FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE COMMISSION ACT OF 1934
For the transition period from ______ to ______
Commission file number: 0-23184
APOLLO EYE GROUP, INC.
(Exact name of the small business issuer as specified in its charter)
Delaware 65-0257498
State or other jurisdiction of (I.R.S Employer
incorporation or organization Identification No.)
2424 N. Federal Highway, Suite 362, Boca Raton, Florida 33431
(Address of Principal Executive Office) ( Zip Code)
(561) 395-5402
(Issuer's telephone number including area code)
Indicate by check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares of the issuer's Common Stock, $.001 par value,
outstanding as of August 6, 1997 was 5,888,898.
Transitional Small Business Disclosure Format
Yes No X
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997 1
and December 31, 1996
Consolidated Statements of Operations for the three 2
and six months ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows for the six 3
months ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements 4 - 7
Item 2. Management's Discussion and Analysis of Financial 8 - 13
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14 - 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
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<TABLE>
APOLLO EYE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
<S> <C> <C>
ASSETS
Current assets:
Cash $ 0 $ 75,462
Accounts receivable 563,148 541,709
Inventory 524,775 551,291
Other current assets 0 49,303
Total current assets 1,087,923 1,217,765
Property and equipment, net 3,256,696 3,589,853
Intangible assets, net 424,399 520,768
Restricted cash 50,000 50,000
Other assets 135,369 151,304
Total assets $4,954,387 $5,529,690
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Cash overdraft $ 51,984 $ 0
Current portion of long-term
debt 30,854 33,754
Current portion of capital
lease obligations 184,398 184,398
Accounts payable 710,142 735,874
Accrued liabilities 2,165,410 2,301,284
Deferred revenue 94,703 111,118
Total current liabilities 3,237,491 3,366,428
Notes payable affiliate 3,025,000 0
Notes payable to shareholder 0 1,755,000
Long-term debt, net of current
portion 81,494 96,364
Capital lease obligations,
net of current portion 58,122 121,883
Total liabilities 6,402,107 5,339,675
Equity (Deficit):
Common stock 5,889 5,889
Additional paid-in capital 9,830,245 9,830,245
Accumulated deficit and fund
balance (11,283,854) (9,646,119)
Total equity (deficit) (1,447,720) 190,015
Total liabilities and
equity (deficit) $4,954,387 $5,529,690
<FN>
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
<TABLE>
APOLLO EYE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
(Unaudited) (Unaudited)
June 30, June 30, June 30, June 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue:
Premium $ 1,050,496 $ 945,762 $ 2,161,653 $ 1,935,719
Practice 1,005,248 1,174,262 2,029,607 2,607,244
Other 92,836 61,417 182,320 149,542
Total revenue 2,148,580 2,181,441 4,373,580 4,692,505
Operating costs and expenses:
Cost of goods and
services sold 553,598 819,121 1,131,884 1,468,355
Depreciation and
amortization 220,219 239,058 457,871 450,723
Selling general
and administrative
expenses 1,947,688 2,689,297 4,273,199 5,090,550
Total operating costs and
expenses 2,721,505 3,747,476 5,862,954 7,009,628
Loss from
operations (572,925) (1,566,035) (1,489,374) (2,317,123)
Other income (expenses):
Other income 0 4,945 0 4,945
Interest, net (78,964) (105,601) (148,361) (170,642)
Other income
(expense), net (78,964) (100,656) (148,361) (165,697)
Loss before provision
for taxes (651,889) (1,666,691) (1,637,735) (2,482,820)
Provision for income
taxes 0 7,654 0 7,654
Net loss $ (651,889) $(1,674,345) $(1,637,735) $(2,490,474)
Net loss per share $ (.11) $ (.37) $ (.28) $ (.74)
Weighted average number of shares used in
computing per
share amount 5,888,898 4,524,167 5,888,898 3,352,014
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
APOLLO EYE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended (Unaudited)
June 30, June 30,
1997 1996
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (1,637,735) $ (2,490,474)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 457,871 450,723
Common stock issued for services 0 25,000
Bad debt expense 6,000 9,797
Loss on disposal of assets 0 1,713
Changes in operating assets and liabilities exclusive
of net assets acquired:
Accounts receivable (27,439) (77,297)
Inventory 26,516 (75,762)
Other current assets 49,303 (194,666)
Accounts payable and accrued
liabilities (161,606) (41,889)
Other assets 15,935
Deferred revenue (16,415) 11,370
Net cash used in operating
activities (1,287,570) (2,381,485)
Cash flows from investing activities:
Purchase of property and equipment (28,345) (546,581)
Proceeds from sale of asset 0 18,900
Increase in intangibles 0 (2,820)
Net cash used in investing activities (28,345) (530,501)
Cash flows from financing activities:
Cash overdraft increase (decrease) 51,984 (3,528)
Payments on long-term debt and capital
lease obligations (81,531) (131,356)
Proceeds (repayment) of notes payable to
shareholder (1,755,000) 3,250,000
Proceeds from notes payable 3,025,000 0
Net cash provided by financing
activities 1,240,453 3,115,116
Net (decrease) increase in cash (75,462) 203,130
Cash, beginning of period 75,462 0
Cash, end of period $ 0 $ 203,130
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1997
1. ORGANIZATION, LIQUIDITY AND BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. These consolidated financial
statements include estimates and assumptions that affect the reported amounts
of assets and liabilities and the amounts of revenues and expenses. Actual
results could differ from those estimates. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The consolidated
balance sheet amounts at December 31, 1996 have been derived from audited
financial statements. Operating results for the three and six month
periods ended June 30, 1997 are not necessarily indicative of the results
that may be expected for Apollo Eye Group, Inc.'s (formerly United Vision
Group, Inc., the "Company" or "AEG") fiscal year or any other interim period.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1996.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company's significant losses in 1996
and projected cash flow deficiency raise substantial doubt about its ability
to continue as a going concern. The financial statements do not include any
adjustments that might arise should the Company be unable to continue as a
going concern. Previously, the Company has relied upon the principal
shareholder to fund the Company's working capital needs. The principal
shareholder agreed in January 1997 to a revolving loan arrangement providing
for loans not exceeding $1,000,000 collateralized by accounts receivable and
inventory. In June 1997, the Company entered into an agreement with a company
controlled by the principal shareholder for a $3,000,000 five year term loan
collateralized by property and equipment. A portion of this loan has been
used in part to repay $1,755,000 of demand loans payable to the principal
shareholder. The Company is exploring the possibility of raising cash
through debt financing or selling equity in a private placement. There
can be no assurances that these activities will be likely to occur.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries which are combined with the accounts of
Optiplan, Inc. based on their related business activities and the Company's
unilateral and perpetual management control. Material intercompany balances
and transactions have been eliminated.
REVENUE RECOGNITION
Revenue from professional services is recognized when the service is performed.
Revenue from optical sales is recognized upon order by the customer.
Consulting subscriptions are deferred and recognized when the service is
delivered. Revenue from managed care plans is recognized ratably over the
life of the related contract.
INVENTORIES
Inventories, consisting primarily of eyeglass frames, contact lenses, lens
blanks and accessories are stated at the lower of cost or market. Cost is
determined using the FIFO (first-in, first-out) method.
CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. The cost of equipment
held under capital lease is equal to the lower of the net present value of
the minimum lease payments or the fair value of the leased equipment at the
inception of the lease. Additions and improvements are capitalized while
maintenance and repairs are expensed when incurred. Asset and accumulated
depreciation accounts are reduced for dispositions with resulting gains or
losses recorded in the statement of operations. Depreciation and amortization
are computed on a straight-line basis over the estimated useful lives of the
property and equipment or over the lesser of the lease term or the asset's
useful life for leasehold improvements.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
INTANGIBLES
Goodwill related to the reverse acquisition of the Company is amortized on
the straight-line method over four years. Goodwill related to the
acquisition of the Company's subsidiary, Medricon, Inc. is amortized on the
straight-line method over 15 years. The Company periodically evaluates the
carrying value of goodwill to measure and recognize the possible impairment
of this asset. Other intangibles resulting from the acquisition of Medricon,
consisting of research materials, subscription lists, and customer lists,
are amortized on the straight-line method over their estimated useful lives
of 5 to 7 years. Other intangible assets, consisting of computer software
costs, licenses and organization costs are recorded at cost and amortized on
the straight-line method over five years.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable. The risk is
limited due to the large number of the Company's customers. The Company does
not require collateral for its accounts receivable.
RESTRICTED CASH
Under Florida Statutory Law, the Company is required to maintain a $50,000
certificate of deposit with the Treasurer and Insurance Commissioner.
INCOME TAXES
For the year ended December 31, 1996, the Company will file consolidated
Federal and State income tax returns which includes all of the members of
the group except Optiplan, which is a non-profit entity required to file a
separate return.
The Company utilizes the liability method for accounting for deferred income
taxes. Under this method, deferred tax assets and liabilities are
established based on the differences between financial statement and tax
bases of assets and liabilities using the rates in effect for the year in
which the differences are expected to reverse. The Company has established
a valuation allowance against its deferred tax assets based on management's
belief that it is not likely such benefits will be realized.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
REVERSE STOCK SPLIT
On October 7, 1996, the shareholders approved a one-for-five reverse split
of the Company's Common Stock. As a result, the number of common shares
outstanding was reduced from 29,444,454 to 5,888,898 as of the November 1,
1996 effective date. All references in the financial statements to the number
of shares and per share amounts of the Company's Common Stock have been
retroactively restated to reflect the reduced number of common shares
outstanding.
PER SHARE DATA
Per share data is based on the weighted average number of shares of Common
Stock outstanding during the period.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, SFAS No. 128, "Earnings Per Share" was issued. SFAS No.
128 establishes new standards for computing and presenting earnings per share
("EPS"). This statement replaces the presentation of primary EPS and will
require a dual presentation of basic and diluted EPS. SFAS No. 128 is
effective for financial statements issued for periods ended after December 15,
1997 and requires restatement of all prior-period EPS data presented. The
adoption of SFAS No. 128 is not expected to have a material impact on the
Company's financial statements.
3. CONTINGENCIES
The Company is a party to various lawsuits arising in the ordinary course of
business. During the year ended December 31, 1996, estimated litigation
settlements of $300,000 were charged to operations based on review of such
litigation with legal counsel. For the six months ended June 30, 1997 and
June 30, 1996, the Company made charges to operations of $0 and $50,000
respectively for litigation settlements. The Company believes it has
defenses and is defending these suits vigorously.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis presents the significant changes in
the financial condition and results of operations of the Company for the
three and six month periods ended June 30, 1997.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company
had negative working capital of $2,148,663 and equity had been reduced to
$190,015 at December 31, 1996. At June 30, 1997, working capital was further
reduced to a negative $2,149,568 and equity was reduced by $1,637,735, to a
deficit of $1,447,720. There are no assurances that the Company will be able
to increase premium revenue with additional managed care contracts or that
practice revenue will increase to meet cash requirements. As a result,
substantial doubt exists about the Company meeting its liquidity needs and
continuing as a going concern. (See Liquidity and Capital Resources.)
Results of Operations
Total revenues for the three and six months ended June 30, 1997 were
$2,148,580 and $4,373,580 versus $2,181,441 and $4,692,505 in the three
and six month periods ending June 30, 1996. Revenue from premiums (Capitation
Payments) was $1,050,496 for the three months ended June 30, 1997, compared
with $945,762 in 1996. Premium revenue for the first six months of 1997 was
$2,161,653 versus $1,935,719 for the same period in 1996. The increase
results from managed care contracts effective July 1996 in Puerto Rico and
managed care contracts in South Florida renewed in October 1996 at higher
capitated rates offset by the loss of a South Florida managed care contract
effective February 1, 1997. Practice revenue decreased to $1,005,248 and
$2,029,607 for the three and six months ended June 30, 1997 from $1,174,262
and $2,607,244 for the three and six month periods ending June 30, 1996.
The decrease in practice revenue was attributable to a decrease in
professional services and optical sales resulting from the loss of the
previously mentioned third party contract effective February 1, 1997.
Revenue is expected to decline in 1997 compared with 1996. Premium revenue
is expected to be reduced as a result of the termination of a contract for
vision care in South Florida effective February 1997 and the termination of
two contracts for vision care in Puerto Rico effective July 1, 1997. The
loss of the three contracts represents approximately $185,000 of monthly
premium revenue. The loss of premium revenue has been partially offset by
the renewal of a contract negotiated in December 1996 with a managed care
sponsor for increased premium revenue effective October 1996. In addition,
the Company entered into an agreement to provide vision benefits on a
discounted fee for service in South Florida effective June 1, 1997. The
Company believes that as a result of these changes, total premium revenue
in 1997 will be below the 1996 premium revenue. The cancellation of the
South Florida vision care contract also has negatively impacted practice
revenue due to a decrease in the number of patients that are seen in the
Apollo practices. The terminated contract represented approximately 40%
of the patients seen by the Apollo practices. While it is not possible
to quantify the loss of practice revenue that
<PAGE>
will result from the termination of the vision care contract, the Company
believes that practice revenue in 1997 will be significantly below the 1996
practice revenue.
The Company is working to secure new contracts with managed care sponsors
for both vision care and ophthalmology services. There are no assurances
that the Company will be successful in obtaining new contracts, or that the
contracts, if obtained, will replace the premium and practice revenue lost
as a result of the contract termination discussed above.
Costs of Goods and Services Sold (COGS) is computed as including the costs
of eyewear, including eyeglass frames, lenses and contact lenses, along with
the fees paid for services to outside providers (participating providers not
associated with the Company). The cost of services provided by internal
providers (employed or contracted by the Company) are reported as part of
Selling, General and Administrative (SG&A) expenses. The Costs of Goods and
Services Sold decreased to $553,598 during the quarter ended June 30, 1997
versus $819,121 during the same 1996 period. For the six months ended June 30,
1997, the Cost of Goods and Services was $1,131,884, a decrease from
$1,468,355 for the six months ended June 30, 1996. The decrease is due
to a decline in the volume of eyewear resulting from decreased optical
revenue and a reduction in external provider payments.
Management has focused its efforts in the eyewear product area on inventory
management including automating inventory systems, consolidating purchasing
and quarterly inventory reviews to decrease obsolescence. Inventory (net
of reserves) decreased to $524,775 at June 30, 1997 from $551,291 at December
31, 1996. The decrease results from a change in the mix of frames and
agreements with certain vendors to consign inventory. The Company expects
to improve inventory utilization as a result of the 1996 consolidation of
its laboratory operations into a single location in Broward County, Florida.
SG&A expenses decreased to $1,947,688 and $4,273,199 respectively during the
three and six months ended June 30, 1997 from $2,689,297 and $5,090,550 for
the three and six months ended June 30, 1996. The decreases in SG&A were
primarily related to reductions in compensation, benefits, consulting, legal
and advertising expenses offset by increases in rent expense due to an
expanded number of facilities.
Depreciation and amortization expenses for the three months ended June 30,
1997 increased to $457,871 from $450,723 in the same period last year.
The increased expense results from depreciation of equipment acquired in
June 1996 from Focus Fashion Optical and a full quarter of depreciation on
Apollo equipment placed in service in 1996. Property and Equipment
decreased to $5,400,260 at June 30, 1997 from $5,428,444 at December 31, 1996.
<PAGE>
Net Loss
The Company's losses decreased to $651,889 ($0.11 per share) for the quarter
ended June 30, 1997 from $1,674,345 ($0.37 per share) for the quarter ended
June 30, 1996. For the six month period ended June 30, 1997, the loss
decreased to $1,637,735 ($0.28 per share) from $2,490,474 ($0.74 per share)
for the six months ended June 30, 1996. Per share data is based on the
Company's weighted average of shares outstanding in the period of 5,888,898
and 4,524,167, respectively, for the three months ended June 30, 1997 and
1996, and 5,888,898 and 3,352,014 respectively for the six months ended
June 30, 1997 and 1996. The total shares outstanding at June 30, 1997 was
5,888,898.
Balance Sheet Dated June 30, 1997
The Company's cash decreased to an overdraft of $51,984 at June 30, 1997
from a balance of $75,462 at December 31, 1996.
The Company's accounts receivable (net of allowance for doubtful accounts)
increased to $563,148 at June 30, 1997 from $541,709 at December 31, 1996.
This increase is due to an increase in managed care premiums outstanding at
June 30, 1997. The total current assets of the Company decreased to $1,087,923
on June 30, 1997, from $1,217,765 at December 31, 1996.
The Company's property and equipment (net of accumulated depreciation)
decreased from $3,589,853 at December 31, 1996 to $3,256,696 at June 30, 1997.
The decrease results from depreciation expense for the six months ended
June 30, 1997. The total assets of the Company decreased from $5,529,690 at
December 31, 1996 to $4,954,387 at June 30, 1997 due to decreases in cash,
inventory, property and equipment (net), and intangible assets (net).
The Company's Notes Payable and Capital Lease obligations decreased from
$436,399 at December 31, 1996 to $354,868 at June 30, 1997. These decreases
are associated with repayment of borrowing. Accounts Payable and Accrued
Liabilities at June 30, 1997 were $2,875,552 compared with $3,037,158 at
December 31, 1996.
In January 1997, the Company entered into a revolving loan agreement with
James R. Cook, M.D., the majority shareholder, providing for loans not to
exceed $1,000,000 collateralized by accounts receivable and inventory and
bearing interest at prime. In the three month period ending March 31, 1997,
the Company borrowed $550,000 under this agreement. In June 1997, the
Company borrowed $3,025,000 from Chardonnay Enterprises, Inc., a corporation
controlled by James R. Cook, M.D., the majority shareholder. The loan is
collateralized by property and equipment of the Company. From the proceeds
of the note payable to Chardonnay Enterprises, the Company used $1,755,000
to repay shareholder loans payable to James R. Cook, M.D. At June 30, 1997,
the note payable to Chardonnay Enterprises was $3,025,000 and the Company
repaid the balance on the revolving loan agreement with James R. Cook, M.D.
(See Liquidity and Capital Resources.)
<PAGE>
The Company's equity decreased in the period from $190,015 at December 31,
1996 to a deficit of $1,447,720 at June 30, 1997. This decrease is directly
related to operating losses in the period.
Cash Flow Statement for Six Month Period Ending June 30, 1997
Net Cash used in Operating Activities decreased to $1,287,510 for the six
month period ending June 30, 1997 from $2,381,485 for the six month period
ending June 30, 1996. The decreased cash used resulted from decreased
operating losses and decreased inventory offset by increased accounts
receivables and decreased accounts payable and accrued liabilities.
For the six months ended June 30, 1997, investing activities used cash of
$28,345 compared with cash of $530,501 used in investing activities for the
three months ended June 30, 1996.
Net Cash provided by financing activities totaled $1,240,453 for the six
month period ending June 30, 1997. The Company borrowed $3,025,000 from
Chardonnay Enterprises, Inc., a corporation controlled by James R. Cook,
M.D., the majority shareholder. From the proceeds of the note payable to
Chardonnay Enterprises, the Company used $1,755,000 to repay shareholder
loans payable to James R. Cook, M.D. (See Liquidity and Capital Resources.)
Liquidity and Capital Resources
In 1996, the Company lost $4,464,986 on revenues of $9,926,280 and used
$3,942,143 of cash in operating activities and used $690,137 in investing
activities. Financing activities provided net cash of $4,707,742 that
included $4,955,000 of cash from Dr. Cook.
As a result of the recent loss of managed care contracts and continued
operating losses, the Company does not have sufficient cash resources to
fund the business in 1997. Management has taken steps to reduce expenses.
Optical laboratory facilities have been consolidated, personnel headcount
has been reduced by thirty percent since October 1, 1996, compensation of
ophthalmologists, optometrists, and opticians has been changed to a
performance based system, administrative and senior management compensation
has been reduced, operating hours of the Apollo Eye Associates practices have
been reduced, and advertising has been reduced. If the Company is not
successful in obtaining new managed care contracts with HMOs, further
expense reductions will be necessary.
In addition to cash flow generated from operations, management believes
that approximately $3,500,000 of additional capital will be needed in 1997
to meet the cash flow shortfall. In January 1997, the Company entered into
a revolving loan agreement with James R. Cook, M.D., the majority shareholder,
providing for loans not exceeding $1,000,000 collateralized by inventory and
accounts receivables. In the first quarter of 1997, the Company borrowed
$550,000 of this revolver, the maximum loan available based on present
levels of inventory and accounts receivable. In April 1997, the Company
entered into a loan agreement with Chardonnay Enterprises, Inc., a
corporation controlled by James R. Cook, M.D., providing
<PAGE>
for loans not exceeding $500,000 collateralized by property and equipment
of the Company. As of May 28, 1997, the Company had borrowed the $500,000
available under loans collateralized by property and equipment.
On May 28, 1997, the Board of Directors authorized the Company to enter
into an agreement with Chardonnay Enterprises, Inc. to borrow up to
$3,000,000 collateralized by property and equipment of the Company.
This loan includes the $500,000 of borrowings from Chardonnay Enterprises
previously authorized by the Company. The loan carries interest at the
prime rate and has a five-year term with interest only due until July 1, 1998.
After July 1, 1998, the loan agreement requires 59 monthly installments
including interest at prime based on a seven year amortization schedule
with the balance of the loan payable in the 60th installment. The Board
further authorized that the Company repay $1,755,000 of unsecured demand
notes due to James R. Cook, M.D. from the proceeds of the note from
Chardonnay Enterprises.
James R. Cook, M.D., the majority shareholder, and corporations he controls
have indicated that they are not willing to continue funding the Company at
the current levels of cash requirements beyond amounts already loaned. Dr.
Cook and such entities reserve all rights to demand repayment of such
amounts loaned in accordance with the terms of the loan documentation.
As a result of these loan arrangements with James R. Cook, M.D. or
corporations he controls, the Company has obtained funding in 1997 for
$1,795,000 of the estimated $3,500,000 cash requirements. Management is
continuing to seek to obtain other debt and/or equity financing for the
balance needed to fund operations for the current year. If additional
funding is not available, management believes a significant downsizing of
the Company will be necessary to reduce expenses to the level of cash
generated from operations. This downsizing could include additional
personnel and compensation reductions, closing or further reduction of
operating hours at some or all of the Apollo Eye Associates practices,
relocation or consolidation of office facilities and additional reductions
of operating expenses.
Based on the Company's net loss for 1996 and anticipated 1997 results, the
Company does not anticipate it will be able to generate sufficient cash to
fund operations. The Company's independent accountants have issued a report
covering the December 31, 1996 consolidated financial statements containing
an explanatory paragraph that states that these facts raise substantial doubt
about the Company's ability to continue as a going concern. The accompanying
consolidated financial statements of the Company do not include any
adjustments that might arise from the outcome of this uncertainty. See
Note 1 to the Company's consolidated financial statements.
In addition to the cash required for operations, as much as $2,000,000 of
investment may be required for leasehold improvements and capital equipment
purchases to remodel and expand certain older practice locations.
Development of new practice locations or the acquisition of additional
practice locations will require cash.
<PAGE>
The Company is exploring a private placement to raise $10 to $20 million.
If successful, proceeds of the offering would be used first to fund the
operating cash needs of the business and current working capital requirements.
The balance of any funds raised would be used to finance the Company's growth
plans. There are no assurances that the Company will be successful in
raising this capital.
<PAGE>
Management is also exploring the business combination opportunities with
companies in similar lines of business in South Florida. There can be no
assurance that the Company will receive any proposal in this connection or
that the terms of any proposal received would be such that the Company's
Board of Directors would accept the proposal and recommend it to the
Company's stockholders (should stockholder action be required).
Additionally, the Company may at any time decide to discontinue these
explorations.
The words "believe," "expect," "anticipate," "project," and similar
expressions signify forward looking statements. Readers are cautioned
not to place undue reliance on any forward looking statements made by or
on behalf of the Company. Any such statement speaks only as of the date
the statement is made, and the Company undertakes no obligation to update
or revise any forward looking statements.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
Except as noted below, the Company is not party to any material litigation,
nor, to the knowledge of the Company, is any material litigation threatened.
In April 1995, an action entitled Dynex Sport Optics, Inc. v. United Vision
Group, Inc. ("Dynex") was filed against the Company in the United States
District Court for the District of New Jersey in connection with an alleged
agreement between the Company and Dynex. According to Dynex, the Company
promised to issue 1,250,000 shares of its Common Stock in exchange for 100%
of the stock of Dynex and to provide $250,000 in working capital to Dynex.
The Company denies that the alleged agreement is enforceable and believes
that, in any event, Dynex deliberately concealed or misrepresented the
business, assets, rights and prospects of Dynex. The Company is vigorously
defending against the claim. The Company moved to dismiss the action due to
lack of jurisdiction in New Jersey. In June 1996, the U.S. District Court
for the District of New Jersey ruled in favor of the Company and dismissed
the action. In July 1996, the Company filed an action for Declaratory
Judgment with respect to the same claims in the United States Federal Court
in Palm Beach County, Florida. In July 1996, Dynex filed an action identical
to its New Jersey action in the United States District Court for the Southern
District of New York. It is currently expected that this matter will go to
trial in late 1997 or early 1998.
In August 1995, an action entitled Lowinger v. United Vision Group, Inc.,
J. K. Enterprises of Deerfield Beach, Inc., Jan Kaplan and Karen Kaplan was
filed against the Company in the United States District Court for the
Southern District of Florida. Mr. Lowinger, a former employee of the
Company, alleged discrimination on the basis of age and handicap, breach of
contract to pay a bonus, payment owing for employment benefits including
vacation and automobile expenses and violation of ERISA. In March 1997,
the case was tried in the United States District Court for the Southern
District of Florida. The jury found in favor of Lowinger as to the age
discrimination claim and that the Company acted willfully in the termination.
Lowinger was awarded back pay, compensatory and punitive damages and interest
in the amount of $394,000. Plaintiff was also granted reinstatement to a
position similar to the one held prior to termination with comparable salary
and benefits. The remaining claims were found in favor of the Company.
At a hearing for post-trial motions held July 16, 1997, the Court denied a
motion to enter a judgment in favor of the Company notwithstanding the
verdict. The Company believes it has grounds to appeal the jury verdict and
plans to file such appeal.
<PAGE>
In May 1997, two actions entitled Jan H. Kaplan v. United Vision Group, Inc.,
Apollo Eye Associates, Inc., and Apollo EyeCare Management Corp. and Karen
Kaplan v. United Vision Group, Inc., Apollo Eye Associates, Inc., and Apollo
EyeCare Management Corp. were filed against the Company in the County Court
for Broward County, Florida. Mr. and Mrs. Kaplan, both former employees of
the Company, allege breach of a December 1995 contract to pay consulting
fees and seek to recover the amounts of $11,667 and $7,083 respectively for
April 1997. The Company believes that it has substantial defenses and is
defending these suits vigorously.
In May 1997, an action entitled Apollo Eye Group, Inc., Master Vision Plans,
Inc., Optiplan, Inc., and J. K. Enterprises of Deerfield Beach, Inc. v.
Joseph P. Antal and Preferred Vision Care, Inc. was filed by the Company in
the Circuit Court of the Seventeenth Judicial Circuit of Broward County,
Florida. The complaint alleges that Mr. Antal, a former employee of the
Company, is in breach of a covenant not to compete contained in the
employment agreement that existed between the Company and Antal during his
term of employment. The lawsuit seeks injunctive relief to enjoin Antal
from solicitation of managed care sponsors including those currently under
agreement with Apollo Eye Group of Puerto Rico, Inc. (formerly Master Vision
Plans, Inc.). A hearing for injunctive relief was held in May 1997 and will
be continued in the third quarter of 1997.
The Company is a defendant in certain other legal actions in the normal
course of business, none of which is expected to result in a material adverse
effect on the Company's net worth, total cash flows, or results of
operations.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(m) -- Participating Physician Services Agreement between Apollo
EyeCare Management Corporation and FPA Medical Management
of Florida, Inc.
(b) Reports on Form 8-K - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
APOLLO EYE GROUP, INC.
Dated: __________________ By: /s/ J. Richard Damron, Jr.
J. Richard Damron, Jr.
Treasurer and Chief Financial Officer
<PAGE>
PARTICIPATING PHYSICIAN SERVICES AGREEMENT
THIS PARTICIPATING PHYSICIAN SERVICES AGREEMENT ("Agreement"), is made and
entered into this 1st day of June, 1997 by and between FPA MEDICAL MANAGEMENT
OF FLORIDA, INC. ("FPA"), and APOLLO EYE CARE MANAGEMENT CORP. AND AFFILIATES
("Participating Physician").
Whereas, Participating Physician wishes to contract with FPA to provide
Covered Services for Health Plans; obligating said Physician to provide or
arrange for said Covered Services for Members; and
Whereas, Participating Physician agrees to provide or arrange for Covered
Services for Members under the terms and conditions set forth herein; and
Whereas Participating Physician and FPA have read, understand and agree to
the terms listed hereunder; and
Whereas, FPA and Participating Physician mutually desire to preserve and
enhance patient dignity;
NOW, THEREFORE, it is mutually agreed as follows:
1 . DEFINITIONS
a) Certificate means the contract which sets forth the terms and conditions
governing the relationship between the applicable Health Plan and its
Members, including the medical and hospital benefits provided to, or
arranged for, Members by Health Plan. Certificates covered under this
Agreement shall be determined solely by FPA.
b) Commercial HMO Coverage Plan means a plan of group health care expense
coverage that is provided to one or more employers (or to other groups or
individuals) through group health insurance contracts, trusts, health care
services plans, or any other health care service arrangements agreed to by
FPA. Commercial HMO Coverage Plans covered under this Agreement shall be
determined solely by FPA.
c) Covered Services means those medical and hospital services and benefits
to which Members are entitled under the terms of the applicable Certificate
as determined by the applicable Health Plan, the relevant portions of which
shall be made available to Participating Physician by FPA.
d) Credentialing Committee refers to the committee that determines
standards for participation of Participating Physicians and enforces those
standards.
e) Emergency means
i) A medical condition manifesting itself by acute symptoms of sufficient
severity, which may include severe pain or other acute
<PAGE>
symptoms, such that
the absence of immediate medical attention could reasonably be expected to
result in any of the following:
a) Serious jeopardy to the health of a patient, including a pregnant woman
or a fetus.
b) Serious impairment to bodily functions.
c) Serious dysfunction of any bodily organ or part.
ii) With respect to a pregnant woman:
a) That there is inadequate time to effect safe transfer to another
hospital prior to delivery;
b) That a transfer may pose a threat to the health and safety of the
patient or fetus; or
c) That there is evidence of the onset and persistence of uterine
contractions or rupture of the membranes.
f) Emergency Services means medical screening, examination, and evaluation
by a physician, or, to the extent permitted by applicable law, by other
appropriate personnel under the supervision of a physician, to determine
if an Emergency exists and, if it does, the care, treatment, or surgery
for a Covered Service by a physician necessary to relieve or eliminate
the Emergency, within the service capability of a hospital.
g) Health Plan refers to an industry, corporation, company, partnership,
union, enterprise, health care service plan, prepaid health plan, preferred
provider organization, accountable health partnership, health maintenance
organization, insurer, or other defined or otherwise legally constituted
group or organization which enters into a Payor Agreement with FPA to allow
such Health Plan's employees or Members the opportunity of selecting health
services arranged for by FPA. Any references to Health Plan in this
Agreement is limited to the particular Health Plan whose Member is being
treated by Participating Physician. Health Plans covered under this
Agreement shall be shall be referenced in Attachment A-2.
h) Incident is defined as any occurrence that is not routine in a health
care facility. These situations may include, but are not limited to, the
following:
i) any unusual occurrence;
ii) a happening which could have or did result in an injury to a Member;
iii) a condition, situation, procedure, etc., which could or did result in
an injury to a Member, including any happening of an untoward (unusual)
nature to a Member.
Incidents shall not be limited to quality of care issues.
<PAGE>
i) Medicaid means the program of the Agency for Health Care Administration
(AHCA) and the State of Florida to provide health and welfare benefits.
j) Medicaid HMO Coverage Plan means a plan of group health care expense
coverage that is provided to Medicaid Members through AHCA and the State of
Florida, or any other health care service arrangements agreed to by FPA, as
determined by FPA. Medicaid HMO Coverage Plans covered under this Agreement
shall be determined solely by FPA.
k) Medical Director means a Physician or his/her designee who has been
designated by FPA to monitor and implement the provision of Covered Services
to Members.
1) Medically Necessary means services or supplies received by a Member
which FPA through its Medical Director, subject to Health Plan's UM/QI
programs, determines to be:
i) consistent with the symptoms or diagnosis and treatment of Member's
condition, disease, ailment or injury;
ii) appropriate with regard to standards of good medical practice within
the community;
iii) not primarily for the convenience of Member, Member's family, his/her
Physician, hospital, or other health care provider; and
iv) the most appropriate supply or level of service which can be safely
provided to Member in the least costly setting or as otherwise provided in
Member's certificate.
m) Member means an eligible individual covered by or enrolled under a
Certificate, and the eligible dependents of such individual who are enrolled
under such Certificate. In the event that FPA has a Contract as defined in
section 5b(iii) below to serve Medicare or Medicaid beneficiaries, the
definition of Member shall include enrolled individuals from the Medicare
or Medicaid populations. Members covered under this Agreement shall be
determined solely by FPA.
n) Participating Physician means the Physician who has entered into an
agreement with FPA, or on whose behalf an agreement has been entered into
with FPA (including any Physicians employed by, associated with or
contracting with Participating Physician), to provide certain services to
Members upon appropriate referral. If this Agreement affects more than
one Physician, a list of said Physicians will appear on Attachment A- I
of this Agreement.
o) Participating Physician Services Agreement ("Agreement") means the
written Agreement between a Participating Physician and FPA to provide
health care services for Members. This Agreement shall be the sole
<PAGE>
governing document between Participating Physician and FPA for Members
assigned to FPA. Under no circumstances shall this Agreement be interpreted
as granting any exclusive rights or privileges to the Participating
Physician.
p) Participating Physician Services means those services set forth in
Attachment A which are delivered by a Participating Physician and with
respect to which Participating Physician has been credentialed by FPA
(or Health Plan, if applicable).
q) Participating Provider means a health care provider including, but
not limited to, Physicians, hospitals, ancillary providers, that have
entered into an agreement with FPA, or on whose behalf a contract has
been entered into with FPA, for the provision of Covered Services to
Members.
r) Payor Agreement refers to the contract between a Health Plan and
FPA which describes the costs, procedures, benefits, conditions, limitations,
exclusions and other obligations to which Health Plan Members are subject
under Health Plan's health services plan and which describes the terms and
obligations of the Health Plan/FPA relationship.
S) Physician means a duly licensed doctor of medicine, osteopathic
medicine, doctor of chiropractic, or podiatric medicine, each respectively
having an unrestricted license to practice medicine in the jurisdiction in
which such individual's services are to be provided, including, if
applicable, an unrestricted license to prescribe controlled medications,
substances and supplies. Every Physician must be credentialed pursuant to
FPA's credentialing criteria.
i) Participating Physician means the Physician who has entered into an
agreement with FPA, or on whose behalf an agreement has been entered into
with FPA (including any Physicians employed by, associated with or
contracting with Participating Physician), to provide certain services
to Members upon appropriate referral.
ii) Covering Physician means the Physician or other licensed health care
provider, as may be appropriate, who has entered into an agreement, either
oral or written, with a Participating Physician to arrange Covered Services
for his/her Members when Participating Physician is not available. Covering
Physician may or may not be under an agreement with Health Plan or FPA.
iii) Primary Care Physician ("PCP") means a Participating Provider who has
agreed to provide services to Members who have selected or have been
assigned to PCP and to assume primary responsibility for arranging and
coordinating the overall health services of such Members, as applicable.
<PAGE>
t) Quality Improvement ("QI") means those processes and procedures
established by FPA or Health Plan which are designed to review and analyze
various aspects and levels of desired health care.
u) Referral Authorization means the form or number evidencing an
authorization by FPA for referral of a Member to a health care provider,
including Participating Providers.
v) Resource-Based Relative Value Scale ("RBRVS") means the system of
medical care claims payment utilized by the Health Care Financing
Administration ("HCFA") in the payment of Medicare claims, wherein payment
is made by multiplying a universal conversion factor by the RBRVS-determined
relative value of each given procedure. Regional modifiers shall not apply
under this Agreement.
w) Senior HMO Coverage Plan means a plan of health care expense coverage
provided to Seniors through insurance contracts, health care services plans,
or any other health care service arrangements agreed to by FPA. Senior HMO
Coverage Plans covered under this Agreement shall be determined solely by
FPA.
x) Senior means any Member who is eligible for Medicare as defined by
HCFA by reason of attainment of age 65 or by the presence of a Medicare-
eligible disabling condition, and is a member of Senior HMO Coverage Plan
as determined by FPA.
y) Service Area means the geographic area for which FPA has contracted for
health care services on behalf of Members. The Service Area shall be defined
as the State of Florida and FPA shall determine which portion, if not all, of
the Service Area as defined in Attachment A-3 will be the responsibility of
Participating Physician.
z) Specialty Care Financial Allocation Fund (Fund) means the mechanism
through which FPA calculates payments for covered health care services,
which is described in Attachment C of this Agreement.
aa) Utilization Management ("UM") means those processes and review
procedures that must be followed by all Participating Physicians.
2. OBLIGATIONS OF FPA
a) Administrative Procedures. FPA shall make available to Participating
Physician administrative procedures and other administrative duties of
Participating Physician under this Agreement. Participating Physician
agrees to abide by these administrative procedures.
b) Compensation. For all services for which Participating Physician is
responsible hereunder, as set forth in Attachment A, Participating Physician
shall be compensated by FPA in accordance with Attachment B and C for the
provision of those services. If a Participating Physician provides any
Covered Service not specified in Attachment A or any non-Covered Service,
Participating Physician shall not be entitled to any compensation for such
services, except as provided in section 3a. If a Participating Physician
<PAGE>
provides any Covered Service not specifically authorized by FPA,
Participating Physician shall not be entitled to any compensation for
such services, except as provided in section 3a or in cases of Emergency.
Participating Physician shall accept such compensation with the exception
of applicable copayments and/or deductibles ("Copayments") as payment in
full for all services provided by Participating Physician except as
otherwise provided by this Agreement.
c) FPA shall make payment to Participating Physician for covered health
care services based on the mechanism specified in Attachment B and C.
Notwithstanding the above or anything else in this Agreement to the
contrary, FPA shall only be responsible to make the payments due
Participating Physician to the extent that FPA has collected the charges
for health care services provided by Participating Physician for which
payment is sought from the Health Plan. Participating Physician shall
receive from FPA compensation as stated above less any copayments which
are the responsibility of Members.
d) Should FPA fail to pay for Covered Services rendered by a Participating
Physician, the Participating Physician may seek payment from Health Plan,
and Health Plan will pay the Participating Physician for Covered Services
compensable under the agreement.
3. OBLIGATIONS OF PARTICIPATING PHYSICIAN
a) Health Services. Participating Physician agrees to provide or arrange
for the provision of those Covered Services set forth on Attachment A hereto,
consistent with FPA's (or Health Plan's, if applicable) UM/QI program.
Participating Physician shall not refer Members to other Physicians or
Participating Providers without a Referral Authorization from FPA, except
as set forth in the UM/QI program. In the event Participating Physician
shall provide a Member non-Covered Services, Participating Physician shall,
prior to the provision of such non-Covered Services, inform Member:
(a) of the service(s) to be provided; (b) that FPA and the Health Plan
will not pay or be financially liable for said services; and (c) that
Member will be financially liable for such services. In the event that
Member is not so informed, neither Member, FPA nor Health Plan shall be
financially liable to Participating Physician for those services.
Participating Physician shall not bill Members for services that are
determined by Health Plan, in its sole discretion, not to be Medically
Necessary unless Member has been informed, in advance by Participating
<PAGE>
Physician that the services are not Medically Necessary and has agreed
to be financially liable for those services.
b) Provision of Services and Professional Requirements.
i) Participating Physician shall make necessary and appropriate
arrangements to ensure the availability of Participating Physician
Services to Members on a twenty-four (24) hour per day, seven (7) day
per week basis, including arrangements to ensure coverage of Members
after hours or when Participating Physician is otherwise absent, consistent
with FPA's staffing requirements. Participating Physician agrees that
scheduling of appointments shall be done in a timely manner, as specifically
defined in FPA's Provider Manual. Participating Physician shall ascertain
and ensure that such Covering Physician will cooperate with and accept the
findings of FPA's peer review procedures as they relate to services provided
to Members and that such Covering Physician will seek authorization from
the Medical Director prior to all hospitalizations, except for Emergencies
or as otherwise provided in the UM/QI program. For services rendered by
Covering Physician on behalf of Participating Physician, Participating
Physician shall be responsible to make suitable arrangements with Covering
Physician regarding the amount and manner in which said Covering Physician
will be reimbursed or otherwise compensated, provided, however, that
Participating Physician shall ensure that Covering Physician will not,
under any circumstances, bill Members (except Copayments), FPA or Health
Plan for Covered Services. Participating Physician shall be liable for
paying Covering Physician and Participating Physician hereby agrees to
indemnify and hold harmless Members, AHCA, HCFA, FPA and Health Plan against
charges for Covered Services rendered by Covering Physician. It is
understood that FPA reserves the right to make payment to any Covering
Physician for which a valid invoice, or portion thereof, is outstanding for
more than thirty (30) days. FPA will provide notice of its intention to
make payment of such claims but FPA need not wait the above thirty (30) day
period where Participating Physician has engaged in a pattern of late
payments to Covering Physician in the past, as reasonably determined by FPA.
FPA may deduct any such payments plus a reasonable administrative fee from
any amounts otherwise due Participating Physician pursuant to this Agreement.
ii) All services performed hereunder shall be consistent with the standards
of medicine and osteopathy, and such services shall be performed in
accordance with the customary rules of ethics and conduct promulgated by the
American Medical Association, the American Osteopathic Association, the
American Hospital
<PAGE>
Association and similar provider organizations, as
applicable, and such other bodies, formal or informal, governmental or
otherwise, from which health care providers seek advice and guidance or to
which they are subject to licensing and control as applicable.
iii) Participating Physician shall utilize such additional allied health
and other qualified licensed personnel as are available and appropriate
for effective and efficient delivery of health services, consistent with
FPA policies.
iv) Participating Physician shall participate in such programs of continuing
education as FPA may require as well as such programs, if any, as are
required by state regulatory authorities.
v) Participating Physician shall notify FPA within one (1) business day
of becoming aware of:
a) loss or restriction of any of his/her/its hospital privileges;
b) loss or limit of his/her/its DEA permit;
c) loss or restriction of his/her/its license to provide health services
in any state as well as any actions taken by the state, Joint Commission on
Accreditation of Healthcare Organizations ("JCAHO"), or any other regulatory
body that would materially impair the ability of Participating Physician to
provide and/or arrange for health services to Members;
d) loss or suspension of his/her/its participation in the Medicare and/or
Medicaid Programs;
e) any adverse action by a governmental body, or
f) occurrence of an Incident at his/her/its facility involving a Member
and shall do so on the Incident Report form as provided by FPA.
Participating Physician shall also provide FPA and Health Plan with a
copy of any and all Code 15 Reports filed with the Agency for Health
Care Administration (AHCA) pursuant to Florida law, involving any Members.
Receipt of the notices required by this section shall not constitute an
assumption of liability on the part of FPA or Health Plan. If any event
described above occurs, Participating Physician consents to FPA disclosing
the event to each affected Health Plan, if the terms of the Payor Agreement
require such disclosure.
<PAGE>
vi) Participating Physician, for the term of this Agreement, shall meet
all credentialing and recredentialing requirements as may be established
by FPA (or Health Plan, if applicable) from time to time.
vii) Participating Physician agrees and warrants that he/she is in compliance
with all applicable local, state and federal laws relating to the provision
of medical services, including the Federal Clinical Laboratory Improvement
Act and other acts, as applicable.
viii) Participating Physician acknowledges FPA's and Health Plan's
obligation and right to report to and, access the National Practitioner
Data Bank as it relates to Participating Physician. Participating Physician
agrees to assist FPA and Health Plan in accessing and reporting to the Data
Bank, including making inquiries to the Data Bank on behalf of FPA and
Health Plan, if requested to do so by FPA.
ix) Participating Physician shall not initiate general communications with
Members, except with respect to the treatment of a particular medical
condition, or collection for non-Covered Services, Copayments or Deductibles
without the prior written consent of FPA and the applicable Health Plan
which consent may be withheld in FPA's and such Health Plan's sole
discretion. This provision shall survive the termination of this Agreement
for a period of six (6) months.
x) Participating Physician agrees to implement applicable and reasonable
procedures necessary for external accreditation of Health Plan and/or FPA
by the National Committee for Quality Assurance (NCQA) or any other similar
organization selected by Health Plan and/or FPA.
xi) Participating Physician shall comply with any and all applicable
Florida laws and regulations governing contracting providers of health
care service plans and relating to the subject matter of this Agreement
including without limitation the requirements set forth in section 641.17
to 641.395 of the Florida Insurance code, as amended, and Chapter 4-31 of
the rules of the Department of Insurance as amended, as applicable.
c) Claims. Unless otherwise specifically provided in Attachment B and C
of this Agreement, Participating Physician shall bill FPA for all services
rendered in a manner consistent with the terms of this Agreement in a
billing form acceptable to FPA within thirty (30) days of providing such
services. FPA shall pay Participating Physician for such services within
<PAGE>
thirty (30) days of receipt of an undisputed bill. If Participating
Physician has not billed FPA for Participating Physician Services rendered
to Members within sixty (60) days of a Member's receipt of such services,
Participating Physician's claim for compensation with respect to such
services shall be deemed waived. Participating Physician agrees to bill
only for services that have been specifically authorized by FPA.
Participating Physician Services not specifically authorized by FPA shall
not be eligible for payment. All payments made by FPA to Participating
Physician shall be considered final unless adjustment is requested in
writing by Participating Physician within forty-five (45) days after
receipt of such payment by FPA.
d) Referrals. Except in Emergencies, or when authorized by Medical
Director, Participating Physician agrees to refer Members to other
Participating Providers. Participating Physician further agrees to
obtain a Referral Authorization from FPA prior to any referral to other
Participating Providers, except as otherwise provided in the UM/QI program,
and prior to such referral to furnish such Participating Providers complete
information on treatment procedures and diagnostic tests to be performed.
In the event that services required by a Member are not available from
Participating Providers, other providers may be utilized with the prior
approval of Medical Director. If Participating Physician refers a Member
to a Participating Provider, or other provider, in a manner contrary to
the UM/Ql program, the cost of such services shall, at FPA's option, be
the financial responsibility of Participating Physician and FPA may
offset such liability from the amounts otherwise due Participating
Physician pursuant to this Agreement.
e) Hospital Admissions. In cases where a Member requires a non-Emergency
hospital admission, Participating Physician, as provided in the UM/QI
program, shall secure prior authorization from FPA for such admission.
Participating Physician shall abide by the UM/QI program and shall not
extend the initial length of stay assigned to Member, as set forth in FPA's
authorization, without prior approval from Medical Director. If a
Participating Physician admits or extends the length of stay of a Member
in a manner contrary to the UM/QI program, the cost of such services shall,
at FPA's option, be the financial responsibility of Participating Physician,
and FPA may offset such liability from the amounts otherwise due
Participating Physician pursuant to this Agreement.
f) No Discrimination of Members: Acceptance of Members. Participating
Physician shall observe, protect and promote the rights of Members as
patients without regard to race, age, sex, national origin, religion,
place of residence, economic status, health status or health care needs,
benefit plan or source of payment of such Members, including individuals
who have or are currently receiving care from Participating Physician for
whom
<PAGE>
payment is being made on a self-pay basis or through other third-
party payor program. A Participating Physician may notify FPA upon ninety
(90) days prior written notice that he/she does not wish to accept
additional Members associated with a Health Plan. However, in such event,
Participating Physician shall not accept any new patients associated with
any other Health Plan until such time as that Participating Physician
reopens his/her practice to Health Plan Members. FPA may limit, restrict
or suspend Members' opportunity to select and/or use Participating
Physician.
g) Charges to Members. FPA shall require Members to pay applicable
Copayments for certain Covered Services at the time services are rendered.
It is the responsibility of Members to pay such Copayments at the time
services are received. In addition, Members shall be financially liable
to Participating Physician for non-Covered Services provided by Participating
Physician pursuant to section 3a. Participating Physician shall indemnify
and hold FPA, Health Plan, AHCA, HCFA and Members harmless from any costs,
including legal fees, relating to improper billing practices or efforts
which breach the terms of this Agreement.
h) Member Non-liability. Participating Physician agrees and warrants,
that in no event including, but not limited to, non-payment by FPA or Health
Plan, FPA's or Health Plan's insolvency, or breach of this Agreement, shall
Participating Physician, or any representative of Participating Physician,
bill, charge, collect a deposit from, seek compensation, remuneration or
reimbursement from or have any recourse against any Member or persons other
than FPA acting on any Member's behalf, the Florida Agency for Health Care
Administration (AHCA), or the Health Care Financing Administration (HCFA)
defined below for services provided pursuant to this Agreement. This
provision shall not prohibit the collection by Participating Physician of
any Copayments from a Member, in accordance with the terms of the applicable
Certificate, nor shall it prohibit charges for services as provided in
section 3a above. Participating Physician further agrees, that
i) this provision shall survive the termination of this Agreement
regardless of the cause giving rise to termination and shall be construed
to be for the benefit of Members, as applicable, and
ii) this provision supersedes any oral or written contrary agreement now
existing or hereafter entered into between Participating Physician and
Members, or persons acting on their behalf.
No modifications, additions, or deletions to the provisions of this section
3h or section 4b shall be made by FPA without the prior written approval of
the Florida Commissioner of Insurance. Participating Physician shall not
balance bill any Member.
<PAGE>
i) Records and Reports; Encounter Data.
i) Participating Physician shall maintain such records and provide such
medical, financial and administrative information to FPA as may be
necessary for compliance by FPA and Health Plan with state and federal
law, as well as for program management purposes. Participating Physician
agrees to provide FPA monthly encounter data on such forms as may be
approved by FPA and FPA may withhold Participating Physician's monthly
capitation payment, or a portion of such capitation payment, if such
encounter data is not received from Participating Physician within thirty
(30) days from the date Participating Physician renders services. Records
shall be maintained for a period of not less than seven (7) years from the
termination of this Agreement and be retained further if records are under
review or audit until such review or audit is complete. FPA, Health Plan,
state and federal officials shall have access at reasonable times, upon
demand, to the books and medical records of Participating Physician relating
to the health care services provided Members, to the cost thereof, and to
Copayments received by Participating Physician from Members and FPA and
Health Plan shall have the right to copy such books and medical records,
either with the written consent of Members which consent as contained in
Health Plan's enrollment form is hereby deemed satisfactory by Participating
Physician for such purposes, or as otherwise provided by applicable law.
In the event an examination of the Covered Services rendered under this
Agreement is conducted by appropriate state, federal or other governmental
officials, Participating Physician shall submit any required books and
records to facilitate such examination. FPA, Health Plan, state and federal
officials shall also have the right to inspect, at reasonable times,
Participating Physician's facilities pursuant to FPA's or Health Plan's
quality improvement and peer review procedures and state and federal
mandated procedures.
ii) Participating Physician shall maintain a medical record for each Member
in accordance with the requirements established by FPA, consistent with
applicable state and federal laws. Medical records of Members will include
reports from referral providers, discharge summaries, records of Emergency
Services received by Member and such other information as FPA may reasonably
request. Medical records of Members shall be treated as confidential so as
to comply with all applicable state and federal laws and regulations
regarding the confidentiality of patient records.
j) Member Grievances. Participating Physician agrees to cooperate with
FPA and Health Plan in resolving any Member grievances related to the
<PAGE>
provision of health services hereunder. In this regard, Participating
Physician agrees to participate in grievance procedures, as FPA and Health
Plan from time to time may establish, and comply with all final
determinations rendered.
k) Insurance.
i) Participating Physician agrees to maintain in force such policies of
general and professional liability insurance, as shall be necessary, to
insure Participating Physician and their employees against any claim or
claims for damages arising by reason of personal injuries or death
occasioned, directly or indirectly, in connection with the performance of
any service by Participating Physician. The amounts and extent of such
professional liability insurance coverage shall be subject to the approval
of FPA and shall not be less than $250,000 per occurrence, $750,000 per
policy period or as otherwise required by applicable laws or regulations.
In addition, Participating Physician shall obtain and maintain General
Liability insurance in amounts no less than $1,000,000 per occurrence
Combined Single Limit or as otherwise required by applicable laws or
regulations. Participating Physician shall provide Certificates of
Insurance to FPA upon request. Both parties shall obtain worker's
compensation insurance to cover all employees as required by applicable
state law. Participating Physician further agrees that FPA shall be
given thirty (30) days prior written notice of cancellation or termination
of Participating Physician's insurance policies. In the event of such
cancellation and/or termination, FPA may terminate this Agreement effective
immediately upon Participating Physician's receipt of written notice from
FPA.
ii) Participating Physician agrees to notify FPA immediately whenever a
Member files a claim or a notice of intent to commence legal action against
Participating Physician. Upon request by FPA or Health Plan, Participating
Physician agrees to provide full details of the nature, circumstances and
disposition of such claims to FPA, Health Plan or their legal representatives.
iii) The parties agree to adhere to and be bound by the common law and
statutory principles of indemnification and contribution as they exist in
the State of Florida.
1) Indemnification and Hold Harmless. Participating Physician agrees to
indemnify and hold FPA, Health Plan, HCFA, AHCA and any Member harmless from
and against any and all debts of Participating Physician; provided, however,
this provision shall not abrogate the responsibility of Health Plan to pay
for Covered Services as a licensed health maintenance
<PAGE>
organization as provided in section 2d. Participating Physician agrees to
indemnify and
hold harmless FPA, Health Plan, HCFA, AHCA, and any Member from any and all
debts, claims, damages, costs, causes of action, expenses or liabilities,
including reasonable attorney's fees and court costs, to the extent
proximately caused by or which may arise out of and/or be incurred in
connection with, any negligent or other wrongful conduct on the part of
Participating Physician arising from this Agreement. In return, FPA agrees
to indemnify and hold Participating Physician harmless from any and all
debts, claims, damages, costs, causes of action, expenses or liabilities,
including reasonable attorney's fees and court costs, to the extent
proximately caused by or which may arise out of and/or be incurred in
connection with, any negligent or other wrongful conduct on the part of
FPA arising from this Agreement. This section shall survive the termination
of this Agreement for any reason, including insolvency.
m) Administration.
i) Participating Physician agrees to cooperate and participate in FPA's
UM/Ql program or a Health Plan's UM/Ql program, if applicable, including
peer review and/or provider or Member grievance programs, external audit
systems, and administrative process as may be established by FPA.
Participating Physician shall comply with all final determinations rendered
pursuant to the UM/QI program. The UM/QI program shall include, but not
be limited to, pre-authorization of elective admissions and procedures,
referral processes and reporting of encounter data. Each party agrees to
notify the other party within two (2) business days whenever a Member files
an informal or formal complaint as set forth in FPA's or Health Plan's
grievance procedure, as provided by FPA from time to time, and to refer
Members who have complaints to Health Plan's Member Services Department.
Each party shall cooperate with the other party in the investigation of
any such complaint.
ii) FPA and Health Plan may use the name of Participating Physician and
his/her address, phone number, types of practice, hospital affiliations,
as may be applicable, and an indication of Participating Physician's
willingness to accept additional Members in FPA's and Health Plan's roster
of Participating Providers and other FPA materials. Participating Physician
may use the name of FPA to indicate it is a contracting provider, subject
to FPA's written approval, which, approved, shall not be unnecessarily
withheld. Both parties agree that this Agreement is an indication that
provider is willing to accept additional Members with FPA.
iii) Participating Physician will cooperate to the fullest extent possible
to allow FPA to evaluate possible subordination claims and to
<PAGE>
coordinate benefits in accordance with the National Association of Insurance
Commissioner's (NAIC) guidelines. In the event Participating Physician
provides Covered Services to a Member, Participating Physician, at his/her
sole cost and expense, will cooperate to the fullest extent possible to:
a) Determine whether the Member has medical services coverage in addition
to Health Plan;
b) Determine the Member's primary and secondary payor, in accordance with
NAIC's guidelines; and
C) Secure reimbursement from primary payor.
iv) Participating Physician agrees to assist and work with the Medical
Director in implementing the UM/Ql program and resolving other issues
related to the delivery of health services that may arise from time to time.
n) Cooperation with Health Plan. Participating Physician understands that
Health Plans will place certain obligations upon FPA regarding the quality of
care received by Members and that Health Plans in certain instances will have
the right to oversee and review the quality of care administered to Members.
Participating Physician agrees to cooperate with Health Plans in the review
of the quality of care administered to Members. Participating Physician
further agrees to participate in any Member grievance procedures, upon the
request of FPA or a Health Plan.
o) Risk Management. Participating Physician shall participate in FPA
and/or Health Plan's risk management program by allowing access to his/her
respective facilities for scheduled reviews and audits. Additionally,
Participating Physician shall notify FPA and/or Health Plan's risk management
department of any and all Incidents involving Health Plan Members in writing
within two (2) calendar days of occurrence. Thereafter, FPA and
Participating Physician and Health Plan's risk management department shall
coordinate all investigative efforts.
p) Representation of Participating Physician. FPA shall represent
Participating Physician in matters with Health Plans pertaining to the
provision of Covered Services under this Agreement, and Participating
Physician grants FPA the written consent to such representation.
4. TERM AND TERMINATION
a) Term. When executed by both parties, this Agreement shall become
effective as of the date set forth in the introductory paragraph on page 1
hereof and shall continue in effect for a period of one (1) year from that
date. Thereafter, the Agreement shall be automatically renewed for periods
of one (1) year unless terminated as provided below.
<PAGE>
b) Termination.
i) This Agreement may be terminated by either party at any time by written
notice given at least ninety (90) days in advance of such termination. This
Agreement may also be terminated by FPA effective immediately upon written
notice if Participating Physician violates sections 3b(i), (ii), (iv), (vii),
(viii), (x), (xi), (xii), 3f, 3h, 3k, 3m(i), 51 or 5m hereof or if, in FPA's
reasonable opinion, continuation of this Agreement will negatively affect
Members' care. This Agreement may also be terminated by FPA if Participating
Physician commits a material breach of any provision herein.
ii) Participating Physician shall provide ninety (90) days advance written
notice to FPA, Health Plan, Department of Insurance and the Agency for Health
Care Administration before terminating this Agreement for any reason. The
non-payment by FPA for goods or services rendered by Participating Physician
to Members shall not be a valid reason for avoiding this ninety (90) day
advance notice of termination provision. Upon receipt by FPA of a ninety
(90) day termination notice, FPA may, if requested by Participating
Physician, terminate this Agreement in less than ninety (90) days if Health
Plan is not financially impaired or insolvent. This provision is being
included in this Agreement pursuant to Fla. Stat. 641.315.
iii) Upon such termination, the rights of each party hereunder shall
terminate, provided however, that such action shall not release Participating
Physician or FPA of their obligations with respect to: (a) payments accrued
to Participating Physician, prior to termination; (b) Participating
Physician's agreement not to seek compensation from Members for Covered
Services provided prior to termination or pursuant to subsection (c) below;
and (c) the continuation of Participating Physician's obligations with
respect to, and Participating Physician's care for, then Members until
continuation of such Members' care can be arranged by FPA consistent with
sound medical judgment or, at FPA's election, until the anniversary date of
such Members' coverage by Health Plan, but not to exceed twelve (12) months.
FPA shall compensate Participating Physician, as applicable, for such care
pursuant to the terms of this Agreement. Participating Physician further
agrees; (a) this provision shall survive the termination of this Agreement
regardless of the cause giving rise to termination and shall be construed to
be for the benefit of Member, FPA and Health Plan, as applicable, and (b)
this provision supersedes any oral or written contrary agreement now existing
or hereafter entered into between
<PAGE>
Participating Physician and Members, or
persons acting on their behalf. No modifications, additions, or deletions
to the provisions of this section 4b shall be made by FPA without the prior
written approval of the Florida Commissioner of Insurance. Upon notice of
termination, Participating Physician shall cooperate fully with FPA and FPA
protocols, if any, in the transfer of Members to other health care
providers.
iv) Participating Physician agrees that, pursuant to a Payor Agreement, a
Health Plan may, with or without cause, terminate or obligate FPA to
terminate Participating Physician's participation in the Health Plan
notwithstanding the continuation of this Agreement. In such event of
termination, Participating Physician expressly agrees to hold FPA and Health
Plan harmless from any liability or damage arising from, relating to or
resulting from FPA's compliance with its obligations under a Payor Agreement
to terminate Participating Physician's provision of services to Health Plan
Members in connection with such Payor Agreement. This provision shall
survive the termination of this Agreement.
5. MISCELLANEOUS
a) Modification of this Agreement. Subject to the provisions hereafter,
this Agreement may be amended or modified in writing as mutually agreed upon
by the parties. In addition, FPA may modify this Agreement upon thirty (30)
days written notice to Participating Physician. Failure of Participating
Physician to object to such modification during the thirty (30) day notice
period shall constitute acceptance of such modification. If Participating
Physician objects to such modification or amendment notwithstanding section
5o, below, FPA may terminate this Agreement upon written notice pursuant to
section 4b. This Agreement shall automatically be amended to comply with
the requirements of state or federal law and, if applicable, the compensation
rates in the Attachment B and C shall be adjusted accordingly.
b) Interpretation. The validity, enforceability and interpretation of any
of the clauses of this Agreement shall be determined and governed by
applicable Florida law as well as applicable federal laws. In the event of
any conflict between this Agreement and a contract entered into between
Health Plan and: (i) the State of Florida for prepaid Medicaid Members;
(ii) HCFA for prepaid Medicare Members; and/or (iii) any governmental
entity with respect to a government health care or benefit program (the
"Contracts") for which Participating Physician is providing services, the
Contracts shall govern. Participating Physician agrees to be subject to
all requirements that may be imposed on FPA and Participating Physician by
Health Plan under the Payor Agreement. In the event of any conflict between
this Agreement and a Payor Agreement for which Participating Physician is
<PAGE>
providing services, the Payor Agreement shall govern. The parties agree
that jurisdiction for any legal action regarding this Agreement shall be in
the state or federal courts in Dade County, Florida. Except where provided
in favor of Member, Health Plans and/or certain governmental entities,
there shall be no third party beneficiaries to this Agreement.
c) This Agreement shall not be considered valid until approval of
Participating Physician by Credentialing Committee. Participating Physician
shall continue to meet the standards for participation set by the
Credentialing Committee throughout the term of this Agreement.
d) This Agreement shall not be construed as a guarantee, warrant or
promise that Members will be referred or assigned to Participating Physician
by FPA.
e) Severability. The illegality, unenforceability or ineffectiveness of
any provision of this Agreement shall not affect the legality, enforceability
or effectiveness or any other provision of this Agreement.
f) Waiver. The waiver of any breach of any term, covenant or condition of
this Agreement, shall not be deemed a waiver of any subsequent breach of the
same or any other term, covenant or condition.
g) Notice. Any notice required to be given pursuant to the terms and
provisions hereof shall be sent by certified mail, return receipt requested,
postage prepaid, or by overnight mail service such as Federal Express, to
FPA at:
Attn: Contracts Department
FPA Medical Management of Florida, Inc.
5835 Blue Lagoon Drive
Miami, Florida 33126
and to Participating Physician:
Apollo Eye Associates, Inc.
2424 North Federal Highway
Suite 362
Boca Raton, Florida 33431
h) Relationship of Parties.
i) None of the provisions of this Agreement is intended to create nor
shall be deemed or construed to create any relationship between the parties
hereto other than that of independent entities contracting with each other
hereunder solely for the purpose of effecting the provisions of this
Agreement. None of the above nor any of their respective employees shall
be construed to be the agent, employer or representative of the other nor
will any of the above have an expressed or implied right of authority to
assume or create any
<PAGE>
obligation or responsibility on behalf of or in the
name of the other party.
ii) Nothing contained in this Agreement shall be construed to require
Participating Physician to: (i) recommend any procedure or course of
treatment which a Participating Physician deems professionally unacceptable;
or (ii) recommend that FPA or Health Plan deny benefits for any procedure or
course of treatment.
iii) FPA agrees that it shall not intervene in any way or manner with the r
endition of medical services by Participating Physician, it being understood
and agreed that the traditional relationship between Physician and patients
will be maintained. Thus, Participating Physician agrees that denial of
authorization by FPA or Health Plan for a particular course of medical
treatment shall not relieve Participating Physician from providing or
recommending such care to Members as they deem to be appropriate nor shall
such benefit determination be considered to be a medical determination by
FPA or Health Plan. All coverage determinations are appealable by Members
and Participating Physician agrees to inform Members of their right to
appeal an adverse utilization review or coverage determination pursuant to
FPA's or Health Plan's grievance procedures.
i) Headings. The headings in this Agreement are inserted merely for the
purpose of convenience and do not limit, define or extend the specific terms
so designated.
j) Agreements with Employees and Independent Contractors. Notwithstanding
any interpretation of this Agreement to the contrary, Participating Physician
agrees that all of the provisions of this Agreement, unless clearly
inapplicable, shall apply with equal force to Participating Physicians'
employees or independent contractors and Participating Physician agrees to
assure such compliance. Participating Physician agrees, and shall require
its employees and independent contractors who are providing Participating
Physician Services to Members to agree that in the event of any
inconsistency, omission or misinterpretation in the contract entered into
by Participating Physician and the employee or independent contractor, the
terms of this Agreement shall control, notwithstanding any review and/or
approval of those agreements by FPA. At FPA's request, Participating
Physician shall provide FPA with copies of all forms of agreements entered
into to render services to Members pursuant to this Agreement.
k) Professional Corporations or Partnerships. In the event that
Participating Physician contracts with a Physician that is a professional
corporation, professional association or partnership rather than an
individual Physician
<PAGE>
or provider, Participating Physician agrees that all
of the terms set forth herein applicable to a Participating Physician shall
apply with equal force to both the professional corporation, professional
association or partnership and the individual Physician or providers
associated with such entity.
l) Proprietary Information. Participating Physician recognizes that all
material provided to them by FPA, including Member lists, is not the property
of Participating Physician. Participating Physician shall not use such
information for any purpose other than to accomplish the purposes of this
Agreement. Participating Physician shall not disclose or release such
material to any third-party without the prior written consent of FPA.
This specifically includes, but is not limited to, use of any of the above
referenced materials, directly or indirectly, to further the business
purposes of any other organization or business including, but not limited
to, Participating Physician, HMOs or other alternative health care delivery
systems or other entities in the business of FPA. Upon notice of the
termination of this Agreement, Participating Physician agrees to return all
such materials, including all copies, whether authorized or not, to FPA.
This provision shall survive the termination or expiration of any term or
provision of this Agreement. In addition, Participating Physician shall
not solicit Members, directly or indirectly, to enroll in any different
insurance or health coverage or alternative health care delivery system than
currently enrolled by such Members. This provision shall survive the
termination or expiration of any term or provision of this Agreement for a
period of one (1) year from the effective date of termination. The parties
agree that any violation of this section by Participating Physician will
result in irreparable injury to FPA and Health Plan. Therefore, in addition
to any remedies otherwise available to FPA and Health Plan and
notwithstanding section 5m below, FPA and Health Plan are hereby entitled to
an injunction enjoining and restraining Participating Physician, and any
related individuals or parties from violating this section. If it is
determined that the scope of the provisions of this section are too extensive
to be enforceable by court, then they shall be modified to be whatever is
determined by a court to be reasonable in order to obtain enforcement and
the parties hereto agree to accept such determination subject to any appeals.
For purposes of this section, information shall not be considered proprietary
if (i) such information is required to be disclosed pursuant to law,
provided, however, that FPA is provided reasonable advance notice of such
disclosure, or (ii) such information is generally available to the public
other than through a violation of this section by Participating Physician.
m) Arbitration. Except as provided in section 5l, any dispute, controversy
or claim arising out of or relating to, this Agreement shall, on the request
of one party served upon the other, be submitted to arbitration. Any such
<PAGE>
dispute, controversy or claims will be settled by arbitration in accordance
with the rules of the American Arbitration Association then in effect. Any
order, judgment or decision of the arbitrators may be entered in a court of
competent jurisdiction. The cost of any arbitration, including but not
limited to attorneys' and related fees, shall be borne solely upon the losing
party. The site of arbitration shall be at the corporate offices of FPA in
Dade County, Florida. Notwithstanding the rules of the American Arbitration
Association, the arbitrators shall not be permitted to award punitive
damages.
n) Affirmative Action. Participating Physician agrees to abide by the
nondiscrimination and affirmative action requirements of Executive Order
11246, the Vietnam Era Veterans Readjustment Assistance Act of 1974, section
503 of the Rehabilitation Act of 1973, and the implementing rules and
regulations of the Office of Federal Contract Compliance Programs, U.S.
Department of Labor, as found in the Code of Federal Regulations, Title 41,
Chapter 60.
o) Entire Agreement. This Agreement (including all attachments annexed
hereto) contains all the terms and conditions agreed upon by the parties and
supersedes all other agreements of the parties, oral or otherwise, regarding
the subject matter hereof.
<PAGE>
HEREOF, the undersigned have executed this Agreement as of the day and year
first above written.
FPA PARTICIPATING PHYSICIAN
/s/ Richard Collado /s/ J. R. Damron, Jr.
Title: VP MSO Operations Title: Chief Financial Officer
Date: June 2, 1997 Date: May 28, 1997
Tax ID No.: 65-0636932
<PAGE>
ATTACHMENT A
PARTICIPATING PHYSICIAN SERVICES
"Participating Physician Services" for the purposes of this Agreement means
all the services customarily provided by Physician practicing in the field of
Optometry and Optical including, without limitation, such services rendered
in a Physician's office, ambulatory care facility, or on an inpatient basis
performed at the applicable Health Plan's Participating Provider hospitals
which are Covered Services and are rendered in a manner consistent with all
provisions of this Agreement, FPA's UM/QI protocols and the applicable
Certificate, and at non-participating hospitals in the Service Area provided
Participating Physician is notified of the need for a Participating Physician
by FPA or its designee.
<PAGE>
ATTACHMENT A- I
The following is a list of Physicians on whose behalf this Agreement has
been entered into with FPA, including any Physician employed by, associated
with, or contracted with Participating Physician. This list may be amended
by FPA and Participating Physician as necessary; however, all Physicians
affiliated with Participating Physician as described above are considered
bound by the requirements of this Agreement whether or not they are listed
in this Attachment A-1, with the sole exception of Physicians explicitly
defined in this Attachment A- I as not participating with FPA under this
Agreement.
<PAGE>
ATTACHMENT A-2
HEALTH PLAN(S)
PCA Family Health Plan, Inc.
PCA Health Plans of Florida, Inc.
Foundation Health, A Florida Health Plan, Inc.
<PAGE>
ATTACHMENT A-3
SERVICE AREA
The Service Area shall be defined as Dade, Broward, Palm Beach, and St. Lucie
Counties.
<PAGE>
ATTACHMENT B
COMPENSATION
Compensation shall be based on a RBRVS conversion factor determined by the
Specialty Care Allocation Fund as defined Attachment C.
FPA Conversion Factors as of 10/01/96:
Commercial HMO Coverage Plans: $26.75
Medicaid HMO Coverage Plans: $24.03
Senior HMO Coverage Plans: $26.75
Not withstanding the above, the following Covered Services will be reimbursed
as such:
Routine well care vision examination $35.00
Frames and lenses, single vision $25.00
Frames and lenses, bifocal $35.00
Frames and lenses, trifocal $45.00
Contact lenses, medically necessary $63.00
No reimbursement will exceed the covered benefit amount.
Frames shall be provided from Apollo's Executive Collection, which includes
72 current styles. This frame collection is available for inspection by FPA.
Lenses shall be CR-39 plastic lenses as follows:
Single Vision
Bifocals - Round 22, FT25 or FT28
Trifocals - 7 x 28
Contacts lenses will consist of the following:
Daily wear - Prosite "XT", Prosite Thin
Extended wear - Prosite "55"
Disposable - Prosite Disposable
<PAGE>
ATTACHMENT C
I SPECIALTY CARE FINANCIAL ALLOCATION FUND
On a monthly basis, FPA shall allocate a portion of its revenue ("Financial
Allocation Fund" or "Fund") for the payment of authorized Covered Services
provided by Participating Providers according to the following categories.
a) Commercial HMO Coverage Plans
b) Medicaid HMO Coverage Plans
c) Senior HMO Coverage Plans
2. PAYMENT FOR SERVICES
Payments to Participating Physicians from the Fund will be calculated on a
monthly basis, in accordance with the following:
a) Fund Adjustments
i) Payments to providers or other parties with whom FPA or Participating
Physician have made other formal arrangements shall be debited against the
Fund.
ii) Payments made to providers or other parties that have provided services
to Members that are eligible through Health Plans shall be debited against
the Fund.
iii) A reasonable reserve for incurred but not received (IBNR) claims to be
submitted by non-participating physicians or other providers of services,
including physician services rendered in situations of Medical Emergency,
shall be debited against the Fund. Adjustments to this allowance, either
upward or downward, may be made by FPA based on actual claims activity.
Eligible claims submitted by non-participating physicians or other providers
shall be paid from this allowance.
iv) FPA shall have the right to make necessary and reasonable adjustments
to the Fund in order to ensure financial integrity of FPA or to assure FPA
is in compliance with any or all of the following: Fla. Stat. 641.315,
Health Plan agreements, applicable state or federal statutes, requirements
promulgated by HMO Quality Assurance/Improvement governing bodies, the Health
Care Financing Administration (HCFA), or any other recognized entity or
legislation charged with HMO/Managed Care regulation.
<PAGE>
3. ELIGIBLE CLAIMS
i) Eligible claims submitted by Participating Physician will be reimbursed
from the Fund as follows:
ii) Each item of service shall be identified by a CPT-4 service code and
relative value under the Resource Based Relative Value Scale (RBRVS).
iii) Claims submitted against the Fund shall be calculated using the
applicable FPA conversion factor. FPA conversion factors shall be calculated
quarterly, in FPA's reasonable discretion, based on the amount of the Fund
following the deduction of allowances as noted above, divided by the total
number of authorized RBRVS units billed to the Fund during the previous
quarter. Conversion factors shall be subject to quarterly adjustments by
FPA, in order to account for fluctuations in eligible claim activity.
Payment to Participating Physician shall be based on the applicable quarterly
conversion factor in effect at the time of payment multiplied by the number
of RBRVS units for the applicable CPT code(s). Eligible claims shall be
paid no later than thirty (30) working days following the date of receipt by
FPA.
iv) Eligible claims will be considered claims for services that meet all of
the following conditions:
a) Services are a benefit under applicable Health Plan;
b) Prior authorization for services has been obtained from Primary Care
Physician and/or FPA, or in the case of an Emergency, whichever is
applicable;
c) Claims have been submitted to FPA within sixty (60) days of the date of
service, or within sixty (60) days from initial denial in the case of a claim
re-submission;
v) Eligible claims must provide all necessary information, including but
not limited to the following:
a) Member Social Security number
b) Member name
c) Member employer name (if applicable)
d) Group number
e) Patient name, if different
f) Patient date of birth
g) Patient's relationship to Member
<PAGE>
h) Patient gender
i) COB information
j) If accident or illness was work-related or TPL
k) Date of Service
1) Place of Service
m) Participating Physician's name, address, and TIN
n) Name of referring physician
o) CPT-4 with modifiers
p) Diagnostic coding (ICD-9)
q) Itemized charges
r) Copayment amount
s) Medicaid aid code, if applicable
t) Operative reports, if applicable
u) Authorization number
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> The accompanying supplemental data are to be used in conjunction
with the unaudited financial statements and associated notes to the
financial statements for the quarter ended June 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 563,148 <F1>
<ALLOWANCES> 0
<INVENTORY> 524,775
<CURRENT-ASSETS> 1,087,923
<PP&E> 3,256,696 <F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,954,387
<CURRENT-LIABILITIES> 3,237,491
<BONDS> 0
0
0
<COMMON> 5,889
<OTHER-SE> 9,830,245 <F3>
<TOTAL-LIABILITY-AND-EQUITY> 4,954,387
<SALES> 4,373,580
<TOTAL-REVENUES> 4,373,580
<CGS> 1,131,884
<TOTAL-COSTS> 5,862,954
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (148,361)
<INCOME-PRETAX> (1,637,735)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,637,735)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,637,735)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> 0
<FN>
<F1> Receivalbes are recorded net of allowance for doubtful accounts
<F2> PP&E is recorded net of depreciation
<F3> Other stockholder's equity includes additional paid in capital
</FN>
</TABLE>
