity that results
from the participation of the Company in a reorganization,
liquidation or any other form of corporate transaction; (ii) a
merger, consolidation, reorganization, liquidation or
dissolution in which the Company does not survive; or (iii) a
sale, lease exchange or other disposition of all or
substantially all the property and assets of the Company), the
Employee shall receive a severance package equal to fifty
percent (50%) of Employee's annual base salary at the time of
termination, payable in six (6) equal monthly installments,
beginning in the second calendar month following the month in
which termination occurs.
Employee shall be entitled to all holidays that are prescribed
by the Company's policies and practices. The Employee shall be
entitled to five (5) days paid sick leave per year. Unused sick
leave days may not be carried over to the following calendar
year or years.
2
<PAGE> 3
F. The Company shall provide Employee with an office and
secretarial services comparable to those of its other executive
employees.
G. The Company shall deduct the usual withholding taxes from
Employee's compensation consistent with standard practices and
applicable federal and state laws.
H. The Company shall reimburse Employee for any documented out of
pocket expenses incurred in connection with the duties and
responsibilities described herein, subject to the Company's
policies. Upon termination of this Agreement, all accrued but
unpaid compensation to Employee shall be payable in full.
4. STOCK OPTIONS
A. Time Options - Employee shall be granted on June 1, 1997 under the Company's
stock option plan non-qualified options ("Time Options') to purchase two hundred
(200) shares of the Company's Common Stock at an exercise price of one dollar
($1.00) per share which shall be evidenced by a stock option agreement (such
Time Options shall be subject to adjustment in the event of a re-capitalization,
stock split, rights offering, stock dividend). Sale of the shares of Common
Stock issued to Employee upon the exercise of the Time Options may be subject to
limitations pursuant to Rule 144 under the Securities Act of 1933. The Time
Options shall vest with respect to thirty-three and one-third percent (33 1/3%)
on June 1, 1998; thirty-three and one-third percent (33 1/3%) on June 1, 1999;
and thirty-three and one-third percent (33 1/3%) on May 31, 2000. The Time
Options shall be exercisable for a period of five (5) years from June 1, 1997.
However, in the event this Agreement is terminated for cause or in the event
Employee resigns from the employment of the Company, the vested Time Options
shall be exercisable for a period of three (3) months from the date of such
termination or resignation.
B. Performance Options - Employee shall be granted on June 1, 1997 under the
Company's stock option plan, non-qualified performance options ("Performance
Options') to purchase two hundred (200) shares of the Company's Common Stock at
an exercise price of one dollar ($1.00) per share which shall be evidenced by a
stock option agreement (such Performance Options shall be subject to adjustment
in the event of a re-capitalization, stock split, rights offering, stock
dividend). Sale of the shares of Common Stock issued to Employee upon the
exercise of the Performance Options may be subject to limitations pursuant to
Rule 144 under the Securities Act of 1933. The Performance Options shall vest at
the rate of twenty (20) Performance Options for every one million dollars
($1,000,000.00) of after tax net income determined in accordance with GAAP,
generated by the Company in fiscal year 1999, which ends December 31, 1999.
However, in the event this Agreement is terminated for cause or in the event
Employee resigns from the employment of the Company, the vested Performance
Options shall be exercisable for a period of three (3) months from the date of
such termination or resignation.
C. Additional Options - In the event of an initial public offering ("IPO') by
the Company, the Company shall, in addition to the Time Options and the
Performance Options, create a management stock option plan ("Management Option
Plan") representing not less than five percent (5%) of the fully issued and
outstanding shares of the Company at that time, before the
3
<PAGE> 4
issuance of the shares in the IPO, and employee shall be granted twenty percent
(20%) of the Management Option Plan.
5. TERMINATION
This Agreement may be terminated prior to the end of the Employment Term,
(i) by the written agreement between Company and Employee;
(ii) by the death of Employee or her disability for a period of one
hundred and twenty (120) consecutive days or the adjudicated
mental incompetency of Employee; or
(iii) by the Company for cause, where "cause" shall mean for purpose
of this Agreement:
(a) a violation by Employee of any material provision of
this Agreement, a breach of fiduciary duty or conduct
involving moral turpitude, where such violation,
activity, or conduct is not remedied by Employee
within thirty, (30) days of written notice from the
Company
(b) employee's conviction of a felony
6. COVENANT NOT TO COMPETE; NOT TO SOLICIT
A. During the Employment Term and for a period of six (6) months
thereafter, the Employee will not without the prior written
permission of the Company in each instance directly or indirectly
carry on or participate in a business the same as or similar to or in
competition with that conducted or engaged in by the Company or any
of its subsidiaries or affiliates. In the event this Agreement is
terminated in accordance with Section 5 herein, the terms of this
Section 6(a) shall be applicable for a period of six (6) months
beyond such termination.
B. The term "carry on or participate in a business the same as or
similar to that conducted or engaged in by the Company or any
of its subsidiaries or affiliates" shall include the Employee,
directly or indirectly, doing any of the following listed
acts, other than carrying on or engaging in activities
expressly permitted under this Agreement:
(i) carrying on or engaging in any such business as a
principal, or solely or jointly with others as a director,
officer, agent, employee, consultant or partner, or
stockholder or limited partner owning more than five
percent (5%) of the stock or equity interests in or
securities convertible into more than five percent (5%) of
the stock of or equity interests in any corporation,
association or limited partnership; or
(ii) as agent or principal carrying on or engaging in any
activities or negotiations with respect to the acquisition
or disposition of any such business; or
(iii) lending credit or money for the purpose of establishing or
operating any such business; or
(iv) giving advice to any other person, firm, association,
corporation or other entity engaging in any such business,
provided such other person, firm, association, corporation
or other entity is not a member of Employee's immediate
family; or
(v) lending or allowing his name or reputation to be used in any
such business; or
C. In the event of a breach or threatened breach by the Employee of the
provisions of this Section 6, the Company shall be entitled to
injunctive relief against the Employee.
4
<PAGE> 5
Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies available to the Employer for such breach
or threatened breach, including without limitation the recovery of
damages from the Employee.
D. During the Employment Term and for six (6) months thereafter, the
Employee will not without the prior written permission of the Company
in each instance will not solicit, or attempt to solicit and employ
any employee of the Company or any of its subsidiaries or affiliates,
or commit an act the primary purpose of which is to induce employee
of the Company or any of its subsidiaries or affiliates to leave such
employment or significantly interfere with, disrupt or attempt to
disrupt any past, present or prospective relationship, contractual or
otherwise, relating to the business activities between the Company or
any of its subsidiaries or affiliates and their respective prospects.
E. The parties hereto consider the restrictions contained in this
Section 6 to be reasonable. If, however, such restrictions are found
by any court having jurisdiction to be unreasonable because they are
(or any of them is) too broad, then such restrictions shall
nevertheless remain effective, but shall be considered amended as to
protection of business, time or geographic area in whatever manner is
considered reasonable by that court and, as so amended, shall be
enforced.
F. The provisions of this Section 6 shall survive the expiration or
termination, for any reason, or this Agreement and shall be
separately enforceable.
7. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. The Employee agrees that she will not, during the Employment Term
or thereafter, make use of, divulge or otherwise disclose, directly
or indirectly, any trade or business secret (including, without
limitation, any customer list, data, records or financial information
constituting a trade or business secret) concerning the business or
policies of the Company or any of its subsidiaries or affiliates
which she may have learned as a result of her employment during the
Employment Term or prior thereto as shareholder, employee, officer
and/or director or the Company except to the extent such use or
disclosure is necessary to the performance of this Agreement and in
furtherance of the Company's best interest. The provisions of this
Section 7 shall survive the expiration or termination, for any
reason, of this Agreement.
B. The Employee shall not during the Employment Term or for six (6)
months thereafter make use of, divulge or otherwise disclose,
directly or indirectly, any confidential information concerning the
business or policies of the Company or any of its subsidiaries or
affiliates which she may have learned while a shareholder, employee,
officer and/or director of the Company.
C. In the event of a breach or reasonably threatened breach by the
Employee of the provisions of this Section 7, the Company shall be
entitled to an injunction restraining the Employee from disclosing,
in whole or in part, any such trade or business secret and/or any
such confidential information, or from rendering any services to any
person,
5
<PAGE> 6
firm, corporation, association, or other entity to whom any such
trade or business secret and/or any such confidential information, in
whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company for
such breach or threatened breach, including without limitation the
recovery of damages from the Employee.
D. The provisions of this Section 7 shall survive the expiration or
termination, for any reason, of this Agreement and shall be
separately enforceable.
8. AMENDMENT
This Agreement may be amended only by the written agreement of the Company and
Employee.
9. SUCCESSORS AND ASSIGNS
The Company's rights and obligations under this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Company; and
the Company may delegate all or any part of its rights and obligations hereunder
to any affiliate or subsidiary of the Company.
The Employee acknowledges and agrees that this Agreement is personal to her and
her rights and interests hereunder may not be assigned, nor may her obligations
and duties hereunder be delegated with exception of the voting rights assigned
to Employee's spouse by Employee.
10. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of Florida.
11. ENTIRE AGREEMENT
This Agreement supersedes any and all other agreements, either oral or written
heretofore made with respect to the subject matter hereof.
12. SEVERABILITY
Any provision of this Agreement which is found to be unenforceable in any
jurisdiction, shall, as to such jurisdiction only, be ineffective to the extent
of such unenforceability, without invalidating or otherwise affecting the
remaining provisions hereof. If any of the covenants against competition
contained in Section 6 are found by a court having jurisdiction to be
unreasonable in duration, geographical scope, or character of restriction, the
covenant shall not be rendered unenforceable thereby, but rather the duration,
geographical scope, or character of restriction of said covenant shall
respectively be reduced or modified to render the covenant reasonable and the
covenant shall be enforced as modified.
6
<PAGE> 7
13. COUNTERPARTS
This Agreement may be executed simultaneously in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. This Agreement shall be binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of the parties reflected hereon as signatories.
14. NOTICES
All notices required or permitted under this Agreement shall be in writing and
shall be deemed effective upon personal delivery or upon deposit in the United
States Post Office, by registered or certified mail, postage prepaid, addressed
to:
(i) Employee at the address shown above, or at such other address or
addresses as Employee shall designate to the Company in accordance
with this Section, or
(ii) Company at the address set forth on the above letterhead, or at
such other address as the Company shall designate to Employee in
accordance with this section.
15. PRONOUNS
Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms and the singular
form of nouns and pronouns shall include the plural and vice versa.
16. MISCELLANEOUS
A. No delay or omission by the Company or Employee in exercising any
right under this Agreement shall operate as a waiver of that or any
other right. A waiver or consent given by the Company or Employee on
any one occasion shall be effective only in that instance and shall
not be construed as a bar or waiver of any right on any other
occasion.
B. The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or
substance of any of this Agreement.
17. EMPLOYEE REPRESENTATIONS
Employee represents and warrants that he has the full power and authority to
enter into this Agreement and perform the duties as contemplated hereunder.
Employee further represents and warrants that he is free to enter into this
Agreement and that there are no other employment contracts, agreements or
understandings, written or oral, restrictive covenants, agreements not to
compete, confidentiality agreements or other restrictions whether written or
oral, preventing the performance of his duties hereunder. To the extent of any
breach of these representations and warranties by Employee, Employee agrees to
indemnify Employer and hold Employer harmless from any claim, action, liability,
damage or loss threatened or incurred by Employer on account of such breach.
7
<PAGE> 8
* * *
If the foregoing accurately sets out our agreement with regard to the above,
please indicate your acceptance by executing and returning two copies of this
letter to the undersigned.
Very truly yours,
COMPLETE WELLNESS INDEPENDENT PHYSICIAN ASSOCIATION, INC.
By:
-------------------------------
C. Thomas McMillen
Chairman and CEO
Accepted and agreed to this ___ day of _________________, 1997.
- ----------------------------------
Christian E. Miller
"Employee"
8
<PAGE> 1
Exhibit 10.13
[OPTIMUM HEALTH SERVICES LETTERHEAD]
AMENDMENT TO EMPLOYMENT
AGREEMENT DATED MAY 12, 1997
CHRISTIAN E. MILLER
JUNE 25, 1998
The following changes to the Agreement are made and effective as of May 31,
1998:
Section 2. Employment Term
The term of the Agreement is extended one year and shall end on May 31, 2001.
Section 3.A. Compensation, Expenses, Etc.
a) The following shall be added to the end of the second sentence: ",
effective the first day of the fiscal quarter in which the Company is
deemed to be operational."
b) The third sentence is deleted and the following is substituted in its
place. "For purposes of this Agreement, the Company shall be deemed
"operational" at such time as the Company's accrued revenues for a fiscal
quarter are equal to or greater than $375,000."
Section 3.B. Compensation, Expenses, Etc.
The performance bonus percentage is hereby changed from 20% to 25%.
Section 4. Stock Options
a) Time Options - The vesting of the stock options granted under the Company's
1997 stock option plan is hereby accelerated by the action of the Board of
Directors to May 15, 1998. In addition, the entire Time Options section is
hereby changed to:
"Employee shall be granted, under the Company's 1998 stock option plan,
incentive stock options ("Time Options") to purchase 12,568 shares of the
Company's Common Stock at an exercise price of $1.44 per share. The Time
Options will vest in equal installments on June 1, 1999, June 1, 2000, and
May 31, 2001 which shall be
<PAGE> 2
evidenced by a stock option agreement (such Time Options shall be subject
to adjustment in the event of a re-capitalization, stock split, rights
offering, stock dividend). Sale of the shares of Common Stock issued to
Employee upon the exercise of the Time Options may be subject to
limitations pursuant to Rule 144 under the Securities Act of 1933. The Time
Options shall be exercisable for a period of five (5) years from June 1,
1998. However, in the event this Agreement is terminated for cause or in
the event Employee resigns from the employment of the Company, the vested
Time Options shall be exercisable for a period of three (3) months from the
date of such termination or resignation."
b) Performance Options - Deleted in its entirety.
c) Additional Options - Deleted in its entirety.
/s/ CHRISTIAN E. MILLER /s/ JASON M. PATCHEN
--------------------------- -----------------------------
Christian E. Miller Jason M. Patchen
<PAGE> 1
Exhibit 10.14
May 12, 1997
Mr. Jason M. Patchen
4932 Ridgemoor Circle
Palm Harbor, FL 34685
Dear Mr. Patchen,
This letter, when accepted by you in a manner hereinafter provided, will
evidence the agreement among Mr. Jason M. Patchen (the "Employee") and Complete
Wellness Independent Physician Association, Inc. (the "Company"), a subsidiary
of Complete Wellness Centers, Inc., a Delaware corporation ("CWC") for the
provision of certain services to be rendered by Employee to the Company (the
"Agreement"), all under the following terms and conditions to wit:
1. EMPLOYMENT DUTIES
The Company shall employ Employee as President and Chief Operating Officer.
Employee shall report to the Chairman and Chief Executive Officer, subject in
all events to the control and supervision of the Board of Directors.
Employee shall devote his time and best efforts on a substantially full time
basis to the business and affairs of the Company.
2. EMPLOYMENT TERM
This Agreement shall commence on June 1, 1997, and shall end on May 31, 2000
(the "Employment Term") unless extended by the Company and Employee in writing
or unless sooner terminated in accordance with the provisions of this Agreement.
3. COMPENSATION, EXPENSES, ETC.
In consideration of performance of the services and activities hereby, the
Company shall pay Employee compensation as follows:
A. An initial base salary of forty-five thousand dollars ($90,000)
per annum until such time as the Company is operational. At such
time as the Company is operational, Employee's base salary shall
increase to eighty thousand dollars ($150,000.00) per annum,
payable semi-monthly in arrears. For the purposes of this
Agreement, the Company shall be deemed to be "operational" at
such a time as the Company executes a binding agreement(s) with
a managed care organization(s) covering at least two thousand
five hundred (2,500) lives.
<PAGE> 2
B. Employee shall receive an additional performance bonus (the
"Bonus") equal to twenty percent (20%) of the Company's
management bonus pool ("Management Bonus Pool"). The management
Bonus Pool shall be equal to ten percent (10%) of the Company's
annual pre-tax income, determined in accordance with generally
accepted accounting principles ("GAAP"). However, in no case
shall the Management Bonus Pool exceed five million dollars
($5,000,000.00) annually. In the event Employee terminates his
employment agreement with the Company, his Bonus will be
reallocated by the Board.
In the event the Company is obligated in fiscal year 1998 to
fund shortfall in its capital reserves to meet managed care
contracting requirements, the Company shall defer payment of the
Bonus due employee in fiscal year 1998 until fiscal year 1999
and such deferred Bonus shall not be included as part of the
five million dollar ($5,000,000.00) cap on the Management Bonus
Pool for that year.
In the event this Agreement is terminated by the Company in
accordance with section 5 herein, unless such termination is for
Cause, Employee shall receive a pro rata portion of the Bonus.
C. An automobile allowance in the amount of five hundred dollars
($500.00) per month, commencing at such a time as the Company is
operational.
D. Four (4) weeks of compensated vacation which shall vest ratably
throughout the year. Vacation accrued but unused at the end of
the calendar year may be carried over into the following year
and used in accordance with Company policy.
E. The Company shall make available such health benefits and any
other benefits as it makes available to its executive employees.
F. Upon termination of this Agreement by mutual written agreement,
death, or disability of the Employee, or change of control
(where change of control shall mean (i) any transaction that has
the result that stockholders of the Company immediately before
such transaction cease to own at least fifty-one percent (51%)
of the voting stock of the Company or of any entity that results
from the participation of the Company in a reorganization,
liquidation or any other form of corporate transaction; (ii) a
merger, consolidation, reorganization, liquidation or
dissolution in which the Company does not survive; or (iii) a
sale, lease exchange or other disposition of all or
substantially all the property and assets of the Company), the
Employee shall receive a severance package equal to fifty
percent (50%) of Employee's annual base salary at the time of
termination, payable in six (6) equal monthly installments,
beginning in the second calendar month following the month in
which termination occurs.
Employee shall be entitled to all holidays that are prescribed
by the Company's policies and practices. The Employee shall be
entitled to five (5) days paid sick
2
<PAGE> 3
leave per year. Unused sick leave days may not be carried over
to the following calendar year or years.
G. The Company shall provide Employee with an office and
secretarial services comparable to those of its other executive
employees.
H. The Company shall deduct the usual withholding taxes from
Employee's compensation consistent with standard practices and
applicable federal and state laws.
I. The Company shall reimburse Employee for any documented out of
pocket expenses incurred in connection with the duties and
responsibilities described herein, subject to the Company's
policies. Upon termination of this Agreement, all accrued but
unpaid compensation to Employee shall be payable in full.
4. STOCK OPTIONS
A. Time Options - Employee shall be granted on June 1, 1997 under the Company's
stock option plan non-qualified options ("Time Options') to purchase two hundred
(700) shares of the Company's Common Stock at an exercise price of one dollar
($1.00) per share which shall be evidenced by a stock option agreement (such
Time Options shall be subject to adjustment in the event of a re-capitalization,
stock split, rights offering, stock dividend). Sale of the shares of Common
Stock issued to Employee upon the exercise of the Time Options may be subject to
limitations pursuant to Rule 144 under the Securities Act of 1933. The Time
Options shall vest with respect to thirty-three and one-third percent (33 1/3%)
on June 1, 1998; thirty-three and one-third percent (33 1/3%) on June 1, 1999;
and thirty-three and one-third percent (33 1/3%) on May 31, 2000. The Time
Options shall be exercisable for a period of five (5) years from June 1, 1997.
However, in the event this Agreement is terminated for cause or in the event
Employee resigns from the employment of the Company, the vested Time Options
shall be exercisable for a period of three (3) months from the date of such
termination or resignation.
B. Performance Options - Employee shall be granted on June 1, 1997 under the
Company's stock option plan, non-qualified performance options ("Performance
Options') to purchase two hundred (200) shares of the Company's Common Stock at
an exercise price of one dollar ($1.00) per share which shall be evidenced by a
stock option agreement (such Performance Options shall be subject to adjustment
in the event of a re-capitalization, stock split, rights offering, stock
dividend). Sale of the shares of Common Stock issued to Employee upon the
exercise of the Performance Options may be subject to limitations pursuant to
Rule 144 under the Securities Act of 1933. The Performance Options shall vest at
the rate of twenty (20) Performance Options for every one million dollars
($1,000,000.00) of after tax net income determined in accordance with GAAP,
generated by the Company in fiscal year 1999, which ends December 31, 1999.
However, in the event this Agreement is terminated for cause or in the event
Employee resigns from the employment of the Company, the vested Performance
Options shall be exercisable for a period of three (3) months from the date of
such termination or resignation.
3
<PAGE> 4
C. Additional Options - In the event of an initial public offering ("IPO') by
the Company, the Company shall, in addition to the Time Options and the
Performance Options, create a management stock option plan ("Management Option
Plan") representing not less than five percent (5%) of the fully issued and
outstanding shares of the Company at that time, before the issuance of the
shares in the IPO, and employee shall be granted twenty percent (20%) of the
Management Option Plan.
5. TERMINATION
This Agreement may be terminated prior to the end of the Employment Term,
(i) by the written agreement between Company and Employee;
(ii) by the death of Employee or her disability for a period of one
hundred and twenty (120) consecutive days or the adjudicated
mental incompetency of Employee; or
(iii) by the Company for cause, where "cause" shall mean for purpose
of this Agreement:
(a) a violation by Employee of any material provision of
this Agreement, a breach of fiduciary duty or conduct
involving moral turpitude, where such violation,
activity, or conduct is not remedied by Employee
within thirty, (30) days of written notice from the
Company
(b) employee's conviction of a felony
6. COVENANT NOT TO COMPETE; NOT TO SOLICIT
A. During the Employment Term and for a period of six (6) months
thereafter, the Employee will not without the prior written
permission of the Company in each instance directly or indirectly
carry on or participate in a business the same as or similar to or in
competition with that conducted or engaged in by the Company or any
of its subsidiaries or affiliates. In the event this Agreement is
terminated in accordance with Section 5 herein, the terms of this
Section 6(a) shall be applicable for a period of six (6) months
beyond such termination.
B. The term "carry on or participate in a business the same as or
similar to that conducted or engaged in by the Company or any of its
subsidiaries or affiliates" shall include the Employee, directly or
indirectly, doing any of the following listed acts, other than
carrying on or engaging in activities expressly permitted under this
Agreement:
(i) carrying on or engaging in any such business as a principal,
or solely or jointly with others as a director, officer,
agent, employee, consultant or partner, or stockholder or
limited partner owning more than five percent (5%) of the
stock or equity interests in or securities convertible into
more than five percent (5%) of the stock of or equity
interests in any corporation, association or limited
partnership; or
(ii) as agent or principal carrying on or engaging in any
activities or negotiations with respect to the acquisition
or disposition of any such business; or
(iii) lending credit or money for the purpose of establishing or
operating any such business; or
4
<PAGE> 5
(iv) giving advice to any other person, firm, association,
corporation or other entity engaging in any such business,
provided such other person, firm, association, corporation
or other entity is not a member of Employee's immediate
family; or
(v) lending or allowing his name or reputation to be used in any
such business; or
C. In the event of a breach or threatened breach by the Employee of
the provisions of this Section 6, the Company shall be entitled to
injunctive relief against the Employee. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies
available to the Employer for such breach or threatened breach,
including without limitation the recovery of damages from the
Employee.
D. During the Employment Term and for six (6) months thereafter, the
Employee will not without the prior written permission of the Company
in each instance will not solicit, or attempt to solicit and employ
any employee of the Company or any of its subsidiaries or affiliates,
or commit an act the primary purpose of which is to induce employee
of the Company or any of its subsidiaries or affiliates to leave such
employment or significantly interfere with, disrupt or attempt to
disrupt any past, present or prospective relationship, contractual or
otherwise, relating to the business activities between the Company or
any of its subsidiaries or affiliates and their respective prospects.
E. The parties hereto consider the restrictions contained in this
Section 6 to be reasonable. If, however, such restrictions are found
by any court having jurisdiction to be unreasonable because they are
(or any of them is) too broad, then such restrictions shall
nevertheless remain effective, but shall be considered amended as to
protection of business, time or geographic area in whatever manner is
considered reasonable by that court and, as so amended, shall be
enforced.
F. The provisions of this Section 6 shall survive the expiration or
termination, for any reason, or this Agreement and shall be
separately enforceable.
7. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. The Employee agrees that she will not, during the Employment Term
or thereafter, make use of, divulge or otherwise disclose, directly
or indirectly, any trade or business secret (including, without
limitation, any customer list, data, records or financial information
constituting a trade or business secret) concerning the business or
policies of the Company or any of its subsidiaries or affiliates
which she may have learned as a result of her employment during the
Employment Term or prior thereto as shareholder, employee, officer
and/or director or the Company except to the extent such use or
disclosure is necessary to the performance of this Agreement and in
furtherance of the Company's best interest. The provisions of this
Section 7 shall survive the expiration or termination, for any
reason, of this Agreement.
B. The Employee shall not during the Employment Term or for six (6)
months thereafter make use of, divulge or otherwise disclose,
directly or indirectly, any confidential information concerning the
business or policies of the Company or any of its
5
<PAGE> 6
subsidiaries or affiliates which she may have learned while a
shareholder, employee, officer and/or director of the Company.
C. In the event of a breach or reasonably threatened breach by the
Employee of the provisions of this Section 7, the Company shall be
entitled to an injunction restraining the Employee from disclosing,
in whole or in part, any such trade or business secret and/or any
such confidential information, or from rendering any services to any
person, firm, corporation, association, or other entity to whom any
such trade or business secret and/or any such confidential
information, in whole or in part, has been disclosed or is threatened
to be disclosed. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company for
such breach or threatened breach, including without limitation the
recovery of damages from the Employee.
D. The provisions of this Section 7 shall survive the expiration or
termination, for any reason, of this Agreement and shall be
separately enforceable.
8. AMENDMENT
This Agreement may be amended only by the written agreement of the Company and
Employee.
9. SUCCESSORS AND ASSIGNS
The Company's rights and obligations under this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Company; and
the Company may delegate all or any part of its rights and obligations hereunder
to any affiliate or subsidiary of the Company.
The Employee acknowledges and agrees that this Agreement is personal to her and
her rights and interests hereunder may not be assigned, nor may her obligations
and duties hereunder be delegated with exception of the voting rights assigned
to Employee's spouse by Employee.
10. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of Florida.
11. ENTIRE AGREEMENT
This Agreement supersedes any and all other agreements, either oral or written
heretofore made with respect to the subject matter hereof.
12. SEVERABILITY
Any provision of this Agreement which is found to be unenforceable in any
jurisdiction, shall, as to such jurisdiction only, be ineffective to the extent
of such unenforceability, without invalidating or otherwise affecting the
remaining provisions hereof. If any of the covenants against competition
6
<PAGE> 7
contained in Section 6 are found by a court having jurisdiction to be
unreasonable in duration, geographical scope, or character of restriction, the
covenant shall not be rendered unenforceable thereby, but rather the duration,
geographical scope, or character of restriction of said covenant shall
respectively be reduced or modified to render the covenant reasonable and the
covenant shall be enforced as modified.
13. COUNTERPARTS
This Agreement may be executed simultaneously in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. This Agreement shall be binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of the parties reflected hereon as signatories.
14. NOTICES
All notices required or permitted under this Agreement shall be in writing and
shall be deemed effective upon personal delivery or upon deposit in the United
States Post Office, by registered or certified mail, postage prepaid, addressed
to:
(i) Employee at the address shown above, or at such other address or
addresses as Employee shall designate to the Company in accordance
with this Section, or
(ii) Company at the address set forth on the above letterhead, or at
such other address as the Company shall designate to Employee in
accordance with this section.
15. PRONOUNS
Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms and the singular
form of nouns and pronouns shall include the plural and vice versa.
16. MISCELLANEOUS
A. No delay or omission by the Company or Employee in exercising any
right under this Agreement shall operate as a waiver of that or any
other right. A waiver or consent given by the Company or Employee on
any one occasion shall be effective only in that instance and shall
not be construed as a bar or waiver of any right on any other
occasion.
B. The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or
substance of any of this Agreement.
17. EMPLOYEE REPRESENTATIONS
Employee represents and warrants that he has the full power and authority to
enter into this Agreement and perform the duties as contemplated hereunder.
Employee further represents and
7
<PAGE> 8
warrants that he is free to enter into this Agreement and that there are no
other employment contracts, agreements or understandings, written or oral,
restrictive covenants, agreements not to compete, confidentiality agreements or
other restrictions whether written or oral, preventing the performance of his
duties hereunder. To the extent of any breach of these representations and
warranties by Employee, Employee agrees to indemnify Employer and hold Employer
harmless from any claim, action, liability, damage or loss threatened or
incurred by Employer on account of such breach.
* * *
If the foregoing accurately sets out our agreement with regard to the above,
please indicate your acceptance by executing and returning two copies of this
letter to the undersigned.
Very truly yours,
COMPLETE WELLNESS INDEPENDENT PHYSICIAN ASSOCIATION, INC.
By:
-------------------------------
C. Thomas McMillen
Chairman and CEO
Accepted and agreed to this ___ day of _________________, 1997.
- ----------------------------------
Jason M. Patchen
"Employee"
8
<PAGE> 1
Exhibit 10.15
[OPTIMUM HEALTH SERVICES LETTERHEAD]
AMENDMENT TO EMPLOYMENT
AGREEMENT DATED MAY 12, 1997
JASON M. PATCHEN
JUNE 25, 1998
The following changes to the Agreement are made and effective as of May 31,
1998:
Section 2. Employment Term
The term of the Agreement is extended one year and shall end on May 31, 2001.
Section 3.A. Compensation, Expenses, Etc.
a) The following shall be added to the end of the second sentence: ",
effective the first day of the fiscal quarter in which the Company is
deemed to be operational."
b) The third sentence is deleted and the following is substituted in its
place. "For purposes of this Agreement, the Company shall be deemed
"operational" at such time as the Company's accrued revenues for a fiscal
quarter are equal to or greater than $375,000."
Section 3.B. Compensation, Expenses, Etc.
The performance bonus percentage is hereby changed from 20% to 25%.
Section 4. Stock Options
a) Time Options - The vesting of the stock options granted under the Company's
1997 stock option plan is hereby accelerated by the action of the Board of
Directors to May 15, 1998. In addition, the entire Time Options section is
hereby changed to:
"Employee shall be granted, under the Company's 1998 stock option plan,
incentive stock options ("Time Options") to purchase 17,632 shares of the
Company's Common Stock at an exercise price of $1.44 per share. The Time
Options will vest in equal installments on June 1, 1999, June 1, 2000, and
May 31, 2001 which shall be
<PAGE> 2
evidenced by a stock option agreement (such Time Options shall be subject
to adjustment in the event of a re-capitalization, stock split, rights
offering, stock dividend). Sale of the shares of Common Stock issued to
Employee upon the exercise of the Time Options may be subject to
limitations pursuant to Rule 144 under the Securities Act of 1933. The Time
Options shall be exercisable for a period of five (5) years from June 1,
1998. However, in the event this Agreement is terminated for cause or in
the event Employee resigns from the employment of the Company, the vested
Time Options shall be exercisable for a period of three (3) months from the
date of such termination or resignation."
b) Performance Options - Deleted in its entirety.
c) Additional Options - Deleted in its entirety.
/s/ JASON M. PATCHEN
--------------------------- -----------------------------
C. Thomas McMillen Jason M. Patchen
<PAGE> 1
Exhibit 10.16
May 12, 1997
Mr. David A. Sherwin
3011 Gull Place
Clearwater, FL 34622
Dear Mr. Sherwin,
This letter, when accepted by you in a manner hereinafter provided, will
evidence the agreement among David A. Sherwin (the "Employee") and Complete
Wellness Independent Physician Association, Inc. (the "Company"), a subsidiary
of Complete Wellness Centers, Inc., a Delaware corporation ("CWC") for the
provision of certain services to be rendered by Employee to the Company (the
"Agreement"), all under the following terms and conditions to wit:
1. EMPLOYMENT DUTIES
The Company shall employ Employee as Vice President for Finance. Employee shall
report to the President and Chief Operating Officer, subject in all events to
the control and supervision of the Board of Directors.
Employee shall devote his time and best efforts on a substantially full time
basis to the business and affairs of the Company.
2. EMPLOYMENT TERM
This Agreement shall commence on June 1, 1997, and shall end on May 31, 2000
(the "Employment Term") unless extended by the Company and Employee in writing
or unless sooner terminated in accordance with the provisions of this Agreement.
3. COMPENSATION, EXPENSES, ETC.
In consideration of performance of the services and activities hereby, the
Company shall pay Employee compensation as follows:
A. An initial base salary of forty-five thousand dollars ($68,000)
per annum until such time as the Company is operational. At such
time as the Company is operational, Employee's base salary shall
increase to eighty thousand dollars ($90,000.00) per annum,
payable semi-monthly in arrears. For the purposes of this
Agreement, the Company shall be deemed to be "operational" at
such a time as the Company executes a binding agreement(s) with
a managed care organization(s) covering at least two thousand
five hundred (2,500) lives.
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B. Employee shall receive an additional performance bonus (the
"Bonus") equal to twenty percent (20%) of the Company's
management bonus pool ("Management Bonus Pool"). The management
Bonus Pool shall be equal to ten percent (10%) of the Company's
annual pre-tax income, determined in accordance with generally
accepted accounting principles ("GAAP"). However, in no case
shall the Management Bonus Pool exceed five million dollars
($5,000,000.00) annually. In the event Employee terminates his
employment agreement with the Company, his Bonus will be
reallocated by the Board.
In the event the Company is obligated in fiscal year 1998 to
fund shortfall in its capital reserves to meet managed care
contracting requirements, the Company shall defer payment of the
Bonus due employee in fiscal year 1998 until fiscal year 1999
and such deferred Bonus shall not be included as part of the
five million dollar ($5,000,000.00) cap on the Management Bonus
Pool for that year.
In the event this Agreement is terminated by the Company in
accordance with section 5 herein, unless such termination is for
Cause, Employee shall receive a pro rata portion of the Bonus.
C. Three (3) weeks of compensated vacation which shall vest ratably
throughout the year. Vacation accrued but unused at the end of
the calendar year may be carried over into the following year
and used in accordance with Company policy.
D. The Company shall make available such health benefits and any
other benefits as it makes available to its executive employees.
E. Upon termination of this Agreement by mutual written agreement,
death, or disability of the Employee, or change of control
(where change of control shall mean (i) any transaction that has
the result that stockholders of the Company immediately before
such transaction cease to own at least fifty-one percent (51%)
of the voting stock of the Company or of any entity that results
from the participation of the Company in a reorganization,
liquidation or any other form of corporate transaction; (ii) a
merger, consolidation, reorganization, liquidation or
dissolution in which the Company does not survive; or (iii) a
sale, lease exchange or other disposition of all or
substantially all the property and assets of the Company), the
Employee shall receive a severance package equal to fifty
percent (50%) of Employee's annual base salary at the time of
termination, payable in six (6) equal monthly installments,
beginning in the second calendar month following the month in
which termination occurs.
Employee shall be entitled to all holidays that are prescribed
by the Company's policies and practices. The Employee shall be
entitled to five (5) days paid sick leave per year. Unused sick
leave days may not be carried over to the following calendar
year or years.
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F. The Company shall provide Employee with an office and
secretarial services comparable to those of its other executive
employees.
G. The Company shall deduct the usual withholding taxes from
Employee's compensation consistent with standard practices and
applicable federal and state laws.
H. The Company shall reimburse Employee for any documented out of
pocket expenses incurred in connection with the duties and
responsibilities described herein, subject to the Company's
policies. Upon termination of this Agreement, all accrued but
unpaid compensation to Employee shall be payable in full.
4. STOCK OPTIONS
A. Time Options - Employee shall be granted on June 1, 1997 under the Company's
stock option plan non-qualified options ("Time Options') to purchase two hundred
(200) shares of the Company's Common Stock at an exercise price of one dollar
($1.00) per share which shall be evidenced by a stock option agreement (such
Time Options shall be subject to adjustment in the event of a re-capitalization,
stock split, rights offering, stock dividend). Sale of the shares of Common
Stock issued to Employee upon the exercise of the Time Options may be subject to
limitations pursuant to Rule 144 under the Securities Act of 1933. The Time
Options shall vest with respect to thirty-three and one-third percent (33 1/3%)
on June 1, 1998; thirty-three and one-third percent (33 1/3%) on June 1, 1999;
and thirty-three and one-third percent (33 1/3%) on May 31, 2000. The Time
Options shall be exercisable for a period of five (5) years from June 1, 1997.
However, in the event this Agreement is terminated for cause or in the event
Employee resigns from the employment of the Company, the vested Time Options
shall be exercisable for a period of three (3) months from the date of such
termination or resignation.
B. Performance Options - Employee shall be granted on June 1, 1997 under the
Company's stock option plan, non-qualified performance options ("Performance
Options') to purchase two hundred (200) shares of the Company's Common Stock at
an exercise price of one dollar ($1.00) per share which shall be evidenced by a
stock option agreement (such Performance Options shall be subject to adjustment
in the event of a re-capitalization, stock split, rights offering, stock
dividend). Sale of the shares of Common Stock issued to Employee upon the
exercise of the Performance Options may be subject to limitations pursuant to
Rule 144 under the Securities Act of 1933. The Performance Options shall vest at
the rate of twenty (20) Performance Options for every one million dollars
($1,000,000.00) of after tax net income determined in accordance with GAAP,
generated by the Company in fiscal year 1999, which ends December 31, 1999.
However, in the event this Agreement is terminated for cause or in the event
Employee resigns from the employment of the Company, the vested Performance
Options shall be exercisable for a period of three (3) months from the date of
such termination or resignation.
C. Additional Options - In the event of an initial public offering ("IPO') by
the Company, the Company shall, in addition to the Time Options and the
Performance Options, create a management stock option plan ("Management Option
Plan") representing not less than five percent (5%) of the fully issued and
outstanding shares of the Company at that time, before the
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issuance of the shares in the IPO, and employee shall be granted twenty percent
(20%) of the Management Option Plan.
5. TERMINATION
This Agreement may be terminated prior to the end of the Employment Term,
(i) by the written agreement between Company and Employee;
(ii) by the death of Employee or her disability for a period of one
hundred and twenty (120) consecutive days or the adjudicated
mental incompetency of Employee; or
(iii) by the Company for cause, where "cause" shall mean for purpose
of this Agreement:
(a) a violation by Employee of any material provision of
this Agreement, a breach of fiduciary duty or conduct
involving moral turpitude, where such violation,
activity, or conduct is not remedied by Employee
within thirty, (30) days of written notice from the
Company
(b) employee's conviction of a felony
6. COVENANT NOT TO COMPETE; NOT TO SOLICIT
A. During the Employment Term and for a period of six (6) months
thereafter, the Employee will not without the prior written
permission of the Company in each instance directly or indirectly
carry on or participate in a business the same as or similar to or in
competition with that conducted or engaged in by the Company or any
of its subsidiaries or affiliates. In the event this Agreement is
terminated in accordance with Section 5 herein, the terms of this
Section 6(a) shall be applicable for a period of six (6) months
beyond such termination.
B. The term "carry on or participate in a business the same as or
similar to that conducted or engaged in by the Company or any of its
subsidiaries or affiliates" shall include the Employee, directly or
indirectly, doing any of the following listed acts, other than
carrying on or engaging in activities expressly permitted under this
Agreement:
(i) carrying on or engaging in any such business as a principal,
or solely or jointly with others as a director, officer,
agent, employee, consultant or partner, or stockholder or
limited partner owning more than five percent (5%) of the
stock or equity interests in or securities convertible
into more than five percent (5%) of the stock of or equity
interests in any corporation, association or limited
partnership; or
(ii) as agent or principal carrying on or engaging in any
activities or negotiations with respect to the acquisition
or disposition of any such business; or
(iii) lending credit or money for the purpose of establishing or
operating any such business; or
(iv) giving advice to any other person, firm, association,
corporation or other entity engaging in any such business,
provided such other person, firm, association, corporation
or other entity is not a member of Employee's immediate
family; or
(v) lending or allowing his name or reputation to be used in any
such business; or
C. In the event of a breach or threatened breach by the Employee of
the provisions of this Section 6, the Company shall be entitled to
injunctive relief against the Employee.
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Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies available to the Employer for such breach
or threatened breach, including without limitation the recovery of
damages from the Employee.
D. During the Employment Term and for six (6) months thereafter, the
Employee will not without the prior written permission of the Company
in each instance will not solicit, or attempt to solicit and employ
any employee of the Company or any of its subsidiaries or affiliates,
or commit an act the primary purpose of which is to induce employee
of the Company or any of its subsidiaries or affiliates to leave such
employment or significantly interfere with, disrupt or attempt to
disrupt any past, present or prospective relationship, contractual or
otherwise, relating to the business activities between the Company or
any of its subsidiaries or affiliates and their respective prospects.
E. The parties hereto consider the restrictions contained in this
Section 6 to be reasonable. If, however, such restrictions are found
by any court having jurisdiction to be unreasonable because they are
(or any of them is) too broad, then such restrictions shall
nevertheless remain effective, but shall be considered amended as to
protection of business, time or geographic area in whatever manner is
considered reasonable by that court and, as so amended, shall be
enforced.
F. The provisions of this Section 6 shall survive the expiration or
termination, for any reason, or this Agreement and shall be
separately enforceable.
7. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. The Employee agrees that she will not, during the Employment Term
or thereafter, make use of, divulge or otherwise disclose, directly
or indirectly, any trade or business secret (including, without
limitation, any customer list, data, records or financial information
constituting a trade or business secret) concerning the business or
policies of the Company or any of its subsidiaries or affiliates
which she may have learned as a result of her employment during the
Employment Term or prior thereto as shareholder, employee, officer
and/or director or the Company except to the extent such use or
disclosure is necessary to the performance of this Agreement and in
furtherance of the Company's best interest. The provisions of this
Section 7 shall survive the expiration or termination, for any
reason, of this Agreement.
B. The Employee shall not during the Employment Term or for six (6)
months thereafter make use of, divulge or otherwise disclose,
directly or indirectly, any confidential information concerning the
business or policies of the Company or any of its subsidiaries or
affiliates which she may have learned while a shareholder, employee,
officer and/or director of the Company.
C. In the event of a breach or reasonably threatened breach by the
Employee of the provisions of this Section 7, the Company shall be
entitled to an injunction restraining the Employee from disclosing,
in whole or in part, any such trade or business secret and/or any
such confidential information, or from rendering any services to any
person,
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firm, corporation, association, or other entity to whom any such
trade or business secret and/or any such confidential information, in
whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company for
such breach or threatened breach, including without limitation the
recovery of damages from the Employee.
D. The provisions of this Section 7 shall survive the expiration or
termination, for any reason, of this Agreement and shall be
separately enforceable.
8. AMENDMENT
This Agreement may be amended only by the written agreement of the Company and
Employee.
9. SUCCESSORS AND ASSIGNS
The Company's rights and obligations under this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Company; and
the Company may delegate all or any part of its rights and obligations hereunder
to any affiliate or subsidiary of the Company.
The Employee acknowledges and agrees that this Agreement is personal to her and
her rights and interests hereunder may not be assigned, nor may her obligations
and duties hereunder be delegated with exception of the voting rights assigned
to Employee's spouse by Employee.
10. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of Florida.
11. ENTIRE AGREEMENT
This Agreement supersedes any and all other agreements, either oral or written
heretofore made with respect to the subject matter hereof.
12. SEVERABILITY
Any provision of this Agreement which is found to be unenforceable in any
jurisdiction, shall, as to such jurisdiction only, be ineffective to the extent
of such unenforceability, without invalidating or otherwise affecting the
remaining provisions hereof. If any of the covenants against competition
contained in Section 6 are found by a court having jurisdiction to be
unreasonable in duration, geographical scope, or character of restriction, the
covenant shall not be rendered unenforceable thereby, but rather the duration,
geographical scope, or character of restriction of said covenant shall
respectively be reduced or modified to render the covenant reasonable and the
covenant shall be enforced as modified.
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13. COUNTERPARTS
This Agreement may be executed simultaneously in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. This Agreement shall be binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of the parties reflected hereon as signatories.
14. NOTICES
All notices required or permitted under this Agreement shall be in writing and
shall be deemed effective upon personal delivery or upon deposit in the United
States Post Office, by registered or certified mail, postage prepaid, addressed
to:
(i) Employee at the address shown above, or at such other address or
addresses as Employee shall designate to the Company in accordance
with this Section, or
(ii) Company at the address set forth on the above letterhead, or at
such other address as the Company shall designate to Employee in
accordance with this section.
15. PRONOUNS
Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms and the singular
form of nouns and pronouns shall include the plural and vice versa.
16. MISCELLANEOUS
A. No delay or omission by the Company or Employee in exercising any
right under this Agreement shall operate as a waiver of that or any
other right. A waiver or consent given by the Company or Employee on
any one occasion shall be effective only in that instance and shall
not be construed as a bar or waiver of any right on any other
occasion.
B. The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or
substance of any of this Agreement.
17. EMPLOYEE REPRESENTATIONS
Employee represents and warrants that he has the full power and authority to
enter into this Agreement and perform the duties as contemplated hereunder.
Employee further represents and warrants that he is free to enter into this
Agreement and that there are no other employment contracts, agreements or
understandings, written or oral, restrictive covenants, agreements not to
compete, confidentiality agreements or other restrictions whether written or
oral, preventing the performance of his duties hereunder. To the extent of any
breach of these representations and warranties by Employee, Employee agrees to
indemnify Employer and hold Employer harmless from any claim, action, liability,
damage or loss threatened or incurred by Employer on account of such breach.
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* * *
If the foregoing accurately sets out our agreement with regard to the above,
please indicate your acceptance by executing and returning two copies of this
letter to the undersigned.
Very truly yours,
COMPLETE WELLNESS INDEPENDENT PHYSICIAN ASSOCIATION, INC.
By:
-------------------------------
C. Thomas McMillen
Chairman and CEO
Accepted and agreed to this ___ day of _________________, 1997.
- ----------------------------------
David A. Sherwin
"Employee"
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Exhibit 10.17
[OPTIMUM HEALTH SERVICES LETTERHEAD]
AMENDMENT TO EMPLOYMENT
AGREEMENT DATED MAY 12, 1997
DAVID A. SHERWIN
JUNE 25, 1998
The following changes to the Agreement are made and effective as of May 31,
1998:
Section 1. Employment Duties
The title of Employee is hereby changed from Vice President of Finance to Vice
President of Finance and Administration.
Section 2. Employment Term
The term of the Agreement is extended one year and shall end on May 31, 2001.
Section 3.A. Compensation, Expenses, Etc.
a) The following shall be added to the end of the second sentence: ",
effective the first day of the fiscal quarter in which the Company is
deemed to be operational."
b) The third sentence is deleted and the following is substituted in its
place. "For purposes of this Agreement, the Company shall be deemed
"operational" at such time as the Company's accrued revenues for a fiscal
quarter are equal to or greater than $375,000."
Section 3.B. Compensation, Expenses, Etc.
The performance bonus percentage is hereby changed from 20% to 25%.
Section 4. Stock Options
a) Time Options - The vesting of the stock options granted under the
Company's 1997 stock option plan is hereby accelerated by the action of
the Board of Directors to May 15, 1998. In addition, the entire Time
Options section is hereby changed to:
<PAGE> 2
"Employee shall be granted, under the Company's 1998 stock option plan,
incentive stock options ("Time Options") to purchase 12,134 shares of the
Company's Common Stock at an exercise price of $1.44 per share. The Time
Options will vest in equal installments on June 1, 1999, June 1, 2000, and
May 31, 2001 which shall be evidenced by a stock option agreement (such
Time Options shall be subject to adjustment in the event of a
re-capitalization, stock split, rights offering, stock dividend). Sale of
the shares of Common Stock issued to Employee upon the exercise of the
Time Options may be subject to limitations pursuant to Rule 144 under the
Securities Act of 1933. The Time Options shall be exercisable for a period
of five (5) years from June 1, 1998. However, in the event this Agreement
is terminated for cause or in the event Employee resigns from the
employment of the Company, the vested Time Options shall be exercisable
for a period of three (3) months from the date of such termination or
resignation."
b) Performance Options - Deleted in its entirety.
c) Additional Options - Deleted in its entirety.
/s/ DAVID A. SHERWIN /s/ JASON M. PATCHEN
--------------------------- -----------------------------
David A. Sherwin Jason M. Patchen
<PAGE> 1
Exhibit 10.18
June 30, 1998
Ms. Theresa May
757 Centerwood Drive
Tarpon Springs, FL 34689
Dear Ms. May,
This letter, when accepted by you in a manner hereinafter provided, will
evidence the agreement among Optimum Health Services, Inc, a Delaware
Corporation (the "Company") and Ms. Theresa May (the "Employee") for the
provision of certain services to be rendered by Employee to the Company (the
"Agreement"), all under the following terms and conditions to wit:
1. EMPLOYMENT DUTIES
The Company shall employ Employee as Vice President of Corporate Development.
Employee shall report to the President and be initially responsible for, among
others:
A. Participation in the design and production of collateral materials
B. Development and implementation of a strategic plan for provider
recruitment
C. Provider recruitment including PCP's, specialists, hospitals,
alternative care providers and ancillary service providers
D. Contract negotiations (including compensation arrangements) with
providers. Compensation parameters to be pre-approved by the
President
E. Contract negotiations with payor groups (HMOs, employer's,
individuals, etc...) as approved by supervisor.
F. Development of Provider Manual(s)
G. Recruitment and supervision of network development/provider relations
staff
H. Other duties as may be assigned
2. EMPLOYMENT TERM
This Agreement shall commence on June 30, 1998, and shall end on May 31, 2001
(the "Employment Term") unless extended by the Company and Employee in writing
or unless sooner terminated in accordance with the provisions of this Agreement.
<PAGE> 2
3. COMPENSATION, EXPENSES, ETC.
In consideration of performance of the services and activities hereby, the
Company shall pay Employee compensation as follows:
A. An initial base salary of thirty-nine thousand ($39,000) per
annum during the Company's pre-operational phase; increased to
sixty thousand ($60,000) when operational (operational phase
begins at such time the Company has generated revenues for a
fiscal quarter in an amount equal to or greater than $375,000)
B. Eligible for up to $5,000 bonus payable at the end of each
annual anniversary based on provider recruitment goals, payor
contracts negotiated and Company profitability. Specific goals
in each area to be outlined within 30 days subsequent to each
anniversary period.
C. Payment of group health care premium covering the Employee,
beginning with commencement of the Employment Term; dependent
coverage available through go
D. payroll deduction.
E. Three (3) weeks of compensated vacation which shall vest ratably
throughout the year.
F. Eligibility for other company benefits as they become available
(life insurance, long and short term disability, etc.), in
accordance with company policies
G. Upon termination of this Agreement by mutual written agreement,
death, or disability of the Employee, or change of control
(where change of control shall mean (I) any transaction that has
the result that stockholders of the Company immediately before
such transaction cease to own at least fifty-one percent (51%)
of the voting stock of the Company or of any entity that results
from the participation of the Company in a reorganization,
liquidation or any other form of corporate transaction; (ii) a
merger, consolidation, reorganization, liquidation or
dissolution in which the Company does not survive; or (iii) a
sale, lease exchange or other disposition of all or
substantially all the property and assets of the Company), the
Employee shall receive a severance package equal to fifty
percent (50%) of Employee's annual base salary at the time of
termination, payable in six (6) equal monthly installments,
beginning in the second calendar month following the month in
which termination occurs.
H. The Company shall deduct the usual withholding taxes from
Employee's compensation consistent with standard practices and
applicable federal and state laws.
I. The Company shall reimburse Employee for any documented out of
pocket expenses incurred in connection with the duties and
responsibilities described herein,
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subject to the Company's policies. Upon termination of this
Agreement, all accrued but unpaid compensation to Employee shall
be payable in full.
4. STOCK OPTIONS
Employee will be granted on June 30, 1998 options (the "Options") to purchase
four thousand two hundred fifty-nine (4,259) shares of the Company's common
stock at an exercise price of $1.44 per share under the Company's Stock Option
Plan. The Options will be evidenced by a stock option agreement (such options
shall be subject to adjustment in the event of a re-capitalization, stock split,
rights offering, stock dividend). Sale of the shares of Common Stock issued to
Employee upon the exercise of the Options may be subject to limitations pursuant
to Rule 144 under the Securities Act of 1933. The Options shall vest with
respect to thirty-three and one-third percent (33 1/3%) on May 31, 1999;
thirty-three and one-third percent (33 1/3%) on May 31, 2000; and thirty-three
and one-third percent (33 1/3%) on May 31, 2000. The Options shall be
exercisable for a period of five (5) years from June 1, 1998. However, in the
event this Agreement is terminated for cause or in the event Employee resigns
from the employment of the Company, the vested Options shall be exercisable for
a period of three (3) months from the date of such termination or resignation.
5. TERMINATION
This Agreement may be terminated prior to the end of the Employment Term,
(i) by the written agreement between Company and Employee;
(ii) by the death of Employee or her disability for a period of one
hundred and twenty (120) consecutive days or the adjudicated
mental incompetency of Employee; or
(iii) by the Company for cause, where "cause" shall mean for purpose
of this Agreement:
(a) a violation by Employee of any material provision of this
Agreement, a breach of fiduciary duty or conduct involving
moral turpitude, where such violation, activity, or conduct
is not remedied by Employee within thirty, (30) days of
written notice from the Company
(b) employee's conviction of a felony
6. COVENANT NOT TO COMPETE; NOT TO SOLICIT
A. During the Employment Term and for a period of six (6) months
thereafter, the Employee will not without the prior written
permission of the Company in each instance directly or indirectly
carry on or participate in a business the same as or similar to or in
competition with that conducted or engaged in by the Company or any
of its subsidiaries or affiliates.
B. The term "carry on or participate in a business the same as or
similar to that conducted or engaged in by the Company or any of its
subsidiaries or affiliates" shall include the Employee, directly or
indirectly, doing any of the following listed acts, other than
carrying on or engaging in activities expressly permitted under this
Agreement:
(i) carrying on or engaging in any such business as a principal,
or solely or jointly with others as a director, officer,
agent, employee, consultant or partner, or stockholder or
limited partner owning more than five percent (5%) of the
stock
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or equity interests in or securities convertible into more
than five percent (5%) of the stock of or equity interests
in any corporation, association or limited partnership; or
(ii) as agent or principal carrying on or engaging in any
activities or negotiations with respect to the acquisition
or disposition of any such business; or
(iii) lending credit or money for the purpose of establishing or
operating any such business; or
(iv) giving advice to any other person, firm, association,
corporation or other entity engaging in any such business,
provided such other person, firm, association, corporation
or other entity is not a member of Employee's immediate
family; or
(v) lending or allowing her name or reputation to be used in any
such business.
C. In the event of a breach or threatened breach by the Employee of the
provisions of this Section 6, the Company shall be entitled to
injunctive relief against the Employee. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies
available to the Employer for such breach or threatened breach,
including without limitation the recovery of damages from the
Employee.
D. During the Employment Term and for six (6) months thereafter, the
Employee will not without the prior written permission of the Company
in each instance will not solicit, or attempt to solicit and employ
any employee of the Company or any of its subsidiaries or affiliates,
or commit an act the primary purpose of which is to induce employee
of the Company or any of its subsidiaries or affiliates to leave such
employment or significantly interfere with, disrupt or attempt to
disrupt any past, present or prospective relationship, contractual or
otherwise, relating to the business activities between the Company or
any of its subsidiaries or affiliates and their respective prospects.
E. The parties hereto consider the restrictions contained in this
Section 6 to be reasonable. If, however, such restrictions are found
by any court having jurisdiction to be unreasonable because they are
(or any of them is) too broad, then such restrictions shall
nevertheless remain effective, but shall be considered amended as to
protection of business, time or geographic area in whatever manner is
considered reasonable by that court and, as so amended, shall be
enforced.
F. The provisions of this Section 6 shall survive the expiration or
termination, for any reason, or this Agreement and shall be
separately enforceable.
7. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. The Employee agrees that she will not, during the Employment Term or
thereafter, make use of, divulge or otherwise disclose, directly or
indirectly, any trade or business secret (including, without
limitation, any customer list, data, records or financial information
constituting a trade or business secret) concerning the business or
policies of the Company or any of its subsidiaries or affiliates
which she may have learned as a result of her employment during the
Employment Term or prior thereto as shareholder,
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employee, officer and/or director or the Company except to the extent
such use or disclosure is necessary to the performance of this
Agreement and in furtherance of the Company's best interest. The
provisions of this Section 7 shall survive the expiration or
termination, for any reason, of this Agreement.
B. The Employee shall not during the Employment Term or for six (6)
months thereafter make use of, divulge or otherwise disclose,
directly or indirectly, any confidential information concerning the
business or policies of the Company or any of its subsidiaries or
affiliates which she may have learned while a shareholder, employee,
officer and/or director of the Company.
C. In the event of a breach or reasonably threatened breach by the
Employee of the provisions of this Section 7, the Company shall be
entitled to an injunction restraining the Employee from disclosing,
in whole or in part, any such trade or business secret and/or any
such confidential information, or from rendering any services to any
person, firm, corporation, association, or other entity to whom any
such trade or business secret and/or any such confidential
information, in whole or in part, has been disclosed or is threatened
to be disclosed. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company for
such breach or threatened breach, including without limitation the
recovery of damages from the Employee.
D. The provisions of this Section 7 shall survive the expiration or
termination, for any reason, of this Agreement and shall be
separately enforceable.
8. AMENDMENT
This Agreement may be amended only by the written agreement of the Company and
Employee.
9. SUCCESSORS AND ASSIGNS
The Company's rights and obligations under this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Company; and
the Company may delegate all or any part of its rights and obligations hereunder
to any affiliate or subsidiary of the Company.
The Employee acknowledges and agrees that this Agreement is personal to her and
her rights and interests hereunder may not be assigned, nor may her obligations
and duties hereunder be delegated with exception of the voting rights assigned
to Employee's spouse by Employee.
10. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of Florida.
5
<PAGE> 6
11. ENTIRE AGREEMENT
This Agreement supersedes any and all other agreements, either oral or written
heretofore made with respect to the subject matter hereof.
12. SEVERABILITY
Any provision of this Agreement which is found to be unenforceable in any
jurisdiction, shall, as to such jurisdiction only, be ineffective to the extent
of such unenforceability, without invalidating or otherwise affecting the
remaining provisions hereof. If any of the covenants against competition
contained in Section 6 are found by a court having jurisdiction to be
unreasonable in duration, geographical scope, or character of restriction, the
covenant shall not be rendered unenforceable thereby, but rather the duration,
geographical scope, or character of restriction of said covenant shall
respectively be reduced or modified to render the covenant reasonable and the
covenant shall be enforced as modified.
13. COUNTERPARTS
This Agreement may be executed simultaneously in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. This Agreement shall be binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of the parties reflected hereon as signatories.
14. NOTICES
All notices required or permitted under this Agreement shall be in writing and
shall be deemed effective upon personal delivery or upon deposit in the United
States Post Office, by registered or certified mail, postage prepaid, addressed
to:
(i) Employee at the address shown above, or at such other
address or addresses as Employee shall designate to the
Company in accordance with this Section, or
(ii) Company at the address set forth on the above letterhead, or
at such other address as the Company shall designate to
Employee in accordance with this section.
15. PRONOUNS
Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms and the singular
form of nouns and pronouns shall include the plural and vice versa.
16. MISCELLANEOUS
A. No delay or omission by the Company or Employee in exercising any
right under this Agreement shall operate as a waiver of that or any
other right. A waiver or consent given by the Company or Employee on
any one occasion shall be effective
6
<PAGE> 7
only in that instance and shall not be construed as a bar or waiver
of any right on any other occasion.
B. The captions of the sections of this Agreement are for convenience of
reference only and in no way define, limit or affect the scope or
substance of any of this Agreement.
17. EMPLOYEE REPRESENTATIONS
Employee represents and warrants that she has the full power and authority to
enter into this Agreement and perform the duties as contemplated hereunder.
Employee further represents and warrants that she is free to enter into this
Agreement and that there are no other employment contracts, agreements or
understandings, written or oral, restrictive covenants, agreements not to
compete, confidentiality agreements or other restrictions whether written or
oral, preventing the performance of her duties hereunder. To the extent of any
breach of these representations and warranties by Employee, Employee agrees to
indemnify Employer and hold Employer harmless from any claim, action, liability,
damage or loss threatened or incurred by Employer on account of such breach.
* * *
If the foregoing accurately sets out our agreement with regard to the above,
please indicate your acceptance by executing and returning two copies of this
letter to the undersigned.
Very truly yours,
OPTIMUM HEALTH SERVICES, INC.
By:
-------------------------------
Jason Patchen
President & CEO
Accepted and agreed to this ___ day of _________________, 1998.
- -------------------
Theresa M. May
"Employee"
7
<PAGE> 1
Exhibit 10.19
OPTIMUM HEALTH SERVICES, INC.
1997 BONUS PLAN FOR KEY EXECUTIVES
1. PURPOSE
The purpose of this Plan is to provide supplementary compensation as a reward
for past service and an incentive for future service to eligible key executives
earned through industry, ability, and exceptional service, contribute
materially to the success of the Company.
2. DEFINITIONS
2.1. Board of Directors means the Board of Directors of the Company.
2.2. Bonus Fund means the fund provided for in Article 3 hereof.
2.3. Committee means the Committee of the Board of Directors provided for
in Section 4.1 hereof.
2.4. Company means Optimum Health Services, Inc., a Florida corporation.
2.5. Eligible Employee means any key officer or other salaried executive
who is in service at the end of a Taxable Year and who has been
designated by the Committee as eligible to receive awards hereunder;
provided, however, that if in the judgement of the Committee a key
officer or other salaried executive whose service terminated before
the end of a Taxable Year has made an outstanding contribution to the
Company, he or she may receive a pro rata bonus award despite the
early termination of service.
2.6. Net Income means the income of the Company before deduction or
provision for federal, state, and local taxes, as determined in
accordance with Section 3.2 hereof.
2.7. Plan means this 1997 Bonus Plan for Key Executives of the Company, as
it may be amended from time to time.
2.8 Taxable Year means the fiscal year of the Company.
3. COMPUTATION OF FUND
3.1. There shall be paid into or set aside for a bonus fund (Bonus Fund)
for each Taxable Year an amount equal to 10% of the Company's Net
Income for that year; provided, however, that the amount of the Bonus
Fund for any Taxable year shall not exceed $5 million.
<PAGE> 2
3.2. The amount to be paid into or set aside for the Bonus Fund for any
Taxable year shall be determined in accordance with generally accepted
accounting principles consistently applied by the independent public
accountants employed to audit the books and records of the Company for
that Taxable Year. The determinations of such accountants shall be
final, binding, and conclusive upon the Company and all other persons
who may at any time have any interest in the Company or the Bonus
Fund.
3.3 If all or any part of the amount paid into or set aside for the Bonus
Fund for a Taxable Year is not awarded hereunder for that Taxable
Year, it shall be carried forward and be available for awards
hereunder in subsequent Taxable Years in accordance with Section 5.1
hereof.
4. ADMINISTRATION OF PLAN
4.1 The Plan shall be administered by the Board of Directors or, in its
discretion, a committee consisting of at least two members of the
Board of Directors, who shall be appointed by the Board of Directors
from among those of its members who are not Eligible Employees
(Committee). As used herein, the term "Committee" refers to such
committee or, in the absence of the appointment of such committee, to
the Board of Directors. The Committee shall have full power and
authority to construe, interpret, and administer the Plan. Subject to
any applicable provisions of the Company's By-laws, all decisions,
actions, or interpretations of the Committee shall be final,
conclusive, and binding upon all persons, including the Company and
Eligible Employees.
4.2 No present or former member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or
any bonus awarded hereunder. To the maximum extent permitted by
applicable law and the Company's Certificate of Incorporation and
By-laws, each present or former member of the Committee shall be
indemnified and held harmless by the Company against any cost or
expense (including counsel fees) or liability (including any sum paid
in settlement of a claim with the approval of the Company) arising out
of any act or omission to act in connection with the Plan unless
arising out of such person's own fraud or bad faith. Such
indemnification shall be in addition to any rights of indemnification
the person may have as a director, officer, or employee or under the
Company's Certificate of Incorporation or By-laws or otherwise.
5. AMOUNT AND CONDITION OF AWARDS
5.1 The Committee shall, after the end of each Taxable Year, in its sole
discretion, determine the total amount to be allocated for
distribution from the Bonus Fund for that Taxable Year, which may be
the whole or any part of the Bonus Fund. Any portion of the amount
paid into or set aside for the Bonus Fund for any Taxable Year and not
so allocated for distribution by the Committee shall be
<PAGE> 3
carried forward and, in the discretion of the Committee, may be
allocated and distributed in subsequent Taxable Years.
5.2 The Committee shall, in its sole discretion, determine the amount of
individual bonus awards for Eligible Employees based on its evaluation
of such individual's performance, contribution to the successful
management of the Company, industry, service, compensation, and such
other criteria as it shall consider relevant.
5.3 Notwithstanding any other provision of the Plan, the Committee may, in
its discretion, allocate all or any portion of the Bonus Fund to one
or more Eligible Employees for current and/or future Taxable Years,
pursuant to an employment agreement or otherwise; provided, however,
that any such allocation may not be for more that five consecutive
Taxable Years.
6. PAYMENT OF AWARDS
6.1 Awards for any Taxable Year shall be paid within 30 days after the
completion of the audit of the books and records of the Company for
such Taxable Year by its independent public accountants.
6.2 Awards shall be deemed additional compensation to the recipient and
payroll taxes shall be withheld from payments thereof in accordance
with all applicable federal, state, and local laws.
7. GENERAL RESTRICTIONS
7.1 Nothing in the Plan shall be deemed to give any Eligible Employee the
right to continued employment with the Company or to limit or impair
the right of the Company to terminate any Eligible Employee with or
with out cause at any time. The Plan shall not constitute a contract
between the Company and any Eligible Employee. No Eligible Employee
shall have any right to be granted an award hereunder, whether or not
he or she is selected to participate herein.
7.2 If the Committee shall find that any person to whom any amount is
payable under the Plan is unable to manage his or her affairs because
of illness or accident, or has died, then any payment due such person
hereunder may, if the Committee so directs, be paid to such person's
spouse, child(ren), or other relatives, or an institution maintaining
or caring for such person, or any other individual or entity deemed by
the Committee to be a proper recipient on behalf of such person. Any
such payment shall be a complete discharge of any liability of the
Plan, the Committee, and the Company therefor.
<PAGE> 4
8. AMENDMENT OR TERMINATION
The Board of Directors may at any time amend or terminate the Plan in whole or
in part; provided, however, that no amendment or termination shall impair or
reduce an award hereunder that was made but not paid prior to such amendment or
termination.
9. EFFECTIVE DATE
The effective date of the Plan shall be June 1, 1997.
<PAGE> 1
Exhibit 10.20
OPTIMUM HEALTH SERVICES, INC.
1998 BONUS PLAN FOR KEY EXECUTIVES
1. PURPOSE
The purpose of this Plan is to provide supplementary compensation as a reward
for past service and an incentive for future service to eligible key executives
earned through industry, ability, and exceptional service, contribute
materially to the success of the Company.
2. DEFINITIONS
2.1. Board of Directors means the Board of Directors of the Company.
2.2. Bonus Fund means the fund provided for in Article 3 hereof.
2.3. Committee means the Committee of the Board of Directors provided for
in Section 4.1 hereof.
2.4. Company means Optimum Health Services, Inc., a Florida corporation.
2.5. Eligible Employee means any key officer or other salaried executive
who is in service at the end of a Taxable Year and who has been
designated by the Committee as eligible to receive awards hereunder;
provided, however, that if in the judgement of the Committee a key
officer or other salaried executive whose service terminated before
the end of a Taxable Year has made an outstanding contribution to the
Company, he or she may receive a pro rata bonus award despite the
early termination of service.
2.6. Net Income means the income of the Company before deduction or
provision for federal, state, and local taxes, as determined in
accordance with Section 3.2 hereof.
2.7. Plan means this 1998 Bonus Plan for Key Executives of the Company, as
it may be amended from time to time.
2.8 Taxable Year means the fiscal year of the Company.
3. COMPUTATION OF FUND
3.1. There shall be paid into or set aside for a bonus fund (Bonus Fund)
for each Taxable Year an amount equal to 10% of the Company's Net
Income for that year; provided, however, that the amount of the Bonus
Fund for any Taxable year shall not exceed $5 million.
<PAGE> 2
3.2. The amount to be paid into or set aside for the Bonus Fund for any
Taxable year shall be determined in accordance with generally accepted
accounting principles consistently applied by the independent public
accountants employed to audit the books and records of the Company for
that Taxable Year. The determinations of such accountants shall be
final, binding, and conclusive upon the Company and all other persons
who may at any time have any interest in the Company or the Bonus
Fund.
3.3 If all or any part of the amount paid into or set aside for the Bonus
Fund for a Taxable Year is not awarded hereunder for that Taxable
Year, it shall be carried forward and be available for awards
hereunder in subsequent Taxable Years in accordance with Section 5.1
hereof.
4. ADMINISTRATION OF PLAN
4.1 The Plan shall be administered by the Board of Directors or, in its
discretion, a committee consisting of at least two members of the
Board of Directors, who shall be appointed by the Board of Directors
from among those of its members who are not Eligible Employees
(Committee). As used herein, the term "Committee" refers to such
committee or, in the absence of the appointment of such committee, to
the Board of Directors. The Committee shall have full power and
authority to construe, interpret, and administer the Plan. Subject to
any applicable provisions of the Company's By-laws, all decisions,
actions, or interpretations of the Committee shall be final,
conclusive, and binding upon all persons, including the Company and
Eligible Employees.
4.2 No present or former member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or
any bonus awarded hereunder. To the maximum extent permitted by
applicable law and the Company's Certificate of Incorporation and
By-laws, each present or former member of the Committee shall be
indemnified and held harmless by the Company against any cost or
expense (including counsel fees) or liability (including any sum paid
in settlement of a claim with the approval of the Company) arising out
of any act or omission to act in connection with the Plan unless
arising out of such person's own fraud or bad faith. Such
indemnification shall be in addition to any rights of indemnification
the person may have as a director, officer, or employee or under the
Company's Certificate of Incorporation or By-laws or otherwise.
5. AMOUNT AND CONDITION OF AWARDS
5.1 The Committee shall, after the end of each Taxable Year, in its sole
discretion, determine the total amount to be allocated for
distribution from the Bonus Fund for that Taxable Year, which may be
the whole or any part of the Bonus Fund. Any portion of the amount
paid into or set aside for the Bonus Fund for any Taxable Year and not
so allocated for distribution by the Committee shall be
<PAGE> 3
carried forward and, in the discretion of the Committee, may be
allocated and distributed in subsequent Taxable Years.
5.2 The Committee shall, in its sole discretion, determine the amount of
individual bonus awards for Eligible Employees based on its evaluation
of such individual's performance, contribution to the successful
management of the Company, industry, service, compensation, Employment
Agreement and such other criteria as it shall consider relevant.
5.3 Notwithstanding any other provision of the Plan, the Committee may, in
its discretion, allocate all or any portion of the Bonus Fund to one
or more Eligible Employees for current and/or future Taxable Years,
pursuant to an Employment Agreement or otherwise; provided, however,
that any such allocation may not be for more that five consecutive
Taxable Years.
6. PAYMENT OF AWARDS
6.1 Awards for any Taxable Year shall be paid within 30 days after the
completion of the audit of the books and records of the Company for
such Taxable Year by its independent public accountants.
6.2 Awards shall be deemed additional compensation to the recipient and
payroll taxes shall be withheld from payments thereof in accordance
with all applicable federal, state, and local laws.
7. GENERAL RESTRICTIONS
7.1 Nothing in the Plan shall be deemed to give any Eligible Employee the
right to continued employment with the Company or to limit or impair
the right of the Company to terminate any Eligible Employee with or
with out cause at any time. The Plan shall not constitute a contract
between the Company and any Eligible Employee. No Eligible Employee
shall have any right to be granted an award hereunder, whether or not
he or she is selected to participate herein.
7.2 If the Committee shall find that any person to whom any amount is
payable under the Plan is unable to manage his or her affairs because
of illness or accident, or has died, then any payment due such person
hereunder may, if the Committee so directs, be paid to such person's
spouse, child(ren), or other relatives, or an institution maintaining
or caring for such person, or any other individual or entity deemed by
the Committee to be a proper recipient on behalf of such person. Any
such payment shall be a complete discharge of any liability of the
Plan, the Committee, and the Company therefor.
<PAGE> 4
8. AMENDMENT OR TERMINATION
The Board of Directors may at any time amend or terminate the Plan in whole or
in part; provided, however, that no amendment or termination shall impair or
reduce an award hereunder that was made but not paid prior to such amendment or
termination.
9. EFFECTIVE DATE
The effective date of the Plan shall be January 1, 1998.
<PAGE> 1
Exhibit 10.21
American Stock Transfer & Trust Company ("AST&T")
40 Wall Street
New York, NY 10005
Ladies and Gentlemen:
In order to induce AST&T, and Optimum Health Services, Inc. (together
with its predecessors, successors and assigns, the "Company") to enter into a
Rights Offering agreement with respect to the offering of 1,000,000 shares of
Common Stock to its shareholders, the undersigned hereby agrees that for a
period of thirteen (13) months following the close of the Rights Offering (the
"Management Lock-up Period"), he, she or it will not, without the prior written
consent of the Company's counsel, directly or indirectly, issue, offer, agree
or offer to sell, sell, grant an option for the purchase or sale of, transfer,
pledge, assign, hypothecate, distribute or otherwise encumber or dispose of any
shares of Common Stock or options, rights, warrants or other securities
convertible into, exchangeable or exercisable for or evidencing any right to
purchase or subscribe for shares of Common Stock (whether or not beneficially
owned by the undersigned), or any beneficial interest therein (collectively,
the "Securities").
In order to enable the aforesaid covenants to be enforced, the
undersigned hereby consents to the placing of legends and/or stop-transfer
orders with the Transfer Agent of the Company's securities with respect to any
of the Securities registered in the name of the undersigned or beneficially
owned by the undersigned.
Dated: ___________, 1998
------------------------------
Signature
------------------------------
Print Name
------------------------------
Print Address
------------------------------
Print Social Security Number
Or Taxpayer I.D. Number
<PAGE> 1
Exhibit 10.22
OPTIMUM HEALTH SERVICES, INC.
1997 STOCK OPTION PLAN
1. PURPOSE.
This 1997 Stock Option Plan is intended to provide incentives: (a) to
the officers and other employees of Optimum Health Services, Inc. (the
"Company") by providing such employees with opportunities to purchase stock in
the Company pursuant to options granted hereunder that qualify as "incentive
stock options" under Section 422(b) of the Internal Revenue Code of 1986, as
amended; (b) to the officers and other employees of the Company by providing
such persons with opportunities to purchase stock in the Company pursuant to
options granted hereunder which do not qualify as "incentive stock options;"
and (c) to consultants and certain other persons rendering services to the
Company by providing such persons with opportunities to purchase stock in the
Company pursuant to options granted hereunder which do not qualify as
"incentive stock options."
2. DEFINITIONS.
(a) "Agreements" shall have the meaning ascribed to the term as
set forth in Section 6 hereof.
(b) "Board of Directors" means the Board of Directors of the
Company.
(c) "Common Stock" means the common stock, $.01 par value per
share, of the Company.
(d) "Company" means Optimum Health Services, Inc., a Delaware
corporation.
(e) "Employee" means every individual performing services for the
Company if the relationship between him/her and the person for
whom he/she performs such services is the legal relationship
of employer and employee as determined in accordance with
Section 3401(c) of Internal Revenue Code and Treasury
Regulations promulgated thereunder. A member of the Board of
Directors in his/her sole capacity as such is not an Employee.
(f) "Incentive Stock Option" means a right granted pursuant to
this Plan to purchase Common Stock that satisfies the
requirements of Section 422 of the Internal Revenue Code.
(g) "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended.
<PAGE> 2
(h) "Nonqualified Stock Option" means a right granted pursuant to
this Plan to purchase Common Stock that does not satisfy the
requirements of Section 422 of the Internal Revenue Code.
(i) "Option" means a right granted pursuant to this Plan to
purchase Common Stock which may be either an Incentive Stock
Option or a Nonqualified Stock Option as determined by the
Board of Directors.
(j) "Optionee" means an individual who has received an Option
under the Plan.
(k) "Plan" means this stock option plan authorizing the granting
of stock Options.
(l) "Plan Administrators" shall have the meaning ascribed to the
term as set forth in Section 5 hereof.
(m) "Reserved Shares" shall have the meaning ascribed to the term
as set forth in Section 3 hereof.
3. SHARES SUBJECT TO THE PLAN.
Subject to adjustments pursuant to Section 8 of the Plan, no more
three thousand five hundred (3,500) shares in the aggregate of the Company's
Common Stock (the "Reserved Shares") may be issued pursuant to the Plan to
eligible participants. The number of the Reserved Shares shall be reduced by
the number of Options granted under the Plan. The Reserved Shares may be made
available from authorized but unissued Common Stock of the Company, from Common
Stock of the Company held as treasury stock, from any shares which may become
available due to the expiration, cancellation or other termination of any
Option previously granted by the Company, or from any combination of the
foregoing.
4. ELIGIBILITY.
The individuals eligible to receive Options under this Plan shall be
such valued Employees of the Company, and such consultants and certain other
persons rendering services to the Company, as the Board of Directors may from
time to time determine and select. Employees shall be eligible to receive both
Incentive Stock Options and Nonqualified Stock Options. Consultants and
certain other persons rendering services to the Company shall be eligible to
receive Nonqualified Stock Options.
An Optionee may hold more than one Option. No Employee of the Company
is eligible to receive any Incentive Stock Options if such Employee, at the
time the option is granted, owns, beneficially or of record, in excess of 10%
of the outstanding voting stock of the Company or a subsidiary thereof;
provided, however, that such Employee will be eligible to receive an Incentive
Stock Option if at the time such Option is granted the Option price is at least
110% of the fair market value (determined with regard to Section 422(c)(7) of
the Internal Revenue Code) of the stock subject to the Option and such Option
by its terms is not exercisable after the expiration of five (5) years from the
date such Option is granted.
2
<PAGE> 3
Pursuant to Section 422(d) of the Internal Revenue Code, no Option
granted pursuant to this Plan shall be treated as an Incentive Stock Option to
the extent that the aggregate fair market value (determined at the time the
Option was granted) of Common Stock with respect to which Options (that
otherwise qualify as Incentive Stock Options) are exercisable for the first
time by an Employee during any calendar year (under all plans of the Company
and its subsidiaries) exceeds $100,000.
5. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by those members of the Board
of Directors, or by a committee appointed by the Board of
Directors, (in either event, the "Plan Administrators") who
are disinterested persons within the meaning of Rule
16b-3(c)(2)(i) of the Securities Exchange Act of 1934, as
amended ("Disinterested Persons").
(b) The Plan Administrators shall have the power, subject to, and
within the limits of, the express provisions of the Plan:
(i) To determine from time to time which eligible persons
shall be granted Options under the Plan, and the time
when any Option shall be granted to them;
(ii) To determine the number of Options to be granted to
any person;
(iii) To grant Incentive Stock Options, Nonqualified Stock
Options, or both, under the Plan to such persons;
(iv) To determine the duration and purposes of leaves of
absence which may be granted to Optionees without
constituting a termination of their employment for
purposes of the Plan;
(v) To prescribe the terms and provisions of each Option
granted under the Plan (which need not be identical);
(vi) To determine the maximum period during which Options
may be exercised;
(vii) To construe and interpret the Plan and Options
granted under it, and to establish, amend, and revoke
rules and regulations for its administration; and
(viii) Generally, to exercise such powers and to perform
such acts as are deemed necessary or expedient to
promote the best interests of the Company with
respect to the Plan.
3
<PAGE> 4
(c) Notwithstanding the foregoing, neither the Board of Directors,
any committee thereof nor any person designated pursuant to
paragraph (d) below may take any action which would cause any
Plan Administrator to cease to be a Disinterested Person with
regard to this Plan or any other stock option or other equity
plan of the Company.
(d) The Plan Administrators, in the exercise of these powers, may
correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, or in any Option, in the manner and
to the extent it shall deem necessary or expedient to make the
Plan fully effective. All determinations of the Plan
Administrators shall be made by majority vote. Subject to any
applicable provisions of the Company's By-laws, all decisions
made by the Plan Administrators pursuant to the provisions of
the Plan and related orders or resolutions of the Plan
Administrators shall be final, conclusive and binding on all
persons, including the Company, stockholders of the Company,
Employees and Optionees.
(e) The Plan Administrators may designate the Secretary of the
Company, or other employees of the Company or competent
professional advisors, to assist in the administration of this
Plan and may grant authority to such persons to execute
agreements or other documents on behalf of the Plan
Administrators.
(f) The Plan Administrators may employ such legal counsel,
consultants and agents as they may deem desirable for the
administration of this Plan and may rely upon any opinion
received from any such counsel or consultant and any
computation received from any such consultant or agent. No
present or former Plan Administrator shall be liable for any
action or determination made in good faith with respect to
this Plan or any Option granted hereunder. To the maximum
extent permitted by applicable law and the Company's
Certificate of Incorporation and By-laws, each present or
former Plan Administrator shall be indemnified and held
harmless by the Company against any cost or expenses
(including counsel fees) or liability (including any sum paid
in settlement of a claim with the approval of the Company)
arising out of any act or omission to act in connection with
this Plan unless arising out of such person's own fraud or bad
faith. Such indemnification shall be in addition to any
rights of indemnification the person may have as a director,
officer or employee or under the Certificate of Incorporation
of the Company, the By-laws of the Company or otherwise.
Expenses incurred by the Plan Administrators in the engagement
of such counsel, consultant or agent shall be paid by the
Company.
6. OPTION TERMS AND CONDITIONS.
The Options granted under the Plan shall be evidenced by written
Option Agreements (the "Agreements") consistent with the terms of the Plan
which shall be executed by the Company and the Optionee. The Agreements, in
such form as the Plan Administrators shall from time to time approve, shall,
incorporate the following terms and conditions:
4
<PAGE> 5
(a) Time of Exercise. Options shall be exercisable in accordance
with the terms of the Agreements as approved by the Plan
Administrators from time to time. Incentive Stock Options may
be exercised only if, at all times during the period that
begins on the date of the granting of the Incentive Stock
Option and that ends on the day three (3) months before the
date of such exercise, the Optionee was an Employee of the
Company; provided, however, that if the Optionee is "disabled"
within the meaning of Section 22(e) of the Internal Revenue
Code, then the end of the preceding post-employment exercise
period shall be extended to one (1) year.
(b) Purchase Price. Except as otherwise provided in Section 4
hereof, the purchase price per share of Common Stock
deliverable upon the exercise of an Incentive Stock Option
shall not be less than the fair market value of the Common
Stock on the date the Option is granted. The purchase price
per share of Common Stock deliverable upon the exercise of a
Nonqualified Stock Option shall be determined by the Plan
Administrators in their sole discretion.
(c) Method of Exercise. In order to exercise an Option in whole
or in part, the Optionee shall give written notice to the
Company at its principal place of business of such exercise,
stating the number of shares with respect to which the Option
is being exercised. Such notice shall be accompanied by full
payment of the purchase price thereof in cash. The exercise
date of the Option shall be the date the Company receives such
notice with any necessary accompaniments in satisfactory
order.
(d) Method of Payment. The purchase price shall be paid for (i) in
cash or by certified check or bank draft or money order
payable to the order of the Company or (ii) with the consent
of the Plan Administrators, and to the extent permitted by
them (not later than the time of the grant, in the case of an
Incentive Stock Option), through delivery of shares of Common
Stock having a fair market value on the date of exercise equal
to the purchase price ( but only if such shares have been held
by the Option holder for a period of time sufficient to
prevent a pyramid exercise that would create a charge to the
Company's earnings) or (iii) any combination of the foregoing
methods of payment.
(e) Transferability. An Option shall not be transferable by the
Optionee other than at death and an Option granted to such
Optionee is exercisable, during his lifetime, only by such
Optionee.
The Agreements may also contain such other terms, provisions, and
conditions consistent with the Plan and applicable provisions of the Internal
Revenue Code as the Plan Administrators may determine are necessary or proper.
7. RIGHTS OF STOCKHOLDERS AND OPTIONEE.
An Optionee shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such Option,
unless and until: (a) the Option shall
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<PAGE> 6
have been exercised pursuant to the terms thereof; (b) the Company shall have
issued and delivered the shares to the Optionee; and (c) the Optionee's name
shall have been entered as a stockholder of record on the books of the Company.
Thereupon, the Optionee shall have full voting and other ownership rights with
respect to such shares.
8. ADJUSTMENTS IN THE EVENT OF CHANGES IN THE CAPITAL STRUCTURE,
REORGANIZATION ANTI-DILUTION OR ACCOUNTING CHANGES.
(a) Changes in Capital Structure. In the event of a change in the
corporate structure or shares of the Company, the Plan
Administrators (subject to any required action by the
stockholders) shall make such equitable adjustments designed
to protect against dilution as they may deem appropriate in
the number and kind of shares authorized by the Plan and, with
respect to outstanding Options in the number and kind of
shares covered thereby and in the exercise price of such
Options on the dates granted. For the purpose of this
Section, a change in the corporate structure or shares of the
Company shall include, but is not limited to, changes
resulting from a recapitalization, stock split, consolidation,
rights offering, stock dividend, reorganization, or
liquidation.
(b) Reorganization-Continuation of the Plan. Upon the effective
date of the dissolution or liquidation of the Company, or a
reorganization, merger or consolidation of the Company with
one or more corporations in which the Company is not the
surviving corporation, or of a transfer of substantially all
of the Company's property or more than 80% of the then
outstanding shares of the Company to another corporation not
controlled by the Company's stockholders, the Plan and any
Option previously granted under the Plan shall terminate
unless provision be made in writing in connection with such
transaction for the continuation of the Plan and for the
assumption of the Options previously granted, or for the
substitution of new Options covering the shares of a successor
employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments (in accordance with the applicable
provisions of the Internal Revenue Code) as to the number and
kind of shares and price per share, in which event the Plan
and the Options previously granted or new Options substituted
therefor shall continue in the manner and under the terms as
provided.
(c) Reorganization-Termination of the Plan. In the event of a
dissolution, liquidation, reorganization, merger,
consolidation, transfer of assets or transfer of shares, as
provided in Section 8(b) above, and if provision is not made
in such transaction for the continuance of the Plan and for
the assumption of Options previously granted or the
substitution of new Options covering the shares of a successor
employer corporation or a parent or subsidiary thereof, then
an Optionee under the Plan shall be entitled to written notice
prior to the effective date of any such transactions stating
that rights under his Option must be exercised within thirty
(30) days of the date of such notice or they will be
terminated.
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<PAGE> 7
9. GENERAL RESTRICTIONS.
Each Option shall be subject to the requirement that, if at any time
the Plan Administrators shall determine, in their discretion, that the listing
or qualification of the shares or other securities subject to such Option upon
any securities exchange, or under any state or federal law or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with the granting thereof or the issue or
purchase of shares or payments of any amount thereunder, such Option may not be
exercised in whole or in part and no amounts may be received thereunder unless
such listing, qualification, consent or approval shall have been effected or
obtained free of any conditions unacceptable to the Plan Administrators.
10. EMPLOYMENT.
Nothing in this Plan shall be deemed to grant any right of continued
employment to a participating employee or to limit or waive any rights of the
Company to terminate such employment at any time, with or without cause.
11. AMENDMENT.
Subject to the provisions of Sections 5(c) and 5(d) hereof, the Board
of Directors of the Company shall have the power to amend or revise the terms
of this Plan or any part thereof without further action of the stockholders;
provided, however, that no such amendment shall impair any Option or deprive
any Optionee of shares that may have been granted to him under the Plan without
his consent; and provided, further, that no such amendment shall, without
stockholder approval:
(a) increase the aggregate number of the Reserved Shares for the
purpose of the Plan;
(b) change the class of individuals eligible to receive Options
under the Plan;
(c) extend the maximum period during which any Option may be
granted or exercised;
(d) reduce the Option price per share under any Option below fair
market value; or
(e) extend the term of the Plan.
12. EFFECTIVE DATE AND TERMINATION OF PLAN.
(a) The effective date of the Plan shall be June 1, 1997;
provided, however, in the event that the Plan is not approved
by the voting stockholders of the Company on or before August
15, 1997, the Plan and all Options granted and to be granted
hereunder shall be null and void and the Company shall have no
obligation of any nature whatsoever to any employee or other
person arising out of the Plan or any options granted or to be
granted hereunder.
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<PAGE> 8
(b) The Board of Directors of the Company may terminate the Plan
at any time with respect to any shares that are not subject to
Options. Unless terminated earlier by the Board of Directors,
the Plan shall terminate on May 31, 2007 and no Options shall
be granted under this Plan after it has been terminated.
Termination of this Plan shall not affect the right and
obligation of any Optionee with respect to Options granted
prior to termination.
13. WITHHOLDING TAXES.
Whenever under the Plan shares are to be issued in satisfaction of
Options granted hereunder, the Company shall have the right to require the
recipient to make arrangements to remit to the Company an amount sufficient to
satisfy federal, state and local withholding tax requirements, if any, prior to
or following the delivery of any certificate or certificates for such shares.
14. QUALIFICATION.
This Plan is adopted pursuant to, and is intended to comply with, the
applicable provisions of the Internal Revenue Code and the regulations
thereunder. Incentive Stock Options granted pursuant to this Plan are intended
to be "incentive stock options" as that term is defined in Section 422 of the
Internal Revenue Code and the regulations thereunder. In the event this Plan
or any Incentive Stock Option granted pursuant to this Plan is in any way
inconsistent with the applicable legal requirements of the Internal Revenue
Code or any regulation thereunder, this Plan and any Incentive Stock Option
granted pursuant to this Plan shall be deemed automatically amended as of the
date hereof to conform to such legal requirements, if such conformity can be
achieved by amendment.
15. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
Each Employee who receives an Incentive Stock Option must agree to
notify the Company in writing immediately after the Employee makes a
disqualifying disposition of any Common Stock acquired pursuant to the exercise
of an Incentive Stock Option. For purposes of this Plan, a "disqualifying
disposition" is any disposition (including any sale) of such Common Stock
before the later of (i) two years after the date the Employee was granted the
Incentive Stock Option, or (ii) one year after the date the Employee acquired
Common Stock by exercising the Incentive Stock Option.
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<PAGE> 9
OPTIMUM HEALTH SERVICES, INC.
1997 BONUS PLAN FOR KEY EXECUTIVES
1. PURPOSE
The purpose of this Plan is to provide supplementary compensation as a reward
for past service and an incentive for future service to eligible key executives
earned through industry, ability, and exceptional service, contribute
materially to the success of the Company.
2. DEFINITIONS
2.1. Board of Directors means the Board of Directors of the Company.
2.2. Bonus Fund means the fund provided for in Article 3 hereof.
2.3. Committee means the Committee of the Board of Directors provided for in
Section 4.1 hereof.
2.4. Company means Optimum Health Services, Inc., a Florida corporation.
2.5. Eligible Employee means any key officer or other salaried executive who is
in service at the end of a Taxable Year and who has been designated by
the Committee as eligible to receive awards hereunder; provided, however,
that if in the judgement of the Committee a key officer or other salaried
executive whose service terminated before the end of a Taxable Year has
made an outstanding contribution to the Company, he or she may receive a
pro rata bonus award despite the early termination of service.
2.6. Net Income means the income of the Company before deduction or provision
for federal, state, and local taxes, as determined in accordance with
Section 3.2 hereof.
2.7. Plan means this 1997 Bonus Plan for Key Executives of the Company, as it
may be amended from time to time.
2.8 Taxable Year means the fiscal year of the Company.
3. COMPUTATION OF FUND
3.1. There shall be paid into or set aside for a bonus fund (Bonus Fund) for
each Taxable Year an amount equal to 10% of the Company's Net Income for
that year; provided, however, that the amount of the Bonus Fund for any
Taxable year shall not exceed $5 million.
<PAGE> 10
3.2. The amount to be paid into or set aside for the Bonus Fund for any Taxable
year shall be determined in accordance with generally accepted accounting
principles consistently applied by the independent public accountants
employed to audit the books and records of the Company for that Taxable
Year. The determinations of such accountants shall be final, binding,
and conclusive upon the Company and all other persons who may at any time
have any interest in the Company or the Bonus Fund.
3.3 If all or any part of the amount paid into or set aside for the Bonus Fund
for a Taxable Year is not awarded hereunder for that Taxable Year, it shall
be carried forward and be available for awards hereunder in subsequent
Taxable Years in accordance with Section 5.1 hereof.
4. ADMINISTRATION OF PLAN
4.1 The Plan shall be administered by the Board of Directors or, in its
discretion, a committee consisting of at least two members of the Board of
Directors, who shall be appointed by the Board of Directors from among
those of its members who are not Eligible Employees (Committee). As used
herein, the term "Committee" refers to such committee or, in the absence of
the appointment of such committee, to the Board of Directors. The
Committee shall have full power and authority to construe, interpret, and
administer the Plan. Subject to any applicable provisions of the Company's
By-laws, all decisions, actions, or interpretations of the Committee shall
be final, conclusive, and binding upon all persons, including the Company
and Eligible Employees.
4.2 No present or former member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any bonus
awarded hereunder. To the maximum extent permitted by applicable law and
the Company's Certificate of Incorporation and By-laws, each present or
former member of the Committee shall be indemnified and held harmless by
the Company against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the
approval of the Company) arising out of any act or omission to act in
connection with the Plan unless arising out of such person's own fraud or
bad faith. Such indemnification shall be in addition to any rights of
indemnification the person may have as a director, officer, or employee or
under the Company's Certificate of Incorporation or By-laws or otherwise.
5. AMOUNT AND CONDITION OF AWARDS
5.1 The Committee shall, after the end of each Taxable Year, in its sole
discretion, determine the total amount to be allocated for
distribution from the Bonus Fund for that Taxable Year, which may be
the whole or any part of the Bonus Fund. Any portion of the amount
paid into or set aside for the Bonus Fund for any Taxable Year and not
so allocated for distribution by the Committee shall be
<PAGE> 11
carried forward and, in the discretion of the Committee, may be
allocated and distributed in subsequent Taxable Years.
5.2 The Committee shall, in its sole discretion, determine the amount of
individual bonus awards for Eligible Employees based on its evaluation
of such individual's performance, contribution to the successful
management of the Company, industry, service, compensation, and such
other criteria as it shall consider relevant.
5.3 Notwithstanding any other provision of the Plan, the Committee may, in
its discretion, allocate all or any portion of the Bonus Fund to one or
more Eligible Employees for current and/or future Taxable Years,
pursuant to an employment agreement or otherwise; provided, however,
that any such allocation may not be for more that five consecutive
Taxable Years.
6. PAYMENT OF AWARDS
6.1 Awards for any Taxable Year shall be paid within 30 days after the
completion of the audit of the books and records of the Company for
such Taxable Year by its independent public accountants.
6.2 Awards shall be deemed additional compensation to the recipient and
payroll taxes shall be withheld from payments thereof in accordance
with all applicable federal, state, and local laws.
7. GENERAL RESTRICTIONS
7.1 Nothing in the Plan shall be deemed to give any Eligible Employee the
right to continued employment with the Company or to limit or impair
the right of the Company to terminate any Eligible Employee with or
with out cause at any time. The Plan shall not constitute a contract
between the Company and any Eligible Employee. No Eligible Employee
shall have any right to be granted an award hereunder, whether or not
he or she is selected to participate herein.
7.2 If the Committee shall find that any person to whom any amount is
payable under the Plan is unable to manage his or her affairs because
of illness or accident, or has died, then any payment due such person
hereunder may, if the Committee so directs, be paid to such person's
spouse, child(ren), or other relatives, or an institution maintaining
or caring for such person, or any other individual or entity deemed by
the Committee to be a proper recipient on behalf of such person. Any
such payment shall be a complete discharge of any liability of the
Plan, the Committee, and the Company therefor.
<PAGE> 12
8. AMENDMENT OR TERMINATION
The Board of Directors may at any time amend or terminate the Plan in whole or
in part; provided, however, that no amendment or termination shall impair or
reduce an award hereunder that was made but not paid prior to such amendment or
termination.
9. EFFECTIVE DATE
The effective date of the Plan shall be June 1, 1997.
<PAGE> 1
Exhibit 10.23
OPTIMUM HEALTH SERVICES, INC.
1998 STOCK OPTION PLAN
1. PURPOSE.
This 1998 Stock Option Plan is intended to provide incentives: (a) to
the officers and other employees of Optimum Health Services, Inc. (the
"Company") by providing such employees with opportunities to purchase stock in
the Company pursuant to options granted hereunder that qualify as "incentive
stock options" under Section 422(b) of the Internal Revenue Code of 1986, as
amended; (b) to the officers and other employees of the Company by providing
such persons with opportunities to purchase stock in the Company pursuant to
options granted hereunder which do not qualify as "incentive stock options;"
and (c) to consultants and certain other persons rendering services to the
Company by providing such persons with opportunities to purchase stock in the
Company pursuant to options granted hereunder which do not qualify as
"incentive stock options."
2. DEFINITIONS.
(a) "Agreements" shall have the meaning ascribed to the term as
set forth in Section 6 hereof.
(b) "Board of Directors" means the Board of Directors of the
Company.
(c) "Common Stock" means the common stock, $.01 par value per
share, of the Company.
(d) "Company" means Optimum Health Services, Inc., a Delaware
corporation, all subsidiaries and/or affiliates.
(e) "Employee" means every individual performing services for the
Company if the relationship between him/her and the person for
whom he/she performs such services is the legal relationship
of employer and employee as determined in accordance with
Section 3401(c) of Internal Revenue Code and Treasury
Regulations promulgated thereunder. A member of the Board of
Directors in his/her sole capacity as such is not an Employee.
(f) "Incentive Stock Option" means a right granted pursuant to
this Plan to purchase Common Stock that satisfies the
requirements of Section 422 of the Internal Revenue Code.
(g) "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended.
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<PAGE> 2
(h) "Nonqualified Stock Option" means a right granted pursuant to
this Plan to purchase Common Stock that does not satisfy the
requirements of Section 422 of the Internal Revenue Code.
(i) "Option" means a right granted pursuant to this Plan to
purchase Common Stock which may be either an Incentive Stock
Option or a Nonqualified Stock Option as determined by the
Board of Directors.
(j) "Optionee" means an individual who has received an Option
under the Plan.
(k) "Plan" means this stock option plan authorizing the granting
of stock Options.
(l) "Plan Administrators" shall have the meaning ascribed to the
term as set forth in Section 5 hereof.
(m) "Reserved Shares" shall have the meaning ascribed to the term
as set forth in Section 3 hereof.
3. SHARES SUBJECT TO THE PLAN.
Subject to adjustments pursuant to Section 8 of the Plan, no more than
two hundred thousand (200,000) shares in the aggregate of the Company's Common
Stock (the "Reserved Shares") may be issued pursuant to the Plan to eligible
participants. The number of the Reserved Shares shall be reduced by the number
of Options granted under the Plan. The Reserved Shares may be made available
from authorized but unissued Common Stock of the Company, from Common Stock of
the Company held as treasury stock, from any shares which may become available
due to the expiration, cancellation or other termination of any Option
previously granted by the Company, or from any combination of the foregoing.
4. ELIGIBILITY.
The individuals eligible to receive Options under this Plan shall be
such valued Employees of the Company, and such consultants and certain other
persons rendering services to the Company, as the Board of Directors may from
time to time determine and select. Employees shall be eligible to receive both
Incentive Stock Options and Nonqualified Stock Options. Consultants and
certain other persons rendering services to the Company shall be eligible to
receive Nonqualified Stock Options.
An Optionee may hold more than one Option. No Employee of the Company
is eligible to receive any Incentive Stock Options if such Employee, at the
time the option is granted, owns, beneficially or of record, in excess of 10%
of the outstanding voting stock of the Company or a subsidiary thereof;
provided, however, that such Employee will be eligible to receive an Incentive
Stock Option if at the time such Option is granted the Option price is at least
110% of the fair market value (determined with regard to Section 422(c)(7) of
the Internal Revenue Code) of the stock subject to the Option and such Option
by its terms is not exercisable after the expiration of five (5) years from the
date such Option is granted.
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<PAGE> 3
Pursuant to Section 422(d) of the Internal Revenue Code, no Option
granted pursuant to this Plan shall be treated as an Incentive Stock Option to
the extent that the aggregate fair market value (determined at the time the
Option was granted) of Common Stock with respect to which Options (that
otherwise qualify as Incentive Stock Options) are exercisable for the first
time by an Employee during any calendar year (under all plans of the Company
and its subsidiaries) exceeds $100,000.
5. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by those members of the Board
of Directors, or by a committee appointed by the Board of
Directors, (in either event, the "Plan Administrators") who
are disinterested persons within the meaning of Rule
16b-3(c)(2)(i) of the Securities Exchange Act of 1934, as
amended ("Disinterested Persons").
(b) The Plan Administrators shall have the power, subject to, and
within the limits of, the express provisions of the Plan:
(i) To determine from time to time which eligible persons
shall be granted Options under the Plan, and the time
when any Option shall be granted to them;
(ii) To determine the number of Options to be granted to
any person;
(iii) To grant Incentive Stock Options, Nonqualified Stock
Options, or both, under the Plan to such persons;
(iv) To determine the duration and purposes of leaves of
absence which may be granted to Optionees without
constituting a termination of their employment for
purposes of the Plan;
(v) To prescribe the terms and provisions of each Option
granted under the Plan (which need not be identical);
(vi) To determine the maximum period during which Options
may be exercised;
(vii) To construe and interpret the Plan and Options
granted under it, and to establish, amend, and revoke
rules and regulations for its administration; and
(viii) Generally, to exercise such powers and to perform
such acts as are deemed necessary or expedient to
promote the best interests of the Company with
respect to the Plan.
(c) Notwithstanding the foregoing, neither the Board of Directors,
any committee thereof nor any person designated pursuant to
paragraph (d) below may take any
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<PAGE> 4
action which would cause any Plan Administrator to cease to be
a Disinterested Person with regard to this Plan or any other
stock option or other equity plan of the Company.
(d) The Plan Administrators, in the exercise of these powers, may
correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, or in any Option, in the manner and
to the extent it shall deem necessary or expedient to make the
Plan fully effective. All determinations of the Plan
Administrators shall be made by majority vote. Subject to any
applicable provisions of the Company's By-laws, all decisions
made by the Plan Administrators pursuant to the provisions of
the Plan and related orders or resolutions of the Plan
Administrators shall be final, conclusive and binding on all
persons, including the Company, stockholders of the Company,
Employees and Optionees.
(e) The Plan Administrators may designate the Secretary of the
Company, or other employees of the Company or competent
professional advisors, to assist in the administration of this
Plan and may grant authority to such persons to execute
agreements or other documents on behalf of the Plan
Administrators.
(f) The Plan Administrators may employ such legal counsel,
consultants and agents as they may deem desirable for the
administration of this Plan and may rely upon any opinion
received from any such counsel or consultant and any
computation received from any such consultant or agent. No
present or former Plan Administrator shall be liable for any
action or determination made in good faith with respect to
this Plan or any Option granted hereunder. To the maximum
extent permitted by applicable law and the Company's
Certificate of Incorporation and By-laws, each present or
former Plan Administrator shall be indemnified and held
harmless by the Company against any cost or expenses
(including counsel fees) or liability (including any sum paid
in settlement of a claim with the approval of the Company)
arising out of any act or omission to act in connection with
this Plan unless arising out of such person's own fraud or bad
faith. Such indemnification shall be in addition to any
rights of indemnification the person may have as a director,
officer or employee or under the Certificate of Incorporation
of the Company, the By-laws of the Company or otherwise.
Expenses incurred by the Plan Administrators in the engagement
of such counsel, consultant or agent shall be paid by the
Company.
6. OPTION TERMS AND CONDITIONS.
The Options granted under the Plan shall be evidenced by written
Option Agreements (the "Agreements") consistent with the terms of the Plan
which shall be executed by the Company and the Optionee. The Agreements, in
such form as the Plan Administrators shall from time to time approve, shall,
incorporate the following terms and conditions:
(a) Time of Exercise. Options shall be exercisable in accordance
with the terms of the Agreements as approved by the Plan
Administrators from time to time. Incentive Stock Options may
be exercised only if, at all times during the period that
begins on the date of the granting of the Incentive Stock
Option and that ends
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<PAGE> 5
on the day three (3) months before the date of such exercise,
the Optionee was an Employee of the Company; provided,
however, that if the Optionee is "disabled" within the meaning
of Section 22(e) of the Internal Revenue Code, then the end of
the preceding post-employment exercise period shall be
extended to one (1) year.
(b) Purchase Price. Except as otherwise provided in Section 4
hereof, the purchase price per share of Common Stock
deliverable upon the exercise of an Incentive Stock Option
shall not be less than the fair market value of the Common
Stock on the date the Option is granted. The purchase price
per share of Common Stock deliverable upon the exercise of a
Nonqualified Stock Option shall be determined by the Plan
Administrators in their sole discretion.
(c) Method of Exercise. In order to exercise an Option in whole
or in part, the Optionee shall give written notice to the
Company at its principal place of business of such exercise,
stating the number of shares with respect to which the Option
is being exercised. Such notice shall be accompanied by full
payment of the purchase price thereof in cash. The exercise
date of the Option shall be the date the Company receives such
notice with any necessary accompaniments in satisfactory
order.
(d) Method of Payment. The purchase price shall be paid for (i) in
cash or by certified check or bank draft or money order
payable to the order of the Company or (ii) with the consent
of the Plan Administrators, and to the extent permitted by
them (not later than the time of the grant, in the case of an
Incentive Stock Option), through delivery of shares of Common
Stock having a fair market value on the date of exercise equal
to the purchase price ( but only if such shares have been held
by the Option holder for a period of time sufficient to
prevent a pyramid exercise that would create a charge to the
Company's earnings) or (iii) any combination of the foregoing
methods of payment or (iv) each optionee shall also be
entitled to exercise an option in a "cashless exercise" by
delivering the number of options to be exercised (with no
payment of the exercise price) to the Company and receiving in
return options shares equal to the number of shares by (i)
multiplying the then current "fair market value" of the
Company's outstanding public shares of Common Stock by the
number of options to be exercised, (ii) then deducting the
aggregate exercise price associated with the options being
exercised, and (iii) dividing the remaining number by the
current "fair market value." For purposes of the option, the
"fair market value" of a share of Common Stock as of a certain
date shall be the closing sale price of the Common Stock on
the NASDAQ Stock Market or, if the Common Stock is not then
traded on the NASDAQ Stock Market, such exchange as the Common
Stock is then traded, on the trading date immediately
preceding the date "fair market value" is being determined.
(e) Transferability. An Option shall not be transferable by the
Optionee other than at death and an Option granted to such
Optionee is exercisable, during his lifetime, only by such
Optionee.
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<PAGE> 6
The Agreements may also contain such other terms, provisions, and
conditions consistent with the Plan and applicable provisions of the Internal
Revenue Code as the Plan Administrators may determine are necessary or proper.
7. RIGHTS OF STOCKHOLDERS AND OPTIONEE.
An Optionee shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such Option,
unless and until: (a) the Option shall have been exercised pursuant to the
terms thereof; (b) the Company shall have issued and delivered the shares to
the Optionee; and (c) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company. Thereupon, the Optionee
shall have full voting and other ownership rights with respect to such shares.
8. ADJUSTMENTS IN THE EVENT OF CHANGES IN THE CAPITAL STRUCTURE,
REORGANIZATION ANTI-DILUTION OR ACCOUNTING CHANGES.
(a) Changes in Capital Structure. In the event of a change in the
corporate structure or shares of the Company, the Plan
Administrators (subject to any required action by the
stockholders) shall make such equitable adjustments designed
to protect against dilution as they may deem appropriate in
the number and kind of shares authorized by the Plan and, with
respect to outstanding Options in the number and kind of
shares covered thereby and in the exercise price of such
Options on the dates granted. For the purpose of this
Section, a change in the corporate structure or shares of the
Company shall include, but is not limited to, changes
resulting from a recapitalization, stock split, consolidation,
rights offering, stock dividend, reorganization, or
liquidation.
(b) Reorganization-Continuation of the Plan. Upon the effective
date of the dissolution or liquidation of the Company, or a
reorganization, merger or consolidation of the Company with
one or more corporations in which the Company is not the
surviving corporation, or of a transfer of substantially all
of the Company's property or more than 80% of the then
outstanding shares of the Company to another corporation not
controlled by the Company's stockholders, the Plan and any
Option previously granted under the Plan shall terminate
unless provision be made in writing in connection with such
transaction for the continuation of the Plan and for the
assumption of the Options previously granted, or for the
substitution of new Options covering the shares of a successor
employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments (in accordance with the applicable
provisions of the Internal Revenue Code) as to the number and
kind of shares and price per share, in which event the Plan
and the Options previously granted or new Options substituted
therefor shall continue in the manner and under the terms as
provided.
(c) Reorganization-Termination of the Plan. In the event of a
dissolution, liquidation, reorganization, merger,
consolidation, transfer of assets or transfer of shares, as
provided in Section 8(b) above, and if provision is not made
in such transaction for the continuance of the Plan and for
the assumption of Options previously granted or the
substitution of new Options covering the shares of a successor
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<PAGE> 7
employer corporation or a parent or subsidiary thereof, then
an Optionee under the Plan shall be entitled to written notice
prior to the effective date of any such transactions stating
that rights under his Option must be exercised within thirty
(30) days of the date of such notice or they will be
terminated.
9. GENERAL RESTRICTIONS.
Each Option shall be subject to the requirement that, if at any time
the Plan Administrators shall determine, in their discretion, that the listing
or qualification of the shares or other securities subject to such Option upon
any securities exchange, or under any state or federal law or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with the granting thereof or the issue or
purchase of shares or payments of any amount thereunder, such Option may not be
exercised in whole or in part and no amounts may be received thereunder unless
such listing, qualification, consent or approval shall have been effected or
obtained free of any conditions unacceptable to the Plan Administrators.
10. EMPLOYMENT.
Nothing in this Plan shall be deemed to grant any right of continued
employment to a participating employee or to limit or waive any rights of the
Company to terminate such employment at any time, with or without cause.
11. AMENDMENT.
Subject to the provisions of Sections 5(c) and 5(d) hereof, the Board
of Directors of the Company shall have the power to amend or revise the terms
of this Plan or any part thereof without further action of the stockholders;
provided, however, that no such amendment shall impair any Option or deprive
any Optionee of shares that may have been granted to him under the Plan without
his consent; and provided, further, that no such amendment shall, without
stockholder approval:
(a) increase the aggregate number of the Reserved Shares for the
purpose of the Plan;
(b) change the class of individuals eligible to receive Options
under the Plan;
(c) extend the maximum period during which any Option may be
granted or exercised;
(d) reduce the Option price per share under any Option below fair
market value; or
(e) extend the term of the Plan.
12. EFFECTIVE DATE AND TERMINATION OF PLAN.
(a) The effective date of the Plan shall be June 25, 1998;
provided, however, in the event that the Plan is not approved
by the voting stockholders of the Company on
7
<PAGE> 8
or before June 30, 1998, the Plan and all Options granted and
to be granted hereunder shall be null and void and the Company
shall have no obligation of any nature whatsoever to any
employee or other person arising out of the Plan or any
options granted or to be granted hereunder.
(b) The Board of Directors of the Company may terminate the Plan
at any time with respect to any shares that are not subject to
Options. Unless terminated earlier by the Board of Directors,
the Plan shall terminate on June 25, 2008, and no Options
shall be granted under this Plan after it has been terminated.
Termination of this Plan shall not affect the right and
obligation of any Optionee with respect to Options granted
prior to termination.
13. WITHHOLDING TAXES.
Whenever under the Plan shares are to be issued in satisfaction of
Options granted hereunder, the Company shall have the right to require the
recipient to make arrangements to remit to the Company an amount sufficient to
satisfy federal, state and local withholding tax requirements, if any, prior to
or following the delivery of any certificate or certificates for such shares.
14. QUALIFICATION.
This Plan is adopted pursuant to, and is intended to comply with, the
applicable provisions of the Internal Revenue Code and the regulations
thereunder. Incentive Stock Options granted pursuant to this Plan are intended
to be "incentive stock options" as that term is defined in Section 422 of the
Internal Revenue Code and the regulations thereunder. In the event this Plan
or any Incentive Stock Option granted pursuant to this Plan is in any way
inconsistent with the applicable legal requirements of the Internal Revenue
Code or any regulation thereunder, this Plan and any Incentive Stock Option
granted pursuant to this Plan shall be deemed automatically amended as of the
date hereof to conform to such legal requirements, if such conformity can be
achieved by amendment.
15. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
Each Employee who receives an Incentive Stock Option must agree to
notify the Company in writing immediately after the Employee makes a
disqualifying disposition of any Common Stock acquired pursuant to the exercise
of an Incentive Stock Option. For purposes of this Plan, a "disqualifying
disposition" is any disposition (including any sale) of such Common Stock
before the later of (i) two years after the date the Employee was granted the
Incentive Stock Option, or (ii) one year after the date the Employee acquired
Common Stock by exercising the Incentive Stock Option.
8
<PAGE> 1
Exhibit 10.24
OPTIMUM HEALTH SERVICES, INC.
VALUATION AS OF APRIL 30, 1998
JUNE 5, 1998
<PAGE> 2
June 5, 1998
Mr. Mike Brigante
Vice President of Finance
Complete Wellness Centers, Inc.
666 Eleventh Street, NW
Second Floor, Suite 200
Washington, DC 20001
Dear Mr. Brigante:
We have prepared and enclosed, herewith, our valuation report of OPTIMUM HEALTH
SERVICES, INC. (Company) dated June 3, 1998. The purpose of the valuation is
to render an opinion as to the fair market value of the eighty six and
two-thirds percent (86.67%) ownership of the common stock of OPTIMUM HEALTH
SERVICES, INC. by Complete Wellness Centers, Inc. (CWC) as of April 30, 1998.
CWC intends to distribute its ownership in OHS to its shareholders in a spin
off of OHS from the parent organization.
The term "fair market value" is generally defined as the price at which the
property would change hands between a willing buyer and a willing seller when
the former is not under any compulsion to buy and the latter is not under any
compulsion to sell, and both parties have reasonable knowledge of the relevant
facts.
Our report, as of the valuation date, is based on historical and prospective
financial information provided to us by management. Had we audited or reviewed
the underlying data, matters may have come to our attention which would have
resulted in our using amounts which differ from those provided. Accordingly,
we take no responsibility for the underlying data presented in this report.
Unanticipated events and circumstances may occur subsequent to the date of this
report. Therefore, it is important to recognize that the estimated appraised
value of the Company may change over time.
Based on our approach and calculations and with the scope limitations discussed
further in our report, we estimate that the fair market value of the 86.67% of
common stock owned by Complete Wellness Center, Inc. for distribution to its
shareholders of OPTIMUM HEALTH SERVICES, INC. as of April 30, 1998 is $234,700.
Although in the body of our report we calculated the value based on the
adjusted net assets method and discounted cash flow method, we believe that
since the discounted cash flow method is based on future
<PAGE> 3
Mr.Mike Brigante
Optimum Health Services, Inc.
June 5, 1998
Page 2
earnings that is more indicative of the value of the entity, rather than the
current adjusted book value of the entity under the adjusted net asset method.
We have no present or contemplated financial interest in OPTIMUM HEALTH
SERVICES, INC. Our fees, for this valuation, are based upon our normal hourly
billing rates, and are in no way contingent upon the results of our findings.
We have no responsibility to update this report for events and circumstances
occurring subsequent to the date of this report.
This report has been prepared for the specific purpose of valuing 86.67% of
OPTIMUM HEALTH SERVICES, INC.'s common stock, as of April 30, 1998. This
report is not to be copied or made available to any persons without the express
written consent of American Express Tax and Business Services, Inc.
Very truly yours,
AMERICAN EXPRESS TAX AND BUSINESS SERVICES INC.
S. G. Brooke Tucker Paul Weinblatt, CPA, MHA
Senior Consultant Manager
<PAGE> 4
OPTIMUM HEALTH SERVICES, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. Introduction
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Limiting Conditions and Certifications . . . . . . . . . . . . . . . . . . . . 1-3
II. Company Background
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Organizational Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Complete Wellness Centers, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 5-6
III. Economic Outlook of the Health Care Industry
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
IV. Overview of:
Physician Practice Management . . . . . . . . . . . . . . . . . . . . . . . . . . 8
V. Estimate of Value
Method of Valuation Explained . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Valuation Methods Considered But Not Used . . . . . . . . . . . . . . . . . 10
Valuation Methods Considered . . . . . . . . . . . . . . . . . . . . . . 10-12
Estimate of Value Assumptions and Calculations . . . . . . . . . . . . . . . 13-15
Exhibit
Management Assumptions
</TABLE>
<PAGE> 5
OPTIMUM HEALTH SERVICES, INC.
INTRODUCTION
PURPOSE
Optimum Health Services, Inc. (OHS) is a subsidiary of Complete Wellness
Centers, Inc. (CWC). OHS was established on June 1, 1997 as a joint venture
between CWC and five senior managers from the health care industry. OHS is a
management services organization (MSO) that has contracted with physicians in
Florida to market an independent practice association to managed care entities.
The Company is located in Clearwater, Florida.
The purpose of this report is to establish the fair market value of the 86.67%
common stock of OPTIMUM HEALTH SERVICES, INC. to the shareholders of CWC as of
April 30, 1998 in conjunction with the plan by Complete Wellness Centers, Inc.
to spin off OHS as an independent company which will be traded on the NASDAQ
small capital market. The current shareholders of CWC will each receive pro
rata shares of stock based on the value of the spun off company.
APPROACH
Our approach has been to determine an estimate of value which would provide a
fair and reasonable return on investment to an investor or owner, in view of
the facts available to us at the time. Our opinion is based on, among other
things, our estimate of the risks facing the Company and the return on
investment which would be required on alternative investments with similar
levels of risk. We have applied various valuation methods in estimating the
value of OPTIMUM HEALTH SERVICES, INC. as of April 30, 1998.
We have reviewed and analyzed each method and its results to determine which
method generates the most reasonable estimate of value of OPTIMUM HEALTH
SERVICES, INC. as of April 30, 1998. After careful consideration of each
method's underlying assumptions and variables utilized, we concluded that the
Adjusted Net Assets Method and Discounted Cash Flow Method were the most
appropriate. Please refer to the section titled "Estimate of Value" on pages 9
through 14 of this report.
Both internal and external factors which influence the value of OPTIMUM HEALTH
SERVICES, INC. are reviewed, analyzed and interpreted. Internal factors
include the Company's financial position, results of operations and the size
and marketability of the interest being valued. External factors included,
among other things, the status of the industry and the position of the Company
relative to the industry.
LIMITING CONDITIONS AND CERTIFICATIONS
We have no present or contemplated financial interest in OPTIMUM HEALTH
SERVICES, INC. Our fees for this valuation are based upon our normal hourly
billing rates, and in no way are
<PAGE> 6
OPTIMUM HEALTH SERVICES, INC.
contingent upon the results of our findings. We have no responsibility or
obligation to update this report for events or circumstances occurring
subsequent to the date of this report.
The information contained in this report is based upon the financial records
and assumptions of volumes and expenses of OPTIMUM HEALTH SERVICES, INC., by
its owners and management, its certified public accountant and other
information made available to AETBS. It is believed to be reliable, but no
responsibility for its accuracy is assumed.
Our report is based on historical and/or prospective financial information
provided to us by management and other third parties. Had we audited or
reviewed the underlying data, matters may have come to our attention which
would have resulted in our using amounts which differ from those provided,
accordingly, we take no responsibility for the underlying data presented or
relied upon in this report.
In November 1997, the federal government began investigating billing
irregularities of CWC. We are not privy to the potential fines or penalties
that may be assessed against CWC, and therefore, can not determine such for
purposes of this valuation. AETBS can not be held responsible for any
potential liabilities that might affect the value of OHS in the future based
upon the federal investigation.
We have compiled certain information contained herein. That information,
namely, but not limited to, financial statements, company history and market
overview, has been supplied by the subject company, its officers and
representatives. This information has not been audited or reviewed by us, nor
has it been subjected to any type of audit or review procedures by us, nor have
we audited or reviewed the books and records of the subject company.
Accordingly, this report should not be construed, or referred to, as an audit,
examination or review by American Express Tax and Business Services Inc.
The forecasted statement of income for the next five years was prepared by
management of OHS. We provided no assistance in development of the
assumptions, and therefore, assume no responsibility for such. AETBS makes no
representations, expressed or implied, as to the validity of such forecasts.
We are not rendering legal or tax advice in this report and nothing herein
should be interpreted as such. We are not required to give testimony or
attendance in court by reason of this valuation, unless mutually agreed upon
arrangements are made prior to such appearance.
Users of this business valuation report should be aware that business
valuations are based on assumptions regarding future earnings potential, and/or
certain asset values, that may or may not materialize. Therefore, the actual
results achieved in the future will vary from the assumptions utilized in this
valuation, and the variations may be material.
<PAGE> 7
OPTIMUM HEALTH SERVICES, INC.
We have relied upon the representations of the owners, management and other
third parties concerning the value and useful condition of all equipment, real
estate, investments used in the business, and any other assets or liabilities
except as specifically stated to the contrary in this report. We have not
attempted to confirm whether or not all assets of the business are free and
clear of liens and encumbrances, or that the Company has good title to all
assets.
AETBS does not purport to be a guarantor of value. Valuation of closely-held
companies is an imprecise science, with the value being a question of fact, and
reasonable people can differ in their estimates of value. AETBS has, however,
used conceptually sound and commonly accepted methods and procedures of
valuation in determining the estimate of value included in this report.
This report is neither an offer to sell, nor a solicitation to buy securities,
and/or equity in, or assets of, the subject company.
We certify that to the best of our knowledge and belief the reported analyses,
opinions and conclusions are limited only by the reported assumptions and
limiting conditions, and our personal, unbiased professional analyses, opinions
and conclusions.
<PAGE> 8
OPTIMUM HEALTH SERVICES, INC.
COMPANY BACKGROUND
GENERAL
Optimum Health Services, Inc. (Company) was started in June 1997 when Complete
Wellness Centers, Inc. (CWC) became the majority shareholder (86.67% of common
stock) of a new company, Complete Wellness Independent Physicians Association,
Inc., a Delaware corporation, which then changed its name to Optimum Health
Services, Inc. The remaining 13.33% of common stock are owned by the five
senior managers of Optimum Health Services, Inc. OHS's office is located in
Clearwater, Florida.
The Company is a management service organization (MSO) that has contracted with
approximately 2,000 physicians in Florida to market the network to managed care
organizations. Physicians in the network include:
- - Family practitioners
- - General practitioners
- - Internists
- - Pediatricians
- - Specialists
In addition there are approximately 300 alternative care therapists in the
network. These include:
- - Acupuncturists
- - Chiropractors
- - Massage therapists
- - Podiatrists
- - Dietitians
- - Yoga/Tai Chi instructors
OHS offers this network to payers under several arrangements, including a
discounted preferred provider organization (PPO) network, HMO benefit rider or
as a part of a global risk product used with the traditional provider network.
OHS receives payment either through a percentage of premium or as a management
fee for overseeing the specific negotiated contract between the providers and
payors.
ORGANIZATIONAL PRODUCTS
As an MSO, the Company offers the following products to its member physicians
and contracting partners.
<PAGE> 9
OPTIMUM HEALTH SERVICES, INC.
Utilization Management Program: The Company has proprietary medical protocols
used improving quality of care offered by its network.
Quality Improvement Protocols: Similar in concept to Utilization Management,
the Company has established clinical protocols based on specific diagnosis
which are to improve quality patient care by identifying treatment plans that
are efficient and effective.
Credentialing System: The Company follows National Commission on Quality
Assurance Credentialing protocols to credential its network of providers.
Claims: The Company is licensed by the State of Florida to pay claims on
behalf of contracted organizations.
CONTRACTS
The Company has signed two contracts with managed care organizations. In
February 1998, the Company entered into a Provider Agreement with One Health
Plan of Florida, Inc. Under the agreement, OHS offers its network of primary
care and specialists physicians to One Health Plan's Commercial HMO enrollees
in the Tampa Bay area and a similar PPO/Point of Service (POS) arrangement for
their 75,000 Florida members. The Company receives ninety percent (90%) of the
HMO fee reimbursement, and pays its network providers seventy percent (70%) of
the fee reimbursement. The Company retains the twenty percent (20%) difference
for claims management. The network providers should theoretically see more
patients and, in turn, increased revenues as a result of being part of the
network.
In March 1998, OHS entered into an agreement with Beacon Health Plans, a
Florida based HMO with 30,000 covered lives, to offer its network to its HMO
enrollees in Florida. Until there are 2,000 enrolled members in the contract,
the Company is paid $12.60 per member per month for primary care services. In
turn, the primary care physicians are paid $10 per member per month. Once the
membership reaches 2,000, a global capitation arrangement will be negotiated.
COMPLETE WELLNESS CENTERS, INC.
COMPLETE WELLNESS CENTERS, INC. (CWC) is a physician practice management
company which provides management and clinic support services to
multi-disciplinary medical centers (Integrated Medical Centers) that combine
traditional physician providers and alternative health care providers, such as
chiropractors, acupuncturists, and massage therapists at one location in order
to deliver high quality, cost effective health care services.
As part of the long term management agreement with the existing chiropractic
practice, CWC leases the operating assets of the chiropractic practice, and
seeks to convert the chiropractic patient base as well as attract new patients
to a new medical practice which
<PAGE> 10
OPTIMUM HEALTH SERVICES, INC.
combines chiropractic and medical care. CWC provides capital, management,
marketing expertise, and provides for the employment or contracting of
chiropractors, physicians, specialists and other providers in exchange for a
management fee. CWC believes that chiropractors find affiliation with CWC to
be attractive because it will offer them increased access to capital, improved
information systems, management, and marketing expertise necessary to attract
new patients and to convert their existing patient base to a medical practice
and to contract on a capitated basis with managed care.
<PAGE> 11
OPTIMUM HEALTH SERVICES, INC.
ECONOMIC OUTLOOK OF HEALTH CARE
OVERVIEW
Physician and hospital services accounted for approximately $550 billion of the
$1 trillion spent on health care in 1996(1). In addition, physicians controlled
$700-$800 billion in health care expenditures by deciding in what hospitals
patients are treated, the drugs prescribed, etc. Despite the size of the
industry and the power of the practitioners, in general, physician practices
developed as solo practices and isolated partnerships through the late 1960s.
In the 1970s, physicians began to migrate to group practices.
Concerns over the accelerating cost of health care have resulted in the
increasing prominence of managed care which often involves shifting the
financial risk of providing health care services ultimately to the provider,
thus creating incentives to manage costs more efficiently. Health care in the
United States historically has been delivered through a fragmented system of
health care providers, including individual or small groups of primary care
physicians and specialists. According to the American Medical Association
(AMA), in 1994 there were approximately 685,000 physicians actively involved in
providing care in the United States. A 1993 AMA study estimates that there are
over 86,000 physicians practicing in 3,600 multi-specialty group practices
(consisting of three or more physicians) and over 82,000 physicians practicing
in 12,700 single specialty group practices in the United States.
The migration of physicians into groups in conjunction with a movement to
organize the health care delivery system created business opportunities for
companies that supply services to groups, or to provide physician services to
the health care system in a more organized manner.
In the late 1980s a new business model (pioneered by PhyCor) emerged under
which physicians could partner with corporate entities that would bring
management talent, corporate structure, business acumen, and capital to
physician practices. At this point in the industry's development, two dominant
model types for physicians equity models are emerging: companies that manage
large multi-specialty groups and those that focus on discrete specialty.
The market forces that have been driving physicians into group practice and
driving group practices to seek a corporate partner are intensifying. Among
the catalysts intensifying pressure on physicians are: income erosion, billing
and collection processes becoming increasingly complex, government payment
methodologies and group purchasing discounts driving down revenues per unit,
the uncertainty of at-risk compensation arrangements, escalation in the cost of
remaining competitive (e.g., more sophisticated equipment needs,
- -------------------------------------
1 Modern Healthcare/January 12, 1998.
<PAGE> 12
OPTIMUM HEALTH SERVICES, INC.
increased demand for outcomes data), and the prospect of competing directly
against group practices with a corporate affiliation.
OVERVIEW
PHYSICIAN PRACTICE MANAGEMENT
In response to reductions in the levels of reimbursement by third party payors
and the corresponding cost-containment pressures on health care providers,
physicians are increasingly seeking to affiliate with larger organizations
which manage the non-medical aspects of physician practices, such as billing,
purchasing and contracting with payor entities. Through affiliation with such
organizations, including physician practice management companies, physicians
gain access to capital, as well as the informational, managerial and
administrative resources essential to the delivery of high-quality, cost
effective care in the increasingly cost-conscious managed care environment.
An example of a practice management company is a Management Services
Organization (MSO). An MSO contracts with physicians, physician groups, or
hospitals to provide management and administrative services. The MSO may
acquire physicians' tangible assets (e.g., office space, equipment,
furnishings, management information systems, and personnel) and enter into
management agreements with physicians whereby the MSO leases assets and
performs management and administrative services (e.g., billing, claims
administration, management information systems, marketing, accounting,
utilization review, quality assurance, credentialing, group purchasing, legal
services, insurance, and managed care contracting) for the physicians for
compensation.
An MSO may provide billing, contracting and marketing services to a network of
physicians who remain independent, for a percentage of the managed care
contract premium or flat monthly fee. The physicians are organized as an
independent practice association (IPA), with help from the MSO's management
team to negotiate managed care contracts. The MSO can also arrange for group
purchasing of supplies, insurance and other similar costs.
<PAGE> 13
OPTIMUM HEALTH SERVICES, INC.
METHOD OF VALUATION EXPLAINED
In performing valuation services we are governed by the general standards
contained in Rule 201 of the AICPA's Code of Professional Conduct. In reaching
a conclusion of the estimated value range, methodologies from the National
Association of Certified Valuation Analysts (NACVA) are utilized.
A significant factor in the appraisal of a business is whether the use of the
cost or asset-based, market and/or income approaches makes the most sense.
Businesses may be valued using any or all of these approaches. Through the
valuation process the analyst assumes that the only changes to the facts used
would be those steps taken to maximize revenues of the current business by the
current owners. Additionally, industry economics and specific business risk to
promote the continuance of value must be assessed.
Internal Revenue Service rulings 59-60, 1959, C.B. 237 and 68-609, 1968-2, C.B.
327 were used as guidelines for our consideration of the following items:
- - Going concern status of the Business;
- - Nature of the Business, history of the Business, and factors affecting the
Business;
- - Present and successor management of the Business;
- - Historical earnings and factors affecting earnings, such as competitive
position, markets and market penetration;
- - The economic outlook in general and the condition and outlook of the health
care profession;
- - The earning capacity of the Business;
- - Current and historical financial conditions, analysis of operating ratios and
trend of financial results; and
- - Sales of similar Businesses in the same region, if available.
The methods of valuation we selected to estimate the fair market value of the
86.67% of common stock of OPTIMUM HEALTH SERVICES, INC. are the widely
recognized "Adjusted Net Assets Method" and "Discounted Cash Flow Method".
Since the parent company of OHS is a public company that trades on the NASDAQ
small capital market, and the resulting spun off company of OHS will also be
traded on the NASDAQ small capital market, the 86.67% control of common stock
represents a control marketable security. Since these shares will be
distributed to CWC shareholders, a discount for minority interest has been
applied to determine the minority marketable security that shareholders will be
able to trade on the NASDAQ small capital market.
<PAGE> 14
OPTIMUM HEALTH SERVICES, INC.
VALUATION METHODS CONSIDERED BUT NOT USED
Comparative Valuation Analysis of Comparable Business Entities
While trend analysis is particularly helpful in identifying any trends of
improvement or deterioration, it gives no indication of how OPTIMUM HEALTH
SERVICES, INC.'S balance sheet and operating performance compare with those of
other firms in the same industry. A comparison of publicly traded companies
(or privately-held companies where such information is available) is
particularly useful. In our opinion, we were unable to locate a sufficient
number of such financially and managerially similar firms to make a valid
comparison and render a just opinion as to an estimate of value. In addition,
since OPTIMUM HEALTH SERVICES, INC. has been in existence for less than a year
and has no history of earning income, trend analysis would be meaningless.
Capitalization of Earnings/Other Income Methods
Except for the Discounted Cash Flow Method, which applies to future projected
earnings, income methodology based on past financial performance was not
appropriate. For example, the capitalization of earnings applies a
capitalization rate to a weighted average of prior adjusted normalized
financial results. Since OPTIMUM HEALTH SERVICES, INC. has not shown any prior
financial earnings, income approaches are generally not relevant.
VALUATION METHODS CONSIDERED
Method I - Adjusted Net Assets
Adjusted Net Assets Method is an asset oriented approach. This method is used
to value a business based on the difference between the fair market value of
the business assets and its liabilities. Depending on the particular purpose
or circumstances underlying the valuation, this method sometimes uses the
replacement or liquidation value of the company assets less the liabilities.
Under this method the analyst adjusts the book value of the assets to the fair
market value, and then reduces the total adjusted value of assets by the fair
market value of any recorded or unrecorded liabilities. Tangible as well as
intangible assets are valued in determining total adjusted net assets. As of
this date, the parent organization of CWC is under federal investigation for
billing irregularities. We have not made any adjustment for pending
liabilities because we are unable to determine the possibility that fines or
penalties will be imposed.
A minority interest discount is a term applied to a discount, generally with
respect to the ownership of less than 50% of the voting stock in a closely held
corporation, which eliminates the ability of the owner to have any significant
control over the operations of the business, the payment of dividends, the
ability to receive wages, or to become involved in the day-to-day business
activities of the corporation. Since the value of the 86.67% of common stock
represents a control marketable security, we have applied a discount for
<PAGE> 15
OPTIMUM HEALTH SERVICES, INC.
minority interest of 25% since each of the approximately 500 current CWC
shareholders will receive a portion of the OHS stock. The 25 % discount is
based on an average of the last five years' minority interest discount found in
the Mergerstate Review 1994 (Los Angeles: Houlihan Lobey Howard & Zukin, 1995),
p. 98.
Based on management input of the fair market value if assets were sold between
a willing buyer and willing seller, the value of 86.67% of common stock is
$89,600. A minority interest discount of 25% has been applied to reach a value
to the CWC shareholders of the 86.67% of common stock in OHS of $67,300.
Method II - Discounted Cash Flow
The Discounted Cash Flow (DCF) approach is often considered to be the most
theoretically correct and may be one of the most frequently used methods in
valuing businesses for mergers and acquisitions. The DCF approach is based on
the theory that the total value of a business is the present value of its
projected future earnings, plus the present value of the terminal value. The
future cash flows projected over a five year basis are discounted back to the
present using a risk adjusted rate of return, which considers factors for the
industry as well as risks specific to that practice. A terminal, or residual
value, which is determined by capitalizing the fifth year cash flow projection,
and then discounting it to the present value is added to the yearly projected
future earnings to determine the intangible value of the business.
The discount rate is equal to an after tax capitalization rate plus expected
growth (or lack of growth) of the business. The growth rate is based upon the
risk profile of the income stream. Since the rate of growth for this start-up
company is so high, we have applied a 5% growth rate to the calculation of the
discount rate on the assumption that the growth rate will plateau after 2002 to
that level.
Assumptions specific to the business have been developed by management of OHS
based purely on estimates. The yearly cash flow streams in the projections
were then discounted back to the present considering a 67.50% after tax
discount rate, which was determined using the Capital Asset Pricing Model. We
considered an appropriate Beta to adjust the equity risk premium, specifically
for a market segment containing similar public MSO's.
We used a 50% specific company risk because of the following factors. The
physician practice management company (PPMC) sector has seen a drop in overall
profitability and share price on the stock exchange. For example, Coastal
Physician Group's stock price on the New York Stock Exchange dropped from a
high of $42 in 1993 to less than $2 per share in 1997.(2) FPA Medical Management
reported first quarter 1998 net income of a $9.1 million loss, compared to
$24.5 million loss last year in the first quarter. Medpartners,
- ------------------------------------
2 Medical Economics: April 28, 1997
<PAGE> 16
OPTIMUM HEALTH SERVICES, INC.
another PPMC, has traded between $7 and $32 a share over the last 52 weeks,
ending March 1998.(3) In addition, management has projected over the next five
years rapid growth in revenues and net income while the first two years of the
five year projection shows significant net operating losses which will require
additional capital to support the operations.
A terminal value of the business was estimated by taking the last 12 months'
projected net earnings, capitalized at a 59.43% after tax rate. This terminal
value was then discounted back to the present factor to arrive at the value of
the business. A discount for minority interest of 25% was then applied to the
value of the 86.67% common stock to reach a value of $234,700.
These estimated values do not include other assets not stated in this report.
- ------------------------------------
3 Credit Suisse First Boston Reports
<PAGE> 17
OPTIMUM HEALTH SERVICES, INC.
ESTIMATE OF VALUE ASSUMPTIONS AND CALCULATIONS
Method I - Adjusted Net Assets
Schedule of Adjusted Net Assets as of April 30, 1998
<TABLE>
<CAPTION>
Adjusted Adjustment Market
-------- ---------- ------
<S> <C> <C> <C>
Cash $134,284 $ 0 $134,284
Receivables, net of allowances(4) 940 ( 940) 0
Prepaid expenses 1,845 0 1,845
Furniture and equipment, net of
accumulated depreciation(5) 28,402 ( 12,000) 16,402
Other assets - security deposit 5,061 0 5,061
-------- -------- --------
Total Assets $170,532 ($12,940) $157,592
======== ======= ========
Accounts payable $ 11,495 $ 0 $ 11,495
Accrued liabilities 16,516 0 16,516
Payroll tax liabilities 26,089 0 26,089
Loan payable - CWC, Inc.(6) 50,000 ( 50,000) 0
-------- -------- --------
Total Liabilities 104,100 ( 50,000) 54,100
-------- -------- --------
Common stock 75 0 75
Additional capital 680,525 37,060 717,585
Accumulated deficit ( 614,168) 0 ( 614,168)
-------- -------- --------
Total Stockholders' Equity/(Deficit) 66,432 37,060 103,492
-------- -------- --------
Total Liabilities and
Stockholders' Equity/(Deficit) $170,532 ($ 12,940) $157,592
======== ======== ========
</TABLE>
- --------------------
4 Receivables were assumed to be written off. Receivables
owed by defunct entity, CWC, LLC.
5 Computer equipment was adjusted based on management
estimate of fair market value if sold today.
6 Loan payable was reconstituted as equity.
<PAGE> 18
OPTIMUM HEALTH SERVICES, INC.
Method I - Adjusted Net Assets Method Valuation Summary
<TABLE>
<S> <C>
Value of business $103,492
Stock ownership by CWC, Inc. x .8667
---------
Estimated Value of 86.67% of Common Stock (Rounded) 89,700
Discount for Minority Interest (25%) ( 22,425)
---------
Estimated Value of Common Stock to CWC Shareholders (Rounded) $67,300
=======
</TABLE>
<PAGE> 19
METHOD II - Discounted Cash Flow
<TABLE>
<CAPTION>
Projected Twelve Months ending December 31,
1998 1999 2000 2001 2002 Terminal Year
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE - CASH BASIS
HMO Revenue 634,715 3,237,883 8,494,473 11,732,636 16,057,157 16,860,015
---------------------------------------------------------------------------
OPERATING EXPENSES
Physician Servicess and Medical Claims 601,740 2,356,240 5,963,778 8,247,665 11,287,800 11,852,190
Administrative and Marketing 1,287,471 2,441,414 2,710,990 2,951,626 3,349,197 3,516,657
---------------------------------------------------------------------------
Total Operating Expenses 1,889,211 4,797,654 8,674,768 11,199,291 14,636,997 15,368,847
OPERATING INCOME (EARNINGS BEFORE
DEPRECIATION, AMORTIZATION & TAXES) -1,254,496 -1,559,771 -180,295 533,345 1,420,160 1,491,168
Depreciation and Amortization 14,255 48,077 72,744 77,177 82,811 94,544
---------------------------------------------------------------------------
EARNINGS BEFORE TAXES -1,268,751 -1,607,848 -253,039 456,168 1,337,349 1,396,624
Income Taxes/Net Operating Loss
Carryforward 0 0 0 0 0 0
---------------------------------------------------------------------------
NET INCOME AFTER TAXES -1,268,751 -1,607,848 -253,039 456,168 1,337,349 1,396,624
Subtract: Capital Expenditures/Financing 399,200 23,200 121,000 26,000 32,000 0
Add: Depreciation/Interest 14,255 48,077 72,744 77,177 82,811 94,544
---------------------------------------------------------------------------
NET CASH FLOW -1,653,696 -1,582,971 -301,295 507,345 1,388,160 1,491,168
TERMINAL YEAR EXIT MULTIPLE (59.43%
CAPITALIZATION RATE) 1.68
TERMINAL VALUE 2,509,177
PRESENT VALUE FACTOR -67.40% DISCOUNT RATE 0.000 0.000 0.000 0.127 0.076 0.076
---------------------------------------------------------------------------
PRESENT VALUE - FREE CASH FLOWS 0 0 0 64,607 105,600 190,877
===========================================================================
</TABLE>
<TABLE>
<S> <C> <C> <C>
CALCULATION OF DISCOUNT RATE SUM OF PRESENT VALUES 170,207
Risk Free Rate of Return 6.00%
Market Equity Risk Premium Rate 7.90% ADD: PRESENT VALUE OF TERMINAL YEAR 190,877
Beta (see discussion pg 12 ) x1.00 7.90% ----------------
-------------
Small Stock Risk Premium 3.50% ESTIMATED BUSINESS ECONOMIC VALUE 361,084
Specific Company Risk 50.00% ----------------
----------
Net Cash Flow Discount Rate 67.40% VALUE OF 86.67% OF COMMON STOCK 312,952
----------
CALCULATION OF AFTER TAX CAPITALIZATION RATE DISCOUNT FOR MINORITY DISCOUNT (25%) 78,238
Net Cash Flow Discount Rate 67.40% ----------------
less: Growth Rate 5.00%
----------
After tax Capitalization Rate for 1998 62.40% INDICATED BUSINESS ECONOMIC VALUE (ROUNDED) 234,700
divided by 1.05 ================
----------
After tax Capitalization Rate for 1997 59.43%
==========
</TABLE>
<PAGE> 20
MANAGEMENT ASSUMPTIONS
ENROLLMENT AND REVENUE BREAKDOWNS AND RECONCILIATION
The following represents a summary of 1998 expected total enrollment and
revenues by healthplan contract/member source:
Enrollment:
<TABLE>
<CAPTION>
Healthplan Effective Date 12/98 Members 1998 Revenues
- ---------- -------------- ------------- -------------
<S> <C> <C> <C>
One Health Plan - PPO 3/1/98 30,605 $7,575
Beacon Health Plan - PCP 4/1/98 1,680 $96,500
Beacon Health Plan - Pools 4/1/98 1,680 $521,100
OHS CAM PPO Retail 10/1/98 350 $5,400
OHS CAM PPO - HMO 9/1/98 1,680 $4,140
TOTAL 173,369 $634,715
===== ======= ========
</TABLE>
THE following represents a brief description of each line of business
represented in this budget:
- - HMO Risk Members: Represents Beacon Health Plans and other Florida HMO
members delegated to the Company that are a combination of full HMO risk and
PCP risk members as they pertain to the Company. Under the current full HMO
risk arrangement, Beacon will prepay the Company a premium representing 80.0%
of all funds received by Beacon for covered health and medical services from
all insured members. Under the current PCP risk agreement, Beacon will
prepay the Company a premium representing approximately 12.0-15.0% of the
funds received by Beacon.
- - HMO Pooled Members: Under the initial phase of the Beacon Contract, the
Company is prepaid only PCP risk funds. The remaining funds representing the
difference between HMO risk funds less the PCP prepayment to the Comppany is
pooled and held by Beacon. On a monthly basis, Beacon reconciles these pools
and shares equally any surplus/deficit with the Company. At such time that
the delegated PCP risk membership exceeds 2,000 members, this item disappears
as the Company's form of reimbursements shifts to HMO risk model only.
- - CAM Service Members: This category is the consolidation of the Company's CAM
retail product, wholesale HMO product, and insured rider product. Both the
retail and wholesale product are PPO products with a 30.0% discount for
enrolled members. The insured rider is currently in development and is not
expected to begin marketing for two to three years.
- - Other Members Served: This category represents the current One Health Plan
PPO and POS agreement under which One Health Plan's members have been
granted access to the Company's traditional provider network. Reimbursement
to the Company is in the form of a markup on all claims incurred by One
Health Plan's members.
<PAGE> 21
OPTIMUM HEALTH SERVICES, INC.
BUDGET ASSUMPTIONS
The 1998-2002 Forecast for the Company is attached for reference. The
following is the list of assumptions by line item:
Forecasted Income Statement:
Revenues:
- - HMO Risk Members:
- - Beacon HMO $### PMPM
- - Beacon PCP $### PMPM
- - Other HMOS $### PMPM
- - HMO Pooled Members:
- - Beacon PCP $### PMPM
- - CAM Service Members:
- - CAM Retail Product $### PMPM
- - CAM Rider $### PMPM
- - CAM Wholesale Product $### PMPM
- - Other Members Served:
- - One Health Plan PPO/POS $### PMPM
Operating Expenses:
- - Physician Services and Medical Claims: MLR is applied only to HMO Risk
Members, HMO Pooled Members, Other Members Served, and the CAM Rider. This
calculated according to the following schedule:
- - Calendar Year 1998: 90.0%
- - 1/99 through 6/99 85.0%
- - 7/99 through 12/99 82.5%
- - Calendar Years 2000 through 2002 80.0%
- - Administrative and Marketing: This category is the consolidation of the
following expense categories:
<PAGE> 22
OPTIMUM HEALTH SERVICES, INC.
- - Compensation: Total compensatory related expenses including payroll,
employee benefits, payroll taxes, and workers compensation. Total expected
FTEs by year-end are:
1998 22.0
1999 25.5
2000 44.5
2001 60.0
2002 74.0
- - Professional Fees: Includes legal fees, consulting, accounting, and auditing
fees - approximately $90,000 annual run rate.
- - Occupancy - $3,712 per month through 7/98, increasing to $7,100 per month
through 12/98, $10,100 per month for 1999, and a 3.0% annual increase
thereafter.
- - Telephone: includes all communications expenses, e.g., local and long
distance, cellular, pagers, etc. - based on administrative experience,
approximately $156 per FTE.
- - Travel: Includes all travel and entertainment, including provider recruiting
related expenses - based on administrative experience, approximately $376 per
FTE.
- - Insurance: Includes e&o, d&o, etc - based on current and quoted rates,
approximately $37,000 annual run rate.
- - Postage: Includes regular and bulk mailings, overnight and express packaging,
and courier - based on administrative experience, approximately $78 per FTE.
- - Other: Includes bank charges, dues and subscriptions, fees and applications,
office supplies, minor equipment, printing and reproduction, and repairs and
maintenance - based on administrative experience, approximately $828 per
FTE.
- - Lease Expenses: Includes five-year leasing obligations for all furniture and
the communications system.
- - Marketing: Includes all marketing materials and advertising - based on the
following targets (by annual run rates):
1998 $64,000
1999 $375,000
2000 $650,000
2001 $725,000
2002 $800,000
- - Depreciation and Amortization: see capital expenditures.
Forecasted Cash Flow Statement:
Cash In:
- - Premium Revenues: Represents the consolidation of all same month accrued
revenues, e.g., HMO risk member revenues and CAM service members revenues.
- - Fee-For-Service Revenues: Represents all other members served revenues.
<PAGE> 23
OPTIMUM HEALTH SERVICES, INC.
- - Pool Revenues: Represents HMO pooled members revenues received with a ninety
day lag from booked to received date.
- - Claim Payments: Represents all claim payments made to providers under
fee-for-services provider agreements. Claim lags have been calculated using
the following assumptions - 20.0% of all claims will be paid within 30 days
from incurred date, 50.0% with 60 days of incurred date, and 100.0% paid with
90 days of incurred date.
- - Capitation Payments: Represents all capitated payments made to providers
under capitated provider agreements. All payments are made the same month
applicable to the received premium payment from the applicable healthplan.
- - Trade Payables: Represents the consolidation of all same month
administrative and marketing expenses.
- - Capital Expenditures: Represents the cash payment of all capital expenses
including computer hardware, network servers, network accessories, MMIS
software and related, and copiers. All purchases are depreciated using a
five year straight calculation, and reported under depreciation and
amortization under operating expenses of the income forecast.
<PAGE> 1
Exhibit 10.25
- --------------------------------------------------------------------------------
CERTIFICATE OF AUTHORITY CP00031
[SEAL OF THE STATE OF FLORIDA LOGO]
STATE OF FLORIDA
OFFICE OF
INSURANCE COMMISSIONER AND TREASURER
THIS IS TO CERTIFY THAT:
COMPLETE WELLNESS INDEP. PHY. ASSN.-FL
507 SOUTH PAULA DRIVE
DUNEDIN, FLORIDA 34698
HAS DULY QUALIFIED PURSUANT TO SECTIONS 626.88-626.894
FLORIDA STATUES FOR CERTIFICATION AS A THIRD PARTY ADMINISTRATOR
AND IS ENTITLED TO TRANSACT BUSINESS IN ACCORDANCE WITH THE
AUTHORIZATION CITED ABOVE.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
12 04 97 12 40 00000000 0.00 45089
- ---------------- ---- ----- ------------ ------------ ------- --------------- /s/ BILL NELSON
ISSUE DATE TYPE CLASS APPLICATION TAXES & FEES COMPANY EXPIRATION DATE TREASURER
CODE INSURANCE COMMISSION
FIRE MARSHAL
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 1
Exhibit 10.26
REGISTRATION #: 673
---
CERTIFICATE#: 212
---
STATE OF FLORIDA
AGENCY FOR HEALTH CARE ADMINISTRATION
DIVISION OF HEALTH QUALITY ASSURANCE
PRIVATE REVIEW AGENT
ACTIVE
This is to confirm that COMPLETE WELLNESS INDEPENDENT PHYSICIAN ASSOC. OF
FLORIDA, INC. has complied with the requirements of the State of Florida, Agency
for Health Care Administration, for registration as authorized by Florida
Statutes 395.0199 and is authorized to operate the following:
COMPLETE WELLNESS INDEPENDENT PHYSICIAN ASSOC. OF FLORIDA, INC.
507 SOUTH PAULA DRIVE
DUNEDIN, FL 34698
EFFECTIVE DATE: 08/26/1997
---------- [SIG]
----------------------------------------------
EXPIRATION DATE: 08/26/1998 Director, Division of Health Quality Assurance
----------
<PAGE> 1
Exhibit 10.27
PROMISSORY NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD UNLESS IT
HAS BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
$200,000 July 15, 1998
FOR VALUE RECEIVED, OPTIMUM HEALTH SERVICES, INC., a Delaware
corporation (the "Company"), HEREBY PROMISES TO PAY to the order of Complete
Wellness Centers, Inc. (the "Purchaser") or its registered assigns (i) the
principal sum of TWO HUNDRED THOUSAND DOLLARS and (ii) interest on any and all
principal amounts remaining unpaid hereunder from time to time outstanding from
the date hereof until such principal amount become due.
Interest on the unpaid balance of the principal amount of this Note
shall be computed on the basis of a 360-day year of twelve 30-day months and
shall accrue quarterly in arrears on the first day of each quarter commencing
on August 1, 1998, at a rate per annum equal to twelve percent (12%) per annum
until the unpaid principal balance of this Note shall be paid in full (whether
by scheduled maturity or at a date fixed for prepayment, redemption or
repurchase or by declaration, demand or otherwise) and shall be senior to any
other debt or obligation. All such accrued interest shall be capitalized and
added to the principal amount of this Note.
The unpaid principal balance of this Note, together with any accrued
but unpaid interest hereunder, shall be due at the earlier of December 31,
1999. However, in the event that the Company succeeds in securing equity
financing in an amount not less than $1,000,000, prior to December 31, 1999,
but exclusive of the Rights Offering, then the unpaid balance of the principal
and interest of the note shall be repayable as follows: 20% up to and equal to
$1,000,000 in financing. Payment shall be due and owing within ten (10) days
of the closing of such equity financing. Payments of principal of, and
interest and premium, if any, on this Note are payable in lawful money of the
United States of America at:
COMPLETE WELLNESS CENTERS, INC.
ATTN: CHIEF FINANCIAL OFFICER
666 ELEVENTH STREET, NW
SUITE 200
WASHINGTON D.C. 20001
Whenever any payment under this Note shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of payment of interest.
Nothing contained in this Promissory Note shall require the Company to
pay interest at a rate exceeding the maximum rate permitted by applicable law.
If interest payable to the Purchaser on any date would exceed the maximum
permissible amount, it shall be automatically reduced to such amount, and
interest for any subsequent period, to the extent less than that permitted by
applicable law, shall, to that extent, be increased by the amount of such
reduction.
<PAGE> 2
This Note is a registered Note and is transferable only upon surrender
of this Note for registration of transfer or exchange (and, in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer, duly executed by the registered holder of this
Note or his attorney duly authorized in writing), at which time a new Note for
a like principal amount will be issued to, and registered in the name of, the
permitted transferee.
The holder hereof, by acceptance of this Note, agrees that this Note
shall not be transferred, sold or otherwise disposed of except to an Accredited
Investor (as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act of 1933, as amended). This Note may be transferred in
whole or in part only by registration of such transfer on the register
maintained for such purpose by the companies.
This Note is secured by all of the Company's assets, both tangible
and intangible, including but not limited to accounts receivable, furniture,
fixtures, bank accounts, licenses, leasehold improvements, etc., and the UCC-I
financing statements filed thereon.
If an Event of Default shall occur and be continuing, the unpaid
balance of principal of this Note and any accrued and unpaid interest and other
amounts payable hereon may be declared or otherwise become due and payable upon
demand.
This note shall be governed by, and construed in accordance with, the
internal laws of the State of Delaware applicable to contracts made and to be
performed therein without consideration as to choice of law.
COMPLETE WELLNESS CENTER, INC.
By: ------------------------------ -----------
C. Thomas McMillen Date
Chairman & CEO
OPTIMUM HEALTH SERVICES, INC.
By: ------------------------------- -----------
Jason Patchen Date
President & CEO
<PAGE> 1
Exhibit 10.28
TERM PROMISSORY NOTE
Principal amount $_____________________ Date:_____________________
FOR VALUE RECEIVED, the undersigned, ______________________ ("Borrower") hereby
promises to pay to the order of Optimum Health Services, Inc. (the "Lender"),
or the designee or assignee of Lender, in lawful money of the United States and
in immediately available funds, the principal amount of
_____________________________ ($___________), plus interest at a rate of 6.1%
per annum, payable in full on January 30, 1999.
This Note may be prepaid at any time without penalty.
This note shall, at the option of any holder thereof, be immediately
due and payable upon the occurrence of any of the following:
1) Failure to make payment due hereunder within 7 days of its due date.
2) Upon the death, incapacity, dissolution or liquidation of the undersigned,
or any endorser, guarantor to surety hereto.
3) Upon the filing by any of the undersigned of an assignment for the benefit
of creditors, bankruptcy or other form of insolvency, or by suffering an
involuntary petition in bankruptcy or receivership not vacated within
thirty (30) days.
In the event this note shall be in default and placed for collection,
then the undersigned agrees to pay all reasonable attorney fees and costs of
collection. Payment not made within seven (7) days of the due date shall be
subject to a late charge of 1.5% of said payment. In the event of default by
Borrower, Lender may seek entry of a judgment by confession for outstanding
principal, interest, attorney fees, penalties, and any other costs related to
collection. Lender may assign this note.
All payments hereunder shall be made to such address as may from time
to time be designated by any holder. The undersigned agrees to remain fully
bound until this note shall be fully paid and waive demand, presentment and
protest and all notices hereto and further agrees to remain bound
notwithstanding any extension, modification, waiver, or other indulgence or
discharge or release of any obligor hereunder or exchange, substitution, or
release of any collateral granted as security for this note. No modification or
indulgence by any holder hereof shall be binding unless in writing; and any
indulgence on any one occasion shall not be an indulgence for any other or
future occasion. Any modification or change in terms, hereunder granted by any
holder hereof, shall be valid and binding upon the undersigned, notwithstanding
the acknowledgment of the undersigned. The rights of any holder hereof shall
be cumulative and not necessarily successive.
<PAGE> 2
This note shall take effect as a sealed instrument and shall be
construed, governed and enforced in accordance with the laws of the State of
Delaware.
- ------------------------------- ------------------------------
Borrower Date
Name:
- ------------------------------- ------------------------------
Witness Date
Name:
<PAGE> 1
AGREEMENT BY AND BETWEEN
MANAGED CARE OF AMERICA PPO, INC.
AND
OPTIMUM HEALTH SERVICES OF FLORIDA, INC.
1. Parties
This agreement is between MANAGED CARE OF AMERICA PPO, INC. (MCA) and
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. (OHS) MCA and OHS are
separate independent entities. Neither party shall be liable for any
actual or alleged acts or omissions of the other party.
2. Purpose
A.
(1) A network of contracted health care providers ("Providers") is
developed and maintained through OHS and through MCA on behalf
of participating payors for the purpose of obtaining rates and
terms favorable to participating health care reimbursement
plans ("payors").
(2) This contracted network is for the sole purpose of
establishing financial reimbursement terms for payment by the
participating payors for covered services. The health care
services rendered by the provider are solely within the
authority and responsibility of the provider.
The purpose of this agreement is to make available a provider contract
network for use by participating payors represented by MCA and OHS;
and to make available the provider network to MCA participating payors
and clients.
B. This agreement shall not apply for services already being used by
a payor independently of this agreement.
3. Reimbursement
A. For services furnished through this agreement, each
participating payor shall pay a fee. The fee shall be based
on scope of services used and split between OHS and MCA.
B. ATTACHMENT A to this agreement shall specify the participating
payor fee, and also shall specify the portion of the fee
payable to MCA and OHS. Unless otherwise specified in
Attachment A and mutually agreed in writing, the client fee
will be divided 50% to OHS and 50% to MCA.
C. Payor shall reimburse OHS for all claims within thirty (30)
days of the date of submission.
4. Confidentiality
OHS and MCA each acknowledge that as a result of this agreement each
may learn or gain access to trade secrets, or other confidential or
proprietary information of the other party such as cost containment
methodology, processes, techniques, client lists, pricing data, and
other such information. Each party acknowledges that such
confidential information is the property of the other party and it
shall not at any time during or after this agreement directly or
indirectly use, disclose, or transfer such information without the
prior written approval of the other party. The parties acknowledge
that such unauthorized use, disclosure or transfer will cause harm to
the other party and the breaching party may be liable.
<PAGE> 2
5. Term of Agreement
A. This agreement is effective August 1st 1998. The specified
effective date for each applicable payor is shown in
ATTACHMENT A.
B. This agreement may be amended by mutual written consent of the
parties.
C. The term of this agreement shall be for three years. Either
party may terminate this agreement by providing thirty days
written notice to the other party without cause.
D. In the event of termination of this agreement, the
reimbursement and services specified in ATTACHMENT A shall
continue for the earlier of thirty days from the date of
termination or until care may be transferred to another in
network provider.
6. General Provision
A. This agreement represents the entire agreement between the
parties.
7. Notices
A. Any notice given pursuant to this agreement shall be in
writing and shall be delivered personally or sent by certified
mail, return receipt requested, postage paid, addressed as
follows:
MCA - PPO: James K. Johnson
Vice President Managed Care of America PPO, Inc.
999 Ponce de Leon Blvd. - Suite 940
Coral Gables, Florida 33134
OHS: Terri May
Vice President of Corporate Development
Optimum Health Services of Florida
17757 US 19 North, Suite 350
Clearwater, Florida 33764
<PAGE> 3
IN WITNESS WHEREOF, MANAGED CARE OF AMERICA PPO, INC. and OPTIMUM HEALTH
SERVICES OF FLORIDA, INC., have caused this agreement to be executed on this
1st day of August, 1998
MANAGED CARE OF AMERICA PPO, INC.
NAME: JAMES K. JOHNSON
TITLE: VICE PRESIDENT
DATE: 7/8/98
----------------------------------------
SIGNATURE: /s/ JAMES K. JOHNSON
----------------------------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC.
NAME: TERRI MAY
TITLE: VICE PRESIDENT OF CORPORATE DEVELOPMENT
DATE: 7/7/98
---------------------------------------
SIGNATURE: /s/ TERRI MAY
---------------------------------------
<PAGE> 4
ATTACHMENT A
PAYOR:
------------------------------
EFFECTIVE DATE:
------------------------------
SERVICES TO BE PROVIDED BY MANAGED CARE OF AMERICA PPO:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SERVICES TO BE PROVIDED BY OPTIMUM HEALTH SERVICES OF FLORIDA, INC.:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MANAGED CARE OFAMERICA PPO FEE:
----------------------
OPTIMUM HEALTH SERVICES OF FLORIDA, INC. FEE:
----------------------
- -------------------------------------- ---------------------------
OPTIMUM HEALTH SERVICES MANAGED CARE OF AMERICA
<PAGE> 1
[OPTIMUM HEALTH SERVICES LETTERHEAD]
Mr. C. Thomas McMillen
Chairman & Chief Executive Officer
Complete Wellness Centers, Inc.
666 11th Street N.W.
Suite 200
Washington, D.C. 20001
Dear Tom,
This letter when executed by both parties will evidence the agreement ( the
"Agreement") Between Optimum Health Services, Inc. ("OHS") and Complete Wellness
Centers, Inc. ("CWC") with respect to the operational relationship between the
companies following the spin-off of OHS from CWC. The terms of our understanding
are as follows:
1) Term: The term (the "Term") of the Agreement shall be for ten (10) years.
The Agreement may be terminated by mutual written agreement at any
time. Either party may terminate this contract for cause with 30
days notice. Cause shall be defined as a material breach of any term
of this agreement.
2) Responsibilities:
A) CWC shall provide the following services to OHS:
1) Financing assistance- assisting in the raising of capital,
preparation of public filings, investor relations.
2) Legal Support- drafting and reviewing of employment
agreements, managed care contracts, and other agreements.
3) Strategy - assisting in the development of operational
strategies.
4) Mergers and acquisitions- assisting in the completion of
various merger and acquisition transactions.
5) Wellness products and services- CWC shall make available to
OHS, on a mutually agreed upon discount, the use of its
products and services for its networks, including
Nutri/Systems, SMOKENDERS, etc., subject to applicable legal
limitation(s). OHS has right of first refusal in selling these
products to managed
<PAGE> 2
care organizations (including HMO's) in their existing
geographic markets if CWC is not already selling in that
market to such customers.
6) Miscellaneous- CWC shall make available to OHS, on a cost
basis, other goods and services that it shall acquire or
develop during the term of the Agreement.
7) Communication- OHS management shall make every effort to
coordinate with CWC" management with respect to the execution
of the aforementioned items, including participation in weekly
telephone conferences, semiannual strategic conferences, and
other meetings as necessary.
B) OHS shall provide the following services to CWC:
1) Credentialing- OHS shall assist in credentialing the CWC
affiliated professionals.
2) Management Information Services ("MIS")- OHS shall assist in
the provision of the MIS division for CWC, including hosting
the Website, data transfer and storage, technical support,
etc. Neither OHS, its subsidiaries nor officers shall be held
liable for any losses, financial or other, due to any
corporate MIS issues including downtime, disasters, and
sabotage. It will be the responsibility of CWC to maintain
appropriate property and business loss insurance coverage for
the IS systems maintained at any optimum office location.
3) Corporate compliance- OHS shall assist in providing, through
David Sherwin, who shall remain the Chief Corporate Compliance
Officer of CWC, overall supervision of CWC's corporate
compliance program. Neither OHS its subsidiaries nor officers,
including David Sherwin, shall be held liable for any CWC, its
affiliates or clinics compliance issues or allegations.
4) Managed Care expertise- OHS shall assist CWC in the
procurement of managed care contracts for its affiliated
clinics. Including supervising Mark Michel in the
aforementioned task.
4A) Managed Care financial modeling.
5) Managed care contracts- OHS shall provide managed care
contracts for eligible CWC clinics (where eligible shall be
defined as "meeting the standards of the medical clinics on
OHS' network"). OHS shall give priority in a defined
geographic area
<PAGE> 3
and under contract under the same terms and conditions as
other clinics (including price) with the respect to the
managed care contracts with eligible CWC affiliated clinics.
7) Miscellaneous- OHS shall make available to CWC, on a cost
basis, other goods and services that it shall acquire or
develop during the term of the Agreement.
8) Communication- CWC's management shall make every effort to
coordinate with OHS's management with respect to the execution
of the aforementioned items, including participation in weekly
telephonic conferences, semiannual strategic conferences, and
other meetings as necessary.
3) Compensation
A) CWC shall compensate OHS for services as follows (to be
reviewed annually):
1) Credentialing- Ninety dollars ($90.00) per M.D.
professional credentialed and seventy-five dollars
($75.00) per non-M.D. professional credentialed.
Reimbursement is to be made to OHS no later than thirty
(30) days after the end of the month in which service is
rendered or an invoice is presented.
2) MIS- Time and cost of materials based upon the mutually
agreed upon budget. (Exhibit A)
3) All other items- Ten thousand dollars ($10,000.) per
month.
4) Expenses- CWC shall reimburse OHS for all mutually
agreed upon out of pocket expenses. In addition, CWC
shall reimburse OHS for all telephone, mailing, and
delivery charges, etc. All reimbursement shall be made
to OHS no later than thirty (30) days after the end of
the month that service is rendered.
5) Warrants - CWC shall grant to OHS 5,000 seven (7) year
warrants per year vested at 1,000 warrants per year for
five years at the closing bid price of the CWC common
stock as reported by the NASDAQ Exchange on the
anniversary date of this agreement
<PAGE> 4
B) OHS shall compensate CWC for services as follows ( to be
reviewed annually):
1) All items- Ten thousand dollars ($10,000.) per month.
2) Expenses- OHS shall reimburse CWC for all mutually
agreed upon out of pocket expenses. In addition, OHS
shall reimburse CWC for all telephone, mailing, and
delivery charges, etc.
3) Warrants - OHS shall grant to CWC 5,000 seven (7) year
warrants per year vested at 1,000 warrants per year for
five years at the closing bid price of the OHS Common
Stock as reported by the exchange on which the stock is
traded on the anniversary date of this agreement
4) Covenant Not to Compete; Not to Solicit
A) During the Agreement Term and for the period of six (6) months
thereafter, CWC and OHS will not without the prior written
permission of the other company in each instance directly or
indirectly carry on or participate in a business the same as
or similar to or in competition with that conducted or engaged
in by the other company or any of its subsidiaries or
affiliates. The same as or similar to or in competition with
shall be defined as any company engaged in the business of
medical integration of chiropractic practices, weight
management programs, smoking cessation programs, the provision
of practice management services to chiropractic-medically
integrated facilities and the provision of integrated delivery
system benefits and management services (alternative and
traditional providers networks) to payors.
B) The term "carry on or participate in a business the same as or
similar to that conducted or engaged in by either company or
any of its subsidiaries or affiliates" shall include directly
or indirectly, doing any of the following listed acts, other
than carrying on or engaging in activities expressly permitted
under this Agreement:
(i) carrying on or engaging in any such business as a
principal, or solely or jointly with others as a
director, officer, agent, employee, consultant, partner,
or stockholder or limited partner owning more than five
percent (5%) of the stock or equity interests in or
securities convertible into more than five (5%) of the
stock of or equity interests in any corporation,
association or limited partnership; or
<PAGE> 5
(ii) as agent or principal carrying on or engaging in any
activities or negotiations with respect to the
acquisition or disposition of any such business; or
(iii) lending credit or money for the purpose of establishing
or operating any such business; or
(iv) giving advice to any other person, firm, association,
corporation, or other entity engaging in any such
business, provided such other person, firm, association,
corporation or other entity is not a member of any
Employee's immediate family; or
(v) lending or allowing his name or reputation to be used in
any such business.
C) In the event of a breach or reasonably threatened breach by
CWC or OHS of the provisions of this section 4, CWC or OHS
shall be entitled to injunctive relief against the other
company. Nothing herein shall be constructed as prohibiting
the either company from pursuing any other remedies available
to CWC or OHS for such breach or threatened breach, including
without limitation the recovery of damages from the other
company.
D) During the Term and for a period of six (6) months thereafter,
CWC or OHS will not without the prior written permission of
the other company in each instance will not solicit, or
attempt to solicit and employ any employee of the other
company or any of its subsidiaries or affiliates, or commit an
act the primary purpose of which is to induce employee of the
CWC or OHS or any of its subsidiaries or affiliates to leave
such employment or significantly interfere with, disrupt or
attempt to disrupt any past, present or prospective
relationship, contractual or otherwise, relating to the
business activities between CWC or OHS or any of its
subsidiaries or affiliates and their respective prospects.
E) The parties hereto consider the restrictions contained in this
Section 4 to be reasonable. If, however, such restrictions are
found by any court having jurisdiction to be unreasonable
because they are (or any of them is) too broad, then such
restrictions shall nevertheless remain effective, but shall be
considered amended as to protection of business, time or
geographic area in whatever manner is considered reasonable by
that court and, as so amended, shall be enforced.
F) The provisions of this Section 4 shall survive the expiration
or termination, for any reason, of this Agreement and shall be
separately enforceable.
<PAGE> 6
5) Indemnification- Each party hereto hereby agrees to indemnify,
defend and hold the other harmless from and against any and all
costs, losses, claims, demands and liabilities, including reasonable
attorneys' fees which arise out of or relate to any breach by the
other of any of the terms and conditions in the Agreement; any
negligent or intentional wrongful act of the other ; any act or
omission of the other which constitutes negligence; or any other act
not authorized under the terms of the Agreement. If any party or any
of its shareholders or affiliates is made a party to litigation or
obligation or otherwise incurs any loss or expense as a result of
the other's activities unconnected with the other's business
hereunder, such parties shall forthwith upon demand, reimburse the
other party or such individuals for any all expenses incurred as a
result thereof. Each party shall name the other as "additional
insured" on their respective E & O policies and each shall provide
the other with a Certificate of Insurance evidencing such.
6) Arbitration- except for any claim based on fraud or seeking
injunctive relief, any controversy, dispute or disagreement arising
out of or relating to the Agreement or the breach thereof, including
without limitation any dispute concerning the scope of this
arbitration clause, shall be settled by binding arbitration, which
shall be, conducted in the venue which shall be that of the party
instituting the arbitration, in accordance with the American Health
Lawyer's Association ("AHLA") Alternative Resolution Service Rules
of Procedure of Arbitration. The courts, in the venue, shall have
exclusive jurisdiction for the entry of judgement upon any award
rendered by such arbitration panel. The parties hereto consent to
such exclusive jurisdiction and venue.
If this letter meets with your understanding, please execute below.
Sincerely,
/s/ JASON PATCHEN
--------------------------------
Jason Patchen
Chief Executive Officer
Optimum Health Services, Inc.
Agreed to and Accepted by:
/s/ C. THOMAS MCMILLEN
--------------------------------
C. Thomas McMillen
Chairman and Chief Executive Officer
Complete Wellness Centers, Inc.
<PAGE> 7
EXHIBIT A
CWC MIS DEPARTMENT
1998 BUDGET
<TABLE>
<CAPTION>
====================================================================================================================================
MONTH
CATEGORY OF EXPENSE February March April May June July
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
1 HARDWARE & SOFTWARE $5,455 $5,455 $5,455 $5,455 $5,455 $5,455
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
2 CONSULTING SERVICES $3,182 $3,182 $3,182 $3,182 $3,182 $3,182
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3 MISC (Travel, Training, Seminars & Publications) $2,727 $2,727 $2,727 $2,727 $2,727 $2,727
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
4 OPERATING EXPENSES (RECURRING)
- ------------------------------------------------------------------------------------------------------------------------------------
A COMPENSATION $2,917 $5,833 $5,833 $5,833 $5,833 $5,833
- ------------------------------------------------------------------------------------------------------------------------------------
B PAYROLL TAXES AND BENEFITS $642 $1,283 $1,283 $1,283 $1,283 $1,283
- ------------------------------------------------------------------------------------------------------------------------------------
C MIS ALLOCATION $900 $900 $900 $900 $900 $900
- ------------------------------------------------------------------------------------------------------------------------------------
D BONUS $0 $0 $0 $0 $0 $0
====================================================================================================================================
E TOTAL OPERATING EXPENSES $4,458 $8,017 $8,017 $8,017 $8,017 $8,017
====================================================================================================================================
====================================================================================================================================
5 TOTAL EXPENSES $15,822 $19,380 $19,380 $19,380 $19,380 $19,380
====================================================================================================================================
====================================================================================================================================
6 TOTAL EXPENSES - CUMMULATIVE $15,822 $35,202 $54,583 $73,963 $93,343 $112,723
====================================================================================================================================
====================================================================================================================================
7 FTE'S 1.0 2.0 2.0 2.0 2.0 2.0
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
MONTH TWELVE
MONTH
CATEGORY OF EXPENSE August September October November December TOTAL
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
1 HARDWARE & SOFTWARE $5,455 $5,455 $5,455 $5,455 $5,455 $60,000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
2 CONSULTING SERVICES $3,182 $3,182 $3,182 $3,182 $3,182 $35,000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3 MISC (Travel, Training, Seminars & Publications) $2,727 $2,727 $2,727 $2,727 $2,727 $30,000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
4 OPERATING EXPENSES (RECURRING)
- ------------------------------------------------------------------------------------------------------------------------------------
A COMPENSATION $5,833 $5,833 $5,833 $5,833 $5,833 $61,250
- ------------------------------------------------------------------------------------------------------------------------------------
B PAYROLL TAXES AND BENEFITS $1,283 $1,283 $1,283 $1,283 $1,283 $13,475
- ------------------------------------------------------------------------------------------------------------------------------------
C MIS ALLOCATION $900 $900 $900 $900 $900 $9,900
- ------------------------------------------------------------------------------------------------------------------------------------
D BONUS $0 $0 $0 $0 $6,000 $6,000
====================================================================================================================================
E TOTAL OPERATING EXPENSES $8,017 $8,017 $8,017 $8,017 $14,017 $90,625
====================================================================================================================================
5 TOTAL EXPENSES $19,380 $19,380 $19,380 $19,380 $25,380 $215,625
====================================================================================================================================
====================================================================================================================================
6 TOTAL EXPENSES - CUMMULATIVE $132,104 $151,484 $170,864 $190,245 $215,625
====================================================================================================================================
====================================================================================================================================
7 FTE'S 2.0 2.0 2.0 2.0
====================================================================================================================================
</TABLE>
MIS Budget Allocation - Payments are due monthly
Total $215,625.00
<PAGE> 1
Exhibit 20.1
THIS IS A CLAIMS MADE POLICY
PLEASE READ CAREFULLY
[LOGO]
NATIONAL UNION
FIRE INSURANCE COMPANY
OF PITTSBURGH, PA.(R)
175 WATER STREET, NEW YORK, N.Y. 10038
A CAPITAL STOCK COMPANY, HEREIN CALLED THE "COMPANY"
NOTICE: THE LIMITS OF LIABILITY AVAILABLE TO PAY JUDGEMENTS OR SETTLEMENTS SHALL
BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE. FURTHER NOTE THAT AMOUNTS
INCURRED FOR LEGAL DEFENSE SHALL BE APPLIED AGAINST THE DEDUCTIBLE AMOUNT.
ASSOCIATION PROFESSIONAL LIABILITY INSURANCE
RENEWAL OF: POLICY NUMBER: 861-13-48
DECLARATIONS
Item 1. Insured: COMPLETE WELLNESS INDEPENDENT PHYSICIAN
ASSOCIATION
Address: 17757 U.S. HIGHWAY 19 NORTH
SUITE 350
CLEARWATER, FL 34624
Item 2. Policy Period
From: January 21, 1998 To: January 21, 1999
at 12:01 A.M. standard time at the address of the Insured stated above.
Item 3. Limits of Liability: $1,000,000 aggregate inclusive of defense
--------------
costs, and expenses.
Item 4. Deductible: $5,000 each Wrongful Act.
--------------
Item 5. Premium: $2,500
---------------
Producer: MDM INSURANCE ASSOCIATES
Address: 777 SOUTH FIGUEROA STREET, 9TH FL
LOS ANGELES, CA 90017
By acceptance of this policy the Insured agrees that the statements in the
Declarations and the Application and any attachments hereto are the Insured's
agreements and representations and that this policy embodies all agreements
existing between the Insured and the Company or any of its Representatives
relating to this insurance.
<TABLE>
<S> <C>
COUNTERSIGNED BY JAYME PAYNE /s/ JAYME PAYNE MAR 06, 1998
----------------------------------
OCALA FL Authorized Company Representative
341002 ON 8 DAY OF 4, 1998 Vice President - National Union
-------------------------------- ----------------------------------
Countersignature Date Countersigned at
</TABLE>
29300 (7/80)
<PAGE> 1
Exhibit 20.2
[AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE COMPANY LOGO]
A Capital Stock Company (herein called the "Company")
c/o American International Surplus Lines Agency, Inc.
Harborside Financial Center, 401 Plaza 3
Jersey City, New Jersey 07311
A Member Company
of American
International Group, Inc.
Policy Number: 244-11-68 RENEWAL OF:
THIS IS A CLAIMS MADE POLICY-PLEASE READ IT CAREFULLY
NOTICE: THE LIMITS OF LIABILITY AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS SHALL
BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE. FURTHER NOTE THAT AMOUNTS
INCURRED FOR LEGAL DEFENSE SHALL BE APPLIED AGAINST THE DEDUCTIBLE AMOUNT.
THIRD PARTY ADMINISTRATORS PROFESSIONAL LIABILITY INSURANCE POLICY
DECLARATIONS
Item 1. NAMED INSURED: COMPLETE WELLNESS INDEPENDENT PHYSICIAN
ASSOCIATION OF FLORIDA, INC.
Address: 17757 U.S. HIGHWAY 19 NORTH
SUITE 350
CLEARWATER, FL 34624
Item 2. POLICY PERIOD: From: January 21, 1998 To: January 21, 1999
(12:01 A.M. standard time at the address stated in
Item 1)
Item 3. Limits of Liability: (inclusive of DEFENSE EXPENSE):
$1,000,000 each WRONGFUL ACT or series of continuous,
-------------- repeated or interrelated WRONGFUL ACTS
$3,000,000 aggregate
--------------
Item 4. Deductible: $10,000 each WRONGFUL ACT or series of continuous,
-------------- repeated or interrelated WRONGFUL ACTS
Item 5. Premium: $11,250
---------------
Item 6. RETROACTIVE DATE: January 20, 1997
----------------
Producer: PROGRAM UNDERWRITERS INC
Address: 3700 COCONUT CREEK PARKWAY
COCONUT CREEK, FL 33066
5905722 May 20, 1998 [SIG]
------------------------------------------------
Authorized Representative
Or Countersignature (In states where applicable)
52948 (1/92)
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF OPTIMUM HEALTH SERVICES, INC.
State of
Subsidiary Name (and business use name) Incorporation
- --------------------------------------- -------------
Optimum Health Services of Florida, Inc. Florida
CamCare, Inc. Florida
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the captions "Excerpts" and
"Selected Financial Data" and to the use of our report dated July 16, 1998,
in the Registration Statement (Form SB-2 No. 33-00000) and the related
Prospectus of Optimum Health Services, Inc. for the registration of 1,000,000
rights for its common stock dated July ___, 1998.
/s/ Ernst & Young LLP
Tampa, Florida
July _, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM
SB-2 REGISTRATION STATEMENT.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JUN-01-1997
<PERIOD-END> MAY-31-1998 DEC-31-1997
<CASH> 150,886 69,996
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 154,915 72,953
<PP&E> 32,802 29,066
<DEPRECIATION> 4,947 2,276
<TOTAL-ASSETS> 187,830 100,400
<CURRENT-LIABILITIES> 49,749 49,599
<BONDS> 0 0
0 0
0 0
<COMMON> 2,127 2,170
<OTHER-SE> 135,954 48,631
<TOTAL-LIABILITY-AND-EQUITY> 187,830 100,400
<SALES> 0 0
<TOTAL-REVENUES> 3,147 1,140
<CGS> 0 0
<TOTAL-COSTS> 1,428 0
<OTHER-EXPENSES> 321,952 291,689
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (362,720) (329,799)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (362,720) (329,799)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (362,720) (329,799)
<EPS-PRIMARY> (1.67) (1.52)
<EPS-DILUTED> (1.67) (1.52)
</TABLE>
