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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER 1-11343
CORAM HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 33-0615337
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1125 SEVENTEENTH STREET, SUITE 2100 80202
DENVER, COLORADO (Zip Code)
(Address of principal executive offices)
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Registrant's telephone number, including area code: (303) 292-4973
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock ($.001 par value per share) New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the securities exchange act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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RECENT EVENTS
Pursuant to a letter agreement dated April 13, 1998, the Company reached an
agreement with Cerberus Partners, L.P., Goldman Sachs Credit Partners, L.P. and
Foothill Capital Corporation, the holders of its Subordinated Rollover Note (the
"Rollover Note"), on an indicative term sheet which provides for the
restructuring of the debt represented by the Rollover Note and the warrants to
purchase shares of the Company's common stock issued in connection with such
Rollover Note. The restructuring is subject to the execution of definitive
documentation and consummation of the restructuring on or prior to June 30,
1998. If the debt restructuring is not consummated on or prior to June 30, 1998,
all interest and accrued fees on the Rollover Note previously deferred to
September 30, 1998 then become due and payable. There can be no assurance that
future cash flow from operations will be sufficient to cover current or future
debt obligations or that any restructuring of the Rollover Note will be
consummated.
In April 1998, the Company entered into a five-year capitated agreement
with Aetna U.S. Healthcare, Inc. ("Aetna USHC") for the management and provision
of certain home health services, including home infusion, home nursing,
respiratory therapy, durable medical equipment, hospice care and home nursing
support for several of Aetna USHC's disease management programs. Effective July
1, 1998, the Company will receive capitated payments on a monthly basis for
covered members, assume certain financial risk for such services and manage a
network of home health providers through its Resource Network Division. The
Company's network of participating providers will include certain subsidiaries
of the Company, and the network will serve certain persons enrolled in Aetna
USHC's HMO-based plans in the eight state area covered under the agreement, who
are presently not, or who will not be, committed to other networks. As of April
23, 1998, the membership covered under the agreement between the Company and
Aetna USHC totaled approximately 2.0 million lives.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
BOARD OF DIRECTORS
The following table sets forth certain information concerning each member
of the Board of Directors of Coram as of April 28, 1998. Except as set forth
below, none of the directors entered into any arrangement or understanding
pursuant to which such person was to serve as a director.
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NAME AGE POSITION WITH CORAM DIRECTOR SINCE
- ---- --- ------------------- --------------
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Donald J. Amaral................ 45 Chairman of the Board and Chief 1995
Executive Officer
William J. Casey................ 53 Director 1997
Richard A. Fink................. 43 Director 1994
Stephen G. Pagliuca............. 43 Director 1994
L. Peter Smith.................. 49 Director 1994
</TABLE>
Mr. Amaral was appointed Chairman of the Company's Board of Directors on
September 16, 1997. Mr. Amaral has served as a director and Chief Executive
Officer of the Company since October 13, 1995 and served as President from
October 13, 1995 through December 1997. Previously, he was President and Chief
Operating Officer of OrNda Healthcorp ("OrNda") from April 1994 to August 1995,
and served in various executive positions with Summit Health Ltd. ("Summit")
from October 1989 to April 1994, including President and Chief Executive Officer
between October 1991 and April 1994. Summit was merged into OrNda in April 1994.
Mr. Amaral is also a member of the Board of Directors of Meditrust Corporation
and CareMatrix Corporation.
Mr. Casey has served as a director of Coram since September 1997. Since
1983, Mr. Casey has served as a consultant in the healthcare industry,
specializing in hospital management evaluation, hospital planning,
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managed care contracting and turnaround services. From 1986 to the present, Mr.
Casey has also served as Contract Administrator for Emergency Department
Physicians' Medical Group, Inc. and its affiliated medical groups, which provide
physician services to non-governmental facilities. In addition, from 1988 to the
present, Mr. Casey has served as Contract Administrator for NP Medical Group,
Inc., which provides physician services to government facilities. Mr. Casey also
serves as a director of TriCounties Bank.
Mr. Fink has served as a director of Coram since July 1994. Mr. Fink has
been a partner of the law firm of Brobeck, Phleger & Harrison LLP since October
1987 and is currently Chairman of that firm's Business & Technology Group.
Mr. Pagliuca has served as a director of Coram since July 1994. Mr.
Pagliuca founded Information Partners, a venture capital and management buyout
company based in Boston, Massachusetts, in 1989 and has been Managing Director
since that time, focusing on health care and information industry private-equity
investment opportunities. Mr. Pagliuca is also the Chairman of the Board for
Wesley Jensen Corporation and serves on the boards of Dade International,
Physicians Quality Care, Inc., Vivra, Inc. and Physio Control, Inc.
Mr. L. Peter Smith has served as a director of Coram since July 1994.
Between November 1993 and July 1994, Mr. Smith was a director of Medisys, Inc.
Mr. Smith served as the Managing Partner of AllCare Health Services, Inc., which
was acquired by Medisys in December of 1992. Mr. Smith is also Chief Executive
Officer and serves on the Board of Directors of Ralin Medical, Inc., a company
specializing in cardiac disease management. Mr. Smith also serves on the Board
of Directors of Sabratek Corporation and AMSYS, Inc.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of the
executive officers of Coram. The executive officers serve at the direction of
the Board of Directors of Coram. Biographical information with respect to Donald
J. Amaral is set forth under the caption "Board of Directors" above.
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NAME AGE POSITION(S) WITH CORAM
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Donald J. Amaral....................... 45 Chairman of the Board and Chief
Executive Officer
Robert J. Mentzer...................... 45 Senior Vice President, East
Paul J. Quiner......................... 38 Senior Vice President and General
Counsel
Wendy L. Simpson....................... 49 Executive Vice President and Chief
Financial Officer
Joseph D. Smith........................ 39 President, Resource Network Division
Richard M. Smith....................... 38 President and Secretary
Christopher J. York.................... 37 Chief Operating Officer, West
</TABLE>
Robert J. Mentzer has been Senior Vice President, East since March 1998.
Previously, Mr. Mentzer served as Vice President, Sales -- East and Vice
President, Sales -- Southeast since joining the Company in February 1997. From
January 1996 to January 1997, Mr. Mentzer had served as Division Vice
President -- East for Nursefinders. He served as Vice President of Sales -- East
from May 1994 to July 1995 and Region Vice President from April 1994 to May
1994. Mr. Mentzer served as General Manager for Abbey Healthcare Group, Inc.
from November 1993 to April 1994.
Paul J. Quiner has been Senior Vice President and General Counsel of Coram
since March 1996. Mr. Quiner served as Assistant General Counsel from July 1994
through February 1996. From September 1992 to July 1994, Mr. Quiner served as
Assistant General Counsel for T2 Medical, Inc. Previously, Mr. Quiner was a
partner in the Atlanta and Washington D.C. law firm of Alston & Bird.
Wendy L. Simpson has been Executive Vice President and Chief Financial
Officer since March 1998. Previously, Ms. Simpson held the positions of
Executive Vice President, Chief Operating Officer and Chief Financial Officer
for Transitional Hospitals Corporation from July 1994 to July 1997. From March
1991 to
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June 1994, she was Chief Financial Officer and Principal of Weisman Taylor
Simpson & Sabatino. Ms. Simpson also serves on the Board of Directors of LTC
Properties, Inc., a real estate investment trust.
Joseph D. Smith has been President, Resource Network Division, since March
1998. Prior to that time, Mr. Smith served as Chief Operating Officer of the
East since December 1996. Preceding that and since the Company's inception, Mr.
Smith had served as Area Vice President -- Northeast. From 1993 until September
1994, Mr. Smith was the Eastern Area Vice President of H.M.S.S., Inc. a regional
home infusion company acquired by Coram in September 1994.
Richard M. Smith has been the President of Coram since December 1997 and
has served as Secretary since July 1995. Mr. Smith also served as Chief
Financial Officer from August 1995, prior to which time he served as Vice
President, Tax and Treasury, from October 1994 to August 1995. From November
1993 to October 1994, Mr. Smith served as Vice President, Finance and Treasurer,
and Assistant Secretary, for CoreSource, Inc., a health care company
specializing in third party claims administration, workers compensation and
integrated health delivery systems.
Christopher J. York has been Chief Operating Officer, West since December
1996. Since the Company's inception, Mr. York had served as Area Vice
President -- Midwest. From 1993 until Coram's inception, Mr. York was the Vice
President of Sales and Operations of Medisys, Inc.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Coram's directors, executive officers and persons who
beneficially own greater than 10% of a registered class of Coram's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission") and the New York Stock
Exchange. Based solely upon its review of copies of the Section 16 reports Coram
has received and written representations from certain reporting persons, Coram
believes that during its fiscal year ended December 31, 1997, all of its
directors, executive officers and greater than 10% beneficial owners were in
compliance with these filing requirements, with the exception of the following:
(i) Richard M. Smith inadvertently omitted disclosure of the repricing of
options held by him in June 1997 on a Statement of Change in Beneficial
Ownership on Form 4 and an Annual Statement of Changes in Beneficial Ownership
on Form 5 and (ii) Joseph D. Smith inadvertently omitted disclosure of the
ownership of 200 shares of the Company's common stock on the Initial Statement
of Beneficial Ownership of Securities on Form 3 and inadvertently omitted
disclosure of the acquisition of 12 shares of the Company's common stock in his
1997 Annual Statement of Changes in Beneficial Ownership.
ITEM 11. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS.
COMPENSATION OF DIRECTORS
Fees for Board Service. Mr. Amaral, the only director of the Company who is
also an employee, receives no additional compensation for service on the Board
of Directors. Compensation for participation in the Board of Directors is at the
discretion of the Board. In addition to the reimbursement of out-of-pocket
expenses relating to meeting attendance, non-employee directors of Coram earned
the following compensation for Board meetings attended during fiscal 1997.
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Arne Alsin................................................. $ 6,250
William J. Casey........................................... 5,500
James M. Sweeney........................................... 9,750
Richard A. Fink............................................ 15,000
Andrew J. Nathanson........................................ -0-
Stephen G. Pagliuca........................................ 10,750
L. Peter Smith............................................. 13,000
Dr. Gail R. Wilensky....................................... 10,000
</TABLE>
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Outside Directors' Automatic Option Grant Program. Non-employee members of
the Board of Directors participate in the Automatic Option Grant Program in
effect under the Company's 1994 Stock Option/Stock Issuance Plan (the "1994
Stock Option Plan"). On the date of each annual meeting of Coram's stockholders,
each individual who will continue to serve as a non-employee Board member will
receive a non-statutory stock option to purchase 2,500 shares of Common Stock at
an exercise price equal to the fair market value of the Common Stock on the
automatic option grant date. Each individual who continued to serve as a
non-employee Board member on September 16, 1997, received an automatic option
grant under the program for 2,500 shares of Coram Common Stock at an exercise
price of $4.9375 per share, the fair market value on such date. Additionally,
each non-employee individual, upon being newly appointed or elected to Coram's
Board of Directors, is automatically granted, at the time of such initial
election or appointment, a non-statutory option to purchase 75,000 shares of
Common Stock. In 1997, automatic options to purchase 75,000 shares relating to
newly appointed/elected individuals were granted to (i) Mr. Alsin upon his
appointment to the Board on August 4, 1997, at an exercise price of $4.3125 per
share and (ii) Mr. Casey upon his election to the Board on September 16, 1997,
at an exercise price of $4.9375 per share. With regard to the automatic non-
statutory stock options for both the newly appointed/elected Board members and
the continuing Board members, each option will be immediately exercisable for
all of the option shares. However, any shares purchased under the option will be
subject to repurchase by Coram at the original exercise price paid per share
upon the optionee's cessation of Board service prior to vesting of such shares.
The optionee's option shares will vest in a series of equal monthly installments
over twelve (12) months of Board service measured from the automatic option
grant date. However, the shares subject to each automatic option grant under the
1994 Stock Option Plan will vest in full upon (i) the optionee's cessation of
Board service due to death or disability, (ii) an acquisition of Coram by merger
or asset sale or (iii) a change in control of Coram. Mr. Alsin's non-statutory
option to purchase 75,000 shares of Common Stock was cancelled upon his
resignation from the Board of Directors on December 18, 1997.
Each automatic option granted to the non-employee Board members includes a
limited stock appreciation right which will allow the optionee, upon the
successful completion of a hostile tender offer for more than 50% of Coram's
outstanding securities, to surrender that option to Coram, in return for a cash
distribution in an amount per surrendered option share equal to the highest
price per share of Coram Common Stock paid in the tender offer less the exercise
price payable per share.
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SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the annual and long-term compensation earned
by the Chief Executive Officer, the four most highly compensated executive
officers of the Company (other than the Chief Executive Officer) who were
serving as executive officers of the Company at the end of 1997 and one
additional individual who would have been included among such four individuals
had he been serving as an executive officer of the Company at the end of 1997
(collectively the "Named Executive Officers") for services rendered in all
capacities to the Company and its subsidiaries for the year ended December 31,
1997.
SUMMARY COMPENSATION TABLE
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LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
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NAME AND OTHER ANNUAL STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION(6) YEAR SALARY BONUS(2) COMPENSATION(4) (#) COMPENSATION
--------------------- ---- -------- -------- --------------- ------------- ------------
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Donald J. Amaral.............. 1997 $623,076 $ 90,000 $ -- 300,000 $ --
Director, Chairman and 1996 600,000 600,000(8) -- -- --
Chief Executive Officer 1995 120,834(1) -- -- 2,200,000 --
Daniel L. Frank(3)............ 1997 $203,733 $570,000(3) $ -- 200,000(5) $33,654(7)
Former Lithotripsy 1996 158,333 -- -- -- --
Division President
Paul J. Quiner................ 1997 $185,000 $ 35,000 $ -- 137,500(5) $ --
Senior Vice President 1996 180,270 83,750 -- 25,000 --
And General Counsel 1995 133,833 61,750 -- 50,000 --
Joseph D. Smith............... 1997 $235,809 $ 50,000 $ -- 300,000(5) $ --
President, Resource Network 1996 148,425 116,750 -- 25,000 --
Division 1995 134,187 54,416 -- 75,000 --
Richard M. Smith.............. 1997 $252,732 $250,000 $ -- 650,000(5) $ --
President and Secretary 1996 201,458 205,500 -- -- --
1995 145,178 156,250 -- 300,000 --
Christopher J. York........... 1997 $235,809 $ 50,000 $ -- 325,000(5) $ --
Chief Operating Officer, 1996 161,501 117,375 -- 50,000 --
West 1995 136,354 69,375 30,120 75,000 --
</TABLE>
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(1) Mr. Amaral joined the Company in October 1995.
(2) Unless otherwise indicated, reflects performance, retention and
discretionary bonuses paid in 1998, 1997 and 1996 for services rendered to
the Company in 1997, 1996 and 1995, respectively.
(3) Mr. Frank joined the Company in March of 1996. The above reflects a bonus
paid for services rendered to the Company in connection the Company's sale
of substantially all of its assets in its Lithotripsy division (the
"Lithotripsy Division") in 1997. Following the sale of the Lithotripsy
Division in October 1997, Mr. Frank's employment as President of the
Lithotripsy Division was terminated. See also "Employment Contracts,
Termination of Employment and Change of Control Arrangements."
(4) Does not include perquisites aggregating in dollar value less than the
lesser of $50,000 or 10% of the individual's annual salary and bonus
reported for such individual for the year presented.
(5) Includes reissuance of certain stock options under the 1994 Stock Option
Plan. See "Option Grants in Last Fiscal Year."
(6) Unless otherwise indicated, see information above under captions "Board of
Directors" and "Executive Officers" for employment history.
(7) The above reflects severance paid in 1997 in connection with Mr. Frank's
termination of employment following the sale of substantially all its assets
in the Lithotripsy Division.
(8) Fifty percent of Mr. Amaral's 1996 bonus was paid in cash in April 1997 and
fifty percent was paid in shares of common stock of the Company based on the
average closing price of the Company's common stock on the New York Stock
Exchange in the 30-day period immediately preceding the issuance of such
shares of common stock.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning options granted to
each of the Named Executive Officers during the year ended December 31, 1997. In
addition, in accordance with the rules of the Commission, there are shown
hypothetical gains or "option spreads" that would exist for the respective
options. These gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term. No stock appreciation rights were granted to the Named Executive
Officers during the fiscal year ended December 31, 1997.
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INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PER ------------------------------
GRANTED FISCAL YEAR SHARE EXPIRATION DATE 0% 5% 10%
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Donald J. Amaral............... 300,000 12.89% $2.625 May 16, 2007 $-- $495,255 $1,255,072
Daniel L. Frank................ -- -- -- -- -- -- --
Paul J. Quiner................. 62,500 2.68% 2.500 June 2, 2007 -- 98,265 249,022
Joseph D. Smith................ 150,000 6.44% 2.500 June 2, 2007 -- 235,835 597,653
Richard M. Smith............... 125,000 5.37% 2.500 June 2, 2007 -- 196,529 498,045
200,000 8.59% 3.125 December 17, 2007 -- 393,059 996,089
Christopher J. York............ 150,000 6.44% 2.500 June 2, 2007 -- 235,835 597,653
</TABLE>
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(1) Potential realizable value is determined by taking the exercise price per
share and applying the stated annual appreciation rate compounded annually
for the term of the option, subtracting the exercise price per share at the
end of the period and multiplying the remaining number by the number of
options granted. Actual gains, if any, on stock option exercises and Coram
common stock holdings are dependent on the future performance of the Coram
Common Stock and overall stock market conditions. Does not reflect changes
in the market price of Coram Common Stock subsequent to December 31, 1997.
In May 1997, the Company's Board of Directors recognized that the exercise
price of certain stock options issued under the 1994 Stock Option Plan were
significantly out of the money as a result of a substantial decline in Coram's
stock price. To better align such options with the current fair market value of
Coram common stock, and thus better achieve the goal of aligning the interests
of such executive officers with those of the Company's stock holders, options
held by all employees (other than Donald J. Amaral) to purchase in the aggregate
2.8 million shares of the Company's common stock were reissued to reflect an
exercise price of $2.625 per share, representing the fair market value of the
Company's common stock on the date of such reissuance.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning the aggregate number
of options exercised during the year ended December 31, 1997 by each of the
Named Executive Officers and outstanding options held by each such officer at
December 31, 1997. None of the Named Executive Officers exercised any stock
appreciation rights during the 1997 fiscal year. No stock appreciation rights
were held by the Named Executive Officers at the end of the 1997 fiscal year.
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NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED DECEMBER 31, 1997 DECEMBER 31, 1997(1)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
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Donald J. Amaral................. -- -- 1,466,653 1,033,347 $ -- $ 225,000
Daniel L. Frank.................. -- -- 87,500 112,500 65,625 84,375
Paul J. Quiner................... -- -- 53,745 96,355 30,859 80,079
Joseph D. Smith.................. -- -- 83,839 216,161 62,879 180,871
Richard M. Smith................. -- -- 219,280 430,720 164,460 238,665
Christopher J. York.............. -- -- 93,734 231,266 70,300 192,200
</TABLE>
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(1) Value is determined by subtracting the exercise price from the closing price
for the common stock as reported by the New York Stock Exchange on December
31, 1997 ($3.375) and multiplying the resulting number by the number of
underlying shares of Common Stock. For the purpose of such calculation, the
exercise price per share is the applicable exercise price as of December 31,
1997 and does not reflect market price changes subsequent to December 31,
1997.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
Except for those agreements outlined below, the Company does not presently
have any employment contracts in effect with any of the Named Executive
Officers.
On October 13, 1995, Coram entered into an employment agreement with Donald
J. Amaral, for a three-year term commencing on such date, unless otherwise
terminated in accordance with the terms thereof. The Company extended the
agreement to Mr. Amaral to attract and retain his services in light of the
downturn in the Company's business, and its uncertain prospects as he is
considered critical to Coram's future success in the Company's turn-around
period. Under the agreement, Mr. Amaral received a base salary of $600,000 per
annum, and the right to receive a performance bonus based on the Company's
reaching certain performance targets determined annually by the Compensation
Committee. If Mr. Amaral's employment is terminated by the Company other than
for cause or by Mr. Amaral in the event that the Company fails to comply with
any material provision of the agreement, Mr. Amaral will be entitled to receive
his base salary through the longer of (i) the remaining term of the agreement or
(ii) twelve months, plus a bonus payable after the end of each of the Company's
fiscal years thereafter through 1998 in an amount equal to the average bonus
earned by Mr. Amaral during the employment period. Under the agreement, Mr.
Amaral was also granted options to purchase 2,200,000 shares of Common Stock at
$3.40 per share. The options will vest and become exercisable in three equal
annual installments upon Mr. Amaral's completion of each year of service over
the three-year period measured from the October 13, 1995 grant date. The options
will immediately vest and become exercisable in full upon (i) a change in
control of the Company; (ii) any termination by the Company of the employment
agreement other than for cause; (iii) any termination by Mr. Amaral as a result
of a material breach of the employment agreement by the Company; or (iv)
termination of the employment agreement as a result of Mr. Amaral's death or
permanent disability. Mr. Amaral is also eligible to receive all other benefits
generally made available to the Company's senior executives.
In May 1997, the Board of Directors approved an increase of Mr. Amaral's
base salary from $600,000 per annum to $650,000 per annum, the extension of the
term of Mr. Amaral's employment agreement until May 15, 2000 and the granting to
Mr. Amaral, as of June 2, 1997, of options to purchase an additional 300,000
shares of Coram Common Stock at a price of $2.625 per share. Subject to Mr.
Amaral's continued employment with the Company, such options will vest and
become exercisable in three equal annual installments on each of the first,
second and third anniversaries of their grant date and will immediately vest
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and become exercisable in full upon the occurrence of any event resulting in the
full vesting of the original options granted under the employment agreement. As
of April 28, 1998, Mr. Amaral had not agreed to the foregoing extension of the
term of his employment agreement.
In September 1997, the Board of Directors approved certain contingent
"success fees" payable to Mr. Amaral as follows: (i) $1,000,000 upon the
refinancing of the Company on terms acceptable to the Board of Directors. The
refinancing fee is to be paid in two segments (a) $500,000 upon closing, and (b)
$500,000 six months later provided that Mr. Amaral is still employed by the
Company at that date; and (ii) $4,000,000 upon the sale of the Company on terms
acceptable to the Board of Directors and approved by the Company's stockholders,
which would be payable on the earlier of (a) the first anniversary of the sale
if Mr. Amaral remains employed by the Company or (b) involuntary termination,
other than for cause, of Mr. Amaral following the sale of the Company.
In December 1997, at Mr. Amaral's request, the Board of Directors adopted a
resolution authorizing the payment of Mr. Amaral's salary, effective January 1,
1998, in shares of common stock of the Company with the number of shares issued
representing a cash value of the monthly base salary subject to normal or
required payroll deductions. The number of shares to be issued in payment of
such salary is calculated based on a per share price equal to the lesser of (i)
the closing price of the Company's common stock on the last business day of the
month, or (ii) the average closing price of the Company's common stock during
the thirty business days ending on the last business day of the month.
Shares subject to options granted under the 1994 Stock Option Plan to the
Company's Named Executive Officers will immediately vest in full upon (i) an
acquisition of the Company by merger or asset sale in which such options are not
to be assumed by the acquiring entity or, (ii) if such options are so assumed,
the subsequent involuntary termination of the optionee's employment within
eighteen months following such acquisition. In addition, the Compensation
Committee, as the 1994 Stock Option Plan administrator, has the authority to
provide for the accelerated vesting of the shares of the Company's common stock
subject to outstanding options held by the Company's executive officers, or any
unvested shares actually held by those individuals under the 1994 Stock Option
Plan, in connection with a hostile take-over of the Company effected through a
successful tender offer for more than 50% of the Company's outstanding
securities or through a change in the majority of the Board as a result of one
or more contested elections for Board membership or in the event such
individual's employment were to be involuntarily terminated following such
hostile take-over.
In April 1997, the Board approved certain retention bonuses, change in
control payments and minimum severance to the Named Executive Officers as
follows:
<TABLE>
<CAPTION>
RETENTION CHANGE IN MINIMUM
BONUS(1) CONTROL PAYMENT(2) SEVERANCE(3)
--------- ------------------ ------------
<S> <C> <C> <C>
Daniel L. Frank(4).......................... $157,500 $210,000 12 months
Paul J. Quiner.............................. 138,750 185,000 12 months
Joseph D. Smith............................. 187,500 375,000 12 months
Richard M. Smith............................ 187,500 375,000 12 months
Christopher J. York......................... 187,500 375,000 12 months
</TABLE>
- ---------------
(1) Reflects retention bonuses due for active employment through December 31,
1998. Prior to December 31, 1998, retention bonus will be paid upon the
earlier of (i) termination by the Company (other than for cause) on a
prorated monthly basis or (ii) involuntary termination following a "Change
in Control." See Note 2.
(2) Reflects amount due following a "Change in Control" defined as (i) a merger
or consolidation in which the Company is not the surviving entity; (ii) the
sale, transfer or other disposition of all or substantially all the assets
of the Company; or (iii) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
of the total combined voting power of Coram's outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such merger.
9
<PAGE> 10
(3) Represents minimum severance, including health and welfare benefits, due
upon termination by the Company (other than for cause) or involuntary
termination following a Change in Control.
(4) In connection with the termination of Mr. Daniel L. Frank as the Company's
Lithotripsy Division President in October 1997, the Company agreed to a
salary continuation of twelve months. In addition, Mr. Frank's rights to a
retention bonus and change of control payment were terminated.
In connection with her terms of employment, Ms. Wendy L. Simpson is
entitled to a minimum severance of twelve months.
In December 1997, concurrent with his appointment as President of the
Company, Mr. Richard M. Smith's retention bonus (effective July 1, 1999), change
in control payments and minimum severance were revised as follows:
<TABLE>
<CAPTION>
RETENTION CHANGE IN MINIMUM
BONUS(1) CONTROL PAYMENT(2) SEVERANCE(3)
--------- ------------------ ------------
<S> <C> <C> <C>
Richard M. Smith............................ $240,000 $480,000 24 months
</TABLE>
- ---------------
(1) Reflects retention bonus due for active employment through June 30, 1999.
Prior to June 30, 1999, retention bonus will be paid upon the earlier of (i)
termination by the Company (other than for cause) on a prorated monthly
basis or (ii) involuntary termination following a Change in Control.
(2) Reflects amount due following a Change in Control.
(3) Represents minimum severance, including health and welfare benefits, due
upon termination by the Company (other than for cause) or involuntary
termination following a Change in Control.
ITEM 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT.
The following table sets forth as of March 31, 1998 (unless otherwise
disclosed) the number of shares of outstanding Coram Common Stock beneficially
owned by (i) each person known to Coram to be the owner of more than 5% of the
outstanding Common Stock, (ii) each Director of the Company, (iii) each of the
Named Executive Officers and (iv) all Directors and executive officers of Coram
as a group. All information is taken from or based upon ownership filings made
by such persons with the Commission or upon information provided by such persons
to Coram.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OF
NAME AND ADDRESS OF NUMBER OF SHARES OF COMMON STOCK
BENEFICIAL OWNER(1) COMMON STOCK(2) OUTSTANDING(2)
------------------- ------------------- --------------
<S> <C> <C>
Donald J. Amaral..................................... 1,666,837 3.31%
William J. Casey..................................... 1,900 *
Richard A. Fink...................................... 6,666 *
Stephen G. Pagliuca.................................. 6,666 *
L. Peter Smith....................................... 36,747 *
Daniel L. Frank...................................... 108,333 *
Paul J. Quiner....................................... 66,262 *
Joseph D. Smith...................................... 99,682 *
Richard M. Smith..................................... 242,713 *
Christopher J. York.................................. 115,831 *
All executive officers and directors as a group (12
persons)........................................... 2,351,637 4.61%
Fidelity Management(3)............................... 4,027,427 9.05%
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise indicated, the address of each person named above is 1125
Seventeenth Street, Suite 2100, Denver, Colorado 80202.
(2) Shares of Common Stock subject to options or warrants that are currently
exercisable or exercisable within 60 days are deemed outstanding for
purposes of computing the percentage of the person holding
10
<PAGE> 11
such options or warrants but not for purposes of computing the percentage of
any other person. The aggregate ownership numbers presented include the
following shares of common stock subject to options for the following
persons: Mr. Amaral 1,566,653; Mr. Fink 6,666; Mr. Pagliuca 6,666; Mr. L.
Peter Smith 6,666; Mr. Frank 108,333; Mr. Quiner 61,557; Mr. J. Smith
99,470; Mr. R. Smith 242,713; and Mr. York 111,970. Except as indicated by
footnote, Coram has been advised that the persons and entity named in the
table above have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them. Percentage computations
are based on 48,803,214 shares of common stock outstanding as of March 31,
1998.
(3) Fidelity Management and Research Company ("Fidelity") reports sole voting
power with respect to shares of common stock reported above. The information
with respect to Fidelity is as of December 31, 1997 as reported by Fidelity
to the Securities and Exchange Commission on Form 13G. The address of
Fidelity is 82 Devonshire Street, Boston, MA 02109.
There is no arrangement known to the Company, including any pledge by any
person of securities of the Company, the operation of which may at a subsequent
date result in a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Mr. Fink, a director of Coram since July 1994, is a partner in a law firm
that rendered various legal services to Coram in 1997 and is continuing to
render such services in 1998.
Mr. Nathanson, a director of Coram from December 1995 to May 1997, is a
Managing Director of Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), an investment banking firm that rendered various financial services to
Coram in 1997. DLJ provided a $150.0 million bridge loan to Coram in April 1995
in connection with Coram's acquisition of certain assets of the home infusion
business of Caremark, Inc and Caremark International, Inc. under a Securities
Purchase Agreement and held the Rollover Note issued in connection therewith
until May 1997, at which time DLJ sold the Rollover Note to Cerberus Partners,
L.P., Goldman Sachs Credit Partners, L.P. and Foothill Capital Corporation. The
Securities Purchase Agreement provided that DLJ had the right to appoint a
director to Coram's Board of Directors if an event of default occurred and so
long as it was continuing provided however, that the right terminated at such
time that DLJ is no longer the holder of at least fifty percent of the aggregate
principal amount of the outstanding bridge notes. DLJ was granted the right to
appoint a director in September 1995 in exchange for certain waivers under the
Purchase Agreement which right expired upon the sale of the Rollover Note
referenced above. Fees for financial advisory and investment banking services to
DLJ approximated $6.5 million in 1995. On October 4, 1996, DLJ was engaged by
Coram to act as a financial advisor to Coram in connection with the possible
sale, merger, consolidation or other business combination involving Coram. By
letter dated July 17, 1997, DLJ agreed to the termination of such engagement,
together with all other prior engagement agreements between Coram and DLJ,
effective upon payment by Coram of approximately $0.5 million to DLJ in
reimbursement of out-of-pocket expense incurred by DLJ pursuant thereto. No
other amounts have been paid, or are owed, to DLJ pursuant to such engagement.
L. Peter Smith also serves on the Board of Directors of Sabratek
Corporation, a manufacturer of medical devices. On February 26, 1997, the
Company agreed to purchase up to $13.0 million of multi-therapy infusion pumps
and related proprietary telemedicine technology from Sabratek Corporation. The
pricing schedule applicable to the infusion pumps and related technology to be
purchased was negotiated by certain of Coram's management after proposals from
other manufacturers for comparable equipment had been solicited. Prior to
entering into the agreement with Sabratek, the Company's clinical and operations
staffs conducted field level trials and tests on infusion pumps made by several
different manufacturers, including Sabratek. Under the purchase agreement, the
Company purchased from Sabratek Corporation approximately $11.5 million in
multi-therapy infusion pumps and $4.3 million in related equipment and supplies
during 1997.
11
<PAGE> 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.41 -- Letter Agreement and Summary of Indicative Restructuring
Terms between the Registrant and Cerberus Partners, L.P.,
Goldman Sachs Credit Partners L.P., and Foothill Capital
Corporation.*
10.42 -- Master Agreement (the "Master Agreement") by and between
the Registrant and its applicable affiliates and Aetna
U.S. Healthcare, Inc. and its applicable affiliates.
Certain attachments and schedules to the Master Agreement
are omitted from this Exhibit. The Registrant agrees to
furnish supplementally any omitted exhibit or schedule to
the Securities and Exchange Commission.*
</TABLE>
- ---------------
* Filed herewith.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on April
28, 1998.
CORAM HEALTHCARE CORPORATION
By:
-----------------------------------
Donald J. Amaral
Chairman and Chief Executive
Officer
By:
----------------------------------
Wendy L. Simpson
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on be half of the
registrant and in the capacities on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chairman and Chief Executive April 28, 1998
- ----------------------------------------------------- Officer (Principal Executive
Donald J. Amaral Officer)
President and Secretary April 28, 1998
- -----------------------------------------------------
Richard M. Smith
Executive Vice President and April 28, 1998
- ----------------------------------------------------- Chief Financial Officer
Wendy L. Simpson (Principal Financial Officer)
Vice President and Controller April 28, 1998
- ----------------------------------------------------- (Principal Accounting Officer)
Scott R. Danitz
Director April 28, 1998
- -----------------------------------------------------
William J. Casey
Director April 28, 1998
- -----------------------------------------------------
Richard A. Fink
Director April 28, 1998
- -----------------------------------------------------
Stephen G. Pagliuca
Director April 28, 1998
- -----------------------------------------------------
L. Peter Smith
</TABLE>
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.41 -- Letter Agreement and Summary of Indicative Restructuring
Terms between the Registrant and Cerberus Partners, L.P.,
Goldman Sachs Credit Partners L.P., and Foothill Capital
Corporation.*
10.42 -- Master Agreement (the "Master Agreement") by and between
the Registrant and its applicable affiliates and Aetna
U.S. Healthcare, Inc. and its applicable affiliates.
Certain attachments and schedules to the Master Agreement
are omitted from this Exhibit. The Registrant agrees to
furnish supplementally any omitted exhibit or schedule to
the Securities and Exchange Commission.*
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 10.41
Coram Healthcare Corporation
Coram, Inc.
1125 Seventeenth Street, Suite 2100
Denver, Colorado 80202
April 13, 1998
Attention: Richard Smith
Wendy Simpson
Ladies and Gentlemen:
You have requested that we exchange the Subordinated Rollover
Notes and the Warrants issued pursuant to the Securities Purchase Agreement
dated as of April 6, 1995 among the Company, Coram and Coram Funding, Inc., for
New Notes.
We (collectively, the "Noteholders") hereby agree to work with
you to restructure the Subordinated Rollover Notes (the "Existing Notes") by
means of an exchange of the Existing Notes and the Warrants for New Notes having
substantially similar terms as are set forth on the attached Summary of
Indicative Restructuring Terms, which is made a part hereof. It is understood
and agreed that this letter and the Summary of Terms does not constitute a
commitment of the Noteholders, but represents the basis on which the Noteholders
are prepared to negotiate with you in good faith with a view to proceeding to
definitive documentation as soon as is reasonably practicable.
You may treat this letter as satisfying the condition, as set
forth in our letter to you dated March 29, 1998 ( the "1998 Deferral Letter"),
to the deferral of interest and fees on the Existing Notes extending beyond
April 13, 1998; provided, however, that if the Closing Date (as defined in the
Summary of Terms) does not occur by June 30, 1998, the references in the 1998
Deferral Letter to "September 30, 1998" shall be changed to "June 30, 1998".
You expressly agree that the terms of any documentation which
follow this letter are not limited to those set forth in the Summary of Terms.
CERBERUS PARTNERS, L.P.
By: /s/ JOYCE C. JOHNSON-MILLER
--------------------------------
Name: Joyce C. Johnson-Miller
Title: Managing Director
<PAGE> 2
GOLDMAN SACHS CREDIT PARTNERS, L.P.
by GSEM Partners, its general partners
By: /s/ EDWARD A. MULE
-------------------------------------
Name: Edward A. Mule
Title: Managing Director
FOOTHILL CAPITAL CORPORATION
By: /s/
-------------------------------------
Name:
Title: Vice-President
Acknowledged and Agreed:
CORAM HEALTHCARE CORPORATION
By: /s/ DONALD J. AMARAL
--------------------------------------------
Name: Donald J. Amaral
Title: Chairman and Chief Executive Officer
CORAM, INC.
By: /s/ DONALD J. AMARAL
--------------------------------------------
Name: Donald J. Amaral
Title: Chairman and Chief Executive Officer
<PAGE> 3
CORAM HEALTHCARE CORPORATION
SUMMARY OF INDICATIVE RESTRUCTURING TERMS
SUBORDINATED ROLLOVER NOTES
Disclaimer: These indicative terms do not constitute any form of
binding contract but rather are solely for the purpose of outlining the terms
pursuant to which definitive agreements may ultimately be entered into. The
restructuring is contingent upon the negotiation and execution of satisfactory
documentation.
ISSUER: Coram, Inc. (the "Company").
GUARANTORS: Coram Healthcare Corporation ("Holdings") and
each subsidiary of Holdings which is a
"Subsidiary Guarantor" under the Existing
Rollover Notes (defined below).
EXCHANGE: Cerberus, GSCP and Foothill (the "Noteholders")
will agree to exchange all their existing
Subordinated Rollover Notes (including all
deferred amounts of interest and fees thereon
and interest on such deferred amounts) (the
"Existing Rollover Notes") and all Warrants
issued or issuable under the Securities
Purchase Agreement dated as of April 6, 1995
among the Company, Holdings and Coram Funding,
Inc. (the "Existing Warrants") for their
ratable share of the New Notes.
AMOUNTS: $150 million Series A Notes.
$___ million Series B Convertible Notes (amount
of Series B Notes will represent (i) the
balance of the amounts owing under or with
respect to the Existing Rollover Notes through
and including the Effective Date, plus (ii)
$8.4 million for the Existing Warrants.
EFFECTIVE DATE: April 13, 1998, provided the exchange of the
Existing Rollover Notes for the New Notes (the
"Closing") has occurred on or prior to May 4,
1998. If the Closing has not occurred by May 4,
1998, the Effective Date will be the date on
which Closing occurs (the "Closing Date") but
in no event shall the Closing
<PAGE> 4
Date be later than June 30, 1998. If, at any
time, the only outstanding condition to Closing
is the New Amaral Employment Agreement (as
hereinafter defined) (the "Employment Agreement
Condition"), then the Effective Date shall be
(i) April 13, 1998, if all conditions other
than the Employment Agreement Condition are
satisfied or waived on or prior to May 4, 1998,
or (ii) such later date on or prior to June 30,
1998 on which all conditions other than the
Employment Agreement Condition are satisfied or
waived. The parties agree that once all
conditions to Closing, other than the
Employment Agreement Condition have been
satisfied, the parties will be legally and
irrevocably bound to close the transaction upon
the earlier of satisfaction by the Company or
waiver by the Noteholders of the Employment
Agreement Condition, provided, however, that
such satisfaction or waiver occurs on or prior
to June 30, 1998.
RANKING: The New Notes will be senior unsecured
obligations of the Company and will rank pari
passu with all other senior debt of the
Company.
SERIES A NOTES: Interest Rate 9 7/8% per annum, payable
quarterly in arrears, increasing by 5/8% on
each of (i) the date falling 6 months after the
date of issuance if EBITDA for the 9 months
ended September 30, 1998 is less than $22.5
million and (ii) the date falling 12 months
after the date of issuance if EBITDA for the 12
months ended March 31, 1999 is less than $32.5
million.
Maturity The later of (i) October 2000 and (ii)
the maturity date of the new bank facility.
Interest Payments Subject to the following
proviso, the Company shall have the right to
pay interest on each interest payment date by
issuing additional Series A Notes ("Additional
Series A Notes") in principal amount equal to
the amount of interest due. Additional Series A
Notes shall otherwise be identical to the
outstanding Series A Notes and will be issued
to the Noteholders pro rata; provided, however,
that interest shall be payable in cash if
trailing 12-month EBITDA less CAPEX
2
<PAGE> 5
(to be defined) divided by Total Interest
Expense (to be defined but not to include
Series B Notes interest expense) is equal to or
greater than 2.0.
Company's Option to Redeem The Series A Notes
are redeemable at the option of the Company, in
whole or in part, at any time on not less than
10 Business Days' notice, at 103% of their
principal amount plus payment of accrued
interest.
Holders' Option to Redeem In the event of any
change of control, merger, consolidation or
other combination by the Company or Holdings in
which the Company or Holdings, as the case may
be, is not the surviving entity, or transfer of
all or substantially all the assets of the
Company or Holdings, the Noteholders shall have
the one-time option to put the Series A Notes
at 103% of the principal amount thereof plus
payment of accrued interest.
SERIES B NOTES: Interest Rate 8% per annum.
Maturity 10 years from issuance.
Interest Payments Interest on the Series B
Notes will accrue quarterly in arrears. The
Company, at its option, may pay interest in
cash or issue additional Series B Notes
("Additional Series B Notes") in principal
amount equal to the amount of interest accrued
on each interest payment date. Additional
Series B Notes shall otherwise be identical to
the outstanding Series B Notes and will be
issued to the Noteholders pro rata.
Companys' Option to Redeem The Series B Notes
will not be redeemable at the option of the
Company.
Holders' Option to Redeem In the event of any
change of control, merger, consolidation or
other combination by the Company or Holdings in
which the Company or Holdings, as the case may
be, is not the surviving entity, or transfer of
all or substantially all the assets of the
Company or Holdings, the Noteholders shall have
the one-time option to put the Series B
3
<PAGE> 6
Notes at 103% of the principal amount thereof
plus accrued interest. In addition, the
Noteholders shall have a one-time right to put
the Series B Notes at par plus accrued interest
in October 2000 (or upon the maturity of the
Series A Notes, if later).
Conversion Rights At each Noteholder's option,
at any time prior to maturity, the Series B
Notes (including any Additional Series B Notes)
will be convertible into common stock of
Holdings at the Conversion Price, subject to
adjustment for dilution.
Conversion Price The Conversion Price shall be
$3.00 per share, subject to adjustment on
4/13/99 and 10/13/99 (each a "Conversion Price
Adjustment Date"). On each Conversion Price
Adjustment Date, the Conversion Price will be
adjusted to reflect the average closing price
of Holdings' stock for the 20 consecutive
trading days prior to such Conversion Price
Adjustment Date; provided, however, that (i)
the Conversion Price on the second Conversion
Price Adjustment Date cannot exceed the
Conversion Price in effect on the first
Conversion Price Adjustment Date, and (ii) the
Conversion Price shall not exceed $3.00 per
share.
Anti-Dilution Provisions The Series B
Conversion Rights will be adjusted to provide
usual and customary anti-dilution protection,
including with respect to stock splits,
recapitalizations and issuances below market or
conversion price.
PROVISIONS COMMON TO
SERIES A AND SERIES B: Covenants The Notes will be cross-defaulted
with the Company's existing and future funded
indebtedness and will contain affirmative,
negative and financial convenants to be
determined, including, without limitation, a
prohibition on the incurrence of new debt and
on making any restricted payments.
Asset Sales/Purchases The Company will not be
required to apply the net proceeds of sale of
any assets to pay down the
4
<PAGE> 7
New Notes. The Noteholders will have the right
to approve any acquisition by Holdings, the
Company or any subsidiary with consideration in
excess of $10 million.
Events of Default The Notes will contain usual
and customary default provisions, including,
but not limited to, (i) any early termination
or breach by Don Amaral of the Non-Compete
Agreements (defined below), and (ii) Don Amaral
leaving the Company at any time (other than by
reason of his incapacitation or death).
Representations and Warranties The Notes will
contain usual and customary representations and
warranties for this type of notes.
Registration Rights The holders of the Notes
will be granted usual and customary demand and
piggy-back registration rights, with respect to
the New Notes and the common stock issuable
upon conversion of the Series B Notes.
Transfer Restrictions The Notes will be
transferable upon the conditions to be
specified in the exchange agreement, which
conditions are intended to ensure compliance
with the provisions of the Securities Act.
EXISTING WARRANTS: The Noteholders will exchange all Existing
Warrants for $12.4 million, $8.4 million of
which shall be represented in the principal
amount of the Series B Notes and $4 million of
which shall be paid in cash on the earlier of
(i) the closing of the new bank facility and
(ii) 90 days after the Closing Date.
BOARD REPRESENTATION: The Noteholders shall have the right to appoint
one director to the Board of Holdings. In the
event that the Noteholders do not appoint a
director, the Noteholders shall have board
observation rights which will include the right
to receive all information provided to board
members.
5
<PAGE> 8
NON-COMPETE
AGREEMENTS: As a condition precedent to the exchange for
the New Notes, Don Amaral will sign: (i) a
two-year non-compete agreement covering the
home healthcare industry, (ii) a non-compete
agreement for the entire healthcare industry
which will expire upon the expiry of his
current employment agreement with the Company,
and (iii) upon entering into a new employment
agreement with the Company, a two-year
non-compete agreement for the entire healthcare
industry. Each Non-Compete Agreement shall be
in a form approved by the Noteholders. The
restrictions in the Non-Compete Agreements will
expire upon early repayment of the New Notes.
The Company will use its best efforts to enter
into a new employment agreement with Don Amaral
by May 31, 1998 (the "New Amaral Employment
Agreement").
APPROVAL OF NEW
BANK FACILITY: The Noteholders will consent to the new senior
secured bank facility agreement, subject to
their review and approval of the terms and
satisfactory documentation.
EXPENSES: The Company shall pay all reasonable outside
legal and consulting fees of the Noteholders in
connection with the transaction.
INDEMNITIES: The Company shall indemnify each Noteholder and
its respective affiliates and its and their
directors, officers and employees against all
losses and damages resulting from the
transaction other than such losses and damages
which arise out of such person's gross
negligence or willful misconduct.
ACCOUNTING TREATMENT: For accounting purposes only, the Company may
treat the interest rate on the New Notes as
applying to the Existing Rollover Notes from
January 1, 1998 through the Effective Date, by
capitalizing the interest spread between the
Existing Rollover Notes and the New Notes
during such period. This calculation is for
accounting purposes only and will not affect
the issue date of the New Notes, the Effective
Date or have any economic impact on the
Noteholders whatsoever.
6
<PAGE> 9
CONDITIONS PRECEDENT: The exchange for the New Notes will be subject
to conditions precedent which are customary for
transaction of this type.
SUBORDINATION: The principal and premium, if any, and interest
on the New Notes will be subordinated to
designated senior debt of the Company under the
senior back facility on terms to be agreed
upon. Any documentation relating to this
subordination shall require the approval of the
Noteholders.
GOVERNING LAW: New York.
IT IS UNDERSTOOD AND AGREED THAT THIS SUMMARY OF TERMS DOES
NOT CONSTITUTE A COMMITMENT OF THE NOTEHOLDERS TO ENTER INTO THE
RESTRUCTURING, BUT REPRESENTS THE BASIS ON WHICH THE NOTEHOLDERS ARE PREPARED
TO NEGOTIATE WITH YOU IN GOOD FAITH WITH A VIEW TO PROCEEDING TO DEFINITIVE
DOCUMENTATION AS SOON AS IS REASONABLY PRACTICABLE.
YOU EXPRESSLY AGREE THAT THE TERMS OF THE DEFINITIVE
DOCUMENTATION FOR THIS TRANSACTION ARE NOT LIMITED TO THOSE SET FORTH IN THE
SUMMARY OF TERMS.
7
<PAGE> 1
EXHIBIT 10.42
MASTER AGREEMENT
EXECUTION SHEET
This Master Agreement ("Agreement") is made and entered into by and between
Aetna U.S. Healthcare, Inc., on behalf of itself and all of its applicable
Affiliates as defined herein ("Company"), and Coram Healthcare Corporation, on
behalf of itself and its applicable Affiliates as defined herein (hereinafter
"Network"). As used in this Agreement, "Company" and "Network" may refer
respectively from time to time to Aetna U.S. Healthcare Inc. and its affiliated
companies, collectively, and to Coram Healthcare Corporation and its affiliated
companies collectively. Company and Network are hereinafter sometimes referred
to as "Parties" and individually as a "Party".
The Effective Date of this Agreement shall be May 1, 1998 ("Effective Date").
Company and Network mutually desire to enter into an agreement whereby Company
and Network will provide access to and coordinate the provision of home health
care services to Members with the objective of delivering quality and
cost-effective home health care services.
The parties acknowledge and agree that certain state laws and regulations within
the Regions may require that certain obligations of the parties as contemplated
hereunder be carried out by duly licensed and/or authorized Affiliates(s) of the
Parties. To that end, the parties agree that they shall cause their respective
Affiliates(s) to execute the agreements attached hereto as Attachments D and M
(incorporated herein by reference) contemporaneously herewith, and shall ensure
compliance by their respective Affiliate(s) with the terms of such agreements,
as necessary to ensure the Parties' compliance with this Agreement.
This Agreement, together with all of its Attachments, Exhibits and Schedules, as
it and they may be amended from time to time as provided herein, constitutes the
complete and exclusive contract between the parties with respect to the subject
matter hereof and supersedes any and all prior contemporaneous oral or written
communications or proposals not expressly included herein. The Parties further
agree that, upon the Implementation Date hereof, the agreements between the
Parties or their respective Affiliates for the provision of the Home Health
Services to Network Members in the Regions shall be amended by the terms of this
Agreement which relate to the provision of Home Health Services by Network or
its Affiliates in the Region, and those provisions of such agreements not
otherwise in conflict with this Agreement shall remain in full force and effect
and are hereby ratified and affirmed. Provisions addressing the requirements in
the immediately preceding sentence shall be in accordance with the Network
Amendment in Attachment E-1 and the Three Party Agreement in Attachment E-2, as
the case may be.
In consideration of the mutual covenants and promises stated herein and other
good and valuable consideration, the parties hereby enter into this Agreement.
By executing this Agreement, the parties acknowledge and agree that they have
reviewed all of the terms and conditions of this Agreement and intend to be
legally bound by same.
COMPANY NETWORK
By: By:
--------------------------- ---------------------------
Printed Name: Printed Name:
------------------ -----------------
Title: Title:
------------------------- ------------------------
Date: Date:
-------------------------- --------------------------
<PAGE> 2
This Agreement is entered into by and between Company and the Network that has
signed the Execution Sheet attached hereto.
1. NETWORK REQUIREMENTS AND REPRESENTATIONS
A. Network maintains and operates, or will, prior to the Implementation
Date, maintain and operate one or more networks for the provision of
the home health care services listed in Attachment A hereof ("Home
Health Services") in each of the following states: New York,
Connecticut, Rhode Island, Massachusetts, New Hampshire, Pennsylvania,
New Jersey and Delaware, and such other states as may be agreed to by
the Parties in writing and added as an addendum to this Agreement. The
network in each of such states is hereinafter referred to as a "Home
Health Network". Attached hereto as "Attachment B" is a list of
Network's Network Providers in each of the foregoing states, organized
by provider type, and showing the name, address and telephone number of
each such Network Provider, and Company agrees that such Network
Providers listed on such Attachment "B", as of the Effective Date, are
deemed by Company to satisfy all Company participation criteria as
Participating Providers. At all times during the term of this Agreement
upon and after the Implementation Date, Network shall maintain such
Home Health Networks. Network agrees, upon reasonable prior written
notice, and so long as a provider meets Network's then current
participation criteria (which criteria shall not be materially
different from or inconsistent with then-current applicable Company
participation criteria) and meets Company's participation criteria, and
who accepts Network's then current fee schedule consistently applied,
to add such additional providers as Network Providers to each Home
Health Network as reasonably required by Company to meet the health
care needs of Company Members in the Geographic Areas.
B. In order to provide services pursuant to this Agreement, Network
Providers must have executed individual provider contracts and other
appropriate agreements and instruments with both Company and Network
for provision of services to Members and agreeing to the terms and
conditions herein, in form and content as specified herein. Network
shall require all Network Providers to provide Home Health Services to
Network Members under each applicable Plan. The provision of Home
Health Services by each Network Provider to Network Members shall be
governed by the applicable Company provider agreement signed by such
provider if and only to the extent any inconsistency arises between the
applicable Company contract and any other document to which Network
Provider may be a party, except as expressly provided for otherwise
herein.
All Network Providers will act as independent contractors of Company
and all Network Associated Providers will act as independent
contractors of Network in providing Home Health Services to Members.
Except as otherwise set forth in this Agreement, Company shall not be
liable to Network for any provider's failure to properly perform health
care services or deliver supplies to any Member or fulfill his/her/its
obligations under a Company provider contract or any other agreement to
which such provider is a party.
Notwithstanding anything contained hereinabove to the contrary, Network
and Network Affiliated Providers make no representations or warranties,
express or implied, as to the safety, fitness or fitness for a
particular purpose of any item, supply or durable medical equipment
furnished to a Member in connection with this Agreement. This provision
shall not be construed to absolve or limit Network or Network
Affiliated Providers' obligations to provide Home Health Services with
at least the same degree of care and skill as customarily provided to
patients who are not Members in accordance with generally accepted
standards of practice applicable to similarly situated providers under
the terms of this Agreement or the applicable Network Participating
Provider Agreement or the applicable Company Participating Provider
Agreement.
C. Network Provider Agreements. Network Providers shall be under agreement
with Network and Company in order to provide services to Network
Members hereunder. Such agreements, as between Network and Network
Providers, shall be executed in the form and content attached hereto
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as Attachment C, and Network represents and warrants that all Network
Providers will have executed or will execute the form of agreement in
Attachment C. Such Network Participation Agreements are hereby deemed
acceptable to Company for purposes of meeting Network's obligations
hereunder. Amendments to such Network Participation Agreements which
would have a material impact on the provision of Home Health Services
to Network Members by Network Providers under this Agreement, require
the prior written approval of Company, not to be unreasonably withheld.
Network shall contractually require Network Providers to comply with
the applicable terms of this Agreement. Subject to the terms of the
Three Party Agreement described in section 1.E below, Network agrees to
enforce its Agreements with Network Providers as necessary to ensure
compliance with the terms of this Agreement, including but not limited
to the obligation that Network Providers provide the Home Health
Services to Network Members in accordance with the applicable Plan. In
order to remain Network Providers for the term of this Agreement,
Network Providers must continue to meet the Company Participation
Criteria set forth in the applicable Company Participating Provider
Agreement attached hereto as Attachment D.
D. Company Provider Agreements. Network agrees to cause Network Affiliated
Providers to execute a Company Participating Provider agreement and to
contractually require Network Associated Providers to execute the
applicable form of Company Participating Provider Agreement attached
hereto as Attachment D, for each of the states referenced above.
Agreements, as between Company and Network Providers shall be, for
those Network Associated Providers already contracted with Company as
of the Implementation Date, in approved Company provider contract forms
provided that such forms of agreements shall not be materially
inconsistent with the Attachment D. For all Network Affiliated
Providers as of the Implementation Date and all Network Providers who
are contracted by the Parties after the Implementation Date, as between
Company and Network Providers, agreements shall be in the form and
content in Attachment D hereof, with only those state-specific changes
as may be required by the applicable regulatory authorities.
Notwithstanding anything to the contrary herein, at Company's
discretion, Company may amend such agreements upon written notice to
Network Providers and Network only as required to comply with
applicable law or regulation, or any order or directive of any
governmental agency with appropriate jurisdiction. Except for a
provider who is not a Participating Provider but whose participation is
approved by the applicable Company regional medical director on a
case-by-case basis as provided in this section 1.D, Company represents
and warrants that all Network Providers added to Network after the
Implementation Date will execute an agreement substantially in the form
attached hereto in Attachment D, with only those state-specific changes
as may be required by the applicable regulatory authorities, and
Network Providers shall not provide Home Health Services to Members
unless and until such Network Provider has executed and delivered to
Company (and Company has accepted) the applicable attached Company
participating Provider Agreement. The case-by-case approval by the
applicable Company regional medical director in the immediately
preceding sentence shall be given in those limited circumstances and
only in those circumstances where no Network provider exists after
Network has fulfilled its obligations hereunder, such approval not to
be unreasonably withheld.
Network shall recommend to Network Providers who have expressed the
desire to participate under the terms of this Agreement, and who are
not currently Company Participating Providers, to apply for
participation with Company. Company agrees to accept for participation
under this Agreement and to enter into a Company Participating Provider
Agreement in the applicable form of Attachment D and Attachment E-2,
any such Network Provider that meets Company's participation criteria
and who agrees to be bound by the terms of this Agreement, provided
that the participation of such providers under this Agreement does not,
in Company's reasonable good faith determination, materially impair
Company's business objectives in the Region(s) under this Agreement.
E. Three Party Agreements/Negative Amendments. For each Network Associated
Provider not based in New York state, as of the Implementation Date,
Network shall amend their Network Participation Agreements with such
Network Associated Provider in the form and substance in Attachment E-1
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hereto, which attachment, inter alia, provides that Network Associated
Provider shall look solely to Network for any payment in respect of
Home Health Services rendered to Network Members, Company shall be the
third-party beneficiary of such amendment and that Company may directly
enforce against such Network Associated Provider the Network Provider
obligations created as a result of such amendment, without Company
being subject to any defenses or claims such Network Associated
Provider may raise or have against Network ("Network Amendment").
Network represents and warrants that such Network Amendment is deemed
approved by and legally enforceable against such Network Provider in
accordance with the terms herein and in accordance with its terms,
except as such Network Associated Provider provides effective notice to
Network within 20 days of receiving such Network Amendment that such
Network Associated Provider does not accept such Network Amendment.
Such Network Associated Providers who provide such notice rejecting
such Network Amendment shall, for the purposes of this Agreement, not
be a Network Provider, unless such Network Associated Provider executes
a Three Party Agreement (as defined below). Throughout the term of this
Agreement, for Network Providers (including all New York state Network
Providers as of the Implementation Date) who are added to a Home Health
Network after the Implementation Date, such Network Provider, Network
and Company shall execute an agreement in the form attached hereto as
Attachment E-2 ("Three Party Agreement"). The Parties agree to execute,
and to use their commercially reasonable best efforts to cause Network
Providers and Company Participating Providers wishing to participate
under this Agreement to execute, the Three Party Agreement attached
hereto as Attachment E-2 . For the purposes of the immediately
preceding sentence, Network shall be obligated, on or prior to the
Implementation Date, to cause each Network Affiliated Provider to
execute and deliver to Company the Three Party Agreement. Each of such
Network Amendment and such Three Party Agreement shall resolve any
differences between Company's Participating Provider Agreement and
Network's Participating Provider Agreement, and shall set forth the
terms and conditions pursuant to which Home Health Services shall be
rendered to Network Members by each Network Provider who executes such
Network Amendment or such Three Party Agreement. All revisions or
amendments to any Network Amendment or Three Party Agreement require
the mutual written consent of the Parties, not to be unreasonably
withheld or delayed.
F. Legal Compliance and Representations. Network represents and warrants
to Company that it has full right and authority to enter into this
Agreement and the other collateral agreements contemplated by this
Agreement (including the New York IPA Agreement as defined herein), and
that neither the execution of such agreements nor the carrying out of
their respective terms will contravene, violate or cause the breach of,
any contract or agreement to which Network is a party or by which
Network may be bound. Network further represents and warrants that, as
of the Effective Date, its responses to Company's "Home Health Care
Provider Profile Questionnaire", transmitted by Mr. Louis A. Zambelli,
Jr. to Company on May 30, 1997, as amended in correspondence from
Network to Company's National Ancillary Contract staff through the
Effective Date, and all of same are true and correct in all material
respects.
G. Provider Education. In cooperation with and with assistance from,
Company, Network shall review, inform and educate Network Providers of
all Company policies and procedures applicable under the terms of this
Agreement.
H. Network Support. Network agrees to maintain such support staff,
toll-free telephone lines and other operations reasonably necessary to
fulfill Network's obligations under this Agreement.
I. Claims Processing and Payment. Effective as of the Implementation Date,
and for so long as Company has paid Network the applicable Capitation
Amount due and owed by Company to Network, and for so long as Network
has not been notified of a breach of its obligations hereunder pursuant
to Section 6.D hereof and such breach is continuing, Network agrees to
provide Network Provider Claims Management Services (as defined herein
and in Attachment F) for Home Health
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Services provided to Network Members, including claim processing and
payment, and such other provider payment services as set forth in this
section 1.I.
(1) "Claims Management" or "Claims Management Services" shall mean the
process by which claims for payment are paid to Network Providers
(but not non-Network Providers or non-Participating Providers) for
Home Health Services provided to Network Members, including
emergency and urgent services as defined by the Health Care
Financing Administration, and records that are to be maintained of
claims and payments for such services. Network shall provide
Claims Management Services in accordance with Company standards,
subject to Network's ability to cure pursuant to section 6.F
hereof. Network represents, warrants and agrees that at all times
its provision of Claims Management services meet or exceed (i) all
Company standards, policies and procedures; (ii) all applicable
state and federal statutes and regulations, including but not
limited to, Medicare statues and regulations and all fiduciary
obligations under ERISA; and (iii) the standards of any applicable
accrediting organization, including, but not limited to, NCQA. In
the event that Company or an accrediting organization's standards
or any state or federal statutory or regulatory provisions are
materially changed or revised, Network agrees, without limiting
the Parties' rights and obligations pursuant to section 6.G
hereof, to comply with or implement, as applicable, and to the
reasonable good faith satisfaction of Company, any such change or
revision within the earlier of sixty (60) calendar days of
receiving notice of such change or within such time frame as may
be required by the accrediting organization or applicable law or
regulation. Company agrees to promptly notify Network of any and
all such changes, whether through written communication or through
the Operating Committee.
(2) Network shall allow Company to maintain oversight of the Claims
Management services furnished by Network on behalf of Company.
Such oversight shall at a minimum include permission for Company,
Company's designated agents(s), federal, state and local
governmental authorities having jurisdiction, and any applicable
accrediting organization, to audit, during regular business hours
upon at least ten (10) calendar days prior written notice, any and
all documents and materials directly related to Claims Management
Services rendered under this Agreement. In addition Company,
Company's designated agent(s), federal, state and local
governmental authorities having jurisdiction, and any applicable
accrediting organization shall be permitted by Network to conduct
a site visit and/or audit at any site where Network processes
claims under the terms of this Agreement upon not less than ten
(10) calendar days prior written notice, except as otherwise
required under applicable law. Any such audit shall be at
Company's expense (except for federal, state and local
governmental authorities auditing Network not arising from this
Agreement, in which case Company shall not share any expenses in
connection with any such audit, and shall be reasonably permitted
during the term of this Agreement and for a period of three (3)
years thereafter; provided, however, that nothing in this section
1.I(2) shall extend the audit rights under this Agreement of any
such entity.
(3) Network shall provide, in a format acceptable to Company and so
long as available under Network's then-current management
information system without material upgrades to software or
hardware, timely, accurate and appropriate data and information
(including demographics) to enable Company to fulfill applicable
accrediting organizations and state and federal regulatory filing
requirements. If such information cannot be provided by Network to
Company without such material upgrades to software or hardware,
Network shall provide to Company, in a format available to it
under its then-current system, the above information which
satisfies Company's reporting requirements.
(4) Network agrees that in addition to its obligations to maintain
"proprietary or confidential business information" as set forth in
Section 7 herein, Network shall ensure that any Information
related to a Member which discloses data by which individual
patients can be identified is to be kept strictly confidential in
accordance with all state and federal laws
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regarding, among other things, the confidentiality of patient
records and shall not be released to any third party without the
prior written permission of Company or pursuant to a court order,
subpoena or appropriate request from any regulatory agency with
jurisdiction. In the event of such a court order, subpoena or
request from a regulatory agency, unless prohibited by law,
Network will provide Company prior written notification prior to
releasing such information or records so that Company may seek a
protective order or other remedy at Company's expense.
2. OTHER DUTIES OF NETWORK
Network shall perform each of the following additional obligations:
A. Member Hold Harmless. If the applicable payor is an HMO, Network agrees
that in no event, including but not limited to, non-payment by the HMO,
insolvency of the HMO or breach of this Agreement, shall Network bill,
charge, collect a deposit from, seek remuneration or reimbursement
from, or have any recourse against, including without limitation, the
institution of any action at law, a Member or persons (other than the
HMO) acting on a Member's behalf for Covered Services or any other
amounts owed Network Providers by HMO. This provision shall not
prohibit the collection of deductibles, coinsurance or copayments from
Network Members in accordance with the terms of the Member's Plan and
applicable law. Network agrees that: (i) this provision shall survive
termination of this Agreement regardless of the cause giving rise to
termination and shall be construed for the benefit of Network Members,
and (ii) this provision supersedes any oral or written agreement to the
contrary now existing or hereafter entered into between Network and a
Network Member or persons acting on a Network Member's behalf.
B. Network agrees to perform its duties and responsibilities under this
Agreement in accordance with the Performance Standards of Attachment G
hereof, and Network agrees that its failure to satisfy and comply with
such Performance Standards in any Home Health Network may, at Company's
discretion, result in the imposition of the financial assessments
and/or taking other actions identified in Attachment G or possible
termination and/or other actions authorized under this Agreement in
accordance with Sections 6.D and 6.E hereof.
C. Limited Utilization Management and Case Management Services. Network
shall perform, either directly, or through an Affiliate appropriately
licensed and qualified (if required under applicable state law), and in
accordance with Company's applicable rules, policies and procedures,
the following case management and utilization management functions with
respect to Home Health Services to Network Members: intake of all
referrals for services under this Agreement; development, in
conjunction with the Member's physician, of a plan of care; ongoing
case management (including reauthorizations of care) to assure the
appropriate level of care (as determined by the applicable Plan or the
Plan's appropriate medical director) is being rendered; accepting
referrals for Home Health Services provided to Network Members;
coordinating the provision of Home Health Services provided to Network
Members; and, authorizing and reauthorizing such services. Network
shall make all initial determinations as to whether a Network Member is
eligible to receive Home Health Services (based on eligibility data
supplied by Company under the terms hereof), and as to whether a
service/supply is a covered Home Health Service (based on benefit plan
descriptions supplied by Company under the terms hereof). In the event
Company authorizes the provision of services/supplies which are not
covered Home Health Services under Attachment A, ("Extra-Contractual
Services"), Company shall pay for such Extra-Contractual Services on a
fee-for-service basis, and Network assumes no financial liability or
risk whatsoever for payments to providers with respect to such
Extra-Contractual Services. If, upon referral of a Network Member to
Network or pursuant to a request for reauthorization for a Home Health
Service to Network Members, Network patient care coordinators and/or
management staff would
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make a negative recommendation as to the medical necessity of a
requested service and/or supply, or that a requested service/supply is
not a Covered Home Health Service, or is a negative recommendation
based on a Member's status as a Network Member (in the case of
non-emergent, non-urgent services), Network shall defer all such
recommendations to the applicable Company Medical Director who shall
review and either affirm or reject such recommendation. Network shall
not negatively recommend or delay the provision or arranging of
emergent or urgent services to an individual (and it is represented by
such individual or the referring source that such individual is a
Member) solely on the basis that such individual is not a Network
Member. Notwithstanding anything to the contrary herein, the Parties
acknowledge that Company retains final authority for all medical
necessity denials, interpretation of Plans, patient and disease
management programs, member grievances and appeals and any other duties
as mandated by applicable law and as expressly provided elsewhere
herein.
D. Demonstrate the willingness to expand this Agreement to other
Geographic Areas on the terms, or terms substantially similar to those,
herein and such other reasonable terms as are mutually satisfactory to
the Parties, and Network shall use reasonable efforts to assist Company
in any Company expansion market in establishing a provider network for
Home Health Services consistent with the terms of this Agreement and on
such other commercially reasonable terms mutually acceptable to the
Parties and negotiated in good faith.
E. Encounter Data. For those services performed by Network Providers for
Network Members, Network shall provide Company with encounter data by
type of Covered Service rendered to Network Members in the form and
manner as reasonably specified by Company that Network can provide
using its current systems and without incurring a significant financial
cost or significant or material reprogramming. During the term of this
agreement such encounter data shall be jointly owned by Network and
Company, and upon expiration or termination of this agreement such
encounter data shall be the property of Company; provided that Network
and Company shall jointly own (during the term of this Agreement and
thereafter) all reports, summaries analyses, trends and the like
derived from such encounter data. Network agrees that Company and its
Affiliates, shall, during Network's normal business hours and without
unreasonably interfering with Network's customary business operations,
have unlimited free and equal access: (1) to all data and information
obtained, created, or collected by Network which specifically relates
to Network Members and (2) to all data and information created by
Network by which individual patients can be identified (each of (1) and
(2) above is "Information"). Network shall not enter into any contract
or arrangement whereby Company or it Affiliates do not have unlimited
free and equal access, consistent with the terms of this section, to
the Information in electronic or other form or would be required to pay
any access, transaction or other fee to obtain such Information in
electronic, written or other form. No Information shall be directly or
indirectly provided by Network to any competitor of Company or
competitor of Company's Affiliates. Network represents and warrants
that Network will use (whether during or after the term of this
Agreement) such Information solely for internal quality assessment
purposes, including benchmarking, best practices, and clinical
pathways. Network agrees not to use such Information in a manner
competitive with Company's or its Affiliates' business. Notwithstanding
the immediately preceding sentence, each of Network and Company shall
bear fully its costs arising from its year 2000 reprogramming
initiatives, if any. Network may share Company-specific data to a third
party in connection with its performance of its obligations hereunder,
so long as such third party signs a confidentially agreement in a form
and content attached hereto as Attachment H prior to such disclosure.
Nothing in this section is intended to prohibit Network's use of
aggregate information that Network develops or maintains, provided,
however, that Network may not disclose aggregate information derived
from Information which: (a) may reveal or disclose proprietary
information of Company as described in section 7 hereof; (b) reveals or
readily identifies Company's utilization rates or other related data of
Company ; or (c) personally identifies or reveals the identity of a
Member or patient.
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<PAGE> 8
F. Insurance. Network shall maintain comprehensive general liability
insurance at minimum levels reasonably required from time to time by
Company, but in no event less than One Million Dollars ($1,000,000) per
claim and Three Million Dollars in the annual aggregate and director
and officer liability coverage for Network's directors, officers,
trustees and managers in the minimum amount of Five Million Dollars
($5,000,000). Certificates of insurance or copies of declaration pages
relating to such policies shall be delivered to Company upon request.
Network shall notify Company at least thirty (30) days in advance of
any cancellation, limitation, or non-renewal of, or any material change
to, said policies.
3. DUTIES OF COMPANY
Company shall use its commercially reasonable best efforts in performing
each of the following obligations:
A. Patient Management. Except as provided in section 2.C to the contrary,
patient management services, including but not limited to utilization
review, case management, disease management, precertification, and the
patient management obligations of this section 3.A imposed upon Company
by this Agreement, or by federal and state statutes and regulations,
which as between Company and governmental authorities with jurisdiction
over such statutes and regulations, are non delegable. Utilization
management personnel will be identified to Network and will work with
utilization management staff on- and off-site, as reasonably necessary
for Network to perform its obligations hereunder. New Disease
Management programs, other than those identified in Attachment A as of
the Effective Date, for which Network will be responsible for
supporting and in respect of which Network will be providing or
arranging support services, will be implemented under this Agreement
sixty (60) days after written notice to Network by Company or sixty
(60) days after communication of such new program by or through the
Operating Committee. Prior to the sixty (60) day implementation period,
the performance standards in respect of such new program will not apply
to Network's performance of such new program.
B. Products/Publicity. Company shall have responsibility for and agrees to
continually advertise and market the Plans during the term of this
Agreement. Network and any Network Provider may not advertise, issue a
press release or make any public statement about Company or this
Agreement without Company's prior written approval, not to be
unreasonably withheld; provided, however, Network and Network Providers
may advertise themselves as participating Company Providers. Company
shall not make any public disclosures of the names of Network Providers
without Network's and such Network Provider's prior written consent,
not to be unreasonably withheld; provided, however, that Company may
freely and without Network's or Network Providers' consent, advertise
Network's and Network Providers' participation hereunder and under
Company Participating Provider agreements in Company's provider and
similar directories and to other providers in connection with any
service rendered to or required by Members.
C. Subcontractors. Company agrees that any of its subcontractors under
this Agreement shall be bound to all of Company policies and procedures
applicable to such subcontractor hereunder, under the terms of this
Agreement, and Company shall require and ensure that such
subcontractors comply with all of such policies and procedures in
conformity with the terms hereof.
D. Member services, including enrollment, dedicated member services phone
line, grievance processes and collection of premium and processing.
E. Provider and Network Support Services. Company agrees to provide
provider services, a dedicated (i.e., for provider relations purposes)
provider relations telephone line, and a Company Medical Director
interface with Network. Company shall provide (including all costs to
establish and maintain) Network with 24 hour a day, 365 days per year,
access to a reasonably required number
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of dedicated toll-free 800 telephone lines for purposes of verifying
Member eligibility. Such dedicated toll-free 800 lines shall include a
VRU system which is continually updated and which, at all times, will
have real-time eligibility data on Members available to Network.
Network shall be entitled to rely upon the accuracy of all eligibility
information obtained via the 800 line VRU System, and Company may not
retroactively deny payment for services (on the basis of ineligibility)
for which Network has first obtained affirmative coverage status.
Company shall, also provide Network, as soon as is practicable but no
later than on the Implementation Date, and, after the Implementation
Date, on or before the first day of each month thereafter during the
term hereof, with magnetic tapes or cartridges or hard copy for any
data elements not available until August 1, 1998 (in a format(s)
compatible with the Network's hardware and software so long as
available under Company's then-current management information system
without material upgrades to software or hardware, and if such material
upgrades would be required, Company shall provide Network with the
following in a format and in the frequency then available) of current
Network Member eligibility data, which will include, at a minimum: the
Network Member's I.D. #, name, age, gender, Primary Care Physician's
office #, and applicable copayments, coinsurance or deductible amounts
and a benefit rider designation, if any. In addition, Company shall, on
a monthly basis, deliver to Network a report that shows the provider
numbers or the primary care physicians for the Members enrolled in the
Company's HMO-based Plans serviced by an integrated delivery system.
F. Legal Compliance. Regulatory compliance and filings relating to
Company's obligations with respect to its products and its provider
contracts. Company represents and warrants that it and its Affiliates
have full authority to enter into this Agreement and the collateral
agreements required hereby (including the New York IPA Agreement), and
that neither the execution nor the performance of their respective
terms will contravene, violate or cause the breach of any contract or
agreement to which Company is a party or to which it is bound which
affect Company's obligations hereunder. Company further represents and
warrants that the form of agreements in Attachments D and Attachment M
are the most current (as of the Effective Date) versions of such
agreements to have been approved by the New York Department of Health.
G. Underwriting services.
H. System support services, including appropriate data collection and
reporting to regulatory agencies.
I. Quality assessment services, including provider credentialing and
recruiting, accreditation, member satisfaction, surveys (related to
primary care physicians, provider sanctioning, specialists and hospital
services, other than such surveys which Network has agreed to perform
in accordance with the terms hereof) and data collection, analysis and
reporting.
J. Provider payment, including but not limited to, claims processing
services for Home Health Services provided to non-Network Members, and
provider payment, including but not limited to, claims processing
services (but in no event limiting the financial responsibility of
Network for Home Health Services) for Home Health Services rendered to
Network Members on an out-of-network basis, either by non-Network
Providers or by non-Participating Providers.
K. All other administrative and management services for the Plans.
L. Company shall provide Network with the reports in the formats and
frequencies identified and reasonably requested by Network through the
Operating Committee, so long as available under Company's then-current
management information system without material upgrades to software or
hardware, and if such material upgrades would be required, Company
shall provide Network with such reports in a format and in the
frequency then available.
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M. Insurance. Company shall maintain comprehensive managed care,
professional and general liability insurance or a program of
self-insurance at minimum levels generally standard in the industry for
a health maintenance organization of Company's size, but in no event
less than Five Hundred Thousand Dollars ($500,000) per claim, and One
Million Dollars ($1,000,000) and Five Million Dollars ($5,000,000),
respectively, in the annual aggregate, and director and officer
liability coverage (or a program of self-insurance) for Company's
directors, officers, trustees and managers in the minimum amount of
Five Million Dollars ($5,000,000). Certificates or memorandum copies
evidencing such coverage or programs of self-insurance shall be
delivered to Network upon its request. Company shall notify Network at
least thirty (30) days in advance of any cancellation, limitation, or
any material adverse change to, said policies, coverages or programs of
self-insurance.
4. PAYMENT ARRANGEMENTS
A. Network shall be compensated and shall be fully financially responsible
in accordance with the provisions of Attachment A for the provision and
for arranging the provision of all Home Health Services to Network
Members by home health care providers on and effective the first day of
July, 1998 ("Implementation Date") and (except as otherwise expressly
provided herein) Network shall be paid by Company hereunder on the last
day of each month thereafter (beginning August 31, 1998) for
obligations to provide or arrange for the provision of Home Health
Services during such month, provided, however, that the first
Capitation Amount payment hereunder shall occur upon the Implementation
Date subject to all the limitations and conditions hereof. Network
agrees to accept the payments provided for in Attachment A as full and
complete compensation for provision by Network and Network Providers
and all other providers of Home Health Services to Network Members and
other obligations under this Agreement, except as otherwise expressly
provided herein. For the provision of any Home Health Services to
Members who are not Network Members within such Geographic Area, each
Participating Provider or Network Provider shall be paid in accordance
with their individual provider contracts with Company.
Notwithstanding the foregoing paragraph, if pursuant to the terms of
section 5.A hereof, Network elects at any time to fund the Letters of
Credit (and does so fund such Letters of Credit and provide same to
Company no later than the fifth (5th) day of the then-current month, in
the Fully-Funded amounts as provided in section 5.A, the Capitation
Amounts hereunder shall be paid by Company to Network on a prospective
basis, on or before the first day of each month, effective as of the
first month immediately following the month in which the Letters of
Credit are so increased.
B. From the Effective Date through the Implementation Date and for all
Home Health Services with dates of service prior to the Implementation
Date, each Company Participating Provider shall be paid by Company for
the provision of any Home Health Services to Members in accordance with
their individual provider contracts with Company; provided that with
respect to those Home Health Services which are authorized prior to the
Implementation Date and for which reimbursement is on a case rate, or
episode of care (e.g., DME rental) basis, the amount of such
reimbursement shall be allocated to the Parties on a prorated basis in
a mutually acceptable manner to be agreed upon prior to the
Implementation Date.
C. Network or Network Providers shall be entitled to collect and retain
from Members the copayments or coinsurance permitted under the terms of
the applicable Plan. Network agrees, and Network shall cause Network
Affiliated Providers and shall contractually require Network Associated
Providers to agree, to accept the payments provided for in the
applicable Network Provider Agreement or in the individual
Participating Provider agreements (as the case may be) as full and
complete compensation for provision by Network Providers of Home Health
Services, except for those charges permitted under the applicable Plan.
At no time will Network or Network Providers seek compensation from
Members for Home Health Services except for those charges authorized by
the Plan.
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<PAGE> 11
5. LETTER OF CREDIT; EXCESS LOSS INSURANCE.
A. Financial Reserves/Letter of Credit.
Subject to the terms of section 6.D, at all times during term of this
Agreement, Network shall maintain a clean, irrevocable standby Letter
of Credit (or multiple Letters of Credit as provided herein at
Company's direction) in the amounts and according to the terms herein
and in the form attached hereto as Attachment I , and from a bank
acceptable to Company (the "Letter(s) of Credit").
Company may draw upon the Letter(s) of Credit to pay any Network
Providers or any other providers for Home Health Services provided to
Network Members for which Network is financially responsible hereunder,
if: the funds from Network's Capitation Amounts paid to Network are
insufficient or unavailable to pay such providers, upon Company's
reasonable determination after review of Network's Financial
Statements; if Network has persistently engaged in a pattern of failure
to pay Network Providers claims, when due, that are undisputed in good
faith; or if Network becomes insolvent or for any reason ceases to
conduct business. Company shall provide Network with contemporaneous
notice of any draw on the Letter(s) of Credit, which notice shall
include the reasons for the draw and the amounts drawn. To the extent
that such amounts are drawn under the Letter(s) of Credit, in whole or
in part, Network's financial obligations hereunder shall be deemed by
Company to be reduced dollar-for-dollar in the amount(s) so drawn. In
the event of any draw by Company upon the Letter(s) of Credit as
provided herein, Company shall reconcile any payments made to Network
Associated Providers for Home Health Services with the actual amounts
of Network Associated Providers' clean, undisputed in good faith claims
for payment for Home Health Services. To the extent that the amounts of
such claims are exceeded by the amounts drawn by Company under the
Letter(s) of Credit, at the time so drawn, Company shall credit Network
with such amounts with respect to any then-outstanding or future
financial liability of Network.
The following Letter(s) of Credit shall be maintained by Network in
accordance with the terms herein and according to the schedule and in
the amounts immediately below ("Scheduled Amounts"):
<TABLE>
<CAPTION>
Letter of Credit Amount Obtained by Effective As of
<S> <C> <C>
$3,000,000 Effective Date ID
$4,000,000 Implementation Date ("ID") ID
$3,750,000 ID + 52 days ID + 60 days
$3,750,000 ID + 82 days ID + 90 days
$14,500,000 Total at 90 days after Implementation Date
</TABLE>
Until such time as the Letter(s) of Credit is funded by Network in the
amount of $14.5 million, Network shall submit to Company, no later than
thirty-five (35) days after the close of the preceding month, Network's
Balance Sheet, Income Statement and a summary report of cash flows
prepared in accordance with GAAP, consistently applied ("Network's
Financial Statements").
At any time after the Implementation Date, Network may elect to
increase the amount of the Letter(s) of Credit such that all aggregate
amounts then so available to Company are equal to three-months
then-current Capitation Amount ("Fully-Funded Amount"). In such event,
the payment to Network of the Capitation Amount shall revert to a
payment schedule whereby Company shall pay such Capitation Amount
prospectively in accordance with Section 4 hereof.
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<PAGE> 12
Network will present to Company the Letter(s) of Credit in the required
formats and amounts three (3) days prior to Company's scheduled
generation of the then-current month's Capitation Amount payment (which
shall mean the generation by Company of Network's Capitation Amount
payment by the 25th of each month, but shall not mean the due date of
such payment by Company, which latter time is addressed in section 5
hereof). In any given month, if by such time Network does not so
present Company with the required Letter(s) of Credit, Company may, at
Company's discretion, deduct from the Capitation Amount then due the
amount necessary to cover the amounts of the then-required Letter(s) of
Credit amount per the above schedule and as other amounts as required
by this section 5.A. Company will release such funds to Network's
designee immediately upon Company's receipt of the required Letter(s)
of Credit.
After the last Letter of Credit is delivered to Company in the
Scheduled Amounts, such amounts shall be modified annually, as follows:
The aggregate amount available to Company under the Letters of Credit
shall be adjusted to an amount equal to the greater of: (a) that
portion of the three-(3) months aggregate Capitation Amount that
Network reasonably anticipates it is obligated to pay hereunder and
under the Network Provider Agreements to Network Associated Providers
over the subsequent three (3) month period; or (b) the amount that
represents the total anticipated three-(3) months claims liability of
Network for Home Health Services (based upon Network's then-current
reference [fee] schedules) for Home Health Services rendered to Network
Members by Network Associated Providers, all as reasonably projected by
Network on an actuarially-sound basis and as demonstrated to Company's
reasonable satisfaction using the prior twelve (12) months' (or such
shorter period if this Agreement has been in effect for less than 12
months) Home Health Services claims experience for such Network
Associated Providers.
In the event that the Letter(s) of Credit are delivered to Company in
the Fully-Funded Amounts, such amounts shall be modified annually, as
follows: The aggregate amount available to Company under the Letter(s)
of Credit shall be adjusted to an amount equal to the greater of: (a)
that portion of the three-(3) months aggregate Capitation Amount that
Network reasonably anticipates it is obligated to pay hereunder and
under the Network Provider Agreements to Network Providers over the
subsequent three (3) month period; or (b) the amount that represents
the total anticipated three-(3) months claims liability of Network for
Home Health Services (based upon Network's then-current reference [fee]
schedules) for Home Health Services rendered to Network Members by
Network Providers, all as reasonably projected by Network on an
actuarially-sound basis and as demonstrated to Company's reasonable
satisfaction using the prior twelve (12) months' (or such shorter
period if this Agreement has been in effect for less than 12 months)
Home Health Services claims experience for such Network Providers.
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<PAGE> 13
Nothing in this section 5.A shall be interpreted to restrict or limit
Company from reasonably requiring additional increases in the Letter(s)
of Credit amount(s) in the event that: (a) Network is not reimbursing
Network Providers in accordance with this Agreement, and (b) Network is
experiencing two or more consecutive quarterly deficit positions (based
upon and defined as the amount of any then-current negative difference
between Total Capitation Amounts paid by Company to Network and
then-currently projected total costs in respect of the Home Health
Services provided to Network Members by Network Associated Providers.
Upon termination of this Agreement, Network shall maintain, subject to
section 6.D hereof, the Letter(s) of Credit for a period of at least 13
months after such termination. Company is hereby authorized by Network
to draw upon the Letter of Credit on behalf of Network only under the
circumstances described in this section 5.A. Network and Company shall
execute all documents reasonably necessary to enable Company to perform
such functions.
In the event of Network's insolvency or if the Capitation Amounts then
due to Network by Company are insufficient or unavailable to satisfy
all Network Providers' valid, outstanding claims against Network for
Home Health Services, Network agrees, for and on behalf of its Network
Affiliated Providers, that such claims for payment shall be subordinate
to such claims of Network Associated Providers for such services, but
only to the extent that Network's available funds are insufficient or
unavailable for Network to pay such claims of both Network Affiliated
Providers and Network Associated Providers without any reduction,
compromise or accord and satisfaction; and, to such extent, such
Network Affiliated Providers' unsatisfied claims (or any unsatisfied
portions thereof) against Network are hereby waived. Coram Healthcare
Corporation ("Coram") shall cause each of its Affiliates providing
services pursuant to this Agreement to delay or waive such Affiliates'
rights to payment by Coram under each such Affiliate's Network Provider
Agreement in accordance with the terms of this paragraph, and to cause
such Affiliates to execute such documents and instruments Company deems
necessary to enforce the designation of payment obligations of such
Affiliates pursuant to the Three Party Agreement or Negative Amendment,
as the case may be. Network and each of such Affiliates forever waive
any claim, right or defense against Company to additional money or
payments hereunder, except as is expressly provided in this Agreement.
B. Excess Loss. Network shall purchase an excess loss policy from an
insurer reasonably acceptable to Company, effective upon the
Implementation Date, which policy shall insure Network (and name
Company as an additional insured) against the financial risk assumed by
Network (less a risk corridor in a policy that is industry standard and
as mutually acceptable to the Parties), for the provision, or the
arranging for the provision, of Home Health Services in excess of the
total PMPM Amount (as determined on an actuarially sound basis) for any
calendar year. As an alternative to this Excess Loss policy, Network
may deliver a policy or maintain adequate reserves designed to provide
similar protection in form and substance reasonably acceptable to
Company.
6. TERM
A. This Agreement shall be effective for an initial term ("Initial Term")
of five (5) years commencing on the Effective Date. Neither Party may
terminate this Agreement without cause during the Initial Term, and
this Agreement may only be otherwise terminated as set forth in this
section 6. Thereafter, this Agreement shall renew automatically for
one-year periods, unless terminated by either Party hereunder. Either
Party may at its sole discretion and option terminate this Agreement at
any time without cause by giving at least one hundred eighty (180) days
written notice to the other Party; provided, however, that no such
termination shall be effective during the Initial Term hereof. These
provisions shall not be construed to terminate any rights of Network
Providers to compensation by Network for Network Providers' services
rendered to Network Members prior to termination, except as otherwise
expressly provided in this Agreement.
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<PAGE> 14
B. Notwithstanding the foregoing, if any of the following events shall
occur with respect to Network, Company shall have a right to terminate
this Agreement immediately upon notice to Network:
1. The withdrawal, expiration or non-renewal of any state or local
license, essential certificate, approval or authorization (or the
imposition of any such license, essential certificate, approval or
authorization which Network does not then possess) of Network
which withdrawal, expiration or non-renewal or imposition
materially adversely affects Network's ability to perform under
the Agreement and which can not be resolved to the Parties' mutual
satisfaction through restructuring the terms of this Agreement on
substantially equivalent economic terms as if such withdrawal,
expiration, non-renewal or imposition had not occurred.
2. The bankruptcy or receivership of Network, or an assignment by
Network for the benefit of creditors.
3. The loss of or limitation of Network's general or professional
liability insurance.
4. The debarment of Network from participation in any
governmental-sponsored program.
5. The conviction of Network of any felony or crime of a moral
turpitude.
6. The dissolution of Network.
7. The breach by Network of any of its representations set forth in
section 1.F or the breach by Network of section 11 if there is no
good faith dispute among the Parties that a breach of section 11
has occurred, and if there is a good faith dispute among the
Parties that a breach of section 11 has occurred, the dispute has
remain unresolved for a period of ten (10) business days following
Network's receipt of written notice describing such breach and
after Company's documented good faith attempt to contact one of
Network's representatives on the Operating Committee to resolve
such dispute.
Network shall provide immediate notice to Company of the occurrence of any
of the aforesaid events.
C. Notwithstanding section 6.A, if any of the following events shall occur
with respect to Company, Network shall have a right to terminate this
Agreement immediately upon notice to Company:
1. The breach by Company of any of its representations set forth in
section 3.F;
2. The withdrawal, expiration or non-renewal of any state or local
license, essential certificate, approval or authorization (or the
imposition of any such license, essential certificate, approval or
authorization which Company does not then possess) of Company
which withdrawal, expiration or non-renewal or imposition
materially adversely affects Company's ability to perform under
the Agreement and which can not be resolved to the Parties' mutual
satisfaction through restructuring the terms of this Agreement on
substantially equivalent economic terms as if such withdrawal,
expiration, non-renewal or imposition had not occurred;
3. The bankruptcy or receivership of Company, or an assignment by
Company for the benefit of creditors;
4. The loss of or limitation of Company's general or professional
liability insurance (such as a program of self-insurance);
5. The debarment of Company from participation in any governmental-
sponsored program;
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<PAGE> 15
6. The conviction of Company of any felony that would materially
effect or impair Company's obligations hereunder.
7. Except as related to section 5.A hereof, the failure by Company to
make Capitation Amount payments when due to Network pursuant to
section 5 and Attachment A hereof, and such failure has remained
unresolved for a period of seven (7) business days following
Company's receipt of written notice describing such failure and
after Network's documented good faith attempt to contact a manager
of Company's National Ancillary Contracts department to resolve
such failure.
D. Termination By Company Upon Certain Other Events. Company may, at its
discretion and without limiting any other remedy hereunder or at law or
in equity, revoke the exclusivity service arrangement as to the
Geographic Area in any Region in which any of the following may occur,
or Company may terminate this Agreement, on ninety (90) days written
notice in the event Network breaches any one or more of the following
or if any of the following occurs, and (except as to (1) or (2) of this
section 6.D), Network has failed to cure such breach or to resolve such
occurrence to Company's reasonable satisfaction within such ninety (90)
day period:
1. Member satisfaction levels among the Network Members within such
Geographic Area have continually and materially deviated from the
targets specified in Attachment G; or
2. Network has failed to maintain the Letter of Credit as required
under section 5.A; or
3. Network has a provider network, at any time after the
Implementation Date, within any given Geographic Area which is
inadequate, in Company's reasonable determination, to provide all
Home Health Services required under the applicable Plans to
Network Members in any such Geographic Area.
In addition, without limiting any other remedy or right under this
Agreement or at law or in equity, in the event that Network has failed,
either consistently or materially, to fulfill its obligations with
respect to the Claims Management Services as provided in section 1.I
hereof and the related procedures in Attachment F (or changes to such
Attachment F of which Network has been given reasonable prior written
notice), Company may after the Implementation Date, in its discretion
and upon sixty (60) days prior written notice, terminate Network's
performance under section 1.I with the remainder of this Agreement
continuing in full force and effect with respect to all other terms and
conditions in accordance with its terms. In the event that Company so
terminates Network's performance under section 1.I hereof, the Parties
shall meet and negotiate in good faith as to a mutually acceptable and
reasonable reduction in the amount of the Letter(s) of Credit required
to be maintained by Network pursuant to section 5.A above, which
reduction shall be in proportion to the reduction in Company's legal
exposure resulting from such termination of Network's performance under
section 1.I hereof.
E. Termination by Company for Category I Material Events. In addition to
any assessments under Attachment G upon the occurrence of any Category
I Material Event (as defined in such Attachment G), Company may, at its
discretion, in the applicable Geographic Area , take the following
actions: (1) terminate the exclusivity arrangement; and/or (2) add
another Home Health Services network or provider, notwithstanding the
exclusivity arrangement herein.
F. Termination By Either Party for Breach of Material Obligation. This
Agreement may be terminated by either Party in the event of a breach of
a material term or material obligation of this Agreement by either
Party, provided that the non-breaching Party has first given notice in
writing and the breaching Party has not cured the alleged breach (or
commenced actions to cure such breach) not later than sixty (60) days
following such notice. For the purposes of this section 6.F, the
obligations of Network under Sections 1.A, 1.B, 1.C, 1.E, 1.F, 1.I,
1.H, 2.B, 2.C, 2.E and 2.F hereunder shall be
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<PAGE> 16
deemed to be material obligations of Network. The obligations of
Company contained in Sections 3.A, 3.E, and 4.A hereof are deemed to be
material obligations of Company. Such notice shall set forth the facts
underlying the alleged breach. If such breach is cured (or such actions
are commenced) within such 60 day period, then this Agreement shall
continue in effect for its remaining term, subject to each provision of
this Agreement. Neither the waiver by either of the Parties of a breach
of or default under any of the provisions of this Agreement nor the
failure of either of the Parties, on one or more occasions, to enforce
any of the provisions of this Agreement, or to exercise any right or
privilege hereunder, shall be construed as a waiver of any subsequent
breach or default of a similar nature, or as a waiver of such rights or
privileges hereunder.
G. Renegotiation/Termination Upon Certain Events and Related Disputes. In
the event: (i) Company changes the Home Health Services applicable to
its HMO-based Plans for which Network is obligated hereunder, and such
changes have a material adverse financial consequence on Network (which
consequence shall be demonstrable to Company's reasonable satisfaction)
or there is a material financial benefit to Network as a result of such
change (demonstrated to Network's reasonable satisfaction); or (ii)
Company implements a change to any of its patient management policies
and procedures applicable to Network under the terms hereof, and such
change has a material adverse financial consequence on Network (which
consequence shall be demonstrable to Company's reasonable satisfaction)
or there is a material financial benefit to Network as a result of such
change (demonstrated to Network's reasonable satisfaction); or (iii);
independent of Company or Network efforts or actions, changes occur in
the industry, including but not limited to regulatory changes
(excluding licensure requirement changes), changes in technology,
medicine or medical practices which materially change the course of
home care services, thereby materially changing the use or cost of such
services, therapies, treatments and there is a material financial
benefit or detriment to either Party (demonstrated to the other Party's
reasonable satisfaction); then the Parties shall negotiate in good
faith for a period of forty-five (45) days as to whether to make an
appropriate increase or decrease to the Capitation Amounts described in
Attachment "A". If, by the end of such 45 day period the Parties are
unable to agree on a mutually satisfactory adjustment to the Capitation
Amount, then either Party shall request in writing (pursuant to the
notice provisions herein) the President of each party to resolve the
matter. If the President of each Party is unable to resolve such matter
within thirty (30) days after the matter is referred to the Presidents,
either Party may terminate this Agreement (but not before the process
in this paragraph of this section 6.G.) upon one hundred-twenty (120)
days prior written notice to the other Party. During the period
described in this paragraph, each Party shall continue to perform each
of its obligations under this Agreement in accordance with its terms,
and neither party shall take any action or cause any action to be
taken, or refrain from taking any action or from causing any action to
be taken which has the effect of suspending or restricting the other
Party's obligations under this Agreement, except as may be expressly
provided otherwise in this Agreement. In no event shall Network delay,
cease or discontinue the provision or arranging of Home Health Services
to Network Members during any such period described in this paragraph
or upon any other dispute among the Parties.
During the period after Company's implementation of the proposed
changes in section one of this section 6.G., and prior to the effective
date of termination (or the date the parties agree to a new Capitation
Amount, whichever shall first occur), the proposed changes, if related
to a change in Home Health Services as provided in section 6.G(i)
above, shall result in (and shall not exceed) payment by Company to
Network on a fee-for-service basis at the then-current geographic
market rate determined by Network Provider Agreements plus a network
administration fee* until agreement on a new Capitation Amount or
termination of this Agreement in accordance with this section 6.G. In
the event that the Parties agree to a new Capitation Amount, the new
Capitation Amount shall reflect, on a unit cost per patient per month
basis, an amount which accurately reflects Network's incremental
increase or decrease, as the case may be, of its administrative unit
costs attributable to its management hereunder of such new Home Health
Service (or change in same). In
----------------
*Confidential Treatment Requested
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<PAGE> 17
establishing such incremental increase or decrease of Network's
incremental unit cost, per patient per month, to the extent that such
incremental unit cost is greater than or less than the network
administration fee paid to Network above, Company or Network,
respectively, shall reimburse the other Party in the amount of such
excess or shortfall, respectively. Network shall provide or arrange for
the provision of such services to Network Members in accordance with
the terms hereof. If there is no corresponding fee schedule amount of
the service, Company shall develop a mutually acceptable,
actuarially-based amount for the service. In the event the parties
agree to an adjusted Capitation Amount within the initial 45 or 75 day
period of this section 6.G., the new Capitation Amount shall apply
effective, if in the case of 6.G(i), as of the first day of the month
immediately following the month in which agreement on the new
Capitation Amount is reached, and if in the case of section 6.G(ii) or
6.G(iii), retroactively to the time when such 6.G(ii) or 6.G(iii)
changes were implemented.
7. CONFIDENTIALITY
Company and Network agree that they shall treat the terms of this
Agreement, and any correspondence, reconciliation or other communication
relating to payment under this Agreement, as confidential information and
shall not disclose the terms of this Agreement to any third party without
the prior written consent of the other party, except as required by law.
Neither Company nor Network shall disclose any proprietary or confidential
business information to a third party, other than to Network Providers,
Network's or Company's lenders as of the Effective Date or excess loss
insurance providers. Any other disclosures of such information, other than
to sources related to Network's financing (debt or equity) or legal
disclosure requirements, each of which disclosures by Network requires
Company's prior written consent, not to be unreasonably withheld or
delayed), including but not limited to disclosures to any outside attorney,
consultant or advisor representing the parties in connection with the
negotiation of this Agreement (who shall agree to abide by this
confidentiality provision), requires execution by such parties of the
Confidentiality Agreement attached hereto as Attachment H, and the express
written consent of the Party whose information is to be disclosed not be
unreasonably withheld, qualified or delayed. For purposes of this
Agreement, the term "proprietary or confidential business information" will
include internal business practices and business records, including but not
limited to, information concerning products, pricing, contracts, or
business methods, in any form whatsoever, but not including information
otherwise readily available to the public or information generally and
reasonably understood by the parties to be non-confidential.
Network agrees that in addition to its obligations to maintain "proprietary
or confidential business information" as set forth in this Section 7,
Network shall ensure that any information related to a Member under this
Agreement which discloses data by which individual patients can be
identified is to be kept strictly confidential in accordance with all state
and federal laws regarding, among other things, the confidentiality of
patient records, and shall not be released (except pursuant to a duly
executed patient release, or pursuant to a court order, subpoena or
appropriate request from any regulatory agency with competent
jurisdiction). In the event of such a court order, subpoena or appropriate
request from a regulatory agency, unless prohibited by law, Network will
provide Company prior written notification prior to releasing such
information or records so that Company may seek a protective order or other
remedy at Company's expense.
Company and Network agree that disclosure of information in violation of
this Section would cause injury to the other not adequately compensable by
money damages. Accordingly, in addition to, and not in limitation of its
rights, either party shall be entitled to a permanent injunction in order
to prevent or restrain any breach (by the other party or any person acting
directly or indirectly for the other party) of such party's obligations set
forth in this Section 7. Both Parties also agree to waive any right such
Party may have to a jury trial concerning only the enforcement of the
obligations set forth in this Section, but expressly reserve such right as
to any other matter or dispute arising in connection with this Agreement.
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<PAGE> 18
8. RESTRICTIVE COVENANTS
A. During the term of this Agreement and for a period of twelve (12)
months following the termination of this Agreement, Network agrees that
it and its Affiliates shall not directly or indirectly, enter into or
engage in the ownership, management, operation, or control of, or act
as a consultant or advisor to any existing or proposed entity operating
or planning to operate a health maintenance organization, or other
health insurance or benefits business (collectively, a "Health
Insurer"). In the event Network hereafter acquires a provider group
that owns a Health Insurer, Network agrees to make good faith efforts
to structure such acquisition so as not to become an owner (directly or
indirectly) of such Health Insurer prior to the consummation of such
acquisition. Network agrees that it shall not during the term of this
Agreement actively promote any health plan or insurer competitive with
Company and further agrees that it shall not cooperate with or assist
in any marketing or other activity that is intended to or is likely to
have the effect of soliciting or recruiting members for any other
health plan or insurer competitive with Company, except that Network
may advertise that it is a participating provider in such plans. During
the term of this Agreement and for a period of twelve (12) months
following the termination of this Agreement, Network shall not,
directly or indirectly, advise, counsel or solicit to any Network
Associated Provider to terminate its provider agreement with Company in
the Regions; provided, however, the foregoing provision, shall not be
construed to limit or impair, in any manner whatsoever, Network's right
to inform Network Providers of the opportunity to participate in
arrangements negotiated by Network with other payors on such Provider's
behalf.
Notwithstanding the foregoing, this provision shall not be construed to
prohibit or in any manner limit Network, at any time during or after
the term hereof, from soliciting or entering into direct contracts with
self-insured groups on a fee-for-service or other basis to provide or
arrange for the provision of Home Health Services to the group's
members/employees, so long as such groups are not then current
customers of Company and so long as (during the term of this Agreement)
Network provides Company thirty (30) days prior written notice of
Network's intent to solicit such business (or such shorter notice if
Network is required, due to no action or request on its part, to
respond to such group in less than thirty days, in which case Network
shall provide Company such notice as is reasonably practicable); and
Network discusses with Company in good faith the feasibility of
approaching such group on a joint Network/Company basis for the
provision and administration of the delivery of such services. If, by
the end of such thirty (30) day period (or such shorter period as may
occur in the immediately preceding sentence), the Parties are unable to
agree in good faith as to a mutually acceptable arrangement for the
joint delivery and administration of such services to such group,
Network shall thereafter be free to individually solicit and contract
with such group. Notwithstanding anything to the contrary herein,
Network shall not solicit Company's then-current customers or counsel
or advise, directly or indirectly, Payors, Sponsors or other entities
then under contract with Company to cancel, modify, or not renew said
contracts.
B. Rights of First Offer/Refusal. In the event that, on or prior to the
fifth anniversary of the Effective Date, Network (through its executive
management or designee) enters into discussions with, or solicits
offers, proposals, letters of interest or bids for (in whole or in
part) or enters into any arrangement or transaction for the sale of all
or substantially all of its assets or stock, or that involves
substantially all the assets or stock or the business of Network,
whether through an affiliation, joint venture, merger or consolidation,
to or with a Company Competitor, Network shall give written
notification to Company as soon as practicable but in any event, prior
to the consummation of active discussions or negotiations, and prior to
the execution of a letter of intent, or definitive agreement with
respect to such arrangements or transactions, and Network shall solicit
Company's offer, proposal, letter of interest or bid on the same terms
and in the same manner as required of or by such other entities prior
to Network entering into any definitive agreement with any such entity
for such discussions, arrangements or transactions, and Company shall
respond with its intentions, but is not so obligated, to Network's
notice within fifteen (15) days of Company's receipt of same. In the
event that Company does not so respond, Network's obligations hereunder
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<PAGE> 19
as to the discussions, arrangements or transactions under consideration
at the time Network's notice to Company was issued, shall be deemed
fulfilled hereunder. In the event Network has complied with this
section 8.B, this section 8.B. shall not be construed to require
Network to enter into a definitive agreement with Company on the same
or similar terms as such other entity.
C. Change in Control.
(1) Except as prohibited by law, during the term of this Agreement
Network agrees that it shall use reasonable efforts to provide to
Company prompt written notice before public announcement of any
transaction that results in the change of control or ownership of
Network or a sale of substantially all of Network's assets
("Change of Control Transaction") and in no event less than thirty
(30) days prior to the consummation of such Change of Control
Transaction. Network shall promptly notify Company upon such
Change of Control Transaction.
Company reserves the right to terminate this Agreement any time
prior to the consummation of such Change in Control Transaction,
or within ninety (90) days following the consummation of a Change
of Control Transaction only if such Change of Control Transaction
is likely to result in (i) Company being under contract to an
entity that has been barred from participation in the Medicare
Program; or (ii) Company being under contract with a Company
Competitor
(2) Except as prohibited by law and except for possible transactions
announced prior to the Effective Date, during the term of this
Agreement Company agrees that it shall use reasonable efforts to
provide to Network prompt written notice before public
announcement of any transaction that results in the change of
control or ownership of Company or a sale of substantially all of
Company's assets ("Change of Control Transaction"), and in no
event less than thirty (30) days prior to the consummation of such
Change of Control Transaction. Network reserves the right to
terminate this Agreement any time prior to or within ninety (90)
days following the consummation of a Change of Control
Transaction, only in the following circumstances: such Change of
Control Transaction results or is likely to result in (i) Network
being under contract to an entity that has been barred from
participation in the Medicare Program; or (ii) Network being under
contract with an entity competitive to Network's business
(provided, however, that the activities permitted under section
8.A hereof shall not be deemed to be Network's business for the
purposes of this section 8.C(2)(ii).
9. COOPERATION OF THE PARTIES/RELATIONSHIP OF THE PARTIES
A. Network and Company will maintain an effective liaison and close
cooperation with each other to provide maximum benefits at reasonable
costs to Members consistent with applicable standards of medical
practice, provided that nothing in this section 9.A shall be construed
to alter or amend Network's express rights or obligations herein.
Network and Company will use their reasonable best commercial efforts
to comply with each other's administrative policies and procedures,
including those related to the delivery of medical services and will
keep and make available (except to the extent prohibited by applicable
law, rule or regulation), such medical, financial and other records as
each Party requires to fulfill its obligations under this Agreement.
B. Company will provide copies of relevant Company policies and procedures
and updates which are necessary for Network to perform its obligations
hereunder, including, but not limited to, all applicable patient
management and utilization management policies and procedures, benefit
Plans, eligibility data and disease management programs. Subject to the
terms of section 6.F., Network shall be bound only by those Company
policies and procedures and updates of which Network has received a)
not less than 30 days prior written notice or b) through direct
communications from or by the Operations Committee.
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<PAGE> 20
C. Each Party will exchange such financial information, Member
demographics, encounter and clinical data reasonably necessary for the
other Party to perform its obligations under this Agreement. Such
information will be exchanged electronically, to the extent feasible to
both Parties.
D. Each Party will be given, by the other Party, the good faith
opportunity to participate in the development of new clinical programs
related, in either Party's reasonable determination, to the obligations
of either Party.
E. Indemnification. Network agrees to indemnify and hold Company, its
officers, employees and agents harmless from any claims, demands, loss,
liability, damages, costs and expenses (including reasonable attorney's
fees and including any sanctions, fines or fees from a regulatory
agency as a result of Network's failure to fulfill its obligations
under Sections 1.I and 2.C of this agreement) made or incurred by
Company through no fault of Company in connection with any threatened
or proposed action, suit, proceeding, demand, assessment or judgment
arising from and directly attributable to the acts and omissions of
Network in its performance of its obligations under Sections 1.I and
2.C hereof. Company agrees promptly to notify Network in writing of any
claim or the commencement of any action against Company that could give
rise to a claim for indemnification by Company hereunder.
In the event that litigation or a proceeding is commenced by any third
party against Company and such litigation or proceeding gives rise to a
claim for indemnification (under the terms of this Section 9.E) and
counsel for Company reasonably - in the exercise of utmost good faith
recommends the defense, settlement of or compromise with respect to
such litigation or proceeding, Company shall have communicated such
defense, settlement or compromise to Network and Network shall have the
right to give its prior reasonable consent (such consent not to be
unreasonably withheld, qualified or delayed) to such defense,
settlement or compromise. In the event that Network does not consent to
such defense, settlement or compromise, Network shall have the
discretion - to be exercised in the utmost good faith - to defend,
settle, compromise or otherwise direct such litigation or proceeding,
including without limitation the right to assume the defense of
Company. In the event that Network elects to direct, defend, settle or
compromise such litigation or proceeding, the parties shall sever any
then-existing joint defense arrangement and Network shall assume the
direction, defense, settlement or compromise of such litigation or
proceeding and, from such point forward, Network shall bear all
expenses, costs and settlements, judgments or compromises related to
the same of the assumed litigation or proceeding. Notwithstanding the
foregoing, prior to any offer, settlement or compromise, relating to a
matter for which Company may be liable and which is severable from
Network's obligation to indemnify hereunder, Company shall have the
right to give its prior reasonable consent (such consent not to be
unreasonably withheld, qualified or delayed) to such offer, settlement
or compromise.
In the event that Company directs any such litigation or proceeding, or
proposes an offer, settlement or compromise of the same, and such
litigation or proceeding gives rise to a claim for indemnification
under this Section 9.E, prior to communicating to or agreeing with such
third party any offer, settlement or compromise, Company shall be
obligated to obtain Network's prior reasonable consent (such consent
not to be unreasonably withheld, qualified or delayed) to such offer,
settlement or compromise.
Notwithstanding anything to the contrary in this Section 9.E, in the
event of a claim for indemnification under this Section 9.E, Network
and the Company jointly and in good faith shall explore retaining
common counsel to protect the interests of each of Company and Network,
except in the case of a conflict between the Parties or if in the
judgment of common counsel preservation of the attorney-client
privilege is or likely would be jeopardized. In the event that common
counsel is so retained, such common counsel shall defend the claim,
action or proceeding pursuant to the joint, good faith instructions of
Company and Network.
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<PAGE> 21
Nothing in this Section 9.E is intended to limit or reduce, nor shall
it have the effect of limiting or reducing, either Party's rights and
remedies under this Agreement, at law or in equity.
None of the provisions of this Agreement is intended to create, nor
shall be deemed or construed to create, any relationship between the
parties hereto other than that of independent entities contracting with
each other hereunder solely for the purpose of effecting the provisions
of this Agreement. Neither of the parties herein, nor any of their
respective employees, shall be construed or represent themselves to be
the agent, employee, servant, employer or representative of the other.
This Agreement is not a joint venture between the parties.
10. AGREEMENT ADMINISTRATION
The parties shall designate Operating Committees to oversee the operation
of this Agreement and the related provider contracts. The Operating
Committees shall consist of equal numbers of representatives from each
party. The Operating Committees shall meet , commencing on the
Implementation Date, with the frequency described and shall consider those
issues and items listed in Attachment J hereof.
11. ASSIGNMENT
This Agreement shall not be assignable or transferable, in whole or in
part, by Network without the prior written consent of Company, its
successors or assigns, which consent shall not be unreasonably withheld,
qualified or delayed. For the purposes of this paragraph only, and
disregarding any possible contrary construct or interpretation, an
assignment or transfer by Network shall include, but not necessarily be
limited to: (a) the sale or transfer of (i) capital stock or comparable
equity interests of Network, (ii) controlling voting interests in Network,
(b) operation of law in connection with a merger or consolidation of
Network, (c) the sale of all or substantially all of the assets of Network,
or (d) any other similar transaction or disposition by or involving
Network. Nothing in this paragraph shall be construed to limit or prohibit
any single transaction by Network involving its affiliates only, the sole
result of which is an internal restructuring or recapitalization by
Network.
This Agreement may be assigned or transferred by Company to an Affiliate or
to a successor in interest, regardless of the form of transaction, or
pursuant to a transaction whereby Company or its Affiliates sell, are
acquired by, or merge or consolidate with, another entity; provided,
however, that if, as a result of such sale, merger or consolidation of an
HMO Affiliate to or with a third-party successor in interest, Company will
no longer operate any Plan for Network Members of such HMO Affiliate,
Company shall provide Network with written notice of such sale, merger or
consolidation of such an HMO Affiliate to such third-party successor in
interest prior to the consummation of such sale, merger or consolidation,
and Network shall, at its sole discretion, have the right to not have this
Agreement apply with respect to such Plan.
12. EXCLUSIVE RELATIONSHIP. During the term of this Agreement, the Parties
shall have an exclusive relationship in the Regions for Network Members.
Except as expressly provided otherwise in this Agreement and except with
respect to those Members enrolled in Company's HMO-based Plans serviced by
an IDS which is at risk for providing the Home Health Services, Members on
the Aetna Health Plan of Southern New England license and subsequent
Members acquired or encumbered by Company as a result of an acquisition,
merger or other transaction closed after the Effective Date and imposing an
obligation inconsistent with the Network Member arrangement under this
Agreement, neither Company nor its Affiliates shall enter into any
agreement, whether oral or in writing, directly or indirectly, for the
provision of Home Health Services to Members in the Regions with any
organization or provider other than by or through Network, except
agreements, which as a result of acquisition merger or other transaction
impose obligations inconsistent with this Agreement. The Parties understand
and acknowledge that the immediately preceding sentence shall not be
interpreted to prohibit or limit
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<PAGE> 22
Company with respect to a potential acquisition by Company or Company's
parent, of the health business of New York Life Inc., known as "NYLCare"
and Network acknowledges that, to the extent that NYLCare members become
Company Members, but such Members are subject to an obligation or
encumbrance inconsistent with the exclusivity provisions of this Agreement,
such Members may not (at Company's election) be considered Network Members
for the purposes of this Agreement, and Network agrees that Company is
under no obligation to deal exclusively with Network for such members,
provided that, upon the expiration or other termination of such obligations
or encumbrances during the term of this Agreement, such Members shall
automatically be considered Network Members under the terms and conditions
of this Agreement. Without limiting the foregoing and without limiting in
any way the Performance Standard remedies if Home Health Services to
Network Members are not available from Network Providers, Company may
contract directly with an alternate provider of such services; provided
that, Company gives Network sixty (60) days prior written notice of the
need for such services and Network does not, within such time, recruit
Network Provider(s) able to perform such services and who otherwise meet
Company's applicable participation criteria set forth in Attachment D.
Notwithstanding anything contained herein above to the contrary, Network
acknowledges that Company has entered into at-risk arrangements with the
hospital systems, providers and integrated delivery systems ("IDS")
pursuant to which such systems/providers have agreed to assume all or part
of the financial risk associated with the delivery of Home Health Services
to Members in the Regions who have selected a primary care physician who is
a member of such provider/systems as his/her primary care physician. The
parties agree that such arrangements shall not be deemed a breach of this
Section. In the event Company wishes to add additional at-risk groups
during the term of this agreement, nothing in this Section 12 is intended
to restrict Company's ability to do such; provided however, Company agrees:
a) to provide Network upon the Effective Date with a listing of such IDS as
of the Effective Date, b) to communicate to Network on an ongoing basis
such listings of IDS as may be added throughout the term of this Agreement;
c) to act in good faith as a liaison between Network and all existing and
additional at-risk groups, and to use its best commercial efforts in
assisting Network in developing a participation arrangement between such
at-risk group(s) and Network consistent with the terms of this Agreement.
All of the above communication and actions in the immediately preceding
sentence shall occur and be conducted through the Operating Committee.
13. SEVERABILITY
Without limiting sections 6.B(1) and 6.C(2) hereof, if any part of this
Agreement should be declared unenforceable or void, the remaining
provisions herein shall continue to have full force and effect so long as
the rights and obligations of the parties, including financial obligations,
continue to be substantially consistent with the original terms of the
Agreement; provided however, that if federal or state laws, rules or
regulations prohibit payment to Network on the basis pursuant to Attachment
A, payment shall be made by Company to Network on a fee-for-service basis
according to the provisions in Attachment K hereof, on substantially
equivalent economic terms as if such withdrawal, expiration, non-renewal or
imposition had not occurred, within 30 days of Network's submission to
Company of claims for Covered Home Health Services for payment after such
federal or state laws, rules or regulations have gone into effect.
14. ENTIRE AGREEMENT
This Agreement (including all exhibits, Schedules and Attachments hereto,
which are hereby incorporated by reference herein and all Company
Participating Provider Agreements and all Network Provider agreements
related to this Agreement) constitutes the entire understanding of the
parties hereto and no changes, amendments, waivers or alterations shall be
effective unless signed by both parties. In the event the terms and
conditions of this Agreement are inconsistent with the terms and conditions
of any Attachment and/or Schedule and or Provider Agreement hereto, the
terms and conditions of this Agreement shall govern.
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<PAGE> 23
15. NOTICES
Any notice required to be given pursuant to the terms and provisions hereof
shall be in writing and shall be effective when sent by certified or
registered mail, or overnight or same-day courier to Network at:
Coram Healthcare Corporation
1125 17th Street, Suite 2100
Denver, CO 80202
Attention: Contracts and Pricing Department
With a copy to: General Counsel
and to Company at:
Aetna U.S. Healthcare
980 Jolly Road
Blue Bell, PA 19422
Attention: National Ancillary Contracting Department
cc: Chief Legal and Regulatory Officer
16. AFFIRMATIVE ACTION
Company is an Equal Opportunity Employer which maintains an Affirmative
Action Program. The parties shall comply with Executive Order 11246, the
Vietnam Era Veterans Readjustment Act of 1974, the Drug Free Workplace Act
of 1988, the Vocational Rehabilitation Act and similar legislation in
transactions relating to any government contract. Network further agrees to
ensure that applicants are employed, and that employees are treated during
employment, without regard to their race, color, religious creed, ancestry,
national origin, sex, sexual orientation or disability.
17. NON-DISCLOSURE
The terms and conditions herein shall be treated by the parties as strictly
confidential. Accordingly, the Parties agree not to disclose, directly or
indirectly, this Agreement or the terms and conditions herein, including
but not limited to all schedules and financial terms, to any third party,
other than financing sources (debt or equity)except to carry out or enforce
the terms and conditions of this Agreement. The Parties agree that the
breach or prospective breach of this provision will cause irreparable harm
for which money damages may not be adequate. The Parties therefore agree
that in addition to any other remedies, the non-breaching party shall be
entitled to injunctive or other equitable relief to restrain the breach
hereof. This provision shall not apply to:
A. Disclosures required by law, provided such disclosure is limited to the
extent required by law; or
B. disclosures to professionals, including but not limited to accountants
and attorneys, retained by each party to carry out its ordinary
business activities; or
C. information that is within the public domain and which each party
learns of through the public domain at the time of disclosure, or was
previously known to the disclosing party, or is or becomes publicly
available without breach of this Agreement, or is received from a third
party holding such information legally and having the legal right to
disseminate it without breach of this Agreement by such disclosing
party, or is disclosed by the disclosing party with the written
approval of the other party.
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18. INDEPENDENT CONTRACTORS. None of the provisions of this Agreement is
intended to create, nor shall be deemed or construed to create, any
relationship between the parties hereto other than that of independent
entities contracting with each other hereunder solely for the purpose of
effecting the provisions of this Agreement. Neither of the parties herein,
nor any of their respective employees, shall be construed or represent
themselves to be the agent, employee, servant, employer or representative
of the other. This Agreement is not a joint venture between the parties.
19. GOVERNING LAW. This Agreement shall be governed by the laws of the State of
Delaware.
20. COMPLIANCE WITH LAW. The Parties agree to comply with all applicable
federal and state laws and all other ordinances, regulations, orders and
codes related to this Agreement and the services to be provided hereunder,
including, but not limited to statutes and regulations related to fraud,
abuse, discrimination, disabilities, confidentiality, self-referral, false
claims and prohibition of kick backs.
21. KEY PERSONNEL. Between the Effective Date and the Implementation Date,
Network must receive Company's prior written consent, not to be
unreasonably withheld, for replacements for the key Network staff who are
dedicated to implementing this Agreement, as identified on the attached
Attachment L.
22. ADDITION OF AFFILIATES. Subject to the terms of section 6.G, in the event
that Company wishes to add to its Affiliates under the terms of this
Agreement, Company shall provide Network with reasonable prior written
notice of the acquisition with respect to Network Members of any entity
which will become an Affiliate of Company, together with any information
necessary for Network to perform its obligations under this Agreement with
respect to such Network Members. In the event that Company adds an
Affiliate after the Implementation Date hereof, and Company can not
implement the Capitation Amount payment arrangement under Attachment A
hereunder with respect to such Affiliate, then until such time as Company
can pay the Capitation Amounts under Attachment A with respect to such
Affiliate, all the terms of this Agreement apply with respect to Home
Health Services relating to such Affiliate, with the exception that payment
to Network relating to such Affiliate shall be in accordance with
Attachment K, on substantially equivalent economic terms as if such payment
had been in accordance with Attachment A hereof.
23. NEW YORK IPA AGREEMENT. The Parties acknowledge and agree that all payments
due to Network pursuant to section 5 and Attachment A hereof with respect
to Network's services and Home Health Services rendered to or for Network
Members enrolled in Company's New York HMO Affiliate, shall be made by
Company in accordance with the terms herein and shall be paid directly to
Network's New York affiliate, Coram Independent Practice Association, Inc.,
or its lawful designee ("IPA") (at the address specified in advance by
Network to Company), in complete satisfaction of Company's payment
obligations with respect to such Network Members hereunder. The parties
acknowledge and agree that, notwithstanding anything to the contrary
herein, or notwithstanding anything pursuant to the New York IPA Agreement
in Attachment M between IPA and Company or by virtue of New York state law
or regulation, the Parties shall be obligated under this Agreement as if
such new York IPA Agreement did not exist. The Parties shall conform the
form of agreement in Attachment M to be consistent with this Agreement in
all material respects, to the extent that such modifications do not require
filing such agreement with the New York Department of Health.
24. SURVIVAL OF TERMS. Except as expressly provided otherwise herein, the
rights and obligations in this Agreement shall survive termination or
expiration of this Agreement.
25. DEFINITIONS
When used in this Agreement, all capitalized terms shall have the following
meanings:
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<PAGE> 25
A. Affiliate. means, when used with respect to Company or Network, any
corporation, partnership or other legal entity directly or indirectly
owned or controlled by, or which owns or controls, or which is under
common ownership or control with Company or Network, as the case may
be.
B. Company Competitor means, for the purposes of sections 8.B, 8.C(1) and
8.C(2), and only for the purposes of sections 8.B, 8.C(1) and 8.C(2),
an entity that operates a health maintenance organization or other
entity engaged in the business of insurance or benefits management
programs or services, except that such term for such sections does not
refer to an entity whose primary business is the provision and/or the
provision and arranging for the provision of health care services.
C. Geographic Area shall have the meaning ascribed to such term in the
description of "Category II" of the Performance Standards hereof.
D. HMO Based Plans. means those Company underwritten health benefit Plans
issued pursuant to Company's applicable state HMO license, which
include the following: Company HMO, Medicare Risk and Point of Service
(including but not limited to Company's "QPOS") products.
E. Home Health Network. means Network's network of home health providers
organized to provide or arrange for the provision of Home Health
Services to patients.
F. Home Health Services. Those Medically Necessary services which are to
be provided to Network Members under the terms and conditions of the
group master contract or insurance policy for the applicable Plan and
which are listed on Attachment A. When used with respect to individuals
not Network Members, such term is intended to describe those services
described in Attachment A.
G. Medically Necessary Services shall be as defined in the group master
contract or insurance policy for the applicable Plan.
H. Member. A person who is currently enrolled in a Plan.
I. NCQA. The National Committee for Quality Assurance, its successor or
such other health care accrediting organization designated by Company
and approved by Network in writing.
J. Network Affiliated Provider. A Home Health Services provider or
facility employed or owned or controlled by the Network or other entity
affiliated with the Network in the delivery of Home Health Services and
who is also a Participating Provider. A list of these providers is
provided in Attachment "B".
K. Network Associated Provider. A Home Health Services provider or
facility involved in the delivery of Home Health Services which is
under contract with Network to provide or arrange for the provision of
Home Health Services and who is also a Participating Provider.
L. Network Member Shall mean those Members enrolled in Company's HMO-based
Plans not serviced by an IDS which is at risk for providing the Home
Health Services, and excluding those Members on the Aetna Health Plan
of Southern New England license and subsequent Members acquired or
encumbered by Company as a result of an acquisition, merger or other
transaction imposing an obligation inconsistent with the Network Member
arrangement under this Agreement, after the Effective Date.
M. Network Provider. A Network Affiliated Provider or a Network Associated
Provider.
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<PAGE> 26
N. Participating Provider. Any Network Provider who has entered into and
continues to have a current valid contract with Company to provide Home
Health Services to Members. Such Providers may also be referred to
herein as "Network Providers", as such term is defined herein.
O. "Payment Fund" means that fund, as described in Attachment A, for the
purpose of providing Company a source (but not an exclusive source) for
obtaining reimbursement for the Total Company Direct Payments.
P. Performance Standard or Performance Standards. Those standards
identified in Attachment G hereof.
Q. Plan. Each health benefit plan offered, issued or administered by
Company.
R. "PMPM" means per Member per month.
S. "PMPM Payment Rates" means the PMPM amounts specified in Attachment A
and subject to adjustments or modifications as set forth in Attachment
"A" in accordance with the terms of this Agreement.
T. Regions means Company's Northeast and Mid-Atlantic Regions, which
include all of Company's existing and future service areas in the
States of NY, NJ, PA, DE, CT, NH, MA and RI. Company's service areas in
the Regions as of the Effective Date include the following:
NY:
NJ:
PA:
DE: [List of Applicable Counties appears in Exhibit 1]
CT:
NH:
MA:
RI:
U. "Total Company Direct Payments" means, with respect to each calendar
year or partial calendar year hereunder and excluding the aggregate
payments made or credited by Company to Network at the PMPM Payment
Rates for the applicable period, the total payments made by Company to
any and all providers in respect of Home Health Services furnished to
Network Members after the Implementation Date for which Network is
financially responsible under this Agreement.
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