SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended Commission File Number
September 30, 1996 0-3415
STV GROUP, INCORPORATED
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1698231
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
205 West Welsh Drive, Douglassville, Pennsylvania 19518
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 385-8200
Securities registered pursuant to Section 12(b) of the Act: None
Name of each exchange on
Title of each class which registered
Common Shares ($1.00 par) NASDAQ
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, (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 (ss.229.405 of this chapter) 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.[ ].
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of November 25, 1996 is $1,424,512. (1)
The number of shares outstanding of the registrant's classes of common stock as
of November 25, 1996 is as follows:
Common Shares 1,821,246
DOCUMENTS INCORPORATED BY REFERENCE
Part I Part II Part III Part IV
(None) Annual Report Proxy Statement 1984, 1987, 1989, 1990
to Shareholders and Annual Re- 1991, 1992, 1993, 1994 and
for fiscal 1996 port to Share- 1995 Form 10-K; Registration
holders for Statement No. 2-88904
fiscal 1996
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(1) The rules of the Securities and Exchange Commission require that the
aggregate dollar amount of the voting stock set forth above equal the amount of
common shares outstanding, reduced by the amount of common shares held by
executive officers, directors and shareholders owning in excess of 10% of the
Company's common shares, multiplied by the last traded price on November 25,
1996. The information provided shall in no way be construed as an evaluation by
the Company of the market price of such common stock, nor shall it be construed
as an admission that any officer, director or 10% shareholder in the Company may
be deemed an affiliate of the Company and any such inference is hereby
disclaimed. The information provided is included solely for record keeping
purposes of the Securities Exchange Commission.
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PART I
ITEM 1. BUSINESS
STV Group, Inc. provides engineering and architectural consulting and
design services on a variety of projects for the federal government, local,
state and foreign governments and private industry. The Company is also pursuing
selected design/build projects. STV Group, Inc. consists of the following
wholly-owned subsidiaries: STV Incorporated, STV Architects, Inc., STV
Environmental, Inc., STV International, Inc., STV Surveying, Inc. and STV
Construction Services. STV and its subsidiaries are hereinafter collectively
referred to as the "Company".
The Company's projects frequently require the service of a firm with
diverse capabilities. For example, a particular project may require electrical
engineers, civil engineers, draftsmen and other professional personnel. Each of
STV Group, Inc.'s subsidiaries customarily staffs a particular project with
personnel from the respective firm's offices. Where appropriate, however,
multifirm project teams are formed with qualified professionals drawn from the
entire Company. Management believes that close cooperation among the STV Group,
Inc. subsidiaries, under its management, assures proper control and support for
all Company activities. As of September 30, 1996, the Company employed 982
people.
Services
The principal areas in which the Company provides services and the
approximate percentage of the Company's revenue attributable to each service
area are set forth below:*
Year Ended September 30,
1996 1995 1994
Architectural Engineering 25% 27% 27%
Civil, Highway, Bridge,
Airport and Port Engineering 33 35 36
Defense Systems Engineering 4 5 4
Industrial Process Engineering 1 2 2
Transportation Engineering 35 29 28
Other Engineering Services 2 2 3
* The Company does not record revenue data according to each service area.
However, to provide an approximation of the revenue attributable to each
service area, the Company has analyzed contract revenue in the fiscal year
according to its principal service area. The aggregate revenue each year of
these contracts is at least 75% of the consolidated revenue for these fiscal
years.
Architectural Engineering
Architectural engineering generally involves consulting and design
services, as well as construction inspection services, for the construction of
commercial, industrial and governmental
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buildings, medical and educational facilities, laboratories, recreational,
religious and cultural centers, military installations, penal institutions, and
public utility facilities. As part of its services, the Company has designed and
developed systems for heating, ventilation, cooling, refrigeration, fire
protection, lighting, power generation and distribution and communications. In
addition, the Company has performed energy conservation audits and has
recommended and designed programs, including computerized control programs for
multi-building complexes, for the conservation of fuel and electrical energy.
Civil, Highway, Bridge, Airport and Port Engineering
This area of engineering generally involves consulting and design
services for the construction of highways (including interchange ramps and
secondary roads), bridges, airports and marine ports. Services performed by the
Company have included site selection and development (including economic
evaluations and feasibility reports), design and development of specifications,
and construction inspection. As part of these services, the Company has designed
lighting, toll and service facilities, drainage and erosion control systems, and
has performed mapping and landscaping, hydraulic and hydrologic studies, soils
engineering, traffic studies and surveys. In addition, the Company has designed
and inspected the construction of airport terminals, runways, aircraft
maintenance hangars, fuel systems, control towers and marine ports.
Defense Systems Engineering
Defense systems engineering involves consulting and design services for
the development of equipment and special hardware for the Department of Defense.
Services performed by the Company have included the design, development and
testing for systems relating to naval aircraft, weapons systems, aircraft
carriers, support ships, land-based operations and support missions. The Company
has prepared analytical support studies for aircraft carriers, support ships,
land-based operations and support missions, analytical support studies for
aircraft catapults and arresting systems, jet blast deflectors, shipboard
weapons, loading and transfer systems, ship-weapon compatibility, mobile weapon
loaders, munition trailers, launch and recovery television systems, lighting and
marking systems, parachutes, life rafts and personnel life-support systems. In
addition, the Company has prepared operation and maintenance manuals, technical
reports, specifications and other documents describing equipment and hardware.
The Company has the capacity to provide all of the services necessary to prepare
these publications, including layout, artwork composition, photography and
reproduction.
Industrial Process Engineering
This area involves consulting and design services for the development
of various manufacturing equipment and process systems. Services performed by
the Company have included technical analyses, feasibility studies, plant layouts
and machinery and construction inspection services. The Company has provided
these services in connection with systems for the manufacture of paper,
plastics, bulk chemicals, flooring, steel, rubber, telephone equipment,
television sets, ammunition, foods and automotive production equipment. In
addition, the Company has provided
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services for various waste-to-energy engineering projects such as municipal and
industrial incinerators designed to convert various forms of waste into
marketable energy and for various environments, sanitary and water pollution
control projects, including water supply systems, storm and sanitary sewage
collection systems.
Transportation Engineering
Transportation engineering involves consulting and design services, as
well as construction supervision services, for various transportation
facilities, including the planning and design of track, terminals, stations,
yards and shops for the railway industry. This area also involves evaluation and
inspection of rolling stock for intercity rail lines, light rail, commuter line
and urban mass transit systems and design and construction inspection of
maintenance and storage facilities.
Design Build
This area involves the joint and simultaneous design and construction
of a project under a single contract with an owner. Projects could be for
complex transportation facilities, building design or rehab, and/or industrial
projects. In order to perform these projects, the Company will join with a
construction firm in order to provide the services to a client. The arrangement
with a contractor could be as a subcontractor, a joint-venture partner, or as
the prime contractor. Depending upon the type of arrangement with the owner and
the contractor, the Company may be responsible for ensuring the actual
construction of a project for a guaranteed price.
In November, 1996 the Company entered into an agreement with Bombardier
Corporation to provide the design and installation of three maintenance
facilities for new trainsets to be purchased by Amtrak for its Northeast
Corridor fleet.
Customers
The following table sets forth the percentage of contract revenues
derived from each of the following customers for the periods indicated:
Year Ended September 30,
1996 1995 1994
U.S. Government Contracts................. 14% 19% 22%
State and Local Government Contracts...... 56 50 49
Foreign Government Contracts.............. 2 2 1
Private Contracts......................... 28 29 28
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In fiscal years 1996, 1995, and 1994 the Company's business activities
in countries other than the United States accounted for approximately 4%, 4%,
and 5% of total revenues, respectively. Due to the fact that virtually all of
the Company's international business is funded through United States or
international development agencies, management believes that there are no
unusual risks attendant to obtaining payment for services rendered under its
foreign contracts.
Contracts
In recent years, many of the Company's contracts have been awarded on a
cost-plus, as opposed to a fixed-price, basis. Under cost-plus contracts, the
Company is reimbursed for its allowable costs (direct labor plus overhead rate)
and is paid a negotiated fixed fee. Under fixed-price contracts, the Company is
paid an agreed-upon price for services rendered. Under fixed-price contacts, the
Company bears any risk of increased or unexpected costs that may reduce its
profit or cause it to sustain a loss. The majority (approximately 75%) of the
Company's contracts are cost-plus contracts.
Government Contracts
Many of the government programs in which the Company participates as a
contractor may extend for several years but may be funded on an annual basis.
The Company's government contracts are subject to termination, reduction or
modification as a result of changes in the government's requirements or
budgetary restrictions. In addition, government contracts are subject to
termination at the convenience of the government. If a contract were to be
terminated for convenience, the Company would be reimbursed for its allowable
costs to the date of termination and would be paid a proportionate amount of the
stipulated profits or fees attributable to the work actually performed. To date,
no government agency has terminated for convenience any significant contracts
with the Company.
Under certain circumstances, the government can suspend or debar
individuals or firms from obtaining future contracts with the government. While
the Company has not experienced such a suspension or debarment and considers the
possibility of any suspension or debarment to be remote, any such suspension or
debarment would have a materially adverse effect upon the Company.
The books and records of the Company are subject to audits by a number
of federal, state and local government agencies, including the Defense Contract
Audit Agency. Such audits could result in adjustments to contract costs and
fees. To date, no material audit adjustments have been made in the Company's
contracts, although no assurances can be given that future adjustments will not
be required. All contract revenues are recorded in amounts which are expected to
be realized upon final settlement and the Company does not anticipate material
audit adjustments.
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Accounts Receivable and Costs and Estimated Profits of Uncompleted Contracts in
Excess of Related Billings
Accounts receivable and costs and estimated profits of uncompleted
contracts in excess of related billings represented 87% and 83% of total assets
as of September 30, 1996 and 1995, respectively. Accounts receivable are
comprised of billed receivables while costs and estimated profits of uncompleted
contracts in excess of related billings are essentially unbilled receivables.
Unbilled receivables represent payment obligations for which invoices have not
or cannot be presented until a later period. The reasons for which invoices are
not presented may include normal invoice preparation lag, lack of billable
documents to be supplied by the client, and excess of actual direct and indirect
costs over amounts currently billable under cost reimbursement contracts to the
extent they are expected to be billed and collected. The financing of
receivables requires bank borrowings and the payment of associated interest
expense. Interest expense is a business expense not permitted as a reimbursable
item of cost under any government contracts.
Backlog
Backlog represents the value of existing contracts less the portion of
such contracts included in revenues on the basis of percentage-of-completion.
The Company's backlog for services as of September 30, 1996 and 1995 was
approximately $130,000,000 and $129,000,000, respectively. The Company's backlog
includes anticipated pass through cost such as reimbursement for travel,
purchase of supplies and sub-contracts. Over the last three years, pass through
costs, as a percent of total revenues, have been 24.2% in 1996, 22.2 in 1995,
and 26.5% in 1994.
A majority of the Company's customer orders or contract awards and
additions to contracts previously awarded are received or occur at random during
the year and may have varying periods of performance. The comparison of backlog
amounts on the same date in successive years is not necessarily indicative of
trends in the Company's business or future revenues.
The major component of the Company's operating costs are payroll and
payroll-related costs. Since the Company's business is dependent upon the
reputation and experience of its personnel and adequate staffing, a reasonable
backlog is important for the scheduling of operations and for the maintenance of
a fully staffed level of operation.
Competition
The Company has numerous competitors in all areas in which it does
business. Some of its competitors are large, diversified firms having
substantially greater financial resources and larger technical staffs than the
Company. It is not possible to predict the extent of competition which the
Company will encounter in the future because of changing customer requirements
in terms of types of projects and technological developments. It has been the
Company's experience that the principal competitive factors for the type of
service business in which the Company engages are a firm's demonstrated ability
to perform certain types of projects, the client's own previous experience with
the competing firms, a firm's size and financial condition, and the cost of the
particular proposal.
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It is Management's belief that the diversified scope of the services
offered by the Company is a positive competitive factor. Among other things, the
wide range of expertise which the Company possesses permits it to remain
competitive in obtaining federal government contracts despite shifts in federal
spending emphasis. Management believes that the national and international scope
of the Company is a positive factor in attracting and retaining clients which
have the need for engineering services in different regions of the country and
the world.
Marketing
Marketing activities are conducted by key operating and executive
personnel, including specifically assigned sales personnel, as well as through
professional personnel who maintain existing and develop new client
relationships. The Company's ability to compete successfully in the industry is
largely dependent on aggressive marketing, the development of information
regarding client requirements, the submission of responsive cost-effective
proposals and the successful completion of contracts. Information concerning
private and governmental requirements is obtained during the course of contract
performance, from formal and informal briefings, from participation in
activities of professional organizations, and from literature published by the
government and other organizations.
Personnel
As of September 30, 1996, the Company had 982 employees, of whom 864
were engaged in engineering and architectural services, 87 were engaged in
administration and 31 in marketing.
Because of the nature of services provided, many employees are
professional or technical personnel having specialized training and skills,
including engineers, architects, analysts, management specialists, technical
writers and skilled technicians. Although many of the Company's personnel are
highly specialized in certain areas the Company is not currently experiencing
any material difficulty in obtaining the personnel it requires to perform under
its contracts. Management believes that the future growth and success of the
Company will depend, in part, upon its continued ability to retain and attract
highly qualified personnel. The Company believes its employee relations to be
good.
Environmental Compliance
The Company's facilities are subject to federal, state and local
authorities environmental control regulations. The Company believes it is in
compliance with these numerous regulations and that it is not exposed to any
material liability as it relates to contamination of the environment. To date,
compliance with these environmental regulations has not had a material effect on
the Company's earnings nor has it required the Company to expend significant
capital expenditures.
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Executive Officers of the Registrant
Position with STV Group, Inc. Business
Name Age Experience During the Past 5 Years
---- --- ------------------------------------
Michael Haratunian (1) 63 Chairman of the Board and Chief Executive
Officer of STV Group, Inc.
Dominick M. Servedio (2) 56 Director, President and Chief Operating
Officer of STV Group, Inc. and President
and Chief Operating Officer of STV
Incorporated
Frank E. Lyon, Jr. (3) 68 Senior Vice President of STV Incorporated
W. A. Sanders II (4) 49 Senior Vice President of STV Incorporated
Peter W. Knipe (5) 47 Secretary/Treasurer of STV Group, Inc.
_______________
(1) Mr. Haratunian has been associated with the Company continuously since 1972
in various capacities and was appointed President of Seelye, Stevenson,
Value & Knecht, Inc. in 1977 and Director and Executive Vice-President of
Engineering of STV Group, Inc. in 1981 and assumed the Presidency of STV
Group, Inc. in 1988. He was appointed Chief Executive Officer in 1991 and
Chairman of the Board in 1993. Mr. Haratunian is a registered professional
engineer.
(2) Mr. Servedio joined the Company is 1977 as Vice President of Seelye,
Stevenson, Value & Knecht, Inc. and was appointed Executive Vice President
in 1982. He was appointed President of Seelye, Stevenson, Value & Knecht,
Inc. and Executive Vice President of STV Group, Inc. in 1988. Mr. Servedio
was elected President of STV Group, Inc. in 1993. Mr. Servedio is a
registered professional engineer.
(3) Mr. Lyon was the President and Chairman of the Board of Lyon Associates,
Inc. for more than five years prior to the acquisition of certain of its
assets by a subsidiary of the Company in 1983. Mr. Lyon currently is
President of the Company's Lyon Associates, Inc. subsidiary. Mr. Lyon is a
registered professional engineer.
(4) Mr. Sanders has been associated with the Company continuously since 1968 in
various capacities and was appointed Executive Vice President of Sanders &
Thomas in 1991. Mr. Sanders is a registered professional engineer.
(5) Mr. Knipe joined the Company in 1979, was appointed Controller in 1983 and
was elected Treasurer in 1987 and Secretary in 1993. In addition to his
position with the Company, he serves as a director and officer of certain
subsidiaries of the Company.
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ITEM 2. PROPERTIES
The Company's executive offices and a principal engineering office are
located in a modern 58,000 square foot building leased by the Company in
Douglassville, Pennsylvania, pursuant to a lease which expires in October 2011.
The Company leases office facilities in a number of other locations
both in the United States and overseas, at which it performs engineering and
architectural consulting and design services, including a facility of
approximately 55,000 square feet in New York, New York, pursuant to a 15 year
lease which expires in December, 2006.
The Company believes that its facilities are adequate to meet the
current and foreseeable needs of the Company. The Company does not expect to
experience any difficulty in securing additional space should that become
necessary.
ITEM 3. LEGAL PROCEEDINGS
The Company is the subject of various claims, legal actions and
complaints arising in the ordinary course of business. In most cases, the
Company is one of several named defendants or third-party defendants. In the
opinion of management, most of these matters are without merit or are of such a
nature or involve such amounts that an unfavorable disposition would not have a
material adverse effect on the financial condition of the Company.
For policy years beginning March 4, 1993, the Company's professional
liability insurance arrangement provides for an annual aggregate $5,000,000 of
coverage with a $250,000 deductible per occurrence on a claims made basis. For
the policy year beginning March 4, 1992, the Company's professional liability
insurance arrangement provided for an aggregate $5,000,000 of coverage. There
was a $500,000 deductible and a requirement to indemnify the insurer for an
additional aggregate $1,000,000. The Company had a similar arrangement for
professional liability coverage for the period October 1, 1986, to March 3,
1992, providing an aggregate $5,000,000 of professional liability coverage. The
Company has recognized the indemnity obligation by charges of $4,500,000 to
operations in prior years and the posting of a $1,000,000 letter of credit. In
addition to the professional liability coverage, the Company has general
liability insurance in excess of $10,000,000 per occurrence and in the
aggregate.
During 1992, the Company and its insurers settled a personal injury
lawsuit for $5,400,000, of which $2,700,000 was paid by the Company's
professional liability insurer from the funded indemnity and $2,700,000 by the
general liability insurer. There remains a declaratory judgement action pending
as to whether insurance coverage was to be provided under the previous general
liability policy or professional liability policy then in effect. In this
proceeding, the court has required that the limits of the Company's insured
coverage be reserved to pay this claim if the insurer is found liable. The
Company and its professional liability insurer believe that this matter should
be covered under its general liability policy in which case the $2,700,000 would
be repaid to the professional liability insurer to replenish the indemnity.
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In addition, in 1992 the Company's former professional liability
insurer was found liable for approximately $4,000,000 due to a previous
arbitration proceeding allegedly relating to an asset acquisition. The judgement
was reversed on appeal in 1994. If the Company's professional liability insurer
is found ultimately liable under both of these actions, the Company may be
required to indemnify the professional liability insurer to the extent of the
policy limit of $5,000,000 as described above. Such payments would constitute a
charge to operations in the year the determination is made. The Company and the
Company's professional liability insurer continue to deny liability and intend
to vigorously pursue defenses available to them.
The Company is also involved in various other litigation arising out of
the ordinary course of business, which may require the payment of additional
amounts. The Company's management believes that the final resolution of the
above legal matters will not have a material adverse effect on the Company's
financial statements.
If the outcome of all of the aforementioned litigation is adverse to
the Company and the Company is required to pay additional amounts, it could have
a material adverse effect on the earnings and financial condition of the Company
in the year such determination is made; however, management believes that the
final resolution of these legal matters will not have a material adverse effect
on the Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The information contained under the caption "Common Stock Market
Prices" from the Company's Annual Report to Shareholders for the fiscal year
ended September 30, 1996, is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information contained under the caption "Financial Highlights for
the Fiscal Year Ended September 30," 1992 through 1996 in the Company's Annual
Report to Shareholders for the fiscal year ended September 30, 1996 is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.
Results of Operation
The Company's contracts have been awarded on a cost-plus or fixed-price
basis. See Part I, Item 1, "BUSINESS - Contracts". As a service business, the
Company's profitability is directly affected by the degree to which its
professional staff is fully utilized on existing contracts.
Fiscal Year 1996 Compared to Fiscal Year 1995
Total revenues for the fiscal year ended September 30, 1996, increased
5.4 percent to $94,073,000. This is up from a .3 percent decrease in fiscal 1995
and up from a 2.4 percent increase in fiscal 1994. The increase in total
revenues in fiscal 1996 was mostly due to a 15.0 percent increase in subcontract
and procurement mainly in the transportation area. Revenues from U.S. government
contracts decreased 21.5 percent in fiscal 1996 as compared to fiscal 1995 and
13 percent as compared to fiscal 1994. This decrease is attributable to the
government's spending reduction, particularly in overseas infrastructure
projects. Operating revenues (total revenues excluding pass-through costs)
increased 2.7 percent to $71,271,000 compared to a 5.6 percent increase to
$69,397,000 in fiscal 1995 and a 4.9 percent increase in fiscal 1994. We
continue to see an increased demand for facilities and transportation
engineering. United States defense work has decreased slightly, but there is
continued demand for services in other areas of the U.S. government.
Pass-through costs, expressed as a percentage of total revenue,
increased to 24.2 percent in fiscal 1996 compared to 22.2 percent in fiscal 1995
compared to 26.5 percent in fiscal 1994. Costs will vary from year to year
depending on the need for specialty subconsultants and governmental subcontract
requirements.
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Cost of services, expressed as a percentage of operating revenues, was
89.2 percent in fiscal 1996, which is a decrease from the 89.3 percent in fiscal
1995, but is comparable to 89.2 percent in fiscal 1994. In fiscal 1996, costs
increased from $61,942,000 in fiscal 1995 to $63,557,000. This increase is due
primarily to increased labor expenses as a result of increased workload
commensurate with operating revenue increase.
General and administrative expense, expressed as a percentage of
operating revenues, decreased to 6.9 percent in fiscal 1996 from 7.1 in 1995 and
1994. Total general and administrative costs also decreased .8 percent in fiscal
1996 from $4,952,000 to $4,912,000.
Interest, expressed as a percentage of operating revenues, was 2.1
percent in fiscal 1996 and 2.2 percent in fiscal 1995 and 1994. Interest rates
decreased in fiscal 1996, and bank loans were lower due to a more efficient use
of cash.
The Company had a pre-tax profit of $1,301,000. Income tax expense was
54 percent of pre-tax income compared to 58 percent in fiscal 1995 and 45
percent in fiscal 1994. The variance in the rate is due to reduction in
non-deductible expenses as a percent of pre-tax income.
In the fourth quarter, the Company had a pre-tax profit of $483,000 as
compared to $286,000 in fiscal 1995 and $144,000 in fiscal 1994. The increase in
pre-tax profit from fiscal 1995 is due to a decrease in employee-related costs
and interest expense.
Fiscal Year 1995 Compared to Fiscal Year 1994
Total revenues for the fiscal year ended September 30, 1995 decreased,
0.3% to $89,232,000. This is down from a 2.4% increase in fiscal 1994 and a
15.3% increase in fiscal 1993. The reduction in total revenues in fiscal 1995
was the result of a 16.4% reduction in subcontract and procurement mainly in the
transportation area. Revenues from U. S. Government contracts decreased 13% in
fiscal 1995 as compared to fiscal 1994 and 15.8% as compared to fiscal 1993.
This decrease is attributable to the Government's spending reduction,
particularly in overseas infrastructure projects. Operating revenues (total
revenues excluding pass-through costs) increased 5.6% to $69,397,000 compared to
a 4.9% increase in fiscal 1994 and a 13.5% increase in fiscal 1993. While there
was a reduction in the international region, we continue to see an increased
demand for facilities and transportation engineering. United States defense work
has decreased slightly but there is continued demand for services in other areas
of the U. S. Government.
Pass-through costs, expressed as a percentage of total revenue,
decreased to 22.2% in fiscal 1995 compared to 26.5% in fiscal 1994 and 28.2% in
fiscal 1993. Costs will vary from year to year depending on the need for
specialty subconsultants and governmental subcontract requirements.
Cost of services, expressed as a percentage of operating revenues, was
89.3% in fiscal 1995, which is comparable to the 89.2% in fiscal 1994, but is an
increase from the 88.0% in fiscal 1993. In fiscal 1995, costs increased from
$58,614,000 in fiscal 1994 to $61,942,000. This increase is due to increased
international marketing efforts and increased labor and labor-related expenses
due to
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increased workload. The increase in fiscal 1994 was due in part to a transfer of
certain costs from general and administrative expense to cost of services.
Without this transfer, cost of services expressed as a percentage of revenue was
comparable to fiscal 1993 at 87.7%. Total costs in fiscal 1994 (excluding the
transfer of $1.0 million) increased to $57,614,000 from $55,173,000. This
increase was due to increased post retirement benefit costs, increased
international marketing efforts and increased labor and labor-related expenses
due to an increased workload.
General and administrative expense, expressed as a percentage of
operating revenues, was 7.1% in fiscal 1995 and 1994 and decreased from 8.3% in
fiscal 1993. Total general and administrative costs increased 6.3% in fiscal
1995 from $4,657,000 to $4,952,000. This increase is due mainly to an increase
in legal fees. The decrease in fiscal 1994 was due to the above mentioned
reclassification of costs from general and administrative expense to cost of
services.
Interest, expressed as a percentage of operating revenues, was 2.2% in
fiscal 1995 and 1994 and decreased from 2.3% in fiscal 1993. While interest
rates increased in fiscal 1995, the average amount of the bank loan outstanding
decreased by 7% as compared to fiscal 1994.
The company had a pre-tax profit of $949,000. Income tax expense was
58% of pre-tax income compared to 45% in fiscal 1994 and 46% in fiscal 1993. The
variance in the rate is due to an increase in non-deductible expenses and the
recognition of income in the various states in which we do business and their
tax rates.
In the fourth quarter the Company had a pre-tax profit of $286,000 as
compared to $144,000 in fiscal 1994 and $152,000 in fiscal 1993.
Fiscal Year 1994 Compared to Fiscal Year 1993
Total revenues for the fiscal year ended September 30, 1994 increased
2.4% to $89,465,000. This is down from a 15.3% increase in fiscal 1993 and a
6.4% increase in fiscal 1992. The increased revenues in fiscal 1994 were the
result of increased demand for transportation engineering services. In fiscal
1993, U. S. government contracts accounted for 47 percent of the total increase
in revenues as compared to fiscal 1992, while revenues for U. S. government
contracts were comparable in fiscal 1994 versus fiscal 1993. The balance of the
fiscal 1993 increase was also due to increased demand for transportation
engineering services. Operating revenues (total revenues excluding pass-through
costs) increased 4.9% to $65,746,000 compared to a 13.5% increase in fiscal 1993
and a 1.6% decrease in fiscal 1992. The increase in operating revenues reflects
continued demand for transportation engineering services as well as the results
of increased marketing effort. While there have been decreases in the U.S.
Government spending for defense, there has been significant demand for services
in other departments of the U. S. government as well as demand by non U. S.
government clients for transportation and infrastructure.
Pass-through costs, expressed as a percentage of total revenue,
decreased to 26.5% in fiscal 1994 compared to 28.2% in fiscal 1993 and 27.1% in
fiscal 1992. Costs will vary from year to year depending on the need for
specialty subconsultants and governmental subcontract requirements.
-12-
<PAGE>
Cost of services, expressed as a percentage of operating revenues,
increased to 89.2% in fiscal 1994 from 88.0% in fiscal 1993 and decreased from
89.6% in fiscal 1992. The increase in fiscal 1994 is due in part to a transfer
of certain costs from general and administrative expense to cost of services.
Without this transfer, cost of services expressed as a percentage of revenue
would be comparable to fiscal 1993 at 87.7%. Total costs (excluding the transfer
of $1.0 million) increased from $55,173,000 to $57,614,000. This increase is due
to increased post retirement benefit costs, increased international marketing
efforts and increased labor and labor related expenses due to an increased
workload. The decrease in fiscal 1993 from fiscal 1992 was due to an increase in
revenue and the Company's cost containment strategy.
General & administrative expense, expressed as a percentage of
operating revenues, decreased to 7.1% in fiscal 1994 from 8.3% in fiscal 1993
and 8.9% in fiscal 1992. This reduction was due to the above mentioned
reclassification of costs from general and administrative expense to cost of
services and without this reclassification, would have been comparable to
previous years at 8.6%.
Interest, expressed as a percentage of operating revenues, decreased to
2.2% in fiscal 1994 from 2.3% in fiscal 1993 and 2.5% in fiscal 1992. This
decrease was the result of the increase in revenues.
The company had a pre-income tax profit of $1,028,000 due to the
increase in revenues. Income tax expense was 45% of pre-tax income compared to
46% in fiscal 1993 and an income tax benefit of 37% in fiscal 1992. Included in
the 1994 tax rate was a favorable adjustment of $45,000 due to the adoption of
FASB 109. The variance in the rate is primarily due to the recognition of income
in the various states in which we do business and their tax rates.
In the fourth quarter the Company had a pre-tax profit of $144,000.
This profit was impacted by higher than anticipated legal expenses.
Liquidity, Capital Resources and Financing Agreements.
Cash provided in operating activities was $4,268,000 in fiscal 1996
compared to cash provided in operating activities of $1,109,000 in fiscal 1995.
This increase was due mainly to an increase in billings in excess of related
costs and an increase in accounts payable and other current liabilities. Working
capital increased $501,000 to $8,721,000 in fiscal 1996 compared to a $1,036,000
increase in 1995 and a $554,000 increase in 1994. Investing activities slowed to
$357,000 for the continued purchase of computer hardware and software compared
to $951,000 in 1995. Financing activities consisted of a $3,803,000 net
reduction in short-term borrowing due to the previously mentioned increase in
billings in excess and accounts payable and other current liabilities.
Capital resources available to the Company include an existing line of
credit for working capital. The current line is a maximum of $16.5 million based
on accounts receivable and work-in-progress, of which approximately $5,900,000
is currently available. An agreement is being negotiated whereby the line of
credit may be reduced. The line of credit is also a demand note and requires the
Company to maintain certain financial covenants. To date, the Company has
maintained these
-13-
<PAGE>
covenants and believes that its working capital and existing or reduced line of
credit are adequate to meet current fiscal year requirements. If the Company
should fail to meet these covenants or should the bank demand payment on the
note, there would be a material adverse financial impact. The Company is not
aware of any reason for the bank to demand payment and does not expect that it
would do so in the future. The Company is planning to continue its program of
purchasing computer-assisted design and drafting equipment.
In the long term the Company relies on the ability to generate
sufficient cash flows from operating activities to fund investing and financing
requirements. If demand for services should increase sharply, additional sources
of financing may be required.
The Company is currently involved in two lawsuits, Skinner and American
Continental Properties. If the outcome of these lawsuits is adverse, the Company
may be required to pay substantial deductibles or indemnification. The Company
believes that it will be able to finance any adverse finding through the use of
an income tax carryback of the resulting loss in combination with the line of
credit and existing resources. The Company is vigorously pursuing its defenses,
and management believes the final resolution of these legal matters will not
have a material adverse effect on the Company's financial statements.
Impact of Inflation
Because the Company's business is essentially the supplying to
customers of the expertise of its employees, there are certain factors which
significantly reduce the impact of inflation. One such factor is that the
Company has a comparatively small investment in property and equipment as a
percentage of total assets. In addition, a substantial percentage of the
Company's contracts are under cost reimbursement contract provisions or
fixed-price contracts which include inflation assumptions when bid upon.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The report of the independent auditors and consolidated financial
statements included in the Company's Annual Report to Shareholders for the year
ended September 30, 1996, are included in Part IV, Item 14 of this Report.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
-14-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the caption "Election of Directors" in
the company's 1996 Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the caption "Executive Compensation" in
the Company's 1996 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information contained under the caption "Security Ownership" in the
Company's 1996 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN TRANSACTIONS AND RELATED TRANSACTIONS.
The information contained under the caption "Certain Transactions" in
the Company's 1996 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K.
(A) The following documents are filed as part of this report;
(1) Financial Statements:
Report of Independent Auditors
Consolidated Balance Sheets - September 30, 1996 and
1995
Consolidated Statements of Income - Years ended
September 30, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity Years
ended September 30, 1996, 1995 and 1994
Consolidated Statements of Cash Flows - Years ended
September 30, 1996, 1995 and 1994
-15-
<PAGE>
Notes to Consolidated Financial Statements -
September 30, 1996
(2) Financial Statements schedules required by Item 8.
All schedules for which provision is made in the
applicable accounting regulations of the
Securities and Exchange Commission are not
required under the related instructions or are
inapplicable, and therefore have been omitted.
(B) Reports on Form 8-K.
There were no reports on Form 8-K for the fiscal year ended
September 30, 1996.
(C) Exhibits filed pursuant to Item 601 of Regulation S-K:
****** 3.1 Amended and restated Articles of Incorporation of the Company.
****** 3.2 By-Laws of the Company, as amended.
*** 3.3 Amendment to Section 1.04 of the By-Laws of the Company.
* 4.0 Specimen Common Stock Certificate of the Company.
* 10.2 Loan Agreement, undated, between the Company and Richard L.
Holland, relating to the purchase of 48,779 shares of Common
Stock.
*** 10.3 Asset Acquisition Agreement, dated September 22, 1987, between
STV/WAI, Inc. and Michael Lynn Assoc., P.C. relating to the
acquisition by STV/Michael Lynn Associates, Inc. of certain assets
of Michael Lynn Assoc., P.C.
* 10.4 Lease, dated October 3, 1980, between the Company and Montco
Investors Realty Company, relating to the Company's executive and
engineering offices in Pottstown, Pennsylvania
* 10.5 Lease, dated August 30, 1983, between the Company and Montco
Investors Realty Company, relating to the addition to the
Company's offices in Pottstown, Pennsylvania and granting the
Company an option to extend its lease for such facility for two
additional five-year periods.
* 10.6 Lease, dated November 22, 1983, accompanying Workletter, dated
October 12, 1983, and letters (2) dated November 22, 1983 between
the Company and 225 Fourth Company, providing for the renovation
and use of office space at 225 Park Avenue South, New York, New
York.
-16-
<PAGE>
* 10.7 STV Engineers, Inc. Employee Stock Ownership Plan, dated January
7, 1982, and STV Engineers Employee Stock Ownership Plant Trust
Agreement, dated January 7, 1982, and Amendment No. 1 thereto,
dated May 14, 1982.
* 10.8 STV Revised Pension Plan.
* 10.9 STV, Inc. Money Purchase Pension Plan.
10.10 Officers' and Directors' Liability Policy.
*** 10.11 Employment Agreement of Richard L. Holland
**** 10.12 Stipulation of Amendment to Employee Stock Ownership Plan
effective October 1, 1984.
*** 10.13 Loan Agreement, dated February 28, 1986, between the Company and
First Pennsylvania Bank, N.A., relating to the Company's
$13,000,000 line of credit.
*** 10.14 Amendment, dated November 26, 1986, to the Loan Agreement between
the company and First Pennsylvania Bank, N.A., increasing the
limit of standby letters of credit in the Agreement to $3,500,000.
*** 10.15 STV Engineers, Inc. 1985 Stock Option Plan.
*** 10.16 Lease, dated January 27, 1986, and Amendments thereto, between
Company and 225 Fourth Company providing for the use of office
space at 233 Park Avenue, New York, New York.
*** 10.17 Amendment, dated May 28, 1987, between the Company and First
Pennsylvania Bank, N.A., decreasing the interest rate for short
term borrowings and the creation of a $1,500,000 term loan.
*** 10.18 Amendment, dated November 12, 1987, increasing the line of credit
to $17,000,000.
***** 10.22 Amendment, dated June 1, 1990 between the Company and First
Pennsylvania Bank, NA increasing the interest rate for short term
borrowings.
****** 10.26 Amendment dated September 30, 1991, between the company and
CoreStates Bank, N.A., decreasing the maximum amount of the line
of credit and increasing the charge for issuing letters of credit.
-17-
<PAGE>
******* 10.27 Lease extension dated March 13, 1992 between the Company and
225 Fourth Company relating to an extension of seven years,
four months for use of office space at 225 Park Avenue South,
New York, New York.
******* 10.28 Agreement effective January 1, 1992 relating to ACEC medical
and life insurance.
******* 10.29 Agreement dated August 29, 1991 relating to U. S. Healthcare
medical insurance.
********* 10.31 Employment Agreement of Dominick M. Servedio.
********* 10.32 Employment Agreement of Michael Haratunian.
********** 10.33 Amendment to the STV Group Incorporated Employee Stock
Ownership Plan
10.34 Lease, dated August 21, 1995, and Addendums thereto, between
the Company and Dame Enterprises, relating to the Company's
executive and engineering offices in Douglassville,
Pennsylvania.
10.35 Agreement effective July 1, 1996 with Corporate Health
Insurance Company providing Group Health Insurance - Custom
Plan.
10.36 Agreement effective December 1, 1996 with U. S. Healthcare
providing medical insurance.
11 Statement Re: Computation of Per Share Earnings.
13.1 "Common Stock Market Prices" from Company's Annual Report to
Shareholders.
13.2 "Financial Highlights for the Fiscal Year Ended September 30,"
1992 through 1996 from Company's Annual Report to
Shareholders.
21.1 Subsidiaries of the Company from Company's Annual Report to
Shareholders.
* Incorporated by reference from the Annual Report and Form 10-K for
the year ended September 30, 1984.
** Incorporated by reference from Registration Statement No. 2-88904.
*** Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1987.
-18-
<PAGE>
**** Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1989.
***** Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1990.
****** Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1991.
******* Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1992.
******** Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1993.
********* Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1994.
********** Incorporated by reference from Form 10-K and the Annual Report for
the year ended September 30, 1995.
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: December 30, 1996 STV GROUP, INCORPORATED
-------------------------
(Registrant)
By: /s/ Michael Haratunian
-------------------------
MICHAEL HARATUNIAN,
Chairman of the Board, Chief
Executive Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
/s/ Michael Haratunian December 30, 1996
- ------------------------------- Chairman of the Board,
MICHAEL HARATUNIAN Chief Executive Officer
and Director (Principal
Executive Officer)
/s/ Dominick M. Servedio December 30, 1996
- ------------------------------- President, Chief
DOMINICK M. SERVEDIO Operating Officer and
Director
/s/ Peter W. Knipe December 30, 1996
- ------------------------------- Secretary/Treasurer
PETER W. KNIPE (Principal Accounting
and Financial Officer)
/s/ Richard L. Holland
- ------------------------------- Director December 30, 1996
RICHARD L. HOLLAND
/s/ Harry Prystowsky
- ------------------------------- Director December 30, 1996
HARRY PRYSTOWSKY
/s/ Ray M. Monti
- ------------------------------- Director December 30, 1996
RAY M. MONTI
/s/ Maurice L. Meier
- ------------------------------- Director December 30, 1996
MAURICE L. MEIER
/s/ William J. Doyle
- ------------------------------- Director December 30, 1996
WILLIAM J. DOYLE
<PAGE>
FINANCIAL STATEMENTS
Index
Report of Independent Auditors 22
Consolidated Balance Sheets 23
Consolidated Statements of Stockholders' Equity 24
Consolidated Statements of Cash Flows 25
Notes to Consolidated Financial Statements 26
-21-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
STV Group, Incorporated
We have audited the accompanying consolidated balance sheets of STV Group,
Incorporated and Subsidiaries as of September 30, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended September 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of STV Group,
Incorporated and Subsidiaries as of September 30, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1996, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Reading, Pennsylvania
November 14, 1996
-22-
<PAGE>
CONSOLIDATED BALANCE SHEETS
STV Group and Subsidiaries.
<TABLE>
<CAPTION>
September 30
1996 1995
<S> <C> <C>
Assets
Current Assets:
Cash $ 28,000 $ 668,000
Accounts receivable 20,504,000 21,758,000
Costs and estimated profits of uncompleted
contracts in excess of related billings 14,290,000 12,976,000
Deferred tax benefit 180,000 165,000
Income taxes recoverable 0 486,000
Prepaid expenses and other current assets 1,577,000 1,888,000
----------- -----------
Total Current Assets 36,579,000 37,941,000
Property and equipment, net 1,314,000 1,883,000
Deferred tax benefit 1,369,000 1,026,000
Other assets 733,000 776,000
----------- -----------
Total Assets $39,995,000 $41,626,000
Liabilities and Stockholders' Equity
Current Liabilities:
Note payable $ 9,448,000 $13,251,000
Current maturity of long-term debt 1,000,000 1,340,000
Accounts payable 5,603,000 5,254,000
Billings on uncompleted contracts in
excess of related costs and estimated profits 4,318,000 3,344,000
Accrued payroll and related expenses 5,775,000 5,217,000
Accrued expenses 1,522,000 1,315,000
Income tax payable 192,000 0
----------- -----------
Total Current Liabilities 27,858,000 29,721,000
Long-Term Debt 1,795,000 2,021,000
Other liabilities 0 12,000
----------- -----------
Total Liabilities 29,653,000 31,754,000
Commitments and contingencies
Stockholders' Equity:
Preferred stock, authorized 2,000,000 shares,
no par, no shares issued or outstanding 0 0
Convertible preferred stock, cumulative,
par $1, authorized 2,000,000 shares,
issuable in series, $1.50 series,
no shares issued or outstanding 0 0
Common stock, par $1, authorized 6,000,000 shares 1,921,000 1,921,000
Capital in excess of par 3,003,000 3,003,000
Retained earnings 5,814,000 5,219,000
----------- -----------
10,738,000 10,143,000
Less: Treasury stock 271,000 271,000
Loans receivable from officers 125,000 0
----------- -----------
Total Stockholders' Equity 10,342,000 9,872,000
Total Liabilities and Stockholders' Equity $39,995,000 $41,626,000
</TABLE>
See notes to consolidated financial statements.
-23-
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
STV Group and Subsidiaries
<TABLE>
<CAPTION>
For the Year Ended September 30
1996 1995 1994
<S> <C> <C> <C>
Total revenues $ 94,073,000 $ 89,232,000 $ 89,465,000
Subcontract and procurement costs 22,802,000 19,835,000 23,719,000
Operating revenue $ 71,271,000 $ 69,397,000 $ 65,746,000
------------ ------------ ------------
Costs and expenses:
Costs of services $ 63,557,000 $ 61,942,000 $ 58,614,000
General and administrative 4,912,000 4,952,000 4,659,000
Interest 1,501,000 1,554,000 1,445,000
------------ ------------ ------------
$ 69,970,000 $ 68,448,000 $ 64,718,000
Income before income taxes $ 1,301,000 $ 949,000 $ 1,028,000
Income tax expense (706,000) (555,000) (465,000)
------------ ------------ ------------
Net income $ 595,000 $ 394,000 $ 563,000
Earnings per common share $ .32 $ .22 $ .32
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
STV Group and Subsidiaries
<TABLE>
<CAPTION>
Common Stock Treasury Stock
Capital in
Number excess of Retained Number
of shares Amount par earnings of shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance
September 30, 1993 1,842,972 $1,843,000 $2,681,000 $4,262,000 99,726 $ 271,000
Net income for the year 563,000
Balance
September 30, 1994 1,842,972 $1,843,000 $2,681,000 $4,825,000 99,726 $ 271,000
Net income for the year 394,000
Issuance of stock 78,000 78,000 322,000
Balance
September 30, 1995 1,920,972 $1,921,000 $3,003,000 $5,219,000 99,726 $ 271,000
Net income for the year 595,000
Balance
September 30, 1996 1,920,972 $1,921,000 $3,003,000 $5,814,000 99,726 $ 271,000
</TABLE>
See notes to consolidated financial statements.
-24-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
STV Group and Subsidiaries
<TABLE>
<CAPTION>
For the Year Ended September 30
1996 1995 1994
<S> <C> <C> <C>
Operating Activities
Net income $ 595,000 $ 394,000 $ 563,000
Adjustments to reconcile net income to
net cash provided by (used in) operating activities
Depreciation 997,000 1,015,000 836,000
Deferred income taxes (358,000) (165,000) (225,000)
Stock contribution to Employee
Stock Ownership Program (ESOP) -- 400,000 --
Interest in Joint Venture -- -- 2,000
Changes in operating assets and
liabilities
Accounts receivable 1,254,000 2,655,000 (3,254,000)
Costs and estimated profits of
uncompleted contracts in excess
of related billings and other current assets (1,003,000) (1,000) (149,000)
Accounts payable and other current liabilities 1,131,000 (2,533,000) 1,523,000
Billings on uncompleted contracts in excess
of related costs and estimated profits 974,000 (456,000) 390,000
Current income taxes 678,000 (200,000) 130,000
------------ ------------ ------------
Net cash provided by (used in)
operating activities $ 4,268,000 $ 1,109,000 $ (184,000)
Investing Activities
Purchase of property and equipment $ (338,000) $ (727,000) $ (827,000)
Purchase of software (19,000) (224,000) (46,000)
(Increase) decrease in other assets (40,000) 9,000 (23,000)
Loans receivable from officers (125,000) -- --
------------ ------------ ------------
Net cash used in investing
activities $ (522,000) $ (942,000) $ (896,000)
Financing Activities
Proceeds from line of credit and
long term borrowings $ 85,797,000 $ 84,412,000 $ 79,889,000
Principal payments on line of credit and
long term borrowings (90,183,000) (84,551,000) (78,987,000)
------------ ------------ ------------
Net cash (used in) provided by
financing activities $ (4,386,000) $ (139,000) $ 902,000
(Decrease) increase in cash (640,000) 28,000 (178,000)
Cash at beginning of year 668,000 640,000 818,000
Cash at end of year $ 28,000 $ 668,000 $ 640,000
</TABLE>
See notes to consolidated financial statements.
-25-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STV Group and Subsidiaries.
1. Significant Accounting Policies
Basis of Presentation
The Company and its subsidiaries consider themselves in a single line of
business: consulting engineering, architectural, surveying and related services.
The Company's clients consist primarily of various governmental agencies, with
an increasing presence in the private sector in geographic regions throughout
the United States.
Certain amounts in the 1994 and 1995 financial statements have been reclassified
to conform to their 1996 presentation.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its
subsidiaries, and the 50 percent interest in an architectural joint venture. All
significant intercompany transactions and balances have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Revenue Recognition
The Company uses the percentage-of-completion method of accounting for contract
revenues. Progress toward completion is measured on a contract-by-contract basis
using direct labor costs incurred to date as compared with estimated total labor
costs at completion. The asset, "Cost and estimated profits of uncompleted
contracts in excess of related billings," represents revenues recognized in
excess of amounts billed. The liability, "Billings on uncompleted contracts in
excess of related costs and estimated profits," represents billings in excess of
revenues recognized. Significant changes in contract terms affecting the results
of operations are recorded and recognized in the period in which the revisions
are determined.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, trade receivables, investments in U.S. treasury bills, trade
payables, and debt instruments. The book value of cash and cash equivalents,
trade receivables, U.S. treasury bills, and trade payables are considered to be
representative of their respective fair values. The carrying value of the
Company's long-term debt is comparable to fair value based on current rates and
terms, with the exception of the deferred compensa
-26-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
tion plan liability with interest imputed at 16 percent (See Note 11.) The fair
value of this liability discounted at 8 percent is estimated to be $1,382,000.
Depreciation
Depreciation is primarily on the straight-line method over the estimated useful
lives of the assets. Depreciation of assets recorded under capital leases is
included in depreciation expense. For income tax purposes, accelerated
depreciation methods are used by certain subsidiaries and deferred income taxes
are provided, when applicable.
New Accounting Standards
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. The
Company will adopt SFAS 121 in the first quarter of fiscal year 1997 and, based
upon the circumstances, does not believe the effect of adoption will be
material.
SFAS No. 123, "Accounting for Stock-Based Compensation," is effective for fiscal
years beginning after December 15, 1995. SFAS 123 provides companies with a
choice to follow the provisions of SFAS 123 in determining stock-based
compensation expense or to continue with the provisions of APB 25, "Accounting
for Stock Issued to Employees." The Company expects to continue to follow APB 25
in respect to its Stock Option Plan and will provide disclosures as required by
SFAS 123 in the September 30, 1997, notes to the financial statements.
2. Costs and Estimated Profits of Uncompleted Contracts in Excess of Related
Billings
Costs and estimated profits of uncompleted contracts at September 30, 1996, and
1995, respectively, are as follows:
1996 1995
Costs and estimated earnings on
uncompleted contracts $328,090,000 $294,418,000
Less billings to date 318,118,000 284,786,000
------------ ------------
$ 9,972,000 $ 9,632,000
Costs and estimated profits of uncompleted contracts are included in the
accompanying balance sheet under the following captions:
1996 1995
Costs and estimated profits of
uncompleted contracts
in excess of related billings $14,290,000 $12,976,000
Billings on uncompleted
contracts in excess of related
costs and estimated profits 4,318,000 3,344,000
----------- -----------
$ 9,972,000 $ 9,632,000
-27-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
Included in accounts receivable are retainages related to uncompleted contracts
in the amount of $3,230,000 in 1996 and $3,245,000 in 1995. The collection of
retainages generally coincides with final project acceptance.
3. Property and Equipment
Property and equipment, at cost, are as follows:
1996 1995
Land $ 54,000 $ 54,000
Equipment 5,895,000 5,616,000
Leased equipment 930,000 1,227,000
Furniture and
fixtures 2,673,000 2,334,000
Leased furniture
and fixtures 233,000 271,000
Leasehold
improvements 2,516,000 2,566,000
----------- -----------
$12,301,000 $12,068,000
Less: Accumulated
depreciation and
amortization 10,987,000 10,185,000
----------- -----------
$ 1,314,000 $ 1,883,000
4. Note Payable
The note payable on demand with the Company's bank is with interest at 1-1/2
percent above the prime rate and is secured by substantially all assets. The
weighted average interest rate was 9.9 percent and 10.2 percent in fiscal 1996
and 1995, respectively. The bank also provides letters of credit which incur a
charge of 2-1/2 percent of the face value. Currently, $1,140,000 letters of
credit are outstanding. The face value of the letters of credit and note payable
cannot exceed a maximum of $16,500,000 based on the accounts receivable and
contracts in progress.
An agreement with this bank contains restrictive covenants regarding additional
debt and stockholders' equity. The restrictions include maintaining a minimum
tangible net worth, a maximum total debt to tangible net worth ratio, and a
minimum working capital amount.
5. Income Taxes
The Company uses the liability method of accounting for income taxes required by
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes."
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of September 30, 1996, are
as follows:
-28-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
Deferred tax assets:
Vacation accruals $ 574,000
Depreciation 88,000
Deferred compensation 662,000
Litigation 284,000
Postemployment benefits 18,000
Postretirement medical benefits 314,000
----------
Total deferred tax assets 1,940,000
Deferred tax liabilities:
Retainage 391,000
----------
Total deferred tax liabilities 391,000
Net deferred tax assets $1,549,000
Significant components of the provision (benefit) for income taxes are as
follows:
1996 1995 1994
Current:
Federal $ 734,000 $ 520,000 $ 600,000
State 330,000 200,000 90,000
----------- ----------- -----------
Total current $ 1,064,000 $ 720,000 $ 690,000
Deferred:
Federal $ (239,000) $ (100,000) $ (172,000)
State (119,000) (65,000) (53,000)
----------- ----------- -----------
Total deferred $ (358,000) $ (165,000) $ (225,000)
Income tax
expense $ 706,000 $ 555,000 $ 465,000
A reconciliation of federal income taxes at the statutory rate to the Company's
income tax provision follows:
1996 1995 1994
Federal income
tax rate 34.0% 34.0% 34.0%
Non-deductible
expenses and other 9.2 14.6 7.0
State taxes, net of
federal tax effect 10.8 9.4 4.0
---- ---- ----
54.0% 58.0% 45.0%
The Company made income tax payments of $488,000, $1,014,000, and $881,000 in
1996, 1995, and 1994, respectively. The Company received income tax refunds of
$51,000 in 1996, $92,000 in 1995, and $225,000 in 1994.
6. Amounts per Common Share
Earnings per common share is based on the weighted-average number of shares
outstanding during the periods presented after giving effect to the potential
dilutive effect, if any, of the exercise of stock options. Earnings per common
share are based upon 1,873,000 shares in 1996, 1,832,000 shares in 1995, and
1,754,000 shares in 1994.
7. Commitments and Contingencies
For policy years beginning March 4, 1993, the Company's professional liability
insurance arrangement provides for an annual aggregate $5,000,000 of coverage
with a $250,000 deductible per occurrence
-29-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
on a claims made basis. For the policy year beginning March 4, 1992, the
Company's professional liability insurance arrangement provides for an aggregate
$5,000,000 of coverage. There was a $500,000 deductible and a requirement to
indemnify the insurer for an additional aggregate $1,000,000. The Company had a
similar arrangement for professional liability coverage for the period October
1, 1986, to March 3, 1992, providing an aggregate $5,000,000 of professional
liability coverage. The Company has recognized the indemnity obligation by
charges of $4,500,000 to operations in prior years and the posting of a
$1,000,000 letter of credit. In addition to the professional liability coverage,
the Company has general liability insurance in excess of $10,000,000 per
occurrence and in the aggregate.
During 1992, the Company and its insurers settled a personal injury lawsuit for
$5,400,000, of which $2,700,000 was paid by the Company's professional liability
insurer from the funded indemnity and $2,700,000 by the general liability
insurer. There remains a declaratory judgement action pending as to whether
insurance coverage was to be provided under the previous general liability
policy or professional liability policy then in effect. In this proceeding, the
court has required that the limits of the Company's insured coverage be reserved
to pay this claim if the insurer is found liable. The Company and its
professional liability insurer believe that this matter should be covered under
its general liability policy in which case the $2,700,000 would be repaid to the
professional liability insurer to replenish the indemnity.
In addition, in 1992 the Company's former professional liability insurer was
found liable for approximately $4,000,000 due to a previous arbitration
proceeding allegedly relating to an asset acquisition. The judgement was
reversed on appeal in 1994. If the Company's professional liability insurer is
found ultimately liable under both of these actions, the Company may be required
to indemnify the professional liability insurer to the extent of the policy
limit of $5,000,000 as described above. Such payments would constitute a charge
to operations in the year the determination is made. The Company and the
Company's professional liability insurer continue to deny liability and intend
to vigorously pursue defenses available to them.
The Company is also involved in various other litigation arising out of the
ordinary course of business, which may require the payment of additional
amounts. The Company's management believes that the final resolution of the
above legal matters will not have a material adverse effect on the Company's
financial statements.
The Company has noncancellable lease agreements for the use of office space and
equipment. These agreements expire on varying dates and in some instances
contain renewal options. In addition to the base rental costs, occupancy lease
agreements generally provide for rent escalations resulting from increased
assessments for real estate taxes and other charges. Future minimum lease
payments under noncancellable leases (excluding automobile leases) with
remaining terms of more than one year are due as follows:
-30-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
Capital Leases Operating Leases
1997 $ 555,000 $ 2,987,000
1998 $ 228,000 $ 2,453,000
1999 $ -- $ 2,375,000
2000 $ -- $ 1,920,000
2001 $ -- $ 1,771,000
Thereafter $ -- $10,741,000
Total minimum
lease payments $ 783,000 $22,247,000
Less amount
representing interest $ 56,000
Present value of
net minimum
lease payments $ 727,000
Rental expense under operating leases amounted to $2,892,000, $2,705,000, and
$2,713,000 in 1996, 1995, and 1994, respectively.
8. Stock Plans
On October 1, 1981, the Company initiated an Employee Stock Ownership Plan
(ESOP) which covers substantially all of its employees. Contributions to the
plan are based on a percentage of eligible salaries. The total retirement
expense for the years 1996, 1995, and 1994 was $1,002,000, $989,000, and
$918,000, respectively. The liability is funded through either the issuance of
shares of Company stock (at fair market value on date of issuance) or a cash
payment for future stock purchases. The Company has funded the 1996 contribution
with cash payments throughout 1996. At September 30, 1996, 1,240,000 shares of
Company stock are held by the ESOP and are included in the earnings per share
computation.
The Company adopted the 1985 Stock Option Plan which reserves 300,000 shares of
its common stock for grants of options to officers and key employees. The plan
requires that option prices be at least equal to the fair market value of the
common stock at the date of grant. Options to purchase 190,000 shares at $4.12
to $5.12 per share have been granted.
A new Stock Option Plan was approved in fiscal 1996. Under this plan, 500,000
shares of common stock are reserved for issuance upon the exercise of the
options granted. No options under the plan have been granted.
On October 20, 1995, certain Company officers borrowed $125,000 from the Company
to purchase 25,000 shares of common stock from an outside director of the
Company. The five-year term loan, secured by a stock pledge agreement, is
payable at the term with interest at the Company bank borrowing rate currently
at 1-1/2 percent above prime rate. These loans have been recorded as a reduction
to stockholders' equity.
9. Postretirement Benefit Plan
The Company sponsors a defined benefit health care plan that provides
postretirement medical benefits to all current and retired officers and their
spouses upon attaining age 65, or age 55 with 10 years of service. The plan is
contributory, with retiree contributions adjusted annually, and contains other
cost-sharing features such as deductibles and coinsurance. The accounting for
the plan anticipates future cost-sharing changes to the written plan that are
consistent with the Company's expressed intent to increase the retiree
contribution rate annually for the expected general inflation rate for that
year.
-31-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
The following table presents the plan's status reconciled with amounts
recognized in the Company's balance sheets:
1996 1995
Accumulated postretirement
benefit obligation:
Retirees $ (305,000) $ (728,000)
Fully eligible active
plan participants (489,000) (1,071,000)
Other active
plan participants (375,000) (790,000)
----------- -----------
Accumulated postretirement
benefit obligation $(1,169,000) $(2,589,000)
Unrecognized
net gain (536,000) (250,000)
Unrecognized
transition obligation 951,000 2,220,000
----------- -----------
Accrued postretirement
benefit cost $ (754,000) $ (619,000)
Net periodic postretirement benefit costs include the following components:
1996 1995 1994
Service cost $ 43,000 $ 67,000 $ 70,000
Interest cost 119,000 185,000 187,000
Amortization of transition
obligation over 20 years 84,000 124,000 124,000
Unrecognized (gain) loss (49,000) -- --
--------- --------- ---------
Net periodic
postretirement
benefit cost $ 197,000 $ 376,000 $ 381,000
Effective December 1,1995, STV switched from an indemnity to a combination
indemnity and managed care program. The cost assumptions associated with a
managed care plan are less than with an indemnity program. The weighted-average
annual assumed rate of increase in the per capita cost of covered benefits
(i.e., health care cost trend rate) is 11.5 percent for 1996 (12 percent in
1995, 12.5 percent in 1994) and is assumed to decrease gradually to 6 percent in
2008 and remain at that level thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated post retirement benefit obligation as
of September 30, 1996, 1995 and 1994 by $133,000, $330,000 and $334,000,
respectively, and the aggregate of the service and interest cost components of
net periodic postretirement benefit cost for 1996 and 1995 by $20,000 and
$34,000, respectively.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.75 percent at September 30, 1996 and
1995.
10. Major Customers
The percentage of total revenues derived from contracts with the United States
government for fiscal years 1996, 1995 and 1994 were 14 percent, 19 percent and
22 percent, respectively.
-32-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
11. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Capital leases with various maturities, the latest to September 1998, rates
ranging from 8 percent to 11 percent, and monthly installments ranging
from $974 to $15,897 $ 727,000 $1,305,000
Deferred compensation liability payable in fixed monthly installments of
$12,000 through September 2006 with interest imputed at 16 percent 689,000 715,000
Executive deferred compensation liability for certain executives with annual
interest at 1 percent above prime rate as of November 1 payable
upon the termination of employment or approval of the Board of Directors 558,000 499,000
Deferred compensation liability payable in fixed monthly installments of
$6,000 through October 1996 with interest imputed at 20 percent 6,000 65,000
Supplemental executive retirement agreements for two current executives payable
in monthly installments upon retirement with interest imputed at 7 percent. (1) 360,000 193,000
Other 455,000 584,000
---------- ----------
2,795,000 3,361,000
Less: Current portion 1,000,000 1,340,000
---------- ----------
$1,795,000 $2,021,000
</TABLE>
(1) These agreements for two current executives provide for future cash payments
of $122,000 and $226,000 annually, based on salary at retirement commencing
September 2003 and September 2005, respectively. If maximum Company performance
goals are achieved, these amounts would be increased 20 percent starting in
September 2003, or at a prorated rate based on the levels of performance
achieved.
Interest paid during 1996, 1995, and 1994 amounted to $1,472,000, $1,517,000,
and $1,423,000, respectively.
The company incurred capital lease obligations of $ 0 in 1996, $804,000 in 1995,
and $613,000 in 1994 to acquire equipment.
Annual maturities of long-term debt are as follows:
Year ending September 30
1997 $1,000,000
1998 $ 254,000
1999 $ 42,000
2000 $ 49,000
2001 $ 57,000
Thereafter $1,393,000
-33-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
STV Group and Subsidiaries
12. Quarterly Results (unaudited)
(All dollar amounts omit 000 except per share data.)
Quarter Year
First Second Third Fourth
Revenue from services:
1996 $ 22,983 $ 23,502 $ 24,949 $ 22,639 $ 94,073
1995 $ 22,817 $ 21,092 $ 23,187 $ 22,136 $ 89,232
Operating revenue:
1996 $ 18,004 $ 17,788 $ 17,982 $ 17,497 $ 71,271
1995 $ 17,353 $ 17,519 $ 17,358 $ 17,167 $ 69,397
Gross profit:
1996 $ 1,883 $ 1,781 $ 1,979 $ 2,071 $ 7,714
1995 $ 1,885 $ 1,871 $ 1,835 $ 1,864 $ 7,455
Net income:
1996 $ 103 $ 71 $ 159 $ 262 $ 595
1995 $ 102 $ 95 $ 79 $ 118 $ 394
Earnings per share:
1996 $ .06 $ .04 $ .08 $ .14 $ .32
1995 $ .05 $ .05 $ .05 $ .07 $ .22
In the fourth quarter of 1996, STV made revised estimates to record the actual
results of certain expenses. The impact of these adjustments on fourth quarter
earnings was an increase of $.05 per share.
-34-
<PAGE>
EXHIBITS
Index
Exhibit 10.10 - Officers' and Directors' Liability Policy
Exhibit 10.34 - Lease, dated August 21, 1995, and Addendums thereto, between
the Company and Dame Enterprises, relating to the Company's
executive and engineering offices in Douglassville,
Pennsylvania.
Exhibit 10.35 - Agreement effective July 1, 1996 with corporate Health
Insurance Company providing Group Health Insurance - Custom
Plan.
Exhibit 10.36 - Agreement effective December 1, 1996 with U. S. Healthcare
providing medical insurance.
Exhibit 11 - Statement Re: Computation of Per Share Earnings
Exhibit 13.1 - "Common Stock Market Prices" from Company's Annual Report to
Shareholders
Exhibit 13.2 - "Financial Highlights for the Fiscal Year Ended September 30,"
1991 through 1995 from Company's Annual Report to Shareholders
Exhibit 21.1 - Subsidiaries of the Company from Company's Annual Report to
Shareholders
Exhibit 10.10
POLICY NUMBER:
483-12-48
RENEWAL OF:
444-97-15
[GRAPHIC OMITTED]
American International Companies
Directors, Officers and Corporate Liability Insurance Policy
[ ] AIU Insurance Company
[ ] Illinois National Insurance Company
[ ] American International South Insurance Company
[X] National Union Fire Insurance Company of Pitts., PA
[ ] Birmingham Fire Insurance Company of Penns.
[ ] National Union Fire Insurance Company of Louisiana
[ ] Granite State Insurance Company
[ ] New Hampshire Insurance Company
(each of the above being a capital stock company)
NOTICE: EXCEPT TO SUCH EXTENT AS MAY OTHERWISE BE PROVIDED HEREIN, THE COVERAGE
OF THIS POLICY IS GENERALLY LIMITED TO LIABILITY FOR ONLY THOSE CLAIMS THAT ARE
FIRST MADE AGAINST THE INSUREDS DURING THE POLICY PERIOD AND REPORTED IN WRITING
TO THE INSURER PURSUANT TO THE TERMS HEREIN. PLEASE READ THE POLICY CAREFULLY
AND DISCUSS THE COVERAGE THEREUNDER WITH YOUR INSURANCE AGENT OR BROKER.
NOTICE: THE LIMIT OF LIABILITY AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS SHALL
BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE. AMOUNTS INCURRED FOR LEGAL
DEFENSE SHALL BE APPLIED AGAINST THE RETENTION AMOUNT.
NOTICE: THE INSURER DOES NOT ASSUME ANY DUTY TO DEFEND; HOWEVER, THE INSURER
MUST ADVANCE DEFENSE COSTS PAYMENTS PURSUANT TO THE TERMS HEREIN PRIOR TO THE
FINAL DISPOSITION OF A CLAIM.
DECLARATIONS
ITEM 1. NAMED CORPORATION: STV GROUP, INC.
MAILING ADDRESS: 11 ROBINSON STREET
Pottstown, PA 19464
STATE OF INCORPORATION OF THE NAMED CORPORATION:
Pennsylvania
ITEM 2. SUBSIDIARY COVERAGE: any past, present or future Subsidiary of the Named
Corporation
ITEM 3. POLICY PERIOD: From: May 05, 1996 To: May 05, 1997
(12:01 A.M. standard time at the address stated in Item 1.)
ITEM 4. LIMIT OF LIABILITY: $6, 000, 000
aggregate for Coverages A and B combined (including Defense Costs)
<PAGE>
ITEM 5. RETENTION:
SECURITIES CLAIMS:
Judgments & Settlements (all coverages) None
Defense Costs (non-lndemnifiable Loss) None
Defense Costs (Coverage B(i) and
Indemnifiable Loss) $125.000
for Loss arising from
Claims alleging the same
Wrongful Act or related
Wrongful Acts (waivable
under Clause 6 in certain
circumstances)
OTHER CLAIMS:
Judgments, Settlements and Defense
Costs (non-Indemnifiable Loss) None
Judgments, Settlements and Defense
Costs (Indemnifiable Loss) $ 125,000
for Loss arising from
Claims alleging the same
Wrongful Act or related
Wrongful Acts
ITEM 6. CONTINUITY DATES:
A. Coverages A and B(ii): October 26, 1983
B. Coverage B(i): May 05, 1996
C. Coverages A and B:
Outside Entity Coverage (Per Outside Entity)
See Endorsement #62790
ITEM 7. PREMIUM: $ 95.000
ITEM 8. NAME AND ADDRESS OF INSURER ("Insurer"):
(This policy is issued only by the insurance company indicated below.)
National Union Fire Insurance Company of Pittsburgh, Pa.
70 Pine Street
New York. NY 10270
<PAGE>
IN WITNESS WHEREOF, the Insurer has caused this policy to be signed on the
Declarations Page by its President, a Secretary and a duly authorized
representative of the Insurer.
/s/ Elizabeth M. Tuck
SECRETARY PRESIDENT
AUTHORIZED REPRESENTATIVE
COUNTERSIGNATURE DATE COUNTERSIGNED AT
ROEHRS & COMPANY
INC
PO BOX 100
EXTON PA 19341
<PAGE>
American International Companies
DIRECTORS, OFFICERS AND CORPORATE LIABILITY INSURANCE POLICY
In consideration of the payment of the premium, and in reliance upon the
statements made to the Insurer by application forming a part hereof and its
attachments and the material incorporated therein, the insurance company
designated in Item 8 of the Declarations, herein called the "Insurer"-, agrees
as follows:
1. INSURING AGREEMENTS
COVERAGE A: DIRECTORS AND OFFICERS INSURANCE
This policy shall pay the Loss of each and every Director or Officer of the
Company arising from a Claim first made against the Directors or Officers
during the Policy Period or the Discovery Period (if applicable) and reported
to the Insurer pursuant to the terms of this policy for any actual or alleged
Wrongful Act in their respective capacities as Directors or Officers of the
Company, except when and to the extent that the Company has indemnified the
Directors or Officers. The Insurer shall, in accordance with and subject to
Clause 8, advance Defense Costs of such Claim prior to its final disposition.
COVERAGE B: CORPORATE LIABILITY INSURANCE
This policy shall pay the Loss of the Company arising from a:
(i) Securities Claim first made against the Company, or
(ii) Claim first made against the Directors or Officers,
during the Policy Period or the Discovery Period (if applicable) and reported
to the Insurer pursuant to the terms of this policy for any actual or alleged
Wrongful Act, but, in the case of (ii) above, only when and to the extent that
the Company has indemnified the Directors or Officers for such Loss pursuant
to law, common or statutory, or contract, or the Charter or By-laws of the
Company duly effective under such law which determines and defines such rights
of indemnity. The Insurer shall, in accordance with and subject to Clause 8,
advance Defense Costs of such Claim prior to its final disposition.
1
<PAGE>
2. DEFINITIONS
(a) "Claim". means:
(1) a written demand for monetary or non-monetary relief; or
(2) a civil, criminal, or administrative proceeding for monetary
or non-monetary relief which is commenced by:
(i) service of a complaint or similar pleading; or
(ii) return of an indictment (in the case of a criminal proceeding); or
(iii) receipt or filing of a notice of charges.
The term "Claim" shall include a Securities Claim; provided, however, that
with respect to Coverage B(i) only, Claim or Securities Claim shall not
mean a criminal or administrative proceeding against the Company.
(b) "Company" means the Named Corporation designated in Item 1 of the
Declarations and any Subsidiary thereof.
(c) "Continuity Date" means the date set forth in:
(1) Item 6A of the Declarations with respect to Coverages A and B (ii); or
(2) Item 6B of the Declarations with respect to Coverage B(i); or
(3) Item 6C of the Declarations with respect to Coverages A and B for
a Claim against an Insured arising out of such Insured serving as
a director, officer, trustee or governor of an Outside Entity.
(d) "Defense Costs" means reasonable and necessary fees, costs and expenses
consented to by the Insurer (including premiums for any appeal bond,
attachment bond or similar bond, but without any obligation to apply for
or furnish any such bond) resulting solely from the investigation,
adjustment, defense and appeal of a Claim against the Insureds, but
excluding salaries of Officers or employees of the Company.
2
<PAGE>
(e) "Director(s) or Officer(s)" or "Insured(s)" means:
(1) with respect to Coverages A and B (ii), any past, present or future
duly elected or appointed directors or officers of the Company. In the
event the Named Corporation or a Subsidiary thereof operates outside
the United States, then the terms "Director(s) or Officer(s)" or
"Insured(s)" also mean those titles, positions or capacities in such
foreign Named Corporation or Subsidiary which is equivalent to the
position of Director(s) or Officer(s) in a corporation incorporated
within the United States. Coverage will automatically apply to all new
Directors and Officers after the inception date of this policy;
(2) with respect to Coverage B(i) only, the Company.
(f) "Listed Event. means any of the following events:
(1) any event for which the Company has reported or is required to report
on Form 8-K filed with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934; or
(2) any restatement or correction of a Company financial statement
contained in any document filed with the Securities and Exchange
Commission; or
(3) any statement or disclosure made by or on the behalf of the Company
relating to a prior forecast, estimate or projection of the Company's
earnings or sales made by or on behalf of the Company, which statement
or disclosure represents a greater than 15% change from such prior
forecast, estimate or projection.
(g) "Loss. means damages, judgments, settlements and Defense Costs; however,
Loss shall not include civil or criminal fines or penalties imposed by
law, punitive or exemplary damages, the multiplied portion of multiplied
damages, taxes, any amount for which the Insureds are not financially
liable or which are without legal recourse to the Insureds, or matters
which may be deemed uninsurable under the law pursuant to which this
policy shall be construed.
Further, with respect to Coverage B only, Loss shall not include damages,
judgments or settlements arising out of a Claim alleging that the Company
paid an inadequate or unfair price or consideration for the purchase of
its own securities or the securities of a Subsidiary.
Notwithstanding the foregoing, with respect to Coverage B(i) only and
subject to the other terms, conditions and exclusions of the policy, Loss
shall include punitive damages (if insurable by law) imposed upon the
Company.
3
<PAGE>
(h) "No Liability" means with respect to a Securities Claim made against the
Insured(s): (1) a final judgment of no liability obtained prior to trial,
in favor of all Insureds, by reason of a motion to dismiss or a motion
for summary judgment, after the exhaustion of all appeals; or (2) a final
judgment of no liability obtained after trial, in favor of all Insureds,
after exhaustion of all appeals. In no event shall the term "No
Liability" apply to a Securities Claim made against an Insured for which
a settlement has occurred.
(i) "Outside Entity" means:
(1) a not-for-profit organization under section 501(c)(3) of the Internal
Revenue Code of 1986 (as amended); or
(2) any other corporation, partnership, joint venture or other
organization listed by endorsement to this policy.
(j) "Policy Period" means the period of time from the inception date shown in
Item 3 of the Declarations to the earlier of the expiration date shown in
Item 3 of the Declarations or the effective date of cancellation of this
policy; however, to the extent that coverage under this policy replaces
coverage in other policies terminating at noon standard time on the
inception date of such coverage hereunder, then such coverage as is
provided by this policy shall not become effective until such other
coverage has terminated.
(k) "Securities Claim" means a Claim made against an Insured which alleges a
violation of the Securities Act of 1933 or the Securities Exchange Act of
1934, rules or regulations promulgated thereunder, the securities laws of
any state, or any foreign jurisdiction, and which alleges a Wrongful Act
in connection with the claimant's purchase or sale of, or the offer to
purchase or sell to the claimant, any securities of the Company, whether
on the open market or arising from a public or private offering of
securities by the Company.
(l) "Subsidiary" means:
(1) any corporation of which the Named Corporation owns on or before the
inception of the Policy Period more than 50% of the issued and
outstanding voting stock either directly, or indirectly through one or
more of its Subsidiaries; -;
(2) automatically any corporation whose assets total less than 10% of the
total consolidated assets of the Company as of the inception date of
this policy, which corporation becomes a Subsidiary during the Policy
Period. The Named Corporation shall provide the Insurer with full
particulars of the new Subsidiary before the end of the Policy Period;
4
<PAGE>
(3) any corporation which becomes a Subsidiary during the Policy Period
(other than a corporation described in paragraph (2) above) but only
upon the condition that within 90 days of its becoming a Subsidiary
the Named Corporation shall have provided the Insurer with full
particulars of the new Subsidiary and agreed to any additional premium
and/or amendment of the provisions of this policy required by the
Insurer relating to such new Subsidiary. Further, coverage as shall be
afforded to the new Subsidiary is conditioned upon the Named
Corporation paying when due any additional premium required by the
Insurer relating to such new Subsidiary.
A corporation becomes a Subsidiary when the Named Corporation owns more
than 50% of the issued and outstanding voting stock, either directly, or
indirectly through one or more of its Subsidiaries. A corporation ceases to
be a Subsidiary when the Named Corporation ceases to own more than 50% of
the issued and outstanding voting stock either directly, or indirectly
through one or more of its Subsidiaries.
In all events, coverage as is afforded under this policy with respect to
any Claim made against a Subsidiary or any Director or Officer thereof
shall only apply for Wrongful Acts committed or allegedly committed after
the effective time that such Subsidiary became a Subsidiary and prior to
the time that such Subsidiary ceased to be a Subsidiary
(m) "Wrongful Act" means:
(1) with respect to individual Directors or Officers, any breach of duty,
neglect, error, misstatement, misleading statement, omission or act by
the Directors or Officers of the Company in their respective
capacities as such, or any matter claimed against them solely by
reason of their status as Directors or Officers of the Company, or any
matter claimed against them arising out of their serving as a
director, officer, trustee or governor of an Outside Entity in such
capacities, but only if such service is at the specific written
request or direction of the Company,
(2) with respect to the Company, any breach of duty, neglect, error,
misstatement, misleading statement, omission or act by the Company,
but solely as respects a Securities Claim.
5
<PAGE>
3. EXTENSIONS
Subject otherwise to the terms hereof, this policy shall cover Loss arising
from any Claims made against the estates, heirs, or legal representatives
of deceased Directors or Officers, and the legal representatives of
Directors or Officers in the event of incompetency, insolvency or
bankruptcy, who were Directors or Officers at the time the Wrongful Acts
upon which such Claims are based were committed.
Subject otherwise to the terms hereof, this policy shall cover Loss arising
from all Claims made against the lawful spouse (whether such status is
derived by reason of statutory law, common law or otherwise of any
applicable jurisdiction in the world) of an individual Director or Officer
for all Claims arising solely out of his or her status as the spouse of an
individual Director or Officer, including a Claim that seeks damages
recoverable from marital community property, property Jointly held by the
individual Director or Officer and the spouse, or property transferred from
the individual Director or Officer to the spouse; provided, however, that
this extension shall not afford coverage for any Claim for any actual or
alleged Wrongful Act of the spouse, but shall apply only to Claims arising
out of any actual or alleged Wrongful Acts of an individual Director or
Officer, subject to the policy's terms, conditions and exclusions.
4. EXCLUSIONS
The Insurer shall not be liable to make any payment for Loss in connection
with a Claim made against an Insured:
(a) arising out of, based upon or attributable to the gaining in fact of
any profit or advantage to which an Insured was not legally entitled;
(b) arising out of, based upon or attributable to: (1) profits in fact
made from the purchase or sale by an Insured of securities of the
Company within the meaning of Section 16(b) of the Securities Exchange
Act of 1934 and amendments thereto or similar provisions of any state
statutory law; or (2) payments to an Insured of any remuneration
without the previous approval of the stockholders of the Company,
which payment without such previous approval shall be held to have
been illegal;
(c) arising out of, based upon or attributable to the committing in fact
of any criminal or deliberate- fraudulent act; ;
[The Wrongful Act of a Director or Officer shall not be imputed to any
other Director or Officer for the purpose of determining the applicability
of the foregoing exclusions 4(a) through 4(c)]
6
<PAGE>
(d) alleging, arising out of, based upon or attributable to the facts
alleged, or to the same or related Wrongful Acts alleged or contained,
in any claim which has been reported, or in any circumstances of which
notice has been given, under any policy of which this policy is a
renewal or replacement or which it may succeed in time;
(e) alleging, arising out of, based upon or attributable to any pending or
prior litigation as of the Continuity Date, or alleging or derived
from the same or essentially the same facts as alleged in such pending
or prior litigation;
(f) alleging, arising out of, based upon or attributable to a Listed Event
that occurs no later than 90 days subsequent to the Continuity Date;
provided, however, that this exclusion shall only apply with respect
to coverage which would have otherwise been afforded under Coverage
B(i) of the policy;
(g) with respect to serving as a director, officer, trustee or governor of
an Outside Entity, for any Wrongful Act occurring prior to the
Continuity Date if the Insured knew or could have reasonably foreseen
that such Wrongful Act could lead to a Claim under this policy;
(h) alleging, arising out of, based upon or attributable to any actual or
alleged act or omission of the Directors or Officers serving in their
capacities as directors, officers, trustees or governors of any other
entity other than the Company or an Outside Entity, or by reason of
their status as directors, officers, trustees or governors of such
other entity;
(i) which is brought by any Insured or by the Company; or which is brought
by any security holder of the Company, whether directly or
derivatively, unless such security holder's Claim is instigated and
continued totally independent of, and totally without the solicitation
of, or assistance of, or active participation of, or intervention of,
any Insured or the Company; provided, however, this exclusion shall
not apply to a wrongful termination of employment Claim brought by a
former employee other than a former employee who is or was a Director
of the Company;
(j) for any Wrongful Act arising out of the Insured serving as a director,
officer, trustee or governor of an Outside Entity if such Claim is
brought by the Outside Entity or by any director, officer, trustee or
governor thereof; or which is brought by any security holder of the
Outside Entity, whether directly or derivatively, unless such security
holder's Claim is instigated and continued totally independent of, and
totally without the solicitation of, or assistance of, or active
participation of, or intervention of, the Outside Entity, any
director, officer, trustee or governor thereof, any Insured or the
Company;
(k) for bodily injury, sickness, disease, death or emotional distress of
any person, or damage to or destruction of any tangible property,
including the loss of use thereof, or for injury from libel or slander
or defamation or disparagement, or for injury from a violation of a
person's right of privacy;
7
<PAGE>
(l) alleging, arising out of, based upon, attributable to, or in any way
involving, directly or indirectly:
(1) the actual, alleged or threatened discharge, dispersal, release
or escape of pollutants; or
(2) any direction or request to test for, monitor, clean up, remove,
contain, treat, detoxify or neutralize pollutants,
including but not limited to a Claim alleging damage to the Company or
its securities holders.
Pollutants include (but are not limited to) any solid, liquid, gaseous
or thermal irritant or contaminant, including smoke, vapor, soot,
fumes, acids, alkalis, chemicals and waste. Waste includes (but is not
limited to) materials to be recycled, reconditioned or reclaimed;
(m) for violation(s) of any of the responsibilities, obligations or duties
imposed upon fiduciaries by the Employee Retirement Income Security
Act of 1974, or amendments thereto or any similar provisions of state
statutory law or common law.
5. LIMIT OF LIABILITY - (FOR ALL LOSS - INCLUDING DEFENSE COSTS)
The Limit of Liability stated in Item 4 of the Declarations is the limit of
the Insurer's liability for all Loss, under Coverage A and Coverage B
combined, arising out of all Claims first made against the Insureds during
the Policy Period and the Discovery Period (if applicable); however, the
Limit of Liability for the Discovery Period shall be part of, and not in
addition to, the Limit of Liability for the Policy Period. Further, any
Claim which is made subsequent to the Policy Period or Discovery Period (if
applicable) which pursuant to Clause 7(b) or 7(c) is considered made during
the Policy Period or Discovery Period shall also be subject to the one
aggregate Limit of Liability stated in Item 4 of the Declarations.
Defense Costs are not payable by the Insurer in addition to the Limit of
Liability. Defense Costs are part of Loss and as such are subject to the
Limit of Liability for Loss.
6. RETENTION CLAUSE
The Insurer shall only be liable for the amount of Loss arising from a
Claim which is in excess of the Retention amount stated in Item 5 of the
Declarations, such Retention amount to be borne by the Company and/or the
Insureds and shall remain uninsured, with regard to all Loss under: (i)
Coverage A or B(ii) for which the Company has indemnified or is permitted
or required to indemnity the Director(s) or Officer(s) (-Indemnifiable
Loss-); or (ii) Coverage B(i). A single Retention amount shall apply to
Loss arising from all Claims alleging the same Wrongful Act or related
Wrongful Acts.
8
<PAGE>
Notwithstanding the foregoing, solely with respect to a Securities Claim
under this policy, the Retention shall only apply to Defense Costs;
provided, however, no Retention shall apply for a Securities Claim even as
respects Defense Costs in the event of a determination of No Liability of
all Insureds, and the Insurer shall thereupon reimburse such Defense Costs
paid by the Insured.
7. NOTICE/CLAIM REPORTING PROVISIONS
Notice hereunder shall be given in writing to the Insurer named in Item 8
of the Declarations at the address indicated in Item 8 of the Declarations.
It mailed, the date of mailing shall constitute the date that such notice
was given and proof of mailing shall be sufficient proof of notice.
(a) The Company or the Insureds shall, as a condition precedent to the
obligations of the Insurer under this policy, give written notice to
the Insurer of any Claim made against an Insured as soon as
practicable and either:
(1) any time during the Policy Period or during the Discovery Period
(if applicable); or
(2) within 30 days after the end of the Policy Period or the
Discovery Period (if applicable), as long as such Claim is
reported no later than 30 days after the date such Claim was
first made against an Insured.
(b) If written notice of a Claim has been given to the Insurer pursuant to
Clause 7(a) above, then any Claim which is subsequently made against
the Insureds and reported to the Insurer alleging, arising out of,
based upon or attributable to the facts alleged in the Claim for which
such notice has been given, or alleging any Wrongful Act which is the
same as or related to any Wrongful Act alleged in the Claim of which
such notice has been given, shall be considered made at the time such
notice was given.
(c) If during the Policy Period or during the Discovery Period (if
applicable) the Company or the Insureds shall become aware of any
circumstances which may reasonably be expected to give rise to a Claim
being made against the Insureds and shall give written notice to the
Insurer of the circumstances and the reasons for anticipating such a
Claim, with full particulars as to dates, persons, and entities
involved, then any Claim which is subsequently made against the
Insureds and reported to the Insurer alleging, arising out of, based
upon or attributable to such circumstances or alleging any Wrongful
Act which is the same as or related to any Wrongful Act alleged or
contained in such circumstances, shall be considered made at the time
such notice of such circumstances was given.
9
<PAGE>
8. DEFENSE COSTS, SETTLEMENTS, JUDGMENTS (INCLUDING THE ADVANCEMENT OF DEFENSE
COSTS)
Under both Coverage A and Coverage B of this policy, except as hereinafter
stated, the Insurer shall advance, at the written request of the Insured,
Defense Costs prior to the final disposition of a Claim. Such advanced
payments by the Insurer shall be repaid to the Insurer by the Insureds or
the Company severally according to their respective interests, in the event
and to the extent that the Insureds or the Company shall not be entitled
under the terms and conditions of this policy to payment of such Loss.
The Insurer does not, however, under this policy, assume any duty to
defend. The Insureds shall defend and contest any Claim made against them.
The Insureds shall not admit or assume any liability, enter into any
settlement agreement, stipulate to any judgment, or incur any Defense Costs
without the prior written consent of the Insurer. Only those settlements,
stipulated judgments and Defense Costs which have been consented to by the
Insurer shall be recoverable as Loss under the terms of this policy. The
Insurer's consent shall not be unreasonably withheld, provided that the
Insurer shall be entitled to effectively associate in the defense and the
negotiation of any settlement of any Claim.
The Insurer shall have the right to effectively associate with the Company
and the Insureds in the defense of any Claim that appears reasonably likely
to involve the Insurer, including but not limited to negotiating a
settlement. The Company and the Insureds shall give the Insurer full
cooperation and such information as it may reasonably require.
The Insurer may make any settlement of any Claim it deems expedient with
respect to any Insured subject to such Insured's written consent. If any
Insured withholds consent to such settlement, the Insurer's liability for
all Loss on account of such Claim shall not exceed the amount for which the
Insurer could have settled such Claim plus Defense Costs incurred as of the
date such settlement was proposed in writing by the Insurer.
The Company is not covered in any respect under Coverage A; the Company is
covered, subject to the policy's terms and conditions, only with respect to
its indemnification of its Directors or Officers under Coverage B(ii) as
respects a Claim against such Directors and Officers, and subject to the
policy's terms and conditions, under Coverage B(i) for a Securities Claim
made against the Company. Accordingly, the Insurer has no obligation under
this policy for Defense Costs incurred by, judgments against or settlements
by the Company arising out of a Claim made against the Company other than a
covered Securities Claim, or any obligation to pay Loss arising out of any
legal liability that the Company has to the claimant except as respects a
covered Securities Claim against the Company.
10
<PAGE>
With respect to (i) Defense Costs jointly incurred by, (ii) any joint
settlement made by, and/or (iii) any adjudicated judgment of joint and
several liability against the Company and any Director or Officer, in
connection with any Claim other than a Securities Claim, the Company and
the Director(s) or Officer(s) and the Insurer agree to use their best
efforts to determine a fair and proper allocation of the amounts as between
the Company and the Director(s) or Officers(s) and the Insurer, taking into
account the relative legal and financial exposures of and the relative
benefits obtained by the Directors and Officers and the Company. In the
event that a determination as to the amount of Defense Costs to be advanced
under the policy cannot be agreed to, then the Insurer shall advance such
Defense Costs which the Insurer states to be fair and proper until a
different amount shall be agreed upon or determined pursuant to the
provisions of this policy and applicable law.
9. PRE-AUTHORIZED SECURITIES DEFENSE ATTORNEYS
Only with respect to a Securities Claim:
Affixed as Appendix A hereto and made a part of this policy is a list of
Panel Counsel law firms ("Panel Counsel Firms"). The list provides the
Insured a choice of law firms from which a selection of legal counsel shall
be made to conduct the defense of any Securities Claim made against them.
The Insureds shall select a Panel Counsel Firm to defend a Securities Claim
made against the Insureds in the jurisdiction in which the Securities Claim
is brought. In the event a Securities Claim is brought in a jurisdiction
not included on the list, the Insureds shall select a Panel Counsel Firm in
the listed jurisdiction which is the nearest geographical jurisdiction to
either where the Securities Claim is brought or where the corporate
headquarters of the Named Corporation is located. In such instance the
Insureds also may, with the consent of the Insurer, which consent shall not
be unreasonably withheld, select a non-Panel Counsel Firm in the
jurisdiction in which the Securities Claim is brought to function as "local
counsel" on the Securities Claim to assist the Panel Counsel Firm which
will function as mead counsel. in conducting the defense of the Securities
Claim.
With the express prior written consent of the Insurer, an Insured may
select a Panel Counsel Firm different from that selected by other Insured
defendants if such selection is required due to an actual conflict of
interest or is otherwise reasonably justifiable.
The list of Panel Counsel Firms may be amended from time to time by the
Insurer. However, no change shall be made to the specific list attached to
this policy during the Policy Period without the consent of the Named
Corporation. At the request of the Insured, the Insurer may in its
discretion add to the attached list of Panel Counsel Firms for the purposes
of defending a Securities Claim made against the Insured in any specified
jurisdiction (including a jurisdiction not originally included in the Panel
Counsel list) a Panel Counsel Firm not originally listed for such
jurisdiction. The Insurer may in its discretion waive, in part or in whole,
the provisions of this clause as respects a particular Securities Claim.
11
<PAGE>
10. DISCOVERY CLAUSE
Except as indicated below, if the Insurer or the Named Corporation shall
cancel or refuse to renew this policy, the Named Corporation shall have the
right, upon payment of an additional premium of 75% of the "full annual
premium", to a period of one year following the effective date of such
cancellation or nonrenewal (herein referred to as the "Discovery Period")
in which to give to the Insurer written notice of Claims first made against
the Insureds during said one year period for any Wrongful Act occurring
prior to the end of the Policy Period and otherwise covered by this policy.
As used herein, "full annual premium" means the premium level in effect
immediately prior to the end of the Policy Period. The rights contained in
this paragraph shall terminate, however, unless written notice of such
election together with the additional premium due is received by the
Insurer within 30 days of the effective date of cancellation or nonrenewal.
In the event of a Transaction, as defined in Clause 12, the Named
Corporation shall have the right, within 30 days before the end of the
Policy Period, to request an offer from the Insurer of a Discovery Period
(with respect to Wrongful Acts occurring prior to the effective time of the
Transaction) for a period of no less than three years or for such longer or
shorter period as the Named Corporation may request. The Insurer shall
offer such Discovery Period pursuant to such terms, conditions and premium
as the Insurer may reasonably decide. In the event of a Transaction, the
right to a Discovery Period shall not otherwise exist except as indicated
in this paragraph.
The additional premium for the Discovery Period shall be fully earned at
the inception of the Discovery Period. The Discovery Period is not
cancelable. This clause and the rights contained herein shall not apply to
any cancellation resulting from non-payment of premium.
11. CANCELLATION CLAUSE
This policy may be canceled by the Named Corporation at any time only by
mailing written prior notice to the Insurer or by surrender of this policy
to the Insurer or its authorized agent. This policy may also be canceled by
or on behalf of the Insurer by delivering to the Named Corporation or by
mailing to the Named Corporation, by registered, certified, or other first
class mail, at the Named Corporation's address as shown in Item 1 of the
Declarations, written notice stating when, not less than 60 days
thereafter, the cancellation shall be effective. The mailing of such notice
as aforesaid shall be sufficient proof of notice. The Policy Period
terminates at the date and hour specified in such notice, or at the date
and time of surrender.
If this policy shall be canceled by the Named Corporation, the Insurer
shall retain the customary short rate proportion of the premium herein.
If this policy shall be canceled by the Insurer, the Insurer shall retain
the pro rata proportion of the premium herein.
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<PAGE>
Payment or tender of any unearned premium by the Insurer shall not be a
condition precedent to the effectiveness of cancellation, but such payment
shall be made as soon as practicable.
If the period of limitation relating to the giving of notice is prohibited
or made void by any law controlling the construction thereof, such period
shall be deemed to be amended so as to be equal to the minimum period of
limitation permitted by such law.
12. CHANGE IN CONTROL OF NAMED CORPORATION
If during the Policy Period:
a. the Named Corporation shall consolidate with or merge into, or
sell all or substantially all of its assets to any other person
or entity or group of persons and/or entities acting in concert;
or
b. any person or entity or group of persons and/or entities acting
in concert shall acquire an amount of the outstanding securities
representing more than 50% of the voting power for the election
of Directors of the Named Corporation, or acquires the voting
rights of such an amount of such securities;
(either of the above events herein referred to as the "Transaction")
then this policy shall continue in full force and effect as to Wrongful
Acts occurring prior to the effective time of the Transaction, but there
shall be no coverage afforded by any provision of this policy for any
actual or alleged Wrongful Act occurring after the effective time of the
Transaction. This policy may not be canceled after the effective time of
the Transaction and the entire premium for this policy shall be deemed
earned as of such time. The Named Corporation shall also have the right to
an offer by the Insurer of a Discovery Period described in Clause 10 of the
policy.
The Named Corporation shall give the Insurer written notice of the
Transaction as soon as practicable, but not later than 30 days after the
effective date of the Transaction.
13. SUBROGATION
In the event of any payment under this policy, the Insurer shall be
subrogated to the extent of such payment to all the Company's and the
Insureds' rights of recovery thereof, and the Company and the Insureds
shall execute all papers required and shall do everything that may be
necessary to secure such rights including the execution of such documents
necessary to enable the Insurer to effectively bring suit in the name of
the Company and/or the Insureds. In no event, however, shall the Insurer
exercise its rights of subrogation against an Insured under this policy
unless such Insured has been convicted of a criminal act, or been
judicially determined to have committed a deliberate fraudulent act, or
obtained any profit or advantage to which such Insured was not legally
entitled.
13
<PAGE>
14. OTHER INSURANCE AND INDEMNIFICATION
Such insurance as is provided by this policy shall apply only as excess
over any other valid and collectible insurance.
In the event of a Claim against a Director or Officer arising out of his or
her serving as director, officer, trustee or governor of an Outside Entity,
coverage as is afforded by this policy shall be specifically excess of
indemnification provided by such Outside Entity and any insurance provided
to such Outside Entity with respect to its directors, officers, trustees or
governors. Further, in the event such other Outside Entity insurance is
provided by the Insurer or any member company of American International
Group, Inc. ("AIG"-) (or would be provided but for the application of the
retention amount, exhaustion of the limit of liability or failure to submit
a notice of a Claim) then the maximum aggregate Limit of Liability for all
Losses combined covered by virtue of this policy as respects any such Claim
shall be reduced by the limit of liability (as set forth on the
declarations page) of the other AIG insurance provided to such Outside
Entity.
15. NOTICE AND AUTHORITY
It is agreed that the Named Corporation shall act on behalf of its
Subsidiaries and all Insureds with respect to the giving notice of Claim or
giving and receiving notice of cancellation, the payment of premiums and
the receiving of any return premiums that may become due under this policy,
the receipt and acceptance of any endorsements issued to form a part of
this policy and the exercising or declining to exercise any right to a
Discovery Period.
16. ASSIGNMENT
This policy and any and all rights hereunder are not assignable without the
written consent of the Insurer.
17. ARBITRATION
It is hereby understood and agreed that all disputes or differences which
may arise under or in connection with this policy, whether arising before
or after termination of this policy, including any determination of the
amount of Loss, shall be submitted to the American Arbitration Association
under and in accordance with its then prevailing commercial arbitration
rules. The arbitrators shall be chosen in the manner and within the time
frames provided by such rules. If permitted under such rules the
arbitrators shall be three disinterested individuals having knowledge of
the legal, corporate management or insurance issues relevant to the matters
in dispute.
14
<PAGE>
Any party may commence such arbitration proceeding in either New York, New
York; Atlanta, Georgia; Chicago, Illinois; or Denver, Colorado. The
arbitrators shall give due consideration to the general principles of
Delaware law in the construction and interpretation of the provisions of
this policy; provided, however, that the terms, conditions, provisions and
exclusions of this policy are to be construed in an evenhanded fashion as
between the parties, including without limitation, where the language of
this policy is alleged to be ambiguous or otherwise unclear, the issue
shall be resolved in the manner most consistent with the relevant terms,
conditions, provisions or exclusions of the policy (without regard to the
authorship of the language, the doctrine of reasonable expectation of the
parties and without any presumption or arbitrary interpretation or
construction in favor of either party or parties, and in accordance with
the intent of the parties.)
The written decision of the arbitrators shall be provided to both parties
and shall be binding on them. The arbitrators' award shall not include
attorney fees or other costs.
Each party shall bear equally the expenses of the arbitration.
18. ACTION AGAINST INSURER
Except as provided in Clause 17 of the policy, no action shall lie against
the Insurer unless, as a condition precedent thereto, there shall have been
full compliance with all of the terms of this policy, nor until the amount
of the Insureds' obligation to pay shall have been finally determined
either by judgment against the Insureds after actual trial or by written
agreement of the Insureds, the claimant and the Insurer.
Any person or organization or the legal representative thereof who has
secured such judgment or written agreement shall thereafter be entitled to
recover under this policy to the extent of the insurance afforded by this
policy. No person or organization shall have any right under this policy to
join the Insurer as a party to any action against the Insureds or the
Company to determine the Insureds' liability, nor shall the Insurer be
impleaded by the Insureds or the Company or their legal representatives.
Bankruptcy or insolvency of the Company or the Insureds or of their estates
shall not relieve the Insurer of any of its obligations hereunder.
19. HEADINGS
The descriptions in the headings of this policy are solely for convenience,
and form no part of the terms and conditions of coverage.
15
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<PAGE>
APPENDIX A
PANEL COUNSEL
-1-
CALIFORNIA
Los Angeles
Gibson Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071-3197
Contact Persons:
Robert S. Warren (213) 229-7326
Wayne W. Smith (213) 229-7464
John H. Sharer (213) 229-7476
Irell & Manella
1800 Avenue Of The Stars
Suite 900
Los Angeles, California 90067
Contact Person: Richard Borow
(310) 277-1010
Kirkland & Ellis
300 South Grand Avenue
Los Angeles, California 90071
Contact Person: Jeffrey S. Davidson or
Stephen C. Neal (213) 680-8400
Latham & Watkins
633 West Fifth Avenue
Los Angeles, CA 90071-2007
Contact:
Hugh Steven Wilson (213) 485-1234
Munger, Tolles & Olson
355 South Grand Avenue - 35th floor
Los Angeles, California 90071-1560
Contact Person:
Dennis Kinnaird (213) 683-9264 or
John W. Spiegel (213) 683-9152
O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071-2899
Contact Person: Seth Aronson or
Robert Vanderet (213) 669-6000
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Suite 3400
Los Angeles, California 90071
Contact Person: James E. Lyons or
Frank Rothman (213) 687-5000
Palo Alto
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Contact Person: Bruce Vanyo or
Steven Sethatz (415) 493-9300
Heller, Ellman, White & McAuliffe
525 University Avenue
Palo Alto, California 94301
Contact Person: Norman J. Blears
(415) 324-7000
San Francisco
Brobeck, Phleger & Harrison
Spear Street Tower
One Market
San Francisco, California 94104
Contact Person:
Tower C. Snow, Jr. (415) 442-0900
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
Contact Person: Douglas Schwab or
M. Laurence Popofsky (415) 772-6000
McCutchen, Doyle, Brown & Enersen
3 Embarcadero Center - 18th floor
San Francisco, California 94111
Contact Person: David Balabanian or
Philip R. Rotner (415) 393-2000
Morrison & Foerster
345 California Street
San Francisco, California 94104-2675
Contact Person:
Melvin R. Goldman (415) 677-7311
Paul T. Friedman (415) 677-7444
Orrick Herrington & Sutcliffe
Old Federal Reserve Bank Bldg.
400 Sansome Street
San Francisco, California 94111
Contact Person:
James A. Hughes (415) 392-1122 or W. Reece Bader
(415) 392-1122
Pillsbury, Madison & Sutro
P.O. Box 7880
235 Montgomery Street
San Fransisco, California 94104
Contact Person: Gary H. Anderson
(415) 983-1341
<PAGE>
APPENDIX A (continued)
PANEL COUNSEL
-2-
DISTRICT OF COLUMBIA
Washington
Arnold & Porter
555 Twelfth St. N.W.
Washington, DC 20004-1202
Contact Person: Scott Schreiber
(202) 942-5672
Davis Polk & Wardwell
1300 I Street, NW
Suite 1100
Washington, D.C. 20005
Contact Person: Scott W. Muller
Michael P. Carroll (202) 962-7000
Gibson, Dunn & Crutcher
1050 Connecticut Avenue, NW
Suite 900
Washington, D.C. 20036-5306
Contact Person: F. Joseph Warin
(202) 887-3609
Mudge Rose Guthrie Alexander & Ferdon
212 K Street, NW
Washington, D.C. 20037
Contact Person: Leonard Garment or
1. Lewis Libby (202) 429-9355
Patton Boggs, L.L.P 2550 M Street N.W.
Suite 900
Washington, D.C. 20037
Contact Person:
C. Allen Foster (202) 457 6320 or
Charles H. Camp (202) 457-5265
Shearman & Sterling
801 Pennsylvania Avenue N.W.
Washington, D.C. 20004-2604
Contact Person:
Thomas S. Martin or
Jonathan L Greenblatt (202) 508-8000
Wilikie Farr & Gallagher
Three Lafayette Centre
1155 21st Street N.W.
Washington, D.C. 20036-3384
Contact Person:
Kevin B. Clark (202) 328-8000
GEORGIA
Atlanta
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Contact Person:
Peter Bassett (404) 881-7343
Mary C. Gill (404) 881-7276
King & Spalding
191 Peachtree Street N.W.
Atlanta, Georgia 30303-1763
Contact Person: Michael R. Smith or
Griffin Bell (404) 572-4600
Long, Aldridge & Norman
One Peachtree Center
303 Peachtree Street - Suite 5300
Atlanta, Georgia 30308
Contact Person:
Clay C. Long (404) 527-4050
J. Allen Maines (404) 527-8340
Smith, Gambrell & Russel
Suite 1800
3343 Peachtree Road N.E.
Atlanta, Georgia 30326 -1010
Contact Person:
David Handley (404) 264-2671
Robert C. Schwartz (404) 264-2658
ILLINOIS
Chicago
Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Contact Person: Jerold Solovy
(312) 222-9350
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Contact Person: Garrett B. Johnson
Robert J. Kopecky (312) 861-2000
<PAGE>
APPENDIX A (continued)
PANEL COUNSEL
-3-
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Contact Person: Robert Downing (312) 853-7434
Eugene Schoon (312) 853-7279
Walter C. Carlson (312) 853-7734
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Suite 2100
Chicago, Illinois 60606
Contact Person: Timothy Nelsen or
Susan Getzendanner (312) 407-0700
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606-6404
Contact Person: Harold D. Shapiro
(3 1 2) 876-8035
MASSACHUSETTS
Boston
Goodwin, Proctor & Hoar
Exchange Place
Boston, Massachusetts 02109
Contact Person:
Don M. Kennedy (617) 570-1000
Hale & Dorr
60 State St.
Boston, Massachusettes 02109
Jeffery Rudman (617) 742-9100
Ropes & Gray
One International Plaza
Boston, Massachusetts 02110-2624
Contact Person: John Donovan, Jr.
(617) 951-7566
Skadden, Arps, Slate, Meagher & Flom
1 Beacon Street
Boston, Massachusetts 02108
Contact Person: Thomas A. Dougherty or
George J. Skelley (617) 573-4800
Palmer & Dodge
1 Beacon Street
Boston, Massachusetts 02108
Contact Person: Peter Terris or
Peter Saparoff (617) 573-0100
NEW YORK
New York
Arnold & Porter
399 Park Avenue
New York, New York 10022-21690
Contact Person:
Kenneth V. Handal (212) 715-1020 or
Scott Schreiber (212) 701-1000
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Contact Person: Charles A. Gilman or
Thomas J. Kavaler (212) 701-3000 or
Immanuel Kohn
Davis, Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Contact Person: Henry King, or
Dan Kolb (212) 450-4000
Fried Frank Harris Shriver & Jacobson
1 New York Plaza - 27th Floor
New York, New York 10004
Contact Person:
Sheldon Rasb (212) 820-8090
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022-4675
Contact Person: Yosef J. Riemer or
Frank M. Holozubiec (212) 446-4800
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Contact Person: Russell E. Brooks
(212) 530-5554
Mudge Rose Guthrie Alexander & Ferdon
180 Maiden Lane
New York, New York 10038
Contact Person: Kenneth Conboy,
John J. Kirby, Jr., or
Laurence V. Senn, Jr. (212) 510-7000
Shearman & Sterling
Citicorp Center
153 E 53rd Street
New York, New York 10022-4676
Contact Person:
Dennis Orr (212) 848-8000
<PAGE>
APPENDIX A (continued)
PANEL COUNSEL
-4-
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Contact Person: Roy L Reardon,
James Hagan, or
Michael J. Chepiga (212) 455-2000
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Contact Person: Barry H. Garfinkel or
Jonathan Lerner (212) 735-3000
Stroock & Stroock & Lavan
Seven Hanover Square
New York, NY 10004-2696
Contact:
Melvin A. Brosterman (212) 806-5400
Laurence Greenwald (212) 806-5400
Alvin K. Hellerstein (212) 806-5400
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Contact Person: John L. Warden
(212) 558-4000
Wachteil, Lipton, Rosen & Katz
51 West 57th Street
New York, New York 10019
Contact Person: Norman Redlich
(212) 371 -9200
Wilikie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Contact Person:
Michael R. Young (212) 821-8000
David L. Foster (212) 821-8000
Richard L. Posen (212) 821-8000
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Contact Person: Dennis J. Block
(212) 310-8000
Kaye, Scholer, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022
Contact Person: Frederic W. Yerman
(212) 836-8663
TEXAS
Dallas
Akin, Gump, Strauss, Hauer & Feld, L.L.P
4100 Suite
1700 Pacific Avenue
Dallas, Texas 75201-4618
Contact Person: Michael Lowenberg P.C. or
Louis P. Bickel (214) 969-2800
Fulbright & Jaworski
2200 Ross Avenue
Suite 2800
Dallas, Texas 75201
Contact Person: Karl G. Dial
(214) 855-8000
Locke Purnell Rain Harrell
2200 Ross Avenue
Suite 2200
Dallas, TX 75201-6776
Contact Person:
John McElhaney (214) 740-8458
Peter Flynn (214) 740-8654
Morris Harrell (214) 740-8404
Thompson & Knight, P.C.
1700 Pacific Avenue
Suite 3300
Dallas, TX 75201
Contact Person:
Schuyler B. Marshall (214) 969-1246
Baker & Botts, LLP.
2001 Ross Avenue
Dallas, Texas 75201-2916
Contact Person:
Ronald L Palmer (214) 953-6500
Haynes & Boone, LLP.
3100 NationsBank Plaza
901 Main Street
Dallas, Texas 75202-3789
Contact Person: Michael Boone,
George Bramblett, or
Noel Hensley (214) 651-5000
<PAGE>
APPENDIX A (continued)
PANEL COUNSEL
-5-
Houston
Akin, Gump, Strauss, Hauer & Feld, LLP
Pennzoil Place - South Tower
711 Louisiana Street
Suite 1900
Houston, Texas 77002
Contact Person: Charles Moore or
Paula Hinton (713) 220-5800
Fulbright & Jaworski, LLP.
1301 McKinney
Suite 5100
Houston, Texas 77010
Contact Person: Richard Carrell or
Frank Jones (713) 651-5151
Vinson & Elkins
2500 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Contact Person: David T. Hedges Jr.
(713) 758-2676
Baker & Botts
910 Louisiana Street
Houston, Texas 77002-4995
William C. Slugger (713) 229-1234
Harold Metts (713) 229-1234
<PAGE>
ENDORSEMENT # 1
This endorsement, effective 12:01 AM May 05, 1996 forms a part of
policy number 483-12-48
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
NUCLEAR ENERGY LIABILITY EXCLUSIONS ENDORSEMENT
(BROAD FORM)
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payment for Loss in connection with
any Claim made against any Insured(s):
A. alleging, arising out of, based upon, attributable to, or in any way
involving, directly or indirectly the hazardous properties of nuclear
material, including but not limited to:
(1) nuclear material located at any nuclear facility owned by, or operated
by or on behalf of, the Company, or discharged or dispersed therefrom;
or
(2) nuclear material contained in spent fuel or waste which was or is at
any time possessed, handled, used, processed, stored, transported or
disposed of by or on behalf of the Company; or
(3) the furnishing by an Insured or the Company of services, materials,
parts or equipment in connection with the planning, construction,
maintenance, operation or use of any nuclear facility; or
(4) claims for damages to the Company or its shareholders which alleges,
arises from, is based upon, is attributed to or in any way involves,
directly or indirectly, the hazardous properties of nuclear material.
B. (1) which is insured under a nuclear energy liability policy issued by
Nuclear Energy Liability Insurance Association, Mutual Atomic Energy
Liability underwriters, or Nuclear Insurance Association of Canada, or
would be insured under any such policy but for its termination or
exhaustion of its Limit of Liability; or,
(2) with respect to which (a) any person or organization is required to
maintain financial protection pursuant to the Atomic Energy Act of
1954, or any law amendatory thereof, or (b) the Insured is, or had
this policy not been issued would be entitled to indemnity from the
United States of America, or any agency thereof, under any agreement
entered into the United States of America, or any agency thereof, with
any person or organization.
-1-
<PAGE>
ENDORSEMENT # 1 (Continued)
As used in this endorsement:
"hazardous properties" include radioactive, toxic or explosive properties;
"nuclear material" means source material, special nuclear material or byproduct
material;
"source material", "special nuclear material", and "byproduct material" have the
meanings given them in the Atomic Energy Act of 1954 or in any law amendatory
thereof;
"spent fuel" means any fuel element or fuel component, solid or liquid, which
has been used or exposed to radiation in a nuclear reactor;
"waste" means any waste material (1) containing byproduct material and (2)
resulting from the operation by any person or organization of any nuclear
facility included within the definition of nuclear facility under paragraph (a)
or (b) thereof;
"nuclear facility" means--
(a) any nuclear reactor,
(b) any equipment or device designed or used for (1) separating the isotopes of
uranium or plutonium, (2) processing or utilizing spent fuel, or (3)
handling, processing or packaging waste,
(c) any equipment or device used for the processing, fabricating or alloying of
special nuclear material if at any time the total amount of such material
in the custody of the insured at the premises where such equipment or
device is located consists of or contains more than 25 grams of plutonium
or uranium 233 or any combination thereof, or more than 250 grams of
uranium 235,
(d) any structure, basin, excavation, premises or place prepared or used for
the storage or disposal of waste, and includes the site on which any of the
foregoing is located, all operations conducted on such site and
all-premises used for such operations;
"nuclear reactor" means any apparatus designed or used to sustain nuclear
fission in a self-supporting chain reaction or to contain a critical mass of
fissionable material.
All-other terms, conditions and exclusions remain unchanged.
/s/
AUTHORIZED REPRESENTATIVE
-2-
<PAGE>
ENDORSEMENT # 2
This endorsement, effective 12:01 AM May 05, 1996 forms a part of
policy number 483-12-48
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
CAPTIVE INSURANCE COMPANY
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payments for Loss in connection with
any Claim made against any Insured(s) alleging, arising out of, based upon,
attributable to the ownership, management, maintenance and/or control by the
Company of any captive insurance company or entity including but not limited to
Claims alleging the insolvency or bankruptcy of the Named Corporation as a
result of such ownership, operation, management and control.
All other terms, conditions and exclusions remain unchanged.
/s/
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT # 3
This endorsement, effective 12:01 AM May 05, 1996 forms a part of
policy number 483-12-48
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
COMMISSIONS EXCLUSION
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payment for Loss in connection with
any Claim made against any Insured(s) alleging, arising out of, based upon,
attributable to:
(i) Payments, commissions, gratuities, benefits or any other favors to or for
the benefit of any full or part-time domestic or foreign government or
armed services officials, agents, representatives, employees or any members
of their family or any entity with which they are affiliated; or
(ii) Payments, commissions, gratuities, benefits or any other favors to or for
the benefit of any full or part-time officials, directors, agents,
partners, representatives, principal shareholders, or owners or employees,
or affiliates (as that term is defined in The Securities Exchange Act of
1934, including any of their officers, directors, agents, owners, partners,
representatives, principal shareholders or employees) of any customers of
the company or any members of their family or any entity with which they
are affiliated; or
(iii) Political contributions, whether domestic or foreign.
All other forms, conditions and exclusions remain unchanged.
/s/
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT # 4
This endorsement, effective 12:01 AM May 05, 1996 forms a part of
policy number 483-12-48
issued to STV GROUP, INC.
by National Union fire insurance Company of Pittsburgh, Pa.
PENNSYLVANIA AMENDATORY ENDORSEMENT
TAIL COVERAGE CLAUSE
In consideration of the premium charged, it is hereby understood and agreed that
the first paragraph of the clause which is referred to in the policy as the
"Extended Reporting Clause" or "Discovery Clause. is deleted in its entirety and
replaced by the following;
I. DEFINITIONS
The following definitions apply for purposes of this endorsement:
1) "Termination of Coverage" means:
a) cancellation of this policy: or
b) non-renewal of the policy.
2) "Authorized Insured" means the "Named Insured", the "First Named Insured",
"Named Corporation", "Named Sponsor", or "Named Organization" first named
in item 1 of the Declarations page of this policy.
3) "Full Annual Premium" means the premium level in effect immediately prior
to termination of coverage.
4) "Insurer" means the insurance company which issued the policy to which this
endorsement is attached.
II. TAIL COVERAGE CLAUSE
Upon Termination of Coverage by the Insurer or the Insured, the Authorized
Insured shall have the right to purchase Tail Coverage. The premium for the Tail
Coverage shall be 40% of the Full Annual Premium.
Tail Coverage shall be effective for a period of one (1) year following the
effective date of Termination of Coverage. If purchased, the Authorized Insured
can give written notice to the Insurer of claims first made against an Insured
during said one year period for a Wrongful act occurring prior to such
Termination of Coverage and otherwise covered by the policy.
-1-
<PAGE>
ENDORSEMENT # 4 (continued)
The right of the Authorized Insured to buy Tail Coverage will terminate unless
the Insurer within sixty (60) days from the effective date of Termination of
Coverage receives written acceptance of the Tail Coverage from the Authorized
Insured together with payment from the Authorized Insured of an amount equal to:
(a) the premium for the Tail Coverage plus (b) any premium for the Policy Period
which is owed and not yet paid.
The premium for the Tail Coverage shall be fully earned by the Insurer at
the inception of the Tail. The Tail Coverage shall not be cancelable.
The Limit of Liability for the Tail Coverage shall be part of and not in
addition to the Limit Of Liability for the policy period.
The offer by the Insurer of renewal terms, conditions, limits of liability
and/or premiums different from those of the expiring policy shall not
constitute a refusal to renew.
All other terms, conditions and exclusions remain unchanged.
/s/
AUTHORIZED REPRESENTATIVE
-2-
<PAGE>
ENDORSEMENT # 5
This endorsement, effective 12:01 AM May 05, 1996 forms a part of
policy number 483-12-48
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
PENNSYLVANIA
AMENDATORY ENDORSEMENT
Wherever used in this endorsement: 1) "we", "us", "our", and "Insurer" mean the
insurance company which issued this policy; and 2) "you", "your", "named
Insured", "First Named Insured", and "Insured" mean the Named Corporation, Named
Organization, Named Sponsor, Named Insured, or Insured stated in the
declarations page; and 3) "Other Insured(s). means all other persons or entities
afforded coverage under the policy.
CANCELLATION/NONRENEWAL
The cancellation provision of this policy is amended as follows:
Cancelling a policy midterm is prohibited except if:
1. A condition material to insurability has changed substantially;
2. Decrease or loss of reinsurance has occurred;
3. Material misrepresentation by the Insured or Other Insured(s);
4. Policy was obtained through fraud;
5. The Insured has failed to pay a premium when due;
6. The Insured has requested cancellation;
7. Material failure to comply with terms;
8. Other reasons that the commissioner may approve.
Notice Requirements for Midterm Cancellation and Nonrenewal
Notice shall be mailed by registered or first class mail by the Insurer directly
to the named Insured. Written notice will be forwarded directly to the named
Insured at least sixty (60) days in advance of the termination date unless one
or more of the following exists:
1) The Insured have made a material misrepresentation which affects the
insurability of the risk, in which case the prescribed written notice of
cancellation shall be forwarded directly to the named Insured at least
fifteen (15) days in advance of the effective date of termination.
-1-
<PAGE>
ENDORSEMENT # 5 (continued)
2) The Insured has failed to pay a premium when due, whether the premium is
payable directly to the Insurer or its agents or indirectly under a premium
finance plan or extension of credit, in which case the prescribed written
notice of cancellation shall be forwarded directly to the Named Insured at
least fifteen (15) days in advance of the effective date of termination.
3) The policy was cancelled by the named Insured, in which case written notice
of cancellation shall not be required and coverage shall be terminated on
the data requested by the Insured. Nothing in these three sections shall
restrict the Insurer's right to rescind an insurance policy ab initio upon
discovery that the policy was obtained through fraudulent statements,
omissions or concealment of fact material to the acceptance of the risk or
to the hazard assumed by the Insurer.
The notice shall be clearly labeled "Notice of Cancellation" or "Notice of
Nonrenewal". A midterm cancellation or nonrenewal notice shall state the
specific reasons for the cancellation or nonrenewal. The reasons shall identify
the condition or loss experience which caused the midterm cancellation or
nonrenewal. The notice shall provide sufficient information or data for the
Insured to correct the deficiency.
A midterm cancellation or nonrenewal notice shall state that, at the Insured's
request, the Insurer shall provide loss information to the Insured for at least
three years or the period of time during which the Insurer has provided coverage
to the Insured, whichever is less. Loss information on the Insured shall consist
of the following:
1) Information on closed claims, including date and description or occurrence,
and any amount of payments, if any;
2) Information on open claims, including date and description of occurrence,
amount of payment, if any, and amount of reserves, if any;
3) Information on notices of occurrence, including date and description of
occurrence and amount or reserves, if any.
The Insured's written request for loss information must be made within ten (10)
days of the Insured's receipt of the midterm cancellation or nonrenewal notice.
The Insurer shall have thirty (30) days from the date of receipt of the
Insured's written request to provide the requested information.
Notice of Increase in Premium
The Insurer shall provide not less than sixty (60) days notice of intent to
increase the Insured's renewal premium with thirty (30) days notice of an
estimate of the renewal premium. The notice of renewal premium increase will be
mailed or delivered to the Insured's last known address. If notice is mailed, it
will be by registered or first class mail.
Return of Unearned Premium
Cancellation Initiated by Insurer -- Unearned premium must be returned to the
Insured not later than ten (10) business days after the effective date of
termination. i
-2-
<PAGE>
ENDORSEMENT # 5 (continued)
Cancellation Initiated by Insured -- Unearned premium must be returned to the
Insured not later than thirty (30) days after the effective date of termination.
All other terms, conditions and exclusions shall remain the same.
/s/
AUTHORIZED REPRESENTATIVE
-3-
<PAGE>
ENDORSEMENT # 6
This endorsement, effective 12:01 AM May 05, 1996 forms a part of
policy number 483-12-48
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
OUTSIDE ENTITY ENDORSEMENT
(2x)
In consideration of the premium charged, It is hereby understood and agreed that
the following entities shall be deemed an "Outside Entity", but only as respects
the Outside Entity's respective Continuity Date below:
OUTSIDE ENTITY CONTINUITY DATE
1) A not-for-profit organization
under section 501(c) (3) of the
Internal Revenue Code of 1986 (as
amended). May 05, 1996
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED
/s/
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT # 7
This endorsement, effective 12:01 A.M.. May 5, 1996 forms a part of
policy number 483-12-48
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, PA.
In consideration of the premium charged, it is hereby understood and agreed that
Clause 4, EXCLUSIONS (d), of the policy is deleted in its entirety and replaced
by the following:
(d) alleging, arising out of, based upon or attributable to any pending or prior
litigation as of May 5. 1992. Or alleging or derived from the same or
essentially the same facts as alleged in such pending or prior litigation.
It is further understood and agreed that the Limit of Liability $1,000,000
excess of $3,000,000. exclusion 4(h) is amended to indicate that the Insurer
shall not be liable to make any payment for Loss in connection with any claim or
claims made against the Directors and Officers alleging, arising out of, based
upon or attributable to any pending or prior litigation as of August 19, 1992 or
alleging or derived from the same facts as alleged in such pending or prior
litigation.
It is further understood and agreed that the Limit of Liability $2,000,000
excess of $4,000,000, exclusion 4(h) is amended to indicate that the Insurer
shall not be liable to make any payment for Loss in connection with any claim or
claims made against the Directors and Officers alleging, arising out of, based
upon or attributable to any pending or prior litigation as of May 5, 1994 or
alleging or derived from the same facts as alleged in such pending or prior
litigation.
/s/
Authorized Representative
<PAGE>
ENDORSEMENT # 8
This endorsement, effective 12:01 AM May 05, 1996 forms a part of
policy number 483-12-48
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
EMPLOYMENT PRACTICES ENDORSEMENT
COVERAGE
In consideration of the premium charged, it is hereby understood and agreed that
the coverage as is afforded by this policy is extended to Employment Practice
Claims against an individual "Insured" (defined below) (whether such claims are
brought by (i) a past, present or prospective employee or employees, whether
directly or by class action; or (ii) by the Equal Employment Opportunity
Commission ("EEOC") or any other state or federal governmental authority
regulating employment practices; or (iii) by any other person or entity),
subject to both the terms, conditions and exclusions of this endorsement and the
policy.
DEFINITIONS
It is further understood and agreed that for the purposes of this endorsement
only, the following definitions shall apply:
(1) "Employment Practices Claims. shall mean any Claim relating to a past,
present or prospective employee of the Company for, or arising out of
the following: (i) any actual or alleged wrongful dismissal, discharge
or termination (either actual or constructive), of employment; (ii)
employment related misrepresentation; (iii) wrongful failure to employ
or promote; (iv) wrongful deprivation of career opportunity; (v)
wrongful discipline; (vi) failure to grant tenure or negligent
employee evaluation; or (vii) failure to provide adequate employee
policies and procedure; or (viii) sexual or workplace harassment of
any kind, (including the alleged creation of a harassing workplace
environment); or (ix) unlawful discrimination, (including sexual or
workplace harassment or creation of a harassing workplace environment)
whether direct, indirect, or unintentional.
Employment Practices Claims shall include Claims brought under state,
local or federal law (whether common or statutory) and shall include,
but not be limited to, allegations of violations of the following
federal laws (as amended), including regulations promulgated
thereunder:
1. Family and Medical Leave Act of 1993 ;
2. Americans with Disabilities Act of 1992 (ADA),
3. Civil Rights Act of 1991,
-1-
<PAGE>
ENDORSEMENT # 8 (continued)
4. Age Discrimination in Employment Act of 1967 (ADEA), including
the Older Workers Benefit Protection Act of 1990.
5. Title VII of the Civil Rights Law of 1964, as amended, including
the Pregnancy Discrimination Act of 1978,
6. Civil Rights Act of 1866, Section 1981, and
7. Fifth and Fourteenth Amendments of the U.S. Constitution.
(2) The term "Insured" shall include, for the purposes of Employment
Practices Claims only, any past, present or future duly elected
individual Director or Officer or any past, present of future employee
of the Company whether such individual is in a supervisory, co-worker
or subordinate position or otherwise. Coverage shall automatically
apply to all new employees after the inception date of the policy.
EXCLUSIONS
It is further understood and agreed that solely for the additional coverage
hereby granted for Employment Practices Claims exclusions (i) and (k) are
amended as follows:
(1) Exclusion (i) is amended by deleting the phrase, "wrongful termination
of employment claims", and substituting the phrase, "Employment
Practice Claims" (as defined in this endorsement) and by deleting the
word "former employee" and substituting the word "employee" to read as
follows:
(i) which are brought by any Insured or the Company; or which are
brought by any security holder of the Company, whether directly
or derivatively, unless such security holder's Claim(s) is
instigated and continued totally independent of, and totally
without the solicitation of, or assistance of, or active
participation of, or intervention of, any Insured or the Company;
provided, however, this exclusion shall not apply to Employment
Practice Claims brought by an employee other than an employee who
is or was a Director of the Company.
(2) Exclusion (k) is amended by deleting the phrase, "emotional distress",
and by deleting the phrase, "or for injury from libel or slander or
defamation or disparagement or for injury from a violation of a
person's right of privacy", to read as follows:
(k) for bodily injury, sickness, disease or death of any person, or
damage to or destruction of any tangible property, including the
loss of use thereof.
It is further understood and agreed that only as respects any additional
coverage granted by virtue of this endorsement, the following exclusions shall
apply: '
(1) The Insurer shall not be liable for any Loss in connection with any
Claim or Claims made against an Insured alleging, arising out of,
based upon or attributable to any pending or prior litigation as of
May 05, 1996 , or alleging or derived from the same or essentially the
same facts as alleged in such pending or prior litigation.
-2-
<PAGE>
ENDORSEMENT # 8 (continued)
(2) The Insurer shall not be liable for any Loss in connection with any
Claim or Claims made against an Insured for any alleged Wrongful Act
committed prior to May 05, 1996 if any Insured(s), as of such date,
knew or could have reasonably foreseen that such Wrongful Act could
lead to a Claim.
ALL OTHER TERMS, CONDITIONS, AND EXCLUSIONS OF THE POLICY REMAIN UNCHANGED.
/s/
AUTHORIZED REPRESENTATIVE
-3-
<PAGE>
ENDORSEMENT # 9
This endorsement, effective 12:01 AM May 05, 1996 forms a part of
policy number 483-12-48
issued to STV GROUP, INC.
by National Union Fire Insurance Company, of Pittsburgh, Pa.
SEC Exclusion Relating to Secondary Public Offerings of Securities
(With 30 day reporting provision)
In consideration of premium charged, it is hereby understood and agreed that the
Insurer shall not be liable to make any payment for Loss in connection with any
claim or claims made against the Directors and Officers (including but not
limited to claims brought by any governmental or regulatory entity or any
security holder, whether directly, derivatively or by class action, or by any
other claimant) whether under federal, state or foreign, statutory, regulatory
or common law, if such claim alleges, arises out of, is based upon or is
attributable to the purchase or sale, or offer or solicitation of an offer to
purchase or sell, any security of the Company in a public offering of securities
(hereinafter an OFFERING OF SECURITIES).
This exclusion shall apply, but not be limited to, any such claim which alleges,
arises out of, is based upon or is attributable to any claim arising out of any
alleged misrepresentations or non-disclosures in any written or oral statement,
including but not limited to any Registration Statement, prospectus, offering
circular, private placement memorandum or other document or statement relating
to the OFFERING OF SECURITIES, as well as any failure to file any document
required to be filed with the Securities and Exchange Commission.
Notwithstanding the above, this endorsement shall not apply to the OFFERING OF
SECURITIES described below:
REGISTRATION STATEMENT NO. DATE
Notwithstanding the foregoing, however, this exclusion shall not apply in the
event that within thirty days prior to the effective time of an OFFERING OF
SECURITIES not scheduled or described above, the Company gives written notice
thereof together with all particulars and underwriting information relating
thereto; the Insurer agrees, in its discretion, to grant coverage subject to
such terms, conditions and additional premium as it may require; and the Company
accepts such terms, conditions and additional premium. Such coverage is also
subject to the Company paying when due such additional premium.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
/s/
Authorized Representative
<PAGE>
ENDORSEMENT # 10
This endorsement, effective 12:01 AM May 05, 1996 forms a part of
policy number 483-12-48
issued to STV GROUP, INC.
by National Union Fire Insurance Company of Pittsburgh, Pa.
ARCHITECT OR ENGINEER E&O EXCLUSION
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payment for Loss in connection with
any Claim made against an Insured(s) alleging, arising out of, based upon or
attributable to the performance of or failure to perform services as an
architect or engineer, or any act, error or omission related thereto.
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
/s/
AUTHORIZED REPRESENTATIVE
Exhibit 10.34
LEASE
THIS AGREEMENT made the 21st day of August, 1995, by and between DAME
ENTERPRISES, a Pennsylvania partnership (hereinafter called "Landlord") of one
part, and STV GROUP, INCORPORATED, a Pennsylvania Corporation with its principal
place of business located at 11 Robinson Street, Pottstown, PA 19464
(hereinafter called "Tenant" ) of the other part.
RECITALS:
WHEREAS, Landlord desires to acquire title to a certain parcel of real
estate located generally at Route 422, Old Airport Road, Amity Township, Berks
County, Pennsylvania (the "Property"); and
WHEREAS, the Tenant desires to lease the Property from the Landlord,
have the Landlord erect an office building thereon that is constructed to
specifications acceptable to Tenant, and conduct its business in said office
building.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and intending to be legally bound hereby, the parties agree as follows:
1. Description Of Property, Duration Of Lease And Rental - Landlord
does hereby demise and let unto Tenant all that certain premises consisting of
approximately six (6) acres as shown on the plan attached as Exhibit "A", (the
"Premises"), together with the use of driveways, sidewalks and parking areas for
the term of fifteen (15) years beginning on the latter of July 1, 1996 or seven
(7) days after the date of issuance by the proper municipal authorities of a
certificate of occupancy for the Building (hereinafter defined) (the
"Commencement Date") and ending on the last day of the calendar month next
succeeding 15 years from the Commencement Date (the "Termination Date"). The
annual net rental (the "Base Rent") payable in equal monthly installments in
advance during the said term of this Lease shall be:
A. Year one (1) of the lease term: $544,980.00
B. Years two (2) through five (5) of the lease term: $544,980.00 per year
C. Years six (6) through ten (10) of the lease term: $559,992.00 per year
D. Years eleven (11)through fifteen (15) of the lease term: $575,880.00 per year
Monthly rent payments shall be made on the same day of each month, the first
installment to be paid on the Commencement Date and monthly on the same day of
each month thereafter. The monthly rent payments to be made by the Tenant shall
be:
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A. Year one (1) of the lease term (provided, however, that the tenant shall
not be required to pay any rent during the first, fourth, eighth and
twelfth months of the first year of the lease): $45,415.00 each
B. Years two (2) through five (5) of the lease term: $45,415.00 each
C. Years six (6) through ten (10) of the lease term: $46,660.00 each
D. Years eleven (11) through fifteen (15) of the lease term: $47,990.00 each
The foregoing notwithstanding, the Tenant shall not be required to pay Base Rent
during the first, fourth, eighth and twelfth months of the first year of the
lease term. The term of this Lease shall end on the Termination Date without the
necessity of notice from either party to the other.
2. Construction of Improvements -
A. The Landlord shall construct on the Premises a multi-story
office building, containing approximately Fifty-Eight Thousand (58,000) square
feet, substantially in accordance with the preliminary plans and specifications
attached hereto and made a part hereof as Exhibit "B" (the "Building") including
all necessary and required site work. The Landlord shall complete final plans
and specifications for the Building with due diligence upon the execution of
this Lease Agreement. Upon completion of the final plans for the Building,
together with any modifications or amendments thereto, the plans shall be
approved by the Landlord and the Tenant. Upon approval of the final plans and
specifications by the Landlord and the Tenant and after all appropriate
municipal approvals have been received by Tenant, the Landlord shall commence
construction of the Building on the Premises in accordance with the final plans
and specifications and shall proceed diligently to complete the same.
B. In the event that Tenant requests any modifications or
changes to be made to the Building during or after construction of the same has
begun or is completed, as the case may be, or the final plans for the Building,
after the same shall have been approved by the Landlord and the Tenant as
provided in subparagraph A, above, in either event Landlord shall have the
option of approving said change or modification and Tenant shall first have the
option of securing financing for said change or modification and paying the
Landlord for the same and absent the ability or desire of tenant to secure
financing then Landlord shall first reasonably attempt to secure financing thus
allowing Tenant to pay for any and all of the added costs of such changes and
modifications, including, without limitation, design costs, architectural fees,
engineering fees, bank financing charges and attorney fees for the Landlord's
lender's legal counsel, as additional rent in equal monthly installments
amortized over the remaining term of the Lease at an annual capitalization rate
equal to the annual interest rate charged to the Landlord by its lender to
finance the cost of making such changes and modifications (said interest rate to
be set forth in a commitment letter issued to the Landlord) plus one and one
half percent (1.5%). By way of example only, if the Tenant submits a written
request for changes to the Building at the end of the fifth year of this Lease,
the cost of making said changes to the Building at the end of the fifth year of
this Lease, the cost of making said changes is One Hundred Thousand Dollars
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($100,000.00) and the interest rate charged to the Landlord to finance the
changes and modifications requested by the Tenant is six and one half (6.5%),
then Landlord shall require the Tenant to pay for such costs as additional rent
in consecutive equal monthly payments of One Thousand Two Hundred Thirteen
Dollars and Twenty-Eight Cents ($1,213.28). If after reasonable efforts the
Landlord is unable to secure financing for the change or modification, the
Landlord shall then require Tenant to pay any and all costs necessary to effect
such changes and modifications, including, without limitation, design costs,
architectural fees and engineering fees, at the time the Landlord is charged for
the same by the contractor overseeing the construction of the Building. Tenant's
request for a change or modification in the approved final plans for the
Building or for a change or modification of the Building's existing structure
shall be submitted in writing to the Landlord for its approval.
C. Tenant's taking possession of the Building shall be
conclusive evidence, as against the Tenant, that, at the time such possession
was so taken, the work to be performed by the Landlord in constructing the
Building was substantially completed. Within ten (10) days after the
Commencement Date or the date on which the Tenant takes possession of the
Building, whichever shall first occur, a representative of the Landlord and a
representative of the Tenant shall survey the Building for the purpose of
determining those items, if any, of the work to be performed by the Landlord in
the Building that remain to be completed, which items they shall reduce to an
itemized agreed "punch" list, and the Landlord agrees to complete the items on
said punch list within thirty days thereafter or within such other time as the
parties may agree in writing. In the event that the Landlord does not complete
items on the "punch" list within thirty days or such other time as agreed upon
by the parties, the Tenant shall have the right to employ a third party of its
choosing to complete the items on the "punch" list and deduct the cost of doing
so from the monthly rent payments due to the Landlord hereunder. Notwithstanding
the said punch list, the Tenant shall be obligated to the conditions of this
Lease and the payment of rent as of the Commencement Date.
D. If the completion of construction of the Building shall be
delayed due to any act or omission of the Tenant or its agents, employees or
contractors, the Building shall be deemed ready for occupancy on the date when
it would have been ready but for such delay. Such delay shall include, without
limitation:
1. Delay in the submission of Tenant's plans or
specifications or the giving of any authorizations or approvals required for the
preparations for or execution of the Landlord's work;
2. Delay due to changes made by or on behalf of the
Tenant to the preliminary or final plans for the Building;
3. Delay due to postponement of any of Landlord's work
at the Tenant's request; or
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4. Delay due to any other interference with the
Landlord's work in the Building by the Tenant and/or its agents, servants or
employees.
In the event that Landlord determines that there has been an
act or omission of the Tenant or it's agents, employees or contractors that
causes completion of construction of the building to be delayed, Landlord, or
it's agent, shall notify the Tenant in writing. Such notice shall describe with
reasonable specificity the cause and nature of the delay being attributed to the
Tenant and it's agents, employees or contractors.
3. Security Deposit -
A. Concurrent with the commencement of the Lease term, the
Tenant has deposited with the Landlord Forty Five Thousand Four Hundred Fifteen
Dollars ($45,415.00) as security for Tenant's performance of all its obligations
hereunder. Alternatively, Tenant may present Landlord with an irrevocable letter
of credit that may be drawn upon by Landlord in an amount equal to the
aforementioned security deposit (the "Letter of Credit"). Landlord shall return
such sum or said Letter of Credit, as the case may be, to Tenant after the
expiration of the lease term if Tenant has performed all of such obligations.
Prior to the time that Tenant is entitled to the return of the security deposit,
and if Tenant elects not to present Landlord with the Letter of Credit, Landlord
shall maintain such security deposit in a separate interest bearing account.
Interest on said account shall inure to the benefit of Tenant, less a service
fee equal to one percent (1%) of the principal of the security deposit to be
retained by the Landlord. The net interest on the account shall be paid to
Tenant annually or at such time as the Tenant is entitled to a return of the
principal of the security deposit, whichever occurs first.
B. If Tenant defaults in the performance of any of its
obligations hereunder, including, but not limited to, the payment of rent and
additional rent, the Landlord may use, apply, or retain all or any part of such
security deposit for the payment of any unpaid rent and additional rent, or for
any other amount which the Landlord may be required to spend by reason of the
Tenant's default, including any damages or deficiency in the reletting of the
Premises, regardless of whether the accrual of such damages or deficiency occurs
before or after an eviction or a summary reentry or other reentry by the
Landlord.
C. Tenant shall not assign or encumber the security deposit
or attempt to revoke the Letter of Credit without Landlord's written consent,
and any assignment, encumbrance or revocation without such consent shall not
bind the Landlord. Regardless of any assignment of this Lease by the Tenant, the
Landlord may return the security deposit to the original Tenant, in the absence
of evidence satisfactory to the Landlord of an assignment of the right to
receive such security deposit or any part of the balance thereof.
D. If there is a bona fide sale, subject to this Lease, the
Landlord may transfer the security deposit to the purchaser for the benefit of
the Tenant. In such case, the Landlord
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shall be considered released by the Tenant from all liability for the return of
the security deposit, and the Tenant shall look to the new landlord solely for
the return of the security deposit. The preceding shall apply to every transfer
or assignment made of the security deposit to a new landlord.
4. Intent of Parties to Create A "Net Lease" - It is the intention of
the Landlord and the Tenant that the rent aforementioned shall be net to the
Landlord in each year and month during the term of this Lease, that all costs,
expenses and obligations of every kind relating to the Premises which may arise
or become due during the term of this Lease, except those specifically made the
Landlord's responsibility herein, shall be paid by the Tenant, and that the
Landlord shall be indemnified by the Tenant against such costs, expense and
obligations. Except as provided for in this Lease, the net rent shall be paid to
the Landlord without notice or demand without abatement, deduction or set-off.
5. Use Of Premises - The Premises shall be used as an office building
or for such other lawful business mutually agreed upon by the parties which
agreement shall not be unreasonably withheld. Tenant shall not use the Premises
for any unlawful purpose and shall not suffer any article to be brought, or act
to be done on the Premises which would increase the fire hazard to the Building
or the Premises or would increase any insurance rates above the rates applicable
to the above-mentioned type of business, or that would make the Building or the
Premises uninsurable for their prescribed uses.
6. Payment Of Taxes, Etc. - The Tenant shall promptly pay all real
estate taxes, taxes on rents, assessments, water and sewer charges, and other
governmental levies against the Premises, and also any occupancy tax and tax on
rents, all of which are herein called "impositions". The phrase "tax on rents"
shall mean any tax levied, assessed, or imposed in connection with the receipt
of rent under this Lease for the use and occupancy of the Premises, in lieu of,
in whole or in part, or in addition to, any real estate or personal property tax
upon the Premises. The Tenant may pay any imposition in installments, if payment
may be so made without penalty. All impositions for the tax year in which the
Lease shall commence or terminate shall be apportioned between the Tenant and
the Landlord, except that any imposition which the Tenant has elected to pay
installments shall be paid in full by the Tenant at least sixty (60) days prior
to the expiration of the Lease term.
A. The Tenant shall furnish to the Landlord official receipts
or other satisfactory proof of payment, within a reasonable time after demand by
the Landlord.
B. The Tenant may contest the amount or validity of any
imposition by appropriate proceedings. However, the Tenant shall promptly pay
such impositions unless (1) such proceedings shall operate to prevent or stay
the collection of the imposition so contested and (2) the Tenant shall have
deposited with the Landlord the amount so contested and unpaid, together with a
sum sufficient to cover all charges that may be assessed against the Premises in
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such proceedings. Upon the termination of such proceedings, the Tenant shall
deliver to the Landlord proof of the imposition as finally determined, and
thereupon the Landlord shall, out of the sums so deposited with it by the
Tenant, pay such imposition, and shall refund the balance to the Tenant. If the
sums deposited with the Landlord shall be insufficient to pay the full amount of
such imposition and other charges, the Tenant shall forthwith pay any
deficiency. If, at any time during such proceedings the Landlord shall deem the
amount deposited with it insufficient, the Tenant shall, upon demand, deposit
with the Landlord such additional sums as the Landlord may reasonably request.
The Landlord, at the Tenant s sole expense, shall join in any such contestation
proceedings if any law shall so require. Any sums deposited hereunder with the
Landlord shall be held in a trust account.
C. All sums (other than the Base Rent) which may be due and
payable or are to be deposited by the Landlord under this Lease shall be payable
on demand and shall be deemed to be additional rent hereunder.
D. The Landlord appoints the Tenant the attorney-in-fact of
the Landlord for the purpose of making all payments to be made by the Tenant
pursuant to any of the provisions of this Lease to persons other than the
Landlord. In case any person to whom any sum is directly payable by Tenant under
any of the provisions of this Lease shall refuse to accept payment of such sum
from the Tenant, the Tenant shall thereupon give written notice of such fact to
the Landlord and shall pay such sum directly to the Landlord, who shall
thereupon pay such sum to such person.
7. Additional Rent - All taxes, charges, costs, and expenses which the
Tenant is required to pay hereunder, together with all interest and penalties
that may accrue thereon in the event of the Tenant's failure to pay such
amounts, and all damages, costs, and expenses which the Landlord may incur by
reason of any default of the Tenant or failure on the Tenant's part to comply
with the terms of this Lease, shall be deemed to be additional rent and, in the
event of non-payment by the Tenant, the Landlord shall have all the rights and
remedies with respect thereto as the Landlord has for the non-payment of the
basic rent.
8. Place For Payment Of Rent - All rents and charges shall be payable
without prior notice or demand at the office of Landlord at 2201 Ridgewood Road,
Suite 400, Wyomissing, Pennsylvania 19610, Attn: Mervin A. Heller, Jr., Esquire,
or at such other place as Landlord may from time to time designate by notice in
writing.
9. Acceptance Of Premises By Tenant - Provided the Landlord shall
construct the Building in accordance with the final plans and specifications
therefor referred to in Paragraph 2, the Tenant shall accept the Premises in its
existing condition. All warranties obtained from contractors, sub-contractors,
suppliers or manufacturers pertaining to the Building or any equipment installed
in the Building as called for in the final plans and specifications shall be
assigned by the Landlord to the Tenant at the time Tenant takes occupancy of the
Building unless
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specifically prohibited by the terms of such warranties. In addition to the
foregoing, Landlord shall specifically assign to the Tenant any and all rights
pursuant to Section 13.2.2 of its construction contract with Advanced Building
Systems, Inc., the contractor for the Premises which shall remain in full and
effect regardless of any limitations expressed herein or hereafter. The
following are the provisions of 13.~.2 of its construction contract: "13.2.2 If,
within one year after the Date of Substantial Completion of the Work or
designated portion thereof or within one year after acceptance by the Owner of
designated equipment or within such longer period of time as may be prescribed
by law or by the terms of any applicable special warranty required by the
Contract Documents, any of the Work is found to be defective or not in
accordance with the Contract Documents, the Contractor shall correct it promptly
after receipt of a written notice from the Owner to do so unless the Owner has
previously given the Contractor a written acceptance of such condition. This
obligation shall survive termination of the Contract. The Owner shall give such
notice promptly after discovery of the condition." Landlord agrees to provide a
certified copy of the construction contract sufficient to confirm the aforesaid
warranty is part of the construction contract. No representation, statement or
warranty, express or implied, has been made by or on behalf of the Landlord as
to such condition, or as to the use that may be made of the Premises and/or the
Building. In no event shall the Landlord be liable for any defect in the
Premises or the Building or for any limitation on the use of either or both.
Tenant's taking possession of the Building shall be conclusive evidence, as
against the Tenant, that, at the time such possession was so taken, the Tenant
accepted the Building and Premises in their then existing condition and without
relying upon any representation, statement or warranty, express or implied, made
by or on behalf of the Landlord.
10. Duty Of Tenant To Maintain Premises -
A. The Tenant shall not cause or permit any waste, damage or
injury to the Premises and shall surrender the Premises to the Landlord at the
end of the lease term in the same condition as the Premises existed at the
inception of this Lease, reasonable wear and tear excepted. The Tenant, at its
sole expense, shall keep the Premises as now or hereafter constituted with all
improvements made thereto (including, without limitation, the Building) and the
adjoining sidewalks, curbs, walls, parking areas, landscaping, and access roads
clean and in good condition (reasonable wear and tear excepted) and shall make
any and all repairs, replacements and renewals, whether ordinary or
extraordinary, seen or unforeseen necessary to maintain the Premises. The
foregoing notwithstanding, the Landlord, at its sole cost and expense, shall
make all structural repairs to the Building not necessitated by the negligent or
willful misconduct of the Tenant or its agents, employees, licensees or
invitees. For purposes of this Lease, the term "structural repairs" shall mean
repairs to the roof, exterior walls, foundation, and interior load bearing walls
of the Building. Structural repairs shall not include repairs to the HVAC System
(hereinafter defined) or the electrical, plumbing and sewer systems in the
building. All repairs, replacements and renewals made by the Tenant shall be at
least equal in quality of materials and workmanship to that originally existing
in the Building. The Landlord shall in no event be required to make any repair,
alteration or improvement to the Premises, unless specifically
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required to do so pursuant to the terms of the Lease. Any equipment and
materials replaced by Tenant shall belong to the Landlord and all proceeds from
the disposition thereof may be retained by the Landlord. The Tenant shall
indemnify the Landlord against all costs, expenses, liabilities, losses damages,
suits, fines, penalties, claims and demands, including reasonable counsel fees,
because of Tenant's failure to comply with the foregoing, and the Tenant shall
not call upon the Landlord for any disbursement or outlay whatsoever in
connection therewith, and hereby expressly releases and discharges Landlord from
any liability therefor.
B. Tenant shall engage, at its sole cost and expense, a
maintenance firm to service the heating, ventilating and air conditioning system
(the "HVAC System") servicing the Building. Said maintenance firm shall service
the HVAC System on a quarterly basis, and such service shall include, without
limitation, adjustment and replacement of all belts, and inspection, replacement
and necessary servicing of all filters, condensers, chiller coils and
compressors. The Tenant shall provide Landlord with a copy of such maintenance
contract prior to the Commencement Date and, thereafter, Tenant shall provide
Landlord with evidence that the maintenance contract has been renewed on or
before each anniversary of the Commencement Date. If Tenant fails to obtain or
renew such maintenance contract at any time during the term of this Lease, the
Landlord may, but shall not be obligated to, provide for maintenance of the HVAC
System and the Tenant shall pay the Landlord on demand the cost therefor as
additional rent.
11. Compliance With Municipal Authorities - Except for those items
which are required as a prerequisite of the issuance of the Occupancy Permit,
the Tenant, at its sole expense, shall comply with all orders, and regulations
of Federal, state, county and municipal authorities, and with any direction of
any public officer, pursuant to law, which shall impose any duty upon the
Landlord or the Tenant with respect to the Premises. The Tenant, at its sole
expense, shall obtain all licenses or permits which may be required for the
making of repairs, alterations, improvements, or additions and the Landlord,
when necessary, will join with the Tenant in applying for all such permits or
licenses. The foregoing notwithstanding, the Landlord shall be responsible for
obtaining the initial building permits and all other certificates and
governmental approvals required for construction of the Building, all at the
Landlord's sole cost and expense.
12. Zoning; Permits; Signs - Anything herein elsewhere contained to
the contrary notwithstanding, this Lease and all the terms, covenants, and
conditions hereof are in all respects subject and subordinate to all zoning
restrictions affecting the Premises, and the building in which the Premises is
located, and the Tenant agrees to be bound by such restrictions. The Landlord
further does not warrant that any license or licenses, permit or permits, which
may be required for the business to be conducted by the Tenant on the Premises
will be granted, or, if granted, will be continued in effect or renewed, and any
failure to obtain such license or licenses, permit or permits, or any revocation
thereof or failure to renew the same, shall not release the
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Tenant from the terms of this Lease. Tenant shall comply with the Laws of the
Township of Amity, Berks County, Pennsylvania for said signs.
13. Land Use and Development Approval - The Landlord and Tenant each
acknowledge that this Lease is being executed prior to the Landlord's
acquisition of the Premises whereon the Building shall be erected. The Landlord
and Tenant further acknowledge that the Landlord's obligations hereunder are
specifically conditioned on the Landlord's acquiring good and marketable title
to the Premises and obtaining all land use and development approvals necessary
to allow the Landlord to construct the Building in accordance with the plans
therefor, whether preliminary or final on or before December 15, 1995 (the
"Lease Termination Date"). In the event that the Landlord is not able to acquire
good and marketable title to the Premises or is unable to obtain any and all
land use and development approvals necessary to allow the Landlord to construct
the Building in accordance with the plans therefor, whether preliminary or
final, prior to the Lease Termination Date, this Lease shall immediately become
null and void and neither party shall have any obligation to the other under the
terms of this Lease and any security deposit and rent paid by the Tenant to the
Landlord shall be returned immediately with interest at a rate equal to that
earned by Landlord prior to termination and return of the security deposit.
Notwithstanding anything heretofore stated, if the building being constructed is
not ready for occupancy, through no fault of the Tenant, on or before November
13, 1996, the terms of this Lease, at the option of the Tenant, shall become
null and void.
14. Subordination and Attornment - This Lease shall be subject and
subordinate at all times to the lien of any mortgages and/or rents and/or other
encumbrances now or hereafter placed on the land and buildings demised or of
which the Premises form a part without the necessity of any further instrument
or act on the part of the Tenant to effectuate such subordination, but the
Tenant covenants and agrees to execute and deliver upon demand such further
instrument or instruments evidencing such subordination of this Lease to the
lien of any such mortgage or mortgages and/or ground rent and/or other
encumbrances as shall be desired by any mortgagee or proposed mortgagee or by
any other such person. Upon the Tenant's written request, the Landlord shall use
good faith efforts to obtain from any such mortgagee a written Subordination,
Nondisturbance and Attornment Agreement providing that the rights of the Tenant
shall remain in full force and effect during the term of this Lease so long as
Tenant shall continue to recognize and perform all of the covenants and
conditions of this Lease required to be performed by the Tenant as herein
provided.
15. Assignment of Leases and Rents - Tenant hereby consents to the
Landlord's executing one or more assignments of leases and rents as may be
required by any lender providing financing for the Landlord's acquisition of the
Premises and construction of the Building. If a lender notifies the Tenant in
writing that, pursuant to the terms of its assignment agreement, all future
payments and performance under this Lease are to be made to and for the benefit
of such lender, the Tenant shall comply with such notice notwithstanding any
default whatsoever on the part of the Landlord.
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16. Tenant's Right To Make Alterations - Upon commencement of the
lease term, the Tenant shall have the right to make changes or alterations to
the Premises, subject to the following conditions:
A. No change or alteration shall at any time be made which
shall impair the structural soundness or diminish the value of the Building or
the Premises, as the case may be.
B. No change or alteration shall be made involving an
expenditure in excess of Five Thousand Dollars ($5,000.00) without the prior
written consent of the Landlord.
C. Before commencing any material change or material
alteration to or of the Building, the Landlord and Tenant shall procure the
written consent of the holder of any mortgage covering the Premises to which
this Lease is subordinated.
D. No change or alteration shall be undertaken until the
Tenant shall have procured and paid for all required municipal and other
governmental permits and authorizations of the various municipal departments and
governmental subdivisions having jurisdiction.
E. Tenant shall submit to Landlord for Landlord's written
approval (said approval not to be unreasonably withheld) any and all plans and
architectural drawings for the proposed change or alteration. In addition, all
changes or alterations to the Building or the Premises shall be performed by
such contractors as shall be approved by the Landlord which such approval shall
not be unreasonably withheld. In no event shall Landlord have any responsibility
or liability with regard to any change or alteration made by, or at the request
or direction of, the Tenant.
F. All work done in connection with any change or alteration
shall be done in a good and workmanlike manner and in compliance with the
building and zoning laws, and with all other laws, ordinances, orders, rules,
regulations, and requirements of all federal, state and municipal governments,
and the appropriate departments, commissions, boards, and officers thereof, and
in accordance with the orders, rules and regulations of the Board of Fire
Underwriters or any other body now or hereafter constituted exercising similar
functions, and the Tenant shall procure certificates of occupancy and other
certificates if required by law.
G. At all times when any change or alteration is in progress,
there shall be maintained, at the Tenant's expense, workmen's compensation
insurance in accordance with laws covering all persons employed in connection
with the change or alteration, and general liability insurance for the mutual
benefit of the Tenant and the Landlord expressly covering the additional hazards
due to the change or alteration. Tenant shall provide Landlord with any and all
reasonable documentation the Landlord may require to establish that said
workman's compensation insurance and general liability insurance is in force at
the time any change or alteration to the Building is made.
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H. Any improvement to the Premises or any part thereof and
any replacement of fixtures during the term of this Lease shall at once become
the absolute property of the Landlord without payment of any kind therefor.
Landlord shall have the right to require Tenant to remove any and all such
improvements or fixtures upon termination of this Lease and restore the Building
to its original condition, reasonable wear and tear excepted, all at Tenant's
sole cost and expense.
I. Tenant shall have no right or power to do any act or make
any contract which may create or be the basis for any lien, mortgage or other
encumbrance upon the estate of the Landlord in the Premises or the Building, or
any part of either. All changes, alterations, repairs, materials and labor shall
be done at Tenant's sole expense, and Tenant shall be solely and wholly
responsible to contractors, laborers and materialmen's furnishing labor and
materials to the Tenant in connection with the Premises and/or the Building. To
that end Tenant shall file a waiver of mechanics' and materialmen's liens prior
to commencing any repair, change or alteration to the Premises or the Building
so as to place all laborers and materialmen and contractors on notice that they
must look solely to the Tenant for the payment of any bills and charges for work
done and materials furnished to or at the Premises and/or the Building.
17. Utilities To Be Furnished By Tenant - The Landlord shall, as part
of its, work in constructing the Building, provide adequate utility service to
the Premises as set forth in the plans and specifications for the Building
mutually agreed upon by Landlord and Tenant. The cost of all utilities consumed
on the Premises, including, without limitation, water, steam, heat, gas,
electricity and sewer services shall be paid for by Tenant. Tenant further
agrees to maintain a temperature in the Building of no less than fifty degrees
Fahrenheit at all times during the term of this Lease.
18. Indemnification By Tenant - Tenant agrees to be responsible for
and to relieve and hereby relieves the Landlord from all liability by reason of
any injury or damage to any person or property in or on the Premises, whether
belonging to the Tenant or any other person caused by any fire, breakage or
leakage in any part or portion of the Premises, or from water, rain or snow that
may leak into, issue or flow from any part of the Building or the Premises from
the drains, pipes, or plumbing work of the same, or from any place or quarter,
to the extent such breakage, leakage, injury or damage shall be caused by or
result from the negligence of the Tenant or its servants, agents or invitees.
Tenant also agrees to be responsible for, and to relieve and hereby relieves
Landlord from, all liability by reason of any damage or injury to any person or
thing which may arise from or be due to the use, misuse or abuse of all or any
of the appurtenances of any kind whatsoever which may exist or hereafter be
erected or constructed on the Premises, or from any kind of injury which may
arise from any other cause whatsoever on said Premises to the extent such use,
misuse, abuse, injury or damage shall be caused by or result from the negligence
or willful misconduct of the Tenant or its servants, agents or invitees.
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If the Landlord pays a sum of money for property damage or
personal injury resulting from the Tenant's failure to observe or perform this
covenant, then the sum so paid by the Landlord, together with all costs, damages
and reasonable attorney's fees, shall be considered additional rent, due in the
month succeeding such payment and collectible at such time.
19. Environmental Indemnification -
A. Tenant shall, to the fullest extent allowable by law, be
responsible for and indemnify, defend and hold harmless Landlord from any
liability and costs associated with any liability, including, without
limitation, reasonable attorney's fees, arising out of or incident to the
presence of any hazardous substances, hazardous wastes or other environmental
contamination as defined under the Storage Tank and Spill Prevention Act or any
other applicable federal. state or local environmental law, whether asserted by
private or public entities, which liability arises from the actions of Tenant,
its employees, agents, invitees, sublessees and permitted assigns subsequent to
the execution of this Lease and during Tenant's or its permitted subtenants' or
assignees' occupancy of the Premises. In no event shall Tenant be liable for any
environmental contamination of the Premises occurring prior to Tenant's
execution of this Lease and Tenant's indemnification shall not apply to such
preexisting environmental contamination.
B. Notwithstanding anything to the contrary contained in this
Lease, Landlord makes no representations or warranties as to the absence or
existence of hazardous substances, hazardous wastes or other environmental
contamination in the Premises. Landlord shall, to the fullest extent allowable
by law, be responsible for and indemnify, defend and hold harmless Tenant from
any liability and costs associated with any liability, including, without
limitation, reasonable attorney's fees, arising out of or incident to the
presence of any hazardous substances, hazardous wastes or other environmental
contamination as defined under the Storage Tank and Spill Prevention Act or any
other applicable federal, state or local environmental law, whether asserted by
private or public entities, on the Premises and occurring prior to Tenant's
occupancy of the same.
20. Events of Default - The following events shall be deemed to be
events of default by the Tenant under this Lease:
A. The Tenant shall fail to pay any installment of rent or any
other obligation hereunder involving the payment of money and such failure shall
continue for a period of ten (10) days after the due date.
B. The Tenant shall fail to comply with any term, provision,
covenant, rule or regulation, whether herein contained or hereafter established,
of this Lease, other than as described in subparagraph A, above, and shall not
cure such failure within fifteen (15) days after
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written notice thereof to the Tenant, provided, however, that if the Tenant
shall within said fifteen (15) day period take reasonable steps to cure such
default and diligently pursues the same to completion, the Tenant shall not be
deemed in default hereof
C. The Tenant shall become insolvent, or shall make a
transfer in fraud of creditors, or shall make an assignment for the benefit of
creditors.
D. The Tenant of the Tenant's obligations under this Lease
shall file a petition under any section or chapter of the Bankruptcy Act, or the
Tenant of the Tenant's obligations under this Lease shall be adjudged bankrupt
or insolvent in proceedings filed against the Tenant of the Tenant's obligations
under this Lease.
E. A receiver or trustee shall be appointed for the Premises
or the Building of for all or substantially all of the assets of the Tenant or
of any guarantor of the Tenant's obligations under this Lease.
F. The Tenant shall desert or vacate or shall commence to
desert or vacate the Premises and/or the Building or any substantial portion of
the Premises and/or the Building or shall remove or attempt to remove, without
the prior written consent of the Landlord, all or a substantial portion of the
Tenant's goods, wares, equipment, fixtures, furniture or other personal
property.
G. The Tenant shall do or permit to be done anything that
creates a lien upon the Premises and/or the Building.
The foregoing individually shall constitute an "Event of
Default" and collectively "Events of Default" by the Tenant.
21. Rights Of Landlord Upon Default By Tenant - Upon the occurrence of
an Event of Default:
A. If the Landlord so elects, this Lease shall thereupon
become null and void, and the Landlord, without prejudice to any other remedy
that the Landlord may have for possession of the Building and the Premises or
for any arrearage in rent (including, without limitation, any interest which may
have accrued pursuant to the terms of this Lease) shall have the right to
reenter or repossess the Premises and the Building, either by force, summary
proceedings, surrender or otherwise, and disposes and remove therefrom the
Tenant, or other occupants thereof, and their effects, without being liable to
any prosecution therefor, as the agent of the Tenant, and the Tenant immediately
shall pay the Landlord, without further notice from Landlord, the rent herein
reserved and agreed to be paid by the Tenant for the portion of the lease term
remaining at the time of reentry or repossession as if by the terms of this
Lease it were payable in advance. It is further agreed that the Tenant shall
compensate the Landlord for all
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expenses incurred by the Landlord in regaining possession of the Premises and
the Building (including, without limitation, any increases in insurance premiums
for the Building caused by the vacancy of the Premises or the Building), all
expenses incurred by the Landlord in reletting the Building (including, without
limitation, the cost of repairs, remodeling, replacements, advertisements and
real estate brokerage fees), all concessions granted to a new tenant upon
reletting the Building or the Premises (including, without limitation, renewal
options), all attorneys' fees, court costs and expenses of litigation, and all
other costs of any nature whatsoever incurred by the Landlord as a direct or
indirect result of the Tenant's default (including, without limitation, any
adverse reaction by the Landlord's mortgagees and a reasonable allowance for the
Landlord's administrative efforts, salaries and overhead attributable directly
or indirectly to the Tenant's default and the Landlord's pursuit of its rights
and remedies provided herein and under applicable law). The Landlord shall
provide Tenant with ten ( 10) days prior written notice of its intention to
re-enter the Premises or institute legal proceedings in the exercise of the
Landlord's remedies set forth herein. The Tenant waives and will waive all
rights to trial by jury in any proceeding hereafter instituted by the Landlord
against the Tenant in respect to the Premises. In addition, the Tenant agrees to
pay to the Landlord on demand the amount of all loss and damages which the
Landlord shall suffer by reason of any termination of this Lease effected
pursuant to this subparagraph A.
B. Without any notice or demand whatsoever, the Landlord may
take any one or more of the actions permissible at law to insure performance by
the Tenant of the Tenant's covenants and obligations under this Lease. In this
regard, it is agreed that if the Tenant deserts or vacates the Building or the
Premises, the Landlord may enter upon and take possession of the same in order
to protect them from deterioration and continue to demand from Tenant monthly
payments of the rent and other charges and expenses set forth in this Lease,
without any obligation to relet the Building or any portion thereof; but if the
Landlord does, at its sole discretion, elect to relet the Building or the
Premises, such action by the Landlord shall not be deemed as an acceptance of
Tenant's surrender of the Premises or the Building unless the Landlord expressly
notifies the Tenant of such acceptance in writing. The Tenant hereby
acknowledges that the Landlord shall otherwise be reletting the Premises as the
Tenant's agent and the Tenant furthermore hereby agrees to pay to the Landlord
on demand any deficiency that may arise between the monthly rentals and other
charges provided in this Lease and that actually collected by the Landlord. It
is further agreed in this regard that upon the occurrence of an Event of Default
described in Paragraph 20 of this Lease, the Landlord shall have the right to
enter upon the Premises and the Building by force if necessary without being
liable for prosecution or any claim for damages therefor, and do whatever the
Tenant is obligated to do under the terms of this Lease; and the Tenant agrees
to reimburse the Landlord on demand for any expenses that the Landlord may incur
in thus effecting compliance with the Tenant's obligations under this Lease, and
the Tenant further agrees that the Landlord shall not be liable for any damages
resulting to the Tenant from such action.
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22. Right Of Entry And Inspection By Landlord - The Landlord or its
representatives may enter the Premises or the Building, at any reasonable time,
for the purpose of inspecting the Premises, performing any work which the
Landlord elects to undertake made necessary by reason of the Tenant's Default
under the terms of this Lease, exhibiting the Premises for sale, lease or
mortgage financing, or posting notices of non-responsibility under any
mechanic's lien law, and Tenant agrees to make no claim against Landlord by
reason of any interference with Tenant's business caused by Landlord's entry.
23. Destruction Of Premises
A. No destruction or damage to the Building or any other
improvement on the Premises by any casualty caused by the Tenant's negligent use
and enjoyment of the Premises, including, without limitation, fire, shall
entitle the Tenant to surrender possession thereof, to terminate this Lease, to
violate any of its provisions, or to cause any rebate or abatement in rent then
due or thereafter becoming due under the terms hereof.
B. In the event that the Premises is totally destroyed or so
damaged by fire or other casualty not occurring through the fault or negligence
of the Tenant or its agents, employees, licensees or invitees, that the same
cannot be repaired or restored within One Hundred Eighty (180) days from the
date of the fire or other casualty, this Lease shall absolutely cease and
determine, and the rent shall abate for the balance of the lease term.
C. If the damage caused as described in subparagraph B is only
partial and such that the Premises can be restored to its original condition
within One Hundred Eighty (180) days from the date of the fire or other
casualty, the Landlord, at its option, shall restore the Premises with
reasonable promptness, reserving the right to enter upon the Premises for that
purpose, even though the effect of such entry is to render the Premises or a
portion thereof untenantable. In either event the rent shall be apportioned and
suspended during the time the Landlord is in possession, taking into account the
portion of the Premises rendered untenantable and the duration of the Landlord's
possession. Lessor shall make its election to repair the Premises or terminate
this Lease by giving written notice thereof to the Tenant at the Premises within
thirty (30) days from the date Landlord receives notice that the Premises has
been destroyed or damaged by fire or other casualty.
D. Landlord shall not be liable for any damage, compensation
or claim by reason of inconvenience or annoyance arising from the necessity of
repairing any portion of the building of which the Premises is a part, the
interruption in the Tenant's use of the Premises, or the termination of this
Lease by reason of the destruction of the Premises, provided that the Landlord
makes the said repairs with reasonable promptness.
E. Damage by fire or other casualty rendering more than forty
percent (40%) of the floor area of the Premises untenantable shall constitute
total destruction hereunder.
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24. Insurance -
A. Tenant, at its own cost and expense, at all times after the
Commencement Date of this Lease, shall obtain and maintain, in full force and
effect, for the benefit of Landlord and Tenant (and any institutional mortgagee,
with a standard mortgagee endorsement), policies of insurance against loss or
damage to the building and the premises by fire and such other casualties as may
be included within either fire and extended coverage insurance, or all-risk
insurance, boiler insurance, plate glass insurance and such other insurance as
may reasonably be required from time to time by any mortgagee.
B. After Tenant takes possession of the Building and Premises,
Tenant, at Tenant's sole cost and expense, shall maintain and keep in effect
throughout the Lease term, insurance against liability for bodily injury
(including death) or property damage in or about the Building and/or the
Premises under a policy of comprehensive general public liability insurance,
with such limits as to each as may be reasonably required by Landlord from time
to time, but not less than a combined single limit of One Million Dollars
($1,000,000.00) and Two Million Dollars ($2,000,000.00) in the aggregate for
bodily injury (including death) and for property damage. The aforementioned
policy of comprehensive general public liability shall name Landlord as an
additional insured party. All policies of insurance relating to the Building
and/or the Premises, including the public liability insurance referred to in
this subparagraph 26.B, and the fire and casualty insurance referred to in
subparagraph 26.A, shall provide that they shall not be cancelable without at
least thirty (30) days prior written notice to Landlord and to any mortgagee
named in an endorsement thereto and shall be issued by an insurer and in a form
satisfactory to Landlord. At least ten (10) days prior to the Commencement Date,
a Certificate or Certificates of Insurance shall be delivered to Landlord by the
Tenant. If Tenant shall fail, refuse or neglect to obtain, pay for or to
maintain any insurance that Tenant is required to provide, or fails to furnish
Landlord with satisfactory evidence of coverage on any such policy, Landlord
shall then have the right to purchase or pay for such insurance directly. All
such payments made by Landlord shall be recoverable by Landlord from Tenant,
together with interest thereon, as additional rent, promptly upon being billed
therefore.
C. Each of the parties hereto hereby releases the other, to
the extent of the releasing party's insurance coverage, from any and all
liability for any loss or damage covered by such insurance which may be
inflicted upon the property of such party, even if such loss or damage shall be
brought about by the fault or negligence of the other party, its agents or
employees; provided, however, that this release shall be effective only with
respect to loss or damage occurring during such time as the appropriate policy
of insurance shall contain a clause to the effect that this release shall not
affect said policy or the right of the insured to recover thereunder. If any
policy does not permit such a waiver, and if the party to benefit therefrom
requests that such a waiver be obtained, the other party agrees to obtain an
endorsement to its insurance policies permitting such waiver of subrogation if
it is available. If an additional
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premium is charged for such wavier, the patty benefiting therefrom agrees to pay
the amount of such additional premium promptly upon being billed therefor.
D. Tenant will not do anything or fail to do anything which
will cause the cost of Landlord's insurance to increase or which will prevent
Landlord from procuring policies (including, but not limited to, public
liability insurance) from companies and in a form satisfactory to Landlord. If
any breach of this subparagraph D by Tenant shall cause the rate of fire or
other insurance to be increased, Tenant shall pay the amount of such increase as
additional rent promptly upon being billed therefor.
25. Failure of Tenant to Perform --
A. If the Tenant shall at any time fail to make any payment
within ten (10) days after a written request from the Landlord after the same
shall be due or perform any act on its part to be made or performed under the
terms of this Lease within thirty (30) days after written notice from the
Landlord, then the Landlord may, but shall not be obligated so to do, and
without further notice to or demand upon the Tenant and without waiving or
releasing the Tenant from any obligation in this Lease contained, make any such
payment or perform any such act on the part of the Tenant to be made or
performed as in this Lease provided. All sums so paid by the Landlord and all
necessary incidental costs and expenses in connection with the performance of
any such act by the Landlord, together with interest thereon at two points above
the prime rate of Meridian Bank per annum from the date of making of such
expenditure, shall immediately become due and be payable by the Tenant on
demand. All sums which may become payable to the Landlord by Tenant, as in this
subparagraph A provided, shall be deemed additional rent, and the Landlord shall
have (in addition to any other right or remedy of the Landlord) the same rights
and remedies in the event of the nonpayment of any such sums by the Tenant as in
the case of Default by the Tenant in the payment of the minimum rent.
B. All of the remedies hereinbefore given to the Landlord and
all rights and remedies given to it by law and equity shall be cumulative and
concurrent. No determination of this Lease or the taking or recovering of the
Premises shall deprive the Landlord of any of its remedies or actions against
the Tenant for rent due at the time or which, under the terms hereof, would in
the future become due as if there had been no determination, or for any and all
sums due at the time or which, under the terms hereof, would in the future
become due as if there had been no determination, nor shall the bringing of any
action for rent or breach of covenant, or the resort to any other remedy herein
provided for the recovery of rent be construed as a waiver of the right to
obtain possession of the Premises.
26. Indemnification of Landlord - In addition to any and all other
obligations of the Tenant, after taking possession of the Building and the
Premises, Tenant shall indemnify and save harmless the Landlord and Landlord's
agents against and from all liabilities, obligations, damages, penalties,
claims, costs, charges and expenses, including, without limitation, any and
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all architects' and attorneys' fees, which may be imposed upon or incurred by or
asserted against the Landlord or the Landlord's agents by reason of any of the
following occurring during the term of this Lease:
A. Any injuries to persons or property occurring on or about
the Premises or the Building and arising as a result of the negligence of the
Tenant and/or its agents, contractors, servants, employees, licensees or
invitees; or
B. Any failure on the part of the Tenant to perform or comply
with any of the covenants, agreements, terms or conditions in this Lease on its
part to be performed or complied with.
The provisions of this Paragraph 26, as well as any and all
other provisions in this Lease requiring the Tenant to indemnify and save the
Landlord and Landlord's agents harmless, shall survive the termination of this
Lease.
27. Condemnation -
A. If all of the Premises are taken or condemned for a public
or quasi-public use (a sale in lieu of condemnation to be deemed a taking or
condemnation for purposes of this Lease), this Lease shall terminate as of the
date title to the condemned real estate vests in the condemnor and the rent and
Additional Rent herein reserved shall be apportioned and paid in full by Tenant
to Landlord to that date and all rent prepaid for periods beyond that date shall
forthwith be repaid by Landlord to Tenant and neither party shall thereafter
have any liability hereunder.
B. If only part of the Premises are taken or condemned for a
public or quasi-public use and if such taking or condemnation shall render the
Premises unsuitable for the business of the Tenant, then the term of this Lease
shall cease and terminate as of the date on which possession of the Premises is
required to be surrendered to the condemning authority and the rent and
additional rent herein reserved shall be apportioned and paid in full by Tenant
to Landlord to that date and all rent prepaid for periods beyond that date shall
forthwith be repaid by Landlord to Tenant and neither party shall thereafter
have any liability hereunder and Tenant shall have no claim against Landlord for
the value of any unexpired term of this Lease. In the event such partial taking
is not extensive enough to render the Premises unsuitable for Tenant's business,
the Lease shall continue in full force and effect except that the rent and
additional rent due hereunder shall be reduced in the same proportion that the
floor area of the Premises so taken bears to such floor area immediately prior
to such taking, such reduction commencing as of the date Tenant is required to
surrender possession of such portion. Landlord shall promptly restore the
Premises, to the extent of condemnation proceeds available for such purpose, as
nearly as practicable to a condition comparable to their condition at the time
of such condemnation, less the portion lost in the taking. Tenant shall be
responsible for making all repairs and alterations to Tenant's fixtures,
equipment and furnishings as a result of such taking or condemnation. For
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purposes of determining the amount of funds available for restoration of the
Premises from the condemnation award, said amount shall be deemed to be that
part of the total award which remains after payment of Landlord's reasonable
expenses in recovering the same and any amounts due to any mortgagee of
Landlord, and which represents a portion of the total sum so available
(excluding any award or other compensation for land) which is equitably
allocable to the Premises.
C. In the event of any condemnation or taking as provided
above, whether whole or partial, the Tenant shall not be entitled to any part of
the award as damages or otherwise for such condemnation and Landlord and any
mortgagee of Landlord are to receive the full amount of such award as their
respective interests may appear. Tenant hereby expressly waives any right or
claim to any part of it and assigns to Landlord any such right or claim to which
Tenant might become entitled.
D. Although all damages in the event of any condemnation are
to belong to the Landlord and any mortgagee of Landlord as aforesaid, whether
such damages are awarded as full compensation for diminution in value of the
leasehold or to the fee of the Premises, Tenant shall have the right, to the
extent that same shall not diminish the Landlord s or such mortgagee's award, to
claim and recover from the condemning authority, but not from Landlord or such
mortgagee, such compensation as may be separately awarded or recoverable by
Tenant under the applicable eminent domain code in effect where the complex of
which the Premises is a part is located in Tenant's own right for or on account
of, and limited solely to, any cost to which Tenant might be put in removing
Tenant's merchandise, furniture, trade fixtures, leasehold improvements and
equipment.
28. Assignment And Sub-Lease - Accept for assignments to, and
sub-leases involving, controlled subsidiaries of the Tenant, Tenant shall not
assign, mortgage or pledge this Lease or underlet or sublease the Building or
the Premises or any part thereof; or permit any other person, firm or
corporation to occupy the Premises, Building or any part of either, without the
specific prior written consent of the Landlord, and if written consent is given,
Landlord shall retain the liability of the Tenant for completion of the terms of
the Lease. Such approval by Landlord shall not unreasonably be withheld. Tenant
shall not be required to obtain Landlord's prior written approval for sub-leases
involving, or an assignment of this lease, a controlled subsidiary of the
Tenant.
29. Tenant's Estoppel Certificate - Within ten (10) days after notice
from the Landlord, the Tenant shall execute and deliver to Landlord a statement
in writing certifying such matters as requested by Landlord, including that this
Lease is unmodified and in full force and effect, or in full force and effect,
as modified, stating the modifications, the amount of the rent, the dates to
which the rent has been paid in advance and the amount to any security deposit
or prepaid rent.
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30. Termination and Holding Over - The term of this Lease shall end on
the last day of the calendar month next succeeding fifteen (15) years from the
Commencement Date, without the necessity of notice from either party to the
other. In the event Tenant remains in possession of the Premises and/or the
Building after the expiration of the original lease term without the execution
of a new Lease, Tenant shall be deemed to be occupying said Premises as a Tenant
from month to month at a rental equal to the rental and common area costs herein
on the last day of the regular lease term, plus fifty percent (50%) of such
amount and the Tenant shall otherwise subject to all the conditions, provisions
and obligations of this Lease insofar as the same are applicable to a month to
month tenancy.
31. Construction Observation - During the course of construction, the
Tenant shall be entitled to make periodic visits to the construction site, but
such visits shall not relieve the Contractor from the obligation to construct
the building in accordance with the Plans and Specifications.
32. Notices - All notices herein required shall be given by Certified
Mail and shall be effective as of the date of mailing. Notices to the Landlord
shall be addressed to 2201 Ridgewood Road, Suite 400, Wyomissing, Pennsylvania
19610, Attn: Mervin A. Heller, Jr. and to the Tenant at the Building or to c/o
Secretary-Treasurer, 11 Robinson Street, Pottstown, Pennsylvania 19464 or to
such other address as the Landlord or Tenant may provide from time to time after
written notice to the other party.
33. Relationship of the Parties - Nothing herein contained shall be
deemed or construed by the parties hereto, nor by any third party, as creating
the relationship of principal and agent or of partnership or of joint venture
between the parties, it being understood and agreed that neither the method of
computation of rent, not any other provisions contained herein, nor any acts of
the parties, shall be deemed to create any relationship between the parties
hereto other than the relationship of landlord and tenant.
34. Governing Law and Venue - This Lease shall be governed by, and
construed in accordance with, the internal laws of the Commonwealth of
Pennsylvania. The Venue for any action under this Lease shall be Berks County,
Pennsylvania.
35. Captions - The captions used herein are for convenience only and
shall not limit or amplify the provisions hereof.
36. Binding Effect - The terms, provisions and covenants contained in
this Lease shall apply to, inure to the benefit of, and be binding upon the
parties hereto and their respective heirs, successors, legal representatives and
permitted assigns except as otherwise expressly provided herein.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
and have caused this instrument to be executed by their duly authorized officers
the day and year first above written.
DaMe Enterprises, Landlord
/s/ Darryl Shoff
/s/ Mervin A. Heller
STV Group, Incorporated - Tenant
By: /s/ Peter W. Knipe
Attest: /s/ Anna Marie Boore
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ADDENDUM TO LEASE AGREEMENT
THIS ADDENDUM, made the 21st day of August, 1995, to the Lease
Agreement between DAME ENTERPRISES, a Pennsylvania partnership (hereinafter
called "Landlord"), of the one part, and STV GROUP, INCORPORATED, a Pennsylvania
corporation, with its principal place of business located at 11 Robinson Street,
Pottstown, Pennsylvania, 19464 (hereinafter called "Tenant"), of the other part.
RECITALS
WHEREAS, the parties hereto entered into a certain Lease
Agreement dated the 21st day of August, 1995, (the "Agreement") for the rental
of a certain office building to be constructed on a parcel of real estate
located generally at the intersection of Route 422 and Old Airport Road, Amity
Township, Berks County, Pennsylvania; and,
WHEREAS, the parties desire to clarify certain terms of the
Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein, and intending to be legally bound hereby, the parties agree as
follows:
1. The parties acknowledge that the Preliminary Plans and
Specifications required by paragraph two
(2), subparagraph A, of the Agreement to be attached as
Exhibit "B" were not finalized at the time of the execution of the Agreement
and, upon approval, will be signed, dated and attached. 2. The following
paragraph shall be substituted for paragraph thirty (30) of the Agreement:
"30. Termination and Holding Over - The term of this Lease shall
end on the last day of the calendar month upon which the
expiration of the fifteen (15) year term from the
Commencement Date occurs, without the necessity of notice
from either party to the other. By way of example, if
fifteen (15) years from the Commencement Date expires on
July 7th, the Lease will terminate on July 31st. Any rent
due for a partial month shall be pro rated. In the event
Tenant remains in possession of the Premises and/or the
Building after the expiration of the original lease term
without the execution of a new Lease, Tenant shall be deemed
to be occupying said Premises as a Tenant from month to
month at a rental equal to the rental and common area costs
herein on the last day of the regular lease term, plus fifty
percent (50~) of such amount, and the Tenant shall otherwise
be subject to all the conditions, provisions and obligations
of this Lease insofar as the same are applicable to a month
to month tenancy."
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<PAGE>
3. In all other respects, the terms and conditions of the
Agreement dated August 21st, 1995, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have hereunto set their bands
and seals and have caused this instrument to be executed by the duly authorized
officers the day and year first above written.
LANDLORD: DAME ENTERPRISES,
A Pennsylvania Partnership
/s/ Mervin A. Heller
/s/ Darryl Shoff
TENANT: STV GROUP, INCORPORATED
BY: /s/ Peter W. Knipe
ATTEST: /s/ Anna Marie Boore
-3-
<PAGE>
SECOND ADDENDUM TO LEASE AGREEMENT
THIS SECOND ADDENDUM made the 5th day of January 1996, to the Lease
Agreement between DAME ENTERPRISES, a Pennsylvania partnership (hereinafter
called "Landlord"), of the one part, and STV GROUP, INCORPORATED, a Pennsylvania
corporation, with its principal place of business located at 11 Robinson Street,
Pottstown, Pennsylvania, 19464 (hereinafter called "Tenant"), of the other part.
RECITALS
WHEREAS, the parties hereto entered into a certain Lease Agreement and
Addendum, both dated the 21st day of August, 1995, (the "Agreement") for the
rental of a certain office building to be constructed on a parcel of real estate
located generally at the intersection of Route 422 and Old Airport Road, Amity
Township, Berks County, Pennsylvania; and,
WHEREAS, the parties desire to amend certain terms of the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and intending to be legally bound hereby, the parties agree as follows:
1. The following paragraph shall be substituted for paragraph thirteen
(13) of the Agreement:
"13. Land Use and Development Approval - The Landlord and Tenant
each acknowledge that this Lease is being executed prior to
the Landlord's acquisition of the Premises whereon the
Building shall be erected. The Landlord and Tenant further
acknowledge that the Landlord's obligations hereunder are
specifically conditioned on the Landlord's acquiring good
and marketable title to the Premises and obtaining all land
use and development approvals necessary to
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<PAGE>
allow the Landlord to construct the Building in accordance
with the plans therefor, whether preliminary or final on or
before January 30, 1996 (the "Lease Termination Date"). In
the event that the Landlord is not able to acquire good and
marketable title to the Premises or is unable to obtain any
and all land use and development approvals necessary to
allow the Landlord to construct the Building in accordance
with the plans therefor, whether preliminary or final, prior
to the Lease Termination Date, this Lease shall immediately
become null and void and neither party shall have any
obligation to the other under the terms of this Lease and
any security deposit and rent paid by the Tenant to the
Landlord shall be returned immediately with interest at a
rate equal to that earned by Landlord prior to termination
and return of the security deposit. Notwithstanding anything
m heretofore stated, if the building being constructed is
not ready for occupancy, through no fault of the Tenant, on
or before November 13, 1996, the terms of this Lease, at the
option of the Tenant, shall become null and void."
2. In all other respects, the teens and conditions of the Agreement and
Addendum dated August 21st, 1995, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
and have caused this instrument to be executed by the duly authorized officers
the day and year first above written.
LANDLORD: DAME ENTERPRISES,
A Pennsylvania Partnership
/s/ Mervin A. Heller
/s/ Darryl Shoff
TENANT: STV GROUP, INCORPORATED
BY: /s/ Peter W. Knipe
ATTEST: /s/ Lori Jo Berk
2
Exhibit 10.35
CORPORATE HEALTH INSURANCE COMPANY
(A Minneapolis, Minnesota Domiciled Company)
Principal Executive Offices
980 Jolly Road
Blue Bell, Pennsylvania 19422
COMPREHENSIVE MAJOR MEDICAL
GROUP HEALTH INSURANCE POLICY
Providing Health Insurance With Optional Prescription Coverage
NON-PARTICIPATING
This Comprehensive Major Medical Group Health Insurance Policy (the "Policy") is
a legal contract between Corporate Health insurance Company ("CHI" or the
"Company") and the policyholder indicated on the Schedule of Benefits (the
"Policyholder"), which is set forth in the Summary of Benefits distributed to
each eligible employee of the Policyholder and incorporated herein by reference.
In consideration of a signed application and payment of the required premiums.
the Company agrees to provide insurance for eligible employees of the
Policyholder and their eligible dependents while such persons are covered under
this Policy and are insured for the applicable coverage. Benefits are subject to
the terms, conditions. exclusions and limitations of this Policy. Certain
identified benefits are subject to pre-certification requirements. which if not
followed will result in reduced benefits.
This Policy takes effect 12:01 a.m. Eastern Standard Time on the Effective Date
at the Policyholder's address.
Corporate Health Insurance Company has caused its President and Secretary to
execute and witness this Policy
/s/ /s/
Secretary President
<PAGE>
TABLE OF CONTENTS
I. General Information 1
II. Eligibility 2
III. Enrollment Changes 5
IV. Policy Benefits and Payments 6
V. Pre-Certification 8
VI. Covered Medical Services 9
VII. General Exclusions 19
VIII. General Provisions 22
IX. Continuation of Coverage 26
X. Coordination of Benefits 30
XI. Medicare 33
XII. Subrogation 34
XIII. Policyholder/Employer Provisions 35
XIV. Pre-Existing Conditions Limitation 37
XV. Definitions 38
<PAGE>
I. GENERAL INFORMATION
1. POLICY NUMBER: PA 18927I-Custom
2. POLICYHOLDER NUMBER: PA 18927I
3. NAME AND ADDRESS OF POLICYHOLDER:
STV Group
11 Robinson Street
Pottstown, PA 19464
4. EMPLOYER IDENTIFICATION NUMBER (E.I.N.) ASSIGNED
BY INTERNAL REVENUE SERVICE: 23-1698231
5. TYPE OF POLICY: Group Health Insurance Policy - Custom Plan
6. THE NAME, BUSINESS ADDRESS AND TELEPHONE NUMBER OF THE COMPANY:
CORPORATE HEALTH INSURANCE COMPANY
980 Jolly Road
P.O. Box 1109
Blue Bell, Pennsylvania 19422
1-800-204-2300
7. POLICY EFFECTIVE DATE: July 1, 1996
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II. ELIGIBILITY
1. Covered Persons
This Policy will cover the following Covered Persons:
(i) all Eligible Employees of the Policyholder and its subsidiaries and
affiliates specifically identified in writing by the Policyholder to
the Company; and
(ii) their Eligible Dependents.
2. Eligibility Date
The "Eligibility Date" for each Covered Person will be:
(i) if the Covered Person is an Eligible Employee, the later of the date
of hire by the Policyholder (or, if applicable, the date on which the
waiting period imposed by the Policyholder ends) and the Effective
Date of this Policy; or
(ii) if the Covered Person is an Eligible Dependent, the later of the date
of hire (or, if applicable, the date on which the waiting period
imposed by the Policyholder ends) of the Eligible Employee to whom
such Covered Person is a Dependent and the Effective Date of this
Policy.
3. When Coverage Begins
(a) If an Eligible Employee enrolls on or before the Effective Date of
this Policy, coverage will begin under this Policy on the Effective
Date for such Eligible Employee and any Eligible Dependents of such
Employee identified as Covered Persons in the Policy Enrollment Form.
(b) If an Eligible Employee enrolls after the Effective Date of this
Policy, coverage will begin on the first day of the calendar month
after the Eligible Employee enrolls under this Policy.
(c) An Eligible Employee will be deemed to have enrolled under this Policy
when the Eligible Employee has completed, signed and delivered a
Policy Enrollment Form, identifying any Eligible Dependents as Covered
Persons, to the Company and such Policy Enrollment Form has been
accepted by the Company at its sole discretion.
(d) Should the Eligible Employee not be working full-time on the day he or
she would ordinarily become covered under this Policy, the coverage
for such Employee and any Eligible Dependents will be delayed until he
or she returns to full-time work.
(e) Limitation: Each Eligible Employee will have 31 days from his or her
Eligibility Date to enroll for coverage. No Evidence of Good Health
will be required for any Eligible Employee enrolling within such 31
days. All Eligible Employees enrolling after such 31 days will be
required to submit Evidence of Good Health for his or herself and for
each Eligible Dependent. If such Employee fails to provide Evidence of
Good Health satisfactory to the Company, the Company may reject the
Employee's enrollment application for insurance under this Policy.
Coverage under this Policy for enrollees after such 31 days who
provides satisfactory Evidence of Good Health will begin no earlier
than the first day of the calendar month after CHI's approval of
Evidence of Good Health.
(f) For purpose of this Article only, each Eligible Employee who enrolls
under this Policy during any designated open enrollment period of the
Policyholder shall be deemed and treated as a new employee of the
Policyholder.
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4. Return to Work After Voluntary Termination of Employment
If an Eligible Employee returns to active full-time employment with the
Policyholder at any time following voluntary termination of employment with
the Policyholder, the waiting period described herein for new Employees
will apply, unless the Eligible Employee returns within 12 months after the
date of the voluntary termination.
5. Dependent Coverage
(a) A Covered Employee's spouse and a Covered Person's dependent children
can also be covered under the Policy pursuant to the terms hereof.
(b) The Covered Employee's spouse is eligible for dependent coverage
unless:
(i) The Covered Employee and his or her spouse are legally separated
or divorced or have obtained an annulment;
(ii) Both the Covered Employee and his or her spouse are employees of
the Policyholder. The Covered Employee and his or her spouse may
choose to be covered as individual employees of the Policyholder,
or one may cover the other as a Dependent, but both of them may
not cover the other as a Dependent;
(iii) Such spouse is in active Military Service;
(iv) Such spouse is of the same sex; or
(v) Such spouse is not a legal spouse, under the laws of the
Commonwealth of Pennsylvania.
(c) The Covered Person's natural or legally adopted child is eligible from
birth so long as the child is:
(i) Less than age 23, or if a full-time student, less than age 23;
(ii) Not married; and
(iii) Not on active duty in any of the armed forces.
(d) Child/children under legal guardianship (including foster children) or
children under court order will be included under this Policy under
the same conditions and restrictions applicable to a Covered Person's
natural or legally adopted children.
(e) The Covered Employee's spouse and child/rep meeting the requirements
described above are referred to in this Policy as "Eligible
Dependents."
6. Enrolling the Eligible Employee's Eligible Dependents
(a) The Eligible Employee can enroll for family coverage at the same time
he or she becomes eligible for his or her individual coverage.
(b) If the Eligible Employee has no Dependents when the Eligible Employee
first enrolls but later gains one, the Eligible Employee may enroll
for family coverage within 31 days of the date the Eligible Employee
gains the Dependent. This includes Dependents gained by marriage,
birth adoption, legal guardianship or court order. During the first 31
days after the birth of a child, the child will be
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automatically covered for all eligible benefits. For coverage of a
child beyond the first 31 days after birth and for coverage of a
spouse during and beyond the first 31 days after marriage, enrollment
must be made and the first premium charge for that Dependent must be
paid within that 31 day period.
(c) Note: Except for newborn child's coverage during the first 31 days
after birth. if the Eligible Employee does not enroll his or her
Dependents within 31 days after the Dependent becomes eligible.
satisfactory Evidence of Good Health for each Dependent will be
required. If satisfactory Evidence of Good Health is not provided for
such Dependent, the Company may reject the enrollment application for
insurance of such Dependent under this Policy. Coverage for such
Dependent providing satisfactory Evidence of Good Health will then
begin no earlier than the first day of the calendar month following
CHI's approval of the Evidence of Good Health. However, no Evidence of
Good Health will be required for any Dependent who enrolls within such
31 days.
(d) If a Dependent, except a child covered at birth, is confined for
medical care or treatment in any institution or at home when coverage
would normally start, the Dependent will not be covered until given a
final release by a Physician from all such confinement.
7. When Dependent Coverage Stops
Except as otherwise specifically provided in this Policy, coverage for
Dependents shall end when the dependent relationship with the Eligible
Employee ends or when coverage for the Eligible Employee of whom such
person is a Dependent ends. When coverage for a Dependent ends, the
Dependent will have an opportunity to obtain continuation of medical
coverage as provided by the Consolidated Omnibus Budget Reconciliation Act
(COBRA). For more information on COBRA and the right to continued medical
coverage, see Section 1 of Article IX of this Policy.
8. Extension of Coverage for Dependents
(a) Under certain circumstances described below, coverage could continue
for an Eligible Dependent after the time coverage would normally stop
under this Policy.
(b) A child who is otherwise eligible hereunder and is physically or
mentally incapable of self-support upon attaining the limiting age may
be continued under the coverage provided hereunder so long as he or
she remains incapacitated and unmarried at that time, subject to the
coverage of the Covered Employee to whom such child is dependent is
continuing in effect.
(c) To be eligible for the continued coverage described in this Section of
a Dependent child beyond the time coverage would normally end, proof
of his or her incapacity must be submitted to CHI within 31 days after
such Dependent's attainment of the limiting age. Proof of the
incapacity will be required from time to time to keep this coverage in
effect. Each time CHI asks for proof that a Covered Dependent is
incapacitated, CHI may require the Covered Dependent to have a
Physician's examination at the Covered Person's expense. CHI may
specify the Physician.
(d) The continued coverage of a dependent child under this Section shall
terminate on the earliest of the following dates:
(i) the date such child is no longer incapacitated according to the
Policy;
(ii) the date proof of the child's incapacity is not provided when
asked; or
(iii)the date his or her Dependent's coverage terminates pursuant to
Article II, Section 7 or Article XIII of this Policy.
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III. ENROLLMENT CHANGES
Enrollment and benefit coverage under this Policy may be changed only upon a
change in family status of the Covered Employee.
A "change of family status" occurs when:
1. A Covered Employee gets married or divorced;
2. A Covered Employee's child is born or legally adopted;
3. A Covered Employee's spouse or child dies; or
4. A Covered Employee's spouse has a loss of group insurance
coverage.
Unless otherwise permitted under Article II, a Covered Employee may change his
or her benefit coverage or enroll new Dependents only if Evidence of Good Health
has been submitted and approved by CHI for each individual involved.
Furthermore, if a Dependent of a Covered Employee, other than a newborn child,
is confined in a Hospital, Skilled Nursing Facility, at home or any other
institution on the date coverage would become effective, then such coverage will
be postponed until the day after the Dependent is no longer so confined and a
final release from such confinement is provided by the Physician.
<PAGE>
IV. POLICY BENEFITS AND PAYMENTS
If, as a result of an illness or injury, a Covered Person incurs eligible
medical expenses which exceed the Deductible Amount set forth in the Schedule of
Benefits during a calendar year, the Company will pay for such excess in
accordance with the co-payment and co-insurance provisions of the Schedule of
Benefits, subject to all other terms and conditions set forth in this Policy.
1. Deductible Amount
The Deductible Amount is the specified amount of eligible expenses which a
Covered Person or a Family Unit (as the case may be) is required to pay before
CHI pays any benefits under this Policy. Covered expenses which are used in
satisfying the Deductible Amount must be incurred and applied to such deductible
within the applicable calendar year.
The Deductible Amount applies to each Covered Person, subject to any family
Deductible Amount set forth in the Schedule of Benefits, if applicable. The
Deductible Amount must be satisfied once each calendar year, except for:
(a) the Common Accident Provision: if the Deductible Amount applies to
accident expenses and if two or more members of one family incur
covered expenses because of disabilities resulting from injuries
sustained in any one accident, the Deductible Amount will be applied
only once with respect to all covered expenses incurred as a result of
the accident; and
(b) the Carryover Provision: if any part or all of the Deductible Amount
has been satisfied during the last three months of such calendar year,
the Deductible Amount for the next calendar year will be reduced by
the amount applied.
The Deductible Amount is not applicable to certain eligible medical expenses
noted in the Schedule of Benefits, for which you or your family member need to
pay any Deductible Amount prior to being paid benefits under the Policy.
2. Co-Payment and Co-Insurance
After the applicable Deductible Amount has been paid by the Covered Person or
the Family Unit (as the case may be), the eligible expenses for Covered Medical
Services will be paid by CHI and the Covered Persons in accordance with the
co-payment and co-insurance provisions set forth in the Schedule of Benefits.
Certain Covered Medical Services will be subject to co-insurance provisions,
which require the payment obligations in excess of the Deductible Amount to be
shared between CHI and the Covered Person in accordance with percentages of
Reasonable and Customary Charges set forth in the Schedule of Benefits. Certain
other Covered Medical Services will be subject to co-payment provisions, which
require an initial sum specified in the Schedule of Benefits to be paid by the
Covered Person and the balance of Reasonable and Customary Charges to be paid by
CHI.
Certain Covered Medical Services specified in the Schedule of Benefits may not
be subject to co-insurance or co-payment requirements.
3. Out-of-Pocket Maximum
During any calendar year, the Covered Person or the Family Unit (as the case may
be) will not be required to pay an aggregate amount in excess of the
out-of-pocket maximum amount specified in the Schedule of Benefits (the
"Out-of-Pocket Amount"). If during any calendar year the Covered Person or the
Family Unit (as the case may be) has paid pursuant to the above co-insurance or
co-payment provision an aggregate amount greater than the Out-of-Pocket Amount,
CHI will pay for 100% of the balance of the eligible expenses, up to the amount
of the maximum benefit amounts set forth in the Schedule of Benefits.
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<PAGE>
The co-insurance and co-payments paid by the Covered Person or the Family Unit
will be included in the Out-of-Pocket Amount. However, the Deductible Amount
paid by the Covered Person or the Family Unit will not be included in the
Out-of-Pocket Amount.
4. Maximum Benefits
The benefits payable under this Policy for all eligible medical expenses
incurred by any Covered Person shall not exceed the applicable maximum benefits
specified in the Schedule of Benefits. Such maximum benefits may be in the form
of a maximum amount payable during lifetime or a specified period or in the form
of a maximum number of days or visits for which benefits are payable under the
Policy. Different Covered Medical Services may be subject to one or more
different maximum benefits.
5. Restoration and Reinstatement
If a Covered Person has received his or her maximum benefits under the Policy,
then on the first day of each calendar year $1,000 shall be reinstated, but in
no event shall the reinstated amount exceed the applicable maximum benefits set
forth in the Schedule of Benefits. However, any Covered Person who wishes
immediate reinstatement of the full Policy maximum shall again be entitled to
receive full benefits by submitting Evidence of Good Health at his or her own
expense. The new maximum benefits will take effect on the first day of the month
following CHI's approval at its sole discretion of Evidence of Good Health. This
restoration and reinstatement provision will not apply to certain Covered
Medical Services, as specified in the Schedule of Benefits.
6. Re-Entry Into Policy
Any person who was formerly covered under the Policy, either as an Eligible
Employee or as a Dependent, and who again becomes covered hereunder within a
one-year period from the termination date of his or her previous coverage,
either as an employee or as a Dependent, shall not have his or her full maximum
benefits restored solely by reason of the fact that s/he has become covered for
a second or subsequent time. The maximum benefits with respect to such person,
as set forth in the Schedule of Benefits, shall be reduced by any benefits
previously paid under this Policy.
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V. PRE-CERTIFICATION
When a Physician recommends that a Covered Person be hospitalized or receive
certain other medical services or supplies specified in the Schedule of
Benefits, there are certain procedures that must be followed.
The Covered Person, a member of his or her family, a hospital staff member, or
the attending Physician, must notify CHI to pre-certify the admission or
treatment, as the case may be, prior to receiving any of the services or
supplies that require pre-certification pursuant to the Schedule of Benefits or
this Policy.
The Company will reduce the benefits payable under this Policy by the percentage
set forth in the Schedule of Benefits if the procedures for pre-certification
set forth herein are not followed. Each Covered Person will be responsible to
pay the unpaid balance of the benefits.
To obtain pre-certification, call CHI at 1-800-509-3400. This call must be made:
1. Prior to any planned admission into Hospital and prior to receiving
such other eligible services or supplies that require
pre-certification according to the Schedule of Benefits or this
Policy;
2. Within 24 hours after the time of an emergency admission or as soon
thereafter as reasonably possible; and
3. As soon as the attending Physician confirms that a Covered Person is
pregnant and again within 24 hours of the birth or as soon thereafter
as reasonably possible.
When calling CHI, the caller must provide:
1. The Covered Person's name and the Covered Person's social security
number;
2. The treating Physician's name, address and phone number;
3. The name of the Hospital or treatment facility and the anticipated
admission or treatment date; and
4. The Policyholder's name and Policyholder Policy Number.
There is no requirement to call in advance before seeking treatment for an
emergency.
Case Management
Certain medical conditions for which a claim is made under the Policy may be
referred to Case Management (CM).
Only those conditions for which Covered Medical Expenses are expected to exceed
a certain dollar amount, and for which there is a potential lower cost treatment
alternative, will be referred to CM.
CM is a program which provides a case-by-case analysis and medical treatment
plan suggestions that address the need of catastrophically ill or injured
individuals. It concentrates on severe injuries and illnesses, such as spinal
cord injuries or head trauma, when early intervention and individual case
management will prove effective to a patient's recovery.
The decision to refer any case to CM will remain with CHI, who will rely on the
criteria established by the CM service provider to determine which claims are
recommended for CM, except that no alternative treatment will be provided to the
Covered Person under CM without prior consent of the Covered Person and the
attending Physician.
In certain instances a recommendation to use alternative treatment not normally
covered by the Policy may be made when such treatment endorses quality care,
Medical Necessity and cost effectiveness. Under these circumstances, any such
alternative treatment will be covered by the Policy.
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VI. COVERED MEDICAL SERVICES
Subject to the terms, conditions, exclusions and limitations set forth in the
Schedule of Benefits (including the co-payment, co-insurance and maximum benefit
amounts set forth therein) and in this Policy, the Company will pay and provide
to each Covered Person the benefits described below.
This Policy does not cover charges in excess of Reasonable and Customary Charges
(as defined herein) and does not provide benefits for services or supplies other
than those Medically Necessary (as defined herein). Therefore, the term
"charges" used below shall refer only to Reasonable and Customary Charges for
Medically Necessary services or supplies. The coverage under this Policy is also
subject to other exclusions set forth in Article VII of this Policy.
Acupuncture
The charges for the administration of acupuncture when provided for pain
management in lieu of anesthesia.
Alcoholism and Drug Addiction Treatment
For alcoholism and drug addiction treatment, please refer to "Substance Abuse
Treatment" below.
Ambulance Transportation
The charges for ambulance service. Coverage is limited to transportation to and
from the nearest facility that can give necessary care and treatment.
Ambulatory Surgery
The charges for services and supplies furnished in connection with performance
of a surgical procedure at an Ambulatory Surgical Facility or the outpatient
department of a Hospital.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-509-3400 prior to
treatment. The Company will reduce the benefits under this Policy by the
percentage or dollars (as the case may be) set forth in the Schedule of Benefits
if the procedures for pre-certification are not followed.
Limitations/Exceptions
Coverage is limited to charges for the following:
1. Services and supplies furnished by the Ambulatory Surgical Facility or
Hospital on the date of the procedure;
2. Services of the operating Physician for performing the procedure and
for: a. Related pre- and post-operative care; and b. The administering
of an anesthetic; and
3. Services of any other Physician for the administering of a general
anesthetic.
This Policy does not cover Ambulatory Surgery charges incurred:
(a) For the services of a Physician who renders technical assistance to
the operating Physician, unless required in connection with the
procedure; or
(b) While the Covered Person is confined as a full-time Inpatient in a
Hospital.
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Anesthesia
The charges for the administration of anesthetics by a Physician (other than the
surgeon, assistant surgeon or the attending Physician) or registered nurse
anesthetist (R.N.A.).
Assistant Surgeon
The charges for the professional services of a legally qualified Physician to
render technical assistance to the operating surgeon when Medically Necessary in
connection with a surgical procedure performed. However, no benefits are payable
for surgical assistance rendered in hospitals where it is routinely available as
a service provided by a hospital intern, resident or house officer. The
assistant surgeon's charges are determined by using the surgeon's Reasonable and
Customary Charges.
Birthing Center
The charges for services and supplies furnished by a Birthing Center for:
1. Prenatal care;
2. Delivery of a child or children; and
3. Post-partum care rendered within twenty-four (24) hours after the
delivery.
Also included are charges for the services shown below if received in connection
with the above services and supplies furnished by the Birthing Center:
1. Charges by the operating Physician or certified nurse midwife for:
a. Performing an obstetrical procedure;
b. Related pre- and post-operative care; and
c. Administering an anesthetic.
2. Charges by any other Physician for the administering of a general
anesthetic.
Limitations/Exclusions
This Policy does not cover Birthing Center charges incurred:
1. For the services of a Physician or certified nurse midwife who renders
technical assistance to the operating Physician; or
2. For which pregnancy-related expenses are not covered under this
Policy.
Blood and Blood Plasma
The charges for blood and blood plasma, and blood plasma expanders when not
replaced on behalf of the Covered Person.
Cardiac Rehabilitation Services
The charges for cardiac rehabilitation therapy rendered by a licensed therapist,
when prescribed by and provided under the supervision of the attending
Physician.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-509-3400 prior to
receiving services. The Company will reduce the benefits under this Policy by
the percentage or dollars (as the case may be) set forth in the Schedule of
Benefits if the procedures for pre-certification are not followed.
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Chemotherapy
The charges for the treatment of malignant disease by chemical or biological
antineoplastic agents for cancer chemotherapy and cancer hormone treatments and
for services which have been approved by the United States Food and Drug
Administration for general use in treatment of cancer, whether performed in a
Physician's office, as an Inpatient or Out-Patient at a Hospital, or in any
other medically appropriate treatment setting.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-509-3400 prior to
treatment. The Company will reduce the benefits under this Policy by the
percentage or dollars (as the case may be) set forth in the Schedule of Benefits
if the procedures for pre-certification are not followed.
Chiropractic Care
The charges for detection and correction by manual means of structural imbalance
or subluxation resulting from or related to distortion, misalignment or
subluxation of or in the vertical column.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-509-3400 prior to
treatment. The Company will reduce the benefits under this Policy by the
percentage or dollars (as the case may be) set forth in the Schedule of Benefits
if the procedures for pre-certification are not followed.
Consultation
The charges for consultation services by a Professional Provider, provided that
the consultation services are given to the Covered Person at the request of the
attending Physician while confined as an Inpatient in a Hospital, a Skilled
Nursing Facility or a Substance Abuse Treatment Facility.
Consultation consists of an examination of the Covered Person and a review of
his or her x-ray and laboratory examinations and medical history, but not staff
consultations required by hospital rules and regulations.
Diagnostic Services
The charges for Diagnostic Services.
Durable Medical Equipment
The charges for rental or initial purchase (or necessary repair) of Durable
Medical Equipment prescribed by a Physician for the treatment of an Illness or
Injury. It does not include any changes made to the Covered Person's home,
automobile, or personal property, such as air conditioning or remodeling. Rental
coverage is limited to the purchase price of the Durable Medical Equipment.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-509-3400 prior to
leasing or purchasing any equipment in excess of $1,500. The Company will reduce
the benefits under this Policy by the percentage or dollars (as the case may be)
set forth in the Schedule of Benefits if the procedures for pre-certification
are not followed.
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Emergency Services
The charges for Emergency Services received within 48 hours after the onset of a
Medical Emergency. Surgery (e.g., suturing, burn care fracture care, etc.)
payment will be made as a surgical benefit.
After being admitted into a facility for Emergence Services, CHI must be
notified at 1-800-509-3400 within 24 hours of the admission or as soon as
reasonably possible. The Company will reduce the benefits under this Policy by
the percentage or dollars (as the case may be) set forth in the Schedule of
Benefits if the procedures for such notification are not followed.
Hemodialysis
The charges for hemodialysis treatment.
Home Health Services
The charges for Home Health Services provided by a licensed Home Health Agency
pursuant to a Home Health Plan.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-509-3400, and CHI
must approve the Home Health Plan, prior receiving Home Health Services. The
Company will reduce the benefits under this Policy by the percentage or dollars
(as the case may be) set forth in the Schedule of Benefits if the procedures for
pre-certification are not followed.
Limitations/Exclusions
Coverage is limited to one visit per day. Each period of up to four (4) hours or
less will be considered one visit, and each visit by a Home Health Agency is
counted as one visit.
Hospice Care
The charges for Hospice Services if the attending Physician certifies that the
Covered Person is a Terminally Ill Person and recommends admission into a
Hospice Care Program.
To qualify for payment under the Policy, Hospice Services must be:
1. Provided while the Terminally Ill Person is a Covered Person;
2. Provided within six (6) months of the Terminally Ill Person's entry or
re-entry (after a remission period) in the Hospice Care Program; and
3. Furnished or arranged by a Hospice.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-509-3400, and CHI
must approve the Hospice Care Program, prior receiving Hospice Services. The
Company will reduce the benefits under this Policy by the percentage or dollars
(as the case may be) set forth in the Schedule of Benefits if the procedures for
pre-certification are not followed.
Limitations/Exclusions
Coverage is limited to one or more of the following charges:
1. For the confinement of a Terminally Ill Person as an Inpatient in a
Hospice facility;
2. For Home Health Services furnished to the Terminally Ill Person in the
person's home;
3. For social services furnished to the Terminally Ill Person or to the
Family Unit by a Social Worker;
4. For palliative care (medication/treatment directed toward relief); or
5. For respite care.
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Hospital
The charges for Out-Patient services and supplies, and the following Inpatient
charges when a Covered Person is confined in a Hospital:
1. Room and board and general nursing care charges for semi-private
accommodations (designated as such by the Hospital) or, if the Covered
Person utilizes private accommodations because the Covered Person's
medical condition requires isolation for his or her health and the
attending Physician orders such private accommodations, charges for
private accommodations; and
2. Charges for all other hospital services and supplies, including
special meals and dietary services, medicines, laboratory tests, use
of operating rooms and special equipment anesthetics and x-rays,
provided and billed by hospital.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-509-3400 prior to hospital admission as an Inpatient. The Company will
reduce the benefits under this Policy by the percentage or dollars (as the case
may be) set forth in the Schedule of Benefits if the procedures for
pre-certification are not followed.
Limitations/Exclusions
The Policy does not cover hospital charges for any day that the Covered Person
does not receive any medical treatment after being admitted to a Hospital.
Immunization for Children
The charges for child immunization, up to the minimum benefits mandated by the
Pennsylvania Department of Health.
Coverage will be provided for those child immunizations, including the
immunizing agents, which as determined by the Department of Health, conform to
the standards of the U. S. Department of Health and Human Services. These
benefits will be exempt from Deductible Amounts and other dollar limits.
Infertility Services
The charges for services to diagnose infertility. Services to treat infertility
are not covered by this Policy.
Inpatient Physician Services
The charges for medical treatment given by the attending Physician to a Covered
Person while confined as an Inpatient in a Hospital or Skilled Nursing Facility.
Limitations/Exclusions Inpatient Physician services coverage does not include
charges for:
1. Surgical services;
2. Diagnostic Services;
3. Maternity services;
4. Any therapy;
5. For psychiatric treatment; or
6. Treatment rendered to a Covered Person who has exceeded the maximum
number of days of confinement or the maximum benefit amount for
Inpatient Physician services, as set forth in the Schedule of
Benefits.
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Mammography
The charges for female Covered Person's expenses for mammography services, up to
one routine mammography every calendar year if the Covered Person is age 40 or
older. In addition, any mammography recommended by a Physician.
Maternity-Related Care
The charges for female Covered Person's expenses incurred as a result of
pregnancy, miscarriages and Medically Necessary and elective abortions. Life
threatening abortions will be covered as any other surgery.
The Covered Person, a member of his or her family, a hospital staff member' put
preferably the attending Physician, must notify CHI at 1-800-509-3400 as soon as
pregnancy is confirmed and within 24 hours after birth of a child or as soon
thereafter as reasonably possible.
Mental or Nervous Disorders
For coverage of mental or nervous disorder, please refer to "Psychiatric
Treatment" below.
Newborn Baby Care
The charges for care of newborn children, including Hospital charges for nursery
room and board and miscellaneous expenses.
Occupational Therapy
The charges for occupational therapy rendered by a licensed therapist for
Illnesses and Injuries of the Covered Person.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-509-3400 prior to treatment. The Company will reduce the benefits under
this Policy by the percentage or dollars (as the case may be) set forth in the
Schedule of Benefits if the procedures for pre-certification are not followed.
Limitations/Exclusions
Coverage is limited only to treatment for up to such number of days per incident
of Illness or Injury set forth in the Schedule of Benefits, beginning with the
first day of treatment.
Office Visits
The charges for diagnosis or treatment of any Injury or Illness at a Physician's
office.
Organ Transplants
The charges for services which are directly and specifically related to organ
transplants when performed at a Hospital. Where the Covered Person is the
recipient, coverage hereunder includes the hospitalization of donors, and for
those hospital services directly and specifically related to the transplantation
of the organ to the Covered Person, to the extent that the Covered Person
(recipient) would be entitled to such benefits and the donor is not otherwise
insured or covered by another health care plan.
The purchase price of the organ is not covered under this Policy. Coverage under
this Policy is limited to organ transplants meeting the following requirements:
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1. The attending Physician certifies that the organ transplant is
Medically Necessary;
2. The covered Person must be the recipient; and
3. The transplant is accepted by the general medical community at the
time of the procedure as appropriate treatment for the specific
conditions of the Covered Person.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-509-3400 prior to treatment. The Company will reduce the benefits under
this Policy by the percentage or dollars (as the case may be) set forth in the
Schedule of Benefits if the procedures for pre-certification are not followed.
Oxygen
The charges for oxygen and the rental equipment for its administration when
prescribed by the attending Physician.
Papanicolaou Smear (Pap Smear)
The charges for a female Covered Person's expenses for a routine pap smear in
accordance with the recommendations of the American College of Obstetricians and
Gynecologists.
Physical Therapy
The charges for physical therapy rendered by a licensed therapist for Illnesses
and Injuries of the Covered Person.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-509-3400 prior to receiving services. The Company will reduce the benefits
under this Policy by the percentage or dollars (as the case may be) set forth in
the Schedule of Benefits if the procedures for pre-certification are not
followed.
Preventive Care
The charges for an annual gynecological examination including a pelvic
examination and clinical breast examination by a Physician.
The charges for immunizations (other than immunization for children covered
elsewhere in this Policy) and physical examinations (other than papanicolaou
smears and mammography covered elsewhere in this Policy) by a Physician, subject
to the limitations set forth in the Schedule of Benefits.
Private Duty Nursing
The charges for private duty professional nursing services from a L.P.N. or R.N.
for a Covered Person's non-hospitalized acute-illness or injury
Private duty nursing care furnished for Custodial Care is not covered.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-509-3400 prior to receiving services. The Company will reduce the benefits
under this Policy by the percentage or dollars (as the case may be) set forth in
the Schedule of Benefits if the procedures for pre-certification are not
followed.
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Psychiatric Treatment
The charges for the following Inpatient and Out-Patient services for a Covered
Person for the treatment of a Mental Illness.
Inpatient: The hospital services and supplies provided to a Covered Person for
the treatment of a Mental Illness while confined as an Inpatient at a Hospital
or a Psychiatric Hospital.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-509-3400 prior to admission. The Company will reduce the benefits under
this Policy by the percentage or dollars (as the ease may be) set forth in the
Schedule of Benefits if the procedures for pre-certification are not followed.
Out-Patient: The following Out-Patient services for the treatment of a Mental
Illness rendered by a licensed psychiatrist, psychologist, psychotherapist or
psychiatric Social Worker at a Mental Health Treatment Facility:
1. Oral and written diagnostic tests;
2. Consultation visits;
3. Diagnostic visits;
4. Physician's personal treatment visits; and
5. Group therapy.
Radiation Therapy
The charges for the treatment of any Illness or Injury by x-ray (but not dental
x-rays, unless directly related to a Covered Medical Service), gamma ray,
accelerated particles, mesons, neutrons, radium or radioactive isotopes,
including the cost of radioactive materials.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-509-3400 prior to receiving services. The Company will reduce the benefits
under this Policy by the percentage or dollars (as the ease may be) set forth in
the Schedule of Benefits if the procedures for pre-certification are not
followed.
Reconstructive/Corrective Surgery
The charges for reconstructive surgery if such surgery is required to:
1. To restore normal functions of a body part (other than a tooth or
structure that supports the teeth) which is malformed as a result of a
birth defect or as a direct result of Illness or Injury or surgery
performed to treat an Illness; or
2. Repair an Injury which occurs while the person is covered under this
Policy. Surgery must be performed in the calendar year of the accident
which causes the Injury or in the next calendar year.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-509-3400 prior to receiving surgery. The Company will reduce the benefits
under this Policy by the percentage or dollars (as the ease may be) set forth in
the Schedule of Benefits if the procedures for pre-certification are not
followed.
Reconstructive surgery coverage does not include Cosmetic Surgery.
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Respiratory Therapy
The charges for respiratory therapy rendered by a licensed therapist for
Illnesses and injuries of the Covered Person.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-509-3400 prior to receiving services. The Company will reduce the benefits
under this Policy by the percentage or dollars (as the case may be) set forth in
the Schedule of Benefits if the procedures for pre-certification are not
followed.
Skilled Nursing Facility
The charges listed below when a Covered Person is confined as an Inpatient in a
Skilled Nursing Facility while recovering from an Illness or Injury. Coverage is
limited to services and supplies furnished while the Covered Person is under
continuous care of his or her Physician, requires 24-hour nursing care and the
confinement in a Skilled Nursing Facility is required by his or her Physician:
1. Room and board and general nursing care charges for semi-private
accommodations (designated as such by the Hospital) or, if the Covered
Person utilizes private accommodations because the Covered Person's
medical condition requires isolation for his or her health and the
attending Physician orders such private accommodations, charges for
private accommodations; and
2. Charges for all other skilled nursing services and supplies, including
special meals and dietary services and medicines.
Skilled Nursing Facility care coverage does not include Custodial Care.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-509-3400 prior to admission. The Company will reduce the benefits under
this Policy by the percentage or dollars (as the case may be) set forth in the
Schedule of Benefits if the procedures for pre-certification are not followed.
Speech Therapy
The charges for speech therapy rendered by a qualified speech therapist to
restore or rehabilitate any speech loss or impairment caused by Injury or
Illness, a previous speech therapeutic process, or as a result of surgery for an
Injury or Illness.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending physician, must obtain pre-certification by CHI at
1-800-509-3400 prior to receiving services. The Company will reduce the benefits
under this Policy by the percentage or dollars (as the case may be) set forth in
the Schedule of Benefits if the procedures for pre-certification are not
followed.
Substance Abuse Treatment (including Alcoholism and Drug Addiction)
The charges for the following Inpatient and Out-Patient services to treat
Substance Abuse or Dependency, subject to the limitations set forth below and
any additional limitations set forth in the Schedule of Benefits:
1. Out-Patient Care: Covered Medical Services include the following
Out-Patient services in a Substance Abuse Treatment Facility for
treatment for medical conditions resulting from the Substance Abuse or
Dependency: (1) Physician, psychologist, nurse, certified addictions
counselor and trained staff services; (2) rehabilitation therapy and
counseling; (3) family counseling and intervention; (4) psychiatric,
psychological and medical laboratory tests; and (5) drugs, medicines,
equipment use and supplies.
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Each Covered Person is eligible for thirty (30) Out-Patient full
visits per calendar year. Each Covered Person is also eligible for
thirty (30) additional Out-Patient full visits or equivalent partial
visits per calendar year at a Substance Abuse Treatment Facility,
which may be exchanged on a two-for-one basis for up to fifteen (15)
non-hospital, residential alcohol or drug treatment days described in
Paragraph 3 below. Treatment for Substance Abuse or Dependency shall
be provided according to an individualized treatment plan, subject to
a lifetime limit of one hundred and twenty (120) Out-Patient full
visits or equivalent partial visits.
2. Inpatient Detoxification: Covered Medical Services include the
following Inpatient services at a Hospital or a Substance Abuse
Treatment Facility for detoxification and treatment for medical
conditions resulting from the Substance Abuse or Dependency: (1)
lodging and dietary services; (2) Physician, psychologist, nurse,
certified addictions counselor and trained staff services; (3)
diagnostic x-ray; (4) psychiatric, psychological and medical
laboratory testing; (5) drugs, medicines, equipment use and supplies.
Each Covered Person is eligible for seven (7) Inpatient days of per
calendar year, subject to a lifetime limit of four (4) separate such
admissions. Inpatient rehabilitation beyond detoxification in the
Hospital is not covered hereunder.
3. Inpatient Rehabilitation: Covered Medical Services include the
following Non-Hospital Substance Abuse Residential Facility care: (l)
lodging and dietary services; (2) Physician, psychologist, nurse,
certified addictions counselor and trained staff services; (3)
rehabilitation therapy and counseling; (4) family counseling and
intervention; (5) psychiatric, psychological and medical laboratory
tests; and (6) drugs, . medicines, equipment use and supplies.
Each Covered Person is eligible for thirty (30) days per calendar year
for such residential treatment in a Non-Hospital Substance Abuse
Residential Facility, subject to a lifetime limit of ninety (90) days
of such services.
4. Court-ordered chemical dependency admissions are covered but only to
the extent of the covered benefits described above.
In the case of Paragraph 2 or 3 above, the Covered Person, a member of his or
her family, a hospital staff member, but preferably the attending Physician,
must submit to CHI prior to treatment a certificate from a Physician that the
Covered Person is suffering from Substance Abuse or Dependency and needs
treatment.
Voluntary Sterilization
The charges for male or female voluntary sterilization procedures. The Policy
will not cover reversal procedures.
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VII. GENERAL EXCLUSIONS
This Policy Does Not Cover Charges, Expenses or Costs:
1. For services or supplies not Medically Necessary for the diagnosis or
treatment of an Illness or Injury.
2. Which exceeds the Reasonable and Customary Charges or exceeds the
maximum benefit amounts set forth in the Schedule of Benefits.
3. Caused by war (declared or undeclared) or any act of war.
4. Suffered while on full-time active duty in the armed forces of any
country or international authority.
5. Incurred in connection with any injury or illness which is compensable
under any workers' compensation or occupational disease act or law or
the federal Longshoreman's and Harbor Worker's Compensation Act.
6. For services received in a veteran's administration hospital, a public
health service hospital, or any facility operated by the U.S.
government or any of its agencies, except to the extent that there is
an unconditional requirement to pay those charges.
7. For medical and dental care received by retirees from armed forces or
their dependents pursuant to and covered by programs established under
federal law.
8. For the treatment of or care for mental retardation, defects and
deficiency, except that this exclusion does not apply to Mental
Illnesses specifically covered in Article VI.
9. For dental services related to the care, filling, removal or
replacement of teeth and treatment of injuries to or diseases of the
teeth and gums, including but not limited to apicoectomy (dental root
resection), orthodontics, root canal treatment, soft tissue
impactions, alveolectomy, augmentation and vestibuloplasty treatment
of periodontal disease, and dental implants, except for accidental
injuries to sound natural teeth.
10. For optical services: The Policy does not cover charges for
examinations to determine the need for (or change of) eyeglasses or
lenses of any type except initial replacements for loss of the natural
lens, eye surgery such as radial keratotomy when the primary purpose
is to correct myopia (nearsightedness), hyperopia (farsightedness) or
astigmatism (blurring), or exams for the correction of vision and
radial keratotomy eye surgery to improve visual acuity.
11. For services rendered by the Covered Person or his or her Close
Relative.
12. For medical services or supplies not prescribed or rendered by a
Physician.
13. Directly related to attempted suicide or an intentionally
self-inflicted injury (whether sane or insane).
14. For provision or replacement of the following items: arch supports;
elastic hose; birth control devices including, but not limited, to
IUDs, diaphragms and condoms; false teeth; braces; traction apparatus;
canes; cervical collars; walkers; corrective shoes; wheelchairs;
corsets; crutches; wigs or cranial prosthesis; diapers; special
appliances, supplies or equipment. This exclusion does not apply to
Durable Medical Equipment specifically covered by Article VI.
15. For Custodial Care.
16. For Cosmetic Surgery except reconstructive surgery specifically
covered by Article VI
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17. Resulting from the commission of or attempt to commit a felony by the
Covered Person.
18. For personal convenience items or services such as telephones, barber
services, meals, formulas, radio and television rentals, homemaker
services and other like items and services.
19. Applied toward satisfaction of the Deductible Amount or the co-payment
or co-insurance amount payable by the Covered Person.
20. For blood, blood plasma and blood products that are replaced on behalf
of the Covered Person.
21. For actual or attempted impregnation or fertilization which involves
either a Covered Person or a surrogate as a donor or a recipient.
22. For examinations, adjustment of, or purchase of a hearing aid.
23. For career and pastoral counseling.
24. For services or supplies of an Educational, Experimental or
Investigative nature. This exclusion includes, but is not limited to:
- All phases of clinical trials;
- All treatment protocols based upon or similar to those used in
clinical trials;
- Drugs approved by the Federal Food and Drug Administration
under its Treatment Investigatory New Drug regulation or
equivalent;
- Federally approved drugs used for treatment indications not
generally recognized by the medical community.
25. For the reversal of any sterilization procedure or any related care.
26. For sex transformations or other transsexual surgery or related
services not necessitated by an Injury or Illness covered by this
Policy.
27. For services rendered for academic reasons.
28. For orthoptic therapy (vision exercises).
29. For weight reduction programs and gastric stapling for treatment of
obesity.
30. Infertility services, including but not limited to, In-Vitro
fertilization procedures, Gamete Intrafallopian Transfer (GIFT),
Zygote Intrafallopian transfer (ZIFT ) and other similar or related
services; and infertility injectables or other infertility-related
supplies.
31. For bereavement counseling services, except as specifically provided
for under the Hospice Services in Article VI.
32. For treatment of temporomandibular joint dysfunction with/intra oral
devices or any other method to alter vertical dimension.
33. For hypnosis not used as an integral part of a Covered Medical Service
covered under Article VI
34. For telephone consultations, failure to keep a scheduled visit, or
completion of a claim form.
35. For any services or supplies not specifically described herein.
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36. For services or supplies covered by any automobile insurance policy up
to the amount of coverage limitation under such policy.
37. For prescription drugs.
The Company shall determine whether a service or supply is covered under this
Policy or excluded from coverage under this Policy.
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VIII. GENERAL PROVISIONS
1. Notice of Claim
Written notice of claim must be furnished to the Company within 90 days after
Covered Medical Services have been rendered to the Covered Person. A notice of
claim form may be obtained from CHI or the Policyholder. However, in case of a
claim for which the Policy provides any periodic payment contingent upon
continued provision of Covered Medical Services, this notice may be furnished
within 90 days after termination of each period for which the Company is liable.
Failure to furnish the notice of claim within the time required will not
invalidate nor reduce any claim if it is not reasonably possible to give the
notice of claim within 90 days, provided the notice of claim is furnished as
soon as reasonably possible. However, except in the absence of legal capacity of
the claimant, the notice of claim may not be furnished later than one year from
the date when the notice of claim was originally required.
2. Time for Payment of Claim
Benefits payable under the Policy will be paid promptly upon receipt by CHI of
satisfactory notice of claim, unless the Policy provides for periodic payment.
Where the Policy provides for periodic payments, the benefits will accrue and be
paid monthly, subject to satisfactory notice of claim.
3. Payment of Claims
All or any portion of any indemnities provided by the Policy on account of
hospital, nursing, medical or surgical services may, at the Company's option, be
paid directly to the hospital or other persons rendering such services; but it
is not required that the service be rendered by a particular hospital or person.
Any payment made by the Company in good faith pursuant to this provision will
fully discharge the Company's obligation to the extent of the payment. The
Covered Person may request that payments not be made pursuant to this provision.
The request must be made in writing and must be given to the Company not later
than the time of filing notice of claim. Payment made prior to receipt of the
Covered Person's written request at the Company's principal executive office
will be deemed to be payment made in good faith.
The Covered Person shall be responsible for the payment of all charges for any
service or supply in excess of the Reasonable and Customary Charges or otherwise
not covered by this Policy.
4. Review and Appeal Procedures
Reviews of Pre-Certification Denials
If a Covered Person is denied coverage for a procedure during the
pre-certification process described in Article V, the Covered Person will be
advised of the reason(s) for the denial and of his or her right to a prompt
review by a person who did not participate in the denial decision.
If a review is requested, in addition to reviewing the reasons for the denial,
CHI may discuss the case with the treating Physician in an effort to agree on
care that would be covered under the Policy.
If the review does not result in a satisfactory resolution, the Covered Person
will receive a written notice explaining the reason(s) for the denial.
Appeals of Denied Claims or Other Denials
If a Covered Person is denied coverage for a claim or denied coverage for a
procedure during pre-certification process, the Covered Person will be advised
in writing of the reason(s) for the denial. This notice will set forth
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the reasons for such denial. If the Covered Person wishes to appeal this
decision, the Covered Person may write to the address which appears on the
notice (to the attention of the person who signed the letter, if any).
The Covered Person may appeal a denial of benefits within 30 days of the date of
the rejection by sending a letter stating why the Covered Person thinks the
claim should not have been denied, including a copy of the denial letter and
with any additional claim. The Policyholder number, claim number, if any, and
the date of service for which benefits were denied must be included will become
final and incontestable.
Upon receipt of the letter and any additional information the Covered Person
provides, the Covered Person's records will be reviewed; and the results of this
review will be sent to the Covered Person promptly. In unusual cases, as when
review of the claim or denial of coverage requires examination by medical
personnel, including consulting physicians, the review may be extended.
5. Choice of Physician
Each Covered Person has free choice of any Physician, Hospital or other
provider.
6. Time Limit on Certain Defenses
No claim for loss incurred after one year from commencement of the individual
Covered Person's insurance will be reduced or denied on the grounds that the
disease or physical condition existed prior to the commencement of the Covered
Person's insurance.
7. Contract
The entire contract between the Company and the Policyholder consists of the
Policy, the Summary of Benefits and the applications of the Policyholder and
each Covered Employee. All statement contained in the applications will, in the
absence of fraud, be deemed representations and not warranties. No statement
made by an applicant for insurance will be used to void the insurance or reduce
the benefits, unless contained in a written application and signed by the
applicant. No agent has the authority to make or modify the Policy, or to extend
the time for payment of premiums, or to waive any of the Company's rights or
requirements.,
No modification of the Policy will be valid unless evidenced by an endorsement
or amendment of the Policy, signed by an executive officer of the Company and
delivered to the Policyholder.
8. Incontestability
The validity of a Covered Person's insurance will not be contested, except for
non-payment of premium, after his or her insurance under the Policy has been
continuously in force for one year during his or her lifetime. No statement made
by a Covered Employee relating to his or her insurability or that of his or her
Dependents will be used in defense to a claim under the Policy unless: (a) it is
contained in a written application signed by the Covered Employee; and (b) a
copy of the application has been furnished to the Covered Employee or to his or
her beneficiary.
9. Misstatements of Age
If the age of any Covered Person has been misstated, an equitable adjustment
will be made in the premiums or, at the Company's discretion, the amount of
insurance payable. Any premium adjustment will be based on the premium that
would have been charged for the same coverage on a Covered Person of the same
age and similar circumstances.
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10. Physical Examination and Autopsy
The Company, at its own expense, will have the right and opportunity to examine
a Covered Person, when and as often as may reasonably be required during the
pendency of a claim under the Policy and to make an autopsy in case of death,
where it is not forbidden by law.
11. Legal Action
No action at law or in equity may be brought to recover on the Policy unless and
until the expiration of 60 days after notice of claim has been furnished to CHI
in accordance with the requirements of this Policy. No such action may be
brought after the expiration of three (3) years after the time notice of claim
is required to be furnished.
12. Conformity With State Statutes
Any provision of the Policy which, on its Effective Date, is in conflict with
the statutes of the state in which it is issued, is hereby amended to conform to
the minimum requirements of those statutes.
13. Assignment
No assignment of the Policy, or any part of it, will be binding on the Company
unless approved in writing by the President or Executive Vice President of the
Company. The Company does not assume any responsibility for the validity of any
assignment.
14. Rights of Employees
This Policy does not provide any benefit not specifically described herein. This
Policy does not constitute a contract of employment and does not affect the
right of the employer to discharge any Employee.
15. Facility of Payment
If, in the opinion of the Company, a Covered Person is not competent to execute
a valid release for payment of any benefit to which he is entitled under this
Policy, the Company may, but shall not be required to, make payment to such
individual(s) or institution(s) as have assumed the care and support of such
Covered Person. In the event the Covered Person dies before payment is made to
him of all benefits to which he is entitled under the Policy, the Company may,
but shall not be required to, make payment to such individual(s) or
institution(s) as may be, in the opinion of the Company, equitably entitled
thereto, including without limitation, individual(s) or institution(s) to which
the Covered Person may have assigned such benefits prior to his death. Any
payment made in accordance with the foregoing provisions shall fully discharge
the Company to the extent of such payments.
16. Right to Receive and Release Information
For the purpose of determining the applicability of and implementing the terms
of the provisions of the Policy, the Company may release to, or obtain from, any
other plan or policy administrator, insurance company, or other organization or
individual any information, concerning any individual, which the Company
consider to be necessary for those purposes. Any individual claiming benefits
under this Policy will furnish the information that may be necessary to
implement the provisions.
17. Deductible Amounts
For each Covered Medical Expense, the individual Deductible Amount stated in the
Schedule of Benefits must be incurred with respect to a Covered Person before
benefits become payable. If, during a calendar year, such deductibles are equal
to the family Deductible Amount shown in the Schedule of Benefits, no further
deductible amount shall apply with respect to any remaining expenses incurred by
members of that Family Unit during the remainder of that calendar year.
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18. Incorporation of Summary of Benefits
The Summary of Benefits is hereby incorporated in and made a part of this
Policy.
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IX. CONTINUATION OF COVERAGE
1. Consolidated Omnibus Budget Reconciliation Act of 1985, As Amended ("COBRA")
Upon timely notice from the Employer, CHI will make available continuation
coverage, as required by COBRA, for all Covered Persons determined to be
qualified beneficiaries, as defined in Subsection 162(k)(7)(B) of the Internal
Revenue Code, as amended from time to time, and Subsection 607(3) of the
Employee Retirement Income Security Act (ERISA), as amended from time to time.
The Employer shall retain full responsibility for notifying Covered Persons of
their rights to continuation coverage and administering the exercise of
continuation rights, as required by COBRA. CHI shall have no obligation to
ensure that any notices received from the Employer comply with the requirements
of COBRA. For purposes of COBRA, CHI is not the plan administrator.
A. Each Covered Employee has a right to continue coverage if:
1. Employment with the Employer ends for a reason other than gross
misconduct; or
2. Work hours are reduced which result in a loss of coverage.
B. Each Covered Dependent has a right to continue coverage if:
1. The Covered Employee's employment with the Employer ends for a
reason other that gross misconduct;
2. The Covered Employee's work hours are reduced;
3. The Covered Employee dies;
4. In the case of the Covered Employee's spouse, when such spouse
ceases to be an Eligible Dependent as a result of divorce or
legal separation;
5. The Covered Employee becomes entitled to Medicare; or
6. In the case of a Dependent child, when such child no longer
satisfies the eligibility requirements for coverage as an
Eligible Dependent under this Agreement.
Similar rights may apply to certain retirees and their dependents if the
employer commences certain bankruptcy proceedings and these individuals lose
coverage.
Under COBRA, the Covered Employee or a family member has the responsibility to
inform the Employer of a divorce, legal separation, or a child losing dependent
status under the Employer's health plan within 60 days of the later of the date
of the event or the date on which coverage would end under the plan because of
the event. The Employer has the responsibility to notify the Employer of the
Covered Employee's death, termination of employment, reduction in hours or
Medicare entitlement.
When the Employer is notified that one of these events has happened, the
Employer will in turn notify the qualified beneficiary within 14 days of the
notification that he/she has the right to choose continuation coverage. The
qualified beneficiary has at least 60 days from such notification or the
qualifying event, whichever date is later, to inform the Employer of his or her
decision to elect continued coverage. The qualified beneficiary will then have
45 days after notifying the Employer of his or her decision to pay the
retroactive premium.
In the case of the Covered Employee's termination of employment or reduction in
work hours, the coverage may be continued for up to 18 months. The 18 months of
coverage may be extended to 36 months if one of the other events described in
Part B above occurs to a dependent within the initial 18 months of coverage. The
qualifying
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events listed in Part B, other than B(1) and B(2), will entitle the dependents
for up to 36 months of continuation coverage. The 18 months may also be extended
to 29 months if an individual is determined to have been disabled for Social
Security disability purposes at the time of the initial qualifying event and the
Employer is notified of the disability of the Social Security Administrator
determination within 60 days of its disability determination. The affected
individual must also notify the Employer within 30 days of any final
determination that the individual is no longer disabled.
However, coverage will cease earlier if one of the following events occurs:
1. The Employer ceases to provide any group health insurance to any
of its employees;
2. The qualified beneficiary fails to make timely payments of any
premium required;
3. The qualified beneficiary is covered under another group health
plan that does not contain any exclusion or limitation with
respect to any preexisting condition that the qualified
beneficiary may have;
4. The qualified beneficiary is entitled to benefits under Medicare;
or
5. The qualified beneficiary extended coverage for up to 29 months
due to a disability and there has been a final determination that
the qualified beneficiary is no longer disabled.
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2. Employee Conversion Option
When a Covered Employee's coverage under this Policy terminates for reasons
other than failure to make the required premium contributions, the benefits may
be converted to an individual policy (the "Converted Policy") issued by the
Company.
This conversion privilege is available:
(a) to an Eligible Employee if s/he has been continuously insured under
this Policy for at last three (3) months immediately prior to the
termination;
(b) to an Eligible Dependent spouse if the coverage terminates because of
his or her spouse/Employee's death, or because of divorce or annulment
of marriage; and
(c) to an Eligible Dependent child if the coverage terminates because of
the Eligible Dependent's age or because of the death of his or her
parent/Covered Employee.
The conversion privilege is not available to any Covered Person if:
(i) if the Covered Person is, or is eligible to be, within 31 days of
termination of coverage under this Policy, covered for similar
benefits by: (1) another group plan, medical service subscriber
contract, medical practice or other prepayment plan, or (2) any
governmental program;
(ii) if issuing the Converted Policy to the Covered Person would result in
over-insurance, as determined by CHI; or
(iii) if coverage under the Policy terminated because any required premium
contribution was not paid when due.
Application and payment of the first premium under the Converted Policy must be
made to the Company within 31 days immediately following termination of coverage
under this Policy.
If continuation of coverage as described above is elected, this conversion
option will apply at the end of the maximum continuation period under this
Policy.
The Converted Policy will be issued as follows:
(A) The Covered Policy will in the form CHI has them available for
conversion which is most similar to the coverage being converted. The
coverage under the Converted Policy may be different from the coverage
provided under this Policy;
(B) The Converted Policy may exclude any condition for which the Covered
Person was not covered under this Policy, provided a 12-month period
has not elapsed from the original Effective Date of this Policy; and
(C) The premium payable for the Converted Policy will be based on the
CHI's rate then applicable to the class of risk to which the Covered
Person belongs, the age of the Covered Person, and the form and amount
of . coverage provided, on the effective date of the Converted Policy.
If the Covered Employee and one or more of his Dependents were covered by the
Policy, the Converted Policy must cover all previously insured Covered Persons
who are eligible for conversion coverage. The Company may, at its option, issue
a separate Covered Policy to cover any Dependent.
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3. Extension of Benefits Upon Termination of Policy
Except as set forth below, if the Covered Person is an Inpatient on the day
coverage under this Policy terminates, the benefits of coverage under this
Policy shall be provided until the earlier of:
A. the date on which the maximum amount of benefits under this Policy has
been paid; or
B. the date on which the Inpatient stay ends; or
C. the 90th day after the date of termination.
If this Policy is terminated because the Employer participates in or obtains
medical coverage under a health benefit plan or arrangement made available by
another organization, the liability of CHI shall cease as of the date of such
termination, and no benefits will be provided for any services or supplies
provided after such date.
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X. COORDINATION OF BENEFITS
All benefits provided under this Policy are subject to this Article, and will
not be increased by virtue of this Article.
1. Definitions
In addition to the Definitions set forth in Article XV of this Policy, the
following definitions only apply to this Article:
a. "Plan" means any plan providing benefits or services for or by reason
of medical or dental care or treatment, which benefits or services are
provided by:
(1) group, blanket or franchise insurance coverage;
(2) service plan contracts, group practice, individual practice and
other prepayment coverage;
(3) any coverage under labor-management trusteed plans, union welfare
plans, employer organization plans, or employee benefit
organization plans; or
(4) any coverage under governmental programs, and any coverage
required or provided by any statute.
The term "Plan" shall exclude any school accident-type coverages or
group or group-type hospital indemnity benefits of $100 per day or
less.
b. "Dependent" means, for any Plan, any person who qualifies as a
Dependent under that Plan.
c. "Allowable Benefits" means the eligible charges for Covered Medical
Services under this Policy.
d. "Benefits Paid or Payable" means the amounts actually paid for Covered
Medical Services.
2. Effect on Benefits
a. This Article shall apply in determining the benefits of this Policy
if, for Covered Medical Services received, the sum of the Benefits
Payable under this Policy and the Benefits Payable under other Plans
would exceed the Allowable Benefits.
b. Except as provided in Subsection c. of this Section 2, the Benefits
Payable under this Policy for Covered Medical Services will be reduced
so that the sum of the reduced benefits and the Benefits Payable for
Covered Medical Services under other Plans does not exceed the total
of Allowable Benefits.
c. If (1) the other Plan contains a provision coordinating its benefits
with those of this Policy and its rules require the benefits of this
Policy to be determined first, and (2) the rules set forth in
Subsection e. of this Section 2 require the benefits of this Policy to
be determined first, then the benefits of the other Plan will be
ignored in determining the benefits under this Policy.
d. If the other Plan does not include a coordination of benefits
provision, such Plan will be primary.
e. If the other Plan does include a coordination of benefits provision:
(1) The Plan covering the patient other than as a Dependent will be
primary.
(2) Where both Plans cover the patient as a dependent child, the Plan
covering the patient as a dependent child of a parent whose date
of birth, excluding year of birth, occurs earlier in a calendar
year shall be the primary Plan. But, if both parents have the
same birthday, the
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Plan which covered the parent longer will be the primary Plan. If
the parents are separated or divorced, the following will apply:
(a) The Plan which covers the child as a Dependent of the parent
with custody will be the primary Plan.
(b) If the parent with custody has remarried, the Plan which
covers the child as a Dependent of the stepparent with
custody will determine its benefits before the Plan covering
the child as a Dependent of the parent without custody.
(c) Where there is a court decree which establishes financial
responsibility for the health care expenses of the dependent
child, the Plan which covers the child as a Dependent of the
parent with such financial responsibility will be the
primary Plan as long as the Plan of that parent has actual
knowledge of the court decree.
(d) If the specific terms of the court decree state that the
parents shall share joint custody, without stating that one
of the parents is responsible for the health care expenses
of the child, the plans covering the child shall follow the
order of benefit determination rules outlined in the first
paragraph of 2. e. 2).
In the event CHI is coordinating with a Plan that uses the
male/female rule regarding dependent children, the introductory
paragraph of this clause (2) shall be replaced with to the
following introductory paragraph:
Where both Plans cover the patient as a dependent child, the
Plan covering the patient as a dependent child of a male
will be the primary Plan, except that if the parents are
separated or divorced, the following will apply:
(3) Where the determination cannot be made in accordance with clause
(1) or (2) above, the Plan which has covered the patient for the
longer period of time will be the primary Plan; provided that,
(a) the benefits of a plan covering the person as an employee
other than a laid-off or retired employee or as the
Dependent of such person shall be determined before the
benefits of a plan covering the person as a laid-off or
retired employee as a Dependent of such person; and
(b) if either Plan does not have a provision regarding laid-off
or retired employees, and, as a result, the benefits of each
plan are determined after the other, then the provisions of
clause (3)(a) above shall not apply.
f. Services provided under any governmental program for which any
periodic payment of rate is made by the Covered Person shall always be
the primary Plan, except when prohibited by law, or when the Covered
Person has elected Medicare secondary.
3. Facility of Payment
Whenever payments should have been made under this Policy in accordance with
this Article, but the payments have been made under any other Plan, CHI has the
right to pay to any organization that has made such payment any amount it
determines to be warranted to satisfy the intent of this Article. Amounts so
paid shall be deemed to be Benefits Paid under this Policy and to the extent of
the payments for Covered Medical Services, CHI shall be fully discharged from
liability under this Policy.
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4. Right of Recovery
a. Whenever payments have been made by CHI for Covered Medical Services
in excess of the maximum amount of payment necessary at that time to
satisfy the intent of this Article, irrespective of to whom paid, CHI
shall have the right to recover the excess from among the following,
as CHI shall determine: any person to or for whom such payments were
made, any insurance company, or any other organization.
b. The Covered Employee, personally and on behalf of his or her Covered
Dependents shall, upon request, execute and deliver such documents as
may be required and do whatever else is reasonably necessary to secure
CHI's rights to recover the excess payments.
5. CHI shall not be required to determine the existence of any Plan or amount
of Benefits Payable under any Plan except this Policy, and the payment of
benefits under this Policy shall be affected by the Benefits Payable under
any and all other Plans only to the extent that CHI is furnished with
information relative to such other Plans by the Employer or Covered Person
or any other insurance company or organization or person.
6. When the benefits are reduced under the primary Plan because a Covered
Person does not comply with the Plan articles, or does not maximize
benefits available under the primary Plan, the amount of such reduction
will not be considered an Allowable Benefit. Examples of such provisions
are those related to second surgical opinions and pre-certification of
admissions and services.
7. CHI may, without the consent or notice to any person, release to or obtain
from any other insurance company, or other organization or person, any
information, with respect to any Covered Person which CHI deems necessary
to determine the applicability of, and implement the terms of, this
Article, or any similar provision of any other Plan. Any person claiming
benefits under this Policy will furnish to CHI any information necessary to
implement this Article.
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XI. MEDICARE
When a Covered Person is eligible for Medicare, that person must sign and
deliver an election card to the Company, stating whom that Covered Person wants
to be his primary insurer. If the Covered Person elects Medicare as his primary
source of coverage and belongs to a group covered by the Policy covering twenty
(20) persons or more, all Policy benefits otherwise payable to that Covered
Person shall discontinue. If belonging to a covered group of less than twenty
(20) persons, all Policy benefits otherwise payable with respect to the Covered
Person will be reduced by any service or supply provided, or any benefits paid
or payable, under Part A and Part B of Medicare.
For the purposes of this Article, benefits will be paid on the basis that the
Covered Person is covered by both Part A and Part B of Medicare. If the Covered
Person should not receive benefits under either Part A or Part B because of:
(a) failure to enroll when required;
(b) failure to pay any premiums that may be required for full coverage of
the person under Medicare; or
(c) failure to file any written request or claim required for payment of
Medicare benefits;
the Company will make determination of the total benefits that would have been
payable under Medicare in the absence of this failure.
"Part A" means the "Hospital Insurance Benefits for the Aged" portion of
Medicare.
"Part B" means the "Supplementary Medical Insurance for the Aged" portion
of Medicare.
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XII. SUBROGATION
In the event of any payment under the Policy, the Company will, to the extent of
the payment under the Policy, be subrogated to all the rights of recovery of the
Covered Person arising out of the acts or omissions of any person or
organization. The Covered Person hereby agrees to reimburse the Company for any
benefits paid hereunder, out of any moneys recovered from any person or
organization as the result of judgment, settlement or otherwise. After any
benefits under this Policy are paid by the Company, the Covered Person also
agrees to execute and deliver all necessary instruments and to furnish such
information and such reasonable assistance as may be required to facilitate
enforcement of its rights hereunder. In the event the Company recovers an amount
greater than the benefit paid, the excess, will be paid to the Covered Person.
The Covered Person shall do nothing after loss to prejudice these rights. This
Article will not apply, however, to a recovery obtained by any Covered Person
from any insurance company on a policy under which the Covered Person is
entitled to indemnity. as a named insured person or an insured Dependent of a
named person. For purposes of this Article only, "Covered Person" will include
anyone receiving payment under the Policy, either directly or indirectly.
This Article does not pertain to medical malpractice insurance pursuant to
Pennsylvania Law, Chapter 4, Article V1, Section 602 (40 P.S. Section 1301.602),
and is limited for Pennsylvania No-Fault Insurance pursuant to Pennsylvania Law
Chapter 4, Article VI(J), Section III(4) (40 P.S. Section 1009. 111), as now
constituted or later amended.
The Subrogation rights under this Article shall be enforced only to the extent
and at those times permitted by law and shall not be enforceable to the extent
prohibited by any Pennsylvania statute or regulation.
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XIII. POLICYHOLDER/EMPLOYER PROVISIONS
Premiums
1. The premiums for this Policy shall be based upon the administrative
requirements of CHI and the cost of Covered Medical Services and shall be
payable in advance according to the mode of payment agreed upon. At the end
of the first calendar year or at any time thereafter, the premiums for this
Policy may be readjusted by CHI based upon the experience under the Policy.
2. The Employer is solely responsible for the payment of premiums with respect
to its Covered Employees and their Covered Dependents. Payment shall be
made directly to CHI.
3. The first premium will be the sum of the individual premiums determined by
applying the premium rates, shown in the initial schedule of premium rates,
to the amount of insurance then in force at the respective ages of the
Covered Persons insured on the Effective Date of the Policy. The premium
for each successive month will be the sum of the individual premiums
determined by applying the premium rates then in effect to the amount of
insurance then in force at the respective ages of the Covered Persons
insured on the premium due date.
4. The premium rates will be guaranteed for the first twelve (12) months
following the issuance of the Policy. CHI reserves the right to change,
after such guaranteed period, the premium rates by written notice to the
Policyholder at least thirty (30) days prior to the date of the change.
5. Any change in premium rates necessitated by an amendment of the Policy will
be effective on the effective date of the amendment. If the effective date
of the amendment is any day other than the premium due date, then a pro
rata premium adjustment will be made to the applicable month.
6. There will be no premium adjustment for Covered Person who may be added or
terminated between premium due dates. If notice of a Covered Person's
termination received by CHI more than thirty (30) days after their
termination, any unearned premium will be credited only from the first
premium due date prior to the receipt of such notice. This provision will
not extend the Covered Person's insurance beyond the termination date.
Grace Period
If the Policyholder has not previously given written notice to CHI that the
Policy is to be discontinued, the grace period of thirty one (31) days will be
granted to the Policyholder for payment of every premium after the first
premium. During the grace period, the Policy will continue in force, unless
prior to the date payment was due the Policyholder gave timely written notice to
CHI that the Agreement is to be canceled. If the premiums are not paid within
the grace period, the Policy will be discontinued, but the Policyholder will
still be liable to CHI for all unpaid premiums, including the premiums for the
grace period. If during the grace period CHI receives written notice from the
Policyholder that the Policy is to be discontinued, the Policy will be
discontinued on the date notice is received, but the Policyholder will still be
liable to CHI for the payment of all premiums then unpaid, together with a pro
rata premium for the period commencing with the date on which the last premium
became due and ending with the date of receipt of written notice by CHI.
Term of Policy and Right to Terminate
This Policy is issued for an indefinite term, commencing on the Effective Date
shown on the face page. The Policy continues in force, so long as premiums are
paid when due, until terminated in accordance with the terms of this Policy.
The Policyholder may terminate the Policy by giving written notice to CHI.
Termination by the Policyholder will be effective on the latter of: (a) the day
specified in the notice; or (b) the day the notice is received by CHI. CHI
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may terminate any or all insurance under the Policy, as of any premium due date,
by giving written notice to the Policyholder at least thirty (30) days prior to
that date.
Notice
Written notice to the Policyholder will be deemed to be effective on the date it
is placed in the United States mail, postage prepaid and properly addressed to
the principal place of business of the Policyholder. Notice will be deemed to be
properly addressed if it reflects the last address provided to CHI by the
Policyholder.
Individual Certificates
CHI will issue a Summary of Benefits, describing the insurance protection to
which each Covered Person is entitled and to whom payable. Copies of the Summary
of Benefits will be issued to the Policyholder for delivery to each Covered
Employee.
Registry
The Policyholder shall furnish CHI with:
(a) the names of all individuals initially eligible for insurance or who
later become eligible for insurance under the Policy, even if they do
not become insured;
(b) the names of all Covered Persons who become insured or whose insurance
terminates, together with the respective date; and
(c) any information required to initiate, maintain or terminate coverage
on each Eligible Person.
CHI will have the right, at reasonable times, to inspect all books and records
of the Policyholder which relate to the insurance under the Policy.
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XIV. PRE-EXISTING CONDITIONS LIMITATION
No payment will be made to any Covered Person under this Policy for any charge
relating to any condition which was precluded by the group policy (if any) that
this Policy replaced, which existed prior to the date the individual became
covered under this Policy and for which the individual received medical advice
or treatment within 90 days immediately preceding the date coverage under this
Policy commenced, unless the charge is incurred:
1. More than six (6) consecutive months after the Covered Person has been
covered under this Policy during which time no medical advice or
treatment was received; or
2. If the Covered Person is a Covered Employee, collectively more than
twelve (12) consecutive months after the Covered Employee has been
actively employed with the Employer and has been covered under this
Policy and/or another group health insurance policy issued to the
Employer; or
3. If the Covered Person is a Covered Dependent, collectively more than
twelve (12) consecutive months after the Covered Dependent has been
covered under this Policy and/or another group health insurance policy
issued to the Employer.
This Article applies only to Employees and Dependents who become covered under
this Policy after the Effective Date of this Policy.
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XV. DEFINITIONS
For the purposes of this Policy, unless the context clearly indicates otherwise,
the following words and phrases have the following meanings. The following words
and phrases are not intended to imply that coverage for them is provided under
this Policy.
Ambulatory Surgical Facility - A specialized facility licensed, where required,
to render surgical procedures on an Out-Patient basis, which has an
organized staff of Physicians, has been approved by the Joint Commission on
Accreditation of Health Care Organizations, the Accreditation Association
for Ambulatory Healthcare, Inc., or CHI, and which:
1. has permanent facilities and equipment for the primary purpose of
performing surgical procedures on an Out-Patient basis;
2. provides treatment by or under the supervision of Physicians and
nursing services whenever the patient is in the facility;
3. does not provide Inpatient accommodations;
4. provides the full-time services of one or more RNs for patient care in
the operating rooms and in the post-anesthesia recovery room; and
5. provides at least one operating room and at least one post-anesthesia
recovery room; is equipped to perform diagnostic x-ray and laboratory
examinations; and has available trained personnel and necessary
equipment to handle foreseeable emergencies;
6. maintains a written agreement with at least one Hospital in the area
for immediate acceptance of patients who develop complications or
require post-operative confinement; and
7. is not, other than incidentally, a facility used as an office or
clinic for the private practice of a Professional Provider.
Birthing Center - A free-standing facility licensed, where required, to provide
maternity care, which:
1. Is organized and staffed to provide prenatal care, delivery and
immediate post-partum care;
2. Is directed by at least one Physician who is a specialist in
obstetrics and gynecology;
3. Has a Physician or certified nurse midwife present at all births and
during the immediate post-partum period;
4. Has at least two (2) beds or two (2) birthing rooms for use by
patients while in labor and during delivery;
5. Has the capacity to administer a local anesthetic and to perform minor
surgery. This includes episiotomy and repair of perineal tear;
6. Accepts only patients with low risk pregnancies; and
7. Has a written agreement with a Hospital in the area for emergency
transfer of a patient or a child.
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Close Relative - The Covered Person, his or her spouse, a child, brother,
sister, or parent of the Covered Person or his or her spouse.
Company - Corporate Health Insurance Company, a Minnesota corporation, and its
successor, if any.
Co-payment - The flat, fixed-dollar amount which shall be payable by a Covered
Person pursuant to this Policy to a provider of services or supplies, regardless
of, but not in excess of, the charge for such services or supplies, such amount
to be set forth in the Schedule of Benefits with respect to applicable Covered
Medical Service.
Cosmetic Surgery - Any surgery not Medically Necessary, including, without
limitation, ear piercing, rhinoplasty or lipectomy, except cosmetic surgery
resulting from the complication of such Cosmetic Surgery.
Covered Dependent - Any Eligible Dependent whose coverage became effective and
has not terminated.
Covered Employee - Any Eligible Employee whose coverage became effective and has
not terminated.
Covered Person - Any Eligible Employee or Eligible Dependent whose coverage
became effective and has not terminated.
Covered Medical Services - Those services and supplies which are Medically
Necessary and are otherwise covered by this Policy and for which charges are
Reasonable and Customary.
Custodial Care - Any type of care that does not require the skills of technical
or professional personnel or are not furnished by or under the supervision of
such personnel or does not otherwise meet the requirements of post-hospital
Skilled Nursing Facility Care. Custodial Care includes, but is not limited to:
o Help in walking, getting into or out of bed, bathing, dressing, eating
and other functions of daily living of a similar nature;
o General supervision of exercise programs including carrying out of
maintenance programs of repetitive exercises that do not need the
skills of a therapist and are not skilled rehabilitation services;
o Bowel training and management;
o General safety/health precautions and preventive procedures such as
turning to prevent bedsores; and
o Providing patient recreation and/or companionship.
Deductible Amount - The amount of charges for Covered Medical Services a Covered
Person must incur and pay during the calendar year under this Policy. The
Deductible Amount will differ depending upon whether the Covered Person is
covered under an individual coverage or a family coverage. If covered under an
individual coverage, the Covered Person must pay the Deductible Amount for
"individual," as set forth in the Schedule of Benefits, before becoming entitled
to benefits under the Policy. If covered under a family coverage, the Covered
Person and his or her Family Unit must pay the Deductible Amount for "family,"
as set forth in the Schedule of Benefits, before becoming entitled to benefits
under the Policy.
Dentist - Licensed Doctor of Dental Surgery or Doctor of Dental Medicine.
Dependent - Includes a spouse or child, whether by birth or adoption, of an
Eligible Employee.
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Detoxification - The process whereby an alcohol or drug intoxicated or alcohol
or drug dependent person is assisted, in a facility licensed by the Department
of Health, through the period of time necessary to eliminate, by metabolic or
other means. the intoxicating alcohol or drug, alcohol or drug dependent factors
or alcohol in combination with drugs, as determined by a licensed Physician,
while keeping the physiological risk to the patient at a reasonable minimum.
Diagnostic Services - the following procedures prescribed by a Professional
Provider because of specific symptoms to determine a definite condition or
disease. Diagnostic Services include, but are not limited to:
A. diagnostic radiology, consisting of x-ray, ultrasound and nuclear
medicine;
B. diagnostic pathology, consisting of laboratory and pathology tests;
C. diagnostic medical procedures, consisting of ECG, EEG, and other
diagnostic medical procedures; and
D. allergy testing consisting of percutaneous, intracutaneous and patch
tests.
Durable Medical Equipment - Equipment prescribed by the attending Physician
which is:
- Not primarily and customarily used for non-medical purposes;
- Designed for prolonged use; and
- For a specific therapeutic purpose in the treatment of an Illness
or Injury.
Durable Medical Equipment includes, but is not limited to, prosthetic appliances
and orthopedic braces.
Educational - a service or supply the primary purpose of which is to provide the
Covered Person with any of the following training in the activities of daily
living: instruction in scholastic skills such as reading and writing;
preparation for occupation; or treatment for learning disabilities.
Eligible Dependent - Any Eligible Employee's Dependent who satisfies the
eligibility requirements of Article I.
Eligible Employee - Any active employee full-time of the Policyholder who
regularly works at least 30 hours per week and otherwise satisfies the
eligibility requirements of Article I.
Emergency Services - Medical services required for the initial treatment of a
Medical Emergency. These services shall not include treatment for occupational
injury for which benefits are covered under workers' compensation law or similar
occupational disease law. The condition of the Covered Person must be of
sufficient severity to warrant immediate attention.
Employer - The Policyholder.
Evidence of Good Health - A statement from an Eligible Employee or an Eligible
Dependent attesting to the "good health" of such person or his or her Eligible
Dependents. A standard form available from the Policyholder's human resources
department will be provided for this purpose. The Eligible Employee or the
Eligible Dependent is responsible for any and all related costs.
Experimental or Investigative - the use of any treatment, procedure, facility,
equipment, drug, or drug usage device or supply which the general medical
community does not accept as standard medical treatment of the condition being
treated, or any such items requiring federal or other governmental agency
approval which approval has not been granted at the time the services were
rendered.
Family Unit - A Covered Employee and his or her Covered Dependents.
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Home Health Agency - Any organization certified as a home health agency under
the Medicare law or otherwise approved by CHI for the delivery of non-Physician
patient care in the home of a Covered Person.
Home Health Plan - A program for care and treatment of a Covered Person
established and approved in writing by such Covered Person's attending
Physician, together with such Physician's certification that the proper
treatment of the Injury or Illness would require confinement as a resident
Inpatient in a Hospital or confinement in a Skilled Nursing Facility the absence
of services and supplies provided as part of the Home Health Plan.
Home Health Services - Those items and services defined as "home health
services" in the Medicare law and set forth in 42 CFR Part 417.101 et seq.
Hospice - A facility which is licensed as such, where required, and provides
short periods of stay for a Terminally Ill Person in a home-like setting for
either direct care or respite care. This facility may be either free-standing or
affiliated with a Hospital. It must operate as an integral part of the Hospice
Care Program.
Hospice Care Program - A formal program directed by a Physician to help care for
a Terminally III Person. This may be through either
o A centrally-administrated, medically directed and nurse-coordinated
program which
- Provides a coherent system primarily of home care; and
- Is available 24 hours a day, seven (7) days a week; or
o Confinement in a Hospice.
The program must meet standards set by the National Hospice Organization and
approved by CHI. If such a program is required by a state to be licensed,
certified, or registered, it must also satisfy such requirement.
Hospice Services - Services and supplies furnished or arranged by a Hospice to a
Terminally Ill Person.
Hospital - An institution accredited as a Hospital by the Joint Commission on
Accreditation of Health Care Organizations, the Bureau of Hospitals of the
American Osteopathic Association or under Medicare Law, or as otherwise
determined by CHI as meeting reasonable standards, which:
1. is a duly licensed, where required; and
2. is primarily engaged in providing Inpatient diagnostic and surgical
and therapeutic services for the diagnosis, treatment and care of
injured or ill persons by or under the supervision of Physicians; and
3. provides 24-hour nursing service by or under the supervision of
Registered Nurses; and
4. is not a Skilled Nursing Facility, Custodial Care home, health resort,
spa or sanitarium, place for rest, place for the treatment of Mental
Illness, place for the treatment of Substance Abuse or Dependency,
Hospice, rehabilitation center, or place for the treatment of
pulmonary tuberculosis.
Illness - Sickness or disease which requires medical service or supply covered
by this Policy.
Injury - Bodily harm which results from an accident and which requires medical
service or supply covered by the Policy.
41
<PAGE>
Inpatient - A person who is admitted to a Hospital, a Psychiatric Hospital, a
Skilled Nursing Facility or a Substance Abuse Treatment Facility and incurs room
and board charges.
L.P.N. - A full-time licensed practical nurse, other than a Close Relative, who
is recognized by the state in which care is given as qualified to perform
limited nursing functions.
Medical Emergency - a sudden, unexpected onset of a medical condition
manifesting itself by acute symptoms or a traumatic bodily injury resulting from
an accident, which is of sufficient severity that the absence of immediate
medical attention could reasonably result in:
1. Death of the Covered Person;
2. Serious harm the Covered Person's health; or
3. Serious or permanent impairment to bodily functions or any bodily
organ or part.
The non-availability of a private Physician or the fact that the Physician may
refer the Covered Person to the emergency room does not, by itself, constitute a
Medical Emergency. Medical Emergencies include, but are not limited to:
(a) uncontrolled or excessive bleeding;
(b) suspected heart attack;
(c) inability to breath;
(d) appendicitis;
(e) serious burns;
(f) poisoning;
(g) severe pain and suffering; and
(h) convulsion or unconsciousness.
Medically Necessary - Medical service or supply which is provided by a
Professional Provider for the diagnosis or the direct care and treatment of a
Covered Person's Injury or Illness and which is:
1. Appropriate for the symptoms and diagnosis or treatment of the
Covered Person's Injury or Illness; and
2. In accordance with current standards of good medical practice.
Confinement as an Inpatient in a Hospital or other facility is considered
Medically Necessary when the Covered Person needs to be confined because of the
nature of the services being delivered the Covered Person or when treatment for
his or her condition cannot be given safely and adequately if performed on an
Out-Patient basis.
Medicare - The programs health care for the aged and the disabled established by
Title XVIII of the Social Security Act, as first enacted by the Social Security
Amendment of 1965 or as later amended.
Mental Illness - An emotional, nervous or mental disorder means a neurosis,
psychoneurosis, psychopathy or psychosis and mental, emotional or nervous
disorder without demonstrable organic origin.
Mental Health Treatment Facility - A facility, licensed by the Department of
Health, for the care or treatment of person with a Mental Illness and in which
services are provided by or under the supervisions of a Physician.
Military Service - Service in any Army, Navy, Air Force, Marines, Coast Guard,
or other branch of the military.
Non-Hospital Substance Abuse Residential Care - The provision of medical,
nursing, counseling or therapeutic services to patients suffering from alcohol
or drug abuse or dependency in a residential environment, according to
individualized treatment plans.
42
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Out-Patient - A patient who receives diagnosis or treatment at a facility, but
does not incur room and board charges.
Physician - A person, other than a Close Relative of the Covered Person, who is
duly licensed member of a medical profession and is practicing within the scope
of his or her license.
Policy - this Comprehensive Major Medical Group Health Insurance Policy issued
by the Company to the Policyholder.
Policy Enrollment Form - A printed form approved by CHI that an Eligible
Employee must complete, execute and deliver to CHI to be eligible for coverage
under this Policy.
Policy Year - The twelve (12) month period commencing on a date agreed to
between the Policyholder and CHI or, if no such agreement exists, the twelve
(12) month period of January l through December 31 inclusive.
Pre-Certification - A certification that a Covered Person must obtain prior to
receiving any of the services or supplies that are identified by the Schedule of
Benefits or this Policy as needing a Pre-Certification, which certifies the
proposed Hospital admission and length of stay as Medically Necessary.
Prescription Drugs - Drugs and medicines which require a prescription by a
Physician to dispense and are approved by the U.S. Food and Drug Administration
for general use in treating the illness or injury for which they are prescribed.
Prescriptions Drugs include oral contraceptives and vitamins.
Professional Provider - a person or practitioner licensed, where required, and
performing services within the scope of such licensure. The Professional
Providers include:
- R.N. - optometrist
- chiropractor - physical therapist
- clinical laboratory - Physician
- Dentist - podiatrist
- nurse midwife - psychologist
Psychiatric Hospital - An institution which is primarily engaged in providing
diagnosis and therapeutic services for the Inpatient treatment of Mental
Illnesses and meets all of the following requirements:
1. Services are provided by or under the supervision of a Physician;
2. Provides continuous nursing services under the supervision of an RN.; and
3. Is not a Skilled Nursing Facility, Custodial Care home, health resort,
place for rest, place for the treatment of Substance Abuse or Dependency,
Hospice, rehabilitation center, or place for the treatment of pulmonary
tuberculosis.
R.N. - A registered nurse, other than a Close Relative, who is licensed in the
state in which care is given to perform all nursing functions.
Reasonable and Customary Charge - Any charge which, as determined by CHI, does
not exceed (i) the usual or customary fee for comparable service or supply
charged by other providers of similar services or supplies in the area where the
service or supply is provided and who have training, experience and professional
standing comparable to those of the actual provider of the service or supply or
(ii) if no comparison exists, the reasonable fee (which may differ from the
usual or customary fee) determined by CHI after considering unusual clinical
circumstances and/or the actual cost of equipment and facilities involved in the
treatment. When determining whether a charge is Reasonable and Customary, CHI
may consider the severity of the condition being treated and any complications
and unusual circumstances that may be involved.
43
<PAGE>
Schedule of Benefits - The Schedule of Benefits set forth in the Summary of
Benefits, which summarizes the benefits payable under the Policy. The terms of
the Schedule of Benefits will be individually tailored to each Policyholder.
Semi-Private - A two (2) bed room in a Hospital. If the facility has no such
rooms, the rate most commonly charged by similar institutions in the same
geographic area.
Skilled Nursing Facility - An institution or a distinct part of an institution
which is licensed, where required, or approved under state or local law, and
which is primarily engaged in providing skilled nursing care and related
services (on an Inpatient basis to patients requiring 24-hour skilled nursing
but not requiring confinement in an acute care Hospital) as a skilled nursing
facility, extended care facility, or nursing care facility approved by the Joint
Commission on Accreditation of Health Care Organizations or the Bureau of
Hospitals of the American Osteopathic Association, or as a certified skilled
nursing facility under Medicare law, or as otherwise determined by CHI to meet
the reasonable standards applied by any of the aforesaid authorities.
A Skilled Nursing Facility does not include a rest home, a home for the aged, a
place for Custodial Care or educational care, or a treatment facility for
alcoholism, drug addiction, or mental illness.
Social Worker - A duly licensed or certified social worker with at least two (2)
years or three thousand (3,000) hours of post-masters clinical social work
practice in a clinical program established by the state regulatory board or
agency.
Substance Abuse or Dependency - Any use of alcohol or drugs which produces a
pattern of pathological use causing impairment in social or occupational
functioning or which produces physiological dependency evidenced by physical
tolerance or withdrawal.
Substance Abuse Treatment Facility - A Hospital or non-Hospital facility,
licensed by the Department of Health, for the care or treatment of alcohol or
drug dependent persons, except for transitional living facilities.
Terminally Ill Person - A Covered Person who life expectancy is six (6) months
or less, as certified by the attending Physician.
TotalDisability or Totally Disabled - A Covered Employee shall be considered
totally disabled if, as a result of an illness or injury, he or she is unable to
engage in any gainful occupation for which s/he is reasonably fitted by
education, training, or experience, and is not performing work of any kind for
wage or profit. A Covered Dependent will be considered totally disabled if,
because of an illness or injury, he or she is prevented from engaging in all the
normal activities of a person of like age and sex.
44
Exhibit 10.36
UNITED STATES HEALTH CARE SYSTEMS OF PENNSYLVANIA, INC.,
dba THE HEALTH MAINTENANCE ORGANIZATION OF
PENNSYLVANIA, INC. dba
U.S. HEALTHCARE
GROUP MASTER CONTRACT
United States Health Care Systems of Pennsylvania, Inc., dba The Health
Maintenance Organization of Pennsylvania, Inc. dba US Healthcare (referred to in
this Contract as "HMO") operates a comprehensive prepaid program of health care
which provides health care services and benefits to Members in order to protect
and promote their health and preserve and enhance patient dignity.
HMO agrees with the Contract Holder, subject to all the conditions and
provisions of this Contract, to provide the services and benefits and other
rights and privileges which are set forth in this Contract, as may be revised or
amended from time to time.
This Contract and all attachments and endorsements incorporated herein by
reference are delivered by HMO in consideration of the Contract Holder's payment
of premiums and shall take effect on the Contract Effective Date.
Under the Contract, the Subscriber engages HMO to make arrangements through
which medical and hospital benefits may be accessed in accordance with the
covenants and conditions hereafter provided and in reliance upon the statements
of each Subscriber in his/her Enrollment Application.
The Contract is not in lieu of and does not affect any requirement for coverage
by Workmen's Compensation Insurance.
This Contract is governed by the laws of the state in which filed. The Contract
specifications and the conditions and provisions on this and the following
pages, including the cover sheet, any amendments, riders or endorsements
included at delivery or added thereafter, are part of the Contract.
NO SERVICES ARE DELIVERABLE UNDER THIS CONTRACT IN THE ABSENCE OF PAYMENT OF
CURRENT PREMIUMS SUBJECT TO THE 30-DAY GRACE PERIOD AND SECTION VIII.A OF THIS
GROUP MASTER CONTRACT.
SECTION I - DEFINITIONS
The following words and phrases when used in this Contract shall have, unless
the context clearly indicates otherwise, the meaning given to them below:
1. Contract. This Group Master Contract issued to the Contract Holder by HMO
and as subsequently amended by operation of law and as filed with and
approved by applicable public authority.
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HMO/PA Group Master Contract Page 2
2. Contract Holder. An employer or organization who agrees to remit the
premiums for coverage payable to HMO. The Contract Holder shall act only as
an agent of HMO Members in the Contract Holder's Group, and shall not be
the agent of HMO for any purpose.
3. Coordination of Benefits. A Coordination of Benefits (COB) provision is one
that is intended to avoid claims payment delays and duplication of benefits
when a person is covered by two or more Plans providing benefits or
services for medical, dental or other care or treatment. It avoids claims
payment delays by establishing an order in which Plans pay their claims and
providing the authority for the orderly transfer of information needed to
pay claims promptly. It avoids duplication of benefits by permitting a
reduction of the benefits of a Plan when, by the rules established by this
provision it does not have to pay its benefits first. This provision does
not apply to student accident or group hospital indemnity plans.
4. Copayment. An amount required to be paid by or on behalf of a Member in
connection with benefits set forth in Section 11 of this Contract.
5. Custodial or Domiciliary Care. Any type of care that does not meet the
requirements of post-hospital Skilled Nursing Facility Care as defined by
the Medicare Law and set forth in 42 CFR Part 409.30 et seq. Custodial care
includes but is not limited to any type of care where the primary purpose
of the total care provided is to attend to the Member's daily living
activities which do not entail or require the continuing attention of
trained medical or paramedical personnel (for example, assistance in
walking, getting in and out of bed, bathing, dressing, feeding, using the
toilet, changes of dressings of noninfected, post operative or chronic
conditions, preparation of special diets, supervision of medication which
can be self-administered by Members, general maintenance care of colostomy
or ileostomy, routine services to maintain other service which, in the sole
determination of HMO, based on medically accepted standards can be safely
and adequately self-administered or performed by the average non-medical
person without the direct supervision of trained medical or paramedical
personnel, regardless of who actually provides the service}.
6. Dependent. Any person in a Subscriber's family who meets all the
eligibility requirements of Section IV.B of this Contract, has enrolled in
HMO, and is subject to premium requirements set forth in Section X of this
Contract.
7. Detoxification. The process whereby an alcohol or drug intoxicated or
alcohol or drug dependent person is assisted, in a facility licensed by the
Department of Health, through the period of time necessary to eliminate, by
metabolic or other means, the intoxicating alcohol or drug, alcohol or drug
dependent factors or alcohol in combination with drugs as determined by a
licensed physician, while keeping the physiological risk to the patient at
a minimum.
8. Effective Date. The commencement date of coverage under this Contract as
shown on the records of HMO.
9. Emergency Service. Professional health services medically necessary
immediately to preserve life or stabilize health, available on an inpatient
or outpatient basis, 24 hours per day, seven days per week.
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HMO/PA Group Master Contract Page 3
10. Group. Those employees in the eligible class(es) as shown on the Cover
Sheet of this Contract who enroll in HMO and whose premiums are remitted to
HMO by the Contract Holder.
11. Health Professionals. Physicians and other professionals, including
certified nurse midwives, who are engaged in the delivery of health care
services and who are licensed if required by law.
12. Homebound Member. A Member who is confined to the home due to an illness or
injury which makes leaving the home medically contraindicated or which
restricts his ability to leave his place of residence except with the aid
of supportive devices, the use of special transportation, or the assistance
of another person.
13. Home Health Services. Those items and services defined as "home health
services" by the Medicare Law and set forth in 42 CFR Part 417.101 et seq.,
if approved and coordinated in advance by HMO and provided upon the prior
written or verbal referral and direction of the Member's Primary Care
Physician. These services include: (a) Skilled nursing services, provided
by or under the supervision of a registered professional nurse to a
Homebound Member; (b) Services of a home health aide, rendered to a
Homebound Member under the supervision of a registered professional nurse,
or if appropriate, a qualified speech or physical therapist, provided,
however, that the primary purpose of the total Home Health Services
rendered to the Member is skilled in nature; (c) Medical Social Services
rendered to a Homebound Member by or under the supervision of a qualified
medical or psychiatric social worker, in conjunction with other Home Health
Services, if the Primary Care Physician certifies that such services are
essential for the effective treatment of the Member's medical condition;
(d) short-term physical or speech therapy provided by or under the
supervision of a qualified speech pathologist or physical therapist as set
forth in Section II.H of the Group Master Contract and short-term
occupational therapy (except for vocational rehabilitation or employment
counseling) rendered by or under the supervision of a qualified
occupational therapist in connection with other Home Health Services,
provided the Member's Primary Care Physician certifies that such services
will result in significant practical improvement in Member's condition
within a sixty (60) day period.
14 Home Health Agency. Any organization certified as a home health agency
under the Medicare law or otherwise approved by HMO for the delivery of
non-physician patient care in the home of a Member.
15. Hospital. An institution rendering inpatient and outpatient services,
accredited as a Hospital by either the Joint Commission on Accreditation of
Health Care Facilities or the Bureau of Hospitals of the American
Osteopathic Association. A Hospital may be a general, acute care
institution or a specialty institution provided that, in either case, it is
appropriately accredited as aforesaid, and licensed by the proper state
authorities.
16. Hospital Services. Those services which are listed in Section II of this
Contract.
17. Medical Services. Those professional services of physicians, paramedical
personnel, certified nurse midwives and other health professionals
including medical, surgical, diagnostic, therapeutic, preventive care and
birthing facility services.
18. Medical Social Services. Services of a medical or psychiatric social worker
which are provided by Participating Providers, upon the prior written
referral of the Member's
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HMO/PA Group Master Contract Page 4
Primary Care Physician, to assess and assist the Member in resolving, if
possible, emotional, marital and environmental factors related to the
Member's illness, need for care, response to treatment and adjustment to
care. Medical Social Services shall also include counseling services
provided to the Member upon the prior written referral of the Member's
Primary Care Physician and the provision to the Member of information, if
available, relating to community health and social welfare agencies and
related family counseling services, of which the Member may avail himself
but which are not covered by HMO.
19. Medically Necessary or Medical Necessity. Appropriate and necessary
services as determined by HMO which are rendered to a Member for a
condition requiring, according to generally accepted principles of good
medical practice, the diagnosis or direct care and treatment of an illness
or injury and which are not provided only as a convenience.
20. Medicare Law. Title XVIII of the federal Social Security Act and all
amendments and successors thereto.
21. Member. A Subscriber or Dependent as defined in this Section.
22. Non-Hospital Facility. A facility, licensed by the Department of Health,
for the care or treatment of alcohol or drug dependent persons, except for
transitional living facilities.
23. Non-Hospital Residential Care. The provision of medical, nursing,
counseling or therapeutic services to patients suffering from alcohol or
drug abuse or dependency in a residential environment, according to
individualized treatment plans.
24. Open Enrollment Period. A period of not less than ten (10) consecutive
working days, each calendar year, when eligible employees of Contract
Holder may enroll in HMO without a waiting period or exclusion or
limitation based on health status or, if already enrolled in HMO, may
transfer to an alternative health plan offered by Contract Holder.
25. Outpatient Care. The provision of medical, nursing, counseling or
therapeutic services to a Member who does not require an overnight stay in
a hospital or non-hospital facility on a regular and predetermined
schedule, according to an individualized treatment plan.
26. Participating Gynecologist. A Specialist Gynecological Physician who has
contracted with HMO to provide annual gynecological examination services to
members. A referral from the Participating Primary Physician is not
required for this service when the Member chooses a Participating
Gynecologist that is shown on the Member's Identification Card.
27. Partial Hospitalization. The provision of medical, nursing, counseling or
therapeutic services on a planned and regularly scheduled basis in a
hospital or non-hospital facility licensed as an alcoholism or drug abuse
treatment program by the Department of Health, designed for a patient or
client who would benefit from more intensive services than are offered in
outpatient treatment but who does not require inpatient care.
28. Participating Home Health Agency. A Home Health Agency which has entered
into a contractual agreement with HMO to provide home health services as
described in
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HMO/PA Group Master Contract Page 5
Section II of this Contract, to Members on a per visit or otherwise agreed
upon basis.
29. Participating Hospital. A Hospital which has entered into a contractual
agreement with HMO to provide services as described in Section II of this
Contract, to Members on a per diem or otherwise agreed upon basis.
30. Participating Mental Health Provider. A licensed professional providing
diagnostic, therapeutic or psychological services who has entered into a
contractual agreement with HMO. HMO may contract with Participating Mental
Health Providers on a geographic and/or per capita basis.
31. Participating Physician. A Primary Care Physician, Specialist Physician, or
other Health Professional who has contracted with HMO to provide medical
care and services to Members.
32. Participating Provider. A Provider which or who has entered into a
contractual agreement with HMO for the provision of services to Members on
an agreed upon basis.
33. Participating Skilled Nursing Facility. A Skilled Nursing Facility which
has entered into a contractual agreement with HMO to provide skilled
nursing facility services, as described in Section II of this Contract, to
Members on a per diem or otherwise agreed upon basis.
34. Part-Time or Intermittent Services. Covered services provided to a Member
on an infrequent basis, for no more than three hours a day, three days a
week or, on occasion; for up to eight hours a day, seven days a week if
medically necessary, recommended by the Primary Care Physician for a
limited period of time, and approved in advance by HMO.
35. Physician. A duly licensed member of a medical profession, practicing
within the scope of such license.
36. Physical Therapy. Therapy using physical modalities to achieve its goals.
37. Plan/Another Plan/The Plan. Any of these which provides benefits or
services for, or because of, medical or dental care or treatment:
1. Group insurance or group-type coverage, whether insured or uninsured.
This includes prepayment, group practice or individual practice
coverage. Coverage other than school accident-type coverage and Group
hospital indemnity contracts of $100 per day or less are excluded.
2. Coverage under a governmental plan, or coverage required or provided
by law. This does not include a state plan under Medicaid (Title XIX,
Grants to States for Medical Assistance Programs, of the United States
Social Security Act, as amended from time to time). In addition, the
"Plan" shall not include a law or plan when, by law, its benefits are
excess to those of any private insurance plan or other non-government
plan.
38. Primary Care Physician. A Physician who supervises, coordinates and
provides initial care and basic medical services as a general or family
care practitioner, or in some
<PAGE>
HMO/PA Group Master Contract Page 6
cases, as an internist or a pediatrician to Members; initiates their
referral for specialist care and maintains continuity of patient care.
39. Provider. A Physician, Health Professional, Hospital, Skilled Nursing
Facility, Home Health Agency or other entity or person providing services
to Members under this Contract.
40. Skilled Nursing Facility. An institution or a distinct part of an
institution that is licensed or approved under state or local law, and
which is primarily engaged in providing skilled nursing care and related
services as a skilled nursing facility, extended care facility, or nursing
care facility approved by the Joint Commission on Accreditation of Health
Care Organizations or the Bureau of Hospitals of the American Osteopathic
Association, or as a certified skilled nursing facility under Medicare law,
or as otherwise determined by HMO to meet the reasonable standards applied
by any of the aforesaid authorities.
41. Specialist Physician. A Physician who provides medical care in any
generally accepted medical or surgical specialty or subspecialty.
42. Subscriber. A person who meets all applicable eligibility requirements of
Section IV.A of this Contract, has enrolled in HMO, and is subject to
premium requirements set forth in Section X of this Contract.
43. Substance Abuse. Any use of alcohol or drugs which produces a pattern of
pathological use causing impairment in social or occupational functioning
or which produces physiological dependency evidenced by physical tolerance
or withdrawal.
SECTION II - BENEFITS
A. Outpatient Benefits. Except in an emergency as described in Section II.G of
this Contract, the following services will be provided to Members when
medically necessary and only at or through the Primary Care Physician's
office that is shown on Member's Identification Card, or elsewhere upon
prior written referral by Member's Primary Care Physician:
1. Office visits during office hours, and during non-office hours when
medically necessary. Member is responsible for a copayment for each
such visit in the amount shown on the Copayment Schedule, as may be
amended from time to time upon filing with and approval by the
applicable public authority and agreed to by the Contract Holder,
(hereinafter the "current Copayment Schedule").
2. Home visits by Member's Primary Care Physician when medically
necessary. Member is responsible for a copayment for each home visit
in the amount shown on the current Copayment Schedule.
3. Periodic health evaluations to include:
a. Well child care from birth including immunizations and booster
doses of all immunizing agents used in child immunizations which,
as determined by the Pennsylvania Department of Health conform to
the standards of the (Advisory Committee on Immunization
Practices of the Center for disease Control), U.S. Department of
Health and
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HMO/PA Group Master Contract Page 7
Human Services Immunization benefits are exempt from deductible
and dollar limits;
b Routine physical examinations;
c. Pelvic examinations;
d. Routine ear and hearing examinations;
e. Routine allergy injections and immunizations (but not if solely
for the purpose of travel); and
f. Routine eye examinations;
g. For children through age 11, preventive dental care at HMO
Participating Dental Facilities, limited to:
1) Oral prophylaxis (cleaning) as necessary;
2) Topical application of fluorides and the prescription of
fluorides for systematic use when not available in the
community water supply; and
3) Oral examination and hygiene instruction.
Copayment: Member is responsible for a copayment in the amount
listed on the attached Schedule of Benefits for the Primary
Dentist Visit.
4. Diagnostic Services including laboratory and x-ray services,
laboratory specimen collection, EKGs and other diagnostic services.
a. Female members age 40 or older are entitled to one routine
mammography by a participating provider every contract year.
Member is required to obtain a referral from their participating
primary care physician to their participating provider prior to
receiving this benefit.
5. Casts and dressings.
6. Short term rehabilitation services and Physical therapy (see II.H)
when Member's Primary Care Physician certifies that these services
will result in a significant improvement in Member's condition within
a sixty (60) day period.
7. Emergency care. Member's Primary Care Physician provides or arranges
for on call coverage twenty-four (24) hours a day, seven (7) days a
week.
8. Ambulance service is provided:
a. in an emergency, but subject to the notification requirements set
forth in Section II.G of this Contract; or
b. when certified as medically necessary by Member's Primary Care
Physician and approved in advance by HMO.
9. Health education and information. Periodically health education and
health care information literature is made available to a Member at no
expense to the member.
10. Home Health Services as defined in Section I.A.13, and Hospice
services provided upon the prior written referral of the Member's
Primary Care Physician for the palliative care of a Member's terminal
illness.
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HMO/PA Group Master Contract Page 8
11. Infertility services. except injectables and infertility related
supplies, and other services listed in Section III.B.25.
12. Initial provision of prosthetic appliances and initial provision of
orthopedic braces, with shoes when necessary, used to treat congenital
defects. Instruction and appropriate services required for Member to
properly use the item (such as attachment or insertion). False teeth
and other items listed in Section III.B.13 are excluded.
13. Manipulative Services are available through the Participating Provider
Network upon referral from Member's Primary Care Physician or by
selecting an Osteopathic Physician who provides these services as the
Member's Primary Care Physician.
14. Medical Social Services as listed in Section II.F. Copayment. Member
is responsible for a copayment in the amount shown for Primary Care
Physician visits, routine eye exam visits and routine gynecological
visits on the current Copayment Schedule.
B. Specialist Physician Benefits. Except in an emergency as described in
Section II.G of this Contract, benefits will be provided to the Member by a
Participating Specialist Physician at his office or at a Participating
Hospital outpatient department during office or business hours upon prior
written referral by Member's Primary Care Physician. A referral for the
routine gynecological exam is not required if the Member has chosen a
Participating Gynecologist that is shown on the Member's Identification
Card. Services include but are not limited to the following:
1. Allergy Care (except routine injections, which must be administered by
Member's Participating Primary Care Physician)
2. Anesthesia
3. Cardiology
4. Endocrinology
5. Gynecology and Obstetrics
6. Internal Medicine
7. Neurology
8. Oncology
9. Ophthalmology
10. Oral Surgery (limited to bony impactions of teeth, bone fractures,
removal of tumors and orthodontogenic cysts or other HMO approved
surgical procedures)
11. Orthopedics
12. Otolaryngology
13. Pathology
14. Pediatrics
15. Pulmonology
16. Radiology (except dental x-rays, unless related to covered services)
17. Surgery
18. Urology
Copayment. Member is responsible for a copayment in the amount shown for
Specialist Physician Office Visits on the current Copayment Schedule.
<PAGE>
HMO/PA Group Master Contract Page 9
Emergency. In an emergency as described in Section II.G of this Contract,
the services listed above will be covered without prior written referral,
subject to all conditions and requirements set forth in Section II.G.
C. Inpatient Hospital & Skilled Nursing Facility Benefits. A Member who is
hospitalized by a Participating Physician upon prior written referral from
the Member's Primary Care Physician, provided the admission has been
precertified by HMO, is entitled to the following benefits when medically
necessary only at Participating Hospitals and Participating Skilled Nursing
Facilities (or at non-participating facilities upon prior written
authorization by HMO); however, Participating Skilled Nursing Facilities
benefits are limited to those which are medically necessary and which
constitute Skilled Nursing Care as defined by the Medicare law:
1. Semi-private room and board accommodations
2. Private accommodations will be provided when medically necessary upon
certification of Member's Primary Care Physician. A Member who
occupies a private room without such certification shall be directly
liable to the Hospital or Skilled Nursing Facility for the difference
between payment by HMO to the Hospital or Skilled Nursing Facility of
the per diem or other agreed upon rate for semi-private accommodation
established between HMO and the Participating Hospital or the
Participating Skilled Nursing Facility and the private room rate.
3. General nursing care
4. Use of intensive or special care facilities when medically necessary
5. X-Ray examinations including CAT scans but not dental x-rays
6. Use of operating room and related facilities
7. Magnetic resonance imaging
8. Drugs, medications, biologicals, when medically necessary
9. Cardiography/Encephalography
10. Laboratory testing and services
11. Pre- and post-operative care
12. Special tests when medically necessary
13. Nuclear medicine
14. Physical and rehabilitation therapy as provided by Section II.A.6 and
II.H of this Contract
15. Oxygen and oxygen therapy
16. Anesthesia and anesthesia services
17. Administration and processing of whole blood, blood plasma and blood
derivatives
18. Intravenous injections and solutions
19. Surgical, medical and obstetrical services provided by the
participating hospital
20. Private duty nursing when medically necessary and certified as such by
the Participating Specialist Physician in concurrence with Member's
Primary Care Physician and approved in advance by an HMO Medical
Director.
21. Non-experimental or non-investigational transplants are a covered
benefit. Transplants considered to be non-experimental or
non-investigational by HMO/PA in its sole discretion are kidney
transplants, corneal transplants, liver transplants for children with
biliary atresia, and bone marrow transplants for. certain conditions,
specifically aplastic anemia, leukemia, severe combined
immunodeficiency disease and Wiskott-Aldrich Syndrome.
In addition, HMO will cover the medical and hospital services costs
and related organ acquisition costs for certain other transplants
including but not
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HMO/PA Group Master Contract Page 10
limited to heart, liver transplants other than for children with
biliary atresia and other organ transplants when deemed no longer
experimental or investigational by HMO in its sole discretion subject
to the grievance procedure All transplants must be ordered by Member's
Primary and Participating Specialist Physician and approved by HMO's
Medical Director in advance of the surgery. All transplants must
additionally be performed at hospitals specifically approved and
designated by the HMO to perform these procedures.
Copayment. Member is responsible for a copayment in the amount shown
for Inpatient Services on the current Copayment Schedule.
Emergency. In an emergency as described in Section II.G of this
Contract, the services listed above will be covered without prior
written referral, subject to all the conditions and requirements set
forth in Section II.G.
D. Substance Abuse Benefits
1. Outpatient. Benefits include diagnosis, medical treatment and medical
referral services by Member's Primary Care Physician for the abuse of
or addiction to alcohol or drugs.
Member is eligible for thirty (30) outpatient visits per year for
treatment of substance abuse or dependency upon referral by Member's
Primary Care Physician. Member is additionally eligible upon referral
by Member's Primary Care Physician, for up to thirty (30) more
outpatient full or equivalent partial session visits, which may be
exchanged on a two-for-one basis for up to fifteen (15) non-hospital,
residential alcohol or drug treatment days described in Paragraph 3
below. Treatment for substance abuse or dependency shall be provided
according to an individualized treatment plan, subject to a lifetime
limit of one hundred-twenty (120) visits. Benefits include: (1)
physician, psychologist, nurse, certified addictions counselor and
trained staff services; (2) rehabilitation therapy and counseling; (3)
family counseling and intervention; (4) psychiatric, psychological and
medical laboratory tests; (5) drugs, medicines, equipment use and
supplies.
2. Inpatient. Inpatient care benefits for detoxification, medical
treatment and referral services for substance abuse or addiction. The
following services shall be covered under inpatient treatment: (1)
lodging and dietary services; (2) physician, psychologist, nurse,
certified addictions counselor and trained staff services; (3)
diagnostic x-ray; (4) psychiatric, psychological and medical
laboratory testing; (5) drugs, medicines, equipment use and supplies.
3. Inpatient Non-Hospital Residential Facility. Medical, nursing,
counseling or therapeutic services for substance abuse or dependency
in a residential environment, according to an individual treatment
plan. Upon referral by Member's Primary Care Physician, Member is
eligible for thirty (30) days per year for such residential treatment
in facilities appropriately licensed by the Department of Health. This
benefit is subject to a ninety (90) day lifetime limit. The following
services shall be covered: - (1) lodging and dietary services; (2)
physician, psychologist, nurse, certified addictions counselor and
trained staff services; (3) rehabilitation therapy and counseling; (4)
family counseling and intervention; (5) psychiatric, psychological and
medical laboratory tests; (6) drugs, medicines, equipment use and
supplies.
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HMO/PA Group Master Contract Page 11
Copayment - Member is responsible for copayment in the amount shown
for Inpatient Non-Hospital Services on the current Copayment Schedule.
E. Mental Health Benefits. The following services are made available by the
Participating Mental Health Provider upon referral by the Member's Primary
Care Physician as may be necessary and appropriate for short term
evaluation or crisis intervention, mental health services or both.
1. Outpatient. Each Member is entitled to receive up to twenty 120)
outpatient visits during any period of 365 consecutive days to a
psychiatrist, clinical psychologist, or psychiatric social worker in
individual, group or family therapy sessions.
Copayment. Member is responsible for a copayment for each visit in the
amount shown for Outpatient Mental Health Visits on the current
Copayment Schedule attached to this Contract. A visit is 45-60 minutes
of therapy.
2. Inpatient. A Member is entitled to receive up to thirty-five (35) days
of inpatient care for the treatment of mental or nervous disorders
during any period of 365 consecutive days upon referral by Member's
Primary Care Physician or if provided or arranged for by the
Participating Mental Health Provider. Any inpatient stay without a
prior referral or which is not arranged by the Mental Health Provider
is a non-covered service under this Contract.
Copayment. Member is responsible for a copayment in the amount shown
for Inpatient Services on the current Copayment Schedule.
F. Medical social services and other health services to include:
1. pre- and post-hospital planning;
2. referral to (but not payment for) community health and social welfare
agency services;
3. referral to (but not payment for) related family counseling services
except as specified in Section II.D.
4. referral to family planning services, and referral to and payment for
services of appropriate agencies as necessary; and
5. referral to appropriate Specialists and payment for infertility
services except injectables and infertility related supplies.
G. Emergency Care Benefits - Within and Outside the HMO Service Area.
1. HMO will reimburse Member for the reasonable cost as determined by HMO
of emergency medical and hospital services performed within or outside
the HMO service area by non-participating providers without prior
written referral only if:
a. The service rendered is provided as a benefit under this Contract
and is not a service which is normally treated on a non-emergency
basis; and
b. HMO and Member's Primary Care Physician are notified within 24
hours of the emergency service and HMO is furnished with written
proof of the occurrence, nature and extent of the emergency
services within 30 days of the date that services were rendered.
Failure to
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HMO/PA Group Master Contract Page 12
immediately notify or to furnish written proof within 30 days
will not invalidate or reduce any claim for reimbursement if HMO
determines that Member's failure to do so was reasonable under
the circumstances, but in no event shall reimbursement be made
until HMO receives proper written proof; and
c. The HMO's medical review determines that the Member's symptoms
were severe, occurred suddenly, and immediate medical attention
was sought by Member. Conditions which require immediate
treatment include the following:
1. uncontrolled or excessive bleeding
2. acute pain or conditions requiring immediate attention, such
as suspected heart attack, severe shortness of breath or
appendicitis
3. serious burns
4. poisoning
5. convulsions
6. unconsciousness
2. Reimbursement. HMO may limit reimbursement to the reasonable cost as
determined by HMO for emergency services by a non-participating
provider, located either within or outside the HMO service area, to
those expenses which are incurred up to the time the Member is
determined to be medically able to travel or to be transported to an
HMO Participating Provider. In the event that transportation is
medically necessary, Member will be reimbursed for the reasonable cost
as determined by HMO of same. Reimbursement may be subject to payment
by Member of all copayments which would have been required had similar
benefits been provided during office hours and upon prior written
referral to a Participating Provider.
3. Copayments. Member is responsible for a copayment for each emergency
visit to a physician's office and a copayment for each emergency visit
to a hospital outpatient department or emergency room in the amount
shown on the then current Copayment Schedule. The copayment for an
emergency room visit will not apply in the event that Member was
referred for such visit by the Member's Primary Care Physician for
services that could have been rendered in the Primary Care Physician's
office.
H. Rehabilitation Benefits.
1. Speech Therapy
Speech therapy benefits are available on a short term basis. The
benefit consists of treatment within a 60 day period per incident of
illness, beginning with the first day of treatment, if the Member's
Primary Care Physician certifies that the treatment will result in a
significant improvement of the Member's condition within this time
period and treatment is approved by HMO's Medical Director.
2. Physical Therapy
Physical therapy benefits are available on a short term basis. The
benefit consists of treatment within a 60 day period per incident of
illness, beginning with the first day of treatment, if the Member's
Primary Care Physician certifies that the treatment will result in a
significant improvement
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HMO/PA Group Master Contract Page 13
of the Member's condition within this time period and treatment is
approved by HMO's Medical Director.
3. Occupational Therapy
Occupational therapy benefits are available on a short term basis. The
benefit consists of treatment within a 60 day period per incident of
illness, beginning with the first day of treatment, if the Member's
Primary Care Physician certifies that the treatment will result in a
significant improvement of the Member's condition within this time
period and treatment is approved by HMO's Medical Director.
4. Cardiac Rehabilitation
Cardiac Rehabilitation benefits are available only as part of the
Member's inpatient stay.
5. Pulmonary Rehabilitation
Pulmonary Rehabilitation benefits are available on a short-term basis.
The benefits consist of treatment within a sixty (60) day period per
incident of illness beginning with the first day of treatment. The
Member's Primary Care Physician must certify that the treatment will
result in a significant improvement of the Member's condition within
this time period. The treatment must be approved by the HMO's Medical
Director.
6. Cognitive Therapy
Cognitive therapy benefits are available on a short-term basis. The
benefits consist of treatment within a sixty (60) day period per
incident of illness beginning with the first day of treatment. The
Member's Primary Care Physician must certify that the treatment will
result in a significant improvement of the Member's condition within
this time period. The treatment must be approved by HMO's Medical
Director.
SECTION III -- EXCLUSIONS AND LIMITATIONS
A. In the event that alternative medical services can be provided to a
Member that are equal in the quality of care to be provided, HMO
reserves the right to provide coverage only for the least costly
medical service, as determined by HMO, provided that the medical
service is approved in advance by HMO as a medically appropriate
alternative service.
B. The following are not benefits under this Contract:
1. Any service obtained by or on behalf of a Member without prior
written referral by the Member's Primary Care Physician except in
an emergency situation as described in Section II.G of this
Contract.
2. Plastic or cosmetic surgery (including, but not limited to ear
piercing, rhinoplasty, gynecomastia and reduction mammoplasty)
and surgery or treatment relating to the consequences as a result
of plastic surgery. This exclusion does not apply to surgery to
correct the! results of injuries or congenital defects necessary
to restore normal bodily functions.
3. Unless otherwise stated in this Contract, all dental services
related to the care, filling, removal or replacement of teeth and
treatment of injuries to or
<PAGE>
HMO/PA Group Master Contract Page 14
diseases of the teeth, gums and temporomandibular joint,
including but not limited to apicoectomy (dental root resection),
orthodontics, root canal treatment, soft tissue impactions,
temporomandibular joint dysfunction therapy, alveolectomy and
treatment of periodontal disease.
4. Investigational, Ineffective or Experimental surgical or medical
treatments or procedures, research studies, or other experimental
health care procedures including, but not limited to, cancer
chemotherapy protocols, AIDS clinical trials, and I.V. therapies
unless approved by an HMO Medical Director prior to the treatment
being rendered, subject to Section IX.B.
5. Treatment of military service related diseases, disabilities or
injuries for which Member is legally entitled to receive
treatment at government facilities and which facilities are
reasonably available to Member (within a two to three hour drive
time). This exclusion does not apply to the care and treatment of
newborn children as provided under Section VI.B. of this
Contract.
6. Coverage of a non-HMO donor in a transplant procedure unless the
recipient of the transplant is an HMO Member. In the event an HMO
Member is the recipient, coverage will be provided under this
Contract for a live non-HMO donor to the extent benefits are
unavailable from any other source.
7. Except as provided in Section II.C.21., all experimental organ
transplants and procedures and services associated with the
preparation of such transplants.
8. Payment for benefits for which Medicare is the primary payer.
9. Treatment of mental retardation, defects and deficiencies. This
exclusion does not apply to mental health services as described
in Section II.E. or to medical treatment of retarded Members in
accordance with the benefits provided in Section II.
10. Care for conditions that state or local law requires to be
treated in a public facility, including but not limited to mental
illness commitments.
11. Provision of blood, blood plasma, blood derivatives or the cost
of receiving the services of professional blood donors. Only
administration and processing of blood is covered.
12. Routine reduction of nails, calluses and corns which are not
medically necessary.
13. Except as provided in Section II.A. 12 of this Contract,
provision or re placement of the following items are excluded:
arch supports hearing aids
braces TENS units
canes traction apparatus
cervical collars walkers
corrective shoes wheelchairs
corsets other Durable Medical
crutches Equipment (DME), special
elastic hose appliances, supplies or
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HMO/PA Group Master Contract Page 15
false teeth equipment
14. Provision of personal convenience items or services such as
telephones, barber services. guest meals, radio and television
rentals, and other like items and services.
15. Custodial or domiciliary care (as defined in Section I).
16. Weight reduction programs except as provided by HMO.
17. Drugs and medicine except as provided by Section II.C.8 and
Section II.D. of this Contract.
18. Special medical reports not directly related to treatment of the
Member; e.g., employment physicals.
19. Private duty or special nursing care except as provided in
Section II.C and specifically approved in advance by an HMO
Medical Director.
20. Payment for services which are eligible for payment under the
provisions of an automobile insurance contract or pursuant to any
federal or state law which mandates indemnification for such
services to persons suffering bodily injury from motor vehicle
accidents, where permitted by state law.
21. Therapy or rehabilitation, except as provided by Section II.H of
this Contract.
22. Chronic alcoholism or drug addiction treatment, except as
provided by Section II.D of this Contract.
23. Reversal of voluntary sterilization and related follow-up care.
24. Transsexual surgery or related services.
25. InVitro fertilization procedures, related services, infertility
injectables or other supplies, except as provided by Section
II.A.11 of this Contract.
26. Immunizations obtained for the sole purpose of travel.
27. Costs related to any court appearance, proceeding or hearing.
28. Payment for benefits which are compensable under any workmen's
compensation or occupational illness law are not covered services
under this Contract.
29. Surgical operations or procedures for treatment of obesity,
including but not limited to gastric stapling or balloon
procedures, unless medically necessary as determined by an HMO
Medical Director.
30. Orthoptics (a technique of eye exercises designed to correct the
visual axes of eyes not properly coordinated for binocular
vision).
31. All non-surgical medical services, diagnostic or therapeutics
related to temporomandibular joint dysfunction.
<PAGE>
HMO/PA Group Master Contract Page 16
DETERMINATIONS REGARDING DENIAL OF BENEFITS DUE TO INAPPROPRIATE USE OF THE HMO
NETWORK ARE AT THE SOLE DISCRETION OF THE HMO.
SECTION IV - MEMBERSHIP ELIGIBILITY REQUIREMENTS
A. Subscriber Eligibility. To be eligible to enroll as a Subscriber, a person
must be:
1. An employee of the Contract Holder eligible on his or her own behalf
to participate in or currently enrolled in a health care plan offered
by Contract Holder to the Group; and
2. a resident in the HMO service area.
B. Dependent Eligibility.
1. To be eligible to enroll as a Dependent, a person must be: a) the
spouse of a Subscriber under this Contract; or b) a dependent
unmarried child [includes natural, foster, step and legally adopted
children and proposed adoptive children) residing in the HMO service
area who is the age described in the current Schedule of Benefits.
2. Newborn children will be treated as Dependents from birth. This is
subject to enrollment requirements in Section VI.B.
C. Change of Group Eligibility Rules. The eligibility of the Group, the
composition of the Group and the eligibility requirements used to determine
membership in the Group which exist at the effective date of this Contract
are material to the execution of this Contract by HMO. No change in the
eligibility or participation requirements of the Group shall be permitted
to affect eligibility or enrollment under this Contract unless such change
is agreed to by HMO and the Contract Holder, and is not otherwise contrary
to applicable state laws, rules or regulations. Breach of this provision is
considered a material breach of this Contract and may be the basis for
termination under Section XII.B.3.
SECTION V - ENROLLMENT AND ENROLLMENT ELIGIBILITY DATES
A. Enrollment Procedure Any person who satisfies the membership eligibility
requirements described in Section IV is eligible to enroll in HMO in
accordance with Subsection B, below by submitting a completed HMO
enrollment application form to HMO.
B. Enrollment Eligibility Date. The Enrollment Eligibility Date is the date
that a person who satisfies the membership eligibility requirements
described in Section IV is eligible to enroll in HMO.
1. The Enrollment Eligibility Date for any person who satisfies the
membership eligibility requirements described in Section IV on the
Effective Date of this Contract shall be the same date as the
Effective Date of the Contract.
2. The Enrollment Eligibility Date for any person who first satisfies the
membership eligibility requirements described in Section IV after the
Effective
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HMO/PA Group Master Contract Page 17
Date of this Contract shall be the first Premium Due Date following
the date that such person satisfied the membership eligibility
requirements.
SECTION Vl - EFFECTIVE DATE OF COVERAGE
A. Effective Date of Coverage Other Than of a Newborn Child. Subject to
payment of applicable premiums as provided by Section X and in accordance
with the applicable provisions and conditions of this Contract, the
effective date of a Member's coverage hereunder is:
1. The Member's Enrollment Eligibility Date (Section V.B above) provided
that his or her completed HMO enrollment application form is received
by HMO within thirty-one (31 ) days of the Member's Enrollment
Eligibility Date; or
2. If a completed HMO enrollment application form is not received by HMO
within thirty-one (31 ) days of the Member's Enrollment Eligibility
Date (Section V.B), the effective date of Member's coverage is the
next Open Enrollment Period during which Member's completed HMO
enrollment application form is received by HMO, unless such member and
dependents have lost medical coverage due to spouse's layoff or
termination of employment.
Employees must apply within thirty-one (31) days of the layoff or
termination of employment and submit evidence of: 1) former medical
coverage through the spouse's employer; and 2) termination of
employment from the spouse's employer.
B. Effective Date of Coverage of a Newborn Child. Coverage of a newborn child
of a Member is effective at the time of birth and shall automatically
extend for a period of 31 days following birth. Coverage shall include
sickness or injury, including medically diagnosed congenital defects, birth
abnormalities, prematurity, and routine nursery care. The Subscriber shall
have the right, within the 31 day period following the birth of the newborn
child, to continue coverage for the child beyond the 31 day period by
enrolling the newborn child as a Dependent Member in HMO, provided that the
Member eligibility requirements as described in Section IV are satisfied,
all premium payments required by Section X are paid for said child, and a
completed HMO enrollment application form, specifically naming the newborn
child to be added, is received by HMO within 31 days following the birth of
the child.
SECTION VII - TERMINATION OF COVERAGE
Coverage of a Member or Members under this Contract will terminate under any of
the following conditions, and termination will be effective on the date
indicated, subject to the conversion privilege in Section VIII of this Contract,
when applicable:
A. In the event that a Subscriber ceases to meet the eligibility requirements
of Section IV.A of this Contract, coverage of Subscriber and Subscriber's
Dependents who are Members, if any, will terminate on the next premium due
date following the date on which the Subscriber ceased to meet the
eligibility requirements.
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HMO/PA Group Master Contract Page 18
B. In the event that a Subscriber's Dependent who is a Member pursuant to this
Contract ceases to meet the eligibility requirements of Section IV.B of
this Contract, coverage of such Dependent will cease on the next premium
due date following the date on which the Dependent ceased to meet the
eligibility requirements of Section IV.B.
C. In the event that Group coverage under this Contract terminates pursuant to
Section XII, coverage of all Members under this Contract will terminate as
provided in Section XII.
D. In the event that Subscriber or Subscriber's Dependents who are Members
pursuant to this Contract, if any, fails to make any contribution or
copayment required under this Contract, coverage of Subscriber and
Subscriber's Dependents, if any, will terminate thirty (30) days after
written notice is given to the Subscriber and Contract Holder by HMO of
such failure. At the effective date of such termination, prepayments
received by HMO on account of such terminated Member or Members for periods
after the effective date of termination shall be refunded to Contract
Holder, and HMO shall have no further liability or responsibility with
respect to such Member or Members under this Contract.
E. In the event that a Subscriber becomes covered under an alternative health
benefit plan or under any other plan which is offered by, through or in
connection with the Group in lieu of coverage under this Contract, coverage
of Subscriber and Subscriber's Dependents who are Members pursuant to this
Contract. if any, will terminate under this Contract, effective the date
alternate coverage begins.
F. In the event that a Member acts fraudulently or makes a material
misrepresentation in applying for or obtaining coverage or benefits under
this Contract, or misuses the HMO Identification Card, including but not
limited to allowing or assisting a person other than the Member named on
the Identification Card to obtain HMO benefits, Member's coverage under
this Contract shall be terminated effective immediately upon written
notice. In the absence of fraud or material misrepresentation, all
statements made by any Member or any person applying for coverage under the
Contract will be deemed representations and not warranties. No statement
made for the purpose of obtaining coverage will result in the termination
of coverage or reduction of benefits unless the statement is contained in
writing and signed by the Member, and a copy of same has been furnished to
Member prior to termination.
G. In the event a Member refuses upon request to cooperate and provide any
facts necessary for HMO to administer its Coordination of Benefits or
recovery provisions set forth herein, the coverage of such Member may be
terminated upon thirty (30) days written notice by the HMO.
H. In the event that HMO or Participating Providers, after reasonable efforts,
are unable to establish and maintain what it and Member agree to be a
satisfactory relationship with each other, then the rights of such Member
under this Contract may be terminated on not less than thirty (30) days'
written notice to Member and Contract Holder, subject to the Grievance
Procedure described in Section IX.M. At the effective date of such
termination, prepayments received on account of such terminated Member or
Members for periods after the effective date of termination shall be
refunded to the Contract Holder, and HMO shall have no further liability or
responsibility under this Contract with respect to such Member or Members.
<PAGE>
HMO/PA Group Master Contract Page 19
I. In the event the coverage of a Subscriber terminates for any reason listed
in this Section, coverage of Subscriber's dependents who are Members
pursuant to this Contract, if any, will also terminate.
SECTION VIII - CONTINUATION AND CONVERSION
A. Continuation
1. Any Member who is receiving inpatient care in a hospital or skilled
nursing facility on the date coverage under this Contract terminates
is covered in accordance with the Contract until the earlier of i)
when discharged from such inpatient stay, or ii) determination by the
attending physician that care in the hospital or skilled nursing
facility is no longer medically indicated, or iii) when the
contractual benefit has been reached.
2. The continuation of coverage rules of this section, VIII A.2., do not
apply to any Contract Holder who normally employed fewer than 20
employees on a typical business day during the preceding calendar
year. This exception applies to the number of employees employed, not
the number of employees covered by a health plan, and includes
full-time and part-time employees.
If a Member's coverage terminates due to termination of Subscriber's
employment (other than by reason of Subscriber's gross misconduct) or
reduction of hours of Subscriber's employment, Member may elect to
continue coverage for 18 months after eligibility for coverage under
this Contract would otherwise cease.
If Member's coverage terminates due to a) divorce or legal separation,
b) Subscriber's death, c) Subscriber's entitlement to Medicare
benefits, or d) cessation of dependent child status under Section
IV.B. of this Contract, Member may elect to continue coverage for 36
months after eligibility for coverage under this Contract would
otherwise cease.
Continuation coverage ends at the earliest of the following events:
a. The last day of the 18-month period.
b. The last day of the 36-month period.
c. The first day on which timely payment of premium is not made
subject to Section X.A..
d. The first day on which the Contract Holder ceases to maintain any
group health plan.
e. The first day on which a Member is actually covered by any other
group health plan. In the event the Member has a pre-existing
condition, and the Member would be denied coverage under the new
plan for a pre-existing condition, continuation coverage will not
be terminated until the last day of the 18-month continuation
period, or the date upon which the Member's pre-existing
condition becomes covered under the new plan, whichever occurs
first.
f. The date the Member is entitled to Medicare.
g. The date the Member no longer resides in the service area.
The 18-month coverage period may be extended if an event which would
otherwise qualify the Member for the 36 month coverage period occurs
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HMO/PA Group Master Contract Page 20
during the 18-month period, but in no event may coverage be longer
than 36 months from the event which qualified the Member for
continuation coverage initially.
In the event a Member becomes disabled within the meaning of the
Social Security Act, and notifies the employer before the end of the
initial 18-month period, continuation coverage may be extended up to
an additional 11 months for a total of 29 months. This provision is
limited to members who are disabled at the time of their qualifying
event and only when the qualifying event is the employees reduction in
hours or termination. The member may be charged a higher rate for the
extended period.
Contract Holder is responsible for providing the necessary
notification to Members as required by the Consolidated Omnibus Budget
Reconciliation Act of 1985 and the Tax Reform Act of 1986. Coverage
for the sixty (60) day period will be extended only where the
Subscriber or Dependent pays the applicable premium charges due within
forty-five (45) days of submitting the application to the Contract
Holder and Contract Holder in turn remitting same to HMO.
Premiums payable to HMO for the continuation of coverage under this
Section shall be due in accordance with the procedures of Section X
and shall be calculated in accordance with applicable federal law and
regulations.
B. Conversion to Individual Coverage. Conversion is not initiated by HMO. The
conversion privilege set forth in this Section must be initiated by the
eligible Member. The Contract Holder is responsible for giving notice of
the conversion privilege in accordance with its normal procedures; however,
in the event continuation coverage ceases pursuant to Section VIII.A.2(a)
or (b), Contract Holder shall notify Member at some time during the 180-day
period prior to the expiration of coverage.
1. Eligibility.
In the event a Member ceases to be eligible for coverage under this
Contract, he or she may, within thirty-one (31) days after termination
of coverage under this Contract, convert to individual membership in
HMO, effective as of the date of such termination, provided that
Member's coverage under this Contract terminated for one of the
following reasons:
a. The Group coverage under this Contract terminated and was not
replaced with continuous and similar coverage by the Contract
Holder; or
b. Subscriber ceased to meet the eligibility requirements of Section
IV.A of this Contract, in which case Subscriber and Subscriber's
Dependents who are Members pursuant to this Contract, if any, are
eligible to convert; or
c. A Dependent ceased to meet the eligibility requirements of
Section IV.B of this Contract because of his or her age or the
death or divorce of Subscriber; or
d. Continuation coverage ceased under subsection (a) or (b) of
Section VIII.A.2 of this Contract.
Any Member who is eligible to convert to individual membership, may do
so in accordance with the rules and regulations governing such items
as initial
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HMO/PA Group Master Contract Page 21
payment, the form of the agreement and all terms and conditions
thereunder as HMO may have in effect at the time of Member's
application for conversion, without furnishing evidence of
insurability.
SECTION IX - GENERAL PROVISIONS
A. Identification Card. The Identification Card issued by HMO to Members
pursuant to this Contract is for identification purposes only. Possession
of an HMO Identification Card confers no right to services or benefits
under this Contract, and misuse of such identification card may be grounds
for termination of Member's coverage pursuant to Section VII.F of this
Contract. If the Member who misuses the card is the Subscriber, coverage
may be terminated for the Subscriber as well as any of the Subscriber's
Dependents who are Members. To be eligible for services or benefits under
this Contract, the holder of the card must be a Member on whose behalf all
applicable premium charges under this Contract have been paid. Any person
receiving services or benefits which he or she is not entitled to receive
pursuant to the provisions of this Contract shall be charged for such
services or benefits at prevailing rates.
If any Member permits the use of his or her HMO Identification Card by any
other person, such card may be retained by HMO, and all rights of such
Member and his or her Dependents, if any, pursuant to this Contract shall
be terminated immediately, subject to the Grievance Procedure set forth in
Section IX.M of this Contract.
B. Medical Necessity and Appropriateness. Members will receive designated
benefits under the Contract only when medically necessary and appropriate.
HMO may determine whether any benefit provided under the Contract was
medically necessary and appropriate, and HMO has the option to select the
appropriate Participating Hospital to render services if hospitalization is
necessary. Decisions as to medical necessity are subject to review by the
Quality Assurance Committee of HMO or its physician designee. HMO will not,
however, seek reimbursement from an eligible Member for the cost of any
benefit provided under the Contract that is later determined to have been
medically unnecessary and inappropriate, when such service is rendered by
the primary care physician or a provider referred by the primary care
physician without notifying the member that such benefit would not be
covered under the contract.
C. Hospital Rules. Members are subject to all the rules and regulations of
each hospital and other facility in which benefits are provided.
D. Reports and Records. HMO is entitled to receive from any provider of
services to Member, information reasonably necessary to administer this
Contract subject to all applicable confidentiality requirements as defined
in Section IX.L of this Contract. By accepting coverage under this
Contract, Subscriber, for himself or herself, and for all Dependents
covered hereunder, authorizes each and every provider who renders services
to Member hereunder to disclose all facts pertaining to the care, treatment
and physical condition of Member and render reports pertaining to same to
HMO upon request and to permit copying of Member's records by HMO.
E. Refusal of Treatment. A Member may, for personal reasons, refuse to accept
procedures, medicines, or courses of treatment recommended by a
Participating Physician. If such Participating Physician (after a second
Participating Physician's opinion, if requested by Member), believes that
no professionally acceptable alternative exists, and if after being so
advised, Member still refuses to follow the
<PAGE>
HMO/PA Group Master Contract Page 22
recommended treatment or procedure, neither the Physician, nor HMO,
Participating Hospital, Participating Skilled Nursing Facility or
Participating Home Health Agency will have further responsibility to
provide any of the benefits available under this Contract for treatment of
such condition or its consequences or related conditions. HMO will provide
written notice to Member of a decision not to provide further benefits for
a particular condition. The decision is subject to the Grievance Procedure
set forth in Section IX.M of this Contract. Treatment for the condition
involved will be resumed in the event Member agrees to follow the
recommended treatment or procedure.
F. Assignment of Benefits. All rights of Members to receive benefits hereunder
are personal to Member and may not be assigned.
G. Legal Action. No action at law or in equity may be maintained against HMO
for any expense or bill unless brought within the statute of limitations
for such cause of action.
H. Independent Contractor Relationship.
1. No Participating Provider or other provider, institution, facility or
agency is an agent or employee of HMO. Neither HMO nor any employee of
HMO is an agent or employee of any Participating Provider or other
provider, institution, facility or agency.
2. Neither the Group nor the Contract Holder nor a Member is the agent or
representative of HMO, its agents or employees, or an agent or
representative of any Participating provider or other person or
organization with which HMO has made or hereafter shall make
arrangements for services under this Contract.
3. Participating Physicians maintain the physician-patient relationship
with Members and are solely responsible to Member for all medical
services which are rendered by Participating Physicians.
I. Coordination of Benefits With Other Group Health Plans. None of these
coordination of benefits rules will serve as a barrier to the Member first
receiving direct health services from HMO which are covered under this
Contract.
The rules establishing the order of benefit determination between this
Contract and any other plan covering the Member are as follows:
1. The benefits of a plan which does not have a coordination of benefits
with other health plans provision shall in all cases be determined
before the benefits of this Contract.
2. For those plans which have applicable Coordination of Benefit clauses,
the following rules will apply:
a. The benefits of a plan which cover the Member as other than
dependent will be determined before the benefits of a plan which
cover the Member as a dependent;
b. Except as stated in subparagraph (c) below, when a plan and
another plan cover the same child as a dependent of different
parents:
<PAGE>
HMO/PA Group Master Contract Page 23
1) The benefits of the plan of the parent whose birthday falls
earlier in a year are determined before those of the plan of
the parent whose birthday falls later in that year; but
2) If both parents have the same birthday, the benefits of the
plan which covered the parent longer are determined before
those of the plan which covered the other parent for a
shorter period of time;
3) If the other plan does not have the rule described above,
but instead has a rule based upon the gender of the parent,
and if, as a result, the plans do not agree on the order of
benefits, the rule in the other plan will determine the
order of benefits;
4) The word "birthday" refers only to the month and day in a
calendar year, not the year in which the person was born.
c. If two or more plans cover a person as a dependent child of
divorced or separated parents, benefits for the child are
determined in this order:
1) First, the plan of the parent with custody of the child;
2) Then, the plan of the spouse of the parent with custody of
the child;
3) Finally, the plan of the parent not having custody of the
child; and
4) If the specific terms of a court decree state that one of
the parents is responsible for the health care expenses of
the child, and the entity obligated to pay or provide the
benefits of the plan of that parent has actual knowledge of
those terms, the benefits of that plan are determined first.
d. The benefits of a plan which covers a person as an employee who
is neither laid-off nor retired (or as that employee's dependent)
are determined before those of a plan which covers that person as
a laid-off or retired employee (or as that employee's dependent).
If the other plan does not have this rule and if, as a result,
the plans do not agree on the order of benefits, this rule (d)
shall be ignored;
e. If none of the above rules determine the order of benefits, the
benefits of the plan which covered an employee, Member, or
Subscriber longer are determined before those of the plan which
covered that person for a shorter time.
3. If a Member who has enrolled under this Contract is entitled to
maternity benefits under another contract or policy of insurance (such
as extended benefits for pregnancies which began while the Member was
enrolled under a previously held policy), HMO will pay, subject to
Copayments under this Contract, the difference between entitlements
under this Contract and entitlements under the other contract or
policy of insurance.
4. Member agrees to permit HMO to coordinate its obligations under this
Contract with payment under any other contract or policy of insurance
that covers Member.
<PAGE>
HMO/PA Group Master Contract Page 24
5. For purposes of these provisions, HMO may release to or obtain from
any insurance company or other organization any necessary information,
subject to applicable confidentiality requirements, as defined in
Section IX.L of this Contract. Any Member claiming benefits under this
Contract must furnish to HMO all information deemed necessary by it to
implement this provision.
J. Third Party Liability. With regard to any benefit to a Member under this
Contract, unless unenforceable or prohibited by statute or regulation, HMO
may subrogate and succeed to the Member's right of recovery against any
person or organization. Each Member is required to answer all questions
submitted by HMO concerning any accident, illness or injury, and also to
execute and deliver such instruments and take such actions as HMO may
require to exercise its right of subrogation.
K. Inability to Provide Service. In the event that due to circumstances not
within the reasonable control of HMO, including but not limited to major
disaster, epidemic, complete or partial destruction of facilities, riot,
civil insurrection, disability of a significant part of HMO's Participating
Providers or entities with whom HMO has arranged for services under this
Contract, or similar causes, the rendition of medical or hospital benefits
or other services provided under this Contract is delayed or rendered
impractical, HMO shall not have any liability or obligation on account of
such delay or failure to provide services, except to refund the amount of
the unearned prepaid premiums held by HMO on the date such event occurs.
HMO is required only to make a good-faith effort to provide or arrange for
the provision of service, taking into account the impact of the event.
L. Confidentiality. Information contained in the medical records of Members
and information received from physicians, surgeons, hospitals or other
health professionals incident to the physician-patient relationship or
hospital-patient relationship shall be kept confidential; and except for
use incident to bona fide medical research and education as may be
permitted by law, or reasonably necessary in connection with the
administration of this Contract, or in the compiling of aggregate
statistical data, may not be disclosed without the consent of the Member.
M. Grievance Procedure.
1. Under the provisions of the Pennsylvania HMO Act and Department of
Health Regulations, HMO has promulgated written Grievance Resolution
Procedures (the "Procedures") for use by Members in the event of any
breach of this Contract by HMO or any dissatisfaction, problem or
claim arising from HMO services, benefits or Participating Providers.
Said Procedures are available upon request to any Member or Contract
Holder.
2. In summary form, said Procedures require a Member having an injury,
problem or claim to contact the HMO by telephone or in writing. HMO
will provide a Member requesting specific corrective action with a
decision within 45 days of receipt of the request except where
additional information is necessary. HMO's decision shall become final
and binding unless a formal grievance is filed by the Member within 60
days of the date of the decision. A Grievance Committee shall review
and investigate each grievance within 30 days of receipt unless
additional information necessary to resolve the grievance is not
received during such time. The written decision regarding the
grievance will specify the reasons for the decision and the Member's
appeal rights. The decision of the Grievance Committee shall become
final
<PAGE>
HMO/PA Group Master Contract Page 25
and binding unless the Member appeals to the Grievance Appeal
Committee within 30 days of the date of the decision. The Grievance
Appeal Committee, which will be comprised of no less than one-third
HMO members, will hold an informal hearing to consider the appeal. The
Member has a right to attend the hearing, but may choose not to do so.
Upon submission of an appeal, HMO will provide the Member with a copy
of the hearing procedures. The Grievance Appeal Committee will issue a
decision within 10 days of the conclusion of the hearing. The decision
of the Grievance Appeal Committee shall be final and binding unless
the Member appeals to the Department of Health. At each step of the
foregoing process, the Member should be as specific as possible as to
remedy being sought from HMO. In situations involving emergency or
urgently needed care, the Member should so notify HMO so it may handle
the inquiry or grievance under special expedited procedures.
3. Said Procedures are subject to modification or supplementation by
order or direction of the Department of Health. Members have the right
to have an uninvolved HMO representative assist them in understanding
the grievance process.
4. Said Procedures are mandatory and must be exhausted prior to the
filing of an appeal with the Department of Health prior to the
institution of any litigation in court or arbitration regarding either
any alleged breach of this Contract by HMO or the subject matter of
any inquiry, grievance or grievance appeal.
5. The Bureau of Health Financing & Program Development in the
Pennsylvania Department of Health, Room 1026 Health & Welfare
Building, P.O. Box 90, Harrisburg, PA 17108-0090, (717) 787-5193, is
responsible for monitoring HMO's compliance with said Procedures.
N. Clerical Records
1. HMO shall maintain records of the Members.
2. The Group shall forward the information required by HMO in Section XI
of this Contract in connection with the administration of this
Contract.
3. All records of the Group which are incident to the coverage provided
under this Contract shall be available for inspection by HMO at any
reasonable time.
4. HMO shall not be liable for the fulfillment of any obligation
dependent upon such information prior to its receipt in a form
satisfactory to HMO.
5. Incorrect information furnished to HMO may be corrected, provided that
HMO has not acted to its prejudice in reliance thereon. Coverage under
this Agreement shall not be invalidated by failure of the Group due to
clerical error, provided all premiums are properly adjusted and HMO,
in its sole discretion, determines that a clerical error has been
made. However in no case will any changes, additions, or deletions in
HMO's Member list be made effective more than two (2) Premium Due
Dates prior to the date HMO is notified, in a written form
satisfactory to HMO, of the requested change, addition, or deletion.
O. Limitation on Services. Except in cases of emergency as provided under
Section II.G of this Contract, services are available only from
Participating Providers. HMO shall have no liability or obligation
whatsoever on account of any service or benefit
<PAGE>
HMO/PA Group Master Contract Page 26
sought or received by a Member from any Physician, Hospital, Skilled
Nursing Facility, Home Health Agency or other person, entity, institution
or organization unless prior arrangements are made by HMO.
SECTION X - PREMIUMS
A. Premiums are payable to HMO on or in advance of each Premium Due Date at
the corporate offices of HMO unless otherwise specified by HMO in writing.
The payment of any premium shall not maintain coverage under this Contract
in force beyond the date when the next premium becomes payable; however, a
thirty (30) day grace period, during which time this Contract will remain
in force, shall be granted for payment of each premium after the first. The
Contract Holder shall remain liable for i) the payment of the premium for
the time coverage was in effect during the grace period, ii) the member
shall remain liable for copayments owed.
B. HMO, upon approval of the State Insurance Department, reserves the right to
fix new premium rates under this Contract at the end of each rate term.
Notice of any new premium rates shall be given to the Contract Holder at
least thirty (30) days prior to the date specified by HMO in order for the
rates to become effective. Payment of the new rate shall be deemed receipt
of notice and acceptance of change in rate.
SECTION XI - GROUP PERSONNEL DATA
A. The Contract Holder shall furnish to HMO each month during the period of
this Contract, on forms approved by HMO, such information as may reasonably
be required for the purpose of enrolling Members of the Group under this
Contract, processing terminations, and effecting changes in family status
and transfer of employment of Members. HMO shall furnish to the Contract
Holder such information concerning enrollment of Members and other matters
as it may reasonably require. Contract Holder is responsible for providing
written notice to the Members of the conversion privilege within 15 days
before or after termination of coverage under this Contract, unless
continuation coverage ceases pursuant to Section VIII.A. (2)(a) or (b), in
which case Contract Holder shall notify Member prior to expiration of the
continuation coverage.
B. Clerical errors or delays in keeping or reporting data relative to coverage
will neither invalidate coverage which would otherwise be in force nor
continue coverage which would otherwise be validly terminated if HMO, in
its sole discretion, determines that a clerical error has been made. Upon
discovery of such errors or delay, an adjustment of charges shall be made.
This provision notwithstanding, in no case will adjustments in coverage or
rates be made effective more than two (2) Premium Due Dates prior to the
date HMO is notified in writing, on a form satisfactory to HMO, of the
requested addition, deletion, or change in coverage.
<PAGE>
HMO/PA Group Master Contract Page 27
SECTION XII - TERMINATION OF GROUP COVERAGE AND RENEWAL
A. This Contract may be terminated by HMO or Contract Holder on any premium
due date by giving thirty (30) days' prior written notice.
B. This Contract may be terminated by HMO at any time under the following
circumstances:
1. By giving thirty (30) days' prior written notice to Contract Holder if
Contract Holder is guilty of fraud or material misrepresentation of
fact in obtaining coverage hereunder: or
2. Upon default in the payment of premiums required under Section X of
this Contract, subject to the thirty (30) day grace period described
in X.A or if the Contract Holder becomes insolvent, files a petition
in bankruptcy, files a petition seeking any reorganization,
arrangement, composition or similar relief under any federal or state
law regarding insolvency or relief for debtors, or makes an assignment
for the benefit of creditors or similar undertaking, or if a receiver,
trustee, or similar officer is appointed for the business or property
of Contract Holder, or if Contract Holder has begun any voluntary or
involuntary liquidation process; or
3. By giving thirty (30) days' prior written notice to Contract Holder if
Contract Holder breaches the terms of Section IV.C.
SECTION XIII - MISCELLANEOUS
A. Contract Holder hereby makes HMO coverage available to persons who are
eligible under Section IV of this Contract. However, this Contract shall be
subject to amendment, modification or termination in accordance with any
provision hereof, by operation of law, by filing with and approval by
applicable public authority. This can also be done by mutual written
agreement between HMO and Contract Holder without the consent of Members.
By electing medical and hospital coverage pursuant to this Contract, or
accepting benefits hereunder, all Members who are legally capable of
contracting, and the legal representatives of all Members who are incapable
of contracting, agree to all terms, conditions and provisions hereof.
B. Members or applicants shall complete and submit to HMO such applications or
other forms or statements as HMO may reasonably request. Members represent
that all information contained in such applications, forms or statements
submitted to HMO incident to enrollment under this Contract or the
administration hereof shall be true, correct, and complete to the best of
Member's knowledge or belief.
C. HMO may adopt policies, procedures, rules and interpretations to promote
orderly and efficient administration of this Contract.
D. No agent or other person, except a Vice President or President of HMO, has
authority to waive any condition or restriction of this Contract, to extend
the time for making a payment; or to bind HMO by making any promise or
representation or by giving or receiving any information. No change in this
Contract shall be valid unless evidenced by an endorsement on it signed by
one of the aforesaid officers.
<PAGE>
HMO/PA Group Master Contract Page 28
E. This Contract, including the Cover Sheet, constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous arrangements, understandings,
negotiations and discussions of the parties with respect to the subject
matter hereof, whether written or oral; and there are no warranties,
representations, or other agreements between the parties in connection with
the subject matter hereof, except as specifically set forth herein. No
supplement, modification or waiver of this Contract shall be binding unless
executed in writing by authorized representatives of the parties.
F. This Contract has been entered into and shall be construed according to
applicable state and federal law.
G. HMO will furnish each Subscriber with a Member Handbook.
<PAGE>
UNITED STATES HEALTHCARE SYSTEMS OF PENNSYLVANIA, INC.,
dba THE HEALTH MAINTENANCE ORGANIZATION OF
PENNSYLVANIA, dba
U.S. HEALTHCARE
SCHEDULE OF BENEFITS
PATRIOT X QPOS PLAN
STV GROUP
Effective December 1, 1995
Benefit Copayment
Primary Care Physician Office Visit
During Office Hours $10
Non-Office Hours and Home Visits $15
Specialist Physician Office Visit $15
Outpatient Therapies $15
First OB Visit $15
Routine Gynecological Exam(s) $15
Hospital Outpatient Department Visit $15
and Diagnostic Testing
Outpatient Emergency Services
Hospital Emergency Room or Outpatient $35
Department
Outpatient Mental Health Visits Visits 1-20: $25
Outpatient Substance Abuse Visits Visits 1-60: $15
Outpatient Surgery $0
Group No: US018927-001 , PA05-018927-013, PA03-018927-027, PA04-018927-028,
PA09-018927-029
Form: HMO/PA FLEX-SB-2 (11/93) ID: TRKJM1 Page 1
<PAGE>
Inpatient Services
Acute Care $0
Mental Health $0
Substance Abuse Detoxification $0
Substance Abuse Rehabilitation $0
Maternity $0
Skilled Nursing Facility $0
Non-Hospital Services
First course of treatment $0
Second and subsequent courses of treatment 50% of the cost of service
Dependent Eligibility (a) Under 23 years of age, or
(b) 23 years of age or older but
incapable of self-support due to mental
or physical incapacity, either of which
commenced prior to age 23 for
non-student Dependents and prior to age
23 for student Dependents, or
(c) under 23 years of age and attending
a recognized college or university,
trade or secondary school on a full time
basis, and
(d) non-student Dependents will be
covered until the end of the calendar
year after they have reached the age of
23, and
(e) student Dependents will be covered
until the end of the calendar year after
they have reached the age of 23.
Optional Benefits
Routine Eye Exam by Participating $15
Ophthalmologist or Optometrist
Primary Dentist Visit Copayment
(for Preventive Dental Benefit for $5
children, Section II.A.3.g of the
Group Master Contract)
Routine Gynecological Exam(s) One visit per year
Durable Medical Equipment
Copayment $0
Maximum Annual Out-of-Pocket Limit $0
Group No: US018927-001, PA05-018927-013, PA03-018927-027. PA04-018927-028,
PA09-018927-029
Form: HMO/PA FLEX-SB-2 111/93) ID: TRKJM1 Page 2
<PAGE>
Prescription Drugs and Medications
Copayment $10
Lens Reimbursement Reimbursement Amount $35
Group No: US018927-001 , PA05-018927-013, PA03-018927-027, PA04-018927-028,
PA09-018927-029
Form: HMO/PA FLEX-SB-2 (11/93) ID: TRKJM1 Page 3
<PAGE>
THE HEALTH MAINTENANCE ORGANIZATION OF PENNSYLVANIA
ENDORSEMENT
SECTION Vl - EFFECTIVE DATE OF COVERAGE
Section A.2, Effective Date of Coverage Other Than of a Newborn Child, is
amended to read:
2. If a completed HMO enrollment application form is not received by HMO
within thirty-one (31) days of the Member's Enrollment Eligibility Date
(Section V.B), the effective date of Member's coverage is the next Open
Enrollment Period during which Member's completed HMO enrollment
application form is received by HMO, unless such Member and Dependents have
lost medical coverage due to spouse's layoff or termination of employment.
Employees must apply within thirty-one (31 ) days of the layoff or
termination of employment and submit evidence of 1) former medical coverage
through the spouse's employer and 2) termination of employment from the
spouse's employer.
<PAGE>
UNITED STATES HEALTHCARE SYSTEMS OF PENNSYLVANIA. INC..
dba THE HEALTH MAINTENANCE ORGANIZATION OF
PENNSYLVANIA dba U.S HEALTHCARE
E. Mental Health Inpatient Benefit
Section II. E. of the Group Master Contract and the Certificate of Coverage. or
Individual Contract is hereby amended to add:
Member may exchange one (1) Mental Health inpatient benefit day for up to four
(4) outpatient visits. Member may exchange up to a maximum of (10) inpatient
days for a maximum of forty (40) additional outpatient visits under this rider.
Additionally Member may exchange one (1) inpatient day for two (2) days of
treatment in a partial hospitalization program in lieu of hospitalization up to
the maximum benefit limitation.
Requests for a benefit exchange must be initiated by the member's capitated
Mental Health Provider under the guidelines set forth by the HMO. Member must
utilize all outpatient mental health benefits available under the contract and
pay all applicable copayments before an exchange will be considered. The Mental
Health provider must demonstrate medical necessity for extended visits and be
able to support the need for hospitalization if additional visits were not
offered. Request for exchange must be approved in writing by HMO prior to
utilization.
<PAGE>
UNITED STATES HEALTHCARE SYSTEMS OF PENNSYLVANIA, INC.
d/b/a THE HEALTH MAINTENANCE ORGANIZATION OF PENNSYLVANIA, INC.
d/b/a U.S. HEALTHCARE
INJECTABLE BENEFITS AMENDMENT
United States Healthcare Systems of Pennsylvania, Inc. d/b/a The Health
Maintenance Organization of Pennsylvania, Inc. d/b/a U.S. Healthcare, ("HMO")
and Contract Holder agree to offer to the HMO Members the following injectable
benefit subject to the following provisions:
A new section II.K is added to the Group Master Contract and the Certificate of
Coverage:
K. Injectables
Unless specifically excluded, and when an oral alternative drug is not
available, injectable medication is a covered benefit, including those
medications intended to be self administered. Medications must be deemed
medically necessary and appropriate to the Member's needs or condition for
covered services, prescribed by a participating provider and approved in
advance of treatment by HMO. If the drug therapy treatment is approved for
self-administration, Member is required to obtain covered medications at a
U.S. Healthcare participating pharmacy designated to fill injectable
prescriptions.
Experimental or investigational drugs or medications or drugs or
medications that have not been proven safe and effective for a specific
disease or approved for a mode of treatment by the FDA and the NIH are not
covered under this contract. The off-label use of injectable drugs or
medications is not covered. Drugs related to the treatment of noncovered
services are not covered. Drugs related to the treatment of infertility,
contraception and performance enhancing steroids are not covered. Needles,
syringes and other injectable aids are not covered.
A copayment for the primary care physician or specialist physician applies
to this benefit when administered in the participating physician's office
as listed on the attached Schedule of Benefits.
SECTION III - EXCLUSIONS AND LIMITATIONS is hereby amended to delete Exclusion
III.B.17 listed in the Group Master Contract and the Certificate of Coverage in
its entirety and replace it with the following exclusion:
17. Drugs and medicine except as provided by Section II.C.8, Section II.D,
or II.K of this Contract.
<PAGE>
UNITED STATES HEALTHCARE SYSTEMS OF PENNSYLVANIA, INC.
d/b/a THE HEALTH MAINTENANCE ORGANIZATION OF PENNSYLVANIA, INC.
d/b/a U.S. HEALTHCARE
ENDORSEMENT
HMO and Contract Holder agree to offer to Members the following benefit subject
to the following provisions:
SECTION I - DEFINITIONS is amended to include the following definition:
Infertile condition or Infertility - The condition of a presumably healthy
Member who is unable to conceive or produce conception after a period of one
year if the member is under the age of thirty-five (35), or after a period of
six (6) months if the Member is age 35 or older, of unprotected sexual
intercourse.
Participating Advanced Reproductive Technology ("ART") Specialist - A Specialist
which or who has entered into a contractual agreement with HMO for the provision
of the advanced reproductive technology services covered by this endorsement to
Members on an agreed upon basis.
Infertility Program - A program administered by HMO which consists of:
1. The evaluation of "infertile" Members to determine the appropriate
infertility treatment for a Member; and
2. Determination of eligibility for the ART benefit; and
3. Precertification and approval for the ART benefit; and
4. Case management for the provision of infertility services covered under the
Group Master Contract and Certificate of Coverage and the services listed
hereunder.
Section II.A.11 is hereby amended to add the following additional infertility
services to the Group Master Contract and the Certificate of Coverage:
Limited Advanced Reproductive Technology Benefit
1. Eligibility:
To be eligible under the Infertility Program:
a. Member must be covered under the Group Master Contract and the Certificate
of Coverage as a Subscriber or a Dependent; and
b. Member must be diagnosed as infertile.
The ART benefit is not covered for male members when the cause of infertility is
vasectomy or for female members when the cause of infertility is tubal ligation.
2. Access to the ART Benefit and Precertification:
To obtain the ART benefit described in paragraph 3 hereunder, Member must be:
a. Referred by Member's primary care physician or gynecologist to the
Infertility Program, or Member may directly contact the HMO's Infertility
Program Case Management unit by calling the Solutions number listed on
Members ID card; and
<PAGE>
b. Determined to be eligible for the ART benefit after an initial intake
evaluation and consultation with a participating ART Specialist and
recommendation by the ART Specialist that Member be accepted into the
Infertility Program. Eligibility is also based on the participating ART
Specialist's determination of the reasonable possibility of success based
on the Member's medical history and the standards established by HMO; and
c. Pre-certified and approved by HMO for this benefit; and
d. Member has been issued a claim authorization for ART services from the
HMO's Infertility Program Case Management Unit to a participating ART
Specialist. Claim authorizations will only be issued by the Infertility
Program Case Management Unit for all services related to infertility care
and treatment.
3. Benefit:
This benefit covers one (1) egg harvesting and up to two (2) transfers through
InVitro Fertilization (IVF), Zygote Intra-Fallopian Transfer (ZIFT), or Gamete
Intra-Fallopian Transfer (GIFT) only, during each twenty-four (24) month period
from the date of the first visit for actual treatment from the participating ART
Specialist and after the determination of eligibility as described above.
Services under this benefit are only available from the participating ART
Specialists for whom Member has been issued a claim authorization by the
Infertility Program Case Management Unit.
SECTION III - EXCLUSIONS AND LIMITATIONS is hereby amended to delete Exclusion
III.B.25 listed in the Group Master Contract and the Certificate of Coverage in
it's entirety and replace it with the following exclusion:
III.B.25
Infertility injectable medications are not covered. Charges for the freezing and
storage of cryopreserved embryos and charges for storage of sperm are not
covered. Donor costs, including but not limited to the cost of donor eggs and
donor sperm, are not covered. This ART benefit is only available from
participating ART Specialists through the Infertility Program and is excluded
from coverage on a non-referred or out-of-network referred basis. The costs for
ovulation predictor kits are not covered.
<PAGE>
UNITED STATES HEALTHCARE SYSTEMS OF PENNSYLVANIA, INC.
d/b/a THE HEALTH MAINTENANCE ORGANIZATION OF PENNSYLVANIA, INC.
d/b/a U.S. HEALTHCARE
ENDORSEMENT
Effective October 1, 1995
Section VIII.A.1 of the Group Master Contract and Certificate of Coverage,
Continuation, is amended to add the following provision:
In the event a Subscriber's employment with Contract Holder is terminated
involuntarily and without cause, Subscriber shall be entitled to continue
coverage (including coverage of covered Dependents) immediately thereafter,
without payment of additional premium, for a period equal to one month (i.e.,
the corresponding day of the following month, for example from February 15th to
March 15th) for each year that Subscriber has continuously (i.e., no lapse of
more than thirty (30) days) maintained coverage with HMO under a Group Contract,
commencing with the date that Subscriber is effective under this Endorsement, to
a maximum of three months of such coverage. All continued coverage utilized by
Subscriber pursuant to this Endorsement shall be deducted from Subscriber's
accumulated eligibility for continued coverage hereunder (i.e., if Subscriber
has used one (1) month of a three (3) month accumulated continued coverage
period, two (2) months will remain until such time as Subscriber again becomes
eligible for three (3) months of continued coverage.) To be eligible for and
obtain such continued coverage an application must be received by HMO within
thirty (30) days after Subscriber's termination of employment and shall include
(x) a signed representation from the Subscriber that the Subscriber is not
eligible for other comprehensive group health coverage (such as through a spouse
or other employer) or Medicare, and (y) a signed written certification from the
Contract Holder that the Subscriber's employment was terminated involuntarily
and without cause. In the event Subscriber exercises Subscriber's COBRA or other
continuation rights under this Contract, continuation of coverage hereunder
shall be in the form of the waiver of the applicable COBRA premium or other
continuation premium.
<PAGE>
CORPORATE HEALTH INSURANCE COMPANY
(A Minneapolis, Minnesota Domiciled Company)
Principal Executive Offices:
980 Jolly Road
Blue Bell, Pennsylvania 19422
SUMMARY OF BENEFITS
FOR
COMPREHENSIVE MAJOR MEDICAL
GROUP HEALTH INSURANCE POLICY
This Summary of Benefits describes the benefits available to you under the
Comprehensive Major Medical Group Health Insurance Policy No. PA PA01,018927001,
PA03, 018927-027, PA04, 018927-028, PA05 018927-013, PA09, 018927029, GN01,
018927-003, GN02, 018927-002, GN03, 018927-004, NE01, 018927005, DE01,
018927-006, NH01, 018927-007, MD01,018927-008, DC01, 018927009, Rl01,
018927-010, GA01, 018927-011, MD02, 018927-012, NJ01, 018927025, VA01,
012927-026 (the "Policy") issued by Corporate Health Insurance Company ("CHI" or
the "Company") to STV Group ("the Policyholder").
Every attempt has been made to be informative about benefits available under the
Policy and those areas where a benefit may be lost or denied. However, for a
complete description of the benefits, please review this Summary of Benefits
together with the Policy. The benefits described in this Summary of Benefits are
subject exclusively to the provisions and limitations set forth in the Policy.
The benefits described in this Summary of Benefits are those in effect as of
December 1, 1995.
This Summary of Benefits will not constitute a Certificate unless the
Certificate label is fixed to this Summary.
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HOW TO SUBMIT CLAIMS FOR BENEFITS
o A notice of claim, which may be obtained from CHI or your human resources
department, must be sent directly to CHI or its designee within 90 days
after an eligible service or supply is received.
o Please be sure to provide all information required by the notice of claim,
including the Policy number and the Policyholder's name and number.
o If you receive a bill for medical services, send it to CHI or its designee
together with the notice of claim.
o Before submitting a claim for medical expenses, review this Summary of
Benefits and the bills you have accumulated. Be sure you are submitting
bills for which benefits are payable under the Policy. Make copies of all
documents you are submitting.
o Bills must be complete. Each bill must be an original and should show:
* Name of eligible person
* Date(s) of service or supply
* Charge for each service or supply
* Diagnosis (reason for treatment)
* Type(s) of charge(s) (CPT-4 code, if any, and/or description of
service(s) provided)
PLEASE NOTE: The following will not be acceptable:
* Canceled checks
* Cash register receipts
* Balance due bills (bills that show only the amount owed)
* Photocopies
Should you need additional copies of the notice of claim, feel free to contact
CHI between 8:00 AM - 5:00 PM (Eastern Standard Time) at 1-800-323-9930 or check
with your human resources department. All payments will be made directly to the
provider, unless you notify CHI in writing otherwise. If you have any questions,
please call or write:
Corporate Health Insurance Company
980 Jolly Road, P.O. Box 1109
Blue Bell, Pennsylvania 19422
1 -800-323-9930
INSURANCE POLICY HIGHLIGHTS
ELIGIBILITY
Active employees of the Policyholder and their eligible dependents. Dependent
coverage is limited to employee's spouse and unmarried dependent children up to
age 23; full-time students up to age 23.
PRE-CERTIFICATION
To be eligible for maximum benefits under the Policy, you are required to follow
the procedures for pre-certification set forth below. Pre-certification is
obtained by calling CHI at 1-800-541-3149. Pre-certification is required prior
to receiving any of the eligible services or supplies that require
pre-certification, as noted below in the Schedule of Benefits.
FAILURE TO COMPLY WITH THIS PRE-CERTIFICATION REQUIREMENT WILL RESULT IN A 50%
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REDUCTION IN YOUR BENEFITS.
SCHEDULE OF BENEFITS
I. DEDUCTIBLE AMOUNT
The following deductible amount (the "Deductible Amount") must be paid by you or
your family (as the case may be) for eligible medical expenses incurred during
any calendar year. Any eligible medical expenses in excess of the applicable
Deductible Amount will be paid by CHI and the covered person in accordance with
the co-insurance and co-payment provisions set forth below in Section II.
Individual: $300
Family: $900
The Deductible Amount is not applicable to certain eligible medical expenses
noted below in Section V, for which you or your family (as the case may be) need
not pay any Deductible Amount prior to becoming entitled to benefits under the
Policy.
II. CO-INSURANCE AND CO-PAYMENT
All eligible medical expenses in excess of the Deductible Amount will be paid by
CHI and you as follows, until at such time during the calendar year you have
paid up to your out-of-pocket maximum amount set forth below in Section III or
CHI has paid the maximum benefits set forth below in Section IV or V:
CHI Pays: 80% of Reasonable & Customary Charges
You Pay: 20% of Reasonable & Customary Charges
Unless specifically required below in Section V, no co-payment will be payable
on any eligible medical expenses. Certain eligible medical expenses specified
below in Section V are not subject to any co-insurance or co-payment provisions.
CHl's obligation to pay eligible medical expenses under the Policy is further
limited by the maximum lifetime individual benefit limitation set forth in
Section IV below and other maximum benefit amounts set forth next to each
eligible medical expense in Section V below.
III. OUT-OF-POCKET MAXIMUM
During any calendar year, you or your family (as the case may be) will not be
required to pay an aggregate amount in excess of the following out-of-pocket
maximum amount (the "Out-of-Pocket Amount"). If during any calendar year you
have paid pursuant to the above co-insurance or copayment provision an aggregate
amount greater than the Out-of-Pocket Amount below, CHI will pay for 100% of the
balance of the eligible medical expenses, up to the amount of the lifetime
individual maximum benefits amount set forth below in Section IV or the maximum
benefit amounts set forth below in Section V (whichever is applicable).
Individual: $1,200
Family: $3,600
Unless otherwise noted below in Section V, the co-insurance and co-payments paid
by the Covered Individual of the Family Unit will be included in the
Out-of-Pocket Amount. However, the Deductible Amount paid by the Covered
Individual or the Family Unit will not be included in the Out-of-Pocket Amount.
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<PAGE>
IV. LIFETIME INDIVIDUAL MAXIMUM BENEFIT
The maximum amount payable by CHI under the Policy for eligible medical expenses
incurred by you or any member of your family (if applicable) shall not exceed
$1,000,000.
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<PAGE>
V. ELIGIBLE MEDICAL EXPENSES
The Policy covers the following eligible services and supplies provided to you
or your covered family members. However, the Policy covers only those services
and supplies which were medically necessary and only up to reasonable and
customary charges, subject to additional restrictions and limitations set forth
below and in the Policy:
COVERED SERVICES LIMITATIONS AND RESTRICTIONS
Acupuncture In lieu of anesthesia only
Ambulance Transportation To and from the nearest facility that can
give necessary treatment
Ambulatory Surgery Pre-Certification required
Anesthesia
Assistant Surgeon Benefits not payable for hospitals where
surgical assistant is routinely available
Birthing Center Benefits not to exceed those otherwise
available for pregnancy under the Policy
Blood or Blood Plasma Must not be replaced on behalf of the
eligible person
Cardiac Rehabilitation Pre-Certification required
Services
Chiropractic Care Pre-Certification required; CHI pays up to a
maximum benefit amount of $1,000 per calendar
year for detection and correction by manual
means of structural imbalance or o
subluxation resulting from or related to
distortion, misalignment or subluxation of or
in the vertical column
Consultation Only for consultation requested by the
attending physician and given while confined
as an in-patient
Diagnostic Services
Durable Medical Equipment Pre-Certification required on items leased or
purchased for more than $1,500
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Emergency Services Notification must be made within 24
hours of any admission or as soon thereafter
as reasonably possible; Emergency services
must be received within 48 hours after the
onset of the medical emergency
Hemodialysis
Home Health Services Pre-Certification required One visit per day;
up to 4 hours constitute 1 home health care
visit;
Hospice Care Pre-Certification required; Maximum
individual lifetime benefit of $10,000;
Attending physician must certify that the
covered person is terminally ill and must
recommend admission into a hospice care
program
Hospital
Outpatient Care: Pre-Certification required
Inpatient Care: Pre-Certification required
(Room & Board at
Semi-Private Room Rate*)
*Unless Private Room is Medically Necessary
Immunization for No deductible and no co-insurance; Children
Limited to minimum benefits mandated by the
Department of Insurance
Infertility Services to diagnose infertility only; Does
not cover infertility treatment
Inpatient Physician While confined as an inpatient in a hospital
Services or skilled nursing facility
Mammography No deductible and no co-insurance shall be
applied to the charge; Up to 1 routine
mammography per calendar year if the female
eligible person is age 40 or older, and any
additional mammography recommended by a
physician for a female eligible person under
age 40
Maternity-Related Care Notification required soon after
pregnancy is confirmed and within 24 hours
after birth or as soon thereafter as
reasonably possible
Newborn Baby Care
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<PAGE>
Office Visits Only for diagnosis or treatment of an injury
or illness at a physician's office
Organ Transplants Pre-Certification required; Attending
physician must certify medical necessity;
Covered person must be the recipient
Oxygen When prescribed by the attending physician
Papanicolaou Smear Routine pap smear in accordance with the
(Pap Smear) recommendations of the American College of
Obstetricians and Gynecologists. No
deductible or no co-insurance shall be
applied to the charge.
Preventive Care An annual gynecological examination,
including a pelvic examination and clinical
breast examination by a Physician. No
deductible or no co-insurance shall be
applied to the charge.
The charges for immunizations (other than
children's immunizations) and physical
examinations (other than papanicolaou smears
and mammography); Up to maximum benefit of
$150 per individual per calendar year No
deductible or no co-insurance shall be
applied to the charges.
Private Duty Nursing Pre-Certification required;
Must be services of a L.P.N. or R.N. for
non-hospitalized illness or injury
Psychiatric Treatment Includes Mental, Psychoneurotic and
Personality Disorders; Restoration and
reinstatement provision of the Policy does
not apply; Lifetime maximum benefit of
$50,000
Outpatient: Maximum benefit limited to 60 visits per
calendar year; Maximum benefit of $1,500 per
year; CHI pays 50% and You pay 50% Up to $30
per visit
Inpatient: Pre-Certification required; Maximum benefit
limited to 30 days per calendar year
Reconstructive/ Pre-Certification required
Corrective Surgery
Skilled Nursing Facility Pre-Certification required; Maximum benefits
limited to 240 days per calendar year and 35
physician visits per calendar year; Room and
board at semi-private accommodations, unless
isolation is required and the attending
physician orders private accommodations
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<PAGE>
Substance Abuse Pre-Certification required
Treatment
Outpatient Care: Limited to 30 visits per calendar year and 30
additional full visits or equivalent partial
visits, which may be exchanged for up to 15
inpatient rehabilitation days on a 2-for-1
basis
*Inpatient Detoxification: Limited to 7 inpatient days per calendar
year, subject to a lifetime limit of 4
separate admissions
*Inpatient Rehabilitation: Limited to 30 days per calendar year in a
non-hospital substance abuse residential
facility, subject to a lifetime limit of 90
days
*Room and board at Semi-Private room rate.
Therapies Pre-Certification required Includes Cardiac
Rehabilitation, Chemo, Occupational,
Physical, Radiation, Respiratory, and Speech;
Voluntary Sterilizations Does not cover reversal procedures
Vl. EXCLUSIONS
Certain charges and expenses are not covered by the Policy, including those:
o For services or supplies not medically necessary for the diagnosis or
treatment of an illness or injury
o In excess of the reasonable and customary charges or the maximum benefits
provided by this Summary of Benefits
o Caused by war (declared or undeclared) or any act of war
o Suffered while on full-time active duty in the armed forces of any country
or international authority
o Incurred in connection with any injury or illness which is compensable
under any workers' compensation or occupational disease act or law or the
federal Longshoreman's and Harbor Worker's Compensation Act
o For services received in a veteran's administration hospital, a public
health service hospital, or any facility operated by the U.S. government or
any of its agencies, except to the extent that there is an unconditional
requirement to pay these charges
o For certain services received by retirees from armed forces or their
dependents pursuant to and covered by programs established under federal
law
o For the treatment of or care for mental retardation, defects and
deficiency, other than psychiatric treatment specifically covered herein
o For dental services, except for accidental injuries to sound natural teeth
8
<PAGE>
o For optical services
o For services rendered by you or your close relative
o For care, services, and supplies not prescribed or rendered by a Physician
o Directly related to attempted suicide or an intentionally self-directed
injury
9
<PAGE>
o For provision or replacement of the following items: arch supports; elastic
hose; birth control devices including, but not limited, to IUDs, diaphragms
and condoms; false teeth; braces; traction apparatus; canes; walkers;
corrective shoes; corsets; wigs or cranial prosthesis; diapers; or certain
special appliances, supplies or equipment.
o For custodial care
o For cosmetic surgery, except reconstructive surgery specifically covered by
the Policy
o Resulting from the commission or attempt to commit a felony by the eligible
person
o For certain convenience items or services
o Applied toward satisfaction of the deductible or the co-payment or
coinsurance amount payable by the eligible person
o For blood or blood plasma that is replaced on behalf of the eligible person
o For actual or attempted impregnation or fertilization which involves either
an eligible person or a surrogate as a donor or a recipient
o For examinations, proper adjustment of, or purchase of a hearing aid
o For career and pastoral counseling
o For services or supplies of an educational, experimental or investigatory
nature
o For the reversal of any sterilization procedure performed on any family
member
o For sex transformations or other transsexual surgery or related services
not necessitated by an injury or illness covered by the Policy
o For certain services rendered for academic reasons
o For orthoptic therapy (vision exercises)
o For weight reduction programs and gastric stapling for treatment of obesity
o For certain bereavement counseling service
o For treatment of temporomandibular joint dysfunction with/intra-oral
devices or any other method to alter vertical dimension
o For hypnosis not used as an integral part of a treatment covered by the
Policy
o For telephone consultations, failure to keep a scheduled visit, or
completion of a claim form
o For any services or supplies not specifically described in the Policy
o For any services or supplies covered by any automobile insurance policy up
to the amount of coverage limitation under such policy.
o For prescription drugs
o For orthotic devices
10
<PAGE>
CHI shall determine whether a service or supply is covered under or excluded
from coverage under the Policy.
11
<PAGE>
PRE-CERTIFICATION
Prior to receiving hospitalization or certain other medical treatment requiring
pre-certification as specified above in the Schedule of Benefits, the covered
person, a member of his or her family, a hospital staff member, or the attending
physician, must notify CHI to pre-certify the admission or treatment.
The Company will reduce the benefits payable under the Policy by 50% if the
procedures for precertification set forth herein are not followed. Each covered
person will be responsible to pay the unpaid balance of the benefits.
To obtain pre-certification, call CHI at 1-800-541-3149. This call must be made:
1. Prior to any planned admission into hospital and prior to receiving
such other eligible treatment that require pre-certification according
to the Schedule of Benefits or the Policy;
2. Within 24 hours after the time of an emergency admission or as soon
thereafter as reasonably possible; and
3. As soon as the attending physician confirms that a covered person is
pregnant and again within 24 hours of the birth or as soon thereafter
as reasonably possible.
When calling CHI, the caller must provide:
1. The covered person's name and the covered person's social security
number;
2. The treating physician's name, address and phone number;
3. The name of the hospital or treatment facility and the anticipated
admission or treatment date; and
4. The Policyholder's name and Policyholder Policy Number.
There is no requirement to call in advance before seeking treatment for an
emergency.
Case Management
Certain medical conditions for which a claim is made under the Policy may be
referred to Case Management (CM).
Only those conditions for which medical expenses are expected to exceed a
certain dollar amount, and for which there is a potential lower cost treatment
alternative, will be referred to CM.
CM is a program which provides a case-by-case analysis and medical treatment
plan suggestions that address the need of catastrophically ill or injured
individuals. It concentrates on severe injuries and illnesses, such as spinal
cord injuries or head trauma, when early intervention and individual case
management will prove effective to a patient's recovery.
The decision to refer any case to CM will remain with CHI, who will rely on the
criteria established by the CM service provider to determine which claims are
recommended for CM, except that no alternative treatment will be provided to the
covered person under CM without prior consent of the covered person and the
attending physician.
In certain instances a recommendation to use alternative treatment not normally
covered by the Policy may be made when such treatment endorses quality care,
medical necessity and cost effectiveness. Under these circumstances, any such
alternative treatment will be covered by the Policy.
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<PAGE>
DEPENDENT ELIGIBILITY
1. Dependent Coverage
(a) Your spouse and dependent children can also be covered under the
Policy.
(b) Your spouse is eligible for dependent coverage unless:
(i) You and your spouse are legally separated or divorced or have
obtained an annulment;
(ii) Both your and your spouse are employees of the Policyholder. You
and your spouse may choose to be covered as individual employees
of the Policyholder, or one may cover the other as a dependent,
but both of them may not cover the other as a dependent;
(iii) Such spouse is in active military service;
(iv) Such spouse is of the same sex; or
(v) Such spouse is not a legal spouse, under the laws of the
Commonwealth of Pennsylvania.
(c) Your natural or legally adopted child is eligible from birth so long
as the child is:
(i) Less than age 23, or if a full-time student, less than age 23;
(ii) Not married; and
(iii) Not on active duty in any of the armed forces.
(d) Child/children under legal guardianship (including foster children) or
children under court order will be included under the Policy under the
same conditions and restrictions applicable to a covered person's
natural or legally adopted children.
(e) Your spouse and child/rep meeting the requirements described above are
referred to herein as "Eligible Dependents."
2. Enrolling Eligible Dependents
(a) You can enroll for family coverage when you become eligible for
individual coverage.
(b) If you have no dependents when you first enroll but later gain one,
you may enroll for family coverage within 31 days of the date you gain
the dependent. This includes dependents gained by marriage, birth
adoption, legal guardianship or court order. During the first 31 days
after the birth of a child, the child will be automatically covered
for all eligible benefits. For coverage of a child beyond the first 31
days after birth and for coverage of a spouse during and beyond the
first 31 days after marriage, enrollment must be made and the first
premium charge for that dependent must be paid within that 31 day
period.
(c) Note: Except for newborn child's coverage during the first 31 days
after birth, if you do not enroll you dependents within 31 days after
the dependent becomes eligible. satisfactory evidence of good health
for such dependent will be required. If satisfactory evidence of good
health is not provided for such dependent, CHI may reject the
enrollment application for insurance of such dependent under the
Policy. Coverage for
13
<PAGE>
such dependent providing satisfactory evidence of good health will
then begin no earlier than the first day of the calendar month
following CHl's approval of the evidence of good health. However, no
evidence of good health will be required for any dependent who enrolls
within such 31 days.
3. When Dependent Coverage Stops
Coverage for dependents shall end when the dependent relationship with you
ends or when your coverage under the Policy ends. When coverage for a
dependent ends, the dependent will have an opportunity to obtain
continuation of medical coverage as provided by the Consolidated Omnibus
Budget Reconciliation Act.
4. Extension of Coverage for Dependents
(a) Under certain circumstances described below, coverage could continue
for an Eligible Dependent after the time coverage would normally stop
under the Policy.
(b) A child who is otherwise eligible and is physically or mentally
incapable of self support upon attaining the limiting age may be
continued under the coverage provided hereunder so long as he or she
remains incapacitated and unmarried at that time subject to your
coverage continuing in effect.
(c) To be eligible for the continued coverage described in this Section of
a dependent child beyond the time coverage would normally end, proof
of his or her incapacity must be submitted to CHI within 31 days after
such dependent's attainment of the limiting age. Proof of the
incapacity will be required from time to time to keep this coverage in
effect. Each time CHI asks for proof that a covered dependent is
incapacitated, CHI may require the covered dependent to have a
physician's examination at the covered person's expense. CHI may
specify the physician.
(e) The continued coverage of a dependent child under this Section
terminates on the earliest of the following dates:
(i) the date such child is no longer incapacitated;
(ii) the date proof of the child's incapacity is not provided when
asked; or
(iii) the date your dependent's coverage otherwise terminates pursuant
to the Policy.
ENROLLMENT CHANGES
Enrollment and benefit coverage under the Policy may be changed only upon a
change in your family status.
A change of family status occurs when:
1. You get married or divorced;
2. Your child is born or legally adopted;
3. Your spouse or child dies; or
4. Your spouse has a loss of group insurance coverage.
14
<PAGE>
15
<PAGE>
GENERAL PROVISIONS
1. Notice of Claim
Written notice of claim must be furnished to the Company within 90 days after
covered treatment has been rendered to the covered person. A notice of claim
form may be obtained from CHI or the Policyholder. However, in case of a claim
for which the Policy provides any periodic payment contingent upon continued
provision of treatment, this notice may be furnished within 90 days after
termination of each period for which the Company is liable. Failure to furnish
the notice of claim within the time required will not invalidate nor reduce any
claim if it is not reasonably possible to give the notice of claim within 90
days, provided the notice of claim is furnished as soon as reasonably possible.
However, except in the absence of legal capacity of the claimant, the notice of
claim may not be furnished later than one year from the date when the notice of
claim was originally required.
2. Time for Payment of Claim
Benefits payable under the Policy will be paid promptly upon receipt by CHI of
satisfactory notice of claim, unless the Policy provides for periodic payment.
Where the Policy provides for periodic payments, the benefits will accrue and be
paid monthly, subject to satisfactory notice of claim.
3. Payment of Claims
All or any portion of any indemnities provided by the Policy on account of
hospital, nursing, medical or surgical services may, at the Company's option, be
paid directly to the hospital or other persons rendering such services; but it
is not required that the service be rendered by a particular hospital or person.
Any payment made by the Company in good faith pursuant to this provision will
fully discharge the Company's obligation to the extent of the payment. The
covered person may request that payments not be made pursuant to this provision.
The request must be made in writing and must be given to the Company not later
than the time of filing notice of claim. Payment made prior to receipt of the
covered person's written request at the Company's principal executive office
will be deemed to be payment made in good faith.
The covered person shall be responsible for the payment of ail charges for any
service or supply in excess of the reasonable and customary charges or otherwise
not covered by the Policy.
4. Choice of Physician
Each covered person has free choice of any physician, hospital or other
provider.
5. Time Limit on Certain Defenses
No claim for loss incurred after one year from commencement of the individual
covered person's insurance will be reduced or denied on the grounds that the
disease or physical condition existed prior to the commencement of the covered
person's insurance.
6. Incontestability
The validity of your insurance will not be contested, except for non-payment of
premium, after your insurance under the Policy has been continuously in force
for one year during his or her lifetime. No statement made by you relating to
your insurability or that of your dependents will be used in defense to a claim
under the Policy unless: (a) it is contained in a written application signed by
you; and (b) a copy of the application has been furnished to you or your
beneficiary.
7. Misstatements of Age
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<PAGE>
If the age of any covered person has been misstated, an equitable adjustment
will be made in the premiums or, at the Company's discretion, the amount of
insurance payable. Any premium adjustment will be based on the premium that
would have been charged for the same coverage on a covered person of the same
age and similar circumstances.
8. Physical Examination and Autopsy
The Company, at its own expense, will have the right and opportunity to examine
a covered person, when and as often as may reasonably be required during the
pendency of a claim under the Policy and to make an autopsy in case of death,
where it is not forbidden by law.
9. Legal Action
No action at law or in equity may be brought to recover on the Policy unless and
until the expiration of 60 days after notice of claim has been furnished to CHI.
No such action may be brought after the expiration of three (3) years after the
time notice of claim is required to be furnished.
10. Conformity With State Statutes
Any provision of the Policy which, on its effective date, is in conflict with
the statutes of the state in which it is issued, is deemed amended to conform to
the minimum requirements of those statutes.
11. Assignment
No assignment of the Policy, or any part of it, will be binding on the Company
unless approved in writing by the President or Executive Vice President of the
Company. The Company does not assume any responsibility for the validity of any
assignment.
12. Rights of Employees
Neither the Policy nor this Summary of Benefit constitutes a contract of
employment and does not affect the right of the employer to discharge any
employee.
13. Facility of Payment
If, in the opinion of the Company, a covered person is not competent to execute
a valid release for payment of any benefit to which he is entitled under the
Policy, the Company may, but shall not be required to, make payment to such
individual(s) or institution(s) as have assumed the care and support of such
covered person. In the event the covered person dies before payment is made to
him of all benefits to which he is entitled under the Policy, the Company may,
but shall not be required to, make payment to such individual(s) or
institution(s) as may be, in the opinion of the Company, equitably entitled
thereto, including without limitation, individual(s) or institution(s) to which
the covered person may have assigned such benefits prior to his death. Any
payment made in accordance with the foregoing provisions shall fully discharge
the Company to the extent of such payments.
14. Right to Receive and Release Information
For the purpose of determining the applicability of and implementing the terms
of the provisions of the Policy, the Company may release to, or obtain from, any
other plan or policy administrator, insurance company, or other organization or
individual any information, concerning any individual, which the Company
consider to be necessary for those purposes. Any individual claiming benefits
under the Policy will furnish the information that may be necessary to implement
the provisions.
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<PAGE>
SUBROGATION
If any benefit is provided to you under the Policy, CHI will be subrogated and
succeed to your rights of recovery with respect to the services and supplies
involved against a responsible third party and/or insurance company. Please see
the Section entitled "Subrogation" under the Policy to review your rights and
obligations in connection with CHl's subrogation rights.
COORDINATION OF BENEFITS
In addition to the Policy's benefits, the Policy has a Coordination of Benefits
provision. The purpose of this provision is to conserve funds associated with
health care. Coordination of Benefits is applicable only when you, your spouse
or your dependent(s) are eligible for benefits under more than one group health
plan.
When you receive health care services that are also covered under another plan,
a determination is made as to which plan is "primary" and which plan is
"secondary". The primary plan considers the services, without regard to the
secondary plan. The secondary plan will then consider the balances on covered
services according to its own limitations.
If the Policy is determined to be the secondary plan, CHI will not pay more than
it would have had under the Policy there been no other coverage.
The primary plan will be determined in the following order:
1. If the other plan does not include a provision to coordinate benefits,
such plan will be the primary plan.
2. If the other plan does include a provision to coordinate benefits,
then:
A. The plan covering the patient as the covered employee is the
primary plan.
B. Except for situations where the parents of a child are separated
or divorced, the plan of the parent whose date of birth occurs
earlier in the policy year is the primary plan for that child. If
both parents have the same birth date, the plan which covered the
parent longer shall be primary.
Note: In the event this plan is coordinating with a plan that
uses a rule based on the gender of the parent, benefits will be
coordinated as follows:
Except for situations where the parents of a child are separated
or divorced, the plan of the male parent is primary.
C. In those situations where the parents are separated or divorced,
the primary plan is determined as follows:
1) the plan covering the parent with custody of the child is
primary;
2) if the parent with custody of the child has remarried, the
stepparent's plan will pay for covered services before the
plan of the parent without custody; and
3) a court decree may determine the primary plan. You should
advise your employer of any court decree.
18
<PAGE>
D. When the determination cannot be made with the above rules, then
the plan that has covered the patient for the longer period of
time will be the primary plan, except:
o the plan which covers the patient as inactive employee (or a
dependent of such a person) is the primary plan over a plan
that covers a patient as a laid-off or retired person (or a
dependent of such a person); and
o if either plan does not have this condition, then it does
not apply and the plan which has been in effect the longer
period of time is primary;
3. If services are provided under a governmental program for which the
covered employee pays a periodic rate, that program is the primary
plan, except when prohibited by law or when the covered employee
elects Medicare as secondary coverage.
At its sole discretion, CHI may pay benefits first and determine liability
later. If CHI pays first and it is determined that the Policy is the secondary
plan, CHI has the right to recover the expense already paid in excess of its
liability as the secondary plan. If the other health care plan is the primary
plan, CHI may limit payment so that CHI will not pay more than the difference,
if any, between the primary plan's payment and CHl's liability under the Policy.
Benefits payable under another plan include benefits that would have been
payable had the claim been duly made. When the Policy is determined to be
primary, but payment was made by another plan, CHI has the right to reimburse
the other plan, the amount which CHI determines is its liability.
CHI may release to or obtain from any person or organization any information
about coverage, expenses and benefits which may be necessary to coordinate
benefits. The covered employee on his/her own behalf and on behalf of their
dependent(s) may be required to furnish information and to take such other
action as is necessary to assure the rights of CHI.
MEDICARE
When a covered person is eligible for Medicare, that person must sign and
deliver an election card to the Company, stating whom that covered person wants
to be his primary insurer. If the covered person elects Medicare as his or her
primary source of coverage and belongs to a group covered by the Policy covering
twenty (20) persons or more, all Policy benefits otherwise payable to that
covered person shall discontinue. If belonging to a covered group of less than
twenty (20) persons, all Policy benefits otherwise payable with respect to the
covered person will be reduced by any service or supply provided, or any
benefits paid or payable, under Part A and Part B of Medicare.
For the purposes of this Section, benefits will be paid on the basis that the
covered person is covered by both Part A and Part B of Medicare. If the covered
person should not receive benefits under either Part A or Part B because of:
(a) failure to enroll when required;
(b) failure to pay any premiums that may be required for full coverage of
the person under Medicare; or
(c) failure to file any written request or claim required for payment of
Medicare benefits;
the Company will make determination of the total benefits that would have been
payable under Medicare in the absence of this failure.
"Part A" means the "Hospital Insurance Benefits for the Aged" portion of
Medicare.
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<PAGE>
"Part B" means the "Supplementary Medical Insurance for the Aged" portion
of Medicare.
20
<PAGE>
TERMINATION OF COVERAGE
Subject to certain exceptions:
o Your coverage under the Policy ends immediately when you leave the
employment of the Policyholder. It also ends if such employee is no
longer eligible under the Policy, the Policy is discontinued or, after
a grace period, premiums are not paid.
o Coverage for your dependents end when they no longer meet the
definition of dependents under the Policy or your coverage under the
Policy terminates.
o If coverage under the Policy terminates and you want to continue your
medical coverage and that of your eligible dependents, you may apply
for continued coverage under COBRA or convert your coverage into an
individual policy, as explained in Article IX of the Policy.
CLAIMS APPEAL PROCEDURE -
If your claim has been denied in whole or in part, you will be notified by CHI.
This notice will set forth the reasons for such denial. If you wish to appeal
this decision, you may write to the address which appears on the notice (to the
attention of the person who signed the letter, if any).
It is important for you to understand the reasons for the denial of benefits in
order to decide whether you want to appeal and request that the claim be
reviewed again. You should examine this Summary of Benefits and the Policy,
which are on file with your employer. The Policy is a legal document setting
forth the full terms and conditions of your hospital and professional coverages
and excluded services. You may also request a fuller explanation of the
rejection decision by calling CHI.
You may appeal a denial of benefits within 30 days of the date of the rejection
by sending a letter stating why you think your claim should not have been
denied, including a copy of the denial letter and with any additional claim. Be
sure to include in your letter your Policy number, your Policyholder number,
claim number, if any, your employer's name and the date of services for which
benefits were denied. If you do not appeal within thirty (30) days, the denial
will become final and incontestable.
Upon receipt of your letter and any additional information you provide, your
records will be reviewed; and the results of this review will be sent to you
promptly. In unusual cases, as when review of your claim requires examination by
medical personnel, including consulting physicians, the review may be extended.
No legal action at law or equity may be brought to recover any benefits under
the Policy unless and until the appeal process set forth above has been
exhausted, and in no event prior to the expiration of 60 days after notice of
claim has been furnished to CHI in accordance with the requirements of the
Policy.
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<PAGE>
UNITED STATES HEALTH CARE SYSTEMS OF PENNSYLVANIA, INC.,
d/b/a THE HEALTH MAINTENANCE ORGANIZATION OF
PENNSYLVANIA d/b/a
U.S. HEALTHCARE
FLEX OPTION PLAN
DURABLE MEDICAL EQUIPMENT RIDER
United States Health Care Systems, Inc. d/b/a The Health Maintenance
Organization of Pennsylvania, Inc. d.b.a. U.S. Healthcare ("HMO") and Contract
Holder agree to offer to the HMO Members the following benefit subject to the
provisions listed hereunder:
Durable medical equipment will be provided when medically necessary and required
for therapeutic use as determined by HMO. The wide variety and continuing
development of patient care equipment makes it impractical to provide a complete
listing, therefore, the HMO Medical Director must approve requests on a
case-by-case basis. HMO reserves the right to provide the most cost efficient
and least restrictive level of service or item which can be safely and
effectively provided.
Instruction and appropriate services required for the Member to properly use the
item, such as attachment or insertion, is also covered. Replacement, repairs and
maintenance not provided for under a manufacturer's warranty or purchase
agreement coverage will be a covered benefit when it is functionally necessary
and appropriate.
General guidelines considered are:
1. The device must be medically reasonable and necessary for the
improvement of the patient's condition or must improve or supplement a
bodily function.
2. If the equipment is other than standard (electric, motorized) the
extra features of the equipment must be medically necessary.
3. The duration of medically necessary usage must be established,
especially in those situations where the purchase of the item is
relevant.
4. Item, device or equipment is primarily and customarily used to serve a
medical purpose and generally considered to be safe and effective for
the intended purpose.
5. Items generally not useful to a person in the absence of illness or
injury.
Exclusions:
Air conditioners; Whirlpools; Portable Whirlpool Pump; Chair Lifts;
Communication Aids; Elevators; False Teeth; Massage Devices; Overbed
Tables; Sauna Bath; Telephone Alert Systems; Wigs (except where required by
law). Experimental or investigational devices, items or equipment; Items
that are not primary medical in nature.
Member is responsible for the following copayment, per item $0.
Maximum annual out-of-pocket limit $0.
<PAGE>
UNITED STATES HEALTH CARE SYSTEMS OF PENNSYLVANIA, INC.,
dba THE HEALTH MAINTENANCE ORGANIZATION OF
PENNSYLVANIA dba
U.S. HEALTHCARE
FLEX OPTION PLAN
PRESCRIPTION PLAN RIDER
United States Health Care Systems of Pennsylvania, Inc., d/b/a The Health
Maintenance Organization of Pennsylvania d/b/a U.S. Healthcare ("HMO") and
Contract Holder agree to offer to the HMO Members the HMO Prescription Plan,
subject to the following provisions:
SECTION I - DEFINITIONS is amended to include the following definitions:
Participating Pharmacy - a Pharmacy which has contracted with HMO to
provide prescription services to Members.
Average Wholesale Price (AWP) - The published, average price of drugs,
available through wholesale distributors per the Blue Book.
SECTION II - BENEFITS is amended to add the following provision:
I. Prescription drugs and medications, including insulin, when prescribed
by a licensed Physician. Each prescription is limited to a maximum
34-day supply, with up to five (5) refills when authorized by a
licensed Physician. Prescriptions must be filled at the Participating
Pharmacy chosen by the Subscriber, in writing, on forms provided by
HMO, in advance of enrollment in the HMO Prescription Plan. Except for
under Option II.C.3. Generic pharmaceuticals may be substituted for
brand name products, as provided by law, for prescriptions filled
under this rider. There is a $10.00 Copayment, payable directly to the
Participating Pharmacy for each prescription. This Copayment is not
subject to the copayment limitation set forth in the Contract.
ADDITIONAL OPTIONAL BENEFITS
The following benefits/prescriptions are additionally covered as described above
when the corresponding line is appropriately marked:
1. Oral Contraceptives
Exclusion IlI(a) is hereby deleted in its entirety.
2. Diabetic SuppIies
Diabetic Needles and Syringes.
Diabetic test agents, devices and ravage preparations.
Exclusions IlI(c) and (f) are hereby deleted as they relate to
diabetic supplies only
<PAGE>
3. Generic/Brand Name Prescriptions
When a generic alternative is available, Member will pay the higher
copayment based on Member's decision to purchase a brand name
prescription according to the following checked option. Member will
not be subject to the higher copayment when a generic brand is not
available.
___$2.50/$7.50; ___$5.00/$10.00; ___$10.00/$15.00;
___$15.00/$20.00.
SECTION II.G, EMERGENCY SERVICES is amended to add:
Emergency prescriptions out of area - If an emergency prescription is
needed when the Member is located beyond a reasonable distance from
his or her Participating Pharmacy, HMO will reimburse, subject to
professional review, 75% of the cost of the prescription, less the
Copayment.
SECTION III - EXCLUSIONS is amended to include the following provision:
32.(a) Oral contraceptives when used for the purpose of birth control;
(b) injectable except for insulin;
(c) needles and syringes including but not limited to diabetic needles and
syringes;
(d) drugs which do not require a prescription even if a prescription is
written;
(e) medical supplies, devices and equipment;
(f) test agents and devices including but not limited to diabetic tests
agents and ravage preparations;
(g) drugs used for cosmetic purposes, including but not limited to Loniten
(Minoxidil) compounded for hair growth;
(h) experimental and/or investigational drugs;
(i) drugs prescribed for uses other then uses approved by the FDA or other
appropriate regulatory agency; and
(j) smoking cessation aids.
SECTION VIII - CONVERSION is amended to read:
Prescription Plan - The conversion privilege does not apply to the HMO
Prescription Plan.
<PAGE>
UNITED STATES HEALTH CARE SYSTEMS OF PENNSYLVANIA, INC.,
dba THE HEALTH MAINTENANCE ORGANIZATION OF
PENNSYLVANIA, INC. dba
U.S. HEALTHCARE
FLEX OPTION PLAN
LENS REIMBURSEMENT RIDER
Schedule lI.A.3.f. of this Contract is hereby amended to read:
United States Health Care Systems of Pennsylvania, Inc., d/b/a The Health
Maintenance Organization of Pennsylvania, Inc. dba U.S. Healthcare. ("HMO") and
Contract Holder agree to offer to the HMO Members the following benefit subject
to the following provisions:
f. Routine eye examinations and referral to Member's Participating
Specialist Physician for appropriate vision care when necessary.
Additionally, HMO will reimburse Member up to $35.00 for the purchase
of prescription lenses and frames (including contact lenses). This
allowance is payable once in a twenty-four (24) month period which
commences with the Member's initial use date of this benefit.
<PAGE>
CORPORATE HEALTH INSURANCE COMPANY
(A Minneapolis, Minnesota Domiciled Company)
Principal Executive Offices:
980 Jolly Road
Blue Bell, Pennsylvania 19422
COMPREHENSIVE MAJOR MEDICAL
GROUP HEALTH INSURANCE POLICY
NON-PARTICIPATING
This Comprehensive Major Medical Group Health Insurance Policy (the "Policy") is
a legal contract between Corporate Health Insurance Company ("CHI" or the
"Company") and the policyholder indicated on the Schedule of Benefits (the
"Policyholder"), which is set forth in the Summary of Benefits distributed to
each eligible employee of the Policyholder and incorporated herein by reference.
In consideration of a signed application and payment of the required premiums,
the Company agrees to provide insurance for eligible employees of the
Policyholder and their eligible dependents while such persons are covered under
this Policy and arc insured for the applicable coverage. Benefits are subject to
the terms, conditions, exclusions and limitations of this Policy. Certain
identified benefits are subject to pre-certification requirements, which if not
followed will result in reduced benefits.
This Policy takes effect 12 01 a.m. Eastern Standard Time on the Effective Date
at the Policyholder's address.
Corporate Health Insurance Company has caused its President and Secretary to
execute and witness this Policy.
/s/ /s/
Secretary President
<PAGE>
TABLE OF CONTENTS
I. General Information 1
II. Eligibility 2
III. Enrollment Changes 5
IV. Policy Benefits and Payments 5
V. Pre-Certification 7
VI. Covered Medical Services 8
VII. General Exclusions 18
VIII. General Provisions 20
IX. Continuation of Coverage 23
X. Coordination of Benefits 26
XI. Medicare 28
XII. Subrogation 29
XIII. Policyholder/Employer Provisions 29
XIV. Definitions 31
<PAGE>
I. GENERAL INFORMATION
1. POLICY NUMBER: PA01-018927-001, PA05-018927-013,
PA03-018927-028, PA09-018927-009, GN02-018927-002, NJ01-018927-025,
GN01 -018927-003, GN03 -018927-004, NE01 -018927-005, NH01 -018927-007,
MD01 -018927-008, MD02-018927-012, DC01-018927-009, RI01-018927-010,
GA01-018927-011, VA01-018927-026
2. POLICYHOLDER NUMBER: As listed above
3. NAME AND ADDRESS OF POLICYHOLDER
STV Group
11 Robinson Street
P.O. Box 459
Pottstown, PA 19464
4. EMPLOYER IDENTIFICATION NUMBER (E.I.N.) ASSIGNED
BY INTERNAL REVENUE SERVICE: NOT AVAILABLE
5. TYPE OF POLICY: Group Health Insurance Policy - Liberty Flex
6. THE NAME, BUSINESS ADDRESS AND TELEPHONE NUMBER OF THE COMPANY:
CORPORATE HEALTH INSURANCE COMPANY
980 Jolly Road
P.O. Box 1109
Blue Bell, Pennsylvania 19422
1-800-204-2300
7. POLICY EFFECTIVE DATE: December 1, 1995
8. WAITING PERIOD: Full-Time Active Employees Working 30 Hours or
More Per Week; Eligible for Benefits first of the
- month following Date of Hire
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<PAGE>
II. ELIGIBILITY_
1. Covered Persons
This Policy will cover the following Covered Persons:
(i) all Eligible Employees of the Policyholder and its subsidiaries and
affiliates specifically identified in writing by the Policyholder to
the Company; and
(ii) their eligible Dependents.
2. Eligibility Date
The "Eligibility Date" for each Covered Person will be:
(i) if the Covered Person is an Eligible Employee, the later of the date
of hire by the Policyholder (or, if applicable, the date on which the
waiting period imposed by the Policyholder ends) and the Effective
Date of this Policy; or
(ii) if the Covered Person is an Eligible Dependent, the later of the date
of hire (or, if applicable, the date on which the waiting period
imposed by the Policyholder ends) of the Eligible Employee to whom
such Covered Person is a Dependent and the Effective Date of this
Policy.
3. When Coverage Begins
(a) If an Eligible Employee enrolls on or before the Effective Date of
this Policy, coverage will begin under this Policy on the Effective
Date for such Eligible Employee and any Eligible Dependents of such
Employee identified as Covered Persons in the Policy Enrollment Form.
(b) If an Eligible Employee enrolls after the Effective Date of this
Policy, coverage will begin on the first day of the calendar month
after the Eligible Employee enrolls under this Policy.
(c) An Eligible Employee will be deemed to have enrolled under this Policy
when the Eligible Employee has completed, signed and delivered a
Policy Enrollment Form, identifying any Eligible Dependents as Covered
Persons, to the Company and such Policy Enrollment Form has been
accepted by the Company at its sole discretion.
(d) Should the Eligible Employee not be working full-time on the day he or
she would ordinarily become covered under this Policy, the coverage
for such Employee and any Eligible Dependents will be delayed until he
or she returns to full-time work.
(e) Limitation: Each Eligible Employee will have 31 days from his or her
Eligibility Date to enroll for coverage. No Evidence of Good Health
will be required for any Eligible Employee enrolling within such 31
days. All Eligible Employees enrolling after such 31 days will be
required to submit Evidence of Good Health for his or herself and for
each Eligible Dependent. If such Employee fails to provide Evidence of
Good Health satisfactory to the Company, the Company may reject the
Employee's enrollment application for insurance under this Policy.
Coverage under this Policy for enrollees after such 31 days who
provides satisfactory Evidence of Good Health will begin no earlier
than the first day of the calendar month after CHl's approval of
Evidence of Good Health.
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<PAGE>
(f) For purpose of this Article only, each Eligible Employee who enrolls
under this Policy during any designated open enrollment period of the
Policyholder shall be deemed and treated as a new employee of the
Policyholder.
4. Return to Work After Voluntary Termination of Employment
If an Eligible Employee returns to active full-time employment with the
Policyholder at any time following voluntary termination of employment with
the Policyholder, the waiting period described herein for new Employees
will apply, unless the Eligible Employee returns within 12 months after the
date of the voluntary termination.
5. Dependent Coverage
(a) A Covered Employee's spouse and a Covered Person's dependent children
can also be covered under the Policy pursuant to the terms hereof.
(b) The Covered Employee's spouse is eligible for dependent coverage
unless:
(i) The Covered Employee and his or her spouse are legally separated
or divorced or have obtained an annulment;
(ii) Both the Covered Employee and his or her spouse are employees of
the Policyholder. The Covered Employee and his or her spouse may
choose to be covered as individual employees of the Policyholder,
or one may cover the other as a Dependent, but both of them may
not cover the other as a Dependent;
(iii) Such spouse is in active Military Service;
(iv) Such spouse is of the same sex; or
(v) Such spouse is not a legal spouse, under the laws of the
Commonwealth of Pennsylvania.
(c) The Covered Person's natural or legally adopted child is eligible from
birth so long as the child is:
(i) Less than age 23, or if a full-time student, less than age 23;
(ii) Not married; and
(iii) Not on active duty in any of the armed forces.
(d) Child/children under legal guardianship (including foster children) or
children under court order will be included under this Policy under
the same conditions and restrictions applicable to a Covered Person's
natural or legally adopted children.
(e) The Covered Employee's spouse and child/rep meeting the requirements
described above are referred to in this Policy as "Eligible
Dependents."
6. Enrolling the Eligible Employee's Eligible Dependents
(a) The Eligible Employee can enroll for family coverage at the same time
he or she becomes eligible for his or her individual coverage.
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<PAGE>
(b) If the Eligible Employee has no Dependents when the Eligible Employee
first enrolls but later gains one, the Eligible Employee may enroll
for family coverage within 31 days of the date the Eligible Employee
gains the Dependent. This includes Dependents gained by marriage,
birth adoption, legal guardianship or court order. During the first 31
days after the birth of a child, the child will be automatically
covered for all eligible benefits. For coverage of a child beyond the
first 31 days after birth and for coverage of a spouse during and
beyond the first 31 days after marriage, enrollment must be made and
the first premium charge for that Dependent must be paid within that
31 day period.
(c) Note: Except for newborn child's coverage during the first 31 days
after birth. if the Eligible Employee does not enroll his or her
Dependents within 31 days after the Dependent becomes eligible,
satisfactory Evidence of Good Health for each Dependent will be
required. If satisfactory Evidence of Good Health is not provided for
such Dependent, the Company may reject the enrollment application for
insurance of such Dependent under this Policy. Coverage for such
Dependent providing satisfactory Evidence of Good Health will then
begin no earlier than the first day of the calendar month following
CHI's approval of the Evidence of Good Health. However, no Evidence of
Good Health will be required for any Dependent who enrolls within such
31 days.
(d) If a Dependent, except a child covered at birth, is confined for
medical care or treatment in any institution or at home when coverage
would normally start, the Dependent will not be covered until given a
final release by a Physician from all such confinement.
7. When Dependent Coverage Stops
Except as otherwise specifically provided in this Policy, coverage for
Dependents shall end when the dependent relationship with the Eligible
Employee ends or when coverage for the Eligible Employee of whom such
person is a Dependent ends. When coverage for a Dependent ends, the
Dependent will have an opportunity to obtain continuation of medical
coverage as provided by the Consolidated Omnibus Budget Reconciliation Act
(COBRA). For more information on COBRA and the right to continued medical
coverage, see Section 1 of Article IX of this Policy.
8. Extension of Coverage for Dependents
(a) Under certain circumstances described below, coverage could continue
for an Eligible Dependent after the time coverage would normally stop
under this Policy.
(b) A child who is otherwise eligible hereunder and is physically or
mentally incapable of self support upon attaining the limiting age may
be continued under the coverage provided hereunder so long as he or
she remains incapacitated and unmarried at that time, subject to the
coverage of the Covered Employee to whom such child is dependent is
continuing in effect.
(c) To be eligible for the continued coverage described in this Section of
a Dependent child beyond the time coverage would normally end, proof
of his or her incapacity must be submitted to CHI within 31 days after
such Dependent's attainment of the limiting age. Proof of the
incapacity will be required from time to time to keep this coverage in
effect. Each time CHI asks for proof that a Covered Dependent is
incapacitated, CHI may require the Covered Dependent to have a
Physician's examination at the Covered Person's expense. CHI may
specify the Physician.
(d) The continued coverage of a dependent child under this Section shall
terminate on the earliest of the following dates:
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<PAGE>
(i) the date such child is no longer incapacitated according to the
Policy;
(ii) the date proof of the child's incapacity is not provided when
asked; or
(iii)the date his or her Dependent's coverage terminates pursuant to
Article II, Section 7 or Article XIII of this Policy.
III. ENROLLMENT CHANGES
Enrollment and benefit coverage under this Policy may be changed only upon a
change in family status of the Covered Employee.
A "change of family status" occurs when:
1. A Covered Employee gets married or divorced;
2. A Covered Employee's child is born or legally adopted;
3. A Covered Employee's spouse or child dies; or
4. A Covered Employee's spouse has a loss of group insurance coverage.
Unless otherwise permitted under Article II, a Covered Employee may change his
or her benefit coverage or enroll new Dependents only if Evidence of Good Health
has been submitted and approved by CHI for each individual involved.
Furthermore, if a Dependent of a Covered Employee, other than a newborn child,
is confined in a Hospital, Skilled Nursing Facility, at home or any other
institution on the date coverage would become effective, then such coverage will
be postponed until the day after the Dependent is no longer so confined and a
final release from such confinement is provided by the Physician.
IV. POLICY BENEFITS AND PAYMENTS
If, as a result of an illness or injury, a Covered Person incurs eligible
medical expenses which exceed the Deductible Amount set forth in the Schedule of
Benefits during a calendar year, the Company will pay for such excess in
accordance with the co-payment and co-insurance provisions of the Schedule of
Benefits, subject to all other terms and conditions set forth in this Policy.
1. Deductible Amount
The Deductible Amount is the specified amount of eligible expenses which a
Covered Person or a Family Unit (as the case may be) is required to pay before
CHI pays any benefits under this Policy. Covered expenses which are used in
satisfying the Deductible Amount must be incurred and applied to such deductible
within the applicable calendar year.
The Deductible Amount applies to each Covered Person, subject to any family
Deductible Amount set forth in the Schedule of Benefits, if applicable. The
Deductible Amount must be satisfied once each calendar year, except for:
(a) the Common Accident Provision: if the Deductible Amount applies to
accident expenses and if two or more members of one family incur
covered expenses because of disabilities resulting from injuries
5
<PAGE>
sustained in any one accident, the Deductible Amount will be applied
only once with respect to all covered expenses incurred as a result of
the accident; and
(b) the Carryover Provision: if any part or all of the Deductible Amount
has been satisfied during the last three months of such calendar year,
the Deductible Amount for the next calendar year will be reduced by
the amount applied.
The Deductible Amount is not applicable to certain eligible medical expenses
noted in the Schedule of Benefits, for which you or your family member need to
pay any Deductible Amount prior to being paid benefits under the Policy.
2. Co-Payment and Co-Insurance
After the applicable Deductible Amount has been paid by the Covered Person or
the Family Unit (as the case may be), the eligible expenses for Covered Medical
Services will be paid by CHI and the Covered Persons in accordance with the
co-payment and co-insurance provisions set forth in the Schedule of Benefits.
Certain Covered Medical Services will be subject to co-insurance provisions,
which require the payment obligations in excess of the Deductible Amount to be
shared between CHI and the Covered Person in accordance with percentages of
Reasonable and Customary Charges set forth in the Schedule of Benefits. Certain
other Covered Medical Services will be subject to co-payment provisions, which
require an initial sum specified in the Schedule of Benefits to be paid by the
Covered Person and the balance of Reasonable and Customary Charges to be paid by
CHI.
Certain Covered Medical Services specified in the Schedule of Benefits may not
be subject to co-insurance or copayment requirements.
3. Out-of-Pocket Maximum
During any calendar year, the Covered Person or the Family Unit (as the case may
be) will not be required to pay an aggregate amount in excess of the
out-of-pocket maximum amount specified in the Schedule of Benefits (the
"Out-of-Pocket Amount"). If during any calendar year the Covered Person or the
Family Unit (as the case may be) has paid pursuant to the above co-insurance or
co-payment provision an aggregate amount greater than the Out-of-Pocket Amount,
CHI will pay for 100% of the balance of the eligible expenses, up to the amount
of the maximum benefit amounts set forth in the Schedule of Benefits.
The co-insurance and co-payments paid by the Covered Person or the Family Unit
will be included in the Out-of-Pocket Amount. However, the Deductible Amount
paid by the Covered Person or the Family Unit will not be included in the
Out-of-Pocket Amount.
4. Maximum Benefits
The benefits payable under this Policy for all eligible medical expenses
incurred by any Covered Person shall not exceed the applicable maximum benefits
specified in the Schedule of Benefits. Such maximum benefits may be in the form
of a maximum amount payable during lifetime or a specified period or in the form
of a maximum number of days or visits for which benefits are payable under the
Policy. Different Covered Medical Services may be subject to one or more
different maximum benefits.
5. Restoration and Reinstatement
If a Covered Person has received his or her maximum benefits under the Policy,
then on the first day of each calendar year $1,000 shall be reinstated, but in
no event shall the reinstated amount exceed the applicable maximum benefits set
forth in the Schedule of Benefits. However, any Covered Person who wishes
immediate reinstatement of the full Policy maximum shall again be entitled to
receive full benefits by submitting Evidence of Good Health at his or her own
expense. The new maximum benefits will take effect on the first day of the month
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following CHI's approval at its sole discretion of Evidence of Good Health. This
restoration and reinstatement provision will not apply to certain Covered
Medical Services, as specified in the Schedule of Benefits.
6. Re-Entry Into Policy
Any person who was formerly covered under the Policy, either as an Eligible
Employee or as a Dependent, and who again becomes covered hereunder within a
one-year period from the termination date of his or her previous coverage,
either as an employee or as a Dependent, shall not have his or her full maximum
benefits restored solely by reason of the fact that s/he has become covered for
a second or subsequent time. The maximum benefits with respect to such person,
as set forth in the Schedule of Benefits, shall be reduced by any benefits
previously paid under this Policy.
V. PRE-CERTIFICATION
When a Physician recommends that a Covered Person be hospitalized or receive
certain other medical services or supplies specified in the Schedule of
Benefits, there are certain procedures that must be followed.
The Covered Person, a member of his or her family, a hospital staff member, or
the attending Physician, must notify CHI to pre-certify the admission or
treatment, as the case may be, prior to receiving any of the services or
supplies that require pre-certification pursuant to the Schedule of Benefits or
this Policy.
The Company will reduce the benefits payable under this Policy by the percentage
set forth in the Schedule of Benefits if the procedures for pre-certification
set forth herein are not followed. Each Covered Person will be responsible to
pay the unpaid balance of the benefits.
To obtain pre-certification, call CHI at 1-800-541-3149. This call must be made:
1. Prior to any planned admission into Hospital and prior to receiving
such other eligible services or supplies that require
pre-certification according to the Schedule of Benefits or this
Policy;
2. Within 24 hours after the time of an emergency admission or as soon
thereafter as reasonably possible; and
3. As soon as the attending Physician confirms that a Covered Person is
pregnant and again within 24 hours of the birth or as soon thereafter
as reasonably possible.
When calling CHI, the caller must provide:
1. The Covered Person's name and the Covered Person's social security
number;
2. The treating Physician's name, address and phone number;
3. The name of the Hospital or treatment facility and the anticipated
admission or treatment date; and
4. The Policyholder's name and Policyholder Policy Number.
There is no requirement to call in advance before seeking treatment for an
emergency.
Large Case Management
Certain medical conditions for which a claim is made under the Policy may be
referred to Large Case Management (LCM).
Only those conditions for which Covered Medical Expenses are expected to exceed
a certain dollar amount, and for which there is a potential lower cost treatment
alternative, will be referred to LCM.
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LCM is a program which provides a case-by-case analysis and medical treatment
plan suggestions that address the need of catastrophically ill or injured
individuals. It concentrates on severe injuries and illnesses, such as spinal
cord injuries or head trauma, when early intervention and individual case
management will prove effective to a patient's recovery.
The decision to refer any case to LCM will remain with CHI, who will rely on the
criteria established by the LCM service provider to determine which claims are
recommended for LCM, except that no alternative treatment will be provided to
the Covered Person under LCM without prior consent of the Covered Person and the
attending Physician.
In certain instances a recommendation to use alternative treatment not normally
covered by the Policy may be made when such treatment endorses quality care,
Medical Necessity and cost effectiveness. Under these circumstances, any such
alternative treatment will be covered by the Policy.
VI. COVERED MEDICAL SERVICES
Subject to the terms, conditions, exclusions and limitations set forth in the
Schedule of Benefits (including the copayment, co-insurance and maximum benefit
amounts set forth therein) and in this Policy, the Company will pay and provide
to each Covered Person the benefits described below.
This Policy does not cover charges in excess of Reasonable and Customary Charges
(as defined herein) and does not provide benefits for service" or supplies other
than those Medically Necessary (as defined herein). Therefore, the term
"charges" used below shall refer only to Reasonable and Customary Charges for
Medically Necessary services or supplies. The coverage under this Policy is also
subject to other exclusions set forth in Article VII of this Policy.
Acupuncture
The charges for the administration of acupuncture when provided for pain
management in lieu of anesthesia.
Alcoholism and Drug Addiction Treatment
For alcoholism and drug addiction treatment, please refer to "Substance Abuse
Treatment" below.
Ambulance Transportation
The charges for ambulance service. Coverage is limited to transportation to and
from the nearest facility that can give necessary care and treatment.
Ambulatory Surgery
The charges for services and supplies furnished in connection with performance
of a surgical procedure at an Ambulatory Surgical Facility or the outpatient
department of a Hospital.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-541-3149 prior to
treatment. The Company will reduce the benefits under this Policy by the
percentage or dollars (as the cage may be) set forth in the Schedule of Benefits
if the procedures for pre-certification are not followed.
Limitations/Exceptions
Coverage is limited to charges for the following:
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1. Services and supplies furnished by the Ambulatory Surgical Facility or
Hospital on the date of the procedure;
2. Services of the operating Physician for performing the procedure and
for:
a. Related pre- and post-operative care; and
b. The administering of an anesthetic; and
3. Services of any other Physician for the administering of a general
anesthetic.
This Policy does not cover Ambulatory Surgery charges incurred:
(a) For the services of a Physician who renders technical assistance: to
the operating Physician, unless required in connection with the
procedure; or
(b) While the Covered Person is confined as a full-time Inpatient in a
Hospital.
Anesthesia
The charges for the administration of anesthetics by a Physician (other than the
surgeon, assistant surgeon or the attending Physician) or registered nurse
anesthetist (R.N.A.).
Assistant Surgeon
The charges for the professional services of a legally qualified Physician to
render technical assistance to the operating surgeon when Medically Necessary in
connection with a surgical procedure performed. However, no benefits are payable
for surgical assistance rendered in hospitals where it is routinely available as
a service provided by a hospital intern, resident or house officer. The
assistant surgeon's charges are determined by using the surgeon's Reasonable and
Customary Charges.
Birthing Center
The charges for services and supplies furnished by a Birthing Center for:
1. Prenatal care;
2. Delivery of a child or children; and
3. Post-partum care rendered within twenty-four (24) hours after the
delivery.
Also included are charges for the services shown below if received in connection
with the above services and supplies furnished by the Birthing Center:
1. Charges by the operating Physician or certified nurse midwife for:
a. Performing an obstetrical procedure;
b. Related pre- and post-operative care; and
c. Administering an anesthetic.
2. Charges by any other Physician for the administering of a general
anesthetic.
Limitations/Exclusions
This Policy does not cover Birthing Center charges incurred:
1. For the services of a Physician or certified nurse midwife who renders
technical assistance to the operating Physician; or
2. For which pregnancy-related expenses are not covered under this
Policy.
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Blood and Blood Plasma
The charges for blood and blood plasma, and blood plasma expanders when not
replaced on behalf of the Covered Person.
Cardiac Rehabilitation Services
The charges for cardiac rehabilitation therapy rendered by a licensed therapist,
when prescribed by and provided under the supervision of the attending
Physician.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-541-3149 prior to
receiving services. The Company will reduce the benefits under this Policy by
the percentage or dollars (as the case may be) set forth in the Schedule of
Benefits if the procedures for pre-certification are not followed.
Chemotherapy
The charges for the treatment of malignant disease by chemical or biological
antineoplastic agents for cancer chemotherapy and cancer hormone treatments and
for services which have been approved by the United States Food and Drug
Administration for general use in treatment of cancer, whether performed in a
Physician's office, as an Inpatient or Out-Patient at a Hospital, or in any
other medically appropriate treatment setting.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-541-3149 prior to
treatment. The Company will reduce the benefits under this Policy by the
percentage or dollars (as the case may be) set forth in the Schedule of Benefits
if the procedures for pre-certification are not followed.
Chiropractic Care
The charges for detection and correction by manual means of structural imbalance
or subluxation resulting from or related to distortion, misalignment or
subluxation of or in the vertical column.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-541-3149 prior to
treatment. The Company will reduce the benefits under this Policy by the
percentage or dollars (as the case may be) set forth in the Schedule of Benefits
if the procedures for pre-certification are not followed.
Consultation
The charges for consultation services by a Professional Provider, provided that
the consultation services are given to the Covered Person at the request of the
attending Physician while confined as an Inpatient in a Hospital, a Skilled
Nursing Facility or a Substance Abuse Treatment Facility.
Consultation consists of an examination of the Covered Person and a review of
his or her x-ray and laboratory examinations and medical history, but not staff
consultations required by hospital rules and regulations.
Diagnostic Services
The charges for Diagnostic Services.
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Durable Medical Equipment
The charges for rental or initial purchase (or necessary repair) of Durable
Medical Equipment prescribed by a Physician for the treatment of an Illness or
Injury. It does not include any changes made to the Covered Person's home,
automobile, or personal property, such as air conditioning or remodeling. Rental
coverage is limited to the purchase price of the Durable Medical Equipment.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-541-3149 prior to
leasing or purchasing any equipment in excess of $1,500. The Company will reduce
the benefits under this Policy by the percentage or dollars (as the case may be)
set forth in the Schedule of Benefits if the procedures for pre-certification
are not followed.
Emergency Services
The charges for Emergency Services received within 48 hours after the onset of a
Medical Emergency. Surgery (e.g., suturing, burn care, fracture care, etc.)
payment will be made as a surgical benefit.
After being admitted into a facility for Emergence Services, CHI must be
notified at 1-800-541-3149 within 24 hours of the admission or as soon as
reasonably possible. The Company will reduce the benefits under this Policy by
the percentage or dollars (as the case may be) set forth in the Schedule of
Benefits if the procedures for such notification are not followed.
Hemodialysis
The charges for hemodialysis treatment.
Home Health Services
The charges for Home Health Services provided by a licensed Home Health Agency
pursuant to a Home Health Plan.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-541-3149, and CHI
must approve the Home Health Plan, prior receiving Home Health Services. The
Company will reduce the benefits under this Policy by the percentage or dollars
(as the case may be) set forth in the Schedule of Benefits if the procedures for
pre-certification are not followed.
Limitations/Exclusions
Coverage is limited to one visit per day. Each period of up to four (4) hours or
less will be considered one visit, and each visit by a Home Health Agency is
counted as one visit.
Hospice Care
The charges for Hospice Services if the attending Physician certifies that the
Covered Person is a Terminally Ill Person and recommends admission into a
Hospice Care Program.
To qualify for payment under the Policy, Hospice Services must be:
1. Provided while the Terminally Ill Person is a Covered Person;
2. Provided within six (6) months of the Terminally Ill Person's entry or
re-entry (after a remission period) in the Hospice Care Program; and
3. Furnished or arranged by a Hospice.
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The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1-800-541-3149, and CHI
must approve the Hospice Care Program, prior receiving Hospice Services. The
Company will reduce the benefits under this Policy by the percentage or dollars
(as the case may be) set forth in the Schedule of Benefits if the procedures for
pre-certification are not followed.
Limitations/Exclusions
Coverage is limited to one or more of the following charges:
1. For the confinement of a Terminally Ill Person as an Inpatient in a
Hospice facility;
2. For Home Health Services furnished to the Terminally Ill Person in the
person's home;
3. For social services furnished to the Terminally Ill Person or to the
Family Unit by a Social Worker;
4. For palliative care (medication/treatment directed toward relief); or
5. For respite care.
Hospital
The charges for Out-Patient services and supplies, and the following Inpatient
charges when a Covered Person is confined in a Hospital:
1. Room and board and general nursing care charges for semi-private
accommodations (designated as such by the Hospital) or, if the Covered
Person utilizes private accommodations because the Covered Person's
medical condition requires isolation for his or her health and the
attending Physician orders such private accommodations, charges for
private accommodations; and
2. Charges for all other hospital services and supplies, including
special meals and dietary services, medicines, laboratory tests, use
of operating rooms and special equipment, anesthetics and x-rays,
provided and billed by hospital.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-541-3149 prior to hospital admission as an Inpatient. The Company will
reduce the benefits under this Policy by the percentage or dollars (as the case
may be) set forth in the Schedule of Benefits if the procedures for
pre-certification are not followed.
Limitations/Exclusions
The Policy does not cover hospital charges for any day that the Covered Person
does not receive any medical treatment after being admitted to a Hospital.
Immunization for Children
The charges for child immunization, up to the minimum benefits mandated by the
Pennsylvania Department of Health.
Coverage will be provided for those child immunizations, including the
immunizing agents, which as determined by the Department of Health, conform to
the standards of the U.S. Department of Health and Human Services. These
benefits will be exempt from Deductible Amounts and other dollar limits.
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Infertility Services
The charges for services to diagnose infertility. Services to treat infertility
are not covered by this Policy.
Inpatient Physician Services
The charges for medical treatment given by the attending Physician to a Covered
Person while confined as an Inpatient in a Hospital or Skilled Nursing Facility.
Limitations/Exclusions
Inpatient Physician services coverage does not include charges for:
1. Surgical services;
2. Diagnostic Services;
3. Maternity services;
4. Any therapy;
5. For psychiatric treatment; or
6. Treatment rendered to a Covered Person who has exceeded the maximum
number of days of confinement or the maximum benefit amount for
Inpatient Physician services, as set forth in the Schedule of
Benefits.
Mammography
The charges for female Covered Person's expenses for mammography services, up to
one routine mammography every calendar year if the Covered Person is age 40 or
older. In addition, any mammography recommended by a Physician.
Maternity-Related Care
The charges for female Covered Person's expenses incurred as a result of
pregnancy, miscarriages and Medically Necessary and elective abortions. Life
threatening abortions will be covered as any other surgery.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must notify CHI at 1 800-541-3149 as soon as
pregnancy is confirmed and within 24 hours after birth of a child or as soon
thereafter as reasonably possible.
Mental or Nervous Disorders
For coverage of mental or nervous disorder, please refer to "Psychiatric
Treatment" below.
Newborn Baby Care
The charges for care of newborn children, including Hospital charges for nursery
room and board and miscellaneous expenses.
Occupational Therapy
The charges for occupational therapy rendered by a licensed therapist for
Illnesses and Injuries of the Covered Person.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-541-3149 prior to treatment. The Company will reduce the benefit under
this Policy by the percentage or dollars (as the case may be) set forth in the
Schedule of Benefits if the procedures for pre-certification are not followed.
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Limitations/Exclusions
Coverage is limited only to treatment for up to such number of days per incident
of Illness or Injury set forth in the Schedule of Benefits, beginning with the
first day of treatment.
Office Visits
The charges for diagnosis or treatment of any Injury or Illness at a Physician's
office.
Organ Transplants
The charges for services which are directly and specifically related to organ
transplant when performed at a Hospital. Where the Covered Person is the
recipient, coverage hereunder includes the hospitalization of donors, and for
those hospital services directly and specifically related to the transplantation
of the organ to the Covered Person, to the extent that the Covered Person
(recipient) would be entitled to such benefits and the donor is not otherwise
insured or covered by another health care plan.
The purchase price of the organ is not covered under this Policy. Coverage under
this Policy is limited to organ transplants meeting the following requirements:
1. The attending Physician certifies that the organ transplant is
Medically Necessary;
2. The covered Person must be the recipient; and
3. The transplant is accepted by the general medical community at the
time of the procedure as appropriate treatment for the specific
conditions of the Covered Person.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-541-3149 prior to treatment. The Company will reduce the benefits under
this Policy by the percentage or dollars (as the case may be) set forth in the
Schedule of Benefits if the procedures for pre-certification are not followed.
Oxygen
The charges for oxygen and the rental equipment for its administration when
prescribed by the attending Physician.
Papanicolaou Smear (Pap Smear)
The charges for a female Covered Person's expenses for a routine pap smear in
accordance with the recommendations of the American College of Obstetricians and
Gynecologists.
Physical Therapy
The charges for physical therapy rendered by a licensed therapist for Illnesses
and Injuries of the Covered Person.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-541-3149 prior to receiving services The Company will reduce the benefits
under this Policy by the percentage or dollars (as the case may be) set forth in
the Schedule of Benefits if the procedures for pre-certification are not
followed.
Preventive Care
The charges for an annual gynecological examination, including a pelvic
examination and clinical breast examination by a Physician.
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The charges for immunizations (other than immunization for children covered
elsewhere in this Policy) and physical examinations (other than papanicolaou
smears and mammography covered elsewhere in this Policy) by a Physician, subject
to the limitations set forth in the Schedule of Benefits.
Private Duty Nursing
The charges for private duty professional nursing services from a L.P.N. or R.N.
for a Covered Person's non-hospitalized acute-illness or injury
Private duty nursing care furnished for Custodial Care is not covered.
The Covered Person, a member of his or her family, a hospital member; but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-541-3149 prior to receiving services. The Company will reduce the benefits
under this Policy by the percentage or dollars (as the case may be) set forth in
the Schedule of Benefits if the procedures for pre-certification are not
followed.
Psychiatric Treatment
The charges for the following Inpatient and Out-Patient services for a Covered
Person for the treatment of a Mental Illness.
Inpatient: The hospital services and supplies provided to a Covered Person for
the treatment of a Mental Illness while confined as an Inpatient at a Hospital
or a Psychiatric Hospital.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at 1
800-541-3149 prior to admission. The Company will reduce the benefits under this
Policy by the percentage or dollars (as the case may be) set forth in the
Schedule of Benefits if the procedures for pre-certification are not followed.
Out-Patient: The following Out-Patient services for the treatment of a Mental
Illness rendered by a licensed psychiatrist, psychologist, psychotherapist or
psychiatric Social Worker at a Mental Health Treatment Facility:
1. Oral and written diagnostic tests;
2. Consultation visits;
3. Diagnostic visits;
4. Physician's personal treatment visits; and
5. Group therapy.
Radiation Therapy
The charges for the treatment of any Illness or Injury by x-ray (but not dental
x-rays, unless directly related to a Covered Medical Service), gamma ray,
accelerated particles, mesons, neutrons, radium or radioactive isotopes,
including the cost of radioactive materials.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-541-3149 prior to receiving services. The Company will reduce the benefits
under this Policy by the percentage or dollars (as the case may be) set forth in
the Schedule of Benefits if the procedures for pre-certification are not
followed.
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Reconstructive/Corrective Surgery
The charges for reconstructive surgery if such surgery is required to:
1. To restore normal functions of a body part (other than a tooth or
structure that supports the teeth) which is malformed as a result of a
birth defect or as a direct result of Illness or Injury or surgery
performed to treat an Illness; or
2. Repair an Injury which occurs while the person is covered under this
Policy. Surgery must be performed in the calendar year of the accident
which causes the Injury or in the next calendar year.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-541-3149 prior to receiving surgery. The Company will reduce the benefits
under this Policy by the percentage or dollars (as the case may be) set forth in
the Schedule of Benefits if the procedures for pre-certification are not
followed.
Reconstructive surgery coverage does not include Cosmetic Surgery.
Respiratory Therapy
The charges for respiratory therapy rendered by a licensed therapist for
Illnesses and injuries of the Covered Person.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at 1
800-541-3149 prior to receiving services. The Company will reduce the benefits
under this Policy by the percentage or dollars (as the case may be) set forth in
the Schedule of Benefits if the procedures for pre-certification are not
followed.
Skilled Nursing Facility
The charges listed below when a Covered Person is confined as an Inpatient in a
Skilled Nursing Facility while recovering from an Illness or Injury. Coverage is
limited to services and supplies furnished while the Covered Person is under
continuous care of his or her Physician, requires 24-hour nursing care and the
confinement in a Skilled Nursing Facility is required by his or her Physician:
1. Room and board and general nursing care charges for semi-private
accommodations (designated as such by the Hospital) or, if the Covered
Person utilizes private accommodations because the Covered Person's
medical condition requires isolation for his or her health and the
attending Physician orders such private accommodations, charges for
private accommodations; and
2. Charges for all other skilled nursing services and supplies, including
special meals and dietary services and medicines.
Skilled Nursing Facility care coverage does not include Custodial Care.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending Physician, must obtain pre-certification by CHI at
1-800-541-3149 prior to admission. The Company will reduce the benefits under
this Policy by the percentage or dollars (as the case may be) set forth in the
Schedule of Benefits if the procedures for pre-certification are not followed.
Speech Therapy
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The charges for speech therapy rendered by a qualified speech therapist to
restore or rehabilitate any speech loss or impairment caused by Injury or
Illness, a previous speech therapeutic process, or as a result of surgery for an
Injury or Illness.
The Covered Person, a member of his or her family, a hospital staff member, but
preferably the attending physician, must obtain pre-certification by CHI at
1-800-541-3149 prior to receiving services. The Company will reduce the benefits
under this Policy by the percentage or dollars (as the case may be) set forth in
the Schedule of Benefits if the procedures for pre-certification are not
followed.
Substance Abuse Treatment (including Alcoholism and Drug Addition)
The charges for the following Inpatient and Out-Patient services to treat
Substance Abuse or Dependency, subject to the limitations set forth below and
any additional limitations set forth in the Schedule of Benefits:
1. Out-Patient Care: Covered Medical Services include the following
Out-Patient services in a Substance Abuse Treatment Facility for
treatment for medical conditions resulting from the Substance Abuse or
Dependency: (1) Physician, psychologist, nurse, certified addictions
counselor and trained staff services; (2) rehabilitation therapy and
counseling; (3) family counseling and intervention; (4) psychiatric,
psychological and medical laboratory tests; and (5) drugs, medicines,
equipment use and supplies.
Each Covered Person is eligible for thirty (30) Out-Patient full
visits per calendar year. Each Covered Person is also eligible for
thirty (30) additional Out-Patient full visits or equivalent partial
visits per calendar year at a Substance Abuse Treatment Facility,
which may be exchanged on a two-for-one basis for up to fifteen (15)
non-hospital, residential alcohol or drug treatment days described in
Paragraph 3 below. Treatment for Substance Abuse or Dependency shall
be provided according to an individualized treatment plan, subject to
a lifetime limit of one hundred and twenty (120) Out-Patient full
visits or equivalent partial visits.
2. Inpatient Detoxification: Covered Medical Services include the
following Inpatient services at a Hospital or a Substance Abuse
Treatment Facility for detoxification and treatment for medical
conditions resulting from the Substance Abuse or Dependency: (1)
lodging and dietary services; (2) Physician, psychologist, nurse,
certified addictions counselor and trained staff services; (3)
diagnostic x-ray; (4) psychiatric, psychological and medical
laboratory testing; (5) drugs, medicines, equipment use and supplies.
Each Covered Person is eligible for seven (7) Inpatient days of per
calendar year, subject to a lifetime limit of four (4) separate such
admissions. Inpatient rehabilitation beyond detoxification in the
Hospital is not covered hereunder.
3. Inpatient Rehabilitation: Covered Medical Services include the
following Non-Hospital Substance Abuse Residential Facility care: (1)
lodging and dietary services; (2) Physician, psychologist, nurse,
certified addictions counselor and trained staff services; (3)
rehabilitation therapy and counseling; (4) family counseling and
intervention; (5) psychiatric, psychological and medical laboratory
tests; and (6) drugs, medicines, equipment use and supplies.
Each Covered Person is eligible for thirty (30) days per calendar year
for such residential treatment in a Non-Hospital Substance Abuse
Residential Facility, subject to a lifetime limit of ninety (90) days
of such services.
4. Court-ordered chemical dependency admissions are covered but only to
the extent of the covered benefits described above.
In the case of Paragraph 2 or 3 above, the Covered Person, a member of his or
her family, a hospital staff member, but preferably the attending Physician,
must submit to CHI prior to treatment a certificate from a Physician that the
Covered Person is suffering from Substance Abuse or Dependency and needs
treatment.
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Voluntary Sterilization
The charges for male or female voluntary sterilization procedures. The Policy
will not cover reversal procedures.
VII GENERAL EXCLUSIONS
This Policy Does Not Cover Charges, Expenses or Costs:
1. For services or supplies not Medically Necessary for the diagnosis or
treatment of an Illness or Injury.
2. Which exceeds the Reasonable and Customary Charges or exceeds the
maximum benefit amounts set forth in the Schedule of Benefits.
3. Caused by war (declared or undeclared) or any act of war.
4. Suffered while on full-time active duty in the armed forces of any
country or international authority.
5. Incurred in connection with any injury or illness which is compensable
under any workers' compensation or occupational disease act or law or
the federal Longshoreman's and Harbor Worker's Compensation Act.
6. For services received in a veteran's administration hospital, a public
health service hospital, or any facility operated by the U.S.
government or any of its agencies, except to the extent that there is
an unconditional requirement to pay those charges.
7. For medical and dental care received by retirees from armed forces or
their dependents pursuant to and covered by programs established under
federal law.
8. For the treatment of or care for mental retardation, defects and
deficiency, except that this exclusion does not apply to Mental
Illnesses specifically covered in Article VI.
9. For dental services related to the care, filling, removal or
replacement of teeth and treatment of injuries to or diseases of the
teeth and gums, including but not limited to apicoectomy (dental root
resection), orthodontics, root canal treatment, soft tissue
impactions, alveolectomy, augmentation and vestibuloplasty treatment
of periodontal disease, and dental implants, except for accidental
injuries to sound natural teeth.
10. For optical services: The Policy does not cover charges for
examinations to determine the need for (or change of) eyeglasses or
lenses of any type except initial replacements for loss of the natural
lens, eye surgery such as radial keratotomy when the primary purpose
is to correct myopia (nearsightedness), hyperopia (farsightedness) or
astigmatism (blurring), or exams for the correction of vision and
radial keratotomy eye surgery to improve visual acuity.
11. For services rendered by the Covered Person or his or her Close
Relative.
12. For medical services or supplies not prescribed or rendered by a
Physician.
13. Directly related to attempted suicide or an intentionally
self-inflicted injury (whether sane or insane).
14. For provision or replacement of the following items arch supports;
elastic hose; birth control devices including, but not limited, to
IUDs, diaphragms and condoms; false teeth; braces; traction apparatus;
canes; walkers; corrective shoes; corsets; wigs or cranial prosthesis;
diapers; special appliances, supplies or equipment. This exclusion
does not apply to Durable Medical Equipment specifically covered by
Article VI.
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15. For Custodial Care.
16. For Cosmetic Surgery, except reconstructive surgery specifically
covered by Article VI.
17. Resulting from the commission of or attempt to commit a felony by the
Covered Person.
18. For personal convenience items or services such as telephones, barber
services, meals, formulas, radio and television rentals, homemaker
services and other like items and services.
19. Applied toward satisfaction of the Deductible Amount or the co-payment
or co-insurance amount payable by the Covered Person.
20. For blood, blood plasma and blood products that are replaced on behalf
of the Covered Person.
21. For actual or attempted impregnation or fertilization which involves
either a Covered Person or a surrogate as a donor or a recipient.
22. For examinations, adjustment of, or purchase of a hearing aid.
23. For career and pastoral counseling.
24. For services or supplies of an Educational, Experimental or
Investigative nature.
This exclusion includes, but is not limited to:
- All phases of clinical trials.
- All treatment protocols based upon or similar to those used in
clinical trials.
- Drugs approved by the Federal Food and Drug Administration under its
- Treatment Investigatory New Drug regulation or equivalent.
- Federally approved drugs used for treatment indications not
generally recognized by the medical community.
25. For the reversal of any sterilization procedure or any related care.
26. For sex transformations or other transsexual surgery or related
services not necessitated by an Injury or Illness covered by this
Policy.
27. For services rendered for academic reasons.
28. For orthoptic therapy (vision exercises).
29. For Prescription Drugs, except that this exclusion does not apply to
Prescription Drugs provided during treatment of an Illness or Injury
while confined as an Inpatient.
30. For weight reduction programs and gastric stapling for treatment of
obesity.
31. Infertility services, including but not limited to, In-Vitro
fertilization procedures, Gamete Intrafallopian Transfer (GIFT),
Zygote Intrafallopian transfer (ZIFT) and other similar or related
services; and infertility injectables or other infertility-related
supplies.
32. For bereavement counseling services, except as specifically provided
for under the Hospice Services in Article Vl.
33. For treatment of temporomandibular joint dysfunction with/intra oral
devices or any other method to alter vertical dimension.
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34. For hypnosis not used as an integral part of a Covered Medical Service
covered under Article VI.
35. For telephone consultations, failure to keep a scheduled visit, or
completion of a claim form.
36. For any services or supplies not specifically described herein.
37. For services or supplies covered by any automobile insurance policy up
to the amount of coverage limitation under such policy.
38. For orthotic devices.
The Company shall determine whether a service or supply is covered under this
Policy or excluded from coverage under this Policy.
VIII. GENERAL PROVISIONS
1. Notice of Claim
Written notice of claim must be furnished to the Company within 90 days after
Covered Medical Services have been rendered to the Covered Person. A notice of
claim form may be obtained from CHI or the Policyholder. However, in case of a
claim for which the Policy provides any periodic payment contingent upon
continued provision of Covered Medical Services, this notice may be furnished
within 90 days after termination of each period for which the Company is liable.
Failure to furnish the notice of claim within the time required will not
invalidate nor reduce any claim if it is not reasonably possible to give the
notice of claim within 90 days, provided the notice of claim is furnished as
soon as reasonably possible. However, except in the absence of legal capacity of
the claimant, the notice of claim may not be furnished later than one year from
the date when the notice of claim was originally required.
2. Time for Payment of Claim
Benefits payable under the Policy will be paid promptly upon receipt by CHI of
satisfactory notice of claim, unless the Policy provides for periodic payment.
Where the Policy provides for periodic payments, the benefits will accrue and be
paid monthly, subject to satisfactory notice of claim.
3. Payment of Claims
All or any portion of any indemnities provided by the Policy on account of
hospital, nursing, medical or surgical services may, at the Company's option, be
paid directly to the hospital or other persons rendering such services; but it
is not required that the service be rendered by a particular hospital or person.
Any payment made by the Company in good faith pursuant to this provision will
fully discharge the Company's obligation to the extent of the payment. The
Covered Person may request that payments not be made pursuant to this provision.
The request must be made in writing and must be given to the Company not later
than the time of filing notice of claim. Payment made prior to receipt of the
Covered Person's written request at the Company's principal executive office
will be deemed to be payment made in good faith.
The Covered Person shall be responsible for the payment of all charges for any
service or supply in excess of the Reasonable and Customary Charges or otherwise
not covered by this Policy.
4. Renew and Appeal Procedures
Reviews of Pre-Certification Denials
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If a Covered Person is denied coverage for a procedure during the
pre-certification process described in Article V, the Covered Person will be
advised of the reason(s) for the denial and of his or her right to a prompt
review by a person who did not participate in the denial decision.
If a review is requested, in addition to reviewing the reasons for the denial,
CHI may discuss the case with the treating Physician in an effort to agree on
care that would be covered under the Policy.
If the review does not result in a satisfactory resolution, the Covered Person
will receive a written notice explaining the reason(s) for the denial.
Appeals of Denied Claims or Other Denials
If a Covered Person is denied coverage for a claim or denied coverage for a
procedure during pre-certification process, the Covered Person will be advised
in writing of the reason(s) for the denial. This notice will set forth the
reasons for such denial. If the Covered Person wishes to appeal this decision,
the Covered Person may write to the address which appears on the notice (to the
attention of the person who signed the letter, if any).
The Covered Person may appeal a denial of benefits within 30 days of the date of
the rejection by sending a letter stating why the Covered Person thinks the
claim should not have been denied, including a copy of the denial letter and
with any additional claim. The Policyholder number, claim number, if any, and
the date of service for which benefits were denied must be included will become
final and incontestable.
Upon receipt of the letter and any additional information the Covered Person
provides, the Covered Person's records will be reviewed; and the results of this
review will be sent to the Covered Person promptly. In unusual cases, as when
review of the claim or denial of coverage requires examination by medical
personnel, including consulting physicians, the review may be extended.
5. Choice of Physician
Each Covered Person has free choice of any Physician, Hospital or other
provider.
6. Time Limit on Certain Defenses
No claim for loss incurred after one year from commencement of the individual
Covered Person's insurance will be reduced or denied on the grounds that the
disease or physical condition existed prior to the commencement of the Covered
Person's insurance.
7. Contract
The entire contract between the Company and the Policyholder consists of the
Policy, the Summary of Benefits and the applications of the Policyholder and
each Covered Employee. All statement contained in the applications will, in the
absence of fraud, be deemed representations and not warranties. No statement
made by an applicant for insurance will be used to void the insurance or reduce
the benefits, unless contained in a written application and signed by the
applicant. No agent has the authority to make or modify the Policy, or to extend
the time for payment of premiums, or to waive any of the Company's rights or
requirements.
No modification of the Policy will be valid unless evidenced by an endorsement
or amendment of the Policy, signed by an executive officer of the Company and
delivered to the Policyholder.
8. Incontestability
The validity of a Covered Person's insurance will not be contested, except for
non-payment of premium, after his or her insurance under the Policy has been
continuously in force for one year during his or her lifetime. No statement
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made by a Covered Employee relating to his or her insurability or that of his or
her Dependents will be used in defense to a claim under the Policy unless: (a)
it is contained in a written application signed by the Covered Employee; and (b)
a copy of the application has been furnished to the Covered Employee or to his
or her beneficiary.
9. Misstatements of Age
If the age of any Covered Person has been misstated, an equitable adjustment
will be made in the premiums or, at the Company's discretion, the amount of
insurance payable. Any premium adjustment will be based on the premium that
would have been charged for the same coverage on a Covered Person of the same
age and similar circumstances.
10. Physical Examination and Autopsy
The Company, at its own expense, will have the right and opportunity to examine
a Covered Person, when and as often as may reasonably be required during the
pendency of a claim under the Policy and to make an autopsy in case of death,
where it is not forbidden by law.
11. Legal Action
No action at law or in equity may be brought to recover on the Policy unless and
until the expiration of 60 days after notice of claim has been furnished to CHI
in accordance with the requirements of this Policy. No such action may be
brought after the expiration of three (3) years after the time notice of claim
is required to be furnished.
12. Conformity With State Statutes
Any provision of the Policy which, on its Effective Date, is in conflict with
the statutes of the state in which it is issued, is hereby amended to conform to
the minimum requirements of those statutes.
13. Assignment
No assignment of the Policy, or any part of it, will be binding on the Company
unless approved in writing by the President or Executive Vice President of the
Company. The Company does not assume any responsibility for the validity of any
assignment.
14. Rights of Employees
This Policy does not provide any benefit not specifically described herein. This
Policy does not constitute a contract of employment and does not affect the
right of the employer to discharge any Employee.
15. Facility of Payment
If, in the opinion of the Company, a Covered Person is not competent to execute
a valid release for payment of any benefit to which he is entitled under this
Policy, the Company may, but shall not be required to, make payment to such
individual(s) or institution(s) as have assumed the care and support of such
Covered Person. In the event the Covered Person dies before payment is made to
him of all benefits to which he is entitled under the Policy, the Company may,
but shall not be required to, make payment to such individual(s) or
institution(s) as may be, in the opinion of the Company, equitably entitled
thereto, including without limitation, individual(s) or institution(s) to which
the Covered Person may have assigned such benefits prior to his death. Any
payment made in accordance with the foregoing provisions shall fully discharge
the Company to the extent of such payments.
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16. Right to Receive and Release Information
For the purpose of determining the applicability of and implementing the terms
of the provisions of the Policy, the Company may release to, or obtain from, any
other plan or policy administrator, insurance company, or other organization or
individual any information, concerning any individual, which the Company
consider to be necessary for those purposes. Any individual claiming benefits
under this Policy will furnish the information that may be necessary to
implement the provisions.
17. Deductible Amounts
For each Covered Medical Expense, the individual Deductible Amount stated in the
Schedule of Benefits must be incurred with respect to a Covered Person before
benefits become payable. If, during a calendar year, such deductibles are equal
to the family Deductible Amount shown in the Schedule of Benefits, no further
deductible amount shall apply with respect to any remaining expenses incurred by
members of that Family Unit during the remainder of that calendar year.
18. Incorporation of Summary of Benefits
The Summary of Benefits is hereby incorporated in and made a part of this
Policy.
IX. CONTINUATION OF COVERAGE
1. Consolidated Omnibus Budget Reconciliation Act of 1985, As Amended ("COBRA")
Upon timely notice from the Employer, CHI will make available continuation
coverage, as required by COBRA, for all Covered Persons determined to be
qualified beneficiaries, as defined in Subsection 162(k)(7)(B) of the Internal
Revenue Code, as amended from time to time, and Subsection 607(3) of the
Employee Retirement Income Security Act (ERISA), as amended from time to time.
The Employer shall retain full responsibility for notifying Covered Persons of
their rights to continuation coverage and administering the exercise of
continuation rights, as required by COBRA. CHI shall have no obligation to
ensure that any notices received from the Employer comply with the requirements
of COBRA. For purposes of COBRA, CHI is not the plan administrator.
A. Each Covered Employee has a right to continue coverage if:
1. Employment with the Employer ends for a reason other than gross
misconduct; or
2. Work hours are reduced which result in a loss of coverage.
B. Each Covered Dependent has a right to continue coverage if:
1. The Covered Employee's employment with the Employer ends for a
reason other that gross misconduct;
2. The Covered Employee's work hours are reduced;
3. The Covered Employee dies;
4. In the case of the Covered Employee's spouse, when such spouse
ceases to be an Eligible Dependent as a result of divorce or
legal separation;
5. The Covered Employee becomes entitled to Medicare; or
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6. In the case of a Dependent child, when such child no longer
satisfies the eligibility requirements for coverage as an
Eligible Dependent under this Agreement.
Similar rights may apply to certain retirees and their dependents if the
employer commences certain bankruptcy proceedings and these individuals lose
coverage.
Under COBRA, the Covered Employee or a family member has the responsibility
to inform the Employer of a divorce, legal separation, or a child losing
dependent status under the Employer's health plan within 60 days of the later of
the date of the event or the date on which coverage would end under the plan
because of the event. The Employer has the responsibility to notify the Employer
of the Covered Employee's death, termination of employment, reduction in hours
or Medicare entitlement.
When the Employer is notified that one of these events has happened, the
Employer will in turn notify the qualified beneficiary within 14 days of the
notification that he/she has the right to choose continuation coverage. The
qualified beneficiary has at least 60 days from such notification or the
qualifying event, whichever date is later, to inform the Employer of his or her
decision to elect continued coverage. The qualified beneficiary will then have
45 days after notifying the Employer of his or her decision to pay the
retroactive premium.
In the case of the Covered Employee's termination of employment or
reduction in work hours, the coverage may be continued for up to 18 months. The
18 months of coverage may be extended to 36 months if one of the other events
described in Part B above occurs to a dependent within the initial 18 months of
coverage. The qualifying events listed in Part B, other than B(1) and B(2), will
entitle the dependents for up to 36 months of continuation coverage. The 18
months may also be extended to 29 months if an individual is determined to have
been disabled for Social Security disability purposes at the time of the initial
qualifying event and the Employer is notified of the disability of the Social
Security Administrator determination within 60 days of its disability
determination. The affected individual must also notify the Employer within 30
days of any final determination that the individual is no longer disabled.
However, coverage will cease earlier if one of the following events occurs:
1. The Employer ceases to provide any group health insurance to any of
its employees;
2. The qualified beneficiary fails to make timely payments of any premium
required;
3. The qualified beneficiary is covered under another group health plan
that does not contain any exclusion or limitation with respect to any
preexisting condition that the qualified beneficiary may have.
4. The qualified beneficiary is entitled to benefits under Medicare; or
5. The qualified beneficiary extended coverage for up to 29 months due to
a disability and there has been a final determination that the
qualified beneficiary is no longer disabled.
2. Employee Conversion Option
When a Covered Employee's coverage under this Policy terminates for reasons
other than failure to make the required premium contributions, the benefits may
be converted to an individual policy (the "Converted Policy.) issued by the
Company.
This conversion privilege is available:
(a) to an Eligible Employee if s/he has been continuously insured under this
Policy for at last three (3) months immediately prior to the termination;
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(b) to an Eligible Dependent spouse if the coverage terminates because of his
or her spouse/Employee's death, or because of divorce or annulment of
marriage; and
(c) to an Eligible Dependent child if the coverage terminates because of the
Eligible Dependent's age or because of the death of his or her
parent/Covered Employee.
The conversion privilege is not available to any Covered Person if:
(i) if the Covered Person is, or is eligible to be, within 31 days of
termination of coverage under this Policy, covered for similar benefits by:
(1) another group plan, medical service subscriber contract, medical
practice or other prepayment plan, or (2) any governmental program;
(ii) if issuing the Converted Policy to the Covered Person would result in
over-insurance, as determined by CHI; or
(iii) if coverage under the Policy terminated because any required premium
contribution was not paid when due.
Application and payment of the first premium under the Converted Policy must be
made to the Company within 31 days immediately following termination of coverage
under this Policy.
If continuation of coverage as described above is elected, this conversion
option will apply at the end of the maximum continuation period under this
Policy.
The Converted Policy will be issued as follows:
(A) The Covered Policy will in the form CHI has them available for conversion
which is most similar to the coverage being converted. The coverage under
the Converted Policy may be different from the coverage provided under this
Policy;
(B) The Converted Policy may exclude any condition for which the Covered Person
was not covered under this Policy, provided a 12-month period has not
elapsed from the original Effective Date of this Policy; and
(C) The premium payable for the Converted Policy will be based on the CHI's
rate then applicable to the class of risk to which the Covered Person
belongs, the age of the Covered Person, and the form and amount of coverage
provided, on the effective date of the Converted Policy.
If the Covered Employee and one or more of his Dependents were covered by the
Policy, the Converted Policy must cover all previously insured Covered Persons
who are eligible for conversion coverage. The Company may, at its option, issue
a separate Covered Policy to cover any Dependent.
3. Extension of Benefits Upon Termination of Policy
Except as set forth below, if the Covered Person is an Inpatient on the day
coverage under this Policy terminates, the benefits of coverage under this
Policy shall be provided until the earlier of:
A. the date on which the maximum amount of benefits under this Policy has been
paid; or
B. the date on which the Inpatient stay ends; or
C. the 90th day after the date of termination.
If this Policy is terminated because the Employer participates in or obtains
medical coverage under a health benefit plan or arrangement made available by
another organization, the liability of CHI shall cease as of the date of such
termination, and no benefits will be provided for any services or supplies
provided after such date.
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X. COORDINATION OF BENEFITS
All benefits provided under this Policy are subject to this Article, and
will not be increased by virtue of this Article.
1. Definitions
In addition to the Definitions set forth in Article XV of this Policy, the
following definitions only apply to this Article:
a. "Plan" means any plan providing benefits or services for or by reason of
medical or dental care or treatment, which benefits or services are
provided by:
(1) group, blanket or franchise insurance coverage;
(2) service plan contracts, group practice, individual practice and other
prepayment coverage;
(3) any coverage under labor-management trusteed plans, union welfare
plans, employer organization plans, or employee benefit organization
plans; or
(4) any coverage under governmental programs, and any coverage required or
provided by any statute.
The term "Plan" shall exclude any school accident-type coverages or group or
group-type hospital indemnity benefits of S100 per day or less.
b. "Dependent" means, for any Plan, any person who qualifies as a Dependent
under that Plan.
c. "Allowable Benefits" means the eligible charges for Covered Medical
Services under this Policy.
d. "Benefits Paid or Payable" means the amounts actually paid for Covered
Medical Services.
2. Effect on Benefits
a. This Article shall apply in determining the benefits of this Policy
if, for Covered Medical Services received, the sum of the Benefits
Payable under this Policy and the Benefits Payable under other Plans
would exceed the Allowable Benefits.
b. Except as provided in Subsection c. of this Section 2, the Benefits
Payable under this Policy for Covered Medical Services will be reduced
so that the sum of the reduced benefits and the Benefits Payable for
Covered Medical Services under other Plans does not exceed the total
of Allowable Benefits.
c. If: (1) the other Plan contains a provision coordinating its benefits
with those of this Policy and its rules require the benefits of this
Policy to be determined first, and (2) the rules set forth in
Subsection e. of this Section 2 require the benefits of this Policy to
be determined first, then the benefits of the other Plan will be
ignored in determining the benefits under this Policy.
d. If the other Plan does not include a coordination of benefits
provision, such Plan will be primary.
e. If the other Plan does include a coordination of benefits provision:
(1) The Plan covering the patient other than as a Dependent will be
primary.
(2) Where both Plans cover the patient as a dependent child, the Plan
covering the patient as a dependent child of a parent whose date
of birth, excluding year of birth, occurs earlier in a calendar
year shall be the primary Plan. But, if both parents have the
same birthday,
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the Plan which covered the parent longer will be the primary
Plan. If the parents are separated or divorced, the following
will apply:
(a) The Plan which covers the child as a Dependent of the parent
with custody will be the primary Plan.
(b) If the parent with custody has remarried, the Plan which
covers the child as a Dependent of the stepparent with
custody will determine its benefits before the Plan covering
the child as a Dependent of the parent without custody.
(c) Where there is a court decree which establishes financial
responsibility for the health care expenses of the dependent
child, the Plan which covers the child as a Dependent of the
parent with such financial responsibility will be the
primary Plan as long as the Plan of that parent has actual
knowledge-of the court decree.
(d) If the specific terms of the court decree state that the
parents shall share joint custody, without stating that one
of the parents is responsible for the health care expenses
of the child, the plans covering the child shall follow the
order of benefit determination rules outlined in the first
paragraph of 2. e. 2).
In the event CHI is coordinating with a Plan that uses the
male/female rule regarding dependent children, the introductory
paragraph of this clause (2) shall be replaced with to the
following introductory paragraph:
Where both Plans cover the patient as a dependent child, the
Plan covering the patient as a dependent child of a male
will be the primary Plan, except that if the parents are
separated or divorced, the following will apply:
(3) Where the determination cannot be made in accordance with. clause (1)
or (2) above, the Plan which has covered the patient for the longer
period of time will be the primary Plan; provided that,
(a) the benefits of a plan covering the person as an employee
other than a laid-off or retired employee or as the
Dependent of such person shall be determined before the
benefits of a plan covering the person as a laid-off or
retired employee as a Dependent of such person; and
(b) if either Plan does not have a provision regarding laid-off
or retired employees, and, as a result, the benefits of each
plan are determined after the other, then the provisions of
clause (3)(a) above shall not apply.
f. Services provided under any governmental program for which any periodic
payment of rate is made by the Covered Person shall always be the
primary Plan, except when prohibited by law, or when the Covered Person
has elected Medicare secondary.
3. Facility of Payment
Whenever payments should have been made under this Policy in accordance with
this Article, but the payments have been made under any other Plan, CHI has the
right to pay to any organization that has made such payment any amount it
determines to be warranted to satisfy the intent of this Article. Amounts so
paid shall be deemed to be Benefits Paid under this Policy and to the extent of
the payments for Covered Medical Services, CHI shall be fully discharged from
liability under this Policy.
4. Right of Recovery
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a. Whenever payments have been made by CHI for Covered Medical Services
in excess of the maximum amount of payment necessary at that time to
satisfy the intent of this Article, irrespective of to whom paid, CHI
shall have the right to recover the excess from among the following,
as CHI shall determine: any person to or for whom such payments were
made, any insurance company, or any other organization.
b. The Covered Employee, personally and on behalf of his or her Covered
Dependents shall, upon request, execute and deliver such documents as
may be required and do whatever else is reasonably necessary to secure
CHI's rights to recover the excess payments.
5. CHI shall not be required to determine the existence of any Plan or
amount of Benefits Payable under any Plan except this Policy, and the
payment of benefits under this Policy shall be affected by the Benefits
Payable under any and all other Plans only to the extent that CHI is
furnished with information relative to such other Plans by the Employer
or Covered Person or any other insurance company or organization or
person.
6. When the benefits are reduced under the primary Plan because a Covered
Person does not comply with the Plan articles, or does not maximize
benefits available under the primary Plan, the amount of such reduction
will not be considered an Allowable Benefit. Examples of such
provisions are those related to second surgical opinions and
pre-certification of admissions and services.
7. CHI may, without the consent or notice to any person, release to or
obtain from any other insurance company, or other organization or
person, any information, with respect to any Covered Person which CHI
deems necessary to determine the applicability of, and implement the
terms of, this Article, or any similar provision of any other Plan. Any
person claiming benefits under this Policy will furnish to CHI any
information necessary to implement this Article.
XI. MEDICARE
When a Covered Person is eligible for Medicare, that person must sign and
deliver an election card to the Company, stating whom that Covered Person wants
to be his primary insurer. If the Covered Person elects Medicare as his primary
source of coverage and belongs to a group covered by the Policy covering twenty
(20) persons or more, all Policy benefits otherwise payable to that Covered
Person shall discontinue. If belonging to a covered group of less than twenty
(20) persons, all Policy benefits otherwise payable with respect to the Covered
Person will be reduced by any service or supply provided, or any benefits paid
or payable, under Part A and Part B of Medicare.
For the purposes of this Article, benefits will be paid on the basis that the
Covered Person is covered by both Part A and Part B of Medicare. If the Covered
Person should not receive benefits under either Part A or Part B because of:
(a) failure to enroll when required;
(b) failure to pay any premiums that may be required for full coverage of
the person under Medicare; or
(c) failure to file any written request or claim required for payment of
Medicare benefits;
the Company will make determination of the total benefits that would have been
payable under Medicare in the absence of this failure.
"Part A" means the "Hospital Insurance Benefits for the Aged" portion of
Medicare.
"Part B" means the "Supplementary Medical Insurance for the Aged" portion of
Medicare.
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XII. SUBROGATION
In the event of any payment under the Policy, the Company will, to the extent of
the payment under the Policy, be subrogated to all the rights of recovery of the
Covered Person arising out of the acts or omissions of any person or
organization. The Covered Person hereby agrees to reimburse the Company for any
benefits paid hereunder, out of any moneys recovered from any person or
organization as the result of judgment, settlement or otherwise. After any
benefits under this Policy are paid by the Company, the Covered Person also
agrees to execute and deliver all necessary instruments and to furnish such
information and such reasonable assistance as may be required to facilitate
enforcement of its rights hereunder. In the event the Company recovers an amount
greater than the benefit paid, the excess, will be paid to the Covered Person.
The Covered Person shall do nothing after loss to prejudice these rights. This
Article will not apply, however, to a recovery obtained by any Covered Person
from any insurance company on a policy under which the Covered Person is
entitled to indemnity as a named insured person or an insured Dependent of a
named person. For purposes of this Article only, "Covered Person" will include
anyone receiving payment under the Policy, either directly or indirectly.
This Article does not pertain to medical malpractice insurance pursuant to
Pennsylvania Law, Chapter 4, Article VI, Section 602 (40 P.S. Section 1301.602),
and is limited for Pennsylvania No-Fault Insurance pursuant to Pennsylvania Law
Chapter 4, Article VI(J), Section III(4) (40 P.S. Section 1009. 111), as now
constituted or later amended.
The Subrogation rights under this Article shall be enforced only to the extent
and at those times permitted by law and shall not be enforceable to the extent
prohibited by any Pennsylvania statute or regulation.
XII. POLICYHOLDER/EMPLOYER PROVISIONS
Premiums
1. The premiums for this Policy shall be based upon the administrative
requirements of CHI and the cost of Covered Medical Services and shall be
payable in advance according to the mode of payment agreed upon. At the end
of the first calendar year or at any time thereafter, the premiums for this
Policy may be readjusted by CHI based upon the experience under the Policy.
2. The Employer is solely responsible for the payment of premiums with respect
to its Covered Employees and their Covered Dependents. Payment shall be
made directly to CHI.
3. The first premium will be the sum of the individual premiums determined by
applying the premium rates, shown in the initial schedule of premium rates,
to the amount of insurance then in force at the respective ages of the
Covered Persons insured on the Effective Date of the Policy. The premium
for each successive month will be the sum of the individual premiums
determined by applying the premium rates then in effect to the amount of
insurance then in force at the respective ages of the Covered Persons
insured on the premium due date.
4. The premium rates will be guaranteed for the first twelve (12) months
following the issuance of the Policy. CHI reserves the right to change,
after such guaranteed period, the premium rates by written notice to the
Policyholder at least thirty (30) days prior to the date of the change.
5. Any change in premium rates necessitated by an amendment of the Policy will
be effective on the effective date of the amendment. If the effective date
of the amendment is any day other than the premium due date, then a pro
rata premium adjustment will be made to the applicable month.
6. There will be no premium adjustment for Covered Person who may be added or
terminated between premium due dates. If notice of a Covered Person's
termination received by CHI more than thirty (30) days after their
termination, any unearned premium will be credited only from the first
premium due date prior to the receipt of such notice. This provision will
not extend the Covered Person's insurance beyond the termination date.
29
<PAGE>
Grace Period
If the Policyholder has not previously given written notice to CHI that the
Policy is to be discontinued, the grace period of thirty one (31) days will be
granted to the Policyholder for payment of every premium after the first
premium. During the grace period, the Policy will continue in force, unless
prior to the date payment was due the Policyholder gave timely written notice to
CHI that the Agreement is to be canceled. If the premiums are not paid within
the grace period, the Policy will be discontinued, but the Policyholder will
still be liable to CHI for all unpaid premiums, including the premiums for the
grace period. If during the grace period CHI receives written notice from the
Policyholder that the Policy is to be discontinued, the Policy will be
discontinued on the date notice is received, but the Policyholder will still be
liable to CHI for the payment of all premiums then unpaid, together
with a pro rata premium for the period commencing with the date on which the
last premium became due and ending with the date of receipt of written notice by
CHI.
Term of Policy and Right to Terminate
This Policy is issued for an indefinite term, commencing on the Effective Date
shown on the face page. The Policy continues in force, so long as premiums are
paid when due, until terminated in accordance with the terms of this Policy.
The Policyholder may terminate the Policy by giving written notice to CHI.
Termination by the Policyholder will be effective on the latter of: (a) the day
specified in the notice; or (b) the day the notice is received by CHI. CHI may
terminate any or all insurance under the Policy, as of any premium due date, by
giving written notice to the Policyholder at least thirty (30) days prior to
that date.
Notice
Written notice to the Policyholder will be deemed to be effective on the date it
is placed in the United States mail, postage prepaid and properly addressed to
the principal place of business of the Policyholder. Notice will be deemed to be
properly addressed if it reflects the last address provided to CHI by the
Policyholder.
Individual Certificates
CHI will issue a Summary of Benefits, describing the insurance protection to
which each Covered Person is entitled and to whom payable. Copies of the Summary
of Benefits will be issued to the Policyholder for delivery to each Covered
Employee.
Registry
The Policyholder shall furnish CHI with:
(a) the names of all individuals initially eligible for insurance or who
later become eligible for insurance under the Policy, even if they do
not become insured;
(b) the names of all Covered Persons who become insured or whose insurance
terminates, together with the respective date; and
(c) any information required to initiate, maintain or terminate coverage
on each Eligible Person.
CHI will have the right, at reasonable times, to inspect all books and records
of the Policyholder which relate to the insurance under the Policy.
30
<PAGE>
XIV. DEFINITIONS
For the purposes of this Policy, unless the context clearly indicates otherwise,
the following words and phrases have the following meanings. The following words
and phrases are not intended to imply that coverage for them is provided under
this Policy.
Ambulatory Surgical Facility - A specialized facility licensed, where required,
to render surgical procedures on an Out-Patient basis, which has an
organized staff of Physicians, has been approved by the Joint
Commission on Accreditation of Health Care Organizations, the
Accreditation Association for Ambulatory Healthcare, Inc., or CHI, and
which:
1. has permanent facilities and equipment for the primary purpose of
performing surgical procedures on an Out-Patient basis;
2. provides treatment by or under the supervision of Physicians and nursing
services whenever the patient is in the facility;
3. does not provide Inpatient accommodations;
4. provides the full-time services of one or more RNs for patient care in the
operating rooms and in the post-anesthesia recovery room; and
5. provides at least one operating room and at least one post-anesthesia
recovery room; is equipped to perform diagnostic x-ray and laboratory
examinations; and has available trained personnel and necessary equipment
to handle foreseeable emergencies;
6. maintains a written agreement with at least one Hospital in the area for
immediate acceptance of patients who develop complications or require
post-operative confinement; and
7. is not, other than incidentally, a facility used as an office or clinic for
the private practice of a Professional Provider.
Birthing Center - A free-standing facility licensed, where required, to provide
maternity care, which:
1. Is organized and staffed to provide prenatal care, delivery and immediate
post-partum care;
2. Is directed by at least one Physician who is a specialist in obstetrics and
gynecology;
3. Has a Physician or certified nurse midwife present at all births and during
the immediate post-partum period;
4. Has at least two (2) beds or two (2) birthing rooms for use by patients
while in labor and during delivery;
5. Has the capacity to administer a local anesthetic and to perform minor
surgery. This includes episiotomy and repair of perineal tear;
6. Accepts only patients with low risk pregnancies; and
7. Has a written agreement with a Hospital in the area for emergency transfer
of a patient or a child.
CloseRelative - The Covered Person, his or her spouse, a child, brother,
sister, or parent of the Covered Person or his or her spouse.
31
<PAGE>
Company - Corporate Health Insurance Company, a Minnesota corporation, and its
successor, if any.
Co-payment - The flat, fixed-dollar amount which shall be payable by a Covered
Person pursuant to this Policy to a provider of services or supplies, regardless
of, but not in excess of, the charge for such services or supplies, such amount
to be set forth in the Schedule of Benefits with respect to applicable Covered
Medical Service.
Cosmetic Surgery - Any surgery not Medically Necessary, including, without
limitation, ear piercing, rhinoplasty or lipectomy, except cosmetic surgery
resulting from the complication of such Cosmetic Surgery.
Covered Dependent - Any Eligible Dependent whose coverage became effective and
has not terminated.
Covered Employee - Any Eligible Employee whose coverage became effective and has
not terminated.
Covered Person - Any Eligible Employee or Eligible Dependent whose coverage
became effective and has not terminated.
Covered Medical Services - Those services and supplies which are Medically
Necessary and are otherwise covered by this Policy and for which charges are
Reasonable and Customary.
Custodial Care - Any type of care that does not require the skills of technical
or professional personnel or are not furnished by or under the supervision of
such personnel or does not otherwise meet the requirements of post-hospital
Skilled Nursing Facility Care. Custodial Care includes, but is not limited to:
o Help in walking, getting into or out of bed, bathing, dressing, eating and
other functions of daily living of a similar nature;
o General supervision of exercise programs including carrying out of
maintenance programs of repetitive exercises that do not need the skills of
a therapist and are not skilled rehabilitation services;
o Bowel training and management;
o General safety/health precautions and preventive procedures such as turning
to prevent bedsores; and
o Providing patient recreation and/or companionship.
Deductible Amount - The amount of charges for Covered Medical Services a Covered
Person must incur and pay during the calendar year under this Policy. The
Deductible Amount will differ depending upon whether the Covered Person is
covered under an individual coverage or a family coverage. If covered under an
individual coverage, the Covered Person must pay the Deductible Amount for
"individual," as set forth in the Schedule of Benefits, before becoming entitled
to benefits under the Policy. If covered under a family coverage, the Covered
Person and his or her Family Unit must pay the Deductible Amount for "family,"
as set forth in the Schedule of Benefits, before becoming entitled to benefits
under the Policy.
Dentist - Licensed Doctor of Dental Surgery or Doctor of Dental Medicine.
Dependent - Includes a spouse or child, whether by birth or adoption, of an
Eligible Employee.
Detoxification - The process whereby an alcohol or drug intoxicated or alcohol
or drug dependent person is assisted, in a facility licensed by the Department
of Health, through the period of time necessary to eliminate, by metabolic or
other means, the intoxicating alcohol or drug, alcohol or drug dependent factors
or alcohol in
32
<PAGE>
combination with drugs, as determined by a licensed Physician, while keeping the
physiological risk to the patient at a reasonable minimum.
Diagnostic Services - the following procedures prescribed by a Professional
Provider because of specific symptoms to determine a definite condition or
disease. Diagnostic Services include, but are not limited to:
A. diagnostic radiology, consisting of x-ray, ultrasound and nuclear medicine;
B. diagnostic pathology, consisting of laboratory and pathology tests;
C. diagnostic medical procedures, consisting of ECG, EEG, and other diagnostic
medical procedures; and
D. allergy testing consisting of percutaneous, intracutaneous and patch tests.
Durable Medical Equipment - Equipment prescribed by the attending Physician
which is:
- Not primarily and customarily used for non-medical purposes;
- Designed for prolonged use; and
- For a specific therapeutic purpose in the treatment of an Illness or
Injury.
Durable Medical Equipment includes, but are not limited to, prosthetic
appliances and orthopedic braces.
Educational - a service or supply the primary purpose of which is to provide the
Covered Person with any of the following training in the activities of daily
living: instruction in scholastic skills such as reading and writing;
preparation for occupation; or treatment for learning disabilities.
Eligible Dependent - Any Eligible Employee's Dependent who satisfies the
eligibility requirements of Article I.
Eligible Employee - Any active employee full-time of the Policyholder who
regularly works at least 30 hours per week and otherwise satisfies the
eligibility requirements of Article I.
Emergency Services - Medical services required for the initial treatment of a
Medical Emergency. These services shall not include treatment for occupational
injury for which benefits are covered under workers' compensation law or similar
occupational disease law. The condition of the Covered Person must be of
sufficient severity to warrant immediate attention.
Employer - The Policyholder.
Evidence of Good Health - A statement from an Eligible Employee or an Eligible
Dependent attesting to the "good health" of such person or his or her Eligible
Dependents. A standard form available from the Policyholder's human resources
department will be provided for this purpose. The Eligible Employee or the
Eligible Dependent is responsible for any and all related costs.
Experimental or Investigative - the use of any treatment, procedure, facility,
equipment, drug, or drug usage device or supply which the general medical
community does not accept as standard medical treatment of the condition being
treated, or any such items requiring federal or other governmental agency
approval which approval has not been granted at the time the services were
rendered.
Family Unit - A Covered Employee and his or her Covered Dependents.
Home Health Agency - Any organization certified as a home health agency under
the Medicare law or otherwise approved by CHI for the delivery of non-Physician
patient care in the home of a Covered Person.
33
<PAGE>
Home Health Plan - A program for care and treatment of a Covered Person
established and approved in writing by such Covered Person's attending
Physician, together with such Physician's certification that the proper
treatment of the Injury or Illness would require confinement as a resident
Inpatient in a Hospital or confinement in a Skilled Nursing Facility the absence
of services and supplies provided as part of the Home Health Plan.
Home Health Services - Those items and services defined as "home health
services" in the Medicare law and set forth in 42 CFR Part 417.101 et seq.
Hospice - A facility which is licensed as such, where required, and provides
short periods of stay for a Terminally Ill Person in a home-like setting for
either direct care or respite care. This facility may be either free-standing or
affiliated with a Hospital. It must operate as an integral pan of the Hospice
Care Program.
Hospice Care Program - A formal program directed by a Physician to help care for
a Terminally Ill Person. This may be through either:
o A centrally-administrated, medically directed and nurse coordinated program
which
- Provides a coherent system primarily of home care; and
- Is available 24 hours a day, seven (7) days a week; or
o Confinement in a Hospice.
The program must meet standards set by the National Hospice Organization and
approved by CHI. If such a program is required by a state to be licensed,
certified, or registered, it must also satisfy such requirement.
Hospice Services - Services and supplies furnished or arranged by a Hospice to a
Terminally Ill Person.
Hospital - An institution accredited as a Hospital by the Joint Commission on
Accreditation of Health Care Organizations, the Bureau of Hospitals of the
American Osteopathic Association or under Medicare Law, or as otherwise
determined by CHI as meeting reasonable standards, which:
1. is a duly licensed, where required, and
2. is primarily engaged in providing Inpatient-diagnostic and surgical and
therapeutic services for the diagnosis, treatment and care of injured or
ill persons by or under the supervision of Physicians, and
3. provides 24-hour nursing service by or under the supervision of Registered
Nurses; and
4. is not a Skilled Nursing Facility, Custodial Care home, health resort, spa
or sanitarium, place for rest, place for the treatment of Mental Illness,
place for the treatment of Substance Abuse or Dependency, Hospice,
rehabilitation center, or place for the treatment of pulmonary
tuberculosis.
Illness - Sickness or disease which requires medical service or supply covered
by this Policy.
Injury - Bodily harm which results from an accident and which requires medical
service or supply covered by the Policy.
Inpatient - A person who is admitted to a Hospital, a Psychiatric Hospital, a
Skilled Nursing Facility or a Substance Abuse Treatment Facility and incurs room
and board charges.
34
<PAGE>
L.P.N. - A full-time licensed practical nurse, other than a Close Relative, who
is recognized by the state in which care is given as qualified to perform
limited nursing functions.
Medical Emergency - a sudden, unexpected onset of a medical condition
manifesting itself by acute symptoms or a traumatic bodily injury resulting from
an accident, which is of sufficient severity that the absence of immediate
medical attention could reasonably result in:
1. Death of the Covered Person;
2. Serious harm the Covered Person's health; or
3. Serious or permanent impairment to bodily functions or any bodily organ or
part.
The non-availability of a private Physician or the fact that the Physician may
refer the Covered Person to the emergency room does not, by itself, constitute a
Medical Emergency. Medical Emergencies include, but are not limited to:.
(a) uncontrolled or excessive bleeding;
(b) suspected heart attack;
(c) inability to breath;
(d) appendicitis;
(e) serious burns;
(f) poisoning;
(g) severe pain and suffering; and
(h) convulsion or unconsciousness
Medically Necessary - Medical service or supply which is provided by a
Professional Provider for the diagnosis or the direct care and treatment of a
Covered Person's Injury or Illness and which is:
1. Appropriate for the symptoms and diagnosis or treatment of the Covered
Person's Injury or Illness; and
2. In accordance with current standards of good medical practice.
Confinement as an Inpatient in a Hospital or other facility is considered
Medically Necessary when the Covered Person needs to be confined because of the
nature of the services being delivered the Covered Person or when treatment for
his or her condition cannot be given safely and adequately if performed on an
Out-Patient basis.
Medicare - The programs health care for the aged and the disabled established by
Title XVIII of the Social Security Act, as first enacted by the Social Security
Amendment of 1965 or as later amended.
Mental Illness - An emotional, nervous or mental disorder means a neurosis,
psychoneurosis, psychopathy or psychosis and mental, emotional or nervous
disorder without demonstrable organic origin.
Mental Health Treatment Facility - A facility, licensed by the Department of
Health, for the care or treatment of person with a Mental Illness and in which
services are provided by or under the supervisions of a Physician.
Military Service - Service in any Army, Navy, Air Force, Marines, Coast Guard,
or other branch of the military.
Non-Hospital Substance Abuse Residential Care - The provision of medical,
nursing, counseling or therapeutic services to patients suffering from alcohol
or drug abuse or dependency in a residential environment, according to
individualized treatment plans.
Out-Patient - A patient who receives diagnosis or treatment at a facility, but
does not incur room and board charges.
35
<PAGE>
Physician - A person, other than a Close Relative of the Covered Person, who is
duly licensed member of a medical profession and is practicing within the scope
of his or her license.
Policy - this Comprehensive Major Medical Group Health Insurance Policy issued
by the Company to the Policyholder.
Policy Enrollment Form - A printed form approved by CHI that an Eligible
Employee must complete, execute and deliver to CHI to be eligible for coverage
under this Policy.
Policy Year - The twelve (12) month period commencing on a date agreed to
between the Policyholder and CHI or, if no such agreement exists, the twelve
(12) month period of January l through December 31 inclusive.
Pre-Certification - A certification that a Covered Person must obtain prior to
receiving any of the services or supplies that are identified by the Schedule of
Benefits or this Policy as needing a Pre-Certification, which certifies the
proposed Hospital admission and length of stay as Medically Necessary.
Prescription Drugs - Drugs and medicines which require a prescription by a
Physician to dispense and are approved by the U.S. Food and Drug Administration
for general use in treating the illness or injury for which they are prescribed.
Prescriptions Drugs include oral contraceptives and vitamins.
Professional Provider - a person or practitioner licensed, where required, and
performing services within the scope of such licensure. The Professional
Providers include:
- R.N. - optometrist
- chiropractor - physical therapist
- clinical laboratory - Physician
- Dentist - podiatrist
- nurse midwife - psychologist
Psychiatric Hospital - An institution which is primarily engaged in providing
diagnosis and therapeutic services for the Inpatient treatment of Mental
Illnesses and meets all of the following requirements:
1. Services are provided by or under the supervision of a Physician;
2. Provides continuous nursing services under the supervision of an RN.; and
3. Is not a Skilled Nursing Facility, Custodial Care home, health resort,
place for rest, place for the treatment of Substance Abuse or Dependency,
Hospice, rehabilitation center, or place for the treatment of pulmonary
tuberculosis.
R.N. - A registered nurse, other than a Close Relative, who is licensed in the
state in which care is given to perform all nursing functions.
Reasonable and Customary Charge - Any charge which, as determined by CHI, does
not exceed (i) the usual or customary fee for comparable service or supply
charged by other providers of similar services or supplies in the area where the
service or supply is provided and who have training, experience and professional
standing comparable to those of the actual provider of the service or supply or
(ii) if no comparison exists, the reasonable fee (which may differ from the
usual or customary fee) determined by CHI after considering unusual clinical
circumstances and/or the actual cost of equipment and facilities involved in the
treatment. When determining whether a charge is Reasonable and Customary, CHI
may consider the severity of the condition being treated and any complications
and unusual circumstances that may be involved.
36
<PAGE>
Schedule of Benefits - The Schedule of Benefits set forth in the Summary of
Benefits, which summarizes the benefits payable under the Policy. The terms of
the Schedule of Benefits will be individually tailored to each Policyholder.
Semi-Private - A two (2) bed room in a Hospital. If the facility has no such
rooms, the rate most commonly charged by similar institutions in the same
geographic area.
Skilled Nursing Facility - An institution or a distinct part of an institution
which is licensed, where required, or approved under state or local law, and
which is primarily engaged in providing skilled nursing care and related
services (on an Inpatient basis to patients requiring 24-hour skilled nursing
but not requiring confinement in an acute care Hospital) as a skilled nursing
facility, extended care facility, or nursing care facility approved by the Joint
Commission on Accreditation of Health Care Organizations or the Bureau of
Hospitals of the American Osteopathic Association, or as a certified skilled
nursing facility under Medicare law, or as otherwise determined by CHI to meet
the reasonable standards applied by any of the aforesaid authorities.
A Skilled Nursing Facility does not include a rest home, a home for the aged, a
place for Custodial Care or educational care, or a treatment facility for
alcoholism, drug addiction, or mental illness.
Social Worker - A duly licensed or certified social worker with at least two (2)
years or three thousand (3,000) hours of post-masters clinical social work
practice in a clinical program established by the state regulatory board or
agency.
Substance Abuse or Dependency - Any use of alcohol or drugs which produces a
pattern of pathological use causing impairment in social or occupational
functioning or which produces physiological dependency evidenced by physical
tolerance or withdrawal.
Substance Abuse Treatment Facility - A Hospital or non-Hospital facility,
licensed by the Department of Health, for the care or treatment of alcohol or
drug dependent persons, except for transitional living facilities.
Terminally Ill Person - A Covered Person who life expectancy is six (6) months
or less, as certified by the attending Physician.
TotalDisability or Totally Disabled - A Covered Employee shall be considered
totally disabled if, as a result of an illness or injury, he or she is unable to
engage in any gainful occupation for which s/he is reasonably fitted by
education, training, or experience, and is not performing work of any kind for
wage or profit. A Covered Dependent will be considered totally disabled if,
because of an illness or injury, he or she is prevented from engaging in all the
normal activities of a person of like age and sex.
37
EXHIBIT 11
Statement Re: Computation of Per-Share Earnings
<TABLE>
<CAPTION>
Year ended September 30
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Primary
Average shares outstanding 1,821,000 1,812,000 1,743,000
Net effect of dilutive stock options - based
on the treasury stock method using
average market price 52,000 20,000 11,000
---------- ---------- ----------
Total 1,873,000 1,832,000 1,754,000
========== ========== ==========
Net income $ 595,000 $ 394,000 $ 563,000
========== ========== ==========
Per-share amount $ .32 $ .22 $ .32
========== ========== ==========
</TABLE>
EXHIBIT 13.1
Common Stock Market Prices
The common stock of STV Group, Inc., is traded in the over-the-counter market
under the symbol STVI. The following table sets forth the reported high and low
bid prices for the periods indicated. Such quotations, supplied by NASDAQ,
represent interdealer prices without retail mark-up, mark-down or commission.
1996 High Ask Low Bid
4th Quarter 7 3/4 7
3rd Quarter 7 1/2 6
2nd Quarter 7 5 3/4
1st Quarter 6 1/4 5
1995 High Ask Low Bid
4th Quarter 5 7/8 5
3rd Quarter 5 1/2 5
2nd Quarter 5 1/4 4 3/4
1st Quarter 5 1/2 4 3/8
EXHIBIT 13.2
FINANCIAL HIGHLIGHTS FOR THE FISCAL YEAR ENDED
September 30
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Total Revenues $94,073,000 $89,232,000 $89,465,000 $87,361,000 $75,789,000
Operating Revenues 71,271,000 69,397,000 65,746,000 62,692,000 55,231,000
Net Income (Loss) 595,000 394,000 563,000 529,000 (576,000)
Net Income (Loss)
per Common Share .32 .22 .32 .33 (.37)
Working Capital 8,721,000 8,570,000 7,184,000 6,630,000 6,355,000
Stockholders' Equity 10,342,000 9,872,000 9,078,000 8,515,000 7,486,000
Total Assets 39,995,000 41,626,000 43,960,000 40,719,000 37,184,000
Long-Term Obligations 1,795,000 2,021,000 1,939,000 1,875,000 1,790,000
</TABLE>
[GRAPHICS OMITTED]
EXHIBIT 21.1
Subsidiaries:
STV Incorporated
STV Architects, Inc.
STV Construction Services, Inc.
STV Environmental, Inc.
STV International, Inc.
STV/Silver & Ziskind, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Transmitting STV Group's Form 10-K. Period ending 09/30/96.
</LEGEND>
<CIK> 0000095045
<NAME> STV GROUP, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 28,000
<SECURITIES> 389,000
<RECEIVABLES> 20,504,000
<ALLOWANCES> 0
<INVENTORY> 14,290,000
<CURRENT-ASSETS> 36,579,000
<PP&E> 12,301,000
<DEPRECIATION> 10,987,000
<TOTAL-ASSETS> 39,995,000
<CURRENT-LIABILITIES> 27,858,000
<BONDS> 0
1,921,000
0
<COMMON> 0
<OTHER-SE> 8,817,000
<TOTAL-LIABILITY-AND-EQUITY> 39,995,000
<SALES> 94,073,000
<TOTAL-REVENUES> 94,073,000
<CGS> 63,557,000
<TOTAL-COSTS> 69,970,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,501,000
<INCOME-PRETAX> 1,301,000
<INCOME-TAX> 706,000
<INCOME-CONTINUING> 595,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 595,000
<EPS-PRIMARY> .32
<EPS-DILUTED> 0
</TABLE>
