As filed with the Securities and Exchange Commission on May 24, 1996
Registration No. 333-3530
SECURITIES AND EXCHANGE COMMISSION
AMENDMENT NO. 1
to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
VISION HEALTH CARE, INC.
(Exact name of registrant as specified in its charter)
Florida 6324 59-3356439
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation)
c/o Barrack & Liane, P.A.
100 West Bay Street
Jacksonville, Florida 32202
(904) 356-9431
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Pete Liane, President
c/o Barrack & Liane, P.A.
100 West Bay Street
Jacksonville, Florida 32202
(904) 356-9431
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Linda Y. Kelso, Esq.
G. Ray Driver, Jr., Esq.
Foley & Lardner
200 Laura Street
Jacksonville, Florida 32202
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. /X/
If this Form is filed to register additional securities for an
Offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. /_/
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same Offering. /_/
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. /_/
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Item 501 of Regulation S-K
Showing the Location in the Prospectus of
Information Required by Items in Form S-1
Item Number and Caption Heading in Prospectus
1. Forepart of the
Registration Statement and
Outside Front Cover Page of Facing Page; Cross Reference Sheet;
Prospectus . . . . . . . . Cover Page
2. Inside Front and Outside
Back Cover Pages of Cover Page; Table of Contents (Back
Prospectus . . . . . . . . Cover Page)
3. Summary Information, Risk
Factors and Ratio of
Earnings to Fixed Charges Prospectus Summary; Risk Factors
4. Use of Proceeds . . . . . Use of Proceeds
5. Determination of Offering
Price . . . . . . . . . . Determination of Offering Price
6. Dilution . . . . . . . . . Dilution
7. Selling Security Holders . Not applicable
8. Plan of Distribution . . . Plan of Distribution
9. Description of Securities Description of Capital Stock;
to be Registered . . . . . Dividend Policy
10. Interests of Named Experts
and Counsel . . . . . . . Legal Matters; Experts
11. Information with Respect to Prospectus Summary; Risk Factors;
the Registrant . . . . . . The Company; Proposed Acquisition
of VCI Business; Use of Proceeds;
Dividend Policy; Determination of
Offering Price; Dilution; Plan of
Distribution; Capitalization;
Selected Financial and Operating
Data; Management's Discussion and
Analysis of Financial Condition
and Results of Operations;
Business; Management; Certain
Transactions; Principal
Shareholders; Description of
Capital Stock; Financial
Statements
12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities . . . . . . . Not applicable
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION - DATED MAY 24, 1996
PROSPECTUS
504,000 Shares
Vision Health Care, Inc.
Common Stock
Vision Health Care, Inc. (the "Company") is offering to sell up to 504,000
shares of its common stock (the "Common Stock"). Prior to this offering
(the "Offering"), the Common Stock has not been traded, and no trading
market for such stock is expected to develop in the future. The initial
subscription period expires at 5:00 p.m. Eastern Standard Time on
September 1, 1996, unless such time is extended by the Company.
The Company was formed in May 1995 as a for-profit Florida corporation for
the purpose of acquiring substantially all of the assets of Vision Care,
Inc. ("VCI"), a non-stock, not-for-profit Florida corporation engaged in
the management, administration and provision of pre-paid vision care
service plans in Florida.
There has been no trading market for the Company's Common Stock prior to
this Offering, and it is unlikely that a trading market for such stock
will develop in the future. Prospective investors should be aware of the
potential long-term nature of an investment in the Common Stock. In
addition, the stock will be subject to certain transfer restrictions that
could prevent a shareholder from liquidating his or her investment in the
Company. See "Description of Capital Stock -- Transfer Restrictions.
Prospective investors will be required to make certain representations and
warranties with respect to their financial condition and ability to bear
the risk of an investment in the Company. See "Capital Stock -
Representations and Warranties of Investors."
See "Risk Factors" on pages 7 to 11 for a discussion of certain other
material factors that should be considered in connection with an
investment in the Common Stock offered hereby.
______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES REGULATORY AUTHORITY NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting
Price to Discount and Proceeds to
Public Commissions(1) Company(2)
Per Share . . . . . $ 10.00 $ -0- $ 10.00
Total Minimum(3) . . . $2,500,000 $ -0- $2,500,000
Total Maximum(4) . . . $5,040,000 $ -0- $5,040,000
(1) The Common Stock will be sold by the Company, and no underwriting
discounts or commissions will be paid. No sales commissions or other
compensation will be paid to directors, officers or employees of the
Company in connection with this Offering.
(2) Before deducting expenses payable by the Company, estimated to be
$60,000.
(3) Assumes the purchase of 250,000 shares of Common Stock, the minimum
number offered hereby.
(4) Assumes the purchase of all 504,000 shares of Common Stock offered
hereby.
______________________________
This Offering is being made on a "best efforts" basis by the Company.
Funds received upon subscription for shares offered hereby will be held in
an escrow account at Compass Bank, Jacksonville, Florida (the "Escrow
Agent"), pending sale of no fewer than 250,000 shares and the satisfaction
of certain other conditions. Subscriptions may not be modified or revoked
once received by the Company, without the Company's consent. If
subscriptions for 250,000 shares have not been received by September 30,
1996 (unless the Company extends such time 60 days to a date not later
than November 30, 1996) and the other conditions to breaking escrow have
not been satisfied, no shares will be sold and the Offering will
terminate. In such event, the Escrow Agent will promptly return all
subscription funds, with interest. See "Plan of Distribution" for an
explanation of what the Company will do if the initial subscription period
is extended or the Offering is oversubscribed. Certificates representing
shares of Common Stock purchased pursuant to this Offering will be mailed
to subscribers as soon as practicable.
The date of this Prospectus is _____________, 1996.
AVAILABLE INFORMATION
The Company has filed a registration statement on Form S-1 (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the
"Act"), with respect to the shares of Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement,
certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. For further information pertaining to the Company and the
Common Stock, reference is made to the Registration Statement and the
schedules and exhibits thereto, which may be inspected without charge at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of which may also be obtained from the Commission at prescribed
rates.
The Company intends to furnish holders of the Common Stock offered
hereby with annual reports containing financial statements audited by an
independent public accounting firm.
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere
in this Prospectus. Reference is made to, and this summary is qualified
in its entirety by, the more detailed information and financial
statements, including the notes thereto, contained elsewhere in this
Prospectus. Except where otherwise indicated, all share and per share
data in this Prospectus have been adjusted to reflect a stock split of
1.75 shares for each share of Common Stock effective as of March 15, 1996.
The Company
Vision Care, Inc. ("VCI") was formed as a non-stock, not-for-profit
Florida corporation in 1968 to engage in the management, administration
and provision of pre-paid vision care services in Florida and is now the
largest vision care provider in Florida. With ever increasing emphasis
being placed on cost containment and the efficient delivery of health
services, a group of officers and directors of VCI determined that VCI's
business could be best furthered through a for-profit enterprise. Such
officers and directors concluded that the most effective way to respond to
those competitive pressures was to emphasize cost-effective access to
health care, build on VCI's reputation for delivering vision health care
services efficiently and effectively, and to expand services. The ability
to achieve these goals is significantly enhanced by a for-profit corporate
structure which provides a corporation with flexibility that a not-for-
profit entity does not have, including, among other things, the ability to
raise capital through stock offerings. As a result, Vision Health Care,
Inc. (the "Company") was formed in May 1995 as a for-profit Florida
corporation for the purpose of purchasing the operating assets of VCI.
The proceeds of the Offering (together with borrowed funds, if necessary)
will be used to pay the purchase price of VCI's assets at a price equal to
their appraised value as of year-end 1995 ($5 million), plus any increase
or decrease in VCI's book value through the end of the calendar month
immediately preceding the closing. There is no limit on the amount of the
book value adjustments to the purchase price. The Company and VCI entered
into a purchase agreement in March 1996, which was negotiated on behalf of
VCI by a special committee whose members are neither officers, directors
nor shareholders of the Company. The closing, which is subject to
consummation of the Offering, receipt of all applicable regulatory
approvals and the satisfaction of certain other conditions, is expected to
take place on or about July 1, 1996. Following the closing, the Company,
which anticipates hiring all of VCI's existing employees, will continue
VCI's business as a for-profit enterprise.
VCI's pre-paid vision care plans, which offer specified services and
products at predetermined prices (the "Plans"), are offered under the name
"VSP" under license from Vision Service Plan, formally known as California
Vision Service ("Vision Service Plan"), which operates directly or through
license arrangements in other states, or under VCI's internally developed
program known as Primary Plus, which is targeted at health maintenance
organizations ("HMOs"). VCI contracts with public and private employers,
HMOs, preferred provider organizations ("PPOs"), health insurance
carriers, self-insured corporations, unions and other associations
(collectively, the "Sponsors") to provide pre-paid group vision care
services to members, clients or employees of the Sponsors who choose to
participate in a Plan (the "Participants"). Under agreements with Plan
Sponsors, VCI is paid a fixed fee for each Participant which entitles
Participants to obtain eye health examinations and corrective lenses and
frames through VCI's network of more than 1,000 eye care specialists for
no additional payment, unless there is a deductible or a required co-
payment. The vast majority of VCI's contracts with its Sponsors are
assignable by VCI without the consent of the Sponsor which will enable the
Company to continue services to current Sponsors. In those cases where
Sponsors must approve the assignment, the Company does not anticipate any
problem in obtaining such approvals.
Substantially all of VCI's revenues are derived from the Plans
offered under the "Vision Service Plan," or "VSP" names pursuant to VCI's
license agreement with Vision Service Plan, the largest vision care
network in the United States. Under the license agreement, VCI also
receives revenues for providing reciprocal services through its network of
licensed doctors of optometry or ophthalmology (the "Providers") to
Participants in other VSP plans who happen to reside in Florida, but whose
sponsors are based outside the state. VSP Plan pre-paid and reciprocal
program revenues accounted for approximately 52.4% and 36.3%,
respectively, of VCI's revenues in 1995. Vision Service Plan has notified
VCI that it intends to terminate the license agreement at the end of 1997.
While the reason for the notification was not disclosed by Vision Service
Plan, VCI has advised that it believes Vision Service Plan is considering
offering vision care service plans directly in Florida. If the Company is
not successful in negotiating a continuation of the agreement, such
termination is likely to have a material adverse effect on the Company,
even if it is successful in switching Sponsors to non-VSP Plans. See
"Risk Factors -- Possible Termination of Vision Service Plan License
Agreement."
Primary Plus was created by VCI in 1993 to take advantage of the
additional revenue potential generated by the shift in emphasis in health
care to HMOs and managed care. It serves as a proprietary vehicle for
Plans marketed to HMOs, which generally use Providers who traditionally
have not been panel Providers under the VSP Plans. Primary Plus Plans
include surgical and medical eye care as well as routine eye examinations,
eyeglasses and contact lenses. While revenues from VCI's Primary Plus
products have grown from $22,000 in 1993 to over $1 million in 1995, they
accounted for less than 4% of VCI's total revenues in 1995. Revenues
generated from Primary Plus Plans are lower than those generated from VSP
Plans due to the competitive nature of the managed care market and the
less expensive benefit packages offered to Primary Plus Participants.
Primary Plus is able to compete in this market by directing patient volume
to Providers who are willing to accept lower reimbursements and
negotiating competitive lab arrangements that lower Primary Plus'
corresponding expense levels.
The Company believes current market conditions in vision care favor
companies which provide meaningful cost containment to the buyer and that
there are significant niches within each market offering attractive
opportunities for companies which are responsive to consumer demand for
affordable vision care. To take advantage of these market conditions, the
Company's business strategy will be to emphasize cost effective access to
health care, build on VCI's managed care reputation and capabilities, and
expand VCI's lines of products and services.
The Offering
Common Stock offered hereby . . . . . 504,000 Shares
Common Stock to be outstanding
after the Offering . . . . . . . . . 630,000 Shares(1)
Use of proceeds by the Company . . . To purchase substantially all of
VCI's assets.
_______________
(1) Assumes the sale of all 504,000 shares offered hereby. Excludes
157,500 shares reserved for issuance under the Company's Stock
Option Plan, of which 131,906 shares are subject to outstanding
options (with a term of 10 years and an exercise price of $.29 per
share) as of the date of this Prospectus. See "Management -- Option
Plan."
Summary Selected Financial and Operating Data
The following table sets forth selected financial information
(A) on a pro forma basis for the Company for the year ended December 31,
1995, and (B) for the three months ended March 31, 1996, and on a
historical basis for VCI for the five years ended December 31, 1995, and
the three months ended March 31, 1996. The financial information for the
years ended December 31, 1995, December 31, 1994, and December 31, 1993
have been derived from VCI's financial statements for such years, which
have been prepared in accordance with generally accepted accounting
principles and audited by Dwight Darby & Company, independent certified
public accountants, and are included elsewhere in this Prospectus. The
financial information for the years ended December 31, 1992 and December
31, 1991 have been computed from VCI's financial statements for such
years, which were prepared in accordance with statutory accounting
principles promulgated by the Florida Department of Insurance and audited
by Dwight Darby & Company, and which are not included in the Prospectus.
The amounts presented in the financial information for the years ended
December 31, 1992 and December 31, 1991 would not have been significantly
different if prepared under generally accepted accounting principles. The
information should be read in conjunction with (i) the financial
statements and notes, and (ii) Management's Discussion and Analysis of
Financial Condition and Results of Operations, which are included
elsewhere in this Prospectus. Pro forma operating information is
presented as if the acquisition of VCI's business and the Offering had
occurred on January 1, 1996, and January 1, 1995, for the pro forma
periods ended March 31, 1996, and December 31, 1995, respectively. The
pro forma balance sheet data is presented as if these transactions had
occurred on March 31, 1996, and December 31, 1995, for the pro forma
periods ended March 31, 1996, and December 31, 1995, respectively. The
pro forma information incorporates certain assumptions that are included
in the notes to the pro forma financial statements included elsewhere in
this Prospectus. The pro forma information does not purport to represent
what the Company's financial position or results of operations would
actually have been if these transactions had, in fact, occurred on the
dates indicated, or to project the Company's financial position or results
of operations at any future date or for any future period.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
Pro VCI Pro
Forma Historical Forma Vision Care, Inc. Historical
1996 1996 1995(1) 1995 1994 1993 1992 1991
(Dollars in thousands, except per share and other data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Pre-paid programs revenues $ 3,965 $ 3,965 $13,449 $13,449 $11,960 $10,097 $ 8,248 $ 6,778
Reciprocal programs revenues 2,692 2,692 9,324 9,324 8,236 6,878 5,900 4,643
Total revenues 7,587 7,644 25,493 25,668 22,075 18,297 15,404 12,152
Cost of benefits provided 5,888 5,888 20,925 20,925 17,192 14,609 12,516 10,035
General and administrative
expenses 1,272 1,268 4,036 4,032 2,870 2,282 1,872 1,490
Net income 353 443 361 569 1,880 1,253 914 548
Pro forma net income(2) 220 276 225 389 1,255 840 617 375
Pro forma net income per
common share(2) $ 0.54 n/a $ 0.55
Weighted average shares
outstanding(3) 407,000 0 407,000
Other Data:
Number of Sponsors 492 492 494 494 423 371 296 252
Number of Participants 523,600 523,600 513,000 513,000 416,400 348,978 275,175 229,728
<CAPTION>
March 31, December 31,
Pro Pro
Forma Historical Forma Vision Care, Inc. Historical
1996 1996 1995(1) 1995 1994 1993 1992 1991
(Dollars in thousands, except per share and other data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and investments $ 887 $ 1,457 $ 6,507 $ 9,772 $ 7,827 $ 6,215 $ 4,416 $ 2,743
Total assets 9,889 13,365 9,690 12,698 10,585 7,923 5,890 3,835
Professional fees 2,000 5,157 5,133 4,090 3,577 0 0
refundable 2,000(4)
Liability for 2,328 2,328 2,192 2,192 1,785 1,671 1,445 886
outstanding claims
Equity(5) 2,524 5,352 2,524 4,908 4,278 2,459 4,238 2,821
<FN>
(1) Assumes the sale of 250,000 shares of Common Stock offered hereby and the application of the net proceeds
therefrom, which are estimated to be approximately $2.4 million (after deducting estimated offering expenses), and
the net proceeds of a $2.5 million loan bearing interest at an annual rate of 4.57% with principal and interest due
in 90 days.
(2) VCI is a not-for-profit corporation for federal and state income tax purposes. The pro forma information has been
computed as if VCI were subject to federal and state income taxes for all periods presented, based on the tax laws
in effect during the respective periods.
(3) Weighted average number of shares has been computed using the treasury stock method which includes dilutive common
stock equivalents as if outstanding during the respective periods.
(4) Reflects anticipated payment of $3.1 million to be made prior to the closing of the Offering.
(5) Historical amounts for VCI, which is a not-for-profit corporation, represent net assets rather than shareholders'
equity.
</TABLE>
RISK FACTORS
The securities offered hereby are speculative and involve a
significant degree of risk. Accordingly, prospective investors should
carefully consider the following information in conjunction with the other
information contained in this Prospectus before purchasing shares of
Common Stock in the Offering.
Possible Termination of Vision Service Plan License Agreement
In 1988, VCI and Vision Service Plan, a not-for-profit corporation
based in Rancho Cordova, California, entered into a license agreement (the
"License Agreement"), pursuant to which Vision Service Plan granted VCI a
license to use the federally registered and common law service marks "VSP"
and "Vision Service Plan" in Florida. Vision Service Plan is the nation's
largest provider of prepaid vision care service plans. Prepaid program
and reciprocal program services provided under the VSP name accounted for
approximately $13.4 million (52%) and $9.3 million (36%), respectively, of
VCI's revenues in 1995. Vision Service Plan has notified VCI that it
intends to terminate the License Agreement, effective December 31, 1997.
While the reason for the notification was not disclosed by Vision Service
Plan, VCI had advised that it believes Vision Service Plan is considering
offering vision care service plans directly in Florida. VCI has met with
VSP representatives in an attempt to negotiate a continuation of the
License Agreement. Although VCI plans to meet with VSP representatives
several more times in the coming months, there can be no assurance that it
will be successful in securing an extension of the License Agreement.
Although the Company believes that it will be able to maintain many of the
Sponsors utilizing VSP by transferring them to other Company pre-paid
vision service plans if the License Agreement is terminated, neither VCI
nor the Company has entered into discussions with any Sponsors regarding
such a transfer and there is no assurance that Sponsors will not terminate
their relationships with the Company. Any such terminations in
significant numbers would have a material adverse effect on the Company.
On the other hand, if the License Agreement is terminated, the loss of
revenues attributable to the provision of reciprocal services to
participants in other VSP plans who happen to reside in Florida but whose
sponsors are based outside the state would have a minimal impact on the
Company's net income because Vision Service Plan ceased payment of
administration fees to process reciprocal claims in January 1995. In
addition, the Company believes that it will be able to make arrangements
for the provision of services on a reciprocal basis for Participants in
other states, although there can be no assurance that it will be
successful in doing so. See "Business--VSP License Agreement."
Vision Care Costs and the Vision Care Industry
The Company's profitability will depend in large part on predicting
and effectively managing vision care costs. The aging of the population
and other demographic characteristics and advances in medical technology
continue to contribute to rising vision care costs. In addition,
government-imposed limitations on Medicare and Medicaid reimbursements
have caused the private sector to bear a greater share of increasing
vision and eye care costs. Changes in vision care practices, inflation,
new technologies and numerous other factors affecting the delivery and
cost of vision care are beyond the Company's control and may adversely
affect the Company's ability to predict and control vision and eye care
costs and claims.
Dependence Upon Sponsors, Participants and Providers
The Company's profitability also will be dependent upon its success
in maintaining VCI's contracts for pre-paid plans with current Sponsors
and securing contracts with new Sponsors which attract significant numbers
of Participants. VCI currently has in effect contracts with more than 490
Sponsors covering approximately 513,000 Participants. There can be no
assurance that the Company will be able to continue to renew these
contracts on acceptable terms or that it will not experience a decline in
enrollment within its Sponsors. In addition, there can be no assurance
the Sponsors will not terminate their relationships with the Company in
the event that VSP does not extend the License Agreement. Furthermore,
because two different Sponsors each account for more than six percent (6%)
of VCI's revenues, the loss of either of those Sponsors could have a
materially adverse effect on the Company's business after the Offering.
See "Business -- The Plans."
To the extent potential participants choose options for health care
services other than vision care which are offered by their Sponsor's
plans, the number of Participants for which the Company will receive
payments under any particular Sponsor plan may be reduced or limited,
notwithstanding the number of persons eligible to participate in such
plans. In addition, the Company's ability to attract and maintain
Sponsors and large numbers of Participants for pre-paid plans will depend,
in large part, on its ability to attract and maintain qualified Providers
at competitive costs. During the year ended December 31, 1995, VCI paid
claims to more than 1,000 Providers. VCI's contracts with its Providers
generally are not for a specified term and are terminable by VCI upon 30
days written notice to the Provider and by the Provider upon 90 days
written notice to VCI. Furthermore, although Provider Agreements are not
dependent on the License Agreement, Providers could terminate their
agreements and sign on with VSP or another vision care service plan
company in the event that VSP does not renew the License Agreement.
Accordingly, there can be no assurance that the Company can maintain VCI's
relationships with those Providers or enter into agreements with
additional Providers. The failure to do either could adversely affect the
Company's operations. See "Business -- The Plans."
Establishing the Amount of Sponsors' Payments
The Company will derive a majority of its revenues from fixed amounts
paid by Sponsors for each Plan Participant. Those premiums will be
established through negotiations between the Company's management and each
Sponsor at the time the Company enters into an agreement for a pre-paid
program with such Sponsor. Generally, the term of a Sponsor agreement
ranges between one and two years and the amount payable under any
agreement with a Sponsor cannot be adjusted until the expiration and
renegotiation of the agreement.
The amount of premiums under a Sponsor agreement is based upon a
number of factors, including the total number of Participants in the
Sponsor's Plan, the services to be provided to the Participants and the
historical use of services by similar Participants. The Company believes
that its management can effectively predetermine the appropriate amount of
the premiums. However, even if premiums are insufficient to cover
Participants' actual use of services, the Company will be unable to modify
any particular agreement until the expiration of its current term. As a
result, the Company may suffer losses with respect to Participants
associated with such Sponsor. See "Business - General."
Government Regulations
Pre-paid limited health service organizations in Florida are subject
to Florida laws that regulate their services and impose minimum surplus
requirements. See "Business - Government Regulation." These regulations
are generally intended to benefit and protect subscribers and enrollees,
rather than shareholders, when their interests diverge. The Company has
filed an application with the Florida Department of Insurance to be
licensed as a pre-paid limited health service organization. Management
has had discussions with the Department and understands that approval is
forthcoming. The termination by Vision Service Plan of its License
Agreement with VCI would not in and of itself result in the failure of VCI
to meet the licensing requirements of the Florida Department of Insurance.
Moreover, the extension of the License Agreement with VSP is not a
condition of any of the contracts VCI maintains with its Sponsors.
Accordingly, VCI believes it will be able to maintain its relationships
with the Sponsors by transferring the Sponsors presently utilizing VSP
Plans to other Company pre-paid vision service plans if the License
Agreement is terminated. However, if the Company is unsuccessful in
transferring Sponsors to other Company pre-paid vision service plans upon
termination of the License Agreement, the resulting loss of revenue could
adversely affect the ability of the Company to continue to meet the
licensing requirements of the Florida Department of Insurance.
In addition, the Company will assume VCI Plans that include Medicare
and Medicaid Participants thereby subjecting the Company to certain
federal and state regulations and requirements. While the impact of
future legislative and regulatory changes cannot be determined and while
the Company cannot predict what government regulations, if any, affecting
its business may be promulgated in the future, the failure by the Company
to comply with applicable regulations or the adoption of any additional
legislation could have a material adverse effect on the Company. See
"Business--Government Regulation."
Professional Liability
The Company could be subject to claims for personal injury, including
actual and punitive damages, resulting from services furnished to
Participants through its Plans. The Company will obtain professional
liability insurance for the Company in the amount of $3,000,000 for each
claim, or $3,000,000 in the aggregate, but there is no assurance that such
insurance policies will be sufficient to cover potential claims or that
the policies can be maintained in force at a cost acceptable to the
Company. There has never been a professional liability or malpractice
claim filed against VCI. Notwithstanding that, each VCI agreement with a
Provider that will be assumed by the Company requires the Provider to
indemnify VCI against any such liability and to obtain professional
liability insurance in the amount of at least $1,000,000 per occurrence or
the maximum available under market conditions, as determined by VCI, and
when possible, to name VCI as an additional insured. The Provider must
also secure workers' compensation insurance, with such carriers and in
such amounts as VCI may reasonably approve, insuring the Provider, and its
employees and agents, against any claim for damages resulting from the
performance of medical services by the Providers. Although the Company
will receive the benefits of the indemnification and insurance coverage as
VCI's assignee, there can be no assurance that such indemnification and
insurance coverage will be adequate to pay any claims asserted, or that
the Company will not be liable for any inadequacy in such coverage.
Failure to Make Loan Payments or Comply with Restrictive Covenants
In the event that fewer than 504,000 shares are sold in the Offering,
it is anticipated that the Company will borrow the balance of the funds
necessary to fund the purchase of VCI's assets. See "Proposed Acquisition
of VCI Business" and "Use of Proceeds." The failure to make required
payments or to comply with certain financial covenants or other
restrictions which may be included within the terms of the indebtedness
could enable the lenders to foreclose on any property securing such
indebtedness, which would have a material adverse effect on the Company.
Determination of Offering Price; Dilution
The offering price of the Common Stock being offered hereby was
determined by the Company's Board of Directors arbitrarily, without
reference to VCI's earnings or book value. If only 250,000 shares, the
minimum number offered hereby, are sold, the Company's founding
shareholders will own approximately 33.5% of the Company's outstanding
Common Stock (20% if all 504,000 shares offered hereby are sold). There is
no assurance that the shares offered hereby will be sold at the offering
price, or that, if sold, such shares can be resold, at the offering price
or at all, following the Offering. See "Dilution."
Lack of Trading Market
There has been no trading market of the Company's Common Stock prior
to this Offering, and it is unlikely that a trading market for such stock
will develop in the future. The Common Stock will not be listed on a
national securities exchange or quoted in any automated quotation system.
Limited Return on Investment Prior to Breaking of Escrow
The Escrow Agent will invest the subscription proceeds in short-term
investment-grade or government interest-bearing securities pending the
breaking of escrow. See "Use of Proceeds." As a result, a subscriber
will receive a limited return on his or her investment if the Offering is
terminated, or the subscription is rejected, and the subscription funds,
with interest, are returned.
Anti-Takeover Considerations
The Company's Articles of Incorporation and Bylaws contain certain
provisions that could have the effect of making it more difficult for a
party to acquire, or of discouraging a party from attempting to acquire,
control of the Company without approval of the Company's Board of
Directors, including a staggered Board of Directors and preferred stock
that may be issued by the Board of Directors with rights and preferences
established by the Board. The provisions of the Florida Business
Corporation Act regarding control share acquisitions and affiliated
transactions could deter potential acquisitions of the Company by
preventing the acquiring party from voting the Common Stock it acquires or
consummating a merger or other extraordinary corporate transaction without
the approval of the disinterested shareholders. See "Management" and
"Description of Securities -- Common Stock."
Dependence Upon Key Personnel
The Company believes that its success is dependent on the efforts and
abilities of its Chairman of the Board, Chief Executive Officer, and
certain other key executives. The loss of services of any of these key
executives could have a material adverse effect upon the Company. See
"Management."
Competition
The Company believes that there are two primary competitive factors
applicable to the pre-paid vision care business. First, there is
significant competition for a portion of the benefit dollars allocated to
vision care by various organizations under employee benefit programs. In
attempting to obtain a share of such benefit dollars, the Company competes
with various PPO's, HMO's, health care membership programs and vision care
insurance programs for Sponsors and their employees or members. Second,
there is competition from commercial insurers, discount coverage programs
and other pre-paid programs. The Company is aware of at least three other
pre-paid vision care programs licensed by the State of Florida. In
addition, a number of other pre-paid vision plans operate in various parts
of the United States, many of which have larger memberships and greater
financial, marketing and other resources than the Company. The Company
expects that the level of competition will remain high in the future. See
"Business -- Competition."
Dividend Policy
The Company's ability to pay dividends will depend on the Company's
earnings, financial condition and other relevant factors. The Company
anticipates that for the immediate future its earnings will be retained
for the operation and expansion of its business and that it will not pay
cash dividends. See "Dividend Policy."
Transfer Restrictions
It is unlikely that an investment in the Common Stock will have any
liquidity because there is no trading market for the Common Stock and one
is not expected to develop in the future. In addition, the Company's
Articles of Incorporation contain transfer restrictions restricting
transfers of the Common Stock that would result in there being 500 or more
holders of record of the Common Stock (or such other number as would
require the Company to register its Common Stock under the Securities
Exchange Act of 1934, as it may be amended from time to time (the "1934
Act")). The Company believes that so long as there is no trading market
for the Common Stock, it would not be cost effective for the Company to
file periodic reports under the 1934 Act or be subject to the 1934 Act's
regulations. Accordingly, an investor's protection under the federal
securities laws will be limited given that there will be no publicly
available information with respect to the Company, and the Company will
not be required to comply with the federal proxy or periodic reporting
rules, including the disclosure requirements thereunder. The Board of
Directors may waive the transfer restrictions if in the future it
determines that it would be in the Company's best interests to become a
1934 Act reporting company. In the absence of such waiver, the transfer
restrictions in the Company's Articles of Incorporation could prevent a
shareholder from transferring shares to anyone other than the Company or
another shareholder of record and thus could prevent the shareholder from
liquidating his or her investment in the Company. If the transfer
restrictions are applicable and a shareholder wishes to liquidate his or
her investment but the Company is unable to redeem, or another shareholder
is not interested in purchasing, the selling shareholder's shares, the
selling shareholder may be forced to wait until such time as the Company
has sufficient capital to redeem the selling shareholder's shares. See
"Description of Capital Stock -- Transfer Restrictions."
THE COMPANY
The Company was formed in May 1995 as a for-profit Florida
corporation for the purpose of acquiring the operating assets of VCI, a
non-stock, not-for-profit Florida corporation that is engaged in the
management, administration and provision of pre-paid vision care service
plans in Florida. The Company presently has no operations. Its address
is c/o Barrack & Liane, P.A., 100 West Bay Street, Jacksonville, Florida
32202, and its telephone number is (904) 356-9431. The proceeds of the
Offering will be used to pay the purchase price of the assets to be
acquired from VCI. See "Proposed Acquisition of VCI's Business."
Following the acquisition, the Company will occupy VCI's present
headquarters, located at 1511 N. Westshore Boulevard, Suite 1000, Tampa,
Florida 33630-3349.
PROPOSED ACQUISITION OF VCI BUSINESS
Background
VCI is a not-for-profit corporation engaged in the management,
administration and provision of prepaid vision care service plans in
Florida. It has more than 1,000 members, most of whom are licensed to
engage in the practice of optometry or ophthalmology in Florida. At the
time VCI was founded in 1968, Florida law required that entities licensed
to offer prepaid vision care service plans be not-for-profit corporations.
Florida law was amended in 1993 to allow for-profit enterprises to be
licensed to offer prepaid vision care service plans.
VCI faces the same cost-cutting challenges faced by the entire health
care industry. With ever increasing emphasis being placed on cost
containment and the efficient delivery of health services, for-profit
entities are viewed by many as better able to curtail rapid increases in
the cost of health care. Moreover, as a not-for-profit corporation, VCI
is not in a position to raise capital through stock offerings to better
enable it to deal with competitive challenges. VCI's emphasis is on
satisfying its statutory surplus requirements through retained earnings,
which may be increased through its right to withhold fees otherwise due to
health care professionals who agree to serve as VCI Providers. On the
other hand, a for-profit company's emphasis is on operating as efficiently
and effectively as possible so as to maximize profits for its
shareholders.
In the face of these challenges, a group of officers and directors of
VCI determined that VCI's business could be best furthered through a for-
profit enterprise. However, applicable provisions of Florida law and the
Internal Revenue Code prohibit the income or assets of a not-for-profit
corporation from inuring to the benefit of the corporation's members,
officers or directors or to the benefit of any non-charitable enterprise.
Thus, there is no way to convert VCI from a not-for-profit to for-profit
corporation by amending its charter or merging it into a for-profit
corporation. Accordingly, the officers and directors of the Company
organized the Company in May 1995 as a for-profit corporation for the
purpose of purchasing VCI's assets at a price equal to their fair market
value and continuing VCI's prepaid vision service plan business.
Terms of Asset Acquisition
On March 21, 1996, the Company signed an agreement with VCI (the
"Asset Purchase Agreement") providing for the Company to acquire
substantially all of VCI's assets (the "Acquisition"), including the
"Vision Care, Inc." name and all existing contracts with Sponsors and
Providers. The Asset Purchase Agreement provides that the purchase price
shall be the fair market value of the assets being sold in the Acquisition
as of December 31, 1995, as established by the appraisal of an independent
business appraisal firm retained by VCI, and for the price to be adjusted
by an amount equal to any increase or decrease in the net book value of
VCI from December 31, 1995 to the end of the last calendar month preceding
the date of closing. The appraisal firm determined that the fair market
value of VCI's assets was $5 million as of December 31, 1995.
The Asset Purchase Agreement requires the purchase price to be paid
in cash at the closing, in the form of a certified check. In addition, it
requires the Company to assume substantially all of the liabilities of
VCI, including a liability of $2.0 million (after giving effect to a $3.1
million payment expected to take place prior to consummation of the
Offering) due to Providers, representing professional fees previously
withheld by VCI as reserves, and obligations incurred in the ordinary
course under agreements with Sponsors, Providers and Participants. The
Asset Purchase Agreement contains standard representations and warranties
and indemnities requiring VCI to indemnify the Company for such matters as
litigation arising from the conduct of VCI's business prior to the
Acquisition, breaches by VCI of the contracts transferred to the Company,
and violations of law by VCI prior to the Acquisition. Management of the
Company is not aware of the existence of any such potential or threatened
litigation, breaches or violations.
Closing of the Acquisition is scheduled to take place as soon as
practicable after the satisfaction of a number of conditions, including
the continued accuracy of all representations and warranties, receipt of
all applicable approvals of the Florida Department of Insurance, receipt
by the Company of a certificate of authority from the Florida Department
of Insurance, the approval of VCI's members, and the sale by the Company
of a sufficient number of shares in the Offering (and if fewer than
504,000 shares are sold in the Offering, the borrowing by the Company of
the balance of the funds necessary) to fund the cash portion of the
purchase price, pay the Company's transaction costs for the Acquisition,
and maintain statutory and working capital reserves. It is expected that
the closing will take place on or about July 30, 1996. At the closing,
VCI will deliver to the Company a bill of sale and assignments conveying
the purchased assets, an opinion of counsel covering such matters as are
customary for transactions of this type, compliance certificates,
incumbency certificates, and such other documents as the Company
reasonably requests. The Company will deliver to VCI the purchase price,
instruments evidencing the assumption of VCI's liabilities, compliance
certificates, certified resolutions authorizing the transaction,
incumbency certificates, and such other documents as VCI reasonably
requests.
VCI has agreed to reimburse the Company for up to $150,000 in actual
and reasonable transaction expenses incurred by the Company in connection
with the Acquisition as well as pay VCI's own legal and accounting
expenses and the cost of the appraisal.
Most of the officers and directors of the Company also are officers
and/or directors of VCI. See "Certain Transactions." VCI and the Company
have separate legal counsel. The Asset Purchase Agreement was reviewed
and negotiated on behalf of VCI by VCI's own counsel and a special
committee consisting of a VCI director and two VCI members, none of whom
is either an officer or a director of the Company.
Activities of VCI following the Acquisition
The Asset Purchase Agreement requires VCI to refrain from engaging in
the business of providing prepaid vision care service plans throughout the
State of Florida for a period of three years after the closing. VCI is
expected to apply to become a charitable foundation under the Internal
Revenue Code following the closing for the purpose of engaging in the
promotion of public awareness and knowledge of vision care.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Common Stock offered hereby (after deducting estimated offering expenses
of $60,000), are estimated to be approximately $5 million, assuming that
all of the 504,000 shares offered hereby are sold at the initial public
offering price of $10.00 per share. The net proceeds will be used to
purchase substantially all of VCI's assets. See "Proposed Acquisition of
VCI's Business."
The Company intends to seek short-term financing to enable it to
close the Acquisition if it obtains subscriptions for at least 250,000
shares in the Offering but fewer than the 504,000 shares offered hereby.
The Company has received a proposal from SunTrust Bank outlining the terms
of a loan of up to $4 million with an interest rate fixed at .85% above
the bank's 90-day certificate of deposit rate. The loan would be fully
secured by the hypothecation of a certificate of deposit owned by VCI and
would be repaid from the proceeds of the sale of additional shares in the
Offering and/or from cash flow from operations following the Acquisition.
In the event that the net proceeds from the Offering and the loan are not
sufficient to pay the acquisition price, no shares will be sold and the
Offering will terminate. See "Plan of Distribution."
Pending the application of the net proceeds of the Offering as
described above, the Escrow Agent will invest the net proceeds in short-
term investment-grade or government interest-bearing securities.
DIVIDEND POLICY
The Company does not anticipate paying any dividends on its Common
Stock in the immediate future. The Company expects to retain any earnings
generated from its operations for use in the Company's business. Any
future determination as to the payment of dividends will be at the
discretion of the Board of Directors of the Company and will depend upon
the Company's future operating results, financial condition and capital
requirements, general business conditions and such other factors as the
Board of Directors of the Company deems relevant. The payment of
dividends also will be limited by provisions of the Florida Insurance Code
that will require the Company to maintain at all times a minimum surplus
in an amount which is the greater of $150,000 or 10% of the Company's
total liabilities.
DILUTION
The net tangible book value of the Company as of December 31, 1995
was $8,866, or $.07 per share of Common Stock. Net tangible book value
per share represents the amount of the Company's total tangible assets
less total liabilities, divided by the number of shares of Common Stock
outstanding. After giving effect to the sale by the Company of only
250,000 (the minimum number of shares offered hereby) shares of Common
Stock offered hereby at the initial public offering price of $10.00 per
share (after deducting estimated offering expenses) and the $2.5 million
loan, and after giving effect to the Company's acquisition of the
operating assets of VCI, as if the acquisition had taken place on December
31, 1995, the pro forma net tangible book value of the Company as of
December 31, 1995 would have been $2,509,000, or $6.68 per share of Common
Stock. This represents an immediate increase in net tangible book value
of $6.61 per share to existing shareholders and an immediate dilution of
$3.32 to investors purchasing Common Stock in this Offering. The
following table illustrates this per share dilution:
Initial public offering price per share . $10.00
Net tangible book value per share at $ .07
December 31, 1995 . . . . . . . . . . 6.61
Increase in net tangible book value per -------
share attributable to new investors . .
Pro forma net tangible book value after
offering . . . . . . . . . . . . . . . 6.68
-------
Dilution per share to new investors . . . $ 3.32
======
The computations in the above table excludes 157,500 shares reserved
for issuance under the Company's stock option plan, of which 131,906
shares are subject to outstanding options as of the date of this
Prospectus. The options have a term of 10 years and an exercise price of
$.29 per share. To the extent such options were exercised (based on an
average vesting of 23%), the pro forma net tangible book value as of
December 31, 1995 would have been $2,518,000, or $6.20 per share,
representing an immediate increase in net tangible book value of $6.13 per
share to existing shareholders and an immediate dilution of $3.80 to
investors purchasing Common Stock in this Offering. See "Management --
Executive Compensation."
Assuming that all 504,000 shares of Common Stock were sold in the
Offering and after giving effect to the Acquisition, the pro forma net
tangible book value of the Company as of December 31, 1995 would have been
$5,049,000, or $8.01 per share of Common Stock. This represents an
immediate increase in net tangible book value of $7.94 per share to
existing shareholders and an immediate dilution of $1.99 to investors
purchasing Common Stock in this Offering. Assuming that all 504,000
shares were sold and the options were exercised (based on an average
vesting of 23%), the pro forma net tangible book value as of December 31,
1995, after giving effect to the Acquisition, would have been $5,058,000,
or $7.67 per share, representing an immediate increase in net tangible
book value of $7.60 per share to existing shareholders and an immediate
dilution of $2.33 to investors purchasing Common Stock in this Offering.
The following table summarizes on a pro forma basis as of December
31, 1995 the number of shares of Common Stock purchased from the Company,
the total consideration paid to the Company, and the average price paid
per share by the existing shareholders and the new investors, assuming the
sale by the Company of only 250,000 shares of Common Stock, the minimum
number offered hereby, at the initial public offering price of $10.00 per
share, and further assuming the exercise of the options (based on an
average vesting of 23%):
<TABLE>
<CAPTION>
Shares Purchased
from Company Total Consideration Average
Price
Number Percentage Amount Percentage Per Share
<S> <C> <C> <C> <C> <C>
Existing shareholders . 126,000 31.0% $ 24,000 0.9% $ .19
New investors . . . . . 250,000 61.6 2,500,000 98.7 10.00
Option Holders . . . . 29,925 7.4 8,678 0.4 .29
------- ----- --------- ----- ------
Total . . . . . . . 405,925 100.0% $2,532,678 100.0% $ 6.24
======= ===== ========= ===== ======
</TABLE>
The following table summarizes the same information, except that it
assumes the sale by the Company of all 504,000 shares of Common Stock
offered hereby:
<TABLE>
<CAPTION>
Shares Purchased Average
from Company Total Consideration Price
Per
Number Percentage Amount Percentage Share
<S> <C> <C> <C> <C> <C>
Existing shareholders . 126,000 19.1% $ 24,000 0.5% $ .19
New investors . . . . . 504,000 76.4 5,040,000 99.3 10.00
Option holders . . . . 29,925 4.5 8,678 0.2 .29
------- ------ ---------- ------ ------
Total . . . . . . . 659,925 100.0% $5,072,678 100.0% $ 7.69
======= ===== ========== ===== ======
</TABLE>
PLAN OF DISTRIBUTION
This offering of Common Stock of the Company is not underwritten.
The Company is offering these securities through certain of its officers
and directors on a best-efforts basis. The Company will reimburse
officers and directors only for reasonable expenses, if any, they incur in
connection with selling the Common Stock.
The offering price per share was determined by the Company's Board of
Directors arbitrarily and should not be considered to be indicative of the
market value of the Common Stock after this Offering.
The minimum subscription per investor is 250 shares and the maximum
is 2,500 shares. The minimum subscription amount is designed to avoid
having 500 or more holders of record of the Common Stock after the
Offering, which would require the Company to register its Common Stock
under the 1934 Act. See "Risk Factors - Transfer Restrictions." The
maximum subscription amount is designed to permit as many VCI members as
possible to participate in the Offering, if they so choose. The minimum
and maximum subscription amounts per investor may be waived by the Board
of Directors in individual instances, in its discretion. Initially, the
Common Stock will be offered only to persons who are members or employees
of VCI as of June 1, 1996 ( and members of their families) and to whom
offers may be made under applicable securities laws. In the event that
such persons in the aggregate subscribe for more than the maximum number
of shares offered, the shares offered hereby will be allocated on a first-
come, first-served basis according to the dates that subscriptions are
received by the Escrow Agent. If VCI's current members and employees
subscribe for less than the maximum number of shares, then the Company
will offer the remaining shares to persons who are not associated with
VCI. If the offer to such non-members results in an oversubscription, the
shares will be allocated to the non-members on a first come, first served
basis, based upon the date of receipt of subscriptions by the Escrow
Agent. If a subscription is received after the Offering is
oversubscribed, the subscriptions funds will be returned.
Funds received upon subscription for shares offered hereby will be
held in an escrow account at Compass Bank, in Jacksonville, Florida,
pending the sale of no fewer than 250,000 shares and the satisfaction of
the other conditions to closing contained in the Asset Purchase Agreement
with VCI. Subscriptions may not be modified or revoked once received by
the Company, without the Company's consent. If subscriptions for 250,000
shares have not been received by 5:00 p.m., Eastern Standard Time, on
September 30, 1996 (unless the Company exercises its right to extend the
escrow period 60 days to a date not later than November 30, 1996), or if
any of the other conditions to closing in the Asset Purchase Agreement
have not been satisfied by such date, no shares will be sold and the
Offering will terminate. In such event, the Escrow Agent will promptly
return all subscription funds, with any interest earned thereon. The
Company is responsible for all of the Escrow Agent's costs, expenses, and
fees. Accordingly, no deductions will be made from the subscription funds
or the interest earned on such funds.
If 250,000 shares or more are sold during the escrow period, but less
than the total 504,000 shares offered hereby, the Company in successful is
borrowing the balance of the funds required to pay the Acquisition
purchase price and the other conditions to the Closing of the Acquisition
are satisfied, the Company will terminate the escrow fund and sell shares
to subscribers. The Company may continue to sell shares, updating this
Prospectus as needed and as required by federal and state securities laws.
The Offering will be terminated when 504,000 shares are sold, and may be
terminated by the Company at any time after 250,000 shares are sold.
Certificates representing shares of Common Stock purchased pursuant
to this Offering during the escrow period will be mailed to subscribers as
soon as practicable at the end of that period. Certificates representing
shares of Common Stock purchased pursuant to this Offering after the end
of the escrow period will be mailed as soon as practicable after receipt
of the purchase price for the shares.
CAPITALIZATION
The following table sets forth the capitalization of the Company as
of December 31, 1995, and as adjusted to give effect to the Offering and
the anticipated use of proceeds of the Offering (at an offering price of
$10.00 per share and after deducting estimated offering expenses) to
complete the Acquisition as described under "Use of Proceeds." The
following table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and the financial statements and notes thereto incorporated herein by
reference.
As Adjusted (1) As Adjusted(2)
(Maximum (Minimum
Outstanding Offering) Offering)
Long-term debt $ -0- $ -0- $2,500,000
-------- -------- ---------
Shareholders' equity:
Preferred Stock, $.01
par value, 1,000,000
shares authorized, no
shares issued and
outstanding -0- -0- -0-
Common Stock, $.01 par
value, 10,000,000
shares authorized,
126,000 shares issued
and outstanding and
630,000 or 376,000
shares issued and
outstanding as
adjusted(3) 1,260 6,300 3,760
Additional paid-in
capital
22,740 5,057,700 2,520,240
Total shareholders'
equity $24,000 $5,064,000 $2,524,000
------ --------- ---------
Total capitalization $24,000 $5,064,000 $5,024,000
====== ========= =========
_______________
(1) Adjusted to reflect the sale of all 504,000 shares of Common Stock
offered hereby and the application of the net proceeds therefrom,
which are estimated to be approximately $5 million (after deducting
estimated offering expenses).
(2) Adjusted to reflect the sale of 250,000 shares of Common Stock, the
minimum number offered hereby, and the application of the net
proceeds therefrom, which are estimated to be approximately $2.4
million (after deducting estimated offering expenses) and the net
proceeds from a $2.5 million loan.
(3) Excludes 157,500 shares reserved for issuance under the Company's
Stock Option Plan, of which 131,906 shares are subject to outstanding
options (with a term of 10 years and an exercise price of $.29 per
share) as of the date of this Prospectus. See "Management -- Option
Plan."
SELECTED FINANCIAL AND OPERATING DATA
The following table sets forth selected financial information (A) on
a pro forma basis for the Company for the year ended December 31, 1995,
and for the three months ended March 31, 1996, and (B) on a historical
basis for VCI, for the five years ended December 31, 1995 and the three
months ended March 31, 1995 and 1996. The financial information for the
years ended December 31, 1995, December 31, 1994, and December 31, 1993
have been derived from VCI's financial statements for such years, which
have been prepared in accordance with generally accepted accounting
principles and audited by Dwight Darby & Company, independent public
accountants, and are included elsewhere in this Prospectus. The financial
information for the years ended December 31, 1992 and December 31, 1991
have been computed from VCI's financial statements for such years, which
were prepared in accordance with statutory accounting principles
promulgated by the Florida Department of Insurance and audited by Dwight
Darby & Company, and which are not included in this Prospectus. The
amounts presented in the financial information for the years ended
December 31, 1992 and December 31, 1991 would not have been significantly
different if prepared under generally accepted accounting principles. The
information should be read in conjunction with (i) the financial
statements and notes, and (ii) Management's Discussion and Analysis of
Financial Condition and Results of Operations, which are included
elsewhere in this Prospectus. Pro forma operating information is
presented as if the acquisition of VCI's business and the Offering had
occurred on January 1, 1996, and January 1, 1995, for the pro forma
periods ended March 31, 1996, and December 31, 1995, respectively. The
pro forma balance sheet data is presented as if these transactions
occurred on March 31, 1996, and December 31, 1995, for the pro forma
periods ended March 31, 1996, and December 31, 1995, respectively. The
pro forma information incorporates certain assumptions that are included
in the notes to the pro forma financial statements included elsewhere in
this Prospectus. The pro forma information does not purport to represent
what the Company's financial position or results of operations would
actually have been if these transactions had, in fact, occurred on the
dates indicated, or to project the Company's financial position or results
of operations at any future date or for any future period.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
Pro Pro
Forma Historical Forma Vision Care, Inc. Historical
1996 1996 1995(1) 1995 1994 1993 1992 1991
(Dollars in thousands, except per share and other data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Pre-paid programs revenues $ 3,965 $ 3,965 $13,449 $13,449 $11,960 $10,097 $ 8,248 $ 6,778
Reciprocal programs
revenues 2,692 2,692 9,324 9,324 8,236 6,878 5,900 4,643
Total revenues 7,587 7,644 25,493 25,668 22,075 18,297 15,404 12,152
Cost of benefits provided 5,888 5,888 20,925 20,925 17,192 14,609 12,516 10,035
General and administrative
expenses 1,272 1,268 4,036 4,032 2,870 2,282 1,872 1,490
Net income 353 443 361 569 1,880 1,253 914 548
Pro forma net income(2) 220 276 225 389 1,255 840 617 375
Pro forma net income per
common share(2) $ 0.54 n/a $ 0.55
Weighted average shares
outstanding(3) 407,000 0 407,000
Other Data:
Number of Sponsors 492 492 494 494 423 371 296 252
Number of Participants 523,600 523,600 513,000 513,000 416,400 348,978 275,175 229,728
<CAPTION>
March 31, December 31,
Pro Pro
Forma Historical Forma Vision Care, Inc. Historical
1996 1996 1995(1) 1995 1994 1993 1992 1991
Balance Sheet Data:
Cash and investments $ 887 $ 1,457 $ 6,507 $ 9,772 $ 7,827 $ 6,215 $ 4,416 $ 2,743
Total assets 9,889 13,365 9,690 12,698 10,585 7,923 5,890 3,835
Professional fees
refundable 2,000 5,157 2,000(4) 5,133 4,090 3,577 0 0
Liability for outstanding
claims 2,328 2,328 2,192 2,192 1,785 1,671 1,445 886
Equity(5) 2,524 5,352 2,524 4,908 4,278 2,459 4,238 2,821
<FN>
(1) Assumes the sale of the minimum 250,000 shares of Common Stock offered hereby and the application of the net
proceeds therefrom, which are estimated to be approximately $2.4 million (after deducting estimated offering
expenses), and the net proceeds of a $2.5 million loan bearing interest at an annual rate of 4.57% with principal
and interest due in 90 days.
(2) VCI is a not-for-profit corporation for federal and state income tax purposes. The pro forma information has been
computed as if VCI were subject to federal and state income taxes for all periods presented, based on the tax laws
in effect during the respective periods.
(3) Weighted average number of shares has been computed using the treasury stock method which includes dilutive common
stock equivalents as if outstanding during the respective periods.
(4) Reflects anticipated payment of $3.1 million to be made prior to the closing of the Offering.
(5) Historical amounts for VCI, which is a not-for-profit corporation, represent net assets rather than shareholders' equity.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Financial and Operating Data" and VCI's Financial Statements and Notes
thereto appearing elsewhere in this Prospectus. Historical results and
percentage relationships should not be taken as indicative of future
performance.
Results of Operations
Comparison of the three months ended March 31, 1996, to the three months
ended March 31, 1995.
Total revenues increased $1.6 million in the three month period ended
March 31, 1996 to $7.6 million, as compared with revenues for the same
period in 1995. The increase was primarily attributable to increases in
prepaid program revenues of $.7 million (22.3%), reciprocal program
revenues of $.6 million (26.6%), administrative service program revenues
(fees charged to manage Sponsor's self-funded programs) of $69,706
(22.5%), and managed care revenues (revenues generated through Primary
Plus Plans) of $.2 million (105.8%). Revenues increased primarily because
of the sale of VSP and Primary Plus Plans to additional Sponsors and the
growth in the number of Participants in existing Sponsor groups. Net
interest income increased $48,278, or 45.5%, as a result of the investment
of additional surplus funds generated from operating income.
Total revenue for the first quarter increased 27.1% from 1995 to
1996. Total revenues grew faster in 1996 than in 1995 because of
successful competition against HMO discount and value added programs which
allow participants to receive a percentage or "reduced fee for service"
discount on eyecare products and services without paying any premiums.
Costs of benefits provided increased from $4.8 million in the first
quarter of 1995 to $5.9 million in the first quarter of 1996. This
represents a $1.1 million, or 22.4%, increase primarily due to increases
in claims expenses for prepaid programs of $.3 million (14.7%), reciprocal
programs of $.6 million (26.7%) and managed care programs (Primary Plus
Plans) of $134,159 (76.2%). Benefit costs decreased in relation to
revenue due to a lower percentage of benefit requests in relation to the
number of Participants in the first quarter of 1996 compared to the same
period in 1995. This was because the large number of new Sponsors added
in the first quarter of 1996. Participants of a new group tend to under-
utilize benefits during their first three or four months of coverage.
General and administrative expenses increased $398,264, or 45.8%,
from $.9 million in the first quarter of 1995 to $1.3 million in the first
quarter of 1996. Depreciation expense increased 8.8% during the first
quarter of 1996 to $24,420 primarily due to additional capital
expenditures incurred in the period.
1995 Compared to 1994.
Total revenues increased $3.6 million in 1995 to $25.7 million. The
increase was primarily attributable to increases in prepaid program
revenues of $1.5 million (12.5%), reciprocal program revenues of $1.1
million (13.2%), administrative service program revenues of $.1 million
(9.2%) and managed care revenues of $.6 million (211.3%). Revenues
increased primarily because of the sale of VSP and Primary Plus Plans to
additional Sponsors and the growth in the number of Participants in
existing Sponsor groups. The Company believes that this growth can be
attributed in part to VCI's Providers and staff establishing relationships
with the Sponsors and Participants that have instilled confidence in the
delivery of VCI's products and services. Given that the Company will
purchase substantially all of VCI's assets, assume VCI's Provider and
Sponsor contracts, and hire most, if not all, of VCI's employees in the
Acquisition, the Company does not foresee any impact on its operations or
its relationships with VCI's existing Sponsors, Participants and
Providers. As a result, the Company anticipates that the growth trend in
the number of Sponsors and the number of Participants in existing Sponsor
groups will continue.
Net interest income increased $213,565, or 64.5%, as a result of the
investment of additional surplus funds generated from operating income and
the higher yield from investments due to rising interest rates.
Total revenue increased 16.3% from 1994 to 1995 and 20.6% from 1993
to 1994. Revenues did not grow as fast in 1995 as in 1994 because of
increased competition in the marketplace from HMO discount and value added
programs which allow participants to receive a percentage or "reduced fee
for service" discount on eyecare products and services without paying any
premiums.
Costs of benefits provided increased from $17.2 million in 1994 to
$20.9 million in 1995. This represents a $3.7 million, or 21.7%, increase
primarily due to increases in claims expenses for prepaid programs of $1.7
million (22.0%), reciprocal programs of $1.3 million (16.3%) and managed
care programs of $.6 million (192.2%). Benefit cost increases over the
past three years are directly related to the growth in the number of
Sponsors and Participants using the benefits. Rising medical costs were
not a major factor due to the Company's cost containment measures which
are designed to reduce the cost of individual claims by reducing
professional fees through negotiated contracts with Providers and taking
advantage of volume discounts on eyewear through negotiated contracts with
wholesale optical laboratories. Benefit costs increased in relation to
revenue due to (1) the aggressive pricing of the Primary Plus product to
gain entry into the managed care market and to increase market share, and
(2) an increase in professional fees in January 1995. The Company
anticipates that it will continue to aggressively price the Primary Plus
product over the short-term to gain market share and market recognition.
The Company's pricing structure will cover its full claims costs and a
portion of its administrative costs. As the number of Sponsors
subscribing to the Primary Plus product increases, the Company should be
able to spread its administrative costs over a larger customer base
thereby increasing profitability.
As stated above, VCI receives revenues through its administrative
service programs for managing Sponsors' self-funded plans. In exchange
for processing claims, providing data processing for billing accounts, and
performing other services for those Sponsors, VCI receives a cost
reimbursement and an administrative fee. In other words, the Sponsor
bears the underwriting risk and cost. In 1995, the amount of medical
claims in which the Sponsor bore the underwriting risk and cost increased
$1.4 million to $10.2 million.
General and administrative expenses increased $1.2 million, or 40.5%,
from $2.8 million in 1994 to $4.0 million in 1995. Administrative costs
increased over the last three years because of the increased number of
Sponsors and Participants requiring services and the addition of
infrastructure and resources (employees, furniture equipment, software and
office space) required to develop and maintain the managed care product
line. Although increases in general and administrative expenses can be
expected due to the addition of new Sponsors and Participants, salary
increases, inflation and other factors, management believes that these
increases will be insignificant when compared to past years.
Depreciation expense increased 2.7% during 1995 to $89,803 primarily
due to additional capital expenditures incurred in 1995 and in the latter
half of 1994 (which did not reflect a full year's depreciation in 1994 as
in 1995).
1994 Compared to 1993.
Total revenues increased $3.8 million, or 20.6%, from $18.3 million
in 1993 to $22.1 million in 1994. The increase was primarily due to
increases in prepaid program revenues of $1.9 million (18.5%), reciprocal
program revenues of $1.4 million (19.8%), administrative service program
revenues of $.2 million (14.6%) and managed care revenues of $.3 million
(1,335.5%). Revenues increased primarily because of the sale of VSP and
Primary Plus Plans to additional Sponsors and the growth in the number of
Participants in existing Sponsor groups. In addition to the increases in
program revenues, net interest income increased by 42.8% to $331,260 for
1994 from $232,014 for 1993 as a result of the investment of additional
surplus funds generated from operating income and the higher yield from
investments due to rising interest rates.
Costs of benefits provided increased $2.6 million, or 17.7%, from
$14.6 million in 1993 to $17.2 million in 1994. This increase was
primarily attributable to increases in claims for prepaid programs of $.7
million (9.6%) and reciprocal programs of $1.4 million (22.7%). With
respect to administrative service programs, the amount of medical claims
in which the Sponsor bore the underwriting risk and cost increased from
$7.3 million in 1993 to $8.8 million in 1994. General and administrative
expenses increased $0.6 million, or 25.8%, from $2.3 million in 1993 to
$2.9 million in 1994.
Depreciation expense increased 2.3% during 1994 to $87,463 primarily
due to additional capital expenditures incurred in 1995 and in the latter
half of 1994.
Liquidity and Capital Resources
Historically, VCI's principal sources of cash have been the receipt
of premiums, reciprocal revenues and administrative fee payments, and
investment income. VCI's average accounts receivable turnover for the
past three years is approximately 34 days and the turn-around time for
claims is approximately 30 days. VCI invests cash balances pending future
payments of claims and other operating expenses. In September 1992, VCI
entered into a revocable trust agreement and transferred all certificates
of deposit and marketable securities to the trustee. The trust was
created to relieve VCI's management of the administrative burden
associated with investing excess funds including reconciling numerous
accounts, updating signatories and moving funds. The Company's management
does not anticipate any change in those patterns.
Historically, VCI has met its statutory surplus requirements by
withholding a specified percentage of fees due to Providers. VCI's
contracts with its Providers expressly authorize VCI to withhold these
fees as a benefit reserve without creating any obligation on the part of
VCI to pay them to the Providers. The Board of Directors has reclassified
approximately $5.1 million of the withheld amounts as a liability as of
December 31, 1995 due to increases in VCI's net assets from income from
operations. VCI anticipates paying $3.1 million of the liability
immediately prior to consummation of the Offering. See Note 7 of Notes to
Financial Statements. The remaining $2.0 million of professional fees due
to Providers, which the Company will assume from VCI, are expected to be
paid, without interest, during the next ten years, as cash flow permits.
VCI's principal demands for liquidity are expected to be benefit
costs and administrative expenses such as salary, commissions, printing,
rent, etc. The Company anticipates that the cash reserves and the cash
flow available from operations after the consummation of the Offering will
be adequate to meet the capital and liquidity needs of the Company in both
the short and long term. The Company does not anticipate any significant
capital expenditures in the foreseeable future. However, in the event the
Company seeks to accelerate its growth, additional capital may be
necessary.
Net cash provided by operating activities increased to $2.0 million
for the year ended December 31, 1995 from net cash provided of $1.9
million in 1994. This increase cannot be attributed to any one factor.
There was an insignificant increase in net cash provided by operating
activities from 1993 to 1994.
Net cash used in investing activities was $3.1 million for the year
ended December 31, 1995, $2 million more than 1994. The increase was
primarily the result of investing 1994's net income and reinvesting all
interest earned thereon. Net cash used in investing activities was $1.1
million in 1994, $.5 million less than 1993. Because all of VCI's
certificates of deposit are for 24 months, very few certificates purchased
in 1992 and 1993 matured in 1994 to be reinvested.
Inflation
Management does not believe that inflation has had a material effect
on the results of the Corporation's operations. Notwithstanding that,
during periods of significant inflation, the Company believes that its
premium increases and cost control measures will reduce, to a certain
extent, the potential adverse effect of inflation on its operations.
Accounting for Investments
After the Company's acquisition of VCI's assets, the Company's
investments will be accounted for in accordance with Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments
in Debt and Equity Securities. The adoption of this standard will not
materially affect the Company's financial position or its results of
operations. It is anticipated that the Company will have a positive
intent and ability to hold its marketable securities to maturity and will
accordingly classify them as held-to-maturity investments reported at
amortized cost.
BUSINESS
General
The Company was formed as a Florida corporation in May 1995 for the
purpose of purchasing substantially all the operating assets of VCI. See
"Proposed Acquisition of VCI Business." VCI was formed in 1968 to engage
in the management, administration and provision of pre-paid vision care
services in Florida and is now the largest group vision care provider in
Florida based on annual revenues and numbers of Sponsors, Participants and
Providers. VCI also has a certificate of authority to operate in Puerto
Rico but currently, its only business in Puerto Rico, from which it
derives immaterial revenues, is reciprocal business processing claims for
VSP participants in Puerto Rico.
The Plans
As a reaction to the continued rapid increases in the cost of health
care, including vision care, employers and insurers have sought means to
reduce the cost of direct fee-for-service reimbursement plans. In
particular, HMO's, PPO's and other third party health organizations have
been developed to offer a broad range of health care services, including
vision care services, based on capitated fees for membership. VCI's
pre-paid vision care plans, which offer specified services and products at
pre-determined prices (the "Plans"), are offered under the name "VSP"
under license from Vision Service Plan, which operates directly or through
license arrangements in other states, or under VCI's internally developed
program targeted at HMOs and PPOs known as Primary Plus. VCI's Plans will
be one of the assets purchased by the Company under the terms of the Asset
Purchase Agreement.
The Company does not anticipate making any significant changes to the
way VCI manages, administers and provides its products and services.
However, the Company does intend to place more emphasis on the cost-
effective access to health care, build on VCI's reputation to deliver
vision health care services efficiently and effectively, and expand
services. Management believes that the ability to do that is
significantly enhanced by a for-profit corporate structure which provides
the corporation with flexibility that a not-for-profit entity does not
have, including, among other things, the ability to raise capital through
stock offerings.
Currently, VCI contracts with public and private employers, HMOs,
PPOs, health insurance carriers, self-insured corporations, unions and
other associations (collectively, the "Sponsors") to provide pre-paid
group managed vision care services to members, clients or employees of the
Sponsors who choose to participate in a Plan (the "Participants"). The
Sponsors provide access to a large number of potential Participants
thereby enabling VCI to reach a greater number of persons without the
economic burden of marketing directly to the public. As of March 1, 1996,
VCI had contracts with 494 Sponsors. The vast majority of VCI's contracts
with its Sponsors are assignable by VCI without the consent of the Sponsor
which will enable the Company to continue services to current Sponsors.
In those cases where Sponsors must approve the assignment, the Company
does not anticipate any problem in obtaining such approvals.
To the extent necessary, VCI will develop a Plan for each Sponsor
that is tailored to meet the needs of the particular Sponsor and its
members, employees or clients. Then, in exchange for fixed payments made
by the respective Sponsors for each enrolled Participant, Participants
obtain eye health examinations, corrective lenses and frames through VCI's
network of more than 1,000 Providers for no additional payment, unless
there is a deductible or a required co-payment. Participants may select
glasses and other vision products covered by the Plan, or choose from a
wide variety of upgraded frames and lenses at an additional cost.
Upgraded items include, among other things, designer frames, designer
sunglasses, tints, ultra-violet filters, anti-reflective coatings,
speciality lenses, sports and occupational eyewear, photochromatic lenses
and polycarbonate lenses. Complete contact lens services, including
testing, fitting and servicing, as well as post-cataract and pediatric
eyecare services are also available.
VCI's management determines an appropriate premium for a Sponsor's
Plan based upon a number of factors, including the total number of
Participants in the Plan, the services to be provided to Plan Participants
and the historical use of the Plan's services by similar Participants.
The exact premium amount is then negotiated by VCI's management and the
Sponsor at the time VCI enters into an agreement with the Sponsor. The
amount of the premium is included in the agreement between the Sponsor and
VCI and generally cannot be adjusted until the expiration of the current
term of such agreement. The term of the agreement generally ranges
between one and two years. Moreover, the agreement typically is not
terminable by either the Sponsor or VCI (although VCI may terminate the
agreement for the Sponsor's failure to remit premiums) unless the
terminating party provides the non-terminating party with notice of
cancellation ranging from 30 to 90 days prior to the expiration of the
term of the agreement. Historically, approximately 95% of the Sponsors
have renewed their contracts with VCI.
Sponsors contract with VCI for Plans because they are a relatively
inexpensive way of providing an additional health care benefit to
employees and other beneficiaries. In addition to tailoring a Plan to
meet the needs of a particular Sponsor and its members, employees or
clients, VCI also prepares all Plan literature and claim forms for
Sponsors and their Participants; recruits Providers to provide eyecare
services to Participants; provides data processing services for billing
accounts, and renders payments to Providers and other vendors in
connection with eyecare services rendered to Participants; monitors
utilization of services by Participants; and provides quality control
procedures relating to services. The Company believes that Sponsors
typically offer their members or employees participation in the Plans as a
health care option or as an enhancement to the basic benefits offered to
such members or employees.
The Company believes there are several features of the Plans in
addition to the advantages discussed above that make choosing a Plan a
smart decision for Sponsors. First, the Plans are convenient. VCI
provides a state-wide panel of Providers from which a Participant can
choose in order to get the maximum benefit from a Plan, although any
provider may be chosen, panel or non-panel. VCI uses a pre-certified
benefit form which allows a Participant utilizing the services of panel
Providers to receive covered services without making any payment (unless
the particular Plan requires a deductible for co-payment) or completing
any claims paperwork. In addition to convenience, the Plans provide
quality and cost control. VCI maintains quality control standards for
examinations and lens fabrication and encourages its panel Providers to
order high quality frames. Quality control is also enhanced by the fact
that VCI maintains committees to review claims and resolve complaints.
VCI also receives revenues through its administrative service
programs for managing Sponsors' self-funded plans. In exchange for
processing claims, providing data processing for billing accounts, and
performing other services for those Sponsors, VCI receives a cost
reimbursement and an administrative fee.
In short, the Company believes that VCI has an effective structure
for providing vision care products and services to Sponsors and
Participants. Accordingly, the Company anticipates operating its business
in much the same manner that VCI has operated its business for the past 28
years.
VSP License Agreement
Substantially all of VCI's revenues are derived from Plans offered
under the names "Vision Service Plan", or "VSP," under license from Vision
Service Plan, the nation's largest provider of pre-paid vision service
plans. Vision Service Plan is a non-profit PPO that has been providing
vision care benefits for more than 40 years and was one of the first PPOs
to focus exclusively on group vision care, designing and administering its
first vision benefit plan in 1954. Vision Service Plan has expanded to
become the largest vision network in the country, with more than 23,000
providers. Vision Service Plan offers vision care service plans directly
in 46 states and the District of Columbia, and indirectly in the remaining
4 states (including Florida) under license arrangements with other
providers of pre-paid vision care service plans.
In 1988, VCI and Vision Service Plan entered into a license agreement
(the "License Agreement"), giving VCI the exclusive right in Florida to
use the federally registered and common law service marks "VSP" and
"Vision Service Plan" in exchange for license fees equal to $2,000 per
year. By entering into the License Agreement, VCI gained the advantages
of being associated with the largest vision care network in the U.S. while
maintaining the advantages of local control over the quality of vision
care services.
Under the License Agreement, VCI also provides reciprocal services
through its Providers to participants in other VSP plans who happen to
reside in Florida but whose sponsors are based outside the state. These
sponsors have contracted with another VSP entity, whether Vision Service
Plan or one of its other licensees, for pre-paid vision care services for
their covered participants. Likewise, under the reciprocal arrangements
with Vision Service Plan, VCI Participants who reside outside Florida but
whose Florida-based Sponsors have contracted with VCI for Plan coverage
utilize the services of VSP provider networks in other states.
Revenues from VCI Plans offered under the VSP name, including both
pre-paid and administrative service programs, accounted for approximately
57.5%, 59.6% and 60.9% of VCI's revenues in 1995, 1994 and 1993,
respectively. Additionally, revenues from reciprocal business for
services provided by VSP Providers to Florida residents participating in
non-VCI plans offered by Vision Service Plan or its licensees in other
states accounted for approximately 36.3%, 37.3% and 37.6% of VCI's
revenues in 1995, 1994 and 1993, respectively. The Company estimates that
as of March 1, 1996, there were approximately 50,000 Participants residing
out-of-state who are covered by VSP reciprocal arrangements under VCI
Plans.
Vision Service Plan has notified VCI that it intends to terminate the
License Agreement effective December 31, 1997. While the reason for the
notification was not disclosed by Vision Service Plan, VCI has advised
that it believes Vision Service Plan is considering offering vision care
service plans directly in Florida. VCI has met with VSP representatives
in an attempt to negotiate a continuation of the License Agreement.
Although VCI plans to meet with VSP representatives several more times in
the coming months, there can be no assurance that it will be successful in
securing an extension of the License Agreement. In the event that a new
contract is signed, management anticipates that the contract will be on
substantially the same terms and conditions as the License Agreement.
Although the Company believes that it will be able to maintain many of its
Sponsors, Participants and Providers by converting those Sponsors' plans
from VSP Plans to the Company's own proprietary plans if the License
Agreement is terminated, neither VCI nor the Company has not entered into
discussions with any Sponsors regarding such a conversion. The Company
also believes that it will be able to negotiate arrangements for the
provision of services on a reciprocal basis to Participants out-of-state.
However, there can be no assurance that it will be able to do so. The VSP
name is well known and management believes that it has given VCI a
marketing advantage with Sponsors. Moreover, if the License Agreement is
terminated, the Company eventually would lose virtually all revenue from
reciprocal business in Florida for out-of-state VSP plans.
Primary Plus
Primary Plus was created by VCI in 1993 to take advantage of the
additional revenue potential generated by the shift in emphasis in health
care to HMOs and managed care. It serves as a proprietary vehicle for
Plans marketed to HMOs, which generally use Providers who traditionally
have not been panel Providers under the VSP Plans marketed by VCI. By
contrast, VSP Plans are marketed primarily to businesses, school boards,
and other governmental agencies. As a result of the differing needs and
objectives of the groups targeted by each type of Plan, the rates and
products of the two types of Plans are very different. Primary Plus
usually includes all medical and surgical eyecare as well as routine eye
examinations, eyeglasses and contact lenses, while VSP Plans generally
only cover routine examinations, eyeglasses and contact lenses.
As of March 1, 1996, 13 HMOs with approximately 217,000 Participants
in the aggregate have contracted for Primary Plus Plans. Primary Plus
Plans accounted for approximately 3.9%, 1.5% and 0.1% of VCI's revenues in
1995, 1994 and 1993, respectively. Revenues generated from Primary Plus
Plans are lower than those generated from VSP Plans due to the competitive
nature of the managed care market and the less expensive benefit packages
offered to Primary Plus Participants. Primary Plus is able to compete in
this market by directing patient volume to Providers who are willing to
accept lower reimbursements and negotiating competitive lab arrangements
that lower Primary Plus' corresponding expense levels. Given the
increasing emphasis on health care cost containment and the concomitant
growth in HMOs, the Company intends to emphasize the marketing of Primary
Plus to HMOs.
Effective April 1, 1996, Primary Plus began providing administrative
services to certain PPOs covering approximately 150,000 members. Similar
to its administrative service programs discussed above, VCI will receive
revenues on a cost reimbursement plus administrative fee basis.
The Providers
VCI's programs are designed to provide savings to individual
consumers, insurance companies and employers by reducing the cost of
frames, eyeglass lenses, contact lenses and eye examinations. The
proliferation of optical chain stores and other volume eyewear dispensers
has resulted in competitive pressures on the practices of various
independent optometrists and dispensing opticians. One of the goals of
VCI is to assist such vision care professionals in maintaining or
increasing the volume of their practices while enabling consumers to
reduce their eye care costs. The Company intends to continue that goal by
maintaining and attracting new Providers.
Each Provider must be a licensed practicing doctor of optometry or
ophthalmology. Currently, there are approximately 2,800 licensed
potential Providers in Florida, of which 2,000 are optometrists and 800
are ophthalmologists. VCI's process of selecting potential Providers
includes a review of references from existing Providers and regulatory
agencies, personal interviews and telephone calls to references. The
majority of Providers in VCI's prepaid vision care service plans to date
are optometrists who are licensed professionals specializing in vision
examinations, but who are limited in their ability to treat eye diseases.
Optometrists generally have completed four years of post-graduate
education following completion of a bachelor's degree. The other
Providers are ophthalmologists, who are medical doctors specializing in
the care, treatment and surgery of eyes. As of March 1, 1996, VCI had
Provider Agreements with more than 1,000 Providers. The majority of those
agreements are unilaterally assignable by VCI to an entity which has
purchased substantially all of VCI's assets. As a result, the Company
anticipates continuing services to current Sponsors and Participants
without interruption.
The Company anticipates using the same method of contracting with
Providers that VCI currently uses. VCI enters into a separate written
agreement with each optometrist or ophthalmologist who becomes a Provider
(the "Provider Agreement"). Under a Provider Agreement, the Provider
agrees to furnish health care services to Participants in the Plans at
predetermined fees. The Provider Agreement requires that the Provider,
among other things, conduct his or her professional practice in accordance
with the prevailing practices and standards of the profession and the
community. In addition, the Provider must maintain and retain records
relating to Participants in such form as required by law and accepted
medical practice.
Generally, Provider Agreements do not have fixed terms and are
terminable by VCI upon 30 days written notice to the Provider and by the
Provider upon 90 days written notice to VCI. Historically, the majority
of Providers have renewed their agreements with VCI. In order to interest
a greater number of Sponsors, the Company believes that it must establish
a larger network of Providers and will focus its efforts on developing
such a network by continuing to seek highly qualified and geographically
diverse Providers.
VCI generally contracts with Providers to provide services to
Participants simultaneously with the development of a Participant base in
a particular geographic area, although at times VCI may enter into
agreements with Providers in advance of the development of a Participant
base in certain areas in connection with VCI's marketing efforts. The
Company does not expect to alter that strategy. The Provider generally
decides to participate in VCI Plans in order to supplement their
practices. The Plans enable Providers to treat additional patients who
are Participants without requiring them to give up any of their existing
patients or the opportunity to obtain new patients who are
non-Participants. Although patients who are Participants generally pay
fees which are less than those paid by non-Participant patients, the
incremental revenues from Participant patients may be an additional source
of revenues to the Provider with little or no increase in overhead costs.
There can be no assurance, however, that all of the Providers will
continue to participate in the Plans even if their participation results
in such an increase in volume, since that portion of their practices may
become less profitable than other aspects of their practices.
The Company's Strategy
The Company believes current market conditions in vision care favor
companies which provide meaningful cost containment to the buyer. The
Company further believes there are significant niches within each market
offering attractive opportunities for companies which are responsive to
consumer demand for affordable vision care. To take advantage of these
market conditions, the Company's business strategy is to:
- Emphasize cost-effective access to health care. The Company
believes that rising vision care costs will cause buyers to seek
cost containment. The Company plans to focus on this demand by
providing low cost pre-paid vision care programs.
- Build on VCI's managed care reputation and capabilities. The
Company believes that VCI is a vision care leader in the Florida
market place because of the quality of its Provider network, the
number of its Sponsors and the development of flexible and
cost-effective vision care services. The Company intends to build
on that reputation and continue to expand VCI's range and offering
of services.
- Expand services. In response to market opportunities, the Company
intends to continue VCI's strategy of expanding its product lines
and services. New delivery systems that eliminate the pre-
certified benefit form are being positioned in the Provider
networks for implementation as required. In addition, new product
lines emphasizing discount and value added benefits at more
competitive prices are being researched and developed. Select
Provider networks are being recruited to provide non-standard VSP
product services.
Marketing and Promotion
VCI does not market its pre-paid plans directly to the public, and
the Company expects to follow suit. The Company believes that the success
of pre-paid vision care plans depends upon its ability to attract and
maintain Sponsors with a substantial number of members or employees for
enrollment in pre-paid programs. To date, VCI's efforts have been
directed primarily to Sponsors located in Florida. However, if the VSP
License Agreement is terminated, the Company may seek to expand its
operations to other geographical locations or attempt to affiliate with
other providers of prepaid vision care service plans. See "Risk Factors -
Possible Termination of Vision Service Plan License Agreement." Marketing
to potential Sponsors will continue to be conducted primarily through
direct personal contact and solicitation by the Company's management. The
Company also intends to continue marketing pre-paid programs through
attendance at trade shows and by advertising in appropriate trade
journals, as well as through networks of independent health insurance
brokers.
VCI has marketed its prepaid plans in Puerto Rico through insurance
agents. Because the Puerto Rico marketplace has great potential for
development, the Company will continue those efforts. In order to be
successful, the Company believes that a full-time sales representative is
necessary to educate brokers, agents and the public on the value of the
benefits being offered.
Competition
The Company will compete in Florida with at least 4 other pre-paid
vision plans. The membership of one such plan (United Vision Care Plan,
Inc.) is limited to Dade County public school employees and their families
and had approximately $2.1 million of revenues in 1995. The second
company (Optiplan, Inc.) operates primarily in southeast Florida and
Puerto Rico, offering pre-paid and discount vision care services to HMOs
and group members. Optiplan's revenues in 1995 were approximately $3
million. The third company (Spectera Eyecare of Florida, Inc., f/k/a
United Eyecare of Florida, Inc.) received its initial licensure in Florida
in July 1993. Spectera is part of a larger vision health care
organization that primarily provides services in the Northeast. It
currently has limited operations in Florida with revenues of approximately
$.3 million in 1995. A fourth company is being formed by the American
Academy of Ophthalmology and is contemplating operations in 1998 or 1999.
The Provider Agreements do not prohibit Providers from providing services
to any other pre-paid vision plan. Furthermore, there are a sufficient
number of qualified opticians, optometrists and ophthalmologists in
Florida to establish independent provider networks.
In addition to Florida's other pre-paid vision plans, a number of
other pre-paid vision plans operate in various parts of the United States,
many of which possess memberships and financial, marketing and other
resources much greater than that of the Company. The Company anticipates
that its primary bases of competition with those other pre-paid vision
plans will be savings provided to Sponsors and Participants, quality of
service, administration and management, convenience, and availability.
Government Regulation
Chapter 636 of Florida Statutes, the "Pre-paid Limited Health
Service Organization Act of Florida (the "Pre-paid Act"), and the
regulations promulgated thereunder, prohibit a commercial enterprise, such
as the Company, from operating a pre-paid optometric service plan without
obtaining and maintaining a certificate of authority from the Florida
Department of Insurance. The Company has applied for licensing in
accordance with the Pre-paid Act. Management has had discussions with the
Department and understands that approval is forthcoming. The Pre-paid
Act requires, among other things, that the affairs, transactions,
accounts, business records and assets of a licensed entity be examined by
the Florida Department of Insurance (the "Department") at least once every
three years. In lieu of making its own financial examination, the
Department may accept an independent certified public accountant's audit
report prepared on a statutory accounting basis. A licensed entity is
also required to file with the Department certain annual, quarterly and
miscellaneous reports, and to maintain a minimum surplus in an amount
which is the greater of $150,000 or 10% of its total liabilities.
Violation of these provisions can result in the suspension or revocation
of the entity's certificate of authority, or in the imposition of fines.
VCI is licensed under the Puerto Rico Insurance Code to underwrite
life and disability insurance. The Company filed a request with the
Puerto Rico Commissioner of Insurance to transfer VCI's license to the
Company and has received oral confirmation that the license will be
transferred as soon as practicable after the closing of the Acquisition.
See "Proposed Acquisition of VCI's Business." As a licensee, the
Commissioner of Insurance may require the Company to make special reports
from time to time with respect to particular losses or claims, or on any
other matter that he/she deems advisable. Furthermore, as a condition to
licensing, the Company will be required to appoint a licensed general
agent who is a resident of Puerto Rico with the power or duty to supervise
the underwriting and policy service operations of the Company. Violations
of the Puerto Rico Insurance Code can result in the suspension or
revocation of, or a refusal to renew, the Company's license, or the
imposition of fines.
VCI provides Medicaid Plans, and its Primary Plus Plans include
Medicare Participants. As a result, the Company will be required to
comply with extensive federal and state regulations in order to receive
reimbursement for Medicare and Medicaid Participants. There can be no
assurance that Medicare and Medicaid will not reduce their benefits in the
future or impose other regulations or requirements that may have an
adverse effect on the Company's financial condition.
The Company believes that VCI's programs, and the relationships
between and among VCI, its Sponsors, Participants and Providers have been
designed to comply with existing laws, and that VCI's operations are
currently in compliance therewith. The Company fully expects to comply
with all applicable laws and regulations. However, there is no assurance
that future laws and regulations will not be adopted, or existing laws and
regulations will not be modified or interpreted in a manner that would
materially adversely affect the Company.
Properties
VCI leases its office from independent third parties. VCI's
corporate offices consist of 12,675 square feet of space located at 1511
North Westshore Boulevard, Suite 1000, Tampa, Florida 33607. VCI pays a
monthly base rental of $19,805 under a 62-month non-cancelable operating
lease agreement which expires on October 31, 1999. The monthly rent will
increase $528 beginning on September 1, 1996 and another $528 on each
September 1 thereafter, until the expiration of the lease. VCI is also
liable for its pro rata share of any operating costs incurred annually by
the lessee that are greater than $7.00 per square foot of total square
footage leased. VCI has one five-year option to extend the lease at fair
market value at the time of the exercising of such option. In addition,
VCI leases satellite offices in Longwood and Coral Springs, Florida. The
Company will assume all of VCI's liabilities under such leases pursuant to
the terms and conditions of the Asset Purchase Agreement.
Employees
At December 31, 1995, VCI had approximately 53 employees, including
48 administrative personnel, and 5 sales personnel. To the best of the
Company's knowledge, VCI is not a party to any collective bargaining
agreements and believes that its relations with its employees are good.
The Company anticipates hiring all of VCI's employees after the
Acquisition.
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information concerning the
executive officers and directors of the Company:
Name Age Position
Howard J. Braverman, Chairman of the Board of
O.D.(1)(4)* . . . . . . . . . . 49 Directors
Chief Executive Officer,
Peter D. Liane, O.D.(1)* . . . 40 President and Director
James W. Andrews, O.D.(2)* . . 43 Vice President and Director
Alan P. Fisher, O.D.(3)* . . . 45 Secretary and Director
Terrance W. Naberhaus, O.D.(2)*
39 Treasurer and Director
James R. Brauss, O.D.(1) . . . 48 Director
Stanley D. Braverman,
M.D.(3)(4) . . . . . . . . . . 45 Director
Allen L. Garrett(3) . . . . . . 56 Director
Landrum R. Landreth(1) . . . . 71 Director
Jeffery C. Locke, O.D.(3) . . . 35 Director
Raymond M. Neff(2) . . . . . . 54 Director
John M. Renaldo, O.D.(2) . . . 52 Director
Judith A. Zellers, O.D.(1) . . 52 Director
_______________
* Member of the Executive Committee.
(1) Class 1 director whose term will expire at the 1997 annual meeting
of shareholders.
(2) Class 2 director whose term will expire at the 1998 annual meeting
of shareholders.
(3) Class 3 director whose term will expire at the 1999 annual meeting
of shareholders.
(4) Howard Braverman and Stanley Braverman are brothers.
The following executive officers of VCI are expected to become
executive officers of the Company following the Acquisition:
Name Age Anticipated Position
Luis M. Perna, M.S.M. . . 45 President of VSP Division
Roy L. Burgess, C.P.A., 42 President of Primary Plus
M.S.M. . . . . . . . . . . Division
Eugene T. Pizzo, Jr., M.S.M. 53 Controller
Ronald R. Barnette . . . . 46 Vice President-Sales and
Marketing of VSP Division
Howard J. Braverman, O.D., Chairman of the Board of the Company, has
been a practicing O.D. with Braverman Eye Center since 1981. Dr.
Braverman was also associated with Eye Care of Florida from April 1994 to
December 1994. Dr. Braverman has been a board member of VCI since January
1994.
Peter D. Liane, O.D., Chief Executive Officer, President and
director of the Company, has practiced as an optometric physician with
Drs. Barrack and Liane, P.A. since 1979. Dr. Liane is the President of
the Florida Optometric Association and has been a board member of VCI
since January 1995.
James W. Andrews, O.D., Vice President and director of the Company,
has been a sole practitioner since March of 1994. Dr. Andrews was a
partner with Dr. Cravey, O.D. from January 1982 until March 1994. Dr.
Andrews has been a board member of VCI since January 1991.
Alan P. Fisher, O.D., Secretary and director of the Company, has
been an O.D. in private practice for more than the preceding five years.
Dr. Fisher has been a board member of VCI since January 1991.
Terrance W. Naberhaus, O.D., Treasurer and director of the Company,
has been an O.D. with Brevard Optometry Associates since April 1990. Dr.
Naberhaus has been a board member of VCI since January 1992.
Raymond M. Neff, director of the Company, is President, CEO, and
Director of FCCI Mutual Insurance Company. From 1987 to 1994, he was an
administrator for FCCI Self Insurance Fund. During that same period, Mr.
Neff served as President, Chief Executive Officer and director of Florida
Employees Life Insurance Company and Florida Employees Insurance Service
Corporation. Mr. Neff is a director of Barnett Bank of Southeast Florida
and has been a board member of VCI since January 1992.
James R. Brauss, O.D., director of the Company, has been a
practicing O.D. with the firm of James R. Brauss, O.D., P.A. since 1988.
Dr. Brauss is on the Board of Directors of the Broward County Branch of
the American Lung Association and the Broward County Optometry Association
and was a board member of VCI from January 1990 to December 1995.
John M. Renaldo, O.D., director of the Company, has been operating
as an independent contractor with Dr. Salvatore M. DeCanio, Jr. since
February 1996. Prior to working with Dr. Gary Enker at the Enker Eye
Center from October 1994 to February 1996, Dr. Renaldo practiced as Dr.
John M. Renaldo, P.A. Dr. Renaldo has been a board member of VCI since
January 1990.
Landrum R. Landreth, director of the Company, has been retired for
more than the preceding five years. Mr. Landreth has been a board member
of VCI since January 1993.
Stanley D. Braverman, M.D.. director of the Company, has been a
practicing medical doctor, specializing in ophthalmology, since February
1981. Dr. Braverman has been the Medical Director for VCI's Primary Plus
Division since October 1993 and is a clinical instructor in ophthalmology
at the University of Miami School of Medicine.
Judith A. Zellers, O.D., director of the Company, has been a sole
practitioner since 1981. Dr. Zellers has been a board member of VCI since
January 1992.
Jeffery C. Locke, O.D., director of the Company, has been practicing
as Jeffery C. Locke, O.D., P.A. since 1990. In addition, Dr. Locke has
been the Director of Quality Assessment of VCI since January 1994 and
Optometric Director of VCI since August 1995.
Allen L. Garrett, director of the Company, helped to form VCI's
first panel of doctors in 1969 and 1970 and served as President and Chief
Executive Officer of VCI from January 1980 to January 1996. Mr. Garrett
is the current Chairman of the Council of Growing Companies.
Luis M. Perna, M.S.M. has been President of VCI's VSP Division since
January 1996. Prior to that date, Mr. Perna served as Vice President of
Operations from 1990 to 1995. From 1973 to 1990, Mr. Perna was employed
by Crown Life Insurance Company of Canada in both U.S. group insurance
sales and administrative capacities. His final position there was
Regional Manager, Group Administration. Mr. Perna received his B.A. in
Political Science from the University of Florida in 1973 and his M.S. in
Management from Florida International University in 1976.
Roy L. Burgess, C.P.A., M.S.M. is the President of VCI's Primary
Plus Division where he is responsible for product design, marketing,
claims adjudication, underwriting, contract preparation, customer service,
provider relations and quality improvement. Prior to joining VCI in July
1995, Mr. Burgess worked at Prudential Health Care System for 10 years as
Director of Operations for its multiple managed care plans in Tampa and
Orlando, Florida.
Eugene T. Pizzo, Jr., M.S.M., has served as Controller of VCI since
1990. From 1982 until his promotion to Controller in 1990, Mr. Pizzo
served as VCI's office manager. Prior to joining VCI, Mr. Pizzo was a
career officer in the United States Air Force for 20 years during which
time he received his M.S. in Management from Troy State University.
Ronald R. Barnette joined VCI in 1989 and has served as Vice
President of Marketing since February 1990. Prior to joining VCI, Mr.
Barnette served as an account executive with Vision Service Plan from 1984
to 1988, a marketing representative with 3M Company from 1979 to 1984, and
a marketing representative with General Motors Corp. from 1971 to 1979.
Mr. Barnette received his B.S. in Marketing from Virginia Polytechnic
Institute in 1971.
Directors' Compensation
Historically, VCI's board members have received $350 for the first
day of a board meeting, $250 for each subsequent day, and reimbursement
for any reasonable out-of-pocket expenses. In addition, the Chairman of
the Board receives $9,600 per year, and the Vice Chairman and Treasurer
each receive $2,400 per year. The Company expects to adopt the same
policy following the Acquisition.
Directors are eligible to receive options under the Stock Option
Plan described below. See "Management--Executive Compensation."
Executive Compensation
Because the Company has no operating history, compensation
information for executive officers is not available for 1995. The
following table summarizes the compensation received by VCI's Chief
Executive Officer and each of its most highly compensated executive
officers other than the Chief Executive Officer whose total annual base
salary and bonus exceeded $100,000 (the "Named Executives") in their
capacity as executive officers of VCI during 1995. The Company does not
anticipate any change in such compensation, except for annual increases in
the ordinary course of business and consistent with past practice.
<TABLE>
<CAPTION>
1995 Annual Compensation from VCI
Name and Other Annual All Other
Principal Position Salary Bonus Compensation(1) Compensation
<S> <C> <C> <C> <C>
Allen L. Garrett, Chief
Executive Officer and
President(3) $ 95,000 $82,103 -0- $4,750
Luis M. Perna, M.S.M.,
President of VSP Division $ 84,246 $19,769 -0- $4,212
Roy L. Burgess, C.P.A.,
M.S.M., President of
Primary Plus Division $ 52,423(4) -0- -0- -0-
<FN>
_______________
(1) Excludes certain personal benefits such as health insurance, the total value of which did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus for the Named Executive.
(2) Consists of contributions to VCI's profit-sharing plan.
(3) Mr. Garrett's term as VCI's Chief Executive Officer and President expired in January 1996. Currently, Peter D. Liane,
O.D., is the Chief Executive Officer and President of the Company, but, other than any applicable director fees, Dr.
Liane is not compensated for serving in such capacity. There are no immediate plans to hire a full-time salaried Chief
Executive Officer after the Acquisition. However, in the event that a new Chief Executive Officer is hired, the Company
anticipates that such person will receive less compensation than that received by Mr. Garrett while serving as the Chief
Executive Officer and President of VCI.
(4) Mr. Burgess joined VCI in July 1995. Had he worked the entire year, his salary would have been approximately $128,500.
</TABLE>
Option Plan
The Company has established a stock option plan (the "Option Plan")
for the purpose of attracting and retaining the Company's executive
officers and other key employees, directors, and key non-employee advisors
in a manner that will align their interests with those of the Company's
shareholders. A total of 157,500 shares of Common Stock have been
reserved for issuance under the Option Plan. A committee of at least two
directors, who may or may not be employees (the "Committee"), will have
the authority to determine the terms of awards granted under the Option
Plan, including, among other things, the individuals who receive awards,
the times when they receive them, vesting schedules, performance goals
triggering the exercisability of options, whether an option is an
incentive or non-qualified option and the number of shares to be subject
to each award. Currently, the Committee members are Howard J. Braverman,
O.D., Alan P. Fisher, O.D., and Terrance W. Naberhaus, O.D.
The exercise price and term of each option will be fixed by the
Committee, except that the exercise price for each stock option which is
intended to qualify as an incentive stock option must be at least equal to
the fair market value of the stock on the date of grant and the term of
the option cannot exceed 10 years. In the case of an incentive stock
option granted to an individual who owns (or is deemed to own) at least
10% of the total combined voting power of all classes of stock of the
Company, the exercise price must be at least 110% of the fair market value
on the date of grant and the term cannot exceed five years. Incentive
stock options may be granted only to employees and only within ten years
from the date of adoption of the Option Plan. The aggregate fair market
value (determined at the time the option is granted) of shares with
respect to which incentive stock options may be granted to any one
individual under the Option Plan, or any other plan of the Company or any
parent or subsidiary, which stock options are exercisable for the first
time during any calendar year, may not exceed $100,000. An optionee may,
with the consent of the Committee, elect to pay for the shares to be
received upon exercise of his options in cash or shares of Common Stock or
any combination thereof. All options will become exercisable upon any
event constituting a change of control of the Company, which could have
the effect of deterring potential acquisitions of the Company.
In April 1996, the Committee granted a total of 131,906 non-
qualified options as follows: (i) 55,125 to executive officers, and
directors and/or shareholders of the Company who have spent considerable
time and effort in connection with organizing the Company and furthering
the Acquisition (the "Organizing Group"); (ii) 70,875 to those, including
key non-employee advisors and executive officers of the Company, who are
expected to play a key role in encouraging continued Provider and Sponsor
participation in the Plans that the Company will assume from VCI (the
"Network Development Group") and (iii) 5,906 to Messrs. Pizzo and Barnette
who are expected to become officers of the Company upon completion of the
Acquisition. Each of the following individuals, as members of both the
Organizing Group and the Network Development Group, received 15,750
options each: Howard J. Braverman, Chairman of the Board; Peter D. Liane,
Chief Executive Officer and President; James W. Andrews, Vice President;
Alan P. Fisher, Secretary; and Terrance W. Naberhaus, Treasurer. In
addition, the Committee awarded 7,875 options each to Messrs. Perna and
Burgess, both of whom are shareholders of the Company and executive
officers of VCI and are expected to become executive officers of the
Company following the Acquisition, in connection with the time they have
devoted outside normal working hours as members of the Organizing Group.
The options have a term of 10 years and an exercise price of $.29
per share, which the Company has determined represents the fair market
value of the Common Stock on the date of grant. All options granted to
the Organizing Group vest 20% on grant and an additional 20% at the end of
each full year after grant, assuming the holders remain in their
capacities of officers or directors of the Company. The options granted
to each member of the Network Development Group vest 25% upon acceptance
by that member of the responsibility of promoting Provider and Sponsor
participation and 75% at the end of 1996 as to each member of that group
who fulfilled his or her responsibilities in the opinion of the Committee.
The options of Messrs. Pizzo and Barnette vest 20% upon the commencement
of their employment with the Company and the balance at 20% per year for
each year during which they remain employed by the Company. All options
not already vested will vest upon any change of control over the Company.
Employment Agreements
VCI has entered into one year employment agreements with Luis M.
Perna, VCI's Vice President of Operations and President of VCI's VSP
Division since January 1996, Roy L. Burgess, VCI's Vice President of
Managed Care and President of VCI's Primary Plus Division since January
1996, and Ron Barnette, VCI's Vice President of Marketing. Mr. Perna's
agreement provides for an annual base salary of $92,000, a discretionary
annual bonus, and participation in certain incentive compensation plans.
Although Mr. Perna's agreement has not been amended, Mr. Perna began
receiving an annual base salary of $100,000 on January 1, 1996. Mr.
Burgess' agreement provides for an annual base salary of $128,500. Mr.
Barnette's agreement provides for an annual base salary of $70,000 and
incentive payments tied to the annualized volume of VSP contracts and the
sale of Primary Plus contracts. Messrs. Perna's and Burgess' agreements
will be renewed automatically for an additional year on each anniversary
date thereof, unless any party gives written notice of nonrenewal. During
their employment with VCI, and for a period of six months thereafter in
the case of Mr. Perna and one year in the case of Messrs. Burgess and
Barnette, the individuals are prohibited from competing with VCI directly
or indirectly in any business involving the soliciting or administering of
eye care within a state in which VCI offers such coverage or services and
actually writes business. The Company anticipates that each of the above
named employees will enter into employment agreements with the Company on
substantially the same terms and conditions.
Indemnification and Insurance
The Florida Business Corporation Act (the "Florida Act") authorizes
Florida corporations to indemnify any person who was or is a party to any
proceeding (other than an action by, or in the right of, the corporation),
by reason of the fact that he or she is or was a director, officer,
employee, or agent of the corporation or is or was serving at the request
of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise,
against liability incurred in connection with such proceeding, including
any appeal thereof, if he or she acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was unlawful. In
the case of an action by or on behalf of a corporation, indemnification
may not be made if the person seeking indemnification is adjudged liable,
unless the court in which such action was brought determines such person
is fairly and reasonably entitled to indemnification. The indemnification
provisions of the Florida Act require indemnification if a director or
officer has been successful on the merits or otherwise in defense of any
action, suit or proceeding that he or she was a party to by reason of the
fact that he or she is or was a director or officer of the corporation.
The indemnification authorized under Florida law is not exclusive and is
in addition to any other rights granted to officers and directors under
the Articles of Incorporation or Bylaws of the corporation or any
agreement between officers and directors and the corporation. A
corporation may purchase and maintain insurance or furnish similar
protection on behalf of any officer or director against any liability
asserted against the director or officer and incurred by the director or
officer in such capacity, or arising out of the status, as an officer or
director, whether or not the corporation would have the power to indemnify
him or her against such liability under the Florida Act.
The Company's Bylaws provide for the indemnification of directors of
the Company to the maximum extent permitted by Florida law and for the
advancement of expenses incurred in connection with the defense of any
action, suit or proceeding that the director was a party to by reason of
the fact that he or she is or was a director of the Company upon the
receipt of an undertaking to repay such amount, unless it is ultimately
determined that such director is not entitled to indemnification.
The Company intends to obtain a director's and officer's liability
insurance policy insuring (i) the officers and directors of the Company
from claims arising out of an alleged wrongful act by the directors and
officers of the Company in their respective capacities as directors and
officers of the Company and (ii) the Company to the extent that the
Company has indemnified the directors and officers for such loss. It is
not expected that such insurance will cover claims under Federal or state
securities laws.
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions
The Company anticipates that the Board of Directors will determine
compensation for the Company's executive officers.
CERTAIN TRANSACTIONS
All of the officers, directors and 5% shareholders of the Company,
except for two, are members and officers or directors of VCI. The
following table indicates the positions with VCI and the Company as of the
date of this Prospectus of each officer, director and present shareholder
of the Company:
Name Positions with VCI Positions with Company(1)
James W. Andrews, O.D. Board Member Vice President and
Director
James R. Brauss, O.D.(2) Former Board Member Director
Howard J. Braverman, O.D. Board Member Chairman of the Board
of Directors
Stanley D. Braverman, Medical Director(4) Director
M.D.
Roy L. Burgess, C.P.A., President of Primary
M.S.M. Plus Division(4)
Alan P. Fisher, O.D. Board Member Secretary and Director
Allen L. Garrett Consultant(3)(4) Director
Landrum R. Landreth Board Member Director
Mitchell W. Legler None
Peter D. Liane, O.D. Board Member Chief Executive
Officer, President and
Director
Jeffery C. Locke, O.D. Director of Quality Director
Assessment and
Optometric
Director(4)
Terrance W. Naberhaus, Board Member Treasurer and Director
O.D.
Raymond M. Neff Board Member Director
Luis M. Perna, M.S.M. President of VSP
Division(4)
John M. Renaldo, O.D. Board Member Director
Judith A. Zellers, O.D. Board Member Director
_______________
(1) Each person listed owns more than 5% of the Company's outstanding
Common Stock, with the exception of Stanley Braverman who is not a
shareholder of the Company. See "Principal Shareholders."
(2) Dr. Brauss served as a board member of VCI from January 1990 to
December 1995.
(3) Mr. Garrett was President and Chief Executive Officer of VCI until
January 1996. Currently, a consulting contract between VCI and Mr.
Garrett is being negotiated but has not been signed.
(4) The individual is expected to serve in the same capacity with the
Company following the Acquisition.
See "Proposed Acquisition of VCI Business" for information concerning
the terms of the proposed acquisition by the Company of VCI's assets.
VCI, a non-stock, not-for-profit corporation, appointed a special
committee in connection with the negotiation and execution of the Asset
Purchase Agreement, consisting of a VCI director and two VCI members, none
of whom is an officer or director of the Company. The special committee
has been advised by its own counsel in connection with the transaction,
and the price of the assets being sold by VCI to the Company in the
Acquisition has been established by an independent appraisal firm retained
by the special committee to determine the fair market value of such
assets. Consummation of the Acquisition is subject to the affirmative
vote by VCI's members at a special meeting of members which is expected to
be held in June 1996.
Mitchell W. Legler, a shareholder of the Company and the sole
shareholder of Mitchell W. Legler, P.A., is counsel to the Company.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the date of this Prospectus,
information regarding the beneficial ownership of Common Stock by each
person known by the Company to be the beneficial owner of more than 5% of
the Company's outstanding Common Stock, by each director of the Company,
each Named Executive, and by all directors and executive officers of the
Company as a group. Each person named in the table has sole voting and
investment power with respect to all Common Stock shown as beneficially
owned by such person. None of such shareholders is selling any Common
Stock in the Offering.
<TABLE>
<CAPTION>
Percentage Percentage
Ownership After Ownership After
Shares Percentage the Offering the Offering
Beneficially Ownership Assuming Assuming
Owned Prior to Prior to the Maximum Minimum
Offering Offering Offering Offering
<S> <C> <C> <C> <C>
James W. Andrews, O.D. 7,875 6.25% 1.25% 2.1%
James R Brauss, O.D. 7,875 6.25 1.25 2.1
Howard J. Braverman, O.D. 15,750 12.50 2.50 4.2
Roy L. Burgess, C.P.A., M.S.M. 7,875 6.25 1.25 2.1
Alan P. Fisher, O.D. 7,875 6.25 1.25 2.1
Allen L. Garrett 7,875 6.25 1.25 2.1
Landrum R. Landreth 7,875 6.25 1.25 2.1
Mitchell W. Legler 7,875 6.25 1.25 2.1
Peter D. Liane, O.D. 7,875 6.25 1.25 2.1
Jeffery C. Locke, O.D. 7,875 6.25 1.25 2.1
Terrance W. Naberhaus, O.D. 7,875 6.25 1.25 2.1
Raymond M. Neff 7,875 6.25 1.25 2.1
Luis M. Perna, M.S.M. 7,875 6.25 1.25 2.1
John M. Renaldo, O.D. 7,875 6.25 1.25 2.1
Judith A. Zellers, O.D. 7,875 6.25 1.25 2.1
All directors and
executive officers as a
group (15 persons) 118,125 93.75% 18.75% 31.40%
</TABLE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of ten million
(10,000,000) shares of the Common Stock, par value $0.01 per share and one
million shares (1,000,000) of Preferred Stock, par value $0.01 per share.
As of the date of this Prospectus, there were 126,000 shares of Common
Stock issued and outstanding. No shares of Preferred Stock have been
issued. Following completion of the Offering, 630,000 shares of Common
Stock will be issued and outstanding assuming the sale of all 504,000
shares of Common Stock offered hereby. There is no established trading
market for the Common Stock, and one is not expected to develop in the
future.
Preferred Stock
The Board of Directors has the authority to issue up to 1,000,000
shares of Preferred Stock in one or more classes or series and to fix the
number of shares constituting any such series and the rights and
preferences thereof, including dividend rates, terms of redemption
(including sinking fund provisions), redemption price or prices, voting
rights, conversion rights and liquidation preferences of the shares
constituting such class or series, without any further vote or action by
the Company's shareholders. The issuance of Preferred Stock by the Board
of Directors could adversely affect the rights of holders of Common Stock.
For example, an issuance of Preferred Stock could result in a class of
securities outstanding that would have preferences over the Common Stock
with respect to dividends and liquidations, and that could (upon
conversion or otherwise) enjoy all of the rights appurtenant to Common
Stock.
Common Stock
Holders of Common Stock are entitled to receive such dividends as may
be legally declared by the Board of Directors subject to the preferential
rights of any outstanding shares of Preferred Stock. See "Dividend
Policy." Each shareholder is entitled to one vote per share on all
matters to be voted upon and is not entitled to accumulate votes for the
election of directors. Holders of Common Stock do not have preemptive
rights and, upon liquidation, dissolution or winding up of the Company,
are entitled to share ratably in the net assets of the Company available
for distribution to Common Stock holders after the payment of any
preferences to holders of any outstanding shares of Preferred Stock. All
outstanding shares of Common Stock, including the shares offered hereby,
will be validly issued, fully paid and nonassessable.
Transfer Restrictions
Limit on Number of Holders of Record. There is no trading market for
the Common Stock and one is not expected to develop in the future. The
Company believes that so long as there is no trading market for the Common
Stock, it would not be cost effective for the Company to file periodic
reports under the 1934 Act or be subject to the 1934 Act's regulations.
Thus, in order to avoid becoming a reporting company under the 1934 Act,
the Company's Articles of Incorporation provide that no person shall
become a Holder of Record (as defined in the Articles of Incorporation) of
shares of Common Stock if immediately thereafter the number of Holders of
Record of the Common Stock would equal or exceed 500 Holders of Record, or
such other number as may subsequently be set forth in Section 12(g) of the
1934 Act as the minimum number of Holders of Record for a class of equity
securities to be required to be registered under Section 12 of the 1934
Act (the "Public Company Threshold"). Accordingly, an investor's
protection under the federal securities laws will be limited given that
there will be no publicly available information with respect to the
Company, and the Company will not be required to comply with the federal
proxy or periodic reporting rules, including the disclosure requirements
thereunder.
If immediately after any direct or indirect transfer of Common Stock
(including, but not limited to, the transfer into the name of a pledgee as
record owner, or a transfer made for the purposes of circumventing the
registration requirements of Section 12 of the 1934 Act) the number of
Holders of Record of the Common Stock would equal or exceed the Public
Company Threshold, such transfer shall be null and void to the intended
holder, and the intended holder will have no rights to the Common Stock.
Common Stock transferred or proposed to be transferred, which would result
in the Public Company Threshold being equaled or exceeded, will be deemed
held in trust on behalf of and for the benefit of the Company. Such
shares of Common Stock shall be deemed a separate class of stock. Any
person who acquires, attempts or intends to acquire, or retains shares in
violation of these restrictions shall provide written notice to the
Company of such event. The Board of Directors will, within six months
after receiving notice of such actual or proposed transfer, either (i)
direct the holder of such shares to sell all shares held in trust for the
Company to one or more existing Holders of Record in such manner as the
Board of Directors directs or (ii) redeem such shares for a price equal to
the lesser of (a) the price paid by the holder from whom shares are being
redeemed and (b) the price determined in good faith by the Board of
Directors as the fair market value of such Common Stock on the relevant
date. In the absence of a trading market for the Common Stock or the
stock of an entity comparable to the Company, the Company anticipates
using an independent business appraisal firm to determine the fair market
value of the Common Stock. However, in the event that it is not
practicable under the circumstances (e.g., due to expense or timing) to
retain an appraisal firm, the Board of Directors reasonably and in good
faith will establish the price based on discounted anticipated cash flows,
future operations, asset values, and such other factors as the Board of
Directors considers relevant at the time. Notwithstanding which method of
valuation is ultimately used, it is anticipated that the relevant date
would be fixed at or near the end of the six-month period in order to
allow the holder sufficient time to negotiate an arms-length price with
another existing Holder of Record. If the Board of Directors directs the
holder to sell the shares, the holder shall receive such proceeds as the
trustee for the Company and pay the Company out of the proceeds of such
sale all expenses incurred by the Company in connection with such sale,
plus any remaining amount of such proceeds that exceeds the amount
originally paid by the intended holder for such shares. The intended
holder shall not be entitled to distributions, voting rights or any other
benefits with respect to such excess shares except the amounts described
above. Any dividend or distribution paid to an intended holder on excess
shares pursuant to the Company's Articles of Incorporation must be repaid
to the Company upon demand.
All certificates representing shares of Common Stock will bear a
legend referring to the restrictions described above.
Classified Board of Directors. Under the Company's Articles of
Incorporation and Bylaws, the Board of Directors of the Company is divided
into three classes, with staggered terms of three years each. Each year
the term of one class expires.
Special Voting Requirements. The Company's Articles of Incorporation
provide that all actions taken by the shareholders must be taken at an
annual or special meeting of the shareholders or by the written consent of
the holders of 90% of the Company's outstanding voting stock. The
Articles of Incorporation provide that special meetings of the
shareholders may be called by only a majority of the members of the Board
of Directors, the Chairman of the Board or the holders of not less than
35% of the Company's outstanding voting shares. Under the Company's
Bylaws, shareholders will be required to comply with advance notice
provisions with respect to any proposal submitted for shareholder vote,
including nominations for elections to the Board of Directors.
Representations and Warranties of Investors
As stated above, there is no trading market for the Common Stock and
it is unlikely one will develop in the future. Accordingly, prospective
investors will be required to make certain representations and warranties
with respect to their financial condition and their ability to bear the
risk of a long-term investment in the Company. The Company will have the
right to refuse a subscription for the Common Stock from any investor if
it believes that the investment is unsuitable for such investor.
The Common Stock will not be offered in any state in which an offer
is not authorized. In order for the Company to ensure compliance with any
applicable state securities laws, prospective investors will be required
to provide representations with respect to their state of residence.
Certain Provisions of Florida Law
The Company is subject to several anti-takeover provisions under
Florida law that apply to a public corporation organized under Florida law
unless the corporation has elected to opt out of such provisions in its
Articles of Incorporation or (depending on the provision in question) its
Bylaws. The Company has not elected to opt out of these provisions. The
Florida Business Corporation Act contains a provision that prohibits the
voting of shares in a publicly held Florida corporation which are acquired
in a "control share acquisition" unless the holders of a majority of the
corporation's voting shares (exclusive of the above shares held by
officers of the corporation, inside directors or the acquiring party)
approved the granting of voting rights as to the shares acquired in a
control share acquisition. A control share acquisition is defined as an
acquisition that has not been approved beforehand by the Company's Board
of Directors and immediately thereafter entitles the acquiring party to
vote in the election of directors within each of the following ranges of
voting power: (i) 1/5 or more but less than 1/3 of such voting power,
(ii) 1/3 or more but less than a majority of such voting power and (iii) a
majority or more of such voting power.
The Florida Business Corporation Act also contains an "affiliated
transaction" provision that prohibits a publicly held Florida corporation
from engaging in a broad range of business combinations or other
extraordinary corporate transactions with an "interested shareholder"
unless (i) the transaction is approved by a majority of disinterested
directors before the person becomes an interested shareholder, (ii) the
interested shareholder has owned at least 80% of the Company's outstanding
voting shares for at least five years, or (iii) the transaction is
approved by the holders of 2/3 of the Company's voting shares other than
those owned by the interested shareholder. An interested shareholder is
defined as a person who, together with affiliates and associates,
beneficially owns (as defined in Section 607.0901(1)(e), Florida Statutes)
more than 10% of the Company's outstanding voting shares.
LEGAL MATTERS
The validity of the shares of Common Stock to which this Prospectus
relates will be passed upon for the Company by Foley & Lardner,
Jacksonville, Florida.
EXPERTS
The balance sheet of Vision Health Care, Inc. as of December 31, 1995
and the consolidated financial statements of Vision Care, Inc. as of
December 31, 1995 and 1994, and for the years ended December 31, 1995,
1994 and 1993 have been included herein in reliance upon the report of
Dwight Darby & Company, independent certified public accountants, and upon
the authority of said firm as experts in accounting and auditing.
<PAGE>
VISION HEALTH CARE, INC.
INDEX TO FINANCIAL STATEMENTS
Unaudited Pro Forma Financial Information Page
Assuming the sale of 250,000 shares of Common Stock and a
$2.5 million loan (Minimum Offering):
Pro Forma Balance Sheet as of March 31, 1996 (Unaudited) F-2
Notes to Pro Forma Balance Sheet . . . . . . . . . . . . F-4
Pro Forma Statement of Operations for the Three Months
Ended March 31, 1996 (Unaudited) . . . . . . . . . . . F-5
Notes to Pro Forma Statement of Operations . . . . . . . F-7
Pro Forma Balance Sheet as of December 31, 1995 (Unaudited)
F-8
Notes to Pro Forma Balance Sheet . . . . . . . . . . . . F-10
Pro Forma Statement of Operations for the Year Ended
December 31, 1995 (Unaudited) . . . . . . . . . . . . F-11
Notes to Pro Forma Statement of Operations . . . . . . . F-13
Vision Health Care, Inc.
Balance Sheet as of March 31, 1996 (Unaudited) . . . . . F-14
Notes to Balance Sheet . . . . . . . . . . . . . . . . . F-15
Independent Auditors' Report . . . . . . . . . . . . . . F-16
Balance Sheet as of December 31, 1995 . . . . . . . . . . F-17
Notes to Balance Sheet . . . . . . . . . . . . . . . . . F-18
Vision Care, Inc.
Statements of Financial Position as of March 31, 1996 and F-19
1995 (Unaudited) . . . . . . . . . . . . . . . . . . . .
Statements of Activities for the Three Months Ended March
31, 1996 and 1995 (Unaudited) . . . . . . . . . . . . . F-20
Statements of Cash Flows for the Three Months Ended March
31, 1996 and 1995 (Unaudited) . . . . . . . . . . . . . F-21
Notes to Financial Statements . . . . . . . . . . . . . . F-22
Independent Auditors' Report . . . . . . . . . . . . . . F-30
Statements of Financial Position as of December 31, 1995 F-32
and 1994 . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Operations for the Years Ended December 31, F-33
1995, 1994 and 1993 . . . . . . . . . . . . . . . . . .
Statements of Changes in Net Assets for the Years Ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . F-34
Statements of Cash Flows for the Years Ended December 31,
1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . F-35
Notes to Financial Statements . . . . . . . . . . . . . . F-37
<PAGE>
VISION HEALTH CARE, INC.
Interim Pro Forma Balance Sheet (Minimum Offering)
March 31, 1996
(Unaudited)
The following unaudited pro forma balance sheet reflects (i) the
purchase of Vision Care, Inc.'s assets by the Company, (ii) the sale of
250,000 shares of Common Stock in the Offering, the minimum amount offered
thereby, and (iii) the securing of a $2.5 million loan, as if all had
occurred on March 31, 1996. Such pro forma information is based upon the
historical balance sheets of the Company and Vision Care, Inc., as of that
date, giving effect to the Acquisition and the application of the proceeds
of the Offering and the loan as set forth under the caption "Use of
Proceeds." This pro forma balance sheet should be read in conjunction
with the historical balance sheet and notes thereto of the Company and the
historical financial statements and notes thereto of Vision Care, Inc.
included elsewhere in this Prospectus.
This unaudited pro forma balance sheet incorporates certain
assumptions that are included in the notes to the pro forma balance sheet.
This pro forma balance sheet is not necessarily indicative of what the
actual financial position of the Company would have been at March 31,
1996, nor does it purport to represent the future financial position of
the Company.
<PAGE>
<TABLE>
VISION HEALTH CARE, INC.
Interim Pro Forma Balance Sheet (Minimum Offering)
March 31, 1996
(In thousands)
(Unaudited)
<CAPTION>
Historical Pro Forma Adjustments
Vision
Public Purchase of Health
Vision Health Vision Care, Offering Vision Care, Care, Inc.
Care, Inc. Inc. and Loan Inc. Assets Pro Forma
<S> <C> <C> <C> <C> <C>
ASSETS
Cash - checking accounts and
short-term investments $ 24 $ 1,457 $ 4,940(a) $(5,534)(a)(e) $ 887
Certificates of deposit and
marketable
securities 8,326 (3,163) (b) 5,163
Cash on deposit with the State
of Florida 50 50
Accounts receivable
Reciprocal programs 1,731 1,731
Prepaid programs 993 993
Administrative service
programs -
Billed 162 162
Unbilled for outstanding
claims 179 179
Managed care 60 60
Other 0 60(c) 90(c) 150 (c)
Interest receivable 39 39
Prepaid expenses 18 18
Organizational costs 15 15
Furniture, equipment and
leasehold improvements - at
cost, net of accumulated
depreciation of $348,867 350 92(e) 442
-------- ------ ------- ------- ------
TOTAL ASSETS $ 39 $13,365 $ 1,837 $(5,352) $9,889
======== ====== ====== ====== =====
LIABILITIES
Professional fees refundable $ $ 5,157 $(3,157) (b) $ $2,000
Liability for outstanding
claims
Prepaid programs 1,893 1,893
Administrative service
programs 179 179
Managed care program 256 256
Accounts payable 15 177 192
Debt payable 2,500(d) 2,500
Accrued salaries and
commissions payable 103 103
Membership enrollment fees
refundable 6 (6) (b) 0
Deferred income 71 71
Deferred rents 97 97
Advance deposits from groups 74 74
------- ------- ------- ------- -----
Total Liabilities 15 8,013 (663) 7,365
------- ------- ------- ------- -----
STOCKHOLDERS' EQUITY
Common stock 1 3(a) 4
Additional paid in capital 23 2,497(a) 2,520
Retained earnings -
unrestricted 0 5,352 (5,352)(f) 0
------- ------ -------- ------- --------
Total Stockholders' Equity 24 5,352 2,500 (5,352) 2,524
------- ------ ------- ------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 39 $13,365 $ 1,837 $(5,352) $9,889
======== ======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited pro forma balance sheet.
<PAGE>
VISION HEALTH CARE, INC.
Notes to Interim Pro Forma Balance Sheet (Minimum Offering)
(Unaudited)
1. Adjustments to Pro Forma Condensed Balance Sheet
(a) To reflect the issuance of 376,000 shares of the Company's
Common Stock, of which 250,000 are held by those who buy in
connection with this Offering at a price of $10.00 per share.
The remaining 126,000 shares were purchased by the Company's
founders at $.19 per share. Cash is reduced by the cost of the
Offering (estimated to be $60,000) and other transaction
expenses incurred by the Company in connection with the
acquisition of Vision Care, Inc.'s assets (estimated to be
$90,000). It is assumed that all costs associated with the
Offering and the Acquisition will not exceed $150,000.
Estimated costs include legal fees, accounting fees, printer's
charges for printing securities and the SEC registration
statement, and SEC registration fees.
(b) To refund a portion of the professional fees withheld in prior
years to facilitate the proposed purchase of Vision Care, Inc.'s
assets. To also refund the membership enrollment fees of Vision
Care, Inc.'s charter members.
(c) Vision Care, Inc. has agreed to pay up to $150,000 in actual and
reasonable transaction expenses incurred by the Company in
connection with the Acquisition. Therefore, a receivable of
$150,000 is reflected on this pro forma balance sheet.
(d) To acquire debt of $2.5 million in connection with this
Offering, bearing interest at an annual rate of 4.57% with
principal and interest due in 90 days.
(e) To reflect the purchase of Vision Care, Inc.'s assets at their
fair market value of $5 million based on an independent
appraisal at December 31, 1995.
(f) To eliminate retained earnings of Vision Care, Inc..
<PAGE>
VISION HEALTH CARE, INC.
Interim Pro Forma Statement of Operations (Minimum Offering)
For the Three Months Ended March 31, 1996
(Unaudited)
The following unaudited pro forma statement of operations reflects
(i) the purchase of Vision Care, Inc.'s assets by the Company, (ii) the
sale of 250,000 shares of Common Stock in the Offering, the minimum amount
offered thereby, and (iii) the securing of a $2.5 million loan, as if all
had occurred on January 1, 1996. Such pro forma information is based upon
the historical results of operations of Vision Care, Inc. for the three
months ended March 31, 1996, giving effect to the Acquisition and the
application of the proceeds of the Offering and the loan as set forth
under the caption "Use of Proceeds." This pro forma statement of
operations should be read in conjunction with the historical balance sheet
and notes thereto of the Company and the historical financial statements
and notes thereto of Vision Care, Inc. included elsewhere in this
Prospectus.
This unaudited pro forma statement of operations incorporates
certain assumptions that are included in the notes to the pro forma
statement of operations. Accordingly, this pro forma statement of
operations is not necessarily indicative of what the actual results of
operations of the Company would have been assuming the Acquisition, the
Offering and the loan had been completed as set forth above, nor does it
purport to represent the results of operations for future periods.
<PAGE>
VISION HEALTH CARE, INC.
Interim Pro Forma Statement of Operations (Minimum Offering)
For the Three Months Ended March 31, 1996
(In thousands, except share and per share data)
(Unaudited)
Pro Forma
Historical(a) Adjustments
Public Vision Health
Vision Care, Offering Care, Inc.
Inc. and Loan Pro Forma
REVENUES
Prepaid programs $ 3,965 $ $ 3,965
Reciprocal programs 2,692 2,692
Administrative service
programs 379 379
Managed care -
Medicaid 206 206
Administrative 19 19
Commercial 106 106
Medicare 101 101
Member's dues 18 18
Enrollment fees 3 3
Interest income 155 (57)(b) 98
------- ------- -------
Total revenues 7,644 (57) 7,587
------- ------- -------
COSTS AND EXPENSES
Cost of benefits
provided 5,888 5,888
General and
administrative
expenses 1,268 4(c) 1,272
Retirement plan
contributions 20 20
Depreciation and
amortization 25 29
Interest expense 0 29(d) 28
------- ------- --------
Total costs and
expenses 7,201 33 7,233
------- ------- --------
NET INCOME BEFORE INCOME
TAX EXPENSE 443 (90) 353
Pro forma provision for
income tax 133(e) 133
Pro forma net income $ 443 $ (223) $ 220
======= ======= =======
Weighted average number
of Shares Outstanding 0 407,000(f)
=======
Pro forma net income per
share n/a $ 0.54
=======
See accompanying notes to unaudited pro forma statement of operations.
<PAGE>
VISION HEALTH CARE, INC.
Notes to Interim Pro Forma Statement of Operations (Minimum Offering)
For the Three Months Ended March 31, 1996
(Unaudited)
1. Adjustments to Pro Forma Condensed Statements of Operations
(a) Historical information is not included for the Company because
it had no operations during the three months ended March 31,
1996.
(b) To reflect the decrease in interest income due to the use of
funds to refund a portion of the professional fees withheld in
prior years and membership enrollment fees. (See Note 1(b) to
Notes to Pro Forma Balance Sheet).
(c) To reflect loan expense of $4,000 associated with the cost of
acquiring debt of $2.5 million in connection with the offering.
(d) To reflect interest expense of $29,000 on $2.5 million of new
debt bearing interest at an annual rate of 4.57% for 90 days.
The Company has received a proposal from SunTrust Bank
outlining the terms of a loan of up to $4 million with an
interest rate fixed at .85% above the bank's 90-day certificate
of deposit rate. The loan would be fully secured by the
hypothecation of a certificate of deposit owned by VCI and
would be repaid from the proceeds of the sale of additional
shares in the Offering and/or from cash flow from operations
following the Acquisition.
(e) Reflects the computation of federal and state income tax
expense.
(f) Weighted average number of shares has been computed using the
treasury stock method which includes dilutive common stock
equivalents as if outstanding during the respective periods.
<PAGE>
VISION HEALTH CARE, INC.
Pro Forma Balance Sheet (Minimum Offering)
December 31, 1995
(Unaudited)
The following unaudited pro forma balance sheet reflects (i) the
purchase of Vision Care, Inc.'s assets by the Company, (ii) the sale of
250,000 shares of Common Stock in the Offering, the minimum amount offered
thereby, and (iii) the securing of a $2.5 million loan, as if all had
occurred on December 31, 1995. Such pro forma information is based upon
the historical balance sheets of the Company and Vision Care, Inc., as of
that date, giving effect to the Acquisition and the application of the
proceeds of the Offering and the loan as set forth under the caption "Use
of Proceeds." This pro forma balance sheet should be read in conjunction
with the historical balance sheet and notes thereto of the Company and the
historical financial statements and notes thereto of Vision Care, Inc.
included elsewhere in this Prospectus.
This unaudited pro forma balance sheet incorporates certain
assumptions that are included in the notes to the pro forma balance sheet.
This pro forma balance sheet is not necessarily indicative of what the
actual financial position of the Company would have been at December 31,
1995, nor does it purport to represent the future financial position of
the Company.
<PAGE>
<TABLE>
VISION HEALTH CARE, INC.
Pro Forma Balance Sheet (Minimum Offering)
December 31, 1995
(In thousands)
(Unaudited)
<CAPTION>
Historical Pro Forma Adjustments
Vision
Public Purchase of Health
Vision Health Vision Care, Offering Vision Care, Care, Inc.
Care, Inc. Inc. and Loan Inc. Assets Pro Forma
<S> <C> <C> <C> <C> <C>
ASSETS
Cash - checking accounts
and short-term
investments $ 24 $ 384 $ 4,940(a) $(5,090)(a)(e) $ 258
Certificates of deposit
and marketable
securities 9,338 (3,139)(b) 6,199
Cash on deposit with the
State of Florida 50 50
Accounts receivable
Reciprocal programs 1,191 1,191
Prepaid programs 948 948
Administrative service
programs -
Billed 96 96
Unbilled for
outstanding claims 179 179
Managed care 91 91
Other 0 60(c) 90(c) 150 (c)
Interest receivable 50 50
Prepaid expenses 55 55
Organizational costs 15 15
Furniture, equipment and
leasehold improvements -
at cost, net of
accumulated depreciation
of $324,452 316 92(e) 408
---------- -------- -------- --------- ------
TOTAL ASSETS $ 39 $12,698 $ 1,861 $(4,908) $9,690
========= ======= ======= ======= ======
LIABILITIES
Professional fees
refundable $ $ 5,133 $(3,133)(b) $ $2,000
Liability for outstanding
claims
Prepaid programs 1,834 1,834
Administrative service
programs 179 179
Managed care program 179 179
Accounts payable 15 101 116
Debt payable 0 2,500(d) 2,500
Accrued salaries and
commissions payable 129 129
Membership enrollment
fees refundable 6 (6)(b) 0
Deferred income 54 54
Deferred rents 101 101
Advance deposits from
groups 74 74
-------- ------- ------- --------- -------
Total Liabilities 15 7,790 (639) 7,166
-------- ------- ------- --------- -------
STOCKHOLDERS' EQUITY
Common stock 1 3(a) 4
Additional paid in
capital 23 2,497(a) 2,520
Retained earnings -
unrestricted 0 4,908 (4,908)(f) 0
-------- ------- -------- -------- -------
Total Stockholders'
Equity 24 4,908 2,500 (4,908) 2,524
-------- ------- -------- -------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 39 $12,698 $ 1,861 $(4,908) $9,690
======== ======== ======= ======== =======
</TABLE>
See accompanying notes to unaudited pro forma balance sheet.
<PAGE>
VISION HEALTH CARE, INC.
Notes to Pro Forma Balance Sheet (Minimum Offering)
December 31, 1995
(Unaudited)
1. Adjustments to Pro Forma Condensed Balance Sheet
(a) To reflect the issuance of 376,000 shares of the Company's
Common Stock, of which 250,000 are held by those who buy in
connection with this Offering at a price of $10.00 per share.
The remaining 126,000 shares were purchased by the Company's
founders at $.19 per share. Cash is reduced by the cost of the
Offering (estimated to be $60,000) and other transaction
expenses incurred by the Company in connection with the
acquisition of Vision Care, Inc.'s assets (estimated to be
$90,000). It is assumed that all costs associated with the
Offering and the Acquisition will not exceed $150,000.
Estimated costs include legal fees, accounting fees, printer's
charges for printing securities and the SEC registration
statement, and SEC registration fees.
(b) To refund a portion of the professional fees withheld in prior
years to facilitate the proposed purchase of Vision Care, Inc.'s
assets. To also refund the membership enrollment fees of Vision
Care, Inc.'s charter members.
(c) Vision Care, Inc. has agreed to pay up to $150,000 in actual and
reasonable transaction expenses incurred by the Company in
connection with the Acquisition. Therefore, a receivable of
$150,000 is reflected on this pro forma balance sheet.
(d) To acquire debt of $2.5 million in connection with this
Offering, bearing interest at an annual rate of 4.57% with
principal and interest due in 90 days.
(e) To reflect the purchase of Vision Care, Inc.'s assets at their
fair market value of $5 million based on an independent
appraisal at December 31, 1995.
(f) To eliminate retained earnings of Vision Care, Inc..
2. Alternative Offering of Shares
The following table demonstrates the effect on debt,
stockholders' equity, interest expense, net income and per
share amounts of various combinations of stock and short-term
debt financing:
Shares Stockholders' Interest Net Per
Sold Debt Equity Expense Income Share
(in thousands, except per share data)
300 2,000 3,024 161 148 .33
400 1,000 4,024 139 196 .36
500 - 5,024 - 244 .38
<PAGE>
VISION HEALTH CARE, INC.
Pro Forma Statement of Operations (Minimum Offering)
For the Year Ended December 31, 1995
(Unaudited)
The following unaudited pro forma statement of operations reflects
(i) the purchase of Vision Care, Inc.'s assets by the Company, (ii) the
sale of 250,000 shares of Common Stock in the Offering, the minimum amount
offered thereby, and (iii) the securing of a $2.5 million loan, as if all
had occurred on January 1, 1995. Such pro forma information is based upon
the historical results of operations of Vision Care, Inc. for the twelve
months ended December 31, 1995, giving effect to the Acquisition and the
application of the proceeds of the Offering and the loan as set forth
under the caption "Use of Proceeds." This pro forma statement of
operations should be read in conjunction with the historical balance sheet
and notes thereto of the Company and the historical financial statements
and notes thereto of Vision Care, Inc. included elsewhere in this
Prospectus.
This unaudited pro forma statement of operations incorporates
certain assumptions that are included in the notes to the pro forma
statement of operations. Accordingly, this pro forma statement of
operations is not necessarily indicative of what the actual results of
operations of the Company would have been assuming the Acquisition, the
Offering and the loan had been completed as set forth above, nor does it
purport to represent the results of operations for future periods.
<PAGE>
VISION HEALTH CARE, INC.
Pro Forma Statement of Operations (Minimum Offering)
For the Year Ended December 31, 1995
(In thousands, except share and per share data)
(Unaudited)
Pro Forma
Historical(a) Adjustments
Vision
Public Health Care,
Vision Care, Offering Inc.
Inc. and Loan Pro Forma
REVENUES
Prepaid programs $13,449 $ $ 13,449
Reciprocal programs 9,324 9,324
Administrative
service programs 1,313 1,313
Managed care -
Medicaid 802 802
Administrative 126 126
Commercial 86 86
Member's dues 18 18
Enrollment fees 6 6
Realized loss on sale
of investments (1) (1)
Interest income 545 (175)(b) 370
------- -------- ---------
Total revenues 25,668 (175) 25,493
------ -------- ---------
COSTS AND EXPENSES
Cost of benefits
provided 20,925 20,925
General and
administrative
expenses 4,032 4(c) 4,036
Retirement plan
contributions 52 52
Depreciation and
amortization 90 0
Interest expense 0 29(d) 29
------- -------- --------
Total costs and
expenses 25,099 33 25,132
------- ------- ---------
NET INCOME BEFORE
INCOME TAX EXPENSE 569 (208) 361
Pro forma provision for 136(e) 136
income tax
Pro forma net income $ 569 $ (344) $ 225
======= ======= =======
Weighted average number
of Shares Outstanding 0 407,000 (f)
========
Pro forma net income
per share n/a $ 0.55
=======
See accompanying notes to unaudited pro forma statement of operations.
<PAGE>
VISION HEALTH CARE, INC.
Notes to Pro Forma Statement of Operations (Minimum Offering)
For the Year Ended December 31, 1995
(Unaudited)
1. Adjustments to Pro Forma Condensed Statements of Operations
(a) Historical information is not included for the Company because
it had no operations during the twelve months ended December
31, 1995.
(b) To reflect the decrease in interest income due to the use of
funds to refund a portion of the professional fees withheld in
prior years and membership enrollment fees. (See Note 1(b) to
Notes to Pro Forma Balance Sheet).
(c) To reflect $4,000 of loan cost (see Note 1(d) to Notes to Pro
Forma Balance Sheet).
(d) To reflect interest expense of $29,000 on $2.5 million of new
debt bearing interest at an annual rate of 4.57% for 90 days.
The Company has received a proposal from SunTrust Bank
outlining the terms of a loan of up to $4 million with an
interest rate fixed at .85% above the bank's 90-day certificate
of deposit rate. The loan would be fully secured by the
hypothecation of a certificate of deposit owned by VCI and
would be repaid from the proceeds of the sale of additional
shares in the Offering and/or from cash flow from operations
following the Acquisition.
(e) Reflects the computation of federal and state income tax
expense.
(f) Weighted average number of shares has been computed using the
treasury stock method which includes dilutive common stock
equivalents as if outstanding during the respective periods.
2. Alternative Offering of Shares
The following is a chart of various ranges of alternative offering
of shares and financing and their effect on certain financial
statement items:
Shares Stockholders' Interest Net Per
Sold Debt Equity Expense Income Share
(in thousands, except share and per share data)
300,000 2,000 3,024 23 229 .51
400,000 1,000 4,024 11 236 .43
500,000 - 5,024 - 243 .37
<PAGE>
VISION HEALTH CARE, INC.
Balance Sheet
March 31, 1996
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 24,000
-------
Total current assets 24,000
-------
OTHER ASSETS
Organizational costs 15,134
--------
Total assets $ 39,134
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 15,134
--------
Total liabilities 15,134
--------
STOCKHOLDERS' EQUITY
Common stock, $0.1 par value, 1,000,000
shares authorized, 126,000 shares issues and
outstanding (Note 3) 1,260
Additional paid-in capital 22,740
--------
Total stockholders' equity 24,000
--------
Total liabilities and stockholders' equity $ 39,134
========
See Notes to Unaudited Financial Statement
<PAGE>
VISION HEALTH CARE, INC.
Notes to Balance Sheet
March 31, 1996
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General - The Company was incorporated in May, 1995, under the law
of Florida and was organized for the purpose of continuing the
administration of Vision Care plans currently being conducted by Vision
Care, Inc. The Company has filed a Registration Statement on Form S-1
with the Securities and Exchange Commission with respect to the offering
of Common Stock to members and key employees of Vision Care, Inc. The
Company intends to use the proceeds from the offering to acquire the
assets of Vision Care, Inc. for $5 million and the assumption of certain
liabilities. The Company has had no operations at March 31, 1996.
Organizational Costs - Amortization is provided using the straight-
line method over five years.
NOTE 2 - RELATED PARTY
The Company has board members and stockholders, which are also board
members of Vision Care, Inc.
NOTE 3 - STOCK SPLIT
The number of shares outstanding have been adjusted to reflect a
stock split of 1.75 shares for each share of Common Stock effective as of
March 15, 1996.
<PAGE>
VISION HEALTH CARE, INC.
Audited Financials
INDEPENDENT AUDITORS' REPORT
February 14, 1996
To the Board of Directors
and Stockholders of
Vision Health Care, Inc.
We have audited the accompanying balance sheet of Vision Health Care,
Inc. (a Florida Corporation) as of December 31, 1995, the end of the
initial accounting period of the Company. This financial statement is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall balance sheet presentation. We believe that our audit of the
balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly,
in all material respects, the financial position of Vision Health Care,
Inc. as of December 31, 1995, in conformity with generally accepted
accounting principles.
DWIGHT DARBY & COMPANY
Certified Public Accountants
<PAGE>
VISION HEALTH CARE, INC.
Audited Financials
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
CURRENT ASSETS
Cash $24,000
-------
Total current assets 24,000
-------
OTHER ASSETS
Organizational costs 15,134
-------
Total assets $39,134
======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $15,134
-------
Total liabilities 15,134
-------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
1,000,000 shares authorized,
72,000 shares issued and
outstanding 720
Additional paid-in capital 23,280
-------
Total stockholders' equity 24,000
-------
Total liabilities and
stockholders' equity $39,134
======
See Notes to Financial Statement
<PAGE>
VISION HEALTH CARE, INC.
Audited Financials
NOTES TO FINANCIAL STATEMENT
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General - The Company was incorporated in May, 1995, under the
laws of Florida and was organized for the purpose of continuing the
administration of Vision Care plans currently being conducted by Vision
Care, Inc. The Company plans to file a Registration Statement on Form
S-1 with the Securities and Exchange Commission with respect to the
offering of common shares of equity to members and key employees of
Vision Care, Inc. The Company intends to use the aforementioned
proceeds to acquire the assets of Vision Care, Inc. for an amount not
yet determined at December 31, 1995. The Company intends to qualify as
a C-corporation for Federal income tax purposes for the taxable year
ended December 31, 1995. The Company has had no operations at December
31, 1995.
Organizational Costs - Amortization is provided using the
straight-line method over five years. Amortization will begin in 1996.
NOTE 2 - RELATED PARTY
The Company has board members and stockholders, which are also
board members of Vision Care, Inc.
<PAGE>
VISION CARE, INC.
STATEMENT OF FINANCIAL POSITION
(Unaudited)
MARCH 31,
1996 1995
ASSETS
Cash - checking accounts and short
term investments (Notes 2 and 10) $ 1,457,040 $ 2,047,908
Certificates of deposit and
marketable securities (Notes 1, 2, 8,326,010 6,346,901
and 10)
Cash on deposit with the State of 50,000 50,000
Florida (Note 3)
Accounts receivable (Note 1) -
Reciprocal programs 1,730,788 1,256,002
Prepaid programs 993,037 916,614
Administrative service programs -
Billed 162,115 93,696
Unbilled for outstanding claims 179,003 131,606
Managed care program (net of
allowance for doubtful accounts of 60,001 5,779
$21,005 and $0)
Interest receivable 38,847 34,514
Prepaid expenses 17,655 15,861
Furniture, equipment, and leasehold
improvements - at cost, net of
accumulated depreciation of $348,867
and $315,399, respectively (Notes 1
and 4) 350,430 334,329
-------- ---------
TOTAL ASSETS $ 13,364,926 $ 11,233,210
=========== ==========
LIABILITIES AND NET ASSETS
LIABILITIES
Professional fees refundable
(Notes 7 and 11) $ 5,156,501 $ 4,329,941
Liability for outstanding claims
(Note 5) -
Prepaid programs 1,892,985 1,685,825
Administrative service programs 179,003 131,606
Managed care program 255,711 51,485
Accounts payable 176,985 78,757
Accrued salaries and commissions
payable 103,577 67,486
Membership enrollment fees refundable
(Notes 1 and 11) 5,950 5,950
Deferred income 70,921 71,925
Deferred rents 97,234 110,237
Advance deposits from group (Note 1) 74,297 66,056
--------- ---------
Total liabilities 8,013,164 6,599,268
--------- ---------
NET ASSETS
Unrestricted 5,351,762 4,633,942
---------- ----------
TOTAL LIABILITIES AND NET ASSETS $ 13,364,926 $ 11,233,210
========== ==========
See Notes to Unaudited Financial Statements
<PAGE>
VISION CARE, INC.
STATEMENT OF ACTIVITIES
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
1996 1995
CHANGES IN UNRESTRICTED NET ASSETS
REVENUES
Prepaid programs $ 3,964,837 $ 3,242,318
Reciprocal programs 2,692,218 2,126,263
Administrative service programs 378,966 309,260
Managed Care -
Medicaid 205,618 187,069
Commercial 105,709 19,300
Medicare 101,026 -
Administrative 19,989 3,760
Members' dues 18,462 16,482
Enrollment fees 3,000 2,550
Interest income (net of bank charges
of $9,286 and $8,132 respectively 154,474 106,196
--------- ---------
Total revenues 7,644,299 6,013,198
--------- ---------
COSTS AND EXPENSES
Cost of benefits provided (Note 8) 5,888,305 4,811,435
General and administrative expenses 1,268,169 869,905
Retirement plan contributions (Note 6) 20,096 15,050
Depreciation (Note 1) 24,420 22,451
--------- ---------
Total costs and expenses 7,200,990 5,718,841
---------- ---------
INCREASE IN UNRESTRICTED NET ASSETS 443,309 294,357
NET ASSETS - BEGINNING 4,908,453 4,339,585
---------- ----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS $ 5,351,762 $ 4,633,942
========== ==========
See Notes to Unaudited Financial Statements
<PAGE>
VISION CARE, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Increase in net assets $ 443,309 $ 294,357
--------- ---------
Adjustments to reconcile changes
in net assets to net cash provided
by operating activities -
Depreciation 24,415 22,451
(Increase) decrease in:
Accounts receivable (620,154) (16,688)
Interest receivable 11,646 (3,128)
Prepaid expenses 37,272 (5,151)
Increase (decrease) in:
Professional fees refundable 23,293 240,301
Liability for outstanding claims 136,159 83,745
Accounts payable 76,436 (34,295)
Accrued salaries and commissions (25,325) (29,714)
payable
Deferred income 16,678 (4,245)
Deferred rent (3,910) 36,229
--------- ---------
Total adjustments (323,490) 289,505
--------- ---------
Net cash provided by
operating activities 119,819 583,862
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption and/or maturity of
certificates of deposit and bonds 1,012,360 1,902,105
Purchase of equipment (59,102) (28,454)
Purchase of certificates of deposits
and bonds - (1,935,723)
---------- ----------
Net cash provided by/used in
investing activities 953,258 (62,072)
---------- ----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 1,073,077 521,790
CASH AND CASH EQUIVALENTS -
BEGINNING 383,963 1,526,118
---------- ----------
CASH AND CASH EQUIVALENTS -
ENDING $ 1,457,040 $ 2,047,908
========== ==========
See Notes to Unaudited Financial Statements
<PAGE>
VISION CARE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 and 1995
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenues - The Company is organized to provide and administer vision
care plans in order to make available professional optometric and
ophthalmologic services to eligible members of participating groups.
The Company provides vision care plans under two general types of
funding agreements:
Prepaid Programs - Revenue is recognized over the period of coverage
and is generally based upon the number of eligible participants,
therefore, receivables are estimated based on the most recent amounts
received from the groups under the program.
Administrative Service Programs - Revenue from these groups are on a
cost reimbursement basis plus an administrative fee.
The Company also processes claims for participants of groups enrolled
in vision care plans in other states. Claims paid by the Company are
reimbursed by other vision care plans under reciprocal agreements.
Member panel doctors are required annually to pay dues to the Company.
In addition, new participating panel doctors are required to remit
nonrefundable enrollment fees. At December 31, 1995, the board of
directors passed a motion to refund charter member enrollment fees of
$5,950. (See Note 11)
Accounts Receivable - Accounts receivable are reported at their net
realizable value. The Company uses the allowance method to account for
bad debts.
Furniture, Equipment and Leasehold Improvements - Furniture, equipment
and leasehold improvements are recorded at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the
assets, ranging generally from four to seven years. Major improvements of
property and equipment are capitalized. Expenditures for repairs and
maintenance are charged against earnings as incurred. Expenditures for
additions are added to the furniture and equipment account. As furniture
and equipment are sold or retired, the applicable cost and accumulated
depreciation is eliminated from the accounts and any gain or loss is
recorded.
Marketable Securities - Marketable equity securities are stated at the
lower of cost or market, according to Statement of Position 78-10 (SOP 78-
10). SOP 78-10 states that the decline in market value below cost is
recorded as a reduction of the net assets for securities where there is
both the ability and intention to hold the securities to maturity.
Recoveries of market value in subsequent periods will be recorded in the
net assets up to the original cost. The marketable equity securities are
adjusted for amortization of premiums and accretion of discounts using
methods approximating the interest method over the remaining period to
contractual maturity. In addition to long-term investments, the Company
invests cash in excess of daily requirements in short-term investments.
Statement of Financial Accounting Standards No. 124, "Accounting for
Certain Investments Held by Not-For-Profit Organizations," was not adopted
in the March 31, 1996 and 1995 financial statements due to immaterial
differences between cost and market values.
Advance Deposits From Groups - As a condition of their contract,
certain administrative service program groups advance a specific amount to
the Company. These advances are refundable upon termination of the
contract after any indebtedness to the Company has been satisfied. These
advances are noninterest bearing and without collateral.
Income Taxes - No provision for income taxes has been recorded as the
Company has been granted tax exempt status by the Internal Revenue Service
under Section 501(c)(4).
Cash Flows - For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments with a maturity of three
months or less to be cash equivalents.
Management Estimates - Management uses estimates and assumptions in
preparing these financial statements in accordance with generally accepted
accounting principles. Those estimates and assumptions affect the
reported amounts of assets, liabilities, revenues and expenses. Actual
results could vary from the estimates that are used. These interim
financial statements reflect all adjustments which are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods presented. All such adjustments are of a normal recurring nature.
NOTE 2 - CASH, CERTIFICATES OF DEPOSIT AND MARKETABLE SECURITIES
MARCH 31,
1996 1995
Cash consists of the following:
Sun Bank of Tampa Bay -
Repurchase account, interest adjusted
daily $ 493,000 $ 581,000
Checking accounts and short-term
investments 964,040 1,466,908
---------- ----------
$1,457,040 $2,047,908
========== ==========
Certificates of deposit consist of the
following:
Certificates of deposits at various
banks with various maturity dates
ranging from May 1995 through December
1997 and interest rates ranging from
4.05% to 7.5%. $6,226,895 $4,149,798
========== ==========
Marketable securities consists of the following:
AMORTIZED UNREALIZED MARKET
MARCH 31, 1996 COST GAINS/LOSSES VALUE
U.S. Treasury Security
and obligations of U.S.
Government agencies $1,249,315 $ 10,923 $1,260,238
Corporate bonds 399,800 1,199 400,999
Mortgage-backed
securities 450,000 - 450,000
--------- ----------- ---------
$2,099,115 $ 12,122 $2,111,237
========= =========== =========
AMORTIZED UNREALIZED MARKET
MARCH 31, 1995 COST GAINS/LOSSES VALUE
U.S. Treasury Security
and obligations of U.S.
Government agencies $1,248,187 $ 373 $1,248,560
Corporate bonds
498,916 (4,954) 493,962
Mortgage-backed
securities 450,000 - 450,000
--------- ---------- ---------
$2,197,103 $ (4,581) $2,192,522
========= ========== =========
At March 31, 1995 the market value of marketable securities was below
cost. Due to immateriality, these marketable securities are carried at
amortized costs.
MARCH 31,
1996 1995
Total certificates of deposit $ 6,226,895 $ 4,149,798
Total marketable securities 2,099,915 2,197,103
---------- ----------
Total certificates of deposit
and marketable securities $ 8,326,010 $ 6,346,901
========== ==========
In September, 1992, the Company entered into a revocable trust agreement
and transferred all certificates of deposit and marketable securities to
the trustee. The total amount of investment expense totaled $9,286 and
$8,132 for the first quarters ending March 31, 1996 and 1995,
respectively.
The company, as a condition to receive a certificate of authority to
operate in Puerto Rico, agreed to maintain a $300,000 deposit in trust
with the Secretary of the Treasury of Puerto Rico and a $150,000
investment in Puerto Rican securities. This total investment of $450,000
is in mortgaged-backed securities with a market value of $450,000.
NOTE 3 - CERTIFICATE OF DEPOSIT, PLEDGED TO THE STATE OF FLORIDA
The Company, as a condition to receiving its certificate of authority to
operate from the State of Florida, agreed to maintain an unencumbered cash
reserve of $50,000 to cover any losses or unpaid expenses that may be
incurred.
This amount is invested as follows:
MARCH 31,
1996 1995
Cash deposit with the Florida
Department of Insurance with
variable rates of interest $ 50,000 $ 50,000
========= =========
NOTE 4 - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of:
MARCH 31,
1996 1995
Furniture and equipment $ 685,290 $ 649,728
Leasehold improvements 14,007 -
--------- ---------
Total cost 699,297 649,728
Less accumulated depreciated 348,867 315,399
--------- ---------
$ 350,430 $ 334,329
========= =========
NOTE 5 - LIABILITY FOR OUTSTANDING CLAIMS
Outstanding claims represent the estimated liability for claims reported
to the Company plus claims incurred but not yet reported. The liability
for outstanding claims is determined using statistical evaluation and
represents an estimate of all claims incurred through the first quarter
ending March 31st.
Historically, the utilization of benefits is higher in the initial
months of contract. The utilization by plan participants decreases after
the initial six months with a resulting higher profit as the premiums
received exceed the cost of the claims incurred.
NOTE 6 - RETIREMENT PLAN CONTRIBUTIONS
During 1987, the Company initiated a retirement plan covering
substantially all employees (subject to a specified period of continuous
employment). The board of directors will annually determine an amount, if
any, to be contributed to the plan. The Company's contribution for any
year may not exceed the maximum allowable for such contributions in
accordance with relevant provisions of the Internal Revenue Code. The
estimated amount to be contributed to the plan for the first quarter
ending March 31, 1996 is $20,096. The actual contribution to the plan, if
board approved, will be made in December 1996. The amount contributed to
the plan for the first quarter ending March 31, 1995 was $15,050.
NOTE 7 - PROFESSIONAL FEES WITHHELD
The 7% withheld in 1995 and 1994, the 9% withheld from August, 1992
through December, 1993 and 10% withheld prior to August, 1992 from panel
doctors' claims payments is classified as a liability as authorized by the
board of directors and will be refunded in 1996 (See Note 11). The board
of directors has determined that amounts withheld from 1980 and before,
not previously refunded, in the amount of $90,081, will be deemed as
nonrefundable and an unrestricted addition to net assets. As of March 31,
1996 and 1995, the accumulated monies withheld from and refundable to
panel doctors totaled $5,156,501 and $4,329,941, respectively.
NOTE 8 - COST OF BENEFITS PROVIDED
The cost of benefits provided are as follows:
MARCH 31,
1996 1995
Reciprocal programs $ 2,628,299 $ 2,074,775
Prepaid programs 2,630,689 2,293,855
Administrative service 319,134 266,781
programs
Managed care programs 310,183 176,024
--------- ---------
$ 5,888,305 $ 4,811,435
========= =========
NOTE 9 - COMMITMENTS
The Company conducts its operations in leased facilities under a
noncancelable operating lease expiring on October 31, 1999. Base rent is
not subject to any adjustment based on a percentage increase in the
Consumer Price Index or any other similar type index.
The Company is also liable for tenant's pro rata share of any excess
operating costs based on operating costs incurred annually that are
greater than $7.00 per square foot of total square footage leased.
The Company has one five-year option to extend the lease at a base
rent of the fair market value at the time of the exercising of such
option. In addition, the Company leases satellite offices, on an annual
basis, incurring lease expense for the first quarter ending March 31, 1996
and 1995 in the amount of $3,173 and $2,645, respectively. Total lease
expense for first quarter ending March 31, 1996 and 1995 as $64,924 and
$59,404, respectively.
Minimum lease payments plus applicable state sales tax required under
the lease agreements are as follows:
MINIMUM ANNUAL
LEASE
YEAR AGREEMENTS
1996 $ 242,593
1997 $ 236,456
1998 $ 236,456
1999 $ 197,046
---------
$ 912,551
=========
NOTE 10 - CONCENTRATION OF CREDIT RISK
Amounts included within cash are invested in repurchase agreements in
the amount of $493,000 and $581,000 for the first quarter ending March 31,
1996 and 1995, respectively. These amounts are not insured by the Federal
Deposit Insurance Corporation. Other investments totaling $4,608,785 and
$5,190,975 for the first quarter ending March 31, 1996 and 1995,
respectively, include bonds, United States Treasury Notes, and Puerto
Rican securities.
NOTE 11 - SUBSEQUENT EVENT
In November 1995, the board of directors proposed to sell the
Company's assets to a Florida for profit corporation and convert the
Company to a charitable foundation. The offering of shares of the Florida
for profit corporation would be to members and key employees of the
Company. To facilitate the proposed purchase in 1996, the board of
directors of the Company have decided to refund the professional fees and
charter member enrollment fees withheld in prior years.
<PAGE>
VISION CARE, INC.
Audited Financials
INDEPENDENT AUDITORS' REPORT
January 24, 1996
Board of Directors
Vision Care, Inc.
Tampa, Florida
We have audited the accompanying statements of financial position
of Vision Care, Inc. as of December 31, 1995 and 1994, and the related
statements of activities, changes in net assets and cash flows for the
years ended 1995, 1994 and 1993. These financial statements are the
responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our 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 report dated January 26, 1995, we expressed an opinion
that the 1994 and 1993 financial statements fairly presented the admitted
assets, liabilities, surplus and cash flows in conformity with the
statutory basis of accounting prescribed by the Florida Department of
Insurance, which is a comprehensive basis of accounting other than
generally accepted accounting principles. As described in Note 12 to the
financial statements, the company has restated its 1994 and 1993 financial
statements to conform with generally accepted accounting principles.
Accordingly, our present opinion on the 1994 and 1993 financial
statements, as presented herein, is different from that expressed in our
previous report.
In our opinion, the financial statements referred to in the first
paragraph present fairly, in all material respects, the financial position
of Vision Care, Inc. as of December 31, 1995 and 1994, and the results of
its activities, the changes in its net assets and its cash flows for the
years ended 1995, 1994 and 1993 in conformity with generally accepted
accounting principles.
As described in Note 1 to the financial statements, the company
adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 117, "Financial Statements
of Not-For-Profit Organizations" in 1995.
As described in Note 13, the company changed its method of
accounting for professional fees withheld.
DWIGHT DARBY & COMPANY
Certified Public Accountants
<PAGE>
VISION CARE, INC.
Audited Financials
STATEMENTS OF FINANCIAL POSITION
DECEMBER 31,
1995 1994
ASSETS
Cash - checking accounts and
short-term investments
(Notes 2 and 10) $ 383,963 $ 1,526,118
Certificates of deposit and
marketable securities (Notes 1,
2, and 10) 9,338,370 6,251,227
Cash on deposits with the
State of Florida (Note 3) 50,000 50,000
Accounts receivable (Note 1) -
Reciprocal programs 1,190,829 1,224,730
Prepaid programs 947,640 920,715
Administrative service programs -
Billed 96,504 94,773
Unbilled for outstanding claims 179,003 131,606
Managed care 90,814 15,184
Interest receivable 50,493 31,385
Prepaid expenses 54,927 10,710
Furniture, equipment and leasehold
improvements - at cost, net of
accumulated depreciation of $324,452
and $296,831 (Notes 1 and 4) 315,743 328,325
---------- ----------
TOTAL ASSETS $12,698,286 $10,584,773
========== ===========
LIABILITIES AND NET ASSETS
LIABILITIES
Professional fees refundable
(Notes 7 and 13) $ 5,133,208 $ 4,089,639
Liability for outstanding claims
(Note 5)
Prepaid programs 1,833,547 1,626,519
Administrative service programs 179,003 131,606
Managed care program 178,990 27,046
Accounts payable 100,549 113,052
Accrued salaries and commissions
payable 128,902 97,200
Membership enrollment fees
refundable (Notes 1 and 13) 5,950 5,950
Deferred income 54,243 76,170
Deferred rents 101,144 74,008
Advance deposits from groups (Note 1) 74,297 66,055
----------- -----------
Total liabilities 7,789,833 6,307,245
----------- -----------
NET ASSETS
Unrealized loss on securities
(Notes 1 and 2) - (62,058)
Unrestricted 4,908,453 4,339,586
----------- ----------
4,908,453 4,277,528
---------- ----------
TOTAL LIABILITIES AND NET ASSETS $12,698,286 $10,584,773
========== ==========
See Notes to Financial Statements
<PAGE>
VISION CARE, INC.
Audited Financials
STATEMENTS OF ACTIVITIES
YEAR ENDED
DECEMBER 31,
1995 1994 1993
CHANGES IN UNRESTRICTED
NET ASSETS
REVENUES
Prepaid programs $13,449,489 $11,959,559 $10,096,734
Reciprocal programs 9,323,610 8,236,114 6,877,707
Administrative service
programs 1,312,832 1,202,647 1,049,501
Managed care -
Medicaid 801,820 309,236 22,688
Administrative 125,987 10,341 -
Commercial 86,037 6,116 -
Members' dues 17,570 12,246 11,852
Enrollment fees 7,300 7,050 6,950
Realized loss on sale of
investments (1,495) - -
Interest income (net of
bank charges of $33,434,
$29,885 and $22,952,
respectively) 544,825 331,260 232,014
----------- ---------- -----------
Total revenues 25,667,975 22,074,569 18,297,446
----------- ---------- -----------
COSTS AND EXPENSES
Cost of benefits provided
(Note 8) 20,924,923 17,192,079 14,608,705
General and administrative
expenses 4,032,193 2,870,380 2,281,626
Retirement plan contributions
(Note 6) 52,189 44,161 69,011
Depreciation (Note 1) 89,803 87,463 85,501
---------- ---------- ----------
Total costs and expenses 25,099,108 20,194,083 17,044,843
---------- ---------- ----------
INCREASE IN UNRESTRICTED
NET ASSETS 568,867 1,880,486 1,252,603
Unrealized gain (loss)
on securities 62,058 (62,058) -
NET ASSETS - BEGINNING,
AS RESTATED (Note 13) 4,277,528 2,459,100 1,206,497
---------- ---------- ----------
NET ASSETS - ENDING $ 4,908,453 $ 4,277,528 $ 2,459,100
========== ========== ==========
<PAGE>
VISION CARE, INC.
Audited Financials
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED
DECEMBER 31,
1995 1994 1993
NET ASSETS - BEGINNING
As previously reported $8,369,020 $6,037,942 $4,238,179
Adjustment for retro-
active application
of change in account-
ing principle (Note 13) (4,091,492) (3,578,842) (3,031,682)
---------- ---------- ----------
NET ASSETS - BEGINNING,
AS RESTATED 4,277,528 2,459,100 1,206,497
Unrealized gain(loss)
on securities 62,058 (62,058) -
Increase in net assets 568,867 1,880,486 1,252,603
---------- --------- ---------
NET ASSETS - ENDING $ 4,908,453 $4,277,528 $2,459,100
========== ========= =========
See Notes to Financial Statements
<PAGE>
VISION CARE, INC.
Audited Financials
STATEMENTS OF CASH FLOWS
YEAR ENDED
DECEMBER 31,
1995 1994 1993
CASH FLOWS FROM OPERATING
ACTIVITIES
Increase in net assets $ 568,867 $1,880,486 $ 1,252,603
--------- ----------- ----------
Adjustments to reconcile
changes in net assets
to net cash provided by
operating activities -
Depreciation 89,803 87,463 85,501
Loss on sale of invest-
ments 1,495 - -
(Increase) decrease in:
Accounts receivable (117,782) (888,743) (206,012)
Interest receivable (19,108) (9,761) (687)
Prepaid expenses (44,217) 6,261 (195)
Increase (decrease) in:
Professional fees
refundable 1,043,569 512,650 551,257
Liability for out-
standing claims 406,369 113,847 225,959
Accounts payable (12,503) 96,710 1,471
Accrued salaries and
commissions payable
31,702 6,573 39,048
Deferred income (21,927) 35,972 (37,223)
Deferred rent 27,136 74,008 -
Advance deposits 8,242 3,855 -
---------- ---------- ----------
Total adjustments 1,392,779 38,835 659,119
---------- ---------- ----------
Net cash provided
by operating
activities 1,961,646 1,919,321 1,911,722
---------- ---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Redemption and/or maturity
of certificates of deposit
and bonds 4,740,270 604,658 5,062
Purchase of equipment (77,221) (245,314) (112,325)
Purchase of mortgage backed
securities - (450,000) -
Purchase of certificates of
deposit and bonds (7,766,850) (1,020,935) (1,508,113)
---------- ---------- ----------
Net cash used in
investing activities (3,103,801) (1,111,591) (1,615,376)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,142,155) 807,730 296,346
CASH AND CASH EQUIVALENTS
- BEGINNING 1,526,118 718,388 422,042
--------- --------- ----------
CASH AND CASH EQUIVALENTS
- ENDING $ 383,963 $ 1,526,118 $ 718,388
========= ========= =========
SUPPLEMENTAL DISCLOSURES
OF NON-CASH TRANSACTIONS
Unrealized (gain) loss
on securities (See
Note 1) $ (62,058) $ 62,058 $ -
========= ========= =========
See Notes to Financial Statements
<PAGE>
VISION CARE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenues - The company is organized to provide and administer
vision care plans in order to make available professional optometric and
ophthalmologic services to eligible members of participating groups.
The company provides vision care plans under two general types of
funding agreements:
Prepaid Programs - Revenue is recognized over the period of
coverage and is generally based upon the number of eligible partici-
pants, therefore, receivables are estimated based on the most recent
amounts received from the groups under the program.
Administrative Service Programs - Revenue from these groups are
on a cost reimbursement basis plus an administrative fee.
The company also processes claims for participants of groups
enrolled in vision care plans in other states. Claims paid by the
company are reimbursed by other vision care plans under reciprocal
agreements.
Member panel doctors are required annually to pay dues to the
company. In addition, new participating panel doctors are required to
remit nonrefundable enrollment fees. At December 31, 1995, the board of
directors passed a motion to refund charter member enrollment fees of
$5,950. This amount has been restated from unrestricted net assets to a
liability in 1995, 1994 and 1993. (See Note 13)
Accounts Receivable - Accounts receivable are reported at their
net realizable value. All reported accounts receivable are deemed
collectable.
Furniture, Equipment and Leasehold Improvements - Furniture,
equipment and leasehold improvements are recorded at cost. Depreciation
is provided using the straight-line method over the estimated useful
lives of the assets, ranging generally from four to seven years. Major
improvements of property and equipment are capitalized. Expenditures
for repairs and maintenance are charged against earnings as incurred.
Expenditures for additions are added to the furniture and equipment
account. As furniture and equipment are sold or retired, the applicable
cost and accumulated depreciation is eliminated from the accounts and
any gain or loss is recorded.
Marketable Securities - Marketable equity securities are stated
at the lower of cost or market, according to Statement of Position 78-10
(SOP 78-10). SOP 78-10 states that the decline in market value below
cost is recorded as a reduction to the net assets for securities where
there is both the ability and intention to hold the securities to
maturity. Recoveries of market value in subsequent periods will be
recorded in the net assets up to the original cost. The marketable
equity securities are adjusted for amortization of premiums and
accretion of discounts using methods approximating the interest method
over the remaining period to contractual maturity. In addition to long-
term investments, the company invests cash in excess of daily
requirements in short-term investments.
Advance Deposits From Groups - As a condition of their contract,
certain administrative service program groups advance a specific amount
to the company. These advances are refundable upon termination of the
contract after any indebtedness to the company has been satisfied.
These advances are noninterest bearing and without collateral.
Income Taxes - No provision for income taxes has been recorded as
the company has been granted tax exempt status by the Internal Revenue
Service under Section 501(c)(4).
Cash Flows - For purposes of the statement of cash flows, the
company considers all highly liquid debt instruments with a maturity of
three months or less to be cash equivalents.
Management Estimates - Management uses estimates and assumptions
in preparing these financial statements in accordance with generally
accepted accounting principles. Those estimates and assumptions affect
the reported amounts of assets, liabilities, revenues and expenses.
Actual results could vary from the estimates that are used.
Financial Statement Presentation - In 1995, the Organization
elected to adopt Statement of Financial Accounting Standards (SFAS)
No. 117, Financial Statements of Not-for-Profit Organizations. Under
SFAS No. 117, the Organization is required to report information
regarding its financial position and activities according to three
classes of net assets: unrestricted net assets, temporarily restricted
net assets, and permanently restricted net assets. In addition, the
Organization is required to present a statement of cash flows. As
permitted by this new Statement, the Organization has discontinued its
use of fund accounting and has, accordingly, reclassified its financial
statements to present the three classes of net assets required. The
1994 and 1993 financial statements, presented herein, are in conformity
with SFAS No. 117. The reclassification had no effect on the change in
net assets for 1995, 1994 or 1993.
NOTE 2 - CASH, CERTIFICATES OF DEPOSIT AND MARKETABLE SECURITIES
DECEMBER 31,
1995 1994
Cash consists of the following:
Sun Bank of Tampa Bay -
Repurchase account, interest
adjusted daily $ 604,000 $ 327,000
Checking accounts and
short-term investments (220,037) 1,199,118
--------- ---------
$ 383,963 $1,526,118
========== =========
Certificates of deposit consist of
the following:
Certificates of deposits at
various banks with various
maturity dates ranging from
February, 1995 through November
1997 and interest rates ranging
from 4.10% to 7.5%. $6,639,738 $3,616,177
========== =========
Marketable securities consists of the following:
AMORTIZED UNREALIZED MARKET
DECEMBER 31, 1995 COST GAINS VALUE
U.S. Treasury Securities
and obligations of U.S.
Government agencies $1,749,035 $22,585 $1,771,620
Corporate bonds 499,597 2,402 501,999
Mortgage-backed securities 450,000 - 450,000
---------- ------- ----------
$2,698,632 $24,987 $2,723,619
========== ======= ==========
AMORTIZED UNREALIZED MARKET
DECEMBER 31, 1994 COST LOSSES VALUE
U.S. Treasury Securities
and obligations of U.S.
Government agencies $1,749,331 $11,121 $1,738,210
Corporate bonds 497,777 13,771 484,006
Mortgage-backed securities 450,000 37,166 412,834
---------- ------- ----------
$2,697,108 $62,058 $2,635,050
DECEMBER 31,
1995 1994
Total certificates of deposit $6,639,738 $3,616,177
Total marketable securities 2,698,632 2,635,050
---------- ----------
Total certificates of deposit
and marketable securities $9,338,370 $6,251,227
========= =========
In September, 1992, the company entered into a revocable trust
agreement and transferred all certificates of deposit and marketable
securities to the trustee. The total amount of investment expense
totalled $27,321, $22,983 and $16,166 for 1995, 1994 and 1993,
respectively.
The company, as a condition to receive a certificate of authority
to operate in Puerto Rico, agreed to maintain a $300,000 deposit in
trust with the Secretary of the Treasury of Puerto Rico and a $150,000
investment in Puerto Rican securities. This total investment of
$450,000 is in mortgage-backed securities with a market value of
$450,000 and $412,834 for 1995 and 1994, respectively. In 1995, market
values were obtained from different sources ranging from 97.5 to 101.625
depending on broker charges which were included in the market quotes.
Therefore, the market value at December 31, 1995 is disclosed at the
original cost of $450,000.
NOTE 3 - CERTIFICATE OF DEPOSIT, PLEDGED TO THE STATE OF FLORIDA
The company, as a condition to receiving its certificate of
authority to operate from the State of Florida, agreed to maintain an
unencumbered cash reserve of $50,000 to cover any losses or unpaid
expenses that may be incurred.
This amount is invested as follows:
DECEMBER 31,
1995 1994
Cash deposit with the Florida
Department of Insurance with
variable rates of interest $50,000 $50,000
======= =======
NOTE 4 - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of:
DECEMBER 31,
1995 1994
Furniture and equipment $626,188 $625,156
Leasehold improvements 14,007 -
------- -------
Total cost 640,195 625,156
Less accumulated depreciation 324,452 296,831
-------- --------
$315,743 $328,325
======== ========
NOTE 5 - LIABILITY FOR OUTSTANDING CLAIMS
Outstanding claims represent the estimated liability for claims
reported to the company plus claims incurred but not yet reported which
includes an estimate of claims which will exceed anticipated future
premiums (which is in compliance with statement of poition No. 89-5,
Financial Accounting and Reporting by providers of Prepaid Health Care
Services).
The liability for outstanding claims is determined using
statistical evaluation and represents an estimate of all claims incurred
through December 31 of each year.
Historically, the utilization of benefits is higher in the
initial months of contract. The utilization by plan participants
decreases after the initial six months with a resulting higher profit as
the premiums received exceed the cost of the claims incurred.
NOTE 6 - RETIREMENT PLAN CONTRIBUTIONS
During 1987, the company initiated a retirement plan covering
substantially all employees (subject to a specified period of continuous
employment). The board of directors will annually determine an amount,
if any, to be contributed to the plan. The company's contribution for
any year may not exceed the maximum allowable for such contributions in
accordance with relevant provisions of the Internal Revenue Code. The
amounts contributed to the plan were $52,189, $44,161 and $69,011 for
the years ended December 31, 1995, 1994 and 1993, respectively.
NOTE 7 - PROFESSIONAL FEES WITHHELD
The 7% withheld in 1995 and 1994, the 9% withheld from August,
1992 through December, 1993 and 10% withheld prior to August, 1992 from
panel doctors' claims payments is classified as a liability as
authorized by the board of directors and will be refunded in 1996 (See
Note 13). The board of directors has determined that amounts withheld
from 1980 and before, not previously refunded, in the amount of $90,081,
will be deemed as nonrefundable and an unrestricted addition to net
assets. As of December 31, 1995 and 1994, the accumulated monies
withheld from and refundable to panel doctors totaled $5,133,208 and
$4,089,639, respectively.
NOTE 8 - COST OF BENEFITS PROVIDED
The cost of benefits provided are as follows:
DECEMBER 31,
1995
1994 1993
Reciprocal programs $ 9,094,328 $ 7,819,692 $ 6,371,726
Prepaid programs 9,833,409 8,061,465 7,355,880
Administrative service
programs 1,130,883 1,014,440 881,099
Managed care programs 866,303 296,482 -
----------- ----------- ----------
$20,924,923 $17,192,079 $14,608,705
=========== =========== ===========
NOTE 9 - COMMITMENTS
The company conducts its operations in leased facilities under a
noncancelable operating lease expiring on October 31, 1999. Base rent
is not subject to any adjustment based on a percentage increase in the
Consumer Price Index or any other similar type index.
The company is also liable for tenant's pro rata share of any excess
operating costs based on operating costs incurred annually that are
greater than $7.00 per square foot of total square footage leased.
The company has one five-year option to extend the lease at a base
rent of the fair market value at the time of the exercising of such
option. In addition, the company leases satellite offices, on an annual
basis, incurring lease expense for 1995, 1994 and 1993 in the amount of
$12,642, $10,894 and $10,508, respectively. Total lease expense for
1995, 1994 and 1993 was $250,616, $154,953 and $105,132, respectively.
Minimum lease payments plus applicable state sales tax required under
the lease agreements are as follows:
MINIMUM ANNUAL
YEAR LEASE AGREEMENTS
1996 $242,593
1997 236,456
1998 236,456
1999 197,046
--------
$912,551
========
NOTE 10 - CONCENTRATION OF CREDIT RISK
Amounts included within cash are invested in repurchase
agreements in the amount of $604,000 and $327,000 for 1995 and 1994,
respectively. These amounts are not insured by the Federal Deposit
Insurance Corporation. Other investments totalling $3,876,352 and
$5,294,297 for 1995 and 1994, respectively, include bonds, United States
Treasury Notes, and Puerto Rican securities.
NOTE 11 - RECLASSIFICATIONS
Several accounts in the 1994 and 1993 financial statements,
presented herein, have been reclassified to agree with the 1995
classification of accounts.
NOTE 12 - CHANGE IN ACCOUNTING POLICY
For the years ended December 31, 1994 and 1993, as previously
reported, the company's policy was to prepare its financial statements
on the statutory basis of accounting as required by the Florida
Department of Insurance. Effective January 1, 1995, the company adopted
the policy to prepare its financial statements in accordance with
generally accepted accounting principles. The 1994 and 1993 financial
statements, presented herein, have been restated under generally
accepted accounting principles to reflect this change in accounting
policy. However, the effect of the change on net assets is immaterial
and is not included in the 1994 and 1993 financial statements.
NOTE 13 - SUBSEQUENT EVENT
In November 1995, the board of directors proposed to sell the
company's assets to a Florida for profit corporation and convert the
company to a charitable foundation. The offering of shares of the
Florida for profit corporation would be to members and key employees of
the company. To facilitate the proposed purchase in 1996, the board of
directors of the company have decided to refund professional fees
withheld in prior years.
The accompanying financial statements for 1994 and 1993 have
been restated to reflect this change in accounting principle as follows:
Amounts withheld prior to 1995, 1994 and 1993 of $4,085,542,
$3,572,892 and $3,025,732, respectively, and membership enrollment fees
of $5,950 previously reported in net assets were reclassified as a
liability. Net assets as of the beginning of each year has been
restated as a result of this reclassification. The amount of
professional fees withheld as of December 31, 1995 and 1994 was
$5,133,208 and $4,089,639, respectively, and the amount of membership
enrollment fees was $5,950 and has been reclassified as a liability on
the statement of financial position. (See Notes 1 and 7)
<PAGE>
No dealer, salesperson or any other person has been authorized to give
any information or to make any representations other than those
contained in this Prospectus in connection with the offer made by this
Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer to sell or the solicitation of
any offer to buy securities other than the shares of Common Stock
offered by this Prospectus, nor shall it constitute an offer to sell or
a solicitation of any offer to buy the shares of Common Stock by anyone
in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is
not qualified to do so or to any person to whom it is unlawful to make
such offer or solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create an
implication that the information contained herein is correct as of any
time subsequent to the date hereof.
Until __________, 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or
not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligations of dealers to
deliver a Prospectus when acting as Underwriters and with respect to
their unsold allotments or subscriptions.
TABLE OF CONTENTS
Page
Available Information . . . . . . . . . . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Proposed Acquisition of VCI Business . . . . . . . . . . . . . . . 12
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . 16
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Selected Financial and Operating Data . . . . . . . . . . . . . . . 18
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . 20
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Certain Transactions 37
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . 38
Description of Capital Stock . . . . . . . . . . . . . . . . . . . 38
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Financial Statements . . . . . . . . . . . . . . . . . . . . . . F-1
504,000 Shares
Vision Health
Care, Inc.
_____________
PROSPECTUS
_____________
Common Stock
June __, 1996
<PAGE>
PART II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution.
Set forth below is an estimate of the approximate amount of fees and
expenses payable by the Registrant in connection with the issuance and
distribution of the securities registered hereby.
Securities and Exchange Commission $ 1,512
Registration Fee
Printing and Delivery 5,000*
Legal Fees and Expenses 25,000*
Accounting Fees and Expenses 1,000*
Blue Sky Fees and Expenses 1,500*
Miscellaneous $25,988*
-------
Total $60,000*
-------
____________________
* Estimate.
Item 14. Indemnification of Directors and Officers.
The Florida Business Corporation Act (the "Florida Act") permits a
Florida corporation to indemnify a present or former director or officer
of the corporation (and certain other persons serving at the request of
the corporation in related capacities) for liabilities, including legal
expenses, arising by reason of service in such capacity if such person
shall have acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and in any
criminal proceeding if such person had no reasonable cause to believe his
conduct was unlawful. However, in the case of actions brought by or in the
right of the corporation, no indemnification may be made with respect to
any matter as to which such director or officer shall have been adjudged
liable, except in certain limited circumstances.
The Registrant's Bylaws provide that the Registrant shall indemnify
directors to the fullest extent now or hereafter permitted by the Florida
Act.
Item 15. Recent Sales of Unregistered Securities.
In October 1995, the Company sold an aggregate of 126,000 shares of
Common Stock (adjusted to reflect a stock split in March 1995 of 1.75
shares for each share of Common Stock) to its 15 founding shareholders for
an aggregate of $24,000 cash, in connection with the organization of the
Company. The sale was made in reliance on Section 4(2) of the Act as a
transaction not involving a public offering.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
Exhibit
Number Exhibit Description
*2. Asset Purchase Agreement dated as of March 21, 1996 by and
between the Registrant and Vision Care, Inc.
*3.1. Amended and Restated Articles of Incorporation
*3.2. Amended and Restated Bylaws
*5. Opinion of Foley & Lardner as to the legality of the securities
to be issued
*10.1. Stock Option Plan
*10.2. Form of Stock Option Agreement
*23A. Consent of Foley & Lardner (included in Opinion filed as Exhibit
5)
23B. Consent of Dwight Darby & Company
*24. Power of Attorney relating to subsequent amendments (included on
the signature page of this Registration Statement)
27. Financial Data Schedule
99A. Form of Subscription Agreement
99B. Escrow Agreement between the Company and Compass Bank
_______________
* Filed April 12, 1996 as exhibits to S-1 Registration Statement No. 333-
3530.
(b) Financial Statement Schedules.
Financial statement schedules have been omitted either
because they are not applicable or because the information that would be
included in such schedules is included elsewhere in this Registration
Statement.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) (Section 230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this registration statement as of the time it was
declared effective.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this amendment to its registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Jacksonville, State of Florida, on May 23, 1996.
VISION HEALTH CARE, INC.
By: /s/ Peter Liane
Peter Liane, President and Chief
Executive Officer
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
on the Signature Page to this Registration Statement constitutes and
appoints Peter Liane, Howard Braverman, James W. Andrews, Alan P. Fisher
and Terrance W. Naberhaus and each or any of them, his or her true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, including any
amendment or registration statement filed pursuant to Rule 462, and to
file the same, with all exhibits hereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and grants unto
said attorneys-in-fact and agent, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or his or her substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: May 23, 1996 /s/ Howard Braverman
Howard Braverman, Chairman of the Board
Date: May 23, 1996 /s/ Peter Liane
Peter Liane, President (Chief Executive
Officer) and Director
Date: May 23, 1996 /s/ James W. Andrews
James W. Andrews, Vice President and Director
Date: May 23, 1996 /s/ Alan P. Fisher
Alan P. Fisher, Secretary and Director
Date: May 23, 1996 /s/ Terrance W. Naberhaus
Terrance W. Naberhaus, Treasurer (Principal
Financial Officer and Principal Accounting
Officer) and Director
Date: May 23, 1996 /s/ James R. Brauss
James R. Brauss, Director
Date: May 23, 1996 /s/ Stanley Braverman
Stanley Braverman, Director
Date: May 23, 1996 /s/ Allen L. Garrett
Allen L. Garrett, Director
Date: May 23, 1996 /s/ Landrum R. Landreth
Landrum R. Landreth, Director
Date: May 23, 1996 /s/ Jeffrey C. Locke
Jeffrey C. Locke, Director
Date: May 23, 1996 /s/ Ray Neff
Ray Neff, Director
Date: May 23, 1996 /s/ John M. Renaldo
John M. Renaldo, Director
Date: May 23, 1996 /s/ Judith A. Zellers
Judith A. Zellers, Director
<PAGE>
EXHIBIT INDEX
Sequential
Page No.
*2. Asset Purchase Agreement dated as of March 21, 1996 by and
between the Registrant and Vision Care, Inc.
*3.1. Amended and Restated Articles of Incorporation
*3.2. Amended and Restated Bylaws
*5. Opinion of Foley & Lardner as to the legality of the
securities to be issued
*10.1. Stock Option Plan
*10.2. Form of Stock Option Agreement
*23A. Consent of Foley & Lardner (included in Opinion filed as
Exhibit 5)
23B. Consent of Dwight Darby & Company
27. Financial Data Schedule
99A. Form of Subscription Agreement
99B. Escrow Agreement between the Company and Compass Bank
_______________
* Filed April 12, 1996 as exhibits to S-1 Registration Statement No. 333-
3530.
Exhibit 23B
Accountants' Consent
The Board of Directors
Vision Health Care, Inc.
We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the prospectus.
Dwight Darby & Company
Certified Public Accountants
Tampa, Florida
May 23, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 24,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 39,134
<CURRENT-LIABILITIES> 15,134
<BONDS> 0
0
0
<COMMON> 1,260
<OTHER-SE> 22,740
<TOTAL-LIABILITY-AND-EQUITY> 39,134
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
SUBSCRIPTION AGREEMENT
VISION HEALTH CARE INC.
Vision Health Care, Inc.
100 West Bay Street
Jacksonville, FL 32202
ATTN: Board of Directors
Gentlemen:
The undersigned, by signing the Signature Page attached hereto,
hereby tenders this subscription to you as the Board of Directors of
Vision Health Care, Inc., a corporation organized under Florida law (the
"Company"), and applies for the purchase of the total number of shares of
Common Stock (the "Shares") shown hereinafter, at a price of $10.00 per
Share, on the terms and conditions (including but not limited to the
escrow arrangements described under the caption "Plan of Distribution")
set forth in the Company's Prospectus dated ______________, 1996, together
with all exhibits and any supplements (the "Prospectus"), which is
incorporated herein by reference.
Representations and Warranties
The undersigned hereby represents and warrants to you as follows:
I. The undersigned: (i) can bear the risk of investment in the
Company; (ii) has an overall commitment to investments that are not
readily marketable which is not disproportionate to the undersigned's net
worth, and the undersigned's investment in the Shares will not cause such
overall commitment to become excessive; and (iii) finds the objectives of
the Company are compatible with the undersigned's investment goals.
II. The undersigned is a permanent resident of the state indicated
on the Signature Page below and intends to remain a resident of such
state.
The undersigned acknowledges and agrees that the undersigned is not
entitled to cancel, terminate or revoke this subscription, or any
agreements of the undersigned hereunder; provided, however, that if the
Board of Directors shall not accept this subscription, all agreements of
the undersigned hereunder shall automatically be canceled, terminated and
revoked.
This offering is scheduled to terminate on September 30, 1996.
However, the Company has the right to extend the subscription period 60
days to a date not later than November 30, 1996, in which case the Company
will contact all subscribers, informing them of the extended escrow
period, and permitting any subscriber who wishes to do so to withdraw or
modify his or her subscription.
VISION HEALTH CARE, INC.
SIGNATURE PAGE
SUBSCRIPTION. The undersigned hereby execute(s) the Subscription
Agreement, which is included as an exhibit to the Prospectus of Vision
Health Care, Inc. The undersigned subscribe(s) for Shares as follows:
(1) Number of Shares (minimum - 250 Shares;
maximum - 2,500 Shares) _______________
(2) Amount of check ($10.00 per Share) [make checks $_______________
payable to Compass Bank, as Escrow Agent for
Vision Health Care, Inc.]
Exact name or names (registration) investor desires on record:
(Please Print or Type)
Executed this day of , 1996,
at _____________________________, ___________________________
(City) (State)
________________________________ x____________________________________
Print or Type Name(s) Signature
________________________________ _____________________________________
Signature of any Co-Subscriber
________________________________ _____________________________________
Street Address Social Security or Taxpayer ID No.
_________________________________________________________________________
City State Zip Telephone Number
________________________________________
Residence Address (if different)
________________________________________________
City State Zip
Accepted this ___ day of __________, 1996:
VISION HEALTH CARE, INC.
By:_____________________________________
Peter D. Liane, O.D., President
ESCROW AGREEMENT
This Escrow Agreement (herein "Agreement") entered into on the day of ,
1996, by and between VISION HEALTH CARE, INC., a Florida corporation
(herein "Buyer"), VISION CARE, INC. a Florida not-for-profit corporation
(herein "Seller"), and Compass Bank, an Alabama State banking association
(herein "Escrow Agent"), all being duly authorized to execute and deliver
this Agreement.
RECITALS
WHEREAS, Buyer and Seller desire that, and have requested Escrow Agent to
be engaged as agent in accordance with the terms and conditions hereof to
hold on behalf of investors the funds raised by Buyer in a public offering
to be applied toward the purchase price of assets that Buyer has agreed to
buy from Seller, such funds to be held in escrow pending the satisfaction
of the conditions to the closing of the asset purchase. Said funds shall
be deposited in an account maintained with Escrow Agent and designated as
the "Vision Health Care, Inc. Escrow" (the "Escrow Account"); and
WHEREAS, Escrow Agent is willing to perform such services in accordance
with the terms and conditions hereof and has established the Escrow
Account hereunder;
NOW, THEREFORE, in consideration of the foregoing and of the agreements
hereinafter set forth and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
TERMS
SECTION 1. ESCROW AGENT.
A. Buyer and Seller hereby designate and appoint Escrow Agent their
agent hereunder to serve in accordance with the terms and
conditions of this Agreement. Escrow Agent hereby accepts such
appointment and agrees to act as such agent in accordance with
such terms and conditions.
B. The duties and responsibilities of Escrow Agent shall be limited to
those expressly set forth in this Agreement including the duties set
forth in Exhibit A. Notwithstanding anything herein to the contrary,
the Escrow Account shall be the sole source of funds for any payment
made by Escrow Agent pursuant to this Agreement. No implied duties
of Escrow Agent shall be read into this Agreement and Escrow Agent
shall not be subject to, or obliged to recognize any other agreement
between, or direction or instruction of, any or all the parties
hereto even though reference thereto may be made herein.
C. Escrow Agent is authorized, in its sole discretion, to disregard any
and all notices or instructions given by any other party hereto or by
any other person, firm or corporation, except only such notices or
instructions as are herein provided for and orders or process of any
court entered or issued with or without jurisdiction. If any property
subject hereto is at any time attached, garnished, or levied upon
under any court order or in case the payment, assignment, transfer,
conveyance or delivery of any such property shall be stayed or
enjoined by any court order, or in case any order, judgment or decree
shall be made or entered by any court affecting such property or any
part hereof, then and in any of such events Escrow Agent is
authorized, in its sole discretion, to rely upon and comply with any
such order, writ, judgment or decree with which it is advised by
legal counsel of its own choosing is binding upon it, and if it
complies with any such order, writ, judgment or decree it shall not
be liable to any other party hereto or to any other person, firm or
corporation by reason of such compliance even though such order,
writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.
D. Escrow Agent may rely, and shall be protected in acting or refraining
from acting, upon any instrument furnished to it hereunder and
believed by it to be genuine and believed by it to have been signed
or presented by the appropriate party or parties (including without
limitation, with respect to any party which is a corporation, any
instrument purporting to have been signed on its behalf by an
authorized officer listed on Exhibit B hereto (which list may from
time to time be revised by such corporation).
E. Unless otherwise specifically indicated herein, Escrow Agent shall
proceed as soon as practicable to collect any checks or other
collection items at any time deposited or received hereunder. All
such collections shall be subject to the usual collection agreement
regarding items received by its commercial banking department for
deposit or collection. It shall not be required or have a duty to (i)
notify anyone of any payment or maturity under the terms of any
instrument deposited or received hereunder, or (ii) take any legal
action to enforce payment of any check, note or security deposited or
received hereunder. In the event that any funds, including cleared
funds, deposited in the Escrow Account prove uncollectible after the
funds represented thereby have been released by Escrow Agent pursuant
to this Agreement, Buyer shall immediately reimburse Escrow Agent
upon request for the face amount of such check or checks, together
with reasonable and customary charges and expenses related thereto,
and Escrow Agent shall deliver the returned checks or other
instruments to Buyer. Buyer acknowledges that its obligation in the
preceding sentence shall survive the termination of this Agreement.
Escrow Agent shall have no liability for, or obligation to, pay
interest on any money deposited or received hereunder.
F. Escrow Agent may consult with legal counsel of its own choosing with
respect to any matter concerning this Agreement and shall be fully
protected in acting or refraining from acting in good faith and in
accordance with the opinion of such counsel. Any reasonable fees and
expenses of such legal counsel shall be considered part of the fees
and expenses of Escrow Agent described in Section 3 below.
SECTION 2. NOTICES.
Any notices which Escrow Agent is required or desires to give
hereunder to any other party hereto shall be in writing and may be
given by mailing the same to the address indicated below opposite the
signature of such party (or to such other address as such party has
theretofore substituted therefore by written notification to Escrow
Agent), by United States mail, postage prepaid or by overnight
courier. For all purposes hereof any notice so sent shall be as
effectual only when actually received by the party to whom it was
sent by Escrow Agent. Notices to Escrow Agent shall be in writing and
shall not be deemed to be given until actually received by Escrow
Agent's Corporate Trust department employee or officer who
administers the Escrow Account pursuant to this Agreement. Whenever
under the terms hereof the time for giving a notice or performing an
act falls upon a Saturday, Sunday or Bank Holiday, such time shall be
extended to the next day on which Escrow Agent is open for business.
SECTION 3. FEES AND EXPENSES OF ESCROW AGENT.
Buyer agrees to pay the fees, costs and expenses (including counsel
fees and expenses) of Escrow Agent in accordance with Exhibit C and
upon immediate receipt of an invoice. Escrow Agent shall have a first
lien on any property held hereunder for payment of such fees, costs
and expenses. If such fees, costs and expenses are not promptly paid,
Escrow Agent shall have the right to (a) sell the property held
hereunder and reimburse itself from the proceeds of such sale, or (b)
reimburse itself from the cash held hereunder.
SECTION 4. LIMITED LIABILITY OF ESCROW AGENT
Escrow Agent shall not be responsible for the sufficiency or
accuracy, or the form, execution, validity or genuineness, of
documents or securities now or hereafter deposited or received
hereunder, or of any endorsement thereon, or for any lack of
endorsement thereon, or for any description therein, nor shall it be
responsible or liable in any respect on account of the identity,
authority or rights of any person executing, depositing or delivering
or purporting to execute, deposit or deliver any such document,
security or endorsement or this Agreement, or on account of or by
reason of forgeries, false representations, or the exercise of its
discretion in any particular manner, nor shall Escrow Agent be liable
for any mistake of fact or of law or any error of judgment, or for
any act or omission, except as a result of its gross negligence or
willful malfeasance. Escrow Agent's liability for any grossly
negligent performance or non-performance shall not exceed its fees
and charges in connection with the services provided hereunder. Under
no circumstances shall Escrow Agent be liable for any general or
consequential damages or damages caused, in whole or in part, by the
action or inaction of Buyer or Seller or any of their respective
agents or employees. Escrow Agent shall not be liable for any damage,
loss, liability, or delay caused by accidents, strikes, fire, flood,
war, riot, equipment breakdown, electrical or mechanical failure,
acts of God or any cause which is reasonably unavailable or beyond
its reasonable control.
SECTION 5. RIGHTS OF ESCROW AGENT CONCERNING DISAGREEMENTS
In the event that Escrow Agent, in good faith, is in doubt (for
any reason) as to an action to be taken pursuant to this
Agreement, Escrow Agent shall have the absolute right at its
election to do any or all of the following: (i) refuse to
comply with any claims or any demands made on it; (ii) withhold
and stop all further proceeding in, and performance of, this
Agreement and the escrow made the basis hereof; or (iii) file a
suit in interpleader in a court of competent jurisdiction and
obtain an order from the court requiring the parties to
interplead and litigate in such court their several claims and
rights among themselves. In any such event, Escrow Agent shall
not be or become liable in any way or to any person for its
failure or refusal to act, and Escrow Agent shall be entitled to
continue to refrain from acting until (i) the rights of all
parties shall have been fully and finally adjudicated by a court
of competent jurisdiction or (ii) all differences shall have
been adjusted and all doubt resolved by agreement among all the
interested persons, and Escrow Agent shall have been notified
thereof in writing signed by all such persons. The rights of
Escrow Agent under this paragraph are cumulative of all other
rights which it may have by law or otherwise. In the event such
interpleader action is brought, Escrow Agent shall be fully
released and discharged from all obligations and all duties or
obligations imposed upon it by this Agreement as it relates to
the Escrow Account, or any portion thereof, so interpleaded.
SECTION 6. INDEMNIFICATION OF ESCROW AGENT.
Buyer and Seller hereby agree jointly and severally to protect,
defend, indemnify and hold harmless Escrow Agent against and from any
and all costs, losses, liabilities, expenses (including reasonable
counsel fees and expenses) and claims imposed upon or asserted
against Escrow Agent on account of any action taken or omitted to be
taken in connection with its acceptance of or performance of its
duties and obligations under this Agreement as well as the costs and
expenses of defending itself against any claim or liability arising
out of or relating to this Agreement. In case any action or
proceeding is brought against Escrow Agent by reason of any such
claim, Buyer and Seller covenant upon notice from Escrow Agent to
resist or defend such action or proceeding at their own expense.
This indemnification shall survive the release, discharge,
termination, and/or satisfaction of the Agreement.
SECTION 7. RESIGNATION OF ESCROW AGENT.
It is understood that Escrow Agent reserves the right to resign as
Escrow Agent at any time by giving written notice of its resignation,
specifying the effective date thereof, to each other party hereto.
Within thirty (30) days after receiving the aforesaid notice, the
other party or parties hereto shall appoint a successor Escrow Agent
to which Escrow Agent may distribute the property then held
hereunder. If a successor Escrow Agent has not been appointed and has
not accepted such appointment by the end of such thirty (30) day
period, Escrow Agent may apply to a court of competent jurisdiction
for the appointment of a successor Escrow Agent and the fees, costs
and expenses (including reasonable counsel fees and expenses) which
it incurs in connection with such a proceeding shall be paid by
Buyer.
SECTION 8. TERMINATION.
Escrow Agent, having delivered all of the property contained in the
Escrow Account pursuant to the terms of this Escrow Agreement, shall
thereafter be discharged from any further obligation hereunder. If,
by its terms, this Agreement shall not have been previously
terminated, then it, shall terminate on the 1st day of December,
1996, at which time the property then held hereunder shall be
distributed as provided in Exhibit A.
SECTION 9. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement and understanding
among the parties hereto with respect to the subject matter hereof,
and supersedes all prior agreements and understandings, written and
oral, among the parties with respect to such subject matter. Escrow
Agent is not a party to, nor is it bound by, nor need it give
consideration to the terms or provisions of, any other agreement or
undertaking between Buyer and Seller or between either of them and
any other persons. Unless otherwise provided in this Agreement,
Escrow Agent shall have no duty to determine or inquire into the
happening or occurrence of any event or contingency or the
performance or failure of performance of any party to this Agreement
with respect to arrangements or contracts with each other or with
others.
SECTION 10. MODIFICATION.
None of the terms or conditions of this Agreement may be changed,
waived, modified or varied in any manner whatsoever unless in writing
duly signed by Buyer, Seller, and Escrow Agent.
SECTION 11. ENFORCEABILITY.
A. Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
B. This Agreement shall be binding upon, and inure to the benefit of,
and be enforceable by and against the respective successors and
assigns of the parties to this Agreement.
C. This Agreement shall be construed, enforced and administered in
accordance with the laws of the State of Florida.
D. This Agreement is entered into expressly for the benefit of
Buyer and Seller who shall have, and be entitled to enforce, the
rights granted to them herein. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended
or shall be construed to confer upon or to give any other
person, firm or corporation any rights or remedies under or by
reason of this Agreement
SECTION 12. HEADINGS DESCRIPTIVE.
The headings of the several sections of the Agreement are inserted
for convenience only and shall not in any way affect the meaning or
construction of any provision of this agreement.
SECTION 13. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed an original, but all of which
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, Buyer, Seller, and Escrow Agent have caused this
agreement to be executed by their authorized representatives as of the
date first above written.
VISION HEALTH CARE, INC. ("Buyer")
BY:
Its:
VISION CARE, INC. ("Seller")
BY:
Its:
COMPASS BANK ("Escrow Agent")
BY:
Its:
<PAGE>
EXHIBIT A
ESCROW AGENT DUTIES AND RESPONSIBILITIES
Following the effectiveness of Buyer's Form S-1 registration statement
(SEC File No. 333-3530) with the Securities and Exchange Commission, Buyer
shall forward to Escrow Agent for deposit into the Escrow Account checks
that Buyer receives from investors for the subscription price of shares of
Buyer's Common Stock being offered pursuant to such registration
statement. Each such check shall be accompanied by a photocopy of the
Signature Pages from the applicable investor's Subscription Agreement,
which Signature Pages shall be in substantially the form attached hereto,
and shall contain the name, address and Social Security number or Federal
Taxpayer Identification number of the investor and the amount of funds
being deposited into the Escrow Account on behalf of such investor. Buyer
may also cause wire transfers of funds to be made to Escrow Agent for
deposit into the Escrow Account, in which case Buyer shall separately
transmit the applicable investor's Signature Pages to Escrow Agent,
together with a notation that the investor's funds are being sent by wire
transfer.
Escrow Agent shall invest all amounts in the Escrow Account in Permitted
Investments. In the absence of any additional or contrary directions from
Buyer in writing, Permitted Investments shall consist of short-term direct
obligations of the United States or money market funds that invest in
short-term direct obligations of the United States and are rated at least
AAA by either Moody's or Standard & Poor's.
Upon receipt by Escrow Agent on or before November 30, 1996, of written
instructions signed by an authorized officer of Buyer and Seller that the
conditions to the closing of Buyer's asset purchase from Seller have not
been satisfied and that Buyer and Seller wish to terminate the Escrow
Account, or in the event that Escrow Agent does not receive any written
instructions from Buyer and Seller on or before November 30, 1996
regarding the distribution of the Escrow Account, Escrow Agent shall
return to each investor the amount of such investor's funds originally
deposited into the Escrow Account, at such person's address set forth on
the investor's Signature Pages previously delivered to Escrow Agent,
together with a pro rata share of all earnings on the Escrow Account,
prorated based on the amount of such investor's funds deposited into the
Escrow Account and the number of days such funds have been held in the
Escrow Account. Escrow Agent shall provide to each such investor a report
of the amount of earnings paid to such investor no later than the deadline
required by and otherwise in accordance with applicable requirements of
the Internal Revenue Code.
Upon receipt by Escrow Agent on or before November 30, 1996 of written
instructions signed by an authorized officer of Buyer and Seller that the
conditions to the closing of Buyer's asset purchase from Seller have been
satisfied, Escrow Agent shall transfer to Seller by check or wire
transfer, as specified by Buyer and Seller in their instructions, all the
funds in the Escrow Account, including all earnings thereon. All such
earnings shall be deemed for Buyer's account, to be applied against the
asset purchase price, and shall be reported by Escrow Agent to the
Internal Revenue Service as having been earned by Buyer.
Any notices referred to in this Exhibit A may be made by telecopy,
provided that a representative of Buyer or Seller confirm by telephone
with Escrow Agent's Corporate Trust Department officer who administers the
Escrow Account that the notice has been received and is legible and
provided further that the manually signed copy of the notice is sent to
Escrow Agent by U.S. mail. Any notices to be signed by Buyer and Seller
may be signed in counterparts, each of which shall be deemed an original.
<PAGE>
SUBSCRIPTION AGREEMENT
VISION HEALTH CARE INC.
Vision Health Care, Inc.
100 West Bay Street
Jacksonville, FL 32202
ATTN: Board of Directors
Gentlemen:
The undersigned, by signing the Signature Page attached hereto,
hereby tenders this subscription to you as the Board of Directors of
Vision Health Care, Inc., a corporation organized under Florida law (the
"Company"), and applies for the purchase of the total number of shares of
Common Stock (the "Shares") shown hereinafter, at a price of $10.00 per
Share, on the terms and conditions (including but not limited to the
escrow arrangements described under the caption "Plan of Distribution")
set forth in the Company's Prospectus dated ______________, 1996, together
with all exhibits and any supplements (the "Prospectus"), which is
incorporated herein by reference.
Representations and Warranties
The undersigned hereby represents and warrants to you as follows:
I. The undersigned: (i) can bear the risk of investment in the
Company; (ii) has an overall commitment to investments that are not
readily marketable which is not disproportionate to the undersigned's net
worth, and the undersigned's investment in the Shares will not cause such
overall commitment to become excessive; and (iii) finds the objectives of
the Company are compatible with the undersigned's investment goals.
II. The undersigned is a permanent resident of the state indicated
on the Signature Page below and intends to remain a resident of such
state.
The undersigned acknowledges and agrees that the undersigned is not
entitled to cancel, terminate or revoke this subscription, or any
agreements of the undersigned hereunder; provided, however, that if the
Board of Directors shall not accept this subscription, all agreements of
the undersigned hereunder shall automatically be canceled, terminated and
revoked.
This offering is scheduled to terminate on September 30, 1996.
However, the Company has the right to extend the subscription period 60
days to a date not later than November 30, 1996, in which case the Company
will contact all subscribers, informing them of the extended escrow
period, and permitting any subscriber who wishes to do so to withdraw or
modify his or her subscription.
<PAGE>
VISION HEALTH CARE, INC.
SIGNATURE PAGE
SUBSCRIPTION. The undersigned hereby execute(s) the Subscription
Agreement, which is included as an exhibit to the Prospectus of Vision
Health Care, Inc. The undersigned subscribe(s) for Shares as follows:
(1) Number of Shares (minimum - 250 Shares;
maximum - 2,500 Shares) _______________
(2) Amount of check ($10.00 per Share) [make
$_______________
checks payable to Compass Bank, as
Escrow Agent for Vision Health Care, Inc.]
Exact name or names (registration) investor desires on record:
(Please Print or Type)
Executed this day of , 1996, at
___________________________, ___________________________
(City) (State)
_________________________________ x____________________________________
Print or Type Name(s) Signature
_________________________________ _____________________________________
Signature of any Co-Subscriber
_________________________________ ______________________________________
Street Address Social Security or Taxpayer ID No.
__________________________________________________________________________
City State Zip Telephone Number
________________________________________
Residence Address (if different)
____________________________________________________
City State Zip
Accepted this ___ day of __________, 1996:
VISION HEALTH CARE, INC.
By:_____________________________________
Peter D. Liane, O.D., President
<PAGE>
EXHIBIT B
AUTHORIZED OFFICERS OF THE PARTIES
VISION HEALTH CARE, INC. (Buyer):
Peter D. Liane, President
Howard J. Braverman, Chairman
VISION CARE, INC. (Seller):
John W. McClane, III, Chairman - Special Committee
Terrance W. Naberhaus, Chairman
<PAGE>
EXHIBIT C
SUBSCRIPTION ESCROW AGENT SERVICES
SCHEDULE OF FEES AND EXPENSES
Acceptance Fee: $1,000
To accept the appointment and take on the responsibilities of Subscription
Escrow Agent. Should there be any significant changes or modifications to
Compass Bank's standard Escrow Agreement, legal expenses incurred in
document review will be borne by the parties in interest.
Administration Fee:
Receiving deposits from two or more investors or subscribers, providing
investor recordkeeping, and investment of funds as directed.
Up to $10,000,000 in aggregate deposits .050%
Next $20,000,000 in aggregate deposits .020%
Next $20,000,000 in aggregate deposits .008%
Next $20,000,000 in aggregate deposits .007%
Balance of Deposits .005%
Minimum Annual Fee: $2,000 for any portion of the year
In case of return of subscription funds
to investors: $10 per participant
Allocation of interest, disbursements and 1099 reporting
Transaction Charges:
Normal transactions including book entries, cash receipts and
disbursements, and wire transfers will be done at no charge. Foreign
securities will be assessed transaction fees as incurred.
Out-of-Pocket Expenses:
The cost of all business expenses including, but not limited to, legal
counsel fees and expenses, travel, postage, checks, stationary, printing,
messenger delivery or other direct or indirect expenses which can be
allocated will be added to our regular service.
The fees quoted in this schedule apply to services ordinarily rendered in
administering an escrow account and are subject to reasonable adjustment
when Escrow Agent is called upon to undertake unusual duties or as changes
in the law, procedures or the cost of doing business demand. Fees for
extraordinary administrative time may be charged in the event Escrow Agent
performs duties not contemplated at the time of execution of this
agreement.
Unless otherwise agreed upon, the Acceptance Fee and the first year
Administration Fee are payable upon the execution of the Agreement whether
or not the escrow account is funded. The Acceptance Fee is not refundable.
