PART I
ITEM 1. BUSINESS
General
The WellCare Management Group, Inc. ("WellCare" or the
"Company") is a managed health
care holding company whose wholly-owned subsidiary, WellCare of
New York, Inc. ("WCNY"), is
a direct contract independent practice association network
("IPA/Network") mixed model health
maintenance organization ("HMO"). WCNY is the dominant HMO in the
Hudson River Valley
region. WellCare of Connecticut, Inc. ("WCCT"), a wholly-owned
subsidiary of WellCare, is
modeled on WCNY and received licensure to operate an HMO in the
State of Connecticut in March
1995.
WCNY and WCCT ("the WellCare HMOs") provide comprehensive
health care services to
members in a service area that extends from New York City north
through the Hudson River Valley
to the Capital Region and Southern Adirondacks, west into the
Mohawk River Valley and Southern
Tier and east into contiguous areas of Connecticut through a
provider network consisting of
approximately 660 primary care physicians, 3,000 specialists and
60 hospitals. At December 31,
1995, enrollment in the WellCare HMOs was approximately 100,000
members enrolled from
approximately 2,500 employer groups, compared to approximately
82,500 members at December 31,
1994, enrolled from approximately 1,900 employer groups. No
employer group accounts for more
than 5% of the members of the WellCare HMOs.
Through another wholly-owned subsidiary, WellCare also
provides specialty benefit programs
and related administrative services to employer and other groups
which utilize health care services.
The Managed Care Industry
Health care costs in the United States have escalated
dramatically from $324 billion in 1982
to an estimated $938 billion in 1994, or approximately 14% of the
gross national product. As a
result, employers, insurers, governmental entities and health care
providers have sought effective cost
containment measures, contributing to the development of the
managed care industry. Further, the
inability of a significant portion of the population to obtain
health care coverage has resulted in health
care reform measures proposed both at the federal and state
levels, many of which focus on managed
care as a means for providing quality health care services on a
cost-effective basis.
An HMO provides or arranges for the provision of
comprehensive health care services,
including physician and hospital care, to a voluntarily enrolled
population for a fixed, prepaid
premium. Except in cases of medical emergency, the member
receives care from participating
primary care physicians who, in turn, refer the members to
participating specialists and hospitals as
required. HMOs provide management controls designed to encourage
efficient and economic
utilization of health care services. These controls include
monitoring physician services, the level of
hospital admissions and the lengths of hospital stay, and
promoting the use of non-hospital based
medical services.
Initially, managed care was provided primarily through HMOs,
but has expanded to the
provision of an increasing variety of products and services,
including preferred provider organizations
("PPO") utilization review services, third party claims
administrators and specialty benefit programs,
which are marketed to self-insured employer plans, unions,
indemnity insurers and other groups.
A number of government-sponsored health care programs have
begun to encourage the
enrollment of their beneficiaries into managed care plans,
particularly HMOs, as a means of
controlling escalating health care costs. The largest of these
programs are Medicaid and Medicare,
which service the poor and the elderly, respectively.
Medicaid. The Medicaid program, sponsored by individual
state governments, provides
health care services to low income individuals in the United
States, receiving significant financial
support from the federal government. In 1991, approximately $14
billion was spent on Medicaid
programs in New York State, which increased by approximately 36%
to approximately $19 billion
in 1994. Due to significant medical cost inflation, state
governments are increasingly contracting with
managed care companies, including HMOs, to provide health care
services to their Medicaid
recipients. In contracting with private managed care companies,
Medicaid shifts most of the financial
risk of health care service delivery to the HMO and allows the
Medicaid program to benefit from the
cost-efficiency practices of the managed care industry. Several
states, including Connecticut,
currently require and others, including New York (subject to
federal approval), are considering
mandating that all Medicaid beneficiaries enroll with managed care
companies to receive medical
services. Currently, only approximately 25% of the 2.6 million
eligible Medicaid recipients in New
York State are enrolled in HMO plans.
Medicare. Medicare is a federal government-sponsored
entitlement program administered
by the Health Care Financing Administration ("HCFA"), which
provides health care coverage to
approximately 33 million individuals primarily over 65 years of
age. In 1994, Medicare accounted
for approximately $162 billion, or 14.0%, of the total federal
budget. Due to the aging of the
population and medical cost inflation, it is estimated that
government expenditures related to
Medicare will grow by approximately 10.4% per year, to
approximately $265 billion by the year
2000. The federal government, through HCFA, has contracted with
HMOs since 1985, and,
currently, approximately 3.2 million Medicare beneficiaries are
enrolled in HMOs, primarily pursuant
to full-risk contracts. In contracting with HMOs pursuant to a
full-risk contract, HCFA bases its
payment rates on approximately 95% of the average Medicare medical
costs by age, sex, county and
institutional status. In addition to the approximately 5% cost
savings, the financial risk and most of
the administrative burden of health care service delivery are
shifted to the HMO, and the
administrative cost efficiency practices of managed care are
integrated into the Medicare program.
Recent consolidation of the industry has resulted in fewer
HMOs with larger membership
bases. Additionally, national enrollment in HMOs has steadily
increased from approximately 10.2
million members in 1981 to approximately 51.1 million members in
1994.
<PAGE>
Business Strategy
WellCare's strategy has been to provide high quality, low
cost HMO products and other
managed care products and services. WCNY's membership has grown
by approximately 250% since
1991 with the Company successfully increasing penetration in its
core service area and expanding its
service area, primarily into contiguous markets. WellCare
believes it can continue to expand its HMO
membership and deliver effective managed care by continuing to
focus on the following strategies:
Maintaining low premiums through containment of health care
costs. The Company's
success depends to a significant degree upon its ability to
control health care costs. Primary care
physicians are integral to health care cost containment as they
control to a significant degree member
utilization of hospitals, specialists and other health care
providers. WellCare has worked to develop
a network in which virtually all primary care physicians are paid
on a capitation basis. WellCare
directly capitates regional health care alliances (the
"Alliances") and non-Alliance primary care
physicians with a fixed monthly payment for each HMO member
selecting an Alliance primary care
physician or non-Alliance primary care physician, designed to
cover the costs of substantially all
health care services provided to the member, notwithstanding the
amount of medical care rendered.
WellCare assists the primary care physicians in efficiently
managing their practices by providing them
with outcome studies, utilization and other statistical data,
quality assurance reviews, and managed
care educational programs. WellCare is committed to continuously
improving its capitation and other
fee arrangements and to facilitating optimal health care
utilization in order to ensure high-quality,
low-cost service. As part of this commitment, since 1994 WellCare
has been capitating certain
specialty services, including physical therapy and podiatry.
Expanding service areas. WellCare traditionally has
concentrated on expanding in secondary
markets where price competition is less intense than in major
metropolitan areas and where
widespread name recognition is easier to achieve. The Company's
ability to work closely with
physicians, which it believes leads to more efficient cost
containment, is well suited to secondary
markets. Accordingly, WellCare will continue to focus on such
contiguous markets as well as other
growth areas, including certain primary markets. WCNY is
currently approved to operate in 24
counties in New York State, including four of the five counties of
New York City. Approval for
expansion into Westchester County is anticipated to be received by
the end of the third quarter of
1996. Additionally, WellCare expanded its HMO operations into
Connecticut through WCCT.
Providing members access to a broad range of quality
physicians. WellCare recognizes that
expansion and retention of its HMO membership is dependent to a
significant degree upon providing
access to a broad range of quality health care providers and
intends to continue expanding as well as
improving its health care provider network in its core service
area and proposed areas for expansion.
The provider network of the WellCare HMOs currently consists of
approximately 660 primary care
physicians and 3,000 specialists, over 90% of whom are
board-certified. WellCare's widespread name
recognition in its core service area facilitates recruitment of
participating physicians and, during 1995,
approximately 140 additional primary care physicians and 900
specialists joined WellCare's network.
In 1995, approximately 92% of WellCare's members eligible for
reenrollment elected to remain in the
HMO, which WellCare believes is partly attributable to its broad
range of quality physicians.
Adding new benefit programs and initiating new products and
services. In 1995, WellCare
received approval from HCFA to offer a full-risk Medicare product
in eight counties of WCNY's
service area, and WCNY's Medicaid coverage program received
regulatory approvals to expand into
an additional six counties, including four counties in New York
City. To meet the needs of employer
groups and exploit new opportunities in managed care, WellCare is
continuing to expand and initiate
complementary managed care products and services. WellCare offers
a broad PPO network to
provide vision care, mental health, pharmacy and primary care
benefit programs as stand-alone
products. WellCare offers third party administrator services.
WellCare also offers a point-of-service
product for its HMO members.
Making acquisitions and developing strategic partnerships.
In March, 1995, WellCare
acquired Managed Care Administrators, Inc. ("MCA") for a purchase
price of $500,000 in cash and
the assumption of certain liabilities. MCA is a company that
engaged in managing a network of
primary care physicians in New York City providing medical care to
in excess of 6,750 Medicaid
beneficiaries. WellCare has also entered into an agreement with
the ExcelCare System, Inc., a New
York not-for-profit health care provider network organized by
hospitals in Westchester and Putnam
Counties in New York and Fairfield County in Connecticut, to make
its Westchester County provider
network, including approximately 800 New York-based physicians and
five hospitals, available to
WCNY. WellCare intends to continue to pursue ventures it believes
will complement its existing
products and/or markets.
Investments in technology and infrastructure. WellCare
believes that investments in
technology and infrastructure are critical for future HMO
membership growth. In 1995, WellCare
established a new information center employing the latest
technology and, in late 1994, implemented
an IBM RISC System/6000 relational database system to provide
enhanced reporting and analytical
capabilities.
The WellCare HMOs
The WellCare HMOs, provide comprehensive health care services
to their members for a fixed
monthly premium, plus a co-payment by the member to the physician
for each office visit and a
dispensing fee to the pharmacy for each prescription filled. The
basic benefits a member receives
consist of primary and specialty physician care, inpatient and
outpatient hospital services, emergency
and preventive health care, laboratory and radiology services,
ambulance services, eye care, physical
and rehabilitative therapy services, mental health care, and
alcohol and substance abuse counseling.
For an increased monthly premium, members have the option to
receive prescription drugs, and
extended mental and vision care.
WellCare arranges for the provision of other health care
services by contracting with hospitals
which are paid on a diagnostic related group ("DRG") basis under
New York State law rather than
by length of hospital stay (although New York HMOs are permitted
to negotiate lower DRG or per
diem rates with regulatory approval), and with other health care
providers, generally on a discounted
fee-for-service basis or, in the case of certain primary care and
specialty services, on a capitated fee
basis.
Members are allowed to select any primary care physician or
practice participating in the
WellCare HMO network and are allowed to switch from one primary
care physician or practice to
another within the network. All medical care received by the
member, including specialist and
hospital care, is coordinated by the primary care physician.
Hospitalization for members requiring
non-emergency treatment generally takes place in hospitals which
either are under contract or have
arrangements with the WellCare HMOs; emergency treatment may be
obtained in any hospital.
Premiums are generally fixed for a twelve-month period under
contracts with each subscriber
group. WellCare considers a variety of factors in determining HMO
premiums, including anticipated
health care utilization rates, projected medical expenses,
community rating requirements (applicable
in both New York and Connecticut) and competitive conditions.
Premiums are subject to state
regulation (See "Business - Government Regulation").
Membership
WellCare HMOs
At December 31, 1995, the WellCare HMOs provided managed care
services to
approximately 100,000 members enrolled from approximately 2,500
employer groups. The five
largest employer groups accounted for approximately 11% of total
membership, with no one group
accounting for more than 5% of such membership.
The membership of the WellCare HMOs is comprised of the
following:
- Members enrolled through subscribing private or public
sector employers or unions,
and members unaffiliated with subscriber groups
enrolling individually (collectively,
"commercial members");
- Recipients of public aid whose eligibility is
determined by the New York State
Department of Social Services ("Medicaid members");
- Medicare beneficiaries covered under full-risk program
("Medicare beneficiaries");
and
- Medicare beneficiaries receiving HMO supplemental
coverage ("Medicare supplement
members").
Presently, WCCT has received approval to offer coverage to
only commercial members.
When a subscriber group agrees to offer the WellCare HMOs to
its employees, enrollment
is voluntary by the individual, who must be accepted for
enrollment regardless of health status.
Employers generally pay all or part of the monthly health care
premiums for their employees,
deducting the portion not so paid from the employee's salary.
Upon leaving a subscriber group, an
individual may elect to continue as an HMO member by paying a
monthly premium.
Individuals may be enrolled as Medicaid members in WCNY only
if they are eligible recipients
of public aid. Medicaid members are enrolled on an individual
basis pursuant to agreements with
county social services departments and approval by the New York
State Department of Social
Services (the "DSS") and must be enrolled regardless of health
status. Twenty-five percent of the
premiums for Medicaid members is funded by the applicable county,
25% by the State of New York
and the balance by the federal government. The agreements contain
extensive provisions regarding
the required medical services, are entered into annually and may
be terminated by the county
departments for cause or upon 90 days' notice in the event of
unavailability of state funds to pay for
continued services to Medicaid members. In the event the
contracts are terminated or not renewed,
the Company's operating results would be adversely affected.
Effective September 1, 1995, HCFA awarded a full-risk
Medicare contract to WCNY.
Medicare beneficiaries are enrolled pursuant to annual contracts
with the federal government under
which WCNY provides health care services. These contracts provide
for the federal government to
pay WCNY a fixed monthly premium per member equal to approximately
95% of the average medical
costs by age, sex, county and institutional status. Premiums are
subject to periodic unilateral revision
by the federal government. The Medicare beneficiaries pay no
monthly premiums or deductibles,
although there are co-payments for office visits or prescriptions
and there is an annual limit of $500
on prescription charges per member. Medicare members are able to
disenroll for any reason at any
time.
Medicare supplement members may enroll in WCNY on a group
basis through their present
or past employers to supplement medical coverage received from
Medicare. Under the supplemental
coverage, in return for a fixed monthly premium, WellCare pays the
cost of most medical services not
covered by Medicare, provided the Medicare beneficiary uses the
HMO provider network for such
services, other than for emergency care.
Plans Managed by WellCare
The following table reflects the growth in membership and
employer groups for plans
managed by WellCare during the five years ended December 31, 1995:
At December 31,
1991 1992 1993 1994 1995
Commercial Members (1) 36,587 44,456 60,112
71,119 78,910
Medicaid Members 3,218 5,660 8,941
10,010 19,112
Medicare Members (2) 626 801
1,147 1,365 2,032
Total Members 40,431 50,917 70,200
82,494 100,054
Number of Employer Groups 1,077 1,261
1,500 1,900 2,500
(1) Includes HMO commercial members and members enrolled under
non-HMO specialty programs.
(2) Includes Medicare beneficiaries and Medicare supplement
members.
<PAGE>
Medical Cost Control
The Company's success depends to a significant degree upon
its ability to control health care
costs. WellCare controls such costs through (I) capitation
arrangements with the Alliances and with
non-Alliance primary care physicians, (ii) discounted
fee-for-service arrangements with specialists and
other health care providers (other than hospitals which in New
York State are paid on a DRG basis,
although HMOs may negotiate lower DRG or per diem rates), (iii)
capitation arrangements with
providers of certain specialty services, (iv) health care
utilization review programs, and (v) co-payments by members for
office visits and other services. Notwithstanding such cost
control
measures, certain factors, such as regulatory changes, epidemics
and natural disasters, which impact
health care costs, are beyond the Company's control and may
adversely affect its operations.
Physician Arrangements
Prior to the fourth quarter of 1994, WCNY contracted directly
with primary care physicians
and specialists, with substantially all primary care physicians
having been capitated with a fixed
monthly payment for each HMO member selecting the physician. A
portion of the monthly capitation
fee was paid directly to the primary care physician, with the
balance allocated to risk sharing accounts
covering (I) payments to specialists and supplemental providers to
whom the HMO members were
referred by the primary care physician, (ii) outpatient referrals
in excess of certain minimum amounts,
inpatient hospital expenses, certain high risk medical conditions
and pharmaceutical expenses, and
(iii) catastrophic events, in which WellCare shared the risk.
Specialists were generally paid on a
discounted fee-for-service basis. The Company believed its
capitation arrangements held the primary
care physicians individually accountable for all deficits in their
respective risk-sharing accounts,
although the Company for financial reporting purposes, expensed
all deficits incurred until such
deficits are reimbursed to the Company.
Effective October 1, 1994, WCNY modified its arrangements
with a majority of its primary
care physicians and specialists by contracting with regional
health care delivery networks (the
"Alliances") to provide health care services to the Plan's
commercial and Medicaid members. Each
Alliance is a professional corporation that has contracted with
individual primary care physicians and
specialists to provide health care services. At inception, there
were four Alliances with different
equity owners; by December 31, 1995, the four Alliances were
combined into two Alliances. The
Company's initial agreement with each of the Alliances for the
period October 1, 1994 through
September 30, 1995, required payment to the Alliances based on a
percentage of premium revenue
for effected members. As part of this change in capitation
arrangements, the risk-sharing accounts
of Alliance primary care physicians who formerly had been
capitated by WCNY were settled and
outstanding deficits paid to WCNY in the fourth quarter of 1994,
thereby reducing WCNY's medical
expenses during such quarter. Effective October 1, 1995, the
Company entered into a three year
agreement with each of the Alliances at specified per member per
month ("PMPM") rates, providing
for increases of approximately 1% for the period October 1, 1995
through December 31, 1995;
approximately 6% effective January 1, 1996; approximately 1%
effective January 1, 1997; and an
additional 3% effective January 1, 1998. Such rates were
established through arms-length negotiation
with the Alliances.
WCNY's multi-year contract with each Alliance provides the
Alliance with a fixed monthly
fee for each HMO member selecting a primary care physician
affiliated with such Alliance, designed
to cover the costs of all health care services provided to the HMO
member. As an HMO, WCNY
is able to negotiate favorable fees with certain hospitals and
retains a portion of the Alliance's monthly
capitation fee to process and pay all inpatient hospital and
pharmacy fees, although the Alliance is
ultimately responsible for such expenses.
Each Alliance, in turn, capitates each Alliance primary care
physician from the monthly
payments received from WCNY with a fixed monthly payment for each
HMO member designating
them/his/her as their primary care provider, retaining and
allocating the balance to a group risk pool
for payment to specialists. Specialists are compensated on a
fee-for-service basis by the Alliances
which disperse payments to these specialists. To the extent the
risk pools are insufficient to cover
the specialists' fees, the amounts paid to the specialists as a
group can be proportionately reduced,
up to a maximum of 30%. To the extent the risk pools are still
insufficient to cover the specialists'
fee after the maximum reduction, a portion of the capitation
payments to primary care physicians can
be withheld to cover the specialists' fees after the reduction.
Primary care physicians and specialists
are furnished with periodic utilization reports and the Alliances'
accounts are reconciled on a
quarterly basis.
WCNY is ultimately responsible for all medical care provided
to its members notwithstanding
its Alliance arrangements, and intends to remain integrally
involved in assisting primary care
physicians to efficiently manage their practices by providing them
with outcome studies and other
statistical data, quality assurance reviews, utilization and
other managed care educational programs.
At December 31, 1995, Alliance physicians provided medical
care to in excess of 80% of
WCNY's members; the balance are serviced by primary care
physicians who are directly capitated by
WCNY under the prior arrangement. WCNY also has individual
contracts with substantially all
physicians in the Alliances. However, there can be no assurance
that physicians that join an existing
or new Alliance will contract directly with WCNY, or that WCNY
will be able to renew its three year
contracts with the Alliances on terms it deems satisfactory.
WCCT contracts directly with some of its physician network.
A significant number of all
primary care physicians and specialists are contracted through an
IPA or a PHO mechanism that
contracts directly with WCCT.
Hospital and Other Provider Arrangements
Third party reimbursement for most inpatient hospital care in
New York State is currently
required to be paid on a diagnostic related group (DRG) basis,
pursuant to which hospital charges
established by the State are based on the diagnosis of the
patient's condition, generally
notwithstanding the length of hospitalization. New York HMOs have
been permitted, subject to
regulatory approval, to negotiate lower DRG or per diem rates with
hospitals. To the extent DRG
rates apply, a member's length of hospital stay does not affect
WCNY's costs and hospital costs can
best be controlled through controlling hospital admissions and the
utilization of the most effective
treatment methods. Reimbursement for hospital care in Connecticut
is generally based on a per diem
system. When a per diem contract is in effect, utilization
management monitored by the case
management function reduces medical costs to WellCare by
minimizing the length of hospital stay as
well as maximizing the utilization of the most effective treatment
methods. WellCare currently
contracts with 50 hospitals and has arrangements with 13
additional hospitals. Pursuant to the
contracts, the hospital is paid for all authorized inpatient and
outpatient services and all emergency
room services provided to WellCare's members. In addition,
WellCare requires the hospital to
participate in utilization review and quality assurance programs.
WellCare's contracts with hospitals
are terminable upon 120 days' prior notice by either party.
In order to obtain high quality services at cost-effective
rates, WCNY has contracted with
other providers for, among other things, mental health, diagnostic
services, physical therapy,
outpatient surgery, laboratory services and home health care, on
either a capitated or negotiated fee
basis. The Company also has individual contracts with
approximately 330 pharmacies principally in
its core service area.
Utilization Review
Utilization of health care services by members and physicians
is monitored under WellCare's
health care utilization review programs. In cases of excessive
utilization, WellCare counsels the
member with respect to possible unnecessary or duplicate services
or medications. In addition, under
the direction of local physicians, health care service utilization
data are analyzed and, through periodic
meetings with physicians, the Company identifies areas in which
the physician's utilization rates differ
significantly from the rates of other physicians and suggests
methods for improvement.
Educational Programs
WellCare believes that educating its members and health care
providers with respect to health
care is a critical component in health care cost containment and
periodically sponsors programs on
health care. In addition, WellCare maintains a videotape library
that it makes available to its primary
care physicians for viewing by HMO members to acquaint them with
treatment protocols and other
medical information. The Company's bimonthly newsletter to its
members contains, among other
items, information on preventive health care.
WellCare, through WellCare University (a division of
WellCare) is establishing classroom
facilities at its headquarters to conduct seminars and other
educational programs for physicians
constituting part of its network. WellCare University also
conducts a number of ongoing studies
related to the managed care industry. WellCare also publishes
newsletters which it distributes to its
physicians and supplemental health care providers, and sponsors
and arranges conferences, lectures
and symposiums for physicians on different aspects of physician
treatment as well as the conduct and
benefits of managed care programs.
<PAGE>
Quality of Care Programs
WellCare's quality of care programs, consisting of quality of
care audits, periodic peer reviews
and outcome studies, assist the Company in controlling costs by
identifying cost-effective treatment
procedures (See "Business-Quality Assurance").
Co-Payments
To promote member participation in controlling health care
costs, the WellCare HMOs
require co-payments by its members for office visits and other
services. These co-payments are made
by the member directly to the physician or other provider and
range from $3 to $15 for office visits,
and $25 or $35 for emergency room treatment. WCCT is additionally
approved for a $20 co-payment for office visits and a $50
co-payment for emergency room treatment. Certain plans also
require members to pay deductibles for inpatient hospital
services.
Other Products and Services
The Company has initiated services both independent of and
supplemental to its HMO benefit
programs.
Specialty Care Benefit Programs
WellCare offers prescription drug, dental and expanded vision
and other specialty care benefit
programs as stand-alone products to self-insured employer and
other groups through its third party
claims administrator ("TPA") services.
The Company provides TPA services independently and as part
of its specialty care benefit
programs offered to employer and other groups. In addition,
WellCare has established a "PPO"
network, using principally its HMO provider network, to provide
vision care and pharmacy benefit
programs as stand-alone products for self-insured employer and
other groups.
Point-of-Service Product
WCNY offers a point-of-service ("POS") product to its
members, allowing them to select
providers outside WCNY's provider network. When a member uses a
POS product, the member is
required to make a higher co-payment and is subject to pay a
higher deductible.
Physician Practice Management
Through June 30, 1995, WellCare, through its wholly-owned
subsidiary WellCare Medical
Management, Inc. ("WCMM"), performed management and administrative
services for physician
practices. In June 1995, WellCare sold WCMM to a newly formed
entity. (See Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Sale of WellCare Medical
Management, Inc.)
Marketing
WellCare's internal marketing staff consists of 49 sales
representatives, 26 of whom market
WellCare's benefit plans to commercial groups, 8 to Medicaid
recipients, 13 Medicare beneficiaries
and 2 who market WellCare's specialty benefits plans an other
products and services. The Company
also utilizes independent brokers for referrals.
Marketing to commercial groups is generally a two-step
process in which presentations are
made to the employer and then to the individual employees if the
Company's benefit plan is selected.
During a designated period (usually one month annually), employees
select their desired health
coverage. New employees, however, make their choice when
employment commences. The
marketing process is continuous as contracts with employers are
renewable annually, employees are
permitted to change plans annually and employer groups experience
employee turnover.
Marketing the Company's Medicaid program is more complicated
since the names of public
aid recipients generally are not disclosed by the DSS. The
Company actively solicits public aid
recipients by sending its sales representatives directly to
welfare offices, churches and community
centers to make direct contact with eligible Medicaid recipients.
Marketing of the Company's full-risk Medicare program
involves a labor intensive one-on-one
process. Marketing efforts focus on informational
presentations/seminars, community outreach
programs and telemarketing activities.
WellCare markets its supplemental coverage plan for Medicare
beneficiaries through existing
employer groups who provide continued benefit programs to
retirees, accompanied by on-site
meetings and direct mailings to such retirees.
Quality Assurance
WellCare requires all physicians in its provider network to
participate in its quality assurance
and utilization review programs. In 1995, WellCare received
One-Year Accreditation from the
National Committee of Quality Assurance. WellCare's quality
assurance program is designed not only
to maintain but to continually improve the delivery of proper
medical care and includes:
- Quality of care audits, which identify issues affecting
HMO members, including
physician availability, physician treatment patterns and
the structure and content of
medical records;
- Periodic peer reviews, which evaluate the quality and
appropriateness of medical care
provided by a particular physician and review, among
other things, diagnoses, tests,
prescription drug usage and the utilization level of the
physician by the HMO
members;
- Utilization reviews and outcome studies, which evaluate
statistical information with
respect to services used by members and prescribed by
participating physicians and
include such topics as preventive care services,
prescription drugs, physician visits,
emergency room use, hospital admissions and referrals
made by primary care
physicians to specialists; and
- A physician committee infrastructure to oversee medical
policy and the quality
assurance program.
The quality assurance program utilizes computerized claims
information and medical records
which are maintained by the physicians and to which WCNY has
access. In addition, participating
hospitals maintain quality assurance programs which may provide
information to WellCare. As
required by state law, WellCare has established a grievance
procedure for HMO members and
providers to formally register complaints with the Company. These
complaints are then investigated
and resolved pursuant to the grievance procedure established by
the Company.
Competition
The managed care industry is highly competitive principally
on the basis of price, the size and
quality of the provider network, benefits provided and quality of
service. Although WCNY is a
dominant HMO in the Hudson River Valley region of its service
area, it has expanded or is in the
process of expanding into new geographic areas, including New York
City, Westchester County and
Connecticut, where there are other HMOs which have more members
and greater financial resources
than the Company. The Company also competes with commercial
health insurance companies and
not-for-profit health service plans, including Blue Cross and Blue
Shield.
Management Information System
The control of health care cost and the tracking and timely
processing of claims are critical
to the Company's operations. The AMISYS management information
system utilized by WellCare
and widely used in the HMO industry provides detailed information
by employer groups, providers
and hospitals, and expense data relating to membership. This
information is used to identify
utilization patterns and potential areas for cost savings.
Additionally, the IBM RISC System/6000
relational database system, implemented in late 1994, provides
WellCare with significantly enhanced
reporting and analytical capabilities. WellCare believes its
management information systems, with
planned enhancements, can accommodate its anticipated growth for
the foreseeable future.
Government Regulation
State Regulation
The WellCare HMOs are subject to extensive state regulation.
Applicable state statutes and
regulations require the WellCare HMOs to file periodic reports
with the relevant state agencies, and
contain requirements relating to the operation of their HMOs, the
rates and benefits applicable to their
products and their financial condition and practices. In
addition, state regulations require the
WellCare HMOs to maintain restricted cash or available cash
reserves, net worth positions and
restrict their abilities to make dividend payments, loans or other
transfers of cash to the Company.
State regulatory authorities exercise oversight regarding the
provider networks, medical care delivery
and quality assurance programs, contract forms and financial
condition of the WellCare HMOs. The
WellCare HMOs are also subject to periodic examination by the
relevant state regulatory authorities.
Applicable New York statutes and regulations require the
prior approval of the New York
Commissioner of Health and the New York Superintendent of
Insurance for any change of control
of WCNY or the Company. A similar law in Connecticut requires the
approval of the Insurance
Commissioner of Connecticut for any change in control of the
Company or WCCT. Prior approval
would be required for any person to acquire the power to vote 10%
or more of the combined voting
power of the Class A Common Stock and Common Stock of the Company.
Under New York law,
transactions between a holding company and a controlled HMO must
be fair and equitable. Any
transaction that involves five percent or more of WCNY's assets
requires notice to the Commissioner
and the Superintendent, and any transaction that involves 10% or
more of WCNY's assets requires
prior approval.
New York State has required all third party payors to pay
hospitals for most inpatient hospital
charges on a DRG basis, that is, the rates have been fixed by the
State according to a predetermined
schedule based on the diagnosis and not the length of stay. HMOs,
subject to regulatory approval,
have been permitted to negotiate lower DRG or per diem rates.
Certain surcharges are applicable
to the established DRG rates in New York for individuals covered
by commercial indemnity insurers
and self-funded groups. WCNY is not currently subject to any
surcharge on the DRG rates due to
a statutory exception for HMO members and an exception based on
its participation in the Medicaid
programs. In April 1995, the United States Supreme Court upheld
New York State's practice of
imposing surcharges on the DRG rates. However, the current
legislation mandating the DRG basis
is scheduled to sunset in the near future. Hospital charges in
Connecticut are based on a per diem
per patient system rather than a DRG system. Eligible HMOs are
permitted to directly negotiate for
a different rate and method of reimbursement with a Connecticut
hospital.
WellCare's TPA services and PPO (in New York State) currently
are not subject to state
regulation, but there can be no assurance that this status will
continue. Connecticut regulations
require PPOs to make certain notification filings.
Federal Regulation
The WellCare HMOs are not federally qualified and neither
they nor WellCare's managed
health care operations currently are subject to federal regulation
other than those operations relating
to Medicaid and Medicare products.
The Company's full-risk Medicare product is subject to
regulation by HCFA, a branch of the
United States Department of Health and Human Services. Enrollment
under a full-risk Medicare
program cannot exceed 50% of an HMO's total members. Such
regulation covers, among other
things, quality of care, limitations on enrollment and compliance
with requirements established by
peer review organizations contracting with HCFA.
The Company's Medicaid contracts are subject to both federal
and state regulation regarding
services to be provided to Medicaid enrollees, payment for those
services and other aspects of the
Medicaid program.
Discussions are being held at the federal level as to
possible reductions in federal funding for
Medicaid and Medicare, which would have a material adverse effect
on the Company's expansion
program.
Recent Regulatory Developments
With the failure of Congress to enact any significant health
care reform legislation, the
legislatures in many states, including New York and Connecticut,
are considering several programs.
There is current legislation to enhance consumer protection in
many states. Comprehensive consumer
legislation is pending before the New York State Legislature.
Recently, the State of New York
revised its regulations with respect to IPA's. Prior to this
amendment being passed, an IPA could
only contract with one payor. Due to the passage of this
legislation, an IPA can contract with
multiple HMOs. Another issue pending in state legislatures is
"any willing provider" legislation. So-called "any willing
provider" initiatives would require an HMO, such as the WellCare
HMOs, to allow
any physician meeting its credentialing criteria to join its
health care provider network regardless of
geographic need, hospital admitting privileges and similar
factors. In addition, unitary drug pricing
and the movement of Medicaid programs to managed care are also
being considered in the
legislatures of New York. Finally, the current legislation
mandating the DRG basis for inpatient
hospital charges is scheduled to sunset in the near future. New
York State submitted an application
to HCFA in March 1995 for a demonstration waiver. This
demonstration waiver would allow New
York State to mandate managed care for 3.2 million Medicaid
beneficiaries by September 1998.
Connecticut has already passed legislation moving its Medicaid
programs to managed care.
ITEM 2. PROPERTIES
WellCare's executive offices are located in two adjacent
buildings, at Hurley Avenue
Extension, Kingston, New York, and the Company has offices in
three other buildings in Kingston.
It owns these buildings through its wholly-owned subsidiary,
WellCare Development, Inc. These
buildings have a combined space of approximately 75,200 square
feet. Also approximately 2,700
square feet of this space has been converted to office suites and
is leased to health care providers at
an annual rental of approximately $49,100. The Company also
leases approximately 10,000 square
feet in Newburgh, New York, 3,100 square feet in Albany, New York,
750 square feet in Nyack,
New York, 1,250 square feet in Binghamton, New York, and in 1995,
began leasing 10,000 square
feet in New York City, New York at annual rentals of approximately
$243,100, $48,800, $23,100,
$15,000, $180,000, respectively. The Company also subleases 4,100
square feet in Newburgh, New
York and 2,100 square feet in Kingston, New York to health care
providers at annual rentals of
approximately $109,900 and $32,600, respectively.
In 1994, the Company, through WellCare Development, Inc.,
purchased four buildings. Three
of the four buildings are located in Kingston, New York and the
fourth is located in Saugerties, New
York. The buildings located in Kingston, New York provide
approximately 40,200 square feet of
office space utilized by the Company's communication, information
and member services divisions.
The building located in Saugerties, New York provides
approximately 10,000 square feet and has
been converted into office suites leased to health care providers
and a laboratory at annual rentals
of approximately $111,500, $31,400 and $9,000, respectively.
ITEM 3. LEGAL PROCEEDINGS
Class Action Litigation
Between April 1, 1996 and May 14, 1996, the Company as well
as two of its officers who
also are directors were named as defendants in eight separate
purported class actions filed in the
United States District Courts for the Northern and Southern
Districts of New York. The
complaints in these actions are virtually the same, alleging the
defendants violated the federal
securities laws by making alleged materially false and misleading
statements, or withholding
information, which artificially inflated the market price of the
Company's common stock and
caused investors to act in their detriment. A ninth suit filed
during the same period names as
defendants the same parties; as well as three additional
directors, two of whom also are officers.
Because these actions have only recently been filed, discovery has
not yet begun. Most early
litigation activity will involve plaintiffs' counsel's attempts to
achieve consolidation and support
the existence and viability of a class. Accordingly, management
is unable to predict the likelihood
of its success on the merits of these cases but has instructed
counsel to defend vigorously. The
Company has insurance in effect which may, at least in part,
offset any costs to be incurred in
these litigations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on The Nasdaq Stock
Market, Inc. ("Nasdaq")
under the symbol "WELLE." The following table sets forth the
closing high and low sale prices for
the Common Stock for each quarter of the last two calendar years.
There is no trading market for
the Company's Class A Common Stock.
High Low
1994
First Quarter
$ 30
$ 19.5
Second Quarter
25
14 3/4
Third Quarter
22 1/4
15.5
Fourth Quarter
27 3/4
20 3/4
1995
First Quarter
$ 38
$ 24
Second Quarter
37
19 7/8
Third Quarter
24 3/4
19
Fourth Quarter
26
20 1/4
On May 2, 1996, the Company was informed by the staff of
Nasdaq of the intention to de-list
the Company's stock due to the Company's failure to file the
Company's Form 10-K for the period
ending December 31, 1995, on a timely basis. The Company was
granted a hearing before the
Nasdaq Listing Qualifications Panel (the "Panel") to review the
circumstances surrounding the
Company's failure to timely file. On May 22, 1996, the Company
received a determination from the
Panel that the Company would continue to be listed on Nasdaq as
long as the Company filed its Form
10-K and 10-Q for the periods ending December 31, 1995, and March
31, 1996, respectively, by May
31, 1996.
On May 1, 1996, there were approximately 224 and 30 holders
of record of the Company's
Common Stock and Class A Common Stock, respectively, which did not
include beneficial owners
of shares registered in nominee or street name.
WellCare has not paid cash dividends on its capital stock and
does not anticipate paying any
cash dividends on its Common Stock or Class A Common Stock in the
foreseeable future (See
"Business Government Regulation" for restrictions on the payment
of dividends by the WellCare
HMOs, wholly-owned subsidiaries of the Company).
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data have been derived from
the Company's audited
consolidated financial statements and should be read in
conjunction with the consolidated financial
statements, related notes and other financial information included
elsewhere herein. It should be
noted that the selected financial data for the year ended December
31, 1994 has been restated (See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Prior
Period Restatement").
<PAGE>
Statement of Operations Data:
(in thousands, except per share data)
Years Ended
December 31,
1995
1994(1)
1993(2)
1992
1991
Revenue:
Premiums earned. . . . . . . . . . . . . . . . . . . . . . . .
. . .
$144,518
$120,411
$72,905
$38,692
$25,317
Interest and other income. . . . . . . . . . . . . . . . . . .
. . .
8,349
2,171
3,417
2,880
1,913
Total revenue. . . . . . . . . . . . . . . . . . . . . . . . .
. . .
$152,867
122,582
76,322
41,572
27,230
Expenses:
Medical expenses . . . . . . . . . . . . . . . . . . . . . . .
. . .
115,560
98,411
58,471
31,587
25,271
General and administrative expenses. . . . . . . . . . . . . .
. . .
30,279
15,599
9,641
6,168
3,348
Depreciation and amortization expenses . . . . . . . . . . . .
. . .
2,292
1,611
761
549
335
Interest and other expenses. . . . . . . . . . . . . . . . . .
. . .
1,947
1,099
1,331
906
734
Total expenses . . . . . . . . . . . . . . . . . . . . . . . .
. . .
150,078
116,720
70,204
39,210
29,688
Income (loss) before income taxes, extraordinary credit and
cumulative effect of a change in accounting principle . . . .
. . .
2,789
5,862
6,118
2,362
(2,458)
Provision for income taxes . . . . . . . . . . . . . . . . . .
. . .
1,116
2,403
2,533
1,010
59
Income (loss) before extraordinary credit and cumulative
effect
of a change in accounting principle . . . . . . . . . . . . .
. . .
1,673
3,459
3,585
1,352
(2,517)
Extraordinary credit: Utilization of tax loss carry forward. .
. . .
- - -
863
- - -
Cumulative effect of a change in accounting principle:
Accounting for income taxes . . . . . . . . . . . . . . . . .
. . .
- - -
- - -
1,063
Net income (loss). . . . . . . . . . . . . . . . . . . . . . .
. . .
$1,673
$3,459
$4,648
$2,215
$(2,517)
Earnings (loss) per share:
Income (loss) before extraordinary credit and cumulative
effect of a change in accounting principle. . . . . . . . . .
. . .
$0.27
$.056
$0.72
$0.32
$(0.71)
Extraordinary credit . . . . . . . . . . . . . . . . . . . . .
. . .
- - -
0.20
- - -
Cumulative effect of a change in accounting principle. . . . .
. . .
- - -
- - -
0.21
Net income (loss). . . . . . . . . . . . . . . . . . . . . . .
. . .
$0.27
$.056
$0.93
$0.52
$(0.71)
Weighted average shares outstanding. . . . . . . . . . . . . .
. . .
6,250
6,226
5,022
4,257
3,565
___________
Balance Sheet Data:
(in thousands)
Years Ended December
31,
1995
1994
1993
1992
1991
Working capital (deficiency) . . . . . . . . . . . . . . . . .
. . .
$12,733
$4,776
$9,582
$(4,873)
$(4,978)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
72,011
57,793
49,947
16,299
11,449
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . .
. . .
19,209
6,336
5,982
5,152
5,780
Total liabilities. . . . . . . . . . . . . . . . . . . . . . .
. . .
40,207
28,486
23,850
15,862
13,825
Shareholders' equity (deficit) (3) . . . . . . . . . . . . . .
. . .
31,804
29,307
26,097
400
(2,484)
___________
(1) Restated
(2) During 1993, the Company acquired Mid-Hudson Health Plan,
Inc. See Note 3 of the "Notes to Consolidated Financial
Statements".
(3) In 1992 and 1991, after deducting minority interest in
subsidiary.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in
conjunction with the Consolidated
Financial Statements and notes thereto included elsewhere herein.
General Overview
WellCare's principal source of revenue is premiums earned
from the WellCare HMOs, while
interest and other income consists of management and
administrative fees, contributions, interest and
investment income, reimbursements from certain third party
insurers, rental income and miscellaneous
service income. Premium revenues represent in excess of 94% of
the Company's total revenue for
the years ended December 31, 1995, 1994 and 1993 and have grown
substantially since the
Company's inception as a result of increases in both HMO
membership and premium rates.
Medical expenses consist of the hospital charges, physician
fees and related health care costs
for its members. Medical expenses also include estimates of
medical expenses incurred but not yet
reported ("IBNR") to the Company, based on a number of factors,
including hospital admission data
and prior claims experience; adjustments, if necessary, are made
to medical expenses in the period
the actual claims costs are ultimately determined. The Company
believes the IBNR estimates in the
Consolidated Financial Statements are adequate; however, there can
be no assurance that actual
health care claims costs will not exceed such estimates.
The Company seeks to control medical expenses through
capitation arrangements with the
Alliances and with non-Alliance primary care physicians, and
through its quality assurance programs,
utilization review and educational programs on effective managed
care for its providers.
Prior to the fourth quarter of 1994, WellCare contracted
directly with primary care physicians
and specialists, capitating substantially all primary care
physicians with a fixed monthly payment for
each HMO member selecting the physician, with a portion allocated
to risk-sharing accounts.
Effective October 1, 1994, WCNY changed its capitation
arrangements from capitating primary case
physicians with attendant risk-sharing to capitating
newly-established regional health care delivery
networks (the "Alliances") comprised of the specialists and
previously-capitated primary care
physicians. The Alliances have operated at a deficit since
inception and have recently instituted
measures to reduce these deficits and achieve profitability. The
Alliances could request additional
funding from the Company, although management does not believe
that such additional funding
should be required and does not intend to agree to such additional
funding if requested (See Note 17
a of "Notes to Consolidated Financial Statements" and "Business -
Medical Cost Control - Physician
Arrangements").
The Company's results of operations depend in large part on
accurately predicting and
effectively managing medical costs and other operating expenses.
A variety of factors and risks,
including competition, changes in health care practices, changes
in federal or state laws and
regulations or the interpretations thereof, inflation, provider
contract changes, new technologies,
government imposed surcharges, taxes or assessments, reductions in
provider payments by
governmental payors (including Medicare, whereby such reductions
may cause providers to seek
higher payments from private payors), major epidemics, disasters
and numerous other factors
affecting the delivery and cost of health care, may in the future
affect the Company's ability to control
its medical costs and other operating expenses. Governmental
action (including downward
adjustments to premium rates requested by the Company, which could
result in adjusted rates lower
than premium rates then in effect) or business conditions
(including intensification of competition and
the other factors described above) could result in premium
revenues not increasing to offset increases
in medical costs and other operating expenses. Once set, premiums
are generally fixed for one year
periods and, accordingly, unanticipated costs during such periods
cannot be recovered through higher
premiums. The expiration, suspension or termination of contracts
to provide health coverage for
governmental entities or other significant customers would also
negatively impact the Company. Due
to these factors and risks, no assurance can be given with respect
to the Company's premium levels
or its ability to control its medical costs.
Legislative and regulatory proposals have been made at the
federal and state government
levels related to the health care system, including but not
limited to limitations on managed care
organizations (including benefit mandates) and reform of the
Medicare and Medicaid programs. Such
legislative or regulatory action could have the effect of reducing
the premiums paid to the Company
by governmental programs or increasing the Company's medical
costs. Specifically, pending federal
budgetary action could reduce the premiums payable to the Company
under the Medicare program
as compared to previously announced levels; other pending
legislation could have the result of
reducing the premiums payable to the Company under state Medicaid
programs. The Company is
unable to predict the specific content of any legislation, action
or regulation that may be enacted or
when any such legislation or regulation will be adopted.
Therefore, the Company cannot predict the
effect of such legislation, action or regulation on the Company's
business.
Prior Period Restatement
In the second quarter of 1994, two entities which were
predecessors to the Alliances (See
Notes 1a and 17 of "Notes to Consolidated Financial Statements")
made payments of approximately
$2,879,000 to providers in connection with the close out of the
1993 group risk accounts and to
resolve certain disputed amounts between the Company and certain
providers, which payments might
otherwise have been made by the Company. Additionally, these
entities paid approximately
$1,833,000 directly to the Company in payment of 1993 provider
deficits which would otherwise
have been due to the Company directly from the providers. As
originally reported in its 1994
financial statements, the Company recorded the $1,833,000 received
as a reduction of medical
expense, and the Company did not record as medical expense, the
$2,879,000 paid directly to the
providers by these entities.
In March 1996, accounting personnel of the Company were
informed that Mr. Edward A.
Ullmann, then Chairman of the Board, Chief Executive Officer and
President of the Company, (Mr.
Ullmann resigned as Chairman and Chief Executive Officer on April
30, 1996), personally had
guaranteed in his individual capacity two loans, each in the
amount of $2,700,000, made by banks to
these two entities, the proceeds of which were used to fund the
aggregate payments of approximately
$4,712,000 referred to above. After a review of the relevant
circumstances, the Company elected
to restate its 1994 financial statements by recording an
additional $4,712,000 in medical expense and
establishing an additional medical expense accrual. Since there
are no specific amounts payable by
the Company as a result of these transactions, the additional
medical expense accrual will be
accounted for as an offset to medical expense in future periods as
these bank loans are paid down.
A reduction of medical expense of approximately $1,738,000 was
recorded in 1995 as a result of the
reductions in the amounts of these bank loans.
Results of Operations
The following table provides certain statement of operations
data expressed as a percentage
of total revenue and other statistical data for the years
indicated:
Year Ended December 31,
1995 1994 1993
(Restated)
Statement of Operations Data:
Revenue:
Premiums earned 94.5%
98.2% 95.5%
Interest and other income 5.5
1.8 4.5
Total revenue 100.0
100.0 100.0
Expenses:
Hospital services 20.0 19.2
21.5
Physician services 51.1 53.6
53.4
Other medical services 4.5
7.5 1.7
Total medical expenses 75.6
80.3 76.6
General and administrative 19.8
12.7 12.6
Depreciation and amortization 1.5
1.3 1.0
Interest and other expenses 1.3
0.9 1.8
Total expenses 98.2 95.2
92.0
Income before income taxes and cumulative
effect of a change in accounting principle 1.8
4.8 8.0
Provision for income taxes 0.7
2.0 3.3
Income before cumulative effect of a change in
accounting principle 1.1
2.8 4.7
Cumulative effect of a change in
accounting principle ---
- - --- 1.4
Net income 1.1 % 2.8 %
6.1 %
=== ===
===
Statistical Data:
HMO member months enrollment 1,046,559
918,542 596,281
Medical loss ratio (1) 80.0 % 81.7 %
80.2 %
Administrative ratio (2) 19.8 % 12.7 %
12.6 %
(1) Medical expenses as a percentage of premiums earned; reflects
the combined rates for commercial, Medicaid, full-risk Medicare
and Medicare supplemental members.
(2) General and administrative ratio as percentage of total
revenue.
<PAGE>
Year Ended December 31, 1995 Compared to Year Ended December 31,
1994 (Restated)
Premiums earned in 1995 increased 20.0%, or $24.1 million, to
$144.5 million from $120.4
million in 1994, attributable to increases in HMO membership and
in premium rates. Total member
months increased 13.9% in 1995 to 1,046,559, accounting for $16.9
million of the increase in
premiums earned. Premium rates increased 6.4% and .7% for
commercial and Medicaid members,
respectively and including the premium rates earned for full-risk
Medicare members resulted in a
5.4% total weighted average increase and accounted for the $7.2
million balance of the increase in
premiums earned.
Interest and other income increased 284.6%, or $6.2 million,
to $8.3 million in 1995 due to
increases in WellCare University revenues, management fees,
insurance reimbursements and rental
income.
Medical expenses increased 17.4%, or $17.1 million, to $115.6
million in 1995 representing
a 3.1% increase on a per member per month basis, but decreased as
a percentage of premiums earned
(the "medical loss ratio") from 81.7% in 1994 to 80.0% in 1995.
The decrease in the medical loss
ratio resulted, in part, from a 5.4% weighted average increase in
premium rates. As a result of a prior
period restatement, medical expenses in 1994 were increased $4.7
million with a corresponding
reduction to medical expenses in 1995 in the amount of $1.7
million.
General and administrative ("G&A") expenses increased 94.1%,
or $14.7 million, to $30.3
million in 1995, and increased as a percentage of total revenue
from 12.7% in 1994 to 19.8% in 1995.
The increase in G&A expenses resulted primarily from the reserve
established for the note and other
receivables due from the buyer of WellCare Medical Management,
Inc. (See Note 5 of "Notes to
Consolidated Financial Statements"), increased staffing related to
service area and product line
expansion, non-payroll (contracted) services, marketing and
tele-communications related activities,
and an increase in the doubtful account reserve for trade accounts
receivable.
Depreciation and amortization by approximately $700,000 to
$2.3 million in 1995 as a result
of amortization of preoperational costs associated with service
area and product line expansions.
Year Ended December 31, 1994 (Restated) Compared to Year Ended
December 31, 1993
Premiums earned in 1994 increased 65.2% to $120.4 million
from $72.9 million in 1993,
attributable to increases in HMO membership and in premium rates.
Total member months increased
by 54.0% in 1994 to 918,542, of which approximately 22.6% was
attributable to a full year of
membership for members transferred by Mid-Hudson Health Plan,
("Mid-Hudson") to WCNY, as
compared to less than full year of membership in 1993, accounting
for $39.4 million of the $47.5
million increase in premiums earned. Premium rates increased 7.6%
and 5.6% for commercial and
Medicaid members, respectively, accounting for the $8.1 million
balance of the increase in premiums
earned.
With respect to other income, income from affiliates
decreased by $1.2 million, or 85.6%, in
1994 from 1993, principally, as a result of the acquisition of
Mid-Hudson on December 30, 1993, and
the resultant cessation of management fee revenues from
Mid-Hudson. Interest and investment
income increased by $.4 million, or 100.0%, from $.4 million in
1993 to $.8 million in 1994 due
primarily from the investment to the net proceeds generated from
the initial public offering of the
Company's Common Stock in August 1993.
Medical expenses increased 68.3% to $98.4 million in 1994
from $58.5 million in 1993,
representing a 9.3% increase on a per member per month basis and
an increase in the medical loss
ratio to 81.7% in 1994 from 80.2% in 1993. As a result of a prior
period restatement, medical
expenses in 1994 were increased $4.7 million.
General and administrative (G&A) expenses increased 61.8% to
$15.6 million in 1994 from
$9.6 million in 1993, and increased slightly as a percentage of
total revenue to 12.7% in 1994 from
12.6% in 1993. The increase in G & A expenses resulted primarily
from increased marketing efforts
and increased staffing to accommodate the growth of the Company's
business, enhancement of
information systems and physician recruitment activities.
Depreciation and amortization increased by $.9 million, or
111.7%, in 1994 from 1993 as a
result of amortization of the goodwill originating from the
purchase of the assets and liabilities of
Mid-Hudson and depreciation associated with increased levels of
capital expenditures.
Approximately $1.1 million of the net income for 1993 was
attributable to the cumulative
effect of the Company's adoption of Financial Accounting Standards
Board Statement No. 109
"Accounting for Income Taxes" effective January 1, 1993 (See Note
12 of "Notes to Consolidated
Financial Statements").
Liquidity and Capital Resources
On January 19, 1996, the Company announced the completion of
a private placement of a 6%
subordinated convertible note in the principal amount of
$20,000,000 (the "Note") due December
31, 2002, with The 1818 Fund II, L.P., a private equity fund
managed by Brown Brothers Harriman
& Co. The Company has utilized a part of the net proceeds of this
private placement to retire a
portion of the Company's debt. The Company anticipates utilizing
the balance of the proceeds for
general corporate purposes as well as a potential replacement for
the Company's credit line. As of
May 14, 1996, the Company was in negotiations with the holder of
this Note to amend certain terms,
including the conversion price (See "Certain Relationships and
Related Transactions").
The Company's requirements for working capital are
principally for funding geographic and
product expansion for HMO operations, maintaining necessary
regulatory reserves, potential
acquisitions and strategic partnerships and marketing and product
expansion of other managed care
operations.
Net cash used by operating activities in 1995 was
approximately $9.3 million compared to net
cash provided by operating activities in 1994 of approximately
$1.0 million. The use of cash by
operating activities in 1995 was due primarily to increases of
$6.5 million and $3.6 million in trade
and other receivables, respectively. The increase in trade
receivables is attributable, for the most part,
to a $5.6 million increase in amounts due from New York State
related to premiums for Medicaid
recipients; payment for substantially all of which has been
received to date. The increase in other
receivables is primarily due to receivables associated with
contributions made on behalf of WellCare
University. Cash used for capital expenditures was approximately
$1.6 million during 1995 primarily
used for expanding and upgrading the Company's information
systems.
New York State certified HMOs are required to maintain a cash
reserve equal to the greater
of 5% of expected annual medical costs or $100,000. Additionally,
WCNY is required to maintain
a contingent reserve which must be increased annually by an amount
equal to at least 1% of premiums
earned limited, in total, to a maximum of 5% of premiums earned
for the most recent calendar year
and which may be offset by the cash reserve. The cash reserve is
calculated at December 31 of each
year and is maintained throughout the following calendar year. At
December 31, 1995, WellCare had
required cash reserves of $8.2 million and a contingent reserve of
$4.4 million which was fully offset
by the cash reserve. In the event the contingent reserve exceeds
the required cash reserve, the excess
of the contingent reserve over the required cash reserve would be
required to be maintained.
At December 31, 1995, the Company had working capital of
$12.7 million, excluding the $8.2
million cash reserve required by New York State which is
classified as a non-current asset, compared
to working capital of $4.7 million, excluding the $6.6 million
cash reserve, at December 31, 1994;
the increase was attributable primarily to borrowing on the
line-of-credit which is classified as a long-term liability. The
Company believes that the net proceeds from the Note referred to
above, together
with cash on hand, cash generated from operations and available
borrowing will be sufficient to meet
the Company's capital requirements for in excess of twelve months.
In June 1995, Key Bank of New York increased the limit on an
unsecured working capital
line-of-credit to $15.0 million, $6.1 million of which was
outstanding at May 14, 1996. The line
expires on May 31, 1997. In response to the Company's late filing
of its Annual Report on Form 10-K with the Securities and Exchange
Commission, during April 1996 Key Bank froze all borrowing
under the Company's $15.0 million revolving line of credit pending
submission of the Company's
audited financial statements. In addition, Key Bank granted the
Company a waiver of any and all
financial covenants for the period ending December 31, 1995 and
March 31, 1996. The Company
is in the process of retiring a portion of the outstanding line
and renegotiating the line-of-credit with
Key Bank. It is anticipated that the new terms will be finalized
prior to June 30, 1996, (See Notes
11 and 21 of "Notes to Consolidated Financial Statements").
At December 31, 1995, none of the original $2.44 million
purchase price for Mid-Hudson was
outstanding. This note was paid in two installments of $500,000
plus accrued interest of 6% per
annum on June 30, 1995 and December 31, 1995, respectively (See
Note 3 of "Notes to Consolidated
Financial Statements").
At December 31, 1995, the Company had total mortgage
indebtedness of $6.1 million
outstanding on four of its office buildings, of which
approximately $800,000 is due February 1, 1999,
approximately $4.5 million balance on January 1, 2000 and
approximately $800,000 is due March 1,
2000. In February 1996, the Company incurred additional mortgage
indebtedness of $335,000 due
March 1, 2001.
Between April 1, 1996, and May 14, 1996, the Company, as well
as two of its officers who
also are directors, were named as defendants in eight separate
purported class actions filed in the
United States District Courts for the Northern and Southern
Districts of New York. The complaints
in these actions are virtually the same, alleging the defendants
violated the federal securities laws.
A ninth suit filed during the same period names as defendants the
same parties, as well as three
additional directors, two of whom are officers. Management is
unable to predict the likelihood of its
success on the merits of these cases, but has instructed counsel
to defend vigorously. The Company
has insurance in effect which may, at least in part, offset any
costs to be incurred in these litigations.
Sale of WellCare Medical Management, Inc.
In June 1995, the Company contributed approximately $5.1
million of its then wholly-owned
subsidiary, WellCare Medical Management, Inc. ("WCMM") which was
engaged in managing
physician practices, and then sold WCMM for cash of $.6 million
and note receivable of $5.1 million.
A gain of approximately $144,000 was deferred pending the
repayment of the note. The buyer
("Buyer") was newly formed to acquire WCMM and, as of May 14,
1996, approximately 11% of the
Buyer's equity was directly or indirectly held by current or
recent directors, officers or employees of
WellCare. The Buyer is in the business of managing medical
practices and providing related
consultative services. The Buyer has entered into agreements to
manage the Alliances (See Notes
1a, 2 and 17 of "Notes to Consolidated Financial Statements").
The Company has a five year option
to acquire the Buyer at any time at a price determined by a
formula based on the Buyer's results of
operations. The Company is in the process of renegotiating the
terms of this option.
The note receivable bears interest at a rate equal to prime
plus 2% (10.5% at December 31,
1995) with interest payable monthly through July 31, 1996 and,
thereafter, principal and interest
monthly through July 31, 2000. All required interest through
December 31, 1995 has been paid. The
Buyer is seeking additional financing, and is contractually
obligated to pay the note receivable from
such proceeds. Through May 14, 1996 such financing has not taken
place. In view of the Buyer's
operating losses and advances to the Alliances, the Company has
obtained from certain of the Buyer's
equity holders personal guarantees of the notes and pledges of
collateral to secure these guarantees.
Nevertheless, in view of the Buyer's financial condition and
difficulties inherent in the collection of
personal guarantees and realization of collateral, the Company has
elected to fully reserve the note
receivable at December 31, 1995. In addition, the Company has
elected to fully reserve other
receivables from the Buyer amounting to $744,000.
Inflation
Medical costs have been rising at a higher rate than that for
consumer goods as a whole. The
Company believes its premium increases, capitation arrangements
and other cost control measures
mitigate, but do not wholly offset, the effects of medical cost
inflation on its operations and its
inability to increase premiums could negatively impact the
Company's future earnings.
Accounting Changes
Recent pronouncements of the Financial Accounting Standards
Board ("FASB"), which are
not required to be adopted at this date, include Statements of
Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123") and SFAS No. 121.
"Accounting for Impairment of Long-Lived Assets to be Disposed Of
("SFAS 121"), which are
effective for fiscal years beginning after December 15, 1995. The
adoption of SFAS 123 and SFAS
121 is not expected to have a material impact on the Company's
consolidated financial position or
results of operations.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Schedules elsewhere
herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
(Remainder of page intentionally left blank.)<PAGE>
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as
follows:
Name
Age
Position
Robert W. Morey, Jr. . . . . . . . . . . . . . . . . .
Edward A. Ullmann. . . . . . . . . . . . . . . . . . . . . . . . .
.
59
44
Chairman of the Board, Chief Executive Officer
(was appointed April 30, 1996) (1)
President (with the function of chief operating
officer) (1)
Robert E. Goff . . . . . . . . . . . . . . . . . . . . . . . .
.
43
Executive Vice President and Director (4)
G. William Strein. . . . . . . . . . . . . . . . . . . . . . .
.
52
President of WellCare Administration, Inc. and
Director
Marystephanie Corsones . . . . . . . . . . . . . . . . . . . .
.
46
Vice President of Finance, Chief Financial
Officer, Treasurer and Director (2) (4)
Peter G. Kraft.. . . . . . . . . . . . . . . . . . . . . . . . . .
.
35
Vice President of Marketing
Charles E. Crew, Jr. . . . . . . . . . . . . . . . . . . . . .
.
43
Director (2) (3)
Mark D. Dean, D.D.S. . . . . . . . . . . . . . . . . . . . . .
.
55
Vice Chairman of the Board (2) (3) (4)
John E. Ott, M.D. . . . . . . . . . . . . . . . . . . .
59
Director (1)
Lawrence C. Tucker . . . . . . . . . . . . . . . . . .
53
Director (2) (3)
Eileen H. Wilson . . . . . . . . . . . . . . . . . . . .
50
Director (4)
Daniel M. Zeichner, M.D. . . . . . . . . . . . . . . . . . . .
.
48
Director
(1) Member, Executive Committee
(2) Member, Audit Committee
(3) Member, Compensation Committee
(4) Member, Development Committee
Robert W. Morey, Jr., became Chairman of the Board, Chief
Executive Officer and a director
of the Company on April 30,1996. Mr. Morey previously has served
as President and Chairman of
R.W. Morey, Inc., a management firm founded by Mr. Morey in 1972
which was engaged in, among
others things, financial counseling and reinsurance underwriting
of catastrophic health coverage for
the managed care industry. Mr. Morey was engaged in corporate
banking, investment banking and
the institutional brokerage business from 1962 to 1972. Mr. Morey
received a B.A. in Economics
from Yale University in 1958 and an M.B.A. from Harvard Graduate
School of Business in 1962.
Mr. Morey also was founding investor in many HMOs, some of
which are public companies
traded on the New York Stock Exchange or The Nasdaq Stock Market.
Mr. Morey is also the
controlling principal of Moors & Cabot, Inc., a retail stock
brokerage headquartered in Boston.
Edward A. Ullmann, the founder of the Company, has served as
its Chairman, President and
Chief Executive Officer since WellCare's formation in August 1983,
and President with the function
of chief operating officer since April 30, 1996. Mr. Ullmann
previously served as Director of
Administration for Ulster County Mental Health Services, was a
county legislator, and was a
practicing pharmacist. Mr. Ullmann received a B.S. from Albany
College of Pharmacy, Union
University in 1973, an M.P.A. from the Maxwell School at Syracuse
University in 1979, and is a 1981
graduate of the National HMO Management Fellowship Program,
Georgetown University. Mr.
Ullmann is Chairman of the New York State HMO Conference's
Medicaid Committee, serves on the
Managed Care Study Group of the New York State Council on Health
Care Financing and serves on
the editorial advisory board of Medical Interface, a national
managed care magazine. Mr. Ullmann
is the brother of Mr. Kraft, WellCare's Vice President of
Marketing.
Robert E. Goff joined the Company in 1985 as Executive
Director of the WellCare HMO, and
became Executive Vice President of the Company in 1992. Mr. Goff
was Vice President of Good
Samaritan Hospital from 1983 to 1985, and Vice President of
Northern Metropolitan Hospital
Association from 1980 to 1983. He received a B.S. in Business
Administration from Northeastern
University in 1976 and an M.B.A. from Babson College in 1978. Mr.
Goff has been a director of the
Company since March 1991.
G. William Strein joined the Company in 1985 as Vice
President of Planning and
Development, and since 1989 has served as President and Chief
Executive Officer of WellCare
Administration, Inc., a wholly-owned subsidiary of the Company
responsible for WellCare's specialty
benefit programs, new product development and quality assurance.
From 1979 to 1985, Mr. Strein
served as Administrative Director for various health care
programs. Mr. Strein received a B.S. in
Pharmacy from the University of Illinois in 1968, an M.S. from the
University of Illinois in 1972, and
an M.S.P.H. in public health from the University of North Carolina
in 1979. Mr. Strein has been a
director of the Company since January 1989.
Marystephanie Corsones joined the Company as Finance Director
in July 1993, was appointed
its Chief Financial Officer, Vice President of Finance in May 1994
and was elected to the Board in
November 1994. Ms. Corsones has more than 10 years of experience
in international finance and
taxation. Prior to joining WellCare, Ms. Corsones was senior
director of U.S. International
Operations at Coopers & Lybrand in Paris, France, for more than
five years. Ms. Corsones received
an M.B.A in Finance and Economics from the University of
Washington.
Peter G. Kraft joined the Company in 1984 as an Enrollment
Representative, served as Senior
Enrollment Representative from 1985 to 1986, Associate Marketing
Director from 1986 to 1989,
Regional Sales Manager from 1989 to 1991, and was appointed Vice
President of Marketing in 1991.
Mr. Kraft received an A.S. from SUNY at Cobleskill in 1980 and is
a 1993 graduate of the Managed
Care Training Program at the University of Missouri, Kansas City.
Mr. Kraft is the brother of Mr.
Ullmann, WellCare's President.
Charles E. Crew, Jr. has been a director of the Company since
September 1987. Mr. Crew
has been employed with General Electric since 1977, having served
as General Manager of the
Mid-Western Region Plastic Sales Division since 1987.
Mark D. Dean, D.D.S. has been a director of the Company since
May 1984, presently serves
as Vice Chairman of the Board, and is Dental Director for the
WellCare benefit programs. Dr. Dean
has been a dentist in private practice since 1966.
John E. Ott, M.D. is the former Chief Executive Officer of
The George Washington
University Health Plan, a member of the American College of
Physician Executives, and a Diplomate
of the American Board of Medical Management. Dr. Ott currently
serves on the Standards and
Ethics Committee of the Group Health Association of America
("GHAA"). Dr. Ott is a former
President of the American Academy of Clinical Toxicology and
Co-Chairman of the Medical Director
Committee for the Maryland Association of HMOs. He is also board
certified in Pediatrics and
Medical Toxicology. Dr. Ott received his B.S. and M.D. degrees
at the University of Pittsburgh, and
completed a pediatric residency and fellowship in clinical
genetics and biophysics at the University
of Colorado Medical Center.
Lawrence C. Tucker co-founded and co-manages The 1818 Fund,
L.P. and The 1818 Fund
II, L.P. (The "Funds"), private equity investing partnerships with
committed capital of $800 million.
He joined Brown Brothers Harriman & Co. ("BBH & Co."), a general
partner of the Funds, in 1966;
was named a general partner of the firm in 1979; and is the senior
partner supervising the firm's
corporate financial advisory practice which is concerned primarily
with mergers, acquisitions,
corporate restructurings and private equity investing through the
Funds. Mr. Tucker is a member of
BBH & Co.'s Steering Committee. He also serves as a director of
WorldCom, Inc., Blenheim Group
PLC, and Riverwood International Corporation. Mr. Tucker was born
in Winston-Salem, North
Carolina and received a B.S. degree in engineering from Georgia
Institute of Technology in 1964 and
an M.B.A. from the Wharton School of the University of
Pennsylvania in 1966.
Eileen H. Wilson became a director of the Company in
September 1993. Ms. Wilson is
President of Eileen Wilson Associates, a Rochester consulting firm
specializing in management
development and training for the managed care industry and has
more than 13 years experience in the
insurance industry and 14 years in the managed care industry.
Daniel M. Zeichner, M.D. has been a director of the Company
since May 1984. Dr. Zeichner
is a board certified plastic and reconstructive surgeon and has
been in private practice since 1982.
All directors hold office until their successors are elected
and qualified. The Board is divided
into three classes. As a result of this classification of
directors, one class of directors is elected each
year for a three-year term. The terms of the Class III Directors,
Messrs. Crew, Goff and Ullmann,
expire in 1996. The terms of Messrs. Dean and Zeichner and Ms.
Wilson, Class I Directors, expire
in 1997. The terms of Ms. Corsones and Mr. Strein, Class II
Directors, expire in 1998. Mr. Ott,
appointed to the Board in September 1995 to fill the vacancy
created by the death of Mr. Francis
Casey, is also a Class II Director whose term expires in 1996.
The nominee for this position on the
Board will be subject to approval at the next annual meeting of
the shareholders and will serve a term
to expire in 1998.
On January 19, 1996, the Company entered into a Note Purchase
Agreement (the
"Agreement") for the private placement of a 6% subordinated
convertible note in the principal
amount of $20,000,000 due December 31, 2002 (the "Note") with the
1818 Fund II, L.P. (The
"Fund"), a private equity fund managed by BBH & Co. Pursuant to
the terms of the Agreement, as
of such date, the Company caused one (1) vacancy to be created on
its Board of Directors and
appointed Lawrence C. Tucker, as a designee of the Fund, as a
director. Mr. Tucker's directorship
does not have any classification. His term expires in 1996 and is
subject to re-election at the 1996
Annual Meeting of Shareholders for a term to expire in 1998. (See
"Certain Relationships and Related
Transactions").
Officers are elected annually and serve at the pleasure of
the Board of Directors, subject to
rights, if any, under contracts of employment.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation
for 1995 earned by the
Company's Chief Executive Officer and by each other executive
officer whose compensation
during such year exceeded $100,000, as well as similar summary
information for such individuals
for 1994 and 1993:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation
Awards
Common Stock All
Other
Name and Salary Bonus Other Annual
Underlying Compensation
Principal Position Year ($) ($) Compensation ($)
Options (#) ($)
EDWARD A. ULLMANN (10) 1995 $187,061 $103,902 (2) ---
10,000 (4) $ 8,605 (7)(8)
President with the function 1994 180,000 124,764 ---
25,000 (5) 6,007 (7)(8)
of chief operating officer 1993 138,241 125,046 ---
--- 5,005 (7)(8)
ROBERT GOFF 1995 $114,315 $ 23,513 (2) ---
1,000 (4) $ 3,580 (8)
Executive Director and 1994 110,000 40,331 ---
--- 3,000 (8)
Executive Vice President 1993 103,065 36,430 ---
10,000 (4) 1,690 (8)
G. WILLIAM STREIN 1995 $ 86,019 $ 24,234 (2) ---
- - --- $ 2,714 (8)
President, 1994 82,000 36,191
- - --- --- 2,475 (8)
WellCare Administration, 1993 72,304 22,671
- - --- 10,000 (4) 1,728 (8)
Inc.
PATRICK ARLANTICO (1) 1995 $ 79,604 $ 19,666 (2) ---
2,000 (4) ---
Senior Vice President 1994 75,000 30,506
- - --- 2,000 (4) ---
1993 57,759 30,577 ---
10,000 (4) ---
(1) Mr. Arlantico has resigned his position as Senior Vice
President with the company effective March 1, 1996.
(2) Represents the fair market value of Treasury Stock issued as
bonuses in lieu of cash. Also, includes cash bonuses of $30,921
and $320 for
Messrs. Ullmann and Arlantico, respectively.
(3) Represents the amount WellCare had agreed to pay per annum
from 1994 through 2001, for a tax deferred annuity having a
retirement
benefit of $500,000 at age 65.
(4) Represents options to purchase Common Stock.
(5) Consists of options to purchase 10,000 shares of Common Stock
and phantom shares (see footnote 9 below) with respect to 15,000
shares
of Common Stock.
(6) Consists of options to purchase 3,000 shares of Common Stock
and phantom shares (see footnote 9 below) with respect to 5,000
shares of
Common Stock.
(7) Includes $3,985, $3,007 and $1,802 paid by WellCare in 1995,
1994 and 1993, respectively, for a $1,000,000 life insurance
policy on
Mr. Ullmann's life, 50% of which is payable to WellCare and
the balance to Mr. Ullmann's wife.
(8) Consists (or with respect to Mr. Ullmann, included $4,620,
$3,000 and $3,203 in 1995, 1994 and 1993, respectively) of
matching
contributions made by the Company pursuant to the Company's
401(k) Plan.
(9) Phantom shares vest, subject to the executive's continued
employment with the Company, 25% per year o n December 31st of
each year, commencing December 31, 1994, and are payable in
cash only in January 1998 in an amount equal to the product of (A)
and (B), where (A) equals the total number of phantom shares
vested in the executive, and (B) equals the sum of (I), (ii),
(iii), and (iv) equal to the following:
Difference between the closing sales price
of the Common Stock, as reported by The Nasdaq Stock
Market (National Market) on December 31,
(I) 1994 and 1993
(ii) 1995 and 1994
(iii) 1996 and 1995
(iv) 1997 and 1996
(10) Effective April 30, 1996, Mr. Ullmann resigned as Chairman
and Chief Executive Officer, but, continues as President with
functions of
chief operating officer.
<PAGE>
The following table sets forth certain information concerning
options granted in 1995 to
the individuals names in the Summary Compensation Table:
OPTION GRANTS IN 1995
Individual Grants
Potential
Realizable Value
Number of % of Total at Assumed
Annual
Securities Options Exercise Rates
of Stock Price
Underlying Granted to or Base
Appreciation for
Options Employees Price Expiration
Option Term
Name Granted (#) In 1995 ($/Share)
Date 5% ($) 10%($)
Edward A. Ullmann 10,000 (1) 9.5% $24.50
01/01/2000 $ 16,500 $ 69,800
Robert E. Goff 1,000 (1) 0.9% $19.75
08/10/2000 $ 7,200 $ 12,690
Patrick P. Arlantico 2,000 (1) 1.9% $19.75
08/10/2000 $ 14,400 $ 25,380
(1) Exercisable at the cumulative annual rate of 25% of the total
number for shares underlying the option
commencing one year from the date of grant.
The following table presents certain information concerning
options exercised during 1995
and the value of unexercised options held at December 31, 1995 by
the individuals named in the
Summary Compensation Table:
OPTION EXERCISES IN 1995 AND OPTION VALUES AT DECEMBER 31, 1995
Name
Shares
Acquired
on Exercise (#)
Value (1)
Realized ($)
Number of
Unexercised Options
at December 31, 1995 (#)
Exercisable (E)/
Unexercisable (U)
Value (2) of Unexercised
In-the-Money Options
at December 31, 1995 ($)
Exercisable (E)/
Unexercisable (U)
Edward A. Ullmann
---
$ ---
10,000 (U)
$ 10,000
Robert E. Goff
4,000
$ 51,250
2,500 (E)
7,500 (U)
$ 31,875 (E)
95,625 (U)
G. William Strein
1,500
$ 22,875
2,500 (E)
7,500 (U)
$ 31,875 (E)
95,625 (U)
Patrick P. Arlantico
---
$ ---
2,500 (E)
9,500 (U)
$ 31,875 (E)
110,125 (U)
(1) Values are calculated by subtracting the exercise or base
price from the closing sales price of the
Common Stock on the date the option was exercised.
(2) Values are calculated by subtracting the exercise or base
price from the closing sales price of the
Common Stock on December 31, 1995 of $21.50 per share.
<PAGE>
In 1996, the Board approved a one-time lump sum cash bonus
for Mr. Ullmann and
Ms.Corsones. The amounts of the bonuses, paid in 1996, are
$164,850 (or $100,000 after the
application of appropriate payroll withholdings) and $50,000
(gross, or before the application of
withholdings) for Mr. Ullmann and Ms. Corsones, respectively.
Employment Agreements
Mr. Ullmann is employed under an agreement with the Company
effective January 1,
1994 which expires December 31, 1997, and which was subsequently
amended as of January 1,
1996. The agreement provides for a base salary of $225,000 for
1996, with annual increases of
four percent, plus an annual bonus equal to two percent (2%) of
the Company's net (after tax)
profit up to a maximum of $200,000 per annum, and such additional
bonus as the Board of
Directors may determine. In January 1996, the Board of Directors
granted an additional bonus to
Mr. Ullmann in the amount of $164,850 (or $100,000 after the
application of appropriate payroll
withholdings). Under the agreement, Mr. Ullmann is entitled to
receive incentive or non-incentive
options to purchase 10,000 shares of the Company's Common Stock on
January 1st of each year
during his term of employment at an exercise price (a) with
respect to an incentive option, not less
than 110% of the fair market value of the Common Stock on the
date of grant, and (b) with
respect to a non-incentive option, not less than 75% of the fair
market value of the Common
Stock on the date of grant. The options will be exercisable
cumulatively at the rate of 25% of the
underlying shares each year commencing one year from the date of
grant. The agreement further
provides for a grant of 15,000 phantom shares, the terms of which
are described above in the
"Executive Compensation" table under footnote (9).
Under the agreement, WellCare maintains a $1,000,000 term
life insurance policy on the
life of Mr. Ullmann, 50% of which is payable to WellCare and the
balance to Mr. Ullmann's wife,
and also provides Mr. Ullmann with a Company automobile. In the
event of termination for any
reason, Mr. Ullmann is entitled to continued salary and insurance
benefits for one year. The
agreement also provides for a one-time, lump sum severance payment
in the amount of $500,000
in the event of termination of employment prompted by the Company,
and as a result of a change
of ownership or Board composition of over twenty-five percent
(25%).
Mr. Goff is employed under an agreement with the Company
effective January 1, 1994
which expires December 31, 1996, and provides for a base salary of
$118,976 for 1996, with
annual increases of four percent (4%), and such additional bonus
as the Board of Directors or the
Company's President may determine. Under the agreement, WellCare
provides Mr. Goff with a
Company automobile. In the event of termination for any reason,
Mr. Goff is entitled to
continued salary and insurance benefits for 90 days and a
severance payment equal to two weeks'
salary for every year of service with the Company in excess of six
years.
Mr. Strein is employed under an agreement with the Company
effective July 1, 1993
which expires June 30, 1996, and provides for an annualized base
salary of $92,610 for 1996,
with annual increases of five percent (5%), and such additional
bonus as the Board of Directors or
the Company's President may determine. Under the agreement,
WellCare provides Mr. Strein
with a Company automobile. In the event of termination for any
reason, Mr. Strein is entitled to
continued salary and insurance benefits for 90 days and a
severance payment equal to two weeks'
salary for every year of service with the Company in excess of six
years.
Ms. Corsones is employed under an agreement with the Company
effective May 23, 1994
which expires May 22, 1998, and which was subsequently amended as
of January 1, 1996. The
agreement provides for a base salary of $125,000 for 1996, with
annual increases of four percent
(4%) on January 1st of each of the remaining contract years, plus
an annual bonus equal to one
percent (1%) of the annual net (after tax) profit of the Company
up to $100,000 and such
additional bonus as the Board of Directors or the Company's
President may determine. In
January 1996, the Board of Directors granted an additional bonus
to Ms. Corsones in the amount
of $50,000. Under the agreement, Ms. Corsones is entitled to
receive incentive or non-incentive
options to purchase 2,000 shares of Common Stock on January 1st of
each year during her term
of employment at an exercise price (a) with respect to an
incentive option, at the fair market value
of the Common Stock on the date of grant, and (b) with respect to
a non-incentive option, not
less than 75% of the fair market value of the Common Stock on the
date of grant. The options
will be exercisable at the rate of 25% of the underlying shares
each year commencing one year
from the date of grant. The agreement further provides for the
grant of 5,000 phantom shares,
the terms of which are described above in the "Executive
Compensation" table under footnote (9).
Under the agreement, WellCare provides Ms. Corsones with a
Company automobile.
Additionally, the Company is required to make contributions in the
amounts of $14,000 per
annum for a period of seven years into a tax deferred annuity with
a retirement benefit of
$500,000 at age 65. In the event of termination for any reason,
Ms. Corsones is entitled to
continued salary and insurance benefits for one year. However, in
the event of termination
prompted by the Company, and as a result of a change of ownership
or Board composition of
over twenty-five percent (25%), Ms. Corsones is entitled to a
one-time lump sum severance
payment in the amount of $250,000.
Mr. Kraft is employed under an agreement with the Company
effective January 1, 1995
which expires December 31, 1998, and provides for a base salary of
$72,800 for 1996, with
annual increases of four percent (4%), an annual bonus equal to a
minimum of 30% of his base
salary for achieving or exceeding the annual enrollment target
goal established by the Board and
such additional bonus as the Board of Directors or the Company's
President may determine.
Under the agreement, WellCare provides Mr. Kraft with a Company
automobile. In the event of
termination for any reason, Mr. Kraft is entitled to continued
salary and insurance benefits for six
months.
Director Compensation
All directors, who are not employees of the Company, receive
a fee of $500 for each
meeting of the Board of Directors attended, plus reimbursement of
their expenses, and an
additional $300 for each meeting of the Compensation Committee,
Audit Committee or
Development Committee attended. The Vice Chairman of the Board
and the Chairman of the
Audit and Compensation Committees receive a fixed annual stipend
of $12,000 each.
Immediately following the election, re-election or
appointment of an outside director, the
Stock Option Committee grants to each outside director a
non-incentive option to purchase 3,000
shares of Common Stock (pro-rated in the case of an appointment as
a director) at an exercise price
equal to 75% of the fair market value of the Common Stock on the
date of grant. Each option is for
a term of five years from the date of grant, provided, however,
that all options terminate three months
after each outside director ceases to serve as a director of the
Company. Each option is generally
exercisable at the annual rate of 1,000 shares commencing one year
from the date of grant.
In June 1995, Mr. Casey was granted an option to purchase
3,000 shares of the Company's
Common Stock as a result of his election to the Board at the
annual meeting of shareholders. In
September 1995, Dr. John Ott was granted an option to purchase
2,740 shares of the Company's
Common Stock as a result of his appointment to the Board to fill
the vacancy created by Mr. Casey's
death.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth as of May 1, 1996 certain
information with regard to the
beneficial ownership of the Common Stock of the Company as of the
date hereof by (1) each
stockholder who is known by the Company to beneficially own in
excess of 5% of the outstanding
shares of Common Stock or Class A Common Stock, (2) each director,
(3) each of the executive
officers named in the Summary Compensation Table and (4) all
executive officers and directors as
a group.
Percent of Total
Percent
Class A
Class A
of Total
Name
Common
Common (12)
Common
Common
Vote
Robert W. Morey (1)
281,956
503,201
19.1
10.4
16.9
Edward A. Ullmann (2) (3)
750,110
24,114
50.7
*
38.3
The 1818 Fund II, LP (4) (5)
- - -
689,655
*
12.5
3.4
Brown Brothers Harriman & Co. (4) (5)
- - -
689,655
*
12.5
3.4
T. Michael Long (4) (5)
- - -
689,655
*
12.5
3.4
Robert E. Goff
29,168
50,251
2.0
1.0
1.7
G. William Strein (6)
14,585
42,927
*
*
*
Patrick P. Arlantico (7) (8)
9,723
7,592
*
*
*
Marystephanie Corsones
- - -
1,818
*
*
*
Charles E Crew, Jr.
43,752
50,194
3.0
1.0
2.5
Mark D. Dean (9) (10)
121,534
186,006
8.2
3.9
7.1
John E. Ott
- - -
300
*
*
*
Lawrence C. Tucker (4) (5)
- - -
689,655
*
12.5
3.4
Eileen H. Wilson
- - -
610
*
*
*
Daniel M. Zeichner (11)
38,891
63,721
2.6
1.3
2.3
All executive officers and directors
*
*
*
as a group (12 persons) (2) (5) (6)
(7) (10) (11)
1,293,581
1,635,362
87.4
29.5
71.7
* Less than 1%
(1) Address is 55 Main Street, Tiburon, California 94920.
(2) Address is Park West/Hurley Avenue Extension, Kingston, New
York 12401.
(3) Includes 11,045 shares of Common Stock owned by a
not-for-profit corporation of which
Mr. Ullmann is President. Mr. Ullmann disclaims
beneficial ownership of the shares
owned by the not-for-profit corporation.
(4) Address is 59 Wall Street, New York, New York 10005
(5) On January 19, 1996, the Company issued to the 1818 Fund II,
LP (the "Fund"), a 6.0%
Subordinated Convertible Note in the principal amount of
$20,000,000 due December 31,
2002 (the "Note"), entitling the holder thereof to convert
such Note into 689,655 shares of the
Company's Common Stock. Brown Brothers Harriman & Co.
("BBH & Co."), a general
partner of the Fund, have designated Messrs. L. Michael
Long and Lawrence C. Tucker,
either individually or jointly, as the sole and exclusive
partners of BBH & Co. having voting
and investment power with respect to the Note, and the
Common Stock issuable upon
conversion of the Note. Giving effect to the conversion
of the Note, the Fund beneficially
owns 689,655 shares of Common Stock. By virtue of BBH &
Co.'s relationship with the Fund,
BBH & Co. may be deemed to beneficially own 689,655 shares
of Common Stock. By
virtue of the resolution adopted by BBH & Co. designating
Messrs. Long and Tucker, either
individually or jointly, as the sole and exclusive
partners of BBH & Co. having voting and
investment power with respect to the Note, and the Common
Stock issuable upon conver-
sion of the Note, Messrs. Long and Tucker may each be
deemed to beneficially own
689,655 shares of Common Stock.
(6) Includes 15,000 shares of Common Stock owned by Mr.
Strein's wife. Mr. Strein disclaims
beneficial ownership of the shares owned by his wife..
(7) Includes 2,431 shares of Common Stock owned by Mr.
Arlantico's wife. Mr. Arlantico disclaims
beneficial ownership of the shares owned by his wife..
(8) Mr. Arlantico resigned from his position as Senior Vice
President with the Company
effective March 1, 1996.
(9) Address is 62 Riverview, Port Ewen, New York 12466.
(10) Includes 68,059 shares of Class A Common Stock and 118,172
shares of Common Stock
owned by Pine Street Dental Associates, P.C., a
retirement plan in which Dr. Dean has a
48% interest, 4,862 shares of Class A Common Stock and
14,584 shares of Common Stock
owned by Dr. Dean's wife and 6,362 shares of Common Stock
owned by Dr. Dean's son.
Dr. Dean disclaims beneficial ownership of the shares
owned by his wife and son.
(11) Includes 4,862 shares of Common Stock in Dr. Zeichner's
Defined Contribution Pension
Plan and 5,262 shares of Common Stock owned by Dr.
Zeichner's wife. Dr. Zeichner
disclaims beneficial ownership of the shares owned by his
wife.
(12) Includes shares of Common Stock from stock options
exercisable on or before June 30, 1996
as follows:
Exercise
Number
Name
Price
of Shares
Edward A. Ullmann
$23.50
5,000
Edward A. Ullmann
24.50
2,500
Robert E. Goff
11.75
0
G. William Strein
11.75
0
Marystephanie Corsones
11.75
500
Marystephanie Corsones
17.25
750
Marystephanie Corsones
24.50
500
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 19, 1996, the Company entered into an agreement
for the private placement of
a 6% subordinated convertible note in the principal amount of
$20,000,000 (the "Note") due
December 31, 2002, with The 1818 Fund II, L.P. (the "Fund"), a
private equity fund managed by
Brown Brothers Harriman & Co. ("BBH & Co.").
Pursuant to the Note dated January 19, 1996, in the principal
amount of $20,000,000 issued
by the Company and payable to the order of the Fund or its
registered assignees, the Note accrues
interest at an interest rate of six percent (6%) per annum, which
interest is payable quarterly by the
Company. The principal amount of the Note is payable in one
amount on December 31, 2002. The
Note is subject to certain mandatory redemption at the option of
the holder of the Note upon certain
changes in control of the Company. In addition, the Note is
subject to certain optional redemptions
at the option of the Company after the fourth anniversary of the
date of the Note. By its terms, the
Note is subordinated to all senior indebtedness of the Company.
The holder of the Note has the right
to convert the then outstanding principal amount of the Note into
that number of shares of common
stock of the Company at a conversion price of Twenty-Nine Dollars
($29.00) per share, subject to
adjustment. Under the Note, the conversion price granted to the
holder of the Note is adjusted, inter
alia, if the Company issues shares of its common stock or options,
warrants or other rights to acquire
shares of common stock of the Company at a price per share less
than the then current market price.
Pursuant to the terms of the Note Purchase Agreement dated
January 19, 1996 (the
"Agreement") entered into between the Company and the Fund, as of
such date, the Company has
caused one (1) vacancy to be created on its Board of Directors and
has caused Lawrence C. Tucker,
as a designee of the Fund, to be appointed to the Board. Mr.
Tucker's directorship does not have
any classification. In addition, under the terms of the
Agreement, at the next annual meeting of the
shareholders of the Company and at each subsequent annual meeting
of the shareholders of the
Registrant where Class II Directors are to be elected, provided
the Fund owns at least three percent
(3%) of the common stock outstanding of the Company (after giving
affect to the issuance of the
shares issuable upon conversion of the Note), the Fund has the
contractual right to nominate that
number of directors, but in no event less than one (1) director or
more than two (2) directors, equal
to the Fund's proportionate share of the total number of common
stock then outstanding of the
Company, upon giving effect to the conversion of the Note;
provided, however, that if the Fund owns
three percent (3%) or more but less than five percent (5%) of the
common stock outstanding of the
Company (after giving effect to the issuance of the shares
issuable upon conversion of the Note), the
foregoing right will be limited to the nomination of one (1)
director. Such directors will be classified
as Class II Directors. The two (2) principal shareholders of the
Company, Edward A. Ullmann and
Robert W. Morey, Jr., have agreed in the Agreement to vote their
shares of the Company in favor
of the nominees of the Fund. Pursuant to the Agreement, the Fund
may purchase shares of common
stock of the Company (in addition to the shares, issuable upon
conversion of the Note), provided that
such purchases do not, in total, exceed Ten Million Dollars
($10,000,000). Finally, provided the
Fund holds at least fifty percent (50%) of the shares issued or
issuable upon conversion of the Note,
the Fund, under certain conditions, may sell shares issuable upon
conversion of the Note in certain
private placements of common stock by the Company.
Pursuant to the terms of the Registration Rights Agreement
dated January 19, 1996 between
the Company and the Fund, the holder of the Note and the holder of
the shares issued upon
conversion of the Note have been granted two (2) demand
registration rights and unlimited incidental
registration rights. The Company is also required, within
eighteen (18) months of January 19, 1996,
to file with the Securities and Exchange Commission, an
"evergreen" shelf registration statement with
respect to the Note and any shares issued upon conversion of the
Note. As of May 14, 1996, the
Company was in negotiation with the holder of this Note to amend
certain terms, including the
conversion price.
WellCare has an agreement with Park West Entertainment, Inc.
("Park West"), a corporation
wholly-owned by Mr. Ullmann, pursuant to which Park West provides
catering, conferencing and
related administrative services in return for fixed monthly fee.
In 1993, 1994 and 1995, Park West
received aggregate fees of approximately $211,000, $276,000 and
$276,000 respectively, collectively
from WellCare, and its subsidiaries. On December 31, 1994,
WellCare and its subsidiaries
consolidated certain amounts due from Park West. As a result,
Park West owed WellCare, and its
subsidiaries, approximately $198,000, evidenced by promissory
notes bearing interest at a rate of
7.5% per annum and payable in monthly installments over a five
year period commencing January 1,
1995. During 1995, Park West incurred additional amounts due to
the Company of approximately
$60,000. This additional debt along with the outstanding balance
of the December 31, 1994
promissory notes were refinanced. As a result, promissory notes
of approximately $223,000 at 7.5%
per annum, payable in monthly installments and due by December 31,
1999, were outstanding at
December 31, 1995. The Company believes that the interest rate
charged to Park West is comparable
to that which could be obtained by Park West from an unaffiliated
party.
In June 1995, the Company sold WCMM, its then wholly-owned
subsidiary, to a newly
formed corporation for cash of $.6 million and a note receivable
of $5.1 million (See Note 5 of
"Notes to Consolidated Financial Statements"). As of May 14,
1996, approximately 11% of the
Buyer's equity was directly or indirectly held by current or
recent directors, officers or employees of
the Company. The Buyer ("Buyer") is seeking additional financing,
and is contractually obligated to
pay the note receivable from such proceeds. In view of the
Buyer's operating losses, the Company
has obtained from certain of the Buyer's equity holders personal
guarantees of the notes and pledges
of collateral to service these guarantees. As of May 14, 1996,
Dr. Dean, a director of the Company,
guaranteed $1.0 million of the $5.1 note receivable. Dr. Dean
also owns (directly and indirectly)
4.3% of Buyer's equity. Mr. Goff, Executive Vice President and a
director of the Company,
guaranteed $.5 million of the $5.1 note receivable. Mr. Goff owns
2.5% of Buyer's equity. Mr.
Kraft, Vice President of Marketing of the Company, guaranteed $.25
million of the $5.1 note
receivable. Mr. Kraft owns .5% of the Buyer's equity. Mr.
Strein, President of WellCare
Administration, Inc. and a director of the Company, guaranteed
$.25 million of the $5.1 note
receivable (See "Management's Discussion and Analysis of Financial
Condition and Results of
Operations - Liquidity and Capital Resources").
In addition, a $3 million bank line of credit was entered
into by the Buyer on December 28,
1995, which was guaranteed by Mr. Ullmann in his personal
capacity.
WCNY has an agreement with Alliances to provide medical care
of its members (See Notes
1a and 17 of "Notes to Consolidated Financial Statements"). Mr.
Ullmann has personally guaranteed
in his individual capacity loans to two entities which were
predecessors to the Alliances (See Note
2 of "Notes to Consolidated Financial Statements"). Each loan was
in the amount of $2.7 million.
On December 4, 1995, WellCare entered into a Note Agreement
with Cost Management
Technologies, Inc. ("CMT"), whereby WellCare agreed to loan CMT
$320,000, at a fixed interest
rate of six percent (6%) per annum. The loan was originally due
on March 2, 1996. The term of the
loan was extended through June 30, 1996. The Company is in the
process of re-negotiating the terms
of this Note Agreement. As of May 14, 1996, Mr. Morey owned 60.9%
of the equity of CMT.
(Remainder of page intentionally left blank.)<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) List of Documents Filed as Part of this Report.
1. Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1995 and
1994
Consolidated Statements of Operations for the years
ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity for the
years ended December 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements
2. Schedules
Schedule I - Condensed Financial Information of
Registrant
Schedule II - Valuation and Qualifying Accounts
3. Exhibits Required by Item 601 of Regulation S-K
See Index to Exhibits.
(b) Reports on Form 8-K.
None.
Exhibits.
See Index to Exhibits.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto
duly authorized, on the 29th day of May, 1996.
The WellCare Management Group,
Inc.
By: /s/ Robert W. Morey, Jr.
Robert W. Morey, Jr., Chairman
of the
Board and Chief Executive
Officer
(was appointed 4/30/96)
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Report has been
signed by the following persons on behalf of the Registrant and,
in the capacities indicated on
May 29, 1996.
Signature Title
Chairman of the Board, Chief
Executive
/s/ Robert W. Morey, Jr. Officer and Director
(Principal Executive
Robert W. Morey Officer) (was appointed
4/30/96)
/s/ Edward A. Ullmann Director
Edward A. Ullmann
/s/ Marystephanie Corsones Chief Financial
Officer and Director
Marystephanie Corsones (Principal Financial and
Accounting Officer)
/s/ Charles E. Crew, Jr. Director
Charles E. Crew, Jr.
/s/ Mark D. Dean, D.D.S. Director
Mark D. Dean, D.D.S.
/s/ Robert E. Goff Director
Robert E. Goff
/s/ John E. Ott, M.D. Director
John E. Ott, M.D.
/s/ G. William Strein Director
G. William Strein
Director
Lawrence C. Tucker
/s/ Eileen H. Wilson Director
Eileen H. Wilson
/s/ Daniel M. Zeichner, M.D. Director
Daniel M. Zeichner, M.D.<PAGE>
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of the Company:
Page
Report of Deloitte & Touche LLP, Independent Auditors
F-2
Consolidated Balance Sheets as of December 31, 1995 and 1994
F-3
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993
F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
F-5
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1995, 1994 and 1993
F-6
Notes to Consolidated Financial Statements
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
The WellCare Management Group, Inc.
Kingston, New York
We have audited the accompanying consolidated balance sheets of
The WellCare Management
Group, Inc. and subsidiaries (the "Company") as of December 31,
1995 and 1994, and the related
consolidated statements of operations, shareholders' equity and
cash flows for each of the three years
in the period ended December 31, 1995. Our audits also included
the financial statement schedules
listed in the Index at Item 14. These consolidated financial
statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an
opinion on these consolidated financial statements and financial
statement schedules based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the
consolidated financial statements are free of material
misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements.
An audit also includes assessing the accounting principles used
and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.
We believe that our audits provide a reasonable basis for our
opinion. In our opinion, such
consolidated financial statements present fairly, in all material
respects, the financial position of the
Company as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for
each of the three years in the period ended December 31, 1995 in
conformity with generally accepted
accounting principles. Also, in our opinion, such financial
statement schedules, when considered in
relation to the basic consolidated financial statements taken as a
whole, present fairly in all material
respects the information set forth therein.
As discussed in Note 12 to the financial statements, the Company
changed its method of accounting
for income taxes in 1993 to conform with Statement of Financial
Accounting Standards No. 109.
As discussed in Note 2 to the financial statements, the
accompanying 1994 financial statements have
been restated.
As discussed in Notes 17a and 17b, the Company faces several
uncertainties relating to the financial
condition of the Alliances and the class litigation.
Deloitte & Touche LLP
New York, New York
May 14, 1996
<PAGE>
THE WELLCARE MANAGEMENT GROUP, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31,
December 31,
1995
1994
(Restated)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$5,456
$2,293
Short-term investments - available for sale
1,261
7,657
Accounts receivable (net of allowance for doubtful
accounts of $1,166 in 1995 and $334 in 1994)
13,941
7,275
Due from affiliates - net
50
32
Advances to participating providers
3,078
4,109
Other receivables (net of allowance for doubtful
accounts of $744 in 1995 and $0 in 1994)
4,645
2,429
Prepaid expenses and other current assets (net of
allowance for doubtful accounts of $534 in 1995
and $0 in 1994)
5,109
2,754
TOTAL CURRENT ASSETS
33,540
26,549
PROPERTY AND EQUIPMENT
(net of accumulated
depreciation and amortization of $3,711 in 1995
and $2,492 in 1994)
12,993
11,902
OTHER ASSETS:
Restricted cash
8,241
6,584
Notes receivable (net allowance for doubtful
accounts of $4,596 in 1995 and $0 in 1994)
1,389
2,144
Preoperational costs (net of accumulated
amortization of $349 in 1995 and $52 in 1994)
3,232
1,939
Other non-current assets (net of allowance for
doubtful accounts of $348 in 1995 and 1994)
and accumulated amortization of $301 in 1995 and
$166 in 1994)
3,817
1,004
Due from affiliates
173
164
Goodwill (net of accumulated amortization of $1,066 in
1995 and $461 in 1994)
8,626
7,507
TOTAL
$72,011
$57,793
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable
$ -
$2,154
Current portion of long-term debt
1,547
1,910
Medical costs payable
14,030
13,508
Accounts payable
702
986
Accrued expenses
1,453
947
Other current liabilities
15
255
Unearned income
3,060
2,013
TOTAL CURRENT LIABILITIES
20,807
21,773
LONG-TERM LIABILITIES:
Long-term debt
19,209
6,336
Other liabilities
191
377
TOTAL LIABILITIES
40,207
28,486
COMMITMENTS AND CONTINGENCIES
-
-
SHAREHOLDERS' EQUITY:
Class A Common Stock ($.01 par value; 1,599,109 and
1,673,228 shares authorized, 1,484,119 and 1,558,238
shares issued and outstanding at December 31,
1995 and 1994, respectively)
15
16
Common Stock ($.01 par value; 20,000,000 shares
authorized, 4,807,725 and 4,696,198 shares issued at
December 31, 1995 and 1994, respectively)
48
47
Additional paid-in capital
26,371
25,861
Retained earnings
1,233
1,017
Statutory reserve
4,360
2,903
32,027
29,844
Unrealized gain (loss) on short-term investments
5
(104)
Less:
Notes receivable from shareholders
17
38
Treasury stock (at cost; 14,266 and 25,000 shares
of Common Stock at December 31, 1995 and
1994, respectively)
211
395
TOTAL SHAREHOLDERS' EQUITY
31,804
29,307
TOTAL
$72,011
$57,793
See accompanying notes to consolidated financial statements.
F - 3
<PAGE>
THE WELLCARE MANAGEMENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Years Ended December 31,
18 June 1905
17 June 1905
16 June 1905
(Restated)
REVENUE:
Premiums earned
$144,518
$120,411
$72,905
Administrative fee income
2,792
710
942
Income from affiliates
239
199
1,384
Interest and investment income
999
812
407
Other income
4,319
450
684
TOTAL REVENUE
152,867
122,582
76,322
EXPENSES:
Medical expenses
115,560
98,411
58,471
General and administrative expenses
30,279
15,599
9,641
Depreciation and amortization expense
2,292
1,611
761
Interest expense
1,447
666
521
Expenses paid to affiliates
421
379
782
Other expenses - net
79
54
28
TOTAL EXPENSES
150,078
116,720
70,204
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE
2,789
5,862
6,118
PROVISION FOR INCOME TAXES
1,116
2,403
2,533
INCOME BEFORE CUMULATIVE EFFECT OF
A CHANGE IN ACCOUNTING PRINCIPLE
1,673
3,459
3,585
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE:
Accounting for income taxes
-
-
1,063
NET INCOME
$1,673
$3,459
$4,648
EARNINGS PER SHARE:
Income before cumulative effect of a change
in accounting principle
$0.27
$0.56
$0.72
Cumulative effect of a change in accounting
principle
-
-
0.21
NET INCOME
$0.27
$0.56
$0.93
Weighted average shares of common and
common stock equivalents outstanding
6,250
6,226
5,022
See accompanying notes to consolidated financial statements.
F - 4
<PAGE>
THE WELLCARE MANAGEMENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1995
1994
1993
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$1,673
$3,459
$4,648
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
2,292
1,611
761
Increase in deferred taxes
(1,788)
(1,612)
(330)
Loss on sale of assets and others
57
23
-
Changes in assets and liabilities - net of effects of acquistion:
Increase in accounts receivable - net
(6,545)
(1,422)
(3,349)
Increase in medical costs payable
522
2,858
2,518
Increase in due to/from affiliates - net
(27)
(4)
(4,572)
Decrease (increase) in accounts receivable - non-current - net
-
610
(101)
Increase in other receivables
(3,554)
(972)
(539)
(Decrease) increase in accounts payable, accrued expenses
and other current liabilities
(97)
591
771
(Increase) decrease in prepaid expenses and other
(2,131)
503
(382)
Increase in unearned income
1,048
196
980
Increase in restricted cash
(1,657)
(1,713)
(2,641)
Decrease (increase) in advances to participating providers
1,032
(3,040)
508
Decrease (increase) in other non-current assets - excluding
preoperational costs and accounts and other receivables
41
(95)
(547)
Other - net
(166)
(3)
(108)
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES
(9,300)
990
(2,383)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment
(1,608)
(5,816)
(1,068)
Decrease (increase) in notes receivable
466
(162)
(1,371)
Sale of investments
12,702
6,954
8,318
Purchase of investments
(6,367)
(12,463)
(10,479)
Increase in preoperational costs
(1,589)
(1,863)
(105)
Payments to acquire MCA, net of cash acquired
(215)
-
-
Payments to acquire MHP, net of cash acquired
-
(1,126)
(234)
Escrow deposit in connection with MHP acquisition
-
1,000
(1,000)
Other investing activities
109
(104)
-
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES
3,498
(13,580)
(5,939)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock and treasury stock - net
244
-
20,692
Cost of treasury stock purchased
-
(395)
-
Proceeds from exercise of stock options
450
250
-
Proceeds from notes payable and long-term debt
16,545
7,630
2,997
Repayment of notes payable and long-term debt
(8,295)
(7,153)
(2,266)
Other financing activities
21
-
320
NET CASH PROVIDED BY
FINANCING ACTIVITIES
8,965
332
21,743
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
3,163
(12,258)
13,421
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
2,293
14,551
1,130
CASH AND CASH EQUIVALENTS, END OF PERIOD
$5,456
$2,293
$14,551
See accompanying notes to consolidated financial statements.
F - 5
<PAGE>
THE WELLCARE MANAGEMENT GROUP, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1995, 1994, and 1993
(in thousands)
Retained
Unrealized
Class A
Additional
Earnings/
Gain (Loss)
Notes
Total
Common
Common
Paid-in
(Accumulated
Statutory
on Short-term
Receivable
Treasury
Shareholders'
Stock
Stock
Capital
Deficit)
Reserve
Investments
Shareholders'
Stock
Equity
BALANCE, DECEMBER 31, 1992
$19
$24
$4,939
($5,122)
$935
$ -
($395)
$ -
$400
Shares issued
(2)
21
20,673
-
-
-
-
-
20,692
Payments received on
shareholders' notes - net
-
-
-
-
-
-
357
-
357
Transfer to statutory reserve
-
-
-
(733)
733
-
-
-
0
Net income
-
-
-
4,648
-
-
-
-
4,648
BALANCE, DECEMBER 31, 1993
17
45
25,612
(1,207)
1,668
-
(38)
-
26,097
Purchase of treasury stock
-
-
-
-
-
-
-
(395)
(395)
Conversion of Class A Common
shares to Common shares
(1)
1
-
-
-
-
-
-
0
Exercise of stock options
-
1
249
-
-
-
-
-
250
Valuation allowance on short-term
investments
-
-
-
-
-
(104)
-
-
(104)
Transfer to statutory reserve
-
-
-
(1,235)
1,235
-
-
-
0
Net income (Restated)
-
-
-
3,459
-
-
-
-
3,459
BALANCE, DECEMBER 31, 1994
16
47
25,861
1,017
2,903
(104)
(38)
(395)
29,307
Issuance of treasury stock
60
184
244
Conversion of Class A Common
shares to Common shares
(1)
1
0
Exercise of stock options
450
450
Transfer to statutory reserve
(1,457)
1,457
0
Repayments/reclassification of
shareholders' notes - net
21
21
Net change of valuation allowance
on short-term investments
109
109
Net income
-
-
-
1,673
-
-
-
-
1,673
BALANCE, DECEMBER 31, 1995
$15
$48
$26,371
$1,233
$4,360
$5
($17)
($211)
$31,804
<PAGE>
THE WELLCARE MANAGEMENT GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Description of Operations - The WellCare Management Group,
Inc. ("WellCare" or the "Company") was incorporated in New York
State in 1983 to provide management and supervise
all or part of any health service facility, including, but not
limited to, health maintenance organizations.
WellCare of New York, Inc. ("WCNY" or the "Plan"), a
wholly-owned subsidiary, was incorporated in 1985 to develop and
operate as a health maintenance organization
("HMO") in New York State. An HMO is an organization that accepts
contractual responsibility for the delivery of a stated range of
health care services to its enrollees for a
predetermined, prepaid fee. WCNY obtained a certificate of
authority from the New York State Department of Health and
commenced operations in March 1987. WCNY operates
in 24 counties in the Hudson River Valley, Mohawk River Valley,
Albany, and Leatherstocking regions of New York State as a direct
mixed IPA/Direct Contract model Article 44 HMO.
Under this type of arrangement, agreements are entered into with
physician alliances, individual primary care physicians or
physician groups for the provision of all medical care to WCNY's
enrollees for a specified monthly payment ("capitation fee"). On
December 30, 1993, WCNY acquired the net assets of Mid-Hudson
Health Plan, Inc. as described more fully in Note
3.
In July 1995, WCNY received approval from the New York
State Department of Health to expand its service area into the New
York City Boroughs of Manhattan, Queens,
Brooklyn and the Bronx and in August 1995, received regulatory
approvals to offer Healthy Choice, WCNY's managed-care program for
Medicaid recipients, in such boroughs.
WCNY provides incentives to its primary care physicians to
control health care expenses through the use of capitation
arrangements. Under these capitation arrangements, primary
care physicians are entitled to the surplus to the extent health
care costs incurred are less than the negotiated capitation
payments. Surpluses paid to the primary care physicians are
recorded as medical expenses in the period in which the related
health care costs are incurred. Effective October 1, 1994, WCNY
modified its arrangements with a majority of its primary
care physicians and specialists by contracting with regional
health care delivery networks (the "Alliances") to provide health
care services to the Plan's members. Each Alliance is a
professional corporation that has contracted with individual
primary care physicians and specialists to provide health care
services. At inception, there were four Alliances with different
equity owners; by December 31, 1995 the four Alliances were
combined into two Alliances with the same equity owner, who is
also the controlling shareholder in the Buyer referred to
in Note 5. The Company's initial agreement with each of the
Alliances for the period October 1, 1994 through September 30,
1995 required payment to the Alliances based on a
percentage of premium revenue for effected members. Effective
October 1, 1995, the Company entered into a three year agreement
with each of the Alliances at specified per member
per month ("PMPM") rates, providing for increases of approximately
1% for the period October 1, 1995 through December 31, 1995,
approximately 6% effective January 1, 1996,
approximately 1% effective January 1, 1997, and an additional 3%
effective January 1, 1998. Such rates were established through
arms-length negotiation with the Alliances. As part
of this change in capitation arrangements, the risk-sharing
accounts of Alliance primary care physicians who formerly had been
capitated by WCNY were settled and outstanding deficits
paid to WCNY in the fourth quarter of 1994, thereby reducing
WCNY's medical expenses during such quarter.
WellCare Administration, Inc. ("WCA") is a wholly-owned
subsidiary incorporated in 1988 to administer the Company's
pharmacy, vision care, dental care and quality assurance
programs, and provide related consulting services.
WellCare Development, Inc. ("WCD") is a wholly-owned
subsidiary formed in 1992 to acquire, own and develop real estate.
As of December 31, 1992, WellCare contributed
to WCD the Park West Office Complex, which was the principal asset
of UCI Enterprises, a New York tate general partnership in which
WellCare had acquired a 95 percent interest
and in which it acquired the remaining 5 percent interest prior to
such contribution.
WellCare Medical Management, Inc. ("WCMM"), formerly a
wholly-owned subsidiary formed in 1990 to provide managerial,
administrative and financial services to physicians,
was sold in June 1995 (see Note 5).
WellCare of Connecticut, Inc. ("WCCT"), a wholly-owned
subsidiary, was incorporated in 1994 in the State of Connecticut
to develop and operate as an HMO in the State of
Connecticut. WCCT has received final license approval to commence
operations in March 1995 and had no significant revenues in 1995.
WellCare University ("WCU"), a division of WellCare, was
formed during 1994. WCU is dedicated to: strategic planning for
WellCare and others within the managed care/health
care arena, training for WellCare employees and others within the
managed care/health care arena, research and development of many
aspects of providing medical services, and health
care management consulting.
Park West Entertainment, Inc. ("PWE") - an affiliated
entity, provides certain conferencing and administrative services.
Amounts due from PWE at December 31, 1995 and
1994 are set forth in the financial statements.
b. Principles of Consolidation - The consolidated financial
statements include the accounts of the Company and all majority
owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
c. Advances to Participating Providers - Advances to
participating medical providers consist of amounts advanced to
providers, principally hospitals, which are under contract with
the
Company to provide medical services to plan members. Such
advances help provide funding to these providers for claims
incurred but not reported or claims in the process of
adjudication.
d. Property and Equipment - Property and equipment is stated at
cost, less accumulated depreciation. Depreciation is computed by
the straight-line method based upon the estimated
useful lives of the assets which range from 5 to 39 years.
e. Preoperational Costs - Preoperational costs, which include
service area and product line expansion costs, consist of certain
incremental separately identifiable costs directly associated
with building a provider base of network physicians in service
areas in which the Company is applying for licensure and expanding
the Company's Medicare managed care program. Such
costs are deferred until the related licensure approval is
received at which time the costs are amortized on a straight-line
basis over a 36-month period. Preoperational costs are reported
net of accumulated amortization. At December 31, 1995 and 1994,
accumulated amortization approximated $349,000 and $53,000,
respectively.
f. Revenue Recognition - Management fees received in advance are
deferred and recognized as income over the period in which
services are rendered. Premiums from subscribers are
recorded as income in the period that subscribers are entitled to
service. Premiums received in advance are deferred. WCNY
subscriber premiums are determined on an annual basis
using community rating principles required by the New York State
Insurance Department. Although the rate filing request and
approval process is performed on an annual basis, under
New York State insurance law, WCNY is allowed to contract with
subscribers throughout the year based upon a "guaranteed" rate
which incorporates an estimated community rate.
WCNY is required to remit or collect any difference between the
community rate ultimately approved and the guaranteed rate in the
subsequent twelve month contract period. WCCT
subscriber premiums are determined on an annual basis using
community rating principles required by the Connecticut Insurance
Department. Although the rate filing request and approval
process is performed on an annual basis, under Connecticut
insurance law WCCT is allowed to contract with subscribers
throughout the year based on a "guaranteed" rate which
incorporates an estimated community rate. WCCT is required to
remit or collect any difference between the community rate
ultimately approved and the guaranteed rate in the subsequent
twelve month period. Accounts receivable include approximately
$1,741,000 and $1,133,000 at December 31, 1995 and 1994,
respectively, which represented the excess of subscriber
premiums accrued based on approved community rates over amounts
actually billed under guaranteed rates. Approximately $110,000 of
the $1,741,000 and $1,133,000 outstanding
at December 31, 1995 and 1994 have been classified as non-current.
Accounts receivable, other receivables, other current
assets, notes receivable and other non-current assets are reported
net of reserves for doubtful accounts of approximately
$7,388,000 and $682,000 at December 31, 1995 and 1994,
respectively.
g. Reinsurance - WCNY insures excess loss for health care claims
under a policy with a reinsurance company and effective September
1, 1995, reinsures a portion of its Medicare full
risk program with a reinsurance company under a quota share
agreement. Premiums for the policies are reported as medical
expense and insurance recoveries, if any, are recorded as
a reduction of medical expenses. Under the excess loss
reinsurance policy, recoveries are made for claims of each
enrollee or each covered dependent of each enrollee, on an annual
basis,
in excess of the deductible established in the policy subject to
certain limitations. For the period from November 1, 1993 through
October 31, 1994, the deductible under this policy was
$85,000, which increased to $100,000 for the period from November
1, 1994 through October 31, 1995 and $115,000 for the period from
November 1, 1995 through October 31, 1996.
Under the quota share agreement, recoveries are made when claim
and administrative expenses exceed gross revenue received in
connection with WCNY's Medicare full risk contract
program.
Reinsurance premiums charged to medical expenses in the
accompanying financial statements amounted to approximately
$520,000, $472,000, and $504,000 in 1995, 1994 and
1993, respectively. Reinsurance recoveries of approximately
$577,000, $359,000, and $479,000 in 1995, 1994 and 1993,
respectively, have been recognized as reductions in medical
expenses.
Included in other receivables at December 31, 1995 and 1994
were amounts recoverable from the reinsurer of approximately
$633,000 and $571,000, respectively.
h. Medical Costs Payable and Medical Expenses - Medical expenses
for primary care, hospital inpatient services, outpatient
specialty care and pharmacy services, including those for
which advances have been made to providers are recorded, as
expenses in the period in which they are incurred. The liability
for medical costs payable is based upon WCNY's estimate
of the total reported and unreported claims attributable to
services rendered during the year. Such estimates are based upon
a comprehensive accounting of all reported claims as well
as an actuarially determined reserve for claims incurred but not
reported.
i. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. The amounts of incurred but
not reported medical expenses, the reserve for uncollectible
receivables, recoveries from third parties for coordination
of benefits, final determinations of medical cost adjustment pools
by New York State, and medical premiums subject to retrospective
adjustment, require the significant use of estimates.
Actual results could differ from those estimates used by
management in the preparation of these financial statements.
j. Advertising Costs - Advertising costs, which include costs for
certain marketing materials and development/implementation of
public relations and marketing campaigns, are expensed
as incurred. The advertising costs expensed in 1995, 1994 and
1993 were approximately $1,723,000, $1,573,000 and $978,000,
respectively.
k. Cash Flows Statements - For purposes of the statements of cash
flows, the Company considers all highly liquid debt instruments
purchased with a maturity of three months or less
to be cash equivalents. The Company considers all other
instruments to be short-term investments. Cash equivalents are
carried at cost which approximates market value.
l. Short-term Investments - Effective January 1, 1994, the
Company adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and
Equity Securities" ("FAS 115"). The Company has determined that
the securities included in short-term investments, consisting
primarily of state and municipal obligations might be
sold prior to maturity to support its investment strategies. Such
investments have, therefore, been classified as available for
sale. The basis for available for sale securities is market
value.
At December 31, 1995, the cost of these investments approximated
market value and unrealized holding gains or losses were not
material.
m. Goodwill - Goodwill represents the excess of the purchase
price over the fair value of the net assets of acquired entities
and is amortized on the straight-line method over a 15-year
period. At December 31, 1995 and 1994, accumulated amortization
approximated $1,066,000 and $461,000, respectively.
The Company evaluates the recoverability of goodwill by
monitoring reenrollment trends of membership acquired as well as
the inherent profitability of such membership as
determined in connection with annual rate filings. The Company
has determined that no impairment exists at December 31, 1995.
n. Income Taxes - In 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("FAS 109"), which requires recognition of
deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference
between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in
which
the differences are expected to reverse.
o. Long-Lived Assets - In March 1995, the Financial Accounting
Standard's Board ("FASB") issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," effective for fiscal years beginning after December
15, 1995. The Company does not expect the effect on its
consolidated financial condition from the
adoption of this statement to be material.
p. Stock-Based Compensation - In October 1995, the FASB issued
SFAS No. 123, "Accounting for Stock-Based Compensation," which
requires adoption of the disclosure provisions
no later than fiscal years beginning after December 15, 1995 and
adoption of the measurement and recognition provisions for
non-employee transactions no later than after December
15, 1995. The new standard defines a fair value method of
accounting for the issuance of stock options and other equity
instruments. Under the fair value method, compensation cost
is measured at the grant date based on the fair value of the award
and is recognized over the service period, which is usually the
vesting period. Pursuant to SFAS No. 123, companies
are encouraged, but not required, to adopt the fair value method
of accounting for employee stock-based transactions. Companies
are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion ("APB") No.
25, "Accounting for Stock Issued to Employees," but would be
required to disclose in a note to the financial
statements pro forma net income, and per share amounts as if the
company had applied the new method of accounting. SFAS No. 123
also requires increased disclosures for stock-based
arrangements regardless of the method chosen to measure and
recognize compensation for employee stock-based arrangements. The
Company has elected to continue to account for
such transactions under APB No. 25 and will disclose the required
pro forma effect on net income and earnings per share.
q. Reclassifications - Certain amounts in the 1993 and 1994
financial statements have been reclassified to conform to the 1995
presentation.
2. PRIOR PERIOD RESTATEMENT
In the second quarter of 1994, two entities which were
predecessors to the Alliances referred to in Notes 1a and 17, made
payments of approximately $2,879,000 to providers
in connection with the close out of the 1993 group risk accounts
and to resolve certain disputed amounts between the Company and
certain providers, which payments might otherwise
have been made by the Company. Additionally, these entities paid
approximately $1,833,000 directly to the Company in payment of
1993 provider deficits which would otherwise have
been due to the Company directly from the providers. As
originally reported in its 1994 financial statements, the Company
recorded the $1,833,000 received as a reduction of medical
expense, and the Company did not record as medical expense, the
$2,879,000 paid directly to the providers by these entities.
In March 1996, accounting personnel of the Company were
informed that Mr. Edward A. Ullmann, then Chairman of the Board,
Chief Executive Officer and President of the
Company, (Mr. Ullmann resigned as Chairman and Chief Executive
Officer on April 30, 1996), personally had guaranteed in his
individual capacity two loans, each in the amount of
$2,700,000, made by banks to these two entities, the proceeds of
which were used to fund the aggregate payments of approximately
$4,712,000 referred to above. After a review of
the relevant circumstances, the Company elected to restate its
1994 financial statements by recording an additional $4,712,000 in
medical expense and establishing an additional medical
expense accrual. Since there are no specific amounts payable by
the Company as a result of these transactions, the additional
medical expense accrual will be accounted for as an offset
to medical expense in future periods as these bank loans are paid
down. A reduction of medical expense of approximately $1,738,000
was recorded in 1995 as a result of the reductions
in the amounts of these bank loans.
3. ACQUISITION OF MID-HUDSON HEALTH PLAN, INC.
On December 30, 1993, WCNY acquired the net assets of
Mid-Hudson Health Plan, Inc. ("Mid-Hudson"). The acquisition is
being accounted for as a purchase. Mid-Hudson
was a direct contract IPA model not-for-profit HMO based in
Kingston, New York. The Executive Director was a nonvoting
Advisory Member of its Board of Directors and a shareholder
and director of WellCare. Under the terms of the agreement, the
total purchase price was $2,440,000, of which $440,000 was paid at
closing and the balance payable in four equal
installments of $500,000 every six months thereafter, plus
interest at 6 percent per annum on the outstanding balance. The
excess of the purchase price over the fair value of the net assets
acquired approximated $6,549,000 at December 31, 1993. During
1994 additional goodwill of approximately $1,126,000 was recorded
as a result of obtaining necessary additional
information which allowed the Company to adjust the estimate for
incurred but not reported claims at the acquisition date, based on
actual Mid-Hudson claims processed in 1994.
The unaudited consolidated results of operations on a pro
forma basis as if Mid-Hudson had been acquired as of the beginning
of 1993 is as follows:
1993
(In Thousands
Except Per Share
Amounts)
Total revenue $ 90,757
Income before extraordinary credit and cumulative
effect of a change in accounting principle 641
Net income 1,704
Net income per weighted average share of common stock 0.34
The pro forma financial information is presented for informational
purposes only and is not necessarily indicative of the operating
results that would have occurred had the Mid-Hudson
acquisition been consummated as of the above dates, nor are they
necessarily indicative of future operating results.
4. ACQUISITION OF MANAGED CARE ADMINISTRATORS, INC.
On March 31, 1995, pursuant to an option for which it had
paid $200,000 in November 1994, the Company acquired the assets
and assumed certain liabilities of Managed Care
Administrators, Inc. ("MCA"), a company engaged in managing a
network of primary care physicians who provide health care
services to Medicaid recipients in New York City. The
purchase price consisted of $500,000 in cash, the assumption of
certain liabilities and WellCare's agreement to pay an earn-out
not to exceed $1,500,000, whereby MCA is to be paid
each calendar year an amount equal to twenty percent (20%) of the
pre-interest, pre-tax net income generated by the option assets
and liabilities. The excess of $668,750, representing
the sum of the $500,000 cash portion of the purchase price and the
unamortized portion of the option at March 31, 1995, over the
$1,055,100 fair value of the net liabilities assumed
was approximately $1,724,000 at December 31, 1995.
5. SALE OF WELLCARE MEDICAL MANAGEMENT, INC.
In June 1995, the Company contributed approximately $5.1
million to its then wholly-owned subsidiary, WellCare Medical
Management, Inc. ("WCMM") which was engaged
in managing physician practices, and then sold WCMM for cash of
$.6 million and a note receivable of $5.1 million. A gain of
approximately $144,000 was deferred pending the repayment
of the note. The buyer ("Buyer") was newly formed to acquire WCMM
and, as of May 14, 1996, approximately 11% of the Buyer's equity
was directly or indirectly held by current or
recent directors, officers or employees of WellCare. The Buyer is
in the business of managing medical practices and providing
related consultative services. The Buyer has entered into
agreements to manage the Alliances referred to in Notes 1a, 2 and
17 and has provided financial support to these Alliances. The
Company has a five year option to acquire the Buyer
at any time at a price determined by a formula based on the
Buyer's results of operations. The Company is in the process of
re-negotiating the terms of this option.
The note receivable bears interest at a rate equal to prime
plus 2% (10.5% at December 31, 1995) with interest payable monthly
through July 31, 1996 and, thereafter, principal
and interest monthly through July 31, 2000. All required interest
through December 31, 1995 has been paid. The Buyer is seeking
additional financing, and is contractually obligated
to pay the note receivable from such proceeds. Through May 14,
1996 such financing has not taken place. In view of the Buyer's
operating losses and advances to the Alliances, the
Company has obtained from certain of the Buyer's equity holders
personal guarantees of the notes and pledges of collateral to
secure these guarantees. Nevertheless, in view of the Buyer's
financial condition and difficulties inherent in the collection of
personal guarantees and realization of collateral, the Company has
elected to fully reserve the note receivable at December
31, 1995. In addition, the Company has elected to fully reserve
other receivables from the Buyer amounting to $744,000.
6. SHORT-TERM INVESTMENTS
The value of short-term investments is as follows:
1995
Market
Value
Fixed income securities $1,255,325
Equity securities 6,069
Short-term investments $1,261,394
Gross
Amortized Unrealized
Unrealized Market
December 31, 1995 Cost Gains Losses
Value
United States government
and its agencies $- $- $- $-
States and municipalities 1,254,176 5,778
(4,629) 1,255,325
Fixed income securities $1,254,176 $5,778
$(4,629) $1,255,325
Gross
Purchased Unrealized
Unrealized Market
Cost Gains Losses Value
Equity securities $ 1,858 $4,211
$- $ 6,069
TOTAL $1,256,034 $9,989 $(4,629)
$1,261,394
The contractual maturities of fixed income securities at
December 31, 1995 are as follows:
Amortized Market
Cost Value
Due in one year or less $ 326,165 $ 326,860
Due after one year through five years 928,011
928,465
Fixed income securities $1,254,176 $1,255,325
7. OTHER RECEIVABLES
Other receivables consist at December 31, 1995 and 1994 of the
following:
1995 1994
New York State Pools receivable $ 796,521 $675,678
Contributions receivable on behalf
of WellCare University 1,238,642 -
Receivable from third party insurers 545,454
80,000
Reinsurance receivable 633,608 570,681
Pharmacy rebate receivable 649,846 591,000
Others 780,542
511,285
Total $4,644,613
$2,428,644
<PAGE>
8. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1994 consists
of the following:
1995 1994
Land $ 855,310 $ 855,310
Land improvements 434,699 363,840
Construction in progress 202,300 ---
Buildings and building improvements 8,915,769 8,725,842
Leasehold improvements 375,100 213,680
Computer equipment 4,492,722 3,191,897
Furniture, fixtures and equipment 1,428,406 1,043,496
Total $16,704,306
$14,394,065
Less accumulated depreciation 3,710,823 2,492,015
Total $12,993,483
$11,902,050
Included in computer equipment and furniture, fixtures and
equipment is equipment financed through capital leases aggregating
approximately $2,398,000 and $1,793,000 at December
31, 1995 and 1994, respectively. Accumulated amortization
relating to assets financed through capital leases was
approximately $1,303,000 and $914,000 at December 31, 1995 and
1994, respectively.
9. NOTES RECEIVABLE
Notes receivable consist primarily of advances made to six
medical practices totaling $1,706,531, including $342,014 short
term, relating to enhancing WCNY's provider network.
Such notes are collateralized by first liens on all cash, accounts
receivable, inventory, and all office and medical equipment owned
by each of the practices. The notes require monthly
principal and interest payments, at a rate of 7.50 percent per
annum and mature from December 31, 1997 to January 1, 2001.
10. OTHER NON-CURRENT ASSETS
Other non-current assets consist at December 31, 1995 and 1994
of the following:
1995 1994
Long term portion of deferred taxes:
Contributions receivable on behalf of
WellCare University $1,311,740 $ ---
Deposits and other 721,241 696,897
Others 110,051 306,717
Total $3,816,543 $1,003,614
11. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consists of the following:
1995 1994
Line of Credit - Margin agreement with
Morgan Stanley; maximum borrowing
capability based upon market value of
collateralized securities; interest at 1.5%
above the brokers' discount rate; secured
by certain short-term investments held in
custodial account $- $1,813,590
Note payable - Key Bank of New York
due January 1, 1995; interest at 8.50%;
secured by first mortgage on property
located in Saugerties, New York -
340,000
TOTAL - $2,153,590
Long-term debt consists of the following:
1995 1994
Line of Credit - Key Bank; $15,000,000
expiring May 31, 1997; interest at prime
(7.38% as of December 31, 1995) $11,850,000 $-
(see note 21 for Subsequent Events).
The bank will limit the amount outstanding
to each entity, with an aggregate limit of
$15,000,000, as follows:
WellCare Management Group 8,000,000 - -
WellCare of New York 10,000,000 - -
Debt outstanding as of December 31, 1995:
WellCare Management Group: 2,250,000 - -
WellCare of New York: 9,600,000 - -
Mortgage Payable - Key Bank of New York;
$4,610,000; interest at LIBOR plus 175 basis
points (8.5% at December 31, 1995)
with a balloon payment of $3,562,488 due
January 1, 2000. Secured by real estate,
buildings, fixtures and assignment of all leases.
4,466,052 4,610,000
Mortgage Payable - First Hudson Valley;
first mortgage of $820,000; interest at 7.25%
with a balloon payment of $727,000 due
February 1, 1999 797,758
816,937
Note Payable - Lincoln National Administrative
Services Corporation ("LNASC"); payable
monthly with interest at 6 percent on the initial
$1,000,000 and prime plus 1 percent on the
balance in excess of $1,000,000 through
January 1997. A portion of the interest on this note is
deferred until January 1, 1997. The amount of deferred
interest is $189,385 and is included in other long-term
liabilities. 451,757
797,809
Mortgage payable - Key Bank of New York; first
mortgage of $862,500; interest at base rate
(8.5% at December 31, 1995); monthly payments
of $9,300 until March 1, 2000. Secured by property
located in Saugerties. 836,508 -
Note payable - First National Bank of Hudson Valley;
due date April 1, 1998; initial amount of $1,500,000,
monthly payments include principal of $41,667 and
interest at Chase Manhattan Bank rate plus 1%.
(9.5% at December 31, 1995). 1,143,808 -
Due to MHP Foundation -
1,000,000
Capitalized Lease Obligations; due through 2000;
monthly payments of $423 to $9,103 including
interest ranging from 6.5 to 21.8 percent; secured
by equipment 1,209,174
1,021,696
20,755,057
8,246,442
Less current portion 1,546,510
1,909,867
Long-term portion $19,208,547
$6,336,575
<PAGE>
Maturities of long-term debt, excluding capital lease
obligations, and future minimum lease payments under capital
leases as of December 31, 1995 for each of the next five years are
as
follows:
Future
Minimum
Long-term Lease
Year Debt Payments
1996 $ 1,141,219 $ 494,413
1997 12,658,090 391,843
1998 462,950 290,747
1999 1,027,966 187,990
2000 4,255,656 27,729
Thereafter - -
$19,545,883 $1,392,722
Less amount representing interest - $
183,548
$19,545,883 $1,209,174
12. INCOME TAXES
The provision for income taxes consists of the following:
Year Ended December 31,
1995 1994 1993
Current:
Federal $2,180,308 $3,058,334
$1,306,683
State 723,597 956,919
493,156
$2,903,905 $4,015,253
$1,799,839
Deferred:
Federal $(1,342,359) $(1,228,053)
$ 532,275
State (445,546)
(384,200) 200,886
$(1,787,905) $(1,612,253)
$ 733,161
<PAGE>
A reconciliation of the Federal statutory rate to the Company's
effective income tax rate is as follows:
Year Ended December 31,
1995 1994 1993
Federal statutory rate 34.0% 34.0% 34.0%
State income taxes:
Net of Federal benefit 6.0 7.0 7.4
Other - -
-
Effective rate 40.0% 41.0% 41.4%
Under the provisions of FAS 109, the Company was obligated to
recalculate deferred taxes previously recorded, based on current
Federal statutory tax rates, adjust the deferred
tax liability accordingly, and give recognition to the future tax
benefit of net operating losses whose realization was determined
to be more likely than not. Effective January 1, 1993, the
Company adopted FAS 109. The Company previously accounted for
income taxes in accordance with APB 11. The cumulative effect of
adopting FAS 109 on the Company's consolidated
financial statements resulted in an increase to net income and to
deferred income taxes of $1,063,035 on January 1, 1993.
Deferred income taxes reflect the net tax effects of (a)
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes, and (b) operating loss and tax
credit carryforwards. The tax effects of significant items
comprising the Company's deferred tax balance as of December 31,
1995 and 1994 are as follows:
<PAGE>
December 31,
1995 1994
Deferred tax assets:
Accounts receivable - bad debt reserves $2,996,011 $
268,636
Other 1,205,778 1,924,716
Total 4,201,789 2,193,352
Deferred tax liabilities:
Depreciable assets 190,154 187,052
Other 281,848 64,418
Total 472,002 251,470
Net deferred tax asset $3,729,787 $1,941,882
There was no valuation allowance at December 31, 1995 and
1994.
The Company's effective tax rate during 1994 and 1993 was
41.0% and 41.4%, respectively. The effective tax rate applied to
income from operations for the twelve months ended
December 31, 1995 was 40.0%. The decreasing trend in the
effective rate was primarily attributable to a decrease in
nondeductible expenses.
13. COMMON STOCK
On April 26, 1993, the shareholders of the Company approved a
Plan of Reorganization, which was effected on April 30, 1993,
pursuant to which each share of the Company's Class
A Voting Common Stock and Class B Non-Voting Common Stock was
converted into approximately 4,861 shares of Class A Common Stock
and Common Stock, respectively. As part
of the Plan of Reorganization, the shares of treasury stock
outstanding as of December 31, 1992 were eliminated. In addition,
the Company adopted a Stock Option Plan under which 900,000
shares of Common Stock, as of December 31, 1995, are reserved for
issuance upon exercise of options granted thereunder.
The Class A Common Stock and the Common Stock are identical
in all respects except for voting rights, conversion rights and
the non-transferability of the Class A Common Stock.
Holders of Class A Common Stock are entitled to 10 votes per share
and holders of Common Stock to one vote per share. Class A Common
Stock is not transferable and must be converted
to Common Stock to be sold. Holders of Class A Common Stock may,
at their option, convert their shares to Common Stock on a
share-for-share basis.
The Company has 1,000,000 shares of preferred stock
authorized, no shares issued.
The Company completed an initial public offering ("IPO") of
its common stock on August 12, 1993, realizing proceeds after
underwriting discounts and commissions and IPO-related
costs of approximately $20.7 million from the sale of 1,978,147
shares of common stock.
Earnings per share calculations are based on a weighted
average number of shares outstanding for the year. Shares issued
after April 1, 1992, but prior to the initial public offering
of the Company's common stock, have been accounted for as
outstanding since January 1, 1992. Earnings per share as of
December 31, 1995 1994 and 1993 were calculated giving effect
to all outstanding options. The weighted average number of common
and common equivalent shares outstanding at December 31, 1995,
1994 and 1993 were 6,249,712 shares, 6,225,538
shares and 5,022,461 shares, respectively.
14. STOCK OPTIONS
During 1995 and 1994, the Company issued stock options to
purchase Common Stock to certain individuals. Options granted in
1995 and 1994 were issued at the market value of the stock at the
date
of the grant. Following is a summary of transactions:
Shares under Option
1995 1994 1993
Outstanding, beginning of year 335,785 281,500
-
Exercised during the year (37,408)
(21,290) -
Terminated during the year (25,213)
(16,875) -
Granted during the year 114,848 92,450
281,500
Outstanding, end of year 388,012 335,785
281,500
Eligible, end of year, for exercise currently 91,778
45,335 -
Option
price per share $11.75 - $17.25 $11.75 - $23.50
$11.75 - $14.00
In connection with their employment contracts, the Company's
President and its Chief Financial Officer were granted 15,000 and
5,000 phantom shares, respectively, payable in cash only. These
phantom shares vest, subject to the executive's continued
employment with the Company, 25% per year on December 31st of each
year, commencing December 31, 1994, and are payable in January
1998 in an amount equal to the product of the number of phantom
shares vested in the executive, and the difference between the
closing sales prices of the Company's Common Stock as reported by
the
Nasdaq Stock Market (National Market) at various points in
time, as specified in their employment contracts. Through
December 31, 1995, no expenses have been accrued.
15. RETIREMENT SAVINGS PLAN
The Company sponsors a retirement plan designed to qualify
under Section 401(k) of the Internal Revenue Code of 1986, as
amended. All employees over age 21 who have been employed by the
Company for at least one year are eligible to participate in
the plan. Employees may contribute to the plan on a tax deferred
basis generally up to 20% of their total annual salary, but in no
event more
than $9,240 in 1995. Under the Plan, the company makes
matching contributions at the rate of 50% of the amount
contributed by the employee up to a maximum of 2% of the
employee's total annual
compensation.
The employer contributions vest to the employee after five
years of an employee's service with the Company. As of December
31, 1995, 158 employees had elected to participate in the plan.
For the
fiscal year ended December 31, 1995, the Company intends to
contribute approximately $86,000. For the fiscal year ended
December 31, 1994, the Company contributed approximately $52,000.
16. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of investments in
short-term investments in obligations of certain state and
municipal
entities and premiums receivable. Short-term investments are
managed by professional investment managers within the guidelines
established by the Board of Directors, which, as a matter of
policy,
limit the amounts which may be invested in any one issuer.
Concentrations of credit risk with respect to premiums receivable
are limited due to the large number of employer groups comprising
the
Company's customer base. As of December 31, 1995, management
believes that the Company has no significant concentrations of
credit risk.
17. COMMITMENTS AND CONTINGENCIES
a. The Alliances described in Note 1a commenced operations in
the fourth quarter of 1994. Based on information furnished to the
Company by the Alliances, the Alliances have operated at a
deficit since inception. This deficit resulted from
medical expense obligations assumed from WellCare by the Alliances
upon their formation, medical expenses for incurred but not
reported
losses which were in excess of amounts estimated at the
time of their formation, and operating losses since their
formation. The deficit is approximately $16,000,000 at December
31, 1995
based on unaudited financial results of the Alliances. The
Alliances have financed these deficits through a combination of
the lags inherent in the receipt, adjudication, and payment of
claims as
well as further deferral of claim payments and borrowings
from the Buyer referred to in note 5. In addition, a $3,000,000
bank line of credit was entered into by the Buyer on December 28,
1995, which was guaranteed by Mr. Ullmann in his personal
capacity. In May 1996, the Alliances committed to the institution
of a fee withhold program, effective July 1, 1996, as permitted
under its contracts with physicians, to withhold payments
otherwise payable to referral physicians by approximately 15% to
22%, depending on the geographic location of the physician.
Management of the Alliances and WellCare believe that this
withhold program will enable, the Alliances to maintain their
operations and reduce their accumulated deficits in 1996 and
substantially eliminate them in 1997.
The Company has been advised by counsel that it would have
no financial liability to providers for past services rendered in
the event the Alliances were unable to maintain their operations.
Further, the Company has direct contracts with providers
which would require the providers to continue to provide medical
care to members on the financial terms similar to those in the
Alliances' agreements with providers, in the event that the
Alliances were unable to maintain their operations. Nevertheless,
in the event of continuing losses or increasing deficits by the
Alliances, the Alliances could request increased capitation
rates from the Company.
Management of the Company does not believe that such
additional financing or increased contractual capitation rates
should be required by the Alliances and has no intention to agree
to such
terms if requested by the Alliances.
b. Class Action Litigation - Between April 1, 1996 and May 14,
1996, the Company as well as two if its officers who also are
directors were named as defendants in eight separate purported
class
actions filed in the United States District Courts for the
Northern and Southern Districts of New York. The complaints in
these actions are virtually the same, alleging the defendants
violated the
federal securities laws by making alleged materially false
and misleading statements, or withholding information, which
artificially inflated the market price of the Company's common
stock and
caused investors to act to their detriment. A ninth suit
filed during the same period names as defendants the same parties,
as well as three additional directors, two of whom also are
officers.
Because these actions have only recently been filed,
discovery has not begun. Most early litigation activity will
involve plaintiffs' counsel's attempts to achieveconsolidation and
support the
existence and viability of a class. Accordingly,
management is unable to predict the likelihood of its success on
the merits of these cases but has instructed counsel to defend
vigorously. The
Company has insurance in effect which may, at least in
part, offset any costs to be incurred in these litigations.
c. Regulatory Matters - In connection with a comprehensive
review of its arrangements with Alliances and, the financing of
Alliances as discussed further in Notes 2 and 17a, the Company
delayed
the filing of its Annual Report on Form 10-K with the
Securities and Exchange Commission. Also, the Department of
Insurance of the State of New York accelerated its normal
statutory audit of
the Company and is expected to consider the same issues
which were reviewed by the Company, as well as other matters. It
is not possible to predict the actions, if any, which may be taken
by
these or other regulatory bodies or the effects of those
actions, if any, on the business operations or financial
statements of the Company.
d. Other - The Company is involved in litigation and claims
which are considered normal to the Company's business. In the
opinion of management, the amount of loss that might be sustained,
if
any, would not have a material effect on the
Company's consolidated financial statements.<PAGE>
e. Lease - Future minimum rental payments required under
operating leases that have initial or remaining noncancellable
lease terms in excess of one year as of December 31, 1995, are as
follows:
Year Amount
1996 $1,165,652
1997 1,098,498
1998 895,456
1999 665,104
2000 583,377
Thereafter 433,320
Total $4,841,407
18. STATUTORY REQUIREMENTS AND DIVIDEND RESTRICTIONS
The New York State Department of Health requires that WCNY
maintain cash balances equal to the greater of 5 percent of
expected annual medical costs or $100,000. At December 31, 1995
and
1994, WCNY had required cash reserves of $8,241,017 and
$6,584,286, respectively, included in other assets. Additionally,
WCNY is required to maintain a statutory reserve for the
protection of
subscribers in the event WCNY is unable to meet its
obligations. The reserve must be increased annually by an amount
equal to at least 1 percent of the premiums earned limited, in
total, to a maximum
of 5 percent of premiums earned for the most recent calendar
year. At December 31, 1995 and 1994, WCNY had a required
statutory reserve of $4,366,191 and $2,903,326, respectively.
WCMG is subject to similar regulatory requirements with respect
to its HMO operations in Connecticut. As a holding company,
WellCare's ability to declare and pay dividends is dependent upon
cash
distributions from its subsidiaries which, with respect to
WCNY, are limited by state regulations. Although such regulations
do not specifically restrict WCNY from paying dividends, they
require
WCNY to be financially sound as determined by the New York
State Departments of Health and Insurance, and thereby may
preclude WCNY from paying dividends. Any transaction that
involves five
percent or more of WCNY's assets requires notice to the
Commissioner and Superintendent of the Departments of Health and
Insurance, respectively, and any transaction that involves 10% or
more of
WCNY's assets requires prior approval. Any decision to pay
dividends in the future will be made by WellCare's Board of
Directors and will depend upon the Company's earnings, capital
requirements,
financial condition and such other factors as the Board of
Directors may deem relevant.<PAGE>
19. SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the year for:
1995 1994 1993
Income taxes $5,140,000 $3,952,226 $1,625,000
Interest $1,387,298 $667,061 $549,875
During 1995, 1994 and 1993, WellCare entered into capital leases
for equipment in the amounts of $604,681, $321,293 and $1,195,578,
respectively. Of the $1,195,578 of capital leases entered into
by WellCare in 1993, $769,051 resulted from refinancing of
previously existing capital lease obligations and $14,248 were
capital leases assumed by WellCare as a result of the acquisition
of Mid-Hudson Health Plan, Inc.
20. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including cash and
cash equivalents, short-term investments, due from affiliates -
net, advances to participating providers, other receivables - net,
restricted cash, other non-current assets, due from affiliate,
accounts payable and accrued expenses approximate their fair
values.
The fair value of notes receivable consisting primarily of
advances to medical practices, is not materially different from
the carrying value for financial statement purposes. In making
this determination,
the Company used interest rates based on an estimate of the
credit worthiness of the medical practice.
The carrying amount of long-term debt, the majority of which
bears interest at floating rates, are also assumed to approximate
their fair value.
21. SUBSEQUENT EVENTS
a. On January 19, 1996 the Company announced the completion of
a private placement of a 6% subordinated convertible note in the
principal amount of $20,000,000 (the "Note") due December 31,
2002 with the 1818 Fund II, L.P., a private equity fund
managed by Brown Brothers Harriman & Co. The Note accrues
interest at the rate of 6% per annum, payable quarterly by the
Company.
The principal amount of the Note is payable in one amount on
December 31, 2002. The Note is subject to certain mandatory
redemption at the option of the holder of the Note upon certain
changes in control of the Company. In addition, the Note is
subject to certain optional redemptions at the option of the
Company after the fourth anniversary of the date of the Note. By
its terms,
the Note is subordinated to all senior indebtedness of the
Company. As of May 14, 1996, the Company was in negotiation with
the holder of this Note to amend certain terms, including the
conversion price.
b. In response to the Company's late filing of its Annual
Report on Form 10-K with the Securities and Exchange Commission,
during April 1996, Key Bank froze all borrowings under the
Company's $15,000,000 revolving line of credit pending
submission of the Company's audited financial statements. In
addition, Key Bank granted the Company a waiver of any and all
financial
convenants for the periods ending December 31, 1995, and
March 31, 1996. The Company is in the process of renegotiating
the line-of-credit with Key Bank. Management anticipates that the
new terms will be finalized prior to June 30, 1996.
22. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Selected unaudited data reflecting the Company's consolidated
results of operations for each of the last eight quarters are
shown in the following table (dollars in thousands):
1995
1st 2nd 3rd 4th
(Restated)(2) (Restated)(2)
(Restated)(2)
Total revenue $34,875 $36,902
$40,112 $40,977
Total expenses 32,035 33,398
36,083 48,561
Income (loss) from operations 2,840 3,504
4,029 (7,584)
Income (loss) before extraordinary
credit and cumulative effect of a
change in accounting principle 1,675 2,067
2,388 (4,458)
Net income (loss) 1,675 2,067
2,388 (4,458)
Income (loss) per share before
extraordinary credit and
cumulative effect of a change
in accounting principle 0.27 0.33 0.38
(0.71)
Net income (loss) per share 0.27 0.33 0.38
(0.71)
1994
1st 2nd 3rd 4th
(Restated)(2)
Total revenue $29,211 $29,707
$31,021 $32,643
Total expenses 27,064 31,918 28,412
29,327(1)
Income (loss) from operations 2,147 (2,211) 2,609 3,316
Income (loss) before extraordinary credit
and cumulative effect of a
change in accounting principle 1,255 (1,313) 1,561 1,956
Net income (loss) 1,255 (1,313) 1,561 1,956
Income (loss) per share before
extraordinary credit and
cumulative effect of a change
in accounting principle 0.20 (0.20)
0.25 0.31
Net income (loss) per share 0.20 (0.20)
0.25 0.31
The sum of the above quarterly amounts may not equal reported
year to date amounts due to rounding.
(1) Includes the recovery of $2.7
million from primary care physicians in settlement of the deficits
in their 1994 capitation accounts incidental to the restructuring
of WCNY's contractual capitation
arrangements with the majority of
its primary care physicians effective October 1, 1994.
(2) Results of operations for the
second calendar quarter of 1994 have been restated by $4,711,667,
$2,779,912, after applicable income tax effects, ($0.44 per share)
as referred to in note 2. In
addition, as referred to in Note
2, medical expense has been decreased and income from operations
increased by $123,592, $518,385, and $537,898, respectively in
each of the first three calendar
quarters of fiscal 1995. After
applicable income tax effects, this amounts to $72,329 ($0.01 per
share), $305,846 ($0.05 per share) and $318,776 ($0.05 per share)
for these quarters. In addition,
the following unusual charges
occurred in the fourth calendar quarter of 1995: $5,130,000
reserve on the note receivable referred to in note 5, and
approximately $744,000 in related advances;
approximately $2,000,000 in
increases to reserves for other notes and accounts receivable;
approximately $600,000 in reserves for medical cost adjustment
pools by New York State;
approximately $500,000 relating to
premiums; and approximately $700,000 relating to various
adjustments to medical costs payable.
*****<PAGE>
THE WELLCARE MANAGEMENT GROUP, INC.
Schedule I
Condensed Financial Information of Registrant
Condensed Balance Sheets
As of December 31, 1995 and 1994
(in thousands)
1995
1994
(Restated)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$279
$1,493
Short-term investments
1,262
6,066
Accounts receivable
1,614
1,267
Prepaid expenses and other current assets
2,699
3,716
TOTAL CURRENT ASSETS
5,854
12,542
INVESTMENT IN SUBSIDIARIES
22,661
16,513
PROPERTY AND EQUIPMENT - net
185
113
NOTES RECEIVABLE - LONG-TERM
5,470
3,115
OTHER ASSETS
5,009
444
TOTAL
$39,179
$32,727
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Account and notes payable
$45
$1,900
Current portion of long-term debt
910
414
Accrued expenses and other
3,278
495
TOTAL CURRENT LIABILITIES
4,233
2,809
LONG-TERM DEBT
2,953
423
OTHER LIABILITIES
189
189
TOTAL LIABILITIES
7,375
3,421
SHAREHOLDERS' EQUITY:
Common stock
63
63
Additional paid-in capital
26,371
25,861
Accumulated surplus
1,233
1,016
Statutory reserve
4,360
2,903
32,027
29,843
Unrealized gain (loss) on short-term investments
5
(104)
Less:
Notes receivable from shareholders
17
38
Treasury stock - at cost
211
395
TOTAL SHAREHOLDERS' EQUITY
31,804
29,306
TOTAL
$39,179
$32,727
S - 1
<PAGE>
THE WELLCARE MANAGEMENT GROUP, INC.
Schedule I
Condensed Financial Information of the Registrant
Condensed Statement of Operations
For the years ended December 31, 1995, 1994 and 1993
(in thousands)
18 June 1905
17 June 1905
16 June 1905
(Restated)
REVENUE:
Fee income
$14,569
$10,409
$6,623
Interest income
1,306
510
253
Other income
2,673
96
92
TOTAL REVENUE
18,548
11,015
6,968
EXPENSES:
General and administrative expenses
21,730
10,803
6,766
Interest expense
323
128
116
Other expense
79
31
11
TOTAL EXPENSES
22,132
10,962
6,893
(LOSS) INCOME FROM OPERATIONS
(3,584)
53
75
PROVISION FOR INCOME TAXES
(1,762)
19
31
NET (LOSS) INCOME BEFORE EQUITY
IN INCOME IN SUBSIDIARIES
(1,822)
34
44
EQUITY IN INCOME IN SUBSIDIARIES NET
OF TAXES
3,495
3,425
4,604
NET INCOME
$1,673
$3,459
$4,648
S - 2
<PAGE>
THE WELLCARE MANAGEMENT GROUP, INC.
Schedule I
Condensed Financial Information of the Registrant
Condensed Statement of Cash Flows
For the years ended December 31, 1995, 1994 and 1993
(in thousands)
18 June 1905
17 June 1905
16 June 1905
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income
($1,822)
$34
$44
Depreciation and amortization
163
58
67
Loss on sale of assets
53
31
-
Increase in accounts receivable
(347)
(400)
(116)
Other - net
(3,475)
(2,494)
(1,310)
NET CASH USED IN OPERATING ACTIVITIES
(5,428)
(2,771)
(1,315)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment
(121)
(30)
(46)
(Increase) decrease in notes receivable
(2,355)
(3,036)
326
Sale (purchase) of investments - net
4,804
(3,917)
(2,149)
NET CASH PROVIDED BY (USED
IN) INVESTING ACTIVITIES
2,328
(6,983)
(1,869)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in long-term debt
3,026
(430)
(262)
(Decrease) increase in accounts and notes payable
(1,855)
1,500
(703)
Proceeds from issuance of stock and treasury stock - net
244
-
21,049
Cost of treasury stock purchased
-
(395)
-
Proceeds from exercise of stock options
450
249
-
Other - net
21
(10)
(6,563)
NET CASH PROVIDED BY FINANCING ACTIVITIES
1,886
914
13,521
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS
(1,214)
(8,840)
10,337
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
1,493
10,333
(4)
CASH AND CASH EQUIVALENTS, END OF YEAR
$279
$1,493
$10,333
S - 3
<PAGE>
THE WELLCARE MANAGEMENT GROUP, INC.
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1995, 1994 and 1993
(in thousands)
Balance at
Balance at
Beginning
End of
of Period
Additions
Deductions
Period
Year ended December 31, 1995
Allowance for doubtful accounts
$
682
$
6,706
$
-
$
7,388
Year ended December 31, 1994
Allowance for doubtful accounts
$
359
$
323
$
-
$
682
Year ended December 31, 1993
Allowance for doubtful accounts
$
150
$
209
$
-
$
359
S - 4
<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit No. Description of Document
Page
3.1 - Copy of Registrant's Restated Certificate of
Incorporation. (1)
3.1a - Copy of Certificate of Amendment to Restated
Certificate
of Incorporation.
(4)
3.2 - Copy of Registrant's By-Laws.
(1)
3.2a - Copy of Registrant's Amended By-Laws
80
10.1 - Copy of Registrant's Amended and Restated 1993
Incentive
and Non-Incentive Stock Option Plan, including form
of option. (4)
10.2a - Copy of Employment Contract dated January 1, 1994,
between
Registrant and Edward A. Ullmann.
(3)
10.2b - Copy of Amendment to Employment Contract dated
January 1, 1996,
between Registrant and Edward A. Ullmann.*
93
10.2c - Copy of Amendment to Employment Contract dated
January 1, 1996,
between Registrant and Edward A. Ullmann. *
95
10.4a - Copy of Employment Contract dated January 1, 1994
between
Registrant and Robert E. Goff.
(2)
10.6a - Copy of Employment Contract dated January 1, 1995,
between Registrant and G. William Strein.
(3)
10.8a - Copy of Employment Contract dated January 1, 1995,
between
Registrant and Peter G. Kraft.
(3)
10.11 - Form of Agreement between WellCare of New York,
Inc. and
Primary Care Physicians.
(1)
10.12 - Form of Agreement between WellCare of New York,
Inc.
and Specialists.
(1)
10.13 - Form of Agreement between WellCare of New York,
Inc. and
Hospitals.
(1)
10.14 - Form of Medicaid Contract between WellCare of New
York, Inc.
and various counties of the New York State
Department of
Social Services.
(1)
<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit No. Description of Document
Page
10.15a - Copy of restated Agreement dated March 1, 1994, between
WellCare
Administration, Inc., and Diversified
Pharmaceuticals, Inc. (3)
10.16a - Copy of Reinsurance Agreement effective November 1,
1993,
between Registrant and Preferred Life Insurance
Company
of New York
(3)
10.17b - Copy of Agreement dated January 1, 1991, between
Registrant
and FirstCare Physician Associates, P.C.
(1)
10.18 - Copy of Preoperational Management Agreement dated March
15,
1993, between WellCare Administration, Inc. and
Extended
Benefits, Inc., a New Jersey TPA.
(1)
10.19 - Copy of Asset Purchase Agreement dated February 25,
1993,
between WellCare of New York, Inc. and Mid-Hudson
Health
Plan, Inc.
(1)
10.20a - Copy of Agreements dated January 1, 1993 and July
1, 1993,
respectively, between Park West Entertainment, Inc.
("PWE")
and Registrant.
(1)
10.20b - Copy of Agreement dated January 1, 1992, with
Addendum dated
January 1, 1993, between PWE and WellCare of New
York, Inc. (1)
10.20c - Copy of Agreements dated January 1, 1992, with
Addendum dated
January 1, 1993, and July 1, 1992, respectively,
between PWE
and Mid-Hudson Health Plan, Inc.
(1)
10.20d - Copy of Promissory Note dated September 1, 1992
issued by PWE
to Registrant.
(1)
10.21 - Copy of Agreement of Lease dated March 1990,
between WellCare
of New York, Inc., as tenant, and Donald E. Axinn,
as Landlord,
relating to lease of office space in Newburgh, New
York. (1)
10.22 - Copy of Lease dated February 1, 1993, between
WellCare of New
York, Inc., as Tenant, and Huntington Associates,
as Landlord,
relating to lease of office space in Albany, New
York. (1)
10.24 - Copy of Full Risk Capitation Agreement between AMB
Medical
Services, P.C. and WellCare of New York, Inc.
(3)
<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit No. Description of Document
Page
10.25 - Copy of Full Risk Capitation Agreement between Dutchess
Family Medicine, P.C. and WellCare of New York,
Inc. (3)
10.26 - Copy of Full Risk Capitation Agreement between Hudson
Valley
Family Health, P.C. and WellCare of New York, Inc.
(3)
10.26a - Copy of Full Risk Capitation Agreement between Hudson
Valley
Family Health, P.C. and WellCare of New York, Inc.
dated
October 1, 1995, (supersedes Exhibit 10.26).
97
10.27 - Copy of Full Risk Capitation Agreement between Valley
Medical
Services, P.C. and WellCare of New York, Inc.
(3)
10.27a - Copy of Full Risk Capitation Agreement between Valley
Medical
Services, P.C. and WellCare of New York, Inc. dated
October 1, 1995, (supersedes Exhibit 10.27).
112
10.28 - Form of Agreement between WellCare of New York, Inc.
and Network Physician.
(3)
10.29 - Form of Agreement between WellCare of New York, Inc.
and Consulting Physician.
(3)
10.29a - Form of Agreement between WellCare of New York, Inc.
and Consulting Physician, (supersedes Exhibit
10.29). 127
10.30- Form of Agreement between WellCare of New York,
Inc. and
Hospital
(3)
10.30a - Form of Agreement between WellCare of New York, Inc. and
Hospital, (supersedes Exhibit
10.30). 141
10.31 - Copy of Asset Option Agreement between Registrant
and Managed Care Administrators, Inc.
(3)
10.32 - Copy of Consulting Services Agreement between Registrant
and FHP International Consulting, Inc.
(3)
10.33 - Copy of Employment Contract dated May 24, 1994 between
Registrant and Marystephanie Corsones.
(3)
<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit No. Description of Document
Page
10.33a - Copy of Amendment to Employment Contract dated January
1,
1996, between Registrant and Marystephanie
Corsones.* 155
10.34 - Copy of Employment Contract dated January 1, 1994,
between Registrant and Patrick Arlantico.
(3)
10.34a - Copy of Acceptance of Resignation dated March 1, 1996,
between Registrant and Patrick Arlantico.
157
10.35 - Copies of Stock Purchase Warrants issued by Registrant
to
J.J. Farrell Associates, Inc.
(3)
10.36 - Copy of Lease Agreement dated November 7, 1994 between
Catskill
Medical Associates, PC and WellCare Development,
Inc. (3)
10.37 - Copy of Lease Agreement dated October 14, 1994 between
Richard
Bulger and WellCare Development, Inc.
(3)
10.38 - Copy of Management Agreement dated July 1,1994 between
Registrant
and its Wholly owned Subsidiary, WellCare of
Connecticut, Inc. (3)
10.39 - Copy of Key Bank Loan Documents: Line-of-Credit Note and
Guaranty
of Payment and Performance in the amount of
$8,000,000.00
dated June 28, 1995; Line-of-Credit Note and
Guaranty of
Payment and Performance in the amount of
$10,000,000.00
dated June 28, 1995; Loan Agreement Among
Registrant and
Subsidiaries and Key Bank of New York in the amount
of
$15,000,000.00 dated June 28, 1995.
(4)
10.39a - Copy of Modifications to two of the Financial Loan
Covenants
governing the $15,000,000.00 Revolving Credit
Facility
Between Registrant and Key Bank of New York.
159
10.39b - Copy of Clarification of Definition of Additional Bank
Debt
Per Key Bank Loan Agreement.
161
10.39c - Copy of Key Bank correspondence granting a 30-day
extension
of time to the requirements outlined in Article 6,
Section
3 of the $15,000,000.00 Loan Agreement dated June
28,
1995.
163
10.39d - Copy of Key Bank correspondence waiving certain
financial
covenants in the Loan Agreement dated June 28,
1995. 165<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit No. Description of Document
Page
10.40 - Copy of Note Purchase Agreement by and between
Registrant and
The 1818 Fund II, L.P.
(5)
10.41 - Copy of 6% Subordinated Convertible Note Due December
31, 2002
between Registrant and The 1818 Fund II, L.P.
(5)
10.42 - Copy of Registration Rights Agreement between Registrant
and
The 1818 Fund II, L.P.
(5)
10.43 - Copy of Asset Purchase Agreement between WellCare
Medical
Management, Inc. and Primergy, Inc. dated June 30,
1995. 168
10.44 - Copy of Bill of Sale between WellCare Medical
Management, Inc.
and Primergy, Inc. dated June 30, 1995.
185
10.45 - Copy of Promissory Note in the amount of $5,130,000
between
WellCare Medical Management, Inc. and Primergy,
Inc.
dated June 30, 1995.
189
10.46 - Copy of Note Agreement between WellCare Medical
Management,
Inc. and Primergy, Inc. dated June 30, 1995.
197
10.47 - Form of Guaranty and Guarantor Pledge Agreement between
an individual and WellCare Medical Management, Inc.
206
10.48 - Copy of Loan Agreement among and between Managed Care
Administrators, Inc. and Registrant and First
National Bank
of the Hudson Valley in the amount of $1,500,000.00
dated
November 28, 1994.
230
10.49 - Copy of Quota Share Reinsurance Agreement between
Registrant
and Allianz Life Insurance Company of North America
dated
September 1, 1995.
242
11 - Computation of Per Share Earnings.
250
22 - List of Subsidiaries.
252
23ii - Consent of Independent Auditors
254
(1) Incorporated by reference to the same exhibit in Registrant's
Registration Statement on Form S-1 (File No. 33-61012)
<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit No. Description of Document
Page
(2) Incorporated by reference to the same exhibit in Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1993.
(3) Incorporated by reference to the same exhibit in Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1994.
(4) Incorporated by reference to the same exhibit in Registrant's
Report on Form 10-Q for the period ended June 30,
1995.
(5) Incorporated by reference to the same exhibit in Registrant's
Report on Form 8-K dated January 19, 1996.
* Denotes Management Contract or compensatory plan or
arrangement required to be filed as an exhibit to this
Annual Report on Form 10-K.
EXHIBIT 3.2a
ANNEX B
BY-LAWS
OF
THE WELLCARE MANAGEMENT GROUP, INC.
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the
shareholders of The Wellcare Management Group, Inc. (the
"Corporation") shall be held either within or without the State of
New York, at such place and at such time as the Board of Directors
may designate and set forth in the call or in a waiver of notice
thereof, for the purpose of electing directors and for the
transaction of such other business as may properly be brought
before the meeting, and except as otherwise designated by the
Board of Directors and stated in the notice of the meeting, the
annual meeting of the shareholders shall be held on the first
Monday in June in each year, if not a legal holiday, and if a
legal holiday, then on the next business day following, at 6:00
p.m., at which meeting the shareholders shall elect a Board of
Directors for the ensuing year and transact such other business as
may properly be brought before the meeting.
Section 2. Proposed Business at Annual Meeting. No business may
be transacted at an annual meeting of shareholders, other than
business that is either (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board
of Directors (or any duly authorized committee thereof), which
shall include shareholder proposals contained in the Corporation's
proxy statement made in accordance with Rule 14a-8 of the
Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor thereto, or (b) otherwise properly brought
before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof).
Section 3. Special Meetings. Special Meetings of the
shareholders, for any purpose or purposes, may be called at any
time by resolution of the Board of Directors or by the President,
and shall be called by the President or by the Secretary upon the
written request of the holders of record of the issued and
outstanding shares entitled to cast at least twenty percent (20%)
of the total number of votes entitled to be cast by shareholders
at such meeting, at such times and at such place either within or
without the State of New York as may be stated in the call or in a
waiver of notice thereof. Business transacted at any special
meeting shall be limited to the purposes stated in the notice.
Section 4. Notice of Meetings. Notice of the time, place and
purpose of every meeting of shareholders shall be delivered
personally or by first class mail, not less than ten (10) days nor
more than fifty (50) days previous thereto, or by third class
mail, not less than twenty-four (24) days nor more than fifty (50)
days before the meeting, to each shareholder of record entitled to
vote, at his post office address appearing upon the records of the
Corporation or at such other address as shall be furnished in
writing by him to the Corporation for such purpose. Such further
notice shall be given as may be required by law or by these
By-Laws. Any meeting may be held without notice if all
shareholders entitled to vote are present in person or by proxy,
or if notice is waived in writing, either before or after the
meeting, by those not present. The attendance of any shareholder
at a meeting, in person or by proxy, without protesting prior to
the conclusion of the meeting lack of notice of such meeting,
shall constitute a waiver of notice by such shareholder.
Section 5. Quorum. The holders of record of at least a majority
of the shares of the stock of the Corporation, issued and
outstanding and entitled to vote, present in person or by proxy,
shall, except as otherwise provided by law or by these By-Laws,
constitute a quorum at all meetings of the shareholders; if there
be no such quorum, the holders of a majority of such shares so
present or represented may adjourn the meeting from time to time
until a quorum shall have been obtained.
Section 6. Organization of Meetings. Meetings of the
shareholders shall be presided over by the Chairman of the Board,
if there be one, of if he is not present by the President, or if
he is not present by a chairman to be chosen at the meeting. The
Secretary of the Corporation, or in his absence an Assistant
Secretary, shall act as Secretary of the meeting, if present.
Section 7. Voting. At each meeting of shareholders, except as
otherwise provided by statute, every holder of record of stock
entitled to vote shall be entitled to cast the number of votes to
which shares of such class or series are entitled as set forth in
the Certificate of Incorporation or any Certificate of Amendment
with respect to any preferred stock, in person or by proxy for
each share of such stock standing in his name on the records of
the Corporation. Elections of directors shall be determined by a
plurality of the votes cast thereat and, except as otherwise
provided by statute, the Certificate of Incorporation, or these
By-Laws, all other action shall be determined by a majority of the
votes cast at such meeting. Each proxy to vote shall be in
writing and signed by the shareholder or by his duly authorized
attorney.
At all elections of directors, the voting shall be by ballot or in
such other manner as may be determined by the shareholders present
in person or by proxy entitled to vote at such election. With
respect to any other matter presented to the shareholders for
their consideration at a meeting, any shareholder entitled to vote
may, on any question, demand a vote by ballot.
A complete list of the shareholders as of the record date,
certified by the Secretary or the transfer agent of the
Corporation, shall be produced at any meeting of shareholders upon
the request thereat or prior thereto of any shareholder.
Section 8. Action by Consent. Any action required or permitted
to be taken at any meeting of shareholders may be taken without a
meeting, if, prior to such action, a written consent or consents
thereto setting forth such action, is signed by the holders of
record of all of the shares of the stock of the Corporation,
issued and outstanding and entitled to vote.
ARTICLE II
DIRECTORS
Section 1. Number, Quorum, Term, Vacancies, Removal. The number
of directors of the Corporation shall be fixed in the manner
provided in the Certificate of Incorporation.
A majority of the members of the Board of Directors then holding
office shall constitute a quorum for the transaction of business,
but if at any meeting of the Board there shall be less than a
quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum shall have been obtained.
Except as otherwise required by the Certificate of Incorporation,
newly created directorships resulting from an increase in the
number of directors and vacancies occurring in the Board, by
reason of death, resignation, or otherwise, including the removal
of a director as provided in the Certificate of Incorporation,
shall be filled by a vote of the Board or, if the number of
directors then in office is less than a quorum, by vote of a
majority of the directors then in office. A director so elected
to fill a vacancy, other than a vacancy arising through an
increase in the number of authorized directors, shall serve until
the next meeting of the shareholders at which the election of
directors is in the regular order of business, and until his or
her successor has been elected and qualified. A director so
elected to fill a vacancy arising through an increase in the
number of authorized directors shall serve until the next meeting
of the shareholders at which the election of directors is in the
regular order of business, and until his or her successor has been
elected and qualified. When a vacancy is created as a result of
the resignation of a director from the Board of Directors, which
resignation is not effective until a future date, such director
shall not have the power to vote to fill such vacancy. Any
director so elected to fill a vacancy arising through an increase
in the number of authorized directors shall not be classified as
belonging to a certain class of directors until the next annual
meeting of the shareholders of the Company.
Section 2. Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be
eligible for election as directors of the Corporation, except as
may be otherwise provided in any Certificate of Amendment of the
Corporation with respect to the right of holders of certain
specified classes of preferred stock of the Corporation to
nominate and elect a specified number of directors in certain
circumstances. Nominations of persons for election to the Board
of Directors may be made at any annual meeting of shareholders, or
at any special meeting of shareholders called for the purpose of
electing directors, (a) by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (b) by any
shareholder of the Corporation who is a shareholder of record on
the record date for the determination of shareholders entitled to
vote at such meeting.
Section 3. Meetings, Notice. Meetings of the Board of Directors
shall be held at such place either within or without the State of
New York, as may from time to time be fixed by resolution of the
Board, or as may be specified in the call or in a waiver of notice
thereof. Regular meetings of the Board of Directors shall be held
at such times as may from time to time be fixed by resolution of
the Board, and special meetings may be held at any time upon the
call of one director, the Chairman of the Board, if one be
elected, or the President, by oral, telegraphic or written notice,
duly served on or sent or mailed to each director not less than
two days before such meeting. A meeting of the Board may be held
without notice immediately after the annual meeting of
shareholders at the same place at which such meeting was held.
Notice need not be given of regular meetings of the Board. Any
meeting may be held without notice, if all directors are present,
or if notice is waived in writing, either before or after the
meeting, by those not present.
Section 4. Committees. The Board of Directors may, in its
discretion, by resolution passed by a majority of the entire
Board, designate from among its members one or more committees
which shall consist of three or more directors. The Board may
designate one or more directors as alternate members of any such
committee, who may replace any absent or disqualified member at
any meeting of the committee. Such committees shall have and may
exercise such powers as shall be conferred or authorized by the
resolution appointing them, provided, however, that no such
committee shall have authority as to the following matters: (i)
the submission to shareholders of any action that needs
shareholders' approval under the New York Business Corporation
Law, (ii) the filling of vacancies in the Board of Directors or in
any committee, (iii) the fixing of compensation of the directors
for serving on the Board or on any committee, (iv) the amendment
or repeal of the By-Laws, or the adoption of new By-Laws, and (v)
the amendment or repeal of any resolution of the Board which by
its terms shall not be so amendable or repealable. A majority of
any such committee may determine its action and fix the time and
place of its meetings, unless the Board of Directors shall
otherwise provide. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors when
required. The Board shall have power at any time to change the
membership of any such committee, to fill vacancies in it, or to
dissolve it.
Section 5. Action by Consent. Any action required or permitted
to be taken at any meeting of the Board of Directors, of any
committee thereof, may be taken without a meeting, if prior to
such action a written consent or consents thereto is signed by all
members of the Board, or of such committee as the case may be,
and such written consent or consents is filed with the minutes of
proceedings of the Board or committee.
Section 6. Telephonic Meetings. Any or all members of the Board
or any committee thereof may participate in a meeting of such
Board or 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 a meeting.
Section 7. Compensation. The Board of Directors may determine,
from time to time, the amount of compensation which shall be paid
to its members. The Board of Directors shall also have power, in
its discretion, to allow a fixed sum and expenses for attendance
at each regular or special meeting of the Board, or of any
committee of the Board; the Board of Directors shall also have
power, in its discretion, to provide for any pay to directors
rendering services to the Corporation not ordinarily rendered by
directors, as such, special compensation appropriate to the value
of such services, as determined by the Board from time to time.
ARTICLE III
OFFICERS
Section 1. Titles and Election. The officers of the Corporation,
who shall be chosen by the Board of Directors at its first meeting
after each annual meeting of shareholders, shall be a President, a
Treasurer and a Secretary. The Board of Directors from time to
time may elect a Chairman of the Board, a Vice Chairman of the
Board, one or more Vice Presidents, Assistant Secretaries,
Assistant Treasurers and such other officers and agents as it
shall deem necessary, and may define their powers and duties. Any
number of offices may be held by the same person, except that the
office of President and Secretary may not be held by the same
person.
Section 2. Terms of Office. The officers shall hold office
until their successors are chosen and qualify.
Section 3. Removal. Any officer may be removed, either with or
without cause, at any time, by the affirmative vote of a majority
of the Board of Directors.
Section 4. Resignations. Any officer may resign at any time
giving written notice to the Board of Directors or to the
Secretary. Such resignation shall take effect at the time
specified therein, and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.
Section 5. Vacancies. If the office of any officer or agent
becomes vacant by reason of death, resignation, retirement,
disqualification, removal from office or otherwise, the directors
may choose a successor, who shall hold office for the unexpired
term in respect of which such vacancy occurred.
Section 6. Chairman of the Board and Vice Chairman of the Board.
(a) The Chairman of the Board of Directors, if one be elected,
shall be a member of the Board and shall preside at all meetings
of the Board of Directors and of the shareholders, and shall have
and perform such other duties as from time to time the Board of
Directors may prescribe.
(b) The Vice Chairman of the Board of Directors, if one be
elected, shall be a member of the Board and shall perform the
duties of the Chairman of the Board in the latter's absence and
shall have and be assigned such other duties as the Board of
Directors may from time to time prescribe.
Section 7. President. The President shall be the chief executive
officer of the Corporation and, in the absence of the Chairman,
shall preside at all meetings of the Board of Directors, and of
the shareholders. The President shall exercise the powers and
perform the duties usual to the chief executive officer and,
subject to the control of the Board of Directors, shall have
general management and control of the affairs and business of the
Corporation; the President shall appoint and discharge employees
and agents of the Corporation (other than officers elected by the
Board of Directors) and fix their compensation; and shall see that
all orders and resolutions of the Board of Directors are carried
into effect. The President shall have the power to execute bonds,
mortgages and other contracts, agreements and instruments of the
Corporation, and shall do and perform such other duties as the
Board of Directors may from time to time prescribe.
Section 8. Vice Presidents. If chosen, the Vice Presidents, in
the order of their seniority, shall, in the absence or disability
of the President, exercise all of the powers and duties of the
President. Such Vice Presidents shall have the power to execute
bonds, notes, mortgages and other contracts, agreements and
instruments of the Corporation, and shall do and perform such
other duties incident to the office of Vice President and as the
Board of Directors or the President shall direct.
Section 9. Secretary and Assistant Secretary. (a) The Secretary
shall attend all sessions of the Board and all meetings of the
shareholders and record all votes and the minutes of the
proceedings in a book to be kept for that purpose. The Secretary
shall give, or cause to be given, notice of all meetings of the
shareholders and of the Board of Directors, and shall perform such
other duties as may be prescribed by the Board of Directors. The
Secretary shall affix the seal of the Corporation to any
instrument requiring it, and when so affixed, it shall be attested
by the signature of the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer who may affix the seal to
any such instrument in the event of the absence or disability of
the Secretary. The Secretary shall have and be the custodian of
the stock records and all other books, records and papers of the
Corporation (other than financial) and shall see that all books,
reports, statements, certificates and other documents and records
required by law are properly kept and filed.
(b) The Assistant Secretary, if there be one, shall, in the
absence of the Secretary or in the event of the Secretary's
inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and
have such other powers as the Board of Directors may from time to
time prescribe.
Section 10. Treasurer and Assistant Treasurer. (a) The
Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Corporation and shall
deposit all moneys, and other valuable effects in the name and to
the credit of the Corporation, in such depositories as may be
designated by the Board of Directors. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall
render to the Chairman of the Board and the President and the
Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all of the Treasurer's
transactions and of the financial condition of the Corporation.
(b) The Assistant Treasurer, if there be one, shall, in the
absence of the Treasurer of in the event of the Treasurer's
inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and
have such other powers as the Board of Directors may from time to
time prescribe.
Section 11. Duties of Officers may be Delegated. In case of the
absence or disability of any officer of the Corporation, or for
any other reason that the Board may deem sufficient, the Board
may delegate, for the time being, the powers or duties, or any of
them, of such officer to any other officers, or to any director.
ARTICLE IV
INTERESTED DIRECTORS
Section 1. Contracts or Transactions.
(A) No contract or other transaction between the Corporation and
one or more of its directors, or between the Corporation and any
other corporation, firm, association or other entity in which one
or more of its directors are directors or officers, or have a
substantial financial interest, shall be either void or voidable
for this reason alone or by reason alone that such director or
directors are present at the meeting of the Board, or of a
committee thereof, which approves such contract or trans-action,
or that the votes of such director or directors are counted for
such purposes:
(i) If the facts of such common directorship, officership or
substantial financial interest are disclosed or known to the Board
of committee, and the Board or committee approves such contract or
transaction by a vote sufficient for such purpose without counting
the vote or votes of such interested director or directors or, if
the votes of the disinterested directors are insufficient to
constitute an act of the Board, by unanimous vote of the
disinterested directors; or
(ii) If such common directorship, officership or substantial
financial interest is disclosed or known to the shareholders
entitled to vote thereon, and such contract or transaction is
approved by vote of the shareholders.
(b) If the facts of such common directorship, officership or
substantial financial interest are disclosed to the directors or
shareholders, or known to the Board or committee or shareholders
entitled to vote thereon, the contract or transaction may not be
avoided by the Corporation for the reason set forth in Section
1(a). If there was no such disclosure or knowledge, or if the
vote of such interested director or directors was necessary for
approval of a contract or transaction at a meeting of the Board or
committee at which it was approved, the Corporation may avoid the
contract or transaction unless the parties thereto shall establish
affirmatively that the contract or transaction was fair and
reasonable as to the Corporation at the time it is approved by the
Board or committee or the shareholders.
ARTICLE V
CAPITAL STOCK
Section 1. Certificates. The interest of each shareholder of the
Corporation shall be evidenced by certificates for shares of stock
in such form as the Board of Directors may from time to time
prescribe. The certificates of stock shall be signed by the
President or a Vice President and by the Secretary or the
Treasurer or an Assistant Secretary or an Assistant Treasurer,
sealed with the seal of the Corporation or a facsimile thereof,
and countersigned and registered in such manner, if any, as the
Board of Directors may by resolution prescribe. Where any such
certificate is countersigned by a transfer agent other than the
Corporation or its employee, or registered by a registrar other
than the Corporation or its employee, the signature of any such
officer may be a facsimile signature. In case any officer or
officers who shall have signed, or whose facsimile signature or
signatures shall have been used on, any such certificate or
certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise,
before such certificate or certificates shall have been delivered
by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and
delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or
signatures shall have been used thereon had not ceased to be such
officer or officers of the Corporation.
Section 2. Transfer. Subject to any restrictions on transfer of
shares of stock of the Corporation of any class, series or
designation contained in the Certificate of Incorporation, the
shares of stock of the Corporation shall be transferred only upon
the books of the Corporation by the holder thereof in person or by
such person's attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and
power of transfer endorsed thereon or attached thereto, duly
executed, with such proof of the authenticity of the signature as
the Corporation or its agents may reasonably require.
Section 3. Record Dates. The Board of Directors may fix in
advance a date, not less than ten (10) nor more than fifty (50)
days preceding the date of any meeting of shareholders, or the
date for the payment of any dividend, or the date for the
distribution or allotment of any rights, or the date when any
change, conversion or exchange of capital stock shall go into
effect, as a record date for the determination of the shareholders
entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of any such dividend, or to receive
any distribution or allotment of such rights, or to exercise the
rights in respect of any such change, conversion or exchange of
capital stock, and in such case only such shareholders as shall be
shareholders of record on the date so fixed shall be entitled to
such notice of, and to vote at, such meeting, or to receive
payment of such dividend, or to receive such distribution or
allotment of rights or to exercise such rights, as the case may
be, notwithstanding any transfer of any stock on the books of the
Corporation after any such record date fixed as aforesaid.
Section 4. Lost Certificates. In the event that any certificate
of stock is lost, stolen, destroyed or mutilated, the Board of
Directors may authorize the issuance of a new certificate of the
same tenor and for the same number of shares in lieu thereof. The
Board may in its discretion, before the issuance of such new
certificate, require the owner of the lost, stolen, destroyed or
mutilated certificate, or the legal representative of the owner to
make an affidavit or affirmation setting forth such facts as to
the loss, destruction or mutilation as it deems necessary, and to
give the Corporation a bond in such reasonable sum as it directs
to indemnify the Corporation.
ARTICLE VI
CHECKS, NOTES, ETC.
Section 1. Checks, Notes, Etc. All checks and drafts on the
Corporation's bank accounts, and all bills of exchange and
promissory notes, and all acceptances, obligations and other
instruments for the payment of money, may be signed by the
President or any Vice President and may also be signed by such
other officer or officers, agent or agents, as shall be thereunto
authorized from time to time by the Board of Directors.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall
end on December 31st of each year unless otherwise fixed by
resolution of the Board of Directors.
Section 2. Corporate Seal. The seal of the Corporation shall be
circular in form and contain the name of the Corporation, and the
year and state of its incorporation. Such seal may be altered
from time to time at the discretion of the Board of Directors.
Section 3. Books. There shall be kept at such office of the
Corporation as the Board of Directors shall determine, within or
without the State of New York, correct books and records of
account of all its business and transactions, minutes of the
proceedings of its shareholders, Board of Directors and
committees, and the stock book, containing the names and addresses
of the shareholders, the number of shares held by them and the
class or series thereof, respectively, and the dates when they
respectively became the owners of record thereof, and in which the
transfer of stock shall be registered, and such other books and
records as the Board of Directors may from time to time determine.
ARTICLE III
AMENDMENTS
Section 1. Amendments. These By-Laws may be amended or repealed,
or new By-Laws may be adopted, by the majority of the votes cast
at a meeting of shareholders by the holders of shares entitled to
vote thereon. The vote of the holders of at least a majority of
the voting power of the Corporation, of the shares that are issued
and outstanding and entitled to vote, shall be necessary at any
meeting of shareholders to amend or repeal these By-Laws or to
adopt new by-laws. The By-Laws may also be amended or repealed,
or new by-laws adopted, at any meeting of the Board of Directors
by the vote of at least a majority of the entire Board, provided
that any by-law adopted by the Board may be amended or repealed by
the shareholders.
Any proposal to amend or repeal these By-Laws or to adopt new
by-laws shall be stated in the notice of the meeting of the Board
of Directors or the shareholders, or in the waiver of notice
thereof, as the case may be, unless all of the directors or the
holders of record of all of the shares of the Corporation, issued
and outstanding and entitled to vote, are present at such meeting.
EXHIBIT 10.2b
This Addendum to Employment Contract dated January 1, 1994, by and
between The WellCare Management Group, Inc. (hereinafter referred
to as "WellCare") and Edward A. Ullmann (hereinafter referred to
as "Employee") is entered into this seventh day of March 1996 for
the purpose of adding the following clauses to Employment
Agreement.
1. In consideration of the services as President/Chief Executive
Officer of WellCare, WellCare agrees to pay Employee a salary of
$225,000.00 effective January 1, 1996. Both parties agree that
the base salary will automatically increase by four percent (4%)
annually effective January 1 of the remaining contract years.
2. Effective January 1, 1996, a one-time lump sum cash bonus will
be issued to Employee in the net amount of $100,000.00.
This Addendum is signed this 9th day of March, 1996.
The WellCare Management Group, Inc.
/s/ Mark. D. Dean
By: Mark D. Dean, Vice President Board of Directors /s/
Edward A. Ullmann
Edward A. Ullmann, Employee
EXHIBIT 10.2c
This Addendum to Employment Contract dated June 1, 1994, by and
between The WellCare Management Group, Inc. (hereinafter referred
to as "WellCare") and Edward A. Ullmann (hereinafter referred to
as "Employee") is entered into this first day of May 1996 for the
purpose of amending Section 1 of said Employment Contract.
1. Employee will render full-time professional services to
WellCare in the capacity of President with the continuing function
of Chief Operating Officer of WellCare for the remaining term of
this Contract. Employee will, at all times, faithfully,
industriously, and to the best of his ability, perform all duties
that may be required of him by virtue of his position to the
reasonable satisfaction of the Board of Directors of WellCare.
All other terms and conditions of Employment Contract and
Addendums to said Contract will remain in effect and unchanged.
Any other references to job title within Contract and/or Addendums
are hereby amended accordingly.
Dated this 1st day of May 1996
The WellCare Management Group, Inc.
/s/ Robert W. Morey
Robert W. Morey, Chief Executive Officer
Employee
/s/ Edward A. Ullmann
Edward A. Ullmann
EXHIBIT 10.26a
WELLCARE OF NEW YORK, INC.
P. O. Box 4059
Kingston, New York 12401
____________________
AGREEMENT BETWEEN WELLCARE OF NEW YORK, INC.
AND
HUDSON VALLEY FAMILY HEALTH, PC
THIS AGREEMENT is made and entered into as of this 1st day of
October, 1995 by and between WellCare of New York, Inc., a
corporation which operates a New York State health maintenance
organization licensed under Article 44 of the New York Public
Health Law (hereinafter referred to as "WellCare"), and Hudson
Valley Family Health, PC, a professional corporation organized
under the laws of New York State (hereinafter referred to as the
"HVFH").
WHEREAS, HVFH has been organized for the purpose of providing or
arranging for the provision of certain health care services to
individuals enrolled as members of WellCare (hereinafter referred
to as "Members"); and
WHEREAS, HVFH desires to enter into this Agreement with WellCare
to provide or arrange for the provision of primary health care
services and specialist services to Members in accordance with the
terms and conditions of this Agreement; and
WHEREAS, certain primary care and specialist physicians have each
entered into an agreement with HVFH ("Physician-HVFH Agreement")
in addition to their contract with WellCare, pursuant to which
they have each agreed to provide specified health care services to
Members in accordance with the terms and provisions of such
agreement and this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and other good and valuable consideration hereinafter
contained, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
Benefit Plan means the evidence of coverage issued by WellCare to
a Member that describes the obligations of WellCare to arrange for
the delivery of medical services to the Member.
A. Consulting Physician means a physician who has agreed to
provide certain specialty or consultant medical services to
Members.
B. Covered Services mean those services which are Medically
Necessary and which Members are entitled to receive under the
terms of the Benefit Plan.
C. Emergency means the unexpected onset of a medical condition of
such a nature that failure to obtain immediate care would result
in deterioration, thereby placing life in jeopardy or causing
serious impairment to bodily functions. Examples of medical
problems which are considered to be Emergencies are: heart
attacks, poisoning, convulsions, unconsciousness and unusual and
excessive bleeding.
D. Encounter means a patient visit by a Member in a Participating
Physician's office or a hospital.
E. Global Budget means a per capita rate credited by WellCare to
HVFH in exchange for delivering or arranging for the delivery of
certain medical services required by a Member which are covered
under the Member's Benefit Plan or a per capita rate paid
WellCare to a Primary Physician in exchange for delivering or
arranging for the delivery of certain medical services required by
a Member which are covered under the Member's Benefit Plan.
F. Medically Necessary medical services mean those required to
preserve and maintain a Member's health in accordance with
acceptable standards of medical practice and received in an
appropriate setting. The Medical Director of WellCare shall
determine whether a particular medical service rendered to a
Member is Medically Necessary for the purpose of determining
whether such medical service is a Covered Service and not for the
purpose of practicing medicine or determining a course of
treatment, which course is to be determined only by the
Participating Physician.
G. Member means any person who is eligible to receive Covered
Services under a Benefit Plan issued by WellCare.
H. Participating Physician is a Primary Physician or a Consulting
Physician who has agreed to provide Covered Services to Members.
J. Participating Provider is a physician, health care provider,
inpatient, skilled nursing, hospital, or other facility which has
agreed to provide Covered Services to Members.
K. Physician-HVFH Agreement means the agreement entered into, or
to be entered into, between each Participating Physician and HVFH
pursuant to which the Participating Physician has agreed, or will
agree, to provide health care services in accordance with the
terms of this Agreement and the Physician-HVFH Agreement.
L. Primary Physician means any physician who has agreed to provide
specified primary health care services to Members.
ARTICLE II - PARTICIPATING PHYSICIAN RESPONSIBILITIES
A. Services. HVFH will require that each Participating Physician
(I) accept as patients all those Members who seek treatment from
the Participating Physician, subject to any legal or professional
right or obligation to refuse, or to terminate the
physician/patient relationship; and (ii) not unfairly
differentiate or discriminate in the treatment of his/her patients
or in the quality of services delivered to Members on the basis of
age, sex, race, religion, health status, source of payment, or
economic status. In rendering Covered Services, HVFH agrees to,
and agrees to ensure that each Participating Physician, abides by
and complies with such rules and regulations as WellCare may adopt
from time to time.
B. Primary Physician Responsibilities. In addition to providing
primary health care, Primary Physicians shall be required to
coordinate the overall health care of Members who select a
Participating Physician as their Primary Physician, including, but
not limited to the following:
1. Arranging or making referral for all non-Emergency and certain
Emergency care, outside his/her scope of practice, such as
services of Consulting Physicians, allied health professionals,
hospitals and/or other health care facilities, where appropriate
pursuant to the terms of the Benefit Plan. Primary Physicians
shall notify WellCare within five (5) days of any referral. Such
referrals shall be deemed to be an authorization for payment to
the Consulting Physician and/or hospital for services rendered,
and for obtaining appropriate patient Encounter data from the
Consulting Physician, hospital or other provider for the Primary
Physician's record and for reporting to WellCare.
2. Under normal circumstances, Primary Physicians shall use only
Participating Providers. In cases of Emergency, or when Medically
Necessary and with prior approval of WellCare, referrals may be
made to providers who have not contracted with WellCare or HVFH.
3. Ensuring that Covered Services are available to Members 24
hours per day, 7 days a week;
4. Exercising reasonable and ordinary care and diligence to
instruct Members in the appropriate use of health services and in
the contribution each Member can make toward maintaining his/her
own health;
5. Participating in WellCare's utilization review, quality
assurance, grievance, medical advisory and continuing education
programs.
C. Consulting Physician Services. Consulting Physicians shall be
required to provide specialty or consultant medical services
pursuant to the following:
1. Consulting Physicians shall provide Covered Services to a
Member only upon prior referral of such Member by a WellCare staff
physician or Primary Physician on prescribed forms. Consulting
Physician will be subject, as the case may be, to the WellCare
staff physician's or the Member's Primary Physician's final
determination as to whether Consulting Physician's services are
Medically Necessary.
2. Except in cases of Emergency, payment for retroactive referrals
or unauthorized diagnostic, laboratory or related supplemental
health care services shall be made by WellCare only when
determined to be Covered Services by WellCare, and such
determination shall be solely within WellCare's discretion.
3. The Primary Physician shall be authorized to utilize other
Participating Physicians specializing in the same field or a
different field from that of Consulting Physician.
4. Whenever possible, the Primary Physician will refer Members to
Consulting Physician during his/her normal office hours but,
Consulting Physician will agree that in cases of Emergency, as
determined by WellCare, Consulting Physician services may be
rendered at another location consistent with the Consulting
Physician's normal practice.
5. Except in cases of Emergency, Consulting Physician shall use
only Participating Providers or providers who have been approved
in advance by WellCare.
6. Consulting Physicians shall submit to the referring Primary
Physician, as soon as possible after the provision of Covered
Services to a Member, a report concerning the proposed plan of
specialist treatment, if any, including possible hospitalization
or surgery of such Member. In the case of Covered Services
rendered to a Member in an Emergency, Consulting Physician agrees
to notify WellCare or the Primary Physician as soon as possible so
as to assure continuity of care and prompt compensation for
Covered Services rendered.
D. Reporting Requirements. Each Participating Physician will
agree to deliver to WellCare's Medical Director such written
reports as WellCare may require. Encounter data shall be
submitted to WellCare on a monthly basis within thirty (30) days
after the end of each month. This data shall be submitted in the
form requested by WellCare. Each Participating Physician shall
submit to WellCare complaint and grievance information to meet the
requirements of the State of New York and other appropriate
regulatory agencies. Medical information shall be provided to
WellCare as appropriate and without violation of pertinent state
and federal laws regarding the confidentiality of medical records.
Such information shall be provided without cost to WellCare.
E. Malpractice Insurance and Liability. Each Participating
Physician, at his or her sole expense, shall provide and maintain
such policies of malpractice insurance as shall be necessary to
insure the Participating Physician and those health professionals
who are his or her 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 service by the Participating Physician pursuant
to the terms of the Physician-HVFH Agreements or the amounts and
extent of such insurance coverage shall be at least one million
dollars ($1,000,000) per physician-WellCare occurrence and three
million dollars ($3,000,000) in the aggregate. Each Participating
Physician agrees to notify WellCare no less than ten (10) days
prior to any reduction or cancellation of coverage.
F. Credentialing Requirements. HVFH will at all times comply with
and meet, and will require each Participating Physician to comply
with and meet, WellCare's credentialing requirements.
G. Medical Records. Each Participating Physician shall be
required to maintain adequate medical records for all medical
services provided to Members. Each Participating Provider agrees
to retain said records for a period of at least six (6) years, or
in the case of a minor, for at least six (6) years after the age
of majority. Subject to all applicable statutory and legal
privacy and confidentiality requirements, such medical records
shall remain available to each Participating Physician and other
health professionals treating each Member and, upon request, to
any proper committee of WellCare for review to determine whether
their content and quality are acceptable, as well as for peer
review or grievance review purposes. WellCare, the New York State
Department of Health and all governmental agencies who have
contracted with WellCare to provide services to employees or
beneficiaries or their authorized representatives shall have the
right, upon request, to copy and inspect at all reasonable times,
any accounting, administrative, and medical records maintained by
a Participating Physician pertaining to WellCare, Members, and to
a Participating Physician's rendering of Covered Services to
Members. Each Participating Physician will further agree that in
the event an examination concerning the quality of health care
services is conducted by the appropriate officials, as required by
law, the Participating Physician will submit, in a timely fashion,
any required books, and/or records, and facilitate in every way
such examination.
H. Complaint and Grievance Procedure. HVFH and each Participating
Physician shall cooperate with WellCare in its complaint and
grievance procedures, any internal peer review and external audit
systems, and to abide by the outcome of the grievance procedures.
I. Member Communications. HVFH and each Participating Physician
will refer all queries of Members relating to benefit
determinations, access, complaints and grievances, and records to
WellCare, in accordance with the governing grievance procedure. No
materials, pamphlets or explanatory letters regarding WellCare or
the terms of this Agreement shall be provided to Members unless
authorized by WellCare.
J. Physician/Patient Relationship Maintained. Subject to the
provisions of this Agreement, each Participating Physician shall
maintain the relationship of physician and patient with Members,
without intervention in any manner by WellCare or its agents or
employees, and each Participating Physician shall be solely
responsible for all medical advice to, and treatment of, Members
in accordance with accepted professional standards and practices.
K. Participating Physician Panel Expansion and Continuity. In the
event that at any time during the term of this Agreement WellCare
deems that a part of its approved service area is inadequately
covered by Participating Physicians, HVFH shall use its best
efforts to expand the panel of Participating Physicians to include
additional physicians who meet WellCare's credentialing
requirements and WellCare's defined needs for provider network
expansion. Further, HVFH agrees that it shall require its
Participating Physicians to agree to be bound, at WellCare's
option, to the terms of this Agreement in the event of the
dissolution or insolvency of HVFH. This paragraph is intended to
ensure continuity of care to WellCare Plan Members in the event of
such dissolution or insolvency.
L. Inspection of Premises. Each Participating Physician shall
permit representatives of WellCare, including utilization review
committees, upon reasonable notice, to inspect the Participating
Physician's premises and equipment during regular working hours
and review the scope of Covered Services provided to Members,
subject to any applicable restrictions under state or federal law.
M. Utilization and Quality Assurance. HVFH and each Participating
Physician will agree to provide reasonable assistance to WellCare
in maintaining a management information system. HVFH and each
Participating Physician agree that Participating Physician shall
participate in the WellCare utilization review management program
and comply with all WellCare quality management programs.
N. Litigation Notice. HVFH and each Participating Physician will
provide WellCare with notice of and a complete record of all
malpractice litigation or claims either before a court or
administrative agency in which he/he was or is named as a party.
ARTICLE III - PARTICIPATING PHYSICIAN COMPENSATION
A. Primary Physician Compensation. Each Primary Physician will
agree to accept from HVFH the Global Budget payment set forth in
Attachment B attached hereto and made a part hereof as full
compensation for Covered Services rendered to Members and will not
under any circumstances make additional charges to Members except
for deductibles, encounter fees copayments and/or coinsurance
amounts permitted under the Member's Benefit Plan.
B. Consulting Physician Compensation. Each Consulting Physician
will agree to accept from HVFH compensation, as set forth in
Attachment C hereto for commercial WellCare Members, and
Attachment D for Medicaid members, as full compensation for
Covered Services rendered to Members.
C. Participating Physician Failure to Comply. Each Participating
Physician must agree not to seek payment from Members for services
determined by WellCare not to be Medically Necessary. If a
reduction in fees is imposed for failure to comply with the
procedures of the utilization review program, Participating
Physicians will agree not to seek payment from the Member for the
amount of such reduction and the Member shall not be liable for
such amount.
D. Quality Improvement (QI) Matrix Awards. WellCare agrees to
fund a program to reward the highest quality care providers of
HVFH by providing a financial incentive for each WellCare
commercial or Medicaid member enrolled in an HVFH primary care
practice. Criteria for distribution shall be established solely
by HVFH.
ARTICLE IV - RISK-SHARING ARRANGEMENTS
A. Risk Sharing Arrangement
HVFH and its affiliated health care providers agree to participate
in the risk-sharing arrangements described herein as detailed in
Attachment E attached hereto and made a part hereof, as follows:
(i) WellCare shall establish a book account (hereinafter, "Service
Account") and shall credit to it the pmpm global budget payment
set forth in Attachment A for HVFH. The funds represented by this
Service Account shall be used to meet the Service Account expenses
for the services to be provided by HVFH pursuant to this
Agreement.
(ii) Beginning six (6) months after the effective date of this
Agreement, WellCare shall render a quarterly accounting to reflect
amounts credited to the Service Account compared to the expenses
actually paid from or incurred to be paid from the Service
Account. Such accounting shall be completed on or before the 60th
day of the quarter succeeding the quarter to which the accounting
applies and shall be on a two-month time lag basis. All claims
which are eligible for payment based upon the following criteria
shall be charged against the Service Account for the relevant
three-month period:
(a) The claim must be for a Covered Service;
(b) The Participating Physician must have obtained any required
authorization from WellCare for the Covered Service; and
(c) The Participating Physician must have submitted a complete
claim to WellCare within 60 days of the date of service, unless
WellCare has agreed in writing to a later submission.
In addition, a reserve for incurred but not reported claims
("IBNR") will be charged against the Service Account.
(iii) Any Service Account Expenses paid or payable by WellCare in
any calendar quarter which are in excess of the amount credited to
the Service Account (see Article IV(I) above) (such amount
referred to as a "Quarterly Deficit") shall nonetheless be charged
against the Service Account, to be repaid to WellCare as described
below:
(a) In the event there is a Quarterly Deficit, the compensation
amount due to each Participating Physician pursuant to the
Physician-HVFH Agreement for the three (3) calendar months
succeeding the date of the reconciliation of such calendar
quarter(s) shall be reduced to the extent estimated to be
necessary to offset such Quarterly Deficit, subject to any maximum
fee cap negotiated between the parties.
(b) There shall be a final annual adjustment of the Service
Account ("Final Adjustment") performed by WellCare within sixty
(60) days of the end of each calendar year to reflect the
difference, if any, between the Global Budget payment credited to
the Service Account and the Service Account Expenses, including
IBNR, actually paid or payable by WellCare for the year. If the
Final Adjustment shows a deficit as of September 30, the
compensation amount due to a Participating Physician pursuant to
the Physician-HVFH Agreement for the two (2) calendar months
following the date of the Final Adjustment shall be reduced to the
extent estimated to be necessary to offset such Deficit, subject
to any maximum fee cap negotiated between the parties.
(a) If the deduction of amounts from Participating Physician
compensation pursuant to subsections (a) and (b) does not enable
HVFH to fully meet its payment liability to WellCare, HVFH shall
deliver payment to WellCare of the unpaid portion of such amount
by December 1 of the year next succeeding the year to which such
payment corresponds.
(iv) If the final annual adjustment of the Service Account in any
calendar year indicates that the final Service Account balances
are greater than the Service Account expenses paid or payable
(including IBNR), the remaining amounts in the Service Account for
the relevant calendar year (a "Surplus"), shall be paid to HVFH by
WellCare after deduction for any reserve fund deemed appropriate.
(v) Following is a hypothetical example of the manner in which a
Service Account which yields a Surplus will be administered:
(aa) Quarterly Service Account credits = $10,000, yielding
quarterly budgeted amount ("QBA") of $2,500.
(bb) 1st Quarterly Adjustment:
Service Account Expenses ("SAE") = $2,000
Quarterly Surplus = $500
Derived as follows: $2,500 (QBA) - $2,000 (SAE) = $500.
$500 is thus credited against any future Quarterly Deficit
payments for the calendar year.
(cc) 2nd Quarterly Adjustment:
SAE = $3,250
Quarterly Deficit = $750
Derived as follows: $3,250 (SAE) - $2,500 (QBA) = $750
Accrued surplus credit of $500 is applied to $750 deficit.
Capitation payment reduced to recapture one-third of the remaining
$250 deficit in each of the following three months.
(dd) 3rd Quarterly Adjustment:
SAE = $3,000
Quarterly Deficit = $500
Derived as follows: $3,000 (SAE) - $2,500 (QBA) = $500
For Participating Physicians compensation payments will be reduced
by one-third of the $500 deficit in each of the following three
months.
(ee) 4th Quarterly Adjustment:
SAE = $1,500
Quarterly Surplus = $1,000
Derived as follows: $2,500 (QBA) - $1,500 (SAE) = $1,000
$1,000 is thus credited against any annual adjustment payment for
the calendar year.
(ff) Final Annual Adjustment:
Annual Service Account Credits of $10,000 - Service Account
Expenses of $9,750 = $250 Surplus.
HVFH is credited with recaptured portion of 2nd and 3rd Quarterly
Deficit payments totaling $750.
(gg) WellCare distributes an allocated portion of $1,000, less a
reasonable amount for credit to a reserve fund, to HVFH.
(a) Following is a hypothetical example of the manner in which a
Service Account which yields a Deficit will be administered:
(aa) WellCare annual budgeted amount = $10,000, yielding QBA of
$2,500.
(bb) 1st Quarterly Adjustment:
SAE = $2,000
Quarterly Surplus = $500
Derived as follows: $2,500 (QBA) - $2,000 = $500
$500 is thus credited against any future Quarterly Deficit
payments for the calendar year.
(cc) 2nd Quarterly Adjustment:
SAE = $2,250
Quarterly Surplus = $250
Derived as follows: $2,500 (QBA) - $2,250 = $250
$250 is thus credited against any future Quarterly Deficit
payments for the calendar year, yielding an aggregate surplus for
the year to date of $750.
(dd) 3rd Quarterly Adjustment:
SAE = $3,500
Quarterly Deficit = $1,000.
Derived as follows: $3,500 (SAE) - $2,500 (QBA) = $1,000.
Accrued surplus credit of $750 is applied to $1,000 deficit,
yielding $250 net deficit.
For Participating Physicians, Compensation payments reduced by
one-third of the $250 deficit in each of the following three
months.
(ee) 4th Quarterly Adjustment:
SAE = $3,750
Quarterly Deficit = $1,250
Derived as follows: $3,750 (SAE) - $2,500 (QBA) = $1,250
(ff) Final Annual Adjustment:
Actual WellCare Payments of $11,500 - Budgeted Annual Service
Account Costs of $10,000 = $1,500 Deficit.
(gg) HVFH is responsible for the $1,250 deficit, representing the
amount by which Actual WellCare Payments of $11,500 less the final
Service Account balance of $10,000 (i.e., $1,500) exceeds the
credited Quarterly Deficit amount of $250.
(hh) For Participating Physicians, Compensation payments reduced
by one-half of the $1,250 deficit in each of the following two
months, with full payment of any balance due from HVFH by April
30.
B. Financial Reporting
On a quarterly calendar basis, HVFH shall deliver to WellCare
quarterly financial reports indicating the status of said HVFH.
On an annual basis, HVFH will be responsible to deliver to
WellCare an annual independent accounting review of their
financial statements.
C. Calculation of Reserves
HVFH shall be responsible for obtaining an annual independent
actuarial certification with respect to needed reserves.
D. Reinsurance
HVFH shall, to the best of its ability, contract for reinsurance
at a level acceptable to WellCare. Any change to the reinsurance
policy shall be forwarded to WellCare 30-days prior to the
effective date of change.
ARTICLE V - TERM OF AGREEMENT AND TERMINATION
A. Term. This Agreement shall become effective on October 1,
1995. This Agreement shall continue in effect for a three year
term or until September 30, 1998, unless terminated effective as
of the end of a calendar month in accordance with the terms of
this Article.
B. Termination. This Agreement may be terminated by either
WellCare or HVFH with or without cause, at any time to be
effective as of the end of any month, if written notice is given
to the other party at least six (6) months in advance of such
termination.
1. Such action shall not be deemed to release HVFH or a
Participating Physician of obligations imposed with respect to:
(i) third party payors;
(ii) deficit payments accrued and due to WellCare; or
(iii) the obligation of a Participating Physician to persons
receiving treatment at the time that notice of termination is
given. The parties agree that in the event of voluntary
termination, as provided herein, the obligations of Participating
Physicians to continue such treatment to any Member and the
obligations of WellCare shall continue in full force until the
termination date.
2. Such action shall not be deemed to release WellCare from
obligations imposed with respect to:
(I) fees due Participating Providers for services rendered after
termination; or
(ii) payments due and accrued HVFH.
C. HVFH agrees to terminate a Participating Physician's
Physician-HVFH Agreement:
1. Immediately, upon HVFH's receipt of notice, in the event the
Participating Physician:
(i) ceases to be a physician licensed in the State of New York
with staff privileges at least one (1) hospital which has entered
into an arrangement with WellCare to provide Covered Services to
Members;
(ii) becomes disabled or is deceased or retires from active
participation in a medical practice;
(iii) loses or suffers a reduction of his or her professional
liability insurance;
(iv) commits any act or engages in any conduct for which his or
her license or certificate may be revoked, suspended or
restricted by any licensing authority; or is suspended or
terminated from the medicare or medicaid programs; or
(v) is found to have made any untrue statements of material fact
or any intentional misrepresentation of any fact, whether or not
material, in any claim for payment, application forms or
credentialing materials.
2. Within thirty (30) days of HVFH's receipt of notice that a
Participating Physician is not in compliance with the
participation standards for Participating Physicians adopted by
WellCare including, but not limited to, complying with
utilization, credentialing and quality review standards and or
procedures.
D. Each Participating Physician shall have the right to terminate
his or her Physician-HVFH Agreement at the end of any calendar
month upon not less than sixty (60) days prior written days
notice. If physician terminates, physician is subject to
provisions of Section B(1)(2) of this Article.
ARTICLE VI - MODIFICATIONS AND AMENDMENTS
A. Modifications. This Agreement and each of the Physician-HVFH
Agreements constitute the entire understanding of the parties.
Amendments may be issued by WellCare in writing and sent by
certified mail according to Article VII (K) and become binding
fifteen (15) days after issuance unless HVFH advises WellCare in
writing of an objection prior to the expiration of such fifteen
(15) day period. WellCare will then seek to arrive at a mutually
agreeable modification. Should this not be possible, WellCare or
HVFH may terminate this Agreement upon the giving of six (6)
months prior written notice to be effective as of the end of a
calendar month. Material amendments shall be forwarded to the New
York State Department of Health for prior approval.
B. Amendments. This Agreement may be amended at any time by
mutual agreement of the parties.
ARTICLE VII - MISCELLANEOUS
A. New York Law to Govern. The validity, enforceability, and
interpretation of any of the clauses of this Agreement shall be
determined and governed by the laws of the State of New York.
B. Independent Contractor Status. Except as specified herein,
this Agreement is not intended to create, nor shall be designed or
construed to create, any relationship between HVFH or any
Participating Physician and WellCare other than that of
independent entities contracting with each other hereunder solely
for effecting the provisions of this Agreement. Neither of the
parties hereto, nor any of their respective representatives shall
be construed to be the agent, employer, or representative of the
other.
C. Agreement Complete. This Agreement contains all the terms and
conditions agreed to by the parties hereto, and supersedes all
other agreements, oral or otherwise, regarding the subject matter
or parties hereto.
D. Assignment. Except as specifically set forth in this
paragraph, this Agreement may be assigned only with the prior
written consent of WellCare. Any other purported assignment shall
be null and void. Notwithstanding the forgoing, WellCare may
assign, delegate, transfer, convey or sell its rights and/or
obligations to a parent, subsidiary or affiliate or to an entity
into which WellCare is merged or with which WellCare is
consolidated or to a purchaser of all or substantially all of its
assets or as part of a corporate reorganization.
E. Waiver. Any waiver by either party of a breach of any
provision of this Agreement shall not be deemed a waiver of any
other breach of the same or any other provision of this Agreement.
F. Volume. HVFH acknowledges and agrees that WellCare by entering
into this Agreement does not promise or otherwise guarantee any
particular volume of referrals of Members to HVFH or any
Participating Physician for the provision of Covered Services.
G. Dispute Resolution. In the event any dispute shall arise with
regard to the performance or interpretation of any of the terms of
this Agreement, both parties agree to negotiate in good faith to
resolve such dispute. If the dispute is not resolved within
thirty (30) days, both parties agree to submit all matter(s) in
controversy to a Board of Arbitrators consisting of three (3)
members (one member selected by each party to this Agreement, and
these members, in turn selecting a third member). The Board of
Arbitrators so constituted shall proceed under the rules and
regulations of the American Arbitration Association. Both parties
expressly covenant and agree to be bound by the decision of the
arbitrators and accept any decision by a majority of the
arbitrators as a final determination of the matter in dispute.
The parties to this Agreement shall share the cost or arbitration
equally. Arbitration shall not be required of any dispute also
involving a person who is not bound by this or a similar agreement
unless that third party agrees to binding arbitration.
Notwithstanding the forgoing, The Commissioner of the New York
State Department of Health is not bound by the decisions rendered
by the Board of Arbitrators. Furthermore, the Commissioner of
Health shall be notified of all issues submitted to arbitration
and be sent copies of arbitration decisions.
H. Enforceability. The invalidity or unenforceability of any
terms or conditions hereof shall in no way affect the validity or
enforceability of any other term of provision contained herein.
I. Notice. Any notice required to be given pursuant to the terms
and provisions hereof shall be in writing and shall be sent by
certified mail, return receipt requested, prepaid, to WellCare at:
P. O. Box 4059
Kingston, New York 12401
Attn: Robert E. Goff
Executive Director
and to HVFH at:
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year above set forth.
WELLCARE OF NEW YORK, INC.
/s/ Robert E. Goff
BY: Robert E. Goff, Executive Director
DATE: 9-25-95
HUDSON VALLEY FAMILY HEALTH, PC
SIGNATURE:
By:/s/ Richard Weininger
PRINT/TYPE NAME: Richard Weininger
TITLE: President
ADDRESS: 25 Barbarosa Lane
Kingston, NY 12401
PHONE NUMBER: 914/331-4100
TAX ID: 14-1779935
DATE:
s:\adm\hvfh.con
10/26/95
mab
ATTACHMENT A
Effective October 1, 1995, the global budget will be based on the
following per member per month (PMPM) rates for each Commercial
and Healthy Choice member:
Region Ulster
Commercial $013.96
Healthy Choice $100.88
Global budget payment shall increase on January 1, 1996 as
follows:
Region Ulster
Commercial $107.09
Healthy Choice $102.98
Based on the above rate, the global budget payment shall increase
on January 1, 1997 by three percent (3%) and again on January 1,
1998 by three percent (3%).
Hudson Valley Family Health, PC shall provide for a special bonus
pool of $0.20 per member per month (PMPM) for affiliated providers
exceeding the standards of the defined quality matrix.
Medical costs which HVFH and its affiliated providers are
responsible for under the terms and conditions of this agreement
include:
Primary Care and preventive health care services
Referral speciality care and supplemental health care services
Out-of-area and emergency care authorized referral expenses
In-area and out-of-area authorized expenses for:
In patient care/general and psychiatric
Ambulatory surgery
Outpatient mental health services
Pharmacy services
Point-of-Service (POS) referrals
Ambulance services
Expenses covered under a WellCare reinsurance policy
Medical costs which HVFH and its affiliated providers are not
responsible for under the terms and conditions of this agreement
include:
Non-authorized services
Services related to enhanced benefits provided to members by
WellCare
Quality improvement matrix
Extended benefits under WellCare's new Bienestar wellness program
WELLCARE OF NEW YORK, INC.
/s/ Robert E. Goff
by: Robert E. Goff, Executive Director
HUDSON VALLEY FAMILY HEALTH, PC
by:/s/ Richard Weininger 11/1/95
EXHIBIT 10.27a
WELLCARE OF NEW YORK, INC.
P. O. Box 4059
Kingston, New York 12401
____________________
AGREEMENT BETWEEN WELLCARE OF NEW YORK, INC.
AND
VALLEY MEDICAL SERVICES, PC
THIS AGREEMENT is made and entered into as of this 1st day of
October, 1995 by and between WellCare of New York, Inc., a
corporation which operates a New York State health maintenance
organization licensed under Article 44 of the New York Public
Health Law (hereinafter referred to as "WellCare"), and Valley
Medical Services, PC, a professional corporation organized under
the laws of New York State (hereinafter referred to as the "VMS").
WHEREAS, VMS has been organized for the purpose of providing or
arranging for the provision of certain health care services to
individuals enrolled as members of WellCare (hereinafter referred
to as "Members"); and
WHEREAS, VMS desires to enter into this Agreement with WellCare to
provide or arrange for the provision of primary health care
services and specialist services to Members in accordance with the
terms and conditions of this Agreement; and
WHEREAS, certain primary care and specialist physicians have each
entered into an agreement with VMS ("Physician-VMS Agreement") in
addition to their contract with WellCare, pursuant to which they
have each agreed to provide specified health care services to
Members in accordance with the terms and provisions of such
agreement and this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and other good and valuable consideration hereinafter
contained, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
A. Benefit Plan means the evidence of coverage issued by WellCare
to a Member that describes the obligations of WellCare to arrange
for the delivery of medical services to the Member.
B. Consulting Physician means a physician who has agreed to
provide certain specialty or consultant medical services to
Members.
C. Covered Services mean those services which are Medically
Necessary and which Members are entitled to receive under the
terms of the Benefit Plan.
D. Emergency means the unexpected onset of a medical condition of
such a nature that failure to obtain immediate care would result
in deterioration, thereby placing life in jeopardy or causing
serious impairment to bodily functions. Examples of medical
problems which are considered to be Emergencies are: heart
attacks, poisoning, convulsions, unconsciousness and unusual and
excessive bleeding.
E. Encounter means a patient visit by a Member in a Participating
Physician's office or a hospital.
F. Global Budget means a per capita rate credited by WellCare to
VMS in exchange for delivering or arranging for the delivery of
certain medical services required by a Member which are covered
under the Member's Benefit Plan or a per capita rate paid
WellCare to a Primary Physician in exchange for delivering or
arranging for the delivery of certain medical services required by
a Member which are covered under the Member's Benefit Plan.
G. Medically Necessary medical services mean those required to
preserve and maintain a Member's health in accordance with
acceptable standards of medical practice and received in an
appropriate setting. The Medical Director of WellCare shall
determine whether a particular medical service rendered to a
Member is Medically Necessary for the purpose of determining
whether such medical service is a Covered Service and not for the
purpose of practicing medicine or determining a course of
treatment, which course is to be determined only by the
Participating Physician.
H. Member means any person who is eligible to receive Covered
Services under a Benefit Plan issued by WellCare.
I. Participating Physician is a Primary Physician or a Consulting
Physician who has agreed to provide Covered Services to Members.
J. Participating Provider is a physician, health care provider,
inpatient, skilled nursing, hospital, or other facility which has
agreed to provide Covered Services to Members.
K. Physician-VMS Agreement means the agreement entered into, or
to be entered into, between each Participating Physician and VMS
pursuant to which the Participating Physician has agreed, or will
agree, to provide health care services in accordance with the
terms of this Agreement and the Physician-VMS Agreement.
L. Primary Physician means any physician who has agreed to
provide specified primary health care services to Members.
ARTICLE II - PARTICIPATING PHYSICIAN RESPONSIBILITIES
A. Services. VMS will require that each Participating Physician
(I) accept as patients all those Members who seek treatment from
the Participating Physician, subject to any legal or professional
right or obligation to refuse, or to terminate the
physician/patient relationship; and (ii) not unfairly
differentiate or discriminate in the treatment of his/her patients
or in the quality of services delivered to Members on the basis of
age, sex, race, religion, health status, source of payment, or
economic status. In rendering Covered Services, VMS agrees to,
and agrees to ensure that each Participating Physician, abides by
and complies with such rules and regulations as WellCare may adopt
from time to time.
B. Primary Physician Responsibilities. In addition to providing
primary health care, Primary Physicians shall be required to
coordinate the overall health care of Members who select a
Participating Physician as their Primary Physician, including, but
not limited to the following:
1. Arranging or making referral for all non-Emergency and certain
Emergency care, outside his/her scope of practice, such as
services of Consulting Physicians, allied health professionals,
hospitals and/or other health care facilities, where appropriate
pursuant to the terms of the Benefit Plan. Primary Physicians
shall notify WellCare within five (5) days of any referral. Such
referrals shall be deemed to be an authorization for payment to
the Consulting Physician and/or hospital for services rendered,
and for obtaining appropriate patient Encounter data from the
Consulting Physician, hospital or other provider for the Primary
Physician's record and for reporting to WellCare.
2. Under normal circumstances, Primary Physicians shall use only
Participating Providers. In cases of Emergency, or when Medically
Necessary and with prior approval of WellCare, referrals may be
made to providers who have not contracted with WellCare or VMS.
3. Ensuring that Covered Services are available to Members 24
hours per day, 7 days a week;
4. Exercising reasonable and ordinary care and diligence to
instruct Members in the appropriate use of health services and in
the contribution each Member can make toward maintaining his/her
own health;
5. Participating in WellCare's utilization review, quality
assurance, grievance, medical advisory and continuing education
programs.
C. Consulting Physician Services. Consulting Physicians shall be
required to provide specialty or consultant medical services
pursuant to the following:
1. Consulting Physicians shall provide Covered Services to a
Member only upon prior referral of such Member by a WellCare staff
physician or Primary Physician on prescribed forms. Consulting
Physician will be subject, as the case may be, to the WellCare
staff physician's or the Member's Primary Physician's final
determination as to whether Consulting Physician's services are
Medically Necessary.
2. Except in cases of Emergency, payment for retroactive
referrals or unauthorized diagnostic, laboratory or related
supplemental health care services shall be made by WellCare only
when determined to be Covered Services by WellCare, and such
determination shall be solely within WellCare's discretion.
3. The Primary Physician shall be authorized to utilize other
Participating Physicians specializing in the same field or a
different field from that of Consulting Physician.
4. Whenever possible, the Primary Physician will refer Members to
Consulting Physician during his/her normal office hours but,
Consulting Physician will agree that in cases of Emergency, as
determined by WellCare, Consulting Physician services may be
rendered at another location consistent with the Consulting
Physician's normal practice.
5. Except in cases of Emergency, Consulting Physician shall use
only Participating Providers or providers who have been approved
in advance by WellCare.
6. Consulting Physicians shall submit to the referring Primary
Physician, as soon as possible after the provision of Covered
Services to a Member, a report concerning the proposed plan of
specialist treatment, if any, including possible hospitalization
or surgery of such Member. In the case of Covered Services
rendered to a Member in an Emergency, Consulting Physician agrees
to notify WellCare or the Primary Physician as soon as possible so
as to assure continuity of care and prompt compensation for
Covered Services rendered.
D. Reporting Requirements. Each Participating Physician will
agree to deliver to WellCare's Medical Director such written
reports as WellCare may require. Encounter data shall be
submitted to WellCare on a monthly basis within thirty (30) days
after the end of each month. This data shall be submitted in the
form requested by WellCare. Each Participating Physician shall
submit to WellCare complaint and grievance information to meet the
requirements of the State of New York and other appropriate
regulatory agencies. Medical information shall be provided to
WellCare as appropriate and without violation of pertinent state
and federal laws regarding the confidentiality of medical records.
Such information shall be provided without cost to WellCare.
E. Malpractice Insurance and Liability. Each Participating
Physician, at his or her sole expense, shall provide and maintain
such policies of malpractice insurance as shall be necessary to
insure the Participating Physician and those health professionals
who are his or her 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 service by the Participating Physician pursuant
to the terms of the Physician-VMS Agreements or the amounts and
extent of such insurance coverage shall be at least one million
dollars ($1,000,000) per physician-WellCare occurrence and three
million dollars ($3,000,000) in the aggregate. Each Participating
Physician agrees to notify WellCare no less than ten (10) days
prior to any reduction or cancellation of coverage.
F. Credentialing Requirements. VMS will at all times comply with
and meet, and will require each Participating Physician to comply
with and meet, WellCare's credentialing requirements.
G. Medical Records. Each Participating Physician shall be
required to maintain adequate medical records for all medical
services provided to Members. Each Participating Provider agrees
to retain said records for a period of at least six (6) years, or
in the case of a minor, for at least six (6) years after the age
of majority. Subject to all applicable statutory and legal
privacy and confidentiality requirements, such medical records
shall remain available to each Participating Physician and other
health professionals treating each Member and, upon request, to
any proper committee of WellCare for review to determine whether
their content and quality are acceptable, as well as for peer
review or grievance review purposes. WellCare, the New York State
Department of Health and all governmental agencies who have
contracted with WellCare to provide services to employees or
beneficiaries or their authorized representatives shall have the
right, upon request, to copy and inspect at all reasonable times,
any accounting, administrative, and medical records maintained by
a Participating Physician pertaining to WellCare, Members, and to
a Participating Physician's rendering of Covered Services to
Members. Each Participating Physician will further agree that in
the event an examination concerning the quality of health care
services is conducted by the appropriate officials, as required by
law, the Participating Physician will submit, in a timely fashion,
any required books, and/or records, and facilitate in every way
such examination.
H. Complaint and Grievance Procedure. VMS and each Participating
Physician shall cooperate with WellCare in its complaint and
grievance procedures, any internal peer review and external audit
systems, and to abide by the outcome of the grievance procedures.
I. Member Communications. VMS and each Participating Physician
will refer all queries of Members relating to benefit
determinations, access, complaints and grievances, and records to
WellCare, in accordance with the governing grievance procedure. No
materials, pamphlets or explanatory letters regarding WellCare or
the terms of this Agreement shall be provided to Members unless
authorized by WellCare.
J. Physician/Patient Relationship Maintained. Subject to the
provisions of this Agreement, each Participating Physician shall
maintain the relationship of physician and patient with Members,
without intervention in any manner by WellCare or its agents or
employees, and each Participating Physician shall be solely
responsible for all medical advice to, and treatment of, Members
in accordance with accepted professional standards and practices.
K. Participating Physician Panel Expansion and Continuity. In
the event that at any time during the term of this Agreement
WellCare deems that a part of its approved service area is
inadequately covered by Participating Physicians, VMS shall use
its best efforts to expand the panel of Participating Physicians
to include additional physicians who meet WellCare's credentialing
requirements and WellCare's defined needs for provider network
expansion. Further, VMS agrees that it shall require its
Participating Physicians to agree to be bound, at WellCare's
option, to the terms of this Agreement in the event of the
dissolution or insolvency of VMS. This paragraph is intended to
ensure continuity of care to WellCare Plan Members in the event of
such dissolution or insolvency.
L. Inspection of Premises. Each Participating Physician shall
permit representatives of WellCare, including utilization review
committees, upon reasonable notice, to inspect the Participating
Physician's premises and equipment during regular working hours
and review the scope of Covered Services provided to Members,
subject to any applicable restrictions under state or federal law.
M. Utilization and Quality Assurance. VMS and each Participating
Physician will agree to provide reasonable assistance to WellCare
in maintaining a management information system. VMS and each
Participating Physician agree that Participating Physician shall
participate in the WellCare utilization review management program
and comply with all WellCare quality management programs.
N. Litigation Notice. VMS and each Participating Physician will
provide WellCare with notice of and a complete record of all
malpractice litigation or claims either before a court or
administrative agency in which he/he was or is named as a party.
ARTICLE III - PARTICIPATING PHYSICIAN COMPENSATION
A. Primary Physician Compensation. Each Primary Physician will
agree to accept from VMS the Global Budget payment set forth in
Attachment B attached hereto and made a part hereof as full
compensation for Covered Services rendered to Members and will not
under any circumstances make additional charges to Members except
for deductibles, encounter fees copayments and/or coinsurance
amounts permitted under the Member's Benefit Plan.
B. Consulting Physician Compensation. Each Consulting Physician
will agree to accept from VMS compensation, as set forth in
Attachment C hereto for commercial WellCare Members, and
Attachment D for Medicaid members, as full compensation for
Covered Services rendered to Members.
C. Participating Physician Failure to Comply. Each Participating
Physician must agree not to seek payment from Members for services
determined by WellCare not to be Medically Necessary. If a
reduction in fees is imposed for failure to comply with the
procedures of the utilization review program, Participating
Physicians will agree not to seek payment from the Member for the
amount of such reduction and the Member shall not be liable for
such amount.
D. Quality Improvement (QI) Matrix Awards. WellCare agrees to
fund a program to reward the highest quality care providers of VMS
by providing a financial incentive for each WellCare commercial or
Medicaid member enrolled in an VMS primary care practice.
Criteria for distribution shall be established solely by VMS.
ARTICLE IV - RISK-SHARING ARRANGEMENTS
A. Risk Sharing Arrangement
VMS and its affiliated health care providers agree to participate
in the risk-sharing arrangements described herein as detailed in
Attachment E attached hereto and made a part hereof, as follows:
(i) WellCare shall establish a book account (hereinafter,
"Service Account") and shall credit to it the pmpm global budget
payment set forth in Attachment A for VMS. The funds represented
by this Service Account shall be used to meet the Service Account
expenses for the services to be provided by VMS pursuant to this
Agreement.
(ii) Beginning six (6) months after the effective date of this
Agreement, WellCare shall render a quarterly accounting to reflect
amounts credited to the Service Account compared to the expenses
actually paid from or incurred to be paid from the Service
Account. Such accounting shall be completed on or before the 60th
day of the quarter succeeding the quarter to which the accounting
applies and shall be on a two-month time lag basis. All claims
which are eligible for payment based upon the following criteria
shall be charged against the Service Account for the relevant
three-month period:
(a) The claim must be for a Covered Service;
(b) The Participating Physician must have obtained any required
authorization from WellCare for the Covered Service; and
(c) The Participating Physician must have submitted a complete
claim to WellCare within 60 days of the date of service, unless
WellCare has agreed in writing to a later submission.
In addition, a reserve for incurred but not reported claims
("IBNR") will be charged against the Service Account.
(iii) Any Service Account Expenses paid or payable by WellCare in
any calendar quarter which are in excess of the amount credited to
the Service Account (see Article IV(I) above) (such amount
referred to as a "Quarterly Deficit") shall nonetheless be charged
against the Service Account, to be repaid to WellCare as described
below:
(a) In the event there is a Quarterly Deficit, the compensation
amount due to each Participating Physician pursuant to the
Physician-VMS Agreement for the three (3) calendar months
succeeding the date of the reconciliation of such calendar
quarter(s) shall be reduced to the extent estimated to be
necessary to offset such Quarterly Deficit, subject to any maximum
fee cap negotiated between the parties.
(b) There shall be a final annual adjustment of the Service
Account ("Final Adjustment") performed by WellCare within sixty
(60) days of the end of each calendar year to reflect the
difference, if any, between the Global Budget payment credited to
the Service Account and the Service Account Expenses, including
IBNR, actually paid or payable by WellCare for the year. If the
Final Adjustment shows a deficit as of September 30, the
compensation amount due to a Participating Physician pursuant to
the Physician-VMS Agreement for the two (2) calendar months
following the date of the Final Adjustment shall be reduced to the
extent estimated to be necessary to offset such Deficit, subject
to any maximum fee cap negotiated between the parties.
(c) If the deduction of amounts from Participating Physician
compensation pursuant to subsections (a) and (b) does not enable
VMS to fully meet its payment liability to WellCare, VMS shall
deliver payment to WellCare of the unpaid portion of such amount
by December 1 of the year next succeeding the year to which such
payment corresponds.
(iv) If the final annual adjustment of the Service Account in any
calendar year indicates that the final Service Account balances
are greater than the Service Account expenses paid or payable
(including IBNR), the remaining amounts in the Service Account for
the relevant calendar year (a "Surplus"), shall be paid to VMS by
WellCare after deduction for any reserve fund deemed appropriate.
(v) Following is a hypothetical example of the manner in which a
Service Account which yields a Surplus will be administered:
(aa) Quarterly Service Account credits = $10,000,
yielding quarterly budgeted amount ("QBA") of $2,500.
(bb) 1st Quarterly Adjustment:
Service Account Expenses ("SAE") = $2,000
Quarterly Surplus = $500
Derived as follows: $2,500 (QBA) - $2,000 (SAE) = $500.
$500 is thus credited against any future Quarterly
Deficit payments for the calendar year.
(cc) 2nd Quarterly Adjustment:
SAE = $3,250
Quarterly Deficit = $750
Derived as follows: $3,250 (SAE) - $2,500 (QBA) = $750
Accrued surplus credit of $500 is applied to $750 deficit.
Capitation payment reduced to recapture one-third of the remaining
$250 deficit in each of the following three months.
(dd) 3rd Quarterly Adjustment:
SAE = $3,000
Quarterly Deficit = $500
Derived as follows: $3,000 (SAE) - $2,500 (QBA) = $500
For Participating Physicians compensation payments will be reduced
by one-third of the $500 deficit in each of the following three
months.
(ee) 4th Quarterly Adjustment:
SAE = $1,500
Quarterly Surplus = $1,000
Derived as follows: $2,500 (QBA) - $1,500 (SAE) = $1,000
$1,000 is thus credited against any annual adjustment payment for
the calendar year.
(ff) Final Annual Adjustment:
Annual Service Account Credits of $10,000 - Service Account
Expenses of $9,750 = $250 Surplus.
VMS is credited with recaptured portion of 2nd and 3rd Quarterly
Deficit payments totaling $750.
(gg) WellCare distributes an allocated portion of $1,000, less a
reasonable amount for credit to a reserve fund, to VMS.
(d) Following is a hypothetical example of
the manner in which a Service Account which yields a Deficit will
be administered:
(aa) WellCare annual budgeted amount = $10,000, yielding QBA of
$2,500.
(bb) 1st Quarterly Adjustment:
SAE = $2,000
Quarterly Surplus = $500
Derived as follows: $2,500 (QBA) - $2,000 = $500
$500 is thus credited against any future Quarterly Deficit
payments for the calendar year.
(cc) 2nd Quarterly Adjustment:
SAE = $2,250
Quarterly Surplus = $250
Derived as follows: $2,500 (QBA) - $2,250 = $250
$250 is thus credited against any future Quarterly Deficit
payments for the calendar year, yielding an aggregate surplus for
the year to date of $750.
(dd) 3rd Quarterly Adjustment:
SAE = $3,500
Quarterly Deficit = $1,000.
Derived as follows: $3,500 (SAE) - $2,500 (QBA) = $1,000.
Accrued surplus credit of $750 is applied to $1,000 deficit,
yielding $250 net deficit.
For Participating Physicians, Compensation payments reduced by
one-third of the $250 deficit in each of the following three
months.
(ee) 4th Quarterly Adjustment:
SAE = $3,750
Quarterly Deficit = $1,250
Derived as follows: $3,750 (SAE) - $2,500 (QBA) = $1,250
(ff) Final Annual Adjustment:
Actual WellCare Payments of $11,500 - Budgeted Annual Service
Account Costs of $10,000 = $1,500 Deficit.
(gg) VMS is responsible for the $1,250 deficit, representing the
amount by which Actual WellCare Payments of $11,500 less the final
Service Account balance of $10,000 (i.e., $1,500) exceeds the
credited Quarterly Deficit amount of $250.
(hh) For Participating Physicians, Compensation payments reduced
by one-half of the $1,250 deficit in each of the following two
months, with full payment of any balance due from VMS by April 30.
B. Financial Reporting
On a quarterly calendar basis, VMS shall deliver to WellCare
quarterly financial reports indicating the status of said VMS. On
an annual basis, VMS will be responsible to deliver to WellCare an
annual independent accounting review of their financial
statements.
C. Calculation of Reserves
VMS shall be responsible for obtaining an annual independent
actuarial certification with respect to needed reserves.
D. Reinsurance
VMS shall, to the best of its ability, contract for reinsurance at
a level acceptable to WellCare. Any change to the reinsurance
policy shall be forwarded to WellCare 30-days prior to the
effective date of change.
ARTICLE V - TERM OF AGREEMENT AND TERMINATION
A. Term. This Agreement shall become effective on October 1,
1995. This Agreement shall continue in effect for a three year
term or until September 30, 1998, unless terminated effective as
of the end of a calendar month in accordance with the terms of
this Article.
B. Termination. This Agreement may be terminated by either
WellCare or VMS with or without cause, at any time to be effective
as of the end of any month, if written notice is given to the
other party at least six (6) months in advance of such
termination.
1. Such action shall not be deemed to release VMS or a
Participating Physician of obligations imposed with respect to:
(i) third party payors;
(ii) deficit payments accrued and due to WellCare; or
(iii) the obligation of a Participating Physician to persons
receiving treatment at the time that notice of termination is
given. The parties agree that in the event of voluntary
termination, as provided herein, the obligations of Participating
Physicians to continue such treatment to any Member and the
obligations of WellCare shall continue in full force until the
termination date.
2. Such action shall not be deemed to release WellCare from
obligations imposed with respect to:
(I) fees due Participating Providers for services rendered after
termination; or
(ii) payments due and accrued VMS.
C. VMS agrees to terminate a Participating Physician's
Physician-VMS Agreement:
1. Immediately, upon VMS's receipt of notice, in the event the
Participating Physician:
(i) ceases to be a physician licensed in the State of New York
with staff privileges at least one (1) hospital which has entered
into an arrangement with WellCare to provide Covered Services to
Members;
(ii) becomes disabled or is deceased or retires from active
participation in a medical practice;
(iii) loses or suffers a reduction of his or her professional
liability insurance;
(iv) commits any act or engages in any conduct for which his or
her license or certificate may be revoked, suspended or
restricted by any licensing authority; or is suspended or
terminated from the medicare or medicaid programs; or
(v) is found to have made any untrue statements of material fact
or any intentional misrepresentation of any fact, whether or not
material, in any claim for payment, application forms or
credentialing materials.
2. Within thirty (30) days of VMS's receipt of notice that a
Participating Physician is not in compliance with the
participation standards for Participating Physicians adopted by
WellCare including, but not limited to, complying with
utilization, credentialing and quality review standards and or
procedures.
D. Each Participating Physician shall have the right to terminate
his or her Physician-VMS Agreement at the end of any calendar
month upon not less than sixty (60) days prior written days
notice. If physician terminates, physician is subject to
provisions of Section B(1)(2) of this Article.
ARTICLE VI - MODIFICATIONS AND AMENDMENTS
A. Modifications. This Agreement and each of the Physician-VMS
Agreements constitute the entire understanding of the parties.
Amendments may be issued by WellCare in writing and sent by
certified mail according to Article VII (K) and become binding
fifteen (15) days after issuance unless VMS advises WellCare in
writing of an objection prior to the expiration of such fifteen
(15) day period. WellCare will then seek to arrive at a mutually
agreeable modification. Should this not be possible, WellCare or
VMS may terminate this Agreement upon the giving of six (6) months
prior written notice to be effective as of the end of a calendar
month. Material amendments shall be forwarded to the New York
State Department of Health for prior approval.
B. Amendments. This Agreement may be amended at any time by
mutual agreement of the parties.
ARTICLE VII - MISCELLANEOUS
A. New York Law to Govern. The validity, enforceability, and
interpretation of any of the clauses of this Agreement shall be
determined and governed by the laws of the State of New York.
B. Independent Contractor Status. Except as specified herein,
this Agreement is not intended to create, nor shall be designed or
construed to create, any relationship between VMS or any
Participating Physician and WellCare other than that of
independent entities contracting with each other hereunder solely
for effecting the provisions of this Agreement. Neither of the
parties hereto, nor any of their respective representatives shall
be construed to be the agent, employer, or representative of the
other.
C. Agreement Complete. This Agreement contains all the terms and
conditions agreed to by the parties hereto, and supersedes all
other agreements, oral or otherwise, regarding the subject matter
or parties hereto.
D. Assignment. Except as specifically set forth in this
paragraph, this Agreement may be assigned only with the prior
written consent of WellCare. Any other purported assignment shall
be null and void. Notwithstanding the forgoing, WellCare may
assign, delegate, transfer, convey or sell its rights and/or
obligations to a parent, subsidiary or affiliate or to an entity
into which WellCare is merged or with which WellCare is
consolidated or to a purchaser of all or substantially all of its
assets or as part of a corporate reorganization.
E. Waiver. Any waiver by either party of a breach of any
provision of this Agreement shall not be deemed a waiver of any
other breach of the same or any other provision of this Agreement.
F. Volume. VMS acknowledges and agrees that WellCare by entering
into this Agreement does not promise or otherwise guarantee any
particular volume of referrals of Members to VMS or any
Participating Physician for the provision of Covered Services.
G. Dispute Resolution. In the event any dispute shall arise with
regard to the performance or interpretation of any of the terms of
this Agreement, both parties agree to negotiate in good faith to
resolve such dispute. If the dispute is not resolved within
thirty (30) days, both parties agree to submit all matter(s) in
controversy to a Board of Arbitrators consisting of three (3)
members (one member selected by each party to this Agreement, and
these members, in turn selecting a third member). The Board of
Arbitrators so constituted shall proceed under the rules and
regulations of the American Arbitration Association. Both parties
expressly covenant and agree to be bound by the decision of the
arbitrators and accept any decision by a majority of the
arbitrators as a final determination of the matter in dispute.
The parties to this Agreement shall share the cost or arbitration
equally. Arbitration shall not be required of any dispute also
involving a person who is not bound by this or a similar agreement
unless that third party agrees to binding arbitration.
Notwithstanding the forgoing, The Commissioner of the New York
State Department of Health is not bound by the decisions rendered
by the Board of Arbitrators. Furthermore, the Commissioner of
Health shall be notified of all issues submitted to arbitration
and be sent copies of arbitration decisions.
H. Enforceability. The invalidity or unenforceability of any
terms or conditions hereof shall in no way affect the validity or
enforceability of any other term of provision contained herein.
I. Notice. Any notice required to be given pursuant to the terms
and provisions hereof shall be in writing and shall be sent by
certified mail, return receipt requested, prepaid, to WellCare at:
P. O. Box 4059
Kingston, New York 12401
Attn: Robert E. Goff
Executive Director
and to VMS at:
PO Box 234
Claverack, NY 12513
Attn: Richard Weininger
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year above set forth.
WELLCARE OF NEW YORK, INC.
BY: /s/ Robert E. Goff
Robert E. Goff, Executive Director
DATE:9-25-95
VALLEY MEDICAL SERVICES, PC
SIGNATURE: By: /s/ Richard Weininger
PRINT/TYPE NAME: Richard Weininger
TITLE: President
ADDRESS: PO Box 234
Claverack, NY 12513
PHONE NUMBER: 518/828-4647
TAX ID: 14-1779934
DATE:
ATTACHMENT A
Effective October 1, 1995, the global budget will be based on the
following per member per month (PMPM) rates for each Commercial
and Healthy Choice member:
Region Commercial
Healthy Choice
Orange/Sullivan $118.18
$ 84.24
Dutchess $109.66
$ 93.83
Columbia/Greene $107.53
$ 83.10
Global budget shall increase on January 1, 1996 as follows:
Region Commercial
Healthy Choice
Orange/Sullivan $120.67
$ 86.77
Dutchess $109.66
$ 96.59
Columbia/Greene $110.88
$ 85.59
Based on the above rates, the global budget payment shall increase
on January 1, 1997 by three percent (3%) and again on January 1,
1998 by three percent (3%).
Valley Medical Services, PC shall provide for a special bonus pool
of $0.20 per member per month (PMPM) for affiliated providers
exceeding the standards of the defined quality matrix.
Medical costs which VMS and its affiliated providers are
responsible for under the terms and conditions of this agreement
include:
Primary Care and preventive health care services
Referral speciality care and supplemental health care services
Out-of-area and emergency care authorized referral expenses
In-area and out-of-area authorized expenses for:
In patient care/general and psychiatric
Ambulatory surgery
Outpatient mental health services
Pharmacy services
Point-of-Service (POS) referrals
Ambulance services
Expenses covered under a WellCare reinsurance policy
Medical costs which VMS and its affiliated providers are not
responsible for under the terms and conditions of this agreement
include:
Non-authorized services
Services related to enhanced benefits provided to members by
WellCare
Quality improvement matrix
Extended benefits under WellCare's new Bienestar wellness program
WELLCARE OF NEW YORK, INC.
by /s/ Robert E. Goff
Robert E. Goff, Executive Director
VALLEY MEDICAL SERVICES, PC
by /s/ Richard Weininger
September 25, 1995
Date Signed
EXHIBIT 10.29a
WELLCARE OF NEW YORK, INC.
120 Wood Road
Kingston, New York 12401
AGREEMENT BETWEEN WELLCARE OF NEW YORK, INC.
AND
CONSULTING PHYSICIAN
THIS AGREEMENT is made and entered into on this _____ day of
____________, 199__, by and between WellCare of New York, Inc., a
corporation which operates a New York State health maintenance
organization licensed under Article 44 of the New York Public
Health Law ("WellCare"), and ___________________________________,
a duly licensed physician or a duly organized professional service
corporation or partnership, in the State of New York ("Consulting
Physician").
WHEREAS, WellCare has been organized for the purpose of providing
or arranging for the provision of certain primary and specialty
health care services to individuals enrolled as Members of
WellCare ("Members") and wishes to enter into this Agreement in
order to utilize the services of Consulting Physician in
connection therewith; and
WHEREAS, Consulting Physician is a duly licensed physician
specializing in the field of
______________________________________: and
WHEREAS, Consulting Physician desires to provide specialty or
consultant services to Members pursuant to the terms and
conditions set forth herein and pursuant to the terms and
conditions of the Benefit Plan(s) issued by WellCare setting forth
its obligations to Members under its commercial and
Medicaid-specific products; and
WHEREAS, WellCare and Consulting Physician mutually desire to
preserve and enhance patient dignity and desire to enter into an
agreement which recognizes fully the contributions of Consulting
Physician and assures continuous harmonious management of the
affairs of WellCare.
NOW, THEREFORE, in consideration of the promises and mutual
covenants and other good and valuable consideration hereinafter
contained, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
A. Benefit Plan means the evidence of coverage issued by WellCare
that describes its obligations to arrange for the delivery of
medical services to Members who are eligible for such services
pursuant to the terms of (I) WellCare commercial products; and
(ii) WellCare products available to a Medicaid-eligible
population. Each Benefit Plan shall identify those medical
services which are Covered Services available to Members and shall
enumerate all applicable maximums, limitations and exclusions with
respect to the availability of Covered Services to Members.
B. Consulting Physician means the physician, professional service
corporation or partnership who or which is a contracting party to
this Agreement.
C. Covered Services mean those services which are Medically
Necessary and which Members are entitled to receive under the
terms of a Benefit Plan.
D.CPT-4, including subsequent updates, means Current Procedural
Terminology which is a listing of descriptive terms and
identifying codes for reporting medical services and procedures
performed by physicians.
E. Emergency means the unexpected onset of a medical condition of
such a nature that failure to obtain immediate care would result
in deterioration, thereby placing life in jeopardy or causing
serious impairment to bodily functions. Examples of medical
problems which are considered to be emergencies are: heart
attacks, poisoning, convulsions, unconsciousness, and unusual and
excessive bleeding.
F. Encounter means a Member visit with direct contact between the
Member and a physician or physician extender where medical
evaluation services are provided.
G. Member means any person who is eligible to receive Covered
Services under any Commercial or Medicaid Benefit Plan issued by
WellCare.
H. Primary Physician means any physician, professional service
corporation or partnership who or which has agreed to provide
specified primary health services to Members and to coordinate the
overall health care of Members who select him, her or it as their
primary care physician.
I. Participating Provider means a physician, health care provider,
skilled nursing, hospital, or other facility which has agreed to
provide Covered Services to Members.
ARTICLE II - CONSULTING PHYSICIAN RESPONSIBILITIES
A. Services. Consulting Physician will provide to Members the
usual and customary services in Consulting Physician's specialty
field pursuant to the terms of the Benefit Plan and this
Agreement. It is understood, however, that WellCare may make
alternate arrangements for the provision of certain Covered
Services to Members which are services that Consulting Physician's
specialty may typically provide. In such a case, the services
which Consulting Physician may provide to Members may be limited.
WellCare will notify Consulting Physician by mail if it has made
alternate arrangements for the provision of certain Covered
Services. Consulting Physician [agrees to] abide by and [be
bound by] such rules and regulations as WellCare may adopt from
time to time . Consulting Physician will not unfairly
differentiate or discriminate in the treatment of his/her/its
patients or in the quality of services delivered to Members on the
basis of membership in HMO, age, national origin, sex, sexual
preference, race, color, creed, marital status, religion, health
status, source of payment, economic status or handicap.
B. Referral Procedure. Consulting Physician shall provide
specialty or consultant medical services pursuant to the
following:
1. Consulting Physician shall provide Covered Services to a Member
only upon prior referral of such Member by a WellCare staff
physician or Primary Physician in an manner prescribed by
WellCare. Consulting Physician may not order or provide services
to Members unless specifically authorized to do so by a WellCare
staff physician or Primary Physician. Consulting Physician will
be subject to the WellCare staff physician's or the referring
Primary Physician's final determination as to whether Consulting
Physician's services are Medically Necessary.
2. Except in cases of Emergency, payment for retroactive referrals
or unauthorized diagnostic, laboratory or related supplemental
health care services shall be made by WellCare only when
determined to be medically necessary Covered Services by WellCare,
and such determination shall be solely within the discretion of
the WellCare Medical Director.
3. The Primary Physician may utilize other Participating
Physicians specializing in the same field or a different field
from that of Consulting Physician.
4. Whenever possible, the Primary Physician will refer Members to
Consulting Physician during his or her normal office hours but,
in cases of Emergency, as determined by WellCare, Consulting
Physician services shall be rendered at another location
consistent with the Consulting Physician's normal practice.
5. Except in cases of Emergency, Consulting Physician shall use
only Participating Providers which have been approved in advance
by WellCare. The Consulting Physician shall be liable for the
costs of services provided by Non-Participating Providers except
in cases of emergency.
6. The Consulting Physician will render care consistent with the
services authorized by the referring primary care physician. The
Consulting Physician will forward to the primary care physician a
report of those services rendered, or if a consultation was only
provided, a recommended plan of treatment prior to the
commencement of such treatment. Should the Consulting Physician
be authorized to provide a course of treatment over time,
appropriate reports to the primary care physician will be provided
during the term of that treatment and must be provided at its
conclusion. In the case of Covered Services rendered to a Member
in an Emergency, Consulting Physician agrees to notify WellCare or
the Primary Physician as soon as possible so as to assure
continuity of care and prompt compensation for Covered Services
rendered.
C. Compensation of Consulting Physician.
1. Consulting Physician agrees to accept from WellCare the lesser
of his/her/its usual, customary and reasonable charges or the fees
set forth in WellCare's Fee Schedule, as amended from time to time
and subject to a withhold as more specifically set forth in the
risk-sharing arrangement set forth in Attachment A (Summary of
Consulting Physician Risk Share Arrangement) hereof, as full
compensation for Covered Services rendered to Members under any
WellCare Benefit Plan, whether issued in connection with a
commercial product or a Medicaid product. Consulting Physician
shall collect and retain any applicable encounter fee, copayment,
deductible, or coinsurance as permitted under the Member's Benefit
Plan. WellCare will deduct from payments to you the amount, if
any, the Member is required to pay as an encounter fee or
copayment or as coinsurance or a deductible.
2. In order for a claim to be eligible for payment, it must meet
all of the following conditions:
(i) It must be a Covered Service;
(ii) Consulting Physician must have obtained any required prior
authorization from WellCare for that service;
(iii) Consulting Physician must have submitted the claim to
WellCare within 60 days of the date of service, unless WellCare
has agreed in writing to a later submission;
(iv) The claim must comply with all of WellCare's billing
protocols, including but not limited to the provision of the
following information: the Member's name; WellCare ID number;
date of service; CPT code(s) for the service(s) rendered; and
ICD-9 diagnostic code; and
(v) The claim must comply with any additional requirements
mandated by regulatory agencies as communicated by WellCare.
D. No Billing of Members
1. Consulting Physician agrees that in no event, including but not
limited to nonpayment by WellCare, insolvency of WellCare or
breach of this Agreement, shall the Consulting Physician bill,
charge, collect a deposit from, seek compensation, remuneration or
reimbursement from, or have any recourse against a subscriber, a
Member or persons (other than WellCare) acting on his/her/their
behalf for Covered Services provided pursuant to the Agreement.
This provision shall not prohibit Consulting Physician from
collecting from Members deductibles, encounter fees, copayments,
and/or coinsurance amounts permitted under the Member's Benefit
Plan or fees for uncovered services delivered on a fee-for-service
basis to Members. Consulting Physician agrees to inform Members
of their personal obligation for any uncovered services prior to
the provision of such services.
2. Consulting Physician agrees that in the event of WellCare's
insolvency or other cessation of operations, that benefits to
Members will continue through the period for which premium has
been paid, and benefits to Members confined in an inpatient
facility on the date of insolvency or other cessation of
operations will continue until their discharge.
3. Consulting Physician agrees that these provisions shall survive
the termination of this Agreement regardless of the cause giving
rise to termination and shall be construed to be for the benefit
of the Member, and that these provisions supersede any oral or
written agreement to the contrary now existing or hereafter
entered into between Consulting Physician or any persons acting on
their behalf.
4. No changes in the insolvency protection or continuation of
benefits provisions shall be made without prior approval of the
Commissioner of the Department of Health.
E. Reporting Requirements. Consulting Physician agrees to deliver
to WellCare's Medical Director such written reports concerning the
quality or utilization of services to WellCare's Members as
WellCare may require. The Consulting Physician shall submit to
WellCare complaint and grievance information to meet the
requirements of the State of New York and other appropriate
regulatory agencies. Medical information shall be provided to
WellCare as appropriate and without violation of pertinent state
and federal laws regarding the confidentiality of medical records.
Such information shall be provided without cost to WellCare.
F. Malpractice Insurance and Liability. Consulting Physician, at
his, her or its sole expense, shall provide and maintain such
policies of malpractice insurance as shall be necessary to ensure
the Consulting Physician and those health professionals who are
his or her 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
service by the Consulting Physician. The amounts and extent of
such insurance coverage shall be at least one million dollars
($1,000,000) per occurrence and three million dollars ($3,000,000)
in the aggregate. Consulting Physician agrees to notify WellCare
no less than ten days prior to any reduction or cancellation of
coverage.
G. Utilization Management. Consulting Physician shall participate
in the WellCare utilization review management program. This
system shall include, but not be limited to, pre-admission
authorization, concurrent review, and adherence to referral
processes. Consulting Physician agrees to comply with all WellCare
Utilization Management policies and procedures for both
hospital-based and office-based care.
H. Quality Management (QM). Consulting Physician agrees to comply
with all WellCare Quality Management Programs for both
hospital-based and office-based care. This includes but is not
limited to: random office and hospital review and case specific
review, appropriate response to issues identified by WellCare or
governmental agencies, and cooperation with WellCare QM
mechanisms. Consulting Physician will respond appropriately to
all quality referred issues within a reasonable time frame but not
to exceed 14 days of receipt.
I. Credentials. Consulting Physician agrees that all WellCare
Members will be treated by physicians licensed to practice in the
State, or by a qualified para-professional legally acting under
the supervision of a physician licensed to practice in the State.
Consulting Physician agrees that each physician treating Members
and other professionals who have the legal authority to practice
independently of supervision and/or have supervisory authority
over other health care practitioners, shall complete a WellCare
application and shall provide all other information including
information on malpractice cases necessary for WellCare to
complete the credentialing process. Consulting Physician agrees
to notify WellCare within one week of an agreement or subcontract
with any new physician so WellCare may initiate the credentialing
process. Consulting Physician authorizes the licensing bureaus,
affiliations and/or persons to give any information regarding
Consulting Physician. Consulting Physician hereby releases said
licensing bureaus, affiliations and/or persons from all liability
for any damage whatsoever for issuing this information.
Consulting Physician agrees to notify WellCare within forty-eight
(48) hours of any revisions, revocation, or limitation of his (or
any member of the group, if applicable) license to practice,
narcotics license, or hospital privileges or malpractice carrier
change or termination. If a group, Consulting Physician will
notify WellCare of any changes in the members of the group who may
treat WellCare Members within forty-eight (48) hours. WellCare
may provide temporary authorization for new physicians to treat
WellCare Members during the credentialing process. The Consulting
Physician must be properly registered and certified under CLIA and
all other applicable state or federal regulatory agencies for any
laboratory test performed in the Consulting Physician's office.
All Consulting Physicians submitting claims for laboratory
services shall provide evidence of their CLIA number and status.
J. Medical Records. Consulting Physician shall maintain adequate
medical records for all medical services provided to Members.
Consulting Physician agrees to retain said records for a period of
at least six (6) years, or in the case of a minor, for at least
six (6) years after the age of majority. Subject to all
applicable statutory and legal privacy and confidentiality
requirements, such medical records shall remain available to each
physician and other health professionals treating each Member and,
upon request to any proper committee of WellCare for review to
determine whether their content and quality are acceptable, as
well as for peer review or grievance review. WellCare and the New
York State Department of Health or its authorized representatives
shall have the right, upon request, to inspect and copy at all
reasonable times, any administrative, [accounting,] and medical
records maintained by Consulting Physician pertaining to WellCare,
to Member, and to Consulting Physician's participation hereunder.
Consulting Physician further agrees that, in the event an
examination concerning the quality of health care services is
conducted by the appropriate state or federal officials, as
required by state or federal law, Consulting Physician shall
submit, in a timely fashion, any required books, and/or records,
and facilitate in every way such examination.
K. Member Complaint and Grievance Procedure. Consulting Physician
shall cooperate with WellCare in WellCare's Member complaint and
grievance procedure and shall abide by such grievance procedure.
L. Member Communications. Consulting Physician will refer all
queries of Members relating to benefit determinations, access,
complaints and grievances, and records to WellCare, in accordance
with the governing grievance procedure. No materials, pamphlets
or explanatory letters regarding WellCare or the terms of this
Agreement shall be provided to Members unless authorized by
WellCare.
M. Physician/Patient Relationship Maintained. Consulting
Physician shall maintain the relationship of physician and patient
with Members, without intervention in any manner by WellCare or
its agents or employees, and Consulting Physician shall be solely
responsible for all medical advice to, and treatment of, Members
and for the performance of all medical services set forth in a
Benefit Plan in accordance with accepted professional standards
and practices.
N. Inspection of Premises. Consulting Physician shall permit
representatives of WellCare, including utilization review and
quality improvement committees, upon reasonable notice, to inspect
Consulting Physician's premises and equipment during regular
working hours and review the scope of Covered Services provided to
Members, subject to any applicable restrictions under state or
federal law.
O. Litigation Notice. Consulting Physician will provide WellCare
with a complete record of all malpractice litigation or claims
either before a court or administrative agency in which he/she/it
was or is named as a Party.
P. Application to Individual Practitioners and Entities. In the
event that Consulting Physician is a professional service
corporation or partnership, then any and all references to
Consulting Physician herein which contemplate the agreement,
compliance or other action of an individual practitioner providing
Covered Services hereunder as an employee, partner and/or
independent contractor of Consulting Physician, shall be deemed to
apply to all such practitioners, as well as to Consulting
Physician. Consulting Physician hereby agrees to take all actions
necessary to ensure that all such individual practitioners fulfill
all terms and conditions of this Agreement as they apply to such
individual practitioners. Consulting Physician agrees to require
that all such individual practitioners execute an Agreement which
in turn shall bind them to all terms and conditions of this
Agreement. The failure of any individual practitioner who is an
employee, partner and/or independent contractor of Consulting
Physician to fulfill those duties and obligations which apply to
him or her hereunder shall be deemed to be a breach of this
Agreement as if it were the direct result of an action or omission
of Consulting Physician. In the event that Consulting Physician
is an individual practitioner, then all references to Consulting
Physician herein shall apply directly to such individual
practitioner.
The professional service corporation or partnership, if any, shall
require that its participating Consulting Physicians agree to be
bound, at WellCare's option, to the terms of this Agreement as
individuals in the event of the dissolution or insolvency of the
professional service corporation or partnership. This paragraph
is intended to ensure continuity of care to WellCare Plan Members
in the event of such dissolution or insolvency.
Q. Coordination of Benefits. Consulting Physician shall cooperate
with WellCare in determining if a Member's illness or injury is
covered by no-fault auto insurance, worker's compensation
insurance or other health insurance or otherwise gives rise to a
claim by a third party by virtue of coordination of benefits or
subrogation.
ARTICLE III - COVENANTS OF WELLCARE
A. Identification of WellCare Members. WellCare shall maintain a
current Member eligibility data system and shall furnish
Consulting Physician with a means of accessing such system for
purposes of identifying those WellCare Members who are enrolled in
WellCare Plans.
B. Administrative and Marketing Services. WellCare shall perform
the administrative, claims processing, marketing, enrollment,
quality management and utilization management functions that are
required under contract or regulation by a local, state or federal
agency with the authority to govern the activities of WellCare in
the provision of services contemplated by this Agreement.
C. Provider Grievance and Appeal Procedures. WellCare shall make
available to Consulting Physician a copy of the grievance and
appeal procedures which govern instances where there is an issue
in the conduct or operation of WellCare that has not otherwise
been satisfactorily resolved.
D. Benefit Plan Terms. WellCare shall [make available to]
Consulting Physician [a summary] of each applicable Benefit Plan
[. Such summaries shall include schedules of Covered Services,
applicable exclusions or limitations affecting the provision of
Covered Services, and applicable copayments or deductibles.]
ARTICLE IV - TERM OF AGREEMENT AND TERMINATION
A. Term. The term of this Agreement shall commence on the date
first written above and shall continue in effect from year to
year unless terminated effective as of the end of any calendar
month in accordance with the terms of this Article.
B. Termination. This Agreement may be terminated by either
WellCare or Consulting Physician with or without cause, at any
time to be effective as of the end of any month, if written notice
is given to the other party at least sixty (60) days in advance of
such termination. However, such action shall not release either
WellCare or Consulting Physician of obligations imposed with
respect to:
1. third party payors;
2. incentive payments accrued and due to Consulting Physician or
service account deficits due to WellCare in connection with
existing contracts; or
3. the obligation of Consulting Physician to persons then
receiving treatment at the time of said notice. The parties agree
that in the event of voluntary termination, as provided herein,
the obligations of Consulting Physician to continue such treatment
to any Member and otherwise under this Agreement and the
obligations of WellCare shall continue in full force until the
termination date.
C. This Agreement may be terminated by WellCare:
1. Immediately in the event Consulting Physician:
(i) ceases to be (a) duly licensed to practice medicine or
osteopathy in the State of New York, in the case of an individual
physician, with staff privileges at least one (1) hospital which
has entered into an arrangement with WellCare to provide Covered
Services to Members, or (b) duly organized in the State of New
York, in the case of a professional service corporation or a
partnership, and duly authorized to provide health care services;
(ii) in the case of an individual physician, becomes disabled or
is deceased or retires from active participation in a medical
practice;
(iii) in the case of an individual physician, ceases to be
authorized by the United States Drug Enforcement Agency to
prescribe all pharmaceuticals required in connection with the
provision of Covered Services or to be an eligible provider under
Medicaid or Medicare;
(iv) loses or suffers a reduction of his, her or its professional
liability insurance;
(v) commits any act or engages in any conduct for which his, her
or its license, certificate or other authorization to render
professional services may be revoked, suspended or restricted by
any licensing authority; or
(vi) is found to have made any untrue statements of material fact
or any intentional misrepresentation of any fact, whether or not
material, in any claim for payment, application forms or
credentialing materials.
ARTICLE V - MODIFICATIONS
Amendments to this Agreement, including changes to Attachment A,
may be issued to Consulting Physician by WellCare and become
binding fifteen (15) days after receipt of notification thereof
unless the Consulting Physician advises WellCare in writing of an
objection prior to the expiration of such fifteen (15) day period.
WellCare will then seek to arrive at a mutually agreeable
modification. Should this not be possible, the amendment shall be
of no force or effect with respect to Consulting Physician, and
WellCare or the Consulting Physician may terminate this Agreement
upon the giving of sixty (60) days prior written notice, to be
effective as of the end of a calendar month. Notwithstanding the
above, this Agreement may be amended at any time by mutual
agreement of the parties. Material amendments to this Agreement
shall be forwarded to the Department of Health for prior approval.
ARTICLE VI- MISCELLANEOUS
A. New York Law to Govern. The validity, enforceability, and
interpretation of any of the clauses of this Agreement shall be
determined and governed by the laws of the State of New York.
B. Independent Contractor Status. None of the provisions of this
Agreement are intended to create, nor shall be designed or
construed to create, any relationship between Consulting Physician
and WellCare other than that of independent entities contracting
with each hereunder solely for effecting the provisions of the
Agreement. Neither of the parties hereto, nor any of their
respective representatives, shall be construed to be the agent,
the employer, or representative of the other.
C. Subcontracts. The Consulting Physician agrees that any and all
providers engaged by the Consulting Physician to perform services
set forth in this agreement will execute a subcontract with the
Consulting Physician. The Consulting Physician shall require the
subcontractors to abide by this agreement and will ensure that
this agreement is incorporated by reference in the subcontract.
The Consulting Physician agrees not to subcontract with any
providers without the express approval of WellCare, which shall
not be unreasonably withheld. Consulting Physician will make
available, on request by WellCare, all subcontracts that provide
for services to WellCare Members.
D. Malpractice Liability. Neither the Consulting Physician nor
WellCare shall be liable for the expense of defending any action
for alleged professional malpractice against the other, or for any
costs resulting from the loss of such lawsuit. However, neither
the Consulting Physician nor WellCare limits its right to implead
the other as a third-party defendant in such a suit and each party
shall bear its apportioned loss resulting from such three-party
suit.
E. Entire Agreement. This Agreement and the applicable Benefit
Plans represent the entire agreement of WellCare and Consulting
Physician with respect to the subject matter hereof and thereof
and shall together govern and control the parties' rights, duties,
obligations and liabilities with respect to the matters set forth
herein, and no statement, representation, warranty or covenant has
been made by any party with respect thereto except as expressly
set forth in this Agreement and such additional agreements.
F. Assignment. The rights and/or obligations of this Agreement
may not be assigned, delegated, transferred, conveyed or sold
without the prior written consent of the other party, except that
WellCare may assign, delegate, transfer, convey or sell its rights
and/or obligations to a parent, subsidiary or affiliate or to an
entity into which WellCare is merged or with which WellCare is
consolidated or to a purchaser of all or substantially all of its
assets or as part of a corporate reorganization.
G. Waiver. Any waiver by either party of a breach of any
provision of this Agreement shall not be deemed a waiver of any
other breach of the same or any other provision of this Agreement.
H. Volume. Consulting Physician acknowledges and agrees that
WellCare by entering into this Agreement does not promise or
otherwise guarantee any particular volume of referrals of Members
to Consulting Physician for the provision of Covered Services.
I. Maintenance of Records. WellCare and Consulting Physician will
maintain records of account for all financial transactions
pertaining to WellCare. Billing, collection, receipt, and
reconciliation of all revenues and appropriate disbursement of
required monies will be recorded and maintained in accordance with
accepted accounting practices.
J. Dispute Resolution. In the event any dispute shall arise with
regard to the performance or interpretation of any of the terms of
this Agreement, both parties agree to negotiate in good faith to
resolve such dispute. If the dispute is not resolved within
thirty (30) days, both parties agree to submit all matter(s) in
controversy to a Board of Arbitrators consisting of three (3)
members (one member selected by each party to this Agreement, and
these members, in turn selecting a third member). The Board of
Arbitrators so constituted shall proceed under the rules and
regulations of the American Arbitration Association. Both parties
expressly covenant and agree to be bound by the decision of the
arbitrators and accept any decision by a majority of the
arbitrators as a final determination of the matter in dispute.
The parties to this Agreement shall share the cost or arbitration
equally. Arbitration shall not be required of any dispute also
involving a person who is not bound by this or a similar agreement
unless that third party agrees to binding arbitration.
Notwithstanding the forgoing, the Commissioner of the New York
State Department of Health is not bound by the decisions rendered
by the Board of Arbitrators. Furthermore, the Commissioner of the
New York State Department of Health shall be notified of all
issues submitted to arbitration and be sent copies of arbitration
decisions.
K. Enforceability. The invalidity or unenforceability of any
terms or conditions hereof shall in no way affect the validity or
enforceability of any other term of provision contained herein.
L. Notice. Any notice required to be given pursuant to the terms
and provisions hereof shall be in writing and shall be sent by
regular first class mail, to WellCare at :
120 Wood Road
Kingston, New York 12401
and to Consulting Physician at the address listed on the signature
page of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first written above.
Consulting Physician
SIGNATURE:
PRINT NAME/TITLE (if applicable):
ON BEHALF OF (if applicable):
ADDRESS:
PHONE NUMBER:
DEA# (if applicable):
TAX ID:
DATE:
WELLCARE OF NEW YORK, INC.
BY: Robert E. Goff, Executive Director
DATE:
ATTACHMENT A
SUMMARY OF CONSULTING PHYSICIAN RISK SHARE AGREEMENT
Pursuant to the terms of this Attachment A, WellCare shall retain
[fifteen] percent [(15%)] of the compensation amount otherwise
payable to Consulting Physician for Covered Services rendered to
Members. Notwithstanding the foregoing, WellCare may change the
percentage of Consulting Physician's compensation which may be
retained in accordance with this Attachment A upon the giving of
fifteen (15) days' written notice, up to a maximum of thirty
percent (30%) of total compensation. The purpose of establishing
this withhold is to enable WellCare to eliminate any deficits in
the service accounts maintained by it to meet its expenses in
arranging for the provision of Covered Services to Members
eligible to receive such services under the terms of all Benefit
Plans.
ATTACHMENT TO THE AGREEMENT/CONTRACT
BETWEEN WELLCARE OF NEW YORK, INC.
AND
The following providers associated with __________________________
agree to all Articles as contained in the Agreement/Contract
and/or any Amendments between WellCare and
________________________.
SIGNATURE: _____________________________
________________________________
(Specialty)
PRINT NAME:
DATE:
SIGNATURE:
____________________________
(Specialty)
PRINT NAME:
DATE:
SIGNATURE:
____________________________
(Specialty)
PRINT NAME:
DATE:
SIGNATURE:
____________________________
(Specialty)
PRINT NAME:
DATE:
WELLCARE OF NEW YORK, INC.
BY: Robert E. Goff, Executive Director
DATE:
EXHIBIT 10.30a
WELLCARE OF NEW YORK, INC.
120 Wood Road
Kingston, New York 12401
AGREEMENT BETWEEN WELLCARE OF NEW YORK, INC.
AND
HOSPITAL
THIS AGREEMENT is made and entered into on this ______ day of
__________, 199___ by and between WellCare of New York, Inc., a
New York State health maintenance organization (HMO) licensed
under Article 44 of the Public Health Law ("WellCare") and
_________________________, hereinafter referred to as HOSPITAL.
WHEREAS, WellCare has been organized for the purpose of providing
or arranging for the provision of certain primary and specialty
health care services to individuals enrolled as Members of
WellCare ("Members") and wishes to enter into this Agreement in
order to utilize the services of HOSPITAL in connection therewith;
and
WHEREAS, HOSPITAL is an institution operated pursuant to law which
is primarily engaged in providing medical, diagnostic, and
surgical facilities for the care and treatment of sick and injured
persons on an inpatient and outpatient basis, and which provides
such facilities under the supervision of a staff of physicians on
a twenty-four (24) hour per day, 7 day per week basis; and
WHEREAS, HOSPITAL desires to provide such services to Members
pursuant to the terms and conditions set forth herein and pursuant
to the terms and conditions of the Benefit Plan(s) issued by
WellCare setting forth its obligations to Members under its
commercial and Medicaid-specific products; and
WHEREAS, the parties are desirous of contributing to the
objectives of providing readily available, comprehensive health
services of high quality.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other valuable considerations, the parties agree
as follows:
ARTICLE I - DEFINITIONS
A. Benefit Plan means the evidence of coverage issued by WellCare
that describes its obligations to arrange for the delivery of
medical services to Members who are eligible for such services
pursuant to the terms of (i) WellCare commercial products; and
(ii) WellCare products available to a Medicaid-eligible
population. Each Benefit Plan shall identify those medical
services which are Covered Services available to Members and shall
enumerate all applicable maximums, limitations and exclusions with
respect to the availability of Covered Services to Members.
B. Consulting Physician means the physician, professional service
corporation or partnership who or which has contracted with
WellCare to provide specialist services to Members.
C. Covered Services mean those services which are Medically
Necessary and which Members are entitled to receive under the
terms of a Benefit Plan.
D. CPT-4 including subsequent updates, means Current Procedural
Terminology which is a listing of descriptive terms and
identifying codes for reporting medical services and procedures
performed by physicians.
E. Emergency means a sudden unexpected onset of acute sickness or
accidental injury of such a nature that failure to obtain
immediate medical care or treatment could reasonably jeopardize
the Member's life or result in serious impairment of bodily
functions.
F. Encounter means a Member visit with direct contact between the
Member and a physician or physician extender where medical
evaluation services are provided.
G. Member means any person who is eligible to receive Covered
Services under any Commercial or Medicaid Benefit Plan issued by
WellCare.
H. Network Physician means any physician, professional service
corporation or partnership who or which has contracted with
WellCare to provide specified primary health services to Members
and to coordinate the overall health care of Members who select
him, her or it as their primary care physician.
I. Participating Provider means a physician, health care provider,
skilled nursing, hospital, or other facility which has contracted
with WellCare to provide Covered Services to WellCare Members.
ARTICLE II - OBLIGATIONS OF WELLCARE
A. Identification of WellCare Members. WellCare shall maintain a
current Member eligibility data system and shall furnish HOSPITAL
with a means of accessing such system for purposes of identifying
those WellCare Members who are enrolled in WellCare Plans.
B. Administration. WellCare shall perform or have performed the
administrative, claims processing, marketing, enrollment, quality
management and utilization management functions that are
appropriate for the marketing and administration of WellCare under
this Agreement or that are required under contract or regulation
by a local, state or federal agency with the authority to govern
the activities of WellCare in the provision of services
contemplated by this Agreement.
C. Provider Grievance and Appeal Procedures. WellCare shall make
available to HOSPITAL a copy of its grievance and appeal
procedures which govern instances where there is an issue in the
conduct or operation of WellCare that has not otherwise been
satisfactorily resolved.
D. Benefit Plan Terms. WellCare shall make available to the
HOSPITAL a summary of each applicable Benefit Plan. Such
summaries shall include schedules of Covered Services, applicable
exclusions or limitations affecting the provision of Covered
Services, and applicable copayments or deductibles.
ARTICLE III- PROVISION OF COVERED SERVICES
A. It is understood and agreed to that the HOSPITAL will provide
the services set forth in (Exhibit "A"). HOSPITAL shall ensure the
availability of Covered Services on a twenty-four (24) hours per
day, seven (7) days per week basis. HOSPITAL will provide
services when they are Covered Services that have been
specifically requested by a WellCare physician. HOSPITAL agrees
to render services to Members in the same manner, in accordance
with the same standards, and with the same priority offered to
Hospital's other patients. HOSPITAL will not unfairly
differentiate or discriminate in the treatment of its patients or
in the quality of services delivered to Members on the basis of
membership in HMO, age, national origin, sex, sexual preference,
race, color, creed, marital status, religion, health status,
source of payment, economic status or handicap.
ARTICLE IV- BILLING REQUIREMENTS AND REIMBURSEMENT FOR SERVICES
A. Basis of Payment. WellCare shall pay to HOSPITAL the rate
structure which is set forth in Exhibit B "HOSPITAL Reimbursement"
as full compensation for all Covered Services which are rendered
to WellCare Members during the term of this Agreement. HOSPITAL
shall bill for, collect and retain any applicable encounter fee,
copayment, deductible or coinsurance as permitted under a Member's
Benefit Plan. WellCare shall deduct from payments to HOSPITAL the
amount, if any, that the Member is required to pay as a encounter
fee or copayment or as coinsurance or a deductible.
B. Submission of Claims for services rendered. In order for a
claim to be considered for payment, it must meet all of the
following conditions:
1. It must be a Covered Service;
2. HOSPITAL must have obtained any required prior authorization
from WellCare for that service;
3. Except in extraordinary circumstances , or when WellCare is the
secondary payer, HOSPITAL must have submitted the claim to
WellCare within 120 days of the date of discharge or in the case
of outpatient services within one hundred twenty (120) days of the
date of service;
4. The claim must comply with all of WellCare's billing protocols,
including but not limited to the provision of a UB92 containing
the following information: the Member's name; WellCare ID number;
authorization; date of service; ICD-9 code(s) and descriptions for
the service(s) rendered; and an itemized patient statement; and
5. The claim must comply with any additional requirements mandated
by regulatory agencies as communicated by WellCare.
C. Payment for Unauthorized Services. HOSPITAL is aware that
except in an Emergency, Members are required to call their
WellCare Primary Care Physician for instructions as to what to do
or where to go for Services. Emergency care in a HOSPITAL
emergency room without authorization of the Member's primary care
physician is only available in accordance with the Member's
Benefit Plan. Unauthorized admissions or emergency room services
will be subject to retrospective review to determine if the care
rendered was a Covered Service. No payment will be made from
WellCare to HOSPITAL for either unauthorized admissions or
unauthorized emergency services until WellCare has reviewed the
circumstances surrounding the unauthorized services and has made a
determination that such services were Covered Benefits. If a
determination is made that the unauthorized services were not
Covered Benefits, WellCare shall not be responsible for the
reimbursement for such services.
D. No Billing of Members and Continuation of Benefits.
1. HOSPITAL agrees that in no event, including but not limited to
nonpayment by WellCare, insolvency of WellCare or breach of this
Agreement, shall HOSPITAL bill, charge, collect a deposit from,
seek compensation, remuneration or reimbursement from, or have any
recourse against a subscriber, a Member or persons (other than
WellCare) acting on their behalf for Covered Services provided
pursuant to the Agreement. This provision shall not prohibit
HOSPITAL from collecting from Members deductibles, encounter fees,
copayments, and/or coinsurance amounts permitted under the
Member's Benefit Plan or fees for uncovered services delivered on
a fee-for-service basis to Members provided that HOSPITAL has
notified Member of their personal obligation for any uncovered
services prior to the provision of such services.
2. HOSPITAL agrees that in the event of WellCare's insolvency or
other cessation of operations, that benefits to Members will
continue through the period for which premium has been paid, and
benefits to Members confined in an inpatient facility on the date
of insolvency or other cessation of operations will continue until
their discharge.
3. HOSPITAL agrees that these provisions shall survive the
termination of this Agreement regardless of the cause giving rise
to termination and shall be construed to be for the benefit of the
Member, and that these provisions supersede any oral or written
agreement to the contrary now existing or hereafter entered into
between HOSPITAL or any persons acting on their behalf.
4. No changes in the insolvency protection or continuation of
benefits provisions shall be made without prior approval of the
Commissioner of the Department of Health.
ARTICLE V- QUALITY MANAGEMENT
HOSPITAL will maintain a quality management program which meets
the standards of the JCAHO. HOSPITAL agrees to cooperate with
WellCare in its quality management oversight responsibilities and
to comply with all WellCare quality management protocols and
procedures. This includes but is not limited to: random hospital
review and case specific review, and response to quality concerns.
HOSPITAL will respond appropriately to all quality management
concerns raised by WellCare or other governmental or regulatory
agencies within the requested time frame, which is not to exceed
14 days of receipt.
ARTICLE VI- UTILIZATION MANAGEMENT
HOSPITAL agrees to maintain a program which reviews the
appropriateness and efficiency of services provided by the
HOSPITAL. Such program shall include length of stay reviews,
coordination with nonHOSPITAL health care services and critical
pathway development. HOSPITAL agrees to cooperate with the
WellCare utilization management program which includes but is not
limited to retrospective, concurrent, and prospective review. Upon
request, HOSPITAL shall provide WellCare utilization management
personnel with copies of Members medical records, as well as with
Member's authorization for release, in a timely manner for
purposes of utilization management.
ARTICLE VII- HOSPITAL RECORDS AND CONFIDENTIALITY
HOSPITAL shall maintain adequate medical records for all medical
services provided to Members. HOSPITAL agrees to maintain such
records so that they comply with the minimum standards of the
National Committee for Quality Assurance. HOSPITAL agrees to
retain said records for a period of at least six (6) years, or in
the case of a minor, for at least six (6) years after the age of
majority. Subject to all applicable statutory and legal
confidentiality requirements, such medical records shall remain
available to each physician and other health care professionals
treating each Member and, upon request to any proper committee of
WellCare or HOSPITAL for review to determine whether their
content and quality are acceptable, as well as for peer review or
grievance review. WellCare, the New York State Department of
Health as well as other authorized regulatory agencies or their
authorized representatives, shall have the right, upon request, to
inspect and copy at all reasonable times, any accounting,
administrative, and medical records maintained by HOSPITAL
pertaining to WellCare, to Member, and to HOSPITAL's participation
hereunder. HOSPITAL further agrees that, in the event an
examination concerning the quality of health care services is
conducted by appropriate state or federal officials, as required
by state or federal law, HOSPITAL shall submit, in a timely
fashion, any required records, and shall facilitate in every way
such examination. Records will be provided to WellCare at the
lowest fee charged by the HOSPITAL to other non-governmental
managed care plans or insurance companies.
ARTICLE VIII- OBLIGATIONS OF HOSPITAL
A. Admission to HOSPITAL. HOSPITAL shall notify WellCare prior to
admission for all scheduled admissions and within twenty-four (24)
hours of all emergency admissions.
B. Verification of WellCare Eligibility and Authorization for
Services. The HOSPITAL will use best efforts to verify Member
enrollment in WellCare and the authorization for care at the time
of admission or rendering of Services.
C. Pre-Surgical and Pre-Admission Tests. When available, the
HOSPITAL will accept a written copy of the results of New York
state certified laboratory and radiological tests or procedures
performed on a Member not more than two (2) weeks prior to
admission and will not require that duplicate tests or procedures
be performed or be charged for after the Member is admitted unless
such tests are ordered in writing by the admitting physician or
another provider involved in the clinical decision making
affecting the Member. Any pre-surgical or pre-admission testing
performed by or at the HOSPITAL within seventy-two (72) hours of
surgery or admission shall be deemed to be covered by the
inpatient fee in the event of an admission and by the ambulatory
surgical fee in the event of ambulatory surgery and the HOSPITAL
shall make no additional charge to WellCare or to the Member for
such tests.
D. Insurance.
1. HOSPITAL has and shall retain in effect during the term of this
Agreement professional liability ("malpractice") insurance and
primary general liability coverage in the minimum amount of Two
Million Dollars ($2,000,000) per occurrence and Six Million
Dollars ($6,000,000) annual aggregate. If HOSPITAL has a
claims-made malpractice/professional liability insurance policy,
then this policy shall be kept in effect for at least five (5)
years past any termination of this Agreement or HOSPITAL may
purchase "tail" coverage. Said "tail" policy shall have the same
policy limits as the primary professional liability policy.
2. HOSPITAL will provide WellCare with a Certificate of Insurance
evidencing professional and general liability coverage upon
execution of this Agreement and annually thereafter within thirty
(30) days of the renewal of the Agreement. The Certificate of
Insurance shall contain a provision whereby either the insurance
company or the HOSPITAL will notify WellCare of any reduction in
coverage, including termination of the policy, at least thirty
(30) days prior to any such change.
E. Coordination of Benefits. HOSPITAL shall cooperate in the
coordination of benefits and similar programs by making every
reasonable attempt to identify other health care coverage and to
provide such information to WellCare. HOSPITAL agrees to bill,
when appropriate, any primary carrier for services rendered to
WellCare Members. It is understood that WellCare's payment
obligation to HOSPITAL shall be reduced by the amount due to
HOSPITAL from other carriers. Upon request, WellCare and the
HOSPITAL agree to share information with each other pertaining to
the existence of other coverage, including carrier's name,
insured's name and identification number.
F. Education of HOSPITAL Personnel. HOSPITAL shall provide
orientation time to WellCare for in-service training to HOSPITAL
personnel to ensure that HOSPITAL personnel is familiar with
WellCare policies and procedures.
G. HOSPITAL Based Professional Providers. The HOSPITAL agrees to
assist and use its best efforts to enable WellCare to obtain
participation agreements with HOSPITAL based or contracted
providers (including anesthesiologists, pathologists,
radiologists, cardiologists, providers of electroencephalography,
or any other professional services).
H. Adherence to WellCare Policies; Non-Participating Providers.
HOSPITAL agrees that any physician assignments and/or Member
transfers shall be made in accordance with WellCare policies and
shall exclude the use of non-participating providers/facilities,
except in Emergencies. The HOSPITAL shall be held liable for all
services ordered by HOSPITAL rendered to Members by
Non-Participating Providers, including any costs incurred in a
non-Participating hospital to which the HOSPITAL may transfer a
Member without the approval of WellCare, except in Emergencies.
The HOSPITAL agrees not to bill the Member for such services.
I. HOSPITAL Licensing and Accreditation. HOSPITAL agrees to
comply with all WellCare credentialing requirements and that any
credentialing information provided shall continue to be true and
complete. HOSPITAL shall be and remain licensed by the New York
State Department of Health and be and remain accredited by the
Joint Commission on Accreditation of Health Care Organizations
(JCAHO). HOSPITAL represents and warrants that it and its owned
skilled nursing facilities, if any, are currently, and for the
duration of this Agreement shall remain, licensed in accordance
with the licensing provisions of the laws and regulations of the
state of residence of the HOSPITAL.
HOSPITAL also represents and warrants that all physicians and/or
health care personnel providing services to Members at its
facility have all necessary licenses and certificates for any
services that will be provided to Members. In the event that
either HOSPITAL, its employed physicians, or other providers lose
any license or certification HOSPITAL agrees to immediately notify
WellCare of such fact in writing .
J. Subcontracts. The HOSPITAL agrees not to subcontract with
any providers without the express approval of WellCare, which
shall not be unreasonably withheld. The HOSPITAL agrees that any
and all providers engaged by the HOSPITAL to perform services set
forth in this agreement will execute a subcontract with the
HOSPITAL which shall acknowledge WellCare as a third party to the
contract. The HOSPITAL shall require the subcontractors to abide
by this agreement and will ensure that this agreement is
incorporated by reference in the subcontract. HOSPITAL will make
available, on request by WellCare, all subcontracts that provide
for services to WellCare Members. Copies of subcontracts shall
be made available to WellCare in the requested time frame which in
no case shall exceed twenty (20) days after request of such
subcontracts.
K. Member Complaint and Grievance Procedure. HOSPITAL shall
cooperate with WellCare in WellCare's Member complaint and
grievance procedure and shall abide by such grievance procedure.
L. Inspection of Premises. HOSPITAL shall permit representatives
of WellCare, including utilization review and quality improvement
committees, upon reasonable notice, to inspect HOSPITAL'S premises
and equipment during regular working hours and review the scope of
Covered Services provided to Members, subject to any applicable
restrictions under state or federal law.
M. Legal/Regulatory Compliance. HOSPITAL hereby agrees to comply
with all applicable local, state, and federal laws governing the
provision of medical services to WellCare Members.
ARTICLE IX - LIMITATIONS
The rights of Members and the duties and obligations of WellCare
and HOSPITAL shall be subject to the following limitations:
A. In the event of any major disaster or epidemic, HOSPITAL shall
render hospital services insofar as practical according to its
best judgment, within the limitation of those facilities and
personnel which are then available.
B. In the event of a labor dispute, interruption in supply, or all
other causes beyond the control of the HOSPITAL which could
interfere with its ability to provide contracted services, the
HOSPITAL shall render hospital services insofar as practical
according to its best judgement, within the limitation of those
facilities and personnel which are then available.
ARTICLE X - AMENDMENTS
This Agreement may only be amended by mutual written agreement of
the parties hereto. Material amendments to this Agreement shall
be forward to the Department of Health for prior approval. It is
acknowledged by the parties that this Agreement is subject to
filing with the New York State Department of Health and shall be
deemed to be amended to include any changes which the Department
of Health requires.
ARTICLE XI - DURATION OF AGREEMENT
A. This agreement shall be effective on the date first set forth
above and shall automatically renew from year to year unless
either party hereto gives the other written notice of such party's
intention to terminate not less than one hundred-twenty (120) days
before the date of such termination.
B. Any party may terminate this Agreement by giving at least one
hundred twenty (120) days written notice prior to the expiration
of the initial one (1) year term. Thereafter, any party may
terminate this Agreement with or without cause by giving at least
one twenty (120) days prior written notice. Notwithstanding the
above, this Agreement may be terminated by mutual agreement of the
parties at any time. Nothing in this Agreement shall limit
WellCare's ability to terminate this contract immediately if
continuation of this agreement would negatively affect patient
care.
C. Upon termination of this Agreement, WellCare shall be liable
for services rendered by HOSPITAL to a Member who retains
eligibility under the applicable Member Benefit Contract or by
operation of law who is under the care of HOSPITAL at the time of
such termination until the services being rendered to the Member
by HOSPITAL are completed, unless WellCare makes a reasonable and
medically appropriate provision for the assumption of such
services by a contracting provider.
ARTICLE XII - GENERAL PROVISIONS
A. The validity, enforceability, and interpretation of any of the
clauses of this Agreement shall be determined and governed by the
laws of the State of New York.
B. Any waiver by either party of a breach of any provision of this
Agreement shall not be deemed a waiver of any other breach of the
same or any other provision of this Agreement.
C. None of the provisions of this Agreement are intended to
create, nor shall be designed or construed to create, any
relationship between HOSPITAL and WellCare other than that of
independent entities contracting with each hereunder solely for
effecting the provisions of the Agreement. Neither of the parties
hereto, nor any of their respective representatives, shall be
construed to be the agent, the employer, or representative of the
other.
D. WellCare and HOSPITAL shall each have the right, upon request,
to inspect at all reasonable times, all accounting and
administrative books and records maintained by the other
pertaining to WellCare under this Agreement.
E. The invalidity or unenforceability of any terms or conditions
hereof shall in no way affect the validity or enforceability of
any other term of provision contained herein.
F. This Agreement and the applicable Benefit Plans represent the
entire agreement of WellCare and HOSPITAL with respect to the
subject matter hereof and thereof and shall together govern and
control the parties' rights, duties, obligations and liabilities
with respect to the matters set forth herein, and no statement,
representation, warranty or covenant has been made by any party
with respect thereto except as expressly set forth in this
Agreement and such additional agreements.
G. WellCare may list the HOSPITAL in its Participating Provider
directories and instructional materials The HOSPITAL may list
WellCare in its directories and instructional materials.
H. All terms and conditions of this Agreement shall be and remain
confidential between the parties. The terms of this Agreement
shall not be disclosed except as is necessary to the performance
of this Agreement or as required by law.
I. The rights and/or obligations of this Agreement may not be
assigned, delegated, transferred, conveyed or sold without the
prior written consent of the other party, except that WellCare may
assign, delegate, transfer, convey or sell its rights and/or
obligations to a parent, subsidiary or affiliate or to an entity
into which WellCare is merged or with which WellCare is
consolidated or to a purchaser of all or substantially all of its
assets or as part of a corporate reorganization.
J. In the event any dispute shall arise with regard to the
performance or interpretation of any of the terms of this
Agreement, both parties agree to negotiate in good faith to
resolve such dispute. If the dispute is not resolved within
thirty (30) days, both parties agree to submit all matter(s) in
controversy to a Board of Arbitrators consisting of three (3)
members (one member selected by each party to this Agreement, and
these members, in turn selecting a third member). The Board of
Arbitrators so constituted shall proceed under the rules and
regulations of the American Arbitration Association. Both parties
expressly covenant and agree to be bound by the decision of the
arbitrators and accept any decision by a majority of the
arbitrators as a final determination of the matter in dispute.
The parties to this Agreement shall share the cost or arbitration
equally. Arbitration shall not be required of any dispute also
involving a person who is not bound by this or a similar agreement
unless that third party agrees to binding arbitration.
Notwithstanding the forgoing, the Commissioner of the New York
State Department of Health is not bound by the decisions rendered
by the Board of Arbitrators. Furthermore, the Commissioner of the
New York State Department of Health shall be notified of all
issues submitted to arbitration and be sent copies of arbitration
decisions.
K. Any notice required to be given pursuant to the terms and
provisions hereof shall be in writing and shall be sent by
certified mail, return receipt requested, prepaid, to the parties
as follows:
If to WellCare:
WellCare of New York, Inc.
120 Wood Road
Kingston, New York 12401
If to the HOSPITAL :
L. The headings used in this Agreement are inserted for purposes
of convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the
day and year above set forth.
WELLCARE OF NEW YORK, INC.
By:
Title:
Date:
(HOSPITAL)
By:
Title:
Date:
EXHIBIT A (CONTRACTED SERVICES)
EXHIBIT B (HOSPITAL REIMBURSEMENT)
EXHIBIT 10.33a
This Addendum to Employment Contract dated May 23, 1994, and
amended January 1, 1995, by and between The WellCare Management
Group, Inc. (hereinafter referred to as "WellCare") and
Marystephanie Corsones (hereinafter referred to as "Employee") is
entered into this seventh day of March 1996 for the purpose of
amending the following clauses to Employment Agreement.
1. In consideration of the services as Chief Financial Officer
and Acting Vice President of Strategic Planning and Operations of
WellCare, WellCare agrees to pay Employee a salary of $125,000.00
effective January 1, 1996. Both parties agree that the base
salary will automatically increase by four percent (4%) annually
effective January 1 of the remaining contract years.
2. WellCare hereby agrees to provide Employee with a one-time lump
sum cash bonus in the gross amount of $50,000.00.
3. Amendment to Employment Contract dated January 1, 1995, and
replaces said Amendment shall be as follows:
Employee will receive an annual bonus based on her specific
performance of her responsibilities on behalf of WellCare.
Performance bonuses shall be an annual bonus at one percent (1%)
of the annual net (after tax) profit of WellCare up to $100,000.
Net profit will be derived from GAAP audited annual financial
statements of WellCare and its affiliated companies. Any
additional bonuses shall be at the discretion of the Board of
Directors of WellCare. Employee shall retain the right to
request the distribution of year-end bonus funds to any approved
college trust fund, tax deferred retirement fund, or related
entity including but not limited to a rabbi trust.
4. WellCare hereby agrees to provide Employee with a one-time lump
sum severance payment of $250,000 payable upon termination of
employment prompted by WellCare and as a result of a change of
ownership or Board composition of over twenty-five percent (25%)
and an increase in the severance payable in all other
circumstances for a period of twelve (12) months following
termination. Company-paid benefits such as life, long-term
disability, and health insurance will be cancelled the last day
that the Employee is physically on-site performing her job
responsibilities as Chief Financial Officer and Acting Executive
President of Strategic Planning and Operations. However, Employee
will retain any vested rights in bonuses, stock options, or
deferred tax agreements such as a rabbi trust.
This Addendum is signed this 11 day of March 1996.
The WellCare Management Group, Inc.:
By: /s/ Edward A. Ullmann
Edward A. Ullmann, CEO/President
Employee:/s/ Marystephanie Corsones
Marystephanie Corsones
EXHIBIT 10.34a
PERSONAL & CONFIDENTIAL
March 1, 1996
Mr Patrick Arlantico
242 Harwich
Kingston NY 12401
Dear Pat:
Congratulations on your appointment as Chief Operating Officer for
Primergy, Inc.
This letter will acknowledge acceptance of your resignation from
The WellCare Management Group, Inc. effective March 1, 1996, and
will further acknowledge WellCare's release of its restrictive
covenant under Section 6 of your employment contract to allow you
the opportunity to continue your career with Primergy, Inc.
In accordance with the terms and conditions of your employment
contract, please be advised of the following:
Pursuant to Section 2.b., you are eligible to receive an annual
bonus for the period of January 1, 1995 through February 29, 1996.
I am happy to report that I have recommended that a $50,000 bonus
be provided to you to reflect the outstanding performance you
provided to WellCare during this 14-month period. This amount
also reflects all unused, accrued vacation time.
Pursuant to Section 7.c., you have provided WellCare with the
required ninety (90) day written notice of your intent to
terminate your employment.
Pursuant to Section 7.d., WellCare has continue to pay for your
life, long-term disability, dental, and health insurance benefits
during the ninety (90) day notice period.
In addition, please be informed of the following:
According to the Company's 1993 Incentive and Non-Incentive Stock
Option Plan, all corporate stock options expire upon termination
of employment.
In addition to your annual bonus, you will receive a $5,000 bonus
per the attached correspondence dated February 22, 1995.
Good luck with the new chapter in your career. Please don't
hesitate to contact me if you have any questions on any of the
above issues.
Sincerely,
/s/ Ed
Ed Ullmann
President/CEO
EU/nll
cc: Personnel File
EXHIBIT 10.39a
January 19, 1996
Ms. Marystephanie Corsones
Vice President of Finance and
Chief Financial Officer
The WellCare Management Group, Inc.
P.O. Box 4059
Kingston, NY 12401
Via Facsimile
914-334-7820
RE: Modification to two of the Financial Loan Covenants governing
the $15,000,000.00 Revolving Credit Facility between The WellCare
Management Group, Inc. and Key Bank of New York.
Dear Marystephanie:
Key Bank of New York has modified the Leverage and Debt Service
Coverage covenant tests as follows:
The Leverage Ratio (as defined in the June 28, 1995 Loan
Agreement) shall be maintained at less than 2.45:1 as measured as
of the March 31, 1996 10-Q quarter end report. The Leverage Ratio
will then step down as of each subsequent quarter and through the
May 31, 1997 facility maturity date as follows:
June 30, 1996 2.35:1
September 30, 1996 2.25:1
December 31, 1996 2.10:1
March 31, 1997 2:00:1
The Debt Service Coverage Ratio (as defined in the June 28, 1995
Loan Agreement) shall be maintained at 1.65:1 or greater as
measured on the quarterly 10-Q and annual 10-K commencing March
31, 1996.
All other terms, conditions, and covenants related to the
$15,000,000.00 credit facility remain unchanged.
Sincerely,
KEY BANK OF NEW YORK
/s/ Robert J. Bojdak/cdl
Robert J. Bojdak
Senior Vice President
/RB/djw
EXHIBIT 10.39b
January 19, 1996
Ms. Marystephanie Corsones
Vice President of Finance and
Chief Financial Officer
The WellCare Management Group, Inc.
P.O. Box 4059
Kingston, NY 12401
Via Facsimile
914-334-7820
RE: Clarification of Definition of Additional Bank Debt per Key
Bank Loan Agreement
Dear Marystephanie:
Per Section 7.5 of the Key Bank of New York Loan Agreement, the
Subordinated Convertible Note does not constitute additional bank
debt.
Please call me if you need any additional clarification
Sincerely,
KEY BANK OF NEW YORK
/s/Robert J. Bojdak
Robert K. Bojdak
Senior Vice President
/RB:djw
EXHIBIT 10.39c
April 26, 1996
Ms. Marystephanie Corsones
Vice President of Finance and
Chief Financial Officer
The WellCare Management Group, Inc.
Park West/Hurley Avenue Extension
P.O. Box #4059
Kingston, New York 12401
Dear Marystephanie:
Pursuant to your request, Key Bank of New York hereby agrees to a
30 day extension of time to the requirements outlined in Article
6, Section 3 of the Loan Agreement relating to providing you with
copies of our financial statement for the period ended December
31, 1995. Please be advised that we will continue to suspend the
availability under WellCare's $15,000,000.00 Revolving Loan, until
time as the Bank has received and reviewed the December 31, 1995
financial statements and assessed the impact of any restatement of
earnings.
We appreciate the time you, Ed Ullmann, John Markes, and Doug
Phillips took to meet with us on Wednesday, and we are anxiously
awaiting the release of your financial statements. Please do not
hesitate to call me, or any of us at Key Bank, if you have any
questions.
Very truly yours,
/s/ Cynthia D. Langer
Cynthia D. Langer
Senior Vice President
Healthcare Finance Division
EXHIBIT 10.39d
May 24, 1996
Marystephanie Corsones
Vice President of Finance and
Chief Financial Officer
The WellCare Management Group, Inc.
Park West Office Complex
Hurley Avenue Extension
Kingston, NY 12401
Dear Ms. Corsones:
Pursuant to our recent conversations regarding recent covenants in
the Loan Agreement dated June 30, 1995 (the "Loan Agreement")
among The WellCare Management Group, Inc., WellCare of New York,
Inc., WellCare Development, Inc., WellCare Administration, Inc.
and WellCare Medical Management, Inc. and the Bank, please be
advised that the Bank agrees to extend the time required for the
"Borrowers" and "Guarantors" (as each of those terms is defined in
the Loan Agreement) to provide the financial statements required
at Section 6.3(a) of the Loan Agreement for the fiscal year ended
December 31, 1995 for seventy-five (75) days. This extension
applies only to the fiscal year end 1995 statements.
We have also discussed compliance issues with regard to the
financial covenants set forth in Article 5 of the Loan Agreement.
Please accept this letter as the Bank's waiver of any violations
of the covenants set forth in Article 5 which occurred during the
periods ending December 31, 1995 and March 31, 1996.
Additionally, the Bank agrees to forbear from exercising its
rights under the Loan Agreement based on non-compliance with the
provisions of Article 5 occurring during the period ending June
30, 1996 provided that (I) the Loan Agreement is renegotiated
prior to that date in a manner satisfactory to the Bank and (ii)
the Bank does not determine that the financial condition of the
Borrowers or the Guarantors is different in a negative way than
that portrayed to the Bank in the information which you have
provided to us to date.
We confirm that we have begun discussions with you regarding
revisions to the Loan Agreement which would provide for a
reduction in the amount of the Loan and modifications of the
financial covenants set forth in Article 5 of the Loan Agreement.
The purpose of financial covenant revisions would be to establish
financial covenants which the Borrowers, the Guarantors and the
Bank consider achievable based on financial forecasts for fiscal
years 1996 and 1997.
Our consideration of any revisions would require us to review the
year end 1995 and first quarter 1996 financial statements in the
form required by the Loan Agreement together with your forecasts
and all other appropriate financial and non-financial data and
information.
Any revisions to the existing relationship would be subject to our
normal committee review and approval process and as a result, we
cannot commit to you at this time to any revised arrangement or
timetable, particularly since your providing us with appropriate
financial and other information is essential to our beginning the
process.
Based upon our discussions to date and our long standing
relationship, we are anxious to review the financial information
and any other data we need to consider, however, this letter
should not be construed as a commitment to either (I) provide any
waivers or to forbear other than in the manner specifically
described herein or (ii) make any future revisions to the Loan
Agreement.
Sincerely,
/s/ Robert J. Bojdak
Robert J. Bojdak
Senior Vice President
Key Bank of New York
RJB:jes
EXHIBIT 10.43
ASSET PURCHASE AGREEMENT
BETWEEN
WELLCARE MEDICAL MANAGEMENT, INC.
AND
PRIMERGY, INC.
This agreement made on or as of the 30th day of June, 1995, by and
between WELLCARE MEDICAL MANAGEMENT, INC. ("Seller), a New York
corporation having a principal place of business at Park West,
Hurley Avenue Extension, Kingston, New York 12401 and PRIMERGY,
INC. ("Buyer"), a New York corporation having a principal place of
business at 25 Barbarosa Lane, Kingston, New York 12401.
RECITALS:
WHEREAS, Seller conducts a medical management company which
provides management, administration and other services, facilities
and equipment to persons and entities engaged in the private
practice of medicine and
WHEREAS, Buyer is engaged in the same business as Seller, and
WHEREAS, Seller desires to sell and buyer desires to purchase
certain assets of Seller as more fully described herein.
AGREEMENTS
NOW, THEREFORE, in consideration of mutual promises herein
contained and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties,
intending to be bound, agree as follows:
1. DEFINITION OF THE "BUSINESS". For purposes of the Agreement
"Business" means the business of Seller. Managing doctors'
practices in Dutchess, Orange and Ulster Counties, New York.
2. SALE OF ASSETS. Subject to the terms and conditions
hereinafter set forth, Seller hereby sells, transfers and delivers
to Buyer, and Buyer hereby purchases, all of the Seller's right,
title and interest in and to the property and assets relating to
the Business as set forth below:
(a) Seller's Business as a going concern and all customer
relations and goodwill related thereto;
(b) The items of Seller's tangible personal property (furniture,
fixtures, equipment and vehicles) used or usable in the conduct of
the Business set forth on Schedule 2(b) attached hereto;
(c) All of the Seller's contract rights to provide services
(d) Seller's records regarding the management and operation of the
Business, including customers' files, collection and credit
records, sales reports, advertising literature and vendor lists;
(e) Seller's customer list;
(f) Seller's accounts receivable; and
(g) Seller's cash.
(All of the foregoing being hereinafter referred to as the
"Purchased Assets" or the "Assets".)
Except as set forth in (a) through (g) above. All other property
and assets of Seller relating to Seller's business, including,
without limitation, Seller's life insurance, prepaid expenses,
real estate investments, claim for tax credits or refunds, and all
assets relative to the business of Seller other than the Business
shall remain the property of the Seller.
(3) PURCHASE PRICE. The Purchase Price for the Purchased Assets
shall be the same of Five Million Seven Hundred Thousand Dollars
($5,700,000.00).
(4) PAYMENT OF PURCHASE PRICE. The purchase Price for the
Purchased Assets is being paid as follows:
(a) Five Hundred and Seventy Thousand Dollars ($570,000.00)
payable at closing.
(b) The $5,130,000.00 balance by a Promissory Note in a form
substantially similar to Exhibit A, which note shall be secured by
the assets pursuant to a Security Agreement in a form
substantially similar to Exhibit B.
5. ALLOCATION OF THE PURCHASE PRICE. The total Purchase Price
shall be allocated among Purchased Assets in accordance with
Schedule 5 which reflects the relative fair market values of the
Purchase Assets. The parties agree to use such allocation in IRS
Form 8594 to comply with the provisions of Section 1060 of the
Internal Revenue Code. Seller's approval of allocations made by
the Buyer will not be unreasonably withheld.
6. LIABILITIES OF SELLER. Buyer hereby assume (i) all of
Seller's obligations pursuant to the contracts listed in schedule
6A (the "Assumed Contracts") and (ii) accounts payable of Seller
set forth in Schedule 6B ("Assumed Accounts Payable ). Buyer
shall satisfy the Assumed Contracts and the Assumed Accounts
Payable and perform Seller's obligation with respect thereto in a
timely fashion and in accordance with any applicable legal or
contractual requirements. Buyer shall be entitled to Seller's
respective rights and benefits thereunder and Seller shall be
relieved of its obligations to perform the same.
Notwithstanding anything in the Agreement to the contrary, except
as otherwise expressly provided above, Buyer is not assuming
pursuant hereto any liabilities, obligation or duties of Seller or
any of its affiliates of any kind or nature, whether or not
accrued or fixed, absolute or contingent, determined or
determinable (including, without limitation, any penalties, fines
or compensatory or punitive damages of any kind whatsoever),
existing at the time of or arising out of or relating to acts,
events or omissions to act that occurred at or prior to the
Closing. Seller shall retain and duly perform any and all such
liabilities, obligations or duties.
7. ASSUMED CONTRACTS. Seller and Buyer concurrently are
executing an assignment of contracts substantially in the form set
forth in Exhibit C hereto, whereby Seller has assigned to Buyer
and Buyer is assuming all of Seller's right, title and interest in
and to the Assumed Contracts.
Seller shall not cause any material changes to be made to the
Assumed Contracts following the execution of this Agreement unless
such changes have been agreed to by Buyer.
8. ACCOUNTS RECEIVABLE. Concurrently, Seller is providing Buyer
with a list of its outstanding accounts receivable relative to the
Business.
9. SELLER'S WARRANTIES AND REPRESENTATIONS. Seller warrants and
represents to the Buyer with respect to the Business:
(a) Seller has been duly organized and is validly existing and in
good standing under the laws of the State of New York with full
power and authority to own its assets and operate its business in
the manner and places where such business is presently being
conducted.
(b) The execution and delivery of the Agreement and the
consummation of the sale contemplated in accordance with all the
terms hereof have been duly authorized by the board of directors
and stockholders of Seller. This Agreement is a valid and
enforceable obligation of Seller, enforceable in accordance with
its terms.
(c) Seller has good and marketable title to all of the Purchased
Assets, free and clear of all liens, mortgages, security
interests, pledges, conditional sales agreements, encumbrances or
charges whatsoever, except as set forth on Schedule 9(d) hereto,
and with respect to which no default exits, and all of which in
the aggregate do not materially detract from the value or
marketability of such properties or assets or materially interfere
with or impair the present or contemplated use thereof in the
ordinary course of business. All of the Purchased Assets are in
Seller's possession and control, are in good operating condition
and repair, subject only to normal wear and tear and are adequate
for the current operations of Seller. The execution of this
Agreement and the performance of the covenants herein contemplated
has not resulted in the creation of any lien, charge or
encumbrance upon any of the Purchase Assets pursuant to any
indenture, agreement or other instrument to which the Seller is a
party, or by which the Seller is bound or by which the Business or
Purchase Assets may be affected.
(d) There are no contracts or agreements, oral or written, in
existence which materially affect or relate to the use or
operation of the Purchase Assets or that would affect the value or
sale of the Purchase Assets. The Assumed Contracts constitute the
sole and only contracts, leases, commitments and orders of Seller
and Seller is not in default with respect thereto nor have any
notices of default been received by Seller with respect thereto.
All of the Assumed Contracts have been made in the ordinary course
of business and there are no escalator, re-negotiation or
re-determination clauses with respect thereto, nor is there any
pending or threatened cancellation thereof know to Seller.
(e) Except as stated in Schedule 9(f), hereto, no advance payments
or deposits have been made to or with Seller on any contracts or
accounts.
(f) No consents, registrations, approvals, permits or
authorizations required to be obtained, as of the date of
execution of the Agreement, by Seller from any governmental or
regulatory authorities of the United States or the several States
in connection with the execution and delivery of this Agreement by
Seller and the consummation by Seller of the transactions
contemplated hereby.
(g) Attached hereto as Schedule 9(j) is a list of salaried
personnel of Seller setting forth the name, salaries and position
of such personnel.
(h) The names of all persons employed by Seller as salesmen or
engaged as independent sales agents, and all persons who are
parties to written contracts for personal services are set forth
on Schedule 9(k) attached hereto.
(i) Except as set forth in Schedule 9(m), hereto, Seller is not
engaged in or threatened with any suit, action, proceeding,
governmental investigation or other controversy, which might give
rise to any claim against it or which might materially affect any
of its contractual rights or its business, and Seller is not
subject to any outstanding judgement, order, decree or injunction
of any court or governmental body.
(j) To the best of Seller's knowledge, all of the Purchased Assets
conform in all material respects to all application laws,
ordinances, orders and regulations (including laws protecting the
environment and relating to the storage and disposal of hazardous
wastes) and applicable public and private covenants and
restrictions. The use of the Purchased Assets is, to the best of
the Seller's knowledge, in substantial conformity with applicable
laws, ordinances, orders, regulation, covenants and restrictions,
and all necessary permits have been obtained. All material notes
or notices or violation of law, ordinances, orders or regulations
noted in or issued by any state, county, municipal or local
department having jurisdiction against or affecting any of the
Purchased Assets, including, but not limited to the storage,
transportation and/or disposal of hazardous or toxic materials,
have been compiled with by Seller.
(k) The Business has been conducted only in the ordinary course,
and there has not been any material transaction other than in
accordance with such ordinary and usual course. There has not
been any development or combination of developments of which to
Seller's knowledge, individually or in the aggregate are
reasonably likely to result in any material adverse effect in the
financial condition, prospects, properties or results of
operations of the Business other than general industry trends.
(l) The documents delivered or to be delivered by or on behalf of
Seller pursuant to this Agreement are true copies of all such
documents. All statements contained in any exhibit, schedule,
certificate or other instrument delivered by or on behalf of
Seller pursuant thereto, or in connection with the transactions
contemplated hereby, shall be deemed representations and
warranties of the Seller. No representation, warranty, covenant
or statement by Seller in the Agreement (including any exhibits or
schedules annexed hereto) contain any untrue statement of a
material fact known to Seller and upon which Buyer relied, or
omits or will omit a material fact known to Seller, the omission
of which will make the statement contained herein or therein
misleading and upon which Buyer relied.
10. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to Seller as follows:
(a) Buyer has been duly organized and is validity existing and in
good standing under the laws of New York with full power and
authority to own its assets and operate its business in the manner
and places where such business is presently being conducted.
Buyer is duly qualified to do business and is in good standing in
every jurisdiction in which its ownership of real property or the
nature of the business it conducts makes such qualification
necessary.
(b) No consent, approval or authorization of, or designation,
declaration or filing with any governmental authority on the party
of Buyer is required in connection with the execution and delivery
of the Agreement or the consummation of the transactions
contemplated herein.
(c) This Agreement, the option agreement of even date herewith
between Buyer and WellCare Management Group, Inc. and the various
documents, instruments and agreements called for herein have been
duly executed and delivered by the Buyer, and constitute legal,
valid, binding obligations of Buyer, enforceable against Buyer in
accordance with the terms thereof.
(d)Buyer and/or any of its affiliated corporations is not engaged
in or threatened with any suit, action, proceeding, governmental
investigation or other controversy, which might give rise to any
claim against it or if which might materially affect any of its
contractual rights or its business; and Buyer is not subject to
any outstanding judgement, order decree or injunction of any court
or governmental body.
(e) The documents delivered or to be delivered by or on behalf of
Buyer pursuant to this Agreement are true copies of all such
documents. All statements contained in any exhibit, schedule,
certificate or other instrument deliver by or on behalf of Buyer
pursuant thereto, or in connection with the transactions
contemplated hereby, shall be deemed representations and
warranties of the Buyer. No representation, warranty, covenant or
statement by Buyer in this Agreement (including any exhibits or
schedules annexed hereto) contain any untrue statements of a
material fact known to Buyer and upon which Seller relied, the
omission of which will made the statement contained herein or
therein misleading and upon which Seller relied.
11. EMPLOYEES. Buyer may offer employment to certain of Seller's
employees and has notified Seller of those Employees to whom it is
offering employment. Seller agrees to encourage such employees to
whom Buyer offers employment to accept employment with Buyer.
Those employees who accept such offers are referred to as
"Retained Employees". Seller may terminate all other employees as
of the Closing Date except that if Seller determined to retain any
such employees in its employ after the Closing Date, it may do so
but shall have full responsibility for such employees.
Nothing in this Agreement, however, shall be interpreted to create
a contractual right to continuing employment with any employee of
Seller.
Seller shall be responsible for payments of holdbacks, accrued
vacation not taken by an employee and for bonuses, if any, with
respect to service completed prior to the Closing Date. Seller
shall within ten days after the Closing date make a cash payment
to employees who accept positions with Buyer for their accrued
vacation days or fractions thereof earned but unused while
employed by Seller. For purposes of this Section, personal choice
days or fractions thereof will be treated as vacation days. After
the Closing Date, employees who accept positions with Buyer will
be eligible to earn vacation according to the schedule specified
in Buyer's policy.
Seller shall retain the responsibility for payment of all medical,
dental, health and disability claims incurred by any of its
employees prior to the closing Date, (to the extent that such
claims are covered by Seller's benefit plans) and Buyer shall not
assume any liability with respect to such claims.
Seller agrees that it shall retain, consistent with its normal
employment practices, all liability and obligation, if any,
(including, without limitation, the liability and obligation for
all wages, salary, vacation pay and unemployment, medical, dental,
health and disability benefits) for those former employees of
Seller who retired or terminated employment prior to the Closing
Date or otherwise do not become employees of Buyer.
12. CLOSING. The time, place and manner of closing this
transaction shall be as follows:
(a) The transfer of ownership of the Purchase Assets and the
payment of the purchase price shall take place at 10:00 A.M., on
June 30, 1995 (the "Closing" or the "Closing Date") at the offices
of WellCare Medical Management, Inc., Park West, Hurley Avenue
Extension, Kingston, New York, or such other date and place as may
be mutually agreed upon by the parties. The Closing shall be
effective and the transfer of ownership of the Purchased Assets
shall be deemed to have occurred as of the close of business on
the date of the Closing.
(b) At the Closing, all transactions shall be conducted
substantially concurrently and no transaction shall be deemed to
be completed until all are completed.
(c) At the Closing, Seller shall execute, acknowledge and
deliver to Buyer necessary instruments, in form and substance
reasonably satisfactory to counsel for Buyer, as may be required
or as may be appropriate to vest in Buyer good and marketable
title to all Purchased Assets free and clear of all liens, claims,
restrictions and other encumbrance, except for the Assumed
Accounts Payable, the Assumed Contracts, liens and encumbrances,
if any, as do not, individually or in the aggregate, materially
detract from the value of or interfere with the present use of
such property or otherwise materially impair the operation of the
Business, including:
(i) A general assignment and bill of sale in form reasonably
satisfactory to counsel for Buyer as shall be necessary for
conveying to Buyer all of the personal property of every nature
and description constituting part of the Purchased Assets,
including certificated of title on all vehicle purchased by Buyer
and assignments of all personal property leases assumed by Buyer;
(d) At the Closing, Buyer shall, upon due performance by the
Seller of its obligations hereunder, issue or deliver to Seller:
(i) An assumption of the Assumed Accounts Payable;
(ii) Federal funds wire transfer or bank check in an amount equal
to the $570,000.00;
(iii) The Promissory Note and Note Agreement in the form set forth
in Exhibit A hereto;
(iv) The Security Agreement in the form set forth in Exhibit B.
(v) The Assignment of Contracts in the form set forth in Exhibit C
hereto;
(vi) All necessary documents as counsel for Seller may reasonably
determine as required or appropriate to assume the obligations
which Buyer has agreed to assume hereunder.
(e) The parties shall deliver at the Closing such certificates and
other documents not heretofore delivered as may be required to be
delivered by the Agreement or the delivery of which is required to
satisfy the conditions herein expressed.
(f) All operating expenses and fees accrued or prepaid up to and
including the closing Date, including, without limitation, wages,
salaries, utility payments, personal property taxes, and
assessments relating to the Assets, transferred at Closing , shall
be pro-rated between the parties.
15. DILIGENT EFFORTS TO CONSUMMATE; FURTHER ASSURANCES. Each of
the parties agrees to use diligent efforts to complete the
purchase and sale of assets as contemplated by the Agreement, and
in so doing, to satisfy each and all of the conditions to the
closing set forth herein. From time to time, at Buyer's request
Seller will execute and deliver such further instruments of
conveyance, transfer and assignment and take such other action as
Buyer may require to more effectively convey and transfer to Buyer
in the collection or reduction to possession of such assets and
property. Buyer shall deliver or cause to be delivered such
additional instruments and do and perform all such other acts as
may reasonably be required by Seller for the purpose of carrying
out this agreement.
Promptly after the execution of this Agreement, Seller will meet
with Buyer to investigate, confirm and agree upon mutually
acceptable transaction settlement procedures and procedures and
scheduled for the transfer of the operation of the Business.
16. USE OF SELLER'S NAME. Buyer shall not adopt, use, cause to
be used or approve or sanction Seller's name "WellCare Medical
Management, Inc." or any name so similar as to cause confusion
therewith, except to the extent necessary to collect the Collected
Receivables.
17. PARTIES IN INTEREST. This agreement shall inure to the
benefit of and be binding upon the parties named herein and their
respective successors and assigns. Nothing in this Agreement,
express or implied, is intended to confer upon any person other
than the parties named herein and their respective successors or
assigns any rights or remedies under or by reason of this
Agreement.
18. BULK SALES ACT COMPLIANCE. Seller and Buyer mutually agree to
waive compliance with Article 6 of the New York Uniform Commercial
Code.
19. SELLER'S INDEMNIFICATION. Seller shall forever defend,
indemnify and hold Buyer harmless against and in respect of:
(a) Any liability of Seller not expressly assumed by Buyer
hereunder.
(b) Any and all claims for sales, use or other taxes which Seller
is obligated to pay by law or by this Agreement.
(c) All actions, suits, proceedings, claims, demands,
judgements, assessments, costs and expenses (including reasonable
attorney's fees) incident to any claim under clauses (a) and (b)
above.
Buyer shall give Seller prompt written notice of any claims made
against it which, if valid, would give rise to a claim for
indemnification under this Section 19 and Seller may, as its
option, employ counsel to defend against the claim at Seller's own
expense in the names of Seller or Buyer. Buyer will take all
reasonable action to cooperate in all ways necessary to assist
Seller in such defense, provided same is without cost to Buyer.
If Seller fails to defend against any such claim, Buyer shall use
its reasonable efforts to defend or minimize such claim, but the
determination of Buyer in good faith as to the handling thereof
shall be final.
If any claim which give rise to a claim for indemnification under
the Section 19 shall result in a judgement, decree, injunction,
award or lien against Buyer, Seller shall upon demand satisfy,
discharge or effectively stay the enforcement of same until
satisfied or discharged. To the extent that Buyer incurs any
liability, cost or expenses with respect to any claim for which it
is indemnified hereunder and provided that Buyer has not given
Seller the notice of such claim as required by this Section 26,
and further provided that Seller is not, in good faith, defending
such claim, such liability, cost or expenses may be set-off by
Buyer against any amounts owned Seller by Buyer, without in any
manner limiting Buyer's right to seek any other remedy at law or
in equity against Seller. Notwithstanding the foregoing, Buyer
may exercise its right of set-off hereunder even though Seller is,
in good faith, defending such a claim, if such claim shall result
in a judgement, decree, injunction, award or lien against Buyer
and Seller has not satisfied, discharged or effectively stayed the
enforcement of same.
20. NEW YORK STATE SALES TAX. Seller shall provide Buyer with
all information regarding Seller's Business required for the
completion of New York State Tax Form AU-196-10, including
Seller's Certificate of Authority Identification Number. Buyer
shall pay all sales tax due in connection with the purchase of the
assets contemplated herein.
All sales, excise, use and real property transfer taxes that are
payable or that arise as a result of the consummation of the
purchase and sale contemplated by the Agreement shall be collected
by Seller and remitted to the State of New York. Seller shall
indemnify and hold Buyer harmless from and against any assessment
based upon Seller's failure to remit such taxes to the State of
New York.
After The Closing Date, each of Seller and Buyer shall make
available the other and subject to attorney-client privilege to
any taxing authority as reasonable requested all relevant
information, records, and documents relating to taxes with respect
to the assets or income therefrom, the liabilities or payments in
respect thereof.
BROKERAGE COMMISSION. Seller and Buyer each represent and warrant
to the other they have dealt with no broker or finders in
connection with this transaction.
SURVIVAL OR REPRESENTATIONS AND WARRANTIES. All the indemnities,
representations, warranties and covenants of Seller and Buyer
hereunder shall survive the Closing Date for a period of three (3)
years.
SEVERABILITY. The provisions of the Agreement shall be
interpreted in such a manner as to comply with all applicable laws
to the fullest extent possible; but if, notwithstanding such
interpretation, any provision is determined to be illegal,
invalid, or unenforceable, the remaining provisions of the
Agreement shall not be affected, shall remain in full force, and
shall continue to be binding upon the parties.
ENTIRE TRANSACTION. The Agreement contains the entire
understanding among the parties with respect to the transactions
contemplated hereby and supersedes all other agreements and
understandings among parties and their officers, directors or
employees. Except as expressly set forth in the Agreement, none
of the parties has relied upon any oral representation or oral
information given to it by any representative of either party.
EXPENSES. Each party hereto shall pay its own expenses incidental
to the preparation for carrying this Agreement into effect and
consummating this transaction.
APPLICABLE LAWS. The Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
LITIGATION RELATING TO THE SELLER. It is possible that in the
future, litigation may arise relating to Seller's Business and
which may relate directly or indirectly to the period prior to the
Closing or the period subsequent to the Closing, or both. Each of
the parties agrees, therefore, that to the extent reasonable under
the circumstances, it will fully cooperate with and provide
information, records and documents to the other party with respect
to any such litigation or potential litigation in which such other
party or parties is or maybe involved.
Through the Closing Date, Seller will maintain the records of the
Business in the same manner and with the same care that such
record have been maintained prior to the execution of the
Agreement. All records whether held by Buyer or Seller, shall be
maintained for such periods as are required by law, unless the
parties shall, applicable law permitting, agree in writing to a
different period. From and after the Closing Date, each of the
parties shall permit the other reasonable access to any applicable
records to the extent reasonably necessary to defend litigation
brought against such party.
SECTION HEADINGS. The section headings contained in the Agreement
are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
SCHEDULES. The schedules attached hereto are an integral part of
the Agreement and are incorporated herein by reference. The
schedule numbers of the Section of the Agreement to which they
relate.
WAIVER. Each party may, at its option, waive in writing any or
all of the conditions herein contained to which its obligations
hereunder are subject.
NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be sent by registered or
certified mail, postage prepaid, addressed as follows:
(a) If to Buyer:
PrimErgy, Inc.
25 Barbarosa Lane
Kingston, New York 12401
With a copy to:
McNamee, Lochner, Titus and Williams, P.C.
75 State Street
P.O. Box 459
Albany, New York 12201-0459
Attn: Vincent L. Valenza, Esq.
(b) If to Seller:
WellCare Medical Management, Inc.
Park West/Hurley Avenue Extension
Kingston, New York 12401
With a copy to:
Epstein, Becker and Green, P.C.
250 Park Avenue
New York, New York 10177
Attn: Jeffrey Becker, Esq.
or at such other address or to the attention of such other office,
as either party shall have designated in writing to the other.
COUNTERPARTS. The Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
GUARANTEE. Buyer agrees to guarantee to WellCare New York the
notes receivable from the medical practices managed by Buyer
listed on Schedule 3 pursuant to a guarantee substantially in the
form attached hereto as Exhibit D.
COUNSEL. Buyer and Seller are aware of and waive the conflict of
interest of McNamee, Lochner, Titus & Williams, P.C. in
representing both the Buyer and Seller in this transaction.
IN WITNESS WHEREOF, the parties hereto have executed or caused
duly authorized officers to execute this Agreement all as of the
day first above written.
BUYER
PRIMERGY, INC.
/s/ Richard Weininger
BY: RICHARD WEININGER, PRESIDENT
SELLER:
WELLCARE MEDICAL MANAGEMENT, INC.
/s/ Robert E. Goff
BY: ROBERT E. GOFF, PRESIDENT
STATE OF NEW YORK )
)ss:
COUNTY OF ULSTER )
On this 26th day of July 1995, before me the subscriber personally
appeared Richard Weininger, M.D., who being by me duly sworn, did
depose and say; that he resides at Millbrook Road, Claverack, NY,
that he is the president of PrimErgy, Inc., the corporation
described in and which executed the foregoing instrument; and that
he/she signed his/her name thereto by order of the Board of
Directors of said corporation.
NOTARY PUBLIC
/s/ Gloria Alisandrella
GLORIA ALISANDRELLA
Notary Public, State of New York
Qualified in Orange County
Reg. No. 4899328
Commission Expires 7-6-97
STATE OF NEW YORK )
)ss:
COUNTY OF ULSTER )
On this 26th day of July 1995, before me the subscriber personally
appeared Robert E. Goff, who being by me duly sworn, did depose
and say; that he resides at RD1 Old Castle Point Road, Wappinger
Falls, that he is the President of WellCare Medical Management,
Inc. the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
NOTARY PUBLIC
/s/ Gloria Alisandrella
GLORIA ALISANDRELLA
Notary Public, State of New York
Qualified in Orange County
Reg. No. 4899328
Commission Expires 7-6-97
EXHIBIT 10.44
BILL OF SALE
WellCare Medical Management, Inc., a New York business corporation
("Assignor"), pursuant to the Asset Purchase Agreement (the
"Agreement"), dated as of June 30, 1995, between Assignor and
PrimErgy, Inc., a New York business corporation ("Assignee"), and
for good and valuable consideration to it in hand paid, receipt of
which is hereby acknowledged, hereby sells, transfers, conveys,
assigns and delivers unto Assignee, its successors and assigns,
all of the business, properties, rights, contracts, goodwill and
assets (whether tangible or intangible) of Assignor as a going
concern, and all of Assignor's right (whether at common law or
otherwise), claims (including, without limitation, the proceeds of
any claim that may not be assignable), title and interest therein
and thereto, irrespective of the time or date on which any such
right, claim, cause of action or interest may arise or accrue (the
"Assigned Assets").
Without limiting the generality of the foregoing, the Assigned
Assets being sold, transferred, conveyed, assigned and delivered
hereunder by Assignor include all of the right, title and interest
in, to and under the following assets:
(a) any interest in real estate, together with fixtures and all
other appurtenances thereto;
(b) leases, security deposits and options under leases, licenses,
franchises, sales and other contracts;
(c) inventories, equipment, furniture, tools, vehicles, operating
supplies, instruments and fixtures;
(d) petty cash as of the date hereof;
(e) patents, patent applications, copyrights, trademarks,
trademark registration applications, trade secrets, trade names
and other intangibles (collectively, "Intellectual Property");
(f) an irrevocable, assignable, perpetual, royalty-free,
non-exclusive license to use and sublicense Intellectual Property
that is used in the business of Assignor;
(g) insurance policies;
(h) accounts receivable;
(i) notes receivable;
(j) sales literature, promotional literature and other selling
material;
(k) designs, drawings, research, marketing and operating and other
data, records, files, invoices, customer lists, supplier lists,
blueprints, specifications, business records and plans and all
other book and records, including, without limitation, those
maintained on tape, discs or other magnetic or electronic storage
media;
(l) shares of any corporations; and
(m) to the extent not otherwise included in (a)-(k) above, all
existing business, properties, rights, contracts, goodwill and
assets (whether tangible or intangible) of every kind and nature,
real or personal, tangible or intangible, including, without
limitation, warranties or performance guaranties to the extent
assignable.
Assignor hereby authorizes Assignee to take any appropriate action
in connection with any of the Assigned Assets, in the name of
Assigned or in its own or any other name but at its own expense.
TO HAVE AND TO HOLD the Assigned Assets, unto Assignee and its
successors and assigns, to and for its or their use forever.
And Assignor does hereby warrant, covenant and agree that it:
(a) shall warrant and defend the sale of the Assigned Assets
against each and every person or persons whomsoever claiming or
who may claim against any or all of the same; and
(b) shall take all steps necessary to put Assignee, its successors
or assigns in actual possession and operating control of the
Assigned Assets.
IN WITNESS WHEREOF, Assignor has caused the same to be signed by
its President and its Secretary and its corporate seal to be
affixed hereto as at the opening of business on this 30th day of
June, 1995.
WELLCARE MEDICAL MANAGEMENT, INC.
/s/ Robert E. Goff
By: ROBERT E. GOFF, PRESIDENT
ATTEST:
/s/ Marystephanie Corsones
By: MARYSTEPHANIE CORSONES
SECRETARY
STATE OF NEW YORK )
)ss:
COUNTY OF ULSTER )
On this 26th day of July 1995, before me the subscriber personally
appeared Robert E. Goff, who being by me duly sworn, did depose
and say; that he resides at RD1 Old Castle Point Road, Wappinger
Falls, NY, that he is the President of WellCare Medical
Management, Inc. the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation
NOTARY PUBLIC
/s/ Gloria Alisandrella
GLORIA ALISANDRELLA
Notary Public, State of New York
Qualified in Orange County
Reg. No. 4899328
Commission Expires 7-6-97
EXHIBIT 10.45
PROMISSORY NOTE
$5,130,000
Kingston, New York
Dated: June 30, 1995
FOR VALUE RECEIVED, PrimErgy, Inc., a New York corporation with an
office for the transaction of business located at 25 Barbarosa
Lane, Kingston, New York 12401 (the "Borrower") promises to pay to
the order of WellCare Medical Management, Inc., a New York State
corporation with its principle office and place of business at
Hurley Avenue Extenstion, Kingston, New York, 12401 ("Lender") the
principal sum of Five Million One Hundred Thirty Thousand Dollars
and no/100 ($5,130,000) pursuant to the terms of the Note and a
Note Agreement, dated the date hereof, with interest on the unpaid
principal balance of such amount at the Interest Rate (as
hereinafter defined). This Note evidences a loan (the "Loan")
made available to Borrower as part of a credit facility more fully
set forth in the Note Agreement.
I
DEFINITIONS
Except as otherwise defined herein, capitalized terms used herein
shall have the following definitions:
"Based Rate" shall mean the rate of interest set, determined or
announced on a periodic basis by the Lender as its "Base Rate".
"Default Interest Rate" shall mean the applicable Interest Rate
plus four (4%) percent per annum.
"Interest Rate" shall mean the rate of interest (rounded up to the
nearest one-eighth (1/8%) percent) to be calculated hereunder and
paid by Borrower on any outstanding principal due under this Note
and shall be the Prime Rate.
"Interest Rate Period" shall mean the time period during which
interest is to accrue on the loan at the Prime Rate. An Interest
Rate Period shall be a term of three months (or, for the first
Interest Rate Period only, the two month time period commencing
August 1, 1995). In no event shall any Interest Rate Period
extend beyond the maturity Date of the Loan.
"Prime" shall mean the rate designated under the heading "Prime
Rate" in the "Money Rates" column as published in The Wall Street
Journal two days prior to the date of the end of the quarter for
which a Prime Rate is being calculated.
"Prime Rate" shall mean a fixed rate equal to Prime plus two
percentage points.
"Maturity Date" shall mean July 31, 2000.
II
INTEREST
(a) COMPUTATION OF INTEREST. Interest on the outstanding
principal balance of this Note shall be computed on the basis of a
360-day year. Interest shall accrue until the Loan is repaid.
(b) INTEREST RATE CHANGE PROCEDURES. The Prime Rate calculated
hereunder for the Interest Rate Period shall each change in the
Base Rate shall effect a corresponding rate in the Variable Rate.
(c) IMPLEMENTATION OF DEFAULT INTEREST RATE. Upon occurrence of
an Event of Default (hereinbelow), the computation of interest
under this Note shall immediately and without further action by
the Lender be based upon the Default Interest Rate.
III
PAYMENT OF PRINCIPAL AND INTEREST
(a) INTEREST PAYMENTS. For the first twelve month period of this
Note, Borrower shall pay interest at the applicable Interest Rate
on the sum of Five Million One Hundred and Thirty Thousand Dollars
and 00/100 Dollars ($5,130,000) beginning on the first (1st) day
of August, 1995 and continuing on the first day of each month
thereafter.
(b) PERIODIC INTEREST AND PRINCIPAL PAYMENTS. Commencing August
1, 1996, borrower shall pay all applicable principal and interest
payments on the first day of August 1996 and continuing on the
first day thereafter until the maturity date (or such earlier date
in the event lender accelerates borrowers obligation hereunder) at
which time any accrued and unpaid interest and principal must be
paid.
(c) Borrower shall remit to Lender any debt coverage surplus (as
defined in Appendix 1) in excess of a 1.1 debt coverage ratio
within one hundred fifty (150) days of fiscal year end. Said
surplus shall not be in excess of a 1.2 debt coverage surplus (as
defined in Appendix 1).
IV
GENERAL CONDITIONS
(a) METHOD OF PAYMENT. All payments under this Note are payable
at Hurley Avenue Extension, Kingston, NY 12401 or at such other
places as Lender shall notify Borrower in writing. Lender
reserves the right to require any payment on this Note, whether
such payment is of a regular installment or represents a
prepayment, to be by wired federal funds or other immediately
available funds or to be paid at a place other than the above
address.
(b) APPLICATION OF PAYMENTS RECEIVED. Expected as may otherwise
be provided in the Note, all payments received by Lender on this
Notes shall be applied by Lender to any unpaid Late Payment
Charges (hereinbelow defined), accrued and unpaid interest then
due and owing and the reduction of principal of the Note, in such
order and in such amounts as Lender may determine from time to
time.
(c) LATE PAYMENT CHARGES. If Borrower fails to pay any amount of
principal and/or interest on the Note for ten (10) days after such
payment becomes due, whether by acceleration or otherwise, Lender
may, at its option, whether immediately or at the time of final
payment of the amounts evidenced by the Note, impose a late
payment charge (the "Late Payment Charge") computed by multiplying
the amount of each past due payment by four (4%) percent. Until
any and all Late Payment Charges are paid in full, the amount
thereof shall be added to the indebtness secured by the Note
Agreement. The Late Payment Charge is not a penalty and is deemed
to be liquidated damages for the purpose of compensating Lender
for the difficulty in computing the actual amount of damages
incurred by Lender as a result of the payment by Borrower.
(d) PREPAYMENT. The principal balance may be prepaid in whole or
in part, at any time without premium or penalty. OR
In the event Lender received partial prepayments, or in the event
that Lender shall receive proceeds of condemnation or insurance
proceeds for application against the Loan, such prepayments and
proceeds shall be applied to installments of principal in the
inverse order of maturity.
(e) ACCELERATION AND DEFAULT. If:
(1) Borrower fails to pay any sum due on this Note within ten (10)
days of the date the same is due; or
(2) Borrower shall fail to perform any other covenant, obligation
or agreement required to be performed by Borrower under this Note,
for ten (10) days after Lender has given written notice of such
failure to Borrower; or
(3) Any warranty or representation made or given by Borrower or
any financial or other statement submitted by or on behalf of
Borrower, in reference to this Note or Note Agreement should be
false or misleading in any material respect; or
(4) Borrower shall generally not be paying debts as they become
due or file a petition or seek relief under or take advantage or
any insolvency law; make an assignment for the benefit of
creditors; commence a proceeding for the appointment of a
receiver, trustee, liquidator, custodian or conservator of
Borrower or any Guarantor or of the whole or substantially all of
Borrower's or any Guarantor's property or of any collateral
pledged as security for the Note; or if Borrower or any Guarantor
shall file petition or an answer to a petition under any chapter
of the Bankruptcy Reform Act of 1978, as amended (or any successor
statute thereto), or file a petition or seek relief under or take
advantage of any other similar law or statute of the United States
of American, any state thereof, or any foreign country subdivision
thereof; or
(5) A Court of competent jurisdiction shall enter an order,
judgement or decree appointing or authorizing a receiver, trustee,
liquidator, custodian or conservator of Borrower or an Guarantor
or of the whole or substantially all of Borrower's or any
Guarantor's property, or any portion of the collateral pledged as
security for this Note, or enter an order of relief against
Borrower or any Guarantor in any case commenced under any chapter
of the Bankruptcy Reform Act of 1978, as amended (or any successor
statute thereto), to grant relief under any other similar law or
statute of the United States of America, any state thereof, or any
foreign country or subdivision thereof and the same is not stayed
or discharged within sixty (60) days of entry; or
(6) Under the provisions of any law for the relief or aid of
debtors, a court of competent jurisdiction or a receiver, trustee,
liquidator, custodian or conservator shall assume custody or
control or take possession from Borrower or any Guarantor of all
or substantially all of Borrower's or any Guarantor's property or
any portion or any collateral pledged as security for the Note; or
(7) There is commenced against Borrower any proceeding for any of
the foregoing relief or if a petition is filed against Borrower or
any Guarantor under any chapter of the Bankruptcy Reform Act of
1978, as amended (or any successor statute thereto), or under any
other similar law or statute of the United States of America, any
state thereof, or any foreign country or subdivision thereof, and
such proceeding or petition remains undismissed for a period of
sixty (60) days or if Borrower or any Guarantor by any act
indicates consent to, approval of or acquiescence in any such
proceeding or petition; or
(8) Lender receives a notice to creditors with regard to a bulk
transfer by Borrower pursuant to Article VI of the Uniform
commercial Code or if the Borrower shall dissolve, terminate its
existence, fail, cease normal business operation or otherwise
discontinue its existence; or
(9) Borrower fails to comply with any of the provisions set forth
in the Note Agreement dated June 30, 1995, it being understood
that the terms of said Note Agreement are hereby incorporated in
this Note.
(10) An "Event of Default", as said term is defined in the Note
Agreement, shall have occurred; or
(11) Borrower fails to comply with the terms of or an "event of
default" occurs under any other loan transaction or credit
arrangement of any kind with Lender including without limitation,
then, and in any such event (an "Event of Default"), Lender may,
at its option, proceed to exercise any rights or remedies that it
may have under this Note or the Note Agreement, or such other
rights and remedies which Lender may have at Law, equity or
otherwise. In the event of such acceleration, Borrower may
discharge its obligation to Lender by paying:
the unpaid principal balance hereof as at the date of such
payment, plus
accrued interest computed in the manner set forth above, plus
any Late Payment Charge computed in the manner set forth above.
(f) COSTS AND EXPENSES ON DEFAULT. After the occurrence of an
entitled to collect all costs of collection, including, but not
limited to, reasonable attorney's fees incurred in connection with
the protection or realization of collateral or in connection with
any of Lender's collection efforts, whether or not suit in this
Note or any foreclosure proceeding is filed, and all such costs
and expenses shall be payable on demand and until paid shall also
be secured by the Note Agreement and by all other collateral held
by as security for Borrower's obligation to Lender.
(g) FINANCIAL INFORMATION. Borrower will advise Lender in writing
if Borrower operates on other than a calendar year basis.
Borrower will at all times keep proper books of record and account
in which full, true and correct entries shall be made in
accordance with generally accepted accounting principles and will
deliver to Lender, within one hundred twenty (120) days after the
end of each fiscal year of Borrower, a copy of the annual
financial statements of Borrower relating to such fiscal year,
such statements to include (i) the balance sheet of Borrowers as
at the end of such fiscal year and (ii) the related income
statement, statement of retained earnings and statement of changes
in the financial position of Borrower for such fiscal year,
prepared by such certified public accountants as may be reasonably
satisfactory to Lender. Borrower also agrees to deliver to Lender
within fifteen (15) days after filing same, a copy of Borrower's
income tax return and also, from time to time, such other
financial information with respect to Borrower as Lender may
request.
(h) WAIVER BY BORROWER. Borrower of this Note hereby waives
presentment, protest, demand, diligence, notice of dishonor and of
nonpayment, and waives and renounces all rights to the benefits of
any statute of limitations and any moratorium, appraisement,
exemption and homestead now provided or which may hereafter be
provided by any federal or state statute, including but not
limited to exemptions provided by or allowed under the Bankruptcy
code of 1978, both as to itself personally and as to all of its or
their property, whether real or personal, against the enforcement
and collection of the obligations evidenced by the Note and any
and all extensions, renewals and modifications hereof.
(i) GOVERNING LAW; SUBMISSION TO JURISDICTION. This Note shall be
governed by and construed under the laws of the State of New York.
Borrower hereby submits to personal jurisdiction in said state for
the enforcement of Borrower's obligations hereunder or under any
other Loan Document and waives any and all personal rights under
the law of any other state to object to jurisdiction with such
state for the purposes of litigation to enforce such obligations
of Borrower.
(j) WAIVER OF JURY TRIAL. Lender and the Borrower hereby waive
trial by jury in any litigation in any court with respect to, in
connection with, or arising out of this Note, the Loan Agreement
or the Loan, or any instrument or document delivered in connection
with the Loan, or the validity, protection, interpretation,
collection or enforcement thereof, or any other claim or dispute
howsoever arising between the Borrower and Lender.
(k) NOTICES. Any notices required or permitted to be given
hereunder shall be: (i) personally delivered or (ii) given by
registered or certified mail, postage prepaid, return receipt
requested, or (iii) forwarded by overnight courier service, in
each instance addressed to the addresses set forth at the head of
the Note, or such other addresses as the parties may for
themselves designate in writing as provided herein for the purpose
of receiving notices hereunder. All notices shall be in writing
and shall be deemed given, in the case of notice by personal
delivery, upon actual delivery, and in the case of appropriate
mail or courier service, upon deposit with the U.S. Postal Service
or delivery to the courier service.
(l) ENTIRE AGREEMENT. This Note and the Note Agreement
constitutes the entire understanding between Borrower, the
Guarantors, if any, and Lender and to the extent that any writings
not signed by Lender or oral statements or conversations at any
time made or had shall be inconsistent with the provisions of this
note and the Loan Agreement, the same shall be null and void.
Receipt of this above Note is hereby acknowledge and the terms and
conditions are hereby accepted and agreed upon.
WELLCARE MEDICAL MANAGEMENT, INC.
/s/ Robert E. Goff
BY: ROBERT E. GOFF, PRESIDENT
PRIMERGY, INC.
/s/ Richard Weininger
BY: RICHARD WEININGER, M.D., PRESIDENT
STATE OF NEW YORK )
)ss:
COUNTY OF ULSTER )
On this 26th day of July 1995, before me the subscriber personally
appeared Richard Weininger, M.D., who being by me duly sworn, did
depose and say; that he resides at Millbrook Road, Claverack, NY,
that he is the president of PrimErgy, Inc., the corporation
described in and which executed the foregoing instrument; and that
he/she signed his/her name thereto by order of the Board of
Directors of said corporation.
NOTARY PUBLIC
/s/ Gloria Alisandrella
GLORIA ALISANDRELLA
Notary Public, State of New York
Qualified in Orange County
Reg. No. 4899328
Commission Expires 7-6-97
STATE OF NEW YORK )
)ss:
COUNTY OF ULSTER )
On this 26th day of July 1995, before me the subscriber personally
appeared Robert E. Goff, who being by me duly sworn, did depose
and say; that he resides at RD1 Old Castle Point Road, Wappinger
Falls, that he is the President of WellCare Medical Management,
Inc. the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
NOTARY PUBLIC
/s/ Gloria Alisandrella
GLORIA ALISANDRELLA
Notary Public, State of New York
Qualified in Orange County
Reg. No. 4899328
Commission Expires 7-6-97
EXHIBIT 10.46
NOTE AGREEMENT
THIS AGREEMENT dated as of June 30, 1995 between PRIMERGY, INC., a
New York corporation (hereinafter "PrimErgy"), and WELLCARE
MEDICAL MANAGEMENT, INC., a New York corporation (hereinafter
"WellCare").
WITNESSETH:
PrimErgy and WellCare hereby agree as follows:
1. THE NOTE
Concurrently with the execution of this Agreement, WellCare, in
reliance on the covenants contained herein, has accepted
PrimErgy's promissory note in the principal amount of $5,130,000,
a copy of which is attached hereto (the "Note"), upon the terms
and conditions herein and therein set forth.
2. COLLATERAL
As security for the full and timely payment of the principal and
interest on the Note, PrimErgy hereby grants to WellCare a first
security interest in and a continuing lien upon the following
property, all of which is herein collectively referred to the
"Collateral".
a. All of PrimErgy's tangible personal property (furniture,
fixtures, equipment and vehicles), wherever located and whether
now or hereafter acquired;
b. All of PrimErgy's accounts receivable, notes receivable and
contract rights now existing and which may at any time hereafter
come into existence; and;
c. Any real estate owned by PrimErgy, or hereafter acquired,
including all buildings and improvements situated thereon.
Concurrently with the execution of this Agreement, PrimErgy is
delivering to WellCare an executed security agreement, UCC filing
forms, financing statements and such other instruments as may be
reasonably requested by WellCare to create and perfect the
security interest granted hereby.
3. NEGATIVE COVENANTS.
PrimErgy covenants and agrees that until the Note is paid in full,
it will not:
a. Limitation on Payments to Shareholders.
Declare or pay any dividend or make any distributions of any kind
whatsoever to its shareholders, or apply any of its property or
assets to purchase, redeem, retire or otherwise acquire any shares
of its capital stock;
b. Limitation on Issuance of Shares of Capital Stock.
Issue any additional shares of its capital stock without prior
written authorization from WellCare.;
c. Limitation on Payment of Salaries and Other Compensation.
Pay salaries to executive officers in excess of $250,000 per annum
per executive officer or $1,000,000 in the aggregate; or
compensate any other employees, shareholders or affiliates of
PrimErgy, whether in cash or otherwise, in an aggregate amount
exceeding $1,000,000 per annum;
d. Limitation on Indebtedness.
Incur any indebtedness either pari passu or superior in rights to
the indebtedness evidenced by the Note;
e. Limitation on Liens.
Create, assume or suffer to exist any mortgage, pledge, lien,
encumbrance, security interest, charge or title retention or other
security arrangement of any kind, upon any of its property or
assets, now owned or hereafter acquired, except for:
(1) any such liens or encumbrances held by WellCare;
(2) liens in connection with workmen's compensation, unemployment
insurance and other social security obligations; or
(3) liens for taxes, assessments or governmental charges or levies
on it or its properties not delinquent, or being contested in good
faith;
f. Merger, Sale of Assets, Dissolution, Etc.
Enter into any transaction of merger or consolidation, or
transfer, sell, assign, lease or otherwise dispose of (other than
in the ordinary course of business) all or a substantial part of
its properties or assets, or any of its notes or accounts
receivable, or any stock or any assets or properties necessary or
desirable for the proper conduct of its business, or change the
nature of its business, or wind up, liquidate, or dissolve, or
agree to do any of the foregoing.
g. Prohibition of Dealing with Stockholders or Affiliated
Parties.
Either directly or indirectly, purchase, acquire, lease any
property from, or sell, dispose of or lease any property to, or
otherwise deal with in the ordinary course of business, or
otherwise, any substantial shareholder (as defined below) of or
any corporation in which such substantial shareholder owns a
controlling interest or any partnership in which such substantial
shareholder is a partner, except that the foregoing shall not
prevent any person from serving as a director, officer or employee
of PrimErgy and receiving reasonable compensation thereof. For
purposes of this covenant, "substantial shareholder" shall mean
(i) any person owning directly or indirectly either individually
or together with all other persons to whom such person is related
by blood, adoption or marriage, 5% or more of the outstanding
voting capital stock of PrimErgy, and (ii) any person related by
blood, adoption or marriage to any person falling within the
provisions of clause (i) above.
4. DEFAULTS AND REMEDIES.
Any one or more of the following events shall constitute an event
of default by PrimErgy under the terms of this Agreement:
a. The failure of PrimErgy to pay any installment of principal or
interest of the Note as the same shall become due and payable,
whether at maturity or by acceleration or otherwise;
b. Default in the performance of any provision of breach of any
covenant of this Agreement, the Asset Purchase Agreement dated
June 30, 1995 between PrimErgy and the Company (the "Asset
Purchase Agreement"), or the Option Agreement dated June 30, 1995
between PrimErgy and the Company (the "Option Agreement"), or any
supplements or amendments hereto or thereto, by PrimErgy, or if
this Agreement, the Asset Purchase Agreement or the Option
Agreement shall terminated (other than pursuant to their
respective terms) or become void or unenforceable;
c. If PrimErgy files a petition in a bankruptcy or for the
approval of a plan of reorganization or arrangement under the
Bankruptcy Act (as it now exists or as amended) or an admission
seeking the relief therein provided; is unable or admits in
writing its inability to pay its debts as they become due; makes
an assignment for the benefit of creditors; has a receiver
appointed, voluntarily or otherwise, for its property; is
adjudicated a bankrupt; suspends its business; permits a judgement
to be obtained against it which is not promptly paid or promptly
appealed and secured pending appeal; or becomes insolvent, however
otherwise evidenced;
d. If defaults shall occur in the payment of any principal,
interest or premium with respect to any other indebtedness or
borrowed money of PrimErgy under any agreement or instrument under
or pursuant to which any such indebtedness may have been issued,
created, assumed or guaranteed by PrimErgy and such default shall
continue for more than the period of grace, if any, therein
specified, or if the payment of such indebtedness shall be
accelerated due to any such default;
e. If any judgment against PrimErgy or any attachment or
execution against any substantial portion of its property remains
unpaid, unstayed, unbonded or undismissed for a period of more
than 10 days.
In the event of any such default, and at any time thereafter,
PrimErgy may, at its option, declare the entire principal amount
of the Note, together with all the interest accrued thereon,
immediately due and payable and PrimErgy shall forthwith pay such
Note without presentment, demand, protest, or notice of any kind,
all of which are hereby expressly waived, anything herein or in
the Note to the contrary notwithstanding; in addition, WellCare
may immediately proceed to foreclose its lien or security interest
on any or all of the Collateral, and do all other things provided
for by law or by this Agreement or by the Note.
5. RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy herein conferred upon WellCare is intended to
be exclusive of any other right or remedy contained herein, in the
Note or in the Asset Purchase Agreement or in any instrument or
document delivered pursuant to this Agreement, and every right and
remedy contained herein and therein now or hereafter existing at
law or in equity or by statute, or otherwise shall be cumulative.
6. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
7. CAPTIONS.
The captions contained in this Agreement are for reference
purposes only and shall not effect in any way the meaning or
interpretation of this Agreement.
8. NOTICES.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be sent by registered or certified
mail, postage prepaid, addressed as follows:
(a) If to PrimErgy
PrimErgy, Inc.
25 Barbarosa Lane
Kingston, New York 12401
With a copy to:
McNamee, Lochner, Titus and Williams, P.C.
75 State Street
P.O. Box 459
Albany, New York 12201-0459
Attn: Vincent L. Valenza, Esq.
(b) If to WellCare:
WellCare Medical Management, Inc.
Park West/Hurley Avenue Extension
Kingston, New York 12401
Attn: President
With a copy to:
Epstein, Becker & Green, P.C.
250 Park Avenue
New York, New York 10017
Attn:: Sidney Todres, Esq.
9. BENEFIT.
This Agreement shall be binding upon and inure to the benefit of
PrimErgy and WellCare and their respective successors and assigns
and any subsequent holders of the Note.
10. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
PRIMERGY, INC.
/s/ Richard Weininger
By: Richard Weininger, President
WELLCARE MEDICAL MANAGEMENT, INC.
/s/ Robert E. Goff
By: Robert E. Goff, President
STATE OF NEW YORK )
)ss.:
COUNTY OF ULSTER )
On this 26 day of July 1995, before me the subscriber personally
appeared Richard Weininger, M.D., who being by me duly sworn, did
depose and say; that he resides at Millbrook Road, Claverack, NY,
that he is the president of PrimErgy, Inc., the corporation
described in and which executed the foregoing instrument, and that
he/she signed his/her name thereto by order of the Board of
Directors of said corporation.
/s/ Gloria Alisandrella
Gloria Alisandrella
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF ULSTER )
On this 26 day of July 1995, before me the subscriber personally
appeared Robert E. Goff, who being by me duly sworn, did depose
and say; that he resides at RD1 Old Castle Point Road Wappingers
Falls, that he is the President of WellCare Medical Management,
Inc. the corporation described in and which executed the foregoing
instrument, and that he signed his name thereto by order of the
Board of Directors of said corporation.
Gloria Alisandrella
NOTARY PUBLIC
EXHIBIT 10.47
GUARANTY
GUARANTY, made this day of March, 1996 (this "Guaranty"), by ,
an individual residing at (the "Guarantor"), in favor of WELLCARE
MEDICAL MANAGEMENT, INC., a New York corporation (the "Note
Holder").
PRELIMINARY STATEMENTS:
A. In consideration of the sale by the Note Holder of certain of
its property and assets (the "Sale") to PrimErgy, Inc., a New York
corporation (the "Obligor"), pursuant to the terms and conditions
of an Asset Purchase Agreement, dated as of June 30, 1995, by and
between such parties (the "Purchase Agreement"), the Obligor
entered into a Note Agreement, dated as of such date, with the
Note Holder (such agreement, including all exhibits and schedules
thereto, as it may from time to time be amended, modified or
supplemented, the "Note Agreement") (a copy of which is attached
hereto as Exhibit A), pursuant to which the Obligor issued and
delivered a promissory note dated such date payable to the Note
Holder in a principal amount of Five Million One Hundred Thirty
Thousand Dollars ($5,130,000) (such note, together with any and
all amendments, modifications, substitutions and/or replacements
thereof and thereto, the "Note");
(a copy of which is attached hereto as Exhibit B);
B. The Note represents a portion of the purchase price for the
Sale of the assets and property paid by the Obligor;
C. The Guarantor, (I) in consideration for making and delivering
this Guaranty, shall receive, contemporaneously with the execution
and delivery hereof, options to purchase shares of the capital
stock of the Obligor (as such options are more fully described on
Schedule I attached hereto), and (ii) in its capacity as such
option holder, shall derive benefits, both directly and
indirectly, from the continued existence of the Note in lieu of
immediate repayment of the outstanding principal amount thereof;
and
D. All capitalized terms used herein that are defined in the Note
Agreement and that are not otherwise defined herein shall have the
respective meanings ascribed thereto therein, unless the context
otherwise requires.
ACCORDINGLY, in consideration of the benefits expected to accrue
to the Guarantor by reason of the continued existence of the Note
and the Note Agreement, and for other good and valuable
consideration, the re- ceipt and sufficiency of which is hereby
acknowledged, the Guarantor hereby represents and warrants to, and
covenants and agrees with the Note Holder, as follows:
1. Limited Guarantee.
(a) Guarantee. The Guarantor hereby irrevocably and
unconditionally guarantees to the Note Holder the punctual payment
of the full amount, when due (whether by demand, acceleration or
otherwise), of the principal of, interest on, and fees, expenses
and charges due pursuant to, the Note, (the "Guaranteed
Obligations"). The foregoing is a guaranty of payment and not of
collection, and is the primary and absolute obligation of the
Guarantor. Accordingly, the Note Holder, at any time after an
Event of Default (as such term is defined in the Note) has
occurred and is continuing, may enforce this Guaranty against the
Guarantor. The Guarantor and all Other Guarantors (as such term
is hereinafter defined) shall be jointly and severally liable for
the Guaranteed Obligations. For purposes hereof, "Other
Guarantor" means any existing guarantor of any or all of the
Guaranteed Obligations (including, without limitation, any Option
Guarantor (as such term is defined in Section 1(b) hereof) other
than the Guarantor).
(b) Limitation. Notwithstanding any other provision hereof to
the contrary or the aggregate amount of the Guaranteed Obligations
at any time payable to the Note Holder, the maximum aggregate
amount of the obligations of the Guarantor to the Note Holder
hereunder (the "Maximum Aggregate Amount") shall be equal to the
lesser of: (x) (the "Fixed Amount"), and (y) the amount equal to
the product of (I) subject to Section 14 hereof, the outstanding
amount of the principal of the Note at the time demand for payment
is made hereunder, together with all accrued but unpaid interest
on and all fees, expenses and charges due pursuant to, the Note,
until the date this Guaranty is terminated, multiplied by (II) the
amount equal to the quotient of (A) the Fixed Amount divided by
(B) the aggregate amount of the Fixed Amount of all guarantors of
the Guaranteed Obligations executing guaranties substantially
similar to this Guaranty (including, without limitation, the
Guarantor) in effect (the "Option Guarantors"). Without limiting
the generality of the foregoing, the Note Holder shall be
entitled, in its sole and absolute discretion, to determine: (A)
the order in which the Note Holder shall seek to collect the
liabilities that are, pursuant to this Section 1(b), partially
guaranteed hereby, and (B) the method by which the Note Holder
shall seek to collect such liabilities, including, without
limitation, whether by seeking to realize on any collateral
security now or hereafter granted to the Note Holder by the
Obligor (including, without limitation, the assets securing the
Note described in Section 4(b) of the Note Agreement (the
"Collateral")) by enforcement of this Guaranty, by enforcement of
any Other Guarantee (as such term is hereinafter defined), or by a
combination of such methods. For purposes hereof, "Other
Guarantees" means the guarantees of any or all of the Guaranteed
Obligations made by the Other Guarantors.
2. Security Documents.
(a) Mortgage, Pledge, Etc. In order to secure the due payment
and performance by the Guarantor of the Guaranteed Obligations,
simultaneously with the execution and delivery hereof, the
Guarantor shall execute and deliver to the Note Holder one of the
following instruments:
(I) a mortgage or deed of trust, in form and substance
satisfactory to the Note Holder, of even date herewith, pursuant
to which the Note Holder, effective as of the date of this
Guaranty, has been granted a lien on such interests in real
property, and all improvements now or hereafter located thereon,
owned by the Guarantor, whether fee or leasehold interests, as the
Note Holder shall require (the "Mortgage"); or
(ii) a pledge agreement, in substantially the form attached
hereto as Exhibit A, of even date herewith, by and between the
Note Holder and the Guarantor, pursuant to which the Note Holder,
effective as of the date of this Guaranty, has been granted a
first priority lien on, and a pledge of, the issued and
outstanding marketable securities in an amount and of an issuer
satisfactory to the Note Holder (the "Pledge Agreement"); or
(iii) such other agreement, instrument or document, in form and
substance satisfactory to the Note Holder, of even date herewith,
pursuant to which, effective as of the date of this Guaranty, the
due payment and performance by the Guarantor of the Guaranteed
Obligations has been secured, as determined in the sole and
absolute discretion of the Note Holder (the "Alternate Security
Document").
(b) Other Security Documents. In order to secure the due payment
and performance by the Guarantor of the Guaranteed Obligations,
simultaneously with the execution and delivery hereof, the
Guarantor shall execute and deliver to the Note Holder such other
agreements, instruments and documents as the Note Holder may
reasonably require in order to effect the purposes of the
Mortgage, the Pledge Agreement, or the Alternate Security
Document, as applicable. All of the agreements, instruments and
documents provided for or referred to in this Section 2, are
hereinafter sometimes referred to collectively as the "Security
Documents". For purposes hereof, "Guarantor Collateral" means the
collateral security granted to the Note Holder by the Guarantor
under the Security Documents.
(c) Guarantor Event of Default. In the event the Note Holder
makes a demand hereunder against the Guarantor and the Guarantor
fails to fulfill any of the Guarantor's payment obligations
hereunder (such failure, a "Guarantor Event of Default"), then the
Note Holder may exercise any or all of its rights under any or all
of the Security Documents.
3. Payment. All payments made by the Guarantor under or by
virtue of this Guaranty shall be paid to the Note Holder at its
office at Hurley Avenue Extension, Kingston, New York 12401, or
such other place as the Note Holder may hereafter designate in
writing. The Note Holder shall not be required otherwise to
establish its authority to receive any payment made hereunder or
by virtue hereof.
4. Waiver of Notice; Communications.
(a) Waiver of Notice. The Guarantor hereby waives (I) notice of
acceptance of this Guaranty, (ii) notice of the accrual of any of
the Guaranteed Obligations (iii) notice or proof of reliance by
the Note Holder upon this Guaranty, and (iv) subject to Section
4(b) hereof, suit or taking other action or making any demand
against, and any other notice to any party liable on the
Guaranteed Obligations.
(b) Communications. The Note Holder shall make best efforts to
deliver to the Guarantor a copy of each written communication sent
by the Note Holder to the Obligor after the date hereof relating
to the Note Agreement or the Note, which copy may be redacted to
delete any and all portions thereof relating to matters other than
the Note Agreement or the Note.
5. Rights of Note Holder. The Note Holder may, in its sole and
absolute discretion, at any time and from time to time, without
the consent of, or notice to, the Guarantor, and without impairing
or releasing any of the obligations of the Guarantor hereunder
(including, without limitation, payment of the Guaranteed
Obligations), without any terms or conditions and in whole or in
part:
(a) modify or change the manner, place or terms of, and/or modify,
change or extend the time of payment of, and/or renew, settle,
compromise or otherwise alter, any of the Guaranteed Obligations,
any security therefor, or any liability incurred directly or
indirectly in respect thereof or hereof (including, without
limitation, the Collateral or the Guarantor Collateral) by
amendment of the Note Agreement or the Note or otherwise
(provided, that such modification, change, extension, renewal,
settlement, compromise or alteration, or the manner in which it
was implemented, does not violate the provisions of the Note
Agreement, the Note or any Security Document, and provided further
that the Note Holder shall, prior to effecting or agreeing in
writing to effect any such modification, change, extension,
renewal, settlement, compromise or alteration, or the manner in
which it was implemented, does not violate the provisions of the
Note Agreement, the Note or any Security Document, and provided
further that the Note Holder shall prior to effecting or agreeing
in writing to effect any such modification, change, extension,
renewal, settlement, compromise or other alteration that increases
the principal amount or annual interest rate of the Note, obtain
the consent of Option Guarantors having an aggregate Fixed Amount
of no less than fifty percent (50%) of the aggregate Fixed Amounts
of all Option Guarantors), and this Guaranty shall apply to the
Guaranteed Obligations as so modified, changed, extended, renewed
or altered;
(b) sell, exchange, release, surrender, realize upon or otherwise
deal with, in any manner and in any order, (I) any property by
whomsoever at any time pledged or mortgaged to secure, or
howsoever otherwise securing the Guaranteed Obligations or any
liabilities incurred directly or indirectly in respect thereof or
hereof and/or (ii) any offset or right with respect thereto;
provided, however, with respect to any such property that is
Guarantor Collateral, the manner of any such sale, exchange,
release, surrender, realization upon or dealing with shall be
subject to and in accordance with the terms of the applicable
Security Document(s);
(c) (i) exercise or refrain from exercising any rights against the
Obligor or others (including, without limitation, any Other
Guarantor) or otherwise act or refrain from acting thereagainst,
and (ii) without limiting the generaltiy of the foregoing, when
making any demand hereunder against the Guarantor, make a similar
demand on any Other Guarantor of payment of the Guaranteed
Obligations, and any failure by the Note Holder to make any such
demand or to collect any payments from or any release by the Note
Holder of any Other Guarantor of payment of the Guaranteed
Obligations shall neither relieve nor release the Guarantor of its
oblgiations and libabities hereunder (including, without
limitation, payment of the Guaranteed Obligations), nor impair or
affect the rights and remedies, express or implied, or as a matter
of law, of the Note Holder against the Guarantor (for the purposes
hereof, "demand" shall include, but not be limited to, a written
request by the Note Holder for performance or the commencement and
continuance of any legal proceedings);
(d) Subordinate the payment of all or any part of the Guaranteed
Obligations to the payment of any liability (whether due or not)
of the Obligor to creditors of the Obligor other than the Note
Holder, the Guarantor and the Other Guarantors;
(e) apply any sums by whomsoever paid or howsoever realized to
any of the Guaranteed Obligations, regardless of the liabilities
of the Obligor that remain unpaid; and
(f) Consent to or waive any breach of, or any act, omission or
default or event of default under the Note Agreement, the Note, or
any agreements, instruments or documents referred to therein or
executed and delivered pursuant thereto or in connection
therewith. Any such amendment, modification, consent or waiver
shall not impair or release any of the obligations of the
Guarantor hereunder (including, without limitation, payment of the
Guaranteed Obligations).
6. No Defense; Limited Termination.
(a) No Defense. No invalidity, irregularity or unenforceability
of all or any part of the Guaranteed Obligations or of any
security therefor (including, without limitation, the Collateral
or the Guarantor Collateral) nor any alleged or actual breach of
Section 4(b) hereof shall affect, impair or be a defense to this
Guaranty, and this Guaranty shall be construed as an absolute and
unconditional guarantee of payment without regard to (I) the
validity, regularity or enforceability of this Guaranty, the Note
Agreement, the Note, any of the other Guaranteed Obligations, any
collateral security therefor (including, without limitation, the
Collateral and the Guarantor Collateral), any guaranty thereof
(including, without limitation, the Other Guarantees) or any
rights of offset with respect thereto at any time or from time to
time held by the Note Holder and (ii) and defense, offset or
counterclaim that may at any time be available to or be asserted
by the Obligor against the Note Holder or that constitutes, or
might be construed to constitute, an equitable or legal discharge
(A) of the Obligor for the Guaranteed Obligations or any part
thereof, or (B) of the Guarantor under this Guaranty, in
bankruptcy or in any other instance.
(b) Termination. This Guaranty may be terminated with respect to
the obligations of the Guarantor hereunder upon the earliest to
occur of: (x) the mutual written consent of the Guarantor (or the
Guarantor's executors, administrators or permitted assigns and the
Note Holder, (y) subject to Section 14 hereof, the full payment
and performance of the Guaranteed Obligations in all respects, and
(z) subject to Section 14 hereof, the full payment by the
Guarantor of the Aggregate Maximum Amount.
7. Subrogation. The Guarantor hereby acknowledges that the value
of certain Collateral shall be adversely affected by any right of
the Guarantor to be subrogated to the rights of the Note Holder
with respect to any indebtedness of the Obligor to the Note
Holder. Accordingly, until such time that the Guaranteed
Obligations are paid in full, the Guarantor hereby irrevocably
waives, for the benefit of the Note Holder, any and all rights
that it presently has, or may hereafter have, whether by virtue of
any payment or payments hereunder or otherwise, to be subrogated
to the rights of the Note Holder against the Obligor with respect
to any such indebtedness of the Obligor to the Note Holder.
8. Note Agreement and Note. The Guarantor shall be bound by, and
shall comply with, all of the terms, covenants and provisions of
the Note Agreement and the Note to the extent that the same impose
obligations in respect of or grant rights against it as a
guarantor or otherwise.
9. Representations and Warranties. The Guarantor hereby makes the
following representations and warranties, which shall survive the
execution and delivery of this Guaranty:
(a) Transaction Documents. The Guarantor has examined the
Purchase Agreement, the Note Agreement and the Note. All of the
representations and warranties set forth therein, to the extent
the same relate to the Guarantor, are true and correct.
(b) Authority. The Guarantor has all requisite power, right,
legal capacity and authority to execute, deliver and perform this
Guaranty and the Security Documents. Each of this Guaranty and
the Security Documents have been duly executed and delivered by
the Guarantor and constitute the valid and legally binding
obligations of the Guarantor, enforceable in accordance with their
respective terms.
(c) No Consents. No consent or approval of any individual or
entity (including, without limitation of any landlord or
mortgagee), no waiver of any lien or right of distraint or other
similar right and no consent, license, approval, authorization or
declaration of any governmental authority, bureau or agency is or
will be required in connection with the execution, delivery,
performance, validity, enforcement or priority of this Guaranty,
or any other agreements, instruments or documents to be executed
or delivered pursuant hereto or thereto (including, without
limitation, the Security Documents).
(d) No Breach. The execution, delivery and performance by the
Guarantor of this Guaranty and any other agreements, instruments
or documents to be executed and delivered hereunder (including,
without limitation, the Security Documents) shall not (I)
constitute a violation of any law, statute, rule or regulation to
which the Guarantor is subject, (ii) violate, conflict with or
result in a breach of any judgment, decree, writ, injunction,
ordinance, resolution, award, franchise, order, permit or other
similar document or instrument of any court, arbitrator or
governmental or regulatory authority, bureau or agency, domestic
or foreign, or (iii) violate, conflict with or result in the
breach or termination of, or give rise to any liability or
obligation under, or constitute an amendment to, or otherwise give
any individual or entity the right to terminate or constitute
(with or without the giving of notice or lapse of time, or both) a
default under the terms of, or accelerate or permit the
acceleration of the performance required under the terms of any
contract, mortgage, deed of trust, bond, note, indenture or other
instrument, obligation or agreement to which the Guarantor is a
party or by which the Guarantor or any of the Guarantor Collateral
is bound or affected.
(e) Financial Statements and Tax Returns. The Guarantor has
provided to the Note Holder on or prior to the date hereof, (I)
the Guarantor's personal financial statement in form and substance
satisfactory to the Note Holder (a "Financial Statement") as of
December 31, 1995 and (ii) a correct and complete copy of the
Guarantor's filed tax return (a "Tax Return") for each of 1993 and
1994. Each Financial Statement provided in accordance with the
terms hereof is, and shall be, correct and complete and present
fairly the financial position of the Guarantor, as at its date.
The Guarantor has, and shall have, no material obligation,
liability or commitment, direct or contingent, that is not
reflected in a Financial Statement. At the time of its delivery
to the Note Holder, there has been, and there shall be, no
material adverse change in the financial position of the
Guarantor, from the date of the Financial Statement.
10. Covenant. The Guarantor hereby covenants and agrees that
while (a) this Guaranty is in effect, (b) the Obligor is indebted
to the Note Holder and (c) any of the Guaranteed Obligations
remain unpaid and outstanding, the Guarantor shall deliver to the
Note Holder in accordance with the criteria set forth in Section
9(e) hereof: (I) annually, as soon as available, but in any event
within ninety (90) days after the last day of each calendar year,
a Financial Statement as at such last day of such calendar year,
and (ii) annually, as soon as available, but in any event no later
than October 15th of each calendar year, a copy of the Guarantor's
Tax Return for the preceding calendar year.
11. Notices. All notices, requests, demands or other
communications hereunder shall be in writing, either by letter
(delivered by hand or commercial messenger service or sent by
certified mail, return receipt requested) or telegram or telecopy,
addressed as follows:
(a) if to the Guarantor:
Attention:
Telecopier No.:
with a copy to:
Attention:
Telecopier No.:
(b) if to the Note Holder:
WellCare Medical Management, Inc.
Park West/Hurley Avenue Extension
Post Office Box 4059
Attention: Marystephanie Corsones
Telecopier No.: (914) 344-7820
with a copy to:
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Attention: Seth I. Truwit, Esq.
Telecopier No.: (212) 661-0989
Any notice, request, demand or other communication hereunder shall
be deemed to have been given on the day on which it is telecopied
to such party at its telecopier number specified above or
delivered by hand or such commercial messenger service to such
party at its address specified above, or, if sent by mail, on the
third business day after the day deposited in the mail, postage
prepaid. The Note Holder or the Guarantor may change the
individual, address or telecopier number to whom or to which
notices are to be given hereunder, by notice duly given hereunder;
provided, however, that any such notice shall be deemed to have
been given hereunder only when actually received by the party to
which it is addressed.
12. No Waiver. No delay on the part of the Note Holder in
exercising any of its options, powers or rights, and no partial or
single exercise thereof, whether arising hereunder, under the Note
Agreement, the Note, the Security Documents or otherwise, shall
constitute a waiver thereof or affect any right hereunder. No
waiver of any of such rights and no modification, amendment or
discharge of this Guaranty shall be deemed to be made by the Note
Holder or shall be effective unless the same shall be in a writing
executed and delivered by the Note Holder and then such waiver
shall apply only with respect to the specific instance involved
and shall in no way impair the rights of the Note Holder or the
obligations of the Guarantor to the Note Holder in any other
respect at any other time (including, without limitation, payment
of the Guaranteed Obligations).
13. Governing Law; Jurisdiction. THIS GUARANTY AND THE RIGHTS AND
OBLIGATIONS OF THE NOTE HOLDER AND THE GUARANTOR HEREUNDER SHALL
BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS RULES
PERTAINING TO CONFLICTS OF LAWS. THE GUARANTOR WAIVES TRIAL BY
JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS GUARANTY OR ANY OF THE SECURITY
DOCUMENTS. IN THE EVENT THE NOTE HOLDER BRINGS ANY ACTION OR SUIT
IN ANY COURT OF RECORD IN THE STATE OF NEW YORK TO ENFORCE ANY OR
ALL LIABILITIES OF THE GUARANTOR HEREUNDER, SERVICE OF PROCESS MAY
BE MADE UPON THE GUARANTOR BY MAILING A COPY OF THE SUMMONS TO THE
GUARANTOR BY CERTIFIED OR REGISTERED MAIL, AT THE ADDRESS
SPECIFIED IN SECTION 11 HEREOF, AND THE GUARANTOR HEREBY (A)
CONSENTS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK, COUNTY OF ULSTER, AND THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF NEW YORK OVER THE PERSON OF THE GUARANTOR
AND (B) WAIVES ANY CLAIM THAT ULSTER COUNTY OR THE NORTHERN
DISTRICT OF NEW YORK IS AN INCONVENIENT FORUM. THE GUARANTOR
HEREBY WAIVES THE RIGHT TO INTERPOSE COUNTERCLAIMS OR SET-OFFS OF
ANY KIND AND DESCRIPTION IN ANY SUCH ACTION OR SUIT ARISING
HEREUNDER OR THEREUNDER OR IN CONNECTION HEREWITH OR THEREUNDER.
14. Payment of Judgments, Decrees, Settlements, Etc. If claim is
ever made upon the Note Holder for repayment or recovery of any
amount or amounts received by it in payment or on account of any
of the Guaranteed Obligations and it repays all or part of such
amount by reason of any: (a) judgment, decree or order of any
court or administrative body having jurisdiction over it or any of
its property, or (b) settlement or compromise of any such claim
effected by it with any such claimant (including, without
limitation the Obligor), then, and in either such event, the
Guarantor agrees that any such judgment, decree, order, settlement
or compromise shall be binding upon the Guarantor, notwithstanding
the cancellation of any instrument evidencing any of the
Guaranteed Obligations, and the Guarantor shall be and remain
liable hereunder for the amount so repaid or recovered to the same
extent as if such amount had never originally been received by the
Note Holder; provided, however, any such settlement or compromise
with the Obligor shall be in accordance with the terms of Section
5(a) hereof. This section 14 and the Guarantor's obligation
thereunder shall survive termination of this Guaranty.
15. Assignment; Entire Agreement. This Guaranty shall be binding
upon the Guarantor and its successors and permitted assigns, and
shall inure to the benefit of the Note Holder and its successors
and assigns; provided, however, that the Guarantor shall not be
entitled to assign or delegate any of its rights or obligations
under this Guaranty without the prior written consent of the Note
Holder (which consent may be granted in the sole and absolute
discretion of the Note Holder), and any purported assignment in
the absence of such consent shall be void. This Guaranty,
together with the Security Documents, embodies the entire
agreement and understanding between the Note Holder and the
Guarantor relating to the subject matter hereof and supersedes all
prior agreements and understandings relating to the subject matter
hereof.
16. Severability; Enforceability.
(a) Severability. The provisions of this Guaranty are severable.
If any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or
part thereof, in such jurisdiction and shall not in any manner
affect such clause or provision in any other jurisdiction, or any
other clause or provision in this Guaranty in any jurisdiction.
(b) Enforceability. If any Other Guarantee is held or determined
to be void, invalid or unenforceable, in whole or in part, such
holding or determination shall not impair or affect the validity
and enforceability of the guarantee hereunder by the Guarantor,
which shall continue in full force and effect in accordance with
its terms.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be
duly executed and delivered on the day and year first above
written.
[Name of Guarantor]
SCHEDULE I
OPTIONS
March 7, 1996
GUARANTOR PLEDGE AGREEMENT
GUARANTOR PLEDGE AGREEMENT (this "Pledge Agreement"), made this
day of March, 1996, by and between, , an individual residing at
(the "Pledgor"), and WELLCARE MEDICAL MANAGEMENT, INC., a New York
corporation (the "Note Holder").
PRELIMINARY STATEMENTS:
A. In consideration of the sale by the Note Holder of certain of
its property and assets (the "Sale") to PrimErgy, Inc., a New York
corporation (the "Obligor"), pursuant to the terms and conditions
of an Asset Purchase Agreement, dated as of June 30, 1995, by and
between such parties, the Obligor entered into a Note Agreement,
dated as of such date, with the Note Holder (such agreement,
including all exhibits and schedules thereto, as it may from time
to time be amended, modified or supplemented, the "Note
Agreement"), pursuant to which the Obligor issued and delivered a
promissory note dated such date payable to the Note Holder in a
principal amount of Five Million One Hundred Thirty Thousand
Dollars ($5,130,000) (such note, together with any and all
amendments, modifications, substitutions and/or replacements
thereof and thereto, the "Note");
B. The Note represents a portion of the purchase price for the
Sale of the assets and property paid by the Obligor;
C. The Pledgor, in consideration for the receipt of options to
purchase shares of the capital stock of the Obligor, has
guaranteed to the Note Holder the full payment and performance by
the Obligor of all of the Obligor's indebtedness, liabilities and
obligations under the Note and the Note Agreement by the execution
and delivery to the Note Holder of a Guaranty of even date
herewith (hereinafter, as it may from time to time be amended,
modified or supplemented, referred to as the "Guaranty");
D. In order to induce the Obligor to issue such options, the
Pledgor has agreed to pledge certain issued and outstanding shares
of marketable securities owned by the Pledgor as collateral
security for the performance of the Guaranteed Obligations (as
such term is defined in the Guaranty) and all other obligations of
the Pledgor under the Guaranty;
E. All capitalized terms used herein that are defined in the
Guaranty shall have the respective meanings provided therefor in
the Guaranty, unless otherwise defined herein or unless the
context otherwise requires;
ACCORDINGLY, in consideration of the foregoing, and the covenants
and undertakings of the parties hereto, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending to be legally
bound, do hereby agree as follows:
1. Pledged Securities. The term "Pledged Securities" as used
herein shall mean and include all of the issued and outstanding
marketable securities listed on Schedule A attached hereto, and,
also, any shares, stock cer- tificates, options or rights issued
by an issuer of such securities in substitution of, or in exchange
for, any such securities, and any and all proceeds thereof, now or
hereafter owned or acquired by the Pledgor.
2. Pledge.
(a) Obligations. As collateral security for the due payment and
performance of all Guaranteed Obligations and all other
obligations of the Pledgor to the Note Holder, under the Guaranty
(including, without limitation, its obligations under Section 14
thereof) (all of the foregoing indebtedness and obligations,
collectively, the "Obligations"), the Pledgor hereby pledges,
assigns, hypothecates, delivers and sets over to the Note Holder,
all the Pledged Securities, and hereby grants to the Note Holder a
first security interest in all the Pledged Securities and in any
and all proceeds thereof and substitutions therefor.
(b) Certificates, Options and Rights. If the Pledgor shall
become entitled to receive or shall receive any certificate
(including, without limitation, any certificate representing a
dividend or a distribution in connection with any
reclassification, increase or reduction of capital), option or
rights, whether as an addition to, in substitution of, or in
exchange for any of the Pledged Securities, or otherwise, the
Pledgor shall accept any such instruments as the Note Holder's
agent, shall hold them in trust for the Note Holder, and shall
deliver them forthwith to the Note Holder in the exact form
received, with the Pledgor's endorsement when necessary and/or
appropriate (as determined by the Note Holder in its sole and
absolute discretion), stock powers or other instruments duly
executed in blank, to be held by the Note Holder, subject to the
terms hereof, as further collateral security for the Obligations.
(c) Registration. In the event the Guarantor fails to fulfill
any of its Obligations after the written request of the Note
Holder for such (a "Guarantor Event of Default"), any or all of
the Pledged Securities held by the Note Holder hereunder may, at
the option of the Note Holder or its nominee, be registered in the
name of the Note Holder or its nominee, and the Note Holder or its
nominee may thereafter, without notice, and exercise all voting
and corporate rights at any meeting of any corporation issuing any
of the Pledged Securities and exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges
or options pertaining to any of the Pledged Securities as if it
were the absolute owner thereof, including, without limitation,
the right to receive dividends payable thereon, and the right to
exchange, at its discretion, any and all of the Pledged Securities
upon the merger, consolidation, reorganization, recapitalization
or other readjustment of any corporation issuing any of such
Pledged Securities or upon the exercise by any such issuer of any
right, privilege or option pertaining to any Pledged Securities,
and in connection therewith, to deposit and deliver any and all of
the Pledged Securities with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and
conditions as it may determine, all without liability except to
account for property actually received by it, but the Note Holder
shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure
to do so or delay in so doing.
(d) Cash Dividends. In the event of the occurrence of any
Guarantor Event of Default, the Note Holder shall have the right
to require that all cash dividends payable with respect to any
part of the Pledged Securities be paid to the Note Holder to be
held by the Note Holder as additional security hereunder until
applied to the Obligations.
(e) Remedies. In the event of the occurrence of any Guarantor
Event of Default, the Note Holder without demand of performance or
other demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or private
sale) to or upon the Pledgor or any other individual or entity
(all and each of which demands, advertisements and/or notices are,
to the extent permitted by law, hereby expressly waived), may
forthwith sell, assign, grant an option or options to purchase,
contract to sell or otherwise dispose of and deliver the Pledged
Securities, or any part thereof, except as otherwise set forth
herein, in any manner available to a secured party under, and in
accordance with the terms of, the Uniform Commercial Code of the
State of New York, as amended (the "Code"), as it may deem best,
and any purchase by the Note Holder of any or all of the Pledged
Securities in connection therewith shall be free of any right or
equity of redemption in the Pledgor, and such right or equity is
hereby expressly waived and released; provided, however, in the
event the Pledged Securities are registered under the provisions
of the Securities Act of 1933, as amended (the "Securities Act"),
and are listed on a recognized exchange or are the subject of
publicly-distributed, standard price quotations ("Publicly-Traded
Securities"), any sale of such Publicly-Traded Securities shall be
at the then listed or quoted, as the case may be, sell price.
(f) Application of Proceeds. The proceeds of any sale,
assignment, grant, contract or disposition in accordance with
Section 2(e) hereof shall be applied as follows:
(i) First, to the costs and expenses of every kind incurred in
connection therewith and in connection with and incidental to the
care or safekeeping of any and all of the Pledged Securities,
including, without limitation, reasonable attorneys' fees and
legal expenses;
(ii) Second, to the satisfaction of the Obligations;
(iii) Third, to the payment of any other amounts required by
applicable law (including, without limitation, Section 9-504(l)(c)
of the Code); and
(iv) Fourth, to the Pledgor to the extent of the surplus
proceeds, if any.
(g) Notice of Sale. The Note Holder need not give more than ten
(10) days' notice of the time and place of any public sale or of
the time after which a private sale may take place and such notice
shall be deemed to be reasonable notification of such matters.
(h) Insufficient Proceeds. In the event that the proceeds of any
sale, assignment, grant, contract or disposition in accordance
with Section 2(e) hereof are insufficient to pay all amounts to
which the Note Holder is legally entitled, the Pledgor shall be
liable for the deficiency, together with interest thereon, at the
Default Interest Rate (as such form is defined in the Note), and
the reasonable fees and expenses of any attorneys or other
individuals or entities employed or retained by the Note Holder to
collect such deficiency.
3. Representations and Warranties. The Pledgor hereby represents
and warrants that:
(a) Pledged Securities. The Pledged Securities are owned
directly and beneficially and of record by the Pledgor in the
amount set forth on Schedule A annexed hereto.
(b) No Liens. All of the Pledged Securities have been duly and
validly issued, are fully paid and non-assessable and are owned by
the Pledgor free and clear of any pledge, mortgage, hypothecation,
lien, charge, encum- brance or any security interest of any kind
whatsoever in such Pledged Securities or the proceeds thereof
except for the security interest granted to the Note Holder
hereunder.
(c) Valid Lien. Upon delivery of the Pledged Securities to the
Note Holder or an agent for the Note Holder, this Pledge Agreement
creates and grants a valid first lien on and perfected security
interest in the Pledged Securities and the proceeds thereof,
subject to no prior security interest, lien, charge or encumbrance
of any kind whatsoever or to any agreement purporting to grant to
any third party a security interest in the property or assets of
the Pledgor that would include the Pledged Securities.
4. Covenants.
(a) Negative Covenants. The Pledgor hereby covenants that so
long as the Obligations shall be outstanding and unpaid, in whole
or in part, the Pledgor shall not:
(I) sell, convey or otherwise dispose of any of the Pledged
Securities or any interest therein, nor shall the Pledgor create,
incur or permit to exist any pledge, mortgage, lien, charge,
encumbrance or any security interest of any kind whatsoever with
respect to any of the Pledged Securities or the proceeds thereof
other than that created hereby; or
(ii) consent to or approve the issuance of any additional equity
or debt securities of any class of the issuers of the Pledged
Securities (other than the Note Holder)..
(b) Defense. The Pledgor warrants and shall defend the Note
Holder's right, title, special property and security interest in
and to the Pledged Securities against the claims of any
individual, firm, corporation or other entity.
5. Additional Covenants.
(a) Registration. Notwithstanding any other provision hereof, if
the Note Holder shall determine to exercise its right to sell all
or any part of the Pledged Securities, and if in the opinion of
counsel for the Note Holder it is necessary to have the Pledged
Securities, or that portion thereof to be sold, registered under
the provisions of the Securities Act, the Pledgor shall use its
best efforts: (I) to cause each issuer of Pledged Securities
contemplated to be sold to execute and deliver, and cause the
directors and officers of each such issuer to execute and deliver,
all at the Pledgor's expense, all such instruments and documents,
and to do or cause to be done all such other acts and things as
may be necessary to register the Pledged Securities, or that
portion thereof to be sold, under the provisions of the Securities
Act and to cause the registration statement relating thereto to
become effective and to remain effective for a period of one (1)
year from the date of the first public offering of the Pledged
Securities, or that portion thereof so to be sold, and to make all
amendments thereto and/or to the related prospectus that, in the
opinion of the Note Holder or its counsel, are necessary or
advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto; (ii) to cause each such
issuer to comply with the provisions of the "Blue Sky" law of any
jurisdiction that the Note Holder shall designate; and (iii) to
cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement (which need not be
audited) covering a period of twelve (12) months, but not more
than eighteen (18) months, beginning with the first month after
the effective date of any such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act.
(b) Specific Enforcement. The Pledgor hereby acknowledges that a
breach of any of the covenants contained in Section 5(a) hereof
shall cause irreparable injury to the Note Holder, that the Note
Holder shall have no adequate remedy at law in respect of such
breach and, as a consequence, the covenants of the Pledgor
contained in such Section 5(a) shall be specifically enforceable
against the Pledgor, and the Pledgor hereby waives, and shall not
assert, any defenses against an action for specific performance of
such covenants, except for a defense that no Guarantor Event of
Default has occurred.
(c) Private Sales. Except with respect to Publicly-Traded
Securities, notwithstanding any other provision hereof, the
Pledgor recognizes that the Note Holder may be unable to effect a
public sale of all or a part of the Pledged Securities, and may be
compelled to resort to one or more private sales to a restricted
group of purchasers who shall be obligated to agree, inter alia,
to acquire such Pledged Securities for their own account, for
investment and not with a view to the distribution or resale
thereof. The Pledgor hereby acknowledges that any such private
sales may be at places and on terms less favorable to the seller
than if sold at public sales and agrees, notwithstanding any other
provision hereof or any provision of the Code to the contrary,
that such private sales shall be deemed to have been made in a
commercially reasonable manner, and that the Note Holder has no
obligation to delay sale of any such Pledged Securities for the
period of time necessary to permit the issuer of such Pledged
Securities to register such Pledged Securities for public sale
under the Securities Act.
6. Further Assurances. The Pledgor shall at any time and from
time to time upon the written request of the Note Holder, execute
and deliver such further documents and do such further acts and
things as the Note Holder may reasonably request in order to
effect the purposes of this Pledge Agreement, including, without
limitation, delivering to the Note Holder on the date hereof or at
any time hereafter irrevocable proxies in respect of the Pledged
Securities of each issuer substantially in the form of Exhibit A
attached hereto.
7. Miscellaneous.
(a) Note Holder Responsibilities. Beyond the exercise of
reasonable care to assure the safe custody of the Pledged
Securities while held hereunder, the Note Holder shall have no
duty or liability to preserve rights pertaining thereto, and shall
be relieved of all responsibility for the Pledged Securities upon
surrendering it to the Pledgor or in accordance with the Pledgor's
instructions.
(b) No Waiver; Amendment. No course of dealing between the
Pledgor and the Note Holder, nor any failure to exercise, nor any
delay in exer- cising, on the part of the Note Holder, any right,
power or privilege hereunder or under the Guaranty, the Note
Agreement or the Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege
hereunder or thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
This Pledge Agreement may not be amended except by a writing
executed by each of the parties hereto.
(c) Rights and Remedies. The rights and remedies herein
provided, and provided in the Guaranty, the Note Agreement and the
Note and in all other agreements, instruments and documents
delivered pursuant to the Note Agreement or the Guaranty, are
cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law, including, without limitation,
the rights and remedies of a secured party under the Code.
(d) Severability. The provisions of this Pledge Agreement are
severable, and if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or
provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision in this Pledge
Agreement in any jurisdiction.
8. Notice. All notices, requests, demands or other
communications hereunder shall be in writing, either by letter
(delivered by hand or commercial messenger service or sent by
certified mail, return receipt requested) or telecopy, addressed
as follows:
(a) if to the Pledgor:
Attention:
Telecopier No.:
with a copy to:
Attention:
Telecopier No.:
(b) if to the Note Holder:
WellCare Medical Management, Inc.
Park West/Hurley Avenue Extension
Post Office Box 4059
Kingston, New York 12401
Attention: Marystephanie Corsones
Telecopier No.: (914) 334-7820
with a copy to:
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Attention: Seth I. Truwit, Esq.
Telecopier No.: (212) 661-0989
Any notice, request, demand or other communication hereunder shall
be deemed to have been given on the day on which it is telecopied
to such party at its telecopier number specified above or
delivered by hand or such commercial messenger service to such
party at its address specified above, or, if sent by mail, on the
third business day after the day deposited in the mail, postage
prepaid. The Note Holder or the Pledgor may change the
individual, address or telecopier number to whom or to which
notices are to be given hereunder, by notice duly given hereunder;
provided, however, that any such notice shall be deemed to have
been given hereunder only when actually received by the party to
which it is addressed.
9. Assignment; Entire Agreement. This Pledge Agreement shall be
binding upon the Pledgor and its successors and permitted assigns,
and shall inure to the benefit of the Note Holder and its
successors and assigns; provided, however, that the Pledgor shall
not be entitled to assign or delegate any of its rights or
obligations under this Pledge Agreement without the prior written
consent of the Note Holder (which consent may be) granted in the
sole and absolute discretion of the Note Holder), and any
purported assignment in the absence of such consent shall be void.
This Pledge Agreement, together with the Guaranty and the other
Security Documents, if any, embodies the entire agreement and
understanding between the Note Holder and the Pledgor relating to
the subject matter hereof and supersedes all prior agreements and
understandings relating to the subject matter hereof.
10. Governing Law; Jurisdiction. THIS PLEDGE AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE NOTE HOLDER AND THE PLEDGOR
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO ITS RULES PERTAINING TO CONFLICTS OF LAWS. THE PLEDGOR WAIVES
TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS PLEDGE AGREEMENT OR ANY OF
THE SECURITY DOCUMENTS. IN THE EVENT THE NOTE HOLDER BRINGS ANY
ACTION OR SUIT IN ANY COURT OF RECORD IN THE STATE OF NEW YORK TO
ENFORCE ANY OR ALL LIABILITIES OF THE PLEDGOR HEREUNDER, SERVICE
OF PROCESS MAY BE MADE UPON THE PLEDGOR BY MAILING A COPY OF THE
SUMMONS TO THE PLEDGOR BY CERTIFIED OR REGISTERED MAIL, AT THE
ADDRESS SPECIFIED IN SECTION 8 HEREOF, AND THE PLEDGOR HEREBY (A)
CONSENTS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK, COUNTY OF ULSTER, AND THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF NEW YORK OVER THE PERSON OF THE PLEDGOR
AND (B) WAIVES ANY CLAIM THAT ULSTER COUNTY OR THE NORTHERN
DISTRICT OF NEW YORK IS AN INCONVENIENT FORUM. THE PLEDGOR HEREBY
WAIVES THE RIGHT TO INTERPOSE COUNTERCLAIMS OR SET-OFFS OF ANY
KIND AND DESCRIPTION IN ANY SUCH ACTION OR SUIT ARISING HEREUNDER
OR THEREUNDER OR IN CONNECTION HEREWITH OR THEREUNDER.
11. Counterparts. This pledge Agreement may be executed in
several counterparts, each of which is an original but all of
which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Pledge Agreement
to be duly executed and delivered the day and year first above
written.
[Name of Pledgor]
WELLCARE MEDICAL MANAGEMENT, INC.,
By:
Name:
Title:EXHIBIT A
TO
GUARANTOR PLEDGE AGREEMENT
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS the undersigned does hereby make,
constitute and appoint WELLCARE MEDICAL MANAGEMENT INC. (the "Note
Holder") and each of the Note Holder's officers and employees, its
true and lawful attorneys, for it and in its name, place and
stead, to act as its proxy in respect of all of the shares of
capital stock of Primergy, Inc., a New York corporation
(hereinafter referred to as the "Corporation"), which it now or
hereafter may own or hold, including, without limitation, the
right, on its behalf, to demand the call by any proper officer of
the Corporation pursuant to the provisions of its Certificate of
Incorporation or By-Laws and as permitted by law of a meeting of
its shareholders and at any such meeting of shareholders, annual,
general or special, to vote for the transaction of any and all
business that may come before such meeting, or at any adjournment
thereof, including, without limitation, the right to vote for the
sale of all or any part of the assets of the Corporation and/or
the liquidation and dissolution of the Corporation; giving and
granting to its said attorneys full power and authority to do and
perform each and every act and thing whether necessary or
desirable to be done in and about the premises, as fully as it
might or could do if personally present with full power of
substitution, appointment and revocation, hereby ratifying and
confirming all that its said attorneys shall do or cause to be
done by virtue hereof.
This Proxy is given to the Note Holder and to its officers and
employees in consideration of the stock options to be granted by
the Obligor to the undersigned and in order to carry out the
covenant of the undersigned contained in a certain Guarantor
Pledge Agreement of even date herewith between the undersigned and
the Note Holder and this Proxy shall not be revocable or revoked
by the undersigned, shall be binding upon the undersigned and its
successors and assigns until the payment in full of all of the
Obligations (as defined in the aforesaid Pledge Agreement) and may
be exercised only after a Guarantor of Event of Default under the
Pledge Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Irrevocable
Proxy this day of , 199.
By:
Title
SCHEDULE A
TO PLEDGE AGREEMENT
Pledged Securities OF
[ ]
Number of Number of Shares Number of
Shares Issued and Shares Owned
Certificate
Authorized Outstanding by Pledgor Number
EXHIBIT 10.48
LOAN AGREEMENT
This Loan Agreement is dated as of November 28, 1994 and entered
into among and between MANAGED CARE ADMINISTRATORS, INC., a New
York Corporation with offices at 770 Broadway, New York, New York
10003 (the "Borrower") and WELLCARE MANAGEMENT GROUP, INC., a New
York Corporation with offices at Park West, Hurley Avenue
Extension, P.O. Box 4059, Kingston New York 12401 (the
"Guarantor") and FIRST NATIONAL BANK OF THE HUDSON VALLEY, a
National Banking Association with offices at Route 55, P.O. Box
340, LaGrangeville, New York 12540 (the "Bank").
NOW THEREFORE, in consideration of One ($1.00) Dollar and other
good and valuable consideration by each party to the other paid,
the receipt of which is acknowledged, the parties intending to be
legally bound mutually agree as follows:
ARTICLE I
BACKGROUND AND DEFINITIONS
A. BACKGROUND
SECTION 1.01. Factual Background. Borrower applied to Bank for a
revolving credit loan and on November 17, 1994, the Bank issued a
commitment letter (the "Commitment Letter") relating to revolving
credit loans in an aggregate amount of One Million Five Hundred
Thousand and 00/00 ($1,500,000.00) Dollars (the "Revolving Credit
Loans"),. The loans are required to be guaranteed by WellCare
Management Group, Inc., the Guarantor, which was granted a
commitment for a term loan up to $1,500,000.00 to refinance the
revolving credit loan to be advanced to Borrower.
B. DEFINITIONS
SECTION 1.02. Defined Terms. As used in this Agreement, the
following terms have the following meanings (terms defined in the
singular to have the same meaning when used in the plural and vice
versa):
"Agreement" means this Loan Agreement, as amended, supplemented or
modified from time to time.
"Borrower" means Managed Care Administrators, Inc., a New York
Corporation with offices at 770 Broadway, Third Floor, New York,
New York 10003.
"Business Day" means any day other than Saturday, Sunday or any
other day on which commercial banks in the State of New York are
authorized or required to close.
"Commitment" means the Bank's obligation to make Loans to the
Borrower pursuant to Article II in the amount referred to therein.
"Debt" means: (1) indebtedness or liability for borrowed money, or
for the deferred purchase price of the property or services
(including trade obligations); (2) obligations as lessee under
Capital Leases; (3) current liabilities in respect of unfunded
vested benefits under any Plan; (4) obligations under letters of
credit issued for the account of any Person; (5) all obligations
arising under acceptance facilities; (6) all guaranties,
endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase,
to provide funds for payment, to supply funds to invest in any
Person or otherwise to assure a creditor against loss and (7)
obligations secured by any Lien on the property owned by the
Person, whether or not the obligations have been assumed.
"Default" means any of the events specified in Section 8.01,
whether or not any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied.
"Event of Default" means any of the events specified in Section
8.01, provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been
satisfied.
"GAAP" means generally accepted accounting principals.
"Guarantor" means WellCare Management Group, Inc., a New York
Corporation having its principal place of business at Park West,
Hurley Avenue Extension, P.O. Box 4059, Kingston New York 12401
"Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), or preference, priority or
other security agreement, or preferential arrangement, charge or
encumbrance or any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same
economic effect as any of the foregoing and the filing of any
financing statement under the Uniform Commercial Code or
comparable or comparable law of any jurisdiction to evidence any
of the foregoing).
"Loan(s)" means the Revolving Credit Loans.
"Loan Documents" means this Agreement, the Note, the Guaranty and
any other document or agreement relating to the Loan or necessary
or pertinent to any of the transactions contemplated by this
Agreement.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental authority
or other entity of whatever nature.
"Prime Rate" means the prime commercial lending rate announced by
the Chase Manhattan Bank as in effect from time to time whether or
not the Chase Manhattan Bank shall at times lend at lower rates to
specific borrowers.
"Revolving Credit Loans" shall have the meaning assigned to such
term in Section 2.01.
"Termination Date" means April 1, 1995.
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
GAAP consistent with that applied in the preparation of the
financial statements referred to herein. All financial data
submitted pursuant to this Agreement shall be prepared in
accordance with GAAP.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
A. REVOLVING CREDIT LOANS
SECTION 2.01. Amount. The Bank agrees on terms and conditions
hereinafter set forth to make and/or continue loans (the
"Revolving Credit Loan") to the Borrower from time to time during
the period from the date of this Agreement up to but not including
the Termination Date in an aggregate amount any time outstanding
not to exceed One Thousand Five Million ($1,500,000.00) Dollars.
Within the limits of the Commitment, the Borrower may borrow and
prepay pursuant to Section 2.37 and reborrow under this Section
2.01.
SECTION 2.02. Notice and Manner of Borrowing. The Borrower shall
give notice (effective upon receipt) of any Revolving Credit Loans
under this Agreement, specifying the date and amount thereof. On
the date of such Revolving Credit Loan and upon fulfillment of the
applicable conditions set forth in Article III, the Bank will make
such Revolving Credit Loan available to the Borrower in
immediately available funds by crediting the amount thereof to the
Borrower's account with the Bank.
SECTION 2.03. Interest. The Borrower shall pay interest to the
Bank on the outstanding and unpaid principal amount of the
Revolving Credit Loans made under this Agreement at a variable
rate per annum equal to the Prime Rate.
SECTION 2.04. Payment of Principal and Interest. Interest on the
Revolving Credit Loans shall be paid in immediately available
funds on the first day of each month. The aggregate principal
amount and interest and late charges outstanding under the
Revolving Credit Loans shall be satisfied on or before April 1,
1995, the Termination Date. The aggregate principal amount of
Revolving Credit Loans shall be due and payable in full in
immediately available funds on the Termination Date.
SECTION 2.05. Revolving Credit Note. All Revolving Credit Loans
made by the Bank under this Agreement shall evidenced by, and
repaid with interest in accordance with, a certain Revolving
Credit Note of the Borrower in the principal amount of One Million
Five Hundred Thousand ($1,500,000.00) Dollars dated the date of
this Agreement, payable to the Bank and maturing as to principal
on the Termination Date. The Bank shall deliver to the Borrower
at least once each calendar month a statement of all Revolving
Credit Loans made to the Borrower and all payments of principal in
respect of such Revolving Credit Loans, which statement shall, in
the absence of manifest error, be conclusive as to the outstanding
principal amount of all Revolving Credit Loans; provided, however,
that the failure to set forth such transactions with respect to
any Revolving Credit Loan or payment shall not limit or otherwise
affect the obligations of the Borrower under this Agreement or the
Revolving Credit Note.
SECTION 2.06 Calculation and Effective Date of Interest Rate
Changes. Any change in the interest rate resulting from a change
in the Prime Rate shall become effective as of the opening of
business on the day on which such change in the Prime Rate shall
become effective. Interest shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed.
SECTION 2.07 Prepayments. The Borrower may without penalty prepay
the Note in whole or in part with accrued interest to the date of
such prepayment on the amount prepaid.
SECTION 2.08 Method of Payment. The Borrower shall make each
payment under this Agreement and under the Note on the date when
due in lawful money of the United States to the Bank in
immediately available funds. The Borrower hereby authorizes the
Bank, if and to the extent payment is not made when due under this
Agreement or under the Note, to charge from time to time against
any account of the Borrower with the Bank any amount so due.
Whenever any payment to be made under this Agreement or under the
Note shall be stated to be due on a Saturday, Sunday or a public
holiday, or the equivalent for banks generally under the laws of
the State of New York, 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 the payment of interest.
SECTION 2.09 Use of Proceeds. The Revolving Credit Loan proceeds
shall be used by the Borrower for ordinary, necessary and
recurring operating expenses.
SECTION 2.10 Extension of Revolving Credit Loan. Bank shall be
under no obligation to extend the commitment date to make a
Revolving Credit Loan beyond the Termination Date; provided,
however, that if Bank elects to not to extend its commitment to
make a Revolving Credit Loan beyond the original or any extended
Termination Date it may do so for up to thirty (30) days in its
sole discretion.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01 Condition Precedent to Loans - Documentation. The
obligation of the Bank to make the Loans to Borrower is subject to
the condition precedent that the Bank shall have received on or
before the day of such Loans the Revolving Credit Note and
Guarantee, Resolutions to Mortgage and Guaranty and any other loan
documents reasonably required in form and substance satisfactory
to the Bank and its counsel and payment of the Bank's counsel
fees.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower and Guarantor represent and warrant to the Bank as
follows:
SECTION 4.01. Incorporation, Good Standing and Due Qualification.
The Borrower and Guarantor are corporations duly incorporated,
validly existing and in good standing under the laws of the
jurisdictions of their incorporation; have the corporate power and
authority to own their assets and to transact the business in
which they now engage or propose to engage; and are duly qualified
as foreign corporations and in good standing under the laws of
each other jurisdiction, if any, in which such qualification is
required.
SECTION 4.02. Corporate Power and Authority. The execution,
delivery and performance by the Borrower and Guarantor of the Loan
Documents to which Borrower is a party have been duly authorized
by all necessary corporate action and do not and will not (1)
require any consent or approval of the stockholders of such
corporation(s); (2) contravene such corporation(s)' articles of
incorporation or bylaws; (3) violate any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to
such corporation; (4) result in a breach of or constitute a
default under any indenture or loan or credit agreement or other
agreement, lease or instrument to which such corporation(s) are a
party or by which either or their properties may be bound or
affected; (5) result in, or require, the creation or imposition of
any Lien upon or with respect to any of the properties now owned
or hereafter acquired by such corporation(s) and (6) cause such
corporation(s) to be in default under any such law, rule,
regulation, order, writ, judgment, injunction, decree,
determination or award or any such indenture, agreement, lease or
instrument.
SECTION 4.03. Legally Enforceable Agreement. This Agreement is,
and each of the other Loan Documents is, or when delivered under
this Agreement will be legal, valid and binding obligations of the
Borrower and Guarantor, enforceable against the Borrower and
Guarantor, in accordance with their respective terms except to the
extent that such enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditor's
right generally.
SECTION 4.04. Financial Statements. All consolidated and
consolidating balance sheets of the Borrower and Guarantor
supplied to the Bank, and the related consolidated and
consolidating statements of income and retained earnings of the
Borrower and Guarantor, and the accompanying footnotes, together
with any opinions thereon and all interim financial statements are
complete and correct and fairly present the financial condition of
the Borrower and the Guarantor as of the dates dated and the
results of the operations of the Borrower and the Guarantor for
the periods covered by such statements, all in accordance with
GAAP consistently applied; and since the date of the latest of
such statements, there has been no material adverse change in the
condition (financial or otherwise), business or operations of the
Borrower or Guarantor. There are no liabilities of the Borrower
or Guarantor, fixed or contingent, which are material but are not
reflected in the financial statements or in the notes thereto. No
information, exhibit or report furnished by the Borrower or
Guarantor to the Bank in connection with the negotiation of this
Agreement contains any material misstatement of fact or omits to
state a material fact or any fact necessary to make the statement
contained therein not materially misleading.
SECTION 4.05. Labor Disputes and Acts of God. Neither the
business nor the properties of the Borrower or the Guarantor are
affected by any fire, explosion, accident, strike, lookout or
other labor dispute, drought, storm, hail, earthquake, embargo,
act of God or of the public enemy, or other casualty (whether or
not covered by insurance), materially and adversely affecting such
business or properties or the operation of the Borrower or the
Guarantor.
SECTION 4.06. Other Agreements. Neither the Borrower nor the
Guarantor is a party to any indenture, loan or credit agreement,
or to any lease or other agreement or instrument, or subject to
any article of incorporation or corporate restriction which could
have a material adverse effect on the business, properties,
assets, operations or conditions, financial or otherwise, of the
Borrower or the Guarantor, or the ability of the Borrower to carry
out its obligations under the Loan Documents to which it is a
party. Neither the Borrower nor the Guarantor is in default in
any respect in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any
agreement or instrument material to its business to which Borrower
or Guarantor is a party.
SECTION 4.07. Litigation. There is no pending or threatened
action or proceeding against or affecting the Borrower or the
Guarantor before any court, governmental agency or arbitrator
which may, in any one case of in the aggregate, materially
adversely affect the financial condition, operations, properties
or business of the Borrower or the Guarantor or the ability of the
Borrower or Guarantor to perform their obligations under the Loan
Documents.
SECTION 4.08. No Defaults on Outstanding Judgments or Orders.
The Borrower and the Guarantor have satisfied all judgments; an
neither the Borrower nor the Guarantor is in default with respect
to any judgment, writ, injunction, decree, rule or regulation of
any court, arbitrator or federal, state, municipal or other
governmental authority, commission, board, bureau, agency or
instrumentality, domestic or foreign.
SECTION 4.09. Ownership and Liens. The Borrower and Guarantor
have title to, or valid leasehold interests in, all of their
properties and assets, real and personal, including the properties
and assets and leasehold interest reflected in the financial
statements referred to in Section 4.04 (other than any properties
or assets disposed of in the ordinary course of business.)
SECTION 4.10. Operation of Business. The Borrower and the
Guarantor possess all licenses, permits, franchises, patents,
copyrights, trademarks and trade names or rights thereto to
conduct their respective business substantially as now conducted
and as presently proposed to be conducted; and the Borrower and
the Guarantor are not in violation of any valid rights or others
with respect to any of the foregoing.
SECTION 4.11. Taxes. The Borrower and the Guarantor have filed
all tax returns (federal, state, and local) required to be filed
and have paid all taxes, assessments and governmental charges and
levies shown or determined thereon to be due including interest
and penalties.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any sums due under the Revolving Credit Loans shall
remain unpaid or the Bank shall have any Commitment under this
Agreement, the Borrower and Guarantor will without any notice or
demand from the Bank:
SECTION 5.01. Maintenance of Existence. Preserve and maintain
Borrower's and Guarantor's corporate existence and good standing
in the jurisdiction of incorporation, and qualify and remain
qualified as a foreign corporation in each jurisdiction in which
such qualification is required.
SECTION 5.02. Maintenance of Records. Keep adequate records and
books of account in which complete entries will be made in
accordance with GAAP consistently applied, reflecting all
financial transactions of the Borrower and Guarantor.
SECTION 5.03. Maintenance of Properties. Maintain, keep and
preserve all of their respective properties (tangible and
intangible) necessary or useful in the proper conduct of business
in good working and condition, ordinary wear and tear excepted.
SECTION 5.04. Conduct of Business. Continue to engage in any
efficient and economical manner in a business of the same general
type as conducted by them on the date of this Agreement.
SECTION 5.05. Maintenance of Insurance. Maintain insurance with
financially sound and reputable insurance companies as are usually
carried by companies engaged in the same of a similar business and
similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof.
SECTION 5.06. Compliance with Laws. Comply and cause in all
respects with all applicable laws, rules, regulations and orders,
such compliance to include, without limitation, paying before the
same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property.
SECTION 5.07. Rights of Inspection. Any reasonable time and from
time to time, permit the Bank or any agent or representative
thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the
Borrower and Guarantor and to discuss the affairs, finances and
accounts of the Borrower and Guarantor with any of their
respective officers and directors and the borrower's independent
accountants.
SECTION 5.08. Reporting Requirements. Borrower will furnish to
the Bank monthly updates concerning membership and marketing and
quarterly and annual reports as soon as available and in any event
within sixty (60) days after the end of each of the quarters of
each fiscal year of the Borrower. Borrower and Guarantor will
furnish 10-K's if applicable and such other information respecting
the condition of operations, financial or otherwise, of the
Borrower and Guarantor as the Bank may from time to time
reasonably request.
ARTICLE VI
NEGATIVE COVENANTS
So long as the Note shall remain unpaid or the Bank shall have any
Commitment under this Agreement unless otherwise permitted by the
terms hereof, the Borrower will not:
SECTION 6.01. Liens. Create, incur, assume or suffer to exist
any Lien or pledge upon or with respect to any of its accounts
receivable or other properties, now owned or hereafter acquired,
except:
(a) Liens in favor of the Bank;
(b) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, which
are being contested in good faith by appropriate proceedings and
for which appropriate reserves are maintained;
(C) Liens imposed by law, such as mechanic's materialmen's,
landlords', warehousemen's and carrier's Liens and other similar
Liens securing obligations incurred in the ordinary course of
business which are not past due for more than fourteen (14) days
or which are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been
established;
(d) Liens under workmen's compensation, unemployment insurance,
social security or similar legislation;
(e) Liens securing pre-existing obligations disclosed to the Bank
in writing in the loan application covering the properties therein
described but not the extension of the Lien to other property of
the granting of the Lien to secure the extension of the maturity,
refunding or modification of such obligation, in whole or in part;
(f) Judgment and other similar Liens arising in connection with
court proceedings, provided the execution or other enforcement of
such Liens is effectively stayed and the claims secured thereby
are being actively contested in good faith and by appropriate
proceedings;
(g) Easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere
with the occupation, use and enjoyment by the Borrower of the
property or assets encumbered thereby in the normal course of its
business or materially impair the value of the property subject
thereto; and
(h) Purchase-money Liens on any property hereafter acquired or the
assumption of any Lien on property existing at the time of such
acquisition, or a Lien incurred in connection with any conditional
sale or other title retention agreement or a Capital Lease;
provided that
(1) Any property subject to any of the foregoing is acquired by
the Borrower in the ordinary course of business and the Lien on
any such property is created contemporaneously with such
acquisitions;
(2) Each such Lien shall attach only to the property so acquired
and fixed improvements theron;
(3) The purchase money obligation secured by such Lien is
specifically permitted by this Agreement or the Bank has consented
to such Lien.
SECTION 6.02 Debt. Create, incur, assume or suffer to exist any
Debt except:
(a) Debt or the Borrower under this Agreement or the Note;
(b) Debt previously disclosed to the Bank But no renewals,
extensions or refinancings thereof;
(C) Debt of the Borrower to Guarantor;
(d) Accounts payable to trade creditors for goods or services and
current operating liabilities (other than for borrowed money),
neither of which are more than sixty (60) days past due, in each
case incurred in the ordinary course of business and paid within
the specified time, unless contested in good faith and by
appropriate proceedings; and
(e) Debt otherwise permitted under the terms of this Agreement.
SECTION 6.03. Mergers and Similar Transactions. Merge or
consolidate with or sell, assign, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or
substantially all of the assets or the business of any Person
except that the Guarantor may merge into or transfer assets to the
Borrower or vice-versa.
SECTION 6.04. Leases. Create, incur, assume or suffer to exist
any obligation as lessee for the rental or hire of any real or
personal property except: (a) Capital Leases permitted by Section
6.01(h); (b) leases existing on the date of this Agreement, any
extensions or renewals thereof and any new leases provided that
the aggregate lease payments under such leases do not exceed
$50,000.00 per fiscal year of the Borrower; and (C) leases between
the Borrower and any Subsidiary or the Guarantor.
SECTION 6.05. Sale and Leaseback. Sell, transfer or otherwise
dispose of any real or personal property to any Person and
thereafter directly or indirectly lease back the same or similar
property.
SECTION 6.06. Dividends. Declare or pay any dividends or
purchase, redeem, retire or otherwise acquire for value any of the
Borrower's capital stock now or hereafter outstanding; or make any
distribution of assets to its stockholders as such whether in
cash, assets or obligations of the Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purpose, redemption or retirement of,
any shares of its capital stock; or make any other distribution by
reduction of capital or otherwise in respect of any shares of its
capital stock; or permit any Subsidiary to purchase or otherwise
acquire for value any stock of the Borrower, except that (a) the
Borrower may declare and deliver dividends and made distributions
payable solely in common stock of the Borrower; (b) the Borrower
may purchase or otherwise acquire shares of its capital stock by
exchange for or out of the proceeds received from a substantially
concurrent issue of new shares of its capital stock; and (C)
Borrower may purchase or otherwise acquire shares of its capital
stock for the aggregate consideration or not more than $25,000.000
per fiscal year.
SECTION 6.07. Sale of Assets. Sell, lease, assign, transfer or
otherwise dispose of any now owned or hereafter acquired assets,
except: (a) inventory disposed of in the ordinary course of
business; (b) the sale or other disposition of assets no longer
used or useful in conduct of its business.
SECTION 6.08. Investments. Make any loan or advance to any
Person, or purchase or otherwise acquire any capital stock,
assets, obligations or other securities of, make any capital
contribution to or otherwise invest in or acquire any interest in
any Person except: (a) direct obligations of the United States or
any agency thereof with maturities of one year or less from the
date of acquisition; (b) commercial paper or a domestic issuer
rated at least "A-1" by Standard & Poor's Corporation of "P-1" by
Moody's Investors Services, Inc.; (C) certificates of deposit with
maturities of one year or less from the date of acquisition issued
by a federally insured commercial bank or savings and loan
institution and (d) for stock, obligations or securities received
in settlement of debts (created in the ordinary course of
business) owing to the Borrower or Guarantor.
SECTION 6.09. Guaranties and Similar Obligations. Assume,
guarantee, endorse or otherwise be or become directly or
contingently responsible or liable or otherwise be or become
directly or contingently responsible or liable (including, but not
limited to, an agreement to purchase any obligation, stock,
assets, goods or services, or to supply to advance any funds,
assets, goods or services, or to maintain or cause such Person to
maintain a minimum working capital or net worth, or otherwise to
assure the creditors of any Person to maintain a minimum working
capital or net worth, or otherwise to assure the creditors of any
Person against loss) for obligations of any Person, except
guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business.
SECTION 6.10. Transaction with Affiliate. Enter into any
transaction including, without limitation, the purchase, sale or
exchange of property or the rendering of any service with any
Affiliate to enter into any transaction including, without
limitation, the purchase, sale or exchange of property or the
rendering of any service with any service with any Affiliate
except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower or such
Subsidiary than available in a comparable arm's length transaction
with a Person not an Affiliate.
ARTICLE VII
FINANCIAL COVENANTS
SECTION 7.01. Debt Ratios. So long as the Note shall remain
unpaid or the Bank shall have any Commitment under this Agreement,
the Guarantor will maintain at all times the following ratios
determined on a consolidated basis and in accord with GAAP:
(a) Liquidity: The Guarantor will maintain a current ratio of
total current assets and total current liabilities of not less
than 1.40 to 1.
(b) Profitability. The Guarantor will maintain a debt coverage
ratio of net income plus depreciation and interest to Current
Portion of Long Term Debt (CPLTD) including interest of not less
than 1.25 to 1.
(C) Tangible Net Worth. The Guarantor will maintain at all times
a ratio of total current and long-term liabilities of not greater
than 1.40 to 1.
SECTION 7.02. Guarantor Debt Limitations. The Guarantor will
neither assume or suffer to exist any debt which is in excess of
the following maximums without first obtaining the consent of the
Bank.
(a) Maximum unsecured lending institution Debt shall be
$12,000,000.00.
(b) The Maximum Off Balance Sheet Financing by Guaranties of Debt
of Person(s) dependent on Guarantor for more than 80% of their
total revenue stream (whether from capitation, fee-for-service or
other revenue sources of any kind or nature) shall be
$10,000,000.00.
SECTION 7.03. 10-K. For purposes of establishing compliance with
the above ratios and Guarantor Debt Limitations, the Guarantor's
quarterly 10-K shall be utilized to the maximum extent practical.
SECTION 7.04. Other Limitations on Transfers by Guarantor.
Guarantor shall not sell, lease, assign, transfer or otherwise
dispose of any now owned or hereafter acquired assets, except: (a)
inventory disposed of in the ordinary course of business; (b) the
sale or other disposition of assets no longer used or useful in
conduct of its business (except that Guarantor may sell, lease,
assign, or otherwise transfer its assets which in the aggregate do
not constitute more than ten (10%) percent of its consolidated
assets.)
SECTION 7.05. Banking Relationships. So long as the Note shall
remain unpaid or the Borrower shall have any commitment under this
Agreement, Borrower and Guarantor shall maintain deposit
relationships with the Bank.
EXHIBIT10.49
QUOTA SHARE REINSURANCE AGREEMENT
(hereinafter referred to as the "Agreement")
between
THE WELLCARE MANAGEMENT GROUP, INC.
(hereinafter called "WellCare")
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
(hereinafter called "Allianz")
This Agreement is made and entered into as of the day of September
1, 1995;
WITNESSETH
WHEREAS, WellCare currently operates a Medicare Risk Contract
program called Senior Health (herein referred to as "The
Program"), duly approved by federal authorities of the Federal
Health and Human Services ("HHS") Health Care Finance
Administration ("HCFA") to provide health coverage to Medicare
beneficiaries seniors ("seniors") and other persons eligible
therefore; and
WHEREAS, Allianz is engaged in the business of insurance,
reinsurance and risk sharing services to the HMO industry; and
WHEREAS, WellCare desires to cede to Allianz and Allianz desires
to reinsure WellCare on the basis, terms and conditions of this
Agreement, a quota share of the contractual risks and rewards of
The Program.
NOW, THEREFORE, in consideration of the promises and the mutual
representations, covenants and agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency
whereof is hereby acknowledged, and intending to be legally bound,
WellCare and Allianz do hereby represent, covenant, promise and
agree as follows:
ARTICLE I
BASIS OF REINSURANCE
WellCare hereby agrees to cede, and Allianz hereby agrees to
accept, by way of reinsurance on the terms and conditions
hereinafter appearing, the following quota share of the WellCare
Claim and Administrative Expenses under The Program for each of
the years listed.
1996 25%
1997 25%
1998 25%
1999 10%
2000 10%
2001; 2002; 2003; 2004; 2005 10%
(if applicable)
WellCare "Claim Expenses" will be the amounts paid by WellCare to
providers of health services for The Program, whether paid by case
rate, capitation, per diem, DRG, or fee for service.
WellCare "Administrative Expenses" will be the following
percentages of gross revenue received by WellCare for The Program.
1996 15%
1997 14%
1998 13%
1999 12%
2000 11%
2001; 2002; 2003; 2004; 2005 10%
(if applicable)
ARTICLE 2
PAYMENT TO WELLCARE
In addition, Allianz will pay to WellCare, on behalf of WellCare
University, the amount of Two million dollars ($2,000,000.00)
payable pursuant to the following dates:
January 1, 1996 $250,000
April 1, 1996 $250,000
July 1, 1996 $250,000
October 1, 1996 $250,000
January 1, 1997 $125,000
April 1, 1997 $125,000
July 1, 1997 $125,000
October 1, 1997 $125,000
January 1, 1998 $125,000
April 1, 1998 $125,000
July 1, 1998 $125,000
October 1, 1998 $125,000
Also this payment will not be subject to the cancellation
provisions contained in Article 4.
ARTICLE 3
PREMIUM AND REPORTS
3.1 Reinsurance premium will be the Allianz Quota Share of Net
Revenue received by WellCare for The Program, less the Allianz
Quota Share of Administrative Expenses and Claim Expenses for The
Program.
3.2 WellCare shall send to Allianz a report for each month within
twenty (20) days after the end of the month, showing the Allianz
Quota Share for The Program for the month, of gross revenue less
Claim Expenses less Administrative Expense, along with detail of
gross revenue and Claim Expenses in a format approved by Allianz.
If there is a positive balance, this reinsurance premium is
payable and due with the report. If there is a negative balance,
this reinsurance recovery is payable by Allianz to WellCare within
ten (10) days of receipt of the report.
ARTICLE 4
TERM AND CANCELLATION
4.1 Term. This Agreement is effective January 1, 1996. It will
continue through 2000, and may continue thereafter, year to year,
at the option of Allianz, through 2005. However, the provisions
under Article 2 will be deemed effective upon execution of this
Agreement.
4.2 Cancellation.
(a) If either party is dissolved or liquidated, or shall apply for
or consent to the appointment of a receiver, trustee or liquidator
of it or all or a substantial part of its assets, file a voluntary
petition in bankruptcy, make a general assignment for the benefit
of creditors, file a petition or answer seeking its reorganization
or an arrangement with its creditors or to take advantage of an
insolvency law, or if an order, judgment or decree shall be
entered by any court of competent jurisdiction, on the application
of a creditor, adjudicating said party or appointing a receiver,
trustee or liquidator for said party or all or a substantial part
of its assets, and such order, judgment or decree shall continue
in effect for any period of ninety (90) consecutive days, then in
case of any such event, this Agreement shall expire, at the other
party's option, on five (5) days written notice, notwithstanding
any other provision in this Agreement.
(b) If WellCare or Allianz shall fail to keep, observe or perform
any material covenant, agreement, term or provision of this
Agreement to be kept, observed, or performed by it, and such
default shall continue for a period the greater of thirty (30)
days or in cases where the alleged default is a result of
governmental action or inaction, such longer period as shall be
required to exhaust all procedural and substantive rights
available by law to cure same under applicable governmental or
third party payor laws or regulations, or, if other defaults are
curable but not within the thirty (30) days period, such longer
time as may be required shall be given to cure, provided that the
defaulting party begins to cure immediately and thereafter
proceeds diligently and without interruption until the cure is
completed, after written notice by the non-defaulting party to the
other specifying the default in question and requesting that the
default be cured, then in case of any such event and upon the
expiration of any period of grace applicable thereto the term of
this Agreement shall expire, at the option of the non-defaulting
party, on five (5) days written notice to the other party.
(C) Either party shall have the right to terminate this Agreement
at any time if the operating license for The Program or any
substantial portion thereof is revoked or suspended for more than
sixty (60) consecutive days provided all procedural and
substantive rights available under law to reserve or modify same
shall have first been exhausted by WellCare if it chooses to
pursue such rights, in its sole discretion. Notwithstanding the
foregoing, either party's right to terminate hereunder shall be
exercised only by delivery of written notice to the other party no
later than ten (10) days after expiration of the aforementioned
sixty (60) day period or the exhaustion of all such procedural and
substantive rights.
ARTICLE 5
POTENTIAL REDUCTIONS IN WELLCARE ADMINISTRATION EXPENSES
5.1 If for any year after 1998, WellCare Claim Expenses plus
Administrative Expenses exceed its gross revenue for The Program,
WellCare will pay Allianz an amount to cover the Allianz Quota
Share of this loss, but such payment is not to exceed 1% of gross
revenue for The Program for that year.
5.2 If there is a legal mandate that seniors within the WellCare
service area be given the option of receiving Medicare services
from an HMO, then the WellCare Administrative Expenses will be
reduced by the savings to WellCare caused by this mandate, but
such reduction is not to exceed 4% of gross revenues for The
Program.
ARTICLE 6
RETENTION OF CONTROL BY WELLCARE
Subject to all provisions herein contained, WellCare, acting by
and through its duly authorized officers, shall at all times
exercise overall control over the assets and operations of
WellCare and The Program.
ARTICLE 7
BANK ACCOUNTS AND WORKING CAPITAL
WellCare shall establish a bank account or accounts solely for The
Program (the "Operating Accounts") and thereafter deposit therein
all funds received by WellCare from the operations of The Program.
WellCare shall have responsibility for thereafter maintaining and
reconciling such Operating Accounts. WellCare shall provide
sufficient working capital for the operation of The Program and
shall deposit such working capital in the Operating Program. All
costs and expenses incurred in the operations of The Program shall
be paid out of the Operating Accounts of The Program or by
WellCare.
ARTICLE 8
GOVERNMENT REGULATIONS
WellCare agrees to use its best efforts to operate and maintain
The Program in compliance with the requirements of any statute,
ordinance, law, rule, regulation or order of any governmental or
regulatory body having jurisdiction over WellCare and The Program
and its operations.
ARTICLE 9
TAXES
Any federal, state or local taxes, assessments or other
governmental charges properly imposed on WellCare resulting from
The Program are the obligations of WellCare, and shall be paid out
of the Operating Accounts or by WellCare.
ARTICLE 10
IMPAIRMENT DUE TO GOVERNMENTAL ACTION
In the event any federal, state, local government, or insurance
law, regulation, policy and/or interpretation of the same shall
impair (impairment being considered either an operational or
financial sense) the continuing validity and/or effectiveness of
any material provision hereof, the parties shall meet within
thirty (30) days after such impairment and agree upon a
modification of this Agreement so that each party will receive the
benefits that was expected or, if the parties agree that the
impairment is so material that the Agreement cannot be modified so
that each party would receive the benefits expected, agree to
terminate the Agreement.
ARTICLE 11
ACCESS TO RECORDS
Each party shall have access to records of the other party
necessary to carry out and monitor the terms of this Agreement.
ARTICLE 12
LIABILITY INSURANCE
WellCare agrees that basic limits of professional malpractice
liability insurance will be maintained during this Agreement for
WellCare and The Program and for any member, employee, or
subcontractor of WellCare who will be providing services to or for
The Program, with coverage in an amount of not less than
$1,000,000 per occurrence and $3,000,000 per annual aggregate,
however the policy shall in the form and amounts of such coverage
be not less than those required by all applicable regulatory
agencies and by other applicable New York insurance laws and
regulations. WellCare agrees to provide Allianz with certificates
of insurance as evidence of coverage (and showing that Allianz is
named as an additional insured) and to provide written notice to
Allianz of any proposed modifications, cancellation or termination
of the above-referenced insurance coverage at least thirty (30)
days prior thereto.
ARTICLE 13
INSOLVENCY OF WELLCARE
Allianz hereby agrees that in the event of the insolvency of
WellCare this Agreement shall be so construed that any amount owed
to WellCare shall be payable directly to WellCare or to its
liquidator, receiver, conservator, or statutory successor on the
basis of the liability of WellCare without diminution because of
the insolvency of WellCare or because the liquidator, receiver,
conservator, or statutory successor of WellCare has failed to pay
all or a portion of any claim. It is further agreed that the
liquidator, receiver, conservator, or statutory successor of
WellCare shall give written notice to Allianz of the pendency of a
claim against WellCare within a reasonable time after such claim
is filed in the insolvency proceedings; and that during the
pendency of such claim Allianz may investigate such claim and
interpose at its own expense in the proceedings where such claim
is to be adjudicated any defense or defenses which it may deem
available to WellCare or its liquidator, receiver, conservator, or
statutory successor.
ARTICLE 14
OFFSET
Any debits or credits, matured or unmatured, liquidated or
unliquidated, regardless of when they arose or were incurred, in
favor of or against either WellCare or Allianz with respect to
this Agreement or with respect to any other claim of one party
against the other are deemed mutual debits or credits, as the case
may be, and shall be set off, and only the balance shall be
allowed or paid.
ARTICLE 15
ARBITRATION
If any dispute shall arise between the parties, either before or
after termination of this Agreement, with reference to the
interpretation of this Agreement or the rights of either party
with respect to any transaction under this Agreement, the dispute
shall be referred to three arbitrators, one to be chosen by each
party and the third by the two so chosen. If either party refuses
or neglects to appoint an arbitrator within thirty (30) days after
the receipt of written notice from the other party requesting it
to do so, the requesting party may nominate two arbitrators who
shall choose the third. In the event the two arbitrators do not
agree on the selection of the third arbitrator within thirty (30)
days after both arbitrators have been named then the third
arbitrator shall be selected, pursuant to the commercial
arbitration rules of the American Arbitrator Association. The
arbitrators shall be officials or former officials of other
insurance or reinsurance companies. The arbitration shall take
place in the State of New York, and the arbitration proceedings
are to be governed by the rules of the American Arbitration
Association. The arbitrators shall consider this Agreement an
honorable engagement rather than merely a legal obligation; they
are relieved of all judicial formalities and may abstain from
following the strict rules of law. The decision of a majority of
the arbitrators shall be final and binding on both parties and
judgment upon the award rendered by the arbitrators may be entered
into any court having jurisdiction thereof. Each party shall pay
the expense of the arbitrator chosen by it and share the expense
of the third arbitrator. Arbitration is the sole remedy for
disputes arising under this contract.
IN WITNESS WHEREOF, the parties have set their signatures below.
THE WELLCARE MANAGEMENT GROUP, INC.
By:/s/ Edward A. Ullmann
Title:President/CEO
Date:
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
By:/s/Thomas Lynch
Title:Senior Vice President
Date:
EXHIBIT 11
,,,,,Exhibit 11,
,,,,,,,
THE WELLCARE MANAGEMENT GROUP, INC. AND SUBSIDIARIES,,,,,
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK,,,,,
(in thousands, except per share data),,,,,,,
,,,,,,,
,,,,,,,
,,,,,,,
,,Years Ended December 31,,,,
,,18 June 1905,,17 June 1905,,16 June 1905,
,,,,(Restated),,
,,,,,,,
Income before income taxes and cumulative,,,,,,
effect of a change in accounting principle,$2,789,,$5,862,,$6,118,
,,,,,,,
Provision for income taxes,,1,116,,2,403,,2,533,
,,,,,,,
Income before cumulative effect of a ,,,,,,,
change in accounting principle,,1,673,,3,459,,3,585,
,,,,,,,
Cumulative effect of a change in accounting principle,
-, -,1,063,
,,,,,,,
Net income,,$1,673,,$3,459,,$4,648,
,,,,,,,
,,,,,,,
Weighted average number of common and,,,,,,,
common equivalent shares outstanding,,6,250,,6,226,,5,022,
,,,,,,,
,,,,,,,
,,,,,,,
,,,,,,,
Earnings Per Share:,,,,,,,
,,,,,,,
Income before cumulative effect of a ,,,,,,,
change in accounting principle,,$0.27,,$0.56,,$0.72,
,,,,,,,
Cumulative effect of a change in accounting principle,
-,, -,,0.21,
,,,,,,,
Net income,,$0.27,,$0.56,,$0.93,
,,,,,,,
EXHIBIT 22
THE WELLCARE MANAGEMENT GROUP, INC.
List of Subsidiaries
Name of Corporation and Name Under Which Corporation is Doing
Business As/ State of Incorporation/ Percentage Owned
WellCare of New York, Inc. / New York / 100%
WellCare Administration, Inc. / New York / 100%
WellCare Medical Management, Inc. (1) / New York / 100%
WellCare Development, Inc. / New York / 100%
WellCare of Connecticut, Inc. / Connecticut / 100%
(1) Assets sold to and liabilities assumed by independent third
party.
EXHIBIT 23ii
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in
Registration Statement No. 33-82534 of The WellCare Management
Group, Inc. on Form S-8 of our report dated May 14, 1996,
appearing in this Annual Report on Form 10-K of The WellCare
Management Group, Inc. for the year ended December 31, 1995.
Deloitte & Touche LLP
New York, New York
May 29, 1996
