SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________ to __________
Commission File Number 0-23184
___________APOLLO EYE GROUP, INC.__________
(Exact name of small business issuer in its charter)
Delaware 65-0257498
(State of 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 offices) (Zip Code)
Issuer's telephone number, including area code: (561) 395-5402
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value and Common Stock Purchase Warrants
(Title of Class)
Check whether the issuer (1) 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_____
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of issuer's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The issuer's revenues for the most recent fiscal year were
$9,926,280.
The aggregate market value of the voting stock held by
non-affiliates based upon the average of the bid and asked
prices of the Common Stock at the close of trading on June 20,
1997 was $3,121,116.
As of June 20, 1997, there were 5,888,898 shares of Common
Stock, par value $.001 per share, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes________ No____X____
<PAGE>
INDEX
Page Number
PART I
Item 1. Business 3 - 22
Item 2. Properties 23
Item 3. Legal Proceedings 24 - 25
Item 4. Submission of Matters to a Vote of
Security Holders 26
PART II
Item 5. Market for the Company's Common Stock and
Related Security Holder Matters 27
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations 28 - 36
Item 7. Financial Statements and Supplementary Data 37
Item 8. Changes in the Disagreements with Accountants
and Financial Disclosure 37
PART III
Item 9. Directors and Executive Officers of the Company 38 - 40
Item 10. Executive Compensation 40 - 42
Item 11. Security Ownership of Certain Beneficial Owners
and Management 42 - 43
Item 12. Certain Relationships and Related Transactions 44 - 46
PART IV
Item 13. Exhibits and Reports on Form 8-K 47
SIGNATURES
<PAGE>
PART I
INFORMATION CONCERNING APOLLO EYE GROUP, INC.
ITEM 1. BUSINESS
GENERAL
Apollo Eye Group, Inc. (formerly United Vision Group, Inc.) is
a Delaware corporation formed in 1990 (the "Company"). Through
its wholly-owned subsidiaries, Apollo Eye Associates, Inc.
("Apollo"), J. K. Enterprises of Deerfield Beach, Inc. ("J. K.
Enterprises"), Optiplex, Inc. ("Optiplex"), Apollo EyeGroup of
Puerto Rico, Inc. (formerly Master Vision Plan, Inc.)
("AEGPR"), Apollo Eye Care Management Corporation ("AECMC"),
and Medricon, Inc. ("Medricon"), the Company is primarily
engaged in the provision, management, and administration of
managed vision care plans in Florida and in Puerto Rico on a
prepaid capitated or discounted contract basis and in the
provision of ophthalmic and optical services and products in
fourteen (14) practice locations in Dade, Broward, and Palm
Beach counties, Florida.
The Company's prepaid managed vision plans offer specified eye
examinations, eyeglasses and contact lenses at pre-determined
prices. The contracted vision services and eyewear are paid
under a capitation method with payment being in the form of a
fixed dollar amount per member per month (PMPM) and, as such,
represent premium revenue for the Company. The capitation
payments are paid monthly based upon the number of members and
the contracted fees of each managed vision care contract. These
services and products are generally offered through AECMC or
Optiplan, Inc. ("Optiplan"), a Florida not-for-profit
corporation managed by the Company through a management
agreement. While the Company is not obligated to provide all
such managed vision care services and products through Optiplan,
it has historically done so. The Company administers similar
plans through its AEGPR subsidiary within Puerto Rico whereby it
directly contracts with HMOs to provide eye care services
through third party providers and eyeglasses and contact lenses
through the Company.
Managed vision care services are provided to Sponsors'
(generally an HMO or government agency) members, clients or
employees who choose to participate in the Company's prepaid
plans by a network of more than 144 vision care providers at
nearly 135 locations ("Participating Providers"), including the
fourteen (14) practice locations owned and operated by the
Company ("Apollo Eye Associates" practices).
The Apollo Eye Associates practices provide complete ophthalmic
and optometric eye care services to the general public and for
the Sponsors' members. The Apollo Eye Associates practice
locations have from one (1) to twelve (12) examination rooms for
optometric examinations and ophthalmic patient care. Diagnostic
equipment such as ultrasound scans, visual field analysis,
corneal topography and slit lamp photography is available at
several Apollo locations as well as Yag and Argon laser
treatment devices. Radial keratotomy (RK) and the newly
approved photorefractive keratectomy (PRK) procedures can be
performed by Apollo's
<PAGE>
ophthalmologists. The Company continues to
focus its growth efforts on the provision of optometric and
ophthalmic services to the general public, Medicare
participants, and private insurers (including PPOs) in addition
to providing capitated and discounted vision services under
contracts with various Sponsors.
The Company, through its Medricon subsidiary, provides
reimbursement and practice administration consulting services to
ophthalmologists and optometrists nationwide. Medricon provides
telephone consulting to approximately 350 practices which
represents nearly 10% of the practicing ophthalmologists in the
United States. Medricon also produces monthly newsletters on
reimbursement and practice matters along with training seminars
for physicians and their staff.
During 1995 the Company underwent significant change resulting
from its merger with Apollo Eye Associates, L.P. on August 4,
1995, including a change in control, changes to senior
management, and changes in the Board of Directors along with a
shift in strategic focus towards providing ophthalmic services
as well as routine vision care services from optometrists and a
far greater emphasis on providing professional eye care services
in addition to acting as a network for managed vision care. This
transaction was accounted for as a reverse acquisition whereby
Apollo Eye Associates, L.P. and its general partner, Apollo Eye
Corporation, were deemed to have acquired Apollo Eye Group, Inc.
("AEG") by virtue of the fact that after the merger the former
unit holders of Apollo Eye Associates, L.P. and shareholders of
Apollo Eye Corporation held shares of Common Stock and options
to acquire Common Stock aggregating 75% of the outstanding
Common Stock of the Company.
APOLLO EYE ASSOCIATES, L.P. PRE-MERGER
Apollo Eye Associates, L.P., also referred to as the
"Partnership," was a Delaware limited partnership established
in July 1994 by several experienced health care executives to
participate in the growing consolidation in eye care practices.
The Partnership raised over $7 million of private capital from
its managers and began operations in Boca Raton, Florida.
Apollo Eye Corporation ("AEC"), a Delaware corporation owned by
three of the founders of the Partnership, served as the
Partnership's general partner. At the time of its organization,
the Partnership acquired Medricon, a Connecticut corporation
providing reimbursement and practice administration consulting
services to ophthalmologists and ophthalmic group practices
nationwide. Medricon was a privately held company established
its business in 1985, and subsequent to its merger with the
Partnership, Medricon was relocated to Boca Raton.
As a start-up venture, Apollo Eye Associates, L.P. established
five ophthalmic practices in Broward and Palm Beach Counties,
Florida, between October 1994 and April 1995. These practices
varied in size from 2,400 to 5,200 square feet, and were all in
leased premises in prime consumer locations. The practices were
equipped with new complete examination equipment and specialized
therapeutic and diagnostic equipment for medical and surgical
eye care. Four practices had minor surgery rooms and two
locations were equipped to perform radial keratotomy (RK), a
refractive surgical procedure. Two ophthalmologists were
employed by the Company, and an advertising campaign was
launched to develop name recognition and a flow of patients.
<PAGE>
In addition to providing ophthalmic care and continuing the
consulting activities of Medricon, the Partnership embarked upon
the establishment of a managed care network for medical and
surgical eye care. As a start up venture, the Partnership, from
its inception on July 1, 1994 to December 31, 1994, had only
$153,840 in revenue and posted a net operating loss of $959,611.
For the six months ended June 30, 1995, total revenue was
$433,378 and the net loss was $2,115,685.
During the second quarter of 1995, representatives of AEG and
the Partnership met and discussed a possible business
combination involving the two entities. Both provided vision
care services in the South Florida market, with the Partnership
focused on ophthalmology and AEG on optometry and eyewear
services. It was believed that the combined companies could
approach the managed care Sponsors, based on AEG's relationships
in the area of managed vision care, and seek expanded vision
contracts encompassing medical and surgical eye care as well as
the established optometric exams and eyewear dispensing. It was
also believed that the business combination would yield better
geographic coverage and broaden the services offered in the
practice locations as well as permit the consolidation of some
duplicate practice locations.
APOLLO EYE GROUP PRE-MERGER WITH APOLLO
One of the Company's current subsidiaries, J. K. Enterprises,
was formed in 1983. Prior to the establishment of Optiplan in
1987, J. K. Enterprises' primary activities were the operation
of its optometric practices and of Optiplex, which produced
eyeglasses. The Company historically operated its optometric
practice locations under a number of trade names, including
Vista Optical, Specs Appeal, Pompano Beach Optical, and Kapat
Optical; over the course of time the practices were consolidated
under the name of Family EyeCare Centers. Following the
establishment of Optiplan, the Company focused its attention on
the establishment of an optometric network to support managed
vision care plans along with the expansion of Family EyeCare
Centers and Optiplex to support the contracts. In 1990, a
holding company, United Vision Group, Inc., was formed. During
the period of 1987-1994 the Company experienced growth mainly
due to both increased membership in existing managed vision
plans and an increase in the number of plans offered. Despite
increased revenue generation, the Company continued to
experience operating losses.
As a response to the annual increases in the cost of health
care, including vision care, employers and insurers have
continued to seek means to reduce the cost of direct
fee-for-service reimbursement plans. In particular, HMOs, PPOs,
and other third party health organizations have increasingly
offered a broad range of health care services, including vision
care services, based on flat-rate fees or capitated rates for
their members. In response to the development of such third
party plans and large sponsor groups requiring prepaid vision
plans, and in accordance with Florida law which then required
that prepaid optometric service plans be offered only through a
not-for-profit corporation, Optiplan was formed on February 3,
1987, and has been managed by the Company since inception. A
written management services agreement has outlined the
relationship between Optiplan and J. K. Enterprises (since
January 1996, the Management Services Agreement with Optiplan
has been assumed by Apollo).
<PAGE>
The Company's subsidiary, Optiplex, owned and operated two
optical compounding laboratories, one in Hollywood, Florida, and
the other in Lockhart, Texas, under the unified trade name
Optiplex Optical Laboratories. Prior to the formation of
Optiplex in 1990, the Company operated a single optical
laboratory in Fort Lauderdale, Florida under the trade name
"Benchmark Optical" as a division of J. K. Enterprises. In
November 1993, the Company entered into an agreement with
Wackenhut Corrections Corporation, the State of Texas Department
of Criminal Justice and the City of Lockhart, Texas, under which
the Company agreed to establish and operate an optical surfacing
and finishing laboratory and distribution facility employing a
guaranteed number of residents within the Lockhart Correctional
Facility. In April 1994, the Company relocated the "Benchmark
Optical" laboratory from Fort Lauderdale to Hollywood sharing a
location with one of the Company's Family EyeCare Centers and in
May 1994, Optiplex began operation of a 7,200 square foot
laboratory facility in the Lockhart Correctional Facility.
The Company completed its initial public offering of common
stock on February 8, 1994 at a price of $5.00 per share. The net
funds raised were approximately $4.0 million, which were used
to repay bridge loans, pay unpaid payroll taxes, open the
Lockhart optical laboratory, and provide working capital.
During the fifteen months following the initial public offering,
the Company experienced a number of financial and operational
challenges. The Company reported a net loss of $2,156,739 for the
year ended December 31, 1994, and a loss of $306,520 for the six
months ended June 30, 1995. These operating losses combined with
repayment of the bridge and stockholder loans and past due
payroll taxes left the company depleted of both capital and
cash.
The Company's common stock was delisted from The Nasdaq
SmallCap Market on June 8, 1995, for failure to meet continued
listing requirements and since that time has traded in the
over-the-counter (OTC) market.
THE MERGER TRANSACTION
Prior to the transaction between the Company and the Partnership
(the "Merger"), there was no relationship between the Company and
the Partnership and/or any of its officers or directors. Apollo
Eye Associates, L.P. and Apollo Eye Corporation were merged into a
wholly owned subsidiary of the Company on August 4, 1995. At the
time of the Merger, the Partnership had five (5) ophthalmology
practice locations, approximately $1.8 million in cash on hand,
an experienced management team and unit holders' equity of
approximately $4.3 million which included significant medical
and surgical equipment, leasehold improvements and eyeglass
frame inventory. The cash provided by the Merger relieved the
Company's short-term liquidity crisis including delinquent payroll
taxes due plus interest and penalties in excess of $300,000.
Additional Stock Issuance. At the time of the Merger, the
Company's Certificate of Incorporation authorized the Company to
issue up to 10,000,000 shares of Common Stock and 1,000,000
shares of Preferred Stock. Prior to the Merger, and after the
repurchase by the Company of all 102,004 outstanding shares of
its Series A Preferred Stock in exchange for 612,024 shares of
Common Stock, the Company had 1,191,367 shares of Common Stock
outstanding. In the Merger, the Partnership's limited
partnership interests and AEC's outstanding capital stock were
canceled in exchange for 33,315.9185 shares of the Company's
Series B Preferred Stock and options to acquire 482,509 shares
of Common Stock. Each share of the
<PAGE>
Series B Preferred Stock was
convertible into 100 shares of Common Stock of the Company,
effectively resulting in a total of 4,522,959 shares of Common
Stock outstanding upon conversion of the Series B Preferred
Shares to Common Shares. The Certificate of Incorporation was
amended on March 4, 1996 to increase the total number of shares
of Common Stock which the Company is authorized to issue from
10,000,000 to 30,000,000 in order to make possible the
conversion of the Series B Preferred Stock, and holders of the
Series B Preferred Stock subsequently exchanged their shares for
shares of Common Stock. As a result of the Merger, the former
limited partners of the Partnership and former stockholders of
AEC held shares of Common Stock and options to acquire Common
Stock representing 75% of the voting power of the Company of
which James R. Cook, M.D., a former limited partner of the
Partnership and stockholder of AEC, beneficially owned shares of
Common Stock and options to acquire Common Stock then
representing 51.2% of the voting power of the Company.
On October 7, 1996, the shareholders of the Company approved
several actions including a change of name to Apollo Eye Group,
Inc. and a five-to-one reverse stock split. The shareholders
also approved the conversion of $4,000,000 of debt due to James
R. Cook, M.D., the Company's Chairman, to equity through the
issuance of 1,355,932 shares at the price of $2.95 per share.
The shareholders also approved the issuance of up to 400,000
shares in connection with the Apollo Eye Group, Inc. 1996 Stock
Option Plan.
Following these shareholder actions, the Company has a total of
5,888,898 shares of Common Stock outstanding of which James R.
Cook, M.D. owns 63%. The Company has reserved 80,000 shares of
Common Stock for the 1994 Stock Option Plan. An additional
500,000 shares of Common Stock are reserved for the Company's
1995 Stock Option Plan A established prior to the Merger.
Through certain reassignment provisions of the 1995 Stock Option
Plan A, all of these reserved shares will be issued before
August 6, 2005. An additional 400,000 shares of Common Stock
are reserved for issuance upon the exercise of options which
have been or may be granted under the Company's 1996 Stock
Option Plan. Therefore, 23,131,102 shares of Common Stock of
the 30,000,000 shares authorized for issuance remain available
for future issuances. This does not include shares for issuance
to warrant holders although 225,000 of the 237,000 warrants
outstanding are at exercise prices of $25.00 or greater. Other
shares could be issued for a variety of corporate purposes,
including, but not limited to, acquisition transactions,
executive compensation arrangements (such as additional stock
option plans) and stock dividends. There are no preemptive
rights in respect of the Common Stock.
Since the conversion of the Series B Preferred Stock to Common
Stock, the Company has no outstanding shares of Preferred Stock
and has 1,000,000 shares of Preferred Stock authorized and
available for issuance. The Preferred Stock may be issued in
one or more series with such designations, rights and
preferences as may be determined from time to time by the
Company's Board of Directors. Accordingly, the Board is
empowered, without stockholder approval, to issue Preferred
Stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other
rights of holders of the Company's Common Stock.
<PAGE>
Change of Control. The Merger of the Partnership and AEC into
a wholly owned subsidiary of the Company resulted in a change of
control of the Company on August 7, 1995. Prior to the Merger,
approximately 30.9% of the Company's Common Stock was
beneficially owned by Jan H. Kaplan and Karen Kaplan and
approximately 24.7% was beneficially owned by Robert M. Rubin.
Mr. and Mrs. Kaplan as well as Mr. Rubin were officers and/or
served on the Company's Board of Directors prior to the Merger,
and collectively controlled 55.6% of the outstanding shares of
the Company.
As discussed above, following the conversion of the Series B
Preferred Stock issued in connection with the Merger and
assuming exercise of the 1995 Stock Option Plan A options, and
assuming exercise of options for an additional 80,000 shares of
Common Stock under the Company's 1994 Stock Option Plan, the
former limited partners of the Partnership and stockholders of
AEC held in the aggregate 75.0% of the voting power of the
Company and Dr. Cook held 47.1% of the voting power of the
Company.
With the conversion of $4,000,000 debt to equity, Dr. Cook now
holds 63% of the voting power of the Company. In the aggregate
the former limited partners of the Partnership and stockholders
of AEC beneficially own 79% of the voting power of the Company.
Change of Board of Directors. Prior to the Merger, Messrs.
Robert M. Rubin and James E. Cohen, two of the Company's four
directors, resigned as directors. Immediately following the
Merger, Dr. Cook and Messrs. Peter Molinaro, Jr., Vincent C.
Manopoli and J. Richard Damron, Jr., all former limited partners
of the Partnership, were elected to fill vacancies in the Board
of Directors of the Company. In addition, Dr. Cook was elected
Chairman and Messrs. Molinaro and Manopoli were elected
Executive Vice Presidents of the Company. With these
resignations and the addition of such new directors, a change of
Board control also occurred. On May 17, 1996, John Prelaz, also
a former limited partner of the Partnership, was elected to the
Board of Directors. On December 16, 1996, Mr. Manopoli resigned
from the Board of Directors.
In connection with the Merger, James R. Cook, M.D., Jan H.
Kaplan, Karen Kaplan and Robert M. Rubin entered into a
Stockholders Voting Agreement pursuant to which (1) Mr. and Ms.
Kaplan and Mr. Rubin agreed to execute a written consent of
stockholders adopting an amendment to the Company's Certificate
of Incorporation increasing the number of authorized shares of
Common Stock to 30,000,000 and approving the Company's 1995
Stock Option Plan A, and (2) Dr. Cook agreed (i) for so long as
Mr. Kaplan was employed by the Company to vote to elect Mr.
Kaplan as a director of the Company, (ii) for so long as Mrs.
Kaplan was employed by the Company to elect Mrs. Kaplan, or
another person nominated by Mrs. Kaplan and reasonably
acceptable to Dr. Cook, as a director of the Company and (iii)
for a period of one year from August 1, 1995, to vote to elect a
third person nominated by Mr. Kaplan and reasonably acceptable
to Dr. Cook as a director of the Company.
As part of the Termination, Settlement and Mutual Release
Agreements entered into between the Kaplans and the Company, Jan
Kaplan and Karen Kaplan resigned as directors of the Company
effective January 1, 1996 and released Dr. Cook from voting his
shares to elect the Kaplans or persons nominated by the Kaplans
as directors of the Company.
<PAGE>
Change in Senior Management. Effective with the Merger, Dr.
Cook assumed the position of Chairman of the Company, and
Vincent C. Manopoli and Peter Molinaro, Jr. were elected
Executive Vice Presidents of the Company. Jan Kaplan remained
as President and Karen Kaplan remained as an Executive Vice
President until the employment of each was terminated on
December 18, 1995. The Company and the Kaplans entered into
Termination, Settlement and Mutual Release Agreements, as well
as Consulting Agreements on March 23, 1996, effective January 1,
1996. On May 17, 1996, Mr. Damron was elected as the Company's
Chief Financial Officer and Treasurer. On December 6, 1996,
Vincent C. Manopoli resigned as an Executive Vice President of
the Company.
Change in Accountants and Legal Counsel. Changes have
occurred in the Company's accountants and outside legal counsel.
Coopers & Lybrand, L.L.P. replaced Feldman Radin & Company,
P.C., as the Company's independent accountants on September 12,
1995. The firm of Taft, Stettinius & Hollister, Cincinnati,
Ohio, now serves as principal legal counsel with respect to
securities and corporate law matters. During December 1995 the
Company shifted its Florida litigation matters to the firm of
Koski, Aranson and Thomas, of Boca Raton, Florida.
MANAGED CARE PROGRAMS
Managed Vision Care. Optiplan obtains and operates managed
vision care plans in Florida whereby routine eye examinations
with the dispensing of eyewear are provided through Optiplan by
duly licensed opticians, optometrists and ophthalmologists
participating in the Optiplan program. Under Florida state law,
Optiplan is also permitted to enter into contracts and
participating agreements with licensed opticians, optometrists
and ophthalmologists to provide and dispense optical services
and products to members of the public who are Participants in
Optiplan managed vision care programs. Further, in response to
similar needs for managed prepaid vision care programs in Puerto
Rico, the Company formed AEGPR, which primarily contracts with
PPOs and HMOs for prepaid vision care.
Optiplan provides prepaid group managed vision care services to
Participants located in Florida and AEGPR provides prepaid managed
vision care services to Participants located in Puerto Rico.
Participants in the managed vision care programs are enrolled
through Sponsors such as HMOs, PPOs, health insurance carriers
and governmental entities, as well as self-insured corporations,
unions and other associations. The Company's principal Sponsors
include United Healthcare Plans of Florida, Foundation Health
Corporation, and PCA/Family Health Plans of Florida.
Sponsors make fixed periodic payments, known as Capitation
Payments, to a managed vision care program for each Participant
enrolled. These payments are calculated on a per member per
month basis. The Company's management determines the
appropriate Capitation Payment for a Sponsor based upon a
combination of factors including the total number of
Participants in the particular plan, the services to be provided
to the Participants of the plan and the historical utilization
of the plan's services and products by similar participants.
The exact Capitation Payment amount is determined through
negotiations between the Company's management and each Sponsor
at the time Optiplan enters into an agreement with such Sponsor.
The amount of the Capitation Payment is included in the
agreement between the Sponsor and Optiplan, and cannot
<PAGE>
be adjusted, except by mutual agreement, until the expiration of
the current term of such agreement. Some plans have automatic
annual or biannual rate increases.
Participants can obtain eye examinations, eyeglass frames and
lenses, and contact lenses through the Company's network of 240
Participating Providers at 230 locations, including the Apollo
Eye Associates practices. Participants receive eye examinations
from licensed optometrists or ophthalmologists and may obtain
eyeglasses or contact lenses at any Apollo practice or other
Participating Provider location. Depending on the terms of the
plan, there may be certain pre-determined co-payments associated
with either the professional service or eyewear or both.
Participants may select eyeglasses and other vision products
covered by the plan, or choose from a wide variety of non-plan
or upgraded contemporary and designer frames and lenses at an
additional cost. The Company generates significant revenues
from sales of upgraded frames and lenses.
The Company produces eyeglasses from a large assortment of
frames and lens blanks and also distributes contact lenses and
eyewear accessories and supplies. The Participating Provider
agreements require that the Company, or a laboratory that is
approved by the Company, provide all materials and products with
respect to all covered materials for the Company's managed
vision care programs. Each managed vision care program specifies
a specific group or assortment of eyeglass frames covered by the
plan as well as certain types of eyeglass lenses. The Company
currently has developed three groups or collections of standard
frames for its plans, each of which contains from 72 to 120
different frames.
The Company's agreements with Sponsors for prepaid programs
typically have a term of one to four years and are automatically
renewable unless 15 to 120 days prior written notice is given by
either party, although some agreements the Sponsor has the right
to cancel the agreement on a 30 to 60 day notice. The Company
currently has twelve (12) such agreements in effect, the
termination dates of which range from December 31, 1997 through
July 1, 2000. The Company altered its structure during 1996
and executed certain Sponsor agreements in the name
of Apollo EyeCare Management Corporation ("AECMC"), a
wholly-owned subsidiary. This subsidiary affords
the Company more direct control of certain plans sponsored by
HMOs which do not require the insurance license held by
Optiplan. The plans requiring Optiplan's Prepaid Limited Health
Services Organization ("PLHSO") license continue with
Optiplan. The current providers of Optiplan are eligible to
participate regardless of whether the plan is with AECMC, the
Company's subsidiary, or with Optiplan, the non-profit
corporation managed by the Company.
The Company recognizes income from Sponsors as premium revenue.
Premiums are accrued ratably over the term of the contract
provided the Company either has a signed contract with a given
Sponsor or if there is a history of payment by the Sponsor and
the Company is providing services under a given contract. There
is no timing difference of income and/or expense recognition
between Optiplan and the Company. The expenses of Optiplan
include costs associated with claims from Participating
Providers, the cost of eyewear and administrative, management,
and claims processing costs.
<PAGE>
Optiplan Management Agreement. In January 1992, the Company,
through its J. K. Enterprises subsidiary, and Optiplan entered
into a written management agreement (the "Management
Agreement"), pursuant to which the Company receives fees from
Optiplan for the management, marketing and administration of
Optiplan. The Management Agreement was assumed by Apollo in
January 1996. The management and consulting services provided
by the Company to Optiplan consist of, among other things, the
organization and maintenance of the Optiplan programs, including
complete preparation of state licensures, certifications and
qualification reports to the Florida Department of Insurance;
development of an Optiplan program for each Sponsor tailored to
meet the needs of the particular Sponsor and its members,
employees or clients; preparation of all plan literature and
claim forms for Sponsors and their members, employees or
clients; recruitment and supervision of Participating Providers
and the Apollo practice professionals for the provision of eye
care services to Participants; provision of data processing
services for the purpose of billing accounts, and rendering
payments to Participating Providers and other vendors in
connection with eye care services rendered to Participants
through Optiplan; monitoring utilization of services by
Participants and providing quality control procedures relating
to services and/or products; maintenance of general accounting
activities for Optiplan; collection of Optiplan accounts; and
overall management of all responsibilities for Optiplan's
day-to-day operations.
The management control that the Company exhibits over Optiplan
and the Company's related business activities forms the basis
for the financial statement combination. Furthermore, as part of
the Merger, Optiplan agreed to make the management agreement
permanent and noncancelable except by mutual agreement and to
allow the Company, at its sole discretion, to take measures
necessary to move any or all plans to a new entity. The Company
has assigned the Management Agreement to Apollo Eye Associates,
Inc., another of its wholly-owned subsidiaries in an effort to
simplify its legal structure.
Managed Ophthalmology Care. In December 1995, the Company
established a new wholly-owned subsidiary, Apollo EyeCare
Management Corporation (AECMC), in order to consolidate and more
easily manage certain managed vision care contracts which do not
require Optiplan's PLHSO license along with expanding service
into ophthalmic (medical and surgical) eye care. The Company
operates AECMC in a fashion similar to Optiplan, but
as a for-profit entity holding certain managed care contracts
for which a PLHSO license is not necessary, such as those
provided to HMOs already licensed under Florida insurance laws.
Optiplan continues to provide all services to Sponsors which
require a PLHSO license including county and municipal
governmental entities and small groups. Furthermore, the Company
consolidated the operations of Medricon into AECMC during the
first quarter of 1996.
Apollo EyeCare Management has formed a Florida state-wide
network of ophthalmologist providers and has obtained and will
continue to seek managed care contracts providing Participants
with medical and surgical eye care as well as routine eye
examinations and eyeglasses or contact lenses. It is the
Company's plan to be able to provide Sponsors with the full
spectrum of eye care products and services, rather than only the
routine eye examinations and eyewear as historically provided by
the Company.
<PAGE>
The Company's principal Sponsors under all prepaid plans
accounted for a total of 46% of the Company's revenues for the
year ended December 31, 1996. In addition, no individual
sponsor accounted for greater than 13% of the Company's revenues
for the year ended December 31, 1996. In addition to the direct
revenues from Sponsors, significant additional revenue is
derived by the Company from patient co-payments and from those
patients choosing to purchase non-covered or upgraded optical
products.
As of February 1, 1997, the Company is no longer
providing capitated vision services for the Medicare members or
discounted vision services for the commercial members of Blue
Cross/Blue Shield Health Options Plans, representing a capitated
revenue reduction of approximately $80,000 per month and a
significant volume of discounted fee for services visits in the
Apollo Eye Associates practices. Marketing programs to retain the
base of discounted patients in the Apollo practices have been
initiated.
The Company has an agreement with Servi-Medical to provide vision
benefits in San Juan, Puerto Rico, that terminates June 30, 1997.
On February 25, 1997, the Company received notice from Servi-Medical
of their intention not to renew the contract at the termination of
the agreement. Effective July 1, 1997, this represents a reduction
in capitated revenue of approximately $26,000 per month. In addition,
on March 31, 1997, the Company received notice effective June 30,
1997 of cancellation of a contract for managed care vision benefits
with United Health Care Plans of Puerto Rico, Inc. The Company
attempted to retain the contract and submitted new proposals for the
1997-98 contract year. However, on May 29, 1997, United Health Care
of Puerto Rico provided notice that the 1997-98 contract for vision
benefits was awarded to a third party. The loss of the contract
with United Health Care Plans of Puerto Rico will result in a
reduction of capitated revenue of approximately $82,000 per month.
The Company has entered into a contract with FPA Medical Management
of Florida, Inc. to provide vision benefits on a discounted fee for
service for approximately 50,000 lives. The contract is effective
June 1, 1997 in Broward and Palm Beach Counties, and effective
July 1, 1997 in Dade County. A majority of the patients will
receive services in the Apollo Eye Associates practices. The
Company may derive additional revenue from patient purchases of
non-covered or upgraded optical products. It is difficult to
estimate the revenue the company will realize from this contract
or from the sales of optical products.
APOLLO EYE ASSOCIATES PRACTICES
The Company currently provides routine eye examinations,
ophthalmic medical and surgical eye care, and the dispensing of
eyewear including glasses and contact lenses from fourteen
practice locations in Dade, Broward, and Palm Beach Counties,
Florida. The professional care is rendered by either
independent optometrists or ophthalmologists who are employed by
Apollo Eye Associates, Inc., a wholly-owned subsidiary of the
Company. Prior to the Merger with the Partnership, AEG called
its practice locations Family EyeCare Centers, although actual
signage on locations rarely promoted this trade name, while the
Apollo Eye Associates' name was prominently displayed on the
five newly developed ophthalmology practices opened by the
Partnership during late 1994 and 1995.
<PAGE>
As part of the Company's desire to develop a common name
recognition, operations of the Company are consolidated under
the Apollo Eye Associates name. The Company believes that the
Apollo name is associated with high quality practice locations
and services. The Apollo Eye Associates name has been prominent
in the media in south Florida with regular advertising along
with strong presence in the Yellow Pages.
Prior to the Merger, the Company operated ten (10) practice and
dispensing locations (Family EyeCare Centers) in Dade, Broward,
and Palm Beach counties while Apollo operated five (5)
ophthalmology practices in Broward and Palm Beach counties. The
Company has closed three of the Family EyeCare Center locations
(in Pompano Beach, Deerfield Beach, and Tamarac) all of which
geographically overlapped with the newer, larger Apollo
locations.
Other important operating synergies associated with the
combined practice locations include the ability to provide more
comprehensive eye care in all practice locations by combining
the Company's traditional expertise in optometric care and
eyeglass dispensing with Apollo's ophthalmic-based practices
providing medical and surgical eye care by ophthalmologists
(M.D.s). Importantly, the Merger allows the Company to expand
its managed care operations significantly. Heretofore, the
Company has been a leader in its market in the operation of
managed vision care programs under which the Company serves as a
contract provider of eyewear and routine eye examinations,
generally provided by independent doctors of optometry (O.D.s),
for plan sponsors including HMOs, health insurance carriers,
and governmental entities. With the inclusion of the Apollo
practice locations, the Company is in the process of expanding
its managed care programs to include medical and surgical care
of the eyes by ophthalmologists.
The remaining seven historic Family EyeCare Centers have
undergone a name change to "Apollo Eye Associates" so that all
practice locations are now trading under a uniform name. These
previous Family EyeCare Center locations require renovations in
order to increase the number of examination rooms to accommodate
increased volumes of patients being cared for by Participating
Providers associated with the Company. In addition, additional
examination rooms and specialized testing and treatment rooms
are required in order to efficiently and fully provide
ophthalmic (medical and surgical) eye care in these locations,
which heretofore had been limited to routine eye examinations
and dispensing of eyewear. In order to meet these needs and
also to provide cosmetic improvements to the older facilities,
the Company has planned a capital improvement program. To date,
the Company has entered into an expanded lease for its Kendall
location by acquiring immediately adjacent space potentially
expanding the practice from 1,400 to 2,476 square feet. A new
lease has been entered into relative to the North Miami location
whereby the practice would be moved to a more preferable street
location and expanded from 3,300 to 4,400 square feet.
Architectural drawing packages have been completed for the
remaining five (5) older locations. This capital improvement
program is expected to cost approximately $2 million, an amount
not likely to be generated from Company operations.
On June 19, 1996, the Company acquired two practice locations
from Focus Fashion Optical, one in Pembroke Pines and the other
in Sunrise, Broward County, Florida, for $169,522 in cash and
the assumption of $45,833 of liabilities, bringing to fourteen
the number of Apollo Eye Associates practices.
<PAGE>
In August 1996, Apollo Eye Associates acquired the practice of
a pediatric ophthalmologist and relocated his practice to the
Company's Coral Springs location, thus providing important
subspecialty ophthalmic care.
Each practice location is connected on-line to Apollo's
central billing and accounts receivable system and optical point
of sale system, the installation of such computers and systems
now having been completed in the former Family EyeCare Center
locations and other acquired locations. The purpose of the
central system is to increase efficiency by centralizing
functions that can be pooled such as receivables management,
lens and frame purchasing, eyewear order entry, and appointment
scheduling. Furthermore such centralization allows the Company
to present a variety of appointment alternatives and locations
to patients, thereby increasing Apollo's ability to accommodate
patients. Lastly, this connectivity allows the Company to assure
that specific administrative tasks are completed without
interruption such as appointment confirmation, verification of
insurance and claims submission. Hopefully, such centralization
will improve financial controls and reduce costs.
In addition to the capitated managed care agreements entered
into by Optiplan and AECMC, the Company has a number of
agreements with HMOs and other entities to provide eye care
products and services on a discounted fee for service basis.
These contracts often have fixed fees for routine vision
examinations and for basic eyewear. These discount plans are
administered within the Apollo Eye Associates practices.
Patient Services. Each of the Company's fourteen Apollo Eye
Associates practices provide services to Participants in
Optiplan and AECMC managed care and discount programs, as well
as services to the general public. Optometric care, through
association with independent doctors of optometry, and the
dispensing of glasses and contact lenses was carried out
historically by the Company; currently, ophthalmic diagnostic
and therapeutic care is being provided by the Company's
ophthalmologists on a regular basis in eleven of the fourteen
locations, with plans to extend such services to all locations.
In addition to the professional services, Apollo Eye Associates
provide their patients and for the Optiplan or AECMC
Participants, a complete selection of eyeglasses and contact
lenses. The Company provides a selection among approximately
650 frames in most practice locations for prices ranging from
$60 for economical eyewear to $300 for the more costly designer
frames and lenses. The Apollo Eye Associates practices also
carry a complete line of contact lenses, including color-tinted
lenses and disposable contact lenses. The frames, lenses, and
contact lenses are complemented by a complete line of
accessories, which include sunglasses, carrying cases, lens
cleaners, solutions for contact lens wearers and other
miscellaneous eye care items.
The Company records practice revenues when services are
rendered. The Company includes in practice revenue, professional
services to patients, including surgery and the sales of
eyewear, including upgrades to glasses.
<PAGE>
Optical Laboratories. The Company is the primary provider of
finished optical products to Apollo Eye Associates practices.
The Company produces finished eyeglasses from lens blanks and
frames which are purchased from independent third-party
suppliers. Generally, lens blanks are held in inventory for
day-to-day use, while most non-contract frames are ordered and
shipped for delivery to the laboratory. The Company maintains
frame inventories in each of its practice locations for patient
selection and in addition maintains frame inventories in its
optical laboratories for managed care contract frames. The
laboratories use state-of-the-art high speed, computer assisted
lens grinding, polishing, cutting and edging equipment capable
of producing high quality, distortion-free lenses.
The Company relocated both of its major manufacturing
facilities during 1996. The Hollywood, Florida laboratory and
the Texas laboratory were consolidated into a new single
location in Broward County, Florida. The consolidation is
expected to result in decreased production costs and, with
regards to the Texas facility, reduced freight, travel and
communications costs. The savings projected from this
consolidation are expected to be greater than the favorable
labor costs and occupancy costs historically enjoyed in the
Lockhart Correctional Facility. The consolidation also is
expected to result in a more efficient manufacturing facility
with improved inventory and work-in process management and
improvements to turnaround and delivery time.
Optometric Services Agreement. Optometric services in the
Apollo practices are provided by full- time and part-time
optometrists who are usually employed by Koepnick, O.D., P.A.
("Koepnick"). Apollo Eye Associates, Inc. and Koepnick are
parties to an Optometric Services Agreement whereby Koepnick
provides optometric care to patients in the Apollo practices.
Koepnick directly employs or contracts with independent
optometrists. Apollo provides certain management services as
well as facilities, equipment, and support for Koepnick, subject
to the management services agreement. The optometrists report
directly to Lance Koepnick, O.D., and are directly responsible
for all optometric patient care including provision of eye
exams, scheduling of return visits, staff and technician
supervision and training, and preparation and maintenance of
patient records. Koepnick operates under the name "Vision
Associates," a trade name registered by Optiplan.
MARKETING AND PROMOTION; CUSTOMERS
The Company's customers may be thought of in several different
categories depending on the service or product being provided.
With regard to the managed care plans, the customers are the
Sponsors of the various managed vision care plans including major
HMOs, insurance companies, and government bodies. Providers for
the Company's managed vision and ophthalmology eye care plans may
also be thought of as customers with regard to the Company's vision
care network operations. With regard to the practices, individual
private patients and managed care plan participants constitute
the customer group.
<PAGE>
Sponsors. Currently, the Company does not market prepaid or
discount plans directly to the public, although it may do so in
the future. Rather, the Company believes that the success of
prepaid and discount vision care plans offered by Optiplan and the
Company depends upon its ability to attract Sponsors with a
substantial number of members or employees for enrollment in
prepaid and discount programs. The Company's marketing efforts
are therefore directed at Sponsors such as HMOs, PPOs, unions,
school boards, government entities and large employers. To
date, the Company's efforts have been directed primarily to
Sponsors located in Florida (United HealthCare Plans of Florida,
Foundation Health Corporation, PCA/Family
HealthPlans of Florida) and Puerto Rico (United HealthCare Plans
of Puerto Rico and First Medical). The Company is
seeking to expand its operations to other geographical
locations. Marketing to potential Sponsors is conducted
primarily through direct personal contact and solicitation by
the Company's management.
Providers. The Company currently has nearly 500,000
Participants through approximately 16 Sponsors. In order to
interest a greater number of Sponsors, the Company believes that
it must establish a larger network of Participating Providers,
and has focused its efforts on developing such a network by
continuing to seek highly qualified and geographically diverse
Participating Providers. The Company believes that it must
balance this effort with providing services through its owned
Apollo facilities in a focused market area (southeast Florida)
and has sought to add providers in areas where it does not have
practices while reducing providers in areas where adequate
practice locations exist. More recently, the Company has
established a Florida network of Ophthalmologist Providers to
provide care for the Participants in the Company's expanded
medical and surgical eye care plans. The Company also provides
services, including newsletters, seminars and consulting to
physicians nationwide, through its Medricon subsidiary.
Patients. Apollo Eye Associates, prior to the Merger, was
in a start-up phase having established five (5) ophthalmology
practices in Broward and Palm Beach counties during late 1994
and early 1995. These practices provided ophthalmology services
and the dispensing of eyewear but did not have any significant
managed care component. As a result, a significant amount of
marketing directly to the public was carried out during 1995.
Marketing efforts were broad and consisted of newspaper, radio
and television advertising as well as the direct mailing of
practice opening and new physician announcements. Nearly
$1,000,000 was spent during 1995 to promote the Apollo name and
develop an initial patient base. The Company spent $330,000 in
1996 on marketing and advertising to promote
itself to private and insurance plan patients. The Company also
indirectly benefits from the marketing efforts of HMOs and the
increasing awareness of the general public of managed care
organizations.
COMPETITION
All aspects of the Company's business are highly competitive.
The Company competes with other professional ophthalmic,
optometric and optical practices, and optical chains for
patients, products and services as well as other managed vision
care companies. Some of these entities are national in scope.
Many of the Company's competitors have significantly greater
financial, marketing and administrative resources than the
Company.
<PAGE>
The Company's Apollo Eye Associates practices face competition
from a large number of individual and group optometric and
ophthalmic practices. In total, there are over 100 individual
ophthalmic practices in Palm Beach, Broward and Dade counties
which compete for the same patients as the Apollo Eye Associates
practices. Professional optometry practices and chain optical
stores including Lenscrafters, Pearle Vision, and VisionWorks
are also well represented in South Florida.
Optiplan competes in Florida with at least three other pre-paid
vision plans. The membership of one such plan is limited to
Dade County public school employees and their families. Another
company, Vision Service Plan (VSP), operates throughout Florida
and has a large network of providers nationally. The third
company is a new program which received its initial licensure
from Florida in July 1993 and currently has no known operations
in Florida. In Puerto Rico, the Company competes with at least
one pre-paid managed vision care company that was formed in
December 1996.
Optiplan's Participating Provider agreements are not exclusive
as to any other pre-paid vision plan. However, there are a
sufficient number of qualified opticians, optometrists and
ophthalmologists in Florida and Puerto Rico to establish
independent provider networks.
In addition, a number of other pre-paid vision plans operate in
various parts of the United States, many of which possess
memberships far in excess of that of Optiplan or AEGPR. To the
extent the Company seeks to expand its operations outside
Florida and Puerto Rico, the Company will be in direct
competition with such other vision care plans. The Company
competes primarily upon the basis of savings provided to
Sponsors and Participants, quality of service, administration
and management, as well as inventory and availability. The
Company does not believe that its programs compete with
providers of same-day vision services, but rather compete on the
basis of lower prices and its ability to manage patient
benefits.
With respect to the Company's discount programs, the Company's
primary competitors are commercial insurance and other pre-paid
coverage programs, numerous other retail eye care providers
serving the Florida market and established discount plans which
have many different forms of eye care products and have
substantially greater resources, financial and otherwise, than
the Company.
There are regional or national companies which have embarked
upon certain segments of the optical and ophthalmic care market.
This market continues to be highly fragmented and very few
companies are approaching the full spectrum of eye care. Some
companies have specifically entered into the ambulatory surgical
center market while others own and operate ophthalmic practices
as well as surgical centers. In addition, there are several
companies which have particularly focused on the emerging market
for excimer laser treatments for myopic patients.
<PAGE>
GOVERNMENT REGULATION AND SUPERVISION
General. The health care industry is highly regulated, and
there can be no assurance that the regulatory environment in
which the Company operates will not change significantly in the
future. The Company believes that health care regulations will
continue to change and, therefore, will regularly monitor
developments in health care law. The Company expects to modify
its agreements and operations from time to time as the business
and regulatory environment changes. However, there can be no
assurance that it will be able to successfully address changes
in the regulatory environment.
Every state imposes licensing requirements on individual
physicians and other vision care professionals, and many states
impose licensing requirements on facilities and services
operated by such persons. In addition, federal and state laws
regulate HMOs and other managed care organizations with which
the Company and its affiliated professionals may have contracts.
Many states require regulatory approval, including certificates
of need, before establishing or expanding certain types of
health care facilities, offering certain services or making
expenditures in excess of statutory thresholds for health care
equipment, facilities or programs. In connection with the
expansion of existing operations and the entry into new markets,
the Company and its affiliated professionals may become subject
to compliance with additional regulation.
In addition to extensive, existing government health care
regulation, there have been numerous initiatives on the federal
and state levels for comprehensive reforms affecting the payment
for and availability of health care services. The Company
believes that such initiatives will continue during the
foreseeable future. Aspects of certain of these reforms as
proposed in the past, such as further reductions in Medicare and
Medicaid payments and additional prohibitions on physician
ownership, directly or indirectly, of facilities to which they
refer patients, or expansion of insurance company regulation to
managed vision care plans, if adopted, could adversely affect
the Company. Concern about the potential effects of such reform
measures has contributed to the volatility of stock prices of
many companies in health care and related industries and may
similarly affect the price of the Company's Common Stock. Other
aspects of such initiatives, such as universal health insurance
coverage and coverage of certain previously uncovered services,
could have an impact on the Company's business.
The Company believes its current operations are in compliance
with existing applicable laws. However, the ability of the
Company's business to operate profitably will depend in part
upon the Company and its affiliated professionals obtaining and
maintaining all necessary licenses, certificates of need and
other approvals and operating in compliance with applicable
health care regulations.
Fee-Splitting; Corporate Practice of Medicine. The laws of
many states prohibit physicians from splitting fees with
non-physicians and prohibit non-physician business entities from
practicing medicine. Similar laws often apply to other vision
care professionals such as optometrists. These laws vary from
state to state and are enforced by the courts and by state
regulatory authorities with broad discretion. Although the
Company believes its operations as described herein are in
compliance with existing applicable laws, the Company's business
<PAGE>
operations have not been the subject of judicial or regulatory
interpretation. There can be no assurance that review of the
Company's business by courts or regulatory authorities will not
result in determinations that could adversely affect the
operations of the Company or that the health care regulatory
environment will not change so as to restrict the Company's
existing operations or their expansion. In addition, the
regulatory framework of certain jurisdictions may limit the
Company's expansion into such jurisdictions if the Company is
unable to modify its operational structure to conform with such
regulatory framework.
Insurance Regulation. The laws of many states may characterize
the provision of managed vision care services under Capitation
Payment arrangements as conducting the business of insurance and
thus subject to regulation by that state. Capitation Payment
plans provide a certain monthly payment per eligible patient to
providers such as the Company (or intermediary plans
contracting between employers, insurance companies and such
providers) for all or certain specified services and/or products
required by such a patient group. While the Company believes
its current operations as described herein are in compliance
with applicable law, application of these laws in certain states
could limit the Company's managed vision care operations and/or
profitability and could require affiliation with other licensed
insurance entities.
Medicare Physician Payment System. The Company believes that
regulatory trends in cost containment will continue to result in
a reduction from historical levels in per-patient revenue for
medical and optometric practices. The federal government has
implemented, through the Medicare program, the RBRVS payment
methodology for physician services. This methodology went into
effect in 1992 and is continuing to be implemented in annual
increments through December 31, 1997. RBRVS is a fee schedule
that, except for certain geographical and other adjustments,
pays similarly situated physicians the same amount for the same
services. The RBRVS is adjusted each year, and is subject to
increases or decreases at the discretion of Congress. To date,
the implementation of RBRVS has reduced reimbursement rates for
certain of the procedures historically provided by the Company
while increasing reimbursement rates for a limited number of
procedures. There can be no assurance that any reduced
operating margins could be offset by the Company through cost
reductions, increased volume, introduction of additional
procedures or otherwise.
Rates paid by non-governmental insurers, including those that
provide Medicare supplemental insurance, are based on
established professional charges, and are generally higher than
Medicare payment rates. A change in the makeup of the patient
mix of the vision care patients under Company management that
results in a decrease in patients covered by private insurance
could adversely affect the Company's revenues and income.
Medicare and Medicaid Fraud and Abuse. Federal law prohibits
the offer, payment, solicitation or receipt of any form of
remuneration in return for, or in order to induce, (i) the
referral of a person, (ii) the furnishing or arranging for the
furnishing of items or services reimbursable under Medicare or
Medicaid programs or (iii) the purchase, lease or order or
arranging or recommending purchasing, leasing or ordering of any
item or service reimbursable under Medicare or Medicaid.
Pursuant to this anti-kickback law, the federal government has a
policy of increased scrutiny of joint ventures and other
transactions among health care providers in an effort to reduce
potential fraud and abuse relating to Medicare costs.
<PAGE>
The applicability of these provisions to many business
transactions in the health care industry has not yet been
subject to judicial and regulatory interpretation.
Noncompliance with the federal anti-kickback legislation can
result in exclusion from Medicare and Medicaid programs and
civil and criminal penalties. Although the Company believes that
it is in compliance with federal and state anti-kickback and
anti-referral laws, the operations of the Company could be
subject to scrutiny under these laws.
Significant prohibitions against physician referrals have been
enacted by Congress. This legislation, commonly known as "Stark
II," amended prior physician self-referral legislation known as
"Stark I" by dramatically enlarging the field of physician-owned
or physician-interested entities to which the referral
prohibitions apply. Effective December 31, 1994, Stark II
prohibits a physician from referring Medicare or Medicaid
patients to an entity providing "designated health services" in
which the physician has an ownership or investment interest, or
with which the physician has entered into a compensation
arrangement. The designated health services include prosthetic
devices, which under applicable regulations and interpretations
include one pair of eyeglasses or contact lenses furnished after
cataract surgery, and intraocular lenses provided at ASCs. The
penalties for violating Stark II include a prohibition on
payment by these government programs and civil penalties of as
much as $15,000 for each violative referral and $100,000 for
participation in a "circumvention scheme." To the extent that
the Company is deemed to be subject to the prohibitions
contained in Stark II for designated health services, the
Company believes its activities fall within the permissible
activities defined in Stark II, including, but not limited to,
the provision of in-office ancillary services.
Florida. The laws of Florida prohibit a commercial enterprise,
such as the Company, from operating a prepaid optometric service
plan without the prior licensure by the Florida Department of
Insurance. Pursuant to Chapter 637 of Florida statutes
("Chapter 637"), any such plan must be offered only by a
not-for-profit corporation that is licensed by the Florida
Department of Insurance. Consequently, the prepaid optometric
programs developed and managed by the Company in Florida are
offered by Optiplan, which has been organized and licensed in
accordance with Chapter 637. Commercial entities are permitted
to offer discount plans for optometric services, so the
Company's discount plans may be offered either by Optiplan or by
the Company through Sponsors to potential Participants. All
optometric services are provided to Participants in prepaid
programs by Participating Providers, including the Company's
Apollo Eye Associates practices, and in discount plans by the
Apollo practices. The regulations of Chapter 637 require, among
other things, that the business and affairs of Optiplan be
examined by the Florida Department of Insurance at least once
every three years. Chapter 637 also requires that the directors
of Optiplan include at least two licensed optometrists and one
representative of the general public. Further, pursuant to
Chapter 637, Optiplan is required to maintain a minimum working
capital equal to all acquisition costs and operating expenses
for a period of at least three months, and to submit an annual
statement of financial condition. Violation of these provisions
can result in suspension or revocation of, or a refusal to
renew, Optiplan's certificate of authority to engage in
optometric services, or in the imposition of fines against
Optiplan.
<PAGE>
In May 1993, the legislature of Florida adopted a series of new
regulations pursuant to House Bill 1965, entitled the "Prepaid
Limited Health Service Organization Act of Florida" (the
"Insurance Act"), which became effective as of October 1, 1993.
Pursuant to the Insurance Act, as of October 1, 1993,
corporations such as Optiplan are no longer regulated by Chapter
637, but will be subject to the Insurance Act. Such regulations
affecting Optiplan are substantially similar to those under
Chapter 637: however, pursuant to the Florida Statutes Chapter
636 (a) Optiplan may be organized as either a "for-profit" or
"not-for-profit" corporation and (b) Optiplan is required to
maintain a fixed, defined working capital reserve of: (i) the
greater of $100,000 or 6% of total liabilities, as of January 1,
1994; (ii) the greater of $125,000 or 8% of total liabilities,
as of January 1, 1995; and (iii) the greater of $150,000 or 10%
of total liabilities, as of January 1, 1996 and thereafter. The
Company plans to restructure the managed care business into a
"for Profit" corporation, for which it has established AECMC,
handling HMO based plans and retain Optiplan as a "non-profit"
entity to contract with governmental entities and employers.
Optiplan, the Company's programs, and the relationships between
and among the Company, Optiplan, Sponsors, Participants, the
Apollo practices and the Participating Providers have been
designed to comply with existing laws. However, there is no
assurance that future laws and regulations will not be adopted,
or existing laws and regulations will not be modified or
interpreted in a manner that would materially adversely affect
the Company and its operations.
Under Florida law, retail establishments offering prescription
optical services and products must have a licensed optician or
optometrist present at all times, and an optometrist may not be
employed by a commercial corporation.
The Company's success is dependent upon its ability to provide
eye examinations, eye care prescriptions, eyeglasses and contact
lenses through Participating Providers. The inability of the
Company to maintain its relationships with existing
Participating Providers and to enter into agreements with
additional Participating Providers would materially adversely
affect the Company's operations.
Puerto Rico. AEGPR currently operates within Puerto Rico as a
provider of optometric and optical products and services for
members of licensed medical plans and HMO's. As such, the
Company is not presently subject to any specific licensing
requirements in Puerto Rico.
PROFESSIONAL AND PRODUCT LIABILITY
The Company or Optiplan could be subject to claims for
personal injury, including actual and punitive damages,
resulting from the sale of prescription eyewear, related optical
products and professional services furnished to its patients
through the Apollo practices. The Company carries professional
liability insurance for itself of $1,000,000 for each claim, or
$3,000,000 in the aggregate, and additionally has obtained
professional liability insurance for its ophthalmologists in the
same amounts, but there is no assurance that such insurance will
be sufficient to cover potential claims or that it can be
maintained in force at a cost acceptable to the Company. The
Company's contract with Koepnick requires Koepnick to maintain
adequate malpractice coverage
<PAGE>
which is currently $1,000,000 for each claim and $3,000,000 in
the aggregate, with Apollo named as an additional insured.
Although the Company does not believe that the Company or
Optiplan would have any liability due to any malpractice on the
part of a Participating Provider, the Participating Provider
Agreement requires each Participating Provider to indemnify the
Company and/or Optiplan against any such liability and to obtain
professional malpractice insurance in the amount of at least
$100,000 for a single occurrence and $300,000 in the aggregate,
and when possible, to name Optiplan or the Company as additional
insureds. There can be no assurance that such coverage will be
adequate to pay any claims asserted, or that the Company, and/or
Optiplan will not be liable for any inadequacy in such coverage.
EMPLOYEES
At June 20, 1997, the Company had 133 full-time and 10
part-time employees. The Company is not a party of any
collective bargaining agreement and believes that its relations
with its employees are good.
<PAGE>
ITEM 2. PROPERTIES
The Company leases its office, retail and laboratory facilities
from independent third parties. The Company's corporate offices
consist of 9,529 square feet of space located at 2424 North
Federal Highway, Suite 362, Boca Raton, Florida 33431. The
Company pays a monthly rental of $17,087 under a lease
agreement which expires in November 1997. All of the Apollo Eye
Associates practices are independently leased from unrelated
entities pursuant to agreements which expire at various times.
The following is a list of all locations, the size of such
location and the expiration date of each lease:
APOLLO EYE ASSOCIATES PRACTICE LOCATIONS
Location Expiration Size of
Date of Lease Location- Sq. Ft.
Dade County, Florida
Kendall December 31, 1999 2,476
Miami Springs December 31, 1997 925
North Miami Beach May 31, 2003 3,700
Broward County, Florida
Hollywood June 30, 2004 3,500
Plantation March 31, 1998 2,150
*Coral Springs July 28, 1997 5,216
*Pompano Beach December 31, 1997 3,000
Pembroke Pines January 31, 2004 2,664
Sunrise August 30, 1999 4,000
Palm Beach County, Florida
*Boca Raton September 30, 1997 3,100
*Boynton Beach May 31, 1999 4,927
Delray Beach September 30, 1997 1,600
*Lake Worth October 31, 1997 3,865
West Palm Beach September 15, 1998 1,745
*Former locations of Apollo Eye Associates, L.P.
The lease price for space varies from approximately $11.00 per
sq/ft. to $22.00 per sq./ft. Each of the leases has standard
renewal terms which range from annual renewals to a series
three-year renewal options. The Company believes that it is
compliance with its leases and will always be able to lease
space suitable for its operations.
The Company is also currently leasing approximately 370 square
feet of office space in Santurce, Puerto Rico. The Company pays
a monthly rental of $530 under a four-year lease agreement which
expires in December 1997.
<PAGE>
ITEM 3. 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 and
compensatory and punitive damages in the amount of $402,000.
The remaining claims were found in favor of the Company. The
Company has filed motions to reduce the amount of the verdict and
to enter a judgment in favor of the Company notwithstanding the
verdict. A judgment has not been entered against the Company.
A hearing for post-trial motions is set for July 16, 1997. The
Company believes it has grounds to appeal the jury verdict and
plans to file such appeal, if not successful at the July 16, 1997
hearing.
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 lawsuits
vigorously.
<PAGE>
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 continued until July 21, 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Apollo Eye Group, Inc.
was held on October 7, 1996. The following items were voted
upon by the stockholders:
(1) The following persons, who were the only nominees, were
elected directors to hold office until their successors are
elected and received the following number of votes:
For Withheld
James R. Cook 20,865,111 17,950
J. Richard Damron, Jr. 20,865,111 17,950
Vincent C. Manopoli 20,864,561 18,500
Peter Molinaro, Jr. 20,864,561 18,500
John Prelaz 20,865,111 17,950
(2) A proposal to amend the Certificate of Incorporation to
change the name of the Company to Apollo Eye Group, Inc. was
approved by the stockholders. The following votes were cast as
to such proposal: For - 20,856,489; Against - 15,522;
Abstentions and Broker Non-Votes - 11,050.
(3) A proposal to amend the Certificate of Incorporation to
effect a one-for-five reverse stock split of the Common Stock
was approved by the stockholders. The following votes were cast
as to such proposal: For - 20,779,839; Against - 95,872;
Abstentions and Broker Non-Votes - 7,350.
(4) A proposal to convert $4,000,000 of debt to James R. Cook to
1,355,932 shares of Common Stock at a conversion price of $2.95
per share was approved by the stockholders. The following votes
were cast as to such proposal: For - 7,599,420; Against
- -37,310; Abstentions and Broker Non-Votes - 1,755,901; James R.
Cook did not vote - 11,490,430.
(5) A proposal to adopt the Apollo Eye Group, Inc. 1996 Stock
Option Plan as amended and restated was approved by the
stockholders. The following votes were cast as to such
proposal: For - 19,117,078; Against - 48,195; Abstentions and
Broker Non-Votes - 1,717,788.
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
The Company's Common Stock currently is traded in the
over-the-counter market. The following table sets forth the
high and low bid and asked prices published by the National
Association of Securities Dealers, Inc. for the Company's Common
Stock. These quotations represent inter-dealer quotations,
without adjustments for retail mark-ups, mark-downs or other
fees or commissions, and may not necessarily represent actual
transactions.
Bid Ask
High Low High Low
First Quarter 1995 2 13/16 15/16 3 3/4 1 1/4
Second Quarter 1995 2 3/16 5/8 6 3/32 15/16
Third Quarter 1995 6 9/16 5/8 7 3/16 1 3/32
Fourth Quarter 1995 6 9/16 15/16 5 15/16 1 7/8
First Quarter 1996 3 3/4 1 41/64 4 11/16 2 3/16
Second Quarter 1996 3 1/8 1 1/4 4 1/16 1 23/32
Third Quarter 1996 2 3/16 15/16 3 1/8 1 1/4
Fourth Quarter 1996
(through 10/30)* 2 3/16 15/16 2 21/32 1 23/32
Fourth Quarter 1996
(11/01-12/31)* 3 5/8 21/32 4 5/8 1
*A 1-for-5 reverse split of the Company's Common Stock was
effected on November 1, 1996. The above schedule has been
restated for earlier periods.
On June 20, 1997, there were approximately 135 holders of
record of the Common Stock and an estimated 875 beneficial
owners.
The Company has not paid any dividends on its Common Stock
since its inception. The Company anticipates that for the
foreseeable future, earnings, if any, will be retained for use
in the business or for other corporate purposes, and it is not
anticipated that dividends will be paid.
<PAGE>
ITEM 6. 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 year ended December 31, 1996. Consistent
with the reverse acquisition accounting treatment, the
historical financial statements of the Company used for this
discussion are the consolidated financial statements of Apollo
Eye Associates, L.P. for the period ended December 31, 1994,
which differ from the consolidated financial statements of
United Vision Group, Inc. which were previously reported. The
discussion and analysis for the year ended December 31, 1995
includes the twelve months operations of Apollo Eye Associates,
L.P. and its successor Apollo Eye Associates, Inc., along with
the five months of operations for Apollo Eye Group, Inc.,
(formerly United Vision Group, Inc.) for the period of August 1,
1995 to December 31, 1995. Prior information may not be
comparable to the Company's current operations due to the
reverse acquisition accounting. This discussion should be read
in conjunction with the financial statements and related notes
included herein.
TWELVE MONTHS ENDED DECEMBER 31, 1996
GENERAL
On August 7, 1995, pursuant to a Merger Agreement dated August
4, 1995, the Company acquired Apollo Eye Associates, L.P., a
Delaware limited partnership, and Apollo Eye Corporation, its
general partner (together, the "Partnership"). The Partnership
was merged into a wholly owned subsidiary of the Company, Apollo
Acquisition Corporation, which was renamed Apollo Eye
Associates, Inc. ("Apollo"). The Merger was accounted for as a
"reverse acquisition" whereby Apollo was deemed to have acquired
the Company for financial reporting purposes. Apollo Eye Group,
Inc. remains the continuing legal entity and registrant for
Securities and Exchange Commission filing purposes. Under the
terms of the acquisition, the former holders of the Partnership
received preferred stock and common stock options which were
collectively convertible into 75% of the total outstanding
Common Stock of the Company on a fully diluted basis.
RESULTS OF OPERATIONS
In accordance with accounting for the transaction as a reverse
acquisition, financial reports reflect results of operations of
the Company for the year ended December 31, 1996, and the
Partnership's operations during the year ended December 31,
1995, including the operations of the Company from the date of
acquisition forward. The Partnership was formed on July 1, 1994.
During 1994 and 1995, the Partnership was in a startup phase
and was in the process of building and completing five
ophthalmology practices with expenditures being related to
initial marketing and facility opening; and accordingly, during
the period the Partnership had limited revenue. The Partnership
commenced providing medical services with the opening of its
first ophthalmology practice in Boca Raton on October 17, 1994
with a second practice opening in Boynton Beach on December 8,
1994. During 1995, but prior to the Merger, the Partnership
opened three additional
<PAGE>
practice locations (Coral Springs, Lake
Worth and Pompano Beach) and promoted the services of these
practices.
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 $2,071,463
and equity had been reduced to $190,015 at December 31, 1996.
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)
Gross revenues for the period ending December 31, 1996
increased to $9,926,280 versus $3,766,196 in the prior year
ending December 31, 1995. This increase was due primarily to the
limited operations of the Partnership in 1995 as compared with
the full year of operations for the Company in 1996. Revenue
from premiums (Capitation Payments) increased to $4,614,307 in
1996 from $1,348,035 in 1995 representing the inclusion of a
full year of capitated revenue. Premium revenue also increased
due to third party payor contracts renewed at higher capitated
rates and new managed care contracts in Puerto Rico. Practice
revenue increased to $5,006,113 from $2,117,890 for the period
ending December 31, 1995. The increases in practice revenue were
attributable to an increase in professional services coincident
with the Merger, increased optical sales due to the Merger, a
full year of operations and growth in the Apollo Eye Associates
practices. In June 1996, the Company acquired certain net assets
of two practice locations in Broward County, Florida from Focus
Fashion Optical, Inc. These practices also contributed to the
increase in practice revenue. Consulting revenue, composed
primarily of service provided by the Company's Medricon
subsidiary increased to $305,860 from $300,271.
Total revenue is expected to decline in 1997 compared with
1996. Premium revenue is expected to be reduced as the result
of the termination of a contract for vision care in South
Florida received from one of the managed care sponsors 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 will be partially
offset by the renewal of a contract negotiated in December 1996
with a managed care sponsor for increased premium revenue effective
October 1996 and 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 vision care
contract is expected to negatively impact practice revenue due to
a decrease in the number of patients that will be 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 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.
<PAGE>
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 terminations discussed above.
Costs of Goods and Services Sold (COGS) is computed as including
the costs of eyewear, including frames, lenses and contact
lenses, along with the fees paid for services to outside
providers (Participating Providers not associated with the
Company). Payments to internal providers (Participating
Providers employed by the Company or Koepnick) are recognized as
part of Selling, General and Administrative (SG&A) expenses. The
Costs of Goods and Services Sold increased to $2,922,025 during
the twelve months ended December 31, 1996 versus $1,757,049
during the twelve months ended December 31, 1995. This
significant increase is due to the reporting of a full twelve
months of COGS, the high optical component with its associated
costs in lenses and frames inherent in the Apollo business, and
the presence of HMO contracts with Sponsors creating the need
for outside provider payments. COGS for the twelve months ended
December 31, 1996 for premium and practice revenue was 30.1% of
revenue versus 50.7% for the prior period.
Management has implemented procedures and installed systems
in the practices in the eyewear product area to improve
inventory management including automating inventory systems,
consolidating purchasing, and quarterly inventory reviews to
decrease obsolescence. The inventory results are reported from a
physical inventory performed at year end December 31, 1996.
Inventory increased from $401,894 on December 31, 1995 to
$551,291 at December 31, 1996, representing the inventory of the
acquisition of the two new locations in Broward County, a change
in the mix of frames, an increase in contact lens inventories,
and an increase in laboratory inventories to facilitate the
closing and relocation of the Texas laboratory late in the
fourth quarter of 1996. The Company is currently implementing
inventory control processes to optimize turnover. The Company
expects to improve inventory utilization as part of the
consolidation of its laboratory operations into a single
location in Broward County, Florida.
During the Merger it was
noted that the Apollo Eye Associates practice locations were in
direct competition with certain newly-recruited Optiplan outside
Participating Provider locations. Consistent with reducing the
reliance on providers and increasing internal revenue, the
Company focused on eliminating providers in close proximity to
its practice locations. In January 1996 management reduced the
number of outside Participating Providers by 17% based on
proximity to the Apollo practice locations and a variety of
other factors. These reductions resulted in reduced outside
provider payouts and increased utilization of the Apollo
practices resulting in increased service and optical sales and
improved margins.
During the year ended December 31, 1996, SG&A expenses
increased from $6,752,121 to $9,824,551. The increases in SG&A
primarily result from reporting twelve months of the companies'
operations in 1996 compared with limited operations in 1995,
payroll cost increases, including professional medical staff,
increased rental expenses due to the expanded number of
facilities and accounting and legal costs, including legal
settlements.
<PAGE>
Depreciation and amortization expenses for the twelve months
ended December 31, 1996 increased to $988,161 from $908,278 in
the same period last year. The increased expense results from
depreciation of equipment acquired in the Merger with AEG and a
full year of depreciation on Apollo equipment placed in service
in 1995. The increase also results from amortization of
intangible assets and goodwill associated with the AEG
acquisition. Property and Equipment increased to $5,428,444 at
December 31, 1996 from $4,754,337 at December 31, 1995. The
equipment purchased includes the assets of two practice
locations acquired in June 1996, medical equipment, optical
manufacturing equipment, computers and communications equipment.
RESTRUCTURING CHARGES
In December 1995 the Company began implementation of a
restructuring plan designed to reduce its operating payroll on
an ongoing basis (resulting in severance and termination
payments), to reduce its laboratory operating expenses, to
eliminate overlapping practices and to write-down non-performing
assets. As part of its plan, the Company took a one-time
restructuring charge associated with the termination of Jan and
Karen Kaplan, the write off of the Rubin Employment Agreement,
the relocation and consolidation of optical laboratories and the
closure of three practice locations and the Company's former
corporate offices. The total restructuring expense of
$1,576,069 was charged to earnings in the fourth quarter of
1995. (See Item 12 - Certain Relationships and Related
Transactions.)
OTHER SIGNIFICANT EXPENSES
The Company also incurred significant expenditures in 1995,
aggregating $566,254, relating to the accrual of probable legal
settlements, a write-down of investment securities, and
write-offs associated with reductions to intangibles including
software and organization costs. In 1996, the Company
recognized $394,500 of expenses for legal settlements, write off
of investment securities, and write down of goodwill.
In 1996 and 1995, the Company recorded $300,000 and $351,000
respectively in recognition of potential settlements of ongoing
litigation and claims. The legal accrual was established by
reviewing potential settlements of the cases. The Company
intends to vigorously defend itself in each of the actions and
such accrual does not constitute an admission of wrong-doing but
represents management's estimate of the cost of settlement.
The Company recorded expense of $38,000 in 1995 on investment
securities to reduce the value of the investment to the current
market value. An additional charge of $12,000 was taken in
1996 to write off the remaining investment value.
The Company reduced the carrying value of goodwill related to
its consulting business by $58,500 in 1996.
<PAGE>
The 1995 write-down of intangibles includes a $15,000 decrease
to the value of the Company's license with Physician Eyecare
Network (PEN). The Company also expensed its license in Great
Plains Dynamic Accounting software of $18,708 since it has
chosen to convert to a single accounting system (MAS-90)
effective December 31, 1995. The Company operated dual systems
during the fourth quarter of 1995. The Company is also
expensing its development costs of $87,151 related to its
Eyecare Benefits Form (EBF) software which was used by Optiplan
in the management of vision care benefits. The EBF system
developed by the Company in late 1994 and early 1995 was
replaced in the fourth quarter of 1995 by an enhanced system
with automated functions such as form generation/fax
transmission, etc.
Additionally in 1995 the Company expensed Apollo Eye
Associates, L.P.'s organizational costs of $10,000. The Company
accrued $23,750 associated with bonuses for two employees earned
in 1995 but due in 1996, and $25,000 associated with a retention
bonus due to a key employee.
NET LOSS
The Company's losses decreased from $7,578,290 ($4.35 per
share) for the year ended December 1995, to $4,464,986 ($1.05
per share) for the year ended December 31, 1996. The loss of
$4.35 per share was derived based on the Company's loss of
$5,181,133 incurred during the five month period ended December
31, 1995.
BALANCE SHEET DATED DECEMBER 31, 1996
The Company's cash increased to $75,462 at December 31, 1996
from an overdraft of $3,528 at December 31, 1995. At December
31, 1995, Marketable Securities of $12,000 represented AEG's
investment in Classic Video Theaters, Inc. which the Company has
written off in 1996.
The Company's Accounts Receivable (net of allowance for
contractual allowances and doubtful accounts) increased to
$541,709 at December 31, 1996 from $253,440 at December 31,
1995. This increase is due to the increased revenue of the
Company. At December 31, 1996, Accounts Receivable include
approximately $181,000 of practice receivables and $305,000 of
premium revenue due from managed care contracts. The allowance
for contractual allowances and doubtful accounts increased from
$2,554 to $158,515 at December 31, 1996 as a result of increased
non-capitated practice revenue for professional fees and optical
sales. Inventory (net of reserves) increased by $149,397 from
$401,894 at December 31, 1995 to $551,291 at December 31, 1996.
The increase results from a change in frame mix, increased
contact lens inventories and increases in laboratory inventories
to facilitate consolidation of the laboratories into a single
location. The total current assets of the Company increased
from $825,087 to $1,294,965 for the years ended December 31,
1995 and 1996 respectively.
<PAGE>
The Company's Property Plant and Equipment (PP&E) decreased
from $3,682,472 at December 31, 1995 to $3,589,853 at December
31, 1996. The PP&E additions include medical equipment, optical
manufacturing equipment, computers and communications equipment.
The PP&E decrease results from depreciation. The total assets
of the Company expanded from $5,357,836 at December 31, 1995 to
$5,529,690 at December 31, 1996 due to the increase in current
assets.
The Company's Current Portions of Long Term Debt and Capital
Leases decreased to $218,152 at December 31, 1996 from $223,766
at December 31, 1995. The decrease results from the payoff of
one of the notes payable in 1997. Similarly, the Long Term Debt
net of Current and Capital Leases net of Current decreased from
$456,363 to $218,247, representing the repayment of the
Company's obligations. Accounts Payable and Accrued Liabilities
decreased to $3,037,158 from $3,170,217 and includes trade
payables, accrued payroll, legal, accounting and property taxes.
The Company's current receivable Due from Employees of $5,568
at December 31, 1995 was repaid in 1996. Amounts Due from
Officers and Employees decreased $38,028 from December 31,
1995, due to the repayment of such amounts through offsets to
future bonuses in the Jan Kaplan Termination, Settlement and
Mutual Release Agreement and $41,570 from expense recognition.
(See Item 12 - Certain Relationships and Related Transactions.)
The Company's equity decreased in the period to $190,015 at
December 31, 1996 from $630,001 at December 31, 1995. This
decrease is directly related to operating losses in 1996 offset
by capital raised in 1996 through the sale of Common Stock to
James R. Cook. (See Item 12 - Certain Relationships and Related
Transactions.)
CASH FLOW STATEMENT FOR PERIOD ENDING DECEMBER 31, 1996
Net Cash Flows used in Operating Activities decreased to
$3,942,143 for the period ending December 31, 1996 from
$3,992,217 for the year ending December 31, 1995. The changes in
cash used include significantly lower operating losses and
accounts receivable and inventory expansion based on increased
revenues and decreased payables.
The Company purchased $639,461 of Property Plant and Equipment
in 1996. The net proceeds used in investing activities totaled
$690,137.
The Net Cash provided by Financing Activities totaled
$4,707,742 for the period ending December 31, 1996. The cash was
provided by James R. Cook through a $4,000,000 sale of Common
Stock and $955,000 of stockholder loans.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Apollo Eye Associates, L.P. was a start-up company established
in July 1994. The Partnership had revenue of only $153,840 with
a net loss of $959,611 for the year ended December 31, 1994.
During 1994, the Partnership consumed $861,376 of cash for
operating activities and used $2,005,708 in investing
activities. Through June 30, 1995, the Partnership had a net
loss for 1995 of $2,115,685 on revenues of $433,378. During
this six month period prior to the Merger, $1,896,034 of cash
was used in operating activities, and another $450,102 used in
investing activities. The Apollo Partnership during its
start-up period was a significant consumer of cash.
For the entire year 1995, the Company had net revenues of
$3,766,196 with a loss of $7,578,290. Net cash of $3,992,217
was consumed by operating activities with $1,038,565 used by
investing activities. After a total of $5,025,745 cash provided
by financing activities, the net decrease in cash for the year
was $3,528. Cash on hand of $1,538,080 as of June 30, 1995, was
diminished to cash overdraft by year end.
As of December 31, 1995, James R. Cook, M.D., the major
shareholder of the Company, provided short term loans in the
amount of $800,000 in an effort to improve liquidity. These
shareholder loans carried an interest rate of prime plus one and
one-half percent; a total of $13,437 of interest on these
shareholder loans was accrued during 1995.
In order to restore the equity base eroded in the Company's
start-up phase and by the large restructuring charge taken
during 1995 and the continuing operational losses, the Board of
Directors believed that equity was needed by the Company. Dr.
Cook, the principal shareholder of the Company, agreed and the
Board of Directors have approved, subject to the appropriate
amendments to the Company's Certificate of Incorporation and
either the receipt of a fairness opinion from a qualified,
independent third party or approval by vote of the Company's
disinterested shareholders, that Dr. Cook would make a
$4,000,000 equity investment in the Company with the conversion
of loans to equity. Subject to the approvals outlined above,
Dr. Cook agreed to convert $4,000,000 of shareholder loans to
purchase 1,355,932 shares of the Company's Common Stock at $2.95
per share. These shares are newly issued and unregistered
securities subject to the usual holding periods for such
securities. This purchase price was established by calculating
the average trading price of the shares of the Company's stock
in over-the-counter trading for the twenty (20) business days
prior to March 27, 1996, the date Dr. Cook and the Company
agreed to convert his loans to equity. The average trading
price of $3.6925 per share was discounted by 20%, owing to the
fact that the investment is sizable and that the shares are to
be unregistered and, as such, illiquid. Through September 30,
1996, total shareholder loans of $4,955,000 were provided by Dr.
Cook. On October 7, 1996, the shareholders of the Company
(excluding shares held by Dr. Cook) approved a transaction
whereby $4,000,000 of loans from Dr. Cook were exchanged for
1,355,932 shares of Common Stock. Dr. Cook made additional
loans to the Company in the fourth quarter 1996 of $800,000 for
total shareholder loans At December 31, 1996 of $1,755,000 after
the conversion of $4,000,000 of shareholder loans to equity.
(See Item 12, Certain Relationships and Related Transactions.)
<PAGE>
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 the present level 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 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 secured 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 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
proceeds of the note from Chardonnay Enterprises.
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 will continue 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.
<PAGE>
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 "Report of Independent Accountants" and
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 AEG's former
Family EyeCare Center practices. Development of new practice
locations or the acquisition of additional practice locations will
require cash.
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.
Management also is exploring 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.
In February 1997, Statements of Financial Accounting Standard
("SFAS") No. 128 "Earnings Per Share" was issued. SFAS No. 128
established 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 presented. The adoption of SFAS No.
128 is not expected to have a material impact on the Company's
financial statements.
Management does not believe that inflation has had a material
effect on the results of the Company's operations.
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>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Financial Statements" for financial statements of
the Company for the fiscal years ended December 31, 1996 and
1995.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The directors and executive officers of the Company as of
June 23, 1997 are set forth below:
Name Age Position
James R. Cook, M.D. 54 Chairman
J. Richard Damron, Jr. 47 Treasurer, Director
Peter Molinaro, Jr. 44 Vice President,
Director and Secretary
John C. Prelaz 37 Director
Directors are elected to serve until the next annual meeting of
stockholders or until the successors have been elected and
qualified. Directors do not receive remuneration for their
services but may be reimbursed for related expenses such as the
cost of travel to Board meetings. Officers are appointed to
serve until the meeting of the Board of Directors following the
next annual meeting of stockholders or until their successors
have been elected and qualified. All current directors are
serving a term beginning October 7, 1996, and will serve as to
such time as new directors are elected and qualified.
Information on the Company's directors and executive officers
is as follows:
James R. Cook, M.D. Dr. Cook, age 54, received his B.S. in
Chemistry, M.S. in Pharmacology, and M.D. degree all from the
University of Illinois. His post graduate hospital clinical
experience includes a residency in ophthalmology from Washington
University, St. Louis, and the National Eye Institute (NEI),
Bethesda, Maryland. Dr. Cook entered the practice of
ophthalmology in Huntington, West Virginia in 1971, and is
certified by the American Board of Ophthalmology.
Dr. Cook served as the medical director and then president of
CILCO, Inc., a manufacturer of intraocular lenses, viscoelastics
and ophthalmic instrumentation ("CILCO"), from 1978 - 1986.
CILCO was acquired by Rorer Group, Inc. in 1981.
In 1986, Dr. Cook, along with Mr. Molinaro and others,
purchased IntraOptics, Inc., a manufacturer of intraocular
lenses ("IntraOptics"), from an Australian publicly-held
company. IntraOptics grew to over $20 million in revenue by
1991 and was sold to Chiron Corporation in early 1992. Also
during the 1986 - 1989 time frame, Dr. Cook served as the
president of Tullis-Cook and Co., Inc., the manager of a $44
million investment pool for health care acquisitions and
investments known as Tullis-Cook Capital Focus, L.P.
<PAGE>
Dr. Cook has served on the boards of publicly-held companies in
the past including LifeCore, Inc., a biotechnology company based
in Minneapolis; Amerihealth, Inc., an Atlanta-based hospital
management company subsequently merged with Champion Healthcare;
and Salvatori Ophthalmics, a Sarasota, Florida maker and
distributor of contact lenses. He has been a director of the
Company since August 1995.
J. Richard Damron, Jr. Mr. Damron, age 47, received his
B.B.A. in Accounting from Marshall University in 1971 and became
a certified public accountant in 1974. Mr. Damron practiced
public accounting in West Virginia from 1971 to 1980 during
which time he consulted with clients on financial planning and
control engagements and managed audits for businesses with $1
million to $50 million of revenue.
In 1980, Mr. Damron joined CILCO as Controller and Treasurer
and was promoted to Chief Financial Officer in 1981 when the
company was acquired by Rorer Group, Inc. In 1985 CILCO was
acquired by CooperVision, Inc., and Mr. Damron became Executive
Vice President of Operations responsible for manufacturing,
research and development, regulatory affairs and quality
assurance. Along with these operating responsibilities, he had
the added responsibility of facility consolidation, process
integration and rationalization plans for operations.
In 1987, Mr. Damron joined Dr. Cook to become a partner in
Tullis-Cook Capital Focus, L.P. In this role he participated in
raising $44 million of capital for investments in health care
companies. He was active in identifying investment
opportunities, negotiating transactions and financing managing
due diligence. Mr. Damron held Board seats on portfolio
investments including Benson Optical Company, Salvatori
Ophthalmics and IntraOptics, Inc. Mr. Damron left Tullis-Cook
in 1990 to join IntraOptics as Chief Financial Officer.
IntraOptics was acquired in January 1992 by Chiron Corporation.
Mr. Damron served as Senior Vice President and Chief Financial
Officer of Chiron Vision from January 1992 to June 1995. In
July 1995 he became Senior Vice President of Mergers and
Acquisitions for Chiron Vision, a position which he held until
joining the Company in April 1996. Mr. Damron has been a
director of the Company since August 1995.
Peter Molinaro, Jr. Mr. Molinaro, age 44, graduated from
Marshall University in 1974 with a B.S. Degree in Zoology, and
went on to receive a M.S. Degree in Biological Science (1975)
and an M.B.A. in Management in 1980, from the same institution.
In December 1977, Mr. Molinaro joined CILCO as Clinical
Research Coordinator responsible for establishing the company's
regulatory affairs and clinical research functions and
ultimately became CILCO's Vice President of Regulatory Affairs
and Quality Assurance.
In 1986, Mr. Molinaro joined Dr. Cook in the acquisition of
IntraOptics. As a Senior Vice President of Sales and Marketing,
he developed the company's sales and marketing organizations
including the recruitment and training of its domestic sales
force.
<PAGE>
In the first full year after the merger of IntraOptics and
Chiron Ophthalmics, Mr. Molinaro served as Chiron IntraOptics'
Senior Vice President of Sales and Marketing, responsible for a
$20 million expense budget, domestic and world wide marketing
and the domestic sales organizations. In October 1993, Mr.
Molinaro left Chiron to work as a consultant and to pursue the
development of Apollo Eye Associates with Dr. Cook. He has been
an executive officer and director of the Company since August
1995.
John C. Prelaz. Mr. Prelaz, age 37, has been a director of
the Company since May 1996. Mr. Prelaz graduated with honors
from Marshall University with a B.A. in Marketing in 1982. From
1982 until 1988, Mr. Prelaz was a sales representative for
CILCO. In 1988, he became a sales manager with IntraOptics and
continued in sales with Chiron Vision after the acquisition of
IntraOptics by Chiron. Mr. Prelaz has over ten years of
experience in ophthalmology practice marketing. He is
co-founder of Results Marketing, a company dedicated to
marketing ophthalmic practices. Mr. Prelaz was a limited
partner of Apollo Eye Associates, L.P., and served as a
director. He is currently employed as a Regional Director for
Chiron Vision concentrating on ophthalmic surgical innovations,
practice marketing and managed care.
Section 16 (a) Beneficial Ownership Reporting Compliance
Section 16 (a) of the Securities Exchange Act of 1934 requires
the Company's executive officers and directors, and persons who
beneficially own more than ten percent of the Company's equity
securities, to file reports of security ownership and changes in
such ownership with the Securities and Exchange Commission (the
"SEC"). Officers, directors and greater than ten percent
beneficial owners also are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they
file. Based upon a review of copies of such forms and written
representations from its executive officers and directors, the
Company believes that all Section 16(a) filing requirements were
complied with on a timely basis during and for 1996.
ITEM 10. EXECUTIVE COMPENSATION
Summary Information. The following table sets forth amounts of
cash and certain other compensation paid to Dr. Cook, the
Company's chief executive officer, and Mr. Molinaro, the
Company's only executive officer receiving cash compensation in
excess of $100,000 during 1996, for services in all capacities
to the Company and its subsidiaries. Dr. Cook and Mr. Molinaro
are sometimes referred to as the "named executive officers."
<PAGE>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
Other Restricted
Annual Stock Securities All
Name & Compen- Awards Underlying Other
Principal Salary Bonus sation Options/ Compen-
Position Year ($) ($) ($) (1) ($) SARs (#) sation ($)
James R. Cook, M.D.
(2) (3)
Chairman 1996 $31,250 --- --- --- --- ---
1995 $75,000 --- --- --- 83,481 ---
Peter Molinaro, Jr.
(2)
Vice President 1996 $101,042 --- -- --- 22,400 ---
1995 $120,480 --- --- --- 186,606 ---
(1) Perquisites did not exceed the lesser of $50,000 or 10% of
salary and bonus.
(2) Dr. Cook and Mr. Molinaro first became executive officers of
the Company during 1995.
(3) Salary amounts were accrued but not paid.
STOCK OPTIONS
The following tables set forth information regarding options
granted to the named executive officers during 1996 and held by
them at fiscal year end:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Number of % of Total
Securities Options/SARS
Underlying Granted to Exercise
Options/SARs Employees in or Base
Granted Fiscal Price Expiration
(#) Year ($/Share) Date
James R. Cook, M.D.
Chairman
0 0.0% ------ ------
Peter Molinaro, Jr.
Vice President 22,400 6.5% $1.5625 October 6,
2006
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY END
OPTION/SAR VALUES
Number of
Securities
Underlying Value of
Options/SARS In-the-Money
Shares at FY End Options/SARS at
Acquired Value (#) FY End ($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
James R. Cook, M.D.
Chairman --- --- 27,828/ $1,030/
55,654 $2,059
Peter Molinaro, Jr.
Vice President --- --- 64,931/ $11,038/
144,075 $20,685
EMPLOYMENT CONTRACTS
In connection with the Merger, James R. Cook, M.D., Peter
Molinaro, Jr. and Vincent C. Manopoli entered into Employment
Agreements with the Company to provide services as Chairman,
Executive Vice President and Executive Vice President,
respectively, for annual salaries of $75,000, $125,000, and
$85,000, respectively. These Employment Agreements were
terminable by either party upon 90 days written notice, with or
without cause. Mr. Manopoli left the Company to pursue other
business interests in March 1997. Dr. Cook and Mr. Molinaro
have agreed with the Company to the cancellation of their
Agreements.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of March 26, 1997, certain
information with regard to the beneficial ownership of the
Company's Common Stock, the Company's only currently outstanding
equity or voting security, by (i) each of the Company's
stockholders known to hold more than 5% of the outstanding
shares of Common Stock, (ii) each director and each executive
officer named on the Summary Compensation Table, individually,
and (iii) all directors and executive officers as a group.
<PAGE>
Common Stock
Name (1) Shares (2) Percent of
Class(2)
James R. Cook, M.D. (3) 3,708,398 62.7%
J. Richard Damron, Jr. 126,480 2.1%
Peter Molinaro, Jr. 417,925 7.0%
John C. Prelaz 435,903 7.4%
All current directors and
executive officers as a group
(4 persons) 4,688,706 78.0%
Jan H. Kaplan (4) 341,205 5.8%
Karen Kaplan (4) (5) 58,000 1.0%
Robert M. Rubin 325,772 5.5%
_________________
(1) The address of (i) Dr. Cook, and Messrs. Damron, Molinaro
and Prelaz is 2424 North Federal Highway, Suite 362, Boca Raton,
Florida 33431, (ii) Mr. and Mrs. Kaplan is 12049 N. W. 9 Court,
Coral Springs, Florida 33071, and (iii) Mr. Rubin is 660 Kings
Gate Circle, Delray Beach, Florida 33484.
(2) Includes shares of Common Stock which may be acquired upon
the exercise of presently exercisable stock options and options
exercisable within sixty (60) days after March 26, 1997 in the
following amounts: Dr. Cook 27,828 shares; Mr. Damron, 10,461
shares; Mr. Molinaro, 64,931 shares; Mr. Prelaz, 19,516 shares;
all directors and executive officers as a group, 120,006 shares;
Mr. Kaplan, 21,000 shares; Mrs. Kaplan, 10,000 shares; and Mr.
Rubin, 31,000 shares.
(3) Includes shares of Common Stock held in a corporation
controlled by Dr. Cook.
(4) Mr. and Mrs. Kaplan, who are husband and wife, each may be
deemed to share voting power over the shares owned by the other.
(5) Includes 700 shares of Common Stock held by Mrs. Kaplan for
her children.
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective August 7, 1995, Jan H. Kaplan, then the Company's
President, and Karen Kaplan, an Executive Vice President,
entered into employment agreements (the "Employment Agreements")
with the Company which replaced their prior agreements with the
Company. Each Employment Agreement had an initial four-year
term. Pursuant to the Employment Agreements, Mr. Kaplan was to
receive an annual base salary of $140,000, and Mrs. Kaplan was
to receive an annual base salary of $85,000. In addition, each
also would be paid a cash bonus of $25,000 per quarter for eight
consecutive quarters, beginning with the quarter ended September
30, 1995. The Employment Agreements provided additional
miscellaneous compensation in the form of certain perquisites,
including the use of automobiles and certain insurance benefits.
On December 19, 1995 the Company announced that it was in the
process of terminating the employment of Mr. and Mrs. Kaplan.
On March 23, 1996, the Kaplans entered into Termination,
Settlement and Mutual Release Agreements and Consulting
Agreements effective January 1, 1996, under the following terms:
1) Under the Termination, Settlement and Mutual Release
Agreements, Jan Kaplan received a payment of $118,429, based
upon his remaining bonus amount of $150,000 less amounts and
advances due to the Company of $31,571, and Karen Kaplan
received a payment of $50,166, based upon her remaining bonus
amount of $150,000 less the $85,000 in Notes Payable due to the
Company and $14,833 of accrued interest payable.
2) The Consulting Agreements provide for monthly payments to Jan
Kaplan of $11,667, and to Karen Kaplan of $7,083 through August 3,
1999.
3) The Consulting Agreements provide for continuing payments of
auto leases and related expenses for both Mr. and
Mrs. Kaplan through mid year 1998.
4) Under the Consulting Agreements, Mr. and Mrs. Kaplan are
limited from competing with the Company, soliciting the business
of the Company, or soliciting the Company's employees through
August 3, 1999.
The Company does not expect to make significant use of the
Kaplans under the Consulting Agreements and wrote off the
projected expenses associated with these various agreements
during 1995.
In a Shareholders Voting Agreement entered into in connection
with the Merger, Dr. Cook agreed, under certain circumstances,
to vote to elect Mr. Kaplan, Mrs. Kaplan (or her designee), and
a third person designated by Mr. Kaplan as directors of the
Company. In the Termination, Settlement and Mutual Release
Agreements, Mr. and Mrs. Kaplan released their rights under the
Stockholders Voting Agreement. Robert M. Rubin, a former
director of the Company, has an employment agreement for a term
of three years expiring in August 1998 at an annual salary of
$50,000, which is terminable by the Company only for cause (as
defined). The Company has not called upon Mr. Rubin for
services and does not expect to do so; therefore, the remaining
expense associated with his Employment Agreement was taken as a
restructuring charge in 1995.
<PAGE>
On August 4, 1995, the Company exchanged all outstanding shares
of its Series A Preferred Stock for Common Stock at rate of six
shares of Common Stock for each share of Series A Preferred
Stock, thereby issuing 82,048 shares to Mark Glick, the brother
of Mrs. Kaplan; 280,205 shares to Mr. Kaplan, and 249,772 shares
to Mr. Rubin. The Series A Preferred Stock had a cumulative
dividend rate of 12% per annum, was not callable and was
convertible at the holder's option into Common Stock at the
following rates: until December 31, 1994, one to one; through
December 31, 1995, 1.22 to one; through December 31, 1996, two
to one; and until December 31, 1997, four to one. If the
Company had not exchanged the Series A Preferred Stock for
Common Stock, it would have been obligated to pay cumulative
dividends of $137,705 through December 31, 1997, at which point
the Series A Preferred Stock would have been convertible into
Common Stock at the rate of four to one. Thus, by issuing an
additional 204,008 shares of Common Stock beyond the four to one
conversion, the Company saved approximately $186,000 (consisting
of $61,200 in accrued and unpaid dividends and approximately
$124,890 of future dividends, representing a present value of
$137,705 of cumulative dividends through December 31, 1997 using a
discount rate of 8% per annum). This represented approximately
$0.9125 per common share, which was a discount of $0.17735 per
share from the average closing spread between the bid and asked
price for the Common Stock of $1.0895 per share for the 20 trading
days prior to the exchange. The exchange rate of six to one was
approved by the Board of Directors of the Company prior to the Merger.
During 1995 and 1996, Dr. Cook provided loans to the Company in
an effort to improve liquidity. These stockholder loans carried
interest at the rate of prime plus 1-1/2% through March 31,
1996, and prime thereafter. Total stockholder loans provided by
Dr. Cook were $800,000 in 1995; accrued interest for that year
was $13,437. Additional loans totaling $4,955,000 were made in
1996. Total interest for 1996 on all outstanding amounts was
$242,214. At the Annual Meeting in October 1996, the Company's
stockholders approved the conversion of $4,000,000 of the
outstanding indebtedness to Dr. Cook to 1,355,932 shares of
Common Stock at a conversion price of $2.95 per share. The
purchase price was established by calculating the average
trading price of the Common Stock for the 20 days prior to March
27, 1996 (the date Dr. Cook and the Company agreed to convert
the debt to equity) and applying a discount of 20% due to the
facts that the investment was sizeable and the shares would be
unregistered and, therefore, illiquid. Subsequent to the Annual
Meeting and conversion, Dr. Cook made additional loans to the
Company. As of December 31, 1996, the Company's outstanding
indebtedness to him was $1,755,000 plus accrued interest of
$242,214.
<PAGE>
In January 1997, the Company's Board of Directors approved an
agreement to enter into a revolving loan agreement with Dr. Cook
providing for loans, bearing interest at prime, not exceeding
$1,000,000 secured by the Company's accounts receivable and
inventory. At March 31, 1997, the Company had borrowed $550,000
under this arrangement, the maximum available based on eligible
accounts receivable and inventory. In April 1997, the Company
entered into a loan agreement with Chardonnay Enterprises, Inc.,
a corporation controlled by James R. Cook, M.D., providing for
loans not exceeding $500,000, bearing interest at prime, secured
by property and equipment of the Company. In May 1997, the
Company entered into an agreement with Chardonnay Enterprises to
borrow up to $3,000,000 including the $500,000 previously
authorized by the Company, all bearing interest at the prime rate.
At June 20, the Company had agreements to borrow an aggregate of
$4,000,000 from Dr. Cook or corporations he controls. At June 20,
the Company has a balance due to Dr. Cook or companies he controls
of $3,025,000 plus accrued interest of $343,613.
The Company purchased marketing services and materials from
Results Marketing and Visual Communications, Inc., in the
amounts of $45,600 and $210,505 in 1996 and 1995. This firm is
owned in part by John C. Prelaz, a director of the Company. The
Company believes that the services and materials were purchased
at fair market value and were necessary for the conduct of the
business of the Company.
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Description of Exhibit
3(a) -- Certificate of Incorporation
3(b) -- By-Laws
10(a) -- Management Agreement between J. K. Enterprises of
Deerfield Beach, Inc. and Optiplan, Inc.
10(b) -- 1995 Stock Option Plan A (1)
10(c) -- Termination, Settlement and Mutual Release, and
Consulting Agreement with Jan H. Kaplan (1)
10(d) -- Termination, Settlement and Mutual Release, and
Consulting Agreement with Karen Kaplan (1)
10(e) -- Employment Agreement between the Company and James R.
Cook, M.D. (2)
10(f) -- Employment Agreement between the Company and Peter
Molinaro, Jr. (2)
10(g) -- Employment Agreement between the Company and Robert
Rubin (2)
10(h) -- Form of Participating Provider Agreement (3)
10(i) -- 1996 Stock Option Plan (4)
10(j) -- Professional Provider Agreement between Master Vision Plan,
Inc. and First Medical Plan, Inc.
10(k) -- Professional Provider Agreement between Master Vision Plan,
Inc. and United HealthCare of Puerto Rico, Inc.
10(l) -- Professional Provider Agreement between Apollo EyeCare
Management Corp. and Foundation Health Corporation
11 -- Computation of Earnings
21 -- Subsidiaries of the Registrant
________________________________
1. Filed as an exhibit to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1995 and incorporated
herein by reference.
2. Filed as an exhibit to the Company's Current Report on Form
8-K dated August 7, 1995 and incorporated herein by reference.
3. Filed with the Company's registration statement on Form SB-2
(File No. 33-72714-A) and incorporated herein by reference.
4. Filed as an exhibit to the Company's definitive Proxy
Statement dated September 3, 1996 and incorporated herein by
reference.
(b) Reports on Form 8-K - None.
<PAGE>
SIGNATURES
Pursuant to the requirement 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: July 10, 1997 By:/s/ J. Richard Damron, Jr.
J. Richard Damron, Jr.
Treasurer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant in the capacities and on the dates
indicated.
Signature Title Date
/s/ James R. Cook, M.D. Chairman of the Board of June 23, 1997
James R. Cook, M.D. Directors (Principal
Executive Officer)
/s/ Peter Molinaro, Jr. Vice President, Secretary June 23, 1997
Peter Molinaro, Jr. and Director
/s/ J. Richard Damron, Jr.Treasurer and Director June 23, 1997
J. Richard Damron, Jr. (Principal Accounting and
Financial Officer)
/s/ John C. Prelaz Director June 23, 1997
John C. Prelaz
<PAGE>
APOLLO EYE GROUP, INC. REPORT ON AUDITS OF CONSOLIDATED
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND 1995
<PAGE>
APOLLO EYE GROUP, INC. CONSOLIDATED FINANCIAL
STATEMENTS
TABLE OF CONTENTS
Pages
Report of Independent Accountants 1-2
Financial Statements:
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statements of Cash Flows 6-7
Consolidated Statements of Stockholders'
Equity and Partners' Capital 8
Notes to Consolidated Financial Statements 9-25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors Apollo Eye Group,
Inc.
We have audited the accompanying consolidated balance sheet of
Apollo Eye Group, Inc. and subsidiaries (the "Company") as of
December 31, 1996 and 1995 and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of
management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Apollo Eye Group, Inc. and subsidiaries as of
December 31, 1996 and 1995 and the consolidated results of their
operations and their cash flows for years then ended in conformity
with generally accepted accounting principles.
<PAGE>
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 1 to the financial statements, the Company experienced
significant losses in 1996 and 1995 and does not project positive
cash flow from operations in 1997. These matters raise substantial
doubt about the Company's ability to continue as a going concern.
Management plans in regard to these matters are also described in
Note 1. The accompanying financial statements do not include any
adjustments relating to the recoverability of assets and
liabilities that might be necessary should the Company be unable to
continue as a going concern.
As also discussed in Note 1 to the financial statements, on August 7,
1995 Apollo Eye Associates, L.P. and Apollo Eye Corporation, its
general partner (the "Partnership") were merged into the Company's
wholly owned subsidiary Apollo Acquisition Corporation which was
subsequently renamed Apollo Eye Associates, Inc. (Apollo). The
merger has been accounted for as a reverse acquisition, whereby
Apollo was deemed to be the acquirer for accounting purposes.
Accordingly, the consolidated financial statements of the period
prior to August 1, 1995 (the effective date of the merger) are those
of Apollo and differ from the consolidated financial statements of
the Company and its subsidiaries as previously reported for those
periods.
West Palm Beach, FL
March 20, 1997, except for Note 9 as to
which date is June 30, 1997
<PAGE>
<TABLE>
APOLLO EYE GROUP, INC. CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash $ 75,462 $ 0
Restricted cash 50,000 50,000
Marketable securities 0 12,000
Accounts receivable, net of allowance
of $158,515 and $2,554 at December
31, 1996 and 1995 541,709 253,440
Due from employees 0 5,568
Inventory 551,291 401,894
Deferred income taxes 27,200 27,200
Other current assets 49,303 74,985
Total current assets 1,294,965 825,087
Property and equipment, net 3,589,853 3,682,472
Intangible assets, net 520,768 764,381
Other assets 124,104 85,896
Total assets $ 5,529,690 $5,357,836
LIABILITIES AND EQUITY
Current liabilities:
Cash overdraft $ 0 $ 3,528
Current portion of long-term debt 33,754 38,718
Current portion of capital lease
obligations 184,398 185,048
Accounts payable 735,874 951,445
Accrued liabilities 2,301,284 2,218,772
Deferred revenue 111,118 73,961
Total current liabilities 3,366,428 3,471,472
Notes payable to stockholder 1,755,000 800,000
Long-term debt,
net of current portion 96,364 132,137
Capital lease obligations,
net of current portion 121,883 324,226
Total liabilities 5,339,675 4,727,835
Equity:
Preferred stock Series B,
$.01 par value, $1,000,000 shares
authorized, 0 and 33,315.9185
shares issued and outstanding at
December 31, 1996 and 1995 0 333
Common stock $0.001 par value,
30,000,000 shares authorized,
5,888,898 and 1,191,367 shares
issued and outstanding at December
31, 1996 and 1995 5,889 1,191
Additional paid-in capital 9,830,245 5,809,610
Accumulated deficit and fund
balance (9,646,119) (5,181,133)
Total equity 190,015 630,001
Total liabilities and equity $5,529,690 $5,357,836
<FN>
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
<TABLE>
APOLLO EYE GROUP, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Year ended Year ended
December 31, December 31,
1996 1995
<S> <C> <C>
Revenue:
Premium $ 4,614,307 $ 1,348,035
Practice 5,006,113 2,117,890
Other 305,860 300,271
Total revenue 9,926,280 3,766,196
Operating costs and expenses:
Cost of goods and services sold 2,922,025 1,757,049
Depreciation and amortization 988,161 908,278
Selling general and administrative
expenses 9,824,551 6,752,121
Restructuring charges 0 1,576,069
Total operating costs and
expenses 13,734,737 10,993,517
Loss from operations (3,808,457) (7,227,321)
Other income (expenses):
Other income, net 8,834 9,758
Interest, net (355,508) (9,727)
Estimated litigation settlements (300,000) (351,000)
Other income (expense), net (646,674) (350,969)
Loss before provision for
taxes (4,455,131) (7,578,290)
Provision for income taxes 9,855 0
Net loss $(4,464,986) $(7,578,290)
Net loss applicable to common
shares $(4,464,986) $(5,181,133)
Net loss per share $ (1.05) $ (4.35)
<FN>
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
<TABLE>
APOLLO EYE GROUP, INC. CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Year ended Year ended
December 31, December 31,
1996 1995
<S> <C> <C>
Cash flow from operating activities:
Net loss $(4,464,986) $(7,578,290)
Adjustments to reconcile net
loss to net cash
used in operating activities:
Restructuring charges 0 1,576,069
Estimated litigation
settlements 300,000 351,000
Loss on write-down of
marketable securities 12,000 38,000
Common stock issued for
services 25,000 0
Write-off of computer software
costs 0 115,860
Bad debt expense 85,673 0
Contractual allowances 92,040 2,554
Depreciation and amortization 988,161 908,278
Changes in operating asset and
liabilities exclusive of net
assets acquired:
Accounts receivable (465,982) (123,082)
Inventory (149,397) 28,318
Other current assets 31,250 758
Accounts payable and accrued
liabilities (433,059) 702,186
Deferred revenue 37,157 (13,868)
Net cash used in operating
activities (3,942,143) (3,992,217)
Cash flows from investing activities:
Purchases of property and equipment (639,461) (1,487,666)
Proceeds from maturity of
marketable securities 0 736,365
Cash paid for acquisitions, net
of cash acquired 0 (179,584)
Increase in intangibles (12,468) (10,016)
Disposal (acquisition) of other
assets (38,208) 5,951
Loan to affiliate 0 (103,615)
Net cash used in investing
activities (690,137) (1,038,565)
Cash flows from financing activities:
Cash overdraft (3,528) 3,528
Payments on long-term debt
and capital lease obligations (243,730) (226,690)
Proceeds from capital
contributions 4,000,000 4,488,907
Proceeds from (repayment of)
short-term partner loan 0 (40,000)
Proceeds from notes payable to
stockholder 955,000 800,000
Net cash provided by financing
activities 4,707,742 5,025,745
Net increase (decrease)
in cash 75,462 (5,037)
Cash, beginning of period 0 5,037
Cash, end of period $ 75,462 $ 0
<FN>
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
APOLLO EYE GROUP, INC. CONSOLIDATED STATEMENTS OF
CASH FLOWS, CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Supplemental disclosures:
Year ended Year ended
December 31, December 31,
1996 1995
Interest paid $ 113,294 $ 114,341
Non-cash transactions relating to the merger during the five
months ended December 31, 1995 were recorded as follows:
Current assets $ 570,765
Property and equipment and other assets 1,571,821
Intangible assets 557,977
Liabilities (1,010,084)
Issuance of common stock (1,510,895)
Net, representing cash paid $ 179,584
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
APOLLO EYE GROUP, INC. CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY AND PARTNERS' CAPITAL FOR THE YEARS ENDED
DECEMBER 31, 1995 AND 1996
Preferred Common Accumulated
Stock Stock Additional Deficit
Number Number Paid-In and
of of Capital Fund Partners
Shares Amount Shares Amount Balance Capital Total
<C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994:
0 0 0 0 0 0 2,208,489 2,208,489
Capital contributions
0 0 0 0 0 0 4,488,907 4,488,907
Issuance of preferred stock
33,315.9185 333 0 0 4,299,906 0 (4,300,239) 0
Acquisition of the Company
0 0 1,191,367 1,191 1,509,704 0 0 1,510,895
Net loss
0 0 0 0 0 (5,181,133)(2,397,157)(7,578,290)
Balance December 31, 1995
33,315.9185 333 1,191,367 1,191 5,809,610 (5,181,133) 0 630,001
Conversion of preferred shares for common
(33,315.9185)(333) 3,331,592 3,332 (2,999) 0
Issuance of stock in acquisition
10,000 10 24,990 25,000
Sale of shares
1,355,932 1,356 3,998,644 4,000,000
Issuance of fractional shares in reverse split
7 0 0
Net loss
(4,464,986) (4,464,986)
Balance, December 31, 1996
0 0 5,888,898 5,889 9,830,245 (9,646,119) 0 190,015
<FN>
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
APOLLO EYE GROUP, INC. NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1. ORGANIZATION, LIQUIDITY AND BASIS OF PRESENTATION:
On August 7, 1995,
Apollo Eye Associates, L.P. and Apollo Eye Corporation, its
general partner (the "Partnership"), were merged into Apollo Eye
Group, Inc.'s (the "Company") wholly owned subsidiary Apollo
Acquisition Corporation which was subsequently renamed Apollo
Eye Associates, Inc., ("Apollo"). In connection with the merger
agreement, the former partners of the Partnership received an
aggregate of 33,315.9185 shares of the Company's newly issued
Series B Preferred Stock and options to acquire 482,503 shares
of the Company's common stock. Each share of Series B Preferred
Stock was convertible into 100 shares of the Company's common
stock. Prior to the merger, the Company's previously
outstanding Series A Preferred Stock was converted into 612,024
shares of common stock. Also prior to the merger, two of the
Company's four members of the Board of Directors resigned and
immediately following the merger four former partners of the
Partnership were elected to the Board.
The series of
transactions described above resulted in the Apollo stockholders
controlling the Company's Board of Directors and having an
approximate 75% ownership of the Company upon conversion of the
Series B Preferred Stock and the exercise of the common stock
options. Accordingly, the transactions have been treated as a
reverse acquisition for financial reporting purposes as if
Apollo recapitalized its ownership interest into 33,315.9185
shares of preferred stock and then acquired the Company under
the purchase method of accounting by the issuance of 1,191,367
shares of common stock. Such stock was valued at approximately
$1,511,000 which represented the estimated market value of the
Company's net assets acquired. The purchase price was allocated
to the net assets acquired and liabilities assumed based upon
their estimated fair values, resulting in an excess of purchase
price over the estimated value of net assets acquired, which is
included in intangible assets in the accompanying financial
statements. The historical results of the Partnership became
the operating results of the Company. The operations of the
Company are included in the results of operations in the
accompanying financial statements from August 1, 1995 which was
the effective date of the merger.
The following unaudited pro forma summary presents the consolidated
results of operations as if the reverse acquisition had occurred
at the beginning of the periods presented and does not purport
to be indicative of what would have occurred had the reverse
acquisition been made as of that date or of results which may
occur in the future.
<PAGE>
APOLLO EYE GROUP, INC. NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS - continued
1. ORGANIZATION, LIQUIDITY AND BASIS OF PRESENTATION, Continued:
Year
December 31, 1995
Revenue $ 7,351,000
Net loss $ (8,141,000)
Net loss per share $ (6.83)
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. The Company's
significant losses in 1996 and 1995 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. This
loan will be used in part to repay $1,755,000 of demand loans
payable to the principal shareholder (See Note 9). 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.
2. NATURE OF OPERATIONS:
The Company through its wholly-owned
subsidiaries Apollo, Apollo EyeCare Management Corp. ("AECM"),
J.K. Enterprises of Deerfield Beach, Inc. ("J.K. Enterprises"),
Optiplex, Inc. ("Optiplex") and Master Vision Plan, Inc.
("MVP"), is primarily engaged in the management, administration
and provision of pre-paid, discount and fee for service vision
care services in Florida and Puerto Rico. The Company's
pre-paid managed vision plans, which offer specified services
and products at pre-determined prices, are offered through
Optiplan, Inc. ("Optiplan"), a not-for-profit corporation
managed by J.K. Enterprises and AECM within Florida and MVP in
Puerto Rico.
The health care industry is highly regulated and
there can be no assurance that the regulatory environment in
which the Company operates will not change significantly in the
future. The Company believes that health care regulations will
continue to change and, therefore, will regularly monitor
developments in health care law.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION AND COMBINATION:
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries which are combined
with the accounts of Optiplan based on their related business
activities and the Company's management control. Material
intercompany balances and transactions have been eliminated.
The consolidated
financial statements include the accounts of the Partnership and
Medricon, Inc. (Medricon), a Connecticut corporation which
provides reimbursement and practice administration consulting
services to ophthalmologists and ophthalmic group practices
nationwide. The Partnership's acquisition of Medricon was
accounted for under the purchase method of accounting. The
purchase price was allocated to the net assets acquired and
liabilities assumed based upon their estimated fair values,
resulting in an excess of purchase price over the estimated
value of net assets acquired, which is included in intangible
assets in the accompanying financial statements. Material
intercompany balances and transactions have been eliminated.
REVENUE RECOGNITION
Revenue from professional services is
recognized when 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 vision plans is recognized ratability over
the life of the related contract.
Revenue from premiums received
from the Company's largest customer was approximately 13% of
total revenue during 1996 and 11% in 1995. This does not
include practice revenue received from managed care patients for
co-payments and optical sales.
INVENTORIES
Inventories, consisting primarily of frames,
contact lenses and accessories, are stated at the lower of cost
or market. Cost is determined using the FIFO (first-in,
first-out) method.
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
relieved 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
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
INTANGIBLE ASSETS
Goodwill related to the reverse acquisition
of the Company is amortized on the straight-line method over 4
years. Goodwill related to the acquisition of Medricon 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 5-7 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 5 years.
MARKETABLE SECURITIES
The Company's marketable securities have
been categorized as trading securities and as a result are
stated at fair value. Unrealized holding gains or losses are
included in the accompanying statements of operations. During
1995, such losses amounted to $38,000. In 1996, the remaining
$12,000 of marketable securities was expensed.
Debt securities
that the Partnership had the ability and intent to hold until
maturity were carried at amortized cost and were classified in
the accompanying balance sheet based on their maturity date.
Unrealized holding gains or losses, if any, were reported as a
net amount in a separate component of equity until realized.
Equity securities were stated at their fair value based on
quoted market prices.
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.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
ADVERTISING
The Company expenses the production costs of
advertising the first time that the advertising takes place.
Advertising expense amounted to approximately $330,000 and
$985,000 during 1996 and 1995, respectively.
INCOME TAXES
Prior to the merger date, the Partnership was not
subject to Federal and state income taxes; instead, the
Partnership's operations were the responsibility of the
partners. Effective on the merger date, the Partnership was
terminated. Medricon filed a separate return and utilized the
liability method of accounting for deferred income taxes.
Prior to the merger date, the Company filed a consolidated return.
For the years ended December 31, 1996 and 1995, the Company files
consolidated Federal and state income tax returns which include
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 of 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.
USE OF ESTIMATES
The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
reported amounts of revenues and expenses. Actual results could
differ from those estimates.
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 has
been 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 restated to reflect the reduced number of
common shares outstanding.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued:
PER SHARE DATA
Per share data is based on the weighted average
number of shares of common stock of 4,260,615 for the year ended
December 31, 1996 and 1,191,367 for the period from the
effective date of the merger (August 1, 1995) through December
31, 1995.
The loss applicable to common stock used in the
computation of the 1995 loss per share of $5,181,133 represents
losses incurred by the Company during the five month period
ended December 31, 1995 and is calculated as follows:
Loss for year ended December 31, 1995 $ 7,578,290
Less loss prior to merger 2,397,157
Loss applicable to common shares $ 5,181,133
Supplementally, if the Series B Preferred Stock issued to the
former partners of the Partnership had been converted to common
stock on the effective date of the merger, the weighted average
number of shares of common stock used in the calculation of per
share data would have been 4,522,959 and the 1995 net loss per
share would have amounted to $1.15.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1996, the Company adopted
Statement of Financial Accounting Standard ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of." The adoption of SFAS No.
121 did not have a material impact on the Company's financial
position, operating results or cash flows.
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 perids ended after December 15, 1997 and requires
restatement of all prior-period EPS data presented.
The adoption of No. 128 is not expected to have a material impact
on the Company's financial statements.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
4. RESTRUCTURING:
During 1995, plans were developed to reduce
the Company's cost structure and improve its productivity. This
restructuring program involves reductions in the officer
workforce, consolidation of laboratories and facilities and the
disposition of assets that are no longer productive. The
accompanying consolidated statement of operations for the year
ended December 31, 1995 includes expenses of approximately
$1,576,000 relating to this program. At December 31, 1995,
approximately $1,119,700 remained in accrued liabilities
representing estimated amounts of wages and severance payments
of approximately $1,059,200 and relocation costs yet to be paid
of approximately $60,500. At December 31, 1996, approximately
$639,200 remained in accrued liabilities representing estimated
wages and severance payments.
5. INVENTORIES:
The components of inventories at December 31,
1996 and 1995 were as follows:
1996 1995
Frames $ 420,524 $ 300,248
Contact lenses 42,285 31,834
Lens blanks and accessories 88,482 69,812
$ 551,291 $ 401,894
6. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1996 and 1995 consisted of the
following:
1996 1995
Examination and laboratory
equipment $ 2,884,906 $ 2,612,123
Furniture and fixtures 709,066 426,609
Leasehold improvements 1,834,472 1,694,823
Automobiles 0 20,782
Less accumulated depreciation
and amortization (1,838,591) (1,071,865)
$3,589,853 $3,682,472
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
6. PROPERTY AND EQUIPMENT, continued:
Included in the above
amounts are capitalized leases principally for examination and
laboratory equipment totaling approximately $855,800 at both
December 31, 1996 and 1995. Accumulated amortization related to
the capital leases was approximately $382,700 and $193,400 at
December 31, 1996 and 1995, respectively. In connection with
the Company's restructuring, property and equipment of
approximately $414,000 were written off during the year ended
December 31, 1995.
7. INTANGIBLE ASSETS:
Intangible assets at December 31, 1996 and 1995 consisted of the
following:
1996 1995
Goodwill $ 614,690 $ 633,199
Research materials 60,000 100,000
Subscription lists 40,000 40,000
Customer lists 40,000 40,000
Computer software costs 41,661 37,846
Licenses 50,000 50,000
846,351 901,045
Less accumulated depreciation
and amortization (325,583) (136,664)
$ 520,768 $ 764,381
Amortization expense related to intangible assets during the
year ended December 31, 1996 and the period ended December 31,
1995 was approximately $190,270 and $114,000, respectively.
Computer software costs and licenses no longer utilized of
approximately $28,700 were written off during the year ended
December 31, 1995.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
8. ACCRUED LIABILITIES:
Accounts payable and accrued liabilities
at December 31, 1996 and 1995 consisted of the following:
1996 1995
Restructuring charges $ 639,198 $1,119,732
Estimated litigation settlements 468,000 351,000
Accrued payroll and related amounts 316,427 179,076
Due to providers 191,812 126,010
Professional fees 231,039 261,265
Interest payable 242,214 0
Other 212,594 181,689
$2,301,284 $2,218,772
9. NOTES PAYABLE TO MAJORITY STOCKHOLDER:
Notes payable to the majority stockholder of $1,755,000 and
$800,000 at December 31, 1996 and 1995 are unsecured and bear
interest at prime (8.3%) at December 31, 1996, and prime (8.5%)
plus 1.5% at December 31, 1995. During 1996, the majority
stockholder converted $4,000,000 of indebtedness into additional
equity. The fair value of the notes payable to the majority
stockholder approximates carrying value due to the variable
interest rate on borrowings.
On January 1997, the Board of Directors approved
an agreement to enter into a one year revolving loan arrangement with
the majority stockholder, providing for loans, bearing interest at
prime, not exceeding $1,000,000 collateralized by the Company's
accounts receivable and inventory. At March 31, 1997, the
Company had borrowed $550,000 under this arrangement, the maximum
available based on eligible accounts receivable and inventory.
In April 1997,the Company entered into a loan agreement with a
corporation controlled by the majority shareholder providing for
loans not exceeding $500,000,bearing interest at prime, collateralized
by property and equipment of the Company. In May 1997, the
Company entered into an agreement with a corporation controlled by
the majority shareholder to borrow up to $3,000,000 collateralized
by the Company's pro0perty and equipment, including
the $500,000 previously authorized by the Company, all bearing
interest at the prime rate. The loan requires interest only until
July 1, 1998, after which the loan 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 due July 1, 2003. At June 20, the Company had agreements
to borrow an aggregate of $4,000,000 from the majority shareholder
or corporations he controls. At June 20, the Company has a balance
due to the majority shareholder or companies he controls of
$3,025,000 plus accrued interest of $343,613.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS, continued
10. LONG-TERM DEBT:
Long-term debt at December 31, 1996 and 1995 consisted of the following:
1996 1995
Note payable-vendor is due in
monthly installments of $3,979
including principal and interest
at 14.92% through May 1, 2000
collateralized by equipment $ 127,218 $ 153,766
Notes payable with interest at a
variable rate equal to the bank's
base rate plus 2.5% (11% at
December 31, 1995) due in
monthly installments of $650 plus
interest, through June 1, 1997,
guaranteed by a former partner of
the Partnership 2,900 11,350
Other 0 0
130,118 170,855
Less current portion (33,754) (38,718)
$ 96,364 $ 132,137
Principal maturities of long-term debt in years subsequent to
1996 are as follows:
1997 $ 33,754
1998 35,752
1999 41,466
2000 19,146
$ 130,118
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
11. CAPITAL LEASE OBLIGATIONS:
Capital lease obligations bear interest ranging from 8% to 22%
and are due in monthly installments, including interest, through
December 1999.
At December 31, 1996, the future minimum lease
payments under capital leases are as follows:
1997 $ 209,284
1998 79,665
1999 50,412
339,361
Less amount representing
interest (33,080)
306,281
Less current portion (184,398)
$ 121,883
At December 31, 1996, the majority stockholder of the Company
personally guaranteed capital lease obligations of approximately
$197,000.
12. INCOME TAXES:
Effective August 7, 1995, the Partnership terminated as a result
of the merger. The accompanying statement of operations for
the year ended December 31, 1995 includes a one time nonrecurring
charge of $83,000 as a result of the Partnership termination and
the implementation of Financial Accounting Standards Board
Statement No. 109, "Accounting for Income Taxes." The charge
was offset by deferred tax benefits related to the operations
of the Company.
In 1995, there was no tax benefit since the
Company had fully reserved the tax benefits of the temporary
differences and operating losses due to the fact that likelihood
of the realization of the tax benefits could not be established.
At December 31, 1996 and 1995, the significant components of
deferred tax assets and liabilities were as follows:
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
12. INCOME TAXES, continued
1996 1995
Deferred tax asset (liabilities):
Tax loss carryforward $4,482,000 $2,316,000
Vacation pay accrual 33,000 11,000
Bad debts 60,000 1,000
Depreciation (43,000) 14,000
Restructuring charges 427,000 760,000
Accrued interest 102,200 11,200
$ 5,061,200 $ 3,113,200
Valuation allowance (5,034,000) (3,086,000)
Net deferred tax asset $ 27,200 $ 27,200
The Company has had several ownership changes, as defined by the
Internal Revenue Code Section 382. The first was in connection
with the public offering of United Vision Group, Inc. in
February 1994. The second ownership change occurred in the
merger discussed in Note 1. As a result of these ownership
changes, the utilization of the net operating losses against
future taxable income is limited. At December 31, 1996, the
Company has available approximately $11,868,000 of net operating
losses subject to ownership change limitations which begin to
expire in the year 2006.
13. COMMITMENTS:
The Company leases office and retail space and
automobiles under non-cancelable operating leases expiring
through 2004. At December 31, 1996, approximate future minimum
rental payments applicable to non-cancelable operating leases
are as follows:
1997 $ 1,188,000
1998 742,100
1999 676,700
2000 509,800
2001 466,700
Thereafter 895,900
$ 4,479,200
Rental expense amounted to $1,041,800 and $557,200 during the
years ended December 31, 1996 and 1995 respectively.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
14. STOCK OPTION PLANS:
The Company adopted a stock option plan (the "1994 Plan") to
provide incentives in the form of non-qualified stock options,
incentive stock options and limited stock appreciation rights.
The Company reserved 80,000 shares of common stock for issuance
upon exercise of options granted. During 1995, 80,000 incentive
stock options were granted under the 1994 Plan. Such options
are exercisable at $1.5625 per share and expire five years from
the date of grant.
During 1995, the Company adopted the United
Vision Group, Inc. 1995 Stock Option Plan A (the "1995 Plan"),
as a method of providing a replacement incentive compensation
program for certain former directors and senior executives of
the Partnership in lieu of incentive compensation programs in
which they were participants prior to the merger.
Under the 1995 Plan, the Company is authorized to issue up to 500,000
shares of common stock. Both incentive stock options and
non-qualified options may be granted to eligible participants
in the 1995 Plan. The exercise price of a non-qualified option
is set by the Board of Directors and such options have no
expiration date. For an incentive stock option, the per share
exercise price may not be less than 100% of the fair market value
of the Company's common stock on the date of grant. No
incentive stock option may be exercised after ten years from
the date of grant. If an optionee holds more than 10% of the
Company's common shares, any incentive stock option granted to
that individual must have a price of at least
110% of the fair market value of the Company's common stock at
the date of grant and is exercisable for a term no longer than
five years. In August 1995, options for 482,508 shares of the
Company's common stock were issued under the 1995 Plan in
connection with the merger agreement. The options vest over six
years and are exercisable at $1.33 to $1.463 per share.
In October 1996, the Company's shareholders approved the adoption
of the 1996 Stock Option Plan whereby incentive stock options
and non-qualified stock options may be granted to key employees,
officers, directors and consultants. The plan provides for a
maximum of 400,000 options to purchase common stock. The
options granted are exercisable at a price not less than the
fair market value on the date of grant. The options become
exercisable over a four year term and expire ten years after the
date of grant.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
14. STOCK OPTION PLANS, continued
The Company applies APB Opinion 25 and related interpretations
in accounting for its stock option plans. Accordingly, no
compensation cost has been recognized for grants of stock
options. Had compensation cost for the Company's stock-based
compensation plans been determined in accordance with the
provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net loss and loss per share would
have been affected as reflected in the pro forma amounts below:
1996 1995
Net loss - as reported $4,464,986 $7,578,290
Net loss - pro forma $4,569,062 $7,659,170
Net loss per share - as reported $1.05 $4.35
Net loss per share - pro forma $1.07 $4.40
The pro forma amounts reflected above are not representative of
the effects on reported operations in future years because, in
general, the options granted in 1996 and 1995 do not vest for
several years and additional awards may be made each year.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
14. STOCK OPTION PLANS, continued
<TABLE>
The following table summarizes the activity for stock options
outstanding:
1996 1995
<S> <C> <C>
Options outstanding at January 1 562,508 0
Options granted 342,139 562,508
Options exercised 0 0
Options forfeited 59,277 0
Options outstanding at December 31 845,370 562,508
Weighted-average option prices per common share:
Outstanding at January 1 $1.38 N/A
Granted at fair market value $1.96 $1.38
Granted at above fair market value N/A N/A
Exercised N/A N/A
Forfeited $2.36 N/A
Outstanding at December 31 $1.55 $1.38
Weighted-average fair value of options
granted at fair market value during
the year $1.18 $0.81
Weighted-average fair value of options
granted at above fair market value
during the year N/A N/A
Options exercisable at December 31 230,836 160,418
Shares available for grant at
December 31 134,630 17,492
</TABLE>
The fair value of each option grant is estimated on the grant
date using the Black-Scholes option pricing model with the
following weighted-average assumption:
Expected life 7 years
Dividend yield 0
Expected volatility 50%
Risk-free interest rate 6.25% to 7.12%
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
14. STOCK OPTION PLANS, continued
<TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1996:
Options Options
Outstanding Exercisable
Weighted
Average Weighted
Range Remaining Number Average
Exercise Number Contractual Exercise Exercisable Exercise
Price Outstanding Life Price at 12/31/96 Price
<C> <C> <C> <C> <C> <C>
$1.00-
$2.00 772,570 8.01 years $1.43 230,836 $1.42
$2.00-
$3.00 72,800 9.43 years $2.80 0 N/A
$1.00-
$3.00 845,370 8.13 years $1.55 230,836 $1.42
</TABLE>
15. WARRANTS:
The Company has outstanding warrants as follows:
Exercise Price
Amount Per Share
Issued prior to public offering 12,000 $6.25
Sold in offering 207,000 $25.00
Granted to underwriters 18,000 $38.75
Outstanding balance, December 31,
1996 and 1995 237,000 $6.25 to $38.75
16. PREFERRED STOCK:
In connection with the merger agreement,
the Company exchanged all 102,004 outstanding shares of its
Series A Preferred Stock for 612,024 shares of common stock.
The former partners of the Partnership received an aggregate of
33,315.9185 shares of the Company's newly issued Series B
Preferred Stock. The Series B Preferred Stock paid no dividends
and had no liquidation preferences. Each share of Series B
Preferred Stock was convertible into 100 shares of the Company's
common stock and had voting rights of 100 votes per share. On
March 4, 1996, all 33,315.9185 shares of Series B Preferred
Stock converted by their terms into 3,331,592 shares of common
stock.
<PAGE>
APOLLO EYE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
17. CONTINGENCIES:
The Company is a party to various lawsuits
arising in the ordinary course of business. During the years
ended December 31, 1996 and 1995, estimated litigation payment
settlements of $300,000 and $351,000 were charged to operations
in the accompanying financial statements based on review of such
litigation with legal counsel.
18. RELATED PARTY TRANSACTIONS:
Results Marketing and Visual Communications, Inc. is owned in
part by a stockholder of the Company and a director of Apollo.
The Company purchased marketing services and materials from
Results Marketing in the amount of approximately $45,600 and
$210,500 in 1996 and 1995.
19. EMPLOYEE BENEFIT PLAN:
Employees of Apollo and Medricon are eligible to participate in
a Company sponsored 401(k) Plan (the "Plan"). The Plan permits
for employees to contribute up to 15% of their compensation
and requires matching contributions by the Company of 50% of the
first $1,000 contributed by each participating employee. The
Company's contributions to the Plan during 1996 and 1995 were
approximately $23,900 and $9,200 respectively.
Participants become vested in their individual accounts derived
from employer contributions at the rate of 20% per year.
Effective January 1, 1996, all employees of the Company became
eligible to participate in the Plan.
<PAGE>
EXHIBIT 3(a)
TEXT OF PROVISIONS OF
CERTIFICATE OF INCORPORATION
OF
APOLLO EYE GROUP, INC.
(containing all amendments through November 1, 1996)
1. The name of the corporation is: Apollo Eye Group, Inc. [as
amended November 1, 1996]
2. The address of its registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered
agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law
of Delaware.
4. The total number of shares of stock which the Corporation
shall have authority to issue shall be THIRTY-ONE MILLION
(31,000,000) consisting of (i) Thirty Million (30,000,000)
shares of Common Stock, par value $.001 per share, and (ii) One
Million (1,000,000) shares of Preferred Stock, par value $.01
per share. [as amended March 4, 1996]
<PAGE>
B. On the date of the filing of a Certificate of Amendment to
the Certificate of Incorporation of the Corporation adding this
Section B (the "Effective Date"), the Common Stock of the
Corporation shall be reverse split on a one-for-five basis so
that each share of Common Stock issued and outstanding
immediately prior to the Effective Date shall automatically be
converted into and reclassified as one-fifth share of a share of
Common Stock (the "Reverse Split"). No fractional shares shall
be issued by the Corporation as a result of the Reverse Split.
In lieu thereof, each stockholder whose shares are not evenly
divisible by five will receive one whole share of Common Stock.
As soon as practicable following the Effective Date,
certificates for the shares of Common Stock to be outstanding
after the Reverse Split shall be issued upon surrender of
certificates representing existing shares of Common Stock
pursuant to procedures adopted by the Corporation's Board of
Directors. [as amended November 1, 1996]
5A. The name and mailing address of each incorporator is as
follows: NAME MAILING ADDRESS
M. A. Brzoska Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
5B. The name and mailing address of each person, who is to
serve as a director until the first annual meeting of the
<PAGE>
stockholders or until a successor is elected and qualified, is
as follows:
NAME MAILING ADDRESS
Jan H. Kaplan 11010 N.W. 5th Manor
Coral Springs, Florida 33071
Karen Kaplan 11010 N.W. 5th Manor
Coral Springs, Florida 33071
Robert Rubin 25 Highland Drive
Dix Hills, New York 11746
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized to
make, alter or repeal the by-laws of the corporation.
8. Elections of directors need not be by written ballot unless
the by-laws of the corporation shall so provide.
Meetings of stockholders may be held within or without the State
of Delaware, as the by-laws may provide. The books of the
corporation may be kept (subject to any provision contained in
the statutes) outside the State of Delaware at such place or
places as may be designated from time to time by the board of
directors or in the by-laws of the corporation.
9. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute,
<PAGE>
and all rights conferred upon stockholders herein are
granted subject to this reservation.
10. A director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director except for liability (i)
for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction
from which the director derived any improper personal benefit.
11. The Corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify
any and all persons whom it shall have power to indemnify under
said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not
be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise both as to
action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a
person who has ceased to be director,
<PAGE>
officer, employee, or
agent and shall inure to the benefit of the heirs, executors,
and administrators of such a person. [as amended January 6,
1992]
<PAGE>
EXHIBIT 3(b)
BY-LAWS
OF
UNITED VISION GROUP, INC.
ARTICLE 1
STOCKHOLDERS
Section 1.1 Place of Meetings. Meetings of stockholders may
be held at such place, either within or without the State of
Delaware, as may be designated by the Board of Directors from
time to time.
Section 1.2 Annual Meeting. An annual meeting of stockholders
shall be held each year on the first Tuesday in June or on such
other date as may be designated by the Board of Directors.
Section 1.3 Special Meetings. Special meetings of
stockholders may be called at any time by the Board of
Directors, the Chairman, the Chief Executive Officer or the
President. Any special meeting of stockholders may be postponed
or canceled by the Board of Directors at any time prior to the
commencement of the meeting.
Section 1.4 Adjournments. Stockholders, by the affirmative
vote of a majority of shares present in person or represented by
proxy at any annual or special meeting of stockholders and
entitled to vote, whether or not a quorum is present, may
adjourn such meeting from time to time. Notice need not be
given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken
unless otherwise required by a nonwaivable and nonmodifiable
provision of applicable law.
Section 1.5 Stockholder Proposals. Unless approved by the
Board of Directors or the Chairman (or the person presiding over
a meeting in the absence of the Chairman), any proposal to be
acted upon at any annual or special meeting of stockholders (or
any adjournment thereof) may be submitted only by a stockholder
of record as of the record date for such meeting and must be
submitted in writing and received by the Secretary not later
than 5:00 p.m. local time on the twenty-first day preceding such
meeting (not including the day of such meeting), provided,
however, that if notice of a meeting is mailed to stockholders
less than thirty days before such meeting, notice of a
stockholder proposal must be received by the Secretary a number
of days prior to the meeting equal to the greater of (A)
twenty-one minus the difference between thirty and the number of
days before the meeting that notice of the meeting is mailed, or
(B) two.
Section 1.6 Conduct of Meetings. The Chairman (or the person
presiding over a meeting in the absence of the Chairman) shall
have full and complete authority to regulate the conduct of any
annual or special meeting of stockholders, including without
limitation (i) determining
<PAGE>
whether discussion will be allowed as
to any particular matter, (ii) if discussion is allowed,
determining who will be permitted to speak and for what
duration, and (iii) excluding stockholders or their proxies or
their agents or representatives from any meeting for disorderly
conduct.
ARTICLE 2
BOARD OF DIRECTORS
Section 2.1 Number. The Board of Directors shall consist of
five (5) individuals or such greater or lesser number of
directors as the Board of Directors shall from time to time
designate.
Section 2.2 Nominations. Nominations for directors may be
made only by the Board of Directors or a committee thereof or by
any stockholder entitled to vote in the election of directors.
Unless made by the Board of Directors or a committee thereof,
written notice of any nominee for election to the Board of
Directors must submitted to the Secretary and such notice must
be received not later than 5:00 p.m. (local time) on the
twenty-first day preceding the date of the meeting at which
directors are to be elected (not including the day of such
meeting), provided, however, that if notice of a meeting is
mailed to stockholders less than thirty days before such
meeting, notice of a director nominee must be received by the
Secretary a number of days prior to the meeting equal to the
greater of (A) twenty-one minus the difference between thirty
and the number of days before the meeting that notice of the
meeting is mailed, or (B) two. Each notice shall set forth (i)
the name, age, business address, if any, and residence address
of each nominee, (ii) the principal occupation(s) of each
nominee during the past five years, and (iii) the number of
shares of capital stock (by class and series) of the corporation
beneficially owned by the nominee and the nominating stockholder.
Section 2.3 Place of Meetings. Meetings of the Board of
Directors may be held at such places either within or without
the State of Delaware as the Board of Directors shall from time
to time determine.
Section 2.4 Calling Meetings. Meetings of the Board of
Directors may be called at any time by the Chairman, if any, the
Chief Executive Officer, the President or by any two (2) members
of the Board of Directors. Each meeting shall be held at such
date, time and place as shall be fixed by the person or persons
calling the meeting.
Section 2.5 Notice of Meetings. Written notice of each
special meeting of the Board of Directors shall be given which
shall state the date, time and place of the meeting. The
written notice of any special meeting shall be given to each
director at the location of such director shown on the books and
records of the Corporation at least twenty-four (24) hours in
advance of the meeting. Notice may be given by mail, courier,
telegram, telecopy or telex and shall be deemed to have been
given when received, if sent by mail or courier, or when
transmitted by telegram, telecopy or telex, as the case may be.
Notice need not be given of any regularly scheduled meeting of
the Board of Directors, provided that each Director shall have
received
<PAGE>
notice of the date, time and place, or method of
determining the date, time and place, of such regularly
scheduled meeting.
Section 2.6 Quorum; Vote Required for Action. Unless
otherwise required by law, at each meeting of the Board of
Directors, the presence of one-half of the total number of
directors shall constitute a quorum for the transaction of
business. The vote of the majority of the directors present at
a meeting at which a quorum is present shall be the act of the
Board of Directors. In case at any meeting of the Board of
Directors a quorum shall not be present, the members of the
Board of Directors present may by majority vote adjourn the
meeting from time to time until a quorum shall attend.
ARTICLE 3
OFFICERS
Section 3.1 Officers. The officers of the Corporation shall
consist of a Chairman of the Board of Directors (herein called
"Chairman"), a Chief Executive Officer, a President, one or more
Executive Vice Presidents, one or more Senior Vice Presidents,
one or more Vice Presidents, one or more Assistant Vice
Presidents, a Secretary, one or more Assistant Secretaries, a
Treasurer, one or more Assistant Treasurers and such other
officers or agents as the Board of Directors it may determine.
An individual may hold more than one office. Only the Chairman
need be a director of the Corporation.
Section 3.2 Election; Term of Office; Vacancies. Officers
shall be elected by a majority of a quorum of the Board of
Directors. Except as otherwise provided by the Board of
Directors when electing any officer, each officer shall hold
office indefinitely until death, resignation or removal. The
Board of Directors may remove any officer or agent with or
without cause at any time. Any such removal shall be without
prejudice to the contractual rights of such officer or agent, if
any, with the Corporation (other than any purported right to
hold office, which shall not be enforceable), but the election
of an officer or agent shall not of itself create contractual
rights. Any vacancy occurring in any office of the Corporation
by death, resignation, removal or otherwise may be filled by a
majority of a quorum of the Board of Directors.
Section 3.3 Chairman of the Board. The Chairman shall preside
at all meetings of the Board of Directors and of the
stockholders and shall have such other duties and powers as the
Board of Directors shall from time to time delegate to the
Chairman.
Section 3.4. Chief Executive Officer. In the absence of the
Chairman, the Chief Executive Officer shall preside at all
meetings of the Board of Directors and of the stockholders. The
Chief Executive Officer shall have the general duties and powers
of a chief executive officer of a corporation and such other
duties and powers as the Board of Directors shall from time to
time delegate to the Chief Executive Officer.
<PAGE>
Section 3.5 President. In the absence of the Chairman and the
Chief Executive Officer, the President shall preside at all
meetings of the Board of Directors and of the stockholders.
Subject to the authority of the Chief Executive Officer, the
President shall have the general duties and powers of a
president of a corporation and such other duties and powers as
the Board of Directors shall, from time to time, delegate to the
President.
Section 3.6 Executive Vice President. Each Executive Vice
President shall have such duties and powers as the Board of
Directors, the Chief Executive Officer, or the President shall
from time to time delegate to such Executive Vice President.
Section 3.7 Vice Presidents. Each Senior Vice President, Vice
President and Assistant Vice President shall have such duties
and powers as the Board of Directors, the Chief Executive
Officer, the President, or the Executive Vice President shall
from time to time delegate to such Vice President.
Section 3.8 Secretary. The Secretary and each Assistant
Secretary shall have the general duties and powers of a
secretary of a corporation and such other duties and powers as
the Board of Directors, the Chief Executive Officer, the
President or the Executive Vice President shall from time to
time delegate to the Secretary. The Secretary shall have the
duty to record in a book to be kept for that purpose the
proceedings of the meetings of the stockholders, the Board of
Directors and any committees designated by the Board of
Directors. The Secretary shall have the duty to assure that
notice is duly given of all meetings in accordance with the
provisions of these by-laws or as required by law. The
Secretary shall be custodian of the records of the Corporation
and the corporate seal and shall have the power to attest all
documents and instruments in writing as shall require
attestation and the power to affix the corporate seal to such
papers as may require it.
Section 3.9 Treasurer. The Treasurer and each Assistant
Treasurer shall have the general duties and powers of a
treasurer of a corporation and such other duties and powers as
the Board of Director, the Chief Executive Officer, the
President, or the Executive Vice President shall from time to
time delegate to the Treasurer. The Treasurer shall have charge
of and be responsible for all funds, securities, receipts and
disbursements of the Corporation and shall deposit or cause to
be deposited, in the name of the Corporation, all moneys or
other valuable effects in such banks, trust companies or other
depositories as shall, from time to time, be selected by or
under authority of the Board of Directors. The Treasurer shall
keep or cause to be kept full and accurate records of all
receipts and disbursements in books of the Corporation and shall
render to the Chairman, the President and the Board of
Directors, whenever requested, an account of the financial
condition of the Corporation.
<PAGE>
ARTICLE 4
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 4.1 Nature of Indemnity. Each person who was or is
made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a
director or officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee,
fiduciary, or agent of another corporation or of a partnership,
joint venture, trust or other enterprise (specifically including
employee benefit plans), shall be indemnified and held harmless
by the Corporation to the fullest extent not prohibited by the
General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said
law permitted the Corporation to provide prior to such
amendment) against all expenses, liability, loss (including
attorneys' fees actually and reasonably incurred by such person
in connection with such proceeding), judgments, fines
(specifically including any excise taxes assessed on a person
with respect to an employee benefit plan) and amounts paid in
settlement, except for any claim based on an act or omission
involving intentional misconduct or a knowing violation of law
or from which such person derived an improper personal pecuniary
benefit. Such indemnification shall inure to the benefit of his
or her heirs, executors and administrators. Except as provided
in Section 4.2 hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding
initiated by such person only if such proceeding was authorized
by the Board of Directors of the Corporation.
Section 4.2 Procedures for Indemnification of Directors and
Officers. Any indemnification of a director or officer of the
Corporation under Section 4.1 or advance of expenses under
Section 4.5 of this Article 4 shall be made promptly, and in any
event within thirty (30) days, upon the written request of the
director or officer. If a determination by the Corporation that
the director or officer is entitled to indemnification pursuant
to this Article 4 is required, and the Corporation fails to
respond within thirty (30) days to a written request for
indemnity, the Corporation shall be deemed to have approved the
request. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition
where the required undertaking, if any, has been tendered to the
Corporation) that the claimant has not met the standards of
conduct for indemnification, but the burden of such defense
shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior
to the commencement of such action that indemnification of the
claimant is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in the General
Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that
the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that
the claimant has not met the applicable standard of conduct.
4.3 Article Not Exclusive. The rights to indemnification and
the payment of expenses incurred in defending a proceeding in
advance of its final disposition conferred in this Article 4
shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the
certificate of incorporation, agreement, vote of stockholders or
disinterested directors or otherwise.
4.4 Insurance. The Corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is
or was a director, officer, employee, fiduciary, or agent of the
Corporation or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against
any liability asserted against him or her and incurred by him or
her in any such capacity, whether or not the Corporation would
have the power to indemnify such person against such liability
under this Article 4.
4.5 Expenses. Expenses incurred by any person described in
Section 4.1 in defending a proceeding shall be paid by the
Corporation in advance of such proceeding's final disposition
upon receipt of an undertaking by or on behalf of the director
or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by
the Corporation. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
4.6 Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article 4 and who are or were
employees or agents of the Corporation, or who are or were
serving at the request of the Corporation as employees or agents
of another corporation, partnership, joint venture, trust or
other enterprise, may be indemnified to the extent authorized at
any time or from time to time by the Board of Directors.
4.7 Contract Rights. The provisions of this Article 4 shall
be deemed to be a contract right between the Corporation and
each director or officer who serves in any such capacity at any
time while this Article 4 and the relevant provisions of the
General Corporation Law of the State of Delaware or other
applicable law are in effect, and any repeal or modification of
this Article 4 or any such law shall not affect any rights or
obligations then existing with respect to any state of facts or
proceeding then existing.
4.8 Merger or Consolidation. For purposes of this Article 4,
references to "the Corporation" shall include, in addition to
the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise, shall stand in the same position under this
Article 4 with respect to the resulting or surviving corporation
as he or she would have with respect to such constituent
corporation if its separate existence had continued.
<PAGE>
ARTICLE 5
STOCK
Section 5.1 Certificates. Every holder of one or more shares
of capital stock of the Corporation shall be entitled to have a
certificate signed by or in the name of the Corporation by the
Chairman or the President or a Vice President, and by the
Secretary or an Assistant Secretary, certifying the number of
shares owned by him in the Corporation. Any of or all of the
signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its
stock ledger, books of account and minute books, may be kept on,
or be in the form of, punch cards, magnetic tape, photographs,
microphotographs or any other information storage device,
provided that the records so kept can be converged into clearly
legible form within a reasonable time. The Corporation shall so
convert any records so kept upon the request of any person
entitled to inspect the same.
Section 6.2 Amendment of By-Laws. These by-laws may be
amended or repealed, and new by-laws adopted, by the Board of
Directors, but the stockholders entitled to vote may adopt
additional by-laws and may amend or repeal any by-law whether or
not adopted by them.
<PAGE>
EXHIBIT 10(j)
MASTER VISION PLANS, INC.
2424 North Federal Highway - Suite 362
Boca Raton, Florida 33431
(hereinafter called MVP)
and
FIRST MEDICAL PLAN, INC.
Avenida de Diego - #328
Edif. Chevere 3rd Piso - Parada 22
Santurce, Puerto Rico 00910 (hereinafter
called Group)
AVENIDA MUNOZ RIVERA, 402 - PARADA 31
HATO REY, PUERTO RICO 00917
Agree as Follows:
MASTER VISION PLANS, INC. shall provide a Panel of Providers to
perform services for eligible persons as described under
"Eligibility," subject to the terms and conditions of this
Agreement.
This Contract shall be effective from the 1st day of July 1996,
for an initial term of forty-eight (48) months and shall
automatically renew thereafter for a period of forty-eight (48)
consecutive months unless terminated by either party upon one
hundred twenty (120) days prior written notice prior to
completion of each forty-eight (48) month term.
The provisions and conditions set forth on these pages,
including all addendum pages shall form a part of this Contract
as fully as if recited over the signatures hereto affixed.
In witness whereof, the parties have caused this Agreement to be
executed at San Juan, Puerto Rico, this 27th day of February,
1996.
FIRST MEDICAL PLAN, INC. MASTER VISION PLANS, INC.
By Eduardo Artau /s/ By Vincent C. Manopoli /s/
Title Chairman Title President
Date 2/27/96 Date 3/11/96
<PAGE>
ELIGIBILITY
Employees/Members who elect Vision Care Coverage and agree to
the necessary payroll reductions are required to retain their
Vision Care Coverage for a minimum of one (1) year, assuming
they remain employed. Eligible employees who are not covered
during the initial enrollment period may not be covered until
the next open enrollment period of the Group. New employees
will be eligible on the first day upon beginning employment.
New employees must elect coverage within sixty (60) days of
eligibility or wait until the next Group open enrollment period.
Employee/Member coverage shall be effective on the Group's
effective date if currently employed.
If the necessary payroll reductions have been agreed to and
dependent coverage is selected, dependents are also required to
retain their Vision Care Coverage for a minimum of one (1) year.
Eligible dependents may be covered by MVP only if the employee
has also elected such Vision Care Coverage. Eligible dependents
who are not covered during the initial enrollment period may not
be covered until the next Group open enrollment period.
Dependent coverage shall be effective on the same day as the
Employee/Member.
Dependents - Dependents eligible are the eligible employee's
legal spouse or unmarried dependent children living with
employee and legal spouse who have not attained their nineteenth
birthday (or their twenty-fifth birthday if attending school
full-time at an accredited educational institution). An
unmarried child over eighteen (18) years of age shall be
eligible as a dependent if he/she is incapable of self-support
because of physical or mental incapacity that commenced prior to
reaching age nineteen (19) and is chiefly dependent upon the
Employee for support and maintenance. Dependent coverage is in
effect at the time of birth of an eligible dependent child of,
or upon the effective date of legal adoption of a child to,
employee and legal spouse, such newborn(s) or adopted child will
automatically be included in such dependent coverage in effect
at that time upon written notification to MVP of such birth or
adoption.
If a claim is denied for the stated reason that the child has
attained the limiting age for dependent children specified in
the Contract, the burden shall be on the Group to establish that
the child is and has continued to be handicapped.
<PAGE>
BENEFITS
The benefits described on the following pages, including all
addendums hereto, are available to each eligible person by any
participating MVP Panel Provider provided eligible person
follows the proper procedures by obtaining an MVP Eyecare
Benefit Form (EBF) and presenting it to the Doctor in advance,
or by having the participating Panel Provider obtain an Eyecare
Benefit Form (EBF) in advance of providing services.
I. VISION EXAMINATION AND ANALYSIS
Each eligible person shall be entitled to a complete vision exam
and analysis as specified in Addendum A.
VISION ANALYSIS shall include a comprehensive examination of the
visual functions including the prescription of corrective
eyewear where indicated.
II. MATERIALS
A. LENSES AND FRAME - Where the vision examination indicates
that new lenses or frame, or both, are necessary for the proper
visual health and welfare of an eligible person, they will be
supplied, together with such professional services as are
necessary, which shall include, but not be limited to:
1. Prescribing and ordering proper lenses.
2. Assisting in the selection of a new frame.
3. Verifying the accuracy of the finished lenses.
4. Proper fitting and adjustment of the spectacles.
5. Progress or follow-up work as necessary.
6. Subsequent adjustments to frame to maintain comfort and
efficiency.
Certain materials, such as those described in "LIMITATIONS," may
be cosmetic in nature and not necessary for the visual welfare
of the patient. The extra cost of these must be borne by the
patient.
MVP offers a modern and extensive selection of frames from the
American Collection of Frames consisting of over 144 current
styles. Each participating Provider under MVP stocks a complete
display supply of this American Collection thereby assuring a
uniform selection of "covered" frame styles when utilizing
Participating Providers.
Materials are available to each eligible person as the
specifications under Addendum A attached hereto.
<PAGE>
B. CONTACT LENSES
In addition to Eyeglass Benefits, the eligible member may choose
PROSITE (or equivalent as determined by Master Vision Plans)
Daily Wear (Prosite "XT"), Extended Wear (Prosite "55"), or
Prosite Disposable (two boxes) Contact Lenses; or Division I
Daily Wear or Division I Extended Wear Contact Lenses.
Frequency is once every twelve (12) months in addition to the
Eyeglass Benefit. Contact Lenses include a starter kit of
solutions with the initial fitting.
C. MEDICALLY NECESSARY CONTACT LENSES
Medically necessary Contact Lenses will be covered under the
Plan, in lieu of Eyeglasses, under the following circumstances:
(1) Following cataract surgery; or (2) when vision acuity
cannot be corrected to 20/70 in the better eye except by the use
of Contact Lenses. Lenses will be provided and assessed once
every twelve (12) months and replaced only if a new prescription
is warranted or if lenses are damaged.
D. OTHER MATERIALS AND SERVICES
Any materials (frames, lenses, or contact lenses) in excess of
the frequencies noted above, or specifically non-covered, will
be available to members at all Participating Provider locations
at a discount of 25% from the Participating Provider's regular
retail prices.
LIMITATIONS
EXTRA COST ITEMS
This Plan is designed to cover visual needs rather than cosmetic
materials. When the patient selects any item not listed in the
description of coverage in Addendum A attached hereto, then MVP
will cover the cost of the allowed materials and the patient
will be responsible for paying the additional cost for extras.
Such extra cost items include, but are not limited to:
1. Oversized lenses required in a "Non-Executive Collection"
frame.
2. Blended and progressive lenses (no-line bifocals) or
lens styles other than those listed in Addendum A.
3. Lens coating.
4. Tinted lenses.
5. Photochromic lenses.
6. Frames costing more than the plan allowance.
<PAGE>
7. Faceted lenses.
8. Lens materials other than CR-39 regular plastic.
9. Other Cosmetic items.
NOT COVERED
There is no benefit for professional services or materials
connected with:
1. Medically necessary Contact Lenses, except as described in
Addendum A, Page 2.
2. Orthoptics or vision training, subnormal vision aids,
aniseikonia lenses, plano (non-prescription) lenses or glasses
secured when there is no prescription change.
3. Lenses and frames furnished under this program which are lost
or broken will not be replaced except at the normal intervals
when services are otherwise available.
4. Medical or surgical treatment of the eyes.
5. Services or materials provided as a result of Workers'
Compensation law, or similar legislation, or obtained through or
required by any government agency or program whether Federal,
Commonwealth, or any subdivision thereof.
6. Any eye examination required by an employer as a condition of
employment, or any service or material provided by any other
vision care plan, or group benefit plan containing benefits for
vision care.
7. If the covered person does not identify himself properly as a
MVP Member in advance, but visits the Panel Doctor as a private
patient, the Panel Doctor is not obligated to accept MVP's fees
as full payment for these services, but may elect to charge the
covered person his usual and customary fees, in which case, the
member will be reimbursed according to the guidelines covering
non-participating provider fee reimbursement.
8. Two pair of glasses in lieu of bifocals.
MVP may, at its sole discretion, waive any of the Plan
limitations if, in the sole opinion and determination of MVP,
this is necessary for the patient's visual welfare.
<PAGE>
RATES AND PAYMENTS
Rates by Group to MVP for services and materials provided
hereunder are outlined in Addendum "B" attached hereto.
Each monthly premium payment is to be paid by Group no later
than the first (1st) calendar day of each month for services
provided the previous month. Example: payment for July
services will be paid no later than August 1st.
Any premiums received by MVP which are more than thirty (30)
days late shall be subject to a 1.5% per month late charge.
This contract may be canceled at MVP's sole discretion for
non-payment of premiums after thirty (30) days written notice to
Group of non-payment and subsequent failure by Group to cure
such delinquency in full.
GENERAL PROVISIONS
1. MVP acts as a contracting agency hereunder to enable Group
and persons to acquire professional vision care on a pre-paid
basis. Under no circumstances shall MVP or Group be liable for
the negligence, wrongful acts, or omissions of any Doctor,
Optician, Laboratory or other person or organization performing
services or supplying materials in connection with this
Agreement. Group agrees that neither Group nor its
representatives or employees shall engage in referring members
of Group directly in preference to any particular Provider, or
Providers, whether or not a member of the MVP Panel, without
MVP's prior written consent.
2. Each eligible person shall be entitled to obtain the services
enumerated herein from a participating Panel Provider of MVP.
The names, addresses, and telephone numbers of the Participating
Panel Providers shall be made available to eligible members of
Group when seeking services.
3. MVP shall have the right at all reasonable times to inspect
such records of Group as MVP deems necessary to determine the
number and eligibility of eligible persons, and Group agrees to
make such records available at such times and upon reasonable
requests.
4. All notices provided hereunder shall be deemed as having been
properly made upon depositing the same in the United States
mail, postage prepaid, Certified, Return Receipt Requested, and
addressing such notices to MVP at its Main Office, or to Group
at the address appearing last on the books of MVP.
5. Upon receipt (verbal or written) by MVP of a request for
benefits from a member of Group, MVP will issue a Eyecare
Benefit Form (EBF) to such member provided:
<PAGE>
A. The request is certified by Group and/or MVP; or
B. The Member appears eligible by reason of the latest
information available to MVP furnished by the Group.
Eyecare Benefit Form (EBF) so issued shall be assigned an
expiration date, allowing a reasonable period of time for the
eligible person to obtain services. Such Eyecare Benefit Form
(EBF) properly used shall constitute a claim against the plan,
irrespective of later loss of eligibility by the Member or
cancellation of this Contract.
6. Eyecare Benefit Forms (EBF) authorizing services will not be
issued under this Contract on or after the date of expiration of
the Contract.
7. If service for an eligible person hereunder is being rendered
as of the termination date of this coverage, such service shall
be continued to completion but in no event beyond six (6) months
after the termination date of the contract. MVP reserves the
right to reject any and all claims for services or benefits
which are filed with it more than sixty (60) days after
completion of services.
8. This instrument contains all of the provisions of the
Contract between the parties hereto, and no promise or agreement
not contained herein shall be binding on the parties unless the
same is in writing, signed by the duly authorized parties hereto
and attached to this Contract. Only an Officer or Director of
MVP has the power to change, modify or waive the provisions of
this Contract, and then only in writing. Consent of eligible
persons is not required to effect any such change.
9. Neither this Contract, nor any benefits hereunder, including
the payment of money is assignable, except with prior consent of
MVP.
10. If any provisions of this Contract is declared invalid or
unenforceable, the remaining provisions hereof shall remain in
full force and effect. The failure of either party to protest
any default or breach shall not constitute a waiver of such
party's rights under this Contract, or such party's rights upon
any subsequent default or breach.
11. This Agreement, and any and all services and benefits
provided hereunder, shall be subject to applicable licensure and
approval by the Department of Insurance of the Commonwealth of
Puerto Rico. In the event such applicable licensure and/or
approval is not in effect as of the effective date of this
Agreement, then the initial term and effective date shall begin
on the first day of the month immediately following receipt of
such applicable notification of approval by the Department of
Insurance.
12. This Contract shall be governed by and construed under the
laws of the Commonwealth of Puerto Rico and any disputes shall
be adjudicated in Puerto Rico.
<PAGE>
13. This Contract may be amended from time to time by mutual
written agreement from both Group and MVP.
14. Each party represents it has all requisite legal power and
authority and has taken all action necessary or appropriate to
enter into this Contract and that its representative executing
this Contract is duly empowered to do so.
SOLICITATION OF MEMBERSHIP
Group will bear all costs for the distribution of MVP brochures
and marketing and other materials (via normal Member
distribution process or by mail) as well as the tabulation and
collection of enrollment forms mailed in by Group's members,
immediately prior to Plan's date of commencement and on an as
needed basis, thereafter as required by MVP to provide the
services and benefits described herein this Agreement.
<PAGE>
FIRST MEDICAL PLAN VISION COVERAGE PLAN DESCRIPTION AMERICAN PLAN
OPTOMETRIC AND OPTICAL ADDENDUM A
The Plan proposed as outlined covers all eligible Benefit
Members and dependents utilizing MASTER VISION PLANS, INC.'s
Participating Providers.
I. COVERAGE
A. Professional Services:
Vision Analysis, Exam
B. Materials:
Frames
Single Vision Lenses
Bifocal Lenses
Trifocal Lenses
Contact Lenses
II. BENEFITS
A. Vision Analysis and Examination
A complete examination and analysis of the eyes and related
structures to assess vision problems or other abnormalities, to
include case history, external and internal examination of the
eyes, retinoscopy, subjective refraction, coordination testing,
near vision testing, tonometry, confrontation fields, diagnosis,
consultation and prescription for eyewear, if necessary.
Eligibility is one (1) such exam every twelve (12) months.
B. Lenses
The Provider will order the appropriate lenses on an "if
needed" basis and verify the accuracy of the finished product.
Lenses will be assessed under the Plan a maximum of once every
twelve (12) months and replaced only if a new prescription is
warranted or if lenses are damaged. The following lenses are
covered:
Single Vision
Bifocals - Round 22, FT 25 or FT 28
Trifocals - 7x25 or 7x28
CR-39 Regular Plastic Lens Material
<PAGE>
C. Frames
The Provider will inspect the frames and replace every twelve
(12) months if needed. Master Vision Plans offers a modern and
extensive selection of frames from the American Collection of
Frames consisting of over 144 current styles. Each
Participating Provider under Master Vision Plans stocks a
complete display supply of this American Collection, thereby
assuring a uniform selection of "covered" frame styles
throughout the island of Puerto Rico.
D. Contact Lenses
In addition to Eyeglass Benefits, the eligible member may
choose PROSITE (or equivalent as determined by Master Vision
Plans) Daily Wear (Prosite "XT"), Extended Wear (Prosite "55"),
or Prosite Disposable (two boxes) Contact Lenses; or Division I
Daily Wear or Division I Extended wear Contact Lenses.
Frequency is once every twelve (12) months in addition to the
Eyeglass Benefit. Contact Lenses include a starter kit of
solutions with the initial fitting.
E. Medically Necessary Contact Lenses
Medically necessary Contact Lenses will be covered under the
Plan, in lieu of Eyeglasses, under the following circumstances:
(1) Following cataract surgery; or (2) when vision acuity
cannot be corrected to 20/70 in the better eye except by the use
of Contact Lenses. Lenses will be provided and assessed once
every twelve (12) months and replaced only if a new prescription
is warranted or if lenses are damaged.
F. Other Materials and Services
Any materials (frames, lenses or contact lenses) in excess of
the frequencies noted above, or specifically non-covered, will
be available to members at all Participating Provider locations
at a discount of 25% from the Participating Provider's regular
retail prices.
III. LIMITATIONS
A. There will be no benefit for professional services or
materials connected with:
1. Orthoptics or vision training (low vision) contact lenses
(except as specified in Section II), lenses or eyewear obtained
when there is no prescription change.
<PAGE>
2. Lenses and frames furnished under this program which are lost
or broken will not be replaced except at the normal intervals
when services are otherwise available.
3. Medical or surgical treatment of the eyes.
4. Service or materials provided as a result of Workers'
Compensation claims.
5. Two (2) pairs of glasses in lieu of bifocals.
6. Tints, photochromatic lenses, hi-index lenses, and the like
are available to members as an out-of-pocket discounted
additional expense.
7. Invisible bifocals, progressive lenses, specialty or
occupational lenses, or lens styles not specifically listed in
Section II-B above.
8. Designer or non-covered frames are available as an
out-of-pocket discounted additional expense.
IV. PLAN REIMBURSEMENT SCHEDULE
A. Examination $8.00 co-payment
B. Lenses
Single Vision Lenses $8.00 co-payment
Bifocal Lenses $8.00 co-payment
Trifocal Lenses $8.00 co-payment
C. Frames $12.00 co-payment
D. Contact Lenses
Cosmetic C/L:
Daily Wear (Prosite "XT") $59.00 co-payment
Daily Wear Division I Lenses $99.00 co-payment
Extended Wear (Prosite "55) $69.00 co-payment
Extended Wear Division I Lenses $129.00 co-payment
Disposable Prosite (2 Boxes) $49.00 co-payment
Medically Necessary C/L $12.00 co-payment
<PAGE>
EXHIBIT 10(k)
AGREEMENT BETWEEN UNITED HEALTHCARE PLANS OF
PUERTO RICO, INC. AND MASTER VISION PLANS, INC.
This Agreement, effective July 1, 1996 ("Effective Date"), is
between United HealthCare Plans of Puerto Rico, Inc. ("Plan")
and Master Vision Plans, Inc. ("Corporation") for the purpose of
setting forth the terms and conditions under which Corporation
shall provide certain services to Plan, as defined herein. For
services rendered on or after its Effective Date, this Agreement
supersedes and replaces any existing agreements between the
parties relating to the same subject matter.
SECTION 1 Definitions
Benefit Contract: A benefit plan which includes health care
coverage and contains the terms and conditions of a Member's
coverage.
Health Services: The health care services and supplies covered
under the Member's Benefit Contract and which are generally
described in Exhibit A to this Agreement.
Member: An individual who is properly covered under a Benefit
Contract and is eligible as defined in Exhibit B to this
Agreement. It at any time Plan's definition of eligibility
varies from that of Exhibit B, Plan's definition will control.
Participating Provider: A health care professional or facility,
including Providers and Corporation, that has or is governed by
a written participation agreement which is in effect with Plan,
directly or through another entity, to provide Health Services
to selected groups of Members.
Payor: The entity or person authorized by Plan to access one or
more of Plan's networks of Participating Providers and that has
the financial responsibility for payment of Health Services
covered by a Benefit Contract.
Provider: An optician, optometrist or ophthalmologist duly
licensed and qualified under the laws of the jurisdiction in
which health care services are rendered, that has entered into
an agreement with Corporation and Plan for the provision of
Health Services to Members.
<PAGE>
SECTION 2 Obligations of Corporation
2.1 Provision of Services. Corporation shall arrange for
Providers to render Health Services to all Members. Corporation
shall, and shall cause Providers to, cooperate with all medical
management, utilization management, credentialing, quality
assessment, peer review, or other similar programs established
by Plan.
2.2 Payment to Providers. Corporation shall be solely
responsible for compensating Providers for all Health Services
rendered to Members, and Corporation and Providers shall hold
harmless and indemnify Plan and Payor against any claims for
compensation by a Provider.
2.3 Representations and Warranties. Corporation represents and
warrants that (1) it has been and will continue to be properly
formed pursuant to the laws of the jurisdiction in which the
services in this Agreement are rendered; (2) it has the
unqualified authority to and shall bind itself and Providers to
all of the terms and conditions of this Agreement, including any
Appendices, Attachments and Exhibits, as applicable; and (3) all
documents reviewed by Plan prior to execution of this Agreement,
including any agreements Corporation has in place with
Providers, shall remain substantially similar to those reviewed
by Plan, and if Corporation intends to make any substantial
changes which would materially affect this Agreement,
Corporation shall submit to Plan any proposed changes for Plan's
prior review and/or approval. Corporation agrees that any such
changes implemented without Plan's prior review and/or approval
shall not take effect with respect to this Agreement at Plan's
sole discretion. Corporation also agrees that if any terms of
any Corporation documents conflict or appear to conflict with
this Agreement, including any Appendices, Attachments and
Exhibits, as applicable, the terms in this Agreement shall
prevail.
2.4 Laws, Regulations, Licensure. Corporation shall maintain all
federal, state and local licenses, certifications and permits,
without material restriction, which are required to provide the
services Corporation is obligated to provide under this
Agreement, and shall comply with all applicable statutes and
regulations.
SECTION 3 Obligations of Plan or Payor
3.1 Payment to Corporation. For the services rendered by
Corporation pursuant to this Agreement, and for the provision of
Health Services to Members by Providers, Payor shall pay
Corporation as provided in the Exhibit C. The obligation for
payment to Corporation under this Agreement is solely that of
Payor.
<PAGE>
SECTION 4 Liability of Parties
4.1 Responsibility for Damages. Each party shall be responsible
for any and all damages, claims, liabilities or judgments which
may arise as a result of its own negligence or intentional
wrongdoing. Any costs for damages, claims, liabilities or
judgments incurred at any time by one party as a result of the
other party's negligence or intentional wrongdoing shall be paid
for or reimbursed by the other party.
4.2 Corporation's Insurance. Corporation and its participating
providers shall procure and maintain professional liability
insurance which covers the services Corporation is providing
under this Agreement, with minimum limits in the amounts of
$300,000 per occurrence and $1,000,000 aggregate. Corporation
shall also procure and maintain comprehensive general and/or
umbrella liability insurance in the amount of $1,000,000 per
occurrence and aggregate. Corporation's professional liability
insurance shall be either occurrence or claims made with an
extended period reporting option under such terms and conditions
as may be reasonably required by Plan and available for
Corporation to purchase. Prior to or within 30 days following
execution of this Agreement by Corporation and at each policy
renewal thereafter, Corporation shall submit to Plan in writing
evidence of insurance coverage. Corporation shall notify Plan
in writing within ten (10) days of any changes in carriers,
termination of, renewal of, or other material changes in
Corporation's liability insurance, including reduction of
limits, erosion of aggregate, changes in retention or
non-payment of premium.
4.3 Plan's Insurance. Plan, at its sole cost and expense, shall
procure and maintain comprehensive general liability,
professional liability and other necessary insurance to insure
Plan and its employees, acting within the scope of their duties,
against claims for damages arising by reason of personal injury
or wrongful death occasioned directly or indirectly by Plan or
by its employees in connection with the performance of Plan's
responsibilities under this Agreement.
SECTION 5 Books and Records
5.2 Maintenance of and Plan Access to Information. Corporation
shall maintain, in accordance with standard and accepted
practices, such financial, accounting and claims records as
shall be necessary, appropriate or convenient for Plan to
monitor Corporation's services under this Agreement. During
regular business hours and upon reasonable notice and demand,
Plan shall have access to and the right to audit all
utilization, information and records within the possession of
Corporation or Providers which are related to the services
provided under this Agreement, including relating to Health
Services rendered by Providers. Unless a longer time period is
required by applicable statutes or regulations, Plan shall have
such access during the term of this Agreement and for three (3)
years following its termination. Records or copies of records
requested by Plan shall be provided within 14 days from the date
such request is made,
<PAGE>
except in the case of an audit by Plan
where records or copies of records shall be provided at the time
of the audit. The photocopying of information requested by Plan
pursuant to this section shall be at no charge to Plan.
5.2 Corporation Access to Plan Information. Corporation shall
have the right at all reasonable times to inspect such records
of Plan as Corporation deems necessary to determine the number
and eligibility of eligible persons, and Plan agrees to make
such records available at such time and upon reasonable request.
5.3 Right to Provider Information. Upon reasonable notice by
Plan, Corporation shall provide Plan with all reasonably
requested information regarding each Provider to the extent
Corporation possesses such information or can obtain it without
undue effort or expense. Plan reserves the right upon
reasonable advance notice to review any files related to the
credentialing of any current or future Providers during the term
of this Agreement. The photocopying of information requested by
Plan pursuant to this section shall be at no charge to Plan.
5.4 Regulatory Agency Access to Information. The federal, state
and local government and any of their authorized representatives
shall have access to, and Plan, Corporation and Providers are
authorized to release, in accordance with all applicable
statutes and regulations, all information and records or copies
of such, within their possession, which are pertinent to and
involve transactions related to this Agreement, and access which
is necessary to comply with statutes and regulations applicable
to Plan, Corporation or Providers.
5.5 Privacy of Information. Corporation, Plan, Payor and
Provider shall maintain the privacy of all information regarding
Members and Providers in accordance with any applicable statutes
and regulations.
SECTION 6 Resolution of Disputes
6.1 Resolution of Disputes. In the event a dispute between Plan
and/or Payor and Corporation and/or any Provider arises out of
or is related to this Agreement, the parties to the dispute
shall meet and negotiate in good faith to attempt to resolve the
dispute. In the event the dispute is not resolved within 30
days of the date one party sent written notice of the dispute to
the other party, and if any party wishes to pursue the dispute,
it shall be submitted to binding arbitration in accordance with
the rules of the American Arbitration Association. In no event
may arbitration be initiated more than one year following the
sending of written notice of the dispute. Any arbitration
proceeding under this Agreement shall be conducted in Puerto
Rico. The arbitrators shall have no authority to award any
punitive or exemplary damages, or to vary or ignore the terms of
this Agreement, and shall be bound by controlling law. If the
dispute pertains to a matter which is generally administered by
certain Plan or Corporation procedures, such as a credentialing
or quality assurance plan, the procedures set forth in that plan
must be fully exhausted by Corporation or Provider before any
right to arbitration under this section may be invoked.
<PAGE>
SECTION 7 Term and Termination
7.1 Term. The term of this Agreement shall begin on the
Effective Date and shall remain in effect for a period of twelve
(12) months, until June 30, 1997, and shall automatically renew
thereafter for periods of twelve (12) consecutive months, unless
terminated by any of the conditions described herein in Section
7.2.
7.2 Termination. This Agreement may be terminated as follows:
1. by either party upon ninety (90) days prior written notice to
the other party.
2. by either party, upon forty-five (45) days
prior written notice to the other party, in the event of a
material breach of this Agreement by the other party. The
parties agree that a reasonable opportunity to cure the material
breach shall be required prior to one party sending notice to
the other party of termination of this Agreement pursuant to
this paragraph.
3. by Plan immediately due to Corporation's loss
or suspension of licensure or certification or loss of liability
insurance required under this Agreement.
4. by Corporation for non-payment of premium by Plan after thirty
(30) days written notice to Plan of non-payment and subsequent
failure by Plan to cure such delinquency in full.
SECTION 8 Miscellaneous
8.1 Amendment. This Agreement may be amended only in writing,
and the amendment must be executed by all parties.
8.2 Regulatory Amendment. Plan may also amend this Agreement to
comply with applicable statutes and regulations, and shall give
sufficient notice pursuant to Section 8.7 to Corporation of such
amendment and its effective date. The amendment will not
require agreement by Corporation.
8.3 Assignment. Plan may assign all or any of its rights and
responsibilities under this Agreement to any entity controlling,
controlled by, or under common control with Plan. Corporation
acknowledges that persons and entities under contract with Plan
may perform certain administrative services under this
Agreement. Corporation may assign any of its rights and
responsibilities under this Agreement to any person and/or
entity controlling, controlled by, or under common control with
Corporation with the prior written consent of Plan, which
consent shall not be unreasonably withheld.
<PAGE>
8.4 Relationship Between Plan and Corporation and Plan and
Providers. The relationships between Plan and Corporation and
between Plan and Providers are solely that of independent
contractors, and nothing in this Agreement or otherwise shall be
construed or deemed to create any other relationship, including
one of employment, agency or joint venture.
8.5 Entire Agreement. This Agreement and attached Exhibits A, B
and C constitutes the entire agreement between the parties in
regard to its subject matter.
8.6 Governing Law. To the extent not preempted by federal law,
this Agreement shall be governed by and construed in accordance
with the applicable laws of the Commonwealth of Puerto Rico.
8.7 Notices. All notices provided hereunder shall be deemed as
having been properly made upon depositing the same in the United
States mail, postage prepaid, certified, return receipt
requested, and addressing such notices to Corporation or Plan at
the addresses appearing on this Agreement.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION THAT
MAY BE ENFORCED BY THE PARTIES.
UNITED HEALTHCARE PLANS OF MASTER VISION PLANS, INC.
PUERTO RICO, INC. 2424 North Federal Highway
St. 1, Corner Road 165 Suite 362
Rexco Office Park Buchanan Boca Raton, Florida 33431
Sector, Guaynabo, Puerto Rico 00968
By \s\ By \s\ Vincent C. Manopoli
Its President Its President
Date May 28, 1996 Date May 29, 1996
<PAGE>
EXHIBIT A
HEALTH SERVICES/BENEFITS
The benefits described in Addendum "A" are available to each
eligible person by any participating Corporation Panel Provider
provided eligible person follows the proper procedures by
obtaining a Corporation Eyecare Benefit Form (EBF) and
presenting it to the Doctor in advance, or by having the
participating Panel Provider obtain an Eyecare Benefit Form
(EBF) in advance of providing services.
This plan is designed to cover visual needs rather than
cosmetic materials. Certain materials, such as those described
in "Limitations" on Addendum "A" may be cosmetic in nature and
not necessary for the visual welfare of the patient. The extra
cost of these must be borne by the patient.
Addendum "A"
The plan proposed as outlined covers all eligible Group Members
and dependents utilizing Corporation's Participating Providers.
I. COVERAGE
A. Professional Service
Vision Analysis, Exam
B. Materials
Frames
Single Vision Lenses
Bifocal Lenses
Contact Lenses
II. BENEFITS
A. Vision Analysis and Examination
A complete examination and analysis of the eyes and related
structures to assess vision problems and other abnormalities, to
include case history, external and internal examination of the
eyes, retinoscopy, subjective refraction, coordination testing,
near vision testing, tonometry, confrontation fields, diagnosis,
consultation and prescription for the eyewear, if necessary.
Eligibility is one (1) such exam every twelve (12) months.
<PAGE>
B. Lenses
The Provider will order the appropriate lenses on an "if
needed" basis and verify the accuracy of the finished product.
Lenses will be assessed under the Plan a maximum of once every
twelve (12) months and replaced only if a new prescription is
warranted or if lenses are damaged. The following lenses are
covered:
Single Vision
Bifocals - Round 22, FT 25 or FT 28
CR-39 Regular Plastic Lens Material
C. Frames
The provider will inspect the frames and replace every twelve
(12) months if needed. Corporation offers a modern and
extensive selection of frames from the Presidential Collection
of Frames consisting of over 96 current styles. Each
Participating Provider under Corporation's Plan stocks a
complete display supply of this Presidential Collection, thereby
assuring a uniform selection of "covered" frame styles
throughout the Island of Puerto Rico. This means that a member
in one part of the Island will have access to the identical
selection of frames as a Member in another part of the Island.
D. Contact Lenses
In lieu of the Eyeglass Benefits, the eligible member may
choose PROSITE Soft Daily Wear Contact Lenses at no additional
charge. Frequency is once every twelve (12) months in lieu of
eyeglasses. Contact Lenses include a starter kit of solutions
with the initial fitting.
E. Other Materials and Services
Any materials (frames, lenses, or contact lenses) in excess of
the frequencies noted above, or specifically non-covered, will
be available to members at all Participating Provider locations
at a discount of 25% from the Participating Provider's regular
retail prices.
III. LIMITATIONS
A. There will be no benefit for professional services or
materials connected with:
1. Medically necessary Contact Lenses, except with prior
authorization.
2. Orthoptics or vision training (low vision) contact lenses
(except as specified in Section II), lenses or eyewear obtained
when there is no prescription change.
<PAGE>
3. Lenses or frames furnished under this program which are lost
or broken will not be replaced except at the normal intervals
when services are otherwise available. However, lenses and
frames furnished under this program are warranted for a period
of twelve (12) months against factory/laboratory defects and
workmanship.
4. Medical or surgical treatment of the eyes.
5. Services or materials provided as a result of Worker's
Compensation claims or provided by the Group's Health Insurance
Plan.
6. Two pairs of eyeglasses in lieu of bifocals.
7. All spectacle lenses shall be CR-39 Plastic. Tints,
photochromatic lenses, Hi-Index lenses and the like are
available to members as an out-of-pocket discounted additional
expense.
8. Invisible bifocals, progressive lenses, specialty or
occupational lenses, or lens styles not specifically listed in
Section II-B above.
9. Designer or non-covered frames are available as an
out-of-pocket discounted additional expense.
<PAGE>
EXHIBIT B
MEMBER ELIGIBILITY
Employees/Members who elect Corporation's coverage and agree to
the necessary payroll deductions are required to retain their
Corporation's coverage for a minimum of one (1) year, assuming
they remain employed. Eligible employees who are not covered
during the initial enrollment period may not be covered until
the next open enrollment period of the Plan. New employees will
be eligible for enrollment on the first day upon beginning
employment. New employees must elect coverage within sixty (60)
days of eligibility or wait until the next Plan open enrollment
period. Employee/Member coverage shall be effective on the
Plan's effective date, if currently employed.
If the necessary payroll deductions have been agreed to and
dependent coverage is selected, dependents are also required to
retain their Corporation's coverage for a minimum of one (1)
year. Eligible dependents may be covered by Corporation only if
the employee has also elected such Corporation's coverage.
Eligible dependents who are not covered during the initial
enrollment period may not be covered until the next Plan's open
enrollment period. Dependent coverage shall be effective on the
same day as the Employee/Member.
DEPENDENTS - Dependents eligible are the eligible employee's
spouse and/or in the case of a couple, the other designated
individual, and unmarried dependent children living with
employee and spouse who have not attained their nineteenth
birthday (or their twenty-fifth birthday if attending school
full time at an accredited educational institution). An
unmarried child over eighteen years of age shall be eligible as
a dependent if he/she is incapable of self-support because of
physical or mental incapacity that commenced prior to reaching
age nineteen and is chiefly dependent upon the Employee for
support and maintenance. Dependent coverage is in effect at the
time of birth of an eligible dependent child of, or upon the
effective date of legal adoption of a child to, employee and
legal spouse, such newborn(s) or adopted child will
automatically be included in such dependent coverage in effect
at that time, upon written or electronic notification to MVP of
such birth or adoption.
If a claim is denied for the stated reason that the child has
attained the limiting age of dependent children specified in the
Contract, the burden shall be on the Plan to establish that the
child is and has continued to be handicapped.
<PAGE>
EXHIBIT 10(l)
PROFESSIONAL PROVIDER AGREEMENT
This Professional Provider Agreement ("Agreement") is made and
entered into as of the 1st day of January 1997 by and between
APOLLO EYECARE MANAGEMENT CORP. ("Provider"), and the Foundation
Health Corporation Affiliates ("Foundation") identified in
Addendum A to this Agreement.
R E C I T A L S
A. Provider is an individual practitioner, or single specialty
group practice corporation that provide professional health care
services or medical products.
B. Foundation is one or more corporations which has the legal
authority to enter into this Agreement, and to perform the
obligations of Foundation hereunder with respect to the Benefit
Programs identified on Addendum A.
C. Foundation desires to enter into this Agreement to arrange
for Provider to render Contracted Services to Beneficiaries of
the various Benefit Programs identified on Addendum A.
D. Provider desires to enter into this Agreement to render
Contracted Services to Beneficiaries of the various Benefit
Programs identified on Addendum A.
A G R E E M E N T
NOW, THEREFORE, in consideration of the above recitals and the
covenants contained herein, the parties hereby agree as follows:
I. DEFINITIONS
Many words and terms are capitalized throughout this Agreement
to indicate that they are defined as set forth in this Article
I.
1.1 Affiliate. A company in which Foundation Health
Corporation, a Delaware corporation, owns 51% or more of the
voting stock. The Affiliates provide, arrange or administer one
or more Benefit Programs covered under this Agreement on behalf
of themselves and Payors. The Affiliates who are parties to this
Agreement are listed on Addendum A, as amended from time to time
by Foundation.
1.2 Beneficiary. (Member) A person who is eligible to receive
Covered Medical Services under a Benefit Program included in
this Agreement, including a newborn baby who is a dependent of
Beneficiary during the first 31 days following the baby's birth
and/or legal adoption.
<PAGE>
1.3 Benefit Program. Foundation's or a Payor's performance of
its obligations to provide, arrange or administer health care,
provider networks, administrative or other related services
pursuant to a written agreement between a public or private
employer or other entity or person and Foundation. The Benefit
Programs covered under this Agreement are listed on Addendum A
hereto, as amended from time to time.
1.4 Benefit Program Requirements. The rules, procedures,
policies, protocols and other conditions to be followed by
Participating Providers and Beneficiaries with respect to
providing Covered Medical Services under a particular Benefit
Program.
1.5 Contracted Services. All professional medical and other
Covered Medical Services except Excluded Services, to be
rendered by Provider to a Beneficiary in accordance with this
Agreement.
1.6 Coordination of Benefits. The allocation of financial
responsibility between two or more payors of health care
services, each with a legal duty to pay for or provide Covered
Medical Services to a Beneficiary at the same time.
1.7 Copayment. That portion of the cost of Covered Medical
Services that a Beneficiary is obligated to pay under a
particular Benefit Program, including deductibles and
coinsurance. A Copayment may be either a fixed dollar amount or
a percentage of the applicable Participating Provider contract
rate. Foundation will advise Participating Providers of the
amounts or methods by which Copayments may be determined.
1.8 Covered Medical Services. (Covered Services) The Medically
Necessary health care services and supplies that are covered
under a Benefit Program.
1.9 Drug Formulary. Listing of medications eligible for
coverage, prior authorization procedures for obtaining coverage
for non-formulary medications, and other policies and procedures
related to covered medications, under Foundation's or a Payor's
optional outpatient prescription medication benefit which is
offered in conjunction with certain Benefit Programs, as updated
from time to time.
1.10 Emergency. (Emergency Services) The sudden onset of a
medical condition manifesting itself by acute symptoms of
sufficient severity, including severe pain, where the absence of
immediate medical attention could reasonably be expected to
result in serious impairment to a bodily function, or serious
and permanent dysfunction of any body organ or body part, or to
cause other serious medical consequences which include placing a
Beneficiary's health in permanent jeopardy.
<PAGE>
1.11 Excluded Services. Those health care services and supplies
which are determined not to be Medically Necessary, or which
otherwise are not Covered Medical Services under the applicable
Benefit Program.
1.12 Medically Necessary. Those Covered Medical Services which
are determined under the applicable Utilization Review and
Management Program to be:
(a) Appropriate and necessary for the symptoms, diagnosis or
treatment of a medical condition; and
(b) Provided for the diagnosis or direct care and treatment of
a medical condition; and
(c) Within standards of good medical practice within the
organized medical community of the treating provider; and
(d) Not primarily for the convenience of the Beneficiary or
the treating provider; and
(e) Consistent with the medical policy, the Utilization
Management Program, Quality Management Program, and Benefit
Program Requirements applicable to the Benefit Program under
which the Covered Medical Services are rendered; and
(f) The most appropriate and cost effective service or supply
consistent with generally accepted medical standards of care.
For inpatient stays, this means that acute care as an inpatient
is necessary due to the kind of services the Beneficiary is
receiving or the severity of the Beneficiary's condition, and
that safe, cost effective and adequate care cannot be received
as an outpatient or in a less intensified medical setting.
1.13 Provider ("Participating Provider"). A hospital,
physician, physician organization, other health care
practitioner or other organization which has a direct or
indirect contractual relationship with Foundation, a Payor or
another Participating Provider and agrees to provide Covered
Medical Services in accordance with the Benefit Programs
identified in the Agreement to which they are a party.
1.14 Payor. Foundation, or any other public or private entity
which provides, administers, funds, insures or is responsible
for paying Participating Providers for Covered Medical Services
rendered to Beneficiaries under a Benefit Program covered under
this Agreement.
<PAGE>
1.15 Preventive Care. Preventive Care aims to remove or reduce
disease risk factors and promote early detection of disease or
precursor states. Health education and behavior modification
are two of the most effective and economical means of disease
control.
1.16 Primary Care Physician (PCP). The physician who is a
Participating Provider and who is responsible pursuant to the
applicable Benefit Program for coordinating and managing the
delivery of Covered Medical Services to Beneficiaries selected
or assigned to such physician.
1.17 Prior Authorization. The written approval by Foundation,
an Affiliate, a Payor, or other permitted person or entity,
prior to admitting a Beneficiary to a hospital, or to providing
certain other Covered Medical Services to a Beneficiary, which
approval is required under the Utilization Management Program of
the applicable Benefit Program.
1.18 Quality Management Program. The functions, including, but
not limited to, credentialing and certification of providers,
review and audit of medical and other records, outcome rate
reviews, peer review and provider appeals and grievance
procedures performed or required by Foundation, an Affiliate, a
Payor, or any other permitted person or entity, to review and
improve the quality of Covered Medical Services rendered to
Beneficiaries.
1.19 Referral. When required under a Benefit Program, the
written approval from the Beneficiary's PCP and usually for a
specified number of visits, treatments, or period of time,
required under a Utilization Management Program for a
Beneficiary to receive Covered Medical Services from a physician
(usually a specialist) or other health care professional or
organization. Referral to a non-Participating Provider
generally requires Prior Authorization.
1.20 Supplemental Medical. A Benefit Program which limits
coverage to Copayments.
1.21 State. The state or states in which Provider is to
provide Contracted Services under this Agreement.
1.22 Utilization Management Program. The functions, including,
but not limited to Prior Authorization, Referral and
prospective, concurrent and retrospective review, performed or
required by Foundation, an Affiliate, a Payor, or any other
permitted person or entity, to review and determine whether
medical services or supplies which have been or will be provided
to Beneficiaries are covered under a Benefit Program and meet
the criteria as Medically Necessary.
<PAGE>
II. PERFORMANCE PROVISIONS
2.1 Credentialing of Provider. Provider shall complete and
submit to Foundation the Credentials Application, as modified
from time to time by Foundation, the current form of which is
contained in Exhibit 1 to Addendum A of this Agreement. The
submitted Credentials Application is a part of this Agreement.
In no event will this Agreement become effective, nor will
Provider begin performing his or her obligations under this
Agreement, until Provider's Credentials Application has been
accepted by Foundation. Provider represents and warrants that
Provider: (a) is licensed by the State(s) to provide Contracted
Services; (b) provides Contracted Services in compliance with
all applicable local, State, and federal laws, rules,
regulations and professional standards of care; (c) is certified
to participate in Medicare under Title XVIII of the Social
Security Act, and in Medicaid under Title XIX of the Social
Security Act or other applicable State law pertaining to Title
XIX of the Social Security Act; (d) holds active staff
privileges on the medical staff(s) of one or more hospital
Participating Providers, where applicable; (e) holds a current
Drug Enforcement Agency narcotic registration certificate, where
applicable; (f) shall maintain professional liability insurance
in an amount equal to the lesser of the amount required by state
law, or $1,000,000 per claim and $3,000,000 in the aggregate of
all claims per policy year; (g) shall maintain all required
professional credentials and meet all continuing education
requirements necessary to retain Board certification or
eligibility in Professional Provider's area(s) of practice; (h)
shall maintain a professional relationship with each Beneficiary
for whom Professional Provider renders Contracted Services, and
shall be solely responsible to such Beneficiary for medical
care; and (i) shall maintain such licensure, compliance,
certification and registration throughout the term of this
Agreement.
2.2 Provision of Services. Provider agrees to render
Contracted Services to Beneficiaries of the Benefit Programs
covered under this Agreement, in accordance with: (a) the terms
and conditions of this Agreement; (b) all laws, rules and
regulations applicable to Provider, Foundation, Affiliates and
Payors; (c) the Utilization Management Program, Quality
Management Program, Benefit Program Requirements and grievance,
appeals and other policies and procedures of the particular
Benefit Program under which the Covered Medical Services are
rendered; (d) standards requiring services to be provided in the
same manner, and with the same availability, as services are
rendered to other patients; and (e) the minimum clinical quality
of care and performance standards that are professionally
recognized and/or adopted, accepted or established by Foundation.
2.3 Drug Formulary. Provider shall comply with the drug
dispensing guidelines set forth in Foundation's or a Payor's
Drug Formulary.
2.4 Offices and Hours. Provider shall maintain such offices,
equipment, patient service personnel and allied health personnel
as may be necessary to provide Contracted Services under this
Agreement. Provider shall notify Foundation should any PCP's
patient load exceed 3,000 active patients. Provider shall
provide Contracted
<PAGE>
Services under this Agreement at Provider's
offices during normal business hours, and shall be available to
Beneficiaries by telephone 24 hours a day, seven days a week for
consultation on medical concerns. Further, Provider shall be
available to provide Covered Services on an Emergency basis 24
hours a day, seven days a week.
2.5 Coverage. Provider shall arrange for coverage, in the
event of Provider's illness, vacation or other absence from his
or her practice, and shall ensure that such coverage is by a
Participating Provider. When coverage is by a non-participating
provider, then Provider is responsible for the services rendered
by the covering provider. Covering physician providers shall
agree to provide care at least at the level of care acceptable
in the community, as well as the level of care prescribed in
Foundation's Medical Policy Manual. Physicians providing
coverage shall be informed in writing on procedures for
accessing Provider's on-call physician and Foundation's Health
Care Services Department for assistance. If such coverage is
not by a Participating Provider, Provider shall cause such
covering professional to abide by the terms of this Agreement.
2.6 Non-Discrimination. Provider shall not discriminate
against any Beneficiary in the provision of Contracted Services
hereunder, whether on the basis of the Beneficiary's coverage
under a Benefit Program, age, sex, marital status, sexual
orientation, race, color, religion, ancestry, national origin,
disability, handicap, health status, source of payment,
utilization of medical or mental health services or supplies or
other unlawful basis including, without limitation, the filing
by such Beneficiary of any complaint, grievance or legal action
against Provider, Foundation, an Affiliate or a Payor.
2.7 Utilization Management Requirements. Provider agrees to
participate in, cooperate with and comply with all decisions
rendered in connection with Foundation's, an Affiliate's or a
Payor's Utilization Management Program. Provider also agrees to
provide such records and other information as may be required or
requested under such Utilization Management Program.
2.8 Prior Authorization and Referrals. Unless a particular
Benefit Program or Utilization Management Program contains no
such requirement, and except in an Emergency, Provider agrees
not to seek payment from Foundation or a Payor for Contracted
Services rendered to a Beneficiary unless Prior Authorization or
a Referral was obtained for the rendering of such services.
Such Prior Authorization or Referral may be issued by
Foundation, the applicable Payor, or a Participating Provider.
In an Emergency, Provider agrees to attempt to obtain Prior
Authorization or a Referral, by telephone if necessary, before
providing Contracted Services or ordering other Covered Medical
Services.
2.9 Participating Providers. Except in an Emergency, as
otherwise described in the applicable Benefit Program
Requirements, or as otherwise required by law, Provider shall
refer Beneficiaries only to Participating Providers for Covered
Medical Services, including but not limited to ancillary
services such as laboratory and
<PAGE>
radiology. If a Participating
Provider is not available, Provider shall obtain Prior
Authorization before referring a Beneficiary to a
non-participating provider. In the event Provider refers a
Beneficiary to a non-participating provider without Prior
Authorization, Provider agrees to be responsible for payment of
claims incurred for the unauthorized Covered Medical Service,
and Provider agrees, in accordance with Section 3.7 of this
Agreement, to hold harmless the Beneficiary for such claims.
For certain specialized procedures and services, Foundation or a
Payor may require that the most cost effective, qualified
Participating Provider is utilized for such care. Additionally,
if so required under the applicable Benefit Program
Requirements, Provider shall admit Beneficiaries only to
designated hospital Participating Providers.
2.10 Quality Management Program. Provider shall be solely
responsible for the quality of Contracted Services rendered to
Beneficiaries. The quality of Contracted Services rendered to
Beneficiaries shall be monitored under the Quality Management
Program applicable to the particular Benefit Program. Provider
agrees to participate in and cooperate in all respects with the
applicable Quality Management Program. Provider also agrees to
comply with all decisions rendered by Foundation or a Payor in
connection with a Quality Management Program. Provider also
agrees to provide such medical and other records within 10 days
of receipt of written notice, and such review data and other
information as may be required or requested under a Quality
Management Program including outcome reporting in accordance
with, but not limited to, the Health Plan Employer Data and
Information Set (HEDIS), Version 2.0, or its successor. In the
event that the standard or quality of care furnished by Provider
is found to be unacceptable under any Quality Management
Program, Foundation shall give written notice to Provider to
correct the specified deficiencies within the time period
specified in the notice. Provider shall correct such
deficiencies within that time period.
2.11 Preventive Care. Provider shall render Preventive Care
and health education to Beneficiaries during each office visit
and document such in the medical record per episode of illness.
2.12 Notice of Adverse Action. Provider shall notify
Foundation in writing, within five days of receiving any written
or oral notice of any adverse action, including, without
limitation, any malpractice suit or arbitration action, or other
suit or arbitration action naming or otherwise involving
Provider, Foundation or any Payor, and of any other event,
occurrence or situation which might materially interfere with,
modify or alter performance of any of Provider's duties or
obligations under this Agreement. Provider shall forward to
Foundation any written complaint or grievance of a Beneficiary
against Provider, Foundation or any Payor within one business
day of receipt thereof. Provider shall maintain a written
record of any Beneficiary complaint and provide such record to
Foundation promptly upon request. Provider also shall notify
Foundation promptly of any action against any license,
certification under Title XVIII or Title XIX or other applicable
statute of the Social Security Act or other State law, DEA
narcotic registration certificate, or medical staff privileges
at any facility, and of any material change in the ownership or
business operations of Provider.
<PAGE>
2.13 Professional Liability Insurance. Provider shall maintain
professional liability insurance in an amount equal to the
lesser of the amount required by State law, or $1,000,000 per
claim and $3,000,000 in the aggregate of all claims per policy
year. Provider agrees to provide Foundation with written
evidence, acceptable to Foundation, of such insurance coverage
within three days of such request by Foundation. Provider also
agrees to notify, or to ensure that its insurance carriers
notify, Foundation at least 30 days prior to any proposed
termination, cancellation or material modification of any policy
for all or any portion of the coverage provided for above.
2.14 Listing of Provider. Provider agrees that Foundation and
Payors may list the name, address, telephone number and other
factual information of Provider, and each of Provider's
Professional Providers in its marketing and informational
materials. Provider shall supply all printed materials and
other information relating to its operations within seven days
of Foundation's request.
2.15 Non-Solicitation. Neither Provider nor any employee,
agent or subcontractor of Provider shall solicit or attempt to
convince or otherwise persuade any Beneficiary not to
participate or to discontinue participation in any Foundation or
Payor Benefit Program for which Provider renders Contracted
Services under this Agreement. Further, Provider, and
Provider's employees, shall treat Beneficiaries promptly, fairly
and courteously.
2.16 New or Additional Benefit Programs. Provider acknowledges
that Foundation may develop new or additional Benefit Programs,
and Provider agrees to negotiate with Foundation in good faith
to amend this Agreement to include such new or additional
Benefit Programs as requested by Foundation. Where a new
Benefit Program falls under existing Addenda, then the
applicable contract rates shall automatically apply.
2.17 Payment of Applicable Taxes. Provider shall be solely
responsible for the collection and payment of any sales, use or
other applicable taxes on the sale or delivery of medical
services.
2.18 Timely Assignment of Beneficiaries. Where required under
a Benefit Program, Foundation shall require Beneficiaries to
select specified Participating Providers at the time of
enrollment. In the event a Beneficiary does not select a PCP or
other Participating Providers within 60 days, Foundation shall
automatically assign the Beneficiary to the appropriate PCP
based upon the zip code in which the Beneficiary resides. Upon
automatic assignment of PCP, the Beneficiary may change to
another PCP of choice.
2.19 Requirement that Most Cost Effective Services be Used.
Unless there is an overriding medical reason, as determined by
the appropriate Foundation Medical Director, Provider agrees to
utilize the lowest cost option in circumstances in which there
is a medically appropriate choice of using different services.
<PAGE>
2.20 Beneficiary Grievance Procedure. Provider shall abide by
the determination of the applicable Payor's Beneficiary
Grievance Procedure.
III. COMPENSATION
3.1 Compensation Rates. Provider shall accept as payment in
full for Contracted Services and all other services (including
payment for any and all sales, use or other applicable taxes on
the sale or delivery of medical services) rendered under this
Agreement to Beneficiaries the amounts payable by Foundation or
a Payor as set forth in the applicable Addendum to this
Agreement, less Copayment amounts payable by Beneficiaries in
accordance with the applicable Benefit Program. It is expressly
understood that, in this context, Provider acknowledges its
obligations to provide care consistent with the professional
standards of care generally accepted by the medical community.
3.2 Billing and Payment.
(a) Billing. Provider shall submit to Foundation, via
Foundation's electronic claims submission program or hardcopy,
clean, complete and accurate claims in a format approved by
Foundation for Contracted Services rendered to a Beneficiary,
within 60 calendar days after such services are rendered. Where
Foundation is the secondary payor under Coordination of
Benefits, such 60 day period shall commence once the primary
payor has paid or denied the claim. Neither Foundation nor any
Payor shall be under any obligation to pay Provider on any claim
not timely submitted. Provider shall not seek payment from any
Beneficiary in the event Foundation or a Payor fails to pay
Provider for a claim not timely submitted.
(b) Payment. Unless the claim is disputed, Foundation or a
Payor shall make payment on each of Provider's clean, complete,
accurate and timely submitted claims for Contracted Services
rendered to a Beneficiary, within 30 working days of receipt of
each such claim or within the time required by applicable State,
Federal law or regulation such other period of time as set forth
in the applicable Benefit Program Addendum to this Agreement, or
as required by State Occupationally Ill/Injured or Workers'
Compensation law, if applicable.
(c) Performance Guarantees. If Foundation determines that
deficiencies identified and reported to Provider relating to the
Quality Management Program, Utilization Review Program,
Preventive Care Services, credentialing, encounter reporting,
and financial reporting are not corrected within 30 working days
of notice to Provider, then Provider's compensation hereunder
shall be reduced at Foundation's discretion up to 2.5% of the
Provider's applicable allowed compensation. Reduction of
compensation shall occur on payments due for the first month
after Provider has been notified and continue until such
identified deficiencies are remedied.
(d) Appeals. Provider shall abide by Foundation's appeal
process for disputes regarding denial of coverage.
<PAGE>
3.3 Eligibility. Except in an Emergency, Provider shall
verify the eligibility of Beneficiaries before providing
Contracted Services. Foundation shall make a good faith effort
to confirm the eligibility of any Beneficiary when such is in
question.
3.4 Collection of Copayments. Provider shall collect all
Copayments due from Beneficiaries, and shall not waive or fail
to pursue collection of Copayments from Beneficiaries, without
the prior written consent of Foundation.
3.5 No Surcharges. Provider shall not charge a Beneficiary any
fees or surcharges for Contracted Services rendered pursuant to
this Agreement (except for authorized Copayments). In addition,
Provider shall not collect a sales, use or other applicable tax
from Beneficiaries for the sale or delivery of medical services.
If Foundation or any Payor receives notice of any additional
charge, Provider shall fully cooperate with Foundation or such
Payor to investigate such allegations, and shall promptly refund
any payment deemed improper by Foundation or a Payor to the
party who made the payment.
3.6 Beneficiary Held Harmless. Provider agrees that in no
event, including, but not limited to, non-payment by Foundation
or a Payor, the insolvency of Foundation or a Payor, or breach
of this Agreement, shall Provider bill, charge, collect a
deposit from, seek compensation, remuneration, or reimbursement
from, or have any recourse against Beneficiaries, the Agency or
persons other than Foundation or a Payor acting on their behalf
for Contracted Services provided pursuant to this Agreement.
This provision shall not prohibit collection of Copayments on
Foundation's or a Payor's behalf made in accordance with the
terms of the applicable Benefit Program. Provider further
agrees that: (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
Beneficiaries; and (b) this provision supersedes any oral or
written contrary agreement now existing or hereafter entered
into between Provider and Beneficiaries or persons acting on
their behalf. Any modification, addition, or deletion of or to
the provisions of this clause shall be effective on a date no
earlier than 15 days after the State regulatory agency has
received written notice of such proposed change and has approved
such change.
3.7 Conditions for Compensation for Excluded Services.
Provider may bill a Beneficiary for Excluded Services rendered
by Provider to such Beneficiary only if the Beneficiary is
notified in advance that the services to be provided are not
covered under the Beneficiary's Benefit Program, and the
Beneficiary requests in writing that Provider render the
Excluded Services, prior to Provider's rendition of such
services. Neither a Beneficiary, nor Foundation nor any Payor
shall be liable to pay Provider for any Contracted Service
rendered by Provider to a Beneficiary which is determined under
a Utilization Management Program not to be Medically Necessary.
<PAGE>
3.8 Coordination of Benefits. Provider agrees to conduct
Coordination of Benefits in accordance with the policies and
procedures established by Foundation or a Payor for the
applicable Benefit Program. Provider shall not bill
Beneficiaries for any portion of Contracted Services not paid by
the primary carrier when Foundation or Payor is the secondary
carrier, but shall instead look to Foundation or Payor for such
payment. When a Beneficiary has coverage which is primary
through another carrier, then Foundation's or a Payor's
compensation to Provider shall be limited to the difference
between the amount paid by the primary payor and the negotiated
rate, including Copayments, contained in the applicable Addendum
to this Agreement.
3.9 Third Party Recoveries. When Foundation or a Payor has
compensated Provider for Contracted Services, then Foundation or
a Payor retains the right to recover from applicable third party
carriers covering a Beneficiary, including self-insured plans,
and to retain all such recoveries. Provider agrees to provide
Foundation with such information as Foundation may require to
pursue recoveries from such third party sources, and to promptly
remit to Foundation or a Payor any monies Provider may receive
from or with respect to such sources of recovery.
3.10 Occupationally Ill/Injured or Workers' Compensation.
Unless a beneficiary is covered under the Occupationally
Ill/Injured or Workers' Compensation Benefit Program (Addendum
D), Covered Medical Services shall not include health care
services and supplies rendered to diagnose or treat occupational
illnesses or injuries.
IV. TERM AND TERMINATION
4.1 Term. The term of this Agreement shall commence on the
date set forth on the first page of this Agreement and shall
continue for a period of three years thereafter. This Agreement
shall automatically renew for successive three year periods,
unless one party notifies the other in writing of its intent not
to renew this Agreement, at least 120 days prior to the next
scheduled renewal date. Any and all negotiations must be
completed 90 days prior to the anniversary date of the
contract. The renewal date of the term of this Agreement shall
remain the same for all Benefit Programs covered hereunder, even
if this Agreement becomes effective with respect to a particular
Benefit Program after the initial or any renewal date of this
Agreement, due to licensure, contract award or other reason.
Regardless of the effective date or any renewal date of this
Agreement, Provider shall not begin providing Contracted
Services to Beneficiaries and Foundation shall have no
obligation to pay for such services until the completion of
Foundation's or a Payor's credentialing and certification
processes.
4.2 Immediate Termination. Foundation may terminate this
Agreement immediately upon notice to Provider, in the event of
(a) Provider's violation of any applicable law, rule or
regulation; (b) Provider's failure to maintain the professional
liability insurance coverage specified hereunder; (c) Provider's
failure to comply with
<PAGE>
the terms, conditions or determinations
of any Utilization Management Program or Quality Management
Program or other Benefit Program Requirements; (d) Provider's
breach of Section 2.1, 2.2, 2.5, 2.6, 2.9, 2.11, 2.12, 3.5, 3.6
or 3.7 hereof; or (e) Foundation's determination that the
health, safety or welfare of any Beneficiary may be in jeopardy
if this Agreement is not terminated.
4.3 Termination Due to Material Breach. In the event that
either Provider or Foundation fails to cure a material breach of
this Agreement within 30 days of receipt of written notice to
cure from the other, the non-defaulting party may terminate this
Agreement, effective as of the expiration of said 30 day period.
If the breach is cured within such 30 day period, or if the
breach is one which cannot reasonably be corrected within 30
days, and the non-defaulting party determines that the
defaulting party is making substantial and diligent progress
toward correction during such 30 day period, this Agreement
shall remain in full force and effect.
4.4 Right of Partial Termination. Provider may only terminate
this Agreement in its entirety in accordance with Sections 4.1
and 4.3. Foundation may terminate this Agreement, with respect
to one or more Benefit Programs as Foundation may indicate in
the notice of termination to Provider. This Agreement shall
remain in full force and effect with respect to all other
Beneficiaries and Benefit Programs.
4.5 Effect of Termination. In the event that a Beneficiary is
receiving Contracted Services at the time this Agreement
terminates, Provider shall continue to provide Contracted
Services to the Beneficiary until: (a) treatment is completed;
or (b) the Beneficiary is assigned to another Participating
Provider. Compensation for such Contracted Services shall be at
the rates contained in the Addendum that applies to the
applicable Benefit Program.
<PAGE>
V. RECORDS, AUDITS AND REGULATORY REQUIREMENTS
5.1 Medical and Other Records. Provider warrants that it
prepares and maintains and will prepare and maintain all medical
and other books and records required by law in a form maintained
in accordance with the general standards applicable to such book
or recordkeeping. Provider shall maintain such records for at
least seven years after the rendering of Contracted Services
[records of a minor child shall be kept for at least one year
after the minor has reached the age of 18, but in no event less
than seven years]. Additionally, Provider shall maintain such
financial, administrative and other records as may be necessary
for compliance by Foundation and Payors with all applicable
local, State, and federal laws, rules and regulations.
5.2 Access to Records; Audits. The records referred to in
Section 5.1 shall be and remain the property of Provider and
shall not be removed or transferred from Provider except in
accordance with applicable local, State, and federal laws, rules
and regulations. Subject to applicable State and federal
confidentiality or privacy laws, Foundation and Payors, or their
designated representatives, and designated representatives of
local, State, and federal regulatory agencies having
jurisdiction over Foundation, including the Department of
Insurance, the Agency, the Department of Health and Human
Services, HCFA, or any Payor, shall have access to Provider's
records, including but not limited to records related to
delivery of services pertinent to appropriateness and timeliness
and pertinent to the contract by the Department of Health and
Human Services and the Agency, at Provider's place of business
on request during normal business hours, to inspect and review
and make copies of such records. When requested by Foundation,
Payors, or representatives of local, State or federal regulatory
agencies, Provider shall produce copies of any such records for
which Provider shall charge no more than $.10 per page. In no
event, however, shall Provider charge for copying records
requested for payment of a claim. Additionally, Provider agrees
to permit Foundation, and its designated representatives, and
designated representatives of local, State, and federal
regulatory agencies having jurisdiction over Foundation or any
Payor, to conduct site evaluations and inspections of Provider's
offices and service locations.
5.3 Continuing Obligation. The obligations of Provider under
Sections 5.1 and 5.2 shall not be terminated upon termination of
this Agreement, whether by rescission or otherwise. After
termination of this Agreement, Foundation and Payors shall
continue to have access to Provider's records as necessary to
fulfill the requirements of this Agreement and to comply with
all applicable laws, rules and regulations.
5.4 Regulatory Compliance. Provider agrees to comply with all
applicable local, State, and federal laws, rules and
regulations, now or hereafter in effect, to the extent that they
directly or indirectly affect Provider, Foundation, or any
Payor, and bear upon the subject matter of this Agreement.
<PAGE>
VI. GENERAL PROVISIONS
6.1 Amendments. All amendments to this Agreement or any of its
Addenda proposed by Provider must be agreed to in writing by
Foundation in advance of the effective date thereof. Any
amendment to this Agreement, including any of its Addenda,
proposed by Foundation shall be effective 20 calendar days after
Foundation has given written notice to Provider of the
amendment, and Provider has failed within that time period to
notify Foundation in writing of Provider's rejection of the
requested amendment. Amendments required because of
legislative, regulatory or legal requirements do not require the
consent of Provider or Foundation and will be effective
immediately on the effective date thereof. Any amendment to
this Agreement requiring prior approval of or notice to any
federal or State regulatory agency shall not become effective
until all necessary approvals have been granted or all required
notice periods have expired. Foundation and Provider shall
amend this Agreement, from time to time, to include additional
Affiliates, Benefit Programs, and Payors.
6.2 Separate Obligations. The rights and obligations of
Foundation under this Agreement shall apply to each Affiliate
listed on Addendum A to this Agreement only with respect to the
Benefit Programs of such Affiliate. No such Affiliate shall be
responsible for the obligations of any other Affiliate under
this Agreement with respect to the other Affiliate's Benefit
Programs. The person executing this Agreement on behalf of
Foundation has been duly authorized by each Affiliate listed on
Addendum A to execute this Agreement on its behalf.
6.3 Assignment. Neither this Agreement, nor any of Provider's
rights or obligations hereunder, is assignable by Provider
without the prior written consent of Foundation. Should the
name of Foundation change, due to any merger or other cause,
Provider agrees that this Agreement shall remain in full force
and effect.
6.4 Confidentiality. Foundation and Provider agree to hold all
confidential or proprietary information or trade secrets of each
other in trust and confidence and agree that such information
shall be used only for the purposes contemplated herein, and not
for any other purpose. Specifically, Provider, as well as
Foundation and Payors, shall keep strictly confidential all
compensation arrangements set forth in this Agreement and its
Addenda, except that this provision does not preclude disclosure
of the method of compensation, e.g., fee-for-service,
capitation, share risk pook, DRG or per diem. However, Provider
agrees that Foundation may extend the compensation rates set
forth in this Agreement and its Addenda, to other Participating
Providers who may from time to time be responsible for
compensating Provider for Covered Medical Services rendered by
Provider to a Beneficiary of Foundation or a Payor. Foundation
and Provider agree that nothing in this agreement shall be
construed as a limitation of Provider's rights or obligation to
discuss with the Beneficiaries matters pertaining to the
Beneficiaries health.
<PAGE>
6.5 Dispute Resolution. Provider and Foundation agree to meet
and confer in good faith to resolve any problems or disputes
that may arise under this Agreement. Negotiation shall be a
condition precedent to the filing of any arbitration demand by
either party, and no arbitration demand may be filed until the
exhaustion of Foundation's internal appeal procedures. In the
event arbitration between Provider and Foundation becomes
necessary, such arbitration shall be initiated by either party
making a written demand for arbitration on the other party.
Such arbitration shall be conducted under rules the same as or
consistent with the State, except where applicable federal or
State law requires otherwise. The parties expressly agree to be
bound by the decision of the arbitrator(s). The parties further
agree that the prevailing, or substantially prevailing, party's
costs of arbitration are to be borne by the other party,
including attorney fees and costs of the arbitrator.
6.6 Entire Agreement. This Agreement supersedes any and all
other agreements, either oral or written, between the parties
with respect to the subject matter hereof, and no other
agreement, statement or promise relating to the subject matter
of this Agreement shall be valid or binding.
6.7 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State,
except to the extent such laws conflict with or are preempted by
any federal law, in which case such federal law shall govern.
Federal law shall also govern with respect to federal Benefit
Programs.
6.8 Indemnification of Parties. Neither Provider nor
Foundation (nor any of their respective agents or employees)
shall be liable to the other for any act or omission of the
other party. Provider and Foundation each agree to indemnify
and hold the other harmless from and against any and all
liabilities, losses, damages, claims and expenses of any kind,
including costs and attorneys' fees, incurred by the indemnified
party and arising from or in connection with the indemnifying
party's performance of, or failure to perform its duties and
obligations under this Agreement.
6.9 Non-exclusive Contract. This Agreement is non-exclusive
and shall not prohibit Provider or Foundation from entering into
agreements with other health care providers or purchasers of
health care services.
6.10 No Notice to Beneficiaries. Provider and Foundation
reserve the right to amend this Agreement and any of its
provisions, to waive any rights granted to either party
hereunder, and to terminate this Agreement without notice to or
consent of any Beneficiary.
6.11 No Third Party Beneficiary. Nothing in this Agreement is
intended to, or shall be deemed or construed to create any
rights or remedies in any third party, including a Beneficiary.
Nothing contained herein shall operate (or be construed to
operate) in any manner whatsoever to increase the rights of any
such Beneficiary or the duties or responsibilities of Provider
or Foundation with respect to such Beneficiaries.
<PAGE>
6.12 Status as Independent Entities. None of the provisions of
this Agreement are intended to create or shall be deemed or
construed to create any relationship between Provider and
Foundation other than that of independent entities contracting
with each other solely for the purpose of effecting the
provisions of this Agreement. Neither Provider nor Foundation,
nor any of their respective agents, employees or
representatives, shall be construed to be the agent, employee or
representative of the other. Nothing in the independent
relationship section of this Agreement shall be construed as
relieving foundation of any responsibility for performance of
duties agreed to through any contract existing now or in the
future entered into with the Agency.
6.13 Notice. Any notice required or desired to be given under
this Agreement shall be in writing and shall be sent by
certified mail, return receipt requested, postage prepaid, or
overnight courier, or facsimile, addressed as follows:
Foundation: 7950 Northwest 53rd Street, First Floor
Miami, FL 33166
Attention: Provider Development
Facsimile number: (305) 718 - 9710
Provider: Apollo Eye Care Management
2424 North Federal Highway, Suite 362
Boca Raton, FL 33431
Telephone number: (561) 395-5402
Facsimile number: (561) 395-5989
Notices given hereunder shall be deemed given upon documented
receipt. The addresses to which notices are to be sent may be
changed by written notice given in accordance with this Section.
6.13 Regulation. Foundation is subject to the requirements of
various local, State, and federal laws, rules and regulations.
Any provision required to be in this Agreement by any of the
above shall bind Provider and Foundation whether or not provided
herein.
6.14 Severability. If any provision of this Agreement is
rendered invalid or unenforceable by any local, State, or
federal law, rule or regulation, or declared null and void by
any court of competent jurisdiction, the remainder of this
Agreement shall remain in full force and effect.
6.15 Status as Independent Entities. None of the provisions of
this Agreement is intended to create or shall be deemed or
construed to create any relationship between Provider and
Foundation other than that of independent entities contracting
with each other solely for the purpose of effecting the
provisions of this Agreement. Neither Provider nor Foundation,
nor any of their respective agents,
<PAGE>
employees, or
representatives shall be construed to be the agent, employee or
representative of the other.
6.16 Addenda. Each Addendum to this Agreement is made a part
of this Agreement as though set forth fully herein. Any
provision of an Addendum that is in conflict with any provision
of this Agreement shall take precedence and supersede the
conflicting provision of this Agreement.
6.17 Regulatory Approval. If Foundation has not been licensed
to provide, or provide services in connection with, a particular
Benefit Program in a particular State, or has not received all
required regulatory approvals for use of this Agreement with
respect to a particular Benefit Program in such State prior to
the execution of this Agreement, this Agreement shall be deemed
to be a binding letter of intent with respect to such Benefit
Program in that State. In such event, this Agreement shall
become effective with respect to any such Benefit Program in
that State on the date that the required licensure and
regulatory approvals are obtained. If Foundation is unable to
obtain such licensure or regulatory approvals after due
diligence, Foundation shall notify Provider and both parties
shall be released from any liability under this Agreement with
respect to the Benefit Program in question in the applicable
State; provided however, that if such licensure or regulatory
approval is conditioned upon amendment of this Agreement, then
this Agreement shall be amended automatically pursuant to
Section 6.1 hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement to
be effective on the first day of the month after Foundation has
executed this Agreement.
APOLLO EYECARE MANAGEMENT, INC. FOUNDATION
_________________________________ ___________________________
Signature Signature
__________________________________ ___________________________
Specialty Title
__________________________________ ___________________________
Date Date
65-0636932 Federal Tax Identification Number
<PAGE>
ADDENDUM A
AFFILIATES, BENEFIT PROGRAMS AND CREDENTIALS APPLICATION
I. AFFILIATES AND BENEFIT PROGRAMS
The Affiliates who are parties to this Agreement and whose
Benefit Programs are included within and covered by this
Agreement, are indicated by the typewritten mark "X" below.
This Agreement applies only to Affiliates and Benefit Programs
where such check mark appears in the "INCLUDED IN AGREEMENT"
box, and may be amended from time to time.
AFFILIATE and Benefit Included In
Programs Addendum Agreement
Care Florida Health
Plan, Inc. Foundation Health, a South
Florida Health Plan, Inc. Foundation
Health, a Florida Health Plan, Inc.
CHAMPUS E N/A
CHAMPUS Supplement E N/A
Other Government E N/A
HMO (Standard) B X
Point of Service B X
Medicare Supplement and Medicare Select F N/A
Supplemental Medical F N/A
Medicare Risk H X
Medicaid G X
Occupationally Ill/Injured or
Workers' Compensation D X
Foundation Health National Life
Insurance Company/Preferred Health Providers, Inc.
CHAMPUS E N/A
CHAMPUS Supplement E N/A
Other Government E N/A
Point of Service C X
Preferred Provider Organization C X
Supplemental Medical F N/A
Medicare Supplement F N/A
Occupationally Ill/Injured or Workers'
Compensation D X
Foundation Health Federal Services
CHAMPUS E N/A
Other Government E N/A
II. CREDENTIALS APPLICATION.
The Foundation Provider Credentials Application is included
herein as Exhibit 1 to this Addendum A. Provider shall be
responsible for completing the Credentials Application in its
entirety.
<PAGE>
EXHIBIT 1 TO ADDENDUM A
CREDENTIALS APPLICATION
(ATTACHED)
<PAGE>
ADDENDUM B
TO PROFESSIONAL PROVIDER AGREEMENT
HMO AND POINT OF SERVICE BENEFIT PROGRAMS
Provider understands and agrees that the obligations of
Foundation set forth in this Addendum shall be the obligations
of:
Care Florida Health Plan, Inc.
Foundation Health, a South Florida Health Plan, Inc.
Foundation Health, a Florida Health Plan, Inc.
Other:_____________________________________________________
as applicable, all of which are Affiliates of Foundation Health
Corporation ("FHC"), and not the obligations of FHC or any other
Affiliate of FHC.
A. STANDARD HMO BENEFIT PROGRAMS.
1. Reimbursement for Contracted Services. Provider shall
render Contracted Services to Beneficiaries of Foundation's
Benefit Programs covered under this Addendum on a capitated
basis. As compensation for providing such Contracted Services,
Provider shall be paid the rates set forth in Exhibit 1 of this
Addendum. Such compensation shall be paid by the 15th business
days of the current month. Provider shall submit complete and
accurate encounter reports for Contracted Services rendered to
Beneficiaries for the previous month.
2. Report of Reinsurance Claims. Provider shall report
potential reinsurance claims in accordance with Foundation's
reinsurance guidelines. Foundation shall provide Provider with
such guidelines, from time to time.
B. POINT OF SERVICE BENEFIT PROGRAMS
1. Benefit Program Design. Under a Point of Service Benefit
Program, Beneficiaries may elect, at the time of obtaining each
Covered Medical Service, to utilize either: (1) HMO coverage
through their selected or assigned PCP; (2) other indemnity
coverage through either non-Participating Providers, or
Participating Providers where other Benefit Program Requirements
are not met; or (3) optional Preferred Provider Organization
("PPO") coverage by self-referring to PPO Participating
Providers.
2. Compensation Method.
2.1 Fee-for-Service. Provider shall render Contracted
Services to Beneficiaries of Foundation's Benefit Programs
covered under this Addendum on a fee-for-service basis. As
compensation for rendering such Contracted Services, Provider
shall be paid the rates set forth in Exhibit 1 of this Addendum.
Such compensation shall be paid within 30 working days of
receipt by Foundation of a complete and accurate claim for
Contracted Services rendered to a Beneficiary.
C. HMO RISK BENEFIT PROGRAMS (only applicable if participating,
as identified on Exhibit B-1, in risk program.)
1. HCFA. the Health Care Financing Administration, an agency
of the Department of Health and Human Services, with which the
HMO has entered into a contract to provide health care
<PAGE>
services
and benefits to Medicare beneficiaries.
2. Medicare Program. The program administered by the Health
Care Financing Administration ("HCFA") on behalf of Medicare
beneficiaries covered under Title 18 of the Social Security Act.
3. Primary Care Capitation. The monthly amount paid to the
Provider, on a prepaid basis, for the provision of Primary Care
Services to Members.
4. In-Area-Emergency Care. Emergency services provided for HMO
Risk Beneficiaries which are performed within Foundation's
approved Service Area.
5. HMO Risk Service Area. The area approved by HCFA and the
State regulatory agency as being the area in which Foundation
may market and enroll Beneficiaries. At any given time during
the term of this Agreement, the Medicare Risk Service Area
consists of the list of zip codes currently approved by HCFA
and/or the State regulatory agency as the HMO Risk Service Area.
This is not necessarily the area for which Provider shall be
responsible for "in-area" care.
6. Out-of-Service-Area Emergency Care. Emergency services
performed outside Foundation's approved Service Area.
7. Primary Care Physician (PCP). The physician selected by or
assigned to a HMO Risk Beneficiary to provide primary care
services and to serve as a "coordinator" to manage utilization
and quality of other medical services. Only physicians who
practice as general practitioners or who practice in and are
Board eligible or certified in the specialties of family
practice, geriatrics, pediatrics (for Medicare eligible infants
and children only) or internal medicine, and who are able to
directly provide a comprehensive range of primary care services,
shall be eligible for listing as a HMO Risk PCP.
8. Urgently Needed Care.
(a) In-Area Urgently Needed Care. Non-Emergency, in-area
Covered Medical Services obtained to treat a condition where the
condition or other circumstances are such that obtaining a
future appointment through standard procedures would result in
severe pain or might reasonably be judged by the Beneficiary to
risk a serious deterioration of the Beneficiary's health.
(b) Out-of-Area Urgently Needed Care. Non-Emergency Covered
Medical Services obtained to treat an unforeseen condition while
a Beneficiary is temporarily outside of the HMO Risk Service
Area where the condition is such that waiting to return to the
service area would risk a serious deterioration of the
Beneficiary's health.
D. HMO RISK BENEFIT PROGRAMS.
1. Provider Obligations. Provider agrees to render Contracted
Services or Provider Risk Services to Beneficiaries eligible for
coverage under Title XVIII of the Social Security Act, as
amended, (otherwise known as Medicare), in accordance with the
terms and conditions of Foundation's HMO Risk Programs.
Foundation shall provide Provider with the Benefit Program
Requirements of such Benefit Programs not set forth in this
Addendum. Such Benefit Program Requirements include the
provisions of the operational policies and procedures,
Utilization Management Program and Quality Management Program
requirements with which Provider shall comply in rendering
Contracted Services or Provider Risk Services, as applicable,
under this Addendum. Provider acknowledges that the
determination of Provider Risk Services and all other services
shall be governed by coverage guidelines established by
Medicare, and the HMO Risk
<PAGE>
Benefit Program and Benefit Program
Requirements, with Foundation being solely responsible for final
coverage determinations, subject to the applicable appeal
procedures.
2. Continuation of Services After Termination. After
termination of this Agreement, Foundation shall be liable for
payment of Covered Medical Services rendered by Provider (other
than for Copayments) to a Member who retains eligibility or is
under the care of Provider at the time of termination, until the
services being rendered to the Member by Provider are completed,
unless Foundation makes reasonable and medically appropriate
provision for the assumption of such services by another
Participating Provider. Foundation shall reimburse Provider for
all services rendered pursuant to this Section and Provider
shall accept such payment, together with any authorized
Copayment, as payment in full. Notwithstanding the above or any
other provisions to the contrary, Provider agrees that, in the
event Foundation ceases operations for any reason, including
insolvency, Provider shall provide Contracted Services and shall
not bill, charge, collect or receive any form of payment other
than an authorized Copayment, nor shall Provider collect a
deposit from any Member or persons acting on their behalf, nor
have any recourse against a Member or persons acting on their
behalf, for Contracted Services provided after Foundation ceases
operations. This continuation of Contracted Services obligation
shall be for the period for which member premium has been paid,
not to exceed a period of 30 days, except for those Members who
are admitted on an inpatient basis. Provider shall continue to
arrange for Contracted Services to those Members who are on an
inpatient basis at the time this Agreement is no longer in
effect until the Member is discharged. No amendment or
modification of the provisions of this Section B.(2) shall be
allowed without the prior written approval of ACHA.
3. Reconciliation of Eligibility. Notwithstanding the
provisions contained in Section 3.3 of the Agreement, Foundation
shall assume financial responsibility for care provided to an
ineligible person due to retroactivity or otherwise erroneous,
incomplete or late Eligibility List data. Such care shall be
provided at the lesser of the amount which the Medicare Program
would have paid plus any applicable deductible or copayment, or
the compensation contained in Exhibit 2 to Addendum B. However,
Foundation shall only be responsible for such payment in the
event that no other payor, including Medicare, Medicaid, or
other HMO or insurance plan, or other individual is responsible
for such care, and when Provider has used Provider's best
efforts to verify and confirm eligibility from Foundation for
any patient whose eligibility is or should have been in
question, or who required institutional or other high cost care.
4. Prohibition on Removal of Plan Assigned Members. Neither
Provider, Provider's employees nor Provider's subcontractors
under the Agreement shall request, demand, require or otherwise
seek, directly or indirectly, the termination from the HMO Risk
Benefit Plan of any Beneficiary based upon the Beneficiary's
need for or utilization of medically required services, or in
order to gain financially or otherwise from such termination.
Provider may request that Foundation terminate coverage of a
Beneficiary for reasons of fraud, disruption of medical
services, or failure to follow a physician's orders, or for any
of the reasons for mandatory disenrollment specified by HCFA.
However, Provider agrees that Foundation shall have sole and
ultimate authority to terminate a HMO Risk Beneficiary's
coverage, and Provider understands that any requested
termination is subject to prior approval by HCFA.
5. Operations Policies and Procedures. Provider shall have a
service area, policies and procedures to administer the HMO Risk
Program.
6. Member Services. Provider shall cooperate fully with
Foundation in the investigation and resolution of complaints by
Members regarding Provider, the services Provider renders or
that are provided by Professional Providers, in compliance with
HCFA, Department of Insurance and ACHA requirements.
<PAGE>
7. Reports and Administration. Foundation shall have sole
obligation for filing reports, obtaining approval from, and
complying with the applicable laws and regulations of federal,
State and local governmental agencies having jurisdiction over
Foundation. Provider shall cooperate in providing Foundation
with such information and assistance regarding Members and
Provider's performance under this Agreement and Addendum as
Foundation may reasonably require in filing such reports.
Foundation shall perform all the necessary administrative,
accounting, enrollment and other functions appropriate for the
marketing and administration of its Benefit Programs and this
Agreement. Any material change in Foundation's marketing and
administrative policies and procedures affecting Provider shall
be promptly communicated by Foundation.
E. COMPENSATION:
Foundation shall establish two Operating Funds from which
medical and hospital services shall be paid for all Members
assigned to the Provider. The Foundation shall also establish
such other funds, or sub-funds, as further described below, from
which other professional services or expenses for contracted
Covered Services shall be paid.
Revenues to each Operating Fund shall be derived from Net
Commercial and Medicare Revenues allocated to the Provider from
premiums accrued to the Provider, respectively. A portion of
such revenues shall be allocated monthly to each Operating Fund
to pay for the provision of Covered Services. The HMO reserves
the right to adjust revenue allocations to the extent the actual
demographics of the Members assigned to the Provider differ from
the demographics of the HMO's aggregate membership, or the
actual utilization indicates either Operating Fund is under or
over funded, or any Covered Services are added, deleted or
changed. The initial Net Commercial Revenue, Net Medicare
Revenue, and funding proportions are specified in Exhibit B-2.
1. Part A Fund. A Part A Fund shall be established on behalf of
the Provider for the payment of Part A Services and other Part A
expenses ("Part A Expenses"). Part A Services are those
services considered Part A or Hospital Services under the
Medicare Program, as such services are defined by HCFA from time
to time, excluding those services specifically listed below
under Part B Services.
Part A Services and Expenses include, but are not limited to:
A. Inpatient Hospital Services (facility charges);
B. Skilled Nursing Facility (facility charges);
C. Home Health Services; and
D. Reinsurance.
2. Part B Fund. A Part B Fund shall be established on behalf of
the Provider for the payment of Part B Services and the Part B
Expenses ("Part B Expenses"). Part B Services are those
services considered Part B or Physician Services under the
Medicare Program, as such services are defined by HCFA from time
to time, as listed below.
Part B Services and Expenses include, but are not limited to:
A. Primary Care Capitation;
B. Specialist and Other Physician Charges (including Hospital
Based Physicians);
C. Licensed Medical Professional Charges;
D. Ambulance Services;
E. Ancillary Provider Charges;
F. Dental Services (for Medicare Members);
G. Durable Medical Equipment (for Members with DME benefits);
<PAGE>
H. Hearing Aids (for Medicare Members);
I. Prosthetic Devices;
J. Optical Services (for Medicare Members);
K. Outpatient Diagnostic Services;
L. Outpatient Hospital Services;
M. Outpatient Laboratory Services;
N. Outpatient Pharmaceutical Expenses (in accordance with the
Formulary adopted by the HMO);
O. Outpatient Surgical Services;
P. Other Medical Services and Supplies provided on an outpatient
basis; and
Q. All Part B Services provided to Medicare Members with Part B
Medicare only.
3. Reinsurance Fund. An amount from the Part A Fund shall be
allocated to the Reinsurance Fund, on a per member per month
basis, to pay for Reinsurance and the Catastrophic Loss Pool.
The HMO reserves the right to adjust this amount in the event
the HMO determines that the Reinsurance Fund is under or over
funded. The initial amount is specified in Exhibit B-3.
4. Operating Fund Reserve. An Operating Fund reserve
("Reserve") shall be established and maintained for the purpose
of reimbursing the Part A or Part B Fund, respectively, for any
Part A or Part B Expenses which exceed the revenues in such
Operating Fund. The Reserve for each Operating Fund shall be
maintained at a pre-determined level ("Minimum Reserve Balance")
which is determined in accordance with the formula described
below.
(a). The Minimum Reserve Balance for each Operating Fund shall
be determined by adding the product of, [the greater of (the
average per member per month Part A or Part B Expenses,
respectively, for all HMO Commercial Members for the previous
calendar quarter), or (the average per member per month Part A
or Part B Expenses, respectively, for Commercial Members
assigned to the Provider during the previous calendar quarter)
by three times the current number of Commercial Members assigned
to the Provider], to the product of [the greater of (the average
per member per month Part A or Part B Expenses, respectively,
for all HMO Medicare Members for the previous calendar quarter),
or (the average per member per month Part A or Part B Expenses,
respectively, for Medicare Members assigned to the Provider
during the previous calendar quarter) by three times the current
number of Medicare Members assigned to the Provider].
(b). The Minimum Reserve Balance in either Operating Fund may
be adjusted quarterly, but shall not exceed an amount equal to
the two most recent months of Net Commercial and Medicare
Revenues allocated to the respective Operating Fund.
(c). The Part A and B Fund Reserves shall be financed by Part A
and Part B Fund Earnings. Part A or Part B Fund Earnings are any
Part A or Part B Fund Revenues which exceed Part A or Part B
Expenses, respectively.
(d). If in any calendar quarter, after and including the first
complete calendar quarter, revenues in either Operating Fund
exceed expenses in the same fund, the resulting Earnings shall
be first allocated to the respective Reserve until the Minimum
Reserve Balance has been reached. If the Part A or Part B
Earnings are insufficient to achieve the Minimum Reserve Balance
in the respective Operating Fund, the Provider's portion of such
deficit or cumulative deficits, if any, shall be financed by the
Provider's portion of any Earnings which exceed the Minimum
Reserve Balance in the other Operating Fund.
(e). Once the Minimum Reserve Balance in both Operating Funds
has been achieved, the Provider's portion of any remaining Part
A or Part B Earnings shall be dispersed to the Provider as
described in Section II of this Amendment H.
5. Other Funds, Sub-Funds or Pools. Foundation reserves the
right to establish such other funds, sub-funds or sharing pools
which Foundation determines is necessary to maintain or improve
the financial condition of the Provider.
<PAGE>
F. PAYMENTS:
1. Payment of Part B Expenses. Unless otherwise specified in
this Agreement, the HMO shall pay all Part B Expenses directly
to the provider of services, in accordance with applicable state
and federal regulations, and deduct such payment from the Part B
Fund.
2. Primary Care Capitation. The HMO shall pay to the Provider
the net aggregate Primary Care Capitation for each Member
assigned to the Provider, as specified in Exhibit B-3, on or
about the tenth business day of each month.
3. Payment of Part A Expenses. The HMO shall pay, on behalf or
the Provider, all Part A Expenses directly to the provider of
services, in accordance with applicable state and federal
regulations, and deduct such payment from the Part A Fund.
4. Operating Fund Accounting. Operating Fund revenues and
expenses shall be calculated on an accrual basis of accounting.
Adjustments shall be made regularly on both a concurrent and
retroactive basis to account for reinsurance recoveries,
coordination of benefits, unknown claims, appeals and other
financial corrections. For purposes of financial accounting,
expenses shall include claims paid or pended, and an estimated
amount for claims incurred but not reported ("IBNR"), based upon
sound actuarial principles.
5. Operating Fund Surpluses and Deficits. After the first
complete calendar quarter of this Agreement, the HMO shall
conduct a financial reconciliation for the initial period
occurring prior to and during the first complete calendar
quarter, and each calendar quarter thereafter, to determine
Surpluses and Deficits. Surpluses are defined as any positive
balance remaining after allocating Part A and Part B Fund
Earnings to the Reserve of the respective Operating Fund until
the Minimum Reserve Balance is reached, and offsetting the
Provider's portion of any cumulative deficits in either or both
Operating Fund(s) with the Provider's portion of any remaining
Part A and/or Part B Fund Earnings. If the same reconciliation
results in a negative balance, such balance is a Deficit.
If the reconciliation results in a Surplus, the Provider shall
receive such Surplus on or about ninety (90) days after the
close of the calendar quarter. If the reconciliation results in
a Deficit, all or part of the Deficit may be reimbursed from any
future payments due the Provider by the HMO. In addition, the
amounts allocated to the Part A and/or Part B Fund, or amounts
paid to the Provider, may be adjusted by the HMO for the
subsequent quarter at the rate required to avoid future Deficits.
The Provider's percentage of Surplus/Deficit sharing for the
Part A and Part B Funds described in this Agreement are
specified in Exhibit B-2.
<PAGE>
EXHIBIT 2 TO ADDENDUM B HMO RISK BENEFIT PROGRAM
NON-APPLICABLE
The following initial rates shall be applied to the Financial
Arrangements set forth in Addendum B. The rates specified below
are subject to change thirty (30) days after written notice
provided by HMO, upon mutual agreement by and between HMO and
the Provider.
A. MEDICARE MEMBERS:
1. The Net Medicare Revenue for Medicare Members with both Part
A and Part B, or Part B only, of Medicare is 75% of Medicare
Premium accrued for Medicare Members assigned to Provider.
2. The portion of the Net Medicare Revenue allocated to the
Part A Fund for Medicare Members with both Part A and Part B of
Medicare is 45%. The portion of the Net Medicare Revenue
allocated to the Part B Fund for Medicare Members with both Part
A and Part B of Medicare is 55%. For Medicare Members with Part
B only of Medicare, the entire Net Medicare Revenue will be
allocated to the Part B Fund.
3. From the Part B Fund, the HMO will pay for Part B Expenses.
A portion will be paid to the Provider on a monthly basis for
the Primary Care Capitation specified in Exhibit B-3. The
remainder will be withheld by the HMO for Part B Expenses to be
paid by the HMO and for the Part B Fund Reserve.
4. The Provider's share of Surplus/Deficit in the Part A for
Medicare Members is 50%.
5. The Provider's share of Surplus/Deficit in the Part B Fund
for Medicare Members is 100%.
B. COMMERCIAL MEMBERS:
1. The Net Commercial Revenue is 85% of the average per Member
per month Commercial premium adjusted for age and sex, and
multiplied by the number of Commercial Members assigned to the
Provider.
2. The portion of the Net Commercial Revenue allocated to the
Part A Fund is 45%. The portion of the Net Commercial Revenue
allocated to the Part B Fund is 55%.
3. From the Part B Fund, the HMO will pay for Part B Expenses.
A portion will be paid to the Provider on a monthly basis for
the Primary Care Capitation specified in Exhibit B-3. The
remainder will be withheld by the HMO for the payment of Part B
Expenses other than Primary Care Capitation and for the Part B
Fund Reserve.
4. The Provider's share of Surplus/Deficit in the Part A Fund
for Commercial Members is 50%.
5. The Provider's share of Surplus/Deficit in the Part B Fund
for Commercial Members is 100%.
<PAGE>
MANAGED CARE SERVICES AGREEMENT
EXHIBIT 3 TO ADDENDUM B PRIMARY CARE CAPITATION SCHEDULE
NON-APPLICABLE
Compensation Model
Commercial/Medicare Risk Program
Commercial/Medicare Capitation Program
1. The PROVIDER shall be paid an amount per member per month
("Capitation") in accordance with the following schedule:
Commercial and Individual Members:
-------------------PLAN TYPE-----------------
AGE SEX Clipper Group Group Individual
(Special) (Other)
<1 M/F $18.30 $32.44 $30.00 $30.00
1 M/F 8.00 16.18 15.00 15.00
2-4 M/F 5.60 9.23 8.50 8.50
5-18 M/F 3.80 6.47 6.00 6.00
19-44 M 5.80 9.21 8.50 8.50
19-44 F 7.70 11.86 11.00 11.00
45-64 M 7.20 11.85 11.00 11.00
45-64 F 8.50 12.94 12.00 12.00
>65 M/F 14.90 25.96 24.00 24.00
B. Medicare Members:
CareFree
AGE SEX Medicare Plan
All M/F $45.00 per member per month
2. Reinsurance Fund
The portion of the Part A Fund allocated to the Reinsurance
Fund is as follows:
$14.50 per Medicare Member per month
$ 3.12 per Commercial Member per month
3. Co-payments. In addition to the Capitation specified above,
the Provider shall collect and retain Co-payments payable by
Members in accordance with their applicable Schedule of
Benefits.
<PAGE>
ADDENDUM C
TO PROFESSIONAL PROVIDER AGREEMENT
PREFERRED PROVIDER ORGANIZATION AND POINT OF SERVICE BENEFIT
PROGRAMS
Provider understands and agrees that the obligations of
Foundation set forth in this Addendum shall be the obligations
of:
Foundation Health National Life Insurance Company ("FHNL")
Preferred Health Providers, Inc. ("PHP")
Other:_________________________________________________________
as applicable, all of which are Affiliates of Foundation Health
Corporation ("FHC"), and not the obligations of FHC or any other
Affiliate of FHC. FHBL, FHNL and PHP provide preferred provider
organization ("PPO") and the indemnity and optional PPO
components of Point of Service Benefit Programs.
Provider understands that Foundation shall seek out Payors with
whom Benefit Program, third party administrator (TPA) and other
contracts may be negotiated. Foundation shall provide Provider
with a listing of all such Payors, as updated from time to time
by Foundation, including those Payors for whom Foundation serves
only in an administrative capacity. The listing shall include
the Payors' utilization management administrator and claims
administrator when such is not Foundation.
A. PREFERRED PROVIDER ORGANIZATION BENEFIT PROGRAMS.
1. Compensation Method. Provider shall render Contracted
Services to Beneficiaries of the PPO Benefit Programs covered
under this Addendum. As compensation for rendering Contracted
Services to Beneficiaries of a PPO Benefit Program, Provider
shall be paid in accordance with the rates set forth on Exhibit
1 of this Addendum. Such compensation shall be paid within the
time and subject to the billing requirements set forth in
Section 3.2 of the Agreement. The above notwithstanding, for
self-insured and other such Payors, Foundation shall not be
obligated to pay all or any portion of any Provider claim unless
and until Foundation has received sufficient funds from the
applicable Payor to cover such claim.
B. POINT OF SERVICE BENEFIT PROGRAMS.
1. Benefit Program Design. Under a Point of Service Benefit
Program, Beneficiaries may elect, at the time of obtaining each
Covered Medical Service, to utilize either: (1) HMO coverage
through their selected or assigned PCP; (2) other indemnity
coverage through either non-Participating Providers, or
Participating Providers where other Benefit Program Requirements
are not met; or (3) optional Preferred Provider Organization
("PPO") coverage by self-referring to PPO Participating
Providers.
2. Compensation Method. Provider shall render Contracted
Services on a fee-for-service basis to Beneficiaries of
Foundation's Point of Service Benefit Programs covered under the
PPO option of this Addendum. As compensation for rendering such
Contracted Services, Provider shall be paid the HMO
fee-for-service compensation rates set forth in Exhibit 1 to
Addendum B. Such compensation shall be paid within the time and
subject to the billing requirements set forth in Section 3.2 of
the Agreement.
<PAGE>
EXHIBIT 1 TO ADDENDUM C
PREFERRED PROVIDER ORGANIZATION COMPENSATION SCHEDULE
Compensation for PPO Covered Services Rendered to Beneficiaries:
Beneficiaries shall be entitled to a twenty percent (20%)
discount off of all services and/or products offered by
Provider. Foundation shall not reimburse or receive a request
for reimbursement from Provider for an eligible Beneficiaries.
Provider Service Area: All Florida counties.
<PAGE>
ADDENDUM D
TO PROFESSIONAL PROVIDER AGREEMENT
OCCUPATIONALLY ILL/INJURED OR WORKERS' COMPENSATION BENEFIT
PROGRAMS
Provider understands and agrees that the obligations of
Foundation set forth in this Addendum shall be the obligations
of:
Care Florida Health Plan, Inc.
Foundation Health, a South Florida Health Plan, Inc.
Foundation Health, a Florida Health Plan, Inc.
Foundation Health National Life Insurance Company
Preferred Health Providers, Inc.
Other:_____________________________________________________
as applicable, all of which are Affiliates of Foundation Health
Corporation ("FHC"), and not the obligations of FHC or any other
Affiliate of FHC.
Foundation shall contract with Payors, which may include
Affiliates of FHC, to provide Occupationally Ill/Injured or
Workers' Compensation Benefit Programs for Beneficiaries for
work related injuries and diseases compensable under State
Occupationally Ill/Injured or Workers' Compensation law.
Provider shall render Contracted Services to Beneficiaries for
occupational illnesses and injuries covered under Foundation's
and Payors' Occupationally Ill/Injured or Workers' Compensation
Benefit Programs. Foundation shall provide Provider with a
listing of all such Payors, as updated from time to time by
Foundation, including those Payors for whom Foundation serves
only in an administrative capacity. The listing shall include
the Payors' utilization management administrator and claims
administrator when such is not Foundation.
A. OCCUPATIONALLY ILL/INJURED OR WORKERS' COMPENSATION
BENEFIT PROGRAMS.
1. Compensation Method. As compensation for the delivery of
Contracted Services, limited as described above, Provider shall
be paid in accordance with the rates set forth on Exhibit 1 of
this Addendum. Such compensation shall be paid within the time
and subject to the billing requirements set forth in Section 3.2
of the Agreement. The above notwithstanding, for self-insured
and other such Payors, Foundation shall not be obligated to pay
all or any portion of any Provider claim, as allowed by
applicable law, unless and until Foundation has received
sufficient funds from the applicable Payor to cover such claim.
<PAGE>
2. Requirements for Eligibility Verification and Service
Authorization. Foundation and Payor Occupationally Ill/Injured
or Workers' Compensation Utilization Management Programs may
require Provider to: (a) verify Beneficiary eligibility to
receive Contracted Services; (b) verify that the Beneficiary's
injury or disease has been determined to "arise out of and in
the course of employment"; (c) determine the requested treatment
is Medically Necessary to cure and relieve the work-related
condition; and (d) obtain a Referral or Prior Authorization to
provide Contracted Services prior to rendering such services.
Provider agrees to comply with such eligibility verification
and/or Referral and/or Prior Authorization requirements and
other verification requirements. Foundation shall advise
Provider of all applicable Utilization Management Program
requirements.
3. Reports. Provider agrees to furnish, upon request, all
information reasonably required by Foundation or a Payor to
verify and provide written substantiation of the provision of
Contracted Services, and the charges for such services.
4. Return to Work. In addition to Contracted Services, and
without further compensation from Foundation or a Payor,
Provider shall work with Foundation and each Payor to develop a
return-to-work program for each Beneficiary.
5. State Laws. Provider agrees to comply with all Workers'
Compensation Statutory requirements in the State of Florida,
including but not limited to the State of Florida's Workers'
Compensation certification requirements.
<PAGE>
EXHIBIT 1 TO ADDENDUM D
OCCUPATIONALLY ILL/INJURED OR WORKERS' COMPENSATION RATE SCHEDULE
Compensation to Provider for the delivery of Medically
Necessary Covered Contracted Services will be 80% of the State
of Florida mandated Occupationally Ill/Injured or Workers'
Compensation Fee Schedule.
Provider Service Area: All Florida counties.
<PAGE>
ADDENDUM E
TO PROFESSIONAL PROVIDER AGREEMENT CHAMPUS, CHAMPUS SUPPLEMENT AND
OTHER GOVERNMENT BENEFIT PROGRAMS
NON-APPLICABLE
Provider understands and agrees that the obligations of
Foundation hereunder are obligations of:
Care Florida Health Plan, Inc.
Foundation Health, a South Florida Health Plan, Inc.
Foundation Health, a Florida Health Plan, Inc.
Foundation Health National Life Insurance Company
Preferred Health Providers, Inc. ("PHP")
Foundation Health Federal Services, Inc.
Other:_____________________________________________________
as applicable, an Affiliate of Foundation Health Corporation
("FHC"), and not obligations of FHC or any other Affiliate of
FHC. Foundation may contract with the United States Department
of Defense ("DOD"), or with other entities which contract with
DOD, to arrange for the provision of health and administrative
services to certain Beneficiaries of the Civilian Health and
Medical Program of the Uniformed Services ("CHAMPUS"), and may
contract with other local, State or federal agencies to arrange
for the provision of health, administrative and certain other
services to the Beneficiaries of other local, State and/or
federal programs.
<PAGE>
A. CHAMPUS PROGRAMS AND REGULATIONS
1. CHAMPUS Programs. CHAMPUS Programs are those services and
benefits which require the use of the services of a contracted
medical provider network and are purchased by the United States
Government through the authorized agency pursuant to Chapter 55
of Title 10 of the United States Code and the regulations
promulgated thereunder.
2. CHAMPUS Regulations. Foundation is obligated to comply with
all applicable CHAMPUS regulations, operations manuals,
Automated Data Processing manuals, policy manuals and the prime
contract technical proposals, and the Americans with
Disabilities Act. These documents provide a comprehensive
description of the applicable CHAMPUS program benefits and
operational requirements. The parties to this Agreement
acknowledge that all services rendered by Provider hereunder are
governed by such requirements. Foundation shall provide
Provider with all information regarding such requirements as
necessary for proper compliance.
3. Fee-for-Service Contracted Services. Provider shall render
Contracted Services to Beneficiaries of CHAMPUS Programs,
including the TRICARE Prime and TRICARE Extra Programs, covered
under this Addendum on a fee-for-service, per diem or DRG basis.
As compensation for providing such Contracted Services, Provider
shall be paid the rates set forth in Exhibit 1 of this Addendum.
Such compensation shall be paid within 30 working days of
receipt by Foundation of a complete and accurate claim for
Contracted Services rendered to a Beneficiary in accordance with
the provisions of Section 3.2(a) and 3.2(b) of the Agreement.
4. Primary Care Manager (PCM). or Primary Care Physician is a
physician who is a Participating Provider and who is responsible
pursuant to the applicable CHAMPUS Benefit Program for
coordinating and managing the delivery of Covered Medical
Services to Beneficiaries selected or assigned to such physician.
5. Supplemental Care. Foundation will work with MTF Commanders
to define Supplemental Care needs and to extend TRICARE contract
rates to the MTF's for those services.
B. CHAMPUS SUPPLEMENT PROGRAMS
1. Fee-for-Service Compensation. Under a CHAMPUS Supplement
Medical Coverage Program, Provider shall render Contracted
Services covered under the Standard CHAMPUS Benefit Program, and
shall bill and accept payment from CHAMPUS or its agent as
payment in full for such services, except for applicable
Copayments. Provider shall bill Foundation, and not
Beneficiaries, for such Copayments. For Contracted Services
rendered that are not covered under the Standard CHAMPUS
program, but which are covered under the applicable Foundation
CHAMPUS Supplement Medical Program, Provider shall be paid the
HMO fee-for-service, per diem or DRG compensation rates set
forth on Exhibit 1 to Addendum B. Such Copayments and
compensation shall be paid within the time and subject to the
billing requirements set forth in Section 3.2 of the Agreement.
C. OTHER GOVERNMENTAL PROGRAMS. Foundation may contract with
local, State or federal entities to provide medical delivery
programs such as universal health care programs, or other
Benefit Programs for which Foundation has contracted with a
Payor to provide Participating Provider networks, or certain
Covered Medical Services. Provider shall render Contracted
Services covered under such other governmental benefit programs,
and shall bill and accept payment from Foundation or a Payor as
payment in full for such services, except for applicable
Copayments, in accordance with the HMO fee-for-service or per
diem compensation rates set forth on Exhibit 1 to Addendum B.
D. PROVIDER OBLIGATIONS
<PAGE>
1. Contracted Services. Provider shall provide Contracted
Services to Beneficiaries of CHAMPUS, CHAMPUS Supplement and
other governmental programs in accordance with the terms and
conditions of those programs. Provider must be contracted and
accept assignment for both CHAMPUS and Medicare as Participating
Providers in order to render services to CHAMPUS Beneficiaries.
Foundation shall provide Provider with the Benefit Program
Requirements of the CHAMPUS, CHAMPUS Supplement and other
governmental programs not set forth in this Addendum. Such
Benefit Program Requirements may include Utilization Management
Program and Quality Management Program requirements with which
Provider shall comply in rendering Contracted Services under
this Addendum. Participating Providers shall monitor the
accessibility of care to Enrollees, and adhere to the following
standards: a). office wait times for non-emergencies shall not
exceed 30 minutes; b). wait times for appointments for well
visits shall not exceed 4 weeks, 1 week for routine visits, nor
1 day for acute illness. Participating Providers shall comply
with the Foundation's reasonable efforts to monitor and evaluate
same.
2. Specialty Providers. Foundation requires all specialty
Providers to request a TRICARE Prime Beneficiary to sign a
release of medical information at each site visit, to include
ancillary services associated with each visit whereby the PCM
and/or the MTF Commanders are designated as the recipients of
the medical records. Specialty Providers are required to submit
the medical records to the PCM and/or MTF Commander within 14
days for all routine referrals.
3. Eligibility. Eligibility of all CHAMPUS and other
governmental program Beneficiaries may be verified by the
designated agent of such program (e.g., Defense Enrollment
Eligibility Reporting System). However, if the designated agent
initially indicates that a patient is a Beneficiary under the
applicable CHAMPUS or other governmental program, and that
patient is later determined to be ineligible at the time of
service, then Foundation shall deny any claims for payment due
to non-eligibility, and Provider may seek compensation from the
patient or the patient's other health insurance coverage.
4. National Disaster Medical System (NDMS). When required
under a CHAMPUS prime contract, Provider shall obtain membership
in the National Disaster Medical System (NDMS) network. Provider
shall work in good faith with Foundation, or its representative,
to become a member of NDMS as soon as possible after
notification of award of such prime contract.
5. Access Requirements. When required by a particular CHAMPUS
program, Provider understands that the Military Treatment
Facility (MTF) is the first resource for health care for CHAMPUS
Beneficiaries, and that Beneficiaries gain access to the
civilian CHAMPUS provider network only through referral of the
Health Care Finder Program, or a Beneficiary's Primary Care
Manager ("PCM"), in coordination with the Health Care Finder
(HCF) Program. Provider agrees to provide services to CHAMPUS
Beneficiaries for non-emergency services only after obtaining
appropriate non-availability statements as required from the
MTF, Referral by Beneficiary's PCM, and prior authorization
through the HCF Program.
6. Benefit Program Phase-Out. Provider agrees to use its best
efforts to submit all CHAMPUS claims within 30 days from date of
service or discharge during the Phase-out period of a DoD prime
contract.
7. Active Duty Personnel. When required under a DoD prime
Contract, Provider shall render Contracted Services to United
States military active duty personnel and seek compensation from
the appropriate service organization at the same rates as
provided in Exhibit 1 to this Addendum.
8. CHAMPUS Quality and Utilization Review Programs. Provider
agrees to comply with all provisions of the CHAMPUS Quality and
Utilization Review programs, including the provision of medical
records and other documentation for cases being reviewed by
Foundation or another CHAMPUS contractor in compliance with
these programs. Provider further authorizes such
<PAGE>
CHAMPUS National Quality Monitoring Contractors to release all review
data obtained through medical record and other document audit to
Foundation.
<PAGE>
EXHIBIT 1 TO ADDENDUM E
CHAMPUS BENEFIT PROGRAMS
COMPENSATION SCHEDULE
NON-APPLICABLE
Compensation to Provider for the delivery of Medically Necessary
Covered Contracted Services will be ___% of CHAMPUS Maximum
Allowable Charges.
<PAGE>
ADDENDUM F TO PROFESSIONAL PROVIDER AGREEMENT
MEDICARE SUPPLEMENT, MEDICARE SELECT AND SUPPLEMENTAL MEDICAL BENEFIT
PROGRAMS
NON-APPLICABLE
Provider understands and agrees that the obligations of
Foundation hereunder are the obligations of:
Care Florida Health Plan, Inc.
Foundation Health, a South Florida Health Plan, Inc.
Foundation Health, a Florida Health Plan, Inc.
Foundation Health National Life Insurance Company
Preferred Health Providers, Inc.
Other:_____________________________________________________
as applicable, all of which are Affiliates of Foundation Health
Corporation ("FHC"), and not the obligations of FHC or any other
Affiliate of FHC.
Provider agrees to provide Contracted Services to Beneficiaries
eligible for coverage under Title XVIII of the Social Security
Act, as amended (otherwise known as Medicare), or other
Beneficiaries in accordance with the terms and conditions of
Foundation's Medicare Supplement, Medicare Select or other
Supplemental Medical Benefit Programs.
<PAGE>
A. MEDICARE SUPPLEMENT AND MEDICARE SELECT BENEFIT PROGRAMS.
1. Fee-for-Service Compensation. Under the Medicare Supplement
and Medicare Select Programs, Provider shall accept Medicare
assignment from Beneficiaries for Contracted Services covered
under Medicare, and shall bill and accept payment from Medicare
as payment in full for such services, except for applicable
Copayments and deductibles. Provider shall bill Foundation, and
not Beneficiaries, for such Copayments and deductibles. For
Contracted Services rendered that are not covered under
Medicare, but which are covered under the applicable Medicare
Supplement or Medicare Select Program, Provider shall be paid
the HMO fee-for-service compensation rates set forth on Exhibit
1 to Addendum B. Such compensation shall be paid subject to the
billing requirements set forth in Section 3.2 of the Agreement.
B. SUPPLEMENTAL MEDICAL BENEFIT PROGRAMS.
1. Fee-for-Service Compensation. Under a Supplemental Medical
Benefit Program, Provider shall render Contracted Services
covered under a Beneficiary's primary health care program, and
shall bill and accept payment from that primary health care
program as payment in full for such services, except for
applicable Copayments. Provider shall bill Foundation, and not
Beneficiaries, for such Copayments. For Contracted Services
rendered that are not covered under the Beneficiary's primary
health care program, but which are covered under the applicable
Foundation Supplemental Medical Benefit Program, Provider shall
be paid the HMO fee-for-service compensation rates set forth on
Exhibit 1 to Addendum B. Such Copayments and compensation shall
be paid subject to the billing requirements set forth in Section
3.2 of the Agreement.
<PAGE>
ADDENDUM G
TO PROFESSIONAL PROVIDER AGREEMENT
MEDICAID PROGRAM
Provider understands and agrees that the obligations of
Foundation hereunder are the obligations of:
Care Florida Health Plan, Inc.
Foundation Health, a South Florida Health Plan, Inc.
Foundation Health, a Florida Health Plan, Inc.
Other:_____________________________________________________
as applicable, all of which are Affiliates of Foundation Health
Corporation ("FHC"), and not the obligations of FHC or any other
Affiliate of FHC.
Foundation has entered into an Agreement with the Agency for
Health Care Administration (AHCA) under which Foundation has
agreed to provide medical services covered under the State's
Medicaid program including Covered Services to Medicaid
Beneficiaries enrolled in or otherwise assigned to Foundation.
<PAGE>
A. DEFINITIONS:
1. Agency - means the Florida Agency for Health Care
Administration.
2. DOI - means the Florida Department of Insurance.
3. HCFA - means the Health Care Financing Administration, an
agency of the U.S. Department of Health and Human Services.
4. Medicaid Program - means the program administered by the
Agency on behalf of Medicaid beneficiaries.
5. Primary Care Capitation - means the monthly amount paid to
the Provider, on a prepaid basis, for the provision of Primary
Care Services to Members.
B. GENERAL PROVISIONS:
1. Subcontracts and Assignment - The Provider shall make all
applicable books and records available at all reasonable times
for inspection, examination or copying by Foundation or the
Agency for Health Care Administration and retain such books and
records for a term of at least five years, or longer if under
audit, from the close of the fiscal year in which the
subcontract is in effect, and comply with the nondiscrimination
and compliance provisions set forth in Section 5, below.
2. Beneficiary Education - Provider shall make health education
materials and programs available to Beneficiaries on the same
basis that it makes such materials and programs available to the
general public, and shall use its best efforts to encourage
Beneficiaries to participate in such health education programs.
3. Grievances - Provider and Foundation agree to cooperate in
resolving all grievances relating to the provision of services
to Beneficiaries. Copies of complaint forms and Foundation's
grievance procedure will be made available to Provider and all
Beneficiaries. Provider agrees to report any complaint directly
to Foundation within one business day of receipt, whether
resolved directly or not. All complaints will be logged by
Foundation, a form letter acknowledging the complaint will be
sent to the Beneficiary within 20 days of its receipt, and a
brief summary of the resolution of the complaint will be sent to
the Beneficiary within 30 days thereafter. Provider agrees to
comply with Foundation's grievance procedure and to abide by
Foundation's adjudication process for grievances concerning
Provider and Beneficiaries, including any fair hearing procedure
involving State or Foundation. Beneficiaries may request
disenrollment from the Benefit Plan or may request a fair
hearing from the State or Foundation.
4. Relationship of the Parties - Provider shall be solely
responsible, without interference from Foundation or its agent,
for providing Covered Services to Beneficiaries, and shall have
the right to object to treating any individual who makes onerous
the relationship between Provider and Beneficiary. In the event
of a breakdown in such relationship, Foundation shall make
reasonable efforts to assign Beneficiary to another
Participating Provider. If reassignment is unsuccessful, a
request may be filed with the State to permit termination of
services to such Beneficiary. Approval from the State must be
obtained before Provider terminates services to such Beneficiary.
5. Fair Employment Requirements - During the term of this
Agreement, Provider and its subcontractors shall not unlawfully
discriminate against any employee or applicant for employment
because of race, religious creed, color, national origin,
ancestry, physical disability, mental disability, medical
condition, marital status, age (over 40) or sex. Provider and
its subcontractors also shall ensure that the evaluation and
treatment of their employees and applicants for employment are
free of such discrimination. Provider and its subcontractors
shall comply with the provisions of the Fair Employment and
Housing Act and the applicable regulations promulgated
thereunder. Provider and its subcontractors shall give written
notice of their obligations under this clause to labor
organizations with which they have a collective bargaining or
other agreements.
<PAGE>
6. Regulation - Provider and Foundation agree to be bound by
any provision required by any of such laws and regulations to be
in this Agreement or Addendum, and with all other laws,
regulations and contractual obligations incumbent upon
Foundation. Additionally, Provider shall comply with all
standards expressed in the PHP Agreement. Further, Provider
agrees that this Agreement, as it applies to Beneficiaries
covered under this Addendum shall be governed by and construed
in accordance with the contractual obligations of Foundation
under the PHP Agreement, as well as with all applicable State,
Federal and Local rules and regulations.
7. Notice - Provider agrees, as long as it provides Contracted
Services to Beneficiaries, to notify the Agency for Health Care
Administration in the event this Agreement is amended or
terminated. Notice to the Agency is considered given properly
addressed and deposited with the United States Postal Service as
first class mail, postage attached.
8. Reports and Information - Provider shall provide Foundation,
within the time requested by Foundation, with all such reports
and information as Foundation may require to allow it to meet
the reporting requirements under the PHP Agreement or any
applicable law, rule or regulation.
9. Confidentiality of Information - Not withstanding any other
provision of this Agreement or Addendum to the contrary, names
of persons receiving public social services are confidential and
are to be protected from unauthorized disclosure in accordance
with the Welfare and Institutions Code and the regulations
adopted thereunder. For the purposes of this Agreement, all
information, records, data and data elements collected and
maintained for or in connection with performance under this
Agreement and pertaining to Beneficiaries shall be protected by
Provider from unauthorized disclosure. With respect to any
identifiable information concerning a Beneficiary under this
Agreement that is obtained by Provider or its subcontractors,
Provider: (I) will not use any transmit to Foundation all
requests for disclosure of such information, (ii) will not
disclose, except as otherwise specifically permitted by this
Agreement, any such information to any party other than
Foundation without Foundation's prior written authorization
specifying that the information is releasable under applicable
law, and will, at the expiration or termination of this
Agreement, return all such information to Foundation or maintain
such information according to written procedures provided
Provider by Foundation for this purpose. Provider shall ensure
that its subcontractors comply with the provisions of this
paragraph.
10. Coordination of Benefits - Provider shall abide by and
comply with the requirements of Foundation's Coordination of
Benefits Policy. The above notwithstanding, Provider shall make
no claim for recovery for Contracted Services rendered to a
Beneficiary when such recovery would result from recovery from
an action involving the tort liability of a third party or
casualty liability insurance, including workers' compensation
awards and uninsured motorist coverage. Provider shall notify
Foundation of cases in which an action by the Beneficiary
involving the tort or workers' compensation liability of a third
party could result in a recovery by the Beneficiary.
Additionally, Provider shall promptly provide: (a) all
information requested by Foundation in connection with the
provision of Provider Risk Services to a Beneficiary who may
have an action for recovery from any such third party; (b)
copies of all requests by subpoena from attorneys, insurers or
Beneficiaries for copies of bills, invoices or claims for
Provider Risk Services; and (c) copies of all documents released
as a result of such requests. Provider shall ensure that its
subcontractors comply with the provisions of this paragraph.
11. Medicaid Program Participation - The Provider understands
that Provider shall not be eligible to participate in
Foundation's Medicaid Program until such time that all of the
requirements for participation are met. Participation
requirements include, but are not limited to:
a) This Agreement, Addendum and any and all supporting
documentation must be in writing and expected by all parties
prior to Provider participating in the Medicaid Program.
b) The Provider's participation in the Medicaid Program shall
be limited to the Medicaid Members and service areas as
identified by this Agreement and Addenda.
c) Provider's participation in the Medicaid Program shall be
specifically limited to those services identified by this
Agreement and Addenda.
d) Provider shall provide Contracted Services to those eligible
Members in the
<PAGE>
services area identified in this Agreement and
Addenda.
e) Provider shall assist AHCA with any evaluation through
inspection or other means to measure the quality,
appropriateness and timeliness of services performed.
f) Provider shall make available any records pertinent to the
participation in the Medicaid program.
g) Provider shall make prompt submission of any information
needed by Foundation to make payment.
h) Require an adequate record system be maintained for
recording services, charges, dates and all other commonly
accepted information elements for services rendered to
recipients under the contract.
i) Provider shall maintain records for a period of not less
than five years.
j) Provider shall defend and indemnify and hold AHCA and any
Member harmless from and against all claims, damages, causes of
action, costs or expense, including court costs and reasonable
attorneys fees to the extent approximately caused by any
negligent act or other wrongful conduct arising from
Foundation's contract with AHCA for participation in the
Medicaid program. This clause shall survive the termination of
this Agreement and Addenda including termination by breach due
to insolvency.
k) Provider shall secure and maintain, during the term of this
Agreement and Addenda, worker's compensation insurance for all
of Provider's employees rendering the Contracted Services under
this Agreement and Addenda.
l) Provider shall ensure that Members are provided timely
access to physician appointment in accordance with the following
standards: Urgent Care- within one day, Routine Sick Carewithin
one week, Well Care- within one month.
C. PROVIDER FUNDS:
1. Payment of Health Care Expenses - Unless otherwise specified
in this Agreement, the Health Plan shall pay all health care
expenses directly to the Provider of the services, in accordance
with applicable state and federal regulations.
2. Primary Care Capitation - The Health Plan shall pay to the
Provider the net aggregate Primary Care Capitation for each
Member assigned to the Provider, as specified in Exhibit 2 of
Addendum G, on or about the tenth business day of each month,
and deduct such payment from the Operating Fund.
<PAGE>
EXHIBIT 2 TO ADDENDUM G
MEDICAID RISK BENEFIT PROGRAM POSITIVE OUTCOME FINANCIAL
INCENTIVE PLAN
NON APPLICABLE
1. Standards for Point Allocation
a. EPSDT
Standard: PROVIDER shall provide all Medicaid Members under the
age of 21 with periodic health screening examinations consisting
of comprehensive health and developmental history, including
assessment of both physical and mental health development,
unclothed physical, developmental assessment, nutritional
assessment, appropriate immunizations, according to the schedule
established by the Advisory Committee on Immunization Practices,
laboratory testing including lead screening, health education
including anticipatory guidance, dental screening including a
direct referral to a dentist for enrollees beginning at 3 years
of age or earlier as indicated, vision screening, and hearing
screening. PROVIDER shall provide all Medicaid Members 21
years of age or older with an annual adult health screening.
Test: The PROVIDER shall conduct Early and Periodic Screening,
Diagnostic and Testing for all Medicaid Members under the age of
21 in accordance with the EPSDT standards and an adult health
screening for all Medicaid Members 21 years of age or older. The
HMO shall measure the PROVIDER's compliance with the standard by
reviewing encounter data.
Point Value: The PROVIDER shall be awarded a maximum of twenty
(20) points for compliance with the EPSDT standards. The
PROVIDER shall be awarded points in accordance with the
above-referenced test and at the following increments: in
increments of one point for each one percentage point beginning
at a compliance level of seventy (70%) percent and increasing
at increments of one point for one percentage to a maximum of
twenty (20) points for maintaining compliance at a standard
greater or equal to ninety percent (90%).
b. Initial Health Assessment
Standard: The PROVIDER shall conduct a complete initial health
assessment for all Medicaid Members including a complete health
history, physical assessment, and the monitoring of physical and
psychological growth and development, and review each Member's
medical records, from previous practitioners, to screen for
Members not receiving EPSDT screens and/or immunizations, and
possible pregnancies.
Test: The PROVIDER shall conduct a complete initial health
assessment for all Medicaid Members within the first ninety (90)
days of their enrollment in the health plan including requesting
and reviewing each Member's medical records from previous
practitioners. The HMO shall measure the PROVIDER's compliance
with the standard by reviewing encounter data and medical
records.
Point Value: The PROVIDER shall be awarded a maximum of forty
(40) points for compliance with the initial health assessment
standards. The PROVIDER shall be awarded points in accordance
with the above-referenced test and according to the following:
in increments of two points for each one percentage point
beginning at a compliance level of eighty (80%) percent and
increasing at increments of two points for one percentage to a
maximum of forty (40) points for maintaining compliance at a
standard equal to one hundred percent (100%).
<PAGE>
c. Access
Standard: PROVIDER shall provide Member access to Covered
Services in accordance with the following: Routine (symptomatic)
care to be see within one week, Routine (non-symptomatic) care
within one week, Wellcare within four weeks, Emergent care
immediately, Urgent care within twenty-four hours.
Test: The HMO shall measure PROVIDER's compliance through the
monitoring of encounter data and facility site visits.
Point Value: The PROVIDER shall be awarded a maximum of forty
(40) points for compliance with the access standards. The
PROVIDER shall be awarded points in accordance with the
above-referenced test and according to the following: in
increments of four points for each one percentage point
beginning at a compliance level of eighty (80%) percent and
increasing at increments of four points for one percentage to a
maximum of forty (40) points for maintaining compliance at a
standard equal to ninety percent (90%).
2. POINT CONVERSION FOR REIMBURSEMENT
aggregate points awarded for compliance with the standards for
EPSDT, Initial Health Screenings and Access Standards.
Compensation shall be based upon the cumulative Surplus or
Deficit divided by one hundred and multiplied by the total
number of points earned.
<PAGE>
EXHIBIT 3 TO ADDENDUM G
MEDICAID PREPAID BENEFIT PROGRAM
NON-APPLICABLE
The following initial rates shall be applied to the Financial
Provisions set forth in Addendum G. The rates specified below
are subject to change thirty (30) days after written notice
provided by Health Plan.
A. MEDICAID MEMBERS
1. The net Medicaid capitation ("Net Medicaid Capitation")
shall be equal to the per Member per month capitation received
from the Agency. The per Member per month capitation is set by
the Medicaid Program according to Medicaid eligible categories
(i.e., AFDC, SSI-No Medicare, SSI Part B only, and SSI Part A
and B). The Operating Funds shall be funded by the net
Medicaid revenue ("Net Medicaid Revenue") which equals 80% of
the Net Medicaid Capitation for those Medicaid Members assigned
to the Provider.
2. From the Operating Fund, the Health Plan will pay for health
care expenses. A portion will be paid to the Provider on a
monthly basis for the Primary Care Capitation specified in
Section B below. The remainder will be withheld by the Health
Plan for the payment of health care expenses other than Primary
Care Capitation and for the Reserve.
3. The Provider's share of Surplus/Deficit in the Operating
Fund is fifty percent (50%).
4. The initial funding of the Reinsurance Fund, including the
Catastrophic Loss Pool, shall be ____per member per month.
5. The initial catastrophic threshold amount ("Threshold") for
the Reinsurance Fund shall be $_______.
B. PRIMARY CARE CAPITATION SCHEDULE
1. The Provider shall be paid an amount per Member per month
(for primary care services) in accordance with the following
schedule:
a. Medicaid Members:
---------------------------MEDICAID
CATEGORY-------------------------
AFDC SSI NO SSI PART SSI PART
MEDICARE A ONLY A AND B
Primary care capitation: ------------------SEE EXHIBIT 4
TO ADDENDUM G-----------------
2. Payments. The Health Plan shall forward payment of the
Capitation specified above on or about the tenth business day of
each month, for the current month.
<PAGE>
EXHIBIT 4 TO ADDENDUM G
MEDICAID BENEFIT PROGRAM
NON-APPLICABLE
1. The Provider shall be paid an amount per member per month
("Capitation") in accordance with the following schedule:
Medicaid Members: Dade County
AGE SSI SSI SSI
No Medicare B only A and B AFDC
0-11
Months $109.20 N/A N/A $43.40
1-5
Years $28.40 N/A N/A $12.40
6-20 $16.65 $12.40 $7.40 $9.90
21-54 $18.10 $13.40 $9.31 $11.90
55+ $19.52 $14.90 $11.81 $14.90
2. In addition to the above per member per month Capitation for
Primary Care Physician services, the Provider shall be paid on a
fee-for-service basis for the following:
a) Early and Periodic Screening, Diagnosis and Treatment
(EPSDT) services performed in accordance with the Medicaid
frequency schedule for Medicaid eligible children under the age
of 21.
EPSDT services (procedure code W9881) will be reimbursed at
100% of the Medicaid prevailing rate and 80% of the Medicaid
prevailing rate for ARNPs and PAs
b) For Medicaid eligible children, from birth to age 18, the
Provider shall be paid an administration fee for covered
injectable vaccines (CPT code Q0034) under the Medicaid program.
The rate of reimbursement shall be $ 12.00 to physicians and
$10.00 to ARNPs and PAs. The appropriate CPT procedure code
must be billed on a HCFA-1500 claim form.
<PAGE>
ADDENDUM H
TO PROFESSIONAL PROVIDER AGREEMENT
MEDICARE PROGRAMS
Provider understands and agrees that the obligations of
Foundation hereunder are the obligations of:
Care Florida Health Plan, Inc.
Foundation Health, a South Florida Health Plan, Inc.
Foundation Health, a Florida Health Plan, Inc.
Other:_____________________________________________________
as applicable, all of which are Affiliates of Foundation Health
Corporation ("FHC"), and not the obligations of FHC or any other
Affiliate of FHC.
<PAGE>
A. DEFINITIONS.
For purposes of this Addendum, the definitions included herein
shall have the meaning required by law to applicable Medicare
Risk Programs.
1. HCFA. the Health Care Financing Administration, an agency
of the Department of Health and Human Services, with which the
HMO has entered into a contract to provide health care services
and benefits to Medicare beneficiaries.
2. Medicare Program. The program administered by the Health
Care Financing Administration ("HCFA") on behalf of Medicare
beneficiaries covered under Title 18 of the Social Security Act.
3. Primary Care Capitation. The monthly amount paid to the
Provider, on a prepaid basis, for the provision of Primary Care
Services to Members.
4. In-Area-Out-of-Plan Emergency Care. Emergency services
provided for Medicare Risk Beneficiaries within Foundation's
approved Service Area.
5. Medicare Risk Service Area. The area approved by HCFA and
the State regulatory agency as being the area in which
Foundation may market and enroll Beneficiaries. At any given
time during the term of this Agreement, the Medicare Risk
Service Area consists of the list of zip codes currently
approved by HCFA and/or the State regulatory agency as the
Medicare Risk Service Area. This is not necessarily the area
for which Provider shall be responsible for "in-area" care.
6. Out-of-Service-Area Emergency Care. Emergency services
performed outside the Foundation's service area.
7. Primary Care Physician (PCP). The physician selected by or
assigned to a Medicare Risk Beneficiary to provide primary care
services and to serve as a "coordinator" to manage utilization
and quality of other medical services. Only physicians who
practice as general practitioners or who practice in and are
Board eligible or certified in the specialties of family
practice, geriatrics, pediatrics (for Medicare eligible infants
and children only) or internal medicine, and who are able to
directly provide a comprehensive range of primary care services,
shall be eligible for listing as a Medicare Risk PCP.
8. Urgently Needed Care.
(a) In-Area Urgently Needed Care. Non-Emergency, in-area
Covered Medical Services obtained to treat a condition where the
condition or other circumstances are such that obtaining a
future appointment through standard procedures would result in
severe pain or might reasonably be judged by the Beneficiary to
risk a serious deterioration of the Beneficiary's health.
(b) Out-of-Area Urgently Needed Care. Non-Emergency Covered
Medical Services obtained to treat an unforeseen condition while
a Beneficiary is temporarily outside of the Medicare Risk
Service Area where the condition is such that waiting to return
to the service area would risk a serious deterioration of the
Beneficiary's health.
B. MEDICARE BENEFIT PROGRAMS.
1. Provider Obligations. Provider agrees to render Contracted
Services or Provider Risk Services to Beneficiaries eligible for
coverage under Title XVIII of the Social Security Act, as
amended, (otherwise known as Medicare), in accordance with the
terms and conditions of Foundation's Medicare Risk Programs.
Foundation shall provide Provider with the Benefit Program
Requirements of such Benefit Programs not set forth in this
Addendum. Such Benefit Program Requirements include the
provisions of the operational policies and procedures,
Utilization Management Program and Quality Management Program
requirements with which Provider shall
<PAGE>
comply in rendering
Contracted Services or Provider Risk Services, as applicable,
under this Addendum. Provider acknowledges that the
determination of Provider Risk Services and all other services
shall be governed by coverage guidelines established by
Medicare, and the Medicare Risk Benefit Program and Benefit
Program Requirements, with Foundation being solely responsible
for final coverage determinations, subject to the applicable
appeal procedures.
2. Continuation of Services After Termination. After
termination of this Agreement, Foundation shall be liable for
payment of Covered Medical Services rendered by Provider (other
than for Copayments) to a Member who retains eligibility or is
under the care of Provider at the time of termination, until the
services being rendered to the Member by Provider are completed,
unless Foundation makes reasonable and medically appropriate
provision for the assumption of such services by another
Participating Provider. Foundation shall reimburse Provider for
all services rendered pursuant to this Section and Provider
shall accept such payment, together with any authorized
Copayment, as payment in full. Notwithstanding the above or any
other provisions to the contrary, Provider agrees that, in the
event Foundation ceases operations for any reason, including
insolvency, Provider shall provide Contracted Services and shall
not bill, charge, collect or receive any form of payment other
than an authorized Copayment, nor shall Provider collect a
deposit from any Member or persons acting on their behalf, nor
have any recourse against a Member or persons acting on their
behalf, for Contracted Services provided after Foundation ceases
operations. This continuation of Contracted Services obligation
shall be for the period for which member premium has been paid,
not to exceed a period of 30 days, except for those Members who
are admitted on an inpatient basis. Provider shall continue to
arrange for Contracted Services to those Members who are on an
inpatient basis at the time this Agreement is no longer in
effect until the Member is discharged. No amendment or
modification of the provisions of this Section B.(2) shall be
allowed without the prior written approval of the ACHA.
3. Reconciliation of Eligibility. Notwithstanding the
provisions contained in Section 3.3 of the Agreement, Foundation
shall assume financial responsibility for care provided to an
ineligible person due to retroactivity or otherwise erroneous,
incomplete or late Eligibility List data. Such care shall be
provided at the lesser of the amount which the Medicare Program
would have paid plus any applicable deductible or copayment, or
the compensation contained in Exhibit 1 to Addendum H. However,
Foundation shall only be responsible for such payment in the
event that no other payor, including Medicare, Medicaid, or
other HMO or insurance plan, or other individual is responsible
for such care, and when Provider has used Provider's best
efforts to verify and confirm eligibility from Foundation for
any patient whose eligibility is or should have been in
question, or who required institutional or other high cost care.
4. Prohibition on Removal of Plan Assigned Members. Neither
Provider, Provider's employees nor Provider's subcontractors
under the Agreement shall request, demand, require or otherwise
seek, directly or indirectly, the termination from the Medicare
Risk Benefit Plan of any Beneficiary based upon the
Beneficiary's need for or utilization of medically required
services, or in order to gain financially or otherwise from such
termination. Provider may request that Foundation terminate
coverage of a Beneficiary for reasons of fraud, disruption of
medical services, or failure to follow a physician's orders, or
for any of the reasons for mandatory disenrollment specified by
HCFA. However, Provider agrees that Foundation shall have sole
and ultimate authority to terminate a Medicare Risk
Beneficiary's coverage, and Provider understands that any
requested termination is subject to prior approval by HCFA.
5. Operations Policies and Procedures. Provider shall have or
develop within 30 days of written request written administrative
and operational policies and procedures to administer the
Medicare Risk Program.
6. Member Services. Provider shall cooperate fully with
Foundation in the investigation and resolution of complaints by
Members regarding Provider, the services Provider renders or
that are provided by Professional Providers, in compliance with
HCFA, Department of Insurance and ACHA requirements.
7. Reports and Administration. Foundation shall have sole
obligation for filing
<PAGE>
reports, obtaining approval from, and
complying with the applicable laws and regulations of federal,
State and local governmental agencies having jurisdiction over
Foundation. Provider shall cooperate in providing Foundation
with such information and assistance regarding Members and
Provider's performance under this Agreement and Addendum as
Foundation may reasonably require in filing such reports.
Foundation shall perform all the necessary administrative,
accounting, enrollment and other functions appropriate for the
marketing and administration of its Benefit Programs and this
Agreement. Any material change in Foundation's marketing and
administrative policies and procedures affecting Provider shall
be promptly communicated by Foundation.
C. COMPENSATION:
Medicare Capitation Program Provider shall render Contracted
Services to Beneficiaries of Foundation's Benefit Programs
covered under this Addendum on a capitated basis. As
compensation for providing such Contracted Services, Provider
shall be paid the rates set forth in Exhibit 1 of this Addendum.
Such compensation shall be paid by the 15th business days of the
current month. Provider shall submit complete and accurate
encounter reports for Contracted Services rendered to
Beneficiaries for the previous month.
Medicare Risk Program Foundation shall establish two Operating
Funds from which medical and hospital services shall be paid for
all Members assigned to the Provider. The Foundation shall also
establish such other funds, or sub-funds, as further described
below, from which other professional services or expenses for
contracted Covered Services shall be paid.
Revenues to each Operating Fund shall be derived from Net
Commercial and Medicare Revenues allocated to the Provider from
premiums accrued to the Provider, respectively. A portion of
such revenues shall be allocated monthly to each Operating Fund
to pay for the provision of Covered Services. The HMO reserves
the right to adjust revenue allocations to the extent the actual
demographics of the Members assigned to the Provider differ from
the demographics of the HMO's aggregate membership, or the
actual utilization indicates either Operating Fund is under or
over funded, or any Covered Services are added, deleted or
changed. The initial Net Commercial Revenue, Net Medicare
Revenue, and funding proportions are specified in Exhibit H-1.
1. Part A Fund. A Part A Fund shall be established on behalf of
the Provider for the payment of Part A Services and other Part A
expenses ("Part A Expenses"). Part A Services are those
services considered Part A or Hospital Services under the
Medicare Program, as such services are defined by HCFA from time
to time, excluding those services specifically listed below
under Part B Services.
Part A Services and Expenses include, but are not limited to:
A. Inpatient Hospital Services (facility charges);
B. Skilled Nursing Facility (facility charges);
C. Home Health Services; and
D. Reinsurance.
2. Part B Fund. A Part B Fund shall be established on behalf of
the Provider for the payment of Part B Services and the Part B
Expenses ("Part B Expenses"). Part B Services are those
services considered Part B or Physician Services under the
Medicare Program, as such services are defined by HCFA from time
to time, as listed below.
Part B Services and Expenses include, but are not limited to:
A. Primary Care Capitation;
B. Specialist and Other Physician Charges (including Hospital
Based Physicians);
C. Licensed Medical Professional Charges;
D. Ambulance Services;
E. Ancillary Provider Charges;
F. Dental Services (for Medicare Members);
<PAGE>
G. Durable Medical Equipment (for Members with DME benefits);
H. Hearing Aids (for Medicare Members);
I. Prosthetic Devices;
J. Optical Services (for Medicare Members);
K. Outpatient Diagnostic Services;
L. Outpatient Hospital Services;
M. Outpatient Laboratory Services;
N. Outpatient Pharmaceutical Expenses (in accordance with the
Formulary adopted by the HMO);
O. Outpatient Surgical Services;
P. Other Medical Services and Supplies provided on an outpatient
basis; and
Q. All Part B Services provided to Medicare Members with Part B
Medicare only.
3. Reinsurance Fund. An amount from the Part A Fund shall be
allocated to the Reinsurance Fund, on a per member per month
basis, to pay for Reinsurance and the Catastrophic Loss Pool.
The HMO reserves the right to adjust this amount in the event
the HMO determines that the Reinsurance Fund is under or over
funded. The initial amount is specified in Exhibit H-2.
4. Operating Fund Reserve. An Operating Fund reserve
("Reserve") shall be established and maintained for the purpose
of reimbursing the Part A or Part B Fund, respectively, for any
Part A or Part B Expenses which exceed the revenues in such
Operating Fund. The Reserve for each Operating Fund shall be
maintained at a pre-determined level ("Minimum Reserve Balance")
which is determined in accordance with the formula described
below.
(a). The Minimum Reserve Balance for each Operating Fund shall
be determined by adding the product of, [the greater of (the
average per member per month Part A or Part B Expenses,
respectively, for all HMO Commercial Members for the previous
calendar quarter), or (the average per member per month Part A
or Part B Expenses, respectively, for Commercial Members
assigned to the Provider during the previous calendar quarter)
by three times the current number of Commercial Members assigned
to the Provider], to the product of [the greater of (the average
per member per month Part A or Part B Expenses, respectively,
for all HMO Medicare Members for the previous calendar quarter),
or (the average per member per month Part A or Part B Expenses,
respectively, for Medicare Members assigned to the Provider
during the previous calendar quarter) by three times the current
number of Medicare Members assigned to the Provider].
(b). The Minimum Reserve Balance in either Operating Fund may
be adjusted quarterly, but shall not exceed an amount equal to
the two most recent months of Net Commercial and Medicare
Revenues allocated to the respective Operating Fund.
(c). The Part A and B Fund Reserves shall be financed by Part
A and Part B Fund Earnings. Part A or Part B Fund Earnings are
any Part A or Part B Fund Revenues which exceed Part A or Part B
Expenses, respectively.
(d). If in any calendar quarter, after and including the first
complete calendar quarter, revenues in either Operating Fund
exceed expenses in the same fund, the resulting Earnings shall
be first allocated to the respective Reserve until the Minimum
Reserve Balance has been reached. If the Part A or Part B
Earnings are insufficient to achieve the Minimum Reserve Balance
in the respective Operating Fund, the Provider's portion of such
deficit or cumulative deficits, if any, shall be financed by the
Provider's portion of any Earnings which exceed the Minimum
Reserve Balance in the other Operating Fund.
(e). Once the Minimum Reserve Balance in both Operating Funds
has been achieved, the Provider's portion of any remaining Part
A or Part B Earnings shall be dispersed to the Provider as
described in Section II of this Amendment H.
5. Other Funds, Sub-Funds or Pools. Foundation reserves the
right to establish such other funds, sub-funds or sharing pools
which Foundation determines is necessary to maintain or improve
the financial condition of the Provider.
<PAGE>
D. PAYMENTS:
1. Payment of Part B Expenses. Unless otherwise specified in
this Agreement, the HMO shall pay all Part B Expenses directly
to the provider of services, in accordance with applicable state
and federal regulations, and deduct such payment from the Part B
Fund.
2. Primary Care Capitation. The HMO shall pay to the Provider
the net aggregate Primary Care Capitation for each Member
assigned to the Provider, as specified in Exhibit H-2, on or
about the tenth business day of each month.
3. Payment of Part A Expenses. The HMO shall pay, on behalf or
the Provider, all Part A Expenses directly to the provider of
services, in accordance with applicable state and federal
regulations, and deduct such payment from the Part A Fund.
4. Operating Fund Accounting. Operating Fund revenues and
expenses shall be calculated on an accrual basis of accounting.
Adjustments shall be made regularly on both a concurrent and
retroactive basis to account for reinsurance recoveries,
coordination of benefits, unknown claims, appeals and other
financial corrections. For purposes of financial accounting,
expenses shall include claims paid or pended, and an estimated
amount for claims incurred but not reported ("IBNR"), based upon
sound actuarial principles.
5. Operating Fund Surpluses and Deficits. After the first
complete calendar quarter of this Agreement, the HMO shall
conduct a financial reconciliation for the initial period
occurring prior to and during the first complete calendar
quarter, and each calendar quarter thereafter, to determine
Surpluses and Deficits. Surpluses are defined as any positive
balance remaining after allocating Part A and Part B Fund
Earnings to the Reserve of the respective Operating Fund until
the Minimum Reserve Balance is reached, and offsetting the
Provider's portion of any cumulative deficits in either or both
Operating Fund(s) with the Provider's portion of any remaining
Part A and/or Part B Fund Earnings. If the same reconciliation
results in a negative balance, such balance is a Deficit.
If the reconciliation results in a Surplus, the Provider shall
receive such Surplus on or about ninety (90) days after the
close of the calendar quarter. If the reconciliation results in
a Deficit, all or part of the Deficit may be reimbursed from any
future payments due the Provider by the HMO. In addition, the
amounts allocated to the Part A and/or Part B Fund, or amounts
paid to the Provider, may be adjusted by the HMO for the
subsequent quarter at the rate required to avoid future Deficits.
The Provider's percentage of Surplus/Deficit sharing for the
Part A and Part B Funds described in this Agreement are
specified in Exhibit H-1.
<PAGE>
EXHIBIT 1 TO ADDENDUM H
MEDICARE RISK BENEFIT PROGRAM
NON-APPLICABLE
The following initial rates shall be applied to the Financial
Arrangements set forth in Addendum B. The rates specified below
are subject to change thirty (30) days after written notice
provided by HMO, upon mutual agreement by and between HMO and
the Provider.
PROVIDER SERVICE AREA: FLORIDA
A. MEDICARE MEMBERS:
1. The Net Medicare Revenue for Medicare Members with both Part
A and Part B, or Part B only, of Medicare is 75% of Medicare
Premium accrued for Medicare Members assigned to Provider.
2. The portion of the Net Medicare Revenue allocated to the
Part A Fund for Medicare Members with both Part A and Part B of
Medicare is 45%. The portion of the Net Medicare Revenue
allocated to the Part B Fund for Medicare Members with both Part
A and Part B of Medicare is 55%. For Medicare Members with Part
B only of Medicare, the entire Net Medicare Revenue will be
allocated to the Part B Fund.
3. From the Part B Fund, the HMO will pay for Part B Expenses.
A portion will be paid to the Provider on a monthly basis for
the Primary Care Capitation specified in Exhibit H-2. The
remainder will be withheld by the HMO for Part B Expenses to be
paid by the HMO and for the Part B Fund Reserve.
4. The Provider's share of Surplus/Deficit in the Part A for
Medicare Members is 50%.
5. The Provider's share of Surplus/Deficit in the Part B Fund
for Medicare Members is 100%.
B. COMMERCIAL MEMBERS:
1. The Net Commercial Revenue is 85% of the average per Member
per month Commercial premium adjusted for age and sex, and
multiplied by the number of Commercial Members assigned to the
Provider.
2. The portion of the Net Commercial Revenue allocated to the
Part A Fund is 45%. The portion of the Net Commercial Revenue
allocated to the Part B Fund is 55%.
3. From the Part B Fund, the HMO will pay for Part B Expenses.
A portion will be paid to the Provider on a monthly basis for
the Primary Care Capitation specified in Exhibit H-2. The
remainder will be withheld by the HMO for the payment of Part B
Expenses other than Primary Care Capitation and for the Part B
Fund Reserve.
4. The Provider's share of Surplus/Deficit in the Part A Fund
for Commercial Members is 50%.
5. The Provider's share of Surplus/Deficit in the Part B Fund
for Commercial Members is 100%.
<PAGE>
MANAGED CARE SERVICES AGREEMENT
EXHIBIT 2 TO ADDENDUM H
PRIMARY CARE CAPITATION SCHEDULE
NON-APPLICABLE
Compensation Model
Commercial/Medicare Risk Program (requires participation in the
Commercial risk program)
Commercial/Medicare Capitation Program
1. The PROVIDER shall be paid an amount per member per month
("Capitation") in accordance with the following schedule:
A. Commercial and Individual Members:
-------------------PLAN TYPE-----------------
AGE SEX Clipper Group Group Individual
(Special) (Other)
<1 M/F $18.30 $32.44 $30.00 $30.00
1 M/F 8.00 16.18 15.00 15.00
2-4 M/F 5.60 9.23 8.50 8.50
5-18 M/F 3.80 6.47 6.00 6.00
19-44 M 5.80 9.21 8.50 8.50
19-44 F 7.70 11.86 11.00 11.00
45-64 M 7.20 11.85 11.00 11.00
45-64 F 8.50 12.94 12.00 12.00
>65 M/F 14.90 25.96 24.00 24.00
B. Medicare Members:
CareFree
AGE SEX Medicare Plan
All M/F $45.00 per member per month
2. Reinsurance Fund NON APPLICABLE
The portion of the Part A Fund allocated to the Reinsurance
Fund is as follows:
$14.50 per Medicare Member per month
$ 3.12 per Commercial Member per month
3. Co-payments. In addition to the Capitation specified above,
the Provider shall collect and retain Co-payments payable by
Members in accordance with their applicable Schedule of
Benefits.
<PAGE>
AMENDMENT TO THE PROFESSIONAL PROVIDER AGREEMENT
BETWEEN APOLLO EYECARE MANAGEMENT CORP. AND FOUNDATION HEALTH
CORPORATION AFFILIATE(S)
This Amendment to the original Professional Provider Agreement
is made and entered into as of the 1st day of January, 1997, by
and between APOLLO EYECARE MANAGEMENT CORP. ("Provider") and
Foundation Health Corporation Affiliate(s) ("Foundation"). This
Amendment is an integral part of the Agreement and shall
supersede any contractual provisions to the contrary.
NOW THEREFORE, in consideration of the mutual considerations
contained in this Amendment, Provider and Foundation hereby
agree to amend the Agreement as follows:
Section 1.18 Quality Management Program, is amended by
inserting the words "review of" after the words "limited to;"
insert the words "by Provider" after "procedures performed."
Section 1.18 shall read as follows:
The functions, including, but not limited to review of,
credentialing and certification of providers, review and audit
of medical and other records, outcome rate reviews, peer review
and provider appeals and grievance procedures performed by
Provider or required by Foundation, an Affiliate, a Payor, or
any other permitted person or entity, to review and improve the
quality of Covered Medical Services rendered to Beneficiaries.
Section 2.1 Credentialing of Provider, is amended by deleting
the first three sentences of the paragraph; delete the word
"Provider" after the words "warrants that," and insert the words
"Professional Providers" accordingly; delete the word "is" after
"(a)," and "(c)," and insert the word "are" accordingly; delete
the phrase "$1,000,000 per claim and $3,000,000" and insert the
phrase "$300,000 per claim and $1,000,000" accordingly. Section
2.1 shall read as follows:
Provider represents and warrants that Professional Providers:
(a) are licensed by the State(s) to provide Contracted Services;
(b) provides Contracted Services in compliance with all
applicable local, State, and federal laws, rules, regulations
and professional standards of care; (c) are certified to
participate in Medicare under Title XVIII of the Social Security
Act, and in Medicaid under Title XIX of the Social Security Act
or other applicable State law pertaining to Title XIX of the
Social Security Act; (d) holds active staff privileges on the
medical staff(s) of one or more hospital Participating
Providers, where applicable; (e) holds a current Drug
Enforcement Agency narcotic registration certificate, where
applicable; (f)
<PAGE>
shall maintain professional liability insurance
in an amount equal to the lesser of the amount required by state
law, or $300,000 per claim and $1,000,000 in the aggregate of
all claims per policy year; (g) shall maintain all required
professional credentials and meet all continuing education
requirements necessary to retain Board certification or
eligibility in Professional Provider's area(s) of practice; (h)
shall maintain a professional relationship with each Beneficiary
for whom Professional Provider renders Contracted Services, and
shall be solely responsible to such Beneficiary for medical
care; and (i) shall maintain such licensure, compliance,
certification and registration throughout the term of this
Agreement.
Section 2.3, Drug Formulary, is deleted in its entirety.
Section 2.4, Offices and Hours, is amended by deleting the
second sentence of the paragraph; delete the phrase "for
consultation on medical concerns" at the end of the third
sentence of the paragraph; delete the phrase "24 hours a day,
seven days a week" at the end of the last sentence of the
paragraph. Section 2.4 shall read as follows.
Provider shall maintain such offices, equipment, patient service
personnel and allied health personnel as may be necessary to
provide Contracted Services under this Agreement. Provider
shall provide Contracted Services under this Agreement at
Provider's offices during normal business hours, and shall be
available to Beneficiaries by telephone 24 hours a day, seven
days a week. Further, Provider shall be available to provide
Covered Services on an Emergency basis.
Section 2.8, Prior Authorization and Referrals, is deleted in
its entirety and replaced with the following:
No prior authorization is required from Foundation for
contracted services so long as Foundation has supplied data
verifying membership in advance of providing services.
Section 2.12, Notice of Adverse Action, is amended by
inserting the sentence "Adverse Action shall be those events
reportable to the National Practitioner Data Bank," after the
first sentence of the paragraph; replace the word "one" with the
word "three (3)" in the second sentence of the paragraph.
Section 2.12 shall read as follows:
Provider shall notify Foundation in writing, within five days
of receiving any written or oral notice of any adverse action,
including, without limitation, any malpractice suit or
arbitration action, or other suit or arbitration action naming
or otherwise involving Provider, Foundation or any Payor, and of
any other event, occurrence or situation which might materially
interfere with, modify or alter performance of any of Provider's
duties or obligations under this Agreement. Adverse Action
shall be
<PAGE>
those events reportable to the National Practitioner
Data Bank. Provider shall forward to Foundation any written
complaint or grievance of a Beneficiary against Provider,
Foundation or any Payor within three (3) business day of receipt
thereof. Provider shall maintain a written record of any
Beneficiary complaint and provide such record to Foundation
promptly upon request. Provider also shall notify Foundation
promptly of any action against any license, certification under
Title XVIII or Title XIX or other applicable statute of the
Social Security Act or other State law, DEA narcotic
registration certificate, or medical staff privileges at any
facility, and of any material change in the ownership or
business operations of Provider.
Section 2.16, New or Additional Benefit Programs, is amended by
inserting the sentence "In no event shall provider be required
to provide services in advance of a written agreement or
approved Addendum" after the first sentence of the paragraph.
Section 2.16 shall read as follows:
Provider acknowledges that Foundation may develop new or
additional Benefit Programs, and Provider agrees to negotiate
with Foundation in good faith to amend this Agreement to include
such new or additional Benefit Programs as requested by
Foundation. In no event shall provider be required to provide
services in advance of a written agreement or approved Addendum.
Where a new Benefit Program falls under existing Addenda, then
the applicable contract rates shall automatically apply.
Section 2.18, Timely Assignment of Beneficiaries, is amended by
deleting the last the second and third sentences of the
paragraph. Section 2.18 shall read as follows:
Where required under a Benefit Program, Foundation shall require
Beneficiaries to select specified Participating Providers at the
time of enrollment.
Section 3.1, Compensation Rates, is amended by deleting the
phrase "less Copayment amounts payable by Beneficiaries in
accordance with the applicable Benefit Program" at the end of
the first sentence of the paragraph. Section 3.1 shall read as
follows:
Provider shall accept as payment in full for Contracted Services
and all other services (including payment for any and all sales,
use or other applicable taxes on the sale or delivery of medical
services) rendered under this Agreement to Beneficiaries the
amounts payable by Foundation or a Payor as set forth in the
applicable Addendum to this Agreement. It is expressly
understood that, in this context, Provider acknowledges its
obligations to provide care consistent with the professional
standards of care generally accepted by the medical community.
Section 3.5, No Surcharges, is amended by inserting the words
"except as required by
<PAGE>
law," at the end of the second sentence
of the paragraph. Section 3.5 shall read as follows:
Provider shall not charge a Beneficiary any fees or surcharges
for Contracted Services rendered pursuant to this Agreement
(except for authorized Copayments). In addition, Provider shall
not collect a sales, use or other applicable tax from
Beneficiaries for the sale or delivery of medical services,
except as required by law. If Foundation or any Payor receives
notice of any additional charge, Provider shall fully cooperate
with Foundation or such Payor to investigate such allegations,
and shall promptly refund any payment deemed improper by
Foundation or a Payor to the party who made the payment.
Section 3.7, Conditions for Compensation for Excluded Services,
is amended by inserting the words "including, but not limited to
copayments, materials, services and extra options," after the
words "Excluded Services" in the first sentence of the
paragraph; replace the word "requests" with the word "agrees" in
the first sentence of the paragraph. Section 3.7 shall read as
follows:
Provider may bill a Beneficiary for Excluded Services,
including, but not limited to copayments, materials, services
and extra options, rendered by Provider to such Beneficiary only
if the Beneficiary is notified in advance that the services to
be provided are not covered under the Beneficiary's Benefit
Program, and the Beneficiary agrees in writing that Provider
render the Excluded Services, prior to Provider's rendition of
such services. Neither a Beneficiary, nor Foundation nor any
Payor shall be liable to pay Provider for any Contracted Service
rendered by Provider to a Beneficiary which is determined under
a Utilization Management Program not to be Medically Necessary.
Section 4.1, Term, is amended by deleting the last sentence of
the paragraph; insert the sentence "Either Foundation or
Provider may terminate this Agreement, without cause, upon 90
days prior written notice to the other party." Section 4.1
shall read as follows:
The term of this Agreement shall commence on the date set forth
on the first page of this Agreement and shall continue for a
period of three years thereafter. This Agreement shall
automatically renew for successive three year periods, unless
one party notifies the other in writing of its intent not to
renew this Agreement, at least 120 days prior to the next
scheduled renewal date. Any and all negotiations must be
completed 90 days prior to the anniversary date of the
contract. The renewal date of the term of this Agreement shall
remain the same for all Benefit Programs covered hereunder, even
if this Agreement becomes effective with respect to a particular
Benefit Program after the initial or any renewal date of this
Agreement, due to licensure, contract award or other reason.
Either Foundation or Provider may terminate this Agreement,
without cause, upon 90 days prior written notice to the other
party.
<PAGE>
Section 4.4, Right of Partial Termination, is amended by
deleting the first and second sentences, and inserting the
sentence "Either Foundation or Provider may terminate this
Agreement, with respect to one or more Benefit Programs, as
Foundation or Provider may indicate in the notice of termination
to the other party." Section 4.4 shall read as follows:
Either Foundation or Provider may terminate this Agreement, with
respect to one or more Benefit Programs, as Foundation or
Provider may indicate in the notice of termination to the other
party. This Agreement shall remain in full force and effect
with respect to all other Beneficiaries and Benefit Programs.
Section 6.1, Amendments, is amended by inserting the words "and
Provider" after "Foundation" in the first sentence of the
paragraph; replace the number "20" with the number "30" in the
second sentence of the paragraph; replace the word "shall" with
the word "may" in the last sentence of the paragraph. Section
6.1 shall read as follows:
All amendments to this Agreement or any of its Addenda proposed
by Provider must be agreed to in writing by Foundation and
Provider in advance of the effective date thereof. Any
amendment to this Agreement, including any of its Addenda,
proposed by Foundation shall be effective 30 calendar days after
Foundation has given written notice to Provider of the
amendment, and Provider has failed within that time period to
notify Foundation in writing of Provider's rejection of the
requested amendment. Amendments required because of
legislative, regulatory or legal requirements do not require the
consent of Provider or Foundation and will be effective
immediately on the effective date thereof. Any amendment to
this Agreement requiring prior approval of or notice to any
federal or State regulatory agency shall not become effective
until all necessary approvals have been granted or all required
notice periods have expired. Foundation and Provider may amend
this Agreement, from time to time, to include additional
Affiliates, Benefit Programs, and Payors.
Section 6.3, Assignment, is amended by deleting the second
sentence of the paragraph, and inserting the sentence "Should
the name of the Provider or Foundation change, due to any merger
or other cause, Provider and Foundation agree that this
Agreement shall remain in full force and effect." Section 6.3
shall read as follows:
Neither this Agreement, nor any of Provider's rights or
obligations hereunder, is assignable by Provider without the
prior written consent of Foundation. Should the name of the
Provider or Foundation change, due to any merger or other cause,
Provider and Foundation agree that this Agreement shall remain
in full force and effect.
Section 6.7, Governing Law, is amended by inserting the words
"of Florida" after the
<PAGE>
words "laws of the State" in the first
sentence of the paragraph. Section 6.7 shall read as follows:
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Florida, except to
the extent such laws conflict with or are preempted by any
federal law, in which case such federal law shall govern.
Federal law shall also govern with respect to federal Benefit
Programs.
Addendum B, Section B, Paragraph 2.1, Fee-for-Service, is
amended by inserting the phrase "unless provided differently
under Exhibit 1 to this Addendum" at the end of the first
sentence. Addendum B, Section B, Paragraph 2.1 shall read as
follows:
Provider shall render Contracted Services to Beneficiaries of
Foundation's Benefit Programs covered under this Addendum on a
fee-for-service basis unless provided differently under Exhibit
1 to this Addendum. As compensation for rendering such
Contracted Services, Provider shall be paid the rates set forth
in Exhibit 1 of this Addendum. Such compensation shall be paid
within 30 working days of receipt by Foundation of a complete
and accurate claim for Contracted Services rendered to a
Beneficiary.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment to
be effective on 1st day of October 1996. All other terms and
conditions of the Agreement remain in full force and effect.
APOLLO EYECARE MANAGEMENT CORP. Foundation
________________________________ ___________________________
Signature Signature
________________________________ ___________________________
Title Title
________________________________ ___________________________
Date DATE
<PAGE>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
1996 1995
Net loss attributable to
common stock ($4,464,986) ($5,181,133)
Weighted average common stock
outstanding 4,260,615 1,191,367
Net loss per share ($1.05) ($4.35)
<PAGE>
EXHIBIT 21
UNITED VISION GROUP, INC. SUBSIDIARIES
1. J. K. Enterprises of Deerfield Beach
Florida Corporation
2. Optiplex, Inc.
Florida Corporation
No current operations
3. Optiplex of Texas, Inc.
Delaware Corporation
4. STIP, Inc./UCIC Management, Inc.
Florida Corporation
No current operations
5. Master Vision Plans, Inc.
Delaware Corporation
6. Master Vision Plans of Puerto Rico, Inc.
Puerto Rico Corporation
No current operations
7. Apollo Eye Associates, Inc.
Florida Corporation
8. Apollo EyeCare Management Corporation
Delaware Corporation
9. Medricon, Inc.
Connecticut Corporation
Related Corporation:
10. Optiplan, Inc.
Florida Non-Profit
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The accompanying supplemental data are to be used in conjuntion with the
audited financial statements an dassociated notes to the financial statements
for the year ended December 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 125,462 <F1>
<SECURITIES> 0
<RECEIVABLES> 541,709 <F2>
<ALLOWANCES> 0
<INVENTORY> 551,291
<CURRENT-ASSETS> 1,294,965
<PP&E> 3,589,853 <F3>
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,529,690
<CURRENT-LIABILITIES> 3,366,428
<BONDS> 0
0
0
<COMMON> 5,889
<OTHER-SE> 9,830,245 <F4>
<TOTAL-LIABILITY-AND-EQUITY> 5,529,690
<SALES> 9,926,280
<TOTAL-REVENUES> 9,926,280
<CGS> 2,922,025
<TOTAL-COSTS> 13,734,737
<OTHER-EXPENSES> 291,166
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 355,508
<INCOME-PRETAX> 4,455,131
<INCOME-TAX> (9,855)
<INCOME-CONTINUING> 4,464,986
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,464,986
<EPS-PRIMARY> (1.05)
<EPS-DILUTED> 0
<FN>
<F1> Cash includes Restricted Cash of $50,000
<F2> Receivables are recorded net of allowances for doubtful accounts
<F3> PP&E is recorded net of depreciation
<F4> Other Stockholder Equity includes Additonal Paid In Capital
</FN>
</TABLE>
